[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

_______________________________________________________________________
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                           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.
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                    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; [email protected].
    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

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