[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
                  AGRICULTURE, RURAL DEVELOPMENT, FOOD
                  AND DRUG ADMINISTRATION, AND RELATED
                    AGENCIES APPROPRIATIONS FOR 2001

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS
                             SECOND SESSION
                                ________

     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES

                     JOE SKEEN, New Mexico, Chairman
 JAMES T. WALSH, New York         MARCY KAPTUR, Ohio
 JAY DICKEY, Arkansas             ROSA L. DeLAURO, Connecticut
 JACK KINGSTON, Georgia           MAURICE D. HINCHEY, New York
 GEORGE R. NETHERCUTT, Jr.,       SAM FARR, California
Washington                        ALLEN BOYD, Florida
 HENRY BONILLA, Texas
 TOM LATHAM, Iowa
 JO ANN EMERSON, Missouri           

 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
  Henry E. Moore, John J. Ziolkowski, Martin P. Delgado, and Joanne L. 
                       Orndorff, Staff Assistants
                                ________

                                 PART 6
                                                                   Page
 Food Nutrition and Consumer Services.............................
 Rural Economic and Community Development Programs................
   Rural Utilities Service

   Rural Housing Service

   Rural Business Cooperative Service

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE

 63-777                     WASHINGTON : 2000



                        COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                    DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California               JOHN P. MURTHA, Pennsylvania
 JOHN EDWARD PORTER, Illinois          NORMAN D. DICKS, Washington
 HAROLD ROGERS, Kentucky               MARTIN OLAV SABO, Minnesota
 JOE SKEEN, New Mexico                 JULIAN C. DIXON, California
 FRANK R. WOLF, Virginia               STENY H. HOYER, Maryland
 TOM DeLAY, Texas                      ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                    MARCY KAPTUR, Ohio
 RON PACKARD, California               NANCY PELOSI, California
 SONNY CALLAHAN, Alabama               PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York              NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina     JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio                 ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma       JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                  JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan             ED PASTOR, Arizona
 DAN MILLER, Florida                   CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                  DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia                MICHEAL P. FORBES, New York
 RODNEY P. FRELINGHUYSEN, New Jersey   CHET EDWARDS, Texas
 ROGER F. WICKER, Mississippi          ROBERT E. ``BUD'' CRAMER, Jr.,
 GEORGE R. NETHERCUTT, Jr.,              Alabama
   Washington                          MAURICE D. HINCHEY, New York
 RANDY ``DUKE'' CUNNINGHAM,            LUCILLE ROYBAL-ALLARD, California
   California                          SAM FARR, California
 TODD TIAHRT, Kansas                   JESSE L. JACKSON, Jr., Illinois
 ZACH WAMP, Tennessee                  CAROLYN C. KILPATRICK, Michigan
 TOM LATHAM, Iowa                      ALLEN BOYD, Florida
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 VIRGIL H. GOODE, Jr., Virginia

                 James W. Dyer, Clerk and Staff Director

                                  (ii)



   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2001

                              ----------                              

                                          Wednesday, March 1, 2000.

                 FOOD, NUTRITION AND CONSUMER SERVICES

                               WITNESSES

SHIRLEY R. WATKINS, UNDER SECRETARY, FOOD, NUTRITION AND CONSUMER 
    SERVICES
SAMUEL CHAMBERS, JR., ADMINISTRATOR, FOOD AND NUTRITION SERVICE
RAJEN ANAND, EXECUTIVE DIRECTOR, CENTER FOR NUTRITION POLICY AND 
    PROMOTION
STEPHEN DEWHURST, DIRECTOR, OFFICE OF BUDGET AND PROGRAM ANALYSIS

                       Introduction of Witnesses

    Mr. Skeen. Good morning. Sorry we kept you waiting, but we 
have more meetings than we can attend and cover at the same 
time. But it is good exercise.
    Today we want to welcome Under Secretary Watkins and other 
witnesses from the Food and Nutrition Service. The Food and 
Nutrition Service delivers some of the most important programs 
that are funded in this bill. That is why I think that these 
programs have enjoyed the strong bipartisan support of this 
subcommittee and the Congress.
    We have reviewed your budget request, and you are here to 
answer any questions that we may have about it. Let's get this 
dialogue started.
    Before I recognize you, Madam Under Secretary, let me turn 
to our ranking member, Ms. Kaptur, for any welcoming remarks 
that she may have.
    Ms. Kaptur. Thank you very much, Mr. Chairman.
    We want to welcome Mrs. Watkins back. We are so very happy 
to have the Under Secretary back with her very able staff.
    The programs that you administer are among the most 
important in this country. I think that the future of the 
Nation depends on healthy children and their ability to be 
educated in every corner of this land. I think the successes of 
the Food and Nutrition Service over the years have not always 
been on the front pages of every newspaper, yet we know the 
impact that you have and that these programs have had across 
our country. If only we could but extend them to the other 
corners of the world more successfully. We look forward to your 
testimony and thank you for your service to our country. You 
have been outstanding.
    Thank you, Mr. Chairman.
    Mr. Skeen. Thank you.
    Mrs. Watkins, let's turn it over to you and let you give us 
the word.

                           Opening Statement

    Mrs. Watkins. Mr. Chairman and the distinguished members of 
this committee, I am indeed honored to be here with you this 
morning. I want to thank both your staff, the FNS staff, and 
the CNPP staff for all of the hard work that has gone into 
putting this hearing together and getting information for us. 
The preparation is daunting when you know what the two staffs 
have to do in making certain that we are prepared. I want to 
thank them for all of their hard work.
    Mr. Skeen. We want to thank them with you because we would 
be in terrible shape if we didn't have those folks back there.
    Mrs. Watkins. That is exactly right. We owe a great deal to 
all staff personnel.
    Sitting with me today is Mr. Stephen Dewhurst, Mr. Sam 
Chambers, and Dr. Rajen Anand. They will be working with me in 
answering the questions to ensure that we can respond to the 
questions that you and the committee have.
    As you know, Mr. Chairman, I am responsible for providing 
the leadership for the 15 nutrition assistance programs at the 
Food and Nutrition Service and the Center for Nutrition Policy 
and Promotion. The Center for Nutrition Policy and Promotion is 
the lead Federal agency in the research and promotion of human 
nutrition issues.
    The mission of the Food and Nutrition Service to America is 
ending hunger and improving nutrition and health. That is our 
road map for planning and policy development to ensure that 
these programs meet the needs of the millions of customers that 
we have across the country. The importance of the nutrition 
assistance programs administered by FNS is pretty clear.
    Before I begin telling you what our budget issues are for 
fiscal year 2001, I would like to draw your attention to the 
successes that you see in front of the table--that you 
mentioned as you came in, Mr. Chairman. That will give you some 
idea of the successes and the initiatives that we were able to 
accomplish during the 1999 budget year. This is just a mirror 
of all of the kinds of things that we were able to do, and I 
won't go into those. But in order for us to get this much 
accomplished, we have waged a valiant effort in providing 
leadership to the agency.
    I would just like for Mr. Chambers to share with you for 
just about 2 minutes the information that has helped us to move 
as far as we have, and then I will begin to go through the 2001 
Budget request. Sam.
    [Information referred to follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Chambers. Good morning, Mr. Chairman and distinguished 
committee members. It is my pleasure to just speak for 2 
minutes with regard to the exciting challenge that this 
administration and this Congress gave us last year with the 
appropriation that was provided to us----
    Mr. Skeen. Thank you, Mr. Chambers.
    Mr. Chambers [continuing]. To signify for all who are 
within the hearing of this statement the significant 
accomplishments of the staff of 1,600 professionals in helping 
to meet the Nation's domestic nutrition assistance and 
education program needs.
    Before, you asked Under Secretary Watkins to identify a 
number of what we refer to as story boards which attempt to 
highlight some of the significant successes that we believe we 
have had. Sixteen hundred staff managing approximately $37 
billion a year, which represents about two-thirds of the entire 
Department of Agriculture's budget, really makes a statement 
about the significant workload but also the significant effort 
that goes into meeting the Under Secretary's requirements for 
us and the professional challenge that we feel we have been 
given in our varied positions.
    Whether we are talking about the Food Stamp Program, where 
we have undertaken a number of exciting initiatives which are 
aimed at eliminating hunger and ensuring access to program 
benefits by America's disadvantaged families, regulative 
changes that make it possible for individuals to receive 
benefits and achieve self-sufficiency by virtue of their 
ability to now have viable transportation for getting to work; 
or whether we are talking about expanding access to the School 
Breakfast Programs to the tune of 1,519 additional schools that 
were able to participate in America this year; or whether we 
are talking about the exciting challenge and the exciting work 
that is being done by our staff this last year and our State 
partners in terms of making improvements in the Child and Adult 
Care Food Program where, as you know, we have had some 
challenges but we have an exciting management improvement 
initiative that is under way which we believe is going to be 
not only impressive in its results but very complimentary to 
the guidance that we have received from other places in the 
administration; or whether we are talking about the release of 
the exciting and revolutionary children's food guide pyramid 
which, for the first time, makes it very clear and very 
possible for parents and other adults in the community to make 
certain that children have a healthy diet and make certain that 
the portions of the meals that they provide as well as the 
nutritional impact they receive is in their best interests; 
and, finally, whether we are talking about the exciting 
reinventions that are going on in this organization, such as 
the reinvention of the entire food distribution program which 
is going to mean a leaner and more efficient delivery system 
and a much more accountable delivery system for our food 
distribution system programs; or our exciting TQM, total 
quality management, initiatives under the leadership of our 
Under Secretary which has established once and for all the 
principles of quality management and leadership that will be 
permeating throughout the entire organization and which today 
have resulted in 165 new and exciting licenses to improve where 
individual employees are in fact reinventing, as we speak, the 
work that they perform every day--all are, I think, significant 
indications of the seriousness with which we accepted the 
charge and the challenge that we have been given and our 
commitment to continuing to meet the needs of America's hungry 
in the future.
    Thank you very much.
    Mr. Skeen. Thank you, Mr. Chambers.
    Mrs. Watkins. Mr. Chairman, I wanted Sam to go through that 
because quite often we forget that, while FNS has the largest 
budget at the Department of Agriculture, over two-thirds of the 
Department of Agriculture's budget, we have only 1,600 
employees. We have perhaps the smallest employee allocation of 
any agency manning this kind of budget. So we wanted you to 
know that the agency is working extraordinarily hard with what 
we call Leadership 2000 and Beyond. This is going to help us to 
get a lot of things done.
    Yesterday in the Washington Post it was clearly indicated--
--
    Mr. Skeen. You read that?
    Mrs. Watkins. Occasionally.
    That we placed in the top five, number four in Federal 
agencies. Of course, I was a little disappointed that we were 
not number one.
    Sam's charge is to make certain that we are the best 
Federal agency in the Federal Government, and we will continue 
to work on that.
    We celebrate today an extraordinarily strong economy and 
good times for the majority of our people. But even now the 
national economic success has not led to personal prosperity 
for everyone. Our nutrition assistance programs are here to 
provide the bridge to self-sufficiency. We must not lose sight 
of the ongoing contribution that these Federal assistance 
programs provide. They ensure that although there are good 
times and bad times, no one in this land of unparalleled 
agricultural abundance should have to go without adequate and 
nutritious food.
    I want to thank you for your continuous support as you help 
us provide the opportunity to share in the accomplishments of 
what our budget requests were in 1999 and what our budget 
opportunities are for 2001.

                             budget request

    I would just like to begin to share with you our request is 
for $36.3 billion for fiscal year 2001. That will support our 
strategic plan, will help us to maintain and augment the 
longstanding contribution of the Nation's nutrition assistance 
programs to achieve what we call nutrition security outcomes. I 
think we are going to be able to do that.

                           Food Stamp Program

    We are requesting $22.2 billion for the Food Stamp Program. 
That is an increase over last year, as a result of projected 
participation cost and food cost estimates.
    Just for the record, the formula for food stamps has not 
changed since 1977, but the times have changed. The housing 
costs have escalated dramatically and there is less money 
available for food for our food stamp recipients. The 
administration believes that some of the provisions of welfare 
reform went just a little bit too far in making changes that 
have nothing to do with our stated goal of moving people from 
welfare to work. So we are proposing some very interesting, and 
we think important, policy changes.
    I would like to cite those four legislative proposals in 
the Food Stamp Program. We propose to restore the food stamp 
eligibility to legal immigrants who resided in the United 
States on August 22, 1996, and who subsequently have reached 
age 65, correcting the inequity of treating some elderly legal 
immigrants differently from others solely on the basis of their 
birth date.
    Number two in the legislative proposal and in our 2001 
budget request, we would restore food stamp eligibility to 
legal immigrant adults who resided in the United States on 
August 22, 1996, and who lived with eligible children. This 
would be effective April 1, 2001. This proposal would also 
eliminate inequity and improve well-being of children by 
increasing the food stamp benefits to their low-income 
households.
    The third legislative proposal is in recognition of the 
importance of owning a reliable vehicle to find and keep a job. 
We want people to go to work, but they have to have some way to 
get there. So under the Food Stamp Program rules, people 
leaving welfare to go to work may not qualify for food stamps 
because of the value of their vehicle. The stringent $4,650 
limit currently in place is a barrier to participation by low-
income people, and they simply cannot get to work. So we have 
requested a legislative proposal to allow States the option of 
making Food Stamp Program vehicle rules conform with the TANF 
rules. This would also simplify some of the administration 
activities in the States and improve access for the working 
poor, so that they can go to work, own a car, and not have to 
worry about food.
    The fourth legislative proposal will allow States to 
conform the mandatory income exclusions in the Food Stamp 
Program to those used in the Medicaid program. This proposal, 
which allows for the alignment of food stamp and Medicaid 
income definitions, will help us to eliminate a great deal of 
the complexity. The estimate of $22.2 billion also includes a 
benefit reserve of $1 billion. That is a $900 million increase 
from fiscal year 2000.
    We are requesting $381 million to support the Employment 
and Training Program, which we call E&T in the Food Stamp 
Program. In addition to that, in the Food Stamp Program request 
is $10 million for a nutrition education initiative and a 
campaign that will be designed to reach potentially eligible 
families and individuals. We would provide information about 
the nutrition benefits of the Food Stamp Program, as well as 
the application procedures. We would target the general public, 
the elderly, the working poor, the disabled and households that 
contain legal immigrants. They would be the focus of our 
efforts. The materials would be bilingual, both in English and 
Spanish.
    That is the bulk of our food stamp request. That is the 
largest request in this budget.

                        child nutrition program

    Our Child Nutrition Program request is for $9.5 billion. 
That is a slight decrease from fiscal year 2000. We do project 
a very modest increase in participation in both the School 
Lunch Program and School Breakfast Program due to the rise in 
the numbers of children participating in the school meals 
programs.
    We currently, as you are aware, do not have funding for 
nutrition education and training so that we can provide 
nutrition education and training to children in schools around 
the country. We currently are, I think, at a critical point in 
this country on health issues. Not having funds for nutrition 
education and training, I think, is going to be a mistake in 
this country. There is an increase in childhood obesity and 
type 2 diabetes. I visited with the staff at the University of 
Tennessee medical school, and they have identified 25 cases of 
rickets--just to tell you how bad it is in this country; and, 
obviously, it is going to get worse.
    We can counteract some of this by beginning to offer 
nutrition education and training in this country to school 
children. That is not being done now. We have a very modest 
request of $2 million. A measly $2 million, Mr. Chairman, is 
all that we are asking for to start the ball rolling on 
nutrition education.
    We also ask for $6 million to complete the final 
installment of resources to fund our school breakfast 
initiative. That is the School Breakfast Pilot Program.
    Our next request is $10 million, which remains at the same 
level that it has been for the last 5 years, for Team 
Nutrition.
    Our third request for the Child Nutrition Program funds is 
to have funds available to improve our CACFP program 
management. We are proposing legislation that would net the 
agency savings of about $800,000 in fiscal year 2001 and $115.2 
million over a 5-year period. This is a legislative proposal 
that includes an array of management issues and changes that 
would improve the integrity and oversight of CACFP.

                   women, infants and children (WIC)

    The WIC program request is $4.1 billion. That is a $116 
million increase from the level enacted for fiscal year 2000. 
This level of funding will support the average monthly 
participation of nearly 7.5 million at-risk women, infants and 
children who receive the nutrition education and food benefits 
of this crucial nutrition assistance program. The requested 
amount is sufficient to ensure that all who are eligible will 
be able to participate.

                     commodity assistance programs

    For the Commodities Assistance Programs, we are requesting 
a funding level of $158.3 million, a net increase of about $5 
million from the fiscal year 2000 level.

                        farmers' market program

    Our Farmers Market Program request is $20 million. That is 
an increase of $5 million over fiscal year 2000. We think that 
we will be able to meet the current program level in the 38 
State agencies that are now participating, as well as those 
interested or those who have expressed an interest in 
participating in the program.
    We had 1,529 authorized farmers markets in 1998, providing 
revenue for almost 9,600 small family farms. We would like to 
see that increased.

                  commodity supplemental food program

    The Commodities Supplemental Food Program provides 
resources to our Women, Infants and Children program as well as 
the elderly. The budget projects that a monthly average of 
423,000 people will be served in Fiscal Year 2001, an increase 
of almost 9,000 people from fiscal year 2000, and that a 
nominal $100 million would be spent for CSFP during fiscal year 
2001. That will also include the participants from the 5 new 
States which we brought into this year's program.

             the emergency food assistance program (TEFAP)

    The TEFAP administrative expenses are $45 million. That is 
the same level that we requested in Fiscal Year 2000.

                   nutrition program for the elderly

    We are requesting $150 million for the Nutrition Program 
for the Elderly. That is a $10 million increase. We had worked 
with the Administration on Aging to look at how we could work 
together on providing better access to our program for the 
elderly. So that is approximately a 7.7 percent increase in the 
number of meals that would be served.

                      food program administration

    The final piece is our food program administration account. 
This contains several initiatives.
    We want to develop a viable partnership in addressing the 
nutritional health needs of some of our most impoverished 
people who are in the southwest border areas known as the 
Colonias. We have been working with them for the last year, and 
we see a need to maximize the nutritional assistance programs 
in partnership with Federal, State and local nonprofit 
partners. We have been successful in that effort. If we can 
begin work as we did in fiscal year 1999, we can work not only 
in the 10 Colonias in Texas but also provide the leadership on 
the border with New Mexico, California, and Arizona.
    We are requesting $2 million to develop an integrated 
nutrition education program which would promote the fifth 
edition of the dietary guidelines.
    Mr. Chairman, if you walked out in the streets of 
Washington, D.C., or any place in this country and asked people 
what the dietary guidelines for Americans are, they would 
simply say I don't know. We spent an inordinate amount of money 
developing these dietary guidelines, and we want to improve the 
health of Americans in this country. So that they do not get 
conflicting information on what the dietary guidelines are, we 
are requesting $2 million to promote the dietary guidelines as 
well as information on the food guide pyramid. This is a very 
modest investment which can result in an extraordinary large 
payback in terms of a healthy America.
    We are requesting a total of $8 million for program 
integrity to supplement other ongoing activities within the 
FNS. Right now, that would include looking at program integrity 
issues and trying to assure that we have the correct 
stewardship to reduce payment errors and avoid any increases. 
We also want to make certain that we evaluate some of the pilot 
programs and alternative methods for determining and verifying 
the eligibility in our school meals program.
    We have a request for $10.7 million in our food stamp 
account, $3 million in the child nutrition account, and $3.5 
million in our WIC account to look at some studies that we have 
been unable to do.
    I come to you this morning almost on my knees begging you 
to look at our view of studies and evaluations for the largest 
programs in the Department of Agriculture. The amount of money 
that is being spent on the programs and the lack of attention 
that is being paid to studies and evaluations and eliminating 
funding for the last 3 fiscal years has severely hampered our 
efforts to have good scientific data, and good evaluation 
mechanisms. This is a critical need for us to be able to 
sustain the integrity of the programs. I hope you will evaluate 
all of the requests we have made in these proposals that would 
help to enhance the programs that provide nutrition assistance 
for Americans in this country, who are most in need.
    This concludes my oral presentation, and we would like to 
be able to answer any questions that the committee may have. I 
would just like to thank you for allowing us this opportunity 
to present our budget requests. Now I am prepared, along with 
the 3 gentlemen at the table, to answer any questions that you 
may have. Thank you very much.
    [The prepared statement of Shirley R. Watkins follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Skeen. Thank you, Mrs. Watkins, and I want you to get 
off your knees now.
    Mrs. Watkins. Does that mean that I get the money?
    Mr. Skeen. We are going to talk about this. The check is 
not in the mail yet.
    Mrs. Watkins. Thank you, Mr. Chairman. I know how you feel 
about these programs, as well as what you would like to see 
accomplished. I also know how dedicated you are to these 
programs. I am sure that you will work with me to make certain 
that we can make those things happen.
    Mr. Skeen. I certainly concur with that announcement, and I 
appreciate the effort.

                         food stamp participant

    Let's take the thing apart here and take a good look at it. 
The Food Stamp Program is the single largest expenditure item 
that we deal with. Even though it is a mandatory program, there 
is a lot of concern about the drop-off in participation. So I 
just want to ask a few questions about this program. Let's 
start with that.
    Does the estimated participation of 18.8 million in 2001 
assume a decrease, level, or increase in participation?
    Mrs. Watkins. That is a slight increase in participation.
    One of the things that we found, if we are able to further 
our efforts with the $10 million request, we will be able to 
provide more information to the immigrant community, the 
elderly community, and those families with children. There is a 
lot of misinformation as to whether people are eligible or 
think that they are eligible. This shows just a modest increase 
in food cost as well.
    Mr. Skeen. Do you have an estimate of how many people there 
are who are eligible for the Food Stamp Program that are not 
participating? Have you done any effort in that category? Mr. 
Chambers, I think referred to that.
    Mrs. Watkins. We have about 700,000 that perhaps are not 
participating, that perhaps could participate.
    Mr. Skeen. That is nationwide?
    Mrs. Watkins. That is nationwide. It could be larger. When 
you look at the numbers of people that we had participating 
before welfare reform and since welfare reform, 63 percent of 
the eligibles are currently participating.
    Mr. Skeen. Sixty-three?
    Mrs. Watkins. Sixty-three percent of the current eligibles 
are participating.
    Clerk's Note.--Subsequent to the hearing, the Food and 
Nutrition Service clarified that, according to a 1997 study, 
the number of people eligible for food stamps, but not 
participating in the program, is 12 million.

                          food stamp education

    Mr. Skeen. Recently, the administration launched some 
initiatives to help make sure that those who are eligible for 
the Food Stamp Programs know that they can get them. 
Specifically, what has been done in this regard and can you 
claim any success for your efforts?
    I know that you have all of the people in your program 
working towards this, and I appreciate what Mr. Chambers was 
saying, that their participation also includes input on how to 
make this program work better. That indicates to me that you 
listen to the people that you work with at the local level.
    Mrs. Watkins. That is correct, Mr. Chairman. We have done 
an awful lot. The States are waging their own efforts and have 
some outreach, and we have worked with several States to reach 
these accomplishments. We printed educational materials, and 
those materials were distributed throughout the country. We 
hope that each one of you got copies of the materials. If you 
didn't, we will make certain that you each get a packet.
    We also have information on the web site so that people can 
download it. So advocacy communities, food banks, soup 
kitchens, and schools, receive outreach information as well as 
other partners in the Federal Government so they could make 
that information available.
    But, by and large, there is an awful lot that we need to 
do; we need to make the information available in a variety of 
languages so that the immigrant community will be able to 
understand the information. What we see is a wide gap, maybe, 
in peoples understanding about what they are eligible for since 
welfare reform, because they are no longer eligible for TANF. 
So it takes a lot of people and a lot of help from a variety of 
sources to get the information out. We have only just begun the 
notification process.
    Mr. Skeen. That indicates to me that you spent a lot of 
effort trying to promote the program and outreach to people 
that really need it, and that is what it was designed to do.
    There has been some press reports that said in some cases 
barriers were being put up to discourage eligible people from 
applying for food stamps. Are you aware of this and do you have 
any specific examples of what is happening in that particular 
category?
    Mrs. Watkins. Yes, sir, we are aware of it. We talked with 
States, and we have worked with food stamp commissioners around 
the country.
    Mr. Skeen. That is a new innovation here that we have, the 
new red signal. You go right ahead.
    Mrs. Watkins. We have some access guides that I would like 
to make available for the record. One is, ``Together We Can'' 
which provides States and local agencies an opportunity to 
understand what the program is all about and how they can fight 
hunger in their communities. Also included is information on 
what we need to do and what they can do to fight hunger.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mrs. Watkins. We also have the ``National Nutrition Safety 
Net, Tools for Community Food Security''. I would like to make 
both of these available for the record so that you can have 
this information. We have copies for each one of you.
    Mr. Skeen. Thank you very much. We appreciate that.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Skeen. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    I want to thank the Under Secretary for her excellent 
testimony.
    On the issue of dietary guidelines and the majority of the 
American people not knowing what they are, I would strongly 
encourage you to work with the Edison Electric Institute and 
many of the organizations that represent the power companies 
around this country and get those dietary guidelines in those 
billings that go to almost every household in America. They 
accept suggestions upon a wide variety of social needs, and 
that might be one very quick way of trying to get that into 
additional people's hands. Maybe you can do that on an 
experimental basis in one or two States or one or two 
communities. I would certainly be happy to call our utility 
company and ask them to include them.
    Mrs. Watkins. Thank you very much.
    Ms. Kaptur. That is all right.
    I just want to pursue one question on this first round. As 
I look through the budget request and the ongoing activities of 
USDA, you administer funds that are larger than many Cabinet-
level departments, if you look at the total amount of funds 
under your jurisdiction. At the same time as we have a crisis 
in rural America among our farmers of considerable proportion, 
huge bankruptcies almost in every sector, and agglomeration of 
smaller units into larger and even organizations like the Farm 
Bureau now supporting anti-trust investigations in the 
agricultural arena of this country--I never thought we would 
get to this point. But at the same time as we have this 
diminishment in small and medium size operators around our 
country, I look at your budget. I see school lunch program cash 
payments to the States, over $5 billion a year; child and adult 
care feeding programs, $1.8 billion, again cash payments to the 
State. A lot of work with the States, depending on the States 
to do the purchases.
    You look at the WIC programs and the types of products that 
are acquired. Commodities supplemental food program, a $93.3 
million request. Billions and billions of dollars of food 
purchases.
    I then look down at a program that I have been very 
supportive of over my tenure here, which is the farmers' market 
program, where you are asking for an increase up to a level of 
$20 million. We know that program works in getting income into 
the hands of farmers. And my major question to you is, during 
your tenure, how have you been able to work within USDA to work 
with the States, to work with your own staff, and to take a 
look at the endangered species that I am very concerned about 
and members of this committee are concerned about, to find ways 
to get those purchases, the funds directly into the pockets of 
farmers?
    In a State like Ohio, where we depend on the Department of 
Education in the State to purchase, they don't think about 
farmers. Many of the farm groups need to be helped in order to 
have their food presented in a way that is processed like the 
school districts like to receive. What kind of leadership do we 
see from the Department of Agriculture in these important food 
and nutrition programs to link to the other part of the 
Department that is trying to hold rural America together?

                            farm initiatives

    Mrs. Watkins. Ms. Kaptur, one of the things that we have 
done is to establish the farm to school initiative. We work 
with the school meals program and directly connect farmers to 
those school cafeterias.
    We have a couple of very successful programs that we 
launched almost 2 years ago, one in North Carolina and one in 
Florida, working cooperatively with the Agriculture Marketing 
Service and with natural resources and soil conservation as 
well as rural development. We have joined together as partners 
to work with the farmers. We have also included the land grant 
colleges to work with us, so that they can work with the 
farmers as well in developing co-ops that can provide the food 
and produce the schools want. If they are looking for chopped, 
diced, or sliced produce then they are working together.
    In addition, we are working with DOD. One of the things 
that we found in talking with the farmers at the round tables 
was that the farmers needed to be able to provide products not 
only to schools when they were in session for 9 months but some 
of the products that were grown they needed to be able to offer 
year-round. Forming a partnership with DOD has enabled us to 
provide access to other installations throughout the DOD 
network. It is working very effectively.
    We have started work in Vermont as well as Alabama. In 
Alabama, we are looking at some farmers who are hog and cattle 
producers. They will provide sausage and beef patties. Those 
are the kinds of programs that we have been able to implement.
    We have the model. Working with the agencies in the 
Department of Agriculture, all of us working together and 
looking at other Federal agencies as to how we can help support 
the small farmers.
    Ms. Kaptur. Mr. Chairman, I know that my time has expired, 
but I would just like to ask the Under Secretary before this 
budget cycle is complete, I would very much appreciate a 
personal briefing on these demonstrations that are going on 
around the country. I want to know what more I can do in this 
budget cycle in order to encourage this. We would like to put 
some of that into the record.
    I appreciate your leadership on this. You listened to the 
subcommittee as we tried to help the farmers, particularly the 
small and independent operators organizing themselves to meet 
this market. Whether it is the research budget, whatever budget 
we can get into in order to get some of these dollars into the 
pockets of those farmers and help them organize to meet this 
market, I am your strongest partner in this Congress. So I 
would just ask you to please come up to spend a little extra 
time with us, and thank you very much for your responsiveness 
to this subcommittee thus far.
    Thank you, Mr. Chairman.
    Mr. Skeen. Thank you. And we would like to have the 
ranchers included in that group that you are talking about.
    Ms. Kaptur. Sorry, Mr. Chairman. I don't know if I have any 
ranchers in my district. That is why you are here.
    Mr. Skeen. We will establish some.
    Mrs. Emerson.
    Mrs. Emerson. Thank you, Mr. Chairman, Secretary Watkins.

                                 tefap

    I want to talk about TEFAP, if we could, to start with. In 
the fiscal year 1999 program, the TEFAP program distributed 
about $107.5 million worth of bonus commodities. As you know, 
that is above and beyond the program money made available to 
TEFAP for commodity food purchases. It really does help our 
food banks and pantries meet the needs of our hungry people. 
Can you tell me what you expect the level of these bonus 
commodity donations to be in fiscal year 2000 since it is not 
listed here in your budget? It says unknown. Do you have any 
idea?
    Mrs. Watkins. It may be about the same, unless we get some 
indication about changing market conditions. Currently we are 
projecting to spend about the same amount of money for bonus 
commodities.
    [Additional information follows:]

                       Bonus Commodities in TEFAP

    The types and value of bonus commodities to be distributed 
to the Emergency Food Assistance Program (TEFAP) in fiscal year 
2000 will depend on market conditions, which are constantly 
changing. To date, the Department has purchased bonus canned 
chicken, canned salmon, dates, walnut pieces, nonfat dry milk, 
and frozen pork for donation to TEFAP. Six more commodities 
have been offered to States, and an additional 16 are under 
consideration. Over 21,269,145 pounds of bonus commodities 
valued at $28,693,666 have been shipped to date. We are 
optimistic that additional food items will be available for 
donation to TEFAP as the year progresses. However, with half of 
the fiscal year remaining, we cannot estimate the total value 
of bonus commodities that will be provided.

    Mrs. Emerson. Just to let you know, in my State the bonus 
commodity donations are down more than 4.3 million pounds and 
more than $2.2 million as of about 10 to 15 days ago. This is a 
huge problem, a tremendous fall-off. I haven't seen any 
evidence that there are decreasing food needs in our areas. 
That, in addition to the depressed farm economy, makes me 
wonder why you would either stay at a static level or even 
decrease the bonus commodity donations because to me it seems 
that now more than ever we need to increase them.
    Let me ask you, would the Department support an increase in 
the $100 million of the authorized level for TEFAP commodity 
purchases?
    Mrs. Watkins. Mrs. Emerson, we would be glad to work with 
you and this committee on any increases that you would like to 
give us.
    Mrs. Emerson. Have you looked at Congressman Tony Hall's 
legislation? It is H.R. 1324, the Food Banks Relief Act. I am 
an original co-sponsor of that bill, which would raise the 
authorized level to $200 million.
    Mrs. Watkins. We have reviewed the legislation. As I 
indicated, any amount of money that you would like to increase 
in addition to what we have requested we would be glad to work 
with you.
    Mrs. Emerson. Just another comment about TEFAP before I ask 
another question. In looking at a 1994 Economic Research 
Service report, it talks about the benefit to farmers from the 
TEFAP program and actually shows that as much as 85 cents on 
the dollar is returned to the producer. Can you just give me 
your comments on the value of this program to our family 
farmers and ranchers?
    Mrs. Watkins. Obviously, any purchase that is made of 
commodities is going to be of value to producers and farmers in 
this country. The more we purchase in the way of commodities, 
the more we enhance the level of support for farmers and 
ranchers in this country.
    Mrs. Emerson. Well, we will do our level best to work for 
an increase, particularly--because I hear all over my district, 
that we don't have enough commodities, that we are running 
short, help, help, help. We need to do something particularly 
as people do move from welfare to work.

                        fsp vehicle value level

    Let me just ask you another question on something that you 
mentioned in your opening remarks with regard to the vehicles 
and allowing the States to set the vehicle value levels, with 
regard to food stamp recipients. Is there a chart of some sort, 
do we have those amounts by State, the allowance that the 
States give for cars?
    Mrs. Watkins. We have the amounts, and we can provide them 
to you. Each State may be just a little different. We can 
provide that to you and to the committee if you would like.
    Mrs. Emerson. I would be grateful because, you know, while 
people would have a problem seeing a food stamp recipient go 
off in his or her Cadillac in the grocery store parking lot, I 
am very well aware of many constituents of mine who have cars 
that might have been given to them by a parent that 
disqualifies them for eligibility when, in fact, they 
desperately need it. There has got to be a balance here. I 
would appreciate you getting that to me.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  ebt

    Mrs. Emerson. My last question has to do with the whole 
issue of EBT interoperability. I know that we worked together 
on this issue, but can you just comment so far on what you have 
done to implement EBT interoperability?
    Mrs. Watkins. We are currently working on the regulations 
and hope to have them out sometime before this year is over.
    Mr. Skeen. Quickly.
    Mrs. Emerson. Okay. My mouth was starting to open, Mr. 
Chairman.
    Let me just mention, too, that one thing that I am a little 
bit concerned about is the issue of settlement costs in the 
States that are currently using compatible systems. In fact, 
one of the central features of our legislation was there was 
going to be 100 percent Federal funding of settlement costs, 
just as we now pay 100 percent costs in the administration of 
food stamps. The initial feedback we are getting from USDA is 
that you might only pay part of the settlement costs. I don't 
know if that is because there is a distinction between State-
provided EBT equipment and equipment owned and operated by the 
retailer. Can you explain this to me?
    Mrs. Watkins. We did have a maximum amount that we were not 
allowed to exceed. We were not to exceed $500,000. That was 
across the country.
    Mrs. Emerson. I assume then that you are including 
stakeholders, the retailers and State project directors and all 
of those folks, in the discussions as you move towards this 
final regulation?
    Mrs. Watkins. Oh, yes. We try to make certain that we 
include everybody while we are working on the regulations. We 
have worked with the roundtables and invited others to come in, 
to work with the staff to provide a diversified atmosphere. You 
can be assured that there will be lots of opportunities for 
people to comment as we work through this process.
    Mrs. Emerson. I appreciate it. Thank you.
    Mr. Skeen. Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    You look at the $66 billion that the Department of 
Agriculture spends and you wonder where the beef is. The beef 
is in this budget, $36 billion of it. This is a program that 
really touches everything. I think more of our constituents are 
affected by your budget, when you look at food stamps, child 
nutrition, WIC, commodity assistance, food donations and 
others.
    Mr. Chairman, it would almost behoove us to have another 
hearing just of some of the user groups here because that is 
where the rubber hits the road in the agricultural policy in 
America. I wish we had more time.

                          school lunch program

    I have three questions. First of all, what could this 
committee do to ensure that in the school lunch program that we 
serve salads and not sodas? We are allowing corporate America 
to just buy into our school lunch program and sell stuff that 
is not necessarily part of the five-a-day because schools make 
money off of those programs. But to me it is almost like 
allowing tobacco to go in and advertise in schools. It seems to 
me that we ought to be putting salads ahead of sodas. I wonder 
if you had any recommendations on that.
    Mrs. Watkins. Mr. Farr, I appreciate you asking that 
question. That matter is also near and dear to my heart, as all 
of you know. We were asked to provide to the Congress our 
efforts to look at nutrition in this country. We were to have 
that report, entitled ``Promoting Healthy Eating: An Investment 
in the Future'', to the Congress by January 1, and we complied. 
I would like to provide this copy for the record. I also would 
like to let you know that, fairly soon, within the next 2 or 3 
months, we are going to have a recommendation that will go out 
across this country from the various medical associations and 
the American Dietetic Association to address this issue.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Farr. Will there be some recommendations that Congress 
could adopt from these studies?
    Mrs. Watkins. I would hope that we can use this as an 
opportunity for you to do that. However, you may be aware that 
in the past when Congress has attempted to do something about 
this issue nothing has been accomplished. The watered-down 
regulations that we have now simply do not help school 
districts to address these issues. You should also be aware 
that many people seem to think this is a local issue and not a 
national issue. Our attempt is to address it as a national 
issue and provide the committee with any material that may be 
needed to address this issue as the Congress.
    Mr. Farr. We have adopted a national policy on nutrition, 
and we ought to follow it up with our money and incentives to 
using that money wisely. If schools are just trying to 
commercialize kids, I am opposed to that. I will work with you 
on that.

                        employment and training

    Another question that I want to ask is one of the things 
that has happened in America is that we have revised the 
Workforce Investment Act in 1998. We require--we are dropping 
thousands in my district alone, thousands of kids who have had 
summer youth employment programs. This is really putting a lot 
of at-risk kids back in the street. Everybody is writing me 
about it. All of the city council and probation officers and 
everybody is writing me about it, saying we have got to find 
some funds. I was asked yesterday whether there would be a 
possibility to use some of your TANF food stamp money to allow 
us to apply it to youth and also whether you could have the E&T 
program where you have some surpluses in there to use those for 
youth employment.
    Mrs. Watkins. Mr. Farr, I am not quite sure how we could do 
that, but I would like to work with you on it. If there is some 
way that we can pay summer youth employees with our E&T money, 
we would be glad to look at it.
    [Additional information follows:]

                   Food Stamp Employment and Training

    Food Stamp Employment & Training (E&T) funding may not be 
used to provide for summer youth employment. By law, Federal 
E&T funding may only be used to implement a State agency 
designed E&T program approved by the Secretary of Agriculture 
for the purpose of assisting food stamp household members to 
gain skills, training, work, or experience that will increase 
their ability to obtain regular employment. E&T allocations may 
not be used to pay wages or stipends to participants in E&T 
programs.
    State agencies are required by statute to use at least 80 
percent of their Federal E&T allocations to serve able-bodied 
adults ages 18 to 50, without dependents, (ABAWDs) who are 
subject to the 3-month food stamp participation limit.
    The remaining 20 percent of Federal E&T allocations may be 
used to fund education and training activities for non-ABAWD 
household members who are required to comply with Food Stamp 
Program work requirements. Members under 18 are exempt from 
these work requirements.

                            community issues

    Mr. Farr. These programs that I mentioned are at the local 
level. That is why I would like to have some of these local 
administrators in here talking about this. That is where it all 
comes together, all of our welfare reform, nutritional 
programs, feeding programs, they are all there. They administer 
all of these programs at the local level.
    That is my last real question, what can we do? My 
frustration in meeting with the provider groups is that we are 
all smokestack administered. Is there any way that we could 
make all of these programs more seamless?
    Why don't we deal with this whole nutrition program, Food 
Stamp Program, like we do with Medicaid? Essentially, we block 
grant the Medicaid to the States, and then they administer it 
for health care programs, and in many cases like California 
they go beyond what the Federal minimums are. Now they are 
working with communities. If the communities come in with 
comprehensive programs or cradle-to-the-grave type of services, 
they will block grant the money. We are getting much better 
bang for the buck for a lot of services.
    Rather than just tying it all up into you are in the Food 
Stamp Program or child nutrition program or the WIC program, or 
commodity--it seems to me that we tie our hands in being able 
to administer what I think you intend, which is to provide for 
a healthy America for people most in need of it.
    Mrs. Watkins. That is one of the reasons we worked so hard 
trying to come up with a strategic plan that could address 
those issues. One of the things that we have struggled with is 
to make sure that we don't have stovepipes. That is why we have 
worked on these issues under the guidance of the Secretary's 
direction, who hammers this every day. The Secretary doesn't 
want stovepipes. That is why we have addressed the issues in 
the two handbooks. We have also gone out and worked with the 
communities, so that we can provide resources to them.

                         fs vehicle initiative

    Mr. Farr. The policy on the automobile, which is 
ridiculous--poverty in America is disguised. When I was a Peace 
Corps volunteer, you could tell who was poor just by looking at 
them. But you can go to a secondhand clothes store and get a 
Brooks Brothers suit and walk down the street, and nobody would 
know that you are poor. You can drive a Cadillac and still be 
poor. The idea that we are starting to put conditions on people 
because of the clothes they wear and the cars they drive and 
saying that we are going to count those in to determine whether 
you are poor I think is an embarrassment. A country like this 
doesn't need to do that.
    Mrs. Watkins. One of the challenges that we have is to try 
to eliminate the stigma not only for our Food Stamp Program, 
but also for our school meals program, and all other programs 
that we administer. We think that the base for all of these 
programs is nutrition. It behooves us to work, and we work 
awfully aggressively, to find creative ways to work with 
communities so that the needs of the working poor can be 
addressed. Then we can make our programs easily accessible and 
then remove some of the barriers.
    We struggle with some of the same things that you are 
talking about when we give a license to improve to our staff. 
This provides guidance to all FNS employees to go out and work 
with the community to improve these programs. That is what they 
have done. We are seeing some extraordinary things going on in 
the agency.
    I am excited that our agency now feels like they can work 
with any community on access issues for all of these programs. 
This is a mindset that has not been there before. We had only 
worked with the States. We thought our customer was only the 
State. That no longer is the mindset in this agency.
    Thanks to Sam Chambers and George Braley for working as 
hard as they have with the entire agency. I think that you are 
going to see a Federal agency that recognizes hunger as a 
problem in this country. We want to make certain that hunger is 
eliminated. We have to work with communities to do it. It 
cannot be done at the Federal level. It has to be done with all 
of us working together. We can't do it nationally by ourselves. 
There are people on the ground floor that are able to help us 
reach our goals. We have to be out there working with them and 
facilitating it. I am out there just like everybody else on 
this staff.
    Mr. Farr. Thank you.
    Mr. Skeen. Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman, and Secretary Watkins 
for your presentation. I had an opportunity to review your 
written testimony, and enjoyed immensely your oral testimony.
    Secretary Watkins, I am a strong advocate of what welfare 
reform has done for this country in a positive way. It has 
released our people from a dependency and made lots of them 
independent. I think the numbers show that, at least they do in 
the area that I come from.
    Having said that, there are always problems that exist or 
some fallout that exists in those kinds of programs. I think 
you are experiencing some of that in your agency. I want to 
relate to you and ask you a question about the WIC program as a 
result.
    I had some of your WIC administrators come visit me a few 
weeks ago. They explained to me that the cost of the WIC 
program had decreased somewhat over the last few years since 
the advent of welfare reform because the number of participants 
had gone down. But they felt very strongly that the folks who 
were eligible were not being reached or not being enrolled in 
the program because many of those folks were working and the 
hours of the WIC office, if you will, was during working hours 
and there was no opportunity for them to interact. They said 
they really needed funds for outreach, if you will. Am I to 
assume that the $3.5 million that you are asking for will 
address that issue? You made the statement when you talked 
about the 3.5 million additional dollars in WIC, and I quote, 
``All who are eligible will be able to participate.''
    Are you aware of that problem and is this what you are 
trying to do here?

                            wic eligibility

    Mrs. Watkins. I am aware of the problem. We are trying to 
address the outreach issue.
    Mr. Boyd. Is $3.5 million going to be part of addressing 
that public outreach?
    Mrs. Watkins. Part of the $3.5 million will address some of 
the outreach issues. As you know, States have money available 
in their budgets for outreach, and they can do outreach. But 
many of the States get very nervous about doing outreach. When 
the States hear budget numbers being thrown around and 
anticipate that we may be looking at 7.1 or 7.2 million instead 
of the 7.5 million, and they only have x amount of money for 
this, they don't do as much outreach as they could. There are 
potentially 8.5 million people eligible for WIC. We estimate 
that we can reach 7.5 million people. When the numbers start to 
fluctuate, States get very, very uneasy, so they do come in and 
say to you this is going to be a problem. So we are reviewing 
this.
    Mr. Boyd. I would encourage you to work with them in light 
of this changed environment since we have the advent of welfare 
reform. Those folks in the country have good ideas of how to 
reach those folks. If you will work with them and listen to 
them, I think that we would be able to meet and serve the 
people who are eligible. I think this Congress will respond to 
those who are eligible. We are not going to respond if there is 
fraud and abuse. I think we would respond in a negative way 
then.

                           program integrity

    That is the next question that I want to address with you. 
I noticed that you outline in your testimony several new 
initiatives, but you also outlined some new money that you 
wanted to solve internal problems. I know that we just talked 
about one--the eligibility of WIC clients and reaching eligible 
clients, you talked about food stamp participation. You think 
there are a lot of folks out there, more so than before, that 
we are not reaching with the advent of welfare reform.
    You talk on page 23 of your testimony about requesting $8 
million to supplement other ongoing programs, program integrity 
activities within FNS. I assume that means there is some 
internal problems with the integrity of the programs. Quality 
control systems, accuracy, you addressed that. Payment error 
rates, those kinds of things.
    Madam Secretary, this Member thinks that we ought to try to 
do a better job with what we are doing, the programs that we 
have, and put focus on getting those done right before we 
expand into a lot of new programs. I know you address nutrition 
education, I know that is an important program, but there are 
some folks doing that at the State level. We ought not to go 
piling on programs on top of programs without understanding 
exactly whether that money is being well spent.
    I look forward to having a dialogue with you and other 
members of the committee on these types of issues. You may want 
to comment on that, but I feel strongly about that.
    Mrs. Watkins. Mr. Boyd, one of the things that I think we 
have the responsibility to do is to ensure that every dollar 
that is spent in these programs, every dollar that I am 
responsible for, is well spent. As a taxpayer, I want to make 
certain that there is no waste and that we are held accountable 
for assuring that. In providing quality programs, we need to be 
sure that we can protect the integrity of all of these programs 
so that the general public feels good about them, as good as 
you and I feel about them. That is why we are requesting funds 
for integrity.
    One of the things that will help me to do that is to have 
good research data on program integrity. We haven't looked at 
research in the last 3 years. That is very troublesome to me.
    If I look at a problem, I need to be able to solve the 
problem. I don't want to come to you and say, I identified the 
problem, but I can't solve it. When I come to you, I want to 
tell you that I have been able to solve the problem. Here is 
what I did, and here is how I did it. So that the money will be 
well spent. We do work very aggressively with the States, and 
the local people, administering programs to ensure that we have 
good, well-run nutrition assistance programs.
    Individuals that use to do a lot of research and studies 
cannot do as much because they do not have the funding from us 
that is needed to complete research initiatives.
    I appreciate your interest in Program Integrity. I want to 
work with you and this committee to ensure that we can be 
certain that these programs are the best that they can possibly 
be. I think that we owe that to the people in this country.
    Mr. Boyd. Thank you, Mr. Chairman.
    Mr. Skeen. Mr. Kingston.
    Mr. Kingston. Thank you, Mr. Chairman.

                     wic nutrition education study

    Mrs. Watkins, let me ask you, in the spirit of what Mr. 
Boyd was asking, there was a WIC study about 2 years ago. Did 
your agency implement a number of those suggestions? It found, 
for example, there were some duplications, and they were doing 
some things in Texas and Ohio that were good examples. Did you 
implement any of that?
    Mrs. Watkins. We have looked at all of the models, and we 
have shared those models with our regional staff, as well as 
provided training for them. Training now is a value in the 
agency. When we look at good programs that work, regardless of 
where they are in the program area, we share that information.
    Mr. Kingston. Could you send me a follow-up on what you 
have implemented from that? And do you think the time is for 
another study in the name of efficiency and following up on 
good ideas and so forth?
    Mrs. Watkins. You always need to look at new ways of doing 
things in order to evaluate what is successful and what is not, 
what is working and what is not. Also to know what kind of 
changes should be made to improve the program. That is a part 
of our strategic plan for continuous improvement.
    [Additional information follows:]

                WIC Nutrition Education Assessment Study

    The final report of the WIC Nutrition Education Assessment 
Study was released in April 1999. It was a longitudinal study 
of nutrition education in WIC, focusing on pregnant and 
postpartum women. It included focus groups, participant 
interviews (3 from the date of pregnancy certification to about 
4 months postpartum), record abstracts, observation, and 
interviews with local WIC directors and staff.
    The study did not include specific recommendations, but it 
included a variety of findings on how nutrition education is 
provided, what is offered, what is received by participants, 
and how their knowledge, attitudes and self-reported behavior 
change over time in response to WIC and other influences. These 
findings suggested a need to reexamine how WIC nutrition 
education is provided in light of recent nutrition education 
research and current public health challenges. In particular, 
they suggested a need to emphasize more client- and behavior-
centered counseling strategies, improve infant feeding 
practices, and focus on healthy behaviors for life, including 
physical activity to address concerns about obesity prevention 
and weight management.
    FNS staff presented the findings at a variety of 
conferences, and solicited comments from members of the WIC 
community. Comments from the WIC community have played a 
central role in the development of a new initiative to 
Revitalize Quality Nutrition Services in WIC, which includes an 
emphasis on: additional training resources for WIC staff, to 
assist them in updating their skills and learning more client- 
and behavior-centered counseling strategies, and to reexamine 
the messages that WIC provides to ensure that they focus on 
achieving and maintaining healthy behaviors for life. To that 
end, we are undertaking:
    WIC Works Resource System. An internet-based web site to 
promote communication among WIC nutrition educators, sharing of 
educational resources and training opportunities.
    Bright Futures in Practice: Nutrition training sessions, in 
partnership with the Department of Health and Human Services, 
Health Resources and Services Administration, Maternal and 
Child Health Bureau (MCHB).
    Partnership with the National Association of WIC Directors: 
to review current nutrition services standards and develop 
measures of quality.
    Conduct workshops with staff at the federal, State and 
local levels to promote and emphasize the importance of quality 
nutrition services in WIC.

    Mr. Kingston. So if this committee pushed for a study you 
would support it?
    Mrs. Watkins. Sure. I would accept any funding that you 
would provide for me to do such a study.
    Mr. Kingston. Probably GSA.
    Mrs. Watkins. I thought you wanted me to do the study?
    Mr. Kingston. If you would work with them----
    Mrs. Watkins. I would be happy to work with GSA on this 
study.
    Mr. Kingston. Actually, you are closer at hand, and if you 
could police yourself that would be great. Some of the younger 
members--sometimes it is better to have somebody come from the 
outside, as you know.

                        food stamp participation

    Let me ask you this. Food stamps--I am confused. I see the 
President flying around the country bragging about welfare 
reform, parading families, saying this is what I have done, and 
50 percent of the people who were on welfare 4 years ago are 
not now, but food stamp rolls are going up. Isn't that what you 
said? They are at 18 million, and they could go up slightly?
    Mrs. Watkins. Participation was up to 27 million, if you 
remember, before welfare reform----
    Mr. Kingston. Actually, I do not remember; and, 
unfortunately, I had another committee meeting so I have been 
in and out. All I caught was the 18 million. So it is from 27 
to 18?
    Mrs. Watkins. We are down dramatically.
    Mr. Kingston. I had it wrong.
    Mrs. Watkins. What you did understand is that we expect a 
slight increase if we go forward with the educational efforts. 
We are only serving about 63 percent of those that are eligible 
to participate.

                            child education

    Mr. Kingston. A great segue to my next question. Child 
education. Fifty cents per child in the school nutrition 
program for nutrition education, does that ring a bell? I am 
not sure if that comes under your department----
    Mrs. Watkins. That does ring a bell. That was in the 1970s, 
we got 50 cents per child allocated for nutrition education and 
training. We only received funds for 2 years. That was when I 
was working in Memphis.
    Mr. Kingston. $27 million, correct, total?
    Mrs. Watkins. If you give it to me.
    Mr. Kingston. You are requesting it in this budget?
    Mrs. Watkins. No, I am not. I am only asking for $2 
million. I would like to have $27 million if you want to give 
it to me. We could do an awful lot in this country on educating 
people, but we never get the funding.
    Mr. Kingston. Actually, I think this committee is a lot 
more interested in that than you think because it gives us a 
measurability. Tying that in, the CDC just came out with 
studies that show that child obesity rates are higher than 
ever, and their sugar consumption has increased to record 
levels. There might be a link there. Funding child nutrition 
education I think is a logical step in trying to address this 
but also putting in a component of whether the nutrition 
education working. Because we haven't given it a fair shot. We 
should look into that.
    Mrs. Watkins. I am so glad you raised that, because the 
Surgeon General released Goals 2010, or what this country will 
be looking forward to working on, and for the first time they 
are going to have some indicators by the year to determine 
whether or not we are successful. We have worked really hard 
with the Surgeon General to make sure that overweight and 
obesity issues were addressed.
    You probably remember 2 years ago, Dr. Anand had the first 
childhood obesity prevention symposium that had ever been 
conducted by the Federal Government. And the Surgeon General 
worked with the Secretary of Agriculture to be sure that we 
could address that. And it is in the 2010 leading indicators 
and in Healthy People 2010. We didn't reach our goal for 2000.
    Mr. Kingston. Now that the bell has rung here, let me ask 
you, I think this committee is a lot more interested in child 
nutrition education. We want to see this moved along. How much 
overlap do you have with the CDC on this? I know that you are 
talking, but you don't share moneys on it, I would assume.
    Mrs. Watkins. We work very aggressively with CDC and HHS on 
all of our nutrition issues.
    Mr. Kingston. Here is what I am moving to, because we are 
sensitive to time. It would appear to me that as we are doing 
this we should look at some pilot programs, in particular areas 
to see between you and CDC and nutrition education if we can 
make some progress to measure the current obesity rate and then 
have a goal of reducing it by a certain level by date certain.
    Mr. Chairman, I guess my time has expired.
    Mr. Skeen. Proceed.
    Mrs. Watkins. Thank you so much, Mr. Kingston. We really 
want to work with this committee. You may not know, because we 
don't share everything--maybe I ought to be up here every day 
telling you what I am doing--but we are working very 
aggressively with HHS, the Department of Education, FNS, and 
CDC on a school health objectives for the Nation. We have 
quarterly meetings and sit down to talk about how we can move 
things forward on this. So I will share with you some of the 
things that we have been doing already, and I think that you 
would be very pleased.
    Mr. Kingston. My last question, which I am not going to ask 
because I know we don't have the time, but it was getting back 
to what Mr. Farr was bringing up with the cafeterias and the 
vending machines and the fact that we give kids a choice 
knowing they will do what they want, not what they need. I am 
glad that you brought that up.
    Mr. Skeen. Folks, I think that we have put sensitivity and 
recognition to this issue. It is a good exchange. You have both 
done very well.
    Mr. Hinchey.

                         food stamp eligibility

    Mr. Hinchey. Thank you, Mr. Chairman.
    Madam Secretary, I for one want to say how important I 
think the work is that you are doing. There is nothing more 
important to any society than the health and well-being of its 
citizens. The best way to maintain the health and well-being of 
citizens is to make sure they are getting adequate nutrition. 
That is what your mission is all about, and I commend you for 
the job that you are doing.
    I know, however, there is always more that can be done and 
problems to overcome. Let me just talk a little bit about some 
of the things that I perceive that we need to address.
    You mentioned that participation in the Food Stamp Program 
is down, and it is down quite dramatically. It is down at a 20-
year-low, as I understand it. I know a lot of that decline is 
directly attributable to the good economy. We have record 
levels of employment, record levels of unemployment, income 
levels are rising, et cetera.
    However, the participation rate in the Food Stamp Program 
has fallen faster than the poverty level. There are almost a 
million people who crossed the poverty line this year. In other 
words, a million people came out of poverty this year. But, at 
the same time, nearly 4 million have left the Food Stamp 
Program. So I am wondering to what extent we can attribute this 
to something else that I perceive going on, and that is that 
agencies are discouraging, even preventing, eligible people 
from applying for benefits.
    A study released last May found that New York City was 
among the biggest offenders in that regard. As a result, an 
increasing burden has been put onto food kitchens and other 
dispensers of emergency food as a result. We have seen evidence 
to indicate that as many as 1,400 children a day, 1,400 
children alone, are turned away from emergency food services in 
New York city because the soup kitchens are saturated. What 
does that tell us? That tells us a lot of hungry people are not 
getting food stamps, the emergency feeding programs are 
inadequate to deal with them, and people are increasingly going 
hungry. I wonder what your comments might be about that 
situation and what you think we ought to be doing about it.
    Mrs. Watkins. Well, obviously, we have a lot of work to do. 
We are working with States to ensure agencies are encouraging 
participation--not discouraging it.
    You mentioned that there have been problems in some States. 
Those States have been identified by some of the advocacy 
community and our regional offices have recognized that there 
is a problem. We have worked very aggressively with those 
States to ensure that there is adequate access to the program 
and that people are not being turned down or discouraged from 
applying. We are sending out information within the community 
for individuals to have a clear understanding that they are 
still eligible.
    We all recognize that welfare reform was good. We have 
people who are working now who could not find jobs before, and 
we have a strong economy. We also, as you indicated, have 
people that are still hungry in this country----
    Mr. Hinchey. I am sorry for the interruption. What are your 
offices in New York City, for example, and other places in New 
York telling you about the actions that have been taken by the 
local governments to discourage participation in the Food Stamp 
Program and what can we do to counteract that?
    Mrs. Watkins. We have been working very aggressively with 
New York, as you may know. Our regional office has been working 
with them as well as our headquarters office and our office. We 
identified some serious problems in New York where they were 
not allowing people to apply, and we worked with them so they 
could understand that they were in violation of the food stamp 
regulations. We have been able to correct the problems and have 
maintained a pretty close working relationship with those 
States who had been identified as not allowing people to apply. 
That was one of the reasons that the President introduced the 
educational initiative, so we would be assured that people had 
access to the program information. So we continue to work with 
New York and the other States that have had some problems, 
States like Wisconsin and a few others. We will continue to 
work with them.
    Mr. Hinchey. That is what I wanted to hear from you. I hope 
that you do act aggressively. I am deeply concerned about the 
fact that we have people going hungry while we have these 
programs and we are seeing such a dramatic decline in the 
programs. There is something wrong when you have 1 million 
people leaving the poverty rolls and 4 million leaving the Food 
Stamp Program. Those numbers just do not match. It is simple 
mathematics. There is something else going on here that needs 
to be addressed. I hope that you will work with us on this 
committee to find out what is happening so that we can deal 
with it more effectively.
    I am wondering also if you have the wherewithal to deal 
with recalcitrant communities that are taking actions that 
actually discourage needy hungry people from participating in 
these feeding programs?
    Mrs. Watkins. We do not have the resources available to 
keep a constant watch of state activities, but we have built a 
strong partnership with the advocacy community. These groups 
are working very closely with us through almost daily contact, 
informing us of what is going on in the State. We are then able 
to respond accordingly.
    I mentioned earlier that we only have 1,600 employees at 
FNS and we can't do everything. We do have to rely on States, 
local people, and the advocacy community to work with us to 
accomplish our program goals.
    Mr. Hinchey. The law has several requirements with regard 
to communities' behavior in these programs, am I correct about 
that?
    Mrs. Watkins. That is exactly right.
    Mr. Hinchey. Do you have recourse to other law enforcement 
agencies at the Federal level when you find that communities 
are not adhering to the law and people are suffering and going 
hungry as a result in actions by those communities?
    Mrs. Watkins. We do not have law enforcement resources 
necessary to ensure that people are not going hungry. We do 
have enforcement resources if individuals are violating 
trafficking or quality control----
    Mr. Hinchey. I am very familiar with that. What I am 
raising with you is a different question, not raised before, to 
my knowledge.
    Mrs. Watkins. That is exactly right.
    Mr. Hinchey. Everybody is very hip to the idea that you 
have some people out there who may be abusing the Food Stamp 
Program and that kind of thing. Well, you send the FBI after 
those people.
    Mrs. Watkins. Mr. Hinchey----
    Mr. Hinchey. Wait a minute----
    Mrs. Watkins. I don't have anyone to send out to make sure 
that the hungry people get fed other than the advocacy 
community. If you want to work with me, I would be glad to find 
more resources to be able to accomplish that.
    Mr. Hinchey. That is exactly what I am interested in. I 
know that if you find out or somebody comes to you says there 
is a racket going on in the City of New York, for example, and 
you have a bunch of people out there who are printing food 
stamps illegally and dispensing them and making money by so 
doing, you go right to the Federal Bureau of Investigation and 
you say to the FBI there is evidence of racketeering operations 
in the City of New York or someplace else with regard to 
illegal food stamps.
    What I am asking you is this: If you find out that some 
municipality is acting in a way that is depriving people of 
their just right under the law to get good food and nutrition 
and the government of that municipality is putting roadblocks 
in the way to make sure that those people do not get the food 
that they need in spite of the fact that they are lawfully 
entitled to it, why wouldn't you go to the FBI and say we have 
a municipality that is violating the law and people are 
suffering as a result of it?
    Mrs. Watkins. The only recourse we have is to withhold 
funding from a State or local agency that may not be following 
the rules. That is the only recourse that we have.
    Mr. Hinchey. Then you may need additional authority. If a 
local government is acting contrary to the law and people are 
suffering and there is no recourse at the local level, you may 
need some additional authority to call in Federal agencies and 
call in an investigation of that if you do not have that 
currently.
    Mrs. Watkins. Daily, our staff works to ensure that the 
laws are followed. The States have worked really well with us 
when we have identified problems in that area. For instance, 
New York worked really well with us after we had to go in and 
get really aggressive with them. They did exactly what we told 
them to do once we informed them that we were going to withhold 
funds. They got busy really quickly.
    Mr. Hinchey. I am getting off where I want to go a little 
bit. You are not helping me at this precise moment to get 
there. I know that you want to, but you are not helping me at 
this precise moment.
    What I am interested in is why we have these numbers, of 
this great disparity, 4 million people dropping out of the Food 
Stamp Program while 1 million people have gotten out of 
poverty. There is something wrong with that. 1,400 children, 
only children, 1,400 children a day being turned away from 
feeding programs in churches and other private organizations 
because they do not have a capacity to feed them all. There is 
something going on where people are not getting the food and 
nutrition they need under food stamps and other programs. I 
would like to have an opportunity to work with you and staff to 
come up with a way to deal with this particular problem. If we 
could do that, I would be very grateful to you.
    Mrs. Watkins. Mr. Hinchey, I would be glad to work with you 
and your staff to see what can be done to ensure that people 
don't go hungry in this country. Our goals are the same.
    Mr. Hinchey. Yes, I know they are, Dr. Watkins.
    If I have another second, I would like to ask one other 
question----
    Mrs. Watkins. Let me just correct one thing. I am not a 
doctor.
    Mr. Hinchey. You are not doctor? I was going to ask you for 
a diagnosis before we left here.
    Mrs. Watkins. I was afraid you were, so I wanted to correct 
that.
    Mr. Hinchey. We won't trouble each other with that.
    We have seen a decline in the consumption of milk in 
schools. We have seen a dramatic increase in the consumption of 
what we refer to as soft drinks. We even see some school 
districts engaging in exclusive contracts with particular soft 
drink manufacturers, deriving revenue from that because they 
can use this revenue to somehow enhance their educational 
programs. That is how desperate some of our school districts 
are. They are so desperate that they enter into contracts with 
soft drink operations knowing that the sugar in those soft 
drinks consumed in large amounts by the children in those 
districts is not good for them and may in fact lead to aberrant 
behavior.

                              school lunch

    Similarly, I think Mr. Kingston may have suggested a few 
moments ago that there may be some connection between the 
dramatic rise in the consumption of sugar through the soft 
drink programs in schools and the increase in violence and 
other similar activities in those schools. Obviously, it is 
much better for children to drink milk. What are we doing to 
encourage the consumption of milk and to discourage the 
consumption of these so-called soft drinks in our school lunch 
programs?
    Mrs. Watkins. We have as a part of our child nutrition menu 
planning strategies to encourage schools to offer milk. This is 
something that is done with our team nutrition efforts in 
providing materials to schools.
    We also have a real serious problem in this country, and it 
is something that this committee can address. As I indicated to 
you earlier, we have something that I think you would be able 
to use from all of the medical associations and the American 
Dietetic Association that will help you get to where you want 
to be. I think if we can provide that information to you in 
another 2 or 3 months it would be something that you could look 
at as possible legislative efforts that can be used to address 
this issue.
    Mr. Hinchey. I agree with you, and I think that would be 
very helpful. I am wondering if you have the authority or the 
ability in some way to work, for example, with the U.S. 
Department of Education to get them to withhold funds from 
schools that do not participate in the milk program or are 
engaging in other activities which are discouraging the 
consumption of milk and encouraging the consumption of sugar 
through these soft drinks? Is there any way that we could 
consider an effort along those lines, which I suggest would be 
a lot more effective than just telling people what is good for 
them?
    Mrs. Watkins. I would like to work with you and this 
committee, Mr. Hinchey, in looking at a variety of ways that we 
could work with other Federal agencies.
    One of our partners is the Department of Education. There 
are some ongoing efforts with them to look at how we can help 
children enhance their educational environment. We have had Dr. 
Anand and the FNS staff do a workshop on the school environment 
that addressed all of the issues that you are talking about. We 
brought all of the noted researchers on this issue in. I think 
we do have some things that we can do with the Department of 
Education, the Department of Health and Human Services. So all 
of us working together can come up with the kinds of things 
that you would like to see done. We would love to continue the 
dialogue and to work with you as we move through this budget 
cycle.
    Mr. Hinchey. I thank you very much. I think we do need to 
take some additional action. It seems that some of these horses 
have been led to the trough, but we can't get them to quite 
drink. We may have to do something else.
    Mr. Skeen. You have to bring a cow.
    Mr. Hinchey. We may have to get them right into the 
schools.
    Mr. Skeen. Mr. Bonilla.

                            food stamp fraud

    Mr. Bonilla. Thank you, Mr. Chairman.
    I might mention to my colleagues that if they are 
interested, as we all are, in trying to curtail some of the 
fraud and abuse in the programs that we are talking about here 
today, we could probably all work together to give the 
Inspector General some more manpower, because he has been 
struggling in the last few years with strict budgets. I think 
that Mrs. Watkins would probably agree that if we gave the 
Inspector General a few more resources he could probably tackle 
some of these people who are stealing from the folks who 
actually need some of these nutrition programs.
    So this leads into my first question, Mrs. Watkins. How are 
you working with the OIG on this problem, and specifically what 
are you doing to try to eliminate some of the fraud and abuse 
in the Food Stamp Program?
    Mrs. Watkins. Mr. Bonilla, we work very closely with the 
OIG's office. As you provide additional staffing and resources 
for the IG's office, you should also look at some staffing for 
FNS to ensure that we will be able to carry out the various 
mandates and the findings of the IG's office. He can find 
whatever he wants to out there, but if we don't have the staff 
to do something about it, then it doesn't do any good.
    Mr. Bonilla. My understanding is when he finds evidence he 
presents it to the Justice Department, isn't that correct?
    Mrs. Watkins. The IG may present it to the Justice 
Department if there is some criminal investigation that is 
necessary.
    Mr. Bonilla. That is what I am referring to, criminal 
activity. This is all criminal activity.
    Mrs. Watkins. We generally go in and identify the problems 
and present them to the IG's office to show that these are 
things that need to be reviewed. As we go through each process 
you should review the resources for both agencies to ensure we 
have adequate staff to work together. We work very closely with 
the IG's office in getting some of these things done because we 
at the Department of Agriculture want to make certain that we 
don't have any quality program issues that damage the integrity 
of the program.
    Mr. Bonilla. I think that we could all agree that 2 to $3 
billion a year is an incredible amount. The OIG, when he 
testified recently, estimated there was between 2 and $3 
billion of fraud and abuse. That is a lot of money that could 
be going for a better cause. That is also why some of us have 
concerns about trying to start a new program, if we don't have 
the systems in place yet where we can stop a lot of this fraud 
and abuse in the programs that we currently have. Why on earth 
would we be trying to start a new program that would be ripe 
for the same kind of fraud and abuse? I think Mr. Boyd raised a 
question earlier. I don't want to be redundant here, but a lot 
of us have that same concern.
    Mrs. Watkins. We all have the same concern as you have. 
Since I am responsible for ensuring that this program has the 
best quality that you can find, then I am perhaps more 
concerned than you are. I have to live with the quality of 
these programs every day.
    Our trafficking estimates do not necessarily constitute a 
loss but more of a diversion of benefits based on our 1993 data 
of about $815 million per year. A more current estimate is that 
it is $660 million per year, based on the 1996-1998 data that 
we currently have in clearance. There is a lot of diversion of 
benefis as well as trafficking.
    We do an enormous amount of work. We are going to release 
some information fairly soon informing you of what the agency 
is doing in addition to what is being done by the IG's office. 
An awful lot of work goes into ensuring that we don't have any 
problems with the programs and the quality of the programs.

                              wic vendors

    Mr. Bonilla. I would like to move on now, Mrs. Watkins, to 
another subject. What prompted the USDA to release the proposed 
regulations in June of last year that will limit vendor 
participation in the WIC program, and have you assessed the 
impact this could have on rural areas?
    In my district, and as I am sure in many rural areas around 
the country are some of the poorest, and there may be only one 
grocery store for serving one community, and you might have to 
drive a long way to find another one that might be part of the 
program. This could really hurt these areas. I think that we 
could look at other ways to try to have a little more control 
over some of these programs. Have you assessed the impact that 
this would have on rural areas?
    Mrs. Watkins. Yes, I have. It is interesting that you just 
mention the IG. One of the reasons we implemented this change 
was recommendations from OIG and GAO. That was what 
precipitated this. In order for us to manage these programs to 
be good-quality managed programs, these implementations were 
necessary.
    Mr. Bonilla. What about the impact on rural areas? Have you 
assessed that?
    Mrs. Watkins. We have assessed the impact across this 
country and don't see any real negative impacts as we move in 
this direction. But we do have to address the issues that you 
raised with me on fraud, waste and abuse when we review the 
program. We have looked at what the effects would be in rural 
America. This is one of the things that we are doing across all 
of our programs, looking to see what happens in rural America, 
and what happens in urban America. The same issues for stores 
in rural America are the same issues for stores in inner city 
America. I am aware that they are parallel.

                           wic food packages

    Mr. Bonilla. Just a final comment. I have an area that goes 
from 500 miles across and about 350 miles up and down. So some 
of these areas you do have a long way to go before you can find 
a particular product. That is why I raised the question, and 
that is why I hope that we can keep an eye on it.
    I know that my time is running out here. But I want one 
more question here. Does the WIC program allow for States to 
make changes in the food packages that would take into account 
regional, cultural or religious preferences in the diet?
    Mrs. Watkins. We do now, and we are currently working on a 
revised WIC food package. This would be the first time that we 
have looked at the WIC food package revision in 20 years. We 
have taken into consideration the cultural and ethnic 
sensitivities. We are also looking at some of the dietary needs 
of WIC recipients. I think that you would be very pleased with 
the new WIC food package.
    Mr. Bonilla. Mrs. Watkins, thank you very much for being 
with us this morning. I may have another question to submit for 
the record. Thank you very much. Mr. Chairman.
    Mr. Skeen. Mr. Nethercutt.
    Mr. Nethercutt. Thank you, Mr. Chairman.
    Welcome to the panel. Mr. Bonilla, he and I sit on the 
National Security Subcommittee on Appropriations. We just had a 
defense hearing, and I am sorry to be late for your testimony.

            food distribution program on indian reservations

    The fiscal year 1999 appropriations bill contained some 
language that I authored relative to continuing consultations 
between the CDC and the Indian Health Service to improve the 
nutritional content of commodities distributed under the Food 
Distribution Program on Indian Reservations, and I saw the 
reference here in your chart. Historically, the fat content of 
the food package was exceeding any accepted standards as very 
high, and we are seeing so many cases of increased type 2 
diabetes among Native American children which is alarming. It 
hits my part of the country in Washington State as well as the 
chairman's and others across this country for American Indians 
and Alaskan natives.
    Apparently, the food content now has been reduced to 25 
percent, and improvements have been made in reducing the salt 
content as well. I believe you are taking steps to expand the 
fresh fruit and vegetables program which was begun as a pilot, 
in 1995, I am informed. I am wondering if you could update the 
subcommittee on that subject as it relates to these young 
children and the Indian tribes that are facing the increasing 
incidences of diabetes.
    Mrs. Watkins. Mr. Nethercutt, I am glad that you raised 
that because it is an issue that has been near and dear to my 
heart.
    We have worked very hard to make changes in the fat 
content. In fact, I have visited a number of reservations in 
this country since 1995 to make sure some of those changes have 
been implemented. We have been working very aggressively with 
the American Indian population to ensure that our food packages 
address their needs and are sensitive to their cultural needs. 
We are looking at the fat content, the sugar content, and the 
sodium content of the food package. We have made some 
substantial progress in that area.
    In addition, we are working on some nutrition education 
efforts. We have done a lot of work in the Mountain Plains 
Region where they have developed most of the materials for us 
that we can use across the country.
    Mr. Nethercutt. What else are you looking at? I understand 
maybe buffalo meat or some other lower fat product.
    Mrs. Watkins. We have tried buffalo meat and we have made 
some purchases of ground beef. We are working with the Indian 
tribes to discuss what other kinds of changes they would like 
to see us make. I think it is important for us to know what 
they want in the way of commodities and how can we provide 
those products and review the nutritional content of those 
products.
    The Agriculture Marketing Service has been just wonderful 
in working with us on this issue. The Department of Defense, I 
can't say enough about them. We approached them to provide the 
fresh fruit and vegetables on a pilot basis, and we have been 
able to expand that to over 30 reservations. We will continue 
until we have all of the reservations on that fresh produce 
pilot program.
    Mr. Nethercutt. That is critically important because I 
think the population that we serve, you serve, in agriculture 
and food distribution is critically important to make sure that 
it is the right kind of food to prevent this diabetes. It is 
epidemic in some tribes, and I have a special interest in it 
myself.

                             organic foods

    I understand that you are experimenting with providing or 
substituting organic foods in some programs. I wonder if you 
have looked at the reliability of the supply of organic foods? 
Could you update the committee on that?
    Mr. Farr. I could tell you about that.
    Mrs. Watkins. I defer to Mr. Farr.
    Mr. Farr. We have the largest organic business in the 
United States in California and the Central Coast. And, yes, 
they can meet market demands.
    Mr. Nethercutt. Is that your finding as well? I love my 
friend, but----
    Mrs. Watkins. I would have to ask my counterpart, Under 
Secretary Mike Dunn, what he is going to do about that once he 
gets some organic rules to come out. We are anxiously awaiting 
the organic rules, and I think I would be a little premature 
saying that we could do something with organic food when I 
don't know what his organic rules are going to be.
    Mr. Nethercutt. When would that be forthcoming?
    Mrs. Watkins. I think pretty soon.
    Mr. Nethercutt. Before the election or next year?
    Mrs. Watkins. We are talking about something really 
imminent.

                   nutrition program for the elderly

    Mr. Nethercutt. Final question. Recently a constituent from 
my State called our office and was concerned that the per meal 
reimbursement on Meals on Wheels was being reduced from 55.39 
cents per meal to 54.04 cents per meal, resulting in programs 
nationally receiving about $10 million less than anticipated. I 
am wondering if you could, now or for the record, please, 
ma'am, advise how many more meals were served in fiscal year 
1998-1999 and the anticipated fiscal year 2000 and what the 
change has been in the per meal reimbursement during those 
years.
    Mrs. Watkins. I would be glad to do that for the record.
    I can just say to you that we conducted some roundtables 
around the country and were pretty astounded at what was going 
on with Meals on Wheels and the enormous caseload waiting list. 
I was just shocked at the waiting list. That precipitated my 
request for some additional funding. Of course, our funds are 
just a small fraction of the money that they get from AOA. 
Anything we can do to assist them should be done.
    [The information follows:]

                            NPE Meals Served

    Section 310 of PL 102-375 (Order Americans Act Amendments 
of 1992) set the reimbursement rate at 61 cents per meal 
adjusted annually for inflation beginning in fiscal year 1993. 
The adjustment would have been based on the June to June change 
in the CPI-U for food was from home with a one year lag. 
However, this legislation has been overridden by the 
Antideficiency Act, which limits the real rate to the available 
appropriation plus carryover (if any) divided by meals served. 
The NPE appropriation was reduced from $150 million in fiscal 
year 1996 to $140 million in fiscal year 1997 and has remained 
at that level through fiscal year 2000. The reimbursement rate 
was virtually unchanged in fiscal year 1997 but declined 
significantly in fiscal year 1998. A more modest rate decline 
occurred in fiscal year 1999 reflecting a minor increase in 
meals served. DHHS has projected a significant rise in activity 
beginning in fiscal year 2000 due to increased funding for the 
home delivery component of the program. If this increase 
occurs, the rate will decline because FNS funding for meal 
reimbursements is unchanged. DHHS projects a far sharper 
increase in fiscal year 2001. FNS has recommended an 
appropriation level of $150 million to prevent a further 
substantial decrease in the reimbursement rate.

------------------------------------------------------------------------
                                           Reimbursement
               Fiscal year                     rate        Meals served
------------------------------------------------------------------------
1995....................................           58.38     251,199,778
1996....................................           58.64     245,591,332
1997....................................           58.57     247,478,931
1998....................................           56.07     250,647,861
1999....................................           55.39     252,459,000
2000 (Proj).............................           54.04     259,000,000
2001 (Proj).............................           54.04     279,000,000
------------------------------------------------------------------------
Note: The 2001 reimbursement rate assumes an appropriation levels of
  $150 million. If the appropriation remains at $140 million, the rate
  will decline to 50.2 cents.

    Mr. Nethercutt. It is a good program. I have had an 
occasion to deliver meals. I would commend it to my colleagues. 
I assume maybe they have done it, too, but it is satisfying and 
interesting to see a program in practice that we know and fund 
and realize is out there. It is different to see it on the 
ground.
    Thank you, Mr. Chairman. Thank you for your testimony 
today, all of you. Thank you.
    Mr. Skeen. We thank you, and I want you to take a look at 
chili as a basic food from our part of the country. If you eat 
chili, you will never be sick a day. But you may become a fast 
runner.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman----
    Mrs. Watkins. I understand that was a gift from Ms. Kaptur 
to you. Are those the same chilies?
    Mr. Skeen. Yes, but be careful, they have been varnished. 
We want to preserve them, and they did a beautiful job. We in 
New Mexico think that chili is a basic food. If anybody dies 
from eating it, they never told us about it.
    Mrs. Watkins. I take your word, Mr. Chairman.
    Ms. Kaptur. The Joe Skeen memorial chilies.
    Mr. Skeen. Miss. Kaptur.

                          children and obesity

    Ms. Kaptur. Thank you very much, Mr. Chairman.
    I wanted to probe a little deeper on one of the issues that 
several committee members have discussed here and that is child 
nutrition. I want to do it from two focal points.
    Madam Under Secretary, based on last year's questioning we 
asked you for information that you provided us with dealing 
with the quality of nutrition of our Nation's youth. I was 
particularly troubled to read some of the statistics that you 
provided, certainly that in the last decade in this country we 
have doubled the number of overweight children to the point 
where approximately one-third of youth are now technically 
obese. It is a national epidemic. In fact, that problem is more 
prevalent as a condition among our youth than, in fact--
including low-income children--than underweight children or 
children with growth retardation.
    It was also alarming to read that a majority of our 
children, over three-quarters of them age 6 to 11, consume 
snacks every day accounting for 20 percent of their caloric 
intake.
    We have also heard from other witnesses before this 
committee that for the first time in modern history milk 
consumption among our children is going down. Soft drink 
consumption is up to incredible levels, and osteoporosis is 
appearing in young girls at a much earlier age. My question on 
that issue really is, how can we, through regulation at the 
Federal level, perhaps through restrictions on State 
eligibility for funds under your jurisdiction, exact changes 
that result in healthier children?
    And then my second question relates to waste in the school 
lunch programs and breakfast programs. We talked about this 
with Secretary Glickman. What is your department doing to 
measure the amount of plate waste attended to feeding programs, 
children essentially substituting soda and candy for beans and 
milk? And many school districts I guess don't follow the offer 
versus serve policy that results in children rejecting good 
food for temporary highs associated with high sugar and so 
forth.
    I am very interested in what you are doing to measure plate 
waste. If I have a personal goal, it would be first of all, 
that we not waste good food but that we somehow use the money 
that is being lost in thrown-away food to turn it back into 
exercise and nutrition and school nurse and educational 
programs for our children to help reverse this. I would like to 
know how you are thinking about that problem. The first deals 
with regulatory changes that would help to produce more healthy 
children and the second dealing with how do we convert that 
plate waste to more useful purposes.
    Mrs. Watkins. To address your first concern on regulatory 
issues, we do have a competitive food policy that could be 
strengthened. That goes back to something I had referenced 
earlier in working with the various medical associations and 
the American Dietetic Association to come up with some 
standards. I think that could be turned into a very 
comprehensive legislative package for you. That is one way that 
you could address the issue.
    Ms. Kaptur. When would that be ready?
    Mrs. Watkins. We hope to have something in another couple 
of months.
    Ms. Kaptur. I hope before completion of this appropriation 
cycle. We ought to have something before we move this bill.
    Mrs. Watkins. Knowing your interest, we can go back to 
those groups and see if we can get it sooner. We were planning 
to release the data in the spring. There were some changes, we 
can look at that and see if we can move it along more 
aggressively.
    We have not done anything recently focusing on offer versus 
serve, since we have had that provision in the law for a long 
time. Knowing that it is a concern of yours, we can go back to 
work with the staff to see what kinds of things can be done 
with offer versus serve.
    Many of the school districts, based on the data that we had 
from the National Food Service Management Institute, indicate 
that most schools are offering a minimum of two items for offer 
versus serve. Not only the entrees but food and vegetable 
choices as well as meat and other items. The staff and I will 
get busy and see what we need to do in working on offer versus 
serve.
    Ms. Kaptur. Do you have ongoing studies to measure plate 
waste?
    Mrs. Watkins. We don't have ongoing studies. We don't have 
funding for that. If that is something that you want us to do, 
we would be more than happy to work with you.
    Ms. Kaptur. Let's figure out a way to do that. Let's get 
some numbers in a few places in the country to measure what is 
going on. You are the expert on where that might best be done. 
I would make that plea to you. I would try to help you in this 
budget cycle as a part of one of these appropriation accounts.

                        employment and training

    I know my time has expired. I would merely ask the Under 
Secretary for help in the employment and training area. I have 
to tell you that there is a great deal of confusion at the 
local level as to what is happening as a result of welfare to 
work, and the State of Ohio is the only urban State in the 
Union that has given back over a billion dollars to the Federal 
Government that is not going into job training. We have new 
people at the local level trying to administer some of these 
training programs at the Department of Health and Human 
Services. They have never done this before.
    Congresswoman Meek talked to me about this problem this 
morning. She is concerned about what is happening in Florida. 
Is there some sort of interagency group you have got over there 
that you could bring up for those members who really feel that 
the job is not being done at the local level? We really need a 
briefing up here.
    Mrs. Watkins. I am glad you asked that. Deputy Under 
Secretary Julie Paradis is working on E&T, and the staff has 
already begun addressing how we can work with States and local 
agencies. We will be glad to come up and explain what we are 
trying to do, and discuss what we have on the drawing board. We 
are as concerned as you are, and we want to make certain that 
agencies use the money to address those needs.
    Ms. Kaptur. May I ask, Madam Secretary, could you bring 
whoever who is in charge at Labor and whoever is in charge at 
HHS so that we can get whoever they are around the same table?
    Mrs. Watkins. Yes. Julie has been working on that. She has 
some things that she has already started.
    It has been an interagency effort within Department of 
Agriculture to work with the other deputies, such as: the 
Deputy Under Secretary in REE, the Deputy Under Secretary in 
rural development and the Forest Service and NRCS. She has 
begun the process. We would be glad to come in and share that 
with you and bring the other deputies with us along with the 
work that she has been doing over at Labor. She is doing an 
outstanding job, so I think you would be pleased.
    Ms. Kaptur. Thank you.
    Thank you, Mr. Chairman.
    Mr. Kingston. [Presiding.] Thank you, Miss Kaptur.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman. I will try to be brief.
    I think you have heard a theme here today about expressing 
what is going on with agriculture in America. The technology of 
agriculture in America has allowed this movement of what they 
call fresh to market, which is just to take fresh commodities 
lying in the field, package them in the field, or keep them 
fresh, like the juices and things like that, and deliver them 
to the market. The theme that you have heard is how can we, 
through recognizing the nutritional value of this fresh food, 
use our commodity programs to encourage more use of fresh foods 
rather than packaged foods? I would like to see how we can do 
that. And if that is consistent with what the nutritional 
recommendations are, how is our purchasing power, how does our 
grants to States or community school districts or nutritional 
programs, how could we encourage more and more of these fresh-
to-market commodities?
    In line with that, Mr. Kingston and I may have disagreement 
on this, but I would like to see Odwalla replace Coca Cola. 
That is the kind of fresh to market I am talking about. So I 
would appreciate any recommendations that you may have. All of 
us have discussed how we are interested in that.
    The second thing I want to talk about or ask you about is 
streamlining. I understand that the requirements for summer 
youth school feeding programs, that the forms--you were talking 
about reinventing government and trying to streamline, but the 
forms that people have to fill out, because there is a 
different form if you are getting fed during the school year 
from the one if you are getting fed during the summer, and 
these forms are complicated. Have you tried to put all of that 
stuff into one form? I had one, but I can't find it here. I 
think that is the one, the difference between the school normal 
year feeding program and the summer program.

                          summer food program

    Mrs. Watkins. Mr. Farr, we have looked at that. One of the 
things that we have done is to try to figure out how we can 
make the summer feeding program more accessible.
    We have been looking back at the history of the summer 
feeding program, how it started and evolved over the years. 
When the program began it was generally sponsored by recreation 
centers and community groups, not by schools. We have had 
roundtables with school superintendents and school food service 
directors to figure out what it is that we need to do to 
encourage them to become summer sponsors, and they identified 
some of the things that you have already mentioned: the 
complexity of the paperwork and having to do two different 
budgets.
    Mr. Farr. The one model form that they fill out, can you do 
this--if you have been doing electronic benefit transfers for 
food stamps, why couldn't we do electronic forms?
    Mrs. Watkins. We have addressed that, and we are working 
with those school districts so that we can continue the summer 
feeding program with the one application. You might remember 
when we had reauthorization, one of the things that we wanted 
to do was to have a simplified process and have one application 
for all of the programs that could ease all of that complex 
paperwork.
    Mr. Farr. Do we have it?
    Mrs. Watkins. We were not able to get that through because 
there was a cost attached to it.
    Mr. Farr. We also have a paperwork reduction mandate in the 
Federal Government. How come we mandate one thing and can't do 
it?
    Mrs. Watkins. Without funding, sometimes you can't get some 
things done. But we have been able to make some changes that 
have reduced the paperwork for schools that are going to 
administer the summer feeding programs. We have addressed those 
issues. I think those people who would administer the summer 
feeding program this year in schools will find it much easier 
to do.

                                  ebt

    Mr. Farr. The last part of the question is that EBT, 
electronic benefit transfer, is operating Statewide in 32 
States. Why is it only in parts of California?
    Mrs. Watkins. We started out in the Los Angeles area--in 
San Diego. It is moving----
    Mr. Farr. North?
    Mrs. Watkins. Yes. North.
    Mr. Farr. Can't move any other way.
    Mrs. Watkins. It is going to move all over that State. You 
realize that we are to have all of these completed by fiscal 
year 2002.
    Mr. Farr. Is there anything that California ought to be 
doing that they are not doing to come online?
    Mrs. Watkins. I understand that California is pretty large, 
and the western region has identified that California released 
an invitation to partner, and their services started August 3 
of 1999. I think they will be coming online soon, but the 
deadline is fiscal year 2002 for us to have all of the States 
online. I think we are going to make that deadline. Cost is a 
big issue for California.
    Mr. Farr. Florida is a big State, very populous, and I see 
that they are online. If there is anything that these States 
aren't doing, you have representatives from those States that 
would like to see them come online ASAP, so we would be glad to 
be advocates for you.
    Mrs. Watkins. We would be glad to come in and work with you 
and share some of the kinds of ideas that can help us to move 
forward.
    Mr. Farr. This committee likes to speak softly and have a 
big stick.
    Mrs. Watkins. Not on me.
    Mr. Kingston. Thank you, Mr. Farr.
    We are going to have a vote in a few minutes, so if the 
committee members are interested in keeping that in mind--I 
think, Mr. Hinchey, Ms. Kaptur, do you have any more questions? 
It is Mr. Hinchey's time.

                          school lunch program

    I want to get back to the school lunch for a minute. I do 
want to emphasize that we recognize that schools, in their 
effort to look for alternative sources of revenue, are having 
all kinds of snack vending machines come in. And it used to be 
that they were roped off and off limits during lunch hours. Now 
they are not.
    I know in a similar vein you can get sport sponsors for 
certain tennis teams and soccer teams and so forth. But what 
happens is it gives a disproportionate advantage to some 
schools that get those sponsorships. But, in this situation, it 
is children's nutrition. It is something that is more of a 
State issue and a local issue, but I think that we do need to 
raise it in as many places as possible. So it is, obviously, a 
problem in California, Georgia, and maybe everywhere in 
between. But we are glad that you are sensitive to it.
    Mr. Hinchey.
    Mr. Hinchey. I am glad you are, too, Mr. Acting Chairman, 
because it is a serious problem. I found it to be similarly so 
in New York.

                           wic participation

    Madam Secretary, I note also in addition to the decline in 
the Food Stamp Program there is a substantially less dramatic 
decline but nevertheless a decline in the WIC program. 
Participation in the WIC program is down by some 200,000 or so 
from just last year. Last year, the enrollment was 7.3 million. 
Now it is 7.1. I am wondering what FNS is doing to find 
eligible women, infants and children to participate in the 
program? I am also wondering if you are seeing the same kind of 
discouraging activities that seem to be going on in some cities 
and States around the country with regard to the Food Stamp 
Program in the WIC program.
    Mrs. Watkins. Mr. Hinchey, we are looking at WIC to see 
what is the cause of the decline and what is going on. Someone 
in the committee mentioned earlier that centers may not be 
open. The hours may not be necessarily friendly for people who 
have gone to work.
    We also have begun to look at some other target indicators 
such as; low birth weight, a high infant mortality rate, and 
high teen pregnancy, even though the teen pregnancy rates have 
dropped in some areas. We have targeted some States and the 
District of Columbia to look at them and find out the cause of 
the decline. For instance, in Mississippi and the District of 
Columbia where they still had high infant mortality rates we 
saw a decline in WIC. We then are going to go in and work with 
those States--to see what kinds of educational outreach we need 
to do to eliminate the low birth weight, the infant mortality 
rate and the high teen pregnancy. And, where those young girls 
may not be going in for WIC and not participating and not 
getting the prenatal care. We are also going to work in those 
States, to encourage more participation and prenatal care.
    We have begun to look at that situation to figure out what 
it is that we need to do. The staff has already been to 
Mississippi to begin some work with them and we will 
aggressively work in these areas. That is in the southwest and 
the southeastern part of this country as well as the District 
of Columbia.
    Mr. Hinchey. Thank you very much. I am encouraged by that. 
I wonder if you would be kind enough to give me some 
information with regard to the specific participation rates in 
New York. I haven't seen it. We may have it. If we don't have 
it, I would be happy to receive that from you.
    Mrs. Watkins. We would be glad to provide you that 
information. We will also review the infant mortality rates in 
New York and the low birth weight babies, because those are 
indicators of where we we need to work with those babies that 
would be at nutritional risk. So we would be glad to provide 
you that information and work with you any way that we can.
    Mr. Hinchey. Thank you very much.
    [The information follows:]

            WIC Participation Data for the State of New York

The State of New York Average Annual Participation in the Special 
Supplemental Nutrition Program for Women, Infants, and Children (WIC)

Fiscal year:
    1995......................................................   452,997
    1996......................................................   466,185
    1997......................................................   478,980
    1998......................................................   482,882
    1999......................................................   476,563
    2000 (1st Quarter)........................................   471,127

                             WIC AUTOMATION

    Mr. Hinchey. I would make one other request of you, if I 
may, and that is that the WIC directors in my district and 
other places around the State frankly have indicated some 
increasing problems with the automation system, difficulties in 
getting people into the system and some difficulties in getting 
maintenance and information along the way. Now, I assume this 
is probably attributable in large measure to the fact that this 
is a new system that you have just implemented fairly recently. 
I don't know if that is the case, but if you would be kind 
enough to have someone look into this situation for me. I am 
getting a number of complaints from WIC directors in places 
like Tompkins County, in upstate New York, the City of Ithaca, 
who claim they are having significant problems in getting 
people into the system and keeping them there and servicing 
them properly.
    Mrs. Watkins. We will be glad to look at that. The 
information systems that the States are putting in for WIC 
around the country are something that our technology people 
have been working on with them. We will be glad to give you a 
report on that.
    Mr. Hinchey. Thank you very much.
    [The information follows:]

     WIC Information System Implementation in the State of New York

    The Northwest Regional Office(NERO) of the Food and 
Nutrition Service (FNS) has worked closely with New York in 
their development of a WIC Statewide information System 
(WICSIS) since the project's inception. NERO has provided 
hundreds of staff hours in technical assistance and several 
million dollars of financial support to the project. Both 
infrastructure and discretionary regional funds have been used 
to support WICSIS.
    In fiscal year 2000 NERO has continued to provide 
assistance and support to the New York WIC State Agency in the 
implementation of the WICSIS.
    The regional office has kept abreast of the status of 
implementation in local agencies and project improvements 
visiting site once a month. The visits were made by program and 
technical Regional office staff. Six local agencies have been 
visited since October 1999. We have also initiated biweekly 
conference calls with the Director so the she can keep us up-
to-date with latest developments. Since the suspension of the 
WICSIS rollout in November 1999, the State and contractor have 
had an opportunity to make needed corrections to software and 
communication lines as well as to revise the method for 
converting new sites to WICSIS.
    At the end of March 2000, the first of a series of 
``builds'' will be implemented. A ``build'' either adds 
contracted functionality to the system of fixes a known 
software inadequacy. The March ``build'' is intended to correct 
items in the certification portion of the software. These high 
priority corrections that were identified as being needed 
through State agency testing and local agency input.

    Mr. Hinchey. One last question. Citibank is doing a lot of 
work for you with regard to the WIC EBT system. I am wondering 
what they are charging for each transaction. How is the 
financial operation of that situation going? Is it causing a 
reduction in benefits for recipients? Do you know exactly how 
are the financial arrangements there being handled?
    Mrs. Watkins. They really don't work for us. Those 
contracts are with the various States with Citibank and not 
with us directly. We can provide you additional information for 
the record.
    Mr. Hinchey. I would be interested.
    Mrs. Watkins. We can provide you that information.
    Mr. Hinchey. I would be very interested in seeing that.
    Mr. Hinchey. The contract then is with Citibank and the 
individual States----
    Mrs. Watkins. Exactly right.
    Mr. Hinchey [continuing]. Who are not involved in that. But 
you do monitor it?
    Mrs. Watkins. We monitor it, and we review the contracts 
that the various States have with the various processors, 
whether they are third-party processors or Citibank directly.
    Mr. Hinchey. I would be very interested in seeing the 
financial data on those arrangements and also specifically to 
see to what extent those financial arrangements with Citibank 
may be causing reduced benefits for the recipients in those 
States.
    Mrs. Watkins. We would be glad to provide you that 
information.
    Mr. Hinchey. Thank you very much.
    [The information follows:]

                                WIC EBT

    Currently, the EBT system in New York delivers benefits in 
New York City and plans are underway to expand statewide by the 
end of the year. The Food Stamp Program and several cash 
benefit programs such as the Temporary Assistance for Needy 
Families program are delivered through this system operated by 
Citibank EBT Services. The State of New York may opt to add the 
Supplemental Food Program for Women, Infants and Children (WIC) 
under this contract but no decisions have been made to do so. 
Pricing is subject to further negotiations. Typically EBT 
pricing is based upon a case/month fee for each household or 
participant rather than a per transaction fee. (McBride)

                                 TEFAP

    Mr. Kingston. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    I wanted to ask the Under Secretary about the TEFAP 
program. I can tell you in Ohio that Second Harvest has told us 
that, while food stamp participation in our State has declined 
by 17 percent, participation in commodity-based programs like 
TEFAP have gone up about 7 percent. One of the issues that came 
up repeatedly was administrative funding to handle these 
commodities. So the question that I would have of you is, what 
can you do with an existing authority to help these States 
respond to this new need? And also do you have any existing 
authority to supplement administrative dollars for some of the 
bonus commodities that are being provided?
    Again, I think a lot of this is occurring, obviously, 
because of the changes in the welfare laws of our country. 
There is just tremendous stress at the food bank level in my 
State--I can't speak for other States--and yet the 
administrative dollars aren't there. It is one of the 
difficulties that they are having now in trying to meet the 
changing nature of the need at the local level.
    Mrs. Watkins. We don't have the administrative authority. 
We have requested $45 million for administrative funding. We 
would be glad to work with you, if the committee wants, to find 
some increases for TEFAP administrative funds.
    Ms. Kaptur. One of the questions I have is the program is 
authorized at $50 million and $45 million has been appropriated 
to date, and that is all that is being requested for this next 
fiscal year. Again, maybe Ohio is atypical, but I doubt it. If 
we were looking at an authorized slot basis, I guess my 
question would really be, what administrative funds would have 
to be provided in 2001 to equate with those that might have 
been authorized back in 1996?
    I am asking you to think about that for us and to look at 
what this need is across the country. Our people are really 
trying to meet that need. These are people that never get any 
press. They are out there every day. I am just so very proud of 
them. Any advice you could give us as we move through this 
appropriation cycle would be really appreciated by this Member.
    Mrs. Watkins. Let me just mention something to you that I 
had asked the staff to do for me. I have been concerned, as we 
hear this expressed quite often. I asked them to provide me the 
regulations and the legislative authority for administering of 
funding for all of the programs. I wanted to know if there is 
something that we do differently in CACFP that we don't do in 
TEFAP, that we do in school meals, that we don't do in food 
stamps?
    We are looking at administrative funding for all of the 
programs across the board. Once I get a grip on that and try to 
figure out if there is something else that we need to come to 
the committee and request, then I would like to sit down with 
you and share that information with this committee.
    Because it is frustrating. We hear it in schools. We hear 
it in the Food Stamp Program. We hear it in TEFAP. We need to 
review the programs and see what makes one program so well 
administered but causes a problem in another program. Also to 
find out if there is something we can learn from one program 
that we could transfer to another program in the way of some 
kinds of legislative proposals or budget requests? Until I can 
get that information, I think I would be premature in 
addressing the TEFAP issue, but I would like to sit down with 
you after we have been able to look at that.
    Ms. Kaptur. Madam Secretary, I will just reiterate this. 
From Ohio's perspective, if you look at the whole of welfare 
reform and what may or may not be happening in Ohio, Ohio again 
is the only urban State in the Union that turned back money to 
the Federal Government, while at the same time its people at 
the local level can't even get transportation funds to go to a 
job training site. I see over a billion dollars that I voted 
for that didn't come to my State. Maybe it went to Mr. 
Kingston's State. I don't know. But the problem is here we have 
people flooding into food banks, and we can't--the volunteers 
and the people down at the local level--can't handle it, and 
yet I see all of this money going back to someone else. That is 
why I begged for that meeting. I know I am not the only Member 
so affected.
    I would like to very quickly, if I could, just throw in a 
question here that many of our Members--Congressman Hall of 
Ohio, very active on hunger issues, Congresswoman Stabenow of 
Michigan, very concerned about why it is taking so long to 
acquire commodities for many of these locally-based hunger 
programs. For example, in Michigan, Congresswoman Stabenow has 
been trying to get low-priced cherries purchased into the 
school food programs there, and they have been waiting months 
and months and months. The same is true of apples, which have 
been in oversupply in Ohio. What are the benchmarks assigned to 
purchases? Why is it taking so long?
    Mrs. Watkins. I wish that I could answer that. It is not 
under my jurisdiction. I will pass it on to Under Secretary 
Mike Dunn, and when he comes up you may want to ask him that 
question.
    Ms. Kaptur. Thank you very much. And I thank the chairman.
    Mr. Kingston. Thank you, Ms. Kaptur.
    I wanted to ask you a question, Mrs. Watkins. It is 
something that I know very little about but Ticket to Work and 
Work Incentives and Improvement Act. Are you familiar with 
that? It has to do with bonus commodities. Ms. Kaptur, does 
that ring a bell to you, bonus commodities?
    Here is what the question was. The National School Lunch 
Act requires at least 12 percent of Federal assistance for 
school lunch be in the form of USDA commodities. Until 
recently, bonus commodities have not been counted as part of 
the 12 percent. However, the Ticket to Work Act requires that 
the bonus commodities be included as part of the 12 percent. Is 
there anything that you want to say on that?
    Mrs. Watkins. No, sir.
    Mr. Kingston. Was it part of the Goodling reauthorization? 
I really don't know that much about it either way. I am not 
fishing here.
    Mrs. Watkins. You asked me if I want to say anything, so I 
do not want to say anything.
    Mr. Kingston. But you are familiar with it?
    Mrs. Watkins. I am very familiar with it.
    Mr. Kingston. Let me take back my offer and ask you, do you 
think it is a good thing, a bad thing, or one of those 
necessary management tools?
    Mrs. Watkins. I would be glad to work with this committee 
in looking at that.
    Mr. Kingston. Mr. Dewhurst, you haven't said anything. We 
welcome you back.
    Mr. Dewhurst. Probably a bad time to start. There is a 
specific provision in this year's appropriations act which 
implements that underlying provision and causes those bonus 
commodities to be counted against the entitlement. So it is a 
matter of both underlying law and what is included in the 
appropriations act.
    Mr. Kingston. I think that is about it from me.
    Ms. Kaptur.
    Ms. Kaptur. I just have one other question, dietary 
guidelines. Again, this is a very specific question, but there 
appears to be a change in the recommendation relative to sugar 
intake, that the Department is recommending from ``moderate'' 
to ``limit.'' But that is not the case with alcohol intake. I 
am just curious as to where these dietary guidelines are going 
and what might be happening on that. Are these moving forward?
    Mrs. Watkins. The Dietary Guidelines Committee released 
their report to Secretary Dan Glickman and Secretary Donna 
Shalala. We are having a public hearing to get some reaction 
from the community on those dietary guidelines. We will not be 
releasing those reports until sometime later this year. I don't 
know what changes we will see based on their recommendations. 
All we have right now are the committee's recommendations.
    Ms. Kaptur. Are scientific findings a part of their 
recommendations? Is this based in food science?
    Mrs. Watkins. This is based on the science that these 
researchers came up with. All of these people who are on that 
committee are researchers in the various areas. So they made 
those recommendations, and we will just have to see how they 
come out.
    Now, what we will do is make certain that the committee has 
a briefing before they are ready to be released. We will make 
certain that you have adequate information so you are able to 
respond to any questions that you may have. So we will ensure 
that you get that from our Center for Nutrition Policy and 
Promotion with Dr. Anand who is going to be responsible for 
getting that out for the public's view.
    Ms. Kaptur. Thank you, Madam Secretary. I will be 
submitting several questions regarding those dietary guidelines 
into the record for your response. Thank you very much for your 
appearance this morning.
    Mr. Kingston. Well, Mrs. Watkins, to you and your team, a 
job well done. Thank you for being with us again.
     Mrs. Watkins. Thank you very much. I want to again express 
my thanks to this committee and for all of the hard work that 
you do in helping us to ensure that we have the best possible 
programs for the people in this country. I especially 
appreciate your interest and concern on the human nutrition 
issues and particularly our children in this country. We want 
to work with you, and whatever information you need to be able 
to help you make good, positive decisions, we would be glad to 
provide that to you. So we will continue to work with you until 
you are done with this process. Thank you very much.
    Mr. Kingston. Thank you.
    [The written statement by Representative Lynn Woolsey 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                         Wednesday, March 22, 2000.

                           RURAL DEVELOPMENT

                               WITNESSES

JILL LONG THOMPSON, UNDER SECRETARY FOR RURAL DEVELOPMENT
CHRISTOPHER A. McLEAN, ADMINISTRATOR, RURAL UTILITIES SERVICE
JAMES C. KEARNEY, ADMINISTRATOR, RURAL HOUSING SERVICE
DAYTON J. WATKINS, ADMINISTRATOR, RURAL BUSINESS-COOPERATIVE SERVICE
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
    Mr. Skeen. Good morning. Today is the final hearing on the 
administration's request for fiscal year 2001. We have saved 
one of the best agencies for last.
    Representing USDA is the Honorable Jill Long-Thompson, the 
Under Secretary for Rural Development, and she is the senior 
manager for all the programs that benefit rural housing, 
business, and cooperative development and utilities, including 
distance learning and telemedicine programs. That is a real 
neat one, telemedicine.
    I believe there are seven other subcommittees holding 
hearings at this time, so I will once again ask for everyone's 
patience and cooperation so we can get the most out of this 
hearing.
    Before I ask the Under Secretary for her statement and 
introduction of colleagues, I will ask my good friend, the 
gentlewoman from Ohio, Miss Kaptur, if she has any opening 
remarks.
    Miss Kaptur. Thank you, Mr. Chairman.
    I just wanted to welcome Under Secretary Thompson, and Mr. 
McLean, Mr. Kearney, Mr. Watkins, and Mr. Dewhurst here this 
morning. This is, I think, our final hearing.
    Mr. Skeen. Yes, and we have all all-stars here this 
morning.
    Miss Kaptur. We certainly do. Based on everything that has 
been said at the previous hearings, we know that so many of the 
answers to rural America's condition lie within your 
jurisdiction, Under Secretary, so we are anxiously awaiting 
your testimony this morning. We thank you for the wonderful 
work you do at USDA and that you did as a Member of this 
institution. We wish you much success in this particular year.
    I will ask some questions during the question period as 
well, but welcome. Good to have you back.
    Mr. Skeen. Thank you. It is all yours, Ms. Thompson.

                           Opening Statement

    Ms. Long Thompson. Thank you, Ms. Kaptur, Marcy. Members of 
the committee, it is really a pleasure to be here today and to 
present to you the President's fiscal year 2001 budget request 
for the Rural Development Mission Area at USDA.
    With me is Steve Dewhurst, the Budget Officer for USDA, 
Chris McLean, the Acting Administrator for the Rural Utilities 
Service, Jim Kearney, the Administrator for the Rural Housing 
Service, and Dayton Watkins, the Administrator for the Rural 
Business-Cooperative Service.
    The questions that I am not able to answer they can answer 
very correctly.
    If it is permissible to the Chair and the committee, I will 
just summarize my statement and request that the full text of 
the statement be submitted for the record.
    Mr. Skeen. You certainly may.

                             fy1999 funding

    Ms. Long Thompson. Before discussing the specific requests 
for 2001, I am pleased to share with you some of the results of 
the funding that the committee provided Rural Development for 
fiscal year 1999. I am very proud of the results, and I think 
that the committee will be, as well.
    With the $1.7 billion appropriated for rural development 
programs in fiscal year 1999, investments totalling $9.9 
billion were made in rural people and communities and 
businesses, and a conservative estimate of the economic impact 
of that investment is $18 billion.
    The following is a sample of the successes. The investment 
in rural businesses, housing, and community infrastructure 
created or saved about 200,000 jobs in rural America.
    Almost 66,000 rural families that could not otherwise 
qualify for mortgage credit were able to buy or improve their 
homes. Over 5,000 affordable rental units were added to the 
rural housing stock, and 43,000 low-income households were able 
to obtain decent housing at an affordable rent. Almost 500 
community facilities, projects, including health clinics, child 
care facilities, schools, libraries, police stations, and fire 
stations serving over 8 million residents were built.
    Almost 2 million rural residents were provided new or 
improved public water supply or waste disposal systems, and 2.8 
million rural residents received improved electrical service; 
287 rural schools and 131 rural health care providers benefited 
from the distance learning and telemedicine facilities, and 
over 200 marketing networks and cooperative partnerships were 
established or increased their business outlets.
    I cite those examples because I think that it reflects very 
well our decisions that the committee made for 1999, and we 
hope to have similar successes for 2000, and with adequate 
funding, we can do similar kinds of things in fiscal year 2001.
    Mr. Chairman, as you and the committee review the 2001 
budget for Rural Development, please keep in mind that the 
reason each of these programs was authorized, and in some cases 
those authorizations took place decades ago, was a concern that 
rural America was being left behind economically.
    Although there has been significant progress during the 
past three decades in addressing these needs, the poverty rate 
in many rural areas is still unacceptable. After showing some 
improvement in the 1970s, many rural areas are once again 
significantly lagging behind the improvement in the national 
economy. I know that you know that as well as anybody in the 
country.

                           rural cooperatives

    More recently, there has been an increased concern about 
the future economic opportunities of rural communities due to 
the concentration of agricultural production and processing. I 
know that you all have worked hard at addressing some of the 
problems associated with that issue, as well.
    We all know that as farming operations increase in size and 
processing operations vertically integrate, ties to rural 
communities are weakened. Larger farms can purchase their 
inputs, and that includes capital, from larger and more distant 
sources. Larger farms also find it easier to negotiate directly 
with processors rather than with local buyers. That often 
results in less income being retained in local communities and 
less capital being available for other business needs and for 
diversifying the local economy to counter the effects of 
concentration.
    This situation is exacerbated by consolidation in banking, 
retailing, and in health care. Consequently, there are fewer 
rural economic hubs than once existed, and the evidence shows 
that the greater the distance from an economic hub, the lower 
the economic growth rate.
    Mr. Chairman, although there have been significant 
successes in rural areas generated by the programs we 
administer, the Federal government is not, nor should it be, a 
substitute for the wealth-generating capacity of the private 
sector. That is why we in Rural Development continue to stress 
that cooperatives are a good solution to some of the 
development needs in rural areas.
    Agricultural producers have the opportunity to maximize 
their position in negotiating prices for their commodities 
through marketing co-ops. They can also increase their profits 
by utilizing cooperatives to process and add value to their 
commodities.
    An example is a new cooperative soybean processing plant 
whose farmer owners will realize an additional 40 cents per 
bushel for their soybeans. Most of the additional earnings 
remain in the local community, and we would like to see more 
cooperative business operations, such as this one and others 
that we have financed in recent years.
    Through market forces, member-owned co-ops help grow local 
economies and rural communities. In addition to the economic 
successes enjoyed by some of these cooperative operations, Mr. 
Chairman, is the satisfaction, and I know that you have all 
seen this, as I have, the satisfaction that you see on the 
faces of the producers when they realize that they can be just 
as entrepreneurial as some of the dot.com companies, and 
success breeds success. Seeing people realize that they can be 
in charge of determining their future is one of the most 
rewarding parts of this job, and it builds on itself.
    I would urge all of you to visit some of these operations, 
if you have not yet had that opportunity. We can certainly 
share the information with you to let you know where they 
exist, because you are the ones who have appropriated the funds 
that make it possible. I think that you would be very, very 
pleased to see how those funds are being used and how they are 
leading to greater independence and profitability.

                          2001 budget request

    With regard to the request for 2001, the President's 
commitment to improving the economies of rural America 
continues, and that is reflected in the request. The Rural 
Development budget request for 2001 is $12.4 billion for 
programs, which is $1.3 billion higher than the level enacted 
for fiscal year 2000. This level requires only about $300 
million more in budget authority, however. That is not counting 
what is requested in the Farm Safety Net proposals, which I can 
discuss later.

                        administrative expenses

    But Mr. Chairman, if the Rural Development Mission Area is 
to deliver programs of this amount and carry out our fiduciary 
responsibilities of protecting the $80 billion loan portfolio 
that we have responsibility for, we do have to have sufficient 
administrative expenses to manage the programs that we 
administer.
    The administrative expenses request for fiscal year 2001 is 
$581 million, which is a request of $48 million higher than 
what was appropriated for the current fiscal year. In that $20 
million is included support for a new guaranteed loan 
accounting system, and other systems improvements.
    I recognize that this places a burden on the committee when 
I make a request like this, but the potential risk that can 
occur without the appropriate level of oversight I think far 
overshadows the cost.
    As an example, between our housing loans of the Rural 
Housing Service and the farm credit operations of the Farm 
Services Agency, we are obligating about $8 billion in 
guaranteed loans annually.
    We do not have an automated accounting system that provides 
the capacity to manage these funds. I think that is not a very 
responsible way for us to be administering those loan guarantee 
programs.
    In addition, an important part of the efforts to modernize 
field operations for the Natural Resources Conservation 
Service, the Farm Service Agency, and the Rural Development 
Agencies is the effective consolidation of three separate and 
largely redundant administrative systems into one under the 
Support Services Bureau. I think the way it is set up now is 
inefficient.
    Consolidated support would be provided for information 
technology, for financial management, for travel, for 
procurement, civil rights, and human resource management. These 
services would be provided under the direction of an executive 
director who would report to a board of directors comprised of 
heads of the serviced agencies.
    Unfortunately, the language in the fiscal year 2000 
Appropriations Act prevented us from implementing our plans for 
the Support Services Bureau. I am asking that you take a look 
at that language, that we might work together to move our 
operations into the modern world, where we can consolidate the 
support services to be more efficient and effective.
    Mr. Chairman, before I leave the area of administrative 
expenses, I would also like to advise the committee that the 
Office of the General Counsel is very, very critical to what we 
do. We consider them to be an integral part of our team, 
ensuring that we are carrying out program delivery under the 
full intent of the Congress, so we are very supportive of their 
requests and funding for them, as well.

                         rural housing service

    With regard to the program requests, first let me talk 
about the Rural Housing Service. The budget request for the 
programs administered by the Rural Housing Service total $6.7 
billion, almost $900 million more than the level appropriated 
for fiscal year 2000, but requiring only about $200 million 
more in budget authority. That increase reflects the 
administration's commitment to improving housing conditions in 
rural areas, and in particular, home ownership opportunities. 
Homeownership is very important for building stable communities 
in all areas, but especially in rural areas.

                   rural business-cooperative service

    For the Rural Business-Cooperative Service, the program 
level requested is $1.5 billion, with the majority of the 
request for the business and industry loan guarantee program, 
which we would like funded at a $1.2 billion level, compared to 
$869 million in fiscal year 2000.
    We will also again establish a policy objective of $200 
million of the total for the development or expansion of co-op 
businesses. As you know, we have established similar priorities 
in other years. While we have not yet achieved that objective 
of $200 million, the level used by cooperatives is increasing 
each year, and we see this of great value to the communities 
they are a part of.
    For example, just this year in the first quarter we have 
been successful at financing almost the same level that we did 
for all of fiscal year 1999, so we are optimistic about that.

                        rural utilities service

    For the Rural Utilities Service, our request is $4.3 
billion, the same as available for fiscal year 2000. For 
electric loans we are requesting $1.5 billion, requiring $26 
million in budget authority. Again this year we respectfully 
request that the budget authority be provided in a single 
amount, rather than by individual program. This flexibility 
will permit us to more effectively manage demand for the four 
different programs.
    So as you can see, we are requesting some additional 
funding for program levels, but in many of those cases it is to 
deal with backlogs of applications that we have been receiving 
for a number of years.

                        administrative expenses

    Before I close, I do want to return one last time to the 
issue of administrative expenses, because I do believe that we 
have to have the requested level or close to that level.
    The programs that we are very proud of and that I believe 
contribute very much to the economies and the quality of life 
in rural America cannot continue to be delivered without 
adequate support for the dedicated employees and automated 
systems that are needed to assure proper accounting of the 
taxpayers' dollars.
    I can tell you that our Rural Development employees, both 
in the national office and throughout the field offices, work 
very, very hard, and they have been doing more with less every 
year, administering higher program levels with fewer FTEs.
    To continue down the path that we have been on in the past 
few years may be penny-wise but I think is dollar-foolish. I am 
very, very proud of our accomplishments, and I think that while 
it is important to reduce unnecessary expenses, it is equally 
important to ensure that we have the resources and the people 
in place not only to work to administer the programs, but to 
manage the portfolios as well, so we can be effective in 
managing the public's dollars and administering the programs.
    The Congress, the administration, as well as the taxpayer 
have every right to be proud of the fact that we have 
eliminated the word ``deficit'' from policy discussions. I 
think we need to acknowledge that fact and move on to ensuring 
every individual in this country has the opportunity to 
participate in a dynamic and growing economy. We want to make 
sure that continues, so we must manage our portfolio and our 
programs effectively.
    We have put quite a stress on our systems, and more 
significantly, on our people. So I am asking you to take a very 
close look at the request we are making for administrative 
expenses.
    Mr. Chairman, it has been a pleasure to provide my 
testimony, and we will be happy to answer any questions of you 
and the committee.
    [The prepared statements and biographies of Ms. Jill Long 
Thompson, Mr. Christopher A. McLean, Mr. James C. Kearney, and 
Mr. Dayton J. Watkins follow:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Skeen. We thank you for the chance to have a colloquy 
on this.

                             subsidy rates

    Let me ask, Madam Secretary, the request for budget 
authority for fiscal year 2001 is sharply over last year, in 
large part because of the additional cost of subsidies in the 
loan programs. It will cost us almost twice as much money to 
support the same level of Section 502 housing, and more than 
twice as much to support a rural utilities program level that 
is actually lower than last year. Commercial interest rates 
have gone up, but not that much.
    What is the reason for these very high subsidy levels?
    Ms. Long Thompson. I can answer, but Steve Dewhurst, our 
Budget Officer, can actually answer that question even better 
than I can.
    Mr. Skeen. He is certainly a great help here, every 
morning. We appreciate you. Go ahead.
    Mr. Dewhurst. The subsidy rates in the budget, of course, 
are based on two factors, primarily. One is interest, the 
degree to which we subsidize the interest on loans we make to 
people and to communities. The other is the risk of loss or 
default on these loans.
    The interest rates assumed in the President's budget for 
fiscal year 2001 are significantly higher than the interest 
rates we have this year. When we built last year's budget, we 
were talking about long-term interest rates of roughly 5 
percent, and now, in the President's budget, we are estimating 
long-term interest rates at over 6 percent. That has a dramatic 
effect.
    Mr. Skeen. That is a big chunk.
    Mr. Dewhurst. That has a dramatic effect on our programs. 
For instance, in housing, we make many loans at 3 percent 
interest. If the Treasury is paying 5 percent to borrow the 
money we are lending, we are subsidizing that loan to the 
extent of 2 percent. But if the rate goes up to 6 percent, that 
is a 50 percent increase in our interest subsidy, because now 
the subsidy on every loan is 3 points instead of 2. So the 
deeper the subsidy, and frankly, the poorer the audience for 
our programs, the more the risk interest rate increases will 
hurt our programs.
    It is also true that in some of these programs there have 
been some reestimates because of some experience with losses on 
these loans. I would have to defer to the agency heads to talk 
about that, but some of the estimate has to do with new data 
for some of these programs.
    Mr. Skeen. They are vital programs. We know that with what 
is happening in farming country, it is very difficult to get 
financing for homebuilding or anything of that sort. This has 
been the terrible truth about it, that there are not very many 
of our folks staying in farming. But to keep agriculture 
strong, you have to have operators. Operators have to have 
places to live, and so forth.

                            farm safety net

    Your testimony mentions the legislative proposals for the 
Farm Safety Net, such as the Cooperative Equity Capital Fund. 
If the authorizing committees do not take up this legislation, 
will you ask for this committee to do so?
    Ms. Long Thompson. I plan to, yes.
    Mr. Skeen. So if we cannot get the other big fellows to do 
anything, we come here and tap into the real people.
    Ms. Long Thompson. You are the big fellows.
    Mr. Skeen. We didn't want to mention that.

                             digital divide

    There is a rural television--I notice in your presentation 
that you have talked about upping the technological quarters 
and work that you need. I am a great believer in this. The 
rural television bill is moving through the Congress.
    Does the administration support this bill, and would there 
be any requirements for funding from this or any other 
appropriations subcommittee?
    Ms. Long Thompson. Unofficially, we are supportive of the 
bill, but I don't think the administration has actually taken 
any position to date. Is that correct, Chris?
    Mr. McLean. The administration has testified that the 
legislation should be technologically neutral, that it should 
be consistent with credit reform, and should enhance consumer 
choice for rural consumers. The administration has had several 
meetings and has testified at various committees about the 
satellite bill.
    There is a need in rural America and a potential coming 
digital divide because of both the satellite legislation and 
the conversion from analog television to digital television 
over the next 6 years.
    Mr. Skeen. I think that is an absolute fact, that these 
things are happening. Madam Secretary, so much for that.

                         administrative support

    You are making a case this year, as you did last year, for 
more administrative support. We can understand that. You are 
also proposing several new programs that may be very good 
ideas. Given the budget constraints that we both have, why 
start new programs when we have trouble funding your basic core 
mission now?
    Ms. Long Thompson. The reason is that the environment out 
there continues to change in rural America as well as in urban 
communities. The new programs that we are proposing for the 
most part are small programs, but they allow us to try to 
address some issues either in a new way or new issues that 
might not have existed at a previous time. In most cases they 
are programs that are very closely aligned with other work that 
we are already doing, so they dovetail very nicely, but we feel 
they will allow us to more effectively use the dollars that we 
have to address issues in rural communities.
    Mr. Skeen. They would also keep you abreast of the 
technology, I would assume.
    Ms. Long Thompson. That is very important.
    Mr. Skeen. We find other agencies in the Federal 
Government, too, that have trouble keeping up with this great 
spurt of support that we have from all this technology.
    Ms. Long Thompson. Our telemedicine and distance learning 
programs have become very, very popular programs.
    Mr. Skeen. They are very expensive.
    Ms. Kaptur.

                           rural conservation

    Ms. Kaptur. Thank you, Mr. Chairman. I wanted to thank the 
Under Secretary for her testimony, and to first apologize. I 
will be running in and out because I have a concurrent hearing 
with the Secretary of Veterans Affairs across the way here, so 
I will be back.
    I am going to focus my questioning in the first three 
rounds. I will cover first Rural Development; second, I am 
going to deal with cooperative development; and thirdly, I want 
to talk a lot about a Strategic Biofuels Reserve. If we can 
have a Strategic Petroleum Reserve, why can't we have a 
Strategic Biofuels Reserve?
    First, let me talk about your name of the division of USDA, 
Rural Development. I mentioned this last year because I find it 
somewhat in an odd juxtaposition.
    We have had other witnesses before this committee that have 
talked about farmland protection and about conservation and 
about the ecosystem. Here we are involved in rural development 
because we know people live there.
    I guess I am asking you to talk to me, and maybe some of 
the other witnesses that are here this morning, about what 
could Rural Development do in its various missions--utility 
service, housing, business--to work with the other parts of 
USDA to encourage conservation easements, limited access, the 
provision of certain arable lands in farmland trusts in 
perpetuity, as part of the development programs that it 
promotes.
    Our State of Ohio has more urban areas than any other area 
of the country, yet agriculture remains one of our primary 
industries. There is no bigger issue, none, including in my 
area, than what is happening to the quality of life. How do we 
preserve some of what people hope they move to, and then it 
disappears? How do we rebuild back into our urban communities 
and make them livable again?
    Lancaster County in Pennsylvania, which is a place that 
receives some visitors because of the presence of a smattering 
of rural life, gets 5 million visitors a year. If they get any 
more, they are going to wipe out the people who are living 
there in a way.
    What can your part of USDA do in order to cooperate with 
groups like the Farmland Trust, with your own department's 
farmland protection programs, with the conservation programs, 
to invite new mechanisms in deeds, in development restrictions, 
working cooperatively with local communities that want to 
preserve quality of life? Is this even in the thinking?
    For instance, rural utilities, you extend a sewer line and 
water line and you have changed the entire makeup. That will 
not be a rural area for very long. But I want to inject this 
because it is something that we are struggling with in our own 
State.
    We do not even have planners to work with these rural 
communities to help initiate some of the programs that would be 
necessary to get locals to cooperate together in order to 
balance these different interests that are competing in the 
rural countryside.
    Ms. Long Thompson. Chris McLean can answer some of these 
questions more specifically than I can, or answer your question 
in a more specific way than I can, but in fact we do take into 
account conservation. Of course it is important to recognize 
that the local community and the States within which we 
operate, I guess, have the ultimate say over what happens in 
their communities, as it should be, within some broad Federal 
guidelines.
    One of the criteria that we look at for scoring 
applications for water and sewer funding is whether or not it 
is going to be affecting farmland and other land. The score 
will be affected by whether or not it is going to be disruptive 
in that community.
    Chris can also address that issue.
    Mr. McLean. I think we are at an extraordinarily unique 
moment in history right now where concerns about urban sprawl 
and rural development can work together, because stabilizing 
rural economies is one of the tools you can have to reduce 
urban sprawl.
    Throughout large parts of rural America, you have people 
leaving their rural communities and moving closer into town 
seeking medical services, seeking certain amenities. If we can 
have stable rural economies so that folks and kids can stay in 
their rural communities, that will prevent some of the issues 
that you raise about sprawl.
    Now in terms of sewer development, it enhances the health 
and quality of life of the folks that are in rural towns. Most 
of the development we see is to replace aging systems, so there 
is a very serious infrastructure concern out in rural 
communities, particularly when we add outmigration to the 
equation. There are fewer people trying to support a declining 
infrastructure. So it is a big challenge for our rural water 
programs.
    Then in terms of working with other agencies, I think there 
is one excellent example where rural development and all of the 
agencies in the United States Department of Agriculture have 
gotten together to work on a digital divide working group, 
where we are trying to think of new ways and think outside of 
the box in order to look at telecommunications technologies as 
opportunities for development and understanding, and working 
together to improve the quality of life in rural America.
    Ms. Kaptur. One of the thoughts I had was as you are 
developing your criteria for loan approvals, for utility line 
extensions, for housing developments, rather than just having a 
pointing system where you say, does it do this, I would have 
encouraging language in there that if they are working hand in 
hand with local preservation groups or farmland trust groups or 
conservation organizations of various kinds, that they would be 
given points for making those connections and trying to protect 
land. And I am talking prime soils, now----
    Mr. McLean. Right.
    Ms. Kaptur. That they would be somehow encouraged that if 
there was limited access, let's say, for tap-ins, and 
development would be channeled to those areas where the land 
has fewer uses, frankly, and less valuable uses to the future, 
that this be considered, and that perhaps some pilot projects 
be initiated within your own department with the people who 
have come to us from the farmland protection side and the 
conservation side.
    It would, it seems to me, be very interesting and it would 
be challenging to do that. You could take places like--I don't 
know if you work in Lancaster County, anymore, they are 
probably full up wall to wall there and do not have enough 
hotel rooms anymore, but, you know, this is a huge problem. And 
we are at a unique time, because there is not any more left. 
They are not making any more of this. All that we can do now is 
diminish what is there. If I take my home county, and I know 
I'm going over time here, if I take my home county, I can just 
see the garden that we sit in disappearing.
    That is why the ecosystem is going to transform so quickly, 
and then people will continue to move out.
    We have not even increased in population. They have just 
spread out. Yet, the idea that development should occur in a 
way where prime land would not be completely compromised, there 
is no mechanism to--and there are not many groups encouraging 
proper, wise land use planning for the future.
    So I just throw that out to you, and nothing is more 
powerful than those water and sewer lines.
    Ms. Long Thompson. I might add, if time permits, that in 
addition to considerations that we make in the Rural Utilities 
Service with regard to the environment, in our Rural Housing 
Service and in the Community Facilities Program, for a 
community facilities project to be constructed on prime 
farmland, their loan would be at a higher interest rate. So we 
do try to encourage any development to be consistent with local 
planning and environmental preservation.
    I think we can do more, and probably to do more there would 
have to be some legislative as well as regulatory changes. But 
I know we would be very interested in working on that with you.
    Ms. Kaptur. I would be looking for some pilots with you, 
Madam Secretary, to encourage people, because there are a lot 
of people who want to do it right. We need to have the 
intelligence to help them locally and federally. I thank the 
committee.
    Ms. Long Thompson. Thank you.
    Mr. Skeen. Mrs. Emerson?
    Mrs. Emerson. Madam Under Secretary, welcome. I just want 
to thank you for the great work you do in Rural Development, as 
well as the field staff with whom my office works in a very, 
very productive way. So thank you for that.
    I have a few questions, and I am going to try to do these 
quickly so I can get them in in my time in case I have to 
leave.

                            farm safety net

    First, and I just need you to clear up a little confusion 
with regard to the Cooperative Development Program, which I 
very, very much support, I might add. In the small budget 
summary of the administration's major initiatives that we have, 
it talks about the CDP as providing equity capital for new 
livestock and other processing cooperatives.
    Yet, as I was reading this budget justification book, it 
says that $50 million earmarked is recommended to establish a 
livestock cooperative capitalization fund, just for livestock. 
Would the extra 30 for the first year then be used for other 
processing facilities? How is that going to really break down?
    Ms. Long Thompson. The $130 million in total for a 2-year 
period is to be used for co-op development all across the 
spectrum of commodities, and it is not targeted specifically to 
livestock.
    The justification should have indicated that.
    Mrs. Emerson. It just says $50 million is earmarked for 
livestock. I have my soybean producers who want to perhaps 
check into the opportunity of doing a soybean crushing plant. 
My rice producers want to do a drying facility. All of these 
are very important for them so they can realize more dollar for 
their commodity, so I just wanted to be sure that there would 
be an opportunity for them to compete for these grants, as 
well.
    Ms. Long Thompson. There is, yes.

                    rural business enterprise grants

    Mrs. Emerson. Okay. My second question deals with something 
that you and I have talked about before. That is the Rural 
Development's administrative notice 34741942-G.
    Ms. Long Thompson. I remember that one.
    Mrs. Emerson. That provided guidance for State and field 
staff regarding the Rural Business Enterprise Grant Program. 
Because there are cases in my congressional district where 
apparently this new guidance is preventing grants from being 
awarded to promising applicants, grants that would have been 
awarded in the past.
    In these particular cases our applicants had very, very 
good programs. They were going to improve their communities. 
They were going to create local jobs. However, for some reason, 
they did not meet the new definition of ``small and emerging 
business enterprise.''.
    I just wanted to know if you all would be willing to 
revisit this issue, so we can ensure that the State and the 
field staff are allowed to use the same program flexibility 
that existed prior to this new administrative notice, or what 
exactly do you think we can do to clear this up?
    Ms. Long Thompson. We are always willing to revisit any 
issue.
    It is my understanding we have not changed the regulations, 
but that we have worked to ensure that our field staff are 
fully apprised of what constraints exist within the 
regulations.
    I would like to defer to Dayton Watkins, or we also have 
Bill Hagy here, who is the Deputy Administrator. They may be 
able to answer more clearly. But as has been explained to me, 
we originally were not administering within the constraints of 
the regulation, and the directive was sent out to clarify what 
was allowable and what was not.
    Mrs. Emerson. I see. Okay.
    Ms. Long Thompson. We can still always revisit our 
regulations, and we would be happy to do that.
    Dayton?
    Mr. Watkins. Congresswoman Emerson, the Under Secretary has 
already answered the question. There is really nothing else I 
can add, just to reemphasize what she said, that through 
auditing of our State offices and their operations with regard 
to implementation and compliance with statute and regulatory 
compliance of programs, we found that several States were not 
following the established regulations with regard to the RBEG 
program and the definition of ``small and emerging.''
    The announcement that we put out was simply to clarify and 
to provide guidance to the States with regard to the 
established regulations. We had no intention of changing the 
definition of ``small and emerging.'' We just wanted to 
reinforce and reemphasize the existing requirements.
    We certainly can go back and revisit that.
    Mrs. Emerson. Let me just ask you, and I know my time is 
up--this will take just a second----
    Mr. Skeen. We will indulge you.
    Mrs. Emerson. Thank you.
    ``Small'' I do understand. I understand that to some extent 
because depending on whether or not we have farmers involved, 
assets and liquid assets are two different things, so 
consequently there is probably a little wiggle room in that 
definition. But ``emerging,'' should I take that to mean 
something that is technological in nature, or sort of leaning 
high-tech, as opposed to something like building a retail 
shopping area that will provide lots of jobs and bring more 
taxes, and therefore increase the tax base for a community?
    Mr. Watkins. I believe the definition says that what we are 
to follow is to finance small and emerging businesses that are 
going to locate in a rural community. That small and emerging 
business is expected to purchase goods, materials, supplies 
from technological businesses or businesses that are 
commercializing products that are being manufactured in rural 
America.
    So the applicant does not necessarily have to be an 
emerging or technological business, as long as products that 
they may acquire come from companies that are manufacturing in 
rural America.
    Mrs. Emerson. Okay. Then we will revisit that, because I 
think perhaps when one writes a grant application, they do not 
quite understand precisely how they are supposed to define 
something. So I appreciate that. I will wait and ask some more 
questions on my second round.
    Ms. Long Thompson. We will be happy to work with you on 
that.
    Mrs. Emerson. Thank you.
    Mr. Skeen. Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman. It is nice to 
have you back before our committee, Mrs. Thompson. You work 
well, whether you are on this side or that side.
    Ms. Long Thompson. Thank you. Thanks.

                         agricultural practices

    Mr. Farr. I am excited you are here, and I have been sort 
of espousing this philosophy because I think this committee is 
probably America's biggest land use committee. Agriculture is 
our land use. I am really concerned because I think our history 
of this country about America is certainly about its people, 
and we celebrate that from our native peoples down to 
discussions of who is coming off the plane or boat today.
    But our history is also about our land, and the land that 
we sing a lot about in the song America the Beautiful. My fear 
is that we are losing that beauty, we are losing it because of 
commercial homogenization of just making everything look 
exactly like everything else. Every town is beginning to look 
the same. The malls look all the same. There are the same 
commercial signs.
    That commercialization I think is killing the soul of our 
communities, which is that each city was kind of built in a 
special way by venture capital, by no public funds at all, when 
people really had a dream about what the town ought to look 
like and feel like.
    You sit at the spot of being able to still influence a lot 
of that, because I think what Marcy Kaptur was talking about 
was the fact that we ought to try to, as sophisticated as we 
are now, not allow good money to follow bad land use practices 
in the local communities. We need to--I think there is a real 
concern in Congress.
    It is interesting, in this presidential debate, there is 
more focus on sort of local issues, on the quality of--on 
getting to work, traffic, quality of schools, quality of the 
community, crime in the local neighborhood. The issues for the 
first time in a presidential election are not about an 
international enemy or a war or fear of that, or about deficit, 
or about the traditional things that people usually run for 
president on. For the first time we are going to have a 
presidential debate on the quality of life in communities.
    I do not really have any questions, but I have more of a 
statement. I would like to see us be able to develop some 
criteria so that the good money that you are spending is 
actually landing in areas where communities are really trying 
to do one thing, and I think this is key to it, it is about 
sustaining agriculture.
    Indeed, if we are going to have the U.S. Department of 
Agriculture, we have to fight to sustain agriculture, not to 
allow agriculture be the placeholder until the next COSCO moves 
in. I think that is what is happening in America. We are 
frankly using Federal funds, not just you in the Department of 
Agriculture but in the Department of Transportation and other 
departments--they are essentially using old fashioned ways to 
get the money out to communities to build that infrastructure, 
and oftentimes that infrastructure is just leading to this 
urban sprawl which is killing the goose that lays the golden 
egg.
    How can we develop some criteria that allows the money, the 
limited amount of money--and I think it is way too little for 
what you are trying to do, and it is good stuff--but make sure 
that that really is based around a stronger criteria; that the 
community you are putting money into is committed to sustaining 
the best management agricultural practices?
    If they are not, we have to say there are other communities 
of like size, shape, income, that have done this, and here are 
some tools out there that you have to use in your local county, 
you have to use in your State legislature, and until you do 
that, we cannot help you.
    So I think if we are not, do you know what it is going to 
do? We are going to use this money to be the placeholder for 
urban sprawl, and it was all brought there for the right 
purposes, for agricultural infrastructure support, but 
essentially we lost it because the local community did not know 
how to sustain agriculture.
    Ms. Long Thompson. I understand your concerns, and it is a 
concern that gets expressed to me, not about our programs 
specifically but about development in rural communities across 
the country. I hear that when I travel across the country.
    One of the advantages that we have at Rural Development is 
that the people who administer our programs live in the same 
communities in which they are administering the programs, we 
share the same kind of concerns and commitments that you have 
expressed very eloquently here this morning.
    I think that to accomplish the larger goal that you are 
talking about, we would have to have legislative direction. We 
would be in violation of congressional intent if we tried to 
administer the programs in a particular way not consistent with 
the law, and there would be concerns that the money would be 
going into certain areas in the country and not others. There 
is an opportunity for us to work together.
    Mr. Farr. This is the chicken and egg. In this case, if you 
lead, Congress will follow, because there are enough people in 
Congress who are interested in trying to do things.
    Real estate in my district is--agricultural real estate is 
$35,000 an acre. If you are going to buy that, you are going to 
have to make more than that off of it, which is almost 
impossible. That is why it is not for sale.
    Yet, the bottom line is that everybody who owns land says, 
if I do not make it I can just develop it. I think that is the 
problem, is that we are making it--we are making that value. 
Why do we think it is $35,000 an acre? It is because of urban 
sprawl pressures on that land. We are helping that urban 
sprawl.
    Why do we not just take that legitimacy out of it and say 
unless the community is really committed to long-term 
agriculture, we are not going to allow you to say, well, we 
will play with agriculture until we do not make it and then we 
will just develop houses? And those houses are way outside the 
area. They are not close to schools, close to urban services.
    Then they come here and they want transportation money to 
build new freeways out there or to build a transit system out 
there, and there are not enough people there because you have 
to live in a more concentrated form. We ought to be encouraging 
in-filling and encouraging people to be clustering where they 
live, and using all our revenue tools at the Federal level to 
encourage that.
    I know Mr. Hinchey is interested in this, Ms. Kaptur, and I 
am sure my colleagues on the other side of the aisle are 
interested, too, because this is not just in the urban States, 
it is happening everywhere.
    Mr. Skeen. Mr. Hinchey.

                        administrative expenses

    Mr. Hinchey. Thank you very much, Mr. Chairman. Good 
morning, Madam Secretary and Chairman. It is nice to be with 
you this morning.
    This looks to me like a very good budget in general. The 
Rural Development budget I think is a very good one. It 
recognizes the fact that there is a big job out there to be 
done, and essentially you have not had the resources to do that 
job. You are asking now for those resources. I commend you for 
facing up to that situation very squarely and coming before the 
committee and asking for this increase. I certainly hope that 
our chairman finds it possible to make that happen.
    There is an increase of $48 million over last year for 
salaries and expenses. Almost half of that, $20 million, is for 
the automated accounting system, to keep track of the billions 
of dollars of loans made by the various services. USDA, I 
think, is the largest direct lender in the Federal Government, 
so you have a big responsibility to deal with. As the GAO has 
pointed out recently in their testimony before the Committee on 
Government Reform, your technical ability just is not there. 
You are not able to keep track of these loans, where they are, 
the behavior of lenders, that kind of thing. So this system, 
this automated accounting system, is very much needed.
    So I commend you for asking for it, and I certainly hope 
that we can find the ways through our chairman's leadership to 
make it happen.
    Ms. Thompson. Thank you, Congressman.

              empowerment zones and enterprise communities

    Mr. Hinchey. I do want to say, though, that I notice that, 
probably for budgetary reasons, I don't know--I wonder if you 
could tell me, you made a recent decision not to renew the 
contract of Cornell University to provide training for rural 
empowerment zones and enterprise communities.
    That is a very important training program. Everyone has 
given Cornell rave reviews for their work. I am wondering what 
the situation is there. Was it purely budgetary? Do you think 
you can correct that in the future? What are the plans for that 
program?
    Ms. Long Thompson. That decision was a purely budgetary 
decision. As you have stated very eloquently, the training that 
Cornell provided was very, very good training, and has been 
utilized across the country in rural communities.
    The problem for us is that with the salaries and expenses 
budget that we have in this current fiscal year, we simply do 
not have the resources to enter into that kind of contract 
again.
    Mr. Hinchey. Do you anticipate renewing that contract in 
the future, should the resources be there?
    Ms. Long Thompson. If the resources were there, we would 
certainly consider that. I cannot make a commitment, obviously, 
and you know that. They do have faculty who have the 
background, who have been very good at putting together a 
training program.
    Not only do we believe that here, but we hear that from 
other folks outside of USDA.
    Mr. Hinchey. I infrequently inject parochial considerations 
into my testimony or questioning before the committee, but 
making an exception in this particular case, obviously, Cornell 
is in my district. But it is also true that they do a very good 
job, and the reviews of their EZ/EC training programs have been 
just outstanding.
    So I think it is very valuable work, and I hope in the 
future if the resources are there that you will reconsider 
engaging them in what appears to be a very productive 
enterprise.
    Ms. Long Thompson. We would certainly look at Cornell or 
Purdue, probably.
    Mr. Hinchey. Okay?
    Mr. Skeen. Well, nothing fairer than that.

                        administrative expenses

    Mr. Hinchey. There has also been a lot of concern that I 
have expressed before about the reduction in staffing levels. 
You have some very good programs in rural development and they 
are very much needed, but you just do not have the human 
resources to deliver them. As a consequence, the product is not 
getting out to the people who need it.
    I wonder if you can tell us what the intentions are of the 
agency to deal with that problem in the future.
    Ms. Long Thompson. In asking for the higher level of 
funding for administrative expenses, that would allow us to not 
cut any more FTEs and potentially fill some FTEs that we feel 
need to be filled in all of our agencies.
    I have to say that I really do believe that our people are 
doing an outstanding job. If you look at the trend lines, 
program levels are going up and FTEs are going down. We are 
still making good loans and good grant decisions, and some of 
that is the result of the centralized servicing center in St. 
Louis, which allows us to operate more efficiently.
    But our people are working much, much harder. One of the 
concerns that I have is that as they are working harder and 
working with less resources to administer greater program 
levels, they are being courted by the private sector. In many 
cases I fear that we are going to lose some of our very good 
people out there to the private sector because they can work a 
little less hard for the same or maybe even better income.
    So I see this as very important. And when we look at the 
total program level that is being administered for really a 
small administrative budget, it is very, very impressive, but 
we do need a higher administrative budget for 2001.
    Mr. Hinchey. Thank you, Mr. Chairman.
    Mr. Skeen. We are going to suspend, have a little recess, 
and get this voting out of the way. However, if we have a 
Member who comes in, we will go ahead.
    Please excuse us.
    Ms. Long Thompson. Thank you, Mr. Chairman.
    [Recess.]
    Mr. Latham (presiding). I know I do not look like Joe 
Skeen, but I wish I did.

                          rural cooperatives.

    I have received a large number of letters regarding new 
rules for the USDA Rural Economic Development Loan and Grant 
Program proposed in December. Iowa's rural electric 
cooperatives have expressed concern that the rule will simply 
spread funds, rather than focus on the best projects in the 
Nation, and they have argued that excluding agriculture as an 
eligible project makes little sense for rural America. In 
short, they feel the new rule is going to create more problems 
than solutions.
    A few questions. When is the agency going to make a final 
decision on the rule, and can you comment on some of those 
concerns? What is the intent of the rule changes?
    Ms. Long Thompson. Thank you for your questions, 
Congressman.
    I am going to defer to Dayton Watkins, who is the Rural 
Business-Cooperative Service Administrator, to give you an 
update and respond to your concerns.
    Mr. Watkins. Congressman, in the spirit of streamlining and 
reducing regulatory burdens on program participants, we are 
looking in Rural Business-Cooperative Service to rewrite those 
regulations that we are currently operating under that have not 
been rewritten since 1993.
    The Rural Economic Development Grant and Loan Program is 
one of those programs that we are looking at. We have developed 
a proposed rule. We published it in the Federal Register. We 
have gotten upwards of 40 different comments regarding that 
rule. We are reviewing those comments now. We are analyzing 
them, evaluating them.
    There has also been, I believe, a request that we hold a 
public forum so that those respondents who want to come in and 
present their case for or against, or some alternative to what 
has been proposed, they will get an opportunity to have that 
dialogue and discussion with Rural Development and our staff in 
Rural Business who have worked on developing that rule.
    We do not expect that we will go forward with the rule 
until we have something that is acceptable to the industry that 
is going to be impacted by this proposed rule change. We have 
not scheduled a public forum yet, but it is something that we 
are planning in the future.
    Mr. Latham. The concern, obviously, is that you are not 
talking about the merit of the proposal, but if they have 
already gotten a grant someplace else, then they are not 
eligible. You are not using jobs as part of the criteria; that 
if they have gotten one grant in a fiscal year, excluding 
agriculture--I don't understand that.
    Mr. Watkins. I frankly don't know exactly what that comment 
is about. In the Rural Business-Cooperative Service, through 
our loan and grant programs, or certainly through our loan 
programs, we are precluded from providing loans to agricultural 
production.
    Mr. Latham. Not agricultural production, but economic 
development using agricultural products.
    Mr. Watkins. Again, I am not exactly sure what that comment 
is, but we are actively participating as a result of the Small 
Farm Commission, and trying to redirect our programs and make 
them more user-friendly for agricultural small farm producers 
so they can gain access to the very same programs that other 
entities in rural America are getting through rural business.
    Mr. Latham. I guess the problem comes if you have like a 
value-added cooperative in milk or eggs, something like that, 
it is no longer eligible under the proposed rules. Talking 
about value-added products, I would hope that the rules would 
prohibit that.
    Mr. Watkins. We support extensively throughout all the 
programs of Rural Business-Cooperative Service value-added 
businesses that small farmers and producers are becoming 
involved in. Again, I am not exactly sure what that particular 
comment was, but I would doubt very seriously if we are making 
proposed rule changes that are going to eliminate small farmers 
from participating in value-added activities.
    Ms. Long Thompson. Mr. Chairman, I am very committed to 
ensuring that our programs are administered in a way that help 
farmers to add value and more effectively market their 
commodities.
    I am not familiar with those proposals, but I would like to 
work with you to ensure that any proposed rule changes and any 
ultimate rule changes do not preclude farmers who are working 
to add value to their products. So I would like to work with 
you on that.
    Mr. Latham. If you would submit for the record who is going 
to be eligible for the grants under the rules, I would 
appreciate that.
    Ms. Long Thompson. I would be very happy to do that. Thank 
you.
    [The information follows:]

    It was recommended by the Small Farms Commission that 
agricultural production not be eligible for RBS Business 
Programs, including the Rural Economic Development Loan and 
Grant Program. The Secretary directed RBS to eliminate 
agricultural production as an eligible purpose for all Business 
Programs regulations, including the Rural Economic Development 
Loan and Grant Program. However, agricultural processing 
operations and projects, especially value-added, will continue 
to be eligible under this program.
    As a part of project selection criteria for the proposed 
rules, projects are given priority based upon the ``number of 
full-time jobs'' being created or saved as a result of the 
proposed project. Again, this is a selection criterion and not 
an eligibility criterion.
    The proposed regulation does not prohibit a project from 
being eligible for financial assistance or not receiving 
priority if the project has received grant funding from other 
sources.

    Mr. Latham. Why don't we go to Mrs. Emerson.

                             digital divide

    Mrs. Emerson. This is good, nobody else is here, so we can 
keep asking all the questions, Tom.
    Mr. McLean, I want to ask you the first question. This has 
to do with rural satellite television. Tell me, how many people 
are out there in rural America who presently are unable to get 
local television news, emergency broadcasts, and the like. Do 
you all have an idea?
    Mr. McLean. According to the NTIA, there is a broadcast 
signal to maybe about 94 percent of Americans. The problem is 
that not all Americans have the full complement of network 
programming, and when you calculate the availability of a 
broadcast signal the way the FCC defines it, you have an A 
contour, which is generally a fairly good signal, and then the 
B contour, which defines the stretch of the station's signal. 
But a B contour can be as bad as 50 percent of a signal 50 
percent of the time.
    So even people, particularly in rural areas, who have 
access to more local news may not have a very high quality 
picture or sound.
    The issue is going to get very much more complicated as we 
move over the next 6 years into converting all television from 
analog to digital, because analog signals fade off very 
gradually and gracefully, and that is why close to the tower 
you can get a clear signal and at the outer edges you can maybe 
just get shadows and sound.
    When we move to a digital signal, there is going to be a 
very sharp dropoff. You will either get the signal or you will 
not get the signal. As the new digital technologies are being 
rolled out, I think there is a significant uncertainty 6 years 
from now on how many rural Americans are going to be able to 
maintain access to the signals they have right now.
    Mrs. Emerson. I would say in my district a good 50 percent, 
if not more, do not have access to local broadcasts in any way, 
shape, or form.
    I have heard estimates ranging from 6 million households, 
for example, do not presently have access to local broadcasts, 
so obviously, as one of the cosponsors of the rural satellite 
television bill, I am very interested and concerned that we are 
able to fund some sort of program that is going to be able to 
reach all of those households, as opposed to just part of them. 
Because either you are going to help rural America or you are 
not going to help rural America.
    Obviously, as you have heard me say in the past, I am very 
supportive of having RUS run that program, and I hope we are 
going to come up with the money to help you do it.
    Mr. McLean. Thank you very much.

                          value-added programs

    Mrs. Emerson. Mr. Watkins, a few months ago you testified 
before the Committee on the Small Business about value-added 
programs at USDA.
    As you may know, the chairman of that Committee, 
Congressman Jim Talent, who comes from Missouri as well, has 
been a strong advocate of providing new and different kinds of 
grant and loan programs to producers so that they can establish 
some sort of value-added agribusinesses.
    It is my understanding, and I was not able to go to that 
hearing, as much as I tried to fit it into my schedule, that 
the producers at the hearing said that they were concerned to 
some extent about the availability of the kinds of technical 
assistance that they need the most.
    I wonder what you might have learned from that hearing, and 
do you think that there is room for improvement in the current 
programs?
    Mr. Watkins. Yes, Congresswoman Emerson. First of all, I 
appreciated the chairman inviting me and the Department of 
Agriculture to participate in the U.S. Committee on Small 
Business hearing. I had not done that before in my current role 
with the Department of Agriculture.
    I was surprised to hear that producers did not know a lot 
about what we were doing in Rural Development and certainly in 
Rural Business-Cooperative Service. It left me thinking that 
there has to be some way for us to work together to ensure that 
the information is in fact available to producers throughout 
rural America.
    We have a lot of programs that we are operating in Rural 
Development and Rural Business-Cooperative Service that 
certainly could benefit them. It is just a matter of ensuring 
that they get their information. We had an opportunity to 
respond to the chairman, and we offered our assistance as he 
develops that activity going forward.
    Mrs. Emerson. Okay. Because obviously there is just a real 
good role here, for USDA to work closer with producers or to 
help with feasibility studies and/or some legal assistance or 
other things that obviously you all probably have expertise in 
with regard to what they want to do, but they do not quite know 
how to access it.
    So it would be helpful if we could come up with some sort 
of creative educational program that did not cost any money so 
that we might be able to all work together to make those 
programs more readily available, and for them to feel more 
comfortable with those programs.
    Mr. Chairman, I guess that is my time. I have more 
questions.
    Mr. Latham. So do I.
    Mrs. Emerson. Okay. Let's just go back and forth.
    Mr. Latham. The cat is away.
    We just said, the cat is away, Mr. Chairman.
    Mr. Skeen. Do I look like a cat?
    Mr. Latham. You are a cool cat.

                     biomass demonstration projects

    I notice in your budget $3.5 million for biomass 
demonstration projects. If you could give me an idea of how 
these projects would be structured. I also sit on Energy and 
Water, and they are doing an awful lot over there.
    Is there coordination, or are we just reinventing the wheel 
here?
    Ms. Long Thompson. There is coordination, but I am going to 
ask Administrator McLean to answer that.
    Mr. McLean. The rural utilities electric programs are all 
loan programs. We believe that the biomass initiative would 
allow us to demonstrate new technologies, renewable 
technologies, in the rural electric family by combining a small 
amount of grant money with the loan money and perhaps have 
larger, more sustainable projects.
    Biomass is one of, I think, the great areas of opportunity 
for both agricultural stability as well as renewable energy 
sources.
    Mr. Latham. What do you envision, what kind of 
demonstration project? I will tell you that the Soybean 
Association has, for the last 10 years, had demonstration 
projects in place. There is a wealth of knowledge available 
already, and proven as far as soybean oil and soy diesel, the 
benefits of that.
    I just wondered what we are doing.
    Mr. McLean. What we are looking to do is to build 
partnerships with the rural electric cooperative family, and 
find business plans that can create sustainable long-term 
projects in those areas.
    Mr. Latham. Like what?
    Mr. McLean. Some of the exact examples that you used on how 
we can use some of those technologies in rural electric 
cooperatives.
    Ms. Long Thompson. What we intend to do is to publish a 
notice, and then we will receive applications. There will be 
considerable flexibility, because it is not only a new 
initiative, but it is a new area of development in the energy 
field.
    Mr. Latham. It does not seem to be very well-defined as to 
what we are actually trying to accomplish.

                             digital divide

    There has been much discussed about the digital divide, and 
that proposal, $102 million, to finance a broad-band 
international access loan and pilot grant program, I have a 
couple things on that.
    Who would qualify for the loans and grants? I will tell 
you, from the State of Iowa, the State government has spent 
$300 million putting fiber-optics throughout the entire State, 
and this is not going to do anything, this whole project.
    We now currently have a lot of private businesses coming 
in. If you go by the little town of Mallard, Iowa, there are 
six fiber-optic lines in the ditch going by Mallard, Iowa, 
right now. I just wondered who is going to get the money, is it 
adequate, and is it something that we should be involved in?
    Ms. Long Thompson. Again, I will turn to Administrator 
McLean to give some specifics, but you are probably familiar 
with the recent study released by RUPRI that included a look at 
Iowa, West Virginia, Texas, and one other State--Louisiana, 
looking at rural communities to identify where rural 
communities stand with regard to high technology and 
availability.
    There are some rural communities that are--in most cases 
they are located fairly close to a large urban area--that are 
actually very well connected, but for the most part rural 
communities are somewhat lagging behind urban centers, 
including suburban areas.
    So the purpose of this, of course, is to work to determine 
how we can best proceed to ensure connectivity in rural 
communities across the country.
    Mr. Latham. What my problem currently is, our telephone 
users are being charged a tax every month to gain access for 
schools and libraries because of the fact in the State of Iowa, 
that the fiber-optic system is State-owned, and we do not have 
access to any of those monies because we are prohibited from 
access to it. So while we pay the tax, we do not get any 
benefit because it is a state-owned entity.
    I just wondered, is there a prohibition on who is going to 
get the money?
    Mr. McLean. No, there would not be. The schools and 
libraries program, of course, is under the jurisdiction of the 
FCC. One of the reasons Iowa actually does have a lot of 
connectivity and a lot of bandwidth is Iowa is one of our best 
States for rural utilities service telecommunications 
borrowers. We have some of the largest number of borrowers and 
independent phone companies who are doing a tremendous job in 
Iowa.
    One thing we have found as we have gone across the country, 
there is a lot of bandwidth that has capacity that passes 
through rural America. Unfortunately, the points of presence or 
the access, the on ramps to that bandwidth, are often bypassed, 
or there is no place for rural towns to get on.
    As I have traveled around the country in the 2 years I have 
been at the Rural Utilities Service, in community after 
community, the issue comes up of getting access to bandwidth, 
to broadband services. In a number of communities, getting 
local dial-up service to the Internet is a significant problem. 
Many states wish they would be in Iowa's position.
    Mr. Latham. So your answer, then--I still do not 
understand, who is going to get the money? Who qualifies?
    Mr. McLean. There is Internet service, where it is not 
otherwise available for local dial-up, and there are still a 
number of rural places----
    Mr. Latham. Private companies?
    Mr. McLean. Everybody but an individual, would be generally 
how we would define that.
    Mr. Latham. And the State of Iowa?
    Mr. McLean. I would have no objection to the State of Iowa.
    If I could express a view on your situation with the 
schools and libraries funding, I think that Iowa should have 
qualified under that program. Having had some participation in 
working on the Telecom Act in my previous job when I was staff 
for Senator Exon, personally I can express surprise at the 
decision that the Commission made on that.
    In administering this pilot program, it will be an adjunct 
we think to our distance learning telemedicine program and use 
the same types of eligibilities. If eligibility to a State 
entity would be helpful, we certainly would be happy to look at 
that in writing the regs for the program.
    Mr. Latham. I just want to know. The mouse will go and the 
big cat can take back over.
    Mr. Farr.
    Mr. Skeen. Glad I got recognized.

                        definition of ``rural''

    Mr. Farr. Madam Secretary, I gave you a letter just before 
we went to vote that is being circulated by one of our 
colleagues on the Committee on Appropriations, John Olver from 
Massachusetts. He is asking appropriators to sign that letter, 
which asks--you have the only copy, but it asks essentially for 
an increase in certain categories, a substantial increase.
    I just wondered, a lot of Members from rural areas are very 
interested in that and will be signing on, and it will be 
coming--maybe the chairman already has a copy of the letter, 
asking for an augmentation in those funds.
    I wondered if you could comment on that.
    Ms. Long Thompson. As you know, in most of these programs 
we have also asked for increases, so my response is actually 
twofold. One is that there is a need for the increase. There is 
a need in rural America for the increase.
    The question always becomes, what would get cut in the 
budget to offset the increase? That becomes I think the 
difficult question for the Congress. But these funding levels 
are certainly levels that we could administer and put the money 
to good use in these various programs in rural America.
    Mr. Farr. Mr. Chairman, I know we are under tough budget 
constraints, but these augmentations I think are reasonable, 
and when we finish all our deliberations we ought to take a 
look at them.
    I just want to thank you very much. You have been very 
helpful to California. Mr. Chairman, last year at this 
committee I talked about the problem we have that some of our 
laws do not really allow for the best targeted use of funds.
    We have a problem in California. In the definition of 
``rural'' rules, usually very small cities, under 60,000 
people--because in our agricultural lands, we are not allowing 
people to develop on the agriculture lands, our cities are 
becoming bigger, and some of them have over 100,000 people, 
where we have both the cannery workers and the field workers 
living often in the same home; the same families, just doing 
different jobs.
    Working with this department, we were able to get a pilot 
project for funding owner-occupied farmworker housing. In the 
past we have never allowed that to happen. But cities want 
them. They are going to be into self-help, building housing. 
This is in conjunction with money that is being put up by the 
local community.
    Those are the kind of innovative solutions to problems that 
I think that Marcy Kaptur and others on this committee who have 
been asking about, is how we use your department to do smart 
things that are actually moving in the direction we ought to be 
moving in, even though we have to sometimes, as you had to do, 
get special authorization for it.
    It is too bad that we need that special authorization, and 
I think as committee members we would like to revisit some of 
these constraints that are on you, that are on your agency, 
that do not allow you to use the money in the smartest way 
possible to essentially accomplish the goal.
    So I look forward to working with you, and thank you for 
helping us out.
    Ms. Long Thompson. Thank you.
    Mr. Skeen. Mr. Hinchey.

                        administrative expenses

    Mr. Hinchey. Thank you, Mr. Chairman.
    Madam Secretary, I wonder if you can tell us how many new 
staff positions the fiscal year 2001 budget will support.
    Ms. Long Thompson. I can tell you, but I have to look it 
up:
    The total for the mission area is 114 staff years over the 
fiscal year 2000 budget. How that is divided among the three 
agencies, though, we do have to look that up. The majority of 
those would be in the Rural Housing Service. That is where we 
have the largest number of employees.
    Mr. Hinchey. You can give it to me later.
    Ms. Long Thompson. Yes. We can submit it later. The total 
for the three agencies is 114.

                      RURAL DEVELOPMENT STAFF YEARS
------------------------------------------------------------------------
                                       2000         2001        Change
------------------------------------------------------------------------
Rural Housing Service............        5,922        6,020           98
Rural Utilities Service..........          698          710           12
Rural Business-Cooperative                 280          290           10
 Service.........................
Alternative Agriculture Research             6            0           -6
 and Commercialization Center
 (AARCC).........................
                                  --------------------------------------
    Total........................        6,906        7,020          114
------------------------------------------------------------------------

                        support services bureau

    Mr. Hinchey. The only reason I asked the question is 
because of the point that we discussed a few moments ago, and 
that is that you have all this good product but it is not 
getting out to people because there is no one to deliver it.
    That is a real concern in the State that I represent, at 
least. I am sure it is the same in other places across the 
country.
    When Joe Leo was here the week before last, he talked about 
the Support Services Bureau and the improvement in the kinds of 
electronic monitoring that is going to take place, and the 
pooling of electronic equipment, and consolidation of services.
    I am wondering what is going to happen to the people who 
are in the jobs now that will be eliminated as a result of this 
consolidation. Will they be offered the opportunity to stay 
with the agency, or what will happen to them?
    Ms. Long Thompson. In most cases, they will. It will depend 
upon the specific responsibilities that they have now and how 
the Support Services Bureau is set up.
    But we are understaffed in so many areas that we do foresee 
that there would be a place for most of the folks who are 
currently working in operations and management.
    Mr. Hinchey. Okay. Good.

              empowerment zones and enterprise communities

    You have been very supportive of the rural economic area 
partnership program. I think those pilot programs are working 
very well. At least in my experience they are.
    Last year in the appropriations bill this committee was 
able to include the REAP Zones in the set-asides for the EZ/EC 
program. That was very helpful and a lot of good work is coming 
out of Those programs. But I notice in this year's budget there 
is a specific removal of the REAP Zones from the EZ/EC set-
asides.
    Can you tell me why that took place? What was the 
motivation there?
    Ms. Long Thompson. It was totally inadvertent, and it was 
all Jim Newby's fault.
    Mr. Hinchey. At least we have somebody to pin it on.
    Ms. Long Thompson. I thought it was a technical problem, 
but it was an inadvertent oversight. We would be thrilled if it 
were put back in.
    Mr. Hinchey. There is also in the budget a request for $15 
million for the third year of funding for the Round II EC/EZ 
communities. This funding will go through the tax-writing 
committees, I think, the Committee on Ways and Means, because 
it is a program that runs over a period of years. But for some 
reason during the past two years those committees have been 
unable to reach a consensus on EZ/EC funding. This committee 
has had to scramble at the last minute to provide the funding.
    I am wondering if the administration is going to make any 
real effort to get this funding passed through the tax-writing 
committees, or if we are going to be back here again at the 
last minute trying to get another year of funding?
    Ms. Long Thompson. We are actually working at this, I can't 
say on all levels, but in parallel.
    Mr. Hinchey. At least two levels?
    Ms. Long Thompson. Yes. There was a Committee on Ways and 
Means hearing yesterday, the 21st. So yes, we are working on it 
at all levels, and we hope there will be agreement and 
cooperation in the Congress as well.
    Mr. Hinchey. So the expectation is that there will be a 
long-term funding program which will be established in this 
year's budget. Failing that, then we will be back to try to get 
one year of it through the appropriations process?
    Ms. Long Thompson. That is correct, yes.
    Mr. Hinchey. But the intention is to try to achieve the 
objective one way or the other?
    Ms. Long Thompson. Yes.
    Mr. Hinchey. But there will be a real effort to get it 
funded over the long-term?
    Ms. Long Thompson. Yes. As you have expressed, the 
strategic planning that takes place in the communities, whether 
they are EZ/ECs or REAPs or champion communities, makes such a 
difference in developing the capacity that allows 
sustainability in terms of growth and opportunity.
    We feel very strongly about this. My only real frustration 
is that we have not been able to work with every community 
across the country that wants to put a strategic plan in place. 
I think the more we would be able to do that in the long run 
the less it would cost in public funds, because there would be 
so much more growth in the private sector.
    Mr. Hinchey. I certainly agree. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Skeen. Mrs. Emerson?

                           rural cooperatives

    Mrs. Emerson. I have one more question, and that is it. It 
is another value-added question, Madam Secretary.
    We talk so much about cooperatives. Let me ask you all if 
the agency is going to consider other models, if you will, in 
helping producers to pursue value-added enterprise, for 
example, S corporations or limited liability corporations, 
single proprietorships, or do they have to be cooperatives?
    Ms. Long Thompson. For many of our programs, co-ops or 
other forms of the business--if the business takes another form 
as a small corporation, they qualify as well. For example, the 
business and industry loan guarantee program is available to a 
variety of different organization structures.
    The reason that I believe co-ops are so valuable is 
probably the same that you do. It allows the producer, the 
person who is growing the commodity, to take advantage of 
marketing opportunities and increase their profitability, and 
sometimes make the difference between profit and loss on their 
commodity.
    Most of our programs, other than the cooperative-specific 
programs, are available to businesses of all different forms.
    Mrs. Emerson. I mention that because a lot of times a lot 
of our producers perhaps might for tax purposes wish to form 
let us say a limited liability corporation instead of a 
cooperative, obviously trying to achieve the same goal at the 
end of the day, but simply for tax reasons wanting to set it up 
a little bit differently. So then they would be precluded, I 
guess, from being able to qualify under the new cooperative or 
development programs?
    Ms. Long Thompson. It depends. There are some co-ops that 
will form limited liability corporations, and the profitability 
from that limited liability corporation goes back to the co-op 
that qualifies.
    Mrs. Emerson. That would qualify. So you would be willing 
to look at some more creative ways of doing that, as long as 
the concept of cooperative is kept in principle?
    Ms. Long Thompson. For the co-op-specific programs. But for 
other programs, they do not even have to have that attachment, 
if you will. They can simply be a business of another form, as 
long as they are rural and meet those criteria.
    Mrs. Emerson. Yes. Because as I said, the more options that 
are available, the more likely our producers will be, I hope, 
to take the risk that is required in order to do value-added.
    Ms. Long Thompson. And there is a lot of potential out 
there.
    Mrs. Emerson. There is, but a lot of risk, too. So thank 
you very much.
    Ms. Long Thompson. Thank you.
    Mr. Skeen.
    Mr. Hinchey.
    Mr. Hinchey. Thank you, Mr. Chairman.
    Yesterday there was a very large rally for rural America 
out on the Mall. A couple of thousand people were there under a 
large tent in the rain. The ground was pretty muddy, but they 
were out there, nevertheless, and they came because there is a 
real crisis in many rural areas across the country, in the Farm 
Belt particularly, with low prices for wheat, milk, and other 
commodities.
    The reason I mention that rally is because we are hearing 
that the President is going to propose a third round of EZ/EC 
communities. I expect that will be true, that he will be doing 
that. But we are hearing that he is not going to propose any 
rural designations within that third round.
    Now, I am certainly hoping that that is not the case, and 
if for some reason the President has been misadvised that there 
ought not to be rural designations, that someone will get his 
ear and suggest that there ought to be.
    Ms. Long Thompson. As you know, the President is very, very 
committed to rural communities and creating more opportunity 
and new opportunity in rural communities, and so I can't speak 
specifically to your issue, but I think that when there is a 
proposal, I think you will be satisfied.
    Mr. Hinchey. Will you be an advocate for that position?
    Ms. Long Thompson. I am an advocate for that position 
already, yes. The empowerment zones and enterprise communities 
work and the REAPs work.
    Mr. Hinchey. They sure do. We have both seen that. And I 
take from your question that you are going to participate----
    Ms. Long Thompson. We are all working on it in the 
administration, yes.

                        water and waste programs

    Mr. Hinchey. I have just one last question. The budget 
includes $502 million for water and wastewater grants, but that 
is a cut of about $52 million from last year. I am wondering 
why in this particular area you are asking for less.
    Ms. Long Thompson. That is purely due to budget 
constraints.
    Mr. Hinchey. Purely budget constraints?
    Ms. Long Thompson. Yes.
    Mr. Hinchey. Okay. This is something that I think we will 
have to look at, I suppose, because there is a situation here 
where there is a real need for these water and wastewater 
disposal programs in rural areas of the country.
    Ms. Long Thompson. The challenge for us is always trying to 
strike a balance between loans and grant monies, and as you 
know, the grant monies go to the communities that have the 
greatest need and the lowest income.
    We can reach more communities with less money when we 
expand the loan program, but the downside of that is that we 
reach fewer of the lowest income communities. It was purely a 
budgetary concern, and we do believe that we will be able to 
reach more people with the grant and loan levels as they are in 
the 2001 budget.
    Mr. Hinchey. That may be true. I certainly am not in a 
position to argue with you about that, but I know from my own 
experience that in the small communities, the loan programs are 
not effective because these communities just can't take out 
loans because they don't have the capacity to pay them back.
    The smaller communities, the real small communities with 
only a few thousand residents particularly, are dependent upon 
the grant program. They just cannot get anything done without 
it. So I am hoping that this is something that we can revisit 
with those smaller communities in mind.
    Ms. Long Thompson. As you have said, just a little bit of 
grant money can reduce the loan amount and make it affordable 
in terms of the consumers' water or sewer bill. We recognize 
that. It was just a decision based on budgetary constraints.
    Mr. Hinchey. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Skeen. Miss. Kaptur.

                                biofuels

    Ms. Kaptur. Thank you, Mr. Chairman. I want to thank 
Congressman Hinchey for doing such a fine job in my absence. I 
appreciate it very much.
    I wanted to ask if the Under Secretary can go back to the 
Department and find an answer for me to a question concerning 
biofuels.
    I would like to know whether, if our national goal were to 
empty the Strategic Petroleum Reserve and fill it with bio-
based fuels, do we have the capacity to produce that much? 
Also, do we have the capacity to deliver it, and what would it 
cost us compared to what we are now paying to purchase and 
store petroleum?
    It is hard for me to read the Department's budget and 
understand exactly how much total money is being requested for 
research and for development in this biofuels area. I know you, 
Under Secretary, have asked for I think a little over $3 
million for various demonstration programs, but there are other 
pieces of this within the Department.
    Maybe Mr. Dewhurst has a magic brief answer here, I don't 
know.
    I am very interested in weighing in on this debate that is 
about to occur here on the issue of oil prices and alternative 
fuel. This Department had better be right at the head of the 
line when it comes to engaging in that. I don't think we 
currently have the information.
    This has happened, actually, since the Secretary visited 
here. This has really come to a head nationally. Oil is about 
$30 a barrel now, most of it imported. I am just interested in 
probing the question, what could we do.
    I understand ethanol now represents a little under 2 
percent of what we sell in the market, and it is about $1.22 a 
gallon. It is competitive with the special benefits that exist 
in our tax code for that. If you could help me get a handle on 
this it would be greatly appreciated. This is big money.
    Ms. Long Thompson. Congresswoman, I would be very happy to 
do that.
    As you know, this is a high priority for the 
administration, and we are working with the Department of 
Energy and also with EPA, because there are environmental 
issues involved, as well.
    But the questions that you have asked I think are exactly 
the right ones that have to be answered. If we do not get the 
answer that is most favorable, then we need, I think, to figure 
out how we can--ensure that we have the production level that 
we need.
    So what we will do is go back to the Department and work 
with the various other agencies within the Department to get an 
answer for you.
    [The information follows:]

    The Strategic Petroleum Reserve (SPR) was created in 1976 by 
Section 154 of the Energy Policy and Conservation Act (P.L. 94-163). 
The law called for a SPR of up to 1 billion barrels of oil to reduce 
the effect of disruption in petroleum supplies and to carry out the 
obligation of the United States under the International Energy Program 
(to equally share petroleum supplies with signatory nations in the 
event of a substantial disruption). 1.5 billion gallons of ethanol were 
produced in the United States in 1999 with total ethanol capacity 
around 1.8 billion gallons. The SPR now contains more than 561 million 
barrels of crude oil stored in salt domes along the coast of Texas and 
Louisiana and represents about 65 days of total oil import replacement.
    Several studies have examined the concept of a strategic ethanol 
reserve (SER). These studies include work by the Department of Energy, 
the General Accounting Office (GAO), the Congressional Budget Office 
(CBO), and the Department of Agriculture (USDA). The DOE report 
concluded that the net economic and security benefits of a SPR are 
higher and the budget costs lower than those of a SER. The CBO report 
concluded that a SER would not be a cost-effective supplement to the 
SPR and would result in very high costs for an inconsequential number 
of new jobs. The GAO study found that cost data were not sufficiently 
developed to permit a conclusive study of the economics of a SER 
compared to a SPR.
    The 1988 USDA study examined the feasibility of a 37.5 billion 
barrel SER, representing 10 percent of the gasoline that could be 
derived from the currently planned SPR. Two scenarios, representing 
different rates of fill, were examined over the crop year 1987-95 
period. In Scenario I, an SER begins filling in crop year 1987 and, at 
a rate of 200 million gallons per year, reaches capacity in 1995. In 
Scenario II, a SER is filled almost twice as fast in Scenario I and is 
completed in 1991.
    Technologically, a SER may be feasible. Capacity exists to produce 
ethanol for a SER without new construction. Potential storage sites are 
available for purchase. Pipeline shipment of ethanol is not feasible 
now but barge, rail, and truck transportation present no difficulties. 
Manpower needs for aspects of SER development and operation can be met.
    Some technological problems exist, however. No research has been 
conducted on long-term storage of denatured ethanol solutions and 
technical problems may prohibit salt formation storage, the least-cost 
option. Research in these areas would be required before a SER is 
established.
    It costs more to acquire, store, and transport ethanol than an 
equivalent quality of petroleum for the SPR. Even after accounting for 
savings in agricultural program costs (that would not occur today under 
the present farm bill) and increased Highway Trust Fund revenues, the 
1988 study found per-Btu costs of a SER would be significantly higher 
than for the SPR. (A 42-gallon barrel of ethanol contains 3.2 million 
Btu; the same size barrel of petroleum, 5.8 million Btu.) The Federal 
cost of the rapid fill SER scenario would be 101 percent higher than 
the SPR; the slow fill scenario would cost 157 percent more than the 
SPR. If salt formation storage were infeasible, per Btu Federal costs 
with new steel tank storage would be 176 or 215 percent more than for 
the SPR.
    Overall, the USDA study found that the value of resources needed 
for a SER exceeds the value of resources needed to acquire and store an 
equal volume of petroleum in the SPR. This means that funds needed for 
a SER could pay for the purchase and storage of an equal volume of 
petroleum and, in addition, provide for the production and purchase of 
other goods and services.
    The SPR could provide more security than a SER in an oil supply 
disruption because petroleum can be used to produce many fuel products 
and essential chemicals. Completely denatured ethanol, on the other 
hand, has limited fuel and chemical uses. Petroleum contains 161 
percent more energy per barrel than ethanol and, although it needs 
processing before it can be used, the SPR may represent a more 
efficient use of fuel storage capacity than would a SER.
    Some have argued that a SER provides more security than a SPR 
because most SPR oil is imported. However, once a commodity is in a 
domestically-controlled reserve, its source is not relevant. The 
existence of a domestic ethanol industry may offer a degree of 
security, albeit an expensive one at this time, over reliance on 
foreign sources of petroleum. But, an ethanol; reserve offers no 
greater security than a petroleum reserve since both would be 
controlled domestically.

    Ms. Kaptur. I greatly appreciate that. We spend close to 
$200 million a year I think just paying for the storage of the 
Strategic Petroleum Reserve, if I remember my numbers 
correctly. That does not include what we buy, and I am very 
interested in how that is stored. I am still getting some of 
these answers myself.
    It is interesting that back in the days when they created 
the Strategic Petroleum Reserve, they did not call it the 
Strategic Fuels Reserve, you know. They did not really have a 
broad idea in those days. But I think we do now, and now you 
have done much more in the way of R&D, and we have these fuels 
coming on line.
    I am very interested in knowing if we can do anything in 
colloquies during the supplemental, as well as in the 2001 
appropriation bill. If it does not require additional 
authority, we could at least try to offer amendments to 
purchase ethanol, methanol, soy-based fuels, if we understand 
the lay of the land.
    Right now at least this committee, this subcommittee, does 
not have information that makes clear what the path is. So in 
the area of rural development, in business, we would certainly 
ask your help.
    The other area I wanted to get into is the cooperative 
development. I have to compliment you, I just think you have 
been such a leader in this, in trying to change the thinking of 
many in rural America about how to compete and reposition in 
this marketplace. Thank you for that.
    A State like Ohio really does not have a co-op tradition 
like Minnesota, and so--and actually, Michigan does not either, 
not really. They have some.
    But it is interesting, because we have credit unions, and 
yet if you have people going under in one sector of 
agriculture, they cannot quite reposition as quickly as people 
in Minnesota simply because they do not have the working 
knowledge. There are not the people there that share that 
heritage. I want to thank you very much for the initiatives in 
this budget. I ask myself if it is enough during the 
supplemental.
    Knowing the marketplace today and the fact that we are 
going to lose people this year, I proposed an amendment for 
$130 million to the supplemental, which was defeated, that 
would have provided a basis for financing for people who only 
have one option left this year. AMTA payments are not going to 
help them because it is row-crop prejudiced, and 20 percent of 
the money went to five congressional districts, and people who 
did not plant a crop got money when people who did plant a crop 
and lost it were going under and got no help. The formula was 
very flawed, in my opinion. All they have left is to reposition 
in the marketplace this year.
    Certainly if they are a specialty crop producer, if they 
are into--take sugar beets, if they are into certain types of 
livestock, poultry, there are so many needs out there this 
year.
    What worries me about your budget is, is it big enough to 
deal with the only option I see left, unless there is going to 
be real wisdom that comes out of the agriculture authorizing 
committees, and I have not seen it yet, to try to deal with the 
reality of what is out there this year in rural America?
    So I am a little uncomfortable with your budget because it 
appears to me to be not sufficient to bring technical 
assistance online and financing online to help these people 
reposition now. You only ask for $6 million in the co-op 
development area, am I wrong? That is my recollection.
    Ms. Long Thompson. It is about 6, yes.
    Ms. Kaptur. Are you familiar with the amendment that I 
offered at all?

                             equity capital

    Ms. Long Thompson. Yes. I commend you also for your 
leadership on this. It was $130 million of grant money to be 
made available.
    If I had to choose between grant and equity capital money, 
I would choose equity capital, because I think that would allow 
us to reach more folks. But we can always use more money in 
virtually every one of our programs, and co-op development in 
my judgment has as much potential as any area, not just at USDA 
but in the Federal Government, because there are opportunities 
that I think we have not even imagined yet that farmers, 
producers, and ranchers, can take advantage of when they work 
cooperatively.
    Again, when we ask for a certain level, it comes back to 
the whole issue of budgetary constraints; that whenever we put 
more money in one program area, we have to find it in another 
program area.
    As Steve Dewhurst mentioned earlier in the hearing, our 
subsidy rates are going up in many of the loan programs. We 
have to be very responsible stewards of the public money.
    While we would like to ask for more money, and we know that 
we could make use of more money, we also have to be very 
respectful of ensuring that we do not go into an annual deficit 
situation again.
    So it is purely budgetary. That decision as well as many 
others are very much budget-driven.
    Ms. Kaptur. I would just ask your help. I am going to come 
back with some amendment that helps people reposition this 
year. I don't know if Larry Combest will, and I know he is 
holding hearings, but I don't think he is going to produce a 
bill, so the only thing that is walking this year is us in 
terms of assistance to rural America.
    The supplemental will come up, and I am going to go up to 
rules and try to get an amendment. I don't know if they will 
allow it or not, but I am still going to keep trying. I would 
greatly appreciate your advice, especially to help people 
reposition this year.
    When we went to the original amendment, we went to the CCC 
and used that authority so we would not have to go directly on 
budget. If we would work with the Department to fashion 
something here, I am very worried about the vegetable people. 
Sam is not here right now, but that is an area that was not 
covered.
    Certainly in my area, various types of hog production have 
a problem. Unless they co-op, and they don't have the help to 
do it. I know. I have been working with them for 2 years. I 
know what is not there for them.
    The same thing is true, by the way, in beef, and it is true 
in beets up in Michigan, and I can just imagine what exists in 
other parts of the country. So I would appreciate the 
Department's advice there, Madam Secretary. You have a big 
supporter here of the co-op development initiatives that you 
have offered here.
    Beyond that, I am asking for your help as we try to save a 
few of these family operations in this year of 2000. Thank you 
very much, and I want to thank the chairman, I want to thank 
the members of the committee, particularly Maurice, who pinch-
hitted for me here for a while.
    This is our last witness. We have really enjoyed the 
Department's testimony this year, all the staff that have come 
up here who are doing such wonderful, wonderful work at a time 
of reorganization and great pressure because of what is 
happening in rural America. We really appreciate the work that 
you do, we are very proud of you, and we want you to take our 
questioning and our concerns I hope in a way that will energize 
you and let you know that you have many friends here who are 
trying to help the country, as you are.
    So thank you very much for being here today.
    Ms. Long Thompson. Thank you.

                            Closing Remarks

    Mr. Skeen. Folks, I think this lady over here has a great 
deal of passion, will, and drive. What we have in this country 
today is a system of government involved in agricultural fields 
that is taken for granted. It has been. You fight this every 
day. The access to technology has to improve, the ability to 
stay on the land has been threatened. It is a very difficult 
situation, because you have a jazzy, technologically astute 
sector and producing in almost every other field of enterprise. 
Agriculture is taken for granted. Thanks to the work that you 
folks do, you are enabling people to come and stay on the 
properties and produce, and hopefully live, because it is a 
tough business. We thank you for what you do and how well you 
do it. So we will fight the battle about whether we are going 
to get the money or not. It all boils down to that, one way or 
another.
    I want to thank you folks on this panel, too. I think we 
have illuminated a great deal of this effort, and I appreciate 
the work that you do.
    Ms. Long Thompson. Mr. Chairman, may I thank you and the 
committee? I am very privileged that I get to work here but I 
still live in Indiana on the farm, and I try to get home every 
weekend. I know from my experiences at home that there are 
fewer and fewer people who really do appreciate the huge 
contribution that rural America makes to keeping the United 
States the strongest country of the world. Your committee and 
your leadership are truly fighting a very successful and strong 
battle. Because rural America is so important, I want to thank 
you for your leadership, not just this year, but for the many 
years that you have been doing this, and also for the 
leadership of the committee. You really are doing very, very 
good work with the public dollars.
    Mr. Skeen. We have a mutual effort, and we also have an 
appreciation for what you are doing.
    Ms. Long Thompson. It shows.
    Mr. Skeen. A lot of times we don't express that effort 
well, particularly when we get over to the Senate and start 
trying to get the money needed for this area.
    So thank you very much for what you do, and thank you for 
making this a very helpful hearing today. You are very 
accustomed to the problems we are going to have to deal with. 
We will get on with the next part of the process. Thank you 
very much.
    [The following questions were submitted to be answered for 
the record:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                           W I T N E S S E S

                              ----------                              
                                                                   Page
Anand, Rajen.....................................................     1
Chambers, Samuel, Jr.............................................     1
Dewhurst, S.B....................................................1, 731
Kearney, J.C.....................................................   731
Long-Thompson, Jill..............................................   731
McLean, C.A......................................................   731
Watkins, D.J.....................................................   731
Watkins, S.R.....................................................     1


                               I N D E X

                              ----------                              

                       Food and Nutrition Service

Budget Request:
                                                                   Page
    Child Nutrition Program......................................    11
    Commodity Assistance Programs................................    12
    Commodity Supplemental Food Program..........................    13
    Energency Food Assistance Program (TEFAP)....................    13
    Farmers' Market Program......................................    12
    Food Program Administration..................................    13
    Food Stamp Program...........................................    10
    General......................................................    10
    Nutrition Program for the Elderly............................    13
    Women, Infants and Children..................................    12
Center For Nutrition Policy and Promotion:
    Dietary Guidelines.................................379-380, 449-518
    Public Requests..............................................   430
    Staff Years..................................................   430
Child Nutrition Program:
    After School Snacks........................................205, 234
    Alternative Meal Count Pilot Projects.......................221-233
    Child and Adult Care Food Program................210, 235, 236, 520
    Child and Adult Care Program Integrity................205, 237, 520
    Child Education..............................................   179
    Chldren and Obesity..........................................   189
    Child Nutrition Act Authorization Language..................240-251
    Consumer Price Index........................................233-235
    Coordinated Review Effort.............................203, 217, 218
    Direct Certification in the National School Lunch Program....   203
    Federal Poverty Guidelines...................................   213
    Food Safety.................................................206-208
    Funding....................................................220, 237
    Homeless Children Nutrition Program...................209, 214, 220
    Nutrition Education Programs.................................   435
    Payment Error Rates.........................................215-217
    Permanent Appropriations.....................................   213
    Report ``Promoting Health Eating''..........................145-172
    School Breakfast Pilot Projects.............201, 203, 235, 532, 533
    School Breakfast Program.....................................   420
    School Food Authorities......................................   436
    School Lunch Program..............143, 183, 194, 204, 436, 439, 533
    School Meals Initiative.....................................210-212
    Special Milk Program.........................................   215
    Stae Administrative Expense..................................   214
    Summer Food Program..........................................   192
    Suspension and Debarment....................................218-220
    Team Nutrition...............................................   212
Commodity Assistance Programs:
    Bonus Commodities..............137, 316, 437, 439-440, 446, 527-528
    Caseload.....................................................   313
    Commodity Foods..............................................   437
    Commodity Supplemental Food Program...............311, 312, 442-444
    Donated Commodities..........................................   312
    Emergency Food Assistance Program (TE137, 315-317, 445-447, 527-529
    Funding..........................................313, 315, 317, 444
    Healthy Meals for Healthy Americans Act.....................317-320
    Hunger Insecurity Study......................................   312
    Initiatives..................................................   438
    Inventory Reduction..........................................   444
    Partnerships.................................................   438
    State Procurement Standards..................................   439
Commodity Supplemental Food Program: See Commodity Assistance 
  Program
Emergency Food Assistance Program: See Commodity Assistance 
  Program
Explanatory Notes...............................................534-729
Food Donations Programs for Selected Groups:
    Food Distribution Program on Indian Reservations......187, 328, 370
    Nutrition Program for the Elderly.....................188, 372, 373
Food Program Administration:
    Budget Request Table.........................................   428
    Computer/ADP Upgrades........................................   385
    Detailed Employees....................................386, 387, 433
    Economic Research Service...................................383-385
    Object Class Breakout.......................................421-427
    Office of Governmental Affairs and Public Information Funding   387
    Staff Years...........................................386, 430, 433
    Studies and Evaluations.....................................387-421
Food Stamp Program:
    Access.......................................................   441
    Administrative Burden........................................   433
    Application Process........................................440, 441
    Benefit Reserve..............................................   331
    Brochure ``National Nutrition Safety Net''...................93-134
    Collections..................................................   324
    Colonias Initiative....................................374-377, 522
    Community Issues.............................................   173
    Conforming Definitions.......................................   323
    Conforming Vehicle Rules.....................................   323
    Deceased Recipients..........................................   324
    Disaster Assistance..........................................   369
    Education....................................................    55
    Electronic Benefit Transfer.............143, 193, 196, 337-362, 529
    Eligibility................................................180, 321
    Employment and Training...............................173, 191, 365
    Enhanced Funding.......................................329-330, 335
    Erroneous Benefits...........................................   321
    Error Rates............................................331-334, 337
    Estimated Costs..............................................   322
    Federal Tax Offset Program...................................   362
    Food Security................................................   518
    Fraud........................................................   184
    Freely Associated States and Palau...........................   372
    Funding for Puerto Rico and American Samoa...................   364
    Handbook ``Together We Can''................................. 57-91
    Legal Immigrants.............................................   322
    Minimum Benefit..............................................   442
    Nutrition Education......................325-326, 382, 430-432, 521
    Organic Food.................................................   188
    Overissuance Claims..........................................   327
    Participation................................55, 178, 325, 442, 519
    Participation and Unemployment...............................   368
    Partnership for Change.......................................   377
    Program Integrity..........................................176, 380
    Proposed Legislation.........................................   382
    Retailer Integrity...........................................   327
    Special Wage Incentive Program...............................   363
    Studies and Evaluations....................................371, 373
    Trafficking..................................................   324
    Vehicle Cost Levels........................................138, 174
Prepared Statements and Biographies:
    Administrator, Food and Nutrition Service, Samuel Chambers, 
      Jr......................................................... 40-54
    Undersecretary, Food, Nutrition, and Consumer Services, 
      Shirley R. Watkins......................................... 15-39
Questions Submitted for the Record:
    Chairman Skeen...............................................   203
    Mr. Bonilla..................................................   533
    Mr. Kingston.................................................   524
    Mrs. Emerson.................................................   527
    Ms. DeLauro..................................................   532
    Ms. Kaptur...................................................   435
Special Supplemental Nutrition Program for Women, Infants, and 
  Children (WIC):
    Automation...................................................   195
    Bonus Funding................................................   305
    Breast-Feeding Promotion....................................447-449
    Budget Request...............................................   523
    Certification Rule..........................................305-310
    Eligibility............................................175, 284-287
    Farm Initiative..............................................   136
    Farmer's Market Nutrition Program.................252, 253-255, 284
    Food Package...............................................186, 253
    Funding.................................251, 252, 289-301, 304, 317
    Income Documentation.........................................   252
    Infant Formula Rebates................................281, 282, 283
    National Survey of WIC Participants..........................   253
    Nutrition Education........................................177, 288
    Obligation Reporting.........................................   238
    Outlays and Unliquidated Obligations.........................   256
    Participation............194, 238, 239, 240, 280, 282, 283, 302-304
    Producer Price Index.........................................   238
    Program Integrity............................................   176
    Reauthorization........................................256-261, 279
    Spendforward Funds...........................................   253
    Spending.....................................................   239
    Studies and Evaluations...............................177, 311, 532
    Terminology................................................238, 304
    Vendor Fraud................................................263-278
    Vendor Management......................................524-526, 530
    Vendor Overcharges...........................................   283
    Vendor Participation Limits..................................   186
    Violations.................................................262, 280

                           Rural Development

Administrative Expenses:
    Funding......................................................   805
    Object Classification........................................   872
    Request...............................................734, 736, 812
    Salaries and Expenditures....................................   873
    Staffing..............................................814, 821, 878
    Travel.......................................................   878
Agricultural Land Practice.......................................   810
Bio-Based Products...............................................   873
Biofuels.......................................................825, 875
Biographical Sketch for Jill Long Thompson.......................   758
Biomass Demonstration Projects...................................   818
Budget Request for FY 2001.......................................   734
Carryover Balances...............................................   836
Champion Community...............................................   861
Civil Rights Policy..............................................   869
Colonias.......................................................872, 941
Deferment........................................................   933
Definition of Rural............................................820, 837
Deregulation.....................................................   943
Employees On Detail..............................................   874
Empowerment Zones/Enterprise Communities:
    Criteria for.................................................   834
    Difference from Champion Community...........................   861
    Economic Area Partnership Zone...............................   873
    Financial Leverage Ratio.....................................   881
    Function of and Alternatives to.............................879-882
    Funding......................................................   822
    Jobs and Skill...............................................   881
    List of......................................................   831
    Performance in Round 1.......................................   881
    Strategic Plan...............................................   880
    Training Programs............................................   813
Explanatory Notes................................................   954
Farm Safety Net................................................804, 808
Federal Financing Bank...........................................   925
Funding for FY 1999..............................................   732
Interagency Communication........................................   872
Inventory Property...............................................   911
Mississippi Delta................................................   891
Object Classification............................................   872
Opening Remarks..................................................   731
Questions Submitted for the Record:
    Mr. Skeen....................................................   831
    Mrs. Emerson.................................................   890
    Ms. Kaptur...................................................   875
Rural Business-Cooperative Service........................735, 838, 894
Delinquency......................................................   895
    Intermediary Relending.....................................898, 904
    Loan Programs................................................   894
    Subsidy Rates................................................   894
Rural Community Development Initiative...........................   872
Rural Community Schools Rebuilding Program.......................   874
Rural Conservation...............................................   806
Rural Development Councils.......................................   839
Service Contracts...............................................862-867
Statement of the Under Secretary.................................   737
Subsidy Rates........................................804, 894, 907, 927
Support Service Bureau...........................................   821
Technical Assistance Grant Program...............................   941
Underserved Population...........................................   923
Waste, Fraud and Abuse...........................................   861
Write-Offs and Losses.....................................856, 944, 948

                         Rural Housing Service

Biographical Sketch of James C. Kearnery, RHS Administrator......   791
Centralized Servicing Center.....................................   867
Community Facility....................................916, 917, 918-920
Explanatory Notes................................................  1022
Farm Labor Housing...............................................   922
Hazardous Weather Early Warning system...........................   862
Housing Preservation Grants..........................894, 898, 907, 913
Multi-Family Housing Loans.......................................   868
Questions Submitted for the Record:
    Mr. Skeen....................................................   907
    Ms. Kaptur...................................................   924
Rental Assistance.........................................908, 920, 922
Rural Housing Service............................735, 838, 883-887, 924
Section 502 Loans..............................................909, 920
Section 515 Funds..............................................908, 921
Sections 533 and 504 Programs....................................   907
Self-Help Housing..............................................913, 916
Single Family Housing..........................................909, 920
Statement of RHS Administrator...................................   774
Very Low-Income Housing Repair Grants.....................907, 913, 914

                  Rural Business--Cooperative Service

Alternative Agricultural Research and Commercialization 
  Corporation.............................................888, 903, 904
Biographical Sketch of Dayton J. Watkins, RBCS Administrator.....   802
Business and Industry Programs...................................   894
Business Opportunities...........................................   906
Concentration in Food Industry...................................   876
Cooperative Research Grants......................................   904
Cooperative Stocks Purchase Program..............................   903
Cooperative Service Technical Assistance.........................   901
Cooperative Development Grants...................................   900
Cooperatives..............................................875, 882, 883
Equity Cooperative Capitalization Fund...........................   828
Explanatory Notes................................................  1057
National Sheep Industry Improvement Center.....................902, 903
Non-Agricultrual Cooperatives....................................   861
Questions Submitted for the Record:
    Mr. Skeen....................................................   894
    Ms. Kaptur...................................................   906
Rural Business Enterprise Grants..........................809, 892, 899
Rural Business Opportunity Grants..............................899, 900
Rural Cooperatives........................................733, 814, 823
Rural Economic Development Loans and Grants......................   901
Statement of RBCS Administrator..................................   792
Value-added programs......................................817, 890, 891

                        Rural Utilities Service

Biographical Sketch of Christopher McLean, RUS Administrator.....   773
Circuit Rider Program............................................   941
Construction Loans...............................................   908
Telephone and Electric Service:
Applications...............................................929, 933-935
    Cost of......................................................   927
    Loan Eligibility.............................................   928
Digital Divide..................................805, 816, 819, 888, 952
Distance Learning and Telemedicine...............888, 926, 929-932, 946
Electric Utility Loan Debt.....................................944, 948
Emergency Community Water Assistance Grants......................   941
Explanatory Notes................................................  1003
Foreign Travel...................................................   935
Questions Submitted for the Record:
    Mr. Skeen....................................................   925
    Ms. Kaptur...................................................   950
Rural Telephone Bank Privatization...............................   948
Rural Telephone Bank Liquidating Account.........................   947
Rural Utilities Service...................................735, 837, 925
Safe Drinking Water Act..........................................   951
Statement of the RUS Administrator...............................   759
Telecommunication Act..........................................942, 950
Troubled Electric Borrowers......................................   949
Water Waste Programs........824, 887, 925, 936, 938, 942, 947, 949, 952

                                
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