[Senate Hearing 107-761]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 107-761

                                                        Senate Hearings

                                 Before the Committee on Appropriations

_______________________________________________________________________


                                                     Agriculture, Rural

                                               Development, and Related

                                                Agencies Appropriations

                                                       Fiscal Year 2003
                                                                   
                                         107th CONGRESS, SECOND SESSION

                                                      H.R. 5263/S. 2801

COMMODITY FUTURES TRADING COMMISSION
DEPARTMENT OF AGRICULTURE
DEPARTMENT OF HEALTH AND HUMAN SERVICES:
    Food and Drug Administration
NONDEPARTMENTAL WITNESSES













                                                        S. Hrg. 107-761
 
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                           FISCAL YEAR 2003
=======================================================================



                                HEARINGS

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   on

                           H.R. 5263/S. 2801

 AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD 
 AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL 
         YEAR ENDING SEPTEMBER 30, 2003, AND FOR OTHER PURPOSES

                               __________

                  Commodity Futures Trading Commission
                       Department of Agriculture
 Department of Health and Human Services: Food and Drug Administration
                       Nondepartmental witnesses

                               __________

         Printed for the use of the Committee on Appropriations





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

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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina   THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland        CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada                   MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota        JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California         ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois          BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE DeWINE, Ohio
                  Terrence E. Sauvain, Staff Director
                 Charles Kieffer, Deputy Staff Director
               Steven J. Cortese, Minority Staff Director
            Lisa Sutherland, Minority Deputy Staff Director
                                 ------                                

  Subcommittee on Agriculture, Rural Development, and Related Agencies

                     HERB KOHL, Wisconsin, Chairman
TOM HARKIN, Iowa                     THAD COCHRAN, Mississippi
BYRON L. DORGAN, North Dakota        ARLEN SPECTER, Pennsylvania
DIANNE FEINSTEIN, California         CHRISTOPHER S. BOND, Missouri
RICHARD J. DURBIN, Illinois          MITCH McCONNELL, Kentucky
TIM JOHNSON, South Dakota            CONRAD BURNS, Montana
PATTY MURRAY, Washington             LARRY CRAIG, Idaho
ROBERT C. BYRD, West Virginia        TED STEVENS, Alaska
  (ex officio)                         (ex officio)
                           Professional Staff

                             Galen Fountain
                             Jessica Arden
                            William Simpson
                      Rebecca M. Davies (Minority)
                         Les Spivey (Minority)
                     Rachelle Schroeder (Minority)

                         Administrative Support
                         Angela Lee (Minority)













                            C O N T E N T S

                              ----------                              

                      Wednesday, February 27, 2002

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

                        Thursday, March 14, 2002

Department of Agriculture........................................   197

                       Wednesday, March 20, 2002

Commodity Futures Trading Commission.............................   355
Department of Agriculture:
    Food Safety..................................................   389
    Marketing and Regulatory Programs............................   415
    Food, Nutrition, and Consumer Services.......................   377
Department of Health and Human Services: Food and Drug 
  Administration.................................................   511
Nondepartmental witnesses........................................   605















AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2003

                              ----------                              


                      WEDNESDAY, FEBRUARY 27, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:20 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Herb Kohl (chairman) presiding.
    Present: Senators Kohl, Harkin, Durbin, Johnson, Byrd, 
Cochran, Specter, and Craig.

                       DEPARTMENT OF AGRICULTURE

                        Office of the Secretary

STATEMENT OF HON. ANN VENEMAN, SECRETARY OF AGRICULTURE
ACCOMPANIED BY:
        JAMES MOSELEY, DEPUTY SECRETARY
        KEITH COLLINS, CHIEF ECONOMIST
        STEVE DEWHURST, BUDGET OFFICER


                 opening statement of senator herb kohl


    Senator Kohl. Be called to order at this time, the 
Appropriations Subcommittee on Agriculture, Rural Development, 
and Related Agencies, for our first hearing on the President's 
budget submission for fiscal year 2003. We want to welcome 
Secretary Veneman, along with Deputy Secretary Moseley, Mr. 
Collins, and Mr. Dewhurst.
    The primary purpose of this hearing is to review USDA's 
plans and priorities as laid out in the fiscal year 2003 budget 
submission, and to discuss the main challenges facing those 
agencies under the jurisdiction of this subcommittee. I would 
like to note that we had originally planned to also hear from 
the Health and Human Services Secretary, Tommy Thompson, in 
regard to the Food and Drug Administration, but he was not 
available to be with us here today.
    Madam Secretary, since you last appeared before this 
subcommittee, events have occurred which have changed the lives 
of us all, altered general perceptions about the role of 
government, and forced a reevaluation of the priorities that we 
hold, both in our own personal lives and as a Nation. September 
11 was a horrible tragedy, but it was also an awakening to new 
challenges and new responsibilities for all Americans.
    The Department of Agriculture clearly has an important part 
to play in this call to service. USDA is on the front line of 
our homeland defense with its work in securing our Nation's 
food supplies, food safety, biological research, and 
containment of exotic pests and diseases. The specter of this 
Nation crippled by a food shortage or terrorized by an 
intentionally-introduced food-borne disease is enough to 
convince most Americans of the truth behind President Bush's 
assertion just last month. Issues of agricultural policy have 
become issues of national security.
    And beyond the increased emphasis USDA must place on these 
security issues, the Department must also continue to run, and 
run well, the traditional programs that support farmers, rural 
communities, the environment, the hungry, children, and many 
others. That task is made more difficult this year by the 
impending passage of a new farm bill, a bill which will 
institute a host of new or improved programs to assist farmers, 
support rural communities, protect the environment, and ease 
hunger.
    I would like to make one comment in regard to the farm 
bill, although I know I must defer to my colleagues, many of 
whom serve on this subcommittee, who are conferees. This 
Administration and others have made a strong case that free and 
open markets are in the best interests of American farmers. In 
the area of dairy, as you know, I have fought for that 
principle, and against interstate price-fixing dairy compacts. 
They benefit dairy farmers in some regions at the expense of 
those in other regions, and they place an unjustified tax on 
milk-drinking constituents in all regions.
    I trust, Madam Secretary, that as you work with the farm 
bill conferees, you and the President will strongly oppose any 
efforts to reinstate dairy compacts in any form.
    I look forward to working with you, Madam Secretary, as we 
put together a budget for fiscal year 2003, and I know that 
together we can direct our limited resources in a way that 
meets the great challenge of keeping our food supply safe while 
treating farmers, consumers, and our rural communities fairly 
and well.
    Before we hear from you, I want to turn to my ranking 
member and my good friend, Senator Cochran, for any comments 
that he may wish to make. I will then ask other members of the 
subcommittee if there are opening statements that they may wish 
to make.
    Senator Cochran?


                   statement of senator thad cochran


    Senator Cochran. Mr. Chairman, thank you. I am pleased to 
join you in welcoming the distinguished Secretary of 
Agriculture, Ann Veneman, to present the Department of 
Agriculture's budget request for next year. I am glad to see 
the request includes increases to protect the safety of our 
Nation's food supply and a generous amount, $73.5 billion, in 
direct spending to fund the new farm bill. I am looking 
forward, as a member of that conference, to helping to draft a 
version of that legislation which I hope will meet the needs of 
our farmers and ranchers over the next 5 or 10 years.
    I know, Madam Secretary, you have spent a lot of time in an 
effort to determine how the department should allocate 
emergency appropriations to meet homeland security needs. I 
also know this has been a hectic 6 months for all the members 
of the President's Cabinet. This has been a time that has 
tested the leaders of our Nation and put an enormous strain on 
our Nation's resources, both human and economic. I want you to 
feel assured that this committee is aware of the importance of 
our working together in a bipartisan way to deal with these 
very important challenges that face our country.
    Senator Kohl. Thank you, Senator Cochran. Senator Byrd?
    Senator Byrd. I have no opening statement. I have some 
questions.
    Senator Cochran. I thank you. Senator Craig?


                    statement of senator larry craig


    Senator Craig. Mr. Chairman, thank you very much. Madam 
Secretary, welcome before the committee. I, like the chairman 
and ranking member, are pleased with the amount that you are 
recognizing in the budget that the President released on 
February 4th of $74.4 billion.
    I must tell you, as we struggle to put together new farm 
policy, and it will be a struggle in conference with the 
disparities between the House bill and the Senate bill, and I 
would hope this committee and the principals on it will work 
sooner rather than later to send a clear message to American 
agriculture, production agriculture in this country, what we 
are going to be doing for the coming year. We are now in the 
field, or soon to be in the field. Credit lines are being 
negotiated, and I think, Mr. Chairman, the message needs to be 
clear as to our plans and this country's support for production 
agriculture.
    My guess is that that message needs to come long before a 
conference report comes to the floor of the Senate on the new 
farm bill, because my guess is that will be a ways out.
    Thank you.
    Senator Kohl. Thank you, Senator Craig. Senator Durbin?


                  statement of senator richard durbin


    Senator Durbin. Thank you very much, Mr. Chairman. And, 
Madam Secretary, thank you for joining us. Deputy Secretary 
Moseley, thank you for being here. And the long suffering Keith 
Collins and Steve Dewhurst, who have come before these 
Congressional committees for many, many years, we are happy to 
see all of you here.
    We will be focusing on production agriculture, as we 
should, and I will have a number of questions, but I think we 
should not overlook the substantial responsibility of your 
department in the area of food safety. Thank you for calling me 
yesterday to discuss the GAO report on Mad Cow disease and what 
we can do to make certain that it never threatens the United 
States.
    I hope that under this President, who made the point during 
his campaign, that we will finally modernize food safety in 
America. To think that we are still dealing with some 12 
different Federal agencies responsible for food safety, 35 
different laws, and 28 different committees and subcommittees 
on Capitol Hill with jurisdiction on that single issue of food 
safety. And as we discuss the Department of Agriculture, we 
should not overlook the responsibility and opportunity that we 
have to modernize the system once and for all.


                           prepared statement


    I think your crowning achievement as Secretary is not only 
to put the agriculture sector of our economy back on track, 
but, as your term ends, whenever it ends, to say that we 
finally took on this issue, which, for half a century, has 
really eluded every Secretary of Agriculture. And I want to 
work with you to make that happen.
    Thank you, Mr. Chairman.
    [The statement follows:]

            Prepared Statement of Senator Richard J. Durbin

    Chairman Kohl, thank you for holding this important hearing today. 
I look forward to working with you, Senator Cochran, and my 
Subcommittee colleagues on the fiscal year 2003 (Agriculture budget. 
Mr. Chairman, I'd like to welcome USDA Secretary Ann Veneman to this 
morning's hearing. Madam Secretary, I look forward to working with you 
and the rest of the USDA team. I'm certainly familiar with two 
gentlemen you've brought with you today, Chief Economist Keith Collins 
Budget Officer Steve Dewhurst both testified last April before this 
Subcommittee, along with the Secretary. I always enjoy their budget 
insights. I'm also happy to welcome Deputy Secretary James Moseley.
    I'd like to take a few minutes this morning to talk about some very 
important issues that affect the Department, and my home State of 
Illinois. When I go back to Illinois, one of the things I hear from 
farmers is: How can we get the rural economy back on track? There are a 
couple of ways. One is having a new Farm Bill, which the Senate just 
passed and is now in conference, and another is through providing 
farmers with incentives for things such as biodiesel and ethanol.
    Having said that, it's important for all of us to realize the 1996 
Freedom to Farm Bill was not written in stone. The legislation simply 
has not worked. While the objective of the 1996 bill was to make our 
farmers less dependent on government subsidies by phasing out many of 
the previously existing subsidy programs to make way for a more market 
driven approach, the 1996 bill did anything but that. A new Farm Bill 
will change things by restoring the farm safety net, targeting payments 
to farmers in need, and ensuring that livestock producers are not left 
behind should be the first steps. I believe this legislation will help 
family farmers, ranchers, and other rural Americans compete in the 
marketplace. The Farm Bill is a good start to putting America's farm 
economy back on solid ground.
    We must also work to become less dependent on foreign oil by 
opening and broadening markets for American agricultural products and 
find appropriate alternative uses. We need to create incentives for our 
farmers to produce and develop more efficient ways to make biodiesel 
and ethanol. More specifically, I hope that my colleagues in Congress, 
and in the Bush Administration, will make every effort to expand the 
role of biodiesel and ethanol in the reformulated gasoline program. 
Knowing what we know about MTBE, this should be a top priority. I 
believe expanding biodiesel and ethanol's role is a win for our 
farmers, a win for the environment, and a win for the rural economy.
    In wake of 9.11.01, I'd now like to turn to another issue of 
importance: food safety and security.
    I recently announced I will soon introduce the BSE Prevention and 
Protection Act to strengthen our national defenses against mad cow 
disease. This bill will apply science and good common sense to make our 
borders more secure, improve our surveillance activities, and remove 
from the food supply for humans and animals some animal-derived 
materials that could potentially spread mad cow. We'll also get these 
same materials out of non-food items, like cosmetics and medicines.
    I plan to reintroduce the Genetically Engineered Foods Act. While I 
strongly support biotechnology, I've seen farmers in Illinois and 
throughout the country get hurt by some grave mistakes made by others. 
We must be able to better assure farmers of an available market for 
biotech crops, and assure consumers of the safety and effective 
oversight of this new technology. My bill will accomplish both these 
goals. I have been working very closely with Senator Harkin on 
legislation that will explicitly empower the USDA to close down 
facilities that repeatedly fail to meet minimum food quality standards. 
I am also planning to hold a hearing to examine the adequacy of 
government oversight of the Federal school lunch program, and how 
managerial and organizational deficiencies may be affecting the health 
of school children.
    All food safety threats--whether salmonella or mad cow--are made 
more difficult to manage by our highly fractured food safety system. 
Currently, Federal oversight for food safety is fragmented with at 
least 12 different Federal agencies, 35 different laws governing food 
safety, and 28 House and Senate subcommittees with food safety 
oversight. With overlapping jurisdictions and scattered 
responsibilities, Federal agencies often lack accountability on food 
safety-related issues. For that reason, I have introduced the Safe Food 
Act. This legislation would unite food safety and inspection activities 
in a single agency with a clear mission to protect the public health. 
While the details of a new structure need to be developed in an open, 
participatory process, one of the best things we can do to protect the 
public health and save lives is unite Federal food safety activities in 
one agency.
    I want to work with you and others in the Administration to design 
and implement a more streamlined system to strengthen food safety and 
better protect public health. I hope the Department will continue to 
explore this idea and work with me on ensuring that our food supply is 
the safest in the world.
    Madam Secretary, I was glad to see you at the event that honored 
former Senators McGovern and Senator Dole, who have championed the 
Global Food for Education Initiative to seek the support of many 
nations to provide a modest meal everyday for every needy child 
throughout the world.
    But I am completely at a loss to understand why this Administration 
has zeroed out the funding for the Global Food for Education Initiative 
pilot project. There are over 300 million children worldwide not 
getting enough to eat. Malnourished children find it difficult to 
concentrate and make poor students. But these school feeding programs 
have many other benefits, including increased attendance rates and more 
years of school attendance; improved girls' enrollment rates; improved 
academic performance; lower malnutrition rates; greater attention 
spans; later ages for marriage and childbirth. I understand that you 
want to assess the pilot project, but it would certainly be possible to 
keep the 55 projects running in more than 30 participating countries 
while you and we in the Congress look at ways to increase the 
effectiveness of the program.
    In closing, I believe we have a great deal to do and a very short 
year in which to accomplish these initiatives for rural America and our 
farm families. It's time for Congress to roll up its sleeves and get to 
work in concert with USDA to revitalize the rural economy, make sure 
our food supply is safe and secure while at the same time looking to 
needs abroad.
    Members of the subcommittee, Secretary Veneman, and others, I look 
forward to working with you as we continue to discuss the fiscal year 
2003 USDA budget. Thank you.

    Senator Kohl. Thank you, Senator Durbin. Senator Johnson?

                    STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Well, thank you, Mr. Chairman. I would 
submit my full statement. I welcome the Secretary, of course, 
to our committee, and the rest of the distinguished panel. I 
would only observe, just very briefly, that, while I am 
appreciative of the USDA support for food safety initiatives, 
and we need to work with them on that, I am disappointed with 
the significant reductions in funding for all of our rural 
development initiatives as well as reductions in research, 
education, and extension programs. And it is my hope that we 
can work together throughout the course of this budget process 
to address some of those shortcomings.
    Thank you, Mr. Chairman.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    Thank you Chairman Kohl and Senator Cochran, it's a pleasure to 
join you today in welcoming our Secretary of Agriculture to the 
subcommittee's hearing concerning the proposed United States Department 
of Agriculture (USDA) budget for fiscal year 2003. I extend greetings 
to Secretary Veneman and thank her for offering testimony on USDA's 
budget. I am also particularly eager to learn USDA's plan to work with 
Congress to complete action on a new farm bill this year.
    Those of us who care about the future of family farmers and 
ranchers recognize the urgency of adopting a new farm bill, with sound 
farm policy, very soon, in order to restore economic security to 
American agriculture.
    However, overall, the President's budget for agriculture fails to 
provide the kind of financial bridge necessary to help America's 
farmers, ranchers, and rural communities cross the divide between 
recession and prosperity. In January, the Administration announced that 
without a new farm bill or emergency payments, net farm income could 
drop by 20 percent this year, and that a new farm bill must be signed 
by the President no later than mid-March in order for it to be 
implemented for the 2002 crop year. Given the failings of the current 
farm bill, and the fact that Congress adopted 4 multi-billion emergency 
bills since the enactment of the 1996 bill, it is imperative that we 
enact new farm legislation quickly.
    However, the President's budget provides conflicting guidance on 
where the Administration stands on farm policy. On one hand, the 
President has expressed support in the USDA budget for an additional 
$73.5 billion in farm bill funding for farmers, ranchers, and rural 
America. However, USDA budget numbers fall short. In the first 5 years, 
the President's USDA budget provides $11.5 billion less for farm policy 
than in the Senate farm bill ($33.4 B versus $44.9 B).
    It appears the President's budget shifts money from the first few 
years the new farm bill in order to pay for a promised new safety-net 
beyond the life of the 5 year farm bill. Washington, DC is famous for 
budget rhetoric and gimmickry, and I understand that the Administration 
opposes the Senate farm bill because, according to OMB and USDA, the 
Senate farm bill ``front-loads'' the funding in the first 5 years of 
the farm bill. However, those of us fighting to fortify the income-
safety net for farmers, who need help now, aren't going to apologize 
for the Senate farm bill, it's loan rates, or the fact that it provides 
meaningful funding, early-on in the life of the farm bill. The 
Administration can call it ``front-loading,'' but I call it making sure 
farmers and ranchers have assurance that the new farm bill won't pull 
the rug out from under them in 2002, 2003, and 2004. So, I am 
disappointed the USDA budget does not adequately address these needs.
    I am also concerned the Administration's USDA budget assumes that 
commodity loan rates will be reduced from the current levels--which 
have been maintained on an annual basis by USDA for several years now--
to the formula levels contained in the 1996 farm bill, which will 
dramatically decrease producers' income protection. A large portion of 
the $73.5 billion will be needed to restore loan rates to existing 
levels, not to mention funds needed to increase to the levels in the 
Senate Farm Bill.
    The House farm bill drops loan rates to formula levels while the 
Senate farm bill increases loan rates and sets them at specified levels 
in the bill. It is disappointing to me that USDA might support the 
House farm bill provisions with respect to commodity loan rates, where 
rates are set at formula levels consistent with the 1996 farm bill, and 
you, as Secretary of Agriculture, are empowered to lower loan rates 
even further. Some estimate the House loan rate provisions would allow 
USDA to lower loan rates to $1.56 per bushel for corn and $4.00 for 
soybeans. I don't think most farmers in South Dakota would support this 
direction with loan rates, it's just the opposite of what they've 
wanted for years with respect to the farm bill.
    Additionally, despite the September 2001 report, ``Food and 
Agricultural Policy-Taking Stock for the New Century'', published by 
USDA, suggests too few farmers reap too many of current farm program 
subsidies, USDA won't support, or even take a position on the Dorgan-
Grassley-Johnson payment limitations amendment in the Senate farm bill. 
Family farmers, ranchers, and rural Americans know that rhetoric is not 
reality, they want USDA to take a stand on these important farm bill 
issues and to help keep them in the final farm bill.
    Beyond the farm bill, I want to recognize that we're operating 
under a totally different budgetary environment today. We started last 
year with a $300 billion annual surplus, and we are now looking at 
deficits each year into the future. It tells us how difficult funding 
at last year's level is going to be when it comes time for Congress and 
the Administration to construct this year's budget. USDA's budget 
reflects that different environment, and I appreciate it is a tough 
position. We should all do our best to hang onto as much of the USDA 
budget as we can, but obviously, huge increases in funding for defense 
and homeland security, compounded by the fact that we'll have less 
money coming in, means that we'll have to pinch pennies.
    I wish to applaud President Bush for including $131 million in 
USDA's budget for new investment to protect the Nation's food supply 
from animal and plant pests and diseases. We must work together to 
provide greater homeland security for our food and fiber system. I 
believe the new money recommended for food security will help us 
increase point-of-entry inspections of food and other imports, expand 
diagnostic and response services, and support greater research aimed at 
protecting our crops and livestock from attack by animal and plant 
diseases. I also support your recommended increases for food safety 
initiatives, and funding to cover State and Federal food inspections.
    Nonetheless, I do not support the recommended decreases for vital 
rural development programs. The total rural development budget has been 
cut by $3.5 billion, with significant reductions for water and waste 
water projects, housing assistance, and cooperative development in 
rural sectors of the country. Rural development is a key ingredient in 
re-igniting prosperity in many of our States, and I will work to 
restore funding for rural development programs where I can.
    Finally, I am deeply concerned with the proposed cuts to USDA's 
budget for research, extension, and education. The total Cooperative 
State Research, Education and Extension Service (CSREES) budget 
experienced a $10 million cut. Land grant institutions such as South 
Dakota State University (SDSU) depend upon a sound financial footing 
contained within base, formula funds, to maintain existing programs 
that keep our farmers and ranchers the most competitive in the world. 
SDSU and other land-grant universities are making a real difference 
with the funding they receive to maintain research, education, and 
extension activities.
    Particularly, SDSU is developing creative, new programs to benefit 
the younger generation of South Dakotans with sportsmanship and 
personal character programs, parents and other adults with respect to 
role-modeling, and of course, the farmers and ranchers of my State with 
new initiatives that promote value-added agriculture and energy 
independence. I believe the Administration should have provided greater 
resources for our land-grant institutions, and I will do what I can in 
this subcommittee to fix USDA's budget concerning the work of land-
grant universities.
    Moreover, the extraordinary cuts to research contained in the 
Agricultural Research Service (ARS) budget may harm important research 
facilities all across the country. For instance, Brookings, South 
Dakota is home to the Northern Grains Insect Research Laboratory. This 
facility, affectionately known as the ``bug lab'' to South Dakota 
farmers, is one of the premier labs with respect to insect research. 
The lab provides farmers in the Northern Plains with crop production 
and pest management information that enables producers to improve their 
bottom line. Cuts to agricultural research, whether they harm the 
efforts of land-grants such as SDSU, or efforts at our Nation's ARS 
labs, are counterproductive and I will work in this subcommittee to 
restore some of this funding where I can.
    Madam Secretary, our work this year will not be easy. But I am 
confident that if we work together, this subcommittee can produce a 
responsible and effective budget for the important functions of the 
USDA. Thank you for appearing before us today and I thank the Chairman 
and the committee for their time.

    Senator Kohl. Thank you, Senator Johnson. Secretary 
Veneman, we would be pleased to hear your statement.

                      STATEMENT OF ANN M. VENEMAN

    Secretary Veneman. Thank you, Mr. Chairman. I very much 
appreciate the opportunity to be here today with you and other 
members of the committee to discuss the fiscal year 2003 budget 
for the Department of Agriculture. I very much appreciate the 
working relationship that I have had with this committee and 
the ability that we have had to work together. I have been to 
many of your States and appreciate the fact that we can call 
and talk about issues anytime.
    As was indicated, with me today are Deputy Secretary Jim 
Moseley, our Budget Officer, Steve Dewhurst, who you all know 
very well, and Keith Collins, our Chief Economist, two of our 
very stellar career employees in the USDA and people that we 
could not operate the Department without.
    I have been very busy traveling this year to many of your 
States, as I indicated, and have had a lot of opportunities to 
talk directly with farmers and ranchers and to hear what they 
think about some new initiatives being introduced, one of which 
has been kind of fun this year, a Leaders of Tomorrow 
initiative. Through this initiative we have been working with 
young people around the country, having 4-H'ers and FFA 
leadership with us at each of our stops and visits throughout 
the country, trying to give young people the opportunity for 
mentoring. We have been promoting some of the youth initiatives 
in this country that will give us the leaders of tomorrow for 
our great Nation.
    I want to thank the committee again this year for its 
support of USDA programs and for the long history of effective 
cooperation between the committee and our Department.
    The budget that we are presenting this year is consistent 
with our policy book that we issued in September called ``Food 
and Agricultural Policy: Taking Stock for the New Century.'' 
Hopefully the committee has had the opportunity to take a look 
at this book.
    Our budget also addresses the Nation's new priorities, as 
you mentioned, Mr. Chairman, in light of the September 11 
events, in a fiscally-responsible manner. Regaining fiscal 
stability requires that we recognize our priorities and that we 
make difficult funding decisions. I can assure you that USDA 
has done just that in preparing our 2003 budget proposals, and 
I want to tell you quickly what our budget does.
    It funds key priorities for USDA. As Senator Cochran 
indicated, it protects farm-program spending, at $73.5 billion 
over the baseline for the next 10 years, supporting the budget 
resolutions of both the House and the Senate last year. It 
strengthens homeland security and infrastructure protections, 
such as pest and disease, food safety, research, all of the 
issues that we have called the ``infrastructure'' that protects 
our agriculture. It provides tools to expand trade and help our 
producers export. It provides a record level of a nutrition 
safety net for families who are in need of assistance. It 
promotes good conservation and environmental stewardship. It 
helps rural communities, and it expands initiatives to make 
sure that we make government work better.
    The fiscal year 2003 budget calls for $74.4 billion in 
spending, which is an increase of $11 billion over the fiscal 
year 2002 budget submitted by the President last year, and is 
only slightly below the 2002 enacted level. The 2002 enacted 
level was higher because of emergencies, whether it was 
fighting forest fires because of droughts in the West, the 
supplemental bill that we got to assist us with homeland 
security, and so forth.
    I want to go through the basic priorities that are detailed 
in our budget. First, this budget provides an additional $73.5 
billion over 10 years, as I mentioned, to meet our commitment 
to fund a farm bill based on sound policy. The President has 
personally reiterated that commitment, and we are going to 
continue to work with the Congress and the conferees to produce 
a sound farm bill that the President can sign.
    We enjoy a good working relationship with Chairman Harkin 
and Senator Cochran and other members of the conference 
committee, and we are looking forward to working closely with 
them as we go through this conference.
    We are also committed to implementing a farm bill as 
quickly as possible. It is not an easy task, but I have met 
with employees recently, both in Georgia and in Missouri, to 
talk about implementation issues and how we can prepare ahead 
of time for the implementation of this farm bill.
    Second, the budget protects agriculture and our food supply 
from potential threats, intentional or unintentional, and 
requests increases for key infrastructure programs that protect 
our food and agriculture--pest and disease prevention, food 
safety, and research. These are core programs that are critical 
to agriculture, and oftentimes they are forgotten. We just need 
to look back over the past year, where we were dealing with the 
threat of Foot and Mouth disease, strengthening our systems and 
reallocating resources to ensure that we did not get that 
economically devastating disease in our livestock herds. It 
could have been so devastating. Then we had the events of 
September 11, where we are now concerned, not only about 
unintentional threats to our food supply, but intentional 
threats, as well. So we are requesting an additional $146 
million in new spending for food safety, pest and animal 
disease prevention, and research.
    There is a record level of spending for the Food Safety and 
Inspection Service to support over 7,600 meat, poultry, and 
egg-product inspectors. In addition, more research is proposed, 
aimed at protecting our food and agriculture system from animal 
and plant diseases, insects, and other pests. Increases for 
research in these areas will emphasize the development of 
improved detection, identification, diagnostic and vaccination 
methods, and identify and control threats to animal and plant 
agriculture.
    Internal surveillance and analysis will be strengthened to 
ensure that we can respond to problems if they were to occur. 
An increase of $48 million is requested for animal health 
monitoring to enhance our ability to quickly identify any 
outbreaks that might occur. An increase of $19 million is 
requested in the Agricultural Quarantine Inspection Program to 
continue to provide border inspection and to protect 
agriculture and the food supply against pests and diseases.
    Staffing for the Agricultural Quarantine Inspection Program 
would be increased to nearly 4,000 staff years in fiscal year 
2003 with this budget. This would be a 55 percent increase from 
staff levels at the beginning of fiscal year 2001.
    Our Research, Economics, and Education agencies in fiscal 
year 2003 would be funded at approximately $2.3 billion. This 
includes doubling the budget for the Department's competitive 
National Research Initiative from $120 million in fiscal year 
2002 to $240 million. This would include $9 million for new 
uses of agriculture products, and $6.5 million for global 
climate change research initiatives.
    Last month, the President approved an additional $328 
million in one-time spending as part of the Defense 
Supplemental Appropriations Act. This includes $105 million for 
pest and disease exclusion, detection, and monitoring, $80 
million for upgrading USDA facilities and operational security, 
$87 million for laboratory upgrades, $40 million for research 
activities, and $15 million for food safety protection. We are 
working now with our appropriate agencies and the President's 
Office of Homeland Security to plan and implement that 
spending.
    I might add that all of these measures and actions that we 
have taken directly support our protection systems to guard 
against BSE. As Senator Durbin mentioned, we did discuss 
yesterday the GAO report that just came out on the BSE issue, 
but I also want to point out that in November, we released, 
with Harvard University, a 3-year study on BSE, which looked in 
depth at how we are dealing with this issue. They found that we 
have strong systems, that our risk of getting this disease is 
relatively low, and that if we were to have a case of the 
disease, that the likelihood of it spreading was very low. 
Nonetheless, we continue to move forward and remain vigilant, 
be on our guard against threats, and take additional 
precautions. We have detailed statements and fact sheets 
available to you and your staff outlining the specific actions 
that we are taking to strengthen all of our programs.
    Third, this budget maintains an aggressive program level of 
over $6.4 billion in support of food and agriculture 
international trade. It increases funding by $50 million for 
trade programs and services that provide valuable tools for 
U.S. producers to gain access in the markets. A substantial 
budget increase for Public Law 480 Title II donations is 
proposed. The Administration believes that the Public Law 480 
program should be the primary vehicle for food aid overseas, 
rather than relying on the use of Section 416(b).
    We continue to hope that the Congress will quickly approve 
trade promotion authority for the President. I might add that 
we will continue to be very aggressive to tear down the unfair 
trade barriers that are hurting our farmers in the 
international marketplace.
    We just had, last week, a decision by Japan to remove an 
unjustified barrier against our poultry exports. Also last week 
we announced a limited, but at least a beginning, of the 
opening for our table grapes into Australia. We announced 
actions just within the last couple of weeks claiming that the 
actions of the Canadian Wheat Board are unfair against our 
producers and that we are going to continue to pursue trade 
remedies. The President has personally intervened, and we 
continue to be very aggressive, on the issue of China's 
regulations for biotechnology that could hurt our exports.
    Fourth, this budget provides a record $41 billion to 
provide a strong nutrition safety net for families who need 
assistance from the government whether it is through our Women, 
Infants, and Children (WIC), Food Stamp, or Child Nutrition 
Programs. The WIC Program is an essential part of the nutrition 
safety net, and this is a program that the President cares 
deeply about. It is designed to protect a very vulnerable 
segment of the population--that is, low-income, nutritionally-
at-risk women, infants, and children. This program has shown 
measurable results, particularly in terms of reductions in 
infant mortality. It is important to remember that 47 percent 
of the children born in this country are born to WIC families. 
For fiscal year 2003, the Administration has included 
sufficient resources in the budget to support an average WIC 
participation of 7.8 million people, up from 7.5 million 
recipients in 2002.
    Specifically for the Food Stamp Program, outlays are 
increased in the President's budget by over $1.4 billion to 
support an average participation of 20.6 million participants, 
up from 19.8 million in fiscal year 2002. The budget also 
requests a $2 billion contingency reserve, should enrollment 
exceed our estimates. The budget includes a number of 
legislative proposals to improve the Food Stamp Program. 
Legislation is proposed for the Food Stamp Program to restore 
Food Stamp eligibility for legal immigrants who have been in 
the United States for at least 5 years, allow ownership of one 
vehicle per work-able household member and other provisions to 
simplify program rules and improve program accountability. I 
might note that just yesterday the President talked about the 
importance of these programs and initiatives when he was 
outlining his Welfare Reform proposals.
    Fifth, this budget promotes good conservation and 
environmental stewardship programs to help our environment and 
farmers and ranchers. The President often says that farmers and 
ranchers are the best stewards of the land, and we want to give 
our farmers and ranchers additional tools to manage working 
lands. The budget provides $6.1 billion in spending for the 
Natural Resources and Environment agencies. It includes a $50 
million increase for conservation operations and technical 
assistance. The budget for the Natural Resources Conservation 
Service, like that for the farm programs, is highly dependent 
upon the outcome of the farm bill.
    The Administration supports a strong conservation component 
in the farm bill to enhance conservation for the working 
farmlands, through programs such as the Conservation Reserve 
Enhancement Program and the Environmental Quality Incentives 
Program. The budget includes resources necessary to continue 
the services USDA provides to farmers and landowners, and the 
budget continues to emphasize key areas, such as nutrient-
management plans for animal feeding operations and the need to 
meet the strong demand for environmental assistance.
    Sixth, this budget contains $11.6 billion for Rural 
Development programs, roughly the same level as that which we 
spent in fiscal year 2001. The budget takes a close look at 
programs and targets resources to high-priority areas. We have 
worked hard in this budget to provide funding for the most 
urgent needs of rural America, including home ownership, waste 
and water systems, and support for business development and 
jobs in rural areas. We have recommended some reviews and 
reforms in some areas of rural development, including the rural 
rental housing and the rural telephone bank, to ensure that 
they are producing the intended results.
    Finally, this budget looks closely at the programs and 
services this Department manages. It contains several critical 
management initiatives that will better integrate USDA programs 
and services to bring them into line and better prepare our 
employees for the 21st century workplace. More importantly, our 
initiatives will help us serve our customers more expeditiously 
and efficiently.
    In the USDA's budget, you will find resources and 
commitments in various places dedicated to the achievement of 
this management agenda. For instance, we want to improve 
customer service in our field delivery system by taking another 
look at our office structure, our organization of 
administrative support functions and how we manage a number of 
important areas, such as our credit portfolio.
    Overall, there is a great level of attention to this budget 
to investments in technology. We cannot expect our employees to 
improve customer service or achieve other management objectives 
unless they are provided with modern technology. We want to 
make e-Government a reality for our customers.
    That completes my overview of some of the key points in 
this budget. We believe it is a responsible budget, it funds 
key priorities and programs at USDA. I very much appreciate the 
opportunity to discuss these important priorities with you 
today.

                          PREPARED STATEMENTS

    Thank you again, and we look forward to working with you 
during the budget process and to advance the priorities that we 
have outlined. I would be glad to respond to any of your 
questions, Mr. Chairman, and those of the committee. Thank you.
    [The statements follow:]

                  Prepared Statement of Ann M. Veneman

    Mr. Chairman, Members of the Committee, it is an honor for me to 
appear before you to discuss the fiscal year 2003 budget for the 
Department of Agriculture (USDA). I have with me today Deputy Secretary 
Jim Moseley, our Chief Economist, Keith Collins, and our Budget 
Officer, Steve Dewhurst.
    I want to thank the Committee again this year for its support of 
USDA programs and for the long history of effective cooperation between 
this Committee and the Department in support of American agriculture. I 
look forward to working with you, Mr. Chairman, and all the Members of 
the Committee during the 2003 budget process.
    As you know, the President's Budget was released on February 4th. 
Total USDA outlays for 2003 are estimated to be $74.4 billion. This is 
an increase of $11.1 billion above the level requested in 2002, and it 
is only slightly below the 2002 enacted level.
    The Department is addressing the Nation's new priorities in light 
of the September 11 events in a fiscally responsible manner. This 
requires recognizing our priorities and making difficult funding 
decisions. I can assure you that USDA has done just that in preparing 
its 2003 budget proposals.
    We have also taken actions to assure that the $328 million of 
emergency supplemental funds made available to USDA for security needs 
in 2002 will be invested in ways to meet high priorities, particularly 
to improve USDA's biosecurity operations for the long term. We are 
working closely with the Office of Homeland Security and we have 
established a USDA Homeland Security Council to coordinate our security 
efforts and track progress in using those funds to ensure that priority 
needs are met. The Council will play a significant role in establishing 
the final plans for use of those funds.
    For 2003, this budget supports the Administration's principles for 
the 21st Century as stated in our report: Food and Agricultural Policy: 
Taking Stock for the New Century, issued last fall. Specifically, the 
budget does the following:
  --Ensures that the new Farm Bill will be generously funded by 
        providing an additional $73.5 billion in mandatory funding over 
        the 2002-2011 period to develop sound policies for farm 
        commodity and income support, conservation, trade, food 
        assistance, research, and other programs.
  --Supports the Administration's goal of opening new markets overseas 
        and expanding U.S. agricultural exports by providing over $6 
        billion in export program support.
  --Provides the largest increase ever for the Special Supplemental 
        Nutrition Program for Women, Infants and Children (WIC) thereby 
        supporting 7.8 million program participants.
  --Provides support for over 20 million food stamp participants 
        including legislation to allow more legal immigrants to 
        participate and other changes to simplify complex rules, 
        support working families and improve program delivery.
  --Protects agriculture and our food supply from potential threats--
        intentional or unintentional--and requests more than $146 
        million in new spending for food safety, pest and animal 
        disease prevention, and research.
  --Improves the Department's management of its delivery of programs.
  --Improves the stewardship of our soil, water and forests by making 
        more resources available for conservation uses with less money 
        spent for overhead expenses.
  --Maintains funding to support loans, grants, and technical 
        assistance to address a diversity of rural development needs 
        including financing electric and telecommunications systems, 
        water and waste disposal systems, rural housing, and business 
        and industry.
    With this as an overview, I would now like to discuss the details 
of our budget proposals for each of the Department's mission areas.
                 farm and foreign agricultural services
    The farm sector in recent years has experienced lower market 
returns for several major commodities and losses from various disease, 
pest and other natural disaster-related causes. Supplemental assistance 
has been enacted to prevent farm income declines. While the situation 
is improving for some commodities, market returns in other areas of the 
farm economy are still low. The President's budget for 2003 provides 
for an additional $73.5 billion in direct spending over the 2002-2011 
period to fund new legislation to replace the expiring 1996 Farm Bill. 
This level is consistent with amounts contained in the Congressional 
Budget Resolution. We will work with Congress to develop a bill which 
contains sound policy consistent with the principles we have laid out 
for 21st Century agriculture.
    The new Farm Bill should be generous but affordable. It should 
provide a reasonable safety net without encouraging overproduction and 
depressing prices, establish farm savings accounts to help manage risk, 
support our commitment to open trade, offer incentives for good 
conservation practices on working lands, and enhance nutrition 
programs.
International Trade
    In conjunction with the new Farm Bill, it is essential that we also 
lower trade barriers and open new markets overseas since trade is 
critical to the long-term health and prosperity of the American 
agricultural sector. Enhancing the competitiveness of U.S. agriculture 
in the world marketplace must also be one of the primary objectives of 
our farm policy.
    One of the most important strategies for enhancing trade is 
continuing the liberalization of global agricultural trade. America's 
farmers and ranchers stand to gain a great deal from further trade 
reform through increased access to markets overseas and a reduction in 
unfair competition in those markets.
    The new round of multilateral trade negotiations is at the center 
of our trade liberalization efforts. Our agenda for agricultural reform 
negotiations includes substantial reductions in tariffs and increased 
market access, elimination of export subsidies, reform of State trading 
enterprises, and tighter rules on trade-distorting domestic support.
    We also are pursuing trade liberalization through both regional and 
bilateral negotiations, and we are closely monitoring existing trade 
agreements to ensure that our trading partners comply fully with the 
terms of those agreements and do not institute technical barriers to 
trade that run counter to their spirit.
    Another strategy laid out in our review of 21st Century agriculture 
is ensuring we have the proper tools needed to expand exports in an 
increasingly competitive environment. This starts with the granting of 
Trade Promotion Authority (TPA) to the President so that we can 
demonstrate to our trading partners that the United States is serious 
in our pursuit of free trade objectives and in our negotiating 
proposals. We urge the Congress to enact this important legislation 
early this year. We also very much want to work with the Congress to 
craft provisions of the trade title of the new Farm Bill so that they 
are consistent with the principles we have established for 21st Century 
agriculture.
    Our work in the international area begins with the Foreign 
Agricultural Service (FAS), the Department's lead agency in 
implementing many of our international activities, and which plays an 
absolutely critical role in our trade expansion efforts. For 2003, the 
budget provides $140 million for FAS, an increase of $10 million above 
the 2002 level. Included in the FAS request is much-needed funding to 
support an e-Government initiative that will upgrade the agency's 
information technology (IT) resources and capabilities, and modernize 
its business practices and operations. Over the last year, FAS has 
faced a series of computer-related crises that have threatened to 
cripple agency operations and communications. This is a particularly 
serious problem for an agency that has offices throughout the world and 
must work closely on a daily basis with many different agencies, such 
as the State Department and Office of the U.S. Trade Representative.
    The FAS proposals also include increased funding for the Cochran 
Fellowship Program. This is a highly successful program that has 
provided training and helped to establish. positive linkages with many 
agriculture officials throughout the world. The additional funding will 
expand programming in a number of important areas, including 
biotechnology, food safety, and World Trade Organization accession 
requirements.
    Another key to having the proper trade expansion tools is to ensure 
adequate funding for the Department's export promotion and market 
development programs, which our budget proposals are designed to do. 
For the CCC export credit guarantee programs, the largest of our export 
programs, the budget includes a program level of $4.2 billion. This is 
an increase of $300 million above the projected 2002 level, reflecting 
continued very strong growth in the supplier credit guarantee program. 
For the Foreign Market Development (Cooperator) Program, Market Access 
Program, and Quality Samples Program, the budget includes a total 
program level of $120 million, unchanged from this year's level, and 
$63 million for the Dairy Export Incentive Program, a slight increase 
over the current estimate for 2002.
    As the Committee is aware, the Administration has undertaken a 
review of U.S. foreign food assistance activities in order to reform 
and rationalize their implementation and to strengthen their 
effectiveness. Among the results of that review is the decision to 
provide a more secure and predictable foundation for our overseas food 
aid activities by reducing their reliance on the year-to-year 
availability of surplus commodities. At the same time, these activities 
will largely be funded through discretionary sources, subject to 
Congressional review and approval, and with reduced reliance on 
mandatory CCC funding. Accordingly, the budget provides increased 
funding for food aid donations under the Public Law 480 Title II 
program, while donations of commodities under section 416(b) authority 
that rely on the purchase of surplus commodities by CCC will not be 
continued in 2003. The budget includes a total program level of $1.35 
billion for Public Law 480 in 2003. Based on current price estimates, 
total commodity shipments under Public Law 480 programs in 2003 should 
reach 3.7 million metric tons.
Farm Program Delivery
    Farm Service Agency (FSA) salaries and expenses are funded at $1.3 
billion in 2003. This would support continuation of staffing levels at 
the current 2002 levels of about 5,800 Federal staff years and 11,250 
county non-Federal staff years, including about 2,000 temporary staff 
years. We expect the workload for FSA to remain relatively heavy in 
2002 and 2003.
    In order to help FSA meet this workload challenge, improve service 
to farmers and enhance operating efficiency, the budget provides 
increased funding of $56 million for FSA's information technology 
efforts related to the Service Center Modernization Initiative. This 
includes an acceleration of geographic information systems and other 
common computing environment initiatives to help move the delivery 
system into the e-Government era. The budget presents these funds as 
well as funds for the other Service Center agencies under the Common 
Computing Environment appropriation to ensure that these activities are 
well coordinated.
    Management initiatives to modernize farm credit program servicing 
activities and to review the Service Center office processes and 
structure of FSA, Natural Resources Conservation Service (NRCS) and 
Rural Development (RD) will also be undertaken in an effort to improve 
our ability to provide services at less cost.
Credit
    We have also included in the budget a program level of about $4 
billion in farm credit programs to assure that farmers have access, 
when necessary, to Federally-supported operating, ownership, and 
emergency credit. No additional funding is being requested for the 
emergency loan program. Based on current estimates, the budget assumes 
that carry-over funding in the emergency loan program will be 
sufficient to meet demand in 2003.
Crop Insurance
    The budget for this mission area also includes full funding for the 
crop insurance program. The budget includes such sums as necessary to 
meet producers demand for the program given that participation in the 
program is voluntary on the part of producers. The program is delivered 
by private insurance companies, and the Federal Government reimburses 
the companies for their delivery, costs. The companies also receive 
underwriting gains on policies for which they retain the risk of loss. 
In 2000, Congress substantially reformed the crop insurance program, in 
part, by providing for substantial increases in the premium subsidy 
available to producers, especially at higher levels of coverage. As a 
result, participation in the program increased substantially. With the 
increase in business, private insurance companies have received a 
windfall as underwriting gains have increased about 400 percent from 
the levels of the early 1990s. This budget includes proposed 
legislation which would cap underwriting gains at 12.5 percent of the 
retained premium.
                   marketing and regulatory programs
    Marketing and Regulatory Programs agencies provide basic 
infrastructure to protect and improve agricultural market 
competitiveness for the benefit of both consumers and U.S. producers.
Pests and Diseases
    Helping protect the health of animal and plant resources from 
inadvertent, as well as intentional pest and disease threats from 
terrorists, is the primary responsibility of the Animal and Plant 
Health Inspection Service (APHIS). The importance of this 
responsibility was recognized by the inclusion of $119 million 
specifically for APHIS in the Homeland Security Supplemental funding 
for 2002. These funds will be used to: improve effective border 
protection, in part through the purchase of equipment and the hiring of 
anti-smuggling personnel; work with the States to expand survey efforts 
for plant and animal pest and disease detection; and meet enhanced 
building security and other needs. Of the total, $14 million will be 
used to relocate certain biohazard laboratory facilities to a facility 
on the National Veterinary Services Laboratories campus in Ames, Iowa.
    For 2003, we are requesting a net increase of about $120 million 
over the regular 2002 appropriation for APHIS salaries and expenses 
which consists of over $262 million in increases partially offset by 
$142 million in decreases. While we have successfully kept foot-and-
mouth disease and bovine spongiform encephalopathy (BSE) out of the 
United States, our inspectors remain highly vigilant, in part, because 
of bioterrorist threats. The $1.1 billion 2003 budget request for APHIS 
reflects continued and enhanced efforts to protect U.S. agriculture at 
the borders, and also to promptly detect and respond to a pest or 
disease outbreak, among other activities. An increase in total program 
level of about $19 million is devoted to enhance Agricultural 
Quarantine Inspection, and an increase of another $48 million is 
devoted to enhanced monitoring and surveillance for pest and disease 
outbreaks.
    Once detected, prompt eradication of an outbreak is essential to 
limit damages and reduce overall control costs. The 2003 budget 
requests $162 million in appropriations to continue funding several 
eradication programs that had been started with funds transferred from 
CCC. Such continuing activities can no longer be considered 
``emergencies.'' These funds will be used to combat species such as the 
Asian Long-horned Beetle, citrus canker, Mediterranean fruit fly, 
chronic wasting disease, plum pox, rabies, scrapie, and tuberculosis. 
For any new emergency pest and disease outbreak, our legal authority to 
use CCC funding would be relied upon. However, the Administration is 
concerned about rising Federal costs of emergency pest and disease 
control and expects to seek public comment on flexible criteria to 
share the financial burden with cooperators who receive benefits from 
program activities.
Marketing
    Another important proposal in this area involves the Grain 
Inspection, Packers and Stockyards Administration (GIPSA). The budget 
includes a total program funding level of $43 million to help ensure 
efficient market functioning. Included within this total is about $2 
million being requested for improved enforcement of anti-competitive 
laws and monitoring the use of new technologies to evaluate livestock 
carcasses. Another $450,000 is requested to expand the newly 
established biotechnology program to keep pace with the rapid 
introduction of new products and the need for commodity certifications. 
A further $3.4 million is requested to enhance the ability of GIPSA to 
electronically provide and receive data and information. The GIPSA 
budget also proposes user fees to recover costs of the U.S. grain 
standards program, as well as license fees to recover costs of the 
Packers and Stockyards program.
    For the Agricultural Marketing Service (AMS) the budget includes an 
increase of $1 million to expand international market news reporting in 
Central America, South America, and Asia and increase the availability 
of accurate, timely, and unbiased international market information. 
This type of real time market information is required for American 
producers to be competitive in a global economy. The budget also 
requests an increase of $1.6 million to implement improvements to the 
Pesticide Data Program and the Federal Seed Act Program. Improvements 
to the program infrastructure for these programs are necessary to 
ensure effective delivery of program services to American agriculture.
                              food safety
    A safe food supply is one of the foundations of a successful food 
and agricultural system. As we have witnessed, highly publicized 
outbreaks of foodborne illness have demonstrated how important 
safeguarding public health is to both consumers and producers. And, 
with the threat of terrorism, we must be even more vigilant in 
safeguarding the Nation's food supply. USDA plays a critical role in 
safeguarding the food supply and its policies have contributed to the 
recent decline in pathogenic contamination of meat and poultry 
products. This Administration believes that continued investment in the 
food safety infrastructure is necessary to ensure that the appropriate 
personnel, tools, and information are available to address the emerging 
food safety hazards that threaten public health and the viability of 
our agricultural system. Therefore, the budget includes record funding 
for the Food Safety and Inspection Service (FSIS).
    For 2003, the budget proposes $804 million, an increase of about 
$28 million over the 2002 current estimate. Funds are requested to 
cover the costs of Federal inspection and for maintaining Federal 
support of State inspection programs. This includes resources necessary 
to maintain approximately 7,600 meat and poultry inspectors which will 
ensure the uninterrupted provision of inspection services.
    In addition, the budget requests an increase of $14.5 million to 
improve FSIS' information technology infrastructure. FSIS' existing, 
disparate information systems will be replaced by a new system with 
enhanced data sharing capabilities. Upgrading these important 
information systems will lead to improved science-based decision-making 
for risk assessment and risk management functions, as well as improved 
resource management.
    The budget also requests an increase of $2.7 million to conduct 
slaughter epidemiological surveys and risk prevention activities for 
small and very small establishments. These surveys will improve the 
quantity and quality of data available to FSIS for use in evaluating 
the effectiveness of inspection strategies to detect animal disease 
outbreaks and the food safety guidelines to limit the impact of those 
outbreaks.
    The 2003 budget includes a commitment to review the current 
overtime fee structure for meat, poultry, and egg products inspection, 
including an analysis of the manner in which fees are assessed and the 
underlying statutory basis for those fees. There is no budget impact in 
2003 as a result of this action, however, the analysis of the current 
fee structure will begin immediately. The budget also proposed a new 
annual licensing fee that will make funds available, beginning in 
fiscal year 2004 and in subsequent years, to invest in food safety 
inspection technology and other Federal programs that directly benefit 
the industry.
                 food, nutrition, and consumer services
    The budget includes $41.9 billion for USDA's domestic nutrition 
assistance programs, the highest request ever, targeted to help 
Americans in need. This request reflects our commitment to the 
nutritional safety net, and to helping participants find and retain 
jobs, and move toward economic self-sufficiency.
    A major component of the nutrition safety net is the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC). 
The budget requests a record level of $4.8 billion for WIC, almost 10 
percent above the 2002 appropriation. The request funds average annual 
participation of about 7.8 million participants, and it provides an 
additional $150 million contingency reserve should additional demand 
for WIC appear. This request reflects the growing demand for WIC and it 
also reflects a firm commitment by this Administration to ensure that 
resources are directed to programs that make a real difference in 
peoples lives. WIC is just such a program. Ensuring funding for WIC is 
one of our major priorities and is critical to the Administration's 
goal of guaranteeing stable funding for this important program.
    The Food Stamp Program is funded at $26.2 billion, an increase of 
almost $3.2 billion above the 2002 level. The increase would cover a 
projected 2 percent increase in food costs with average participation 
of about 20.6 million people. This is an increase of about 2 million 
participants over the most current month reported, November 2001. The 
request also includes a $2 billion contingency reserve, in case it is 
needed to support a higher than expected level of participation.
    Also of great importance is reauthorization of the Food Stamp 
Program. The budget contains several legislative proposals for food 
stamps that are consistent with the principles we have laid out for 
21st Century agriculture. These proposals would:
    Allow legal immigrants who have resided in the U.S. for 5 years or 
more to apply for food stamps. This is consistent with welfare reform 
as it would bring the Food Stamp Program into conformity with other 
public assistance programs such as Medicaid and the Temporary 
Assistance for Needy Families programs that work in concert together at 
the local level. This change provides a nutritional safety net for 
these legal immigrants while maintaining requirements that they look 
first to their earnings, resources and the support of their sponsors to 
meet their needs.
    Index the standard deduction to a percentage of poverty, so it 
adjusts both to reflect household size and changes in living costs. 
This, along with standardized medical and dependent care deductions 
(and several other program simplifications) will allow States to focus 
more on helping households get back on their feet, and less on complex 
and error-prone details.
    Exempt one vehicle per work-able household member from being 
counted as an asset to facilitate participant efforts to seek and 
retain employment.
    Eliminate the requirement that 80 percent of the Employment and 
Training funds going to childless unemployed adults so that States can 
more flexibly direct these resources to help those most likely to use 
them.
    Reform the Quality Control System to focus on recurrent error 
problems. Although error rates are at their lowest level ever, States 
issued nearly $1.3 billion in overpayments and underpaid eligible 
households by nearly $460 million. This is just too high. The proposed 
changes would allow States to receive meaningful incentive awards for 
good performance and only sanction States with 2 consecutive years of 
error rates exceeding the 75th percentile for all States. Enactment of 
these changes will help all stakeholders to strive for even better 
performance.
    The Child Nutrition Programs are budgeted under current law at 
$10.6 billion. The request anticipates an increase of about 2 percent 
in food costs, growth in the programs due to the increased number of 
school aged and younger children, and some expansion in the breakfast 
and child care food programs. Program integrity will continue to be a 
focus for these programs, not only to ensure the proper allocation of 
Child Nutrition funds, but also because far larger sums of Federal and 
State education money are targeted to low-income schools based on free 
and reduced price lunch data.
                   natural resources and environment
    The importance of conservation programs has grown well beyond their 
historical purpose of protecting productive topsoil for the purpose of 
food production. We are now realizing the significance of agriculture's 
impact on other areas of the environment such as water quality. In 
addition, public awareness and concern for the Nation's natural 
resources have continued to grow as we gain a better scientific 
understanding of soil and related resource problems and how best to 
address them. The 2003 budget request in the conservation area 
recognizes these developments, as well as the need to protect the 
conservation partnership that has evolved over the years between the 
Department and conservation districts and farmers.
    The budget request for the Natural Resources Conservation Service 
(NRCS) for 2003 proposes $1.2 billion in appropriated funding, and 
assumes $1.0 billion in mandatory funding for the Environmental Quality 
Incentive Program (EQIP) within the Commodity Credit Corporation (CCC) 
baseline, including estimated spending in the new Farm Bill. The 
appropriated request includes $787 million for conservation technical 
assistance (CTA) which represents the foundation of the Department's 
conservation partnership, as well as the primary means by which the 
Department implements many of the critical natural resource programs 
such as the Conservation Reserve Program (CRP) and the conservation 
initiatives that will be called for in the new Farm Bill.
    Addressing the problems associated with polluted runoff from animal 
feeding operations (AFOs) remains one of the most critical challenges 
and continues to be a high priority within the Department. To help AFO 
operators develop and implement nutrient management plans, NRCS will 
increase the level of technical assistance funding in 2003. Financial 
assistance that AFO operators might need to implement the plans will 
come from the EQIP.
    The Department's 2003 budget request maintains funding for the 348 
Resource Conservation and Development (RC&D) areas now authorized and 
will also be sufficient to support any new areas authorized in 2002. 
The ongoing program will continue to improve State and local leadership 
capabilities in planning, developing and carrying out resource 
conservation programs.
    While maintaining and strengthening those conservation programs and 
activities that are vital to a healthy natural environment, the 2003 
budget ceases funding those programs that have not performed well, that 
have a limited scope, or that have goals that can be better addressed 
through other programs. The Forestry Incentives Program falls in this 
general category and is not to be continued. In addition, all non-
emergency watershed planning and operations funding will be redirected 
to other higher priority work within NRCS. Although support for regular 
watershed operations and planning is being terminated, the 2003 budget 
does propose to fund the Emergency Watershed Protection (EWP) program 
at an appropriated level of $111 million, which is an amount equal to 
the 10-year average for EWP spending. This would provide an important 
level of security to rural areas in the event of sudden and unforeseen 
natural disasters, and would enable the Department to respond to these 
disasters in a much more timely manner.
    Under the Common Computing Environment budget an increase of $13 
million is included for NRCS activities for telecommunications costs, 
GIS implementation, cyber-security initiatives and enhanced access for 
customers.
                           rural development
    The Administration's principles for rural development are to 
recognize the diversity of rural America and the importance of the 
nonfarm economy to rural communities; to create an environment that 
will be attractive to private investors to rural areas, encourage 
greater education and technical skills for rural residents, and 
capitalize on rural America's natural resource base; to protect lives 
and property against certain hazards, such as forest fires; to expand 
rural infrastructure, and to serve as a coordinator among the various 
levels of Government and private sector stakeholders in rural 
development activities.
    USDA's rural development mission area has the primary 
responsibility for administering programs to meet these principles. The 
2003 budget includes over $1.9 billion in budget authority for rural 
development programs that would provide almost $11 billion in loans, 
grants and technical assistance for a variety of purposes, including 
the financing of electric generation and distribution systems, 
telecommunications, water and waste disposal and other essential 
community facilities, rural housing, and business and industry. The 
2003 budget also includes a request for about $685 million for the 
administrative expenses for these programs.
    The total amount of budget authority for Rural Development is $2.6 
billion, which is approximately at the 2002 enacted level. However, the 
budgetary resources have been realigned so that the 2003 budget allows 
USDA to efficiently and effectively meet the needs of rural America. 
Most programs are funded at approximately the 2002 enacted levels. 
About 60 percent of the program decreases are due to reductions in 
demand. The 2003 budget also reflects the annual changes in subsidy 
rates due to different technical and economic assumptions. Funding for 
Round II Rural Empowerment Zones and Enterprise Communities Grants and 
Multifamily Housing loans for new construction has not been requested.
    The telecommunication programs are funded at program levels of $495 
million in direct loans for the regular programs, $50 million in direct 
loans and about $25 million in grants for the distance learning and 
medical link program, and $80 million in direct loans and $2 million in 
grants for the broadband and internet services program. These are the 
same levels as appropriated for 2002 except for distance learning and 
medical link direct loans, and broadband and internet services grants. 
For the past few years, USDA has requested and received program level 
funding for $300 million in direst loans for the distance learning and 
medical link program. Unfortunately, there have been very few 
applicants because potential applicants are more interested in the 
grant program. The reduced level of funding for 2003 is expected to 
fulfill actual demand.
    As for broadband and internet services, the program was established 
on a pilot basis in 2001. The $2 million in program level funding 
available for grants in that year was targeted to a few small 
communities that could not qualify for loans due to a lack of repayment 
ability. While there is no lack of demand for grants for this purpose, 
the Department believes that communities should bear a substantial 
portion of the cost of such services, which means the program should 
focus on loans rather than grants, as reflected in the budget request 
for 2003. Further, the Department is again proposing that no funding be 
provided for Rural Telephone Bank (RTB) loans. The RTB is fully capable 
of obtaining funds to make loans through commercial channels which 
would encourage privatization.
    The water and waste disposal program would be funded at a level of 
$814 million in direct loans, $75 million in guaranteed loans and $587 
million in grants--the same as appropriated for 2002. This program 
provides safe drinking water and waste disposal for rural residents and 
encourages business and industry to locate in rural areas which means 
more jobs and a more diversified rural economy.
    The business and industry guaranteed loan program is funded at a 
program level of $733 million. This is the same amount that will be 
available from the 2002 appropriations.
    The single family program levels for 2003 would support $957 
million in direct loans and nearly $2.8 billion in guaranteed loans--
enough to provide about 50,000 homeownership opportunities.
    The rural rental housing program would be limited to a program 
level of $60 million in direct loans for repair and rehabilitation and 
related purposes and $100 million in guaranteed loans for either new 
construction or repair and rehabilitation. The Department is concerned 
about the substantial cost to the Government for rental assistance 
payments to support its existing portfolio of about 17,800 existing 
projects. These projects have an outstanding balance owed of close to 
$12 billion. Many of these projects are over 20 years old and in need 
of repair or rehabilitation. The Department has already initiated a 
review of alternatives for servicing the portfolio. This review will 
also consider options for making loans for new projects at less cost to 
the Government.
                   research, education, and economics
    To maintain the unparalleled success of U.S. agriculture, it will 
be necessary to make investments in research, education, and economics 
as new challenges confront the agricultural sector. Continuing to 
provide a secure food supply and maintaining and strengthening U.S. 
farmers' competitive advantage in world markets within a restrained 
budget will require a close assessment of priorities.
    The 2003 budget for this mission area totals $2.3 billion. For 
ongoing programs, there is an overall net increase of $15 million. 
There are increases for critical intramural and grant programs, 
decreases for less critical projects--many of which were specific 
congressional earmarks for projects that could be funded through 
competitive programs--and a reduction of $102 million in the 
Agricultural Research Service (ARS) buildings and facilities account 
following the large appropriations in 2002.
    The 2003 budget for ongoing research and information activities in 
ARS is $1,014 million, a net increase of 3 percent above the 2002 
enacted level. The budget includes an increase of $13 million for 
emerging, reemerging, and exotic plant and animal diseases; such as BSE 
and Food and Mouth Disease (FMD), to protect the U.S. food supply and 
increase the product longevity and market quality of agricultural 
commodities; an increase of $9 million for biobased products and 
bioenergy from agricultural commodities, two initiatives that are 
supported by the President's national energy policy; an increase of 
$6.5 million for global climate change to improve our understanding of 
carbon sequestration and support other aspects of the Administration's 
climate change research initiative; an increase of $5.0 million to 
develop advanced pathogen detection capabilities needed for homeland 
security; and several other critical initiatives.
    We are pleased that Congress has responded positively to the urgent 
need for a modern animal health facility in Ames, Iowa with combined 
appropriations of $113 million in the regular and supplemental 
appropriations acts in 2001 and 2002. In this regard, we are in the 
process of preparing a report at the request of the Appropriations 
Committees on our estimates of costs for the entire project, the 
planned construction schedule, and our plans for managing this major, 
multiagency undertaking.
    The 2003 budget proposal for the Cooperative State Research, 
Education, and Extension Service is just over $1 billion. The National 
Research Initiative (NRI) is funded at $240 million, representing an 
increase of $120 million from 2002. The Federal Government plays a 
unique role in its support of the basic research needed to maintain the 
technology-based competitive advantages we currently enjoy in so many 
segments of the economy. In recent years, there have been especially 
large increases in Federal commitments for research in support of 
medicine and national defense. Unfortunately, commitments for 
agricultural research have not kept pace and opportunities to take 
advantage of some of the Nation's best university-based scientific 
talent are being lost. The budget proposal for the NRI will enhance 
agriculture as a scientific discipline; it will provide opportunities 
to partner with other Federal agencies and bring an agricultural 
perspective to topics of mutual interest; and it will make a 
contribution towards encouraging and training the next generation of 
agricultural scientists. Formula-based programs for research and 
extension are continued at the 2002 level, and the budget provides an 
increase of $2.4 million for higher education programs.
    The 2003 budget for the Economic Research Service (ERS) is $82 
million which supports the ongoing program of work and provides 
increases for two initiatives. An increase of $2.7 million will support 
the ERS share of the joint effort with the National Agricultural 
Statistics Service (NASS) to improve the Agricultural Resources 
Management Survey, known as ARMS, generating more dependable and 
statistically defensible results and making results available through 
web-based dissemination. This national survey of farms provides data 
and analysis to characterize the economic conditions and rapidly 
changing structure of the agricultural sector. ARMS is the primary 
source of information about the financial condition, production 
practices, use of resources, and economic well being of America's 
farmers. As the principal source of data, ARMS makes it possible for 
ERS to answer key questions from USDA policy officials, Congress, 
Executive Branch officials, and other decision makers about the 
differential impacts of alternative policies and programs across the 
farm sector and among farm families.
    An increase of $2 million will support the second initiative on the 
effects of invasive pests and diseases on the competitiveness of U.S. 
agriculture. The results of this initiative will provide information 
that can be used to help guide resource allocation for efforts to 
exclude and control invasive species. A major portion of this work will 
be to assess cost effective means of the public sector in reducing 
economic risks to U.S. agriculture from invasive species while 
preserving economic gains from trade and travel.
    The budget for NASS is $149 million which includes an increase for 
four initiatives. An increase of $15.5 million is requested for the 
cyclical change in statistical activities associated with conducting 
the 2002 Census of Agriculture, with 2003 being the peak in the 5-year 
cycle. NASS's portion of the initiative to improve ARMS is $4.6 
million. In addition to improvements discussed previously, this funding 
will support research efficiencies to integrate the ARMS program with 
other data collection efforts. The NASS request also includes about $5 
million in increases for additional computer security, for development 
costs to move to electronic collection of data, and for development of 
an annual locality based county/small area estimation program to 
provide statistical data below the State level.
                        departmental management
    The Departmental staff offices provide leadership, coordination and 
support for all administrative and policy functions of the Department. 
These offices are vital to USDA's success in providing effective 
customer service and efficient program delivery. Salaries and benefits 
often comprise 90 percent or more of these offices' budgets, leaving 
them little flexibility to reduce other expenditures needed to continue 
their operations. The 2003 budget proposes funding needed to ensure 
that these offices maintain the staffing levels needed to provide 
management, leadership, oversight and coordination.
    These offices also have key responsibilities related to the 
President's Management Agenda and other departmentwide and agency-
specific management reforms, which are crucial to making the Department 
an efficient, effective and discrimination-free organization that 
delivers the best return on taxpayers' investments. The 2003 budget 
requests funding to achieve the following management priorities:
    As a direct result of the events of September 11, the budget 
request includes specific changes to increase the level of security and 
emergency planning for the Department.
    We will continue to streamline the Service Center agencies (FSA, 
NRCS and RD) to improve efficiency and customer service. We will also 
continue our efforts to provide electronic services to USDA customers. 
A key element in these plans is the completion of a common computing 
environment for the Service Center agencies and acceleration of our 
efforts to acquire and use geographic information systems.
    We will continue efforts to process employment and program civil 
rights complaints in the Department in a fair and timely manner and 
promote a working environment in which discrimination against employees 
or customers is not tolerated.
    We will continue to develop departmentwide administrative 
information systems so that decisionmakers can receive timely and 
reliable information on the Department's finances, people and 
purchases. These systems will also make the Department's administrative 
operations more efficient by eliminating redundant, stove-piped and 
aging information systems. They are critical to the Department's 
ability to achieve and maintain a clean opinion on its financial 
statements and adequate computer security.
    We will continue to strengthen our information security program to 
better protect USDA's valuable information assets from intrusion and 
theft. We will also develop an Enterprise Architecture, which is a key 
planning and risk management tool for information technology 
investments.
    We will put more of the Department's work up for competition and 
increase the use of performance-based contracting to generate savings 
and efficiencies.
    We will continue renovations of the South Building to ensure that 
employees and customers have a safe and modern working environment.
    We are proposing to fund rental payments to the General Services 
Administration (GSA) in the budgets of agencies occupying GSA space 
instead of a central account in order to hold USDA managers accountable 
for the full cost of their programs.
    The budget also provides increased funding for the Office of the 
Inspector General to help it address an expanding workload and provide 
active assistance to USDA agencies. It also provides for reengineering 
audit and investigative activities, streamlining operations, and 
increasing office efficiencies.
    That concludes my statement. I look forward to working with the 
Committee on the 2003 budget so that we can better serve those who rely 
on USDA programs and services.
                                 ______
                                 
                   Biographical Sketch of Jim Moseley
    Jim Moseley was sworn in as the deputy secretary by Agriculture 
Secretary Ann M. Veneman on July 17, 2001.
    As the deputy secretary, Moseley will oversee the day-to-day 
activities of the U.S. Department of Agriculture, one of the largest 
and most diverse departments in the Federal Government. USDA's mission 
includes the management of traditional farm programs, private lands 
conservation, domestic food assistance, agriculture research and 
education, agricultural marketing, international trade, meat and 
poultry inspection, forestry, and rural development programs.
    Prior to this appointment, Moseley, an Indiana farmer with 32 years 
of hands-on farm experience, was the owner of Ag Ridge Farms, which 
specializes in grains, and managing partner of Infinity Pork, LLC, 
which raises hogs. Both are located in Clarks Hill, Ind.
    Moseley has played a key role in developing public policy for 
agriculture, the environment, and natural resources conservation at the 
state and national levels. From 1989-1990, he served as agricultural 
advisor to the administrator of the U.S. Environmental Protection 
Agency. Moseley previously served at USDA as the assistant secretary of 
agriculture for natural resources and environment from 1990-1992. In 
this capacity, he provided leadership to the Forest Service. and the 
Natural Resources Conservation Service on a variety of issues including 
endangered species, old growth forests, livestock grazing on public 
lands, wetlands, and policy issues related to the conservation title of 
the 1990 Farm Bill.
    In 1997, he served as chairman of the industry negotiating team for 
the National Pork Dialogue. Following the 1995 Farm Bill, Moseley 
served as a consultant to the National Association of State Departments 
of Agriculture, where he worked with producers and NRCS to develop 
model resource management plans for farmers and ranchers
    From 1993 to 1995, Moseley served as the director of agricultural 
services and regulations for the State of Indiana at Purdue University. 
He also served as a political analyst and member of the editorial board 
of the Farm Journal Publications. Moseley has held membership in 
numerous professional and academic organizations and has received many 
awards and honors. In recognition of his service and commitment to 
agriculture, he was voted the National Outstanding Young Farmer of 
America for 1982.
    Moseley was born in Peru, Ind. He holds a Bachelor of Science 
degree in horticulture from Purdue University in West Lafayette, Ind.

 Prepared Statement of Ira L. Hobbs, Acting Chief Information Officer, 
                Office of the Chief Information Officer

                              introduction
    Mr. Chairman and members of the Subcommittee, the Department of 
Agriculture--USDA--appreciates this opportunity to share with you our 
recent progress and future plans to expand electronic government and 
cost-effectively use information technology--IT--to improve customer 
service and make employees more productive.
    In line with the Clinger-Cohen Act, the Office of the Chief 
Information Officer--OCIO--provides USDA agencies with cyber security, 
IT investment, enterprise architecture, and telecommunications policy 
guidance and oversight. The OCIO is responsible for managing the IT 
component of the Service Center Modernization Initiative and leading 
the Department's electronic government--e-Government--program. In 
addition, we provide USDA agencies with department-wide data center and 
telecommunications services, and desktop support for the Office of the 
Secretary and the USDA National Appeals Division.
                  preparing for a changing environment
    The Department faces a changing environment--one filled with new 
challenges and opportunities such as consumer-driven agriculture, 
increasing globalization, and advances in information and 
communications technology. These trends, among others, are bringing 
fundamental changes to the world in which the USDA operates and 
fulfills its mission. Technology is reshaping our economy and in turn 
our society. Agricultural production and rural communities are not 
immune from these forces. What consumers, nonprofits, and businesses 
are becoming accustomed to in terms of electronically enabled 
convenience and improved service in the private sector, they are 
increasingly demanding as citizens and partners from the public sector. 
These trends are here to stay and the pace of innovation will only 
continue to accelerate.
    In order to remain relevant in this new economy, meet these 
challenges, fulfill our social mission, and operate a results-oriented, 
market-driven enterprise in line with Secretary Veneman's vision that 
is outlined in our Food and Agricultural Policy, the USDA must embrace 
this change.
    As the stewards of the IT resources Congress provides USDA, my 
office is working to help provide the increasingly complex information 
technology tools that our customers and staff require, in a manner that 
ensures our funds are invested wisely and protects the integrity and 
confidentiality of the information we gather and store.
     usda's fiscal year 2003 information technology budget summary
    The Department's overall budget request for information technology 
in fiscal year 2003 totals almost $1.7 billion in budget authority; a 
$200 million increase over the $1.5 billion that USDA agencies are 
planning to spend in fiscal year 2002. This request will fund IT staff, 
hardware/software purchases, contractor services, telecommunications, 
and other infrastructure expenditures. These IT resources support every 
aspect of USDA's programs, from financial systems to program delivery 
systems to the infrastructure for our field organizations. This request 
represents about 3 percent of the total $52 billion proposed for IT 
investments for the Federal Government.
    A snapshot of USDA's overall request for IT shows almost 25 percent 
of the proposed total, approximately $410 million, funds entitlements 
that are distributed to the States in support of the Food Stamp and the 
Women, Infants and Children programs--this includes Advanced Planning 
Documents and Electronic Benefits Transfer Grants to States. The IT 
budgets for the Service Center agencies, which include the Farm Service 
Agency--FSA, the Natural Resources Conservation Service--NRCS, and the 
Rural Development Mission Area--RD--agencies, total approximately $390 
million. In addition to the separate agency budgets, the proposed 
budget includes a request for about $130 million to support the Common 
Computing Environment--CCE--infrastructure modernization of these 
agencies. This combined total of about $520 million represents about 30 
percent of the USDA total IT budget. Finally, the USDA Forest Service's 
IT budget of about $347 million comprises another 20 percent of the 
Department's total. USDA IT Capital Planning and Investment Control The 
Department manages its IT funds through the IT Capital Planning and 
Investment Control--CPIC--process. The Executive Information Technology 
Investment Review Board--EITIRB--which is chaired by the Deputy 
Secretary, is the central CPIC body that reviews, monitors and approves 
the Department's IT investments. The EITIRB's review is required by 
Congress and ensures that the Department's major IT investments are 
aligned with its business processes and strategic direction, and that 
the corporate impact of these investments is fully considered.
    In support of the EITIRB, the OCIO continues to strengthen 
management of the USDA's IT investments portfolio by tracking project 
costs, schedules, risks and benefits, from all agencies, by providing 
guidance throughout a project's life-cycle, and by developing and 
providing CPIC and project management training for USDA IT managers.
    As a result of these efforts to enable more informed and 
intelligent investment decisions on IT capital acquisitions, the 
President's first Management Scorecard rated USDA a ``yellow'' for 
Enabling e-Government largely based on our strong IT CPIC performance. 
This was one of only two ``yellows'' awarded government-wide to large 
agencies.
                   strengthening information security
    Last month, the Acting USDA Inspector General testified that ``one 
of the more significant dangers USDA faces is a cyber attack on its IT 
infrastructure, whether by terrorists seeking to destroy unique 
databases or criminals seeking economic gain. The Department has 
numerous information assets, which include market-sensitive data on the 
agricultural economy and its commodities, signup and participation data 
for programs, personal information on customers and employees, 
agricultural research, and Federal inspection information ensuring the 
safety of the food supply, as well as accounting data. The information 
and related systems face unprecedented levels of risk from intentional 
or accidental disruption, disclosure, damage, or manipulation.''
    Today, USDA is only minimally prepared for a natural disaster or 
cyber attack targeted to disrupt our critical IT infrastructure. In a 
review of the Department's cyber security program required by Congress 
in the Government Information Security Reform Act--GISRA, the USDA 
Office of the Inspector General along with the OCIO found a number of 
material IT security weaknesses at USDA. The fundamental cyber security 
challenges to USDA include:
  --Lack of senior management attention to addressing cyber security 
        vulnerabilities,
  --Inadequate disaster recovery and business resumption capacity,
  --Poor integration of information security into the Department's IT 
        capital planning process,
  --Incomplete risk management and information systems security 
        planning,
  --Inadequate information systems security awareness and training for 
        employees,
  --Inadequate intrusion detection monitoring and incident reporting, 
        and
  --Inadequate supervision over information technology contractor 
        provided services.
    Despite these continuing challenges, with the resources provided by 
Congress, we have made significant progress over the past year. For 
example:
  --A Cyber Security Advisory Council, consisting of senior executive 
        program officials and IT personnel from across the Department, 
        has been established to provide broad input into all aspects of 
        cyber security program and policy development.
  --A comprehensive Cyber Security Architecture is being designed to 
        provide a much-improved level of network security for current 
        and future delivery of services over the Internet.
  --Risk Assessments are becoming an integral part of IT management 
        within the Department. OCIO, together with USDA agency staff, 
        continue to develop standard tools and procedures for 
        performing these assessments.
  --Departmental IT security-related policies and guidance have been 
        issued or drafted in areas such as mainframe security, incident 
        reporting, information systems security plan guidance, user ID 
        and password requirements, and privacy policy on the use of 
        customer information.
  --More rigorous security requirements have been included in USDA's IT 
        CPIC process to ensure that plans for all new systems identify 
        specific security controls, costs, and schedules.
  --Structured training courses are being provided for USDA information 
        security technicians and managers in a wide range of security 
        disciplines.
  --New information security incident reporting procedures that require 
        an analysis of the incident as well as reports on corrective 
        measures where appropriate have been established.
  --An Enterprise Agreement to provide all agencies with standard 
        information security tools has enabled the Department to better 
        collect and analyze information for risk prediction, risk 
        quantification and risk management.
    In addition to these activities, the OCIO has evaluated and rated 
the information systems security plans for each USDA agency. We are 
currently providing our analysis of these plans to each agency head, 
and requesting a remediation plan be developed to correct identified 
information security weaknesses. We are also requiring each agency 
undertake an independent risk assessment of their information security 
program this fiscal year.
    Similar to our review of agency security plans, the Office of 
Management and Budget has reviewed USDA's information security program, 
identified weaknesses, and requested the Department improve its overall 
cyber security program. We have already begun revising our project plan 
for the Department's cyber security program, and are working with the 
agencies and OMB to ensure the plan balances OMB expectations with the 
Department's priorities and capacities.
    Your support of the Department's central cyber security program is 
crucial to ensuring USDA is prepared to recover quickly should a 
critical information system be rendered inoperable or unreliable due to 
an unexpected catastrophe. For fiscal year 2003, the President's Budget 
Request includes increases of:
  --$5.5 million to implement an information survivability program to 
        minimize disruptions caused by attempted intrusions, natural 
        disasters, and terrorist attacks. While we continue to improve 
        our intrusion detection system, we recognize that no prevention 
        measures are perfect. Cyber security disaster recovery and 
        business resumptions tools, procedures, and policies must be 
        developed and tested for facilities and operating environments 
        that house USDA's mission critical information systems.
  --$500,000 to establish the USDA Sensitive System Certification 
        Process to provide a standard and repeatable process for 
        evaluating the technical and non-technical security features of 
        an information system. The methodology is measurable and 
        results in documentation and certification activities that hold 
        system owners accountable for the security of their information 
        assets.
    USDA is also cooperating with the White House Office of Homeland 
Security as it develops and coordinates the implementation of a 
comprehensive national strategy to secure the United States against 
terrorist threats or attacks, including cyber attacks.
                        enterprise architecture
    Mr. Chairman, to take our information and information technology 
management to the next level, we need your support for our enterprise 
architecture--EA--initiative. This initiative will enable us to better 
organize and analyze our business processes, information needs, and 
supporting technologies to create a more citizen-centered, results-
oriented, and market-based USDA.
    We are focusing our efforts this year on the EA for a number of 
reasons. An EA is a requirement of the Clinger-Cohen Act, and is the 
key to better integrating our cyber security, e-Government, and 
telecommunications programs. It will also enable us to coordinate 
managing our IT resources in a way that serves our electronically 
enabled citizens, while ensuring that our organization and processes 
are documented and managed to accommodate the business needs of 
citizens who are not able to access USDA electronically.
    Further, OMB has identified the lack of a comprehensive EA as a 
major risk to successful delivery of all IT programs within USDA. 
Managers of IT projects currently under development typically have 
little understanding of what the future IT environment will be like 
when their system is finally deployed. Because an EA develops a shared 
view of the future IT environment, agency project managers developing 
IT programs and projects will have a clearer idea of the direction in 
which they must move to align with the direction of the Department. In 
recent reviews, the General Accounting Office has identified similar 
concerns with other Federal agencies operating without an EA.
    For fiscal year 2003, an increase of $15 million is requested to 
establish the USDA-wide Enterprise Architecture. An EA that is 
integrated with key IT management activities and processes at the 
Department level will enable USDA to ensure that scarce resources are 
spent wisely, and are aligned with a common vision for USDA's IT 
future.
    Building on our previous enterprise architecture efforts, we have 
developed a plan that identifies the major goals, activities, tools, 
and participants to implement an USDA EA. Our plan includes:
  --Developing the architectural components at both the Department and 
        agency levels (e.g. information about business processes, 
        information collected, systems used to collect and use 
        information and the technology that supports the systems);
  --Collecting this information in a central repository to model and 
        analyze the EA;
  --Conducting training and awareness sessions to ensure that all EA 
        components contribute towards an integrated USDA architecture. 
        These sessions will target multiple audiences across the 
        Department including: program executives, IT executives, 
        architecture program managers and their teams, and agency 
        staff;
  --Adding staff years to work with the agencies to ensure cross-
        Departmental architectural consistency; and
  --Integrating EA processes with other internal management processes 
        (e.g., IT investment decisions and information collection 
        reviews). The staff will work on architecture policy and 
        directives, planning and oversight of agency activities.
    The Department's recent efforts to leverage our economies-of-scale 
by negotiating enterprise licensing agreements provide a one tangible 
example of the benefits to establishing an EA. Rather than having 
agencies make individual purchases, during fiscal year 2001, USDA 
entered into or renewed seven enterprise or multi-agency agreements for 
hardware, software and services. These include agreements for cyber 
security tools, Section 508 remediation software, office automation 
products, and GIS software and services for the entire Department. We 
estimate the cost saved by entering into these agreements at 
approximately $240 million for the life-cycle of these products. In 
fiscal year 2002, enterprise agreements already completed include 
statistical analysis and enterprise resources planning software tools, 
and software to support emergency response messaging. Additional 
efforts are underway to complete or consolidate agreements for database 
software tools, anti-virus software, and network routing and switching 
hardware, software and support services. These agreements benefit the 
entire Department by reducing staff required to support acquisitions, 
streamlining training and support requirements, and reducing costs.
    While we have made significant progress in establishing enterprise 
agreements without the benefit of an EA, we can do much more once we 
establish our architecture and are able to look across the Department 
for additional opportunities. We expect these opportunities to come not 
only from enterprise agreements for hardware, software and services, 
but also from the ability to identify duplicate processes and to work 
with agencies to develop shared processes and shared systems. Some of 
this is already underway under the auspices of the e-Government 
program, and will be enhanced by our EA.
    A shared vision of our future business and IT environment, modeled 
in the Enterprise Architecture, will ensure that we are selecting the 
best mix of information and information technology investments to 
deliver USDA's future programs and services.
    service center modernization initiative--information technology
    Mr. Chairman, the Service Center Modernization Initiative--SCMI--
remains among the USDA's highest IT priorities. This initiative, which 
includes the Common Computing Environment--CCE, is a major cornerstone 
of our modernization and technology improvement efforts. It is rapidly 
breaking down the technology barriers of the old legacy systems in the 
Service Center agencies to provide a common technology infrastructure 
that enables use of modern processes, maximizes shareability of 
information, supports electronic access by customers, provides better 
and more efficient services, and supports our goal of one-stop service. 
The CCE is the most visible and far reaching IT modernization at USDA. 
The technology infrastructure will support about 50,000 USDA employees, 
volunteers and partners over three mission areas delivering over $55 
billion annually in services.
    The CCE incorporates common data definitions, structures and 
warehouses; open market office software; use of Geographic Information 
Systems--GIS; use of the Internet and the adopting of modern 
programming languages and scalable systems to ensure long-term 
interoperability and support for current and future program delivery.
    The Office of the Chief Information Officer continues to provide 
direct management and oversight of information technology resources 
provided by Congress under the CCE fund for this initiative. We rely 
heavily on the IT leaders and personnel of the three partner agencies 
working with OCIO executive and project management staff to plan and 
implement the CCE. Employee unions and associations are also fully 
involved and add valuable field insight to the process. Although this 
process has served us well in the design, acquisition, and deployment 
of the CCE technologies, long-term success will depend upon the 
establishment of an integrated IT support staff to operate and maintain 
the shared technology infrastructure.
    Through the end of fiscal year 2001, about 70 percent of the 
planned CCE technology investments were made and several reengineered 
business processes were either deployed, or in the final stages of 
testing. The standardization of the IT infrastructure is well under way 
and will be completed within the next 18 months. The new infrastructure 
is flexible and built around maximizing the ability to share 
appropriate information both within USDA and with other Fderal, State 
and local agencies, USDA customers and the private sector. Our progress 
to date includes a number of significant accomplishments:
  --An integrated technology architecture has been developed, tested 
        and piloted.
  --An interagency IT management structure operating under OCIO has 
        been put into place to oversee the implementation of the CCE 
        along with an OCIO project management office.
  --A Blueprint Plan for CCE has been developed.
  --An Integrated Project Plan has been developed.
  --Shared, integrated phone systems and local and wide area networks 
        have been installed.
  --Wiring to support future technologies has been installed in local 
        offices.
  --Internet access for most employees has been provided.
  --A shared Interoperability Lab and test facility has been 
        established.
  --About 45,000 modern/interchangeable and security capable 
        workstations have been acquired.
  --Common office automation--word processing, spreadsheet, etc.--
        software has been provided that is compatible with customer and 
        partner software.
  --Over 9,000 modern and shareable printers have been acquired.
  --A shared help desk support system has been established.
  --Three Web Farms built around common technologies have been 
        implemented to support Web-based applications and e-Government 
        implementation.
  --A common GIS Enterprise Software License has been acquired.
  --Common security tools, data management approaches and configuration 
        management processes have been implemented.
  --A migration platform--AS 400--for FSA has been acquired and 
        installed to support rewriting of COBOL applications to the new 
        CCE languages.
  --Shared Network Servers to support common e-mail, remote systems 
        management, local data storage and security enhancements have 
        been acquired.
  --Limited numbers of digital cameras and global positioning units 
        were purchased and contracts put in place for future 
        acquisitions.
    As we have moved forward with the CCE, we have taken advantage of 
market trends, enterprise license approaches and volume buying to 
significantly reduce the cost of implementation. CCE contracts 
typically result in substantial discounts off of prices paid by other 
Fderal agencies. Total capital investment costs for the CCE are 
currently projected to be almost 40 percent less than the low-end 
estimate developed in the original business case. In dollar terms, that 
is about $290 million in reduced costs. Additionally, as CCE initiates 
contracts, other USDA agencies often participate, which increases 
volume, reduces unit costs and moves all of USDA towards common 
technology tool sets. A good example of this was the establishment of a 
USDA-wide Enterprise License for GIS software which resulted in 
extremely deep discounted pricing for the CCE, the Forest Service and 
other USDA agencies.
    During the current fiscal year a number of key activities are 
planned which will take the CCE to 90 percent completion by the end of 
the year. These activities include:
  --Network Servers and remaining workstations purchased in fiscal year 
        2001 will be fully deployed thereby providing enhanced 
        security, a shared and robust e-mail system, ability to manage 
        and monitor IT systems from a central location and enhanced 
        local data capabilities.
  --A GIS strategy will be updated and integrated with the government-
        wide geospatial initiative underway through the 
        Administration's Quicksilver initiative, and all remaining CCE 
        architecture issues will be finalized.
  --The Service Center telecommunications capabilities will be 
        significantly enhanced to support growing numbers of Web-based 
        applications and to meet e-Gov and e-File requirements.
  --Shared application servers will be acquired and deployed to support 
        GIS and other new program applications.
  --Investments will be made in data warehouse, data centers, disaster 
        recovery, security components and the Web farms to support 
        internal and external data sharing and electronic services.
  --Employees will be trained in the new technologies.
    Even as the new CCE technologies are being rolled out, the Service 
Center agencies are working to retool their program applications and 
create new shared applications that will run on the new infrastructure. 
The Secretary recently announced the deployment of one of these--The 
Service Center Information Management System--SCIMS--which is a shared 
database of common customer information. All Service Center agencies 
will use this common database, and customers will no longer have to 
give name changes, address changes, etc., multiple times to participate 
in different programs. Other reengineered applications such as the 
customer service toolkit, a common land unit GIS application, natural 
resources data gateway, an office information locator, a shared human 
resource application and others have already been developed, tested, 
and deployed on the CCE system. Many others are in development and 
testing and will be deployed over the next several months. The CCE 
provides the common infrastructure that enables these new and more 
efficient applications.
    Your continued support of this initiative is essential for 
completion of the CCE and the timely, high-quality services that it 
will help bring to USDA customers. For fiscal year 2003, the 
President's Budget requests $133 million for the CCE account, which is 
an increase of $73.8 million over the $59.4 million appropriated in 
fiscal year 2002. This budget proposal includes in the central CCE 
account not only the funding needed to complete and maintain the core 
CCE technologies, but also a number of increases for the Service Center 
agencies' specific needs to ensure that those activities are fully 
coordinated. The fiscal year 2003 funding will be used as follows:
    The $59.4 million base level funds will be used to complete the 
acquisition and deployment of the core CCE infrastructure and begin a 
regular ``refresh'' cycle of replacing CCE components as they reach the 
end of their lifecycle. This will allow us to purchase all remaining 
peripheral devices such as plotters, printers, GPS units, digital 
cameras, etc., that are needed by field staff to fully optimize the use 
of the CCE technologies. We will also replace the first 16,500 CCE 
workstations purchased in late 1998 and, by continuing regular 
replacement of aging equipment, avoid high maintenance costs and 
obsolescence in the future.
    The $73.8 million increase for specific agency needs will be used 
for a variety of modernization costs including the acceleration of GIS 
implementation, systems migration/modernization, shared applications, 
increased telecommunications and other operating costs, security and 
eGovernment related work. Specifically:
  --$32.8 million will be used to acquire GIS imagery, digitize land 
        unit and natural resources information, build GIS data 
        warehouses, support GIS application development and train 
        employees in the application of GIS technologies to program 
        delivery. While the CCE provides the infrastructure to 
        implement GIS, the data applications and training are necessary 
        to fully utilize this capacity and provide the increased 
        efficiencies and better products that this technology will 
        support.
  --$10.8 million will be used to continue FSA's modernization of its 
        Financial Management Information System--FMIS--and the Farm 
        Loan Program--FLP--system. These new centralized systems will 
        include electronic access by employees and customers.
  --$10.2 million will be used for increased telecommunications costs 
        resulting from the move to more Web-based applications, central 
        databases, and e-Government activity. While the central Web-
        based applications and databases are more efficient and allow 
        greater use, re-use and sharing of applications and data, they 
        do result in additional telecommunications needs and costs.
  --$4.8 million will be used to continue implementation of the shared 
        Service Center Information Management System or SCIMS. 
        Additional features will be added to the application fielded 
        early this year and subsidiary systems will be linked to this 
        shared database. When fully implemented, this system will 
        provide immediate access to eligibility and payment limitation 
        information which will eliminate delays and allow for more 
        timely service.
  --$4.0 million will be used for across-the-board SCA projects to 
        implement e-Government. This would be directed towards shared 
        applications and tools needed by all three agencies to 
        implement these activities.
  --The remaining $11.2 million would be used for security, Web Farm 
        support, legacy systems operations and maintenance, and for 
        shared Service Center Modernization costs previously funded 
        under FSA with non-recurring funds.
    The fiscal year 2003 budget request represents a significant 
milestone for our modernization efforts. With it, we complete the 
implementation of the long-term objective of having an integrated 
technology infrastructure for our Service Center agencies. We will also 
begin a regular refreshment of that infrastructure such that, never 
again, do we allow the technology support of these agencies to reach 
the outdated state of the stove pipe technologies that existed when we 
began this effort. Additionally, we will expand the successful model 
that we have used to manage the CCE to include similar oversight and 
coordination of new agency specific IT activities that need to be 
better integrated and leveraged for the benefit of our program delivery 
and our customers.
                         electronic government
    Electronic Government--e-Government--is about more than technology; 
it is about fundamentally transforming how USDA delivers its 
information and services. At USDA, this transformation is being driven 
by the President's emphasis on expanding e-Government to improve 
customer service, make employees more productive, and save taxpayer 
dollars, and the Congress' mandate to action through legislation such 
as the Government Paperwork Elimination Act and the Freedom to E-File 
Act.
    E-Government solutions are necessary for the Department to meet 
many of the challenges we now face, which include:
  --Transformations in industries that the USDA supports and regulates;
  --The need to ``do more with less;''
  --A new focus on market-driven policies and programs;
  --An emphasis on results-oriented solutions that require unified 
        approaches to easily collaborate, share information and manage 
        the organization's knowledge; and
  --Increasing expectations from customers, private and public sector 
        organizations and employees.
    USDA's customer groups are currently online in impressive numbers. 
According to the National Agricultural Statistics Service, 41 percent 
of farmers are online; close to the 44 percent of the total U.S. 
population that used the Internet in 2001--based on information from 
Jupiter Research. And while Internet use by both low-income Americans 
and rural residents lags behind other groups, Internet use by both 
groups has grown quickly. Rural Internet use grew by over 70 percent 
from 1998-2000, and low-income use has grown by 80 percent over the 
past year--the fastest growth rate of any income group. Furthermore, 89 
percent of all children have Internet access at home or school. The 
statistics are sited from the Current Population Survey/August 2000, 
U.S. Department of Labor/U.S. Census Bureau.
    Similarly, USDA's major partner organizations have pervasive 
Internet access. Ninety-eight percent of research and academic partners 
are online and 90 percent or more of banks, insurance companies, 
governments, and major agribusinesses are online as well.
    To meet growing customer demand, several USDA agencies are already 
implementing innovative e-Government initiatives. USDA is considered a 
government pioneer in providing some information and services--such as 
benefits, food safety information for consumers, and loans--
electronically through customer cards/electronic benefits transfer 
(EBT), call centers, and the Web. The USDA Meat and Poultry Hotline, 
the Agriculture in the Classroom educational partnership initiative, 
the Unified Export Strategy and Laboratory Electronic Application for 
Results Notification Web-based applications are just a few examples of 
USDA e-Government successes.
    Building on this foundation, USDA has launched a Department-wide e-
Government Program that is managed by an interagency e-Government 
Executive Council, under the leadership of the Deputy Secretary and the 
OCIO. Chaired by USDA's recently named Associate Chief Information 
Officer for e-Government, the Executive Council is finalizing an e-
Government strategic framework that incorporates the vision, goals, 
marketing, and tactical activities to support our transition away from 
solely traditional paper-based processes and single-agency service 
delivery approaches. USDA's e-Government Strategic Plan establishes a 
comprehensive vision and direction for the Department and its agencies 
for the next 5 years (fiscal year 2002-2006). The Strategic Plan was 
developed to:
  --Incorporate and align e-Government with annual performance and 
        business operating planning and budgeting processes;
  --Build on USDA's current capabilities and efforts;
  --Share USDA best practices;
  --Break down organizational silos by taking a citizen-centered view 
        of the delivery of our programs and services;
  --Avoid redundant approaches and save money by looking for 
        opportunities to unify systems and collaborate across USDA 
        agencies, enterprise-wide and with other Federal departments, 
        including the ``Quicksilver'' initiatives under the auspices of 
        Office of Management and Budget;
  --Prioritize opportunities, devoting resources to opportunities with 
        the largest impact; and
  --Create a sense of ownership and shared vision for the Department as 
        a means to fostering cultural change.
    Through the cooperative efforts of USDA's e-Government leaders in 
all mission areas, we are implementing the USDA e-Government Strategy. 
We are identifying key interdepartmental, enterprise-wide, cross-
mission area and cross-agency opportunities for achieving USDA's e-
Government goals and objectives, including USDA ``smart choices''--
projects which will begin our journey to achieving USDA's e-Government 
goals and those of broader government-wide efforts.
    Integrated into the plan is USDA's compliance with the Government 
Paperwork Elimination Act. Further, progress made by the Service Center 
agencies in addressing the requirements of the Freedom to E-File Act 
during the first quarter of fiscal year 2002 includes deployment of a 
large portion of the technology required for agricultural producers to 
access and submit information to the Department via the Internet. The 
Risk Management Agency approved the E-File implementation plans for 17 
of the 18 crop insurance providers.
    Realizing the Department's vision and achieving USDA's e-Government 
goals will require executive leadership and support, the resources to 
make significant infrastructure and technical improvements, 
participation from USDA's partners, and most of all, the commitment and 
hard work of all USDA employees.
                         it workforce planning
    Implementing e-Government solutions and managing our IT resources 
effectively will require recruiting and retaining highly skilled IT 
employees. Towards this end, the USDA IT human resources communities 
continue to collaborate to improve the professional development of 
USDA's IT workforce. Two specific initiatives underway include the 
analysis of a survey to assess the core competencies required by USDA 
executive and senior IT managers, and the implementation of the new 
Office of Personnel Management IT job classification standard to better 
recruit employees with the skills USDA requires to deliver programs 
today and into the future.
                  ocio working capital fund activities
    The OCIO manages the USDA National Information Technology Center--
NITC--headquartered in Kansas City, Missouri, with a software 
development facility in Ft. Collins, Colorado, and a support office in 
Washington, D.C. The NITC, with a $56 million budget funded by USDA's 
Working Capital Fund, provides innovative, cost-effective and secure 
information technology solutions to support the specific missions of 
USDA's agencies. NITC also provides computer services to the Federal 
Aviation Administration, the General Services Administration, and other 
government clients on a reimbursable basis.
    The OCIO also operates the Department's long distance 
telecommunications network, which like the NITC, is funded by the USDA 
Working Capital Fund. Working in collaboration with the agencies, we 
are redesigning this network to ensure it provides provide cost-
effective, secure, and reliable services to USDA programs 25 hours a 
day, 7 days a week.
                               conclusion
    Mr. Chairman, members of the Committee, the Department of 
Agriculture faces critical challenges as it transitions into this new 
e-Government era of providing services to our customers online. To meet 
these challenges, we are strengthening our Cyber Security program to 
better protect our growing information assets, and we are coordinating 
a Department-wide e-Government effort to ensure customers and staff can 
easily access and use these new Internet-based services.
    We are also focusing on the Service Center Modernization 
Initiative, which will bring USDA's county offices into the 21st 
century while reducing the burden on our customers. The Common 
Computing Environment is key to effectively modernizing the services we 
deliver to farmers, ranchers, and other customers of our Service Center 
agencies. This effort continues to be among the Department's highest 
information technology priorities.
    Finally, by strengthening the overall management of USDA's IT 
resources through the development of an Enterprise Architecture, we 
will be well on our way to realizing the benefits envisioned in the 
Clinger-Cohen Act. We ask for your support for these initiatives, and 
look forward to working with you in the Congress to achieve these 
important objectives.
                                 ______
                                 

  Prepared Statement of James Michael Kelly, Acting General Counsel, 
                     Office of the General Counsel

                              introduction
    Mr. Chairman and members of the Subcommittee, I am pleased to have 
this opportunity to provide you with an overview of our agency and to 
address some of the current activities and issues facing the 
Department.
                                mission
    The Office of the General Counsel (OGC) is the law office for the 
Department. As an independent, central agency within the Department, 
OGC provides legal advice and services to the Secretary of Agriculture 
and other officials of the Department of Agriculture with respect to 
all USDA programs and activities.
                              organization
    OGC's services are provided through 12 Divisions in Washington and 
18 field locations. The headquarters for OGC is located in Washington, 
D.C. The Office is directed by a General Counsel, a Deputy General 
Counsel, a Director for Administration and Resource Management, and six 
Associate General Counsels. The attorneys located in headquarters are 
generally grouped in relation to the agency or agencies served. Our 
field structure consists of five regional offices, each headed by a 
Regional Attorney, and 13 branch offices. The field offices typically 
provide legal services to USDA officials in regional, State, or local 
offices.
                     current activities and issues
              international affairs and commodity programs
    During fiscal year 2001, OGC provided and, in 2002 continues to 
provide, a significant amount of assistance with respect to commodity 
loan, producer income and production adjustment programs authorized by 
various statutes, including the Agricultural Adjustment Act of 1938, 
the Commodity Credit Corporation (CCC) Charter Act, the Food Security 
Act of 1985, and the Federal Agriculture Improvement and Reform Act of 
1996. The assistance provided during the past fiscal year also extended 
to a number of ad hoc programs provided in several acts, primarily the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2001, and Public Law 107-25. This 
required extensive review of, and assistance in, drafting numerous 
regulations and program documents for these new programs which included 
assistance for producers of cottonseed, tobacco, dairy, oilseeds, 
peanuts, honey, wool and mohair, and livestock.
    In addition, recent legislative efforts also produced extensive OGC 
involvement in rule-making and other program efforts related to: (1) a 
disaster program for producers of commodities affected by adverse 
weather conditions; (2) new provisions to implement the revision of the 
United States Warehouse Act; (3) the development of new programs to 
help encourage the production of wheat gluten and related products; (4) 
a Payment-in-Kind (PIK) diversion program to encourage farmers to 
divert acreage from sugar production in return for a payment from CCC 
from its supplies of excess sugar; (5) assistance to producers for 
losses of water in the Klamath Basin region; and (6) a potato diversion 
program. In addition, OGC attorneys continued to be involved in the 
handling of the Starlink corn crisis by assisting in the establishment 
of a program to purchase tainted seed corn in order to reduce the 
amount of Starlink corn in production in 2001. OGC also provided 
substantial assistance to the Foreign Agricultural Service (FAS) and 
the Farm Service Agency (FSA) with respect to legislative proposals to 
streamline and simplify commodity acquisitions for use in various 
foreign and domestic commodity programs.
    With respect to FAS, OGC has been involved in the implementation of 
a number of major international trade and foreign assistance 
initiatives. During fiscal year 2001, OGC was involved in: (1) the 
current round of World Trade Organization (WTO) Agriculture Agreement 
negotiations; (2) negotiations to create a Free Trade Area of the 
Americas; and (3) providing assistance relating to the Codex 
Alimentarius Commission. OGC attorneys participated in various WTO 
activities including consultations, panel considerations, appeals, and 
arbitrations involving various trade disputes. These involved: (1) 
Korea's dual retail system for beef imports; (2) Chile's price band 
system and safeguard measures relating to certain agricultural 
products; (3) ensuring the European Union's compliance with the WTO 
decision striking the ban on imports of meat produced with growth-
promoting hormones; (4) Japanese phytosanitary issues; and (5) Canadian 
dairy export subsidies and access for U.S. products. OGC continues to 
be actively involved in other FAS program areas such as providing legal 
advice for the export credit, supplier credit, and facilities guarantee 
programs. OGC was extensively involved in negotiations on export 
credits and credit guarantees in agriculture that took place under the 
auspices of the Organization for Economic Cooperation and Development. 
In addition, OGC has been heavily involved in the interagency process 
relating to the liberalization of U.S. sanctions on trade in 
agricultural commodities and products. During the past year, OGC has 
also been involved in the implementation of a large number of foreign 
assistance agreements under which agricultural commodities are donated, 
including surplus agricultural commodities acquired by CCC. The 
implementation of these agreements involves extensive review of draft 
agreements, commodity procurement, ocean transportation issues, and 
cargo loss and damage claims. In the area of international food 
assistance, OGC reviewed and helped draft numerous agreements with 
private voluntary relief organizations, the World Food Program of the 
United Nations, and various foreign governments. This assistance 
included a combination of donations and concessional credit sales of 
grains, oilseeds, and other U.S. agricultural commodities. OGC also 
assisted the Department of Justice in pursuing admiralty claims for 
cargo loss and damage arising in connection with food aid shipments and 
defended the Department in a number of lawsuits brought by shipping 
companies that were challenging contracts for the ocean transport of 
the food aid. Fiscal year 2001 and 2002 activities also include 
implementation of the President's Global Food for Education Initiative 
under section 416(b) of the Agricultural Act of 1949 and consulting 
with Congressional committees on legislative changes to this activity 
and food aid authorities generally.
                      food and nutrition division
    With respect to USDA's domestic food assistance programs, OGC has 
been heavily involved in efforts related to the review of proposed 
legislation and the implementation and enforcement of new legislation 
aimed at welfare reform and other program improvements, as well as the 
ongoing program integrity and compliance initiatives. We expect the 
demand for legal services in connection with these activities to remain 
constant in fiscal year 2002 and 2003.
    More specifically, during this past year, OGC attorneys worked 
closely with the Food and Nutrition Service (FNS) to provide legal 
review of major Food Stamp Program regulatory amendments to implement 
provisions of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) (as amended by the Omnibus 
Consolidated Rescissions and Appropriations Act of 1997), the Balanced 
Budget Act of 1997, the Agricultural Research, Extension, and Education 
Reform Act of 1998 and the Agriculture Risk Protection Act of 2000. 
Extensive legal assistance was also provided with respect to 
implementation of a provision of the William F. Goodling Child 
Nutrition Reauthorization Act of 1998 which provides Child and Adult 
Care Food Program (CACFP) benefits to a new group of eligible 
participants (i.e., at risk youth in after school programs). OGC also 
played a significant role in drafting legislation to clarify the 
Secretary's authority to make grants and provide statutory waivers for 
demonstration projects designed to improve the delivery of nutrition 
benefits in the Food Stamp Program.
    In fiscal year 2001, OGC provided legal assistance in the 
development and review of proposed Farm Bill legislation which would: 
provide for transitional food stamp benefits for families moving off 
the welfare programs for up to 6 months following the cessation of a 
household's cash assistance payments under the Department of Health and 
Human Services' Temporary Assistance to Needy Families program; 
continue the supply of commodities to the Emergency Food Assistance 
Program and expand the use of accompanying administrative funds to 
cover storage of commodities prior to distribution by State and local 
authorities; establish the Hunger Fellowship Program designed to 
develop and encourage talented individuals to initiate and administer 
solutions to the hunger problem nationally and internationally; exclude 
from the household income calculation in the Food Stamp Program the 
housing allowances provided to troops and their families living in 
private housing provided by the military on or near military bases; 
extend the Senior Farmers' Market Nutrition Program; and provide free 
fresh fruits and vegetables for consumption outside regular school meal 
service periods by students at elementary schools through a pilot 
program in a number of localities. OGC also reviewed proposed 
legislation to amend the PRWORA to provide Food Stamp benefits for 
qualified alien children. The proposed legislation would also amend 
PRWORA to provide that working immigrant families qualify for Food 
Stamp benefits after working sixteen qualifying quarters as opposed to 
forty qualifying quarters of coverage (as defined under title II of the 
Social Security Act), as currently required by PRWORA.
    During fiscal year 2001, OGC assisted in the defense of several 
legal challenges to the domestic food assistance programs. Among other 
issues, Litigation was brought regarding State implementation of 
certain welfare reform provisions initiated by PRWORA. The challenge 
concerned the Secretary's interpretation of provisions in PRWORA 
affecting the Food Stamp Program eligibility of Micronesians living in 
the United States. Other challenges were brought concerning: the manner 
in which an FNS administrative review was conducted in a matter 
involving a determination of serious deficiency of a sponsor in the 
CACFP based on an audit done by Office of Inspector General (OIG); 
USDA's discretion in permitting flexibility in the implementation by 
State food stamp agencies of the provisions of a final rule; settlement 
negotiations of a class action lawsuit involving State Agency referral 
of Food Stamp Program recipient claims for collection through the 
Treasury Offset Program of the U.S. Department of the Treasury; and, 
again with respect to the CACFP, OGC has been working with counsel for 
several States in pursuing Federal and State administrative claims 
arising from audits performed by OIG. Finally, OGC provided significant 
legal assistance in seeking judicial recognition of the credibility and 
weight of evidence derived solely from data generated through the Food 
Stamp Program electronic benefit transfer system in cases involving the 
withdrawal of the authorization of retail food stores to accept and 
redeem food stamps.
    With respect to program regulations, OGC reviewed a substantial 
final rule implementing the Non-Citizen Eligibility and Certification 
Provisions of PRWORA, which involved numerous significant modifications 
in the Administration of the Food Stamp Program. OGC also provided 
significant legal advice regarding two rules changing the National 
School Lunch and School Breakfast Programs to address foods of minimal 
nutritional value and to require participating schools to identify 
blended beef, pork, poultry and seafood products. Substantial legal 
guidance was also provided in connection with the rule providing for 
the treatment of food delivery systems under the WIC program.
    OGC frequently assisted in furthering the program integrity 
objectives of the nutrition assistance programs. The Office worked 
closely with Department officials engaged in evaluating and sanctioning 
States for their performance in administering the Food Stamp Program 
under that Program's quality control system.
    OGC also provided formal and informal advice on a number of issues 
affecting the efficient Administration of the food assistance programs. 
The Office provided counsel regarding the legal issues affecting the 
consideration of demonstration project proposals to privatize 
certification functions in the Food Stamp Program. OGC also provided 
legal advice on the limitations applicable to the waiver of single 
State agency requirements as authorized under the Intergovernmental 
Cooperation Act of 1970. Finally, OGC worked diligently in providing 
legal advice to assist in the efforts resulting in emergency food 
assistance for victims of the September 11 terrorist attacks in New 
York.
                   regulatory and marketing programs
    The Department's food safety programs and responsibilities are 
exceptionally important to American agriculture and to American 
consumers. OGC attorneys are committed to providing the most effective 
and comprehensive legal assistance possible to these critical programs. 
We will continue to work closely with the Food Safety and Inspection 
Service as it addresses an array of important issues over the next few 
years.
    We will provide the strongest possible support to the agency, in 
light of the court ruling in the Supreme Beef litigation, to ensure 
that meat, poultry, and egg product safety are not adversely affected 
by that decision. OGC participates fully in the agency's continuing 
work to enhance the implementation of the Hazard Analysis and Critical 
Control Points (HACCP)/Pathogen reduction regulations and on the HACCP-
based inspection models project (HIMP) which is testing new inspection 
models that the agency believes will lead to more effective inspection, 
improved food safety, and better use of agency resources. We have 
worked closely with the Department of Justice over the last year to 
defend the HACCP regulations and FSIS' statutory authority to use the 
HIMP project's inspection models in a lawsuit brought by the American 
Federation of Government Employees, the Community Nutrition Institute, 
and several FSIS meat inspectors. The validity of the revised HIMP 
project was approved by the Federal district court and the case was 
appealed for a second time by the plaintiffs. The matter case was 
argued in January 2002, and we are awaiting the court of appeals 
decision.
    OGC also provides comprehensive legal support to FSIS' rulemaking 
activities. Our attorneys work with FSIS staff from the earliest stages 
of these agency policy development activities, serving on an array or 
agency working groups and regulation development teams, involved with 
such projects as the BSE Risk Assessment Working Group, the inspection 
of imported exotic species, an egg products inspection task force, and 
a performance standards working group. We have also assisted in the 
development and preparation of the agency's many rulemakings that have 
included, over the last year, proposed requirements for Listeria 
control, procedures for notification of new technologies, the revision 
of chilling time and temperature requirements for ready-to-cook 
poultry, and establishment of mandatory inspection of ratites and 
squab.
    We also devote considerable resources to the agency's field 
operations activities and to FSIS' compliance and enforcement programs. 
We have worked with the agency in its continuing efforts to improve its 
recall assessment procedures, to enable the sharing of recall 
information with State and other Federal agencies, and to improve the 
use of epidemiological evidence in recall situations. OGC attorneys 
also partner very effectively with agency officials, with the Office of 
the Inspector General, and with the Department of Justice to ensure the 
prompt and successful prosecution of criminal, civil, and 
administrative cases involving violations of the meat, poultry, and egg 
products inspection laws and to prevent the distribution of 
adulterated, misbranded, or uninspected products.
    Safeguarding the animal and plant health of the United States is a 
matter of paramount importance to the Department. OGC has partnered 
effectively with the Animal and Plant Health Inspection Service (APHIS) 
for many years in carrying out these program responsibilities and will 
continue to do so in the future. APHIS' responsibilities have become 
vastly more complex, requiring not just effective safeguarding measures 
to prevent the introduction and dissemination of animal diseases and 
plant pests, but programs to ensure the safe and smooth entry of people 
and goods into the United States, and the facilitation of agricultural 
trade in compliance with our international obligations. Similarly, 
OGC's responsibilities and the demands for timely and effective legal 
support of APHIS inspection and regulatory activities have increased as 
well. A new Plant Protection Act was passed in June 2000. We have 
worked closely with APHIS on the implementation of the new law. In 
addition, we have been extensively involved in APHIS' response to the 
safeguarding review of its Plant Protection and Quarantine activities 
conducted by the National Plant Board, and will be required to dedicate 
significant resources to APHIS as it considers and implements 
improvements based on a similar review of its animal health and disease 
prevention programs.
    We have an exceptional relationship with APHIS program officials 
and with their regulation development staff, and we have worked very 
closely with them in connection with an array of voluntary cooperative 
programs and rulemaking activities that included rules for the 
regulation of sheep and goats for scrapie, rules dealing with bovine 
tuberculosis, pseudorabies in swine, and with respect to plant health 
issues, regulations for plum pox, oak mortality syndrome, citrus 
canker, Karnal bunt, noxious weeds, and the glassy winged sharpshooter. 
In connection with the facilitation of international trade, our 
attorneys provided effective support for APHIS activities related to 
the development of rules that will allow agricultural commodities to 
enter U.S. markets while ensuring that America's agricultural resources 
are not impaired and that plant and animal health in the U.S. are not 
comprised. These regulations have covered requirements for an array of 
commodities ranging from fruits and vegetables to animals and animal 
products. They include the regulation of animals and animal products 
designed to enhance the barriers to bovine spongiform encephalopathy 
(BSE) or Mad Cow Disease, and to prevent the introduction of foot-and-
mouth disease.
    We also dedicated substantial resources to defending APHIS program 
activities and regulations in the Federal courts, including a challenge 
to the Department's authority to order disposal of sheep in Vermont 
which were diagnosed with a transmissible spongiform encephalopahty 
(TSE), and challenges by domestic producer groups to APHIS regulations 
allowing the importation of citrus from Argentina and avocados from 
Mexico. We also handle a broad caseload of administrative cases on 
behalf of APHIS to enforce its regulations. These cases have included 
prosecutions for violations of the standards for accredited 
veterinarians, the illegal importation of plant and animal products, 
violations of the regulations governing the interstate movement of 
various plants, animals and plant and animal products, and the 
falsification of phytosanitary certificates.
    During fiscal year 2002, OGC anticipates expending substantial 
resources in connection with the Horse Protection Act program. OGC 
attorneys serve as agency counsel in administrative enforcement actions 
brought under this statute. In fiscal year 2001, OGC initiated 30 
enforcement cases, and we expect to initiate approximately the same 
number of cases in 2002. OGC will also continue to provide assistance 
and counsel to APHIS in connection with the training of Veterinary 
Medical Officers and in connection with issues relating to APHIS' 
multi-year Operating Plan for the horse show industry.
    OGC provided significant legal services to APHIS in connection with 
enforcement of the Animal Welfare Act (AWA). In fiscal year 2001, OGC 
initiated 57 administrative enforcement cases and we expect fiscal year 
2002 referrals to remain at or exceed that level. We also provided 
assistance to APHIS in a number of rulemaking dockets concerning marine 
mammals held in captivity, confiscation of suffering animals, licensing 
requirements for applicants, and guidelines for handling dangerous 
animals. OGC attorneys also provided training to APHIS personnel in 
connection with the AWA program.
    In the past year, OGC has provided extensive legal services to the 
Agricultural Marketing Service (AMS) in various matters and will 
continue to work closely with AMS in the year ahead. OGC continues to 
provide assistance in rulemaking and related litigation involving Class 
III and IV milk pricing. A recommended decision was issued in November 
2001 and it is anticipated that a final rule will be issued in early 
2002. OGC also assisted AMS in several regional hearings to review 
pooling standards in milk orders and these will continue in fiscal year 
2002.
    OGC has been heavily involved with research and promotion program 
issues. As a result of the Supreme Court's decision in United States v. 
United Foods, Inc., which held that the imposition of mandatory 
assessments upon handlers of fresh mushrooms to fund generic mushroom 
advertising violated the First Amendment because it required handlers 
to subsidize commercial speech with which they disagreed, a 
proliferation of litigation has occurred involving challenges to other 
programs. Administrative challenges to milk, watermelon and honey 
research and promotion programs are currently pending. In addition, two 
cases challenging the beef promotion program, and one challenging the 
pork promotion program, are pending in the U.S. District Courts, and 
three others, filed by beef importers, are pending in the U.S. Court of 
International Trade. There is also an administrative challenge to the 
advertising program conducted under the California tree fruit marketing 
order. In addition to the litigation involving the constitutionality of 
these programs, OGC worked closely with the Agricultural Marketing 
Service in connection with development and publication of proposals for 
new programs for avocados and lamb.
    OGC continues to assist AMS in connection with the implementation 
of the Organic Standards program. The final rule became effective 
February 20, 2000, and the program will be fully implemented October 
21, 2002. During this implementation period, OGC has provided and will 
continue to provide legal advice and assistance on numerous issues such 
as peer review panel procedures, treatment of non-covered agricultural 
products, the provision of reasonable security, and equivalency issues. 
In addition, AMS will need to conduct rulemakings in connection with a 
number of issues which were not covered in the previous rulemaking, and 
OGC will provide assistance in connection with them.
    In the Trade Practices area, we provide legal services under the 
Packers and Stockyards Act (P&S Act), the Perishable Agricultural 
Commodities Act (PACA), and the Capper-Volstead Act and provide the 
liaison for the Department under the Memorandum of Understanding 
between the Department, the Federal Trade Commission and the Department 
of Justice on competition issues. Under the P&SA, the attorneys of the 
Trade Practices Division file administrative complaints to enforce the 
provisions of the statute, requiring prompt payment for livestock and 
poultry and ensuring that livestock auction markets and dealers are 
solvent, provide accurate weights and measures, and account accurately 
to sellers and producers of livestock. Of special note this year under 
the P&S Act, we litigated two enforcement cases against large packers 
alleging violations of the Act. Section 202 of the Packers and 
Stockyards Act makes it unlawful for any packer to engage in any 
unfair, unjustly discriminatory or deceptive practice. Our complaint 
against Excel Corporation alleges that the packer engaged in an unfair 
or deceptive practice when it changed the formula by which it 
calculated lean percent in slaughter hogs, a calculation that directly 
affected the price the packer paid to producers, without telling 
producers of the change. As a result of the change, the packer paid 
lower prices to producers for 80 percent of the hogs it purchased. A 
decision in the case was handed down on February 7, 2002 in which the 
Administrative Law Judge found that Excel had violated the P&S Act and 
the regulations and issued a cease and desist order but did not assess 
a civil penalty. The Department plans to appeal this decision to the 
Judicial Officer. In the second case against a large packer, the 
complaint alleged that Farmland National Beef Packing Company, L.P. 
(Farmland) subjected a feedlot to an unreasonable prejudice or 
disadvantage by retaliating, changing its buying practices (and failing 
to buy at all), after the feedlot manager criticized the packer in a 
letter to a farm journal. The Farmland case settled for a payment by 
Farmland of $90,000.
    As a result of a fiscal year 2000 GAO report recommending changes 
in P&SP's investigation procedures in competition cases, OGC has agreed 
to work closely with P&SP on the process by which its investigations 
are planned and implemented and to assign attorneys to work with agency 
investigators in the initial stages of case development and 
investigation. Congress provided additional resources to OGC for the 
staffing necessary to provide these additional legal services. OGC 
hired three additional attorneys and has begun to participate in the 
early stages of P&SP's competition case investigations, assisting P&S 
with the review of its competition investigation work plans, traveling 
to the field offices to meet with investigation teams and providing 
whatever legal services are necessary as the investigation proceeds.
    OGC has provided significant legal resources to the PACA program 
this year, with an especial emphasis on cases arising out of Operation 
Forbidden Fruit, the investigation and indictment of a number of 
Federal inspectors and produce wholesalers for altering inspection 
documents as a result of bribes. The attorneys of the Trade Practices 
Division file administrative complaints against dealers, brokers or 
commission merchants who must be licensed to buy and sell fruits and 
vegetables in interstate or foreign commerce. The administrative 
complaints enforce the provisions of the Perishable Agricultural 
Commodities Act (PACA) which requires prompt payment, accurate 
accounting and compliance with contractual obligations. The PACA 
includes not only a disciplinary program involving suspension or 
revocation of license or civil penalties for violation of the Act, but 
also a reparation program. The basis of the reparation program rests 
upon section 5(a) which makes a violator of any part of section 2 
liable to the injured party for the full amount of damages caused by 
the violation. This liability may be enforced by suit in any court of 
competent jurisdiction, or by complaint to the Secretary. A complaint 
to the Secretary initiates a reparation proceeding in which both 
parties have opportunity to make an evidentiary record, and have their 
dispute determined by officials of this Department.
    In connection with the Hunts Point ``Operation Forbidden Fruit'' 
convictions, approximately 800 reparation complaints were filed in 
which the complainants allege that they have been defrauded as a result 
of bribes paid by Hunts Point firms to Federal inspectors to issue 
inspection certificates falsely showing poor quality produce. The Hunts 
Point firms typically used these certificates to negotiate downward 
price adjustments with their suppliers. Usually, the suppliers would 
then innocently negotiate similar adjustments with their suppliers all 
the way back to the producers. Approximately100 complaints are still 
pending, and many of the complaints are against innocent intermediate 
firms. The reparation hearings are presided over by attorneys of the 
Trade Practices Division and all decisions, whether based on 
documentary proceedings or after hearing, are reviewed and approved by 
Trade Practices Division attorneys. Also in connection with ``Operation 
Forbidden Fruit'' this year the Division filed disciplinary cases 
against the first of several produce firms whose employees made 
payments to Federal inspectors. The complaint alleges that the firm 
(which is responsible for the acts of its employee) made payments and 
false statements about the condition of the produce it received in the 
altered inspection certificates and those statements constitute false 
or misleading statements for a fraudulent purpose in violation of the 
PACA. The complaint seeks to revoke the PACA licenses of the company.
    Attorneys in the Trade Practices Division continue to act as 
liaison to the DOJ and the Federal Trade Commission on competition 
issues, pursuant to the Memorandum of Understanding between the three 
agencies. OGC expedites the provision of data or expertise to the DOJ 
on agricultural issues as DOJ or the FTC investigates firms or reviews 
mergers or acquisitions of agricultural businesses. OGC is also working 
closely with the FTC and DOJ in their participation in the training of 
investigators and economists of the Packers and Stockyards Programs in 
investigative techniques and case preparation as recommended by the 
September GAO report on P&SP's investigation of competition cases.
                           rural development
    OGC also provides legal services to USDA agencies which manage some 
of America's largest loan portfolios. OGC continues to be heavily 
involved in debt collection, housing and farm foreclosures with many 
farm debts going back to the emergency loan program of the 1980's, and 
civil rights matters affecting the Farm Service Agency's (FSA) farm 
loan programs. OGC is assisting the Department of Justice in defending 
several putative multi-million dollar class actions for damages brought 
by former Mexican agricultural and railroad workers seeking refunds of 
their savings fund for work from 1942 through 1964. We continue to 
provide assistance to FSA and the Rural Development mission area in 
implementing the Debt Collection Improvement Act of 1996, specifically 
involving credit reporting, electronic transfer of funds, offset, and 
cross-servicing. OGC continues to defend several lawsuits involving 
hundreds of Rural Housing Service (RHS) multifamily housing projects 
whose owners want to prepay their loans and thereby remove a 
significant number of low income housing units from rural America.
    OGC continues to work with the Rural Business-Cooperative Service 
(RBS) in reviewing their cooperative agreements and in improving their 
cooperative agreement process. During the past, year we assisted RBS in 
establishing their new Value Added Development Grant program and will 
continue to assist them in further implementing this program. We are 
working to resolve an increasing number of major defaults on Business 
and Industry loans. We also continue to work with the RHS in 
implementing the grant program for agriculture and seafood processor 
workers authorized under Public Law No. 106-387.
    Also in the Rural Development area, OGC successfully 
assistedconcluded assistance to RHS, in conjunction with the Department 
of Housing and Urban Development and the Department of Veterans 
Affairs, to streamline the housing loan application process for Native 
American borrowers on Indian reservations. OGC expects to continue to 
work closely with RHS to overcome obstacles to single family housing 
loans on Indian reservations.
    Implementation of the Agriculture Risk Protection Act of 2000 has 
increased the responsibilities of the Risk Management Agency (RMA). 
Compliance efforts have been enhanced requiring extensive legal service 
to develop administrative cases against producers, agents, loss 
adjusters, and reinsured companies. Millions of dollars are now 
available for contracting and reimbursement for research and 
development and risk management education, all of which will require a 
significant time for legal review. RMA continues to implement new risk 
management programs developed by the private industry to expand the 
number of producers covered under that safety net, which will also 
require a significant time for legal review as such products go through 
the Board of Director approval process.
    We continue to work with Department officials to reduce regulatory 
burdens, eliminate obsolete and unnecessary regulatory requirements, 
and streamline regulations, particularly in the areas of rural, farm 
and utility lending. For example, OGC has worked extensively with FSA 
over the past year to rewrite all of their farm loan programs loan-
making and servicing regulations to reduce regulatory burdens where 
possible and to clearly state agency policy. We are assisting RHS in 
streamlining and rewriting loan-making and servicing regulations for 
their single and multiple family housing loan programs, their Community 
Facilities loan program and their environmental regulations affecting 
these programs. Our efforts on these long-range projects will continue 
into fiscal year 2003.
    The need for legal services in connection with programs of the 
Rural Utilities Service (RUS) grew significantly during fiscal year 
2001 as a result of an increase in the funding in all major program 
areas, the implementation of a number of fundamentally new RUS 
financial assistance programs, and the impact of the continuing changes 
in the electric and telecommunications industries on program structure 
and policies.
    The RUS electric program approved and OGC documented loans and 
guarantees totaling $2.6 billion to 226 borrowers. The electric loans 
included 15 loan guarantees totaling $1.7 billion for generation and 
transmission (G&T) facilities, a $700 million increase over the 
preceding year and the highest G&T loan level in more than 15 years. At 
the end of fiscal year 2001, there remained a backlog of some 20 G&T 
applications seeking $4.0 billion in funding. The need for legal 
services is expected to grow over the next few years as the demand for 
power supply financing continues to increase. Because of the pressing 
need for new generation, a number of borrowers have sought to arrange 
for bridge financing pending action by RUS. Consequently, OGC 
assistance helped develop new security arrangements for bridge lenders. 
The power supply projects typically involve very complex corporate, 
financial and security structures negotiated on a case-by-case basis. 
For example, RUS is now funding special purpose entities under project 
financing arrangements. The transactions are very different from the 
historical model used in the RUS program and, consequently, legal 
documentation must be custom-crafted to fit each project. The projects 
are further complicated as RUS and borrowers addressed problems 
associated with deregulation, unbundling, customer choice, and the 
growing uncertainty and risk in the power supply market. OGC has 
provided considerable legal services to RUS in several projects 
involving financially troubled borrowers, including the restructuring 
of debt and security arrangements for a power supply borrower in a 
manner designed to enhance recovery of RUS loans, improve operations of 
the borrower in the increasingly competitive industry, and facilitate 
the construction of new power supply facilities.
    OGC assisted the RUS electric program in the promulgation on a 
number of regulations. For example, OGC assisted in drafting 
substantial revisions to RUS regulations 7 CFR part 1755 which 
prescribes the forms of contracts to be used in RUS-financed 
construction. The revisions are designed to update and streamline RUS 
contract requirements and procedures. OGC also drafted a notice of 
funding availability (NOFA) and loan documents to implement RUS's new 
``T Rate'' program and assisted in implementing a new loan and grant 
program to high energy rural communities.
    The RUS telecommunications program and the Rural Telephone Bank 
(Bank) processed loans totaling $675million for telecommunications 
infrastructure. In addition, OGC assisted in development of a number of 
new RUS telecommunication programs. These included a $100 million 
broadband pilot loan program which required the drafting of a NOFA and 
the negotiation and drafting of loan documents on a case-by-case basis. 
OGC also drafted a NOFA and grant documents required to implement a new 
Weather Radio Grant program and provided legal services in connection 
with 87 grants and loans provided under the Distance Learning and 
Telemedicine Loan and Grant program. OGC assisted RUS and 
representatives of the Rural Telephone Bank on several legislative 
proposals to privatize the Bank and on issues associated with the 
privatization, the capital structure of the Bank and the rights of Bank 
stockholders.
                           natural resources
    In the natural resources area, the Natural Resources Division and 
OGC Field Offices have been involved in many significant undertakings 
concerning national forest management and natural resources 
conservation programs. We also assisted three of our client agencies, 
the Forest Service, Natural Resources Conservation Service, and 
Agricultural Research Service daily in support of their program 
missions.
    We have provided assistance to the Natural Resources Conservation 
Service (NRCS) in administering a number of conservation programs on 
private or other non-Federal farm, pasture and non-industrial forest 
lands, including the Wetland Conservation (Swampbuster) Program, 
Environmental Quality Incentives Program, Wetland Reserve Program, 
Farmland Protection Program, and the Emergency Watershed Protection 
Program.
    OGC also continued to provide legal counsel to NRCS in the 
enforcement of the highly erodible land and wetland conservation 
compliance provisions of the Food Security Act of 1985. OGC assists 
NRCS in determinations for enforcement and for granting statutorily-
authorized variances. OGC defended the agency in administrative appeals 
and lawsuits challenging the implementation of the conservation 
provision of the Food Security Act. Additionally, OGC continues to 
provide legal services in support of the Wetlands Reserve Program 
(WRP).
    OGC assisted NRCS and the Forest Service in working with the 
Environmental Protection Agency (EPA) regulations promulgated under the 
Clean Water Act for total maximum daily loads of pollutants. The 
increasing concern and focus on water quality matters, particularly 
regarding non-point sources of pollution, have lead to a continuing 
increase in the level of legal services to the Forest Service and the 
NRCS.
    In the forest management program area, OGC provided litigation 
support to the Department of Justice in collecting millions of dollars 
in damages owed the government by defaulting timber sale purchasers. 
OGC provided assistance to the Department of Justice in on-going 
settlement negotiations of more than twenty consolidated cases 
concerning the collection of tens of millions of dollars in damages 
plus interest owed the government pursuant to Orders issued in two of 
the representative consolidated cases. OGC also assisted in limiting 
contractual damages payable by the client agency for environmentally 
protective actions. OGC provided legal assistance on the defense of 
approximately 35 lawsuits challenging timber sale suspensions, 
modifications and cancellations and alleging the right to takings 
compensation pursuant to the Fifth Amendment to the U.S. Constitution. 
OGC also led a negotiation team to resolve litigation and other issues 
involving the Shelton Sustained Yield Unit with a goal of limiting 
liability while also resolving long-term issues related to the 
existence of the Unit. Additionally, OGC provided legal assistance in 
drafting contract provisions to limit liability for contractual 
damages, and developed and presented a 3-day course on Advance Contract 
Law to train Forest Service personnel on various aspects of contract 
law as it relates to their daily program activities.
    The timber sale program in Alaska continues to require significant 
legal services. Attorneys in both the Washington office and the Juneau 
field office are assisting with litigation claims of $1.5 billion 
arising from denial of contract claims on the Alaska Pulp Corporation 
(APC) 50-year timber sale contract on the Tongass National Forest. 
APC's aggressive litigation stance required the commitment of 
significant OGC time and resources to defend against its claim and the 
related massive discovery effort.
    OGC provided legal advice and assistance to the Forest Service 
regarding implementation of stewardship contract pilot projects aimed 
at harvesting timber while simultaneously advancing forest resource 
management objectives and presented information and materials to 
attorneys in the public sector during a training course sponsored by 
the American Law Institute of the American Bar Association. Under these 
stewardship contracts, timber is harvested and contractors provide 
services designed to achieve land management goals, including road and 
trail maintenance, watershed restoration and restoration of wildlife 
habitat. OGC also provided legal advice and assistance on the 
interpretation and implementation of a statute authorizing the 
collection and retention of fees associated with the harvest of special 
forest products.
    OGC advised on planning issues related to forest plans currently 
undergoing revision and overdue plan revisions. Compliance with and 
review of Sierra Nevada framework, including the Herger-Feinstein 
Quincy Library Groups Forest Resources Act, also requires continuing 
OGC advice. OGC also provided, and will continue to provide, 
substantial assistance to the Department and the Forest Service related 
to revision and implementation of the land and resource management 
planning and roadless area conservation, and administrative appeal 
regulations and various transportation and roads initiatives. In 
addition, providing preventive law advice regarding the Endangered 
Species Act (ESA), the National Environmental Policy Act (NEPA), and 
the National Forest Management Act (NFMA), as well as other laws, 
requires continued OGC attention. Of particular significance is 
assisting the Forest Service in dealing with new information and 
coordinating management decisions for wide-ranging fish and wildlife 
species, many of which are threatened or endangered. OGC continues to 
advise on interagency efforts, such as streamlining ESA and NEPA 
processes and the administrative appeal process, wildland fire 
management, and the application of the Migratory Bird Treaty Act. 
Approximately 120 cases are pending challenging Forest Service 
decisions on NEPA, NFMA and ESA grounds. The level of litigation is 
expected to continue or increase, especially with respect to fire 
prevention and restoration projects. OGC assistance is also provided 
for forest plan and project administrative appeals, hundreds of which 
are filed each year.
    In real property matters, OGC provides extensive legal assistance 
to the Forest Service, the Natural Resources Conservation Service and 
the Agricultural Research Service. In fiscal year 2001, over $150 
million was appropriated to USDA agencies for the acquisition of lands 
and interests in lands. These land transactions involve considerable 
legal involvement in contracting, title work and closing. Additionally, 
legal counsel is provided for the entire spectrum of real estate 
matters related to the National Forest System (NFS) and other USDA 
administered lands including title claims, trespass, appraisal, survey, 
special use authorizations and similar issues.
    OGC provides legal services regarding land title claims involving 
private parties, Indian tribes and pueblos, and State and local 
governments. These claims arise under treaties, Spanish land grants, 
and statutory grants by Congress. Several Indian land claims are in 
active settlement negotiations.
    Additionally, OGC has provided an increasing amount of advice to 
the Forest Service in its activities related to hydro power projects, 
in part due to the approximately 200 relicensing proceedings before the 
Federal Energy Regulatory Commission (FERC) occurring in the next 10 
years for projects located on NFS lands.
    In the minerals area, OGC provided significant legal advice 
concerning constitutionally required procedures which the Forest 
Service must adopt to suspend or terminate instruments regulating the 
mining of metals on the tens of millions of acres of land administered 
by that agency which are subject to the United States mining laws. OGC 
also provided extensive assistance to the Department of Justice in 
successfully defending the first challenge to controversial Forest 
Service regulations classifying mineral materials according to their 
use. OGC also significantly assisted the Department of Justice in 
defending several lawsuits alleging that statutes or administrative 
actions of the Forest Service constituted takings of rights held by 
holders of mining claims and mineral leases.
    In congressional matters, OGC provided extensive assistance in 
addressing numerous legal issues encountered during implementation of 
the Secure Rural Schools and Community Self-Determination Act of 2000, 
an act stabilizing payments to 40 States (and through them to 712 
counties) by decoupling them from forest receipts. OGC also provided 
substantial legal assistance in responding to Congressional document 
requests, including a request from Chairman Lieberman relating to the 
Department's controversial roadless area conservation rule. OGC 
assisted the Forest Service Legislative Affairs staff in preparing for, 
and following up to, numerous Congressional hearings.
    In the recreation area, OGC provided significant legal advice 
regarding the Forest Service's off-highway vehicle program, including 
the extent that the Forest Service may restrict the use of such 
vehicles based on environmental concerns by persons with disabilities 
consistent with civil rights law. OGC also continued to provide 
extensive assistance to the Department of Justice in successfully 
defending the Forest Service's noncommercial group use rule. 
Additionally, OGC analyzed the constitutionality of communications site 
land use fee waivers for Corporation for Public Broadcasting 
affiliates, but not for religious broadcasters; issues pertaining to 
Indian religious and cultural use of NFS lands; and methodologies for 
determining the fair market value of using NFS lands for outfitting and 
guiding. OGC also provided assistance to the Forest Service with 
ensuring that States and other non-Federal Governmental entities that 
hold lands and recreation special use permits insure and indemnify the 
United States under those permits.
    In the international forestry area, OGC provided assistance in 
reviewing two nonbinding wildfire arrangements, one between the U.S. 
Departments of Agriculture and the Interior, and the participating 
agencies of Australia, and the other between the U.S. Departments of 
Agriculture and the Interior and the National Rural Fire Authority of 
New Zealand. The arrangements outline the fire fighting assistance that 
each party to the arrangement may provide to another party to the 
arrangement.
    OGC provided substantial assistance to the Department on issues 
relating to compliance with applicable pollution control laws. In 
particular, OGC assisted the USDA Hazardous Materials Policy Council 
and the USDA Hazardous Materials Management Group in carrying out the 
hazardous materials management program. In addition, OGC provided 
assistance and advice to the Department and the Forest Service on the 
cleanup of hazardous materials sites on NFS lands and at other Agency 
facilities. OGC represented the Forest Service, along with the 
Department of Justice, in negotiations with non-Federal parties 
responsible for the cleanup of contamination on NFS lands. OGC also 
played a substantial role in advising the Department on compliance with 
applicable pollution control standards, including negotiating 
compliance agreements with the EPA and State environmental enforcement 
agencies. OGC also provided the Department with advice to protect the 
Department's interests regarding hazardous materials issues which arose 
in the context of land transfers and acquisitions. Finally, OGC 
provided significant legal services in connection with pollution 
control legislative proposals, including the Brownfields bill.
                          general law division
    The General Law Division (GLD) provides legal services concerning 
those areas of law that apply generally to all agencies of the Federal 
Government. These services include, but are not limited to, the 
determination of claims filed under the Federal Tort Claims Act, 
personnel and labor matters, procurement, grants, fiscal law issues, 
and reviewing each year hundreds of Freedom of Information Act and 
Privacy Act appeals, each involving up to hundreds of pages of 
documents, in order to insure that the various agencies of the 
Department do not release or withhold documents inconsistent with 
applicable law. In addition, GLD attorneys assist the Department of 
Justice with any litigation that arises in these and other areas, and 
represent the Department before the USDA Board of Contract Appeals and 
the Merit Systems Protection Board.
    Since the events of September 11, GLD has provided significant 
legal resources in connection with the development of new biosecurity 
policies and procedures for USDA biosafety level 3 (BSL 3) 
laboratories. In connection with the new biosecurity policies and 
procedures, GLD is providing advice regarding implementation of the 
policies and procedures by USDA agencies, as well as application of the 
policies and procedures to non-USDA staff. As the procedures are 
implemented, we anticipate that GLD attorneys will advise agencies 
regarding personnel suitability determinations made pursuant to the 
biosecurity policy. In addition, GLD anticipates that it will provide 
legal services relating to the development of new biosecurity policies 
and procedures for non-BSL 3 laboratories. As the Administration's 
efforts to assure homeland security accelerate, we anticipate that GLD 
will assist the Department in the implementation of the full range of 
USDA homeland security activities.
    Over the past year, client agencies with continuing frequency have 
requested legal advice on the subjects of computer security, the 
Freedom to E-File Act, and the Government Paperwork Elimination Act. 
Replacing the traditional paper infrastructure and doing business 
principally with electronic processes generates legal issues. GLD has 
been called upon to assist in each stage of the constantly evolving 
technology as clients fashion methods of gathering, proving, and 
storing data electronically and in reducing the legal risks in ``going 
paperless.'' In the post September 11, environment, more emphasis than 
ever is being placed on computer security, and we expect that increased 
legal resources will be devoted to that effort.
    GLD attorneys anticipate working with the Office of Procurement and 
Property Management on implementation of the Integrated Acquisition 
System, a Department-wide web-based e-Procurement solution. For non-
procurement programs, GLD continues to advise the Office of the Chief 
Financial Officer and the Cooperative State Research, Education, and 
Extension Service on e-Government issues as they arise. Such issues 
generally involve the binding nature of the use of electronic means in 
the solicitation, application, award, and Administration of Department 
financial assistance. GLD additionally advises on the authority and 
funding issues for Department-wide initiatives.
    Related to these security issues, GLD advises contracting personnel 
of USDA agencies on construction contracts. For example, GLD is working 
with contracting personnel on the contract to design the renovation of 
agricultural research facilities at Ames, Iowa. Other recent examples 
are GLD's representation of the Agricultural Research Service in a bid 
protest before the General Accounting Office, and serving as agency 
counsel in a bid protest before the Court of Federal Claims regarding 
award of a contract to replace the power plant at the Plum Island 
facility in New York. GLD anticipates a substantial increase in the 
need for legal advice and representation on construction contract 
matters as the Department upgrades its facilities. GLD attorneys also 
have noticed increases in the need for legal services relating to the 
use of performance-based statements of work for services contracts, and 
respecting administrative bid protests of awards of permits by the 
Forest Service. Other significant procurement related issues looming on 
the horizon that will require GLD legal support include additional 
contracting out of activities currently being performed in-house and 
the replacement of the agencies' legacy information technology systems.
    GLD continues to provide essential legal support for the Research, 
Education, and Economics agencies. The pending Farm Bill has and will 
require substantial legal support from GLD. GLD attorneys are working 
closely with the research agencies and various staff offices on this 
matter. GLD expects a surge in requests for legal opinions and 
assistance from research agencies and staff offices upon enactment of 
the new Farm Bill. GLD anticipates devoting significant resources to 
assist these agencies and offices in interpreting both new authorities 
and changes to existing authorities, and the many regulatory changes or 
new regulations necessary to implement them. GLD will also assist the 
research agencies with intellectual property issues attendant to 
bringing the benefits of scientific research to the public.
    GLD continues to provide legal services to the National Appeals 
Division (NAD) regarding procedural issues and general administrative 
matters. For example, GLD recently advised NAD on the use of 
videoconferencing for its hearings.
                          legislation division
    OGC continues to provide legislative drafting and related 
assistance to the Department and Congress on major legislative 
activities that involve the Department and its programs. Extensive 
assistance was provided to Departmental policy officials and 
Congressional staffs in drafting and analyzing various legislative 
proposals recently enacted by Congress, including legislation to 
provide emergency funding to farmers (Public Law 107-25) and 
appropriations provisions contained in the Agriculture, Rural 
Development, Food and Drug Administration and Related Agencies 
Appropriations Act, 2002 (Public Law 107-76). In addition, we continue 
to provide drafting assistance to agencies of the Department and 
Congressional staffs regarding the Farm Bill currently before Congress, 
including regarding H.R. 2646, the Farm Security Act of 2001, and S. 
1731, the Agriculture, Conservation, and Rural Enhancement Act of 2002. 
In addition, we are planning to participate in the preparation of 
legislation in support of the President's fiscal year 2003 budget 
request for the Department.
                          litigation division
    Litigation Division attorneys, in cooperation with attorneys from 
the DOJ and other divisions in OGC, presented USDA's position in 
appellate courts. These efforts led to a U.S. Supreme Court decision 
rejecting the argument that governmental authorities licensing 
expressive activity on public property, including the Forest Service, 
should have the burden of seeking judicial review and carry the burden 
of proof whenever denying a permit to engage in such activity. In 
another case, the Supreme Court declined to review a decision by the 
Court of Appeals for the District of Columbia Circuit, which upheld the 
Secretary's revocation of a license issued under the Perishable 
Agricultural Commodities Act after the licensee engaged in commercial 
bribery. The Supreme Court also decided that the Plant Variety 
Protection Act did not prevent a plant breeder from receiving a utility 
patent under the Patent Act for plants which reproduce by seed. The 
Fifth Circuit concluded that USDA veterinarians could not rely solely 
on palpation to support a finding that a horse is sore under the Horse 
Protection Act. The Ninth Circuit prevented the government from 
pursuing an enforcement action to collect over $1 million of 
assessments under the almond marketing order, on the grounds that an 
almond handler distributed its assets to its shareholders following the 
sale of the business. The Fifth Circuit affirmed a decision by the 
Secretary that the failure to install fencing around a facility holding 
tigers violated the Animal Welfare Act. Finally, the Supreme Court has 
agreed to hear a case that raises a question whether a breach of 
contract or a takings claim arise when a statute is enacted that alters 
a contractual right to prepay a government mortgage loan.
                              civil rights
    The Secretary wants to ensure that all of our customers and 
employees are treated with dignity and respect, and are afforded equal 
employment opportunity (EEO) and equal access to all USDA programs. 
Critical to the achievement of these goals was the creation, in 1998, 
of the Civil Rights Division (CRD) within OGC. Staffed with attorneys 
with specialized expertise in civil rights and EEO law, CRD is charged 
with providing legal services to the Secretary and all agencies of the 
Department on civil rights and EEO issues.
    CRD has maintained a stellar litigation record while also providing 
prompt and sound legal advice to our client agencies. However, as 
recognition of CRD's successful efforts spreads, the demands on the 
office increase. CRD's litigation duties currently include 6 program 
class actions and 16 employment class actions, each at different stages 
in the litigation process. The requested damages in these class actions 
could cost USDA upwards of $20.0 billion.
    CRD continues to play a critical role in the settlement of the 
Pigford/Brewington litigation. The settlement helped the Department to 
reinvigorate its efforts to become a Federal civil rights leader in the 
21st century. CRD has taken the leading role in ensuring that USDA 
meets its commitments under the Pigford/Brewington consent decree, 
particularly with respect to the production of relevant documents and 
necessary legal analyses related to each claim filed pursuant to the 
consent decree, as well as ensuring the Department's compliance with 
adjudicator and arbitrator decisions. CRD is working with FSA and the 
Department of Justice (DOJ) to develop timely and appropriate 
Government responses to claims filed by eligible farmers.
    Key to settlement of the Pigford/Brewington case was the 1998 
enactment of the waiver of various statutes of limitations, allowing 
farmers with long-standing discrimination complaints to have their 
claims finally heard. CRD and OGC field offices represent the 
Department in the nearly 100 cases in which a hearing has been 
requested. The number of requests for hearing is anticipated to 
increase to between 150 and 200. With respect to farmer discrimination 
claims not covered by the Pigford/Brewington settlement, CRD works with 
the USDA Office of Civil Rights (CR) to ensure that all claims receive 
expeditious and fair consideration, within the bounds set by applicable 
law.
    With respect to the ongoing implementation of the Pigford consent 
decree, the claimants may opt to seek relief under one of two available 
avenues: The Track A procedure provides for submission of a written 
claim to the adjudicator with pre-determined damages of $50,000 per 
prevailing claimant, whereas the Track B procedure allows for an 
evidentiary hearing before an arbitrator and the opportunity to receive 
actual damages. The total number of claims submitted exceed 72,000, and 
of those, over 21,000 claims have been found eligible for Track A 
consideration. We anticipate that a few hundred additional late-filed 
Track A claims will be accepted. CRD attorneys must review the agency 
response on each of these eligible Track A claims prior to submission 
to the adjudicator. In addition, nearly 180 claims have been found 
eligible for Track B arbitrations. CRD attorneys must assist DOJ 
attorneys in their representation of the agency, including assistance 
with document discovery, identification of similarly situated white 
farmers, and responses to interrogatories. Furthermore, CRD plays an 
important role in the Monitor review process. All claimants can 
petition the Monitor to reevaluate their claims, and CRD reviews 
Department responses to these petitions for legal sufficiency and 
consistency. We anticipate that most of the roughly 8,400 claimants 
whose claims were denied by the adjudicator may seek Monitor review. 
Many claimants who were granted relief by the adjudicator seek Monitor 
review of the scope of the relief granted. In addition, for cases in 
which the Government seeks Monitor review of an adjudicator decision, 
CRD will prepare the Government's petition for Monitor review. The 
Department has already filed over 600 petitions and will continue to do 
so when warranted.
    CRD also assists DOJ in representing USDA in the defense of five 
more recent class action program complaints currently pending in 
Federal district court. Four of these class actions are brought by 
farmers and raise allegations similar to those found in Pigford/
Brewington. Only one of these cases has been certified as a class 
action to date: in Keepseagle, the Federal district court has certified 
a class of Native American farmers and ranchers who allege 
discrimination in the Administration of farm programs and failure of 
the Department to adequately address complaints of discrimination. In 
the Fifth Amended Complaint filed in Keepseagle, 838 named plaintiffs 
joined in the suit. The class agents have represented to the Court that 
as many as 19,000 Native Americans may be members of the class.
    The remaining three class action cases filed by groups of farmers 
are: Love, filed on behalf of female farmers; Garcia, filed on behalf 
of Hispanic farmers; and Wise, filed on behalf of African-American and 
female family farmers. In Love, the court has dismissed all claims 
other than those brought under the Equal Credit Opportunity Act. 
Motions regarding the propriety of class certification are pending in 
both Love and Garcia. The Wise case, which overlaps with both Pigford/
Brewington and Love, has been stayed temporarily by the court. As these 
cases move forward, CRD's role in assisting DOJ with discovery and 
potential management of class issues will expand.
    The sixth program class action is the Chiang case, in which female 
residents of the Virgin Islands are alleging denial of access to rural 
housing credits and benefits on the basis of race, gender and national 
origin. USDA's motion to dismiss the case has been denied, and the 
parties have been directed to submit briefs on the issue of class 
certification. This case is anticipated to require a significant 
commitment of resources by CRD in the development of factual and legal 
issues relating to rural housing programs in the Virgin Islands over a 
nearly 20 year period.
    CRD also represents USDA in the defense of fourteen class action 
employment complaints pending before the Equal Employment Opportunity 
Commission (EEOC). Three of these complaints have been certified by 
EEOC to proceed as class actions. One of the certified classes 
encompasses employees throughout the Department. In addition, CRD is 
representing USDA in the defense of two class action employment 
complaints currently on appeal before EEOC's Office of Federal 
Operations. In one of the complaints on appeal, certification of the 
class was denied; in the second, the EEOC entered a finding of no 
class-wide discrimination following a hearing on the merits. In recent 
years, CRD has settled two employment class action complaints under 
which individual complainants are currently pursuing their claims. 
Another class action is near settlement and thus is anticipated to 
require future monitoring and implementation efforts by CRD.
    Recent years have seen a drastic increase in the demand for CRD's 
litigation services in formal individual complaints filed by USDA 
employees with the EEOC. For example, 796 formal complaints were filed 
with USDA during fiscal year 2001, with 578 complaints currently 
pending for hearing before the EEOC Administrative Judge. Approximately 
1900 active EEO cases are pending throughout USDA. CRD continues to 
carry a full workload of complex and politically sensitive individual 
EEO cases involving either issues of first impression or disputes over 
positions at the highest levels within USDA. CRD litigates these cases 
on behalf of the Department before the EEOC and occasionally, the Merit 
Systems Protection Board (MSPB). These individual cases require 
constant attention, travel across the country, and interaction with 
senior management officials.
    In addition to its primary litigation responsibilities, CRD 
continues to assist DOJ in the litigation of numerous individual civil 
rights cases in both the employment and program areas pending in 
Federal district court. The Assistant U.S. Attorneys (AUSAs) and/or DOJ 
attorneys who serve as lead counsel request an ever-increasing amount 
of litigation support from CRD, including draft answers, full 
litigation reports, dispositive motions, discovery responses, witness 
preparation, and deposition and trial participation.
    To address other employment issues, CRD will intensify its efforts 
to provide training and technical assistance to OGC field attorneys and 
to Department officials, civil rights directors, and employee relations 
specialists. The goal is to identify and address EEO obstacles before 
they elevate into litigation. Where issues are identified, CRD will 
bring the concerns to the attention of appropriate Department 
officials, with legal analysis and recommendations for resolution.
                    fiscal year 2003 budget request
    For fiscal year 2003, the budget proposes a total of $39,841,000 
for OGC salaries and expenses, an increase of $7,214,00 from the amount 
enacted in fiscal year 2002, excluding supplementals. Within this 
fiscal year 2003 request, there is a total of $1,693,000 to cover the 
rental costs previously paid from a central account within USDA in 
accordance with the Administration's proposal to budget for the full 
costs of the programs and $2,308,000 for Retirement/Health Pension 
Benefits. The Explanatory Notes provided to the Committee provide 
information on the comparable levels for these items in fiscal year 
2001 and 2002.
    OGC is also requesting $3,213,000 over the adjusted base for fiscal 
year 2002, consisting of $1,002,000 for pay costs, $722,000 to maintain 
current staffing levels, $811,000 for additional legal staff, $426,000 
for office automation, $246,000 for Employee Pension and Annuitant 
Health Benefits, and $6,000 for the Federal Employment Compensation Act 
program.
                                closing
    That concludes my statement. We very much appreciate the support 
this Subcommittee has given us in the past. Thank You.
                                 ______
                                 

      Prepared Statement of Lou Gallegos, Assistant Secretary for 
              Administration, Departmental Administration

    Mr. Chairman and members of the Subcommittee, I want to thank you 
for the opportunity to submit this statement supporting the President's 
budget proposal for fiscal year 2003 for USDA Departmental 
Administration.
    As you are aware, Departmental Administration (DA) takes in a wide 
range of activities and responsibilities. Our mission is to provide 
leadership in administrative areas and to provide those services that 
make the programs of the Department work better. Today, I want to 
report to you on some of our activities over the last year and 
highlight the budget request for next year.
    The budget request reflects the tragic events of last September. We 
are requesting additional resources to ensure the safety and security 
of USDA facilities and programs. The Budget also shows our strong 
commitment to improving the civil rights record of our programs and 
employment.
                              civil rights
    The Office of Civil Rights (CR), in accordance with the Secretary 
of Agriculture's civil rights policy statement, provides overall 
leadership and direction to USDA agencies to ensure enforcement and 
compliance with civil rights laws, rules and regulations in employment 
and program delivery. In October 2000, CR completed a comprehensive 
analysis of CR systems, processes, procedures, staffing needs, level of 
knowledge, skills and abilities, automation needs, and administrative 
support, called the Long Term Improvement Plan (LTIP). We are currently 
working toward the full implementation of the LTIP, which will enable 
CR to process complaints within the required statutory timeframe.
    CR has made major strides in implementing process and 
accountability improvements. All significant proposed regulations are 
reviewed for civil rights impact and compliance with applicable 
statutes and regulations. Last year, 100,000 USDA employees received 
civil rights training, and senior managers and supervisors were 
required to attend a 1-day diversity training seminar to enhance their 
ability to understand diversity, to better manage diversity, and to 
identify the importance of diversity in making USDA a high performance 
agency.
    The average processing time for program civil rights complaints was 
reduced by 14 percent in fiscal year 2001. Although processing time for 
employment complaints increased by 7 percent during the same period, 
this was due to the fact that many older cases were completed during 
the year. Reports of investigations issued in fiscal year 2001 more 
than doubled over the fiscal year 2000 level. Improved case tracking 
systems are being put in place and management controls have been 
tightened throughout the process.
    The fiscal year 2003 Budget requests an additional $2 million which 
will allow CR to increase its employment by 17 staff years. The 
additional staff will enable CR to take significant steps toward its 
goal of processing civil rights complaints within the required 
statutory timeframe. It will also permit the Department to address some 
of the conditions which cause complaints and to address the 
deficiencies noted in the audit reports of the USDA Inspector General.
                                outreach
    Last year, 47 proposals competed for The Outreach for Socially 
Disadvantaged Farmers grants (``2501'' Program) that provide training 
and technical assistance to underserved groups of farmers and ranchers. 
There were 28 successful grantees that collectively received almost $6 
million in funding, of which $3 million was provided by the Fund for 
Rural America. For fiscal year 2003, The President's Budget continues 
the fiscal year 2002 appropriated level of $3.2 million for the grant 
program.
    During fiscal year 2002, the Office of Outreach's priority is to 
identify a collective method for USDA Agencies to measure and report 
minority participation in USDA programs. This year our office has 
developed a database for capturing information electronically that is 
submitted with the grantee's quarterly report. In 1 year, we have gone 
from paper reporting to collecting information by disk or by e-mail. At 
the end of fiscal year 2002, our office will be able to collect and 
analyze data for reporting and for program evaluation. Outreach plans 
and census data will also be used to identify and remove barriers so 
that underserved groups will be equally represented in USDA programs.
              small and disadvantaged business utilization
    During fiscal year 2001, the Office of Small and Disadvantaged 
Business Utilization (OSDBU), in concert with Southwest Texas State 
University, completed a comprehensive survey of Hispanic small 
businesses on a nationwide basis. The survey resulted in the 
identification of numerous barriers that hinder Hispanic small 
businesses from successfully participating in USDA's contracting 
activities. USDA's OSDBU will use this data to help direct more 
effective USDA-sponsored technical assistance to this under-represented 
group.
    Also during fiscal year 2001, OSDBU developed and implemented a 
Web-based registration process for its Vendor Outreach Program. The 
Program provides the small business community with the opportunity to 
meet with USDA agency small business coordinators and contracting 
officials to discuss their capabilities and learn of potential 
procurement opportunities. The automation of the registration process 
has increased OSDBU's effectiveness in communicating with small 
business and USDA participants. It has also reduced the overall cost of 
managing the program through more reliable and accurate data and 
increased program efficiency. During fiscal year 2002, OSDBU began the 
development of a Web-based electronic procurement forecast system which 
is designed to reduce the labor necessary to collect and assemble 
USDA's annual procurement forecast. Once implemented, the system will 
result in a decrease in errors, making data more reliable and useful, 
and will provide USDA customers with quick and easy electronic access 
to the data.
    During fiscal year 2002, OSDBU will conduct two Outreach/Technical 
Assistance Conferences. The first such conference will provide policies 
and procedures for Federally recognized American Indian tribes to 
participate in OSDBU's Bringing Rural America Venture Opportunities 
(BRAVO) program. BRAVO is a business development program designed to 
assist Tribal entities (Indian Nations) in establishing small start-up 
companies. The initiative will result in increased use of American 
Indian and Alaskan Native-owned business by USDA and increased 
employment on Indian lands.
    The second conference targets women-owned small businesses located 
in rural America. The conference will provide technical assistance on 
how to successfully do business with USDA and other Federal agencies.
                     crisis planning and management
    In December 2000, the Office of Crisis Planning and Management 
(OCPM) was created to coordinate USDA planning and response to 
disasters and emergencies. OCPM supports USDA's Homeland Security 
Council by coordinating emergency activities among USDA agencies and 
other Federal entities in response to potential crises and emergencies, 
such as a domestic outbreak of a foreign animal disease, natural 
disaster, or terrorist attack, through such mechanisms as the Federal 
Response Plan.
    OCPM successfully faced several recent challenges, including 
working to ensure USDA and other Federal agencies were well coordinated 
in responding to a threatened outbreak of Foot and Mouth Disease and in 
supporting the Department's response to the events of September 11, 
2001. DA continues to have lead responsibility for the development and 
maintenance of the USDA Continuity of Operations (COOP) Plan. On 
September 11, 2001, USDA effectively implemented its Headquarters COOP 
plan for the Office of Secretary and was operational at its alternate 
site within hours of the attack. In fiscal year 2002, the Headquarters 
COOP plan is being further refined, and lessons learned on September 
11, 2001 are being addressed.
    In fiscal year 2003, increased funding requested for OCPM is needed 
to expand COOP planning to other critical USDA facilities such as 
critical laboratories and large centers of employment. An effective 
COOP plan is also an essential element of USDA's support to homeland 
security and DA is committed to ensuring that the USDA COOP plan allows 
us to continue delivering critical services to the Department's 
customers during times of emergencies.
    OCPM also oversees the Department's personnel security program. 
Under this program employees are determined suitable for public trust 
positions and worthy of national security clearances. Last year there 
was a backlog of about 560 cases. We stepped up clearance activities 
this year and the backlog was successfully eliminated using a taskforce 
approach. The war on terrorism and USDA's participation in Homeland 
Security activities, however, has reclassified a large number of 
positions that now require background investigations. Additional funds 
requested for fiscal year 2003 will be utilized to complete staffing 
the personnel security program and to begin modernizing the program and 
integrating e-government processes.
                           physical security
    The need for increased physical security for Federal Government 
facilities nationwide and for the protection of employees and critical 
assets has been a concern since the Oklahoma City bombing, and more 
recently with the New York city and Pentagon acts of terrorism. USDA 
conducts its programs in approximately 25,000 buildings at more than 
7,000 sites around the world. DA, through the Office of Procurement and 
Property Management (OPPM), provides overall leadership and direction 
to USDA agencies in the management and coordination of security for 
these facilities. Major activities include policy development, 
education and training, and security assessments of facilities.
    Since September 2001, OPPM has conducted physical security 
assessments of some 40 key USDA facilities. These security assessments 
cover many facets of the security spectrum, including chemical, 
biological and radiological; information technology; food safety, 
animal, and plant research; and aviation assets. These security 
assessments utilize a risk management approach to analyze threats, 
vulnerabilities, and the criticality of assets to better support key 
decisions linking resources with prioritized efforts for results. The 
results will be used to help guide future programs and responses to 
combat terrorism and other threats, and to develop appropriate 
standards and methodology for conducting facility/cyber/personnel 
security assessments, identifying deficiencies, recommending 
countermeasures, and following up on actions taken to mitigate physical 
security concerns.
    OPPM was also focused on the safety and protection of facilities, 
assets and employees during the 2002 Winter Olympics. USDA has 
approximately 56 facilities located in and around the venues of Salt 
Lake City where the Olympics were being held, 17 of which were 
identified as mission-critical facilities involving research activities 
and storage of weapons and explosives. OPPM was the lead in operating 
an emergency command center throughout the duration of the games to 
oversee and ensure the safety and protection of these facilities, 
assets, and employees.
                            use of biofuels
    The Department's support and promotion of biofuels in fiscal year 
2001 resulted in an estimated 112,000 gallons of biodiesel fuel used in 
USDA vehicles and equipment. The Agricultural Research Service's Henry 
A. Wallace Center in Beltsville, Maryland has taken the lead in 
demonstrating the benefits of biodiesel use, including using a 
biodiesel heating oil blend to heat over a dozen buildings at the 
Center.
    On August 8, 2001, Secretary Veneman issued Secretary's Memorandum 
5400-8, establishing a statement of preference for use of ethanol and 
biodiesel fuels in USDA's motor vehicles and ordering actions to carry 
out these policy preferences. USDA was recognized with a White House 
``Closing the Circle'' award in June 2001 for significant contributions 
to the environment through the use and promotion of biodiesel fuel.
                federal excess personal property program
    Section 923 of the Federal Agriculture Improvement and Reform Act 
(FAIR) of 1996, authorized the Secretary of Agriculture to acquire and 
transfer excess Federal personal property to any of the 1994 Tribal 
Institutions, Hispanic-Serving Institutions, and the 1890 colleges and 
universities, including Tuskegee University. In fiscal year 2001, USDA 
transferred $3.1 million worth of personal property under the program, 
bringing the total to greater than $10.6 million since the program 
began in fiscal year 1999. This program provides much needed property 
and equipment to institutions that otherwise would not be able to 
acquire property due to limited funds and will improve the 
institutions' capability in the areas of research, educational, and 
technical and scientific activities.
                           procurement policy
    During fiscal year 2001, USDA completed work to make FedBizOpps 
available for use throughout the Department. FedBizOpps is a system for 
electronically advertising our contracting opportunities and furnishing 
copies of solicitations via the Internet. It is part of the President's 
e-Government Management Agenda.
    With regard to the increased use of Performance Based Service 
Contracting (PBSC), another Presidential Management Agenda item, USDA 
surpassed the Administration's fiscal year 2001 goal of 10 percent of 
eligible contracts applying performance-based methods. In fiscal year 
2002, we are stepping up our monitoring and leadership to assist USDA 
agencies in meeting the 20 percent goal. This includes placing actual 
PBSC contracts on the Internet as examples to assist USDA agencies in 
achieving this challenge. In fiscal year 2003, the planned goal is 30 
percent and we will continue our performance monitoring, scrutinize 
advance procurement plans, and expand our website information, 
including training aids and example PBSC contracts.
                       human resources management
    The Office of Human Resources Management (OHRM) is providing 
leadership to the Department on the human capital piece of the 
President's Management Agenda. OHRM prepared a 5-year restructuring 
plan focused on improving accountability within the Forest Service and 
on improving efficiency within the Service Center agencies. OHRM is 
also supporting the President's Management Initiative dealing with e-
Government, specifically the interagency projects on HR Enterprise, e-
recruiting and e-training.
    OHRM completed a workforce analysis and is working on an analysis 
of critical skill gaps. The Office is participating with the Office of 
Personnel Management and other Federal Departments in a job fair for 
information technology specialists. OHRM is preparing to launch three 
new developmental programs: a USDA-wide mentoring program, a new 
leadership development program for executives and managers, and a new 
Career Intern Program for scientific, administrative and professional 
occupations.
    OHRM is making significant changes to the USDA's policies and 
practices for managing the Senior Executive Service (SES). In fiscal 
year 2002, executive performance plans will be better integrated with 
the Department's Annual Performance Plan. Performance standards will be 
more measurable and reflect a balanced scorecard: mission results, 
business results, customer service satisfaction, employee satisfaction 
and civil rights. OHRM is developing common performance standards to 
hold all executives accountable for the President's Management 
Initiatives and civil rights. A standing Executive Resources Board was 
formed to provide peer oversight of the SES.
    OHRM continues to support the recruitment and retention of a 
diverse workforce. Employee advisory councils were established to 
provide the Secretary with sound advice about eliminating under-
representation of minorities and women. USDA has significantly 
increased its hiring rates for Hispanics and is hiring larger numbers 
of persons with disabilities. In 2000, UDA made a commitment to hire 
9,000 persons with disabilities by 2005.
    OHRM has led a corporate approach to planning and investing in IT 
systems in the human resources management area. USDA now has a standard 
for software that classifies positions and has piloted three possible 
software solutions to speed up the hiring process. USDA also has made a 
good start at e-training with over 17,000 licenses with commercial 
providers. This year, OHRM will lead the mission areas in developing a 
business case for IT solutions for transaction processing and employee 
self-service.
               conflict prevention and resolution ohrm's
    Conflict Prevention and Resolution Center leads and coordinates the 
Department's conflict prevention and resolution activities, focusing on 
the use of Alternative Dispute Resolution (ADR) to resolve conflicts in 
the workplace and between USDA and its customers. In fiscal year 2001, 
two Departmental directives on ADR were issued, and ``Dealing with 
Workplace Conflicts and Concerns: A Guide for Employees'' was published 
for all USDA employees. USDA continued to resolve over 80 percent of 
workplace disputes when ADR was used in the earliest stages of 
conflict, before the filing of a grievance or EEO complaint. Over 5,000 
USDA employees received training in conflict resolution. Finally, the 
Certified Agricultural Mediation Program provided service in over 4,000 
disputes involving producers and other USDA customers. Efforts in 
fiscal year 2002 will be focused on increased use of ADR to resolve EEO 
complaints, and on educating agencies on the potential for ADR usage 
and other collaborative processes in a wide range of programmatic 
disputes.
                       government ethics program
    The Office of Ethics (OE) was formed in 1998 to provide Government 
ethics leadership and services within the Department. At the request of 
other agencies, OE has opened a Web site which provides access to 
training and financial disclosure forms to USDA employees and to 
employees from several other Departments and Government organizations. 
This open Internet access to training and other materials is a major 
step forward toward e-Government.
                  agriculture buildings and facilities
    The fiscal year 2002 Budget requests $71 million for Agriculture 
Buildings and Facilities for the operations, maintenance and repair of 
current facilities including $34 million for the continuation of the 
project to renovate the 70-year old Agricultural South Building. The 
building is 10 years older than the Pentagon and is in dire need of 
repair and renovation to make it safe, efficient, and functional. We 
are now constructing Phase 2 of the 8-phase renovation project approved 
by Congress in 1995. Phase 3 of the renovation will begin this fall. 
The required renovation work includes fire protection systems, 
abatement of hazardous materials, and replacement of over-aged and 
inefficient utility systems.
    The request also contains $851,000 for major repairs scheduled for 
the other buildings of the USDA Headquarters Complex including the 
Sidney R. Yates Building, the Jamie L. Whitten Building and the Cotton 
Annex.
    Formerly, this appropriation included the central rent account 
which provided the rental amounts to be transferred to the General 
Services Administration for space occupied nationwide by USDA agencies 
except the Forest Service. The fiscal year 2003 Budget proposes to fund 
those rental payments and related costs in the budget of the agencies 
occupying the space. This will allow managers direct control over 
rental space allocations and better reflect true program cost.
                     hazardous materials management
    The Hazardous Materials Management Program is needed to meet USDA 
compliance responsibilities under the Comprehensive Environmental 
Response, Compensation and Liability Act (CERCLA), the Resource 
Conservation and Recovery Act (RCRA), and related State and local laws 
and regulations, and to meet the USDA goal of completing all 
environmental cleanup actions by the year 2045. Activities supported by 
this program contribute directly to USDA's strategic goal of 
maintaining and enhancing the Nation's natural resources and 
environment.
    We must clean up and restore lands and facilities currently and 
formerly under USDA jurisdiction, custody, and control and ensure 
responsible management in the use, storage, and disposal of hazardous 
materials and waste. Non-compliance may result in the Department being 
subject to environmental enforcement actions by Federal and State 
regulators, lawsuits by private parties, and citizen suits at any of 
these sites. Under applicable Federal and State pollution control laws, 
fines and penalties could exceed $25,000 per day and lawsuits could 
cost, in some cases, more than the funding needed to perform a timely 
cleanup action.
    USDA cleaned up 47 sites in fiscal year 2001 and plans to cleanup 
17 this year and another 48 sites in fiscal year 2003. Since 1987, over 
2,250 sites have been cleaned up. Many of the smaller, simpler, and 
less costly priority sites have already been cleaned up. However, the 
cleanup of environmentally contaminated sites may now be more 
challenging because many of the over 2,000 sites remaining to be 
completed are more costly and more complicated. Cleanup costs at some 
sites may exceed $100 million, and USDA's current cost estimate to 
complete all work exceeds $4 billion.
                          direct appropriation
    For Departmental Administration, the Budget requests $48.5 million. 
This amount would provide program increases of $2 million for civil 
rights enforcement, $2.2 million for security and homeland defense and 
$200 thousand in support of the President's management objectives for 
Government procurement.
                               conclusion
    Mr. Chairman and members of the Subcommittee, this concludes my 
statement on the Departmental Administration budget for fiscal year 
2003. I want to reiterate our appreciation for the strong support which 
this Subcommittee has given us.
                                 ______
                                 

    Prepared Statement of Kevin Herglotz, Deputy Chief of Staff and 
          Director of Communications, Office of Communications

    Mr. Chairman and members of the Subcommittee, I am pleased to 
discuss the fiscal year fiscal year 2003 budget request for the 
Department of Agriculture's Office of Communications.
    When Congress wrote the law establishing the U.S. Department of 
Agriculture in 1862, it said the department's ``. . . general designs 
and duties shall be to acquire and to diffuse among the people of the 
United States useful information on subjects connected with agriculture 
in the most general and comprehensive sense of the word. The Office of 
Communications coordinates the implementation of that original mandate.
    The Office of Communications coordinates communications with the 
public about USDA's programs, functions, and initiatives, providing 
information to the customers and constituency groups who depend on the 
Department's services for their well-being. It also coordinates the 
communications activities of USDA's seven major mission areas and 
provides leadership for communications within the Department to USDA's 
employees.
    The Office of Communications is adopting new technologies to meet 
the increased demands for information. Using the Internet's world wide 
web, radio, television and teleconference facilities, we are able to 
ensure that the millions of Americans whose lives are affected by 
USDA's programs receive the latest and most complete information. The 
Office of Communications' 5-year strategic goal is to support the 
Department in creating a full awareness among the American public about 
USDA's major initiatives and services. This is essential to providing 
effective customer services and efficient program delivery and should 
result in more citizensBespecially those in underserved communities and 
geographic areasBavailing themselves to helpful USDA services and 
information.
    The Office of Communications will continue to take an active part 
in policy and program management discussions by coordinating the public 
communication of USDA initiatives. We will continue to provide 
centralized operations for the production, review, and distribution of 
USDA messages to its customers and the general public. We will also 
monitor and evaluate the results of these communications. Staff will be 
instructed in using the most effective and efficient communications 
technology, methods, and standards in carrying out communications 
plans.
    Also, we are focusing on improved communications with USDA 
employees, especially those away from headquarters. This will enhance 
their understanding of USDA's general goals and policy priorities, 
programs and services, and cross-cutting initiatives.
    Our office will work hard to meet our performance goals and 
objectives. We will work to communicate updated USDA regulations and 
guidelines, conduct regular training sessions for USDA communications 
staff about using communication technologies and processes to enhance 
public service, foster accountability for communications management 
performance throughout USDA, and continue to work to create a more 
efficient, effective and centralized Office of Communications. 
Increasing availability of USDA information and products to underserved 
communities and geographic areas through USDA's outreach efforts is 
integral to our performance efforts. The Office of Communications will 
also provide equal opportunity for employment and promote an atmosphere 
that values individual differences.
                    fiscal year 2003 budget request
    The Office of Communications is requesting a budget of $10,153,000. 
This is a net increase of $727,0000 ($9,426,000 available in 2002). If 
you exclude the Federal Employee Pension and Health Benefits, our 
request is $9,637,000, a net increase of $743,000. The net increase 
includes $61,000 for annualization of the fiscal year 2002 pay raise, 
$185,000 for the anticipated fiscal year 2003 pay raise, and $497,000 
for Web Page Redesign and Outreach benefits. The Explanatory Notes 
provided to the Committee presents information on the comparable levels 
for these items in fiscal year 2001 and 2002.
    Our central task is to ensure the development of communications 
strategies which are vital to the overall formation, awareness and 
acceptance of USDA programs and policies. As more than 90 percent of 
the Office of Communications' obligations are for salaries and 
benefits, this increase is vital to support and maintain staffing 
levels for current and projected demands for our products and services. 
Since our current budget leaves little flexibility for absorbing 
increased costs, the Office of Communications cannot absorb these 
additional salary costs without placing severe constraints on daily 
operations. This could result in backlogs and delays in communications 
items such as printing, graphic design and photography used in support 
of education or promotion of American agriculture.
    This concludes my statement, Mr. Chairman. I will be pleased to 
respond to any questions.
                                 ______
                                 

Prepared Statement of Edward McPherson, Chief Financial Officer, Office 
                     of the Chief Financial Officer

    Mr. Chairman and members of the Subcommittee, I am pleased to 
present the fiscal year 2003 budget request for the Office of the Chief 
Financial Officer (OCFO) and the Department's Working Capital Fund 
(WCF) of the United States Department of Agriculture (USDA).
    My remarks today address:
  --The results on which we are currently focused;
  --Results we have achieved recently;
  --Our fiscal year 2003 Budget Request;
  --The Department of Agriculture's Working Capital Fund.
    The Chief Financial Officer of the United States Department of 
Agriculture (USDA) is responsible for the financial leadership of an 
enterprise which, were it in the private sector, would be the sixth 
largest company in the United States with $76 billion in annual 
spending, 131,385 employees and $127 billion in assets.
    These responsibilities are fulfilled by a headquarters staff in 
Washington, D.C. with accounting operations support provided by USDA's 
National Finance Center in New Orleans, Louisiana.
    The National Finance Center also operates an item processing and 
record-keeping business that executes payroll for about one-third of 
all Federal employees and provides administrative data for more than 
120 government entities, including the Thrift Savings Plan (TSP) with 
2.5 million participants who own $92 billion in investment assets.
               results on which we are currently focused
    We are currently focused on accomplishing the following five 
results in fiscal year 2002 as context for you in considering our 
fiscal year 2003 budget request:
  --Enhancing USDA's system of internal control with a goal of a clean 
        audit opinion for the United States Department of Agriculture's 
        fiscal year 2002 financial statements after 7 years of 
        disclaimed opinions;
  --Completing the successful implementation of a standard accounting 
        system at USDA and improving related corporate administrative 
        systems;
  --Focusing the effectiveness of the National Finance Center (NFC) in 
        satisfying USDA and non-USDA customers as well as the employees 
        and other stakeholders of NFC;
  --Effectively conducting competitive sourcing responsibilities for 
        USDA under the Federal Activities Inventory Reform (FAIR) Act;
  --Advancing the integration of performance measurement with the 
        annual budget process in concert with USDA's Office of Budget 
        and Program Analysis.
                       results achieved recently
    Since taking these responsibilities on October 5, 2001, am pleased 
to report the following important results that have recently been 
achieved:
    Rural Development (RD) received an unqualified (``clean'') audit 
report on their fiscal year 2001 financial statements as a result of 
our resolving long-standing deficiencies in present value accounting 
(Credit Reform) used to establish program costs on Rural Development's 
$70 billion loan portfolio. In addition, the Commodity Credit 
Corporation, with $14 billion in loans, received an unqualified opinion 
on its Balance Sheet, Statement of Net Position and Statement of Net 
Cost for the first time in several years. (Commodity Credit Corporation 
received a disclaimer on the Statement of Budgetary Services and the 
Statement of Financing due to issues in recording various versions of 
its budgets.)
    Therefore, four of the five USDA agencies that had stand-alone 
audits for fiscal year 2001 will have largely clean opinions--a 
significant breakthrough. The last remaining agency, the Forest 
Service, is a primary focus for corrective actions already underway. A 
sixth agency, Food and Nutrition Services, had a waiver from a stand-
alone audit in fiscal year 2001 because they consistently have had a 
clean opinion.
    USDA's controllership competency has been enhanced by accessing 
additional talent, reengineering accounting processes, integrating 
information technology initiatives, and clarifying individual and 
collective accountability for performance. For example:
  --A new Associate Chief Financial Officer, four experienced 
        controllers and several new agency chief financial officers are 
        now in place at USDA;
  --Accounting operational processes have been improved in the Forest 
        Service, other agencies, and the National Finance Center;
  --Since October 2001, 15 USDA agencies or mission areas comprising 
        approximately 98 percent of USDA employees are served by our 
        standard accounting system;
  --Specific financial accountability performance standards are now 
        included in the annual performance plan of each agency's chief 
        financial officer.
    USDA's decision-making and Administration has been improved in its 
Working Capital Fund through specific business cases justifying the 
spending of this money and improved cash management.
    Our approach to competitive sourcing is now focused on creating 
sound choices to advance the performance of USDA as an enterprise, as 
well as that of individual mission areas and agencies.
    USDA is re-examining our lending function to assure effective 
credit approval, loan portfolio management, information technology use, 
and debt collection.
    Recent achievements at the National Finance Center include:
  --Implementing two new Thrift Savings Plan investment funds, the 
        Small Capitalization Stock Index Investment (S) Fund and the 
        International Stock Index Investment (I) Fund;
  --Establishing the Salary Offset Agency Process to notify payroll 
        offices of past due debts by individuals they currently 
        payroll. NFC was the first payroll office within the Federal 
        Government to provide the Department of Treasury with this 
        automated interface;
  --Opening the Thrift Savings Plan to military service people.
                    fiscal year 2003 budget request
    With this context, let's turn to our 2003 Budget Request. Our 
fiscal year 2003 operating budget request is for $8,399,000, an 
increase of $2,747,000 or 48 percent over the adjusted fiscal year 2002 
level of $5,652,000. Within this budget request there is a total of 
$254,000 to cover the cost of items previously paid from central 
accounts within USDA or on a government-wide basis, including Federal 
Employees Compensation Act and Civil Service retirement and retiree 
health benefits. The Explanatory Notes provided to the Committee 
contain information on the comparable levels for these items in fiscal 
year 2001 and fiscal year 2002. Approximately 90 percent of the Office 
of the Chief Financial Officer's current obligations are for the 
salaries and benefits of the OCFO staff. The requested pay cost 
increase of $147,000 (2.6 percent or $110,000 for the fiscal year 2003 
increase plus $37,000 for annualization of the fiscal year 2002 
increase) and $46,000 or 1 percent for salary adjustments are 
fundamental to maintaining the current staff level for leadership and 
oversight of financial management at USDA.
    The remaining increase of $2.3 million and 17 staff years is 
essential to executing our primary accountability of providing sound 
financial management and accounting operational processes at USDA. 
Specifically, I am seeking increases for the following purposes:
  --An increase of $885,000 and 7 staff years for Financial Statements, 
        Accountability Report and Consolidated Audit Oversight. OCFO is 
        not properly staffed to lead the preparation of financial 
        statements and support to the Inspector General's financial 
        auditing processes. The requested resources are vital for the 
        USDA to comply with basic financial reporting and the increased 
        reporting requirements under the Reports Consolidation Act of 
        2000, which mandates that agencies must produce a single, 
        consolidated accountability report. This accountability report 
        includes the annual financial statements, agencies' assurances 
        on management controls and the annual performance report 
        required by the Government Performance and Results Act (GPRA). 
        Further, Office of Management and Budget Bulletin No. 97-01, 
        Form and Content of Agency Financial Statements, has mandated 
        that agencies submit interim unaudited financial statements on 
        a quarterly basis in fiscal year 2003. In addition, beginning 
        with the quarter ending March 31, 2004, USDA is required to 
        submit to OMB its quarterly unaudited financial statements 21 
        days after the end of each quarter.
  --An increase of $410,000 and 3 staff years for GPRA and Performance 
        Management. Current staffing is insufficient to handle the GPRA 
        planning and review activities for the 26 USDA agencies and to 
        meet the increasing demand for performance reporting. To 
        address increased workload and provide oversight, a staffing 
        increase of three full-time equivalent staff and contract 
        support costs of $100,000 are required for the development and 
        production of the three Department-wide GPRA plans and reports.
  --An increase of $542,000 and 3 staff years for Cost Accounting and 
        competitive sourcing responsibilities associated with the FAIR 
        Act. Fiscal year 1998 through fiscal year 2000 USDA 
        Consolidated Financial Statement Audit Reports have included 
        findings on USDA noncompliance with laws and regulations 
        regarding cost accounting and user fee'reviews for goods and 
        services. Without essential staff, it is not possible to 
        provide the necessary policy and guidance to individual 
        agencies and to perform the necessary follow-up work to ensure 
        compliance with policy. Audit findings have criticized previous 
        USDA CFO's insufficient efforts to provide guidance and 
        monitoring activities related to user fee reviews and cost 
        accounting methodologies. This request would provide two full-
        time equivalent staff to coordinate and oversee the agency's 
        cost accounting and user fee activities review. We also request 
        $250,000 for contract support to develop appropriate cost 
        accounting methodologies, document processes, review user fees, 
        and construct performance linkages to strategic planning goals 
        and objectives.
  --This initiative also requests one additional full-time equivalent 
        staff to support the Department-wide implementation of the 
        Federal Activities Inventory Reform (FAIR) Act of 1998 and 
        related A-76 public/private sector cost comparisons and 
        competition. The Department is required annually to review the 
        workforce and inventory all commercial and inherently 
        governmental jobs and provide reports to the Office of 
        Management and Budget. Increasing public-private competition 
        will require additional oversight, guidance and policy 
        development at the Departmental level.
  --An increase of $463,000 and 4 staff years for Departmental 
        Administration and Staff Office Accounting and Budget Execution 
        Support. This staffing is essential to improve the timeliness 
        and accuracy of financial reporting for these USDA functions. 
        The implementation of the Department's new financial management 
        system has brought significant changes in the financial 
        management practices for Departmental Administration and Staff 
        Offices. These resources will provide important customer 
        services, including the preparation of required external 
        financial reports, definition and development of internal 
        financial management reporting tools, preparation of applicable 
        financial accounting adjustments, and assistance in budget 
        preparation and execution. The staff also acts as an 
        intermediary between the administrative end-users of the 
        financial management system here at headquarters and the 
        accounting processing functions located at the National Finance 
        Center.
                          working capital fund
    Let's focus on USDA's Working Capital Fund (WCF). As context, the 
Working Capital Fund provides controllership services to USDA agencies 
and offices, data processing for USDA and a wide range of item 
processing and record keeping for non-USDA customers.
    We estimate total operating costs for the WCF in fiscal year 2003 
will be $323.0 million, an increase of $11 million or 3.6 percent over 
the fiscal year 2002 estimate. The cost of basic services for financial 
management, information technology data centers, telecommunications and 
administrative services will increase by about $7 million or 2.5 
percent from $274 million in fiscal year 2002 to $281 million in fiscal 
year 2003.
    The remaining $42 million for the operating cost of the USDA 
corporate systems is an increase of $4 million or 11 percent. These 
systems include the Foundation Financial Information System 
(accounting), the Integrated Procurement System and the Universal 
Telecom System (Network Infrastructure).
    The most important financing message I have for you today in this 
regard is my request for $21 million in new appropriations to the 
Working Capital Fund to invest in USDA's corporate systems development. 
These systems are needed to process over $2.1 billion in procurement, 
$3.0 billion in property management, and $15 billion in payroll, travel 
and other administrative systems. This funding will address severe IT 
infrastructure and system architecture deficiencies in order to meet 
the financial management and accounting needs of our agencies.
    USDA's Executive Information Technology Investment Review Board 
will determine funding priorities among the following systems:
  --Integrated Acquisition System (IAS).--This system will be the 
        corporate procurement system for USDA. After the accounting 
        system, it is a critical system for our accurately reporting 
        financial results, improving procurement services, our ability 
        to do electronic government, and streamline and manage both 
        procurement and financial management processes. It will also 
        assure adequate internal controls and avoid the rework we must 
        now do to reconcile the old procurement feeder system and the 
        accounting system.
  --Travel.--We will use this money to look at alternative ways of 
        accounting for travel at USDA. Initial funding will be used for 
        a market survey of potential service providers and for the 
        implementation of the new USDA travel solution.
  --Property/Asset Management.--A large item on our balance sheet 
        financial statement is property, an area over which we need 
        more control and assurance. Simply put, we need a new property/
        asset management system to provide internal stewardship and 
        financial management controls of property with a workable 
        interface among the three key systems for our financial 
        results: property systems, procurement systems and the 
        accounting system.
  --Data Warehouse Enhancements.--The Data Warehouse is the basis for 
        an integrated financial management system at USDA. When it is 
        complete, it will provide USDA with corporate data needed to 
        manage USDA and monitor performance. The enhancements planned 
        will be needed to address the data being provided by the new 
        feeders so users will have adequate reports and to provide the 
        data and system needed for performance and financial reporting.
  --Universal Telecommunications Network.--This effort will provide 
        USDA a shared telecommunications network that has the capacity 
        needed to allow customers to transact business with USDA 
        electronically and safeguard their data from intrusion. Funding 
        will be provided to continue this effort.
    I thank you, Mr. Chairman, for the opportunity to share with you:
  --The results on which we are currently focused;
  --Results we have achieved recently;
  --Our Fiscal year 2003 Budget Request; and
  --USDA Working Capital Fund.
    I welcome any questions the Committee might have.
                                 ______
                                 

Prepared Statement of Nancy L. Smith, Acting Director, National Appeals 
                                Division

    Mr. Chairman and members of the Subcommittee, I am pleased to 
appear before you to discuss the fiscal year 2003 budget request for 
the National Appeals Division.
                              introduction
    The National Appeals Division (NAD) was established by the 
Secretary of Agriculture pursuant to the Reorganization Act of 1994. 
The Act consolidated the appellate functions and staffs of several USDA 
agencies under a single administrative appeals organization. NAD 
appeals involve program decisions of the Commodity Credit Corporation, 
the Farm Service Agency, the Risk Management Agency, the Natural 
Resources Conservation Service, and Rural Development agencies. 
Moreover, in States under the authority of the United States Court of 
Appeals for the Eighth Circuit, NAD Hearing Officers adjudicate and the 
Director makes final determinations on applications for fees under the 
Equal Access to Justice Act (EAJA). NAD is headquartered in Alexandria, 
Virginia, and has regional offices located in Indianapolis, Indiana; 
Memphis, Tennessee; and Lakewood, Colorado. NAD's staff of 133 includes 
70 hearing officers.
                                mission
    NAD's mission is to conduct evidentiary administrative appeals 
hearings and reviews arising out of program decisions of certain USDA 
agencies. Our strategic goal is to conduct independent evidentiary 
hearings and issue timely and well-reasoned determinations that 
correctly apply USDA laws and regulations. NAD's mission is statutorily 
specific, but its operation is dynamic and challenging, given the 
complexities of changing laws, regulations and policies affecting USDA 
program decisions.
    For 2003, the budget proposes a total of $15,262,000 for NAD's 
salaries and expenses, an increase of $2,393,000 from the amount 
enacted in fiscal year 2002, excluding supplementals. Within this 
fiscal year 2003 request, $1,503,000 covers the costs of items 
previously paid from central accounts within USDA or on a government 
wide basis, including GSA rental payments, Federal Employees 
Compensation Act and Civil Service retirement and retiree health 
benefits. The Explanatory Notes provided to the Committee provide 
information on the comparable levels for these items in fiscal year 
2001 and fiscal year 2002.
    That concludes my statement, and I look forward to working with the 
Committee on the 2003 National Appeals Division budget.
                                 ______
                                 

 Prepared Statement of Joyce N. Fleischman, Acting Inspector General, 
                      Office of Inspector General

                       introduction and overview
    Good morning, Mr. Chairman and members of the Committee. I 
appreciate the opportunity to testify before you today to discuss the 
activities of the Office of Inspector General (OIG) and to provide you 
information on our audits and investigations of the major programs and 
operations of the U.S. Department of Agriculture (USDA).
    While this is my first formal appearance before the Committee as 
Acting Inspector General, I have been the Deputy Inspector General at 
USDA for more than 6 years and have been involved in the oversight and 
direction of OIG throughout this time. I want to thank you for your 
support to the agency during the past and hope we have been able to 
address some of your concerns. I look forward to working closely with 
you both as Acting Inspector General and Deputy Inspector General.
    Before I begin, I would like to introduce the members of my staff 
who are here with me today: Gregory Seybold, Assistant Inspector 
General for Investigations; Richard Long, Assistant Inspector General 
for Audit; and Delmas Thornsbury, Director of our Resources Management 
Division.
    The safety and wholesomeness of agricultural products provided to 
the public is our primary concern. Our audits and investigations have 
continually addressed issues related to the integrity and security of 
American agriculture, the protection of the consumer, and the safety of 
USDA-operated and- funded facilities and their personnel. As such, much 
of our work has been focused on what are now termed ``Homeland Security 
issues'' even before the tragic events of September 11.
    Our work in protecting the Nation's food supply, cybersecurity, 
disaster programs, production agriculture, and financial integrity are 
all part of our broad spectrum of ensuring the safety of the 
agricultural economy and the Department's infrastructure. With the 
events of September 11, these efforts have been greatly intensified and 
reinforced.
    In my testimony today, I will address these crucial issues facing 
the Department and the work OIG is doing to support and assist in these 
areas.
                           homeland security
Homeland Security--Response to Terrorism
    The events of September 11 and the subsequent anthrax attacks have 
given new urgency to issues of security over USDA's infrastructure and 
the agricultural economy. Those events tested OIG's law enforcement 
response and audit support to departmental operations as never before 
in our history. Following the terrorist attacks, OIG special agents 
immediately provided emergency assistance and participated in the 
Federal Bureau of Investigation (FBI) task force operations in New York 
City. In addition, over 30 special agents were deployed to more than 50 
critical USDA-operated or -funded facilities, including laboratories 
and research facilities across the country, to determine vulnerability 
to attack or compromise by terrorists. They met with facility and 
laboratory directors, safety officers, and research leaders to discuss 
and evaluate the security measures for the facilities, personnel, 
foreign scientists and researchers, and the handling of hazardous 
materials. We assigned 32 special agents to counterterrorism task 
forces and to nationwide criminal investigations related to the events 
of September 11.
    We are working with USDA agencies to protect the food supply and 
ensure that the Department continues to serve the needs of the 
agriculture sector and the consumer. OIG has helped USDA agencies 
establish teams of dedicated personnel to respond to each emerging 
crisis. In addition, the agency has been responding to numerous anthrax 
contamination threats at Federally inspected meat plants and other 
sensitive USDA facilities. I am happy to say that, to date, all of 
these threats have been hoaxes.
Security of USDA Laboratories and Critical Facilities
    In the spring of 2001, we began a review of the Department's 
security and controls over biohazardous materials at its laboratories. 
We looked at controls to prevent the inadvertent or intentional release 
of the biohazardous materials. We interviewed departmental and agency 
officials and visited 6 of the Department's biosafety level (BL) 3 
laboratories. The Department was then unaware of the nature, number, 
and biosafety risk of biohazardous materials at any of its facilities, 
both USDA-operated and USDA-funded. The Department did not require 
detailed tracking records of any access to biohazardous materials or 
comprehensive security checks on personnel with access to these 
materials. Moreover, the Department did not have adequate physical 
security at a number of its facilities commensurate with the level of 
risk. Our past investigations of vandalism at USDA facilities by animal 
rights and environmental activist groups had already identified the 
heightened need for physical security at many of these facilities, 
especially those of the Forest Service (FS) and the Animal and Plant 
Health Inspection Service (APHIS).
    The September 11 events suddenly imbued these vulnerabilities with 
a new sense of urgency, particularly given the possibility of a 
terrorist presence in our country and the devastating impact of an 
intentional release of such biohazardous materials on the agricultural 
economy. On September 24, we issued an interim report to the Department 
advising that it needed to take immediate steps to identify and compile 
an inventory of biohazardous materials in its possession. Further, it 
needed to strengthen management controls. Moreover, it needed to ensure 
that all materials are adequately accounted for and strengthen or 
upgrade the physical security at its facilities commensurate to the 
biosafety risk of the materials. Shortly thereafter, the Department 
responded by establishing a task force to draft departmentwide policies 
and procedures on biosecurity requirements for its BL 3 laboratories. 
They were to address inventory control, physical security, personnel 
security, and incident reporting. OIG participated in the task force 
discussions and provided feedback on the draft policies and procedures. 
During the period of these reviews, the Department contracted with the 
Sandia National Laboratories to conduct a risk assessment and security 
analysis at all of its BL 3 laboratories.
    Concurrently, because of the heightened awareness of the 
consequence of these biological agents if released, we accelerated and 
broadened our review. We immediately met with APHIS officials to 
discuss our concerns with the import and domestic shipment of such 
biohazardous materials. We were encouraged that the agency had already 
begun to address these concerns by temporarily suspending new permits 
while it reviewed the process. We interviewed Department officials who 
administered the visitor exchange, or J-1 visa program, at the 
departmental laboratories. Based on these interviews and meetings, we 
proposed additional procedures to preclude a potential terrorist, 
posing as a visiting scientist, from obtaining such biohazardous 
materials. Further, we proposed procedures to strengthen the visa 
programs and monitoring of visitors to USDA facilities. We devoted 
increased resources to our review of controls over genetically 
engineered organisms, or GEOs, whose premature and uncontrolled release 
into the environment in an untested state might damage agricultural 
production.
    Because we were concerned whether any new inventory and security 
procedures had been implemented at the field level, we dispatched 
approximately 50 auditors to over 100 laboratories nationwide in 
October and November 2001. In December, we issued another interim 
report to the Department. We reported there had been no concerted 
efforts by the agencies to contact the laboratories under their 
control, obtain an inventory of biohazardous agents, or ensure that 
security measures are adequate. We recommended that the Department 
hasten implementation of the policies and procedures prepared by its 
biosecurity task force and take immediate action to correct the 
deficiencies at one BL 3 laboratory. Since then, a number of the 
agencies have compiled inventories and have started to evaluate the 
vulnerability or risk associated with such inventories with the goal of 
implementing additional biosecurity measures.
    In our second phase of this ongoing review, we intend to evaluate 
the controls and security at university and private laboratories funded 
by the Department. This will include biological agents and chemical and 
radioactive materials stored or used at these laboratories and their 
shipment by these facilities.
Enhanced Controls Needed on Imported Meat and Agricultural Products
    One of OIG's ongoing activities, even before September 11, was 
involvement in departmental efforts to ensure that animal and plant 
diseases from abroad do not infect agricultural production in this 
country. During 2001, the world witnessed outbreaks of Foot and Mouth 
Disease (FMD) in Europe and South America. At the outbreak of FMD in 
Great Britain and elsewhere, we began establishing emergency response 
teams to investigate similar threats to American livestock and 
agriculture. A team traveled to the United Kingdom to gain firsthand 
knowledge of its law enforcement agencies' experience in dealing with 
quarantines, as well as any unlawful activity associated with that 
outbreak.
    Because of the devastating effect FMD could have on the U.S. 
livestock industry if an outbreak occurred in this country, last summer 
OIG undertook an expedited review of APHIS' and the Food Safety and 
Inspection Service's (FSIS) functions regarding imported meat. We found 
that the fundamental problem was poor or failed communications between 
the two agencies. For the processes of inspection, reinspection, and 
clearance or rejection of imported meat to work efficiently, the two 
agencies must communicate in an organized and punctual manner. This did 
not always occur. For example, a mixed shipment of over 32,000 pounds 
of meat product from an FMD-restricted country arrived at the Port of 
Houston and was approved by APHIS for transport to an FSIS inspection 
house. However, when APHIS approved the transfer, it inadvertently 
released the hold on the shipment, allowing the meat product to be 
shipped prematurely. Neither agency was aware the product had been 
shipped to a commercial warehouse in San Antonio, Texas, until the 
broker discovered the error 9 days after the release of the product. As 
a result, the product was returned to Houston, where over one-sixth of 
it had to be destroyed because it had been produced after the FMD 
restricted date.
    We found that APHIS needed to improve its accountability over 
imported products from their arrival at U.S. ports-of-entry through 
disposition. More importantly, neither APHIS nor FSIS had an adequate 
system of controls or records that could produce such information. We 
recommended that these agencies implement new procedures to strengthen 
their communication and coordination at the field level and that they 
issue instructions specifically identifying the responsibilities of 
each agency regarding the handling of products from restricted 
countries. We further recommended that APHIS discontinue its policy of 
allowing mixed shipments of unrestricted and restricted products to 
enter the country for sorting. Additionally, we recommended that the 
agencies jointly conduct an inventory to identify and account for all 
products that had entered the United States from FMD-restricted 
countries and ensure the disposition of any that still remained. We 
recommended that APHIS improve its systems to track and account for 
products that are retained on hold at the ports-of-entry and flag 
instances where such products have remained for an unreasonable amount 
of time. Both APHIS and FSIS agreed with the findings and 
recommendations and are acting on them.
    We are just completing a review of the adequacy and effectiveness 
of APHIS' operations to prevent or minimize the introduction of 
harmful, exotic pests and diseases into the United States. We disclosed 
in an interim report that APHIS' process for performing criminal 
history record checks on newly hired employees assigned to work in 
secure areas of commercial airports did not meet Federal Aviation 
Administration (FAA) requirements. For instance, we documented one case 
in which an APHIS inspection officer worked for over 280 days without a 
check having been initiated even though FAA regulations required one 
within 45 days of hiring. During that time, the employee had unescorted 
access to secure areas of a major commercial airport. We recommended 
that APHIS immediately identify all employees for whom background 
checks had not been made; take interim measures to ensure they were not 
assigned to secure areas; amend its hiring policies to include 
preemployment checks that, at a minimum, meet FAA requirements; and 
implement a tracking system to ensure that employees properly complete 
and return security forms within specified timeframes. APHIS agreed to 
do so.
                     tracing financial transactions
    Since September 11, U.S. Attorneys around the country have 
established task forces of Federal and State law enforcement agencies 
to identify and seize sources of funding for terrorist groups. We are 
participating in many of these task forces because we know that money 
from several of our current food stamp trafficking cases is being 
transferred overseas. We have routinely focused our investigations 
regarding the trafficking of food stamp benefits, either via paper 
coupons or the Electronic Benefits Transfer (EBT) system, on the money 
trail. One recent investigation of food stamp trafficking identified 
approximately $228,000 that was transferred to foreign bank accounts in 
a country known to harbor terrorists by the owners of a convenience 
store authorized to accept food stamps and Special Supplemental 
Nutrition Program for Women, Infants, and Children benefits.
    We have moved to halt this type of fraud through aggressive use of 
money laundering and forfeiture statutes and through combining our 
efforts with other law enforcement agencies. Our goal is to prevent 
USDA program funds from supporting any terrorist operatives, either in 
the United States or overseas.
                    security over hazardous material
    We have an audit underway to evaluate APHIS' safety practices, 
accountability, and internal controls over the handling, security, and 
disposal of hazardous materials, used in its Wildlife Services 
programs, including explosives and pesticides. We found that APHIS 
lacks adequate accountability and control over hazardous pesticides and 
drugs maintained by some of its State offices for use in wildlife 
damage control. At the 2 State offices we visited, which have over 32 
percent nationwide of the pesticides and 24 percent of the drugs used 
in the National program, APHIS did not maintain adequate records to 
support its inventories of hazardous materials representing 8 different 
pesticides or drugs including M-44 cyanide and fumitoxin fumigant. We 
recommended that the two State APHIS offices determine whether 
unaccounted for hazardous materials were missing or stolen and report 
to OIG. In addition, we recommended the State offices immediately 
establish and implement controls to ensure that perpetual inventory 
records of pesticides and drugs are maintained. Further, we recommended 
that the State offices document transfers to applicators and perform 
periodic inventory counts. APHIS has acted on our recommendations; 
however, in requiring its State offices to perform and reconcile 
inventories, discrepancies have come to light which we will be pursuing 
with APHIS to resolve.
Outreach Activities
    Our experiences over the years working with State and local law 
enforcement agencies, especially during Operation Talon, have 
reinforced the benefits that joint Federal, State, and local 
cooperative efforts can have in protecting USDA programs and resources. 
While first responses will always involve State and local agencies, the 
catastrophic events of September 11 highlighted the urgent and 
increased need for Federal, State, and local coordination of efforts to 
protect the Nation's food supply. Recently, we met with top officials 
to emphasize these points and to offer OIG's insight and assistance as 
the Department and each of the agencies undertake an assessment of 
their vulnerabilities and development of solutions. We expanded these 
efforts to the vast field structure maintained by the Department. OIG 
regional managers are meeting with departmental field staff and State 
and local officials, particularly law enforcement and health officials, 
to alert them and join in a concerted effort to protect the 
agricultural economy and the Department's assets.
    For more effective outreach, OIG has expanded its efforts to 
include networking with industry and farm organizations, and other 
similar groups. Recent efforts have included meetings with regional 
shipping and trucking associations and the Southeastern
    Intergovernmental Audit Forum, which consists of Federal, State, 
and local auditors.
                                olympics
    The 2002 Winter Olympics has been declared a Homeland Security 
``Event'' for Federal law enforcement agencies. For the past year and a 
half, OIG has joined in a partnership with the FBI and the U.S. Secret 
Service (USSS) to ensure the integrity and security of the food supply 
for the Olympics, and to ensure the security of USDA's facilities in 
and around Olympic venues that are potential targets for attacks. In 
addition, OIG serves as the liaison between the FBI and USSS with USDA 
agencies while at the event. In
    January, we sent additional special agents to provide law 
enforcement coverage as the Olympics unfold. Further, OIG will provide 
emergency response with other law enforcement agencies to any threat to 
disrupt the events.
                           computer security
    Audits of computer security have been a high priority, and our 
emphasis in this area will continue to increase. As the Department 
continues to expand its use of information technology (IT) for program 
and service delivery, this component of the USDA infrastructure has 
become a key element for operational integrity and control. One of the 
more significant dangers USDA faces is a cyberattack on its IT 
infrastructure, whether by terrorists seeking to destroy unique 
databases or criminals seeking economic gain. The Department has 
numerous information assets, which include market-sensitive data on the 
agricultural economy and its commodities, signup and participation data 
for programs, personal information on customers and employees, 
agricultural research, and Federal inspection information ensuring the 
safety of the food supply, as well as accounting data. The information 
and related systems face unprecedented levels of risk from intentional 
or accidental disruption, disclosure, damage, or manipulation.
    Public confidence in the security and confidentiality of the 
Department's information and technology is essential. The Department 
has taken positive action, through the Office of the Chief Information 
Officer, by developing and initiating a plan to strengthen USDA 
information security; however, we continue to identify deficiencies at 
component agencies. Our independent evaluations, completed to meet the 
Government Information Security Reform Act requirements, disclosed 
material IT security weaknesses. Our assessments identified over 3,300 
high- and medium-risk vulnerabilities and numerous low-risk 
vulnerabilities. Inadequately restricted access to sensitive data was 
the most widely reported problem. Most agencies we reviewed had not 
ensured security plans contained all elements required by the Office of 
Management and Budget. In addition, agencies had not planned or tested 
for contingencies and disaster recovery, nor had they properly 
certified and attested to the adequacy of security controls and 
performed assessments to identify, eliminate, or mitigate risks.
                     food safety and farm programs
Consumer Protection
    During the past year, our investigations of meat and poultry food 
processing operations resulted in 12 convictions and overall monetary 
results totaling over $4.7 million, primarily in fines. We are 
investigating a corporation for distributing unwholesome poultry 
products contaminated with rodent hair and feces to 47 California 
school districts. In two other cases, a major food-processing 
corporation and a major food store chain pled guilty to distributing 
millions of pounds of meat products contaminated with Listeria 
monocytogenes, which can cause severe illness or death to anyone who 
consumes the contaminated product. These firms were fined a total of 
$1.4 million. In the most serious case, the food store chain knowingly 
distributed contaminated food product that resulted in a recall of over 
4.5 million pounds of product.
Protecting Farm Interests
    We are concerned with protecting this Nation's agricultural 
interests from farm to table. Approximately 1 year ago, OIG special 
agents were on the front lines ensuring that APHIS' staff was not 
hindered from enforcing the seizure and transportation of over 350 East 
Friesian sheep from Vermont to the National Veterinary Services 
laboratory in Ames, Iowa, where they were destroyed. Four sheep from 
those flocks had tested positive earlier for a transmissible spongiform 
encephalopathy (TSE)--a class of diseases including bovine spongiform 
encephalopathy, or ``mad cow'' disease. In response to the test 
results, the Secretary issued a declaration of extraordinary emergency 
because of atypical TSE of foreign origin, which enabled USDA to seize 
the sheep. The seizure was challenged in Federal court. While this 
delayed action for approximately 6 months, ultimately a judge upheld 
the Secretary's order, and the sheep were seized, transported, and 
euthanized without incident.
    OIG agents and other members of the Ohio Organized Crime 
Investigations Commission Task Force infiltrated a criminal 
organization which was preying on farmers in the tri-State area. The 
investigation found that the criminal organization was responsible for 
over $5 million in farm-related thefts. In August 2001, 12 members of 
the organized group were arrested in the Dayton area for their 
participation in a conspiracy to steal farm equipment and other items 
from local farmers. Six of the subjects were recently sentenced to jail 
terms from 2 to 12 years, and the task force recovered over $1 million 
worth of the stolen property. OIG positively identified 30 farms 
participating in FSA programs that this criminal organization 
victimized in 12 counties in Ohio, 5 counties in Indiana, and 1 county 
in Kentucky. Much of the stolen property was collateral for farm-owned 
property or operating loans and business and industry loans.
Implementation of Agricultural Risk Protection Act and Disaster 
        Assistance Programs
    We have continued to review RMA and the Farm Service Agency (FSA) 
as they implement the provisions of the Agricultural Risk Protection 
Act of 2000. Our efforts have focused on monitoring their joint 
implementation plan involving program compliance and integrity. We 
participated with the agencies in drafting the implementation plan and 
attended agency briefings provided to congressional and departmental 
staff, as well as industry officials. We also participated in various 
working groups directed to draft specific policies and procedures for 
the implementation plan. Our goal was to assist both RMA and FSA up 
front in improving their quality control system and compliance 
procedures to assess program integrity. This up front and proactive 
approach is more effective and efficient in ensuring that eligible 
farmers are treated fairly and receive proper assistance rather than 
identifying improper payments and recommending their recovery after the 
fact.
    We reviewed FSA's implementation of the disaster assistance 
programs mandated by Congress. Last year, we again reported that the 
agencies had not implemented interagency procedures to share corrected 
program information, such as corrected acreage resulting from a 
compliance review, that could impact payment determinations by the 
other agency. For example, FSA issued over $19 million in disaster 
assistance to watermelon and corn producers based on indemnity payment 
information provided by RMA. However, most of those payments resulted 
from excessive yields established by RMA or from a nonviable crop for 
the area coverage. In both cases, RMA had to rescind these flawed crop 
insurance programs.
    We surveyed FSA's implementation of the fiscal year 2000 disaster 
assistance programs authorized under the Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Act of 2001. We analyzed the amount of funding allocated 
to the various programs. As a result, we initiated a more intensive 
review of FSA's implementation of the new Quality Loss Assistance 
Programs. Further, we examined the implementation of the Limited 
California Cooperative Insolvency Payment Program, particularly FSA's 
determination of producers' payments.
                           food stamp program
    We have continued to proactively review EBT systems that provide 
Food Stamp Program (FSP) benefits as they are implemented in the 
States. Currently, 44 States and the District of Columbia have 
implemented EBT systems with 40 of them implemented statewide or 
districtwide. Approximately 84 percent of food stamp benefits, 
estimated at $17.1 billion for fiscal year 2002, are issued through 
these systems. During fiscal year 2001, we completed reviews in the 
District of Columbia, Hawaii, and Washington and found all of their EBT 
systems have been implemented successfully.
Operation Talon
    For the last 5 years, OIG has coordinated a nationwide law 
enforcement initiative dubbed ``Operation Talon,'' which, to date, has 
resulted in the arrest of nearly 8,000 fugitive felons. This 
initiative, which has been carried out in conjunction with other law 
enforcement agencies and State social service agencies across the 
country, was designed to identify, locate, and apprehend dangerous and 
violent fugitive felons who may also be illegally receiving benefits 
through FSP. Operation Talon has grown into a nationwide dragnet, 
currently encompassing fugitives wanted in 31 States, as well as 
Federal fugitives sought by the U.S. Marshals Service. The more serious 
offenses for which Operation Talon fugitive arrests have been made 
include 35 arrests for homicide; 51 for sex offenses, including rape 
and child molestation; 17 for kidnapping/abduction; 435 for assault; 
229 for robbery; and 1,728 for drug/narcotic offenses. A number of 
States have removed arrested fugitives from their food stamp rolls, 
resulting in savings to FSP. We have managed to leverage our success 
through the use of targeted asset forfeiture funds to pay for overtime 
costs and special equipment needs of the State and local law 
enforcement agencies participating with us in Operation Talon. 
Furthermore, this equipment remains with the State and local agencies 
to support their law enforcement and emergency response efforts.
                           public corruption
    In fiscal year 2001, OIG fought public corruption by investigating 
USDA employees who abused their positions for private gain. We worked 
jointly with the Drug Enforcement Agency, the FBI, the U.S. Customs 
Service, and the Internal Revenue Service to bring to justice an APHIS 
inspector who, over a 3-year period, accepted over $90,000 in cash and 
drugs as bribes to permit approximately 230 kilograms of cocaine to be 
smuggled through the Miami International Airport. The cocaine was 
hidden inside vegetable containers he cleared at the airport. After the 
subject was indicted by a Federal grand jury, he pled guilty to 
conspiracy to possess narcotics with intent to distribute and is 
currently awaiting sentencing.
    In another significant case, a former Agricultural Marketing 
Service produce inspector in St. Louis pled guilty to accepting bribes 
to intentionally downgrade produce. He had been taking bribes for 
almost 15 years. His actions harmed local farmers, who were underpaid 
for their product, and allowed corrupt produce company officials to 
pocket illegal profits. Ten other people associated with produce 
companies have also been found guilty in this case. Our public 
corruption cases led to 21 convictions and 61 personnel actions last 
year.
                          financial integrity
    While some of the Department's agencies have achieved success with 
their financial systems and received clean financial opinions, other 
major agencies have not. For fiscal year 2000, financial statements for 
three agencies received unqualified opinions. The Food and Nutrition 
Service, the Risk Management Agency (RMA), and the Rural Telephone Bank 
(RTB) received unqualified opinions on their fiscal year 2000 financial 
statements, which means their statements fairly presented their 
financial position. But FS and the Commodity Credit Corporation (CCC) 
were unable to timely provide their financial statements for us to 
complete our audit of them by the legislatively mandated date of March 
1, 2001. Statements provided by FS and CCC subsequent to March 1 
contained significant errors. The Rural Development (RD) mission area 
received a qualified opinion because it was not able to properly 
determine the cost of its loan programs.
    The individual conditions of the agencies, when taken together, 
resulted in issuance of a disclaimer of opinion on the Department's 
consolidated financial statements for the past 7 fiscal years--1994 
through 2000. These opinions mean that, overall, the Department did not 
know whether it correctly reported all monies collected and the cost of 
its operations, or that it properly accounted for all of its over $100 
billion of assets. Most importantly, some USDA managers do not have 
reliable financial information on which to make decisions.
    Our current audits of the fiscal year 2001 financial statements 
have shown improvements in the timeliness of CCC financial information 
and in RD's efforts in determining the cost of loan programs. Our audit 
work on the Department's consolidated statement for fiscal year 2001 is 
ongoing.
                     business process reengineering
    Before I close, I would like to take a few minutes and tell you 
about an initiative we have begun within OIG for which our budget 
request would provide critical support. Last summer, the senior 
management team at OIG decided that the agency needed to undertake a 
full review of how we do our business. We believe that the agency can 
achieve greater efficiency in carrying out our mission to audit and 
investigate if we streamline our processes and adopt more modern 
business practices. We also believe that we can use state-of-the-art 
information technology to free our people to do more of the work that 
they are uniquely qualified to do. In other words, we want to utilize 
machines to do that which machines can do, thus allowing human minds to 
do those things only they can do.
    To that end, we launched a formal study of our agency. We are well 
into a detailed, systematic plan that will result in a phased strategic 
plan to equip and train our people so that OIG can maintain its 
historic high level of quality, reliability, production, and service in 
its operations.
    One example of desperately needed modernization involves automated 
audit workpaper files and an electronic case management system for 
Investigations. The Government Paperwork Elimination Act requires that, 
when practicable, Federal agencies must use electronic forms, 
electronic filing, and electronic signatures to conduct official 
business with the public by 2003. OIG currently lacks any systematic 
method of electronically recording and storing audit workpapers. 
Workpapers and other supporting documentation are often prepared using 
multiple approaches, formats, and storage mediums. The few electronic 
workpapers and support documentation the agency does produce, while 
meeting current audit standards for hardcopy documents, fail to meet 
the evolving standards for electronic documents, especially standards 
for electronic record validity. The agency must accept the challenge to 
enhance audit integrity and efficiency using automation. We expect 
automating the agency's audit workpapers to reap significant savings in 
stafftime and review and coordination of our audit work processes. This 
will allow us to work smarter, as well as expand the depth and 
analysis, cross-referencing, quality control, and report writing of our 
audit work. The same analysis holds true for automated case management 
for our law enforcement investigative operations. Our auditors and 
special agents are highly skilled people whose time can be spent more 
effectively doing audits and investigations rather than filing papers.
    We are beginning our modernization effort with this budget with a 
request for money for information technology and training for OIG staff 
to support these agencywide streamlining and cost-cutting efforts, 
allowing us to work smarter and do more with our resources.
                               conclusion
    I am very proud of the accomplishments of OIG and pleased to report 
that, in fiscal year 2001, we continued to more than pay our own way. 
In the Investigations arena, our special agents completed 490 
investigations, obtained 358 indictments and 352 convictions, and made 
1,335 arrests. These actions resulted in $66 million in fines, 
restitutions, other recoveries, and penalties during the year.
    In the audit arena, we issued 111 audit reports and obtained 
management's agreement on 99 recommendations. Our audits resulted in 
questioned costs of over $45 million. Of this, management agreed to 
recover $38.5 million. In addition, management agreed to put another 
$122 million to better use. Equally as important, implementation of our 
recommendations by USDA managers will result in more efficient and 
effective operations of USDA programs.
    The events of September 11 have altered all of our lives and the 
course of the work we do. As I discussed earlier, our work has always 
been focused on the protection and enhancement of American agriculture, 
a safe and plentiful food supply for our own citizens, and, indeed, for 
people around the world. Since September 11, we have redoubled our 
efforts and worked with the Department to support its and the 
Government's Homeland Security efforts to ensure the Nation's food 
supply and to safeguard America's agricultural infrastructure. Overall, 
since the September 11 attacks and subsequent threats, at least one-
third of our resources--more than 100 agents and 75 auditors--have 
taken on additional duties to respond to the immediate Homeland 
Security issues.
    I recognize there is a fierce competition for the Government's 
limited resources; however, I believe adequate funding for our office 
make good sense. OIG is very cost effective in view of the money it 
saves the taxpayers and in providing sufficient assurance and well 
being to the American people. As such, I request that our proposed 
funding level be approved without reduction.
    This concludes my statement, Mr. Chairman. I appreciate the 
opportunity to appear before you today and would be pleased to respond 
to any questions you may have at this time.

                         ANNUAL CROP FORECASTS

    Senator Kohl. We thank you very much for your statement. 
Secretary Veneman, a Bloomburg news item of February 22 stated, 
and I quote, ``Agriculture Department officials said they have 
given advance copies of the agency's annual crop forecasts to 
certain commodity traders, researchers, and investors before 
they are disclosed to the public,'' unquote.
    On the face of this announcement, and even if we were not 
in the current Enron environment, such news items are highly 
disturbing. The security that normally surrounds the USDA crop 
announcements is well known for its intense secrecy and the 
high market sensitivity of such information. To hear that such 
information is being provided to certain commodity traders and 
others in advance of the public release places in question the 
integrity of the USDA and the very markets for which you are 
supposed to provide stability and transparency.
    Would you now please set the record straight on the 
incident raised in this news item and provide for the record 
the current practice at USDA for the release of this type of 
information?
    Secretary Veneman. Yes, Mr. Chairman, I agree that these 
kinds of news items are of concern. However, this is an issue 
that is not practiced. It has gone on for some period of time 
in the Department, since the mid 1990s, as I understand it, and 
does not include the kind of information that is in the lock-up 
reports. Dr. Collins put out a statement yesterday on this 
issue, and I would like him to just reiterate what was in that 
statement and how we will proceed from here on out.
    Senator Kohl. Mr. Collins?
    Dr. Collins. Thank you, Mr. Chairman. Mr. Chairman, I would 
say, first, that we work very hard at USDA. We work vigorously 
to ensure the integrity of our data, our forecasts, our 
estimates, our projections programs, and I think I can stand 
here today and say that our integrity is intact. As a Federal 
agency, we are probably unsurpassed with the record that we 
have had over the years in ensuring the sanctity of the way we 
handle our data and forecasts.
    Let me say I found that article disturbing, too, and I 
think it mischaracterizes what we do. At our Outlook Forum, 
which we have in February, we offer early-season projections of 
the upcoming year, an outlook for the upcoming year. It is 
based on publicly-available information, and it is not 
connected with the lock-up, with surveys, or with internal 
information in any way.
    At that forum, we do peer-review. We have asked external 
reviewers to come in and critique the forecasts before we 
release the outlook for the upcoming year. Those people who we 
have asked to do that are not investors or traders, as the 
article said. They are researchers, and they are analysts. We 
also ask them to protect the confidentiality of the 
information. We have no record that that confidentiality has 
ever been breached or that there has ever been any problem with 
regard to this.
    Finally, I guess I would say that we consider this 
information, because it comes so early in the season and 
because it is not based on any internal surveys or estimates, 
we consider it minimally market-sensitive information.
    So, in any event, the final part of your question was: What 
are we doing about it today? What is our practice? As a result 
of the stories that have surfaced over the last couple of days, 
and to avoid any possible confusion or misperception in 
anyone's mind, we are simply just going to discontinue that 
practice and not have third-party or external reviews of those 
early season outlooks that we present.
    Senator Kohl. Thank you. As you know, and I am sure agree, 
it is extremely important that the markets have complete 
confidence in USDA activities and information. We expect you to 
ensure that USDA's market information is secure and properly 
released to the public. I am sure you agree.
    Dr. Collins. We are committed to that.

            INSPECTION OF IMPORTED MEAT AND POULTRY PRODUCTS

    Senator Kohl. Madam Secretary, as I am sure you are aware, 
the front page of the Washington Post on Monday featured an 
article in regard to USDA inspections of foreign meat-packing 
plants. This article highlighted several cases involving both 
Mexican and French plants found to have numerous sanitation and 
safety problems, some failing USDA inspections altogether. 
After initial inspections, the article reports that many of 
these plants regained their license to export meat to America 
without ever having been reinspected by the USDA.
    The article also mentions a 2000 report by the USDA 
Inspector General which found, among other things, that 19 out 
of 36 U.S. trading partners had exported meat to the United 
States even though their meat and sanitation programs did not 
meet U.S. standards in areas such as testing for chemical 
residues.
    In addition, last Monday HHS Deputy Secretary Claude Allen 
told the Center for Strategic and International Studies that 
our food supply is vulnerable and that it is best to inspect 
food supplies coming into the United States at their source, 
rather than when the product is at our border.
    Given the heightened state of awareness that all Americans 
have practiced since September 11, it would seem that a lack of 
proper inspections or maintenance of standards in the area of 
meat and poultry imports seems counter to the general 
expectations of enhanced oversight. Funds which have been 
provided for homeland security, and for which additional funds 
are requested, have been directed to hire additional APHIS 
inspectors to interdict harmful products entering the country. 
However, it appears that additional homeland security funds are 
not being requested to enhance oversight of foreign slaughter 
and processing facilities in spite of an imperfect record in 
recent years. And so, in view of the current threats posed to 
Americans by those wishing to do us harm, should additional 
steps be taken by USDA in the area of foreign meat and poultry 
inspections to ensure American safety and confidence in these 
products?
    Also, would you comment on what actions USDA has taken in 
response to the June 2000 Inspector General report on this 
subject?
    Secretary Veneman. Mr. Chairman, my understanding is the 
article that appeared in the Post earlier this week was based 
on an OIG report, and that it did not take into account, 
despite several interviews with our Undersecretary for Food 
Safety, the steps that have been taken with regard to Mexico 
since the OIG report was released. Information was not 
contained in that news report, including the fact that we have 
done additional inspections of Mexican plants, that we 
prohibited the plant in question from exporting products to the 
U.S., during the time they were in non-compliance, and that we 
continue to do reviews with regard to those Mexican plants.
    I agree with you that we absolutely need to maintain the 
integrity of these inspection systems. What we do when we go 
into another country where we allow imports, is to certify 
their inspection system, and then we do regular checks on the 
plants within that system to determine whether or not they are 
meeting the criteria. If not, steps are taken to ensure that 
the criteria are met or the plant is prohibited from exporting 
products to the United States. They have been taken with Mexico 
since the 2000 OIG report and we continue to review those 
systems to make sure that there is no issue with regard to 
those meat plants.
    We have increased money within the budget with regard to 
conducting foreign program reviews in Mexico and other 
countries and we are continuing to review those issues. Mexican 
imports, as I understand it, are re-inspected at the border by 
USDA inspectors at a rate of a 100 percent.
    Senator Kohl. Are you suggesting that the basic premise and 
impression of the direct statements, in quotes, that were made 
in that article on Monday are inaccurate, and that the public 
that read that article should, for the most part, disregard its 
import and its inference?
    Secretary Veneman. Mr. Chairman, I think that rather than 
saying it is inaccurate, I would say that the article did not 
tell the whole picture of what has happened over the last year 
or so with regard to the OIG report. We have gone in and 
inspected the plants, we have taken steps since the report to 
correct any violations, and we don't believe that the article 
accurately reflected the actions that have been taken in the 
recent months.
    Senator Kohl. Well, how often are foreign meat-packing 
plants inspected by USDA?
    Secretary Veneman. Mr. Chairman, I will have to get back to 
you with the answer to that. I do not have that particular 
information.
    [The information follows:]

    In light of recent animal health diseases in Europe and 
bioterrorist threats both in the United States and abroad, FSIS' 
certification process for foreign inspection programs has become a 
subject of heightened interest. Annually, we review all foreign 
inspection systems in countries eligible to export meat and poultry to 
the United States. In fiscal year 2001, FSIS reviewed the documentation 
of and performed on-site audits in 27 of the 32 countries eligible to 
export meat and poultry products to the United States, as well as two 
countries requesting eligibility, and was satisfied that all 29 
countries had implemented Sanitation Standard Operating Procedures 
(SSOPs), HACCP systems, and pathogen testing programs. These audits 
included visits to 217 slaughter and processing establishments and 82 
laboratories. FSIS did not audit four countries (Austria, Ireland, 
Northern Ireland, and England) in 2001 because the September 11 events 
disrupted planned travel. The fifth (Uruguay) was delayed because of 
foot and mouth disease concerns that might have resulted in its 
delistment. Those issues were resolved, and Uruguay was audited from 
January 14 through February 1, 2002. There were no major deficiencies. 
FSIS has rescheduled the four remaining audits for 2002.

    Dr. Collins. I can say with regard to Mexico, we audited 
three plants in November, and we have planned an audit again in 
April of this year. So that is two sets of audits within 
several months. I cannot tell you what the schedule is for all 
the countries of the world.
    Senator Kohl. Well, the obvious question that comes up is 
if a product is being shipped from foreign plants into this 
country to be consumed by the American public, shouldn't the 
level of inspection be comparable to inspections here in this 
country?
    Secretary Veneman. We do certify that the countries from 
which meat is imported have systems that are equivalent to 
those here in the United States, including having inspectors in 
the plants from those countries that are trained to enforce 
U.S. inspection standards.
    Senator Kohl. However, isn't it a fair question to ask, if 
that is true, how something like what occurred in that story, 
as reported, could have happened?
    Secretary Veneman. As Dr. Collins indicated, we have 
audited three plants, as I understand it. I can certainly have 
our Undersecretary for Food Safety further elaborate on this 
for you, Senator, and get more information to you.
    [The information follows:]

    Our international efforts include ensuring that imported product is 
safe for consumption and held to the highest standards of food safety. 
I take the recent reports of poor sanitary conditions in meat plants in 
Mexico and the questions concerning USDA's auditing and plant 
certification in Mexico very seriously. For this reason, I requested 
Under Secretary Murano travel to Mexico to get an assessment of the 
situation. During this visit, she, along with the FSIS Acting 
Administrator and other USDA officials, met with Dr. Javier Trujillo, 
Director of Food Safety for Mexico, and other Mexican government 
officials to measure their level of commitment to maintaining a meat 
inspection system that is equivalent to the United States. They took 
the opportunity to visit several plants in question to see the sanitary 
conditions first hand. We will continue to ensure that every effort is 
being made in Mexico and all other eligible exporting countries to 
maintain the highest level of sanitary conditions and will keep you 
apprized of the progress.
    To ensure that foreign countries exporting meat and poultry 
products to the U.S. have equivalent inspection systems, the Agency 
performs on-site audits of those systems, monitoring, verifying, and 
evaluating the effectiveness of the controls that are in place to meet 
Federal requirements. In fiscal year 2001, the Agency completed routine 
audits of establishments, laboratories performing residue and 
microbiological analyses, and government inspection systems in 29 
countries.
    The equivalence of the foreign inspection systems audited is 
assessed by focusing on five risk areas: sanitation, animal disease, 
residue controls, slaughter/processed product controls, and enforcement 
controls. In addition, as part of the audit of each country, the Agency 
evaluates HACCP programs, SSOPs, and generic E. coli and Salmonella 
testing procedures.
    During fiscal year 2001, FSIS completed development of a 
reprogrammed Automated Import Information System (AIIS) and a planned 
revision of the sampling of imported products. Both initiatives were 
described in a public meeting on June 8, 2001. The new AIIS is expected 
to become operational nationwide in the first half of 2002. At that 
time, FSIS will begin a port-of-entry sampling approach that focuses on 
the performance of a country's inspection system, rather than on 
individual plants within the system. The new approach is similar to 
that used to monitor Canadian imports for over 10 years. The new system 
will also use the same HACCP product category codes used by the 
domestic program, so that new information on risks associated with 
products can be incorporated into port-of entry sampling.
    In fiscal year 2001, FSIS conducted the annual Meat and Poultry 
Inspection Seminar for Foreign Government Officials, which was attended 
by 62 government officials from 37 countries, at the FSIS training 
Center in College Station, Texas. Two sessions were held in fiscal year 
2001 to accommodate the growing popularity of the program. The 
objective of the Seminar is to increase the understanding of foreign 
government inspection officials of the U.S. inspection and livestock 
production systems in order to assist them in developing inspection 
systems and in accepting U.S. exports.

    Senator Kohl. Well, do you believe that additional 
inspectors should be hired? How many inspectors, and how much 
money would it take to ensure that foreign meat-packing plants 
were inspected often enough to adequately ensure that meat 
imported into the United States is safe for American consumers? 
It seems to me that you would agree that is our responsibility 
to be able to ensure the safety of the American consumer's food 
supply.
    Secretary Veneman. Oh, absolutely. We need to ensure that 
we have----
    Senator Kohl. And to rely entirely on foreign assurances 
that this is being done, it seems to me, is not adequate, and 
this case demonstrated that it is not an adequate kind of a 
procedure for us to go forward with. The basic question is, 
what are your thoughts and what are your plans with respect to 
providing assurances that product brought into this country are 
as safe as products that are produced in this country?
    Secretary Veneman. Well, as I indicated, Senator, our Food 
Safety and Inspection Service does review the systems of other 
countries. FSIS does not just review and certify the inspection 
systems, but they conduct regular reviews to ensure that a 
plant's certification meets our inspection standards. We will 
continue to review foreign inspection systems.
    We are absolutely committed to making sure that the safety 
of the food supply in this country is in terms of the product 
that is coming in from other countries--as safe as it can 
possibly be. I think that we want to do everything we can to 
assure consumers that this is the case.
    Senator Kohl. Well, let me just end my questioning on this 
matter by asking you whether or not one of your primary hopes 
and goals during your tenure is to improve the quality of 
inspection that takes place on foreign product imported into 
this country? There is a job that needs to be done; there are 
problems that need to be addressed; and ours is not, by any 
means, a system which has been perfected sufficiently, and it 
needs a lot of attention. Do you agree with that?
    Secretary Veneman. Mr. Chairman, I am absolutely committed 
to doing everything that we can to assuring that we continually 
improve food safety in this country. To the extent that we need 
to improve the systems of reviewing meat coming in from other 
countries we want to continue to make sure we enhance those 
systems to the maximum extent possible.
    Senator Kohl. Okay. I will leave it with this comment. I 
get the impression you are saying, look, it is one of many, 
many things we do, and we will continue to work at it. And 
again, my impression is that you believe that what we read on 
Monday is basically not accurate and does not raise clearly 
that there is an urgent problem that needs to be addressed. It 
is my impression that you do not look at this that way, and you 
can respond to that. I will move on to my next question.
    Secretary Veneman. Mr. Chairman, my feeling is, from what I 
have been told by our folks, is that what we read on Monday did 
not accurately reflect all that the Department is doing to 
ensure that the systems are as complete as possible. It did not 
include the fact that checks have been done on these systems, 
that we have reviewed these plants since that time, and that 
the article simply did not reflect the complete story, in terms 
of what has been done since the OIG report was issued.

                            TRADE WITH CHINA

    Senator Kohl. Okay. Secretary Veneman, a recurring theme in 
foreign policy discussions is the need to promote trade and 
open markets. Recently, President Bush was in China and had 
hoped to persuade that government to relax its rules in regard 
to imports of genetically-modified crops. Reports indicate that 
President Bush was less than 100 percent successful, and at 
stake are pending shipments of soybeans and other commodities 
and our long-term access to substantial markets abroad.
    Can you give us an update on the negotiations with the 
Chinese and the issue of biotechnology barriers to that market?
    Secretary Veneman. Well, as you know, Mr. Chairman, and as 
you indicated, the Chinese have pending biotechnology 
regulations. It has created some difficulty with soybean 
shipments from the United States into that market in recent 
months. In the last year, we have had a tremendous market for 
exporting soybeans to China, and that's a market we want to 
maintain. It is a market that is being hampered by the proposed 
regulations, and we are concerned that once the regulations are 
implemented, they could cause difficulties for our exports to 
resume, so we have been working very, very hard on this issue. 
We have had many contacts with the Chinese government. Our 
embassy in China has been very active on this. As you 
indicated, the President raised this when he was in China this 
week.
    We intend to aggressively pursue this issue to maintain the 
ability of our producers to export into this market. Now that 
China is a member of the WTO, if we have to we do have dispute 
settlement mechanisms available to us, something that we did 
not have before the time that China came into the WTO. We will 
continue to pursue every lead we possibly can to ensure that we 
can keep markets open as they should be.

                             BIOTECHNOLOGY

    Senator Kohl. Do you think that better segregation of 
genetically-modified products might be necessary to avoid 
similar trade problems in the future? If so, what can USDA do 
to help facilitate and expedite such a process?
    Secretary Veneman. I believe 60 to 70 percent of our 
soybeans are now products of biotechnology, because they are 
producing a superior product, but it is difficult to segregate. 
The system can segregate if, in fact, there is a need to do 
that, but there is an extra cost, because it basically takes 
the product out of the commodities system.
    The important issue here, I believe, is that we have 
regulatory reviews of our products of biotechnology. There is 
no issue with regard to the safety of those products, there is 
no distinguishable difference from those products, and we 
believe they ought to have access to the global marketplace.
    Senator Kohl. I thank you, and I would like now to turn to 
my friend and the distinguished ranking member of this 
subcommittee, Senator Cochran.

                     HOMELAND SECURITY SUPPLEMENTAL

    Senator Cochran. Mr. Chairman, thank you. Madam Secretary, 
the budget request appears to me to be well-balanced among the 
many responsibilities and programs administered by the 
Department of Agriculture. I notice research programs, for 
example, will receive extra funding in the homeland security 
area. Food safety and the integrity of our food production 
resources are also given higher priority. Specifically, an 
additional $15 million is allocated to the Food Safety and 
Inspection Service in the Homeland Security Supplemental 
Funding for this fiscal year.
    I am curious to know if you can tell us how the money is 
being spent. How is it being allocated in that FSIS account?
    Secretary Veneman. We did obtain about $328 million in the 
Defense Supplemental Appropriations, and within the 
appropriation, some of the funding was designated to certain 
agencies. We are now in the process of working with each of our 
agencies to determine how exactly they are going to spend the 
money to ensure that it is appropriately utilized for the 
purposes for which it was intended. We have an ongoing process 
to make sure that we are not just looking at this from a 
single-agency-by-agency process, but one that integrates all of 
the agencies together to see how we can best integrate our 
programs.
    I cannot tell you exactly what the $15 million in the FSIS 
budget will fund, but we are conducting a comprehensive review 
to look at the entire $328 million and determine how that 
should be spent within the USDA budget.
    Senator Cochran. Well, I know some substantial amount is 
being spent to complete research facilities, if I am not 
mistaken, that will be used to try to help protect the 
integrity of our food production aspects. And APHIS has needs, 
I understand, that were also provided additional funding in the 
emergency supplemental. That is a lot of money to have at this 
point in the year without some more specific idea of how the 
funds are to be used, it seems to me.
    Secretary Veneman. Well, I do not want to indicate that we 
do not have any specific ideas on how to designate the funding, 
because we do, I just wanted to let you know that we have not 
made the final decisions, because the process is ongoing.
    We do have specific needs, as you indicated, in the 
laboratory areas. We have been working on our laboratories for 
some time, in terms of repair and enhancement needs. Since 
September 11 and with some of the issues that we have faced in 
recent years, there is a need to make sure that our laboratory 
system is strong and ready to respond and react to any issue 
that they may be confronted with.
    In addition, we are continuing to do research on a number 
of issues. In the money that is allocated to FSIS, there is a 
total of about $28 million, as I understand it, that is being 
requested in the 2003 budget.
    What FSIS has proposed in the 2003 budget is to improve 
information technology infrastructure, support the 
implementation of improvements to management, and an increase 
of $2.7 million to include slaughter, epidemiological surveys, 
and risk prevention.
    I may have Mr. Dewhurst comment briefly on the process that 
we are going through with regard to the Defense Supplemental.
    Mr. Dewhurst. The Secretary wanted to be sure that we used 
that $328 million in the most effective way possible so we 
asked all of the Department's agencies that are involved with 
that money, specifically FSIS, the Animal and Plant Health 
Inspection Service, the Agricultural Research Service, and a 
number of our staff organizations, to present detailed plans to 
the Department for the use of that money. Those plans have now 
come in.
    The Homeland Security Council in the Department, that the 
Secretary has established, reviewed those plans earlier this 
week. FSIS has made some proposals to strengthen some aspects 
of its inspection system, to improve security at some of its 
laboratory and diagnostic facilities, and to make some 
investments in technology. As you might expect when you go 
through an activity like this, you find that when you call on 
USDA agencies for information, you inevitably find some issues 
with respect to coordination, with respect to making sure 
everybody is on the same page, in terms of the priorities.
    And so the agencies and the Undersecretaries involved have 
been given a very short period of time, to go back and take 
another look at their proposals in light of those concerns. Our 
intention is to provide the Congress with a complete report on 
how we are going to use that money in very short order.
    Senator Cochran. When do you think we can expect to receive 
that report?
    Mr. Dewhurst. Well, I am talking about making these 
decisions in a week or two, and we should have a report shortly 
thereafter.
    Senator Cochran. Okay. I think we are entitled to know what 
the plans are in some specificity, because we have, in this 
budget request, some additional funding that is being requested 
for the same activities, and it would be good to have a 
complete picture before we are called upon to actually make the 
decisions of how we provide for those needs in our bill.

                           FARM BILL FUNDING

    Let me ask you this, too, about the farm bill; I mentioned 
that we are beginning to work--the House and Senate staff on 
the legislative committee has been meeting to identify areas of 
agreement where we can resolve differences early. It looks as 
though this may take a little longer than some people are 
hoping. There is a lot of pressure on the Congress to act now, 
to complete action on this farm bill.
    But in that connection, there is a big difference between 
the two pieces of legislation. The House bill is a 10 year 
bill, as compared to a Senate 5 year bill, in effect, because 
most of the funding in the Senate bill occurs up front. That 
is, the majority of the funding is spent in the earliest years 
of the life of the Senate bill, whereas it seems to be spaced 
out more evenly over time in the House bill.
    So I wonder if you have any observations to make about what 
the considerations of the Administration will be on that 
subject. I am glad to see the Administration becoming involved 
in the process and giving us the benefit of your thoughts. And 
while it may be outside the purview of this hearing, it does 
have funding implications, and it does have implications for 
our appropriations bill. Do you have any comments about that, 
Madam Secretary?
    Secretary Veneman. I do, Senator, and I appreciate the 
question, because I think it is a very important issue that, 
not only I have been talking about on behalf of the 
Administration, but the President has commented on this as 
well. As was indicated, the $73.5 billion was included in the 
budget. We have made it clear that the provision contained in 
the farm bill ought to reflect the House bill, and that this 
funding should be spent relatively evenly over the 10 year 
period. We are concerned about the fact that the Senate bill 
would front-load the spending, thereby undermining the baseline 
for agriculture in the out years. We believe that the 
conference should come out with a bill that is similar to the 
House bill, in the respect that it more evenly spends the 
amount of money allocated. I believe the bill that you offered, 
Senator, did the same thing, in terms of spending relatively 
evenly over the time period allotted.
    We do not believe it is wise to front-load the spending, as 
I said, and we believe that it should be spent evenly or 
relatively evenly over the 10 year period.

                        FARM BILL IMPLEMENTATION

    Senator Cochran. One other consequence of the new farm bill 
would be its potential impact on the costs of Farm Service 
Agency staffing and operations, and information technology 
requirements. Will additional funding be needed from this 
committee to implement farm bill programs in a timely manner? 
Is the department reviewing these needs to help us understand 
what the funding implications might be of the new farm bill in 
that connection?
    Secretary Veneman. Senator, we are reviewing all of these 
issues. Our staffing needs are going to be dependent upon what 
is ultimately agreed to by the Congress and signed by the 
President, in terms of a new farm bill, and whether it involves 
a lot of new programs.
    As I indicated in my opening remarks, one of the things 
that this budget does is it includes a fair amount of money for 
new technology. We believe that new technology is extremely 
important to the future of our Administration of the farm 
programs. The ability of farmers, for example, to access 
information online, to apply online, to use e-Government-type 
solutions for better delivery of services, is not just a matter 
of increased people, but it is how we are able to develop the 
systems to administer our programs.
    Recently, when I was in Georgia, I was able to visit with a 
seminar of people that were coming together from the FSA and 
looking at different ways to get all our maps online. Now, pen 
and ink maps of all the farms are still maintained in most 
county offices. There is an ongoing process to get all of the 
maps online so that they can be integrated with NRCS maps, so 
that we can have better coordination of our services, create a 
more farmer-friendly ability to deliver our programs, give 
farmers the ability to access information from their home 
computers and the ability to deal with their farm decisions.
    So I believe that we are going to have to look at staffing 
and technology together for the future, and it is going to 
depend on what we end up getting in the overall farm bill.
    We do maintain in this budget consistent staffing for the 
Farm Service Agency, anticipating that the implementation of a 
farm bill is going to take a considerable amount of time and 
effort on the part of our employees. We are going to be looking 
at, as you suggest, what the needs are going to be in the long 
term, given the fact that we will have a new farm policy to 
administer.
    Senator Cochran. Thank you. Thank you, Mr. Chairman.
    Senator Kohl. Thank you, Senator Cochran. Senator Byrd?

                            HUMANE SLAUGHTER

    Senator Byrd. Thank you, Mr. Chairman. Madam Secretary, the 
fiscal year 2001 Supplemental Appropriations Bill included $3 
million for activities related to the treatment of animals, of 
which no less than $1 million was to be used to enhance humane 
slaughter practices as established under the jurisdiction of 
the Food Safety Inspection Service. Can you explain how those 
funds have been allocated and the status of the actions 
initiated by the supplemental funding?
    Secretary Veneman. Senator, since that involves such a 
specific line item, I am going to have Mr. Dewhurst answer that 
question for me.
    Senator Byrd. Very well. Mr. Dewhurst?
    Mr. Dewhurst. Senator, of those funds, $1,250,000 has been 
allocated to the Food Safety and Inspection Service. The FSIS 
has used those funds to hire an additional 17 veterinary 
medical specialists. These are folks who move from plant to 
plant and who have humane slaughter as their primary 
responsibility. They had been brought into the system to make 
sure that every effort is stepped up and that the agency's 
responsibilities in that area are carried out.
    An additional $1,250,000 has been allocated to the Animal 
and Plant Health Inspection Service to strengthen their work in 
support of the Animal Welfare Act. They have hired some 
additional staff, they are doing some additional inspections, 
and they are doing a large amount of additional training for 
animal handlers in this country to assure that humane methods 
are used.
    Consistent with what the Congress asked us to do, the 
remainder of the money has been allocated to the Agricultural 
Research Service and to the Cooperative State Research, 
Education, and Extension Service for research in technologies 
that would encourage the humane slaughter and handling of 
animals.
    So the money has been distributed and is being used 
consistent with congressional intent. We owe the Congress a 
report on that subject. We will have that report in short order 
and will give you a much more detailed review.
    Senator Byrd. Well, I was going to ask the question about 
the Senate report that was recommended by the Supplemental 
Appropriations Bill, the committee report--that bill fiscal 
year 2001. And at this point, no report has yet reached this 
committee.
    When you said ``in short order,'' what do you mean by that? 
How soon may this committee expect that report?
    Mr. Dewhurst. It is very hard to say exactly when, since we 
have not received it from the agencies yet. Can I say within 
the next 3 to 4 weeks, and that we will do everything we can to 
get it earlier than that.
    Senator Byrd. Very well. And would you please write me a 
letter to tell me that report is submitted so that I know it is 
being submitted and so that I will be able to read it?
    Mr. Dewhurst. Yes, sir.
    [The information follows:]

                       Letter From Ann M. Veneman

                                   Office of the Secretary,
                                     Washington, DC, April 4, 2002.
Hon. Robert C. Byrd,
Chairman, Committee on Appropriations, United States Senate, S-128, 
        U.S. Capitol, Washington, DC.
    Dear Mr. Chairman: The Senate Report (S. Rpt. 107-33) accompanying 
the fiscal year 2001 Supplemental Appropriations Act (Public Law 107-
20), directed the Secretary of Agriculture to ``provide a report to the 
Committee on Appropriations of the House and the Senate as soon as 
possible on activities of the Animal and Plant Health Inspection 
Service, the Food Safety and Inspection Service, and agencies under the 
jurisdiction of the Under Secretary for Research, Education and 
Economics regarding reported cases of inhumane animal treatment, the 
response of USDA regulatory agencies, and the research, development, 
and promotion of technologies to help reduce the incidence of such 
treatment.'' This report is enclosed.
    We have provided copies of this Report to Senator Stevens and all 
Members of the Committee, in addition to Members of the House Committee 
on Appropriations. If you have any questions or comments, or would like 
us to brief you on this subject, please feel free to call the USDA 
Office of Congressional Relations at (202) 720-7095.
    Sincerely,
                                            Ann M. Veneman,
                                                         Secretary.

    Senator Byrd. You will do that? How many slaughter plants 
are there in this country?
    Mr. Dewhurst. Speaking from memory, I think it is about 
8,000.
    Senator Byrd. Eight thousand?
    Mr. Dewhurst. Approximately.
    Senator Byrd. There are those who suggest that the only way 
to assure that animals are not being treated cruelly in 
slaughter plants is to assign a Federal inspector to each plant 
to provide continuous observation of stunning and killing 
operations. If you are correct in that there are 8,000 plants, 
this probably is not a very viable suggestion.
    If full-time inspectors cannot be continuously placed in 
plants, what assurances can you give, Madam Secretary, that all 
animals will be treated humanely and that cases of animals 
being butchered while still alive or facing other unspeakable 
torments will not again occur?
    Secretary Veneman. We have inspectors in each of our meat 
plants. We just looked at some information. It is not 8,000, 
but 6,000 plants of which 950 are slaughter plants and the 
remaining are processing establishments, and we have 7,600 
full-time inspectors. Meat plants do have inspectors present 
when they are running, part of our meat inspectors' obligation 
is to look at the slaughter methods and review the slaughter 
methods to ensure that the animals are being properly handled.
    Senator Byrd. So what do you propose to do to tighten up 
this operation and make as sure as possible that animals are 
being slaughtered humanely?
    Secretary Veneman. We are continuing to train inspectors to 
ensure that they have the latest information on humane 
slaughter, to ensure that they are continually aware of the 
issues regarding humane slaughter. I recall a series of 
articles last year where industry is also doing additional 
training of their own employees to ensure humane slaughter 
practices are being maintained in meat plants.
    Senator Byrd. Do you have inspection personnel that can 
visit slaughter establishments on a regular basis?
    Secretary Veneman. As Mr. Dewhurst indicated, we do have an 
additional 17 veterinary medical specialists who were assigned 
from the additional supplemental funding that do oversee the 
in-plant enforcement of humane slaughter. So that is a new 
addition.
    Senator Byrd. Understand that between January 1998 and 
January of 2002, 16 agency actions were taken to withhold or 
suspend plant operations for violations of the Humane Methods 
of Slaughter Act. What comment do you have on that? That is 4 
years. Over a period of 4 years, over 16 agency actions were 
taken to withhold or suspend plant operations for violations of 
the Humane Methods of Slaughter Act.
    Secretary Veneman. Again, sir, I believe that, certainly, 
there is always room for improvement, but the fact of the 
matter remains that there are these additional inspectors that 
we have put in place to oversee the humane slaughter issues. We 
are continuing to improve education of our in-plant inspectors 
on the issues relating to humane slaughter, and we are going to 
continue to pursue humane slaughter issues to assure that we 
are doing everything possible to maintain humane slaughter 
practices in the plants.
    Senator Byrd. What was the total number of violations or 
possible violations of the Humane Methods of Slaughter Act that 
were reported for corrective action or further action during 
that period of 4 years?
    Secretary Veneman. Senator, I do not know the answer to 
that question. We would have to get that information to you in 
writing.
    [The information follows:]

    The report shows that in the last 4 years, 16 facilities were 
suspended from receiving Federal meat and poultry inspection services 
due to systemic non-compliance with humane handling or slaughter 
requirements. FSIS also issued 117 warnings of non-compliance since 
October 2001, which have been corrected to prevent reoccurrence.

    Senator Byrd. Very well. Does anyone at the table have more 
to say on this question? Can anyone offer me any further 
information?
    Madam Secretary, I noted you gave the committee a statement 
numbering 24 pages. Not one word did I see in that statement 
about the humane methods of Slaughter Act. I may be mistaken. 
Perhaps there is something in it, but I have glanced, at least 
cursorily, through the statement, and there has not been a word 
said about this subject matter. Is it not important enough to 
include in your statement--that animals were not being 
slaughtered humanely?
    Secretary Veneman. As I indicated earlier, I had read some 
of the articles earlier last year. As I indicated in my 
statement, we are committed, through our Food Safety and 
Inspection Service, to the highest levels of funding ever in 
that agency, which is the agency that oversees the humane 
slaughter of animals. We have included additional inspectors, 
as I have indicated in my earlier remarks. We take this issue 
very seriously, as we do food safety issues and all of the 
issues that we deal with in our Department. We will continue to 
do everything we can to improve these systems and to enhance 
the education and training of our employees in this area.
    Senator Byrd. Well, now, the $3 million, I believe, was 
included in my request in the supplemental. How much is the 
President asking for in this budget, the 2003 budget, for this 
purpose?
    Secretary Veneman. Go ahead.
    Mr. Dewhurst. The President's budget includes enough money 
to carry forward the things we are doing with the $3 million. 
In other words, there is money in the FSIS budget to continue 
to employ the additional veterinary inspectors that we have 
hired with the money. I do not want to mislead you; there is 
not an increase, but there is money in the President's budget 
to carry on the commitments we made with the $3 million.
    Senator Byrd. Do you need additional inspectors to enhance 
the proper treatment of animals in the slaughtering plants? Do 
you need additional inspectors? I think this is a matter of 
considerable importance, and I am sure that the people of this 
country support my conclusion in that respect.
    Madam Secretary, where in your statement is there 
information about this matter? The report that the Committee 
requested in the 2001 supplemental has not been received by 
this Committee. Now, do you need additional inspectors to do 
the proper job? These animals cannot speak for themselves. They 
suffer pain, just as do human beings. Step on a cat's tail. 
Step on the dog's foot. And the answer is: pain. I am waiting 
for your answer. Could you use additional inspectors?
    Secretary Veneman. Sir, we have included in this budget the 
total number of inspectors that the agency has said that they 
need to properly do the job that they have been asked to do. 
What we have said is that the budget fully funds the inspectors 
that the agency indicates that they will need to do food safety 
inspections. So my best advice from the agency is that what we 
have requested in this budget is the total number of inspectors 
that we will need.
    Senator Byrd. And that number is what?
    Secretary Veneman. Seventy-six hundred.
    Senator Byrd. Not 7,600 looking after the humane slaughter 
practices?
    Secretary Veneman. Seventy-six hundred.
    Senator Byrd. I do not think you are saying that, are you?
    Secretary Veneman. Seventy-six hundred total inspectors, 
and the inspectors have a responsibility for overseeing humane 
slaughter, as well as meat inspection within the plants. In 
addition, as I indicated, there have been 17 veterinary medical 
specialists who have been hired to oversee humane slaughter and 
the practices that are going on in the plants, in other words, 
an extra layer just to review this particular issue.
    Senator Byrd. And will the 17 employed by the $3 million 
that I included in the----
    Secretary Veneman. Yes, sir, that is my understanding.
    Senator Byrd. Well, let us find out if we need more.
    Secretary Veneman. We will be happy to do that. We will be 
happy to go back to our Food Safety and Inspection Service and 
determine whether or not additional employees are needed.
    Senator Byrd. For what? What am I asking for?
    Secretary Veneman. For the humane slaughter review.
    Senator Byrd. Right. And to enforce all of the laws that 
are already in the book. Alright, then we will get the report 
then within 3 weeks that was requested in the 2001 
supplemental----
    Secretary Veneman. Yes, we will get that report to you as 
quickly as possible, and hopefully within the time period you 
have indicated. We will do everything we can to get that report 
done as quickly as possible.
    Senator Byrd. You indicate--there are some facts and 
figures in that report in response to some of the questions 
that I have asked.
    Secretary Veneman. Yes, sir.
    Senator Byrd. For example, will these inspectors need to be 
veterinarians to properly serve this function? Well new 
inspectors will be required to meet the requirement of having a 
Federal inspector in each plant to provide continuous 
observation of stunning and killing operations. According to 
news stories that you yourselves have read, some of these 
animals are being--they are not being killed.
    Be prepared to answer some questions on this subject. These 
animals have nobody to speak for them, and the agencies need to 
take seriously this subcommittee's interest in this matter.
    The scriptures say that, ``The righteous man regardeth the 
life of his beasts.'' Think about it.
    Mr. Chairman, I have further questions, but I have taken 
enough time. I am not very satisfied with the responses. I will 
have to say that. It does not seem to be a concern down at the 
agency that many of us have in this matter and of the fact that 
the American people expect the agency to do its work in this 
regard. We should not stand by casually and allow animals to be 
brutalized in the slaughter plants. They should be slaughtered 
humanely and in accordance with the law.
    This subcommittee is going to expect you, Madam Secretary, 
to see that the agency shapes up in this regard and does these 
things. We are concerned. I hope you will be, too.
    Secretary Veneman. Sir, I am concerned, and we will do 
everything possible to make sure the slaughter plants are in 
compliance with the law. That is our obligation.
    Senator Byrd. I thank you, and we will expect the report on 
time. Thank you.
    Senator Kohl. Thank you, Senator Byrd. Senator Craig?

                           RURAL DEVELOPMENT

    Senator Craig. Chairman, thank you. Madam Secretary, one of 
the things that has happened in public land and rural States 
like mine, as access to public-land resources have declined 
dramatically over the last decade, is substantial dislocation 
of people and negative economic impact in many of these 
communities that are not only ag-related, but they are forest-
related, mining-related, and it is largely our people have been 
locked off the land and away from those resources by public 
policy, substantial economic dislocation has occurred.
    Rural economic development is critical, whether it be in 
that blended kind of economy that I have just spoken of, or a 
purely ag-economy. As agriculture has consolidated, there are 
fewer people living in these communities. There is a struggle 
to keep infrastructure whole and, in doing so, to be able to go 
out then and attract other kinds of industries to come into 
those communities.
    In the 2003 budget, we see a fairly flat funding. And while 
I understand that to some degree, I would like an explanation 
as to why in the relatively flat funding we see a reduction 
from $4.1 billion in 2002 to $2.6 billion in 2003 in the direct 
loans and guaranteed loans for rural electric systems, and the 
explanation is reflective of anticipated demand. So if you 
could explain that to me.
    Also, then, if we are at flat funding and we have 
dislocated or readjusted about $1.5 billion, where did that 
money go, and does it stay within rural development?
    Secretary Veneman. I am going to have Mr. Dewhurst answer 
the specifics on the budget.
    Senator Craig. Okay.
    Mr. Dewhurst. Well, you are correct, Senator. For electric 
loans in this budget, we had $2.6 billion in 2001. We have $4.1 
billion in 2002. The 2003 budget is back at essentially the 
$2.6 billion level. We had a number of programs in the 2002 
bill that were increased significantly in anticipation of 
demand for those programs. At the time we were putting this 
budget together last fall, demand for electric loans had not 
appeared. We did not have the resources to budget for that 
demand in 2003 without cutting other programs. So the budget 
put those programs back at the 2001 level.
    One of the things that is happening to us in rural 
development in our credit programs is that the subsidy costs of 
these programs are increasing, because as we are doing a more 
thorough job of auditing our books, and we are finding out that 
the risks in some of these loans are higher than we had 
anticipated. So the budget authority that you provide in the 
Appropriations Act to support these programs is becoming more 
precious. Where we did not have absolute proof of demand, 
although we had rising costs, we had to be fairly conservative 
in the funding levels for the programs.

                   RURAL WATER AND WASTE LOAN PROGRAM

    Senator Craig. One of the areas of high concern, I think, 
to all of us in these rural areas, especially with many of them 
just financially strapped--I mean, I have a couple of small 
communities in Idaho who are being looked at to meet water 
standards, and I am suggesting that EPA--we have one where the 
EPA wants to level a fine of $10,000 a day to a very small 
community that has less than $10,000 in its treasury. Now, I 
think it is pretty damned counterproductive for that to happen. 
What they are in need of is a grant to help them put in a water 
system, not to sit there and sock them around as a Federal 
agency is doing at this moment. In the area of water and waste 
water programs, are we at level or below-level funding?
    Mr. Dewhurst. I will just say that we are a little below 
the 2002 level and about the same as the 2001 level. We need 
loans and grants for rural water and waste-disposal systems. Of 
course, what we do with the community is help them figure out 
what they can afford by way of a loan.
    Senator Craig. Exactly.
    Mr. Dewhurst. We then make the difference in a grant. The 
grants, of course, count against the budget, dollar for dollar. 
This may be interesting, in fiscal year 2002, we have $894 
million for the water and waste loan program. It costs us loan 
level of $62 million in budget authority. That is the 
anticipated subsidy. In the 2003 budget, you only have $814 
million for the loan level. But it costs us $92 million in 
budget authority. In other words, we had to find $30 million in 
increased funds within our budget targets even to finance the 
$814 million loan level. That is because the subsidy costs of 
the program have increased.
    So I do not have a fancy answer for you, other than to say 
we used every dollar we had within the budget targets to try to 
do the best we could for the water and sewer systems budget of 
the Department.
    Secretary Veneman. Senator, can I just add one more thing 
to that? I do understand the issues with regard to some of 
these small rural communities looking at enforcement actions. 
We have had some success in this regard, and we would be happy 
to work with you and with some of your communities where we can 
put our EPA and USDA folks together to help people try to 
comply with the EPA requirements. We have been working 
together, Administrator Whitman and I, on these kinds of 
issues.

                     RURAL DEVELOPMENT COORDINATION

    Senator Craig. Well, it is good news to think that we have 
agencies that are actually talking to each other. That is a 
rarity in this town, especially when sometimes they run 
parallel to each other and do not do so. So actually, with EPA 
doing what I am not suggesting it not do, other than it deal in 
a softer-glove approach in causing and directing folks to get 
things done, to have USDA talking with them and seeing where 
they can coordinate can and should be a very real plus.
    In the new farm bill, when it emerges, I trust that there 
will a substantially stronger rural development title in there. 
I have been a part of putting some authorizing language in 
there, as have others--National Rural Development Partnership 
Act, I and others have crafted and we put it in there. One of 
the things that is true there, and I think will be helpful to 
us, is to create a more seamless relationship between local, 
State, and Federal cooperation and agencies. Now, my folks say 
that the greater bounce for the buck comes when they receive 
block grants that are specific in character and they can direct 
those resources. The State Department of Agriculture in Idaho 
expresses that. Do you see that as an important or a positive 
approach in moving progressively in these areas of rural 
development?
    Secretary Veneman. Absolutely, Senator. We talked a lot 
about the need to look differently at rural communities in the 
policy book that we put out, and I could not agree with you 
more that we need to continually review our programs and our 
policies with regard to rural communities and how we can best 
help them. Part of that is developing the infrastructure so 
that they are not left behind, but a lot of it is also 
utilizing collaborative approach with rural communities by 
having local input into decision making. I think we saw that in 
the implementation of the Secure Rural Schools Self-
Determination Act of 2000. Last December, you came to the 
Department to join me in announcing the release of $384 million 
in payments to States for schools, road projects, and forest 
stewardship projects, where we have and will continue to 
collaborate with local communities. I could not agree more that 
that is extremely important.
    We did have, in the emergency supplemental bill that was 
passed by the Congress and signed by the President in August, 
specific block grants to State Departments of Agriculture, and 
as you indicated, that has been very popular with the State 
Departments of Agriculture. They were in town this week, and 
they again expressed this to me. Whether or not that will 
ultimately end up as something that emerges from the bill, I am 
not sure, but we certainly do have a number of programs that 
assist States in specific areas, particularly the State 
Departments of Agriculture and the pest and disease prevention 
and eradication efforts. I know that there is increasing 
interest in these kinds of programs, as well.
    But the collaboration, in my view, has become ever more 
important since the events of September 11. If we are to have 
homeland security work correctly, we need to have local, State, 
and Federal officials all working together, not only to prevent 
any unfortunate circumstances, but to react in the event that 
something might happen. So I absolutely agree that 
collaboration has to be stronger than ever.
    Senator Craig. Well, thank you very much, Madam Secretary. 
Several of my colleagues have covered other questions that I 
think are of concern to us as it relates to the overall budget 
for the coming year. As I have mentioned earlier, and as I 
mentioned in my opening statement, I think timeliness this year 
and sending the right messages are going to be critically 
important as our agricultural producers struggle to get back on 
their feet and need to get their loan packages put together, an 
element of certainty is critical, and that may not be that 
clear as we struggle to conference a new farm policy. So I 
think that we, through the budget, can offer that kind of 
stability or anticipation, maybe better than the policy itself 
will.
    Thank you.
    Senator Kohl. Thank you, Senator Craig. Senator Durbin?

 FARM BILL PROPOSAL--EXTENDING FOOD STAMP BENEFITS TO LEGAL IMMIGRANTS

    Senator Durbin. Thank you, Mr. Chairman. Madam Secretary, 
thank you for joining us. In your opening statement, you 
reiterated the Administration's position of extending food 
stamps to legal immigrants who have been here for 5 years. In 
the farm bill, which Senator Harkin brought to the floor, we 
cosponsored an amendment with Senator Lugar that established 
that--the vote was 96 to 1 in the Senate. We were very proud of 
that.
    I am asking the Administration, particularly if you would 
be willing to write a letter to the conferrees, since it is not 
included in the House version, to make it clear that that is 
the Administration position and that you would like to see this 
in the final farm bill as enacted.
    Secretary Veneman. Well, I think our position on that is 
very clear. It is in the 2003 budget. If we need to write an 
additional letter, we can certainly reiterate what we have 
already stated.
    [The information follows:]

                       Letter From Ann M. Veneman

         Secretary of Agriculture, Office of the Secretary,
                                     Washington DC, March 13, 2002.
Hon. Larry Combest,
Chairman, Committee on Agriculture, U.S. House of Representatives, 1026 
        Longworth House Office Building, Washington, DC.
    Dear Chairman Combest: At this critical point for the farm bill, I 
would like to reiterate the Administration's main requirements for 
forward-looking, bipartisan consensus legislation.
    Farm bill funding is our top concern, since it affects all policy. 
The Administration believes that the new farm bill must honor the 
limits of the Congressional Budget Resolution. Consistent with this 
Resolution, Congress should not pass a farm bill that exceeds $73.5 
billion. We will strongly oppose any effort by the Conferees to ignore 
the Congress' own spending limits.
    The Senate-passed bill frontloads the 10-year funding into the 
first 5 years, placing the future of farm programs in jeopardy for the 
second 5 years. The Senate bill also sharply reduces or terminates 
funding for roughly fifteen rural, conservation and commodity programs 
after 2006 in order to compensate for this ill-advised frontloading. We 
will strongly oppose any frontloaded farm bill that allocates more than 
$36.8 billion in the first 5 years.
    The farm bill must support farmers without encouraging 
overproduction and further depressing prices. The Administration 
continues to support marketing loan rates--an existing countercyclical 
program--that are equivalent to those contained in the House bill.
    The Administration supports a strong, reliable safety net. The 
House bill's increased funding for fixed decoupled payments ensures 
farmers a consistent, predictable income safety net while maintaining 
market-oriented planting flexibility.
    The Administration supports additional risk management tools to 
help non-program crop producers, and has proposed the use of farm 
savings accounts to complement traditional farm support programs. The 
Administration urges expansion of the Senate's farm savings account 
pilot program in order to provide a broader base of assistance without 
causing planting and marketing distortions.
    The Administration has stressed the absolutely critical importance 
of increased trade to America's farmers, and we have strongly urged 
that the new farm bill must support trade and be consistent with our 
international obligations. The House bill's fixed decoupled payments 
are ``green box'' and meet our trade obligations, while Senate 
provisions increase the likelihood of U.S. non-compliance. Both the 
House and the Senate have worked hard to include ``circuit breaker'' 
provisions to help ensure compliance with our WTO obligations. The USDA 
has suggested some modifications to the Senate's language, which we ask 
the Conferees to consider.
    The Administration strongly objects to any changes in existing law 
regulating the sale of food and medicines to Cuba. We oppose repeal of 
prohibition on private financing by U.S. persons of sales of 
agricultural commodities to Cuba.
    The Administration continues to oppose country of origin labeling. 
Provisions in both bills potentially violate international trade 
agreements, raise costs for consumers, particularly low-income 
Americans, and does nothing for food safety.
    The Administration supports a Farm Bill with a strong conservation 
title that bolsters working land stewardship, supplements farmers' and 
ranchers' income, improves water quality, provides wildlife habitat, 
conserves water and protects open space. We have made a particular 
commitment to conservation programs for working lands, such as EQIP and 
a new Grasslands Reserve Program. We also support growth in established 
conservation programs such as CRP, WRP, FPP and WHIP. However, we are 
concerned that the Senate's new Conservation Security Program commits 
to open-ended spending risking future funding for these established 
programs, without assuring cost effective environmental benefits. We 
suggest a pilot approach to develop tools for measuring benefits and 
establish justifiable payment rates.
    We also commend the Senate for including a provision making legal 
aliens living in the U.S. for at least 5 years eligible for food 
stamps. This is a key component of the President's budget, and we 
encourage the Conferees to include it in the final bill. The 
Administration has also proposed an improved Quality Control system 
that we believe, represents an effective and balanced approach to 
ensuring payment accuracy in the Food Stamp Program.
    Achieving a solid farm bill to assist farmers and ranchers in 
challenging times is of top priority for the Administration. The 
Administration looks forward to working with you toward an expeditious 
conclusion to the conference and a bipartisan farm bill that will best 
help America's producers in the coming years.
            Sincerely,
                                                    Ann M. Veneman.

    Senator Durbin. I hope you can do it. Thank you. Madam 
Secretary, when my wife and I were first married, I gave--her 
first Christmas gift was a puppy. I bought her a little black 
puppy. It was a Newfoundland. And I should have looked ahead, 
because in a matter of about 8 months, it turned into 120-pound 
dog. And it used to push its way out the back door in 
Springfield, Illinois, and get in a world of trouble--stealing 
balls off the playground from kids, and dragging laundry off 
lines--and we would always get phone calls, and I always knew 
when the phone conversation started out, ``Do you own a big, 
black dog,'' that we were in trouble.
    You own a big dog, Madam Secretary. It is food safety. And 
every time that phone rings, you are in trouble, because you 
are dealing with an issue that is spread over 12 different 
Federal agencies, 35 different laws, 28 different committees, 
as I said in my opening statement.
    You just stated that if we are going to be serious about 
homeland security, we have to coordinate things. Well, I have 
heard from the President, the Vice President, Secretary 
Thompson, and from you, as well, that food safety and security 
is one of those things that needs to be coordinated. And I 
sincerely hope that--my plea-is to try to move this 
Administration toward consolidating the food safety and 
security under one agency, which is consistent with President 
Bush's campaign pledge, will really be part of next year's 
proposal. It clearly is not part of this year's proposal. And 
it leaves a lot of questions unresolved.

            FOOD SAFETY IN THE NATIONAL SCHOOL LUNCH PROGRAM

    Let me give you one specific example, the school lunch 
program. Each day today, 28 million kids will eat school 
lunches. And it is shocking to learn that the number of food-
borne illnesses linked to school lunches increased by 56 
percent between 1990 and 1997. Now, this was before you came on 
the scene and had this responsibility, but it has been clear to 
me that the Federal agencies lack the necessary authority to 
deal with something as serious as food-borne illnesses in the 
school-lunch program, such as recall authority, which seems so 
basic, that if someone is supplying a food product to the 
school lunch program, it is found to be contaminated and to 
make children ill, you do not have the authority to recall that 
product that has been distributed to other schools. It does not 
make any sense. And there is little or no coordination between 
the State and the local governments in enforcing any of these 
laws relative to the school lunch program.
    As you sit there, can you point to anything that is 
currently being done in your department in this area of food 
safety in school lunch programs that can lead me to believe 
that you are sensitive to this and moving toward dealing with 
the problem?
    Secretary Veneman. We have been looking very carefully at 
the school lunch program and food safety. In fact, I have 
directed our Agricultural Marketing Service, which does the 
actual procurement of the commodities served in the school 
lunch program, to work directly with our Food and Nutrition 
Service and the Food Safety and Inspection Service personnel so 
that we have a consolidated and coordinated effort in looking 
at the school lunch food safety issues. These agencies have 
worked in their stove pipes in the past, and we want to make 
sure that we have a coordinated food safety effort for school 
lunch programs, and for school lunch purchases and for school 
lunch contracts. These agencies will work together to ensure 
the safety of the food served in this program, and ensure that 
any decisions made, are made jointly with input from all of 
these agencies.
    Now, I had not heard the statistic you talked about, in 
terms of food-borne illness, but we know, from CDC studies, 
that over 80 percent of food-borne illness is from improper 
handling of product. If these statistics are correct, then I 
think we need to make sure that people in the school lunch 
programs that are serving our children school lunches are 
properly trained in how to handle food.
    Senator Durbin. That is right.
    Secretary Veneman. It is food handling that is the biggest 
problem.
    Senator Durbin. It is.
    Secretary Veneman. People are not trained today in how to 
handle food, and we need to make sure that people in our 
schools are properly handling the food.

                      FOOD SAFETY RECALL AUTHORITY

    Senator Durbin. When your predecessor came before my 
Subcommittee in Government Affairs and spoke of food safety, he 
made that point as well, but he also said, ``I really wish I 
had the authority--when I found out that there was contaminated 
food being distributed to schools across America--that I had 
the authority to recall that food. I do not have that 
authority, under law.'' Americans, families, mothers and 
fathers are shocked to know that. Would that not be an 
important tool and weapon for you to have in those cases where 
you deal with contaminated food that could endanger school 
children?
    Secretary Veneman. Well, it is an authority that I think is 
certainly worth talking about. On the other hand, I will say 
that, without the authority, we have been able to get, through 
the voluntary recall process, most product that needs to be 
recalled off the shelves. I recall when this was a Health 
Department issue, not a USDA issue. I was in California in the 
State Department of Food and Agriculture at the time of the 
processed strawberry issue which I believe was in 1997. Through 
working with the Health Departments and working with trace-back 
of the product, USDA was able to get most of the product 
voluntarily recalled--I believe all of it.
    Senator Durbin. Secretary, I do not think you could sell 
that position to any group of parents in America. To tell them 
that you do not need the authority to recall contaminated food 
that has been distributed to schools, will be hard to explain. 
I just--I do not think you are going to be able to sell that, 
and I really hope you will take another look at it, because it 
is one of the proposals which I am going to bring in the area 
of food safety.
    I am giving you a tool which you may never need or never 
use, but when you need it, you need it right now. And a lot of 
parents are counting on you because of your responsibility in 
the school lunch.

                                FOOD AID

    Let me, if I can do two other quick questions, and I thank 
the committee for their forbearance. The Administration has 
made a significant policy decision in this budget when it comes 
to food aid programs not to use surplus commodities. Now, they 
have moved around some money to provide for food aid overseas 
from other sources. The net result of it--and I was at a 
hearing yesterday with the USAID administrator, Mr. Natsios--
the net result of this, Senator Harkin, is that we will provide 
less food assistance as a Nation to the world next year than we 
do this year. I do not think the world is going on a diet. I 
think the world is still hungry. And, in fact, more children 
are going to be born into it. We will put less food aid in that 
world, and I think that is a bad decision.
    But let me ask you, just from an economic viewpoint, going 
back to some economics courses I took many years ago, if we 
have low farm prices and a surplus that is not being utilized 
and used, does that surplus not act as a damper on prices and 
keep them down? Is it not in the best interest of our 
production agriculture for us to use our surplus, exhaust our 
surplus, not have carryover, so that prices can rise, as 
opposed to be diminished by the Administration's new policy of 
not using surplus commodities?
    Secretary Veneman. Let me just clarify the Administration's 
position. The Administration's position is founded on the fact 
that it is better to use Congressionally-allocated funds 
through Title II of Public Law 480, rather than using section 
416(b) authority through mandatory CCC funding for the bulk of 
our food aid donations. This budget allocates additional 
amounts into the Public Law 480 Title II account as opposed to 
depending upon section 416(b) for substantial amounts of our 
donations.
    Now, at the same time, USDA retains the section 416(b) 
authority within the budget. It talks about using section 
416(b) specifically, I believe, for the donation of nonfat 
dried milk, which we do have in surplus. While the budget 
anticipates the use primarily of Public Law 480 for the food 
aid purchases that are needed, our food aid authorities, 
contained in section 416(b) are still an available tool. It is 
just that we do not anticipate using it to the degree that it 
has been used in the past, but rather shifting that to the 
Public Law 480 Title II program.
    Senator Durbin. Basic question: Would a larger surplus of a 
commodity reduce the price on the market or raise the price on 
the market?
    Secretary Veneman. Well, basic economics would say it 
reduces the price on the market.
    Senator Durbin. And so reducing the size of the surplus 
helps bring up market prices for farmers across America, 
correct?
    Secretary Veneman. Yes.
    Senator Durbin. And if the Administration's policy is not 
going to reduce the size of the surplus, then it is going to 
keep farm prices down and increase the cost of the farm 
program, correct?
    Secretary Veneman. Well, Senator, we are not undermining 
our commitment to food aid in this country. I do not want, in 
any way, to leave that impression. The question is through what 
authority should food aid be funded? Is it going to be funded 
through Public Law 480 Title II, which is discretionary 
funding, or should it primarily be funded through section 
416(b), which is mandatory CCC funding. I think that is where 
the debate is, not our commitment to helping people around the 
world and helping our farmers by getting----
    Senator Durbin. I want to pursue this with you, because I 
think if Mr. Natsios' comments yesterday, that we will provide 
less food to a hungry world next year--this seems like a very 
flawed approach.
    I have several other questions, but I have taken too much 
time. Thank you, Mr. Chairman.
    Senator Kohl. Thank you, Senator Durbin. Senator Specter?

                   STATEMENT OF SENATOR ARLEN SPECTER

    Senator Specter. Thank you, Mr. Chairman. I join my 
colleagues in welcoming you here, Madam Secretary, you and your 
associates. How are you enjoying the job?
    Secretary Veneman. It depends on the day.
    Senator Specter. Well, aside from today, how are you----
    Secretary Veneman. It is going very well.
    Senator Specter. This is the annual ritual, Madam 
Secretary. You will get used to it. As they said to Mrs. 
Lincoln, ``Aside from that, how did you like the play?''
    But day in and day out, do you find it rewarding?
    Secretary Veneman. It is very rewarding. We have a very 
diverse Department covering everything from farm programs to 
food and nutrition programs to food safety, as was talked 
about, so we really have a very diverse group of issues which 
we are dealing with, and it is very rewarding to be able to 
serve in this time in our country.

                           FARM BILL FUNDING

    Senator Specter. I see Senator Harkin here--he and I work 
very closely on the Subcommittee on Labor, Health, Human 
Services, and Education--and I infer he has not questioned yet, 
so what do you think of the Harkin Farm Bill?
    How much too expensive is it?
    Secretary Veneman. Well, as I indicated----
    Senator Specter. It is called a loaded question, Madam 
Secretary.
    Senator Harkin taught me how to ask those.
    Secretary Veneman. As I indicated in my earlier comments 
with Senator Cochran, we are concerned about spending the money 
that has been allocated by the Budget Committee relatively 
evenly over the 10 years. I think that the principles that the 
Administration has outlined for the farm bill have been clearly 
stated, and are keeping within the budget agreement and 
allocating that money evenly over the 5 years, making sure that 
we have a safety net that does not overly increase production, 
thereby depressing prices, making sure that the farm bill is 
consistent with our trade obligations, and making sure that we 
have good conservation practices. The Administration is hopeful 
that all of these principles, as well as the possibility of 
creating another tool for farmers and ranchers through the 
establishment of farm savings accounts, can become part of the 
final farm bill that is being discussed by conference 
committee.
    Senator Specter. Well, I know the Administration will weigh 
in at the conference, and we urge you to do that. It was a 
tough vote. I supported the bill. I think we need to go to 
conference. I was concerned about the cost. Many of the 
programs there were very important for the Nation. There was a 
step forward on limiting the payments and trying to avoid 
having the giant farmers get so much of the money. Nationally, 
it is a critical bill.
    I spent my early days in the State of Kansas, worked on a 
farm as a teenager, and I know how hard the work is. And the 
farmers do need support. So for Pennsylvania, the fruit growers 
needed a little help.

                             DAIRY COMPACT

    They got a little, not a whole lot. The dairy farmers 
needed help. We have been fighting for a compact, but do not 
seem to be able to get one. We have--when I said that I worked 
closely with Senator Harkin, I did not mean to exclude working 
closely with Senator Cochran and Senator Kohl. Senator Cochran 
and I, for the last 22 years, have sat next to each other on 
the Appropriations Committee. And Senator Kohl and I, elected 
in 1988 and worked very closely on Ruby Ridge where he was the 
author of great changes and modifications in the use of deadly 
force, but he has been a very tough deadly-forcer on the 
compact issue.
    But what can we do, short of the compact, which we are not 
likely to get, to avoid these enormous shifts, swings in price? 
Our dairy farmers in Pennsylvania go from $16 a hundred weight 
to less than $10 a hundred weight, and they are being driven 
out of business. And there just needs to be some stability 
there. What can we do?
    Secretary Veneman. Well, I am going to ask our Chief 
Economist, Dr. Collins, to assist me in the answer of that 
question, because it really is one of economics.
    Senator Specter. No, I have asked him the question before, 
and I have never found out.
    Okay, Dr. Collins.
    Dr. Collins. Well, I will do my best to continue my record.
    That is a difficult question. I mean, one thing obviously 
we can do is to extend the price support program for dairy, 
which is scheduled to terminate in May of this year. That would 
be one thing we could do. Some of the variability we have seen 
in the dairy market over the last couple of years has been 
driven by weather, for example. Of course, we export very 
little, we import very little and 98 percent of what we consume 
is produced here. So what happens with our production often 
determines these swings in price. Last year we had some poor 
weather, and we had the lowest increase in milk production in 
15 years. In fact, that gave us very high prices. We had the 
second-highest milk price in history in 2001. Now, this year, 
we expect a lower price. So some of this variability simply 
comes from the normal market forces that are related to 
weather.
    I think one thing we could do is develop some type of price 
or risk-management program for dairy producers, beyond what we 
were talking about with the price-support level that the 
government provides.
    Senator Specter. Dr. Collins, I know this is a complex 
subject. What I would like you to do, without taking any more 
of the time, because there are more questions here, is to give 
me a memorandum on it as to where you think we might head on 
stabilizing prices, an option paper. Because I know that is 
something everybody wants to accomplish.
    Dr. Collins. I would be happy to do that.
    Senator Specter. We do not have any more problems coming 
from Australia and New Zealand, do we?
    Dr. Collins. I have not looked at the data recently, but I 
don't believe so.
    Senator Specter. Senator Cochran and I and Senator Symms 
made a trip there in 1982, and we thought we solved that 
problem. I just wanted to be sure.
    Dr. Collins. I will check on that for you.

                        LOAN DEFICIENCY PAYMENTS

    Senator Specter. Okay. Finally, an issue which is 
parochial, but very important to the farmers in Erie. In the 
fall of 2000, the USDA ruled that farmers were ineligible for 
Federal loan-deficiency payments because they had filled out 
the forms wrong on the advice of Federal Farm Service Agency 
employees. I would not be surprised if you were unaware of 
that, Madam Secretary, but people were asked to pay back lots 
of money with interest, not getting anymore payments. And what 
I would like you to do is take a look at it. I saw your 
efficient staff just handed you a memo. That is what you call 
good staff work, handing you a memo to answer a question which 
you could not possibly know all the details on. But what I 
would like you to do is to take a look at it and provide a 
written response as to what we might do.
    These farmers, hundreds of them, were misled. And it is not 
their fault. And if they got payments that they were not 
entitled to, then, okay, maybe there will be an offset, but we 
should not talk about interest, we should not talk about 
penalizing for something that was not their fault, that the 
employees did, if, in fact, that is true. And I believe it is 
true. So if you would provide me with a written response, I 
would appreciate it. Thank you very much.
    Secretary Veneman. We will be happy to do that, sir.
    [The information follows:]
                   Erroneous Loan Deficiency Payments
    A review of the Erie County FSA Office revealed that the office had 
issued incorrect 1998- and 1999-crop loan deficiency payments (LDP's) 
to producers by using the previous day's LDP rate to calculate the 
payments. As a result, some participants were underpaid and others were 
overpaid.
    For those who were underpaid, FSA issued additional payments based 
on the correct LDP rate. For those who were overpaid, the Erie County 
FSA Office issued letters requiring refund of the overpayments (the 
difference between the incorrect payment and the recalculated amount 
based on the correct LDP rate). Interest was waived from the date of 
the erroneous disbursement to the date of notification to the producer 
of the overpayment amount. There were approximately 730 incorrect 
overpayments totaling $115,198.34.
    Participants who had been overpaid had the opportunity to appeal 
FSA's decision to require refunds. In most of the cases that were 
appealed, the National Appeals Division (NAD) upheld the FSA decision 
because the producers had been told that the LDP rate being used in 
calculating the payment was that of the previous day. In the few cases 
where the producer had not been told, NAD reversed the FSA decision.
    At the end of fiscal year 2001, there were 53 producers with 
outstanding overpayment amounts totaling $48,464.29. In October 2001, 
the Pennsylvania State Office was instructed to proceed with collection 
action.

    Senator Specter. Thank you very much. Thank you, Mr. 
Chairman.
    Senator Kohl. Thank you, Senator Specter. Senator Harkin, 
you have been patient, and we will call on you.

                           FARM BILL FUNDING

    Senator Harkin. Thank you very much, Mr. Chairman. And, 
Madam Secretary, welcome again to the committee. And I just 
again want to publicly thank you and all of your staff for the 
close work that we have had as we have labored through this 
farm bill on the Senate side, and we finally got it through. 
And I can say publicly that at no time have I or my staff ever 
sought to get information or any kind of data or colloquies, 
correspondence with your department, that we have not gotten it 
and gotten it in good time, so I just really appreciate that 
very good working relationship.
    I also want to add at this time, I did not speak with 
Senator Specter before we came in here.
    We came in together, but we did not huddle out there, so I 
did not give him that question. I want that on the record.
    However, since he asked, I do want to spend some time--I 
had not planned on this, but I do want to spend a little bit of 
time talking about the Senate bill and the buzz I am hearing 
now. First, I would look at just Page 4 of your written 
testimony. And it says here ``the new farm bill should be 
generous, but affordable. It should provide a reasonable safety 
net without encouraging overproduction and depressing prices.'' 
I believe we have a safety net in the Senate farm bill, 
counter-cyclical. ``It should establish farm savings 
accounts.'' That is in our bill, not the House bill. ``It 
should support our commitment to open trade.'' We have got 
money in there for the Foreign Market Development Program, the 
Market Assistance Program, more than the House has got. ``We 
should offer incentives for good conservation practices on 
working lands.'' We have the CSP program, not the House bill. 
``And we should enhance nutrition programs.'' The House has 
$3.6 billion for nutrition. We have $8.9 billion for nutrition.
    Are you sure you do not support the Senate farm bill?
    I mean, I read that, and I say, well, wait a minute, that 
looks just like what we did when you compare it to the House 
bill.
    But the buzz I am hearing now--I talked to my Governor from 
Iowa last evening, and he said that they had been at the White 
House. And I said, ``Well, did the President talked about 
agriculture?'' He said, ``Well, they did ask him about the farm 
bill, and his response was that there was too much front 
loading. There was too much money spent in the early years.'' 
And that is really all he said. And that is what the President 
said when he was in Colorado. It just seems to be something 
that is fixed in his head, that he just keeps saying this.
    So what I would like to explore with you for awhile is 
that, because I think there is a lot of misinformation out 
there about the budget aspects of the Senate farm bill, and I 
kind of want to get to the bottom of it. And let us bring some 
factual accuracy. My staff gave me this little chart here. It 
is from the Congressional Budget Office. As I understand, the 
Administration said that the farm bill must abide by the 
Congressional Budget Resolution that was adopted last May.
    Again, for the record, I want to point out that was a 
budget resolution passed by a Republican House, a Republican 
Senate, and supported by a Republican president. I want to make 
that clear. This is--we are not talking about any new budget 
that came out of the Senate or anything like that.
    That budget resolution provides for $73.5 billion in new 
spending over 2002 to 2011. The budget resolution contains no 
restrictions on how that money is divided up among the years 
except that no more than $7.35 billion is to be spent in the 
year 2002. Do you agree with that description, Madam Secretary?
    Secretary Veneman. I believe that is correct, but I have 
not seen the language specifically.
    Senator Harkin. Just stating the facts. Now, if you look at 
the final CBO scoring of the Senate farm bill--the final CBO 
scoring of the Senate farm bill--you will see that the CBO 
analysis shows new budget authority of $73.5 billion over 2002-
2011 period, with $7.1 billion in fiscal year 2002. From the 
standpoint of outlays, okay--outlays, let us make sure we are 
talking about the same thing, outlays, in terms of spending--
CBO shows new spending of $72.9 billion--that is from our farm 
bill--over the 2002-2011 period--$5.9 billion of that in fiscal 
2002.
    So, again, I ask you, Madam Secretary, would you agree that 
those CBO figures show that the Senate bill complies with the 
congressional budget resolution? Does the Senate bill comply 
with the congressional budget resolution?
    Secretary Veneman. Senator, I just now saw the CBO chart 
for the first time.
    Secretary Harkin. You have had the CBO numbers, surely, 
before now. This is just a chart. You do not have--you can 
forget about the chart, just listen to the numbers--just get 
your people to----
    Secretary Veneman. No, as far as I understand it, the 10 
year total for the farm bill is $73.5 billion.
    Senator Harkin. That is right.
    Secretary Veneman. So any bill must stay within that 
number.
    Senator Harkin. Do you agree that the Senate----
    Secretary Veneman. The concern----
    Senator Harkin. Does the Senate bill stay within that 
number?
    Secretary Veneman. According to the CBO numbers, that is 
correct. The concern, as I have expressed it to you before and 
today at this hearing, is that the Administration's position is 
that the spending should be used relatively evenly over a 10 
year period. I think what you were referring to with regard to 
what the President said is that there is a concern about 
spending too much money in the first 5 years, and not reserving 
enough for the second 5 years.
    Senator Harkin. I am----
    Secretary Veneman. I understand we have a difference of 
opinion on that.
    Senator Harkin. No, I do not want opinions. I just want 
facts. Right now. We will get into the opinions some other 
time. I just want facts now, because we are talking about 
front-loading, and I want to--I am now going to get to--I just 
wanted to establish the fact that the Senate farm bill does 
comply with the budget resolution passed last year and 
supported by this President. And that fact is yes. And does 
anyone dispute that? If they do, please say so.
    Now I want to get into the front-loading issue. It is 
coming up. Now, what we have done in the Senate farm bill is, I 
believe--is to try to help farmers who are struggling right 
now. Now, this is just in the opinion part of it, perhaps. We 
try to help farmers that are struggling right now. Low 
commodity prices. Very low commodity prices. We then continue a 
strong income protection into the later years and build that 
into the baseline for the next farm bill. There is no reduction 
in the safety net for the program crops in later years.
    But CBO says the safety net will cost less in later years, 
because CBO predicts that commodity prices will increase over 
the next 10 years. That is what CBO said. Prices will increase 
over the next 10 years. The safety net will cost less.
    And so, again, as I understand it, the Administration 
position is--is the new farm bill should put less emphasis on 
helping farm families now so that there might be more funds on 
paper in the budget baseline for 2009 or 2010 or 2011 in the 
next farm bill. It seems to me that that is backwards. Now, 
that is opinion. I am getting into opinion here.
    Now I will go back to facts. The budget resolution--there 
is no constraint on how we divide up the $73.5 billion. Now, 
the Administration has come in and said, ``We want it evenly 
spent.'' Okay. At the time the budget resolution was adopted, 
we had this chart issued. It lays out the assumptions in how 
that is going to be spent over the years. The budget resolution 
that was passed shows that the larger share of the $73.5 
billion would be spent in the first 5 years, as compared to the 
second 5 years. That is this budget resolution that was passed 
last year by the House and the Senate and supported by the 
President.
    Specifically. Specifically. Factually, assumption by the 
CBO was that $40.25 billion of the $73.5 billion would be spent 
in 2002 to 2006, the first 5 years.
    Again, Madam Secretary, I ask are those assumptions that 
were in that budget resolution--is that what the Administration 
is opposed to?
    I will repeat the question. I know you are talking with 
your staff. What I have pointed out was in the budget 
resolution passed last year, CBO assumed that $40.25 billion 
would be spent in the first 5 years. Are you opposed--is the 
Administration opposed to that? Is that the front loading that 
the Administration is opposed to?
    Secretary Veneman. Well, we have not taken a position on 
what CBO did in terms of scoring the budget resolution. What we 
have done is said that the amount of money over the 10 year 
period that has been allocated should be spent relatively 
evenly. The primary reason for that is to make sure that the 
producers have certainty in the out years as to what monies 
will be available, in terms of the baseline.
    Senator Harkin. I will get to that. I will get to that. 
Again, I do not know what ``relatively'' means. I am just 
saying that the budget resolution passed here last year, 
supported by this Administration, supported $40.25 billion in 
the first 5 years. Are you now telling me you do not support 
that, the Administration does not support that, that they have 
changed their mind? If so, I would like to know.
    Secretary Veneman. Sir, we supported the amount of money 
that was in the budget resolution, and we have said that the 
farm bill spending ought to maintain that amount of spending 
over the 10 year period, but it should be spent relatively 
evenly. We have never taken a position on how CBO scored that 
10 year outlay.
    Senator Harkin. Okay. I will ask you again. CBO, last year, 
the budget--and that budget was supported by the 
Administration. That budget was supported by the 
Administration--$40.25 billion is outlayed, is spent in the 
first 5 years. Again, I will ask again, does the Administration 
believe that $40.25 billion in the first 5 years is too much?
    Secretary Veneman. Again, Senator, what we support is the 
$73.5 billion over 10 years. We have not taken a position----
    Senator Harkin. We are there. We have already agreed. We 
are there.
    Secretary Veneman. Right.
    Senator Harkin. Now we----
    Secretary Veneman. We have not taken a position on----
    Senator Harkin. How do I get this first 5 years?
    Secretary Veneman. We have not taken a position on the way 
that CBO has scored the farm bill in the budget resolution. We 
have said that the money should be spent relatively evenly over 
the 10 year period.
    Senator Harkin. Help me out here. I do not know what 
``relatively'' means. Now, 73.5 divided by ten, is that what 
you mean? Every year, it should be spent--exactly that number 
every year? Is that what you are saying?
    Secretary Veneman. We are saying that the spending does not 
have to be exact, but I believe that, and I will ask Dr. 
Collins to correct me if I am wrong, the version of the House 
farm bill has spending relatively even--not exactly even, but 
relatively even in terms of the way the spending is allocated 
over the 10 year period. I believe that the bill that was 
proposed by Senators Cochran and Roberts had spending allocated 
relatively even over a 10 year period of time.
    Senator Harkin. Well, let us get to that. Well, evidently 
you do not want to comment on the budget resolution. Now, 
sometimes we can use it, and sometimes we cannot. It just 
depends on how it fits the facts. But the facts are--and this 
cannot be disputed--the budget resolution of last year 
supported $40.25 billion for 5 years. Now, CBO has scored the 
Senate bill that we passed for 5 years. That scored $40.38 
billion for the same 5 years--one third of 1 percent more. Now 
I am to understand the Administration does not like that.
    So that is--these are some of the facts that we have got to 
get out there on this so-called front-loading that we are 
doing. Now, I am not--as I understand it, you are not arguing 
that we should overturn the budget resolution of last year. Are 
you arguing that? I mean, because it did not do it relatively 
evenly over 10 years. It did $40.25 billion in the first 5 
years.
    Now, if you are saying you want to overturn that, we ought 
to know about it, because I am getting a little upset with this 
talk about this front-loading all the time when I pointed out 
that our front-loading is $130 million more in 5 years than the 
budget resolution, which is one-third of 1 percent.
    Secretary Veneman. Senator, may I have Dr. Collins just 
comment briefly on this?
    Senator Harkin. Sure, glad to.
    Dr. Collins. First of all, I guess I would say, going back 
to the original budget resolution, which did have year-by-year 
numbers in it that the Administration never took a position on 
those year-by-year numbers. It is our understanding that what 
the budget committee does in putting a year-by-year number in 
there is largely irrelevant, that it is up to the authorizing 
committee, your committee, to determine that spending pattern. 
So the position the Administration has taken all along has been 
on the $73.5 billion and not on any year-to-year concept.
    Regarding the question of front-loading, I think you can 
look at it in two lights. You can look at it in terms of 
outlays, which is the numbers you have been quoting. You can 
also look at it in terms of budget authority. I am not sure 
what the budget resolution applies to, whether it is BA or 
outlays. But certainly, in terms of budget authority, the 
Senate bill becomes even more front-loaded.
    Now, you say we have seen the CBO numbers, but I actually 
had not. I saw the CBO numbers on the farm bill for the first 
time this morning. I think they were either released last night 
or this morning, so we really have not had a chance to study 
these numbers, and I have not seen the BA numbers from the CBO. 
I have only seen the outlay numbers, which were provided to me 
this morning. But the earlier BA as scored by CBO for the 
Senate bill was $46 billion during the first 5 years--was $45.8 
billion during the first 5 years.
    Senator Harkin. Was that authority?
    Dr. Collins. That was budget authority, yes, sir.
    Senator Harkin. Let us talk about spending. What is the----
    Dr. Collins. Spending is the number you have quoted.
    Senator Harkin. Right, $40.38 [billion].
    Dr. Collins. Right. So I am saying the question of front-
loading applies to both of the concepts of budget authority and 
spending so you have to keep both of those in mind.
    Senator Harkin. I will be glad to talk authority with you 
Keith, or I will talk outlays, but let us not keep--let us not 
move back and forth across the turf.
    Dr. Collins. Fair enough.
    Senator Harkin. I will be glad to talk with you. If you 
want to talk authority, we will talk it. If you want to talk 
outlays, we will talk to that, too.
    Dr. Collins. No, I am just trying to clarify why we have 
not taken a position on the year-by-year numbers from the 
original budget resolution.
    Senator Harkin. So you are saying that every year has got 
to be relatively even. I would like to figure out what 
``relatively'' means and what the parameter means.
    Dr. Collins. That is a good question.
    Senator Harkin [continuing]. Guidance and direction from 
the Administration on it.
    Dr. Collins. I think that is a fair question.
    Senator Harkin. And I am just saying that we looked at the 
budget resolution, and we kept pretty close track of the budget 
resolution. That is the facts. Now, if the Administration said 
they do not like that budget resolution, well, that is another 
point, and maybe we can get onto it for that. But this idea of 
front-loading--again, getting into the opinion sector of it, it 
is like this. Let us say you have got a bad body wound, and you 
are bleeding profusely. You have cut an artery. Do you need a 
Band-aid or do you need a tourniquet? You need a tourniquet. 
Now, once you suture it up and you stop the bleeding and it 
heals a little bit and you have got a little scar, do you need 
a tourniquet or a Band-aid? You need a Band-aid then. But you 
do not need the same thing at every point along the line, in my 
opinion.
    If you want to get into the opinion side of it, Madam 
Secretary, we have got extremely low prices right now, and we 
are going to have them for the next couple of years. We know 
that. Farmers are hurting--badly. They need the tourniquet now. 
I do not know what they are going to need in 2008 and 2009 and 
2010. We are not going to have a 10 year farm bill. We are 
going to have a 5 year farm bill. I think the House agrees with 
that, and I think the Senate agrees with that. We are going to 
have a 5 year farm bill.
    Now, you said something about the baseline. Let me 
factually state for the record, the bill--the Senate bill--will 
not reduce the baseline for farm income protection. Under the 
Senate bill, when we get to 2006, there will be money in the 
CBO baseline for the income protection level in our bill. The 
baseline will adjust to commodity prices at that time. For 
example, we have an income protection price of $5.75 a bushel 
for soybeans. The cost of that income protection would be built 
into the baseline at the end of this farm bill. Now, the costs 
may go up, or it may go down. But the CBO baseline will 
automatically adjust so that there is, in the baseline, enough 
money to fund that income protection level of $5.75 a bushel 
for soybeans. Obviously, if prices go up, the income protection 
goes down. If prices go down, the income protection goes up. 
And that is the way the way we designed the bill.
    The alternative to that? The alternative to that is to 
continue what we are doing, that is, Freedom to Farm direct 
payments every year, regardless of prices. That is the 
alternative. And that is what the House bill has got. If you 
want to just continue direct payments year after year, 
regardless of what the price is, well, then you just--that is 
the debate I guess we are going to have in conference. And I do 
not know what the Administration's position is going to be on 
that.
    But I want to--there are two things we are doing. We are 
dealing with facts, in terms of how much we are spending on our 
bill in 5 years, compared to the budget resolution. Now, I did 
not compare it to what the Administration was, because I did 
not know what the Administration was. I hope maybe by the time 
we go to conference, I said to my colleagues here--at least 
Senator Cochran who is going to be on the conference--I hope 
maybe the Administration would define ``relatively'' for us.
    What parameter does the Administration want? Does it want 
exactly evenly every year? Is it 2 percent deviation? Five 
percent? Ten percent? How much does the Administration mean by 
that? Then we can start arguing on the basis of opinion and 
sort of philosophy on whether or not we need some more money in 
the first 5 years. I have stated quite frankly for the record, 
I do believe we need more money in the first 5 years. I am not 
arguing that we should not--I believe we do. So if you call 
that front-loading, you call that front-loading. But to hear 
people talk about it, it is like we are taking all the money 
and putting it in 5 years, when we are not taking all the money 
and putting it in 5 years.
    So all I can say is that, you know, the current CBO 
baseline--if the current CBO baseline, Freedom to Farm, will 
continue, we would have the same front-loading, have exactly 
the same front-loading if we continued Freedom to Farm, even 
payments, have the same front-loading, more so than what we 
have got.
    So again, I just want to get those facts out there. And, 
you know, I think, Madam Secretary, you have said time and time 
again we need to rework the Freedom to Farm Bill. We need to 
rework that, and we have done it, and we have put money into 
conservation programs and rural development and farm savings 
accounts and everything like that--foreign market development 
programs, and we have a reasonable safety net. We might argue 
about overproduction and depressing prices. That probably gets 
into the opinion level, I suppose. But I will continue to point 
out the facts of what it is, in terms of the budget we have and 
the budget resolution, and I will continue to ask the 
Administration for their definition of ``relatively.'' Thank 
you, Madam Secretary.
    Senator Kohl. Senator Cochran?

                         RURAL HOUSING SERVICE

    Senator Cochran. Mr. Chairman, Senator Bond, who is helping 
manage the election reform bill, asked if I could raise an 
issue that impacts the Rural Housing Centralized Servicing 
Center in St. Louis and citizens applying for low-income rural 
housing loans. Madam Secretary, he asked if you could delay 
implementation of a new phone-conversation recording system 
until a series of his questions that have been provided to the 
department are answered.
    Secretary Veneman. Certainly, we will be happy to look at 
that. I will review his questions and see if we can accommodate 
his concerns.

                         AGRICULTURAL RESEARCH

    Senator Cochran. Thank you. Mr. Chairman, one comment, I 
suppose, rather than a question as we get to the end of this 
hearing. I noticed in the Secretary's testimony, there is a 
statement to this effect, ``Commitments for agricultural 
research have not kept pace, and opportunities to take 
advantage of some of the Nation's best university-based 
scientific talent are being lost.'' I agree wholeheartedly with 
the Secretary's comment on that subject and that this is a 
problem that we need to address.
    But despite the proposal to double the funding for the 
National Research Initiative, the overall level of funding in 
the budget that the secretary submits today for the 
Agricultural Research Service and the Cooperative State 
Research, Education, and Extension Service (excluding ARS 
building and facilities, emergency supplemental appropriations 
and proposed funding transfers for rental costs and employee 
pension and health annuitant benefits) is $14 million below the 
fiscal year 2002 enacted levels. If we are going to meet the 
current and future challenges, such as genomics, land and 
animal management, pests and diseases, and genetically-modified 
organisms, we will have to invest more rather than less in our 
research efforts.
    Mr. Chairman, thank you for your conduct of the hearing 
today. You have been eminently fair and patient. It is a 
pleasure to work with you, sir.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Kohl. Thank you, Senator Cochran. The subcommittee 
will be submitting questions for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

         nrcs conservation reserve program technical assistance
    Question. Please provide information on the levels of technical 
assistance that were used to carry out the Conservation Reserve Program 
in fiscal year 2002.
    Answer. In fiscal year 2002, a general signup of CRP acres is not 
being held, so technical assistance costs will be a result solely of 
acres signed up through the continuous and farmable wetlands programs. 
Technical assistance will be funded through provisions in the fiscal 
year 2002 Agriculture Appropriations Act permitting use of $13 million 
in funds from the Environmental Quality Incentives Program and through 
a pilot program of direct contracts between the Commodity Credit 
Corporation and private entities.
    Question. Please provide information in regard to SNOTEL operations 
in fiscal year 2002.
    Answer. The increased funding level for SNOTEL in fiscal year 2002 
allowed for all water supply forecasting and drought assessments to be 
fully supported this season. Also, operations of this automated 
snowpack monitoring system have been restored to full response with 
this increased funding and progress is being made on maintenance that 
had been deferred in recent years. At the current funding level, 
scheduled replacement of obsolete components at the two critical base 
meteor-burst radio stations is underway and needed replacements at the 
660 remote SNOTEL stations will be carried out over the next several 
years.
    Question. Please provide a status report on project items included 
under the heading of ``Conservation Operations'' on pages 68-69 of 
House Report 107-275 and any other projects that are included on pages 
86-91 under the same heading in Senate Report 107-41.
    Answer. NRCS will provide the Committee with a listing of the funds 
allocated to States for Conservation Operation project items. NRCS has 
requested that each State Conservationist submit a second quarter 
status for each project in their State. This status summary will also 
be provided.
    [The information follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
fiscal year 2002 nrcs conservation operations earmark status report as 
                              of 3/31/2002
Alabama
    State: Alabama
    Funds: CO-01, $300,000
    Project: Sand Mountain Water Quality Conservation Project
    Progress/Status: NRCS is in the process of developing a grant 
agreement with the State of Alabama Soil and Water Conservation 
Committee to transfer $300,000 to accelerate water quality initiatives 
on Sand Mountain. NRCS is recruiting a soil conservationist to add to 
our existing staff in our Rainsville Field Office to support this 
project.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for the wetland treatment area will be 
completed by September 30, 2003. Long Term Contracts (LTCs) have 
conservation practices scheduled for installation through fiscal year 
2003.

    State: Alabama
    Funds: CO-01, $150,000
    Project: Central Alabama/Birmingham Water Quality and Conservation 
Initiative
    Progress/Status: A Project Coordinator has been appointed to 
complete studies and a plan of work for the project area. Preliminary 
meetings have been held to solicit local need and input from interested 
parties and local units of government.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The installation of all conservation practices will be completed 
by September 30, 2003.

    State: Alabama
    Funds: CO-01, $200,000
    Project: Alabama Gulf Coast Water Quality and Conservation 
Initiative
    Progress/Status: A Coordinator for the project has been appointed. 
Organizational meetings have been scheduled and input solicited from 
interested parties. The Coordinator will work closely with local units 
of government and the local community college to establish a GIS base 
from which to coordinate the data as it is collected and analyzed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The installation of all planned conservation practices will be 
completed by September 30, 2003.
Alaska
    State: Alaska
    Funds: FIP, $504,600
    Project: Reforestation
    Progress/Status: Applications for 392 acres of reforestation, which 
should allocate $120,636 of program funds, have been received. 
Currently, 70.5 acres have been reviewed and approved by State 
Forestry, which will be allocated in early May. The remaining 326.5 
acres will be reviewed by State Forestry as time and staffing is 
available. Current status of seedlings arriving in Alaska will account 
for only 500 acres of planting to be completed in fiscal year 2002. The 
seedlings will be shared by the following programs: FSA, FIP, SIP, 
Kenai Peninsula Borough and Anchorage Municipality funding.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Cost share agreements for the total amount should be allocated by 
September 30, 2002. Disbursements for a majority of the. obligated 
funds should occur in fiscal year 2003 and 2004, dependent upon 
seedling and reforestation vendor availability as well as weather and 
climate.

    State: Alaska
    Funds: CO-01, $50,000
    Project: Harding Lake Association
    Progress/Status: A Cooperative Agreement has been drafted to 
transfer $30,000 to the SalchaDelta Soil and Water Conservation 
District. The SWCD will hire a project planner to coordinate NRCS 
effort with the Lake Homeowners Association. NRCS has promised to 
survey the entire lake, the properties, and possible inlet and outlet 
sites. We are currently negotiating with the Army Corps of Engineers to 
provide LIDAR data as a part of their ongoing work in the area (no 
agreement needed or requested). This would eliminate the need for a 
survey and allow NRCS to focus on hydrology and site analysis.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None. Cooperative Agreement obligating $30,000 will be signed by 
July 1, 2002. Surveying will be completed by September 1, 2002 
utilizing the remaining $20,000.

    State: Alaska
    Funds: CO-01, $450,000
    Project: Kenai Streambank Restoration Project
    Progress/Status: A draft of Amendment #2 to the Cooperative 
Agreement is being developed. The city is prioritizing projects.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Cooperative Agreement obligating entire $450,000 will be signed 
by July 1, 2002. Construction will begin fall 2002 and continue through 
fall 2003.

    State: Alaska
    Funds: CO-01, $2,250,000
    Project: Offices and Staff
    Progress/Status: USDA-NRCS has completed position descriptions for 
Juneau and Glennallen. Vacancy announcement for the Glennallen position 
has closed and selection of candidate will be made in the near future. 
The position in Juneau is advertised and will close on May 13. Funding 
has been allocated to technical support for these offices as, well as 
Nome and Bethel,--Alaska. Field Office furniture and equipment 
(including engineering equipment) is being purchased to assist in 
public information program and assistance in rural Alaska. Grant 
modification with AASWCD for $500,000 was signed January 24, 2002. New 
Grant Agreement between the Alaska Association of Conservation 
Districts and Alaska NRCS for $200,000 was finalized on March 8, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Disbursement for a majority of the obligated funds should occur 
in fiscal year 2002.

    State: Alaska
    Funds: CO-46, $300,000
    Project: Cold Region Plants
    Progress/Status: The project will develop a plant material plot 
network that will transect the State with resulting data that can be 
incorporated into ongoing global warming studies. Cooperative Agreement 
between the USDA Natural Resources Plant Materials. Center was 
finalized on April 14, 2002. The Cooperative Agreement transfers 
$300,000 to the State of Alaska Plant Materials Center to prepare a 
U.S. Cold Region Plant Materials Evaluation Network Project Plan. The 
Cold Regions Evaluation Network will benefit all cold regions 
researchers and people attempting to commercialize plants from 
geographic areas indigenous to regions North of 52 degrees North 
Latitude and equivalent vegetated regions in the Southern Hemisphere 
(South of 52 degrees South Latitude).
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Cost Share agreements for the total amount are allocated. 
Disbursements for the obligated funds will occur in fiscal year 2002 
and 2003.

    State: Alaska
    Funds: CO-46, $350,000
    Project: Native Plant Materials Evaluation and Developing
    Progress/Status: Cooperative Agreement between the USDA Natural 
Resources Conservation Service and the Alaska Department of Natural 
Resources Plant Materials Center was finalized on April 8, 2002. The 
Cooperative Agreement supplement is a revision to the existing 
Cooperative Agreement signed in April 1999 for evaluating and 
increasing native plant materials in Alaska. To assure consistent 
program direction, an advisory committee has been formed. As the 
program is developing, the committee expects to have commercial seed 
producers throughout the State. The Agreement transfers $350,000 to the 
State of Alaska Plant Materials Center for Native Plant Materials 
Evaluation and Development.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Disbursements for the obligated funds will occur in fiscal years 
2002 through 2005.
Arkansas
    State: Arkansas
    Funds: CO-01, $2,750,000
    Project: National Water Management Center
    Progress/Status: National Water Center is accomplishing assigned 
items in national and local business plan.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be obligated by September 30, 2002.

    State: Arkansas
    Funds: CO-01, No funds allocated to this project.
    Project: Phase 2 of the Kuhn Bayou Project
    Progress/Status: NRCS staff is 75 percent complete on the designs, 
plans, and specifications for Phase II with a scheduled completion date 
of August 1, 2002. Phase II contract will complete the main delivery 
system and the distribution system that will provide irrigation water 
to 14,000 acres of cropland and winter water for a wildlife management 
area. NRCS staff also inspected and administered the contract for Phase 
IA which was completed on February 7, 2002, at a final cost of 
$947,623.90. Phase IA contract was for the installation of a portion of 
the main delivery system. Funds were made available for Phase IA 
through a CO-01 earmark in fiscal year 2000.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: No funding was allocated for this project in fiscal year 2002.

    State: Arkansas
    Funds CO-01; $375,000
    Project: Little Red River Irrigation Project
    Progress/Status: This project will provide water for 34,400 acres 
of cropland and a large portion of the cropland will be flooded in the 
fall and winter for waterfowl and other migratory birds. In 2001, NRCS 
provided technical assistance to the Irrigation District and the U.S. 
Army Corps of Engineers in conducting a reconnaissance-type study of 
the diversion project. The Corps completed work on the first phase in 
2001. Work on the second phase began in 2001 and will be completed 
early in calendar year 2002. NRCS will use the Corps' work as it begins 
to develop a project plan and an environmental impact statement. NRCS 
has dedicated 1089 staff days for the planning process in fiscal year 
2002. The plan/EIS will be completed in fiscal year 2003.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: No funds will be disbursed after September 30, 2002.

    State: Arkansas
    Funds: CO-01, $150,000
    Project: Upper Petit Jean Watershed Project
    Progress/Status: NRCS will use the fiscal 2002 appropriation to 
prepare a generic (program neutral) plan and environmental assessment 
for this project. The project plan will add municipal and industrial 
water supply to an existing Public Law 566 planned single purpose 
structure. This water supply will provide additional water for Waldron 
and Booneville, and other rural water districts in Arkansas. NRCS has 
provided planning and other technical assistance information to the 
sponsor and their consultant in fiscal 2001 and 2002. The consultant 
has prepared a feasibility study that estimated the total cost of the 
project of approximately $15.2 million. Due to NRCS' and the 
consultant's planning efforts this fiscal year; the revised project 
cost is $21.3 million.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: No funds will be disbursed after September 30, 2002.

    State: Arkansas
    Funds: CO-01, $150,000
    Project: Walnut Bayou Irrigation Project
    Progress/Status: NRCS will use the fiscal year 2002 appropriation 
to complete a generic (program neutral) plan and environmental 
assessment and the design of Phase I for this project. NRCS prepared a 
natural resource plan in fisca year 2001 with funds provided by the 
State of Arkansas through the Arkansas Soil and Water Conservation 
Commission. That plan documented the feasibility of providing 
irrigation water from the Red River delivered through a pump station 
and pipeline to Walnut Bayou. The project will provide water to 30,000 
potentially irrigated cropland.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: No funds will be disbursed after September 30, 2002.
Arizona
    State: Arizona/New Mexico
    Funds: CO-01, $300,000
    Project: Southwest Strategy
    Progress/Status: Conducted Federal and State employee streamlining 
ESA process training sessions; Completed Section 7 consultations for 
the Programmatic Fire Related activities, formed agency issue 
resolution teams for addressing Section 7 consultation issues; Held 
Fire Risk Reduction and Recovery Workshops; Conducting monthly 
interagency briefings on Fire issues; Developed a national contract to 
train tribal and rural citizens to work on fire fighting and 
restoration and fuel reduction; Completed ``A Guide to the Laws and 
Terminology of Federal Land Management; Co-sponsored Coordinated 
Resource Management (CRM) workshops with NM Association of Conservation 
Districts; Developed an interagency Rangeland Monitoring Handbook and 
Training Program for NM; Providing assistance to the current AZ CRM 
Monitoring efforts; Provided intergovernmental coordination on noxious 
weed management activities (inventory, mapping and public awareness); 
Sponsored a Tribal Lands and People Summit and Tour for Federal and 
Tribal leadership; Hosted the Farm Policy Listening Session for tribal 
government and members; Sponsored interdepartmental Cultural Resource & 
Law Enforcement Training session; Completed Biological Synthesis along 
the United States/Mexico border; and currently providing leadership, 
guidance and coordination through a partnership effort (Federal, State, 
tribal and local governments, local stakeholders and conservation 
districts) in addressing emergency Drought response and activities in 
the Southwest.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The projects and activities will be completed prior to September 
30, 2002.
California
    State: California
    Funds: CO-01, $600,000
    Project: Monterey Bay Sanctuary
    Progress/Status: The NRCS Rural Roads Engineer started work on 
March 11. The NRCS Rangeland Mgmt. Specialist position will be 
advertised in May. The Agriculture Plan Implementation Committee will 
finalize the partnership agreement funds ($80,000) during the third 
quarter. NRCS staff completed curriculum development (fact sheets, 
self-assessment sheets, slide presentations) together with UCCE for 
Farm Water Quality Planning Short Courses & a course was held for 
farmers in San Benito County. Practice effectiveness field trials are 
underway for row arrangement and vineyard cover cropping by NRCS, UCCE, 
RCD and other partners.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Partner Agreements: $116,000

    State: California
    Funds: CO-02, $350,000
    Project: Lake Tahoe Basin
    Progress/Status: Implementation of the Backyard Conservation 
Program with over 100 Site Evaluations on private home sites conducted 
between October 1 and November 15, 2001. Staff is currently previewing 
2001 progress and developing new program needs and objectives for 2002 
field season. Soil Survey--Field work on 20,000 acres (private lands) 
completed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Soils Survey will need to be published.

    State: California
    Funds: CO-01, $375,000
    Project: Agriculture Enhancement
    Progress/Status: Alameda County: A Cooperative Agreement with the 
Alameda County Resource Conservation District is being developed for 
items within the Ag. Enterprise Plan. Funding will also be used to hire 
an NRCS Soil Conservationist and Ecologist. Contra Costa County: A 
Cooperative Agreement was signed with the Contra Costa Resource 
Conservation District for two major tasks: completing and publishing 
the Marsh Creek Watershed Plan and implementing high priority projects 
in the Alhambra Creek Watershed Plan.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Partner agreement (Contra Costa): $55,000, Partner Agreement 
(Alameda): $97,500.
Delaware
    State: Delaware
    Funds: CO-46, $290,000
    Project: Expand cooperative efforts with DE State University for 
Plant materials program.
    Progress/Status: An agreement with Delaware State University and 
the Natural Resources Conservation Service has been obligated in the 
amount of $290,000.00 to support the research efforts of the Claude 
Phillips Herbarium.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All obligations will be completed prior to September 30, 2002.
Florida
    State: Florida
    Funds: CO-01, $5.0 million
    Project: Creation and Implementation of pilot projects for 
innovative technology systems to treat waste and wastewater generated 
by confined animal feeding operations.
    Progress/Status: NRCS entered into a Working Agreement with Farm 
Pilot Project Coordination, Inc. (FPPC) on January 30, 2002. FPPC has 
developed a Plan of Work and budget for the innovative technology 
projects. FPPC has submitted a draft Request for Proposal (RFP) for 
review by NRCS. Two hundred thousand dollars was provided to FPPC as 
start up costs to begin implementation of the project.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The working agreement is for 3 years. It is anticipated $3.5 
million will be disbursed after September 30, 2002.

    State: Florida
    Funds: CO-01, $500,000
    Project: Coop agreement with Manatee Ag Water Reuse System Project.
    Progress/Status: FL-NRCS is in the process of writing an agreement 
with Florida West Coast RC&D to develop a project plan. The plan will 
devise a method to rate potential users and determine the steps 
necessary to begin the hook-ups from transmission lines to user's 
pumps.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The remaining dollars will be used to begin individual user hook 
ups. The $500,000 will be spent by December 30, 2002.
Georgia
    State: Georgia
    Funds: CO-01, $1,100,000
    Project: Cooperative agreement with Georgia Soil and Water 
Conservation Commission
    Progress/Status: NRCS has signed a grant agreement that transfers 
$935,000 to the State of Georgia Soil and Water Conservation Commission 
(SWCC). The grant agreement work plan states that the SWCC will provide 
accelerated assistance on surface water irrigation supplies in the 
project area. Surface water structures and irrigation system 
enhancements will be installed on these farms. NRCS is providing 
technical assistance to plan and design these structures. Planning will 
be completed in fiscal year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The installation of all conservation practices will be completed 
by September 30, 2003.

    State: Georgia
    Fund: CO-01; $500,000
    Project: Georgia Agricultural Water Conservation Initiative
    Progress/Status: Water Conservation District ($250,000), Middle 
South Georgia Soil and Water Conservation District ($150,000), and the 
Georgia Association of Conservation Districts ($25,000). The grant 
agreement work plans state that the Soil and Water Conservation 
Districts will provide accelerated assistance on resource management 
systems to enhance irrigation efficiencies in the project area. Surface 
water structures, irrigation system enhancements and water conserving 
conservation practices will be installed on these farms. Georgia 
Association of Conservation Districts will provide educational and 
information support to the overall project. NRCS is providing technical 
assistance to plan and design the conservation practices. Planning will 
be completed in fiscal year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The installation of all conservation practices will be completed 
by September 30, 2004.
Hawaii
    State: Hawaii
    Fund: CO-46; $250,000
    Project: Molokai Agriculture Community Committee
    Progress/Status: On April 11, 2002, NRCS sent a letter to the Tri-
Isle RC&D Council, Inc. informing the council that additional funding 
in the amount of $250,000 is available for fiscal year 2002. Upon 
receipt of the council's acceptance, the total amount for this Molokai 
Agricultural Development Program will be $1,005,298.44. There are a 
total of 11 projects that are ongoing, which include, but are not 
limited to, farming (e.g., organic sweet potatoes), composting, noni 
processing, community kitchens, promotion of taro as a crop, working 
with the Maui Community College (Molokai) training grantees on 
agricultural courses, etc. It is anticipated that ten additional 
projects (e.g., hydroponics, promotion of Coffees of Hawaii, fruit farm 
expansion, etc.) will be developed by grantees with the fiscal year 
2002 funding.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The cooperative agreement will be extended prior to September 30, 
2002, to accommodate grantees in completing their projects. Fiscal year 
2002 funds will be disbursed to the Tri-Isle RC&D Council, Inc. as 
projects progress or are completed during fiscal year 2003.

    State: Hawaii
    Fund: CO-46; $20,000
    Project: Alien Weed Pests
    Progress/Status: The Garden Island RC&D Council has submitted the 
``Proposal for the Kaua'i Invasive Species Committee'' to NRCS. NRCS is 
currently reviewing the proposal and will award a noncompetitive 
discretionary grant agreement. The goal of the grant agreement is to 
promote and maintain a healthy and diverse forest environment by 
identifying and controlling alien and invasive species.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The proposed grant agreement will be extended prior to September 
30, 2002 to accommodate the project. Fiscal year 2002 funds will be 
disbursed to the Garden Island RC&D Council as the project progresses 
with a completion date of June 2003.

    State: Hawaii
    Funds: CO-46, $300,000
    Project: PMC for Native Plants to Clean Up the Island of Kahoolawe
    Progress/Status: The Hawaii Plant Materials Program continues to 
increase production of native plant seeds for the island of Kaho'olawe. 
Native seeds are being delivered to the island of Kaho'olawe in 
coordination with the Kaho'olawe Island Reserve Commission (KIRC). 
Twenty acres at the PMC are being developed for native seed production 
fields, eight acres of which are currently planted to four species of 
native grasses and shrubs. The NRCS Plant Material Program will be 
acquiring a plant specialist to assist in Kaho'olawe revegetation 
efforts.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None
Idaho
    State: Idaho
    Funds: CO-01, $200,000
    Project: Idaho OnePlan
    Progress/Status: Computer programmers are continuing to work on the 
nutrient management module. Comprehensive business requirements are 
being developed in cooperation with NRCS Information Technology Center 
(ITC) in Fort Collins, Colorado. The nutrient management module is 
scheduled for completion in 4 weeks. The conservation planning module 
is scheduled to be completed by September 1, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Testing within the FifteenMile Creek Watershed is targeted from 
September to December 2002.

    State: Idaho
    Funds: CO-01, $500,000
    Project: Little Wood River Irrigation District Gravity Pressure 
Delivery System
    Progress/Status: The project will convert the current open canal 
gravity delivery system to a closed gravity pressurized system. The 
project will eliminate 4.3 mw of power usage, increase water savings by 
30 percent on irrigated cropland, and eliminate the need for potable 
water use for city landscape watering. A scoping meeting has been held 
and a Plan of Work has been developed. NRCS has detailed a full-time 
employee to serve as the project coordinator. Development of an 
Environmental Impact Statement (EIS) is underway and the public notice 
has been placed in the Federal Register.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Feasibility Study will be completed by June 2003.

    State: Idaho
    Funds: CO-01, $500,000
    Project: Irrigation Vicinity of Minidoka
    Progress/Status: Funds are used to assist land users to convert 
from surface irrigation to sprinkler irrigation due to the closing of 
injection wells by the Bureau of Reclamation. The injection wells 
dispose of tail water from the surface irrigation, which is a direct 
conduit to groundwater. Cooperative agreement has been signed with the 
Minidoka Soil & Water Conservation District to provide pass-through 
dollars to develop long-term contracts with land users and the 
Administration of the contracts. Funds will be obligated by September 
2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The installation of all planned conservation practices and 
management items will be completed by September 2005.
Illinois
    State: Illinois
    Project: Trees Forever Program
    Funding: CO-01; $100,000
    Progress/Status: Developing an Agreement to transfer funds.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Anticipate completion and obligation of funds by May 1, 2002.

    State: Illinois
    Project: Conservation Measures in the Illinois River Basin (EQIP)
    Funding: EQIP; $600,000
    Progress/Status: EQIP funds have been obligated to Priority Areas 
within the Illinois River Basin. All of the $600,000 will be utilized.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be expended by September 30, 2002.

    State: Illinois
    Project: Illinois River Basin
    Funding: CO-01; $50,000
    Progress/Status: NRCS field staff will continue to provide planning 
assistance throughout several local resource planning activities in the 
basin.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be expended by September 30, 2002.

    State: Illinois
    Project: Embarrass River Watershed and Shad Lake
    Funding: CO-01; $100,000
    Progress/Status: NRCS has and continues to provide planning and 
engineering assistance to various groups and landowners throughout the 
watersheds.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be expended by September 30, 2002.

    State: Illinois
    Project: Glen Shoals Lake
    Funding: CO-01; $50,000
    Progress/Status: NRCS has and continues to provide planning and 
engineering assistance in the watershed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Anticipate funds to be expended by September 30, 2002.
Indiana
    State: Indiana
    Funds: CO-01, $50,000
    Project: Source Water Protection Initiative
    Progress/Status: Public meetings have been held to obtain public 
input. NRCS is working with AIRS to develop a study to compare two 
watersheds. One watershed will implement Best Management Practices; the 
other watershed will not. A water monitoring site will be set up in 
each watershed for comparison. A GS-9 soil conservationist will be 
hired to provide technical assistance.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The soil conservationist will be hired for a 1 year period 
starting in May 2002 and ending in May 2003.
Iowa
    State: Iowa
    Funds: CO-01, $800,000
    Project: Hungry Canyons & Loess Hills Erosion Control--Western Iowa
    Progress/Status: Projects have been identified and screened by the 
Hungry Canyons Alliance. A grant agreement is being developed to cover 
ten selected projects. Dollars will be obligated by June 7, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction on selected projects will begin during the summer of 
2002 and carry over into 2003.

    State: Iowa
    Funds: CO-01, $100,000
    Project: Trees Forever Conservation Buffer Promotion
    Progress/Status: A cooperative agreement has been executed with 
Trees Forever. The agreement includes a schedule of conservation buffer 
promotion activities and products to be accomplished by Trees Forever.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Celebration and recognition events will be completed during the 
fall of 2002.

    State: Iowa
    Funds: CO-01, $300,000
    Project: Implement CEMSA with Iowa Soybean Association
    Progress/Status: A draft cooperative agreement for $300,000 with 
the Iowa Soybean Association and the National Pork Producers Council 
has been developed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Work products will be scheduled and completed, and payments will 
be disbursed during both fiscal year 2002 and fiscal year 2003.

    State: Iowa
    Funds: CO-01, $100,000
    Project: Cooperative Agreement with TIAER for a Watershed 
Management and Demonstration Project
    Progress/Status: A draft cooperative agreement for $100,000 with 
TIAER for a Watershed Management and Demonstration Project has been 
developed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Work products will be scheduled and completed, and payments will 
be disbursed during both fiscal year 2002 and fiscal year 2003.
Kentucky
    State: Kentucky
    Fund: CO-01; $1,700,000
    Project: Soil Erosion Cost Share Program
    Progress/Status: NRCS serviced 3,200 applications for KY's State 
cost share program for the installation of conservation practices such 
as waste storage structures, heavy use area protection, and various 
erosion control practices. These requests totaled $37 million; however, 
it appears that approximately $10,350,000 will be appropriated by the 
State legislature from general revenue funds and KY's share of the 
Phase I Tobacco Settlement funds. This is a tremendous Partnership 
effort and provides an important program to the agricultural landowners 
in Kentucky to address nonpoint source pollution concerns on farms and 
ranches.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: NRCS will be asked to design, inspect and certify conservation 
practice implementation on those farms approved for State cost share.

    State: Kentucky
    Fund: FPP; $720,000
    Project: Homeplace Farm Purchase
    Progress/Status: The earmark is for NRCS to assist The Homeplace on 
Green River Incorporated or a local government entity in the Taylor, 
Green, or Adair County(s) to purchase a farm of approximately 230 
acres. The farm will be protected from encroaching development and will 
be used as an educational site to display active farming techniques. 
The Nature Conservancy has agreed to hold the conservation easement for 
the property. The property has been surveyed and an appraisal is being 
conducted.
    Fiscal year 2002 Obligations for disbursement after September 30, 
2002: We anticipate that the funds will be obligated by the end of the 
fiscal year.

    State: Kentucky
    Fund: CO-02; $700,000
    Project: Soil Survey Program
  --$40,000--Digital Map Finishing with NRCS--Tennessee
  --$17,186--English Editor, WV State Office NRCS--MO-13
  --$203,013--GPO/Photo Mechanics, NRCS--National Cartographic and 
        Geospacial Center, Ft. Worth, TX
  --$28,450--NRCS--VA SSURGO, Certify Soil Surveys
  --$15,000--Graves Co. Conservation District Compilation
  --$8,752--Map Compilation, Private Contract, Bourbon and Nicholas 
        Counties
  --$4,900--Map Compilation, Private Contract, Clark County, Carlisle 
        and Hickman Map Compilation not yet contracted
  --$20,000--UGA/UT/UK Lab Assistance
    Fiscal year 2002 Obligations for disbursement after September 30, 
2002: We anticipate that the funds will be obligated by the end of the 
fiscal year.
Louisiana
    State Louisiana
    Fund: CO-01; $125,000
    Project: Barataria-Terrebonne National Estuary Program (BTNEP)
    Progress/Status: NRCS in Louisiana, as a member of the BTNEP 
Management Committee, will continue to work on the implementation of 
the Comprehensive Conservation Management Plan (CCMP). NRCS has 
accelerated technical assistance for the development and implementation 
of twenty-two Resource Management Plans (RMS) on approximately 3,000 
acres of cropland for participants in the Environmental Quality 
Incentive Program (EQIP). Wetlands Enhancement has been applied on over 
9,000 acres within the Basin.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Over 5,800 acres of RMS conservation plans have been developed on 
cropland and 1,700 acres on grazing lands for fiscal year 2002.

    State: Louisiana
    Fund: CO-46; $344,000
    Project: Golden Meadow Plant Material Center facility improvements 
and support for on-going plant materials work
    Progress/Status: NRCS has developed and awarded a contract for 
construction of a metal building for cold storage. Within the next 30 
days, NRCS will purchase, through a GSA contract, a surface water 
irrigation pumping station and contractor installation of the 
associated underground pipeline. A GSA contract will be utilized to 
acquire and install the walk-in cooler.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All works of improvement are scheduled to be completed by August 
30, 2002. All items in the business plan will be accomplished by 
September 30, 2002.
Maryland
    State: Maryland
    Fund: CO-01; $1,728,000
    Project: Chesapeake Bay
    Progress/Status: Implementation procedures for AFO/CAFO and CNMP in 
Maryland are on target. All DCs have received training courses for 
certified conservation and nutrient management planning. We have CREP 
signup acres of 3,400 with 2,300 acres of buffers (46 percent of goals 
accomplished). Buffers and CREP are a high priority in coordination 
with State and Federal partnerships. Nutrient management plans have 
been applied on approximately 12,000 acres. Certified nutrient 
management plans have been developed on 42 sites with 39 CNMPs applied. 
Update of Sections I-IV of the FOTG is 60 percent complete.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None
Massachusetts
    State: MA, WI
    Funds: CO-01, $300,000
    Project: Conservation Programs Related to Cranberry Production
    Progress/Status: NRCS has signed a Cooperative Agreement that 
obligates $280,000 to the Plymouth County Conservation District and 
$20,000 to the Cape Cod Cranberry Growers Association. The objective of 
this project is to provide cranberry growers with planning assistance 
and access to technologies, to conserve water and other natural 
resources, evaluate their off-site impacts, mitigate environmental 
problems, improve efficiencies and diversify their farms. The goal of 
the project is complete farm plans on at least 225 farms.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Funds will be obligated in contracts by September 30, 2002.

    State: MA, NY, CT
    Funds: CO-01, $100,000
    Project: Nature Conservancy's ``Weed It Now'' (WIN)
    Progress/Status: The Nature Conservancy is currently making final 
review of ``Grant Agreement'' materials prepared with NRCS. The Grant 
Agreement will transfer $100,000 to The Nature Conservancy to carry out 
the first year of the ``Weed It Now'' project. The purpose of the 
project is to eliminate six different exotic-invasive weeds from 
specific areas (approximately 565 acres total) within the Berkshire 
Taconic Landscape, thereby helping to protect the value of the forests 
for wildlife habitat, biodiversity and forest resources.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Phase one work will be completed by 4/1/2002.
Mississippi
    State: Mississippi
    Fund: CO-01; $1,500,000
    Project: Franklin County
    Project/Status: NRCS continues to work on the Franklin County Lake 
Project with an estimated completion date of August 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Franklin County Lake Project should be completed by February 
2003.

    State: Mississippi
     Fund: EQIP; $1,560,000
    Project: EQIP National Priority Area in Delta Region
    Project/Status: The agency is in the final ranking stage for EQIP 
National Priority Area in the Delta.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The funds for EQIP National Priority Area in the Delta will be 
obligated by September 2002.

    State: Mississippi
     Fund: CO-01; $750,000
    Project: Miss Delta Resources Study
    Project/Status: The study is complete and NRCS has developed a 
fiscal year 2002 agreement with the Yazoo Water Management District to 
develop plans and implement practices, identified in the study that 
will enhance the quantity of water available to farmers in the 
Mississippi Delta.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The plans and practices identified for fiscal year 2002 will be 
completed by September 2002.

    State: Mississippi
    Fund: CO-02; $0
    Project: Proper classification and taxonomic characteristics of 
sharkey soils
    Project/Status: Soil Scientist in NRCS continues with the study 
using allocated funds to State.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project is on-going.

    State: Mississippi
    Fund: CO-01; $1,300,000
    Project: Delta Conservation Demonstration Center in Washington 
County
    Project/Status: NRCS has entered into an agreement to provide funds 
to Washington County SWCD to implement activities planned for the Delta 
Conservation Demonstration Center.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The scheduled activities will be completed by September 2002.

    State: Mississippi
    Fund: CO-01; $900,000
    Project: Mill Creek Watershed
    Project/Status: NRCS has entered into an agreement to provide funds 
to the City of Magee to implement erosion control and flood control 
measures including vegetated buffers along the stream corridor.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The scheduled activities will be completed by July 2003.

    State: Mississippi
    Fund: CO-01; $250,000
    Project: Squirrel Branch Drainage Project
    Project/Status: NRCS has entered into an agreement with the City of 
Richland to provide funds to complete the Squirrel Branch Drainage 
Project. This City of Richland project is a carryover that was started 
in fiscal year 2001.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Squirrel Branch Drainage Project will be completed by 
November 2002.

    State: Mississippi
    Fund: CO-01; $75,000
    Project: Survey Chickasaway River
    Project Status: NRCS will enter into an agreement with sponsors to 
provide them funds to conduct a study of the feasibility of designating 
the Chickasaways River in Southeast Mississippi.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Survey Chickasaway River project should be completed by 
September 2002.

    State: Mississippi
    Fund: CO-01; $475,000
    Project: Cattle & nutrient management
    Project/Status: NRCS has entered into an agreement with the 
Mississippi Soil and Water Conservation Commission to provide funds to 
implement nutrient management systems with landusers throughout the 
State.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The cattle & nutrient management project will be completed by 
September 2002.

    State: Mississippi
    Fund: CO-01; $400,000
    Project: Improve Drainage along Lyons Creek
    Project/Status: NRCS has entered into an agreement with the Town of 
Taylorsville to provide funds to improve the Lyon Creek Drainage 
System.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Lyons Creek project should be completed by November 2002.

    State: Mississippi
    Fund: CO-01; $175,000
    Project: Cooperative agreement with Alcorn State University
    Project/Status: NRCS has entered into an agreement with Alcorn 
State University to provide the funds and technical assistance to 
analyze soil erosion and water quality needs in the area.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project will be completed by November 2002.

    State: Mississippi
    Fund: CO-46; $275,000
    Project: Jamie Whitten PMC
    Project/Status: NRCS has been developing plans and designs to 
implement improvements at the PMC. The implementations should begin 
April 2002 and be completed by August 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project will be completed by September 2002.

    State: Mississippi
    Fund: CO-01; $150,000
    Project: Mallard Pointe
    Project/Status: NRCS has entered into an agreement to provide funds 
to the Madison County Board of Supervisors to implement erosion control 
and channel bank protection at Mallard Pointe.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project will be completed by November 2002.

    State: Mississippi
    Fund: CO-01; $75,000
    Project: Choctaw County Impoundment Study
    Project/Status: NRCS plan to enter into an agreement with the 
Choctaw County Board of Supervisors to provide them funds to conduct a 
feasibility study pertaining to the proposed surface impoundment 
structure.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project will be completed by September 2002.

    State: Mississippi
    Funds: CO-01, $5,609,000
    Project: Wildlife Management Institute
    Progress/Status: National Water Center is accomplishing assigned 
items in national and local business plan. An agreement is being 
implemented to transfer $3,000,000 to US Fish & Wildlife Foundation.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be obligated by September 30, 2002.
Missouri
    State: Missouri
    Funds: CO-01, $20,000
    Project: Upper White River Basin
    Progress/Status: A report titled ``Establishment of a USDA-NRCS 
Water Quality Project Serving the Upper White River Basin in Missouri'' 
has been completed. It reflects input from various natural resources 
partners and captures budget projections for staffing and support 
costs. Copies of the report have been forwarded to the Chief of NRCS.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None.

    State: Missouri
    Fund: CO-01; $50,000.00
    Project: Source Water Protection Initiative
    Progress/Status: NRCS is in process of signing an agreement with 
State agency to complete agreed to work objectives.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All work will be completed by July 2003.
Nebraska
    State: Nebraska
    Fund: CO-01; $345,900
    Project: National Agroforestry Center
    Progress/Status: $231,900 was transferred to the National Business 
Management Center (NBMC) who provides all administrative support for 
the National Agroforestry Center (NAC). This transfer allows the NBMC 
to process all vouchers, grants and agreements, travel and other 
expenditures for activities related to the NAC. $114,000 is the 
allowance for Gary Wells in Nebraska for his salary and expenses while 
working at the NAC. The USDA National Agroforestry Center (NAC) had its 
origins in the 1990 Farm Bill. It began as a Forest Service effort in 
1992 and expanded into a partnership with the Natural Resources 
Conservation Service in 1995. NAC conducts research on how to design 
and install forested buffers to protect water quality and develops and 
delivers technology on a broad suite of agroforestry practices to 
natural resource professionals who directly assist landowners and 
communities.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $57,000 in salary and support costs has been spent for the 
employee in Nebraska, Gary Wells, working at the NAC. The rest of the 
money is being spent at the NAC administered through the NBMC.
New Jersey
    State: New Jersey
    Funds: CO-01, $1 million
    Project: State Cost Share Program
    Progress/Status: Technical assistance has been provided in 
planning, estimating costs and ranking of offers on 163 fiscal year 
2002 applications. Ninety contracts are currently being developed. 
Implementation is ongoing on over 100 prior year contracts. NRCS has 
hired additional staff (term employees) to meet this workload need.
    Fiscal year 2002 Obligations for Disbursement after September 2002: 
Technical assistance will be offered in the implementation of contracts 
throughout fiscal year 2002.
New Mexico
    State: New Mexico
    Funds: CO-01, $150,000.
    Project: Southwest Strategy
    Progress/Status: The SW Strategy develops an annual plan of 
operations with partnership input each year. Seventeen projects have 
been identified this year. Several additional projects (5 to 7) not 
initially identified are also incorporated into the plan and completed. 
Coordination between numerous partnerships continues.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be obligated by September 30, 2002.
New York
    State: New York
    Funds: CO-01, $325,000
    Project: Westchester County SWCD/Long Island Sound
    Progress/Status: Negotiations have been completed with the 
Westchester County SWCD and have led to an agreement to pass through 
$250,000.00 to the District for projects to be completed to conserve 
and protect Long Island Sound. The remaining $75,000.00 will be used by 
NRCS to provide technical assistance to the project.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $500,000
    Project: Pastureland Management/Rotational Grazing
    Progress/Status: This earmark is more commonly referred to as Graze 
New York. Cooperative Agreements are currently being negotiated to pass 
through approximately $325,000.00 to eight central New York Soil and 
Water Conservation Districts to provide technical assistance for the 
planning and implementation of prescribed grazing systems. The 
remaining $175,000.00 will be used to provide NRCS technical assistance 
to the project.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $250,000
    Project: Skaneateles and Owasco Watersheds
    Progress/Status: Negotiations are currently underway with the 
Cayuga, Onondaga and Tompkins County Soil and Water Conservation 
Districts to provide technical assistance to plan and implement Best 
Management Practices in both watersheds. Approximately $130,000.00 will 
be passed through to the Districts with the remaining $120,000.00 used 
to provide NRCS technical assistance to both projects.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $250,000
    Project: Onondaga Lake Watershed NPS
    Progress/Status: NRCS retains this funding in order to provide 
technical assistance to the Onondaga Lake Watershed Project in Onondaga 
County. Our assistance to the project supports the planning and 
implementation of Whole Farm Plans throughout the watershed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $300,000
    Project: Beaver Swamp Brook
    Progress/Status: Negotiations are currently underway with the City 
of Rye and Village of Harrison which are developing their plans at this 
time. The entire $300,000.00 will be passed through.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $200,000
    Project: Computer Tools for NMP
    Progress/Status: NRCS is working with David Galton, Professor, 
Dairy Management at Cornell University who is developing a proposal for 
the refinement, integration and implementation of computer tools to 
improve nutrient management planning on dairy farms in New York.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $650,000
    Project: Phase II Watershed Ag. Council
    Progress/Status: NRCS will use $570,000.00 for technical assistance 
to the NYC Watershed Agricultural Program for the development and 
implementation of farm plans in the NYC Watershed. The remaining 
$80,000.00 will be used for the stewardship of easements in the NYC 
Watershed. Negotiations for developing the Cooperative Agreement for 
this purpose are currently underway with the Watershed Ag. Council.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York
    Funds: CO-01, $130,000
    Project: Pace University
    Progress/Status: A Cooperative Agreement has been developed with 
Pace University in order for them to promote sustainable growth and 
protection of soil and water resources. The entire $130,000.00 will be 
passed through to Pace University.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: New York/Pennsylvania
    Funds: CO-01, $204,000
    Project: American Heritage Rivers
    Progress/Status: NY received $90,000 and PA received $104,000 for 
technical assistance for river navigator positions in the two States.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0
North Carolina
    State: North Carolina
    Funds: CO-01, $50,000.00
    Project: Dairy Cattle Manure Evaluation.
    Progress/Status: Report in progress.
    Fiscal year 2002 Obligation for Disbursement after September 30, 
2002: Funds are expected to be obligated by September 30, 2002.
North Dakota
    State: North Dakota
    Funds: CO-01, $700,000
    Project: Red River Basin Flood Prevention Project
    Progress/Status: A grant agreement to begin the flood prevention 
study was signed with the University Of North Dakota, Energy & 
Environmental Research Center for $700,000 on April 3, 2002. The 
objective of the study is to establish a program to evaluate the 
feasibility of utilizing existing infrastructure in a systematic way 
for temporary storage of flood water in the Red River Basin.
    Fiscal year 2002 Obligations for Disbursement after 9/30/02: 
Anticipate that $300,000 will be disbursed after 9/30/02.
Ohio
    State: Ohio
    Fund: CO-01; $1,000,000.00
    Project: Maumee Watershed Hydrological Study and Flood Mitigation 
Plan
    Progress/Status: Funding will be used for land treatment and 
technical assistance using multiyear contracts. This assistance will 
enhance partner funding from the Army Corp of Engineers that has been 
made available to five local conservation districts for upland 
treatment.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Funds will be obligated according to the plan developed by the 
local working group.

    State: Ohio
    Fund: CO-01; $50,000.00
    Project: Urban Encroachment on Rural Acres
    Progress/Status: NRCS has an agreement with the Fulton County 
Planning Commission to gather landuse data and produce GIS products. 
Currently, work is being done on survey development; actual survey is 
to be completed in September 2002. The data will be utilized to 
identify land cover/use, environmentally significant areas, 
agricultural significance, ground water information, and suitability 
for development.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Preliminary maps are to be developed by November 2002 with the 
final map products and presentation to be completed by October 2003.

    State: Ohio
    Fund: CO-01; $1,250,000.00
    Project: Great Lakes Basin Program
    Progress/Status: The basin program supports a competitive annual 
grants program that funds several types of erosion and sedimentation 
control projects. Grant applications were reviewed and applicants 
notified of their application status by the Great Lakes Commission.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funding was transferred to the Great Lakes Commission on 
March 21, 2002.

    State: Ohio
    Fund: CO-01; $50,000.00
    Project: Source Water Protection Initiative
    Progress/Status: This funding will increase planning efforts in the 
Upper Big Walnut Creek watershed. A nationally recognized CREP program 
has been initiated in this watershed. This 13 million-dollar local, 
State, and Federal partnership is working to protect the drinking water 
for nearly 600,000 people.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Funds will be obligated according to the developed plan.
Oregon
    State: Oregon
    Funds: CO-46, $325,000
    Project: Oregon Garden Foundation
    Progress/Status: The NRCS is developing an amendment to the fiscal 
year 2001 cooperative agreement that transfers funding to the Oregon 
Garden Foundation. The cooperative agreement work plan submitted by 
Oregon Garden on April 4, 2002 states that the funds will be used to 
pay salaries and expenses for 10 individuals to support improvement of 
the wetlands on site and provide interpretive signage, literature, and 
other educational opportunities that enhance visitor understanding of 
wetland ecology.
    Fiscal year 2002 Obligations for Disbursements after September 30, 
2002: The Federal contract will be completed December 31, 2003.

    State: Oregon
    Funds: CO-46, $125,000
    Project: Advanced Wetland Plant Research--Jackson Bottom Wetland 
Preserve
    Progress/Status: NRCS is finalizing an agreement that transfers 
funding to test and evaluate wetland and upland edge enhancement 
techniques in 10 studies plots designated around the perimeter of the 
education center. The NRCS plant materials specialist is serving as a 
project advisor to establish enhancement goals and set success 
criteria.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract will be completed September 30, 2004.

    State: Oregon
    Funds: EQIP, $250,000; CO-01, $250,000
    Project: Klamath Basin Accelerated Planning and Implementation 
Assistance
    Progress/Status: NRCS is currently assisting the Oregon Klamath 
Soil and Water Conservation District and California's Lava Beds/Butte 
Valley Resources Conservation District to develop a natural resources 
plan that will address Klamath Basin natural resources issues. These 
two districts have established a local Steering Group and will be 
soliciting additional stakeholder participation. The planning process 
will initially focus on delivery of accelerated EQIP financial 
assistance. In the longer term the planning process will need to adapt 
to different planning scales such as the Upper and Lower Klamath Basin, 
sub-watersheds of these basins, irrigation districts, and individual 
farms. NRCS will focus its assistance efforts at the sub-watershed and 
individual farm scale. Complexity of this planning effort is compounded 
by the interaction of the Klamath Basin Project Area, The Endangered 
Species Act, and Tribal concerns with the demands on limited water 
resources in the Klamath Basin. The planning and implementation effort 
will be a long-term project with anticipated benefits to be derived 
when landowners/operators implement conservation systems to improve 
water management--quality and quantity; improve wildlife habitat for 
aquatic and upland wildlife; restore wetland to improve water quality 
and improve/increase wildlife habitat; and improve grazing land 
management. Implementation will lead to improved Klamath Basin 
watershed health with related improvement in hydrologic condition.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All EQIP financial assistance funding will be awarded to private 
landowners before September 30, 2002. Related EQIP technical assistance 
will be utilized well before the end of this fiscal year. All CO-01 
funding technical assistance funding will be utilized before the end of 
this fiscal year.
Pennsylvania
    State: Pennsylvania
    Fund: CO-01; $1,338,000
    Project: Chesapeake Bay Program
    Progress/Status: NRCS has provided planning, me&E, design and 
construction quality assurance to farmers in the Chesapeake Bay area in 
cooperation with the local Conservation District. This accelerated 
technical assistance was provided to manage nutrients, reduce erosion, 
eliminate runoff from barnyards, and improve soil quality.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The design and installation of planned conservation practices 
will continue through fiscal year 2003. Technical assistance will be 
necessary to fulfil the contracts signed with landowners to install 
conservation practices in their CBP contract. These contracts may have 
planned practices for up to 3 years. Payments will need to be processed 
to the landowners.
Puerto Rico
    State: Puerto Rico
    Funds: CO-01, $150,000
    Project: Digitization and Certification of all published soil 
surveys
    Progress/Status: Three of six published soil surveys in Puerto 
Rico, are digitized and SSURGO certified. Two have been compiled and in 
process of digitizing. These two soil surveys are in schedule to be 
digitized and SSURGO certified before the end of the fiscal year 2001. 
Digital Soil Survey CD products will be prepared for each one of these 
five published Soil Surveys. Only one, the Humacao Area Soil Survey, is 
pending because Digital Orthophotography Quadrangles (DOQ's) are not 
available.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The digitizing, certification and digital CD products of all 
published soil surveys (except for Humacao Soil Survey) will be 
completed by September 30, 2003.
Rhode Island
    State: Rhode Island
    Fund: CO-01; $250,000
    Project: Jamestown Water Supply and Wetland Restoration Project
    Progress/Status: NRCS has drafted a cooperative agreement that 
transfers $225,000 to the town of Jamestown, RI. The Town will develop 
a proposed budget, certify that the real property right and permits 
have been obtained, assure compliance with NHPA, ensure the wetlands 
are restored and/or protected, provide engineering designs and as built 
drawings, construct the system connector and assume operations and 
maintenance of the project. NRCS is reviewing the engineering designs, 
conducting inspections during project installation, providing technical 
assistance in ensuring the protection of the wetlands. Town officials 
expect to sign the agreement by April 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The project installation will be completed by December 31, 2002.
South Carolina
    State: South Carolina
    Fund: CO-01; $600,000
    Project: Natural Resources Conservation Decision Support System
    Progress/Status: NRCS has amended the existing cooperative 
agreement to transfer $450,000 to the University of South Carolina for 
fiscal year 2002 activities. The cooperative agreement work plan states 
that the Earth Sciences and Resources Institute of the University 
(ESRI-USC) will continue the development and improvement of GIS-based 
conservation planning and prioritization tools. Current tools developed 
under prior funding include: (1) AFOWizard, a compliance-oriented, site 
specific, nutrient management tool; (2) CRPWizard, a CRP site 
prioritization tool based on the Environmental Benefits Index; and (3) 
PriorityWizard, a watershed prioritization tool. The fiscal year 2002 
scope of work includes: (1) Expedite and improve the comprehensive 
nutrient management planning process with the use of AFOWizard; (2) Use 
spatial analysis to solve current field problems and to address new 
challenges that may arise from the upcoming Farm Bill; (3) Use web-
based applications to better serve and reach NRCS customers; and (4) 
Provide technical support for ESRI-USC-developed applications. Focus of 
the effort will be on NRCS SC needs. The ESRI-USC team is available to 
consult with other States. NRCS is providing technical specialists from 
both field and state office levels.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None

    State: South Carolina
    Fund: CO-01; $550,000
    Project: Changing Land Use and the Environment (CLUE)
    Progress/Status: NRCS has amended the cooperative agreement to 
transfer $412,500 to Clemson University for fiscal year 2002 
activities. The objective of this research program is to develop a 
knowledge base to understand the impact of land use changes on the 
environment. Results of this research will provide quantitative answers 
to questions posed by stakeholders, policy and decision-makers, 
developers, and planners concerning land use alternatives. The project 
has six objectives: (1) Characterize water quality and quantity before, 
during, and after land use change; (2) Evaluate efficacy of installed 
best management practices (BMP's) and compare this efficacy with 
reported values and model predictions; (3) Establish a comprehensive 
water quality monitoring program in two subwatersheds (one developed 
and another undergoing development) to characterize changes in storm 
water and receiving water quality as a function of land use; (4) 
Analyze the determinants of the current use of land-converting 
techniques, some of which may be BMP's; (5) Analyze the cost 
effectiveness of currently used and proposed BMP's; and (6) Collaborate 
with existing outreach programs to insure that the knowledge learned in 
this research is translated to the general public who have questions 
regarding changing land use. The fiscal year 2002 funding will be used 
to continue work on tasks begun in fiscal year 2001 and to initiate 
work on objectives not previously funded. Focus will be on completing 
installation of remaining instrumentation, field data collection and 
analysis, laboratory analyses of water samples, analysis and 
preliminary conclusions, and technology transfer.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Data collection and analyses following storm events are expected 
to extend beyond September 30, 2002, since these are weather dependent. 
This will extend the project completion date beyond fiscal year 2002.
Tennessee
    State: Tennessee
    Fund: FIP; $250,000
    Project: Damage to Forest Health from Southern Pine Beetle
    Progress/Status: NRCS-TN is currently in negotiations with the 
Tennessee Department of Forestry to utilize the funding to provide 
financial assistance to landowners, as a supplement to the TN Dept. of 
Forestry, Southern Pine Beetle Program, to establish new stands of 
pines with proper spacing to resist the pine beetle infestation. 
Subject to agreement, stands will be established on cut-over hardwood 
plots to disperse the pines to areas not previously infested with the 
Southern Pine Beetle.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The plantings and financial assistance will be completed by May 
30, 2003.
Texas
    State: Texas
    Fund: CO-01; $500,000
    Project: Facilitate water conservation and efficient irrigation 
activities in the Bexar, Medina, Uvalde Counties of Edwards Aquifer.
    Progress/Status: Texas received a $500,000 earmark located in 
Congressional District 23 to facilitate water conservation and 
efficient irrigation activities in the Edwards Aquifer Area in Bexar, 
Medina and Uvalde Counties. To date, the irrigation water management 
plan has been developed and 60 percent of the staffing has been 
completed. The remaining 40 percent of the Irrigation Team staffing 
have been selected and will be in place by June 2, 2002. Equipment 
purchases are currently being made for implementing the water 
conservation activities.
    The funding will be used to establish an Irrigation Team 
responsible for evaluating existing irrigation systems, recommending 
installation of more efficient systems and improved irrigation water 
management, outreach activities and developing cost-share contracts in 
the area through the Environmental Quality Incentives Program (EQIP) 
and the Bexar-Medina-Atascosa (BMA) Public Law 566 Program.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All dollars will be dispersed by September 30, 2002.

    State: Texas
    Fund: CO-01; $3,000,000
    Project: Field Office telecommunication pilot project in West Texas
    Progress/Status:
  --Interagency planning meeting was completed in December
  --Information Technology Center, Fort Collins, was involved in the 
        December meeting
  --A detailed plan for implementation has been drafted.
  --Starting to purchase telecommunications equipment
  --Installing T-1 lines or upgrading frame relay in 31 service centers
  --A telecommunications contractor has been selected and additional 
        telecommunications equipment will be purchased based on the 
        contractor's assessment and recommendations
  --Based on a field trip, it has become apparent training is a high 
        priority and steps are underway to implement interagency 
        computer software training. This may be a model for future 
        agency training.
  --Based on interagency planning meeting and field trip, the 
        telecommunication project will encompass innovative means of 
        improving service to our customers. The process is underway to 
        identify, develop, and test new telecommunications application 
        services with customers and agency personnel.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All funds will be obligated by September 30, 2002.

    State: Texas
    Funds: CO-01, $300,000
    Project: TIAER Demonstration Project
    Progress/Status: NRCS has a draft cooperative agreement prepared 
and is negotiating with Texas Institute of Applied Environmental 
Research (TIAER) to finalize project deliverables and responsibilities. 
NRCS-Texas will submit complete agreement draft to Animal Husbandry & 
Clean Water Programs Division for review. NRCS-Texas will transfer 
$300,000 of the earmark to NRCS-Iowa the National Pork Producers 
Council and the Iowa Soybean Association for their demonstration 
project. The utilization of mircowatershed planning and third-party 
certification of CNMP's has potential to demonstrate a new approach for 
addressing water quality issues in agricultural communities.
    Fiscal year 2002 Obligations for Disbursement after June 2003: The 
activities set forth the cooperative agreement and work plan will be 
completed by May 31, 2003.

    State: Texas
    Funds: CO-01, $100,000
    Project: TIAER Demonstration Project
    Progress/Status: NRCS has utilized staff time to develop a draft 
cooperative agreement and conduct meetings with the Texas Institute of 
Applied Environmental Research (TIAER). On site meetings between staff 
have supported the development of the draft agreement and work plan for 
the project. NRCS-Texas has expended 50 percent of the funds to support 
agreement development and project deliverables. NRCS-Texas will work 
with the Animal Husbandry & Clean Water Programs Division to coordinate 
with NRCS staff in Iowa to formalize consistent and comparable 
agreements for the demonstration projects.
    Fiscal year 2002 Obligations for Disbursement after June 2003: The 
funds will be utilized throughout the fiscal year to cover staff time 
and expenses to support the demonstration project, work with TIAER, and 
provide staff resources as agreed. All funds shall be expended by the 
close of the 2002 fiscal year.

    State: Texas
    Fund: CO-46; $568,000.00
    Project: Texas Plant Materials Centers
    Progress/Status: fiscal year 2002 funding to the Texas Plant 
Materials Centers (PMCs) was specified to be not less than the fiscal 
year 2001 level. Texas received $568,000, the same as fiscal year 2001, 
which was distributed as usual among the three PMCs in the State.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All planned activities for 2002 will be completed by September 
30, 2002.
Utah
    State: Utah
    Fund: CO-01; $125,000
    Project Name: AFO/CAFO
    Progress/Status: Utah State legislature was trying to add $400,000 
to the $125,000 as was done in fiscal year 2001. The legislature did 
not pass the additional $400,000. Last year, there was a ranking 
criteria that determined who what get what dollars. Due to the 
legislation not passing, the Utah Department of Agriculture and Food 
(UDAF), is now re-doing the criteria. When the criteria are completed . 
. . . a contract will be initiated.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: A contract between UDAF and NRCS for the $125,000 is expected to 
be signed by May 15.
Vermont
    State: Vermont
    Fund: CO-01; $300,000
    Project: Alternative Manure Management Technology
    Progress/Status: NRCS has not signed any agreements at this time, 
but the funds will be obligated for several activities and projects. An 
existing agreement to hire an Alternative Manure Management Coordinator 
will be amended to continue through 2003; an agreement to continue with 
Super Soil Inc., (a system that delivers electricity to manure to 
change odor and nutrient properties). Potential new projects include 
installing a milkhouse wastewater system that flocculates out solids 
that can be treated separate from liquids; and converting animal waste 
into fuel pellets.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Depending on how the work plan schedules are written, most of the 
fiscal year 2002 Earmark could be disbursed in fiscal year 2003.
Virginia
    State: Virginia
    Funds: CO-01, $1,404,000
    Project: Chesapeake Bay Program
    Project Status: $1.4 million in Chesapeake Bay funds are earmarked 
in the fiscal year 2002 budget for NRCS in Virginia. These funds 
support a total of 19 NRCS staff years within the watershed. Included 
in that number, 2 civil engineering technician positions have been 
filled. These positions provide detailed conservation practice layout, 
design, and training assistance to numerous NRCS and Soil and Water 
Conservation District (SWCD) employees within the drainage area of the 
Bay. In general, our employees provide resource data and technical 
advice to help counties and soil and water conservation districts 
identify buffer and wetland protection areas as part of the tributary 
strategy's process. We provide training and assistance on conservation 
planning and resource management/protection to public and private 
landowners and managers. NRCS service center staff work with SWCDs in 
carrying out education activities, analyzing workload and developing a 
means to improve natural resource conditions. The next step is to track 
and measure progress. Most NRCS staff time is spent helping landowners 
plan, layout, design, and install best management practices to protect 
groundwater and surface water by controlling non-point source pollution 
from agricultural and urban lands. This includes properly managing 
excess animal waste and providing a variety of standards and 
specifications for best management practices cost-shared under State 
and Federal programs. To date, fiscal year 2002 accomplishments have 
consisted of helping landowners apply resource management systems on 
6,100 acres of cropland, 1,400 acres of forestland, and 5,000 acres of 
pasture and hay land; installed 900 acres of riparian forest buffers; 
5,600 acres of nutrient management systems; and 5,200 acres of pest 
management systems.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None
West Virginia
    State: West Virginia
    Funds: CO-01, $250,000
    Project: Mid-Atlantic Highlands-Design & Implement Natural Stream 
Restoration Initiatives.
    Progress/Status: Currently the watershed Work Group is identifying 
a site on Knapps Creek.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Work will be completed by 12/31/2002.

    State: West Virginia
    Funds: CO-02, $200,000
    Project: Geographic Database to conduct digitized soil surveys w/
Cancan Valley Insti.
    Progress/Status: To conduct digitized soil surveys in the Mid-
Atlantic Highlands in conjunction with the Canaan Valley Institute 
(CVI). Established priority work list to include following counties:
    Morgan County; Jeferson County; Kanawha County; Mercer County; 
Summers County; Harrison County and Taylor County.
    After priority list was established, cartographic base materials 
were requested from NRCS's National Cartographic Center. Work is 
currently underway on Morgan and Kanawha County.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: West Virginia
    Funds: CO-01, $160,000
    Project: Nitrogen Soil Test
    Progress/Status: Eleven counties have been identified for 
conducting the testing program. A vacancy announcement has been 
prepared for hiring temporary soil conservation aids to start working 
this summer to collect and test manure, litter and soil samples. This 
information will be provided to the cooperating farmers to reduce, 
costs and protect water quality.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: West Virginia
    Funds: CO-02, $0.00
    Project: GIS Center of Excellence at WV University
    Progress/Status: Met with VWVU department heads and dean several 
times since December 7th to establish a planning team. NRCS met on 
Friday, January 18, 2002 to outline framework of plan. Members of 
planning team include: NRCS Soil Survey Division Director, WVU Dean of 
Arts and Sciences, Department Chair WVU Geology and Geography, NRCS 
State Soil Scientist, and NRCS State Conservationist (Chairman). First 
formal meeting was held in February to approve outline of plan draft.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: N/A

    State: West Virginia
    Funds: CO-01, $860,000
    Project: Appalachian Small Farmer Outreach Program
    Progress/Status: Thirty-three (33) public outreach meetings are 
scheduled, and 33 in-service training sessions are scheduled during the 
second quarter of fiscal year 2002. NRCS continues to support 13 
conservation positions for grassland outreach. NRCS is continuing the 
evaluation of pilot project for the development of technology for 
riparian grazing and winter grazing. NRCS is working with ARS, WVU 
Extension Service and WV Conservation partnership to develop and 
conduct Appalachian Grazing School fiscal year 2002 Obligations for 
Disbursement after September 30, 2002: $0

    State: West Virginia
    Funds: CO-01, $300,000
    Project: Potomac & Ohio River Basin Soil Nutrient Project
    Progress/Status: Sampled 14 soil series in Greenbrier Valley and 7 
soil series in the Potomac Basin and submitted to WVU Laboratory. 
Currently summarizing data collected to date. NRCS prepared sampling 
plan for 2002 field work in Northern Panhandle and Greenbrier Valley. 
Mine soils was added to list for characterization for background on 
soil phosphorus status and potential retention capacity. Meet monthly 
with representatives of Agriculture and Forestry Experiment Station to 
monitor progress in lab work.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: $0

    State: West Virginia
    Funds: CO-01, $546,000
    Project: Chesapeake Bay Program:
    Progress/Status: Funding supplements salaries and benefits for 
conservation staff working in the Chesapeake Bay Drainage Area Counties 
of West Virginia.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None
Wisconsin
    State: Wisconsin
    Funds: CO-01, $300,000
    Project: Wisconsin Cranberry Growers
    Progress/Status: NRCS and the Wisconsin State Cranberry Growers 
Association (WSCGA) have mutually agreed on a ``whole farm planning'' 
process that will address the needs of cranberry growers within the 
State. A cooperative working agreement has been initiated that 
solidifies the partnership between NRCS and WSCGA. NRCS will provide 
office space and the like, along with dedicating a soil conservationist 
to the process. WSCGA will employ a project coordinator with extensive 
experience in Wisconsin cranberry production, train the NRCS soil 
conservationist and formulate a WSCGA Advisory Committee for the 
process.
    Fiscal year 2002 Obligation for Disbursement after September 30, 
2002: All funds will be obligated for implementation of the whole farm 
planning process by December 31, 2003.

    State: Wisconsin
    Funds: CO-01, $2,000,000
    Project: Global Environmental Management (GEM)
    Progress/Status: A cooperative agreement has been completed and 
signed with the University of Wisconsin Stevens Point. The objective of 
the agreement is to develop community planning processes and 
methodologies related to natural and agricultural resources. Approaches 
will be tested in the course of assisting two Wisconsin counties to 
develop comprehensive community plans by 2010. Products and protocols 
will be accomplished in the following areas: social/institutional 
capital, natural and farmland resource inventory techniques, 
alternative resource management strategies.
    Fiscal year 2002 Obligation for Disbursement after September 30, 
2002: Completion of the agreement objectives/products will by June 30, 
2005.

    State: Wisconsin
    Funds: CO-01, $1,000,000
    Project: Aldo Leopold Foundation
    Progress/Status: A cooperative agreement is completed and awaiting 
signatures between NRCS and the Leopold Foundation. After several 
working meetings between NRCS, Leopold Foundation and FACT (Farming and 
Conservation Together), an agreement has been completed to install 
conservation practices that promote the conservation of natural 
resources of the Fairfield Marsh area. Such practices and programs 
could include, wetland restoration, soil conservation, water quality 
improvement, forest management, conservation buffers, wildlife habitat 
improvement, and farmland protection.
    Fiscal year 2002 Obligation for Disbursement after September 30, 
2002: The installation of all conservation practices will be completed 
by December 2005.

    State: Wisconsin
    Funds: CO-01, $250,000
    Project: GLCI--Wisconsin Department of Agriculture
    Progress/Status: NRCS, DATCP and the GLCI council have agreed on 
the implementation of the educational assistance program for Wisconsin 
grazers. The cooperative agreement has been finalized and the call for 
proposals has been released.
    Fiscal year 2002 Obligations: All funds will be obligated to 
successful grant recipients by September 30, 2002.
    Question. Please provide a status report in regard to activities of 
individual NRCS plant materials centers.
    Answer. I will ask the Natural Resources Conservation Service to 
provide that information for the record.
    [The information follows:]

    Plant Materials Centers (PMC) continue to focus on high priority 
issues like invasive species, fire restoration, drought management, 
nutrient management and water quality. Products from PMC work include 
conservation plant releases, printed materials and oral presentations 
that help land owners and managers address key conservation needs and 
environmental concerns.
    Plant materials work is organized according to national projects 
that address key conservation needs. Technology development and 
transfer that relate to these national projects is realized by studies 
at individual PMCs. Consequently, PMC studies form the basic foundation 
upon which the plant materials program functions. Each PMC has multiple 
studies, and these studies emphasize high priority issues of the 
geographic area served by that PMC. A table summarizing this 
information according to plant materials projects, PMCs working on 
them, and the number of studies at each PMC and a table reflecting 
critical resource issues being addressed by the plant materials (PM) 
program are provided for the record.

                    STATUS OF PLANT MATERIALS PROJECTS
------------------------------------------------------------------------
                                             PMCs addressing the project
                                                (and number of active
    Project Title and Brief Description        studies at each PMC to
                                                address the project)
------------------------------------------------------------------------
Critical Area 1.1: Controlling erosion on   Arkansas (6), Colorado (1),
 highly disturbed areas such as highways,    Florida (2), Hawaii (2),
 dams etc.                                   Louisiana (5), Michigan
                                             (2), Mississippi (1),
                                             Montana (1), New Jersey
                                             (1), New Mexico (1), New
                                             York (2), Washington (4)
Cropland 1.1: Controlling erosion on        East Texas (1), Hawaii (1),
 cropland with cropping and residue          Knox City, TX (2), Maryland
 management systems.Florida (2), Georgia     (2), Michigan (1),
 (2), Hawaii (2), Maryland (1),              Mississippi (3), Missouri
 Mississippi (2), New York (2), North        (2), New Mexico (2), South
 Dakota (1)Cropland 2.1: Controlling         Texas (1), Washington (1)
 erosion on cropland with vegetative
 barriers in the US.
Cropland 3.1: Controlling erosion on        Georgia (2), Kansas (1),
 cropland by crop conversion to perennial    Mississippi (11), New York
 crops or less erosive annuals.              (1), Washington (3), West
                                             Virginia (1)
Cropland 4.1: Protecting surface and        California (1), Idaho (2),
 ground water with vegetative filters.       Kansas (10), Knox City, TX
                                             (2), Montana (6), North
                                             Dakota (16), Washington (1)
Forestland 1.1: Conservation systems for    Georgia (1), Hawaii (2),
 controlling erosion and improving water     Mississippi (2), Montana
 quality within forested watersheds.         (1), New Mexico (1), Oregon
                                             (2), Washington (1)
Mineland 1.1: Improve erosion control and   Arkansas (1), Colorado (7),
 the quality of water leaving mined land     East Texas (2), Florida
 and other drastically disturbed sites.      (4), Kansas (3), Montana
                                             (7), New Mexico (10), West
                                             Virginia (6)
Natural Areas 1.1: Maintaining plant        California (1), Colorado
 diversity and controlling soil erosion on   (4), Florida (4), Hawaii
 natural areas.                              (5), Kansas (3), Knox City,
                                             TX (2), Louisiana (1),
                                             Maryland (4), Michigan (8),
                                             Mississippi (4), Montana
                                             (5), New Jersey (3), New
                                             Mexico (6), New York (3),
                                             North Dakota (5), Oregon
                                             (6), Washington (11), West
                                             Virginia (3)
Pasture/Hayland 1.1: Improving forage       Colorado (2), East Texas
 production and other conservation systems   (2), Idaho (1), Kansas (2),
 with cool season plants.                    Knox City, TX (1), Maryland
                                             (1), Michigan (1), Missouri
                                             (1), Montana (2), New
                                             Mexico (4), New York (3),
                                             North Dakota (1), South
                                             Texas (1), Washington (4),
                                             West Virginia (3)
Pasture/Hayland 2.1: Improving forage       Arizona (1), Arkansas (6),
 production and other conservation systems   East Texas (3), Florida
 with warm season plants.                    (7), Georgia (6), Hawaii
                                             (2), Kansas (2), Michigan
                                             (3), Mississippi (31),
                                             Missouri (7), New Jersey
                                             (3), New Mexico (2), New
                                             York (4), North Dakota (1),
                                             West Virginia (1)
Rangeland 1.1: Improving the ecological     Arizona (8), California (3),
 status, production and soil protection of   Colorado (3), Florida (3),
 rangeland.                                  Idaho (12), Kansas (2),
                                             Knox City, TX (6), Montana
                                             (6), New Mexico (13), North
                                             Dakota (2), South Texas
                                             (14), Washington (5)
Urban 1.1: Developing plants to use in      Florida (1), Maryland (1),
 urban areas to control erosion and          Missouri (1), New Mexico
 protect water quality.                      (2)
Urban 2.1: Developing plants to use in      Colorado (1), Florida (3),
 urban areas to reduce water quantity use    Montana (1), New Mexico (4)
 (xeriscapes fit here).
Water Quality 1.1: Develop the technology   East Texas (1), Florida (2),
 for creating and restoring wetlands for     Idaho (6), Knox City, TX
 water quality improvement.                  (3), Louisiana (2),
                                             Maryland (1), Missouri (3),
                                             New Mexico (1), North
                                             Dakota (1), Oregon (22),
                                             South Texas (3)
Water Quality 2.1: Develop the technology   Colorado (6), Georgia (1),
 for restoring or creating riparian areas    Idaho (3), Kansas (1),
 for water quality improvements.             Maryland (4), Mississippi
                                             (1), Missouri (1), New
                                             Jersey (3), New Mexico
                                             (12), New York (1), Oregon
                                             (17), South Texas (1),
                                             Washington (5)
Water Quality 3.1: Develop the technology   Arkansas (1), Idaho (13),
 for stabilizing channels for soil erosion   Kansas (4), Maryland (1),
 control.                                    Michigan (3), New York (1),
                                             Oregon (4), West Virginia
                                             (1)
Water Quality 4.1: Develop plants for       Louisiana (3), New Jersey
 shoreline erosion control.                  (4), New York (1), South
                                             Texas (7)
Wildlife 1.1: Develop plants for improving  Colorado (8), East Texas
 wildlife habitat.                           (3), Florida (2), Hawaii
                                             (1), Knox City, TX (5),
                                             Louisiana (2), Michigan
                                             (1), Mississippi (3),
                                             Missouri (7), Montana (1),
                                             New Jersey (3), New Mexico
                                             (1), New York (4), North
                                             Dakota (4), Oregon (1),
                                             South Texas (6), Washington
                                             (1)
Animal Waste Management...................  California, Colorado, Idaho,
                                             Maryland, Mississippi,
                                             Montana, North Dakota,
                                             Oregon, Washington
------------------------------------------------------------------------



       CRITICAL RESOURCE ISSUES ADDRESSED BY PLANT MATERALS PROGRAM
------------------------------------------------------------------------
                                                PMCs addressing this
 Critical Resource Issues addressed by the   resource concern in one or
                PM Program                          more studies
------------------------------------------------------------------------
Water Quality (Buffers)...................  California, Colorado, East
                                             Texas, Florida, Georgia,
                                             Idaho, Kansas, Knox City
                                             (TX), Maryland, Michigan,
                                             Mississippi, Missouri,
                                             Montana, New Jersey, New
                                             Mexico, New York, North
                                             Dakota, Oregon, South
                                             Texas, Washington
Carbon Sequestration......................  California, Georgia, Idaho,
                                             Kansas, Louisiana,
                                             Michigan, Mississippi,
                                             Montana, New Jersey, New
                                             Mexico, North Dakota,
                                             Washington
Grazing Land Conservation.................  Arizona, Arkansas,
                                             California, Colorado, East
                                             Texas, Georgia, Idaho,
                                             Kansas, Knox City (TX),
                                             Louisiana, Maryland,
                                             Michigan, Mississippi,
                                             Missouri, Montana, New
                                             Jersey, New Mexico, New
                                             York, North Dakota, Oregon,
                                             South Texas, Washington,
                                             West Virginia
Invasive Species..........................  Arizona, California, Hawaii,
                                             Idaho, Kansas, Knox City
                                             (TX), Maryland, Michigan,
                                             Mississippi, Montana, New
                                             Mexico, North Dakota,
                                             Oregon, South Texas,
                                             Washington
Native Species............................  Arizona, Arkansas,
                                             California, Colorado, East
                                             Texas, Florida, Georgia,
                                             Hawaii, Idaho, Kansas, Knox
                                             City (TX), Louisiana,
                                             Maryland, Michigan,
                                             Mississippi, Missouri,
                                             Montana, New Jersey, New
                                             Mexico, New York, North
                                             Dakota, Oregon, South
                                             Texas, Washington, West
                                             Virginia
Nutrient Management.......................  California, Colorado,
                                             Florida, Idaho, Kansas,
                                             Knox City (TX), Louisiana,
                                             Maryland, Mississippi,
                                             Missouri, Montana, North
                                             Dakota, Oregon, Washington
Restoration of Disturbed Areas (e.g.,       Colorado, East Texas,
 fire, minelands, overgrazing, etc.).        Florida, Idaho, Michigan,
                                             Mississippi, Montana, New
                                             York, North Dakota, Oregon,
                                             South Texas, Washington,
                                             West Virginia
Riparian Zones............................  Arkansas, Colorado, East
                                             Texas, Florida, Georgia,
                                             Idaho, Kansas, Knox City
                                             (TX), Maryland, Michigan,
                                             Mississippi, Missouri,
                                             Montana, New Jersey, New
                                             Mexico, New York, North
                                             Dakota, Oregon, South
                                             Texas, Washington
Soil Erosion..............................  Arizona, Arkansas, Colorado,
                                             East Texas, Florida,
                                             Georgia, Hawaii, Idaho,
                                             Kansas, Knox City (TX),
                                             Louisiana, Maryland,
                                             Michigan, Mississippi,
                                             Missouri, Montana, New
                                             Jersey, New Mexico, New
                                             York, North Dakota, Oregon,
                                             South Texas, Washington,
                                             West Virginia
Water Management (e.g., drought)..........  Colorado, East Texas, Idaho,
                                             Knox City (TX), Montana,
                                             New Mexico, Washington
Wetland and Wildlife Conservation.........  Arizona, Colorado, East
                                             Texas, Florida, Hawaii,
                                             Idaho, Kansas, Knox City
                                             (TX), Louisiana, Maryland,
                                             Michigan, Mississippi,
                                             Missouri, Montana, New
                                             Jersey, New Mexico, New
                                             York, North Dakota, Oregon,
                                             South Texas, Washington,
                                             West Virginia
------------------------------------------------------------------------

    Question. Please provide information in regard to activities of the 
individual NRCS conservation institutes.
    Answer. The NRCS Institutes activities focus on providing relevant, 
timely, up-to-date technical tools to field staff. Priority activities 
include development of training and technical guide materials, nutrient 
management, carbon sequestration, and conservation planning; 
development of internet access to technical information and resource 
data; and testing new and innovative methods for protecting the 
nation's natural resources. Specific activities are provided for each 
Institute.
    [The information follows:]
Wetland Science Institute (WLSI)
    Training--developing and delivering specialized training in wetland 
restoration, hydric soil identification, wetland plant identification, 
and application of hydrology tools for wetland identification. Six of 
15 courses/workshops have been delivered to NRCS field personnel with 
wetland restoration and delineation responsibilities thus far in fiscal 
year 2002.
    Technical Guidance--developing and disseminating technical guidance 
documents for wetland restoration, delineation, and assessment. The 
Index of Biotic Integrity Case Study and the Wetland Restoration 
Handbook are scheduled for completion and distribution to the field in 
fiscal year 2002.
    Direct Assistance--providing direct assistance to NRCS State staff 
and others for resolving wetland problem areas in the field. WLSI staff 
has provided assistance to South Dakota (wetland hydrology); Arkansas, 
Louisiana and Oklahoma (wetland restoration); Maryland and Delaware 
(wetland plant issue); Vermont, New Hampshire, Maryland and Delaware 
(hydric soils); and North Dakota (wetland functional assessment).
Social Sciences Institute (SSI)
    Technical Procedures and Skill Enhancement Assistance: The SSI has 
several procedures on compact disk including (1) Self Scoring 
Evaluation of Locally Led Conservation Planning and (2) Adding Up 
Social Capital: An Investment in Communities. Both procedures are 
designed to help NRCS field staff expand community participation in 
conservation planning. The SSI has also developed 30 technical fact 
sheets to help NRCS field staffs improve their human relation skills to 
better serve our customers.
    Gathering and Assessing Customer Feedback--The SSI obtains feedback 
from our customers and assesses internal employee or program needs. 
These assessments include gallop poll of customer satisfaction and 
surveys of: (1) adoption barriers perceived by small and limited 
resource farmers; (2) NRCS employees; (3) council members from the 
Resource Conservation and Development Program Area; and (4) Earth Team 
Volunteers for recruiting and retention purposes.
    Training--developed and delivered training courses to NRCS field 
and management staff. Some examples follow:
  --Developing Your Skills to Involve Communities in Implementing 
        Locally Led Conservation, SSI has trained trainers from 35 
        States.
  --Sponsorship of 27 Leader in You Training Programs since 1996. These 
        programs are satellite transmissions featuring the top trainers 
        in the country, including Steven Covey, Tom Peters, and Warren 
        Bennis.
  --Consultation with American Indian Governments training course. This 
        course provides NRCS employees better tools and techniques to 
        work with our historically under-served Indian tribal 
        customers.
Soil Quality Institute (SQI)
    Soil Carbon Assessment and Monitoring.--Developing soil carbon 
assessment and monitoring protocols, tools and models. Work is being 
conducted in cooperation with the Agricultural Research Service, the 
National Resources Ecology Laboratory, Los Alamos National Laboratory, 
and Land Grant Colleges to determine the ability of different soils to 
sequester carbon undergoing different management systems.
    Soil Quality and Conservation Practice Effects.--One of the 
functions of the SQI is to determine the effects of management systems 
(i.e., agricultural, forestry, grazing, urban) on soil quality. One 
example is the Soil Conditioning Index; a field office tool to be 
distributed this fall, which will give field office staffs the ability 
to assess agricultural systems effects on soil quality.
    Dynamic Soil Properties.--SQI is leading the effort in defining 
dynamic soil properties and its importance to natural resource 
management. Dynamic soil properties are those that change in response 
to land use and management. This type of information is currently not 
available in our soil databases. It will allow field office staffs, 
farmers and ranchers to improve management decisions that enhance soil, 
water, and air quality.
    Training and Outreach.--Four soil quality courses have been taught 
the first two quarters of this fiscal year in New York, Nebraska, 
Louisiana, and Tennessee to NRCS and other partners at the field office 
level. Four more courses will be taught during the last two quarters of 
this fiscal year in Washington, Iowa, Hawaii, and Kansas. Approximately 
20 soil quality workshops reaching over 6,000 people have been given to 
various farm groups and non-government organizations. Well over 100,000 
publications have been distributed on soil quality information.
Natural Resources Inventory and Analysis Institute (NRIAI)
    Technical Assistance--sponsored development of new inventory and 
trending technologies for natural resources on the nations privately 
owned lands. NRIAI is involved in these activities with a variety of 
State and Federal agencies, universities, and not-for-profit 
organizations.
    Technology Development--developed technology to assist NRCS field 
and management staffs perform surveys and statistical analysis. Some 
examples follow:
  --Modern, efficient methods of information management and delivery 
        using geographic information systems, remote sensing, database 
        management, online delivery, economic analyses, and computer 
        modeling to provide practical views of the State of the land 
        and its trends.
  --Relevant new technologies on surveying, statistical analysis, and 
        design to support the NRCS continuous National Resources 
        Inventory.
Grazing Lands Technology Institute (GLTI)
    Technology Development--developing technology to assist NRCS field 
offices in conservation planning processes. Ecological site 
descriptions provide information describing the interactions among 
soils, vegetation, and land management across the landscape. Grazing 
lands application software is utilized to inventory land and animal 
resources and develop a balanced plan between grazing resources and 
animal demand. A web-based version of this software is scheduled for 
release at the end of fiscal year 2002.
    Training--supporting technology delivery to the field level through 
developing and conducting specialized workshops and training sessions 
with NRCS State specialists. Workshops and training sessions have been 
conducted and are scheduled in animal nutrition, prescribed burning, 
rangeland health, pasture condition scoring, ecological site 
descriptions, and forage suitability group descriptions during fiscal 
year 2002.
    Technical Assistance--providing technical assistance to States 
regarding complex grazing management issues. Technical assistance has 
been provided to Northern Plains, South Central, Southeast, and West 
Regions regarding development of ecological site descriptions and 
forage suitability group descriptions. The institute has also provided 
technical assistance to several States regarding grazing management-
animal nutrition issues utilizing the Nutritional Balance Analyzer 
software program.
Watershed Science Institute (WSI)
    Technology Development--developed a model State practice standard 
for forest riparian buffers as well as a watershed ecosystem nutrient 
dynamics model for phosphorus to dynamically simulate phosphorus 
budgets at a watershed scale. The watershed ecosystem nutrient dynamics 
model for phosphorus has been applied in Inland Bays Watershed, 
Delaware; Little Cobb River Watershed, Minnesota; and the Eucha-
Spavinaw WS, Oklahoma/Arkansas.
    Technology Delivery--prepared technical reports for distribution to 
field offices on: (1) Waterborne Pathogens in Agricultural Watersheds; 
(2) Fate and Transport of Waterborne Pathogens; and (3) The Potential 
Use of DNA Fingerprinting in Ag-Related Pathogen/Bacteria Management.
    Training--prepared and distributed handbooks and training materials 
for: Conservation Corridor Planning at the Landscape Level--Managing 
for Wildlife Habitat.
    Technical Assistance--provided technical assistance to States and 
National Headquarters in preparation of environmental assessments to 
accelerate program and project implementation (Tillamook Basin, OR). 
The institute has also provided technical assistance in developing the 
framework and pre-population of the Electronic Field Office Tech Guide 
(EFOTG).
Wildlife Habitat Management Institute (WHMI)
    Training--Supports technology to the field by developing and 
conducting workshops and training courses. Forty-five video lectures 
have been completed through universities and WHMI's staff on courses 
such as (1) Wildlife in Agricultural Ecosystems and (2) Understanding 
the Landscape.
    Technology Development--Supports the field through conducting, 
developing, and managing various technical projects that will enhance 
farm bill delivery through conservation planning. Forty-five projects 
have been completed or are underway at present.
    Assessment--Conducts assessments and findings on USDA-NRCS programs 
as to the effects on fish and wildlife habitat on private lands. Leads 
special efforts to show and substantiate private land conservation 
efforts through partnerships such as ``Our Living Land'' project.
    A table is provided with the funding levels for fiscal year 2002 
for each Institute.
    [The table follows:]

Fiscal Year 2002 Budget Allocation for NRCS Institutes

        Institute                                      Budget Allocation
Grazing Lands Technology Institute......................        $859,200
Natural Resources Inventory and Analysis Institute......         576,600
Social Sciences Institute...............................       1,082,000
Soil Quality Institute..................................         587,100
Watershed Science Institute.............................         902,100
Wetland Science Institute...............................         496,500
Wildlife Habitat Management Institute (allocation 
    includes $3 million for National Fish & Wildlife 
    Foundation).........................................       5,609,000
                    --------------------------------------------------------
                    ____________________________________________________
      Total.............................................      10,112,500
             nrcs watershed and flood prevention operations
    Question. Please provide a status report on project items included 
under the heading of ``Watershed and Flood Prevention Operations'' on 
page 69 House Report 107-275 and any other projects that are included 
on pages 92 through 94 under the same heading in Senate Report 107-41.
    Answer. NRCS will provide the Committee with a listing of the funds 
allocated to States for Watershed and Flood Prevention Operations 
project items. NRCS has requested that each State Conservationist 
submit a second quarter status for each project in their State.
    [The information follows:]
    
    
    
    
    
    
         fiscal year 2002 nrcs watershed earmark status report
Alaska
    State: Alaska
    Funds: WF-08, $340,000
    Project: Tanana River Erosion Control
    Progress/Status: A Cooperative Agreement has been drafted and 
delivered to Alaska Department of Natural Resources, Parks and Outdoor 
Recreation to transfer funds to DNR for implementation. Implementation 
will continue in fiscal year 2003.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Cooperative Agreement is scheduled to be signed in the third 
quarter of 2002. Disbursement will likely occur in fiscal year 2003.
Arkansas
    State: Arkansas
    Funds: EWP, $400,000 financial assistance funds in fiscal year 2002 
and $3,300,000 financial assistance funds carryover from an EWP earmark 
in fiscal year 2001.
    Project: Phase one of the Kuhn Bayou Project
    Progress/Status: NRCS awarded Phase IB contract on January 25, 
2002, at a cost of $3,619,346 with a scheduled completion date of 
January 30, 2004. Phase IB contract includes a portion of the main 
delivery system and the main pumping station that will provide 
irrigation water to 14,000 acres of cropland and winter water for a 
wildlife management area. NRCS staff will administer and inspect the 
installation of this contract through January 2004.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Progress payments for construction installation will be made 
after September 30, 2002, and will continue through January 2004.

    Funds: WF-08, Encourages
    Project: Little Red River Watershed and Big Slough Watersheds
    Progress/Status: NRCS has allocated $700,000 in financial 
assistance and $200,000 in technical assistance in fiscal year 2002 for 
the Little Red River Watershed Land Treatment Project. This water 
conservation project provides cost-share on approved on-farm 
conservation practices that will reduce the rate of decline of 
available groundwater on 25,000 irrigated acres. The financial 
assistance will be obligated to approximately seven new longterm 
contracts (LTC's) on about 1,000 acres. The technical assistance will 
be used to write the new LTC's and service contracts on 40 existing 
LTC's on approximately 13,000 acres. NRCS staff continues to formulate 
a plan supplement for the Big Slough Watershed. The $200,000 that has 
been allocated to this project for fiscal year 2002 will be used to 
prepare the plan supplement, including economic and hydrology and 
hydraulic analyses. The plan supplement addresses floodwater damages to 
approximately 17,000 acres of cropland and urban communities.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: No funds will be disbursed after September 30, 2002 except for 
progress payments on the seven new LTC's in the Little Red River 
Watershed. Payments will be made on these LTC's through September 2006.
California
    State: California
    Funds: WF-08, total no funds earmarked
    Project: Chino River Dairy Reserve Project
    Progress/Status: Watershed planning staff working with local 
sponsors to prepare an application for a watershed project. Application 
has been received.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: N/A

    Funds: WF-08, total $2,500,000
    Project: Beardsley Wash Watershed
    Progress/Status: Project will be installed by local contract 
administered by Ventura County Flood Control District. (VCFCD). Design 
underway by VCFCD. NRCS will review and concur in the design with 
anticipated delivery by May 20. Ventura County will advertise the 
project for bids, and construction is expected to begin by July 30, 
2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Estimated installation of the planned work by December 15, 2002 
with disbursement to follow.
Florida
    State: Florida
    Funds: WF-08, $1,914,000
    Project: Four pilot projects in north Florida (dairy and poultry 
cleanup).
    Progress/Status: Six new long-term contracts (LTCs) executed as of 
April 23, 2002 for $248,393. Plans are to finish an additional 27 LTCs 
for the remaining $961,607 during fiscal year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: This project will be completed during fiscal year 2004, with 65 
LTCs still needing funds during fiscal year 2003 and fiscal year 2004.
Hawaii
    State: Hawaii
    Funds: WF-08, $3,010,000
    Project: Water Storage and Delivery Systems (Lower Hamakua Ditch 
Watershed (LHD), Upcountry Maui WS and Lahaina WS)
    Progress/Status: LHD WS--Survey and design of Phase 2 Flume Repair 
and Historic Flumes Repair underway, Project Agreements for repairs to 
be completed by August 31, 2002. Upcountry Maui WS--Survey and design 
of Phase 2 Main Pipeline underway, Project Agreement for pipeline 
installation to be completed by August 31, 2002. Lahaina WS--Agreement 
for Services executed to contact EIS preparation.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: LHD WS--CLO contracts for Phase 2 Flume Repairs and Historic 
Flume Repair to be awarded by November 30, 2002; Upcountry Maui WS--CLO 
contract for Phase 2 Main Pipeline installation will be awarded before 
November 30, 2002.
Illinois
    State: Illinois
    Funds (WF-08): $1,400,000
    Project: DuPage County
    Progress/Status: In process of developing an agreement with DuPage 
County to transfer funds. Funds will be obligated when Agreement is 
signed that addresses stormwater management.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Anticipate funds to be obligated by June 1, 2002.

    Funds (WF-08): $8,590,000
    Project: Provide Assistance for Embarras River Basin, Lake County 
Watershed and DuPage County
    Progress/Status: Currently working with staff and local sponsors to 
determine funding needs, potential projects/activities, and authorities 
to expend the funds.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Anticipate funds to be obligated by September 30, 2002 and 
disbursed during fiscal year 2003.

Iowa
    State: Iowa
    Funds: WF-08, $1,015,000
    Project: Soap Creek Watershed
    Progress/Status: Designs are being finalized on eight dams. Project 
agreements on these sites will be executed by June 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction on these sites will begin in late summer and carry 
over into fiscal year 2003.

    Funds: WF-08, $834,000
    Project: East Fork of the Grand River Watershed
    Progress/Status: A project agreement obligating financial 
assistance funds has been signed covering the construction of 10 dams. 
In addition, an architectural and engineering contract solicitation is 
being prepared for the design of a large multi-purpose dam.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction on the 10 dams will begin this summer. Construction 
on sites will likely carry over into fiscal year 2003. Design work on 
the multi-purpose dam will begin this summer with disbursements into 
fiscal year 2003.

    Funds: WF-08, $169,000
    Project: Twelve-Mile Creek Watershed
    Progress/Status: Design is being completed for two dams. A project 
agreement obligating funds for these two sites will be executed by June 
30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction on the two dams will begin this summer, with 
disbursement in fiscal year 2003.

    Funds: WF-08, $40,000
    Project: Twin Ponies Watershed
    Progress/Status: Plans are being finalized for the repair of one 
dam. A project agreement obligating funds for this repair work will be 
executed by June 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Repair work will begin late this summer, with disbursement in 
fiscal year 2003.

    Funds: WF-08, $532,000
    Project: Troublesome Creek Watershed
    Progress/Status: Design work is being completed for two dams. A 
project agreement obligating funds for these two sites will be executed 
by the end of June 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction on the two dams will begin this summer, with 
disbursement in fiscal year 2003.

    Funds: WF-08, $221,000
    Project: West Fork of Big Creek Watershed
    Progress/Status: Design work is being completed for five dams. A 
project agreement obligating funds for the five sites will be executed 
by the end of June 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Contracting for construction of the five dams will be completed 
by late summer, and construction of the sites will carry over into late 
fiscal year 2002. Disbursement will occur in fiscal year 2003.

    Funds: WF-08, $210,000
    Project: Mill Creek Watershed
    Progress/Status: Financial assistance funds for this project have 
been obligated. The local contracting organization is currently working 
with individual landowners to complete land treatment projects.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Land treatment work is currently underway; however, some of the 
work will carry over into fiscal year 2003 with disbursements also in 
fiscal year 2003.

    Funds: WF-08, $526,000
    Project: Little River Watershed
    Progress/Status: Design and plan development work for one dam is 
being completed. A project agreement for construction of the dam will 
be executed by June 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: A contract for the dam construction will be awarded in late 
summer. Construction will carry over into fiscal year 2003 with 
disbursement in fiscal year 2003.

    Funds: WF-03, $1,940,000
    Project: Little Sioux Watershed
    Progress/Status: Eighty-seven land treatment contracts have been 
executed to date, and several others are pending. In addition, designs 
for three dams, and the repairs of three other dams, are being 
completed at this time. Project agreements for these six sites and the 
remaining land treatment work will be executed by June 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Work on the dam construction and dam repair projects will carry 
over into fiscal year 2003. Land treatment work that has not commenced 
will also carry over into fiscal year 2003. Disbursements will occur in 
fiscal year 2003.

    Funds: WF-08, $150,000
    Project: Mosquito Creek Watershed
    Progress/Status: Local site conditions will likely preclude dam 
construction work in this watershed. Technical assistance for upland 
treatment is ongoing.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The sponsors have been contacted regarding the status of 
remaining dam work and those actions that are needed to make additional 
work possible. Reprogramming of current dam construction dollars to 
other projects is also being discussed with the sponsors. Disbursements 
will likely occur in fiscal year 2003.
Kansas
    State: Kansas
    Funds: WF-08, $1,942,100
    Project: Wet Walnut Creek Watershed
    Progress/Status: The funds will be obligated by May 1, 2002. The 
engineering plans have been completed for the remedial work on 20 dams, 
with construction underway on 4 sites. All construction work is to be 
completed by 12/31/02.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The construction of the last three sites is scheduled in fiscal 
year 2003 with disbursements to follow.
Kentucky
    State: Kentucky
    Funds: WF-08, $100,000
    Project: Caney Creek Watershed Project
    Progress/Status: Discussions with sponsors are underway to 
ascertain the purpose of the earmark and concerns of the residents. 
Planning efforts will be underway once sponsors articulate their 
objectives.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Disbursements to occur in fiscal year 2003.
Louisiana
    State: Louisiana
    Funds: WF-08, $300,000
    Project: Bayou Bourbeux Watershed Project
    Progress/Status: Five new long-term contracts (LTC) were executed 
in April 2002. Fifty-four LTC's are in force with conservation 
practices installed. Twenty-one LTC's are scheduled to complete 
conservation practice installation this fiscal year. Awaiting funding 
for concrete lining of a channel phase.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Ten LTC's have conservation practices scheduled for installation 
by December 2002 with disbursements to follow in fiscal year 2003.

    Funds: WF-08, $100,000
    Project: Dairy Farmers in Lake Pontchartrain & Middle Tangipahoa 
Project
    Progress/Status: Phase II of the animal waste system clean-out 
program has begun. During Phase I, 28 systems were cleaned during 
fiscal year 2001, updating an estimated 20 percent of the 275 waste 
systems installed in the Lake Pontchartrain Basin during the 1990's. 
Average cost of the system clean-out is $1,040.00. Contracts are 
awarded by the Lake Pontchartrain Foundation to assist dairy farmers in 
protecting water quality by the construction waste management systems.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for waste management systems will be 
completed on May 30, 2003. Twenty-three LTC's have conservation 
practices scheduled for installation October--December, 2002 with 
disbursement in fiscal year 2003.
Minnesota
    State: Minnesota
    Funds: WF-08, $6,450,000
    Project: Snake River Watershed Project
    Progress/Status: Phase I (Lower Floodway) 80 percent complete. 
Phase II (Floodwater Impoundment) currently in bid award process with 
construction start expected in May 2002. Phase III (Upper Floodway) 
will be advertised in August or September 2002. Funds will be obligated 
in by August 30, 2002, with a project agreement for local contracting.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: It is expected that approximately 50 percent of Phase II ($2.2 
million) and all of Phase III ($3 million) will be disbursed after 
fiscal year 2003.
Mississippi
    State: Mississippi
    Fund: WF-08, $313,000
    Project: Town Creek/Coonewah Creek
    Project/Status: Implementation of channel improvements on the 
Coonewah Creek Channel will begin in May 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Town Creek/Coonewah Creek project will be completed by 
September 2002.

    Fund: WF-08, $575,000
    Project: Design flood water retarding structure in Pellaphalia 
Creek Watershed.
    Project/Status: The plan has been completed. The design and 
implementation will be completed in fiscal year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The flood water retarding structure in Pellaphalia Creek 
Watershed should be completed by November 2002 with disbursement to 
follow.

    Fund: WF-08, $430,000
    Project: Pearl River, Dry Creek Watershed, Marion County
    Project Status: Implementation of this bank stabilization measure 
will begin in May 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The flood control project should be completed by November 2002 
with disbursement to follow.

    Fund: WF-03, $625,000
    Project: Install grade stabilization structures in the Skuna River.
    Project Status: Implementation of these bank stabilization 
structures will begin in May 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The grade stabilization structures in the Skuna River should be 
completed by November 2002 with disbursement to follow.

    Fund: WF-03, $300,000
    Project: Strayhorn Creek Watershed
    Project/Status: Implementation of these bank stabilization 
structures will begin in May 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Strayhorn Creek Watershed project will be completed by 
November 2002 with disbursement to follow.
Missouri
    State: Missouri
    Funds: WF-08, $3,120,000
    Project: Hickory Creek
    Progress/Status: Contract awarded for construction of site H-10D to 
implement watershed plan. A cooperative agreement for a local contract 
is scheduled to be developed in the 4th quarter for construction of 
sites H-1A and H-2A. Approximately $200,000 has been placed in a 
cooperative agreement with the City of Neosho in order to purchase 
additional properties in the buyout. Final plans completed for sites H-
10D, H-1A, and H-2A.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The local contract for sites H-1A and H-2A will be completed in 
fiscal year 2003. The buyouts are anticipated to be completed in the 
first quarter of fiscal year 2003.

    Funds: WF-08, $1,100,000
    Project: Marthasville
    Progress/Status: To implement watershed plan, contract awarded for 
construction of site MV-5. Final plans completed for site MV-5.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of site MV-5 is scheduled 
to be completed in November 2002.

    Funds: WF-08, $850,000
    Project: West Fork of Big Creek
    Progress/Status: Contract awarded for construction of five 
floodwater retarding dams. Contract for construction of small 
floodwater retarding dams scheduled to be bid in 4th quarter. Final 
plans completed on 11 floodwater retarding dams.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of six floodwater retarding 
dams has an estimated completion date in Summer 2003.

    Funds: WF-08, $450,000
    Project: East Fork of Grand River
    Progress/Status: A Federal contract for construction of four small 
floodwater retarding dams is scheduled to be bid in 4th quarter. Final 
plans completed on nine floodwater retarding dams.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of four floodwater 
retarding dams has an estimated completion date in Summer 2003

    Funds: WF-08, $365,000
    Project: McKenzie Creek
    Progress/Status: In order to purchase an additional 12-15 
properties in the buyout, $300,000 has been added to the cooperative 
agreement. This is being done through a partnership with the Missouri 
Department of Transportation, the City of Piedmont, and NRCS.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The buyout is expected to extend into the first quarter of fiscal 
year 2003.

    Funds: WF-08, $600,000
    Project: Upper Locust Creek
    Progress/Status: A bid opening for a Federal contract for 
construction of seven floodwater retarding dams is scheduled for May 
30, 2002. Final plans completed on 13 floodwater retarding dams.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of seven floodwater 
retarding dams has an estimated completion date of August 2003.

    Funds: WF-08, $500,000
    Project: Troublesome Creek
    Progress/Status: A bid opening for a Federal contract for 
construction of six floodwater retarding dams is scheduled for May 24, 
2002. Final plans completed on 10 floodwater retarding dams.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of six floodwater retarding 
dams has an estimated completion date in July 2003.

    Funds: WF-08, $370,000
    Project: East Yellow Creek
    Progress/Status: A bid opening for a Federal contract for 
construction of five floodwater retarding dams is scheduled for May 30, 
2002; Final plans completed on five floodwater retarding dams.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: The Federal contract for construction of five floodwater 
retarding dams has an estimated completion date in April 2003.
New Mexico
    State: New Mexico
    Funds: WF-08, $7,777,000
    Project: Truth or Consequences/Williamsburg Arroyos Watershed, Site 
3C, phase III.
    Progress/Status: The design of phase III is complete. Preparation 
of final drawings and specifications are progressing on schedule and 
are expected to be complete by May 30, 2002. A construction contract 
for installation will be awarded by August 30, 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Funds will be disbursed in fiscal year 2003.
North Carolina
    State: North Carolina
    Funds: WF-08, $1,743,000
    Project: Swan Quarter Watershed Project
    Project/Status: The design for phase I, to construct 15,000 foot 
dike is nearly complete. A project agreement will be signed to start 
construction on Phase I by September 1, 2002.
    Fiscal Obligation for Disbursement after September 30, 2002: Funds 
will be disbursed in fiscal year 2003.

North Dakota
    State: North Dakota
    Funds: WF-08, No earmarked funds were provided in fiscal year 2002.
    Project: Devil's Lake Basin Flooding
    Progress/Status: NRCS continues to utilize the WRP, EQIP, and WHIP 
programs in working with individual producers to increase the potential 
water retention capability of wetlands in the basin. NRCS is currently 
working with the Devil's Lake Basin Joint Water Resource Board, the 
North Dakota State Water Commission, and other Federal, State, and 
local agencies to update and revise the 1995 Devils Lake Basin Water 
Management Plan. This Plan will be used in determining future 
directions to address the flooding, transportation, agricultural, and 
other socioeconomic impacts the flooding is continuing to have on the 
Region.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None.
Pennsylvania
    State: Pennsylvania
    Funds: WF-08, $430,000
    Project: Oven Run Watershed Project
    Progress/Status: Site A Phase I construction contract is nearing 
completion. Site A, Phase II will be bid in May 2002. Design of Site E 
will be completed in May and will be out for bids in June. Based on 
engineer's estimates, the total construction cost (NRCS share) to 
complete this watershed in fiscal year 2002 is $532,000. An additional 
$172,000 will be needed in fiscal year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Sites A (Phase II) and Site E construction will continue in 
fiscal year 2003. NRCS quality assurance responsibilities will continue 
during construction. Payments will need to be made to the agreement 
holders in fiscal year 2003 to meet contractual obligations.
Rhode Island
    State: Rhode Island
    Funds: WF-08, $100,000
    Project: Pocasset Flood Plain Management Study and Watershed Plan
    Progress/Status: Flood control watershed measure plan and EIS are 
being drafted. Hydrologic models are being finalized. Draft plan and 
EIS expected to be published in Federal Register in late fiscal year 
2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: None
Texas
    State: Texas
    Funds: WF-03, total (FA and TA): $2,430,000
    Project: Elm Fork of the Trinity Site 19MP (Muenster Dam)
    Progress/Status: All permits obtained, design completed for Phase I 
construction, Phase I contract award will be early June 2002, design of 
Phase II will be completed in August 2002, obligate Financial 
Assistance funds for Phase II by Contracting Local Organization 
Agreement in September 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Phase I construction will be completed in fiscal year 2003, 
contract for Phase II construction will occur in fiscal year 2003 with 
disbursement to follow.

    Funds: WF-08, total (FA and TA): $4,270,000
    Project: Bexar-Medina-Atascosa (BMA) Watershed Project
    Progress/Status: Activities are being carried out to meet the 
intent of the earmark:
  --On-farm land treatment to improve irrigation efficiencies using 
        long term contracts (LTCs) with irrigation farmers in the BMA 
        District
    --Technical assistance to implement 4 LTCs planned in fiscal year 
            2001
    --Technical assistance to plan an estimated 10 new LTCs in fiscal 
            year 2002
    --Obligate financial assistance funds for 10 LTCs by September 30, 
            2002
  --Structural measures (canal improvement and/or Pearson Reservoir)
    --Considerable resources have been dedicated to provide technical 
            assistance on engineering surveys, geologic investigations, 
            preliminary designs in order to be ready to implement in 
            fiscal year 2002.
    --President of the BMA Board has notified NRCS that the Board has 
            postponed implementation of the canal improvement under the 
            Watershed Plan. Since the local sponsors are not ready to 
            carry out their responsibilities of the structure measures 
            under the Plan, construction funds for the canal 
            improvement can not be obligated on this project in fiscal 
            year 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: All LTCs will have conservation practices schedule for 
installation during fiscal year 2003.
West Virginia
    State: West Virginia
    Funds: WF-08, $735,000
    Project: Deckers Creek Watershed
    Progress/Status: Watershed plan revisions underway and will be 
completed in May to be ready for project authorization.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Design and construction of land treatment and reclamation 
measures will continue in fiscal year 2003.

    Funds: WF-03, $550,000
    Project: Potomac Headwaters Land Treatment Watershed Project
    Progress/Status: Implementation of conservation practices in the 
Potomac Headwaters Land Treatment Watershed is underway. Approximately 
60 percent of planned practice installations were completed as of 
January 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Funds for installation practices will be disbursed through fiscal 
year 2003 and fiscal year 2004.

    Funds: WF-08, $360,000
    Project: Knapps Creek Stream Restoration Watershed Project
    Progress/Status: Draft plan for Knapps Creek Watershed was 
completed on January 2, 2002. Completion of plan has been suspended 
pending completion of demonstration project on reach of Knapps Creek.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Authorization of the Watershed Plan will be sought in fiscal year 
2003 after completion of the demonstration project. Cost data from the 
demonstration project will be used in completion of the final Watershed 
Plan.

    Funds: WF-03, $4,800,000
    Project: Lost River Watershed Dam #10
    Progress/Status: Final design of the dam is completed and under 
peer review. Local sponsors are in process of obtaining land rights. A 
contract for construction should be awarded in September 2002.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Construction of the dam will continue through December 2004 with 
disbursements to follow.

    Funds: WF-08, $100,000
    Project: Redesign existing flood impoundments to include water 
storage
    Progress/Status: Several watershed structures have been identified 
for the option of adding water supply. Deckers Creek Watershed, Site 1 
has 30 percent of the planning phase completed. The costs for including 
water supply storage and upgrading the structure to current Federal 
standards have been completed.
    Fiscal year 2002 Obligations for Disbursement after September 30, 
2002: Planning and design will continue in fiscal year 2003.
Wisconsin
    State: Wisconsin
    Funds: Emergency Watershed Protection Program Earmark received 
$1,000,000
    Project: Shell Lake ($750,000) Burnett and Washburn Counties 
($250,000)
    Progress/Status: Agreement with the City of Shell Lake has been 
completed and signed. A cooperative agreement was completed as a grant 
agreement with limited NRCS involvement in the project. Agreement with 
Burnett County to act as the sponsor for tornado debris clean up in 
Burnett and Washburn Counties is in draft and will be signed by April 
30, 2002. NRCS will assist Burnett and Washburn Counties with inventory 
and project design. Four lakes have been identified as priority by the 
sponsor. Three other lakes will be considered in the second phase.
    Fiscal Obligation for Disbursement after September 30, 2002: A 
request for reimbursement of $83,000 was approved for payment on April 
19, 2002. Remaining products are scheduled through fiscal year 2003.
                 nrcs watershed rehabilitation program
    Question. Please provide a status report on activities carried out 
through the Watershed Rehabilitation Program in fiscal year 2002.
    Answer. The fiscal year 2002 Agriculture Appropriations Bill 
provided $10 million to begin implementation of the watershed 
rehabilitation activities authorized by Public Law 106-472. The 
appropriation language directed that priority be placed on those 
projects, which posed the highest risk to life and property. I have 
asked the Natural Resources Conservation Service to provide additional 
information for the record.
    [The information follows:]

    Applications from 80 local communities were received in the first 
quarter of fiscal year 2002. Each application was ranked using a risk-
based system in January 2002, and funds were provided to State 
Conservationists for the selected projects in February 2002. All of the 
43 selected projects in 17 States involve high hazard dams with the 
potential loss of life of at least 11,000 people living below the dams 
selected for rehabilitation activity. The funds for fiscal year 2002 
were projected to:
  --Initiate 43 watershed rehabilitation plans in 17 States;
  --Complete 10 project plans in 7 States; and
  --Have implementation/construction underway on 8 projects in four 
        States.
                    nrcs forestry incentives program
    Question. Please provide information in regard to Forestry 
Incentives Program activities to reduce the potential of wildfire.
    Answer. Since inception of the Forestry Incentives Program in 1975, 
almost 1,463,000 acres of non-industrial private forest land has been 
thinned and pruned to save marketable trees and rural areas from the 
potential destructive forces of wildfire.
    In addition, over 3,868,000 acres of trees have been planted on 
lands hat are managed in a manner to protect the resource from 
wildfire, insect infestation, and other natural calamities.
    In 2002, preventive emergency funds were made available to address 
specific reforestation needs and to reduce fire risk due to massive 
insect infestations in Tennessee and Alaska. These funds were made 
available, until expended, for thinning and reforestation in order to 
reduce the fire hazard from the dead and dying trees. It is expected 
the preventive emergency funds will impact 3,600 acres in Alaska and 
4,500 acres in Tennessee.
                 soil, water and air sciences research
    Question. The fiscal year 2003 President's budget for ARS proposes 
a decrease of $10.737 million to terminate numerous Congressionally-
designated projects appropriated in fiscal year 2001 and 2002 in Soil, 
Water, and Air Sciences research to provide savings to finance higher 
priority research.
    Please provide a status on each of the projects you propose to 
eliminate in fiscal year 2003 and State when you could complete each 
project if you receive funding to do so, as well as how much future 
funding would be necessary.
    Answer. The fact that the Department has requested new funding for 
an initiative while at the same time proposing to eliminate projects 
under the same general initiative is a significant strength of our 
internal review process as reflected in the fiscal year 2003 budget. 
ARS has over 1000 individual projects grouped under different areas, 
and not all of these projects have equal value. The fiscal year 2003 
budget reflects a reallocation of resources to projects that represent 
the most effective use of taxpayer dollars to meet overall national 
needs. Projects that, while of value, are not as important are proposed 
for elimination. Thus, the fiscal year 2003 budget is a valuable 
statement of what the Department believes to be the highest priority 
allocation of resources within each initiative.
    The Agency has about 2,000 scientists (what we refer to as category 
1 scientists) working in 100+ locations across the nation. In recent 
years, scientific research (not just agricultural research) has moved 
away from work being done by a single scientist or a small cohesive 
group of scientists working in a single location. Now, discoveries at 
ARS are far more likely to come from multi-disciplinary research 
conducted at more than one location. In fact, one of the principal 
reasons ARS created National Programs during the mid-1990s was to 
aggregate the research projects that were doing closely related work 
into a structure that would expedite interaction between these 
locations and scientists. A second benefit of the new National Program 
structure has been the strengthening of communication between ARS 
scientists and managers and the various customers and stakeholders in 
each area. The 40 National Program Workshops which were held during the 
startup phase were very helpful in defining the research agendas for 
each program.
    When ARS is asked to address a new or re-emerging problem we assess 
many factors. First we ascertain scope and nature of the problem 
(location, crop(s)/commodity(ies) affected, nature of the problems, 
potential options, etc.). Then we assess the Agency's capabilities 
(where are the scientific skills needed to address the problem; what 
locations have the necessary equipment and facilities to support the 
work needed to address the problem; and what other factors such as 
climatic zones, soil type, are critical to the work). Sometimes these 
analyses produce predictable decisions. But in other cases, some or all 
of the work may be done at locations far from where the problem exists 
or the commodity grows.
    ARS believes that the development of its annual budget, which is 
submitted to Congress as part of the President's budget is the agency's 
most comprehensive statement of how it can and should proceed with a 
comprehensive research plan for addressing the issues confronting 
American agriculture. These issues are identified by interactions with 
our customers and stakeholders, the Congress, and the Administration.
    Question. Three projects recommended for elimination are waste 
management research (Starkville, MS); improved animal waste management/
animal waste treatment research (Florence, SC); and, manure management 
research (Ames, Iowa). Your budget request, however, also proposes a $5 
million increase for research in support of managing wastes to enhance 
air and water quality involving all phases of animal feeding; manure 
handling; storage and treatment; land application; crop production; and 
conservation practices and alternative uses to provide solutions to 
problems associated with animal waste management. Please explain the 
differences and similarities between the proposed reductions for the 
waste management research in Starkville, animal waste/animal waste 
treatment research in Florence, and manure management research in Ames, 
with the $5 million waste management research project you are 
proposing.
    Answer. The $5 million initiative proposed in the President's 
budget is designed to provide tools to producers and their advisors so 
they can effectively deal with animal waste while protecting the 
environment, human health, and animal health. The initiative has three 
main parts: (1) determine the processes controlling losses of manure 
nutrients, emissions and pathogens to soil, water, and air; (2) develop 
management practices, treatment technologies, and decision tools to 
reduce or eliminate risks from animal production systems to the 
environment and human health; and (3) determine the effectiveness of 
the practices, technologies, and tools at the farm and watershed scale. 
The main focus of the new initiative is to strengthen ARS research 
efforts in two key areas: (a) control of atmospheric emissions from 
livestock and poultry production systems and (b) control of manure 
pathogens that may pose a threat to human health. These efforts will 
involve cooperation among ARS scientists, university scientists, and 
scientists from State and other Federal agencies.
    The projects at Starkville, Mississippi are designed to develop and 
evaluate poultry litter management systems for forage and row crop 
production. This research focuses on nutrient management for water 
quality protection and is being done in cooperation with Western 
Kentucky University. These projects would complement the initiative 
proposed in the President's budget.
    The project at Florence, South Carolina addresses the development, 
evaluation and improvement of farm-scale systems of swine waste 
treatment technologies. This project complements the work proposed in 
the President's budget initiative.
    The current manure management research project at Ames, Iowa 
focuses on modification of swine diet to reduce emissions of volatile 
organic compounds associated with odor by manipulating microorganisms 
in the swine gut. The new initiative looks at the whole swine 
production system, not just within the animal, to bring about a 
reduction in emissions of odor causing compounds. The current work at 
Ames would represent one part of the research on an overall system of 
odor control proposed in the 2003 budget.
                        plant sciences research
    Question. The fiscal year 2003 President's budget for ARS proposes 
a decrease of $53.192 million to terminate numerous Congressionally-
designated projects appropriated in fiscal year 2001 and 2002 in Plant 
Sciences research to provide savings to finance higher priority 
research.
    Please provide a status on each of the projects you propose to 
eliminate in fiscal year 2003 and State when you could complete each 
project if you receive funding to do so, as well as how much future 
funding would be necessary.
    Answer. The proposed increases included in the budget are part of a 
national program plan to fund high priority agricultural research 
initiatives that are less project specific and are generally broader in 
scope than are the projects proposed for termination. The Agency has 
about 2,000 research scientists working in 100+ locations across the 
Nation. In recent years, scientific research (not just agricultural 
research) has moved away from work being done by a single scientist or 
a small cohesive group of scientists working in a single location. Now, 
discoveries at ARS are far more likely to come from multi-disciplinary 
research conducted at more than one location. In fact, one of the 
principal reasons ARS created National Programs during the mid-1990s 
was to aggregate the research projects that were doing closely related 
work into a structure that would expedite interaction between these 
locations and scientists. A second benefit of the new National Program 
structure has been the strengthening of communication between ARS 
scientists and managers and the various customers and stakeholders in 
each area. The 40 National Program Workshops which were held during the 
startup phase were very helpful in defining the research agendas for 
each program.
    When ARS is asked to address a new or re-emerging problem we assess 
many factors. First we ascertain scope and nature of the problem 
(location, crop(s)/commodity(ies) affected, nature of the problems, 
potential options, etc.). Then we assess the Agency's capabilities 
(where are the scientific skills needed to address the problem; what 
locations have the necessary equipment and facilities to support the 
work needed to address the problem; and what other factors such as 
climatic zones, soil type, are critical to the work). Sometimes these 
analyses produce predictable decisions. But in other cases, some or all 
of the work may be done at locations far from where the problem exists 
or the commodity grows.
    ARS believes that the development of its annual budget, which is 
submitted to Congress as part of the President's budget, is the 
agency's most comprehensive statement of how it can and should proceed 
with a comprehensive research plan for addressing the issues 
confronting American agriculture. These issues are identified by 
interactions with our customers and stakeholders, the Congress, and the 
Administration.
    Question. Please explain the differences and similarities between 
the proposed reductions for sorghum research (Manhattan, KS; Bushland, 
TX; Stillwater, OK; Lubbock, TX) and citrus/horticultural research (Ft. 
Pierce, FL) with the proposed $500,000 increase for research to thwart 
plant pathogens that could significantly harm agricultural productivity 
and U.S. trade.
    Answer. The sorghum research projects that are cut in the fiscal 
year 2003 President's budget focus on serious problems for the U.S. 
sorghum industry. These include: developing new uses and new markets 
for sorghum (Manhattan, KS), developing cropping and tillage systems to 
improve effectiveness of irrigated and dryland systems for sorghum 
production in the Southern Great Plains, (Bushland, TX), enhancing 
sorghum resistance to drought, heat stress and cold damage (Lubbock, 
TX), and increasing sorghum resistance to the insects, greenbug and 
sorghum midge (Stillwater, OK). However, these sorghum projects do not 
contribute to thwarting the plant pathogens and invasive species that 
are a higher priority in the President's fiscal year 2003 budget.
    Research programs at Ft. Pierce, Florida, are dealing with serious 
diseases of citrus such as citrus canker and citrus tristeza virus. The 
work being done at this site is of critical importance to the national 
citrus industry as there are still serious citrus diseases poised to 
enter the United States, such as citrus variegated chlorosis, which is 
leading to the destruction of 5 million trees per year in the Sao Paulo 
area of Brazil. Given the critical nature of these efforts nationally 
in the United States, research on these important diseases is being 
incorporated into a national defense strategy against exotic and 
invasive plant pathogens. Funds proposed in the 2003 Budget would 
support development of detection and identification methods, including 
genomic sequencing for molecular identification, to aid regulatory 
agencies and policy-makers, an essential element to enhance our defense 
against plant pathogens.
    Question. Please explain the differences and similarities between 
the proposed reduction for sudden oak disease research (Ft. Detrick, 
MD) with the proposed $5.357 million increase for emerging, reemerging, 
and exotic diseases of plants.
    Answer. ARS is conducting multi-disciplinary research on emerging, 
reemerging, and exotic diseases of plants to prevent and control their 
spread. Sudden Oak Death is responsible for killing large numbers of 
Quercus species (oak) from Monterey County, California to southern 
Oregon. The cause of the disease has only recently been identified as 
Phytophthora ramorum, a previously undescribed species of fungus 
capable of killing mature, otherwise healthy trees. Recently, the 
disease has been identified on several plants of horticultural 
significance including rhododendron and related crops. To date, the 
disease has only been found on the west coast. Exotic diseases such as 
Sudden Oak Death pose severe problems of regional and sometimes 
national significance throughout the United States. ARS's 
multidisciplinary research program seeks to determine the basis of host 
specificity and the nature and scope of pathogen diversity in the 
United States. ARS seeks to address longer-term problems of plant 
diseases at a national level. Given the critical nature of exotic 
diseases in the United States, ARS research is being incorporated into 
a national defense strategy against exotic and invasive plant 
pathogens.
    Question. Please explain the differences and similarities between 
the proposed reductions for soybean genetics research/two geneticists 
(Columbia, MO) and microbial genomics research (Pullman, WA) with the 
proposed $2.95 million increase for agricultural genomes research.
    Answer. Projects proposed in the 2003 Budget are part of a national 
program planning process used to develop the agency's budget, and are 
generally part of more broadly defined initiatives. The proposed $2.95 
million increase for agricultural genomics research is in support of a 
multi-commodity program to develop complete maps of the location of 
genes on chromosomes by sequencing DNA from maize, legumes, microbes 
and insects (honey bee). The genetic maps derived from interpretation 
of these DNA sequences are needed to facilitate the development of 
sophisticated gene markers that will help geneticists identify and 
select germplasm with enhanced product quality, productivity, food 
safety and resistance to diseases. Knowledge gained from these 
sequences is a committed step toward future efforts to define genetic 
mechanisms that regulate these biological systems. The proposed 
distribution of funds for these DNA sequencing activities is: maize and 
other cereals such as rice ($1.2 million), soybean and Medicago 
truncatula ($0.8 million), alfalfa and other legumes ($0.4 million) and 
insects ($0.55 million).
    The research associated with the proposed reduction for soybean 
genetics at Columbia, Missouri involves the development of higher value 
soybeans to help improve profitability for farmers. This work focuses 
on the identification and the regulation or expression of genes that 
govern quality of soybean meal, specifically the genes that control the 
level of undesirable carbohydrates and the organic phosphorus in seed. 
These traits respectively reduce feeding efficiency and escalate the 
potential for undesired environmental impact of livestock wastes). This 
work is similar to the proposed agricultural genomes research in that 
it deals with a legume, soybean, and it investigates traits that are 
important to soybean product value. It differs by the fact that the 
work involves the discovery of function for a limited number of genes, 
and does not involve sequencing the entire soybean genome or the 
development of gene markers for the specified traits. This research 
would benefit significantly from knowledge gained by the work proposed 
for agricultural genomes research. In fiscal year 2002, $480,000 was 
appropriated for this project.
    The research associated with the proposed reduction for microbial 
genomics research at Pullman, Washington involves acquisition of the 
genome sequence of Babesiosis bovis (tick) to develop biological 
control strategies or vaccines to block infections that are transmitted 
by ticks to cattle and horses. This work is similar to the proposed 
agricultural genomes research in that it deals with the DNA sequence of 
a microbial organism. DNA sequencing was to be performed under a 
specific cooperative agreement with Washington State University, but 
this agreement did not involve the development of genetic markers or a 
complete genetic map of the B. bovis genome. The investigation focused 
on only a limited number of genes relative to the project objectives. 
Future research on this topic also would benefit significantly from 
knowledge gained by the work proposed for agricultural genomes 
research. In fiscal year 2002, $480,000 was appropriated for this 
project.
    Question. Please explain the differences and similarities between 
the proposed reductions for the Center for Biological Controls/FAMU 
(Gainesville, FL) and Pierce's Disease research (Parlier, CA; Ft. 
Pierce, FL; Davis, CA) with the proposed $2.7 million increase for 
research in support of controlling invasive species.
    Answer. These research programs are similar in that they address 
important agricultural pests--in Florida (associated with Florida A&M 
University), both native and invasive pests, and in California, the 
newly introduced glassy-winged sharpshooter that vectors Pierce's 
disease (a $33 billion annual threat to the grape, raisin, and wine 
industry, a potential threat to production of almonds and other 
commodities, and to roadside safety buffers of oleander). The proposed 
increase of $2.7 million will be directed to developing a national plan 
for fighting additional invasive species, including such potentially 
devastating insect pests as the Asian longhorned beetle in New York 
City and Chicago (a $670 billion annual threat), the Chinese soybean 
aphid (a newly introduced vector of bean viruses) and Russian wheat 
aphid in the Midwest, pink hibiscus mealybug in California, imported 
fire ant and silverleaf whitefly in the South, fruit flies (near ports 
of entry in California and Florida), Formosan termite in New Orleans, 
cereal leaf beetle in the Northwest, mite and beetle pests of bees, and 
many other high priority pests. Invasive weeds such as leafy spurge, 
melaleuca, old world climbing fern, giant salvinia, saltcedar, 
hydrilla, waterhyacinth, yellow starthistle, downy brome, Brazilian 
pepper, jointed goat grass, purple loosestrife, and many other weeds 
that infest over 100 million acres throughout the United States 
resulting in a 12 percent loss in crop yields valued at $36 billion 
annually, will also be targeted.
                        animal sciences research
    Question. The fiscal year 2003 President's budget for ARS proposes 
a decrease of $19 million to terminate numerous Congressionally-
designated projects appropriated in fiscal year 2001 and 2002 in Animal 
Sciences research to provide savings to finance higher priority 
research.
    Please provide a status on each of the projects you propose to 
eliminate in fiscal year 2003 and State when you could complete each 
project if you receive funding to do so, as well as how much future 
funding would be necessary.
    Answer. The Agency has about 2,000 research scientists working in 
100+ locations across the Nation. In recent years, scientific research 
has moved away from work being done by a single scientist or a small 
cohesive group of scientists to a more multi-disciplinary approach 
where research is conducted at several locations. One of the principal 
reasons ARS created National Programs during the mid-1990s was to 
aggregate the research projects that were doing closely related work 
into a structure that would expedite interaction between these 
locations and scientists. A second benefit of the new National Program 
structure has been the strengthening of communication between ARS 
scientists and managers and the various customers and stakeholders in 
each area. The 40 National Program Workshops which were held during the 
startup phase were very helpful in defining the research agendas for 
each program.
    When ARS is asked to address a new or re-emerging problem we assess 
many factors. First we determine the scope and nature of the problem 
(location, crop(s)/commodity (ies) affected), and then we assess the 
Agency's capabilities (scientific skills needed, locations with 
facilities and equipment to support the work, and factors such as 
climatic zones, soil type, etc.).
    ARS believes that the development of its annual budget, which is 
submitted to Congress as part of the President's budget is the agency's 
most comprehensive statement of how it can and should proceed with a 
comprehensive research plan for addressing the issues confronting 
American Agriculture, which includes animal sciences research. These 
issues are identified by interactions with our customers and 
stakeholders, the Congress, and the Administration.
    Question. Please explain the differences and similarities between 
the proposed reduction for the livestock genome mapping initiative 
(Clay Center, NE) with the proposed $3 million increase to identify 
genes that influence disease resistance, reproduction, nutrition, and 
other economically important production traits in livestock and 
poultry.
    Answer. The proposed reduction at Clay Center, NE, is for the 
development of a specific laboratory resource (physical map) needed for 
genomics research while the $3 million increase proposed this year is 
to support high through-put genomic sequencing of farm animal genomes 
in collaboration with NIH.
               commodity conversion and delivery research
    Question. The fiscal year 2003 President's budget for ARS proposes 
a decrease of $5 million to terminate numerous Congressionally-
designated projects appropriated in fiscal year 2001 and 2002 in 
Commodity Conversion and Delivery research to provide savings to 
finance higher priority research.
    Please provide a status on each of the projects you propose to 
eliminate in fiscal year 2003 and State when you could complete each 
project if you receive funding to do so, as well as how much future 
funding would be necessary.
    Answer. As stated in previous responses to similar questions, the 
Agency has about 2,000 research scientists working in 100+ locations 
across the Nation. Discoveries at ARS are far more likely to come from 
multi-disciplinary research conducted at more than one location. When 
ARS is asked to address a new or re-emerging problem we assess many 
factors, including scope and nature of the problem and the Agency's 
capabilities. Sometimes these analyses produce predictable decisions. 
But in other cases, some or all of the work may be done at locations 
far from where the problem exists or the commodity grows.
    ARS believes that the development of its annual budget, which is 
submitted to Congress as part of the President's budget, is the 
agency's most comprehensive statement of how it can and should proceed 
with a comprehensive research plan for addressing the issues 
confronting American agriculture. These issues are identified by 
interactions with our customers and stakeholders, the Congress, and the 
Administration.
    Question. Please explain the differences and similarities between 
the proposed reduction for the biomass crop production research 
(Brookings, SD) with the proposed $3.5 million increase to develop 
technologies to produce biobased products from agricultural commodities 
and byproducts.
    Answer. These research programs are similar in that they develop 
technologies to expand the use of agricultural commodities and 
byproducts through conversion of these materials into value-added 
biobased products that benefit the rural economy, the environment, and 
national security. The projects differ in the kinds of agricultural 
materials used and in the types of biobased products that result. The 
biomass crop production research objective at Brookings, South Dakota 
is to improve the quality and value of animal feed produced from 
distillers' dried grains (a byproduct of ethanol production) and from 
wheat straw, corn stover, and switchgrass. The proposed $3.5 million 
increase to ARS will focus on developing technologies to develop 
composites from cereal grain starches and residues, high-performance 
natural rubber polymers, oil-producing plants that serve as 
biofactories for chemical feedstocks, procedures for processing flax 
fiber, activated carbon adsorbents from agricultural wastes such as 
soybean hulls and nutshells to remove contaminants from water, 
environmentally-friendly enzymatic methods to modify vegetable oils for 
use as lubricants, starch and protein-based copolymers from 
agricultural materials; efficient processing technologies for value-
added co-products from corn milling and ethanol production, biobased 
substitutes for imported products, and value-added products from 
rendered animal byproducts.
                        human nutrition research
    Question. The fiscal year 2003 President's budget for ARS proposes 
a decrease of $1 million to terminate numerous Congressionally-
designated projects appropriated in fiscal year 2001 and 2002 in Human 
Nutrition research to provide savings to finance higher priority 
research.
    Please provide a status on each of the projects you propose to 
eliminate in fiscal year 2003 and State when you could complete each 
project if you receive funding to do so, as well as how much future 
funding would be necessary.
    Answer. The Agency has about 2,000 research scientists working in 
100+ locations across the Nation. In recent years, scientific research 
has moved away from work being done by a single scientist or a small 
cohesive group of scientists to a more multi-disciplinary approach 
where research is conducted at several locations. National Program 
Workshops are held to develop a national research agenda for the 40 
national programs. When ARS is asked to address a new or re-emerging 
problem we assess many factors, including capability of ARS staff, 
available space/facilities, and equipment needs. ARS believes that the 
development of its annual budget, which is submitted to Congress as 
part of the President's budget is the agency's most comprehensive 
statement of how it can and should proceed with a comprehensive 
research plan for addressing the issues confronting American 
Agriculture, which includes Human Nutrition research.
                        buildings and facilities
    Question. In fiscal year 2002, ARS received almost $119 million in 
appropriated funding for buildings and facilities with an additional 
$73 million from the fiscal year 2002 Homeland Security Supplemental.
    With the increased threats to lab security as a result of the 
terrorist attacks and anthrax scares last year, is $16.58 million 
sufficient for your buildings and facilities account in fiscal year 
2003?
    Answer. The $16.58 million is sufficient to meet the highest 
priority projects identified through the budget development and 
Administration priority-setting phase. These proposed funds are not 
related to the lab security needs. We are in the process of reviewing 
our security needs. Security enhancements are being financed with the 
$21.7 million provided in the fiscal year 2002 Emergency Supplemental 
under the Salaries and Expenses account. These funds will help us to 
address the needs at the five laboratories that handle high-risk 
biological agents and needs at selected other high-risk labs as well.
    Question. Of the $16.58 million, how much is directly related to 
enhancing lab security? Has the Department conducted a complete 
analysis of ARS building security needs and if so, what are their 
findings?
    Answer. None of the $16.58 million requested is directly related to 
enhancing lab security, although design and construction projects begun 
with this money will incorporate enhanced lab security features.
    ARS is in the process of conducting physical security assessments 
on our facilities. As of April 2002, 22 assessments have been 
completed. The balance of ARS locations will be completed by September 
2002. Based on the findings of the first 22 sites, ARS estimates that 
it will cost $80 million to address all security needs.
    Question. Please provide a status report on project items or 
locations included under the heading of ``Agricultural Research 
Service'' on page 52 of House Report 107-275 and any other project 
items that are included on pages 20 through 39 under the same heading 
in Senate Report 107-41.
    Answer. The status of each of the building and facility items 
funded in fiscal year 2002 appropriation is:

----------------------------------------------------------------------------------------------------------------
               Project location                  Appropriated                        Status
----------------------------------------------------------------------------------------------------------------
Maricopa, AZ..................................      $8,400,000  Predesign contract completed in first quarter
                                                                 fiscal year 2002. Design scheduled to be
                                                                 completed in the third quarter, fiscal year
                                                                 2003.
Albany, CA....................................       3,800,000  Design for Phase 3 will be completed in first
                                                                 quarter of fiscal year 2003. Construction
                                                                 contract for Phase 1 was awarded in first
                                                                 quarter, fiscal year 2002. Phase 2 will be
                                                                 awarded in the third quarter, fiscal year 2002.
Davis, CA.....................................       5,000,000  Design scheduled for com-pletion by the first
                                                                 quarter, fiscal year 2003. Construction
                                                                 contract scheduled for award in third quarter,
                                                                 fiscal year 2003.
Washington, DC (USNA).........................       4,600,000  Design contract for the Administration Building
                                                                 Modernization will be awarded in the second
                                                                 quarter of fiscal year 2002. Planning and
                                                                 Design of the headhouse/greenhouse will be
                                                                 awarded in the third quarter of fiscal year
                                                                 2002. Design of the Bladensburg Road entrance
                                                                 will be awarded in the fourth quarter, fiscal
                                                                 year 2002.
Hilo, HI......................................       3,000,000  Predesign contract is scheduled for completion
                                                                 in the fourth quarter of fiscal year 2002.
                                                                 Design is scheduled for award upon signing of
                                                                 lease agreement with the University of Hawaii.
Aberdeen, ID..................................         500,000  Design scheduled for award in third quarter of
                                                                 fiscal year 2002.
Peoria, IL....................................       6,500,000  Construction contract for Phase 1 of the 4-phase
                                                                 project will be awarded in the third quarter,
                                                                 fiscal year 2002.
Ames, IA......................................      40,000,000  Design contract for the Large Animal BSL-3Ag
                                                    50,000,000   facilities was awarded the second quarter,
                                                \1\ 14,081,000   fiscal year 2002. Construction award is
                                                                 anticipated in fourth quarter, fiscal year
                                                                 2003. Planning and design for the remaining
                                                                 facilities will begin in the fourth quarter,
                                                                 fiscal year 2002, including the facility to be
                                                                 built by APHIS to relocate labs. Construction
                                                                 of APHIS facilities will begin in fiscal year
                                                                 2003 and be completed in mid-fiscal year 2004.
Manhattan, KS.................................       3,000,000  Partial funding for construction of Phases 3 and
                                                                 4 was provided in fiscal year 2001 and 2002.
Orono, ME.....................................       3,000,000  Design for the new aquaculture facility is fully
                                                                 funded. A design contract for the new facility
                                                                 was awarded in the second quarter, fiscal year
                                                                 2002.
Beltsville, MD (BARC).........................       3,000,000  Design for replacement greenhouses is on hold
                                                                 until reprogramming request of fiscal year 2002
                                                                 funds is approved.
Beltsville, MD (NAL)..........................       1,800,000  Construction award for major upgrade of plumbing
                                                                 and Phase 2 electrical systems is anticipated
                                                                 for the fourth quarter, fiscal year 2002.
St. Paul, MN                                           300,000  Design award anticipated in the third quarter,
                                                                 fiscal year 2002, with completion expected by
                                                                 the second quarter, fiscal year 2003.
Poplarville, MS...............................         800,000  Predesign award anticipated by the first quarter
                                                                 fiscal year 2003.
Stoneville, MS................................       8,400,000  Design for the replacement facility is complete.
                                                                 The construction of lab/office is fully funded.
                                                                 Construction award anticipated by the fourth
                                                                 quarter, fiscal year 2002.
Las Cruces, NM................................         475,000  Design and construction of replacement facility
                                                                 are fully funded. Design is complete.
                                                                 Construction is scheduled for completion in the
                                                                 fourth quarter of fiscal year 2002.
Greenport, NY.................................       3,762,000  Contracts for the construction of the debris
                                                \1\ 23,000,000   removal, coastal erosion control, and design of
                                                                 the potable water system will be awarded in the
                                                                 fourth quarter, fiscal year 2002. Release of
                                                                 the fiscal year 2002 Supplemental funding is
                                                                 contingent upon a report to Congress on
                                                                 security issues, and an independent review of
                                                                 the needs and options for these facilities.
Woodward, OK..................................       1,500,000  Design awarded the second quarter, fiscal year
                                                                 2002.
Wyndmoor, PA..................................       5,000,000  Design award of Phases 8 and 9 is scheduled for
                                                                 the fourth quarter, fiscal year 2002. Phase 7
                                                                 construction is scheduled for award in the
                                                                 first quarter, fiscal year 2003.
Charleston, SC................................       4,500,000  Construction of Phase 1 of the replacement
                                                                 facility is scheduled for completion in the
                                                                 third quarter of fiscal year 2002. Award for
                                                                 construction of headhouse anticipated by the
                                                                 fourth quarter, fiscal year 2002.
Brookings, SD.................................         850,000  Design award anticipated by the fourth quarter,
                                                                 fiscal year 2002.
Logan, UT.....................................       5,600,000  Design for new facility is complete.
                                                                 Construction contract is scheduled for award in
                                                                 the third quarter, fiscal year 2002.
Leetown, WV...................................       2,200,000  Predesign awarded in the first quarter of fiscal
                                                                 year 2002 and scheduled for completion by the
                                                                 third quarter, fiscal year 2002.
Madison, WI...................................       3,000,000  Future site of replacement facility is under
                                                                 negotiation.
----------------------------------------------------------------------------------------------------------------
\1\2002 Supplemental.

                 allocation of homeland security funds
    Question. Madam Secretary, in your testimony you indicate that you 
have established the USDA Homeland Security Council. This Council will 
play a significant role in implementing the final plans for the proper 
disbursement of the $328 million provided for operational security and 
upgrading facilities. In your request for fiscal year 2003, you have 
asked for an additional $28 million for security improvements.
    What do you currently see as the most serious threats facing the 
mission areas of USDA and to what extent do you think you are ready at 
this time to respond to those threats?
    Answer. The greatest threats facing U.S. Agriculture are those that 
relate to the intentional introduction of highly infectious animal 
pathogens into the U.S. food and agriculture system. Having learned a 
lesson from the U.K. Foot and Mouth Disease outbreak, USDA has 
increased its capacity to block the introduction of such pathogens and 
quickly respond to an outbreak. If, however, terrorists were to 
simultaneously and surreptitiously infect livestock at multiple 
locations, it would greatly stress our capacity to respond and 
therefore could have far reaching economic consequences for the United 
States. Therefore, we are allocating funds to strengthen the detection, 
diagnostic and rapid response capabilities in the States. The 
introduction of plant pathogens is likely a lesser threat, as the 
spread of plant disease is generally a slower process. However, once 
introduced, plant pests could become well established and have very 
serious long-term consequences to production and the ability to export 
commodities. Therefore, selected plant pathogens are also on the 
priority list of threats.
    Question. Can you tell us what has been completed to date in terms 
of upgraded facilities and security needs, specifically in the area of 
biosecurity, and how much of this money is supporting new security 
officers that will continue to be in the baseline for future requests? 
Further, to what extent will the decision on allocation of these funds 
be made by the Office of Homeland Security?
    Answer. After September 11 we developed a list of about 130 
facilities that were in critical need of security enhancements. 
Priorities were set within that list and we have been proceeding to 
make improvements. The supplemental funds will greatly assist us in 
making the highest priority improvements and performing assessments to 
assist us in determining additional needs for security enhancements. 
About $1 million of these funds will be used to develop integrated 
standards and methodology for conducting facilities, cyber, and human 
security assessments in accordance with GAO recommendations. About 
$1.25 million will support a staff of security officers that will be in 
the baseline for future requests.
    In the area of biosecurity, USDA entered into an inter-agency 
agreement with the Department of Energy to employ Sandia National 
Laboratories to conduct a risk-based vulnerability survey of five ARS 
and APHIS bio-safety level 3 (BSL-3) laboratories and make 
recommendations to improve the physical, personnel and information 
security at those facilities--that project is essentially concluded and 
cost approximately $0.5 million. Approximately $1.5 million will be 
obligated under the supplemental to follow through by having Sandia 
assist lab managers in implementing the security recommendations and in 
developing biosecurity training and field manuals for these 
laboratories.
    In the interim we have made improvements to heighten security. For 
example,
  --we moved the Ames, Iowa less secure laboratory facility from a 
        shopping center location to the more secure main campus;
  --the USDA emergency operations center is staffed 24 hours a day, 7 
        days a week for any agriculture related disaster;
  --the guard presence in headquarters has been significantly increased 
        and armed;
  --we have worked with the Coast Guard to increase the surveillance 
        around Plum Island;
  --the NFC, NITC and Ft. Collins computer centers security procedures 
        have been reviewed and improvements are underway;
  --all facilities are updating their Emergency Occupant Plans;
  --new procedures are being put in place for communication of 
        emergency situations to employees;
  --we have served as a government leader for anthrax monitoring and 
        testing; and
  --we continue to monitor headquarters for anthrax and certain other 
        pathogens; and we assisted with security for the Olympics.
    Although the Department will make final decisions on allocation of 
these funds, we will certainly work closely with the Office of Homeland 
Security and seek their advice when appropriate.
    Question. How do you justify a request for an additional $28 
million for Homeland Security when you have yet to determine how to 
allocate funds already at your disposal?
    Answer. We are working to assure that we are allocating the 
supplemental funds to the highest priority projects and should have 
that completed soon. The $28 million primarily would be used to 
continue to fund those facility and operational security needs that 
cannot be covered with the supplemental. Also, we need some funding 
that gives us some flexibility for unforeseen needs. We would certainly 
work with the appropriations committees on the allocation of these 
funds.
    Question. I understand that the Department has contracted with the 
Sandia Corporation for a security review of operations at Plum Island, 
New York. Can you provide us an update on this review, when will it be 
complete, and what do you hope it will reveal?
    Answer. In October 2001, the Department retained the Sandia 
Laboratories, through an interagency agreement with the Department of 
Energy, to conduct security reviews at the Department's Biological 
Safety Level 3 (BSL 3) labs that conduct research programs involving 
high consequence pathogens. The draft reports are nearing completion. 
Sandia was tasked with providing a conceptual design for improving 
areas such as electronic security; onsite and local response forces; 
physical protection requirements; personnel suitability determinations; 
escort procedures; material access control and accountability; and 
computer network security.
    Question. Will you please provide a copy of the review to this 
Committee upon completion?
    Answer. The Sandia report has to be classified in order not to 
disclose publicly the nature any vulnerabilities might exist or the 
details of our protective systems. We can and will provide an 
unclassified executive summary, and would be happy to meet face-to-face 
with the Committee or its staff to discuss the findings and the steps 
we are taking to enhance lab security.
    Question. Will you please notify this Committee of decisions in the 
allocation of funds for Homeland Security?
    Answer. Yes, we will notify the Committee as soon as the 
Administration makes decisions on the allocation of these funds.
    Question. Secretary Veneman, what has been obligated to date and in 
which mission areas?
    Answer. I will provide that information for the record.
    [The information follows:]

    As of April 29, 2002, all of the funds ($39 million) for the WIC 
Program of the Food, Nutrition and Consumer Services had been obligated 
as well as about $8.8 million of funds for Departmental Administration, 
$2.0 million for the Agricultural Research Service, and $0.18 million 
for the Office of the Inspector General.

    Question. Who serves on this new USDA Homeland Security Council and 
what authorities do they have?
    Answer. The Deputy Secretary serves as Chairman of the Council. 
Membership is made up of Under and Assistant secretaries, the Chief 
Information Officer, the Chief Financial Officer, the Inspector General 
and the General Counsel. The Chief Economist and the Department's 
Budget Officer also participate. The Council has three Sub-Councils:
  --The Under Secretaries for Food Safety and Marketing and Regulatory 
        Programs co-chair the ``Protection of the Food Supply and 
        Agricultural Production'' Sub-Council.
  --The Under Secretaries for Research, Education and Economics and 
        Natural Resources and Environment co-chair the ``Protecting 
        USDA Facilities and Other Infrastructure'' Sub-Council.
  --The Assistant Secretary for Administration and the Inspector 
        General co-chair the ``Protecting USDA Staff/Emergency 
        Preparedness'' Sub-Council.
    This structure was established to provide a corporate view of what 
the Department needs to do to fill its part in making the country 
safer. This Council will facilitate coordination and reduce duplication 
of efforts among mission areas.
    Question. How much of the activity in the Department is being 
reviewed, directed or approved by Tom Ridge's Office of Homeland 
Security?
    Answer. We have shared the Homeland Security related information we 
are developing with the Office of Homeland Security and have 
participated in many of the coordination meetings called by the Office 
and have provided expertise concerning protecting the food supply to 
them. Governor Ridge and his staff are not directing USDA's homeland 
security efforts. I believe that it is important from the overall 
perspective that we have coordination across the government just as 
that coordination is important within the Department.
                 streamlining/csrs and rental payments
    Question. I see your request includes $5 million for workforce and 
organizational streamlining with a target consolidation of 200 
additional field offices. This Service Center streamlining has been a 
long and hard process. You also indicated in your explanatory notes you 
would build on lessons learned.
    What lessons have you learned and what new factors will you 
consider ensuring USDA has the proper coverage for rural residents and 
farmers to access your programs?
    Answer. We have learned that everyone is in favor of streamlining, 
but no one wants their local field office ``consolidated.'' In order 
for any office consolidation effort to be successful it must be based 
on sound, objective information and take subjective circumstances into 
consideration before final decisions are made. For this reason, we have 
established a special work team made up of field and headquarter 
representatives of the Natural Resources Conservation Service, Farm 
Service Agency, Rural Development and the Departmental Offices of 
Budget and Program Analysis and Chief Information Officer. The Field 
Office Review and Restructuring Team, operating under the guidance of 
the National Food and Agriculture Council, are preparing options for 
reviewing office operations and improving our field delivery system. 
Field and customer involvement are also being planned in the review and 
plan preparation process. Our goal is to improve customer service and 
access to the best possible program services. The criteria being 
considered in the study reflect the needs for serving rural residents 
and farmers as well as impacts of new farm program legislation and 
improvements in technology.
    Question. The budget request also includes moving rental payments 
and pension and health benefits costs from centrally administered 
accounts to individual agencies. Is this action not contrary to the 
streamlining strategies you are putting in place for other USDA 
activities, such as the county field structure?
    Answer. As the Federal Government increases its efforts evaluate 
the effectiveness of programs and to tie program performance to budget 
costs, it is necessary to know the full cost of these programs. 
Therefore, it was decided to attribute the costs you mentioned to 
individual agencies.
                      common computing environment
    Question. Please provide an update on the progress of the Common 
Computing Environment.
    Answer. Significant progress continues to be made regarding the 
critical infrastructure components that form the basis for the Common 
Computing Environment (CCE).
    The following major CCE improvements are planned for fiscal year 
2002. Successful completion of these tasks will bring the CCE to 90 
percent complete. Network servers and workstations will be fully 
deployed, thereby providing enhanced security, a shared and robust e-
mail system, ability to manage and monitor IT systems from a central 
location and enhanced local data capabilities. A GIS strategy will be 
updated and all remaining CCE architectural issues will be finalized. 
The telecommunications capabilities of the Service Centers will be 
significantly enhanced to support the growing number of web-based 
applications and to meet the e-Gov and e-File requirements. Shared 
application servers will be acquired and deployed to support GIS and 
other new program applications. Investments will be made in data 
warehouses, data centers, security components and the Web Farms to 
support internal and external data sharing and electronic services. 
Training is planned to insure employees have the skills needed to 
effectively use and support the new technologies.
    Although the CCE infrastructure will be in place shortly, the full 
utilization of the infrastructure will depend upon (1) how quickly the 
agencies can develop and digitize the base data needed to support GIS 
applications, and (2) the rate of conversion of current business 
applications to more streamlined integrated applications fully 
utilizing the CCE shared systems and data.
        agriculture buildings and facilities and rental payments
    Question. Construction of the South Building is still underway. 
Please provide a status report on the progress, including where you are 
placing employees in temporary setting AND what agencies are affected.
    Answer. We are making good progress on the renovation and 
appreciate the support Congress has provided. Phase 2 of the planned 
eight-phase renovation is now under construction in Wing 4. The 
construction of Phase 2 was funded in fiscal year 2001, started in 
August 2001, and is now scheduled to be completed in November 2002. 
Phase 3 construction, comprised of the headhouse along Independence 
Avenue between Wings 3 and 5, was funded in fiscal year 2002 and is 
scheduled to be awarded in the fall of 2002. Contract documents, 
started in fiscal year 2001, are now being completed and a solicitation 
for the contract will be advertised in May 2002.
    The fiscal year 2003 budget request includes funds for construction 
of Phase 4A: comprising Wing 5, a new mail facility, and the renovation 
of the basement of Wing 4. The design of the new mail facility was 
begun in response to the anthrax-related events of the fall of 2001. 
Design of Phase 4A in Wing 5 is being planned to begin in late 2002, to 
be completed in May 2003, and for award of a construction contract in 
the Fall of 2003. I will provide information for the record on the 
agencies affected.
    [The information follows:]

    In order to proceed with construction in each phase of the 
renovation, the construction zone must be vacated. The relocation space 
strategy for the renovation has included several components, including: 
relocating agencies to the new George Washington Carver Center, 
completed in 1998; relocating agencies to other locations in the 
downtown Agriculture complex, including areas of the South Building 
either previously renovated or not yet renovated; and use of leased 
space in South West Washington near to the South Building. Relocation 
space planning is underway with each mission area or agency.

------------------------------------------------------------------------
          Mission Area or Agency              Planned Relocation Space
------------------------------------------------------------------------
Agencies located within Phase 3 boundaries
 include:
    Natural Resources Conservation Service  South Building, Carver
                                             Center
    Rural Development.....................  South Building
    Grain Inspection, Packers and           South Building
     Stockyards Administration.
    Office of the Chief Financial Officer.  South Building
    Farm and Foreign Agricultural Services  South Building, Limited
                                             Leased Space
    Office of the General Counsel.........  South Building
    Agricultural Marketing Service........  South Building
    Office of Operations..................  South Building
    National Agricultural Library.........  South Building
    Office of Administrative Law Judges...  South Building
    Office of the Chief Information         South Building, Carver
     Officer.                                Center, Whitten Building
Agencies located within the Phase 4A
 boundaries include:
    Farm and Foreign Agricultural Services  South Building, Limited
                                             Leased Space
    Agricultural Marketing Service........  South Building
    Office of Operations..................  South Building, Annex
    Office of Communications..............  South Building
    Office of Small and Disadvantaged       South Building
     Business Utilization.
    Grain Inspection, Packers and           South Building
     Stockyards Administration.
    Agriculture Research Service..........  South Building
    Natural Resources Conservation Service  South Building
    Office of Civil Rights................  South Building
------------------------------------------------------------------------

             assistance for socially disadvantaged farmers
    Question. I understand the Department is requesting the same 
funding level as in fiscal year 2002 but has decreased the direct farm 
operating and ownership credit programs that are the principal tool to 
assist disadvantaged farmers.
    With your limited and oversubscribed funds, how will FSA be able to 
adequately serve this population?
    Answer. The levels requested in the budget were based on estimated 
demand. Changes in the subsidy costs for these programs have made them 
more expensive to deliver in fiscal year 2003 than in fiscal year 2002. 
For example, in fiscal year 2003, we requested $12 million in budget 
authority (BA) to provide $100 million in direct farm ownership loans. 
This compares to $4 million in BA, in fiscal year 2002, to provide $147 
million in loans. For direct farm operating loans we have requested 
$104 million in BA to provide $600 million in loans, in fiscal year 
2003, compared to $55 million in BA to provide $621 million in loans in 
fiscal year 2002. Overall, we have nearly doubled the amount of budget 
authority requested for these programs. The higher subsidy rates are 
primarily the result of changes to the subsidy model to more accurately 
reflect the actual timing of cash flows for these programs.
    Question. What is the breakdown of guaranteed lending in comparison 
to the direct in addressing the need of the Socially Disadvantaged 
farmers in fiscal year 2000 and fiscal year 2001?
    Answer. I will provide that information for the record.
    [The information follows:]

                      FARM SERVICE AGENCY LOAN OBLIGATIONS TO SOCIALLY DISADVANTAGED FARMERS
----------------------------------------------------------------------------------------------------------------
                                                          Number of Loans                   Obligations
                                                 ---------------------------------------------------------------
                                                    Fiscal year     Fiscal year     Fiscal year     Fiscal year
                                                       2000            2001            2000            2001
----------------------------------------------------------------------------------------------------------------
Operating:
    Direct......................................           2,256           2,377     $74,236,000     $79,317,000
    Guaranteed..................................             488             419      74,293,000      69,718,000
Farm Ownership:
    Direct......................................             318             312      35,850,000      35,829,000
    Guaranteed..................................             314             333      92,760,000     103,970,000
----------------------------------------------------------------------------------------------------------------

    Question. Please provide information on new and completed projects 
funded in fiscal year 2002 with section 2501 dollars and where the 
funds were obligated.
    Answer. No 2501 funds have been awarded for fiscal year 2002. A 
Notice of Request for Proposals--RFP--soliciting section 2501 project 
proposals for fiscal year 2002 is currently in clearance within USDA 
and will be published in the Federal Register in the near future.
    Question. Please provide information on the requirements for 
receiving this money, as well as examples of successful and 
unsuccessful uses of section 2501 funds.
    Answer. The statute limits eligibility under this program to 1890 
Land-Grant colleges, including Tuskegee University; Indian Tribal 
community colleges; Alaska Native cooperative colleges; Hispanic-
serving post-secondary educational institutions; other post-secondary 
educational institutions with demonstrated experience in providing 
agricultural education or other agriculturally-related services to 
socially disadvantaged family farmers or ranchers in their region; and 
any community-based organization that (1) has demonstrated experience 
in providing agricultural education or other agriculturally-related 
services to socially disadvantaged farmers and ranchers; (2) provides 
documentary evidence of its past experience in working with socially 
disadvantaged farmers and ranchers during the 2 years preceding its 
application for assistance; and (3) does not engage in activities 
prohibited under Section 501(c)(3) of the Internal Revenue Code of 
1986.
    Applicants must have the financial, legal, administrative, and 
operational capacity to carry out the objectives of the program. I will 
provide examples of projects for the record.
    [The information follows:]

    Alabama A&M University, Normal, Alabama.--This Project employs 
farmer groups, associations and/or cooperatives to marshal existing 
resources in rural Alabama to address the issues socially disadvantaged 
farmers and rural residents in the area face. This concept and the 
holistic approach to outreach form the cornerstones of the outreach and 
technical assistance efforts in North Alabama. The 2501 Project at 
Alabama A&M University believes that it can help rural areas apply the 
cooperative model to a wide variety of problems. It is instrumental in 
the development of three organizations: (1) the Northwest Alabama Small 
Farmers' Agriculture Improvement Association, (2) the Reed Town 
Incubator Center, and (3) the Madison County Agricultural Production 
and Marketing Cooperative. The first organization, the Northwest 
Alabama Small Farmers' Agriculture Improvement Association, 
headquartered in Franklin County, has 43 active members from three 
counties. Working with both the 2501 Project and the Alabama 
Cooperative Extension Service, using a $37,000 grant from the Heifer 
Project International, this organization produces meat goats, cattle, 
and pastured poultry. The second organization, the Reed Town Incubator 
Center, also headquartered in Franklin County has 22 members. Its aim 
is to stimulate general economic growth in the Russellville area by 
attracting agricultural and non-agricultural business to the area. The 
third organization, Madison County Agricultural Production and 
Marketing Cooperative, is producing and marketing non-traditional 
produce such as canola, fruits, vegetables, and organic agricultural 
products. The 2501 Project and the Alabama Cooperative Extension 
Service provide these groups with training and technical assistance in 
the development process of cooperatives, principles of cooperatives, 
functions and roles of cooperative procedures, and grant writing. The 
2501 Project serves over 500 participants in 13 counties.
    Tuskegee University, Tuskegee, Alabama.--The Farm Management 
Specialists are working with 2501 participants to explore value added 
prospects and projects and to develop detailed marketing plans targeted 
to livestock, fruits and vegetables. Farm and Home plans were developed 
with participants and an agreement was reached with the Commonwealth 
National Bank of Mobile, Alabama, to provide a revolving loan program 
to Tuskegee University's 2501 project participants. This agreement also 
involves partnership with the USDA Resource conservation and 
Development Area and the Alabama Tom District. The 2501 participants 
registered and took part in the Booker T. Washington Economic 
Development Conference, Professional Agriculture Workers Conference, 
USDA/Food and Agriculture Council Working Group, USDA/Food and 
Agriculture Council Meeting and the USDA Outreach Working Group 
Meeting.
    Kentucky State University, Frankfort, Kentucky.--Kentucky State 
University Small Farmer Outreach Training and Technical Assistance 
Program conducted a Risk Management Workshop on February 26, 2002, at 
the Boneyville Baptist Church in Lincoln County, Kentucky. The workshop 
focused on Financial Management and USDA Programs. Farmers were given a 
workbook to keep records for the 2002 crop year. The Workshop 
emphasized the importance of crop insurance and record keeping for all 
enterprises in their farming operation. Approximately 75 farmers 
attended this meeting. In addition, several USDA programs were 
discussed along with tobacco and livestock management.
    North Carolina A&T State University, Greensboro, North Carolina.--
The 2501 Project is bridging the Digital Divide of socially 
disadvantaged farm families. Technology via computers is being used to 
help meet global changes in agriculture. North Carolina farmers and 
their families are practicing good record keeping procedures and 
keeping abreast of trends in agriculture to maintain and sustain their 
farming operations. The Farmers Adopting Computer Training--FACT--
Project was designed to improve and enhance the farm management 
practices through the use of technology. FACT has provided in-home, 
one-on-one assistance on an as needed basis for at least 4 days to farm 
families by exposing them to computers, and assisting them in building 
skills that will help with communicating, problem solving, and 
decision-making. This project features a software program that is 
totally customizable to each farm and operation. Prior to implementing 
the FACT Project, several North Carolina farmers were surveyed and it 
was discovered that some farmers kept records in record books or file 
cabinets; however, their traditional ways of record keeping were on 
notepads, in file boxes, on the dashboards of trucks, under truck seats 
and in shoeboxes. Inaccurate record keeping and filing systems have 
reduced farmers' abilities to obtain loans, legal settlements, and to 
effectively market their crops. Introducing farmers to computers as a 
method of record keeping is a new innovative way to keep track of their 
total farm operations in one location. Now, farmers will be able to 
access records and reports in less time; leaving them more time to 
operate their farms.
    Cankdeska Cikana Community College--CCCC, Fort Totten, North 
Dakota.--At one time the bison was the sole source of life to the 
Indians of the Great Plains. In the mid-1800s, their numbers shrank to 
near extinction. With the aid of the 2501 Project, bisons are making 
their resurgence on the Spirit Lake Nation Indian Reservation. In 
November 1999, the management of the bison herd was handed over to the 
CCCC. With the assistance of the Intertribal Bison Cooperative, based 
out of Rapid City, South Dakota, detailed management and marketing 
plans have been established, including harvesting all 2-year-old and 
older bulls that are not going to be used as breeding stock. This will 
not only produce a significant amount of meat, but also a substantial 
supply of bison-by-products, which will be offered to artisans in the 
Spirit Lake Nation. Plans are being made so that once the number of 
bison increases to levels of self-sufficiency local ranchers may 
acquire bison calves to start their own herds.
    Fort Berthold Community College--FBCC, New Town, North Dakota.--The 
2501 Project has incorporated machinery, equipment, labor, and other 
resources to provide six segments of the Fort Berthold Indian 
Reservation the means to return to gardening. Gardening has an integral 
part in the history and heritage of the Three Affiliated Tribes--
Mandan, Hidasta, and Arikara Nations. Historically, these nations were 
known to be great farmers of vegetable crops. The Garrison project, 
which is the largest earth filled dam, inundated 155,000 acres of 
productive bottomlands in 1951. As a result, the native people were 
forced to urban areas to find jobs in factories thousands of miles 
away. Today, these people are returning to their home reservation and 
their traditional roots. In an effort to restore the gardens, FBCC 
initiated a project to help restore a reliable, quality food source, 
promote nutritionally sound diets, and increase the availability of 
fresh vegetables for the reservation. FBCC has provided the people on 
the reservation with services such as preparing old garden sites, and 
creating new ones at their residences where they can plant traditional 
and non-traditional gardens. This 2501 Project initiative is growing 
and continues to be successful as an outreach assistance, training, and 
an inspiration for the elders and tribal members of the Fort Berthold 
Reservation.
    Another 2501 Project for Fort Berthold Community College, New Town, 
North Dakota, with the assistance of local producers established a 
cooperative on the Fort Berthold Indian Reservation to help enhance 
beef cattle production on the reservation. In the past, reservation 
producers have incurred some obstacles while trying to compete as 
suppliers in the modern beef industry. Some of the obstacles producers 
faced included difficulty in obtaining adequate financial assistance to 
increase herd sizes and lack of timely technical assistance to 
establish beef cattle enterprises. This cooperative will purchase and 
distribute livestock to members based on various guidelines. The number 
of cattle appropriated to each member will depend on the producer. A 
member cannot exceed a base herd size of 75 head if he/she plans to 
receive cattle from the cooperative. This restriction will ensure that 
the cooperative is concentrating on helping small farmers. The college 
has developed a loan repayment schedule for producers to follow. The 
repayment plan is based on the price of 500-pound steers on October 30 
of each year at the Stockmen's Livestock Exchange in Dickinson, North 
Dakota. It also considers fluctuating prices in the beef industry, and 
the repayment plan of the loan reflects those changing prices. Members 
interested in joining the program are required to take courses in 
animal husbandry and farm and ranch accounting. By taking the courses, 
the producers will take home practices and techniques to apply on their 
operations. The college will support this joint venture by providing 
meetings, seminars, and workshops to keep members abreast of the latest 
trends, technology, and information available.
    Texas A&M University, College Station, Texas.--The 2501 Project's 
Women in Agriculture Business Management program is targeted to farm 
and ranch wives. The program was created in response to the fact that 
more women are becoming involved in the management of farms and also 
because farming is a high-risk business in which the wife needs to be 
prepared if she is suddenly thrust into the position of being fully in 
charge as the result of an accident, divorce, or death.
    Prairie View A&M University, Prairie View, Texas.--The 2501 Project 
demonstrated some of the latest techniques in sustainable agriculture 
to farmers, leaders in the local agricultural community, and reporters 
during the Smith County Cooperative Extension Program, Media Field Day. 
The 2501 Project facilitates the acquisition and application of 
knowledge and skills focused on agricultural systems that are holistic 
and profitable in their approach to farm resource management, and 
places emphasis on sustainable agriculture. The 2501 Project Farm 
Advisors made 885 direct contacts with producers concerning sustainable 
agriculture issues, resulting in 139 producers reporting that they 
acquired new skills. In addition, 800 program participants received 
technical information on farm pond management and soil conservation 
practices. The goal of sustainable agriculture is to extend the life 
and productivity of area soils and wetlands. Coordinators of the Texas 
Sustainable Agriculture Program, who were on hand to witness the 
demonstrations, plan to train Extension agents on sustainable 
agriculture practices so they can work with growers across the State.
    Rural Community Development Resources, Yakima, Washington.--The 
Center for Latino Farmers, with primary focus on farm worker to farm 
owner initiatives was established in Yakima County, Washington. A 
Spanish/English survey was developed by the 2501 Project staff and USDA 
Outreach personnel in Washington State to learn about the needs of this 
new generation of limited English speaking Latino farmers and their 
knowledge of USDA programs. A preliminary summary of the initial survey 
results were as follows: 90 percent of the respondents preferred 
Spanish as a way to communicate; 50 percent of the farmers were in some 
type of fruit production; 37 percent are beginning farmers; and 13 
percent are vegetable and livestock producers. The 2501 Project has 
identified 150 Latino farmer participants in five rural central east 
Washington counties of Yakima, Grant, Chelan, Adams, and Benton. The 
Project is providing outreach and assistance to these socially 
disadvantaged farmers to increase their access to USDA Programs, 
develop their understanding of computers and train them to set up their 
own computerized accounting systems at home.
    Lac Courte Oreilles (LCO) Ojibwa Community College, Hayward, 
Wisconsin.--The 2501 Project, known locally as the Guiding Resource 
Opportunities with Tribal Heritage--GROWTH, is making tremendous 
strides in its outreach initiatives. Project GROWTH provides students 
with practical learning experiences and is improving several community 
services utilizing the Geographic Information Systems--GIS, a computer 
tool that combines demographic and road information for future land use 
planning. As a result of providing the GIS computer laboratory at LCO 
Ojibwa Community College, the students can now participate in 
interesting and interactive projects with several community entities.
    Growing Power, Inc., Milwaukee, Wisconsin.--The Milwaukee Small 
Farmer Distribution Center, Growing Power, Inc., developed a market 
basket approach for improving the distribution of fresh produce and 
healthy foods to the inner``) city areas of Wisconsin. As a result, 
Growing Power, Inc., is contributing to the development of the urban 
markets for the Wisconsin farmers while providing quality food products 
for city residents. Locally, several socially disadvantaged farmers 
have started or increased their scale of truck farming to supply the 
market for Growing Power, Inc. The increased size of these produce 
farmers with their specialty crops will be able to increase their 
income.

    Question. What are you using to determine these funds are used 
properly and can you see a direct correlation between the outreach 
efforts and increased program participation in this target population?
    Answer. The USDA Office of Outreach provides oversight to determine 
that the funds authorized are used for outreach, training, and 
technical assistance to socially disadvantaged farmers and ranchers by: 
(1) monitoring and evaluating the business management capability 
through reviews of quarterly performance reports; (2) monitoring 
performance of the project recipients and assessing compliance with 
requirements through conducting on-site visits, reviewing progress 
reports, submitted publications, and recipient correspondence; and (3) 
serving as liaison and coordinating the close collaboration between 
project recipients and USDA agencies that administer relevant 
agricultural programs.
    Although we do not have statistical data to show a direct 
correlation between the Program and increased program participation, we 
do have positive anecdotal evidence. Today, we have organizations and 
agencies working together that would have found it impossible to do so 
10 years ago. The Project recipients have implemented programs with 
input and participation from county, State and USDA agencies, State 
Departments of Agriculture, community-based organizations, foundations, 
and churches. The number of participants now actively using the local 
agencies has steadily increased. Since the inception of the program, 
approximately 80 percent of 2501 project participants now use the 
Cooperative Extension Service; and about 75 percent of the participants 
are now familiar with services offered by the Natural Resources 
Conservation Service as compared to pre-project awareness that ranged 
from 5 to 10 percent.
           rhs--rural community development initiative grants
    Question. The President's budget request eliminates the RCDI 
program. This program was created to provide capacity building for non-
profits to provide housing and other essential community needs. It was 
modeled after a program at HUD. Many small rural communities have non-
profits and governmental entities that lack sophistication to access, 
administer and conduct the proper accounting required by Federal 
programs. The non-profit community-based programs are critical for poor 
rural States to deliver service.
    What was the demand for the first NOFA in dollars and requests?
    Answer. The Rural Housing Service received 79 applications for $26 
million for the Rural Community Development Initiative under the first 
Notice of Funds Availability issued during fiscal year 2000.
    Question. Do you see this need addressed in another format?
    Answer. A number of organizations, including Rural Development's 
Office of Community Development, the Resource Conservation and 
Development Districts, the Cooperative Extension System and the Forest 
Service support such capacity building. The Department of Agriculture 
is working hard to continue the strong collaboration among these 
programs that prevents duplication and synergizes more effective 
results.
    Question. HUD has this assistance to our urban counterparts, why is 
rural America left behind again?
    Answer. Rural Housing Service has $12 million available during 
fiscal year 2002 for the Rural Community Development Initiative. The 
Notice of Funds Availability has been published in the Federal Register 
and applications are due on July 2, 2002. We will evaluate the demand 
for this program based upon the number, types, and variety of 
applications received.
       office of assistant secretary for congressional relations
    Question. The Budget request for fiscal year 2003 shows a decrease 
in allocations to the agencies but an increase in the combined account 
for Headquarters and Intergovernmental Affairs. What is the reason for 
the combining Headquarters with Intergovernmental Affairs? Will there 
be significant increased activity in Intergovernmental Affairs and for 
what purpose?
    Answer. The breakout for the Assistant Secretary for Congressional 
Relations is $1,312,000 for Headquarters and $484,000 for 
Intergovernmental Affairs. The increase is to ensure the headquarters 
staff is strengthened to better coordinate the activities of 
congressional relations within the Department of Agriculture. This is 
an effort to ensure our responses to the Congress are timely and 
accurate. This can be accommodated by adjusting the resources devoted 
to congressional relations by our USDA agencies to reflect vacancies in 
those staffs as well as workload considerations.
                       food and nutrition service
    Question. Recently, the New York Times published an interview with 
the author of a book alleging that the food industry is encouraging 
consumers to eat larger portions of food than ever before. ``Biggie-
size'' meals are more prevalent in our society than ever before, and 
while the argument can be made that Americans are more health conscious 
than in years past, the fact still remains that over one-half of 
Americans are overweight. Surgeon General Satcher reported recently 
that over 300,000 Americans die each year from fat-related causes, and 
last year alone we spent $117 billion on obesity-related economic 
costs.
    What actions is USDA taking to counteract the ``eat more'' messages 
consumers are receiving from some members of the food industry, both 
within USDA and in conjunction with the food industry and other 
government agencies?
    Answer. USDA recognizes the seriousness of the problem of 
overweight and obesity in America. Many ongoing nutrition promotion 
activities in the Food, Nutrition, and Consumer Services (FNCS) mission 
area are directed to helping Americans follow the Dietary Guidelines, 
which include guidelines urging Americans to ``aim for a healthy 
weight'' and ``be physically active.'' In addition, we are in the 
process of planning specific program directions and activities that 
focus on an obesity initiative. I will have the Food and Nutrition 
Service (FNS) provide additional information for the record.
    [The information follows:]

    This initiative, ``Breaking the Barriers: Practical Approaches to 
Improve Americans' Eating Behaviors,'' focuses on changing American's 
eating behaviors and exercise patterns. To help us develop a plan that 
will make a difference in the way people eat, FNS recently hosted two 
forums to solicit input from experts in the areas of obesity, portion 
control, and behavior change. Among those present and providing us with 
valuable advice was Dr. Marion Nestle of New York University, the 
author of the book referenced in this question.
    In order to change eating behaviors, these experts advised us to 
plan a focused campaign with specific goals and simple and clear 
messages. We hope to develop a campaign that includes (1) raising 
awareness about the issue and motivating individuals to make changes, 
(2) working to change social norms about how much to eat, and (3) 
incorporating efforts to promote changes in eating environments, so 
that healthful choices are easier to make. The entire initiative will 
center on building partnerships both within the Federal Government and 
with private organizations to leverage our efforts.
    When individuals recognize that they want to make changes in their 
diet, they will need clear, specific, and practical advice. Therefore, 
as one part of the overall effort, we plan to develop practical, 
actionable materials for consumers centered on the Dietary Guidelines 
for Americans and the Food Guide Pyramid. For example, one brochure in 
development is titled ``How Much are You Eating?'' It focuses on 
becoming aware of portion sizes and provides tips to help manage these 
portions. It will be released in the Spring of 2002. The FNS is using 
nutrition education, promotion, and environmental approaches to 
encourage healthy diets and physical activity among program 
participants, and encourage proper portion size. Some examples of 
activities underway in this area include:
  --The messages used in the Eat Smart. Play Hard. campaign, such as 
        ``Balance your day with food and play,'' are intended to 
        promote both better diets and physical activity among children. 
        The campaign also provides guidance for parents and caregivers 
        that includes simple tips to help parents to foster these 
        behaviors.
  --Team Nutrition, in supporting the school meals standards updated 
        through the School Meals Initiative for Healthy Children, 
        provides training and technical assistance to schools and 
        childcare to ensure that portions served in schools are in line 
        with recommendations for age.
  --FNS is currently developing tools for families and childcare 
        providers that teach parents and caregivers about appropriate 
        serving sizes. This material includes guidance on appropriate 
        serving sizes and uses familiar items to communicate a clear 
        picture to help parents accurately estimate the volume of the 
        food they serve.

    Question. What actions are being geared specifically towards 
children (such as through programs authorized by the Child Nutrition 
Act), who are much more easily impressed with toys in fast-food meals, 
and the lure of soda and candy at school vending machines?
    Answer. The health of America's children is a great concern to the 
Department, especially relating to their food intake. We have a number 
of activities underway for them so I will ask the Food and Nutrition 
Service to provide for information for the record.
    [The information follows:]

    The Food and Nutrition Service (FNS) has focused its efforts on 
educating children about the importance of healthy eating and physical 
activity. Working with schools that participate in the School Nutrition 
Programs, nutrition messages are delivered through fun, interactive 
activities that are designed to change children's behavior. While the 
agency cannot, nor does it want to, compete directly with the food 
industry with toys or similar incentives, it has worked to make the 
educational material it develops, colorful and attractive to children. 
Also, the activities are engaging and designed to get children to try 
new foods and to enjoy eating.
    More specifically, Team Nutrition is the agency's initiative 
designed to reach children with simple, consistent nutrition messages 
from a variety of sources on a consistent basis. The messages are 
delivered through the classroom, cafeteria, school, home, community and 
media. The messages are: Eat a variety of foods; Eat more fruits, 
grains and vegetables; Eat lower fat foods more often; and Be 
physically active. Materials have been developed and distributed which 
can be used in the classroom and in school activities while others can 
be taken home and used with the family to expand message delivery.
    Another area of emphasis is the school environment. FNS has 
developed and distributes, upon request, kits that help local groups 
evaluate their school's policies and practices to determine if changes 
are needed. It then provides suggested actions to take to make 
improvements. Areas explored are time to eat, the quality of meals 
served, other food options, nutrition education and physical activity 
policies, etc. The issue is that we are teaching children it is 
important to eat healthy and be physically active in the classroom and 
not supporting those messages in the school environment.
    The EAT SMART. PLAY HARD. Campaign contains a variety of materials 
developed for families that include brochures, activity sheets, 
bookmarks, stickers, and book covers, which deliver positive nutrition 
and activity messages. These materials are available to State and local 
agencies participating in any of the FNS Programs to use in encouraging 
children and their families to eat healthy and be physically active.
    There are many messages being delivered to children in the 
commercial marketplace. We are working to be sure positive nutrition 
and physical activity messages are delivered to them in schools and 
through the agency's programs. We are also working to build 
partnerships with other agencies and organizations that are concerned 
about children's health and well being. By collaborating, we can 
deliver consistent messages to children and their families and, over 
time, change the negative health trends we are seeing now.

    Question. It has been reported many times that lower-income 
Americans are more likely to be overweight than other Americans. Has 
USDA made an effort to streamline information about healthy eating and 
exercise to make it easily accessible to lower-income Americans?
    Answer. FNS recognizes that the Federal nutrition assistance 
programs play a vital role not only in increasing access of low-income 
Americans and children to nutritious foods, but also to helping them to 
develop healthy eating and lifestyle behaviors that promote long-term 
health, reduce risk of disease and support productive lives. I will 
have the Food and Nutrition Service (FNS) provide additional 
information for the record.
    [The information follows:]

    FNS provides educational and promotional materials designed 
specifically to motivate and encourage healthy choices to State and 
local level cooperators who then use a variety of communication 
channels to reach low-income program participants. The agency also 
distributes nutrition guidance, research, and tools that translate 
science to practice to program stakeholders at the State and local 
levels to assist them in designing comprehensive interventions aimed at 
fostering and sustaining behavior change among low-income populations. 
Examples of these include:
  --A book of Recipes and Tips for Healthy, Thrifty Meals, distributed 
        to food stamp recipients nationwide to provide information on 
        preparing and serving low-cost meals.
  --Educational and promotional materials being developed for low 
        literacy and Spanish language groups in the Food Stamp Program 
        that will support maintaining a healthy weight and adherence to 
        the Dietary Guidelines.
  --The cross-program EAT SMART.PLAY HARD.TM campaign 
        designed to improve long-term health by encouraging behaviors 
        consistent with the Dietary Guidelines and the Food Guide 
        Pyramid, including new educational resources now under 
        development in English and Spanish to help make good dietary 
        practices and physical activity easy for parents and children.
  --Healthy Eating for Boys, a collaborative initiative now under 
        development between FNS, CDC and 100 Black Men of America (100 
        BMA Inc.) to introduce nutrition and physical activity 
        component in the 100 BMA Inc. mentoring program. The goal is to 
        promote healthy eating and help to teach young men to act as 
        change agents for healthy communities.
    These educational resources are developed with input from 
cooperators and national experts and generally include testing with 
consumers to ensure relevance, clarity and readability for their target 
populations, including low-income populations.

    Question. Please provide an outline of the activities funded in the 
President's budget directly related to reducing obesity and increasing 
activity among Americans. What role will the Center for Nutrition 
Policy and Promotion and Team Nutrition specifically play in these 
activities?
    Answer. I will have the Food and Nutrition Service provide that 
information for the record.
    [The information follows:]

    The FNCS Obesity Initiative titled Breaking the Barriers is a new 
initiative under the current Administration. The goals of the 
initiative are to promote healthy weight and to prevent and reduce the 
incidence of overweight and obesity. The strategies for the obesity 
initiative include educating American consumers about what constitutes 
a healthy diet, fostering change in social norms about eating and 
exercise, helping consumers develop skills to put nutrition and 
exercise knowledge into practice, and promoting changes in eating 
environments, so that healthful choices are easier to make. Additional 
strategies include improving Food Assistance program standards and 
nutrition education and expanding partnerships and collaborations to 
leverage resources.
    The Center for Nutrition Policy and Promotion's (CNPP) 
responsibilities related to overweight and obesity are to promote 
healthy weight among the general public. CNPP is working to help change 
consumer's eating behaviors through focused, individualized messages 
that offer real-life solutions and practical approaches to help 
Americans make sensible food choices. The Center plans to continue 
collaboration with potential partners to leverage CNPP resources to 
reach the largest possible audience with our messages. CNPP will strive 
to initiate a number of private/public partnerships to promote the 
Dietary Guidelines, 2000. CNPP is also involved in collaborative 
partnership efforts such as 5-A-Day with CDC and NCI, to promote the 
consumption of fruits and vegetables. Using current funding, specific 
projects recently completed or in the planning stages include:
  --Forums Breaking the Barriers: Practical Approaches to Improve 
        Americans' Eating Behaviors and Breaking the Barriers: Helping 
        Americans Eat Smaller Portions.--Experts in nutrition, 
        behavior, the media and potential partners in this effort were 
        invited to advise USDA at two forums. In addition, these forums 
        inform these experts about the initiatives that USDA is 
        promoting to improve health and reduce obesity in America, as 
        well as to begin to define roles and contributions of potential 
        partners. The discussion at these forums is being used to plan 
        USDA initiatives.
  --Consumer brochure How Much are You Eating.--A consumer friendly 
        brochure to help consumers become more aware of how much food 
        is on their plate and to link the amount they eat to Food Guide 
        Pyramid recommendations. The brochure will be released in April 
        2002, and made available on the CNPP website as well as through 
        print copies.
  --Media campaign.--Organize press conferences, appearances, and media 
        events to raise the public's awareness through the media. Media 
        opportunities include USA Weekend, Parade Magazine, and other 
        monthly women's magazines.
  --Promotion and education materials.--Consumer-friendly materials are 
        being developed to increase awareness of food choices, and 
        offer practical tips on making sensible decisions in real life 
        situations such as snacking, fast foods, and restaurants.
  --Food Label Initiative.--Collaborate with the food industry to 
        design and implement nutrition education information on the 
        food label to help consumers relate the amount of food they're 
        eating to the recommendation in the Food Guide Pyramid.
    FNS is working to better address obesity through Federal nutrition 
assistance programs by improving program standards and nutrition 
education, and expanding partnerships and collaboration. Key activities 
include:
  --The Food Stamp Program (FSP) is developing education and 
        promotional materials for low literacy and Spanish language 
        groups that will support maintaining a health weight and 
        adherence to the Dietary Guidelines.
  --Updated nutrition standards in the school meals programs that have 
        contributed to dramatic improvement in the number of schools 
        offering students the opportunity to select a low-fat lunch; 
        FNS is working to support further improvements through:
    --Team Nutrition, an integrated, behavior-based comprehensive 
            program for promoting the nutritional health of the 
            Nation's school children, and infants and preschoolers in 
            child care centers;
    --An action kit, Changing the Scene: Improving the School Nutrition 
            Environment, to help schools provide students with the 
            skills, opportunities and encouragement they need to adopt 
            healthy eating patterns;
    --Improvements in the nutritional quality of commodity foods, 
            including lowering fat levels and increasing the quantity 
            and variety of produce for schools; and
    --Team Nutrition Grants and cooperative agreements to support 
            comprehensive school-based efforts to promote healthy 
            eating and physical activity.
  --Activities in the WIC Program to improve nutrition education 
        include:
    --Revitalizing Quality Nutrition Services (RQNS) in WIC by revising 
            nutrition services standards and promoting effective 
            nutrition education strategies
    --Consistent program nutrition risk criteria to identify infants 
            and children at risk of becoming overweight and to 
            facilitate early intervention; and
    --FIT WIC Demonstration Grants to State Agencies to identify ways 
            that WIC might be changed to help prevent childhood 
            overweight and obesity.
  --Cross-program activities that support healthy eating and physical 
        activity are also underway, including the EAT SMART. PLAY 
        HARD.? campaign designed to improve long-term health by 
        encouraging behaviors that are consistent with the Dietary 
        Guidelines for Americans and the Food Guide Pyramid, and new 
        educational resources in English and Spanish to help make good 
        dietary practices and physical activity easy for parents and 
        children.
                           food stamp program
    Question. The President's Budget includes, and the Senate has 
passed, a legislative proposal to allow legal immigrants who have 
resided in the U.S. for 5 years or more to be eligible to apply for 
food stamps. You have mentioned this proposal in your remarks.
    Please provide the estimated cost over 10 years in order to fund 
this proposal.
    Answer. This proposal would cost $2.099 billion over 10 years.
    Question. Does USDA believe that this proposal will result in a 
rapid influx of new applications for food stamps? Are there 
administrative resources available to handle such an influx?
    Answer. USDA's experience is that when the number of eligible 
households increase in response to new legislation, the new applicants 
come in gradually, allowing State agencies time to hire and train any 
additional personnel that may be needed.
    For example, in fiscal year 2003, we are projecting that the 
proposal would add approximately 129,000 people to a total food stamp 
caseload of about 20 million which would be less than a 1 percent 
increase. The expected number of additional people participating would 
rise to 247,000 in fiscal year 2004 and 358,000 in fiscal year 2005. 
While States with a concentration of immigrants (such as California) 
may have to increase resources slightly to handle the workload, these 
increases would be offset because States would not have to use their 
own resources to provide food stamp benefits and other nutrition 
resources to immigrants who are now ineligible. In addition, USDA pays 
half of all operating costs for the Food Stamp Program, providing a 
dependable source of funding for State agency expansions.
    Question. There are several legislative proposals intended to 
simplify the eligibility requirements to encourage participation by 
low-income families. However, there is also a proposal to require TANF 
recipients to qualify based on actual income and resources, as opposed 
to being categorically food stamp eligible. This particular proposal 
appears to be contradictory to easing eligibility requirements.
    Please explain its justification in light of the Administration's 
attempt to encourage less restrictive eligibility.
    Answer. The President's proposal would restore legislation to the 
pre-Welfare Reform policy of allowing recipients of cash assistance to 
be categorically eligible for food stamps. It would require recipients 
of other, non-cash TANF benefits to qualify for food stamps on the 
basis of their household's income and assets like any other household. 
This proposal targets benefits to those most in need and simplifies the 
current complex policy that requires States to explore eligibility 
under a number of programs rather than looking at a single program--
TANF cash assistance. While households that qualify for cash assistance 
need food stamps, it is less clear that households receiving TANF-
funded benefits other than cash assistance experience a similar level 
of need. For example, the practice of making households categorically 
eligible by providing a low-cost, TANF-funded benefit, such as giving 
them a brochure on domestic violence, may direct food stamp benefits to 
households with significant levels of liquid resources. The proposal 
would allow the benefits now going to such households to be redirected 
to reduce the cost of the other provisions to improve the Food Stamp 
Program.
    Question. I understand that the Administration is concerned that 
the House and Senate Farm Bills make changes to the Quality Control 
system in the Food Stamp Program that you believe will result in a loss 
of State accountability for erroneous payments. I also understand that 
the Administration has a separate proposal regarding the Quality 
Control system.
    Please explain your concerns with both Farm Bill proposals, as well 
as your proposal.
    Answer. The Administration believes that the Food Stamp Quality 
Control system--the program's key measure of payment accuracy--needs 
reform. The system can do a better job of encouraging accuracy and 
effective management in the program, and our proposals do that. I will 
have the Food and Nutrition Service provide additional information for 
the record.
    [The information follows:]

    Under the current system, all States with higher than average error 
rates are liable for a portion of the cost of these errors. With 
sanctions based on the national average, roughly half of all States 
face liabilities in any given year. Thus, the current system does not 
effectively target those States with the worst problems with strong 
incentives for improvement.
    For this reason, the Administration proposed major revisions to the 
current system. The Administration's proposal would sanction States 
with error rates greater than the 75th percentile for two consecutive 
years. The amount of the sanction would equal 10 percent of the cost of 
erroneous payments. Current provisions for enhanced funding would be 
replaced with $70 million in annual performance bonuses for payment 
accuracy and high quality customer service.
    These revisions parallel the House and Senate proposals in that 
they would dramatically reduce the number of States facing liabilities 
in most years. But they differ significantly from the House and Senate 
bills in that they balance this reduction with tough sanctions that 
ensure that States with persistently high error rates continue to face 
serious consequences for failing to perform.
    In contrast, the quality control revisions in the House and Senate 
bills would raise the erroneous payment rate above which penalties 
would be imposed and require USDA to use a lower estimate of each 
State's error rate. States would then have to exceed this higher target 
for three consecutive years before any penalties could be assessed. We 
estimate that only two States would have faced any liability in 2000 
under these provisions, and they would have been liable for only $3 
million.
    In fiscal year 2000, improper payments in the Food Stamp Program 
totaled an estimated $1.33 billion. About $970 million of this amount 
represented benefits received by individuals to which they were not 
entitled. More troubling, however, is that $360 million in benefits 
were not made available to individuals who were entitled to them. An 
increase of just one percentage point in fiscal year 2003 could amount 
to $200 million more in erroneous payments.
    The Administration is concerned that erroneous payments are sure to 
increase if the House and Senate proposals are adopted. Food stamp 
caseloads are rising in response to a softer economy, State 
administrative resources are stretched thin, and with growing pressures 
to eliminate State budget deficits, attention to program management is 
likely to suffer. The Quality Control provisions in the House and 
Senate bills would reduce, if not eliminate, the incentives for States 
to keep erroneous payments low.

    Question. The President's budget recommends a number of legislative 
changes to the Food Stamp Program. During senate consideration of the 
Farm Bill, an amendment was adopted that included changes similar to 
those proposed by the President.
    Are the Food Stamp provisions in the Senate farm bill consistent 
with the President's proposal or are there other changes still 
recommended.
    Answer. The President's proposal includes changes that would ensure 
program access, help modernize the program, enhance work supports and 
increase the emphasis on work and eventual self-sufficiency, simplify 
program rules, and strengthen out-come based performance measures 
including payment accuracy. These are some of the fundamental 
principles. I will ask the Food and Nutrition Service to provide 
additional information for the record.
    [The information follows:]

    The President's proposal included changes that would: (1) simplify 
the program by standardizing the medical and child care deductions, 
excluding interest and dividend income, and allowing the full standard 
utility allowance rather than a prorated amount in certain situations; 
(2) support work by excluding from countable resources one vehicle per 
adult and allowing States more flexibility in using employment and 
training funding; (3) maintain the nutrition safety net by restoring 
eligibility to legal immigrants who have been in the country for 5 
years and indexing the standard deduction to household size; and (4) 
improve accountability by replacing the Quality Control system with a 
system that balances payment accuracy with other program goals.
    While the Senate bill simplifies the program, it does not address 
some areas of complexity that would be streamlined or strengthened by 
the President's proposal. The Senate-passed Farm Bill includes an 
amendment that would restore eligibility to legal immigrants after a 
five-year wait but imposes restrictions if the immigrant has been in 
the country illegally for a year or more. Quality Control revisions in 
the Senate bill raise the erroneous payment rate for which penalties 
would be imposed and require USDA to use a lower estimate of each 
State's error rate. States would then have to exceed this higher target 
for three consecutive years before any penalties could be assessed.
                              wic program
    Question. The President's Budget proposes funding for the WIC 
program at a level intended to support a monthly average of 7.8 million 
participants, an increase of 0.3 million above the fiscal year 2002 
estimated average participation.
    Given the changes in the U.S. economy that have occurred since the 
submission of the President's fiscal year 2002 budget, do you believe 
that adequate resources remain available this fiscal year to meet 
current caseload demand, and potential increases in participation?
    Answer. The Department is currently working closely with its State 
partners to access the adequacy of fiscal year 2002 funds to support 
program caseload and to estimate the level of any potential State 
agency shortfalls. This information will be used, in consultation with 
OMB, to evaluate our program management options for the balance of the 
year.
    Clerk's Note: On March 21, 2002, the Administration submitted an 
emergency supplemental proposal to Congress. This proposal included $75 
million for the WIC Program.
    Question. What is the expected carryover of funds into fiscal year 
2003 based on USDA's most recent data?
    Answer. It is estimated that $110.6 million will be recovered from 
fiscal year 2002 and made available in fiscal year 2003.
    Question. Have any States implemented caseload management 
strategies for the current fiscal year due to depleting funds? If so, 
please describe a typical caseload management plan, and how various WIC 
constituencies may be affected.
    Answer. At this point, it appears several States have implemented 
caseload management strategies in some locations. There are several 
ways that WIC State agencies can efficiently and effectively manage 
caseload. WIC regulations, for example, provide that it be achieved 
through targeting benefits to those most in need on the basis of 
nutritional risk. WIC State agencies may also establish shorter 
certification periods on a participant case-by-case basis, or 
discontinue new certifications of lower-priority participants, or in 
extreme cases, discontinue new certifications of all applicants, while 
implementing applicant waiting lists. As a last-resort measure, State 
agencies can discontinue or temporarily suspend benefits to all 
applicants during a certification period. Please let me ask the Food 
and Nutrition Service for additional details on this.
    [The information follows:]

    The following provides the current status of caseload management 
strategies:
    Restricting access.--Arizona and Michigan have established waiting 
lists for individuals in the lower nutritional risk priorities. 
Michigan currently has four local agencies with waiting lists. One of 
the local agencies has approximately 700 postpartum women and 4-year 
old children on a waiting list. Additionally, some Oregon and 
Washington local agencies are restricting access to lower priorities.
    Potential restrictions.--Many State agencies, including California, 
are predicting the need to restrict access unless additional funding is 
available. Other State agencies are considering making changes to the 
food packages to help reduce food costs (i.e., lowest prices juice, 
store brands, etc.).

    Question. Do you anticipate that any people who apply for the WIC 
Program will be placed on a waiting list or turned away this year? 
Please compare your answer to recent years.
    Answer. There are currently a few local agencies in several States 
that are placing people on waiting lists or not serving certain 
priority levels. Other State may have to take similar action later this 
fiscal year. This has not occurred in recent years except in isolated 
cases that affected relatively few, if any, local agencies at the end 
of a fiscal year.
    Question. Please provide detailed information on the proposed $150 
million WIC contingency funds. What circumstances would trigger the use 
of these funds? If the funds are not used, will they carry over the 
next year? How was this number decided on?
    Answer. The contingency reserve funds will only be allocated to WIC 
State agencies to prevent adverse caseload actions. It is our intent to 
allocate these funds on a case-by-case basis to help State agencies 
dealing with unanticipated circumstances related to caseload levels and 
food costs. We will remain flexible in distributing the funds by 
allocating the money outside the WIC funding formula. The unused 
portion of the contingency reserve would carry forward into fiscal year 
2004.
    The budget was formulated to support an average monthly 
participation of 7.8 million. The contingency fund will serve an 
additional 200,000 participants which should provide an adequate 
cushion in case food costs or program demand exceed current 
expectations.
    Question. Is there anticipation on the part of the Administration 
that funding in the fiscal year 2003 President's budget will not be 
enough to fully fund the WIC program for the entire year? If not, why 
is a contingency fund necessary? If so, why not simply make the funds 
available at the beginning of the fiscal year?
    Answer. The request for contingency funds reflects the 
Administration's commitment to support this vital program. It is 
anticipated that the fiscal year 2003 President's budget can support 
all participants for the entire year. A contingency fund is desirable, 
however, in the event that the appropriated amount is not sufficient to 
maintain participation in particular States as a result of unforeseen 
events, such as increased food costs. We would not expect States to 
plan caseload management decisions based on these contingency funds 
though, and for this reason, it would be inappropriate to allocate the 
money as part of the normal grant award process.
    Question. Many State WIC Directors feel that this contingency fund 
would be more beneficial if they had definite knowledge during their 
planning process whether or not the funds would be available. Please 
comment on their concerns.
    Answer. We envision the contingency funds would be targeted to 
support caseload in those State agencies where there is an 
unanticipated funding shortfall. We believe it is imperative to remain 
flexible in distributing the funds by allocating the money outside of 
the current funding formula; thereby possibly making funds available to 
WIC State agencies that would not otherwise be eligible to receive 
funds.
    Question. Has the Department taken into consideration the enhancing 
activities by WIC providers in regard to nutrition education and 
lowering the childhood obesity rate? What, if any, specific actions 
have been proposed?
    Answer. I will have the Food and Nutrition Service provide this 
information for the record.
    [The information follows:]

    In addition to receiving nutritious supplemental foods, WIC 
participants are offered targeted nutrition education individually or 
as part of a group. WIC's nutrition education approach is designed to 
teach participants and caregivers about the important role nutrition 
plays in health promotion and disease prevention as well as overcoming 
specific risk conditions. WIC nutrition education messages support the 
recommendations of the Dietary Guidelines and the Food Guide Pyramid 
that encourage physical activity, portion control and healthy eating.
    Impacting the issue of childhood obesity is a very complex problem 
requiring a multitude of complex solutions. Specifically, the WIC 
Program has developed consistent nutrition risk criteria to identify 
infants and children who are at risk of becoming overweight and to 
facilitate early intervention. In addition, the ``FIT WIC'' 
demonstration grants given to five State agencies are examining ways 
that WIC might help be more responsive to the problem of childhood 
overweight and obesity. One outcome of this project is the development 
of an implementation manual that will assist other State and local 
agencies in developing similar projects.
                 wic farmers' market nutrition program
    Question. The WIC Farmers' Market Nutrition Program has long been 
an active player in bringing together the programs of nutrition 
assistance and support for farmers and the rural economy. I have 
recently been informed that USDA has decided to not release the 
additional $10 million for the WIC Farmers' Market Nutrition Program 
provided in fiscal year 2002, and a letter is currently being sent to 
the Appropriations Committees informing Members of this decision.
    Please provide information on the factors taken into consideration 
when making this decision.
    Answer. The Agriculture Appropriations Act for fiscal year 2002 
made $10 million available for the WIC Farmers' Market Nutrition 
Program without conditions and another $15 million available if the 
Secretary determined that sufficient funds were available to meet WIC 
caseload requirements. Taking into account the costs and participation 
reported so far this year by States indicate that the funds may not be 
sufficient to continue participation at these record levels for the 
balance of fiscal year 2002 and that the conditions delineated in the 
fiscal year 2002 Agriculture Appropriations Act for release of the 
additional $15 million for the WIC Farmers' Market could not be met.
    Question. Please explain why the Administration chose not to 
continue this program in fiscal year 2003, especially in light of 
significant increase in funding for the WIC Program, including a 
contingency fund of $150 million.
    Answer. While all can agree that supporting America's farmers and 
providing low-income seniors and WIC participants access to fresh 
fruits and vegetables is a laudable goal, these are small programs that 
do not operate in all States and, in many cases, provide a very limited 
benefit level. The Administration believes that we can best serve these 
populations as well as America's agricultural producers, by focusing 
precious resources on broad-based, more universally established 
programs tailored to the nutritional needs of the populations they 
target. We are focused on improving the structure of current programs. 
This kind of hard choice is central to the Administration's 
responsibilities and we accept the need and responsibility for making 
tough choices.
    Question. In addition to farmers' markets program that are directly 
linked to nutrition programs, does USDA have other authorities, such as 
through the Agricultural Marketing Service, to provide support for the 
development and expansion of farmers' markets?
    Answer. Yes. In fact, the Agricultural Marketing Service has put a 
lot of effort into expanding farmers' markets all over the nation. 
Further, food stamps may be redeemed at approved farmers' markets.
    The Food and Nutrition Service and the Agricultural Marketing 
Service (AMS) are the two USDA Agencies that deal directly with the 
development and expansion of farmers' markets. While FNS programs 
provide low-income Americans with access to farmers' markets, AMS 
supports direct marketing opportunities for small farmers including 
farmers' markets, pick-your-own farms, roadside stands, subscription 
farming and community supported agriculture. AMS provides training and 
technical assistance to farmers in the design of facilities, 
transportation, expansion and promotion activities as well as promoting 
research in support of farmers' direct marketing efforts.
               seniors' farmers' market nutrition program
    Question. In fiscal year 2002, the Congress provided $10 million 
from the Commodity Assistance Program to fund the Senior Farmers' 
Market Program, which helps make fresh produce available to senior 
citizens and supports local farmers markets. We also encouraged the 
Secretary to use additional CCC funds to supplement the Seniors' 
Farmers' Market Nutrition Program.
    Do you intend to use additional resources from the Commodity Credit 
Corporation to supplement the appropriated funds for the Seniors' 
Farmers' Market Nutrition Program in fiscal year 2002? If a decision 
has not yet been made, when can one be anticipated?
    Answer. The Department is working closely with OMB to evaluate the 
option of making funds available from the Commodity Credit Corporation 
to supplement the appropriated resources of the Seniors' Farmers Market 
Program. We hope to inform the Committee of the decision on this matter 
shortly.
    Question. This program has been eliminated in the Administration's 
fiscal year 2003 budget. Please explain why the decision was made not 
to fund the program.
    Answer. As with the WIC Farmers' Market Nutrition Program, we agree 
that supporting America's farmers and providing low-income seniors 
access to fresh fruits and vegetables is a laudable goal. However, this 
is a small program that does not operate in all States and, in many 
cases, provides a very limited benefit level. The Administration 
believes that we can best serve low-income populations as well as 
America's agricultural producers, by focusing precious resources on 
broad-based, more universally established programs tailored to the 
nutritional needs of the populations they target. We are focused on 
improving the structure of current programs. This kind of hard choice 
is central to the Administration's responsibilities and we accept the 
need and responsibility for making tough choices.
   fns elderly feeding program (nutrition services incentive program)
    Question. The Administration's budget deletes all funds for this 
program, which provides cash and commodities to States for distribution 
to organizations that deliver meals to elderly citizens in their homes, 
or in group settings. The Administration proposes moving this program 
to the Department of Health and Human Services, Administration on Aging 
and consolidating it with the HHS elderly meals program.
    Has the Administration provided adequate funding to DHHS to absorb 
this program request?
    Answer. The Nutrition Service Incentive Program is included in the 
Department of Health and Human Services (DHHS) fiscal year 2003 budget 
request. The level of funding requested by DHHS for the program is the 
same as the amount appropriated to USDA to administer the program in 
both fiscal year 2001 and fiscal year 2002.
    Question. Has the USDA received any assurance from DHHS that this 
program will indeed be funded in the Labor/HHS appropriations bill?
    Answer. The Nutrition Service Incentive Program is included in the 
Department of Health and Human Services (DHHS) fiscal year 2003 budget 
request. DHHS is working with its appropriations committees to support 
and promote the proposed transfer of funding to their appropriation.
    Question. If this Subcommittee accepts the President's 
recommendation and does not fund this program, and the Labor/HHS 
Subcommittee also fails to provide funding, does the Administration 
have a contingency plan in place to support the Nutrition Services 
Incentive Program in fiscal year 2003 by other means?
    Answer. Even though the Administration is committed to this 
important program, we would not be able to provide these services if 
the program were to not be funded by either Subcommittee.
                   food safety and inspection service
    Question. Protecting the nation's food supply, both from harm 
caused intentionally and unintentionally, are an extraordinary 
important function of government. If we relax our standards or our 
efforts for even the shortest period of time, the consequences could be 
extremely dire. The human and economic tolls would be very high, and 
consumer confidence could be affected for a significant period of time. 
Therefore, it is imperative that the Food Safety and Inspection Service 
have the resources necessary to enable us to continue protecting 
America's food.
    You state that the President's budget will maintain approximately 
7,600 inspectors. Is this number an increase from the number of 
inspectors funded previously?
    Answer. FSIS reached its goal of 7,610 in-plant permanent full-time 
employees in September 30, 2000 and maintained it throughout fiscal 
year 2001. We believe this level, along with the flexibility to use 
temporary or part-time employees as needed, will be adequate to meet 
the industry's demand for inspection services. The Agency plans to 
maintain that level throughout 2003.
    Question. How many, if any, of these inspectors were hired as a 
result of funds provided to the FSIS in response to the terrorist 
attacks?
    Answer. We are planning to use $1.5 million of the funds provided 
by the Homeland Security Supplemental to hire 20 additional import 
inspectors for a total of 100 import inspectors.
    Question. Please provide an update on the efforts of FSIS, 
including work done with other government agencies, within USDA, and 
with industry, to prevent an outbreak of any major animal diseases, 
such as foot-and-mouth, BSE, or other potential animal diseases.
    Answer. I have asked the Food Safety and Inspection Service to 
provide that information for the record.
    [The information follows:]

    Although FSIS conducts post-mortem inspection of animal carcasses 
to determine the presence of disease, FSIS does not operate on the farm 
and its mandate is limited to zoonotic diseases, those that impact 
human health and are transmitted from animals to humans. This mandate 
excludes many animal diseases, including foot and mouth disease. 
However, FSIS has been aggressive and proactive for over a decade to 
prevent Bovine Spongiform Encephalopathy (BSE) from entering the United 
States. No cases of BSE have been found in cattle in the United States.
    State, local and Federal agencies already coordinate strategy on 
BSE and other Transmissible Spongiform Encephalopathies (TSE) through 
an interagency strategic planning committee. The Interagency BSE 
Steering Committee is responsible for planning ways to minimize the 
spread of BSE and identifying potential vulnerabilities in our present 
system, clarifying jurisdictional issues, improving communication 
between Federal agencies on TSE-related matters, and developing 
strategies for communicating with the public if a case of BSE or 
variant Creutzfeldt-Jacob Disease (vCJD) or BSE-contaminated animal 
feed were found in the United States. The Committee consists of 
representatives from USDA, Health and Human Services, U.S. Customs 
Service, Office of the U.S. Trade Representative, Department of Defense 
(DOD), State Department, Office of Management and Budget, White House 
Office of Science and Technology, American Association of Feed 
Officials, National Association of State Departments of Agriculture, 
and the National Assembly of Chief Livestock Health Officials.
    Coordination and planning at the technical level occurs among 
scientists addressing BSE issues through participation in the 
Interagency BSE Working Group. Technical representatives from the 
Animal and Plant Health Inspection Service (APHIS), Agricultural 
Research Service, Center for Disease Control and Prevention, Customs 
Service, DOD, Foreign Agricultural Service, Food Safety and Inspection 
Service (FSIS), and the National Institutes of Health participate in 
the Group. The Group discusses prevention activities, new science, and 
changing world events and coordinates efforts across agencies. Annual 
meetings with Canadian and Mexican technical experts from counterpart 
organizations include the following subject areas: animal health, 
public health, diagnostics and research. These annual interactions have 
contributed to increased understanding and harmonization of TSE control 
and prevention policies among the three countries.
    Within USDA, the Animal and Plant Health Inspection Service is 
primarily responsible for efforts to prevent animal disease outbreaks. 
On January 10, 2002, President Bush signed the Defense Appropriations 
Bill, which bolstered USDA homeland security efforts. This bill 
included $105 million for APHIS for pest and disease exclusion, 
detection, and monitoring. A portion of these funds is being expended 
to enhance activities designed to protect the U.S. from serious animal 
disease threats such as Foot and Mouth Disease (FMD) and BSE.

    Question. Have these activities been enhanced since the terrorist 
attacks of September 11?
    Answer. Yes, we have taken a number of steps to enhance our efforts 
to prevent animal disease outbreaks. For example, in October, 2001, 
USDA provided $1.8 million in State grants for emergency animal disease 
preparedness activities. These grants are to be used to help various 
States better prepare and coordinate emergency preparedness activities 
related to animal disease protection. On January 10, 2002, President 
Bush signed the Defense Appropriations Bill, which bolstered USDA 
Homeland Security efforts. This bill included $105 million for APHIS 
for pest and disease exclusion, detection, and monitoring. A portion of 
these funds is being expended to enhance activities to protect the U.S. 
from serious animal disease threats, such as FMD and BSE.
    FSIS is using a portion of its Homeland Security supplemental 
funding to provide biosecurity training to FSIS inspectors. All FSIS 
inspectors are already trained to look for food safety problems in the 
plants and in the products we regulate--whether the problems are 
intentionally or accidentally caused. The Agency is committed to 
further enhancing the skills of its inspection force to deal with 
biosecurity events. On September 20, 2001, all FSIS inspectors were 
placed on heightened alert and given instruction to report any 
suspicious in-plant activity to FSIS and local law enforcement 
authorities. In addition, FSIS has integrated biosecurity 
responsibilities into the new veterinary medical specialist positions 
created in each District. These individuals will coordinate emergency 
response activities at the District level in conjunction with State and 
local food safety and law enforcement authorities.
    Question. What is the funding level in the Administration's budget 
for these activities?
    Answer. The 2003 budget includes $146 million of increased funding 
to strengthen training and technology to enhance homeland security and 
protect agriculture and the food supply. Highlights of these increases 
include: (A) a $19 million increase in the AQI program for improved 
point-of-entry inspection programs; (B) a $5 million increase to 
strengthen the capability of APHIS to assess and monitor outbreaks of 
diseases in foreign countries that have the potential to spread to this 
country; (C) a $48 million increase for plant and animal health 
monitoring; (D) a $12 million increase for other APHIS programs to 
expand diagnostic, response, management, and other scientific and 
technical services; (E) a $28 million increase to support FSIS food 
safety activities; and (F) a $34 million to support research aimed at 
protecting the Nation's agriculture and food system.
    Question. The FSIS was provided an additional $15 million in 
emergency supplemental funds after the terrorist attacks of September 
11.
    Please provide information on how this money has been expended to 
date, or how the FSIS plans on spending this money.
    Answer. Funds allocated to FSIS from the Homeland Security 
Supplemental will be used to used to improve facility security, educate 
and train inspectors regarding bioterrorist threats, increase 
monitoring and surveillance of the food supply, expand FSIS laboratory 
capabilities for detecting contaminants, and provide technical 
assistance and biosecurity awareness to State and local government 
inspection officials and international cooperators. In addition to the 
$15 million provided directly to FSIS, an additional $1.5 million will 
be allocated to them from funds appropriated to the Office of the 
Secretary to strengthen inspection at ports of entry.
    Question. How were decisions made on how the money would best be 
used?
    Answer. The Department has established a USDA Homeland Security 
Council to provide policy oversight and coordinate Department-wide 
homeland security issues. It also approves budgets and other major 
commitments, appoints representation to inter-agency groups and tracks 
USDA progress on high priority homeland security objectives. The 
Homeland Security Council examined proposals submitted by the agencies 
for spending the $328 million of emergency supplemental funds made 
available to the Department.
                            humane slaughter
    Question. Funding was provided supplemental to the fiscal year 2001 
appropriations to enhance humane slaughter activities carried out by 
FSIS. It is my understanding that these funds were used to hire 17 
District Veterinary Medical Specialists (DVMS)
    Please provide information regarding the functions to be performed 
by the DVMS.
    Answer. Using funding provided in the recent supplemental 
appropriations bill, FSIS added 17 District Veterinary Medical 
Specialists (DVMS) to its workforce. These additional resources will 
further bolster FSIS' oversight of humane slaughter and handling 
issues. Each DVMS will be responsible for on-site coordination of 
nationally prescribed humane slaughter procedures and verification of 
humane handling activities, as well as dissemination of directives, 
notices, and other information from Headquarters through the district 
office to Veterinary Medical Officers in the field.
    Question. Will the DVMS be working solely on humane slaughter 
activities? If not, approximately what percentage of their time will be 
spent on humane slaughter activities?
    Answer. The DVMS' primary responsibility will be the monitoring and 
promotion of humane slaughter practices in their respective Districts. 
It is difficult to assign a strict percentage as to the time spent by 
the DVMS on humane slaughter activities, as that will depend on the 
functional requirements of their Districts. However, it is expected 
that the majority of the DVMS's work hours will be devoted to humane 
slaughter activities and other functions will be incidental.
    Question. Along with disseminating information regarding humane 
slaughter to the field, will these employees also perform ante-mortem 
inspections? If not, will other employees be performing these 
inspections?
    Answer. No, ante-mortem inspection is currently performed on 
livestock presented for slaughter in Federally inspected facilities by 
the veterinarians and inspectors assigned to slaughter plants.
    Question. Is the hiring of the new DVMS expected to increase 
overall the number of ante-mortem inspections to ensure humane 
slaughtering?
    Answer. The DVMS will spend time in the ante-mortem area of 
slaughter plants monitoring the slaughter practices of the plant and 
providing expertise to both plant and FSIS staff in the conduct of 
humane handling practices, as well as in other incidental activities, 
such as the recognition of foreign animal diseases. During their visits 
to plants in their respective Districts, they will provide techniques 
and training in humane slaughter practices and biosecurity to the FSIS 
inplant inspection personnel.
    Question. What would the estimated cost be of providing an ante-
mortem inspection at all continuously operating slaughter plants at 
least once per day?
    Answer. Ante-mortem inspection is currently performed on all 
livestock presented for slaughter, as well as on poultry in Federally 
inspected facilities. These functions are already provided for by funds 
currently appropriated to FSIS.
    Question. Are funds requested in the Administration's budget to 
continue the activities of the 17 new DVMS?
    Answer. The Administration's 2003 budget for FSIS will continue to 
provide funds for the 17 District Veterinary Medical Specialists (DVMS) 
from within the base-level funding appropriated to the Agency.
    Question. Are funds requested to hire more DVMS?
    Answer. The Administration's 2003 budget does not request 
additional funds to hire more DVMS.
               inspection of foreign meat-packing plants
    Question. Madame Secretary, I believe it is extremely important to 
follow up on reports such as the one by the USDA Inspector General in 
June of 2000, that put into doubt the safety of all meat consumed by 
Americans. Currently, there is no way for the average consumer to 
easily find out whether the meat they are buying at the grocery store 
is coming from a USDA approved, clean facility, whether it be domestic 
or abroad. Therefore, according to newspaper articles, and the IG 
report itself, one could conclude that there is no way for the average 
consumer to make a truly informed guess at whether or not the meat they 
are consuming is safe. This is unacceptable, and it is unthinkable that 
plants that have completely failed USDA inspections would be allowed to 
import meat into the United States without ever being re-inspected by 
someone from the USDA. I have asked many of these questions earlier, 
and feel that they are absolutely worth asking again in order to 
receive the best information for the public.
    In view of the current threats posed to Americans by those wishing 
to do us harm, should additional steps be taken by USDA in the area of 
foreign meat and poultry inspections to ensure Americans' safety and 
confidence in these products?
    Answer. We are allocating $1.5 million of Homeland Security 
Supplemental funding to hire 20 additional import inspectors, for a 
total of 100, to perform intensified surveillance of imported meat, 
poultry, and egg products. The inspectors will be located at various 
ports-of-entry to augment the existing inspection force.
    Question. Please expand on any additional steps you feel are 
warranted.
    Answer. The efforts of States and other cooperators with whom USDA 
works are essential to provide in-depth protection of the Nation's from 
security threats to our food supply. Therefore, Federal assistance will 
also be used to bolster State capabilities. This will help maximize our 
ability to contain any outbreaks.
    Question. What actions has USDA taken in response to the IG report 
mentioned above?
    Answer. I have asked FSIS to provide the information you requested 
for the record.
    [The information follows:]

    The IG report identified weaknesses in documentation of FSIS 
decisions on determining the eligibility of countries to export to the 
United States. FSIS has taken a number of steps in response to the 35 
recommendations in the report. These have included strengthening 
documentation on equivalence decisions taken by the Agency on the 
eligibility of foreign countries to export to the United States, 
strengthening management controls on all aspects of the equivalence and 
plant certification processes, documenting procedures for entering 
plant certification information in the Automated Import Information 
System (AIIS) to assure that ineligible shipments are not allowed to 
enter the United States, training managers in management control 
principles, and assuring that FSIS auditors have all the information 
they need to plan in-country audits.

    Question. How often, on average, are foreign meat-packing plants 
inspected by USDA officials? Do you feel that this is adequate?
    Answer. FSIS reviews all foreign inspection systems in countries 
eligible to export meat and poultry to the United States. In fiscal 
year 2001, FSIS reviewed the documentation of and performed on-site 
audits in 27 of the 32 countries eligible to export meat and poultry 
products to the United States, as well as two countries requesting 
eligibility, and was satisfied that all 29 countries had implemented 
inspection systems equivalent to the U.S. inspection system. These 
audits included visits to 217 slaughter and processing establishments 
and 82 laboratories.
    Question. What is the standard procedure when a foreign meat-
packing plant fails to meet USDA guidelines?
    Answer. A foreign plant that fails to meet USDA guidelines is 
delisted; that is, it is no longer allowed to export to the U.S. It may 
be recertified for export to the U.S., however, if it has corrected all 
deficiencies by the time of its next USDA audit.
    Question. If a plant fails to meet USDA guidelines during an 
inspection, should there be a follow-up inspection by USDA officials to 
ensure that the meat is safe before it is sent to the United States, or 
is it the Administration's position that it is acceptable to rely on 
assurances from other countries that the meat is safe?
    Answer. FSIS officials currently conduct follow-up inspections of 
those plants that fail to meet USDA guidelines.
    Question. It does not appear that there is an increase for foreign 
inspectors in the USDA budget.
    Do you believe additional inspectors should be hired?
    Answer. FSIS plans to hire an additional 20 import inspectors with 
funds provided through the Homeland Security supplemental 
appropriation.
    Question. How many inspectors, and how much money, would it take to 
ensure that foreign meat-packing plants were inspected often enough to 
adequately ensure the meat imported into the United Sates is safe for 
consumers?
    Answer. The resources requested in the fiscal year 2003 Budget are 
sufficient to support USDA's Food Safety program in the next fiscal 
year. This includes reviews of foreign inspection programs and the 
inspection of imported product. It is important to remember that all 
meat and poultry imported into the United States must be produced under 
a foreign inspection program that USDA determines provides equivalent 
public health safeguards to our domestic inspection program. 
Additionally, when imported product arrives at a port-of-entry, USDA 
inspectors then reinspect it prior to allowing it to enter the country.
    Question. Can you certify that no meat or poultry products are 
being imported into this country, and sold to American consumers, that 
do not meet at least minimum USDA standards? If your answer is no, what 
are you doing to fix what would appear to be a broken system?
    Answer. All meat and poultry imported into the United States must 
be produced under a foreign inspection program determined to be 
equivalent to the USDA's program. When imported product arrives at a 
port-of-entry, USDA inspectors then reinspect imported product prior to 
allowing it to enter the country.
    Question. This topic also brings into consideration the subject of 
country-of-origin labeling.
    If certain plants, or certain countries, repeatedly fail USDA 
inspections and are then allowed to import meat into the United States, 
do you believe it is the right of the consumer to know where their meat 
is coming from?
    Answer. Currently, all imported meat shipments are reinspected upon 
arrival at U.S. ports of entry. Shipments not meeting USDA standards 
are refused entry to the U.S. Therefore, country of origin labeling in 
no way affects the safety of imported product. The inspection it 
receives is the same as domestic product. The determinations as to 
whether it is fit or unfit for human consumption are the same. As for 
imported retail packages or consumer-ready packages, these are already 
required to bear country of origin labels.
    Question. What effect on this problem do you believe required 
country-of-origin labeling would have?
    Answer. Country of origin labeling would not have any affect on the 
safety of the product.
                             rus--broadband
    Question. What role do you see the government playing in the rural 
broadband transmission arena when the private sector is still debating 
their participation considering cost, regulations, mergers, and other 
factors?
    Answer. Broadband service is vital to the economic development, 
education, health and safety of rural Americans. For rural communities 
to prosper, as they move from predominantly agricultural-based 
economies into today's global marketplace, they must have the same 
access to the world markets and educational and health care 
opportunities as urban residents. Because of the vast distances often 
separating rural communities and the nation's urban economic and 
educational centers, rural broadband deployment is critical to 
sustaining the agricultural economy and the development of e-commerce. 
To further this objective, Rural Utilities Service believes the 
government's role in fostering rural broadband deployment today is more 
important than ever since the private sector's efforts are not focused 
on a universal broadband solution.
                 government functions--contracting out
    Question. In the fiscal year 2002 report, this committee identified 
functions that affect eligibility determination, disbursement, 
collection or accounting for government subsidies provided under any 
direct or guaranteed loan of the Rural Development and Farm Service 
Agency mission area as an inherent government function. Additionally, 
the Committee asked for a report by March 1, 2002, on all efforts by 
the Department to enter into contracts to carry out any of the 
previously stated activities.
    When will the Department submit the report?
    Answer. The Department submitted the report on March 6, 2002. In 
the report we noted that we have not entered into any contracts for 
these services and do not plan to do so.
    Question. In the President's Budget for USDA, the section titled 
``competitive sourcing'' states the goal is to compete 15 percent of 
the commercial positions by the end of 2003.
    What positions fall under the title of commercial positions?
    Answer. Some examples of the type of positions we are considering 
for competitive sourcing include; data processing, finance and 
accounting, public affairs specialists, education and training, 
administrative support, fleet management, charting and mapping, grounds 
maintenance, mapping and charting, and construction management.
    Question. Would these positions include what the Committee 
considers as inherent government functions in the Rural Development or 
Farm Service Agency mission area?
    Answer. We do not believe that these positions will include what 
the Committee considers as inherent government functions.
    Question. Do you have a plan you can share with the Committee to 
reach the President's goal?
    Answer. We are working on our plan to meet the President's goal and 
will provide a copy to the Committee once it is final.
                           inspector general
    Question. Was the increase in staff years between fiscal year 2001 
and fiscal year 2002 sufficient to carry out duties of the Inspector 
General?
    Answer. The Office of the Inspector General's (OIG) full-time 
equivalent (FTE) ceiling was 723 in fiscal year 2001 and 2002. The 
agency was not able to fully fund the 723 FTE ceiling in fiscal year 
2001 with available resources. Actual FTE usage was 650. Additional 
resources for staffing is not available in fiscal year 2002.
    At the current funding and staffing levels, OIG is able to carry 
out the most critical aspects of its mission. The agency performs 
ongoing determinations of its responsibilities and priorities in order 
to direct resources to the areas of most urgent and immediate need.
    Question. How much money is used for overtime of existing employees 
in the field to carry out investigations?
    Answer. As law enforcement officers, OIG's special agents receive 
availability pay as part of their standard compensation package. OIG 
does not utilize overtime pay for its Investigations special agents.
    Question. A few years ago, the USDA RHS and OIG created a joint 
initiative in the multi-family housing portfolio. What was the result 
of this effort, and is it still ongoing?
    Answer. OIG and the Rural Housing Service (RHS) formed the joint 
initiative to review Rural Rental Housing (RRH) projects because of 
concerns about continuing fraud, waste, and abuse in the Rural Rental 
Housing (RRH) program. The result of this initiative was evaluation 
report ``Rural Rental Housing Program Uncovering Program Fraud and 
Threats to Tenant Health and Safety,'' issued in March 1999.
    The initiative targeted 32 multi-family owners and management 
owners that had been identified by Rural Development State Offices as 
potential abusers of the program. We identified 18 owners and 
management agents who misused over $4.2 million while neglecting the 
physical condition of the properties, some of which threatened the 
health and safety of the tenants. The OIG Audit staff referred sixteen 
cases to the Investigations staff.
    Question. What unauthorized funds were collected by the government 
as a result of this effort?
    Answer. The initiative identified $4.2 million in misused funds. 
All funds have been collected, written off, or resolved through 
additional documentation.
    Question. Has the Agency adequately responded to any weaknesses 
that were identified by OIG?
    Answer. The agency has adequately responded. Recommendations from 
all 18 audit reports have received management decision or final action. 
The agency established a Multi-Family Enforcement Task Force, including 
OIG participation. RHS has also implemented improvements to its RRS 
computer database to allow the agency to better monitor and identify 
potential abusers of the program. RHS inspected the projects where OIG 
found significant deficiencies in the physical condition of the 
properties and has required the State Offices to continuously report on 
the status of corrective actions. RHS plans to inspect all of its 
17,000 RRH projects.
              aphis commodity credit corporation transfers
    Question. The fiscal year 2003 President's budget proposes to amend 
the Agricultural Risk Protection Act by preventing the Secretary of 
Agriculture from transferring funds from the Commodity Credit 
Corporation (CCC) to combat emergencies for plant pest or noxious weed 
infestations that the CCC funded the previous year.
    What will the Department do if appropriated funding for emergency 
programs, such as Asian long-horned beetle (ALB) eradication efforts, 
in fiscal year 2003 is insufficient to manage the program that year?
    Answer. We feel that activities for infestations whose scope and 
magnitude are known should be funded through the appropriations 
process. We retain authority to seek the use of funds from the CCC to 
combat any emergency pest and disease outbreak that is outside the 
scope of the appropriations.
    Question. Also, what if the ALB infestation spreads to another 
State, such as Wisconsin, in fiscal year 2003--is that considered a new 
infestation and can the Secretary transfer CCC funds for it?
    Answer. As you describe the situation, I would consider Wisconsin 
to be outside the scope of the infestation to be funded by the 
appropriations. As a result, we retain the to use funds from the CCC 
for such infestations.
                              biosecurity
    Question. U.S. biosecurity is of great concern to all Americans. 
Last year's foot-and-mouth disease outbreaks in other countries, and 
the events of September 11, have heightened the need for increased 
inspection efforts at U.S. ports of entry to prevent biosecurity 
invasions.
    What is the Department doing to better coordinate efforts with all 
inspection agencies at the ports to share data, establish targets for 
inspection, and direct travelers appropriately?
    Answer. Several recent steps have been taken to improve 
communication with Customs, INS and FSIS at the ports. APHIS is 
developing its Port Information Network Operations (PINOPS) database to 
track meat and animal product shipments and its Automated Targeting 
System (ATS) to track product to be held for inspection. The ATS 
corresponds to Customs' Automated Manifest System. It will improve 
identification and automatic targeting of high-risk imports for 
inspection and possible entry refusal. ATS and PINOPS will be linked to 
share relevant data and will contain separate modules for tracking and 
accounting for products on hold, including entry refusal, and 
communicating that status with FSIS and other agencies. We are 
currently at the contracting stage of the development, having completed 
an initial phase of testing. As Customs updates their system, we will 
continue to keep pace with their changes.
    With FSIS, APHIS has also taken broad steps to improve port 
procedures for ensuring that harmful meat products do not enter the 
country. APHIS signed a memorandum of understanding with FSIS to better 
define operational procedures and more clearly define the roles and 
responsibilities of each agency at the ports of entry. APHIS inspectors 
have also begun independently transmitting FSIS inspection forms to 
FSIS to enhance port processes.
    Question. What actions are you taking to identify ports of entry 
that pose high risks for foreign animal disease and plant pest 
introductions?
    Answer. APHIS AQI staff monitor ports nationwide as well as at pre-
clearance locations to determine the level of risk from different ports 
of entry. We collect data in a standard form that identifies what 
biological material has come to the port. If it did not meet the 
requirements to enter the U.S., we track whether it requires treatment 
or would have to be destroyed or returned to its origin. We analyze the 
data at both the regional level and at a central level to determine 
where the greatest risk lies for introductions of pests and diseases.
    Question. How are you enhancing agricultural quarantine inspection 
staffing and technology to prevent the unlawful entry of regulated 
items?
    Answer. APHIS has increased staffing to prevent illegal products 
and will continue to hire additional personnel. APHIS will continue to 
add new positions to address the current safeguarding need. We are 
increasing inspection personnel at the Northern border to look at 
passengers and cargo using Canada as a transit to the U.S. from a third 
country. As part of that effort, staff are gathering intelligence on 
the use of Canada as a transit country. We have increased the number of 
detector dog teams and have begun using them to inspect cargo and will 
also increase their mandate to include post offices and refrigerator 
cars. We have also hired personnel specifically to prevent smuggling. 
Those additional personnel are analyzing data for the highest risk 
places for illegal entry.
    In our efforts to prevent illegal entry of restricted product, we 
are also increasing the use of technology. Analysts are developing the 
Automated Targeting System and the Automated Cargo System to track 
illegal imports. Port staff use a database to post violations across 
the country to be aware of potential violators. We have also increased 
the use of x-ray technology at ports to detect what is in containers 
and bags.
    Question. What is USDA doing to increase prosecutions for trade 
compliance violations to deter the illegal smuggling of produce?
    Answer. Beginning January 1, 2002, APHIS implemented new penalty 
guidelines allowed under the Plant Protection Act. The guidelines 
increased the maximum penalty from $1,000 per violation to $250,000 per 
violation and $500,000 per case. This level of penalties is a better 
deterrent to crime because before, violators could absorb fines as a 
general business cost. Also, to complement the additional activities to 
search for violators, APHIS has increased the number of investigators 
who prosecute violations. This has led to an increase in the number of 
cases we can prosecute, further deterring crime.
    Question. Please provide the amount requested, by line item, in the 
fiscal year 2003 President's budget to prevent foreign animal disease 
establishment in the U.S.
    Answer. I will provide that information for the record.
    [The information follows:]

    In the fiscal year 2003 request, the following line items have a 
foreign animal disease or pest implication:

                              FISCAL YEAR 2003 FOREIGN ANIMAL DISEASE OR PEST-RELATED
                                            [Dollars in the thousands]
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal Year       Program      Total Program
                             Program                                 2002 Base       Increase       Request \1\
----------------------------------------------------------------------------------------------------------------
AQI Appropriated................................................         $58,090         $11,979         $70,069
FMD/Emerging Foreign Animal Diseases............................           3,898           4,119           8,017
Import/Export (import work only)................................           4,710           1,012           5,722
AHM&S (FAD investigations)......................................           1,000               0           1,000
AHM&S Surveillance (FMD and other FADs).........................               0          19,333          19,333
Screwworm.......................................................          30,797               0          30,797
Tropical Bont Tick..............................................             424               0             424
Emergency Management Systems....................................           4,201           6,945          11,146
Wildlife Services Operations (FMD Surveillance).................               0           8,225           8,225
Veterinary Diagnostics (foreign animal disease and lab quality             5,865           3,400           9,265
 assurance).....................................................
                                                                 -----------------------------------------------
      Total.....................................................         108,985          55,013         163,998
----------------------------------------------------------------------------------------------------------------
\1\ Excluding non-program related changes.

    Question. Please provide an update on the Department's cooperative 
efforts with the Vermont Department of Agriculture and the University 
of Vermont, College of Agriculture, to develop a biosecurity 
demonstration and outreach program.
    Answer. APHIS is working with the Vermont Department of Agriculture 
and the University of Vermont to finalize an agreement.
    Question. A recent USDA press release announced the Department's 
efforts with Health and Human Services to strengthen bovine spongiform 
encephalopathy (BSE) protection systems for cattle, including the 
doubling of BSE tests conducted this fiscal year compared to the 
previous year. The news release also mentioned a Harvard BSE risk 
assessment to evaluate current preventative measures and to identify 
additional actions necessary to minimize the risk of BSE.
    Are you planning to enhance BSE testing again in fiscal year 2003 
and, if so, what funds are in the budget request for these tests?
    Answer. We requested $8,443,000 in fiscal year 2003 to enhance our 
national BSE surveillance and laboratory activities.
    Question. What actions is the Department taking to strengthen 
protection programs as a result of the Harvard BSE risk assessment?
    Answer. Though the Harvard study indicated that the risk of BSE 
occurring in the United States is extremely low, we intend to take 
several steps to aggressively protect American consumers and the 
livestock sector. We intend to enhance surveillance by increasing the 
number of cattle samples tested in fiscal year 2002 to more than 12,500 
compared to approximately 5,200 sampled in fiscal year 2001. We have 
invited public comment on further possible regulatory options to 
further reduce human exposure to products that could contain the BSE 
infective agent. Options considered are:
  --Prohibiting the use of brain and spinal cord from specified cattle 
        in human food;
  --Prohibiting the use of central nervous system tissues in boneless 
        beef products, including meat from Advanced Meat Recovery (AMR) 
        systems, and,
  --Prohibiting the use of the vertebral column from certain categories 
        of cattle, including downed animals, in the production of meat 
        from AMR systems.
    Further, the Food Safety and Inspection Service will propose to 
prohibit the use of certain stunning devices used on cattle prior to 
slaughter.
    APHIS will publish an advance notice of proposed rulemaking to 
consider disposal options for dead and downer animals, which are 
considered an important potential pathway for BSE spread in the food 
chain.
    USDA has taken proactive protective measures to prevent the 
introduction of BSE into the United States. Most recently, APHIS 
imposed import restrictions in September, 2001, on Japanese ruminants 
and ruminant products due to a confirmed case of BSE there.
    Question. The threat to agricultural production and the food supply 
from causes either unintended or otherwise, especially since the events 
of September 11, requires our special attention and proper education 
and communication within the agriculture sector. At the same time, 
poorly timed or ill-conceived announcements may have a negative effect 
on the domestic commodity markets and among our trading partners. For 
example, a suggestion that foot and mouth disease has possibly been 
detected in the U.S. would undoubtedly send shock waves throughout the 
livestock markets.
    What is the best approach the Department can take to make sure all 
prudent information in the area of biosecurity is made publicly 
available without unintended market consequences?
    Answer. The Department has been very careful about assuring that 
only accurate information is made publicly available. The recent market 
scare regarding FMD at a Kansas stockyard was precipitated by 
speculative discussions. APHIS immediately dispensed accurate 
information about the extent of testing which was occurring. No FMD was 
found and the markets returned to normal shortly. However, the 
situation underscored the impacts that could occur from an outbreak and 
the need for a quick response with accurate information.
    Question. In view of recent events, do you think it is advisable to 
classify certain security-related USDA information for review only by 
certain leadership positions within government?
    Answer. We are reviewing the need for original classification 
authority.
    Question. Over the years, the Extension Service has developed a 
level of trust within the farming community that far exceeds that of 
other agencies which are considered more regulatory in nature. As a 
consequence, farmers are often more willing to make inquiries of or 
share information with Extension Service personnel than with other 
representatives of government.
    Do you think the Extension Service could play a role as first 
responder in the area of sharing and collecting bio-security 
information within the agriculture sector?
    Answer. Yes, the resources of the Cooperative Extension System 
(CES) of the USDA, the land-grant colleges and universities, and local 
county governments can be mobilized as first responders to support a 
homeland security initiative. The CES is present in all U.S. counties--
including more than 3,000 local offices. It has a long history of 
educational efforts with all communities, offering timely research-
based programs to youth, families, community leaders, and those 
involved in agriculture, natural resources, and business and industry. 
It brings the resources of land-grant colleges and universities to bear 
in addressing locally identified priorities and issues and provides a 
feedback mechanism to these educational institutions so that they can 
better serve citizens and communities. The local CES presence--the 
staff who live and work in these counties and communities--makes the 
CES a logical partner in the homeland security effort.
    A key part of the approach to homeland security will be the 
capacity to reach throughout the U.S. into all communities in a 
constructive and non-threatening way--and in a manner that complements 
rather than disrupts local customs and traditions. The nature of the 
threats will likely change, requiring an ongoing presence and 
association with communities. If the threats materialize, affected 
communities will need help with recovery--which in itself may be a 
protracted task.
    As it has repeatedly demonstrated over the years, the CES can 
effectively respond to natural disasters and other emergency 
situations. The Extension Disaster Education Network (EDEN)--in place 
for a number of years--offers a wide range of educational materials 
that the public and CES staff can use to mitigate the impacts of 
disasters such as floods, storms, droughts, and disease outbreaks. The 
substance and format of these materials can be adapted to support a 
successful homeland security effort. The Department has allocated 
$600,000 to EDEN with funds provided in the fiscal year 2002 Emergency 
Supplemental for Homeland Security. Funds would be used to develop 
educational materials, recruit and train personnel to deliver 
information at times of crises, and secure computer systems. These 
efforts build on the existing network of extension agents who are 
trained to help people and communities deal with natural disasters. 
Funds are needed to expand the Network to meet homeland security needs.
    Question. What role do you think the Extension Service can play in 
education and awareness to reduce future risks of bio-terrorism, such 
as better ways to secure farm chemical storage, protect livestock from 
the spread of disease, or other potential threats?
    Answer. The CES is poised to become a major player in the homeland 
security initiative. It has a vast array of experiences and resources--
as well as a long history of community involvement--to carry out the 
educational and communication tasks that are critical to the success of 
homeland security in an open society. The CES also has a strong record 
of cooperating with other organizations, such as public schools, law 
enforcement agencies, fire and emergency services, local governments, 
and other higher education institutions. The CES is, of course, a 
national organization and as such has communications and other systems 
firmly in place that can assure a focused response to threats and a 
capacity to engage with communities in responding to terrorist or other 
episodic events.
    CES can, as it does with other efforts, greatly multiply its 
resources by training volunteers to train others and using its existing 
presence and communication networks. Specialized materials would be 
prepared, tested, and disseminated for each of the four action-related 
focuses--awareness, risk assessment, mitigation, and recovery.
                           biological control
    Question. As a method to reduce the use of chemicals, there has 
been a significant employment of biological control agents to counter 
various threats to agricultural production. Unfortunately, there are 
cases in which this practice can have unintended consequences. For 
example, it has been reported that in the late 1970's and early 1980's, 
USDA introduced into a number of States a species known as Harmonia 
axyridis (multicolored Asian lady beetle) as a biocontrol agent. Since 
that time it spread rapidly, killing the native lady beetles, and now 
posing potentially millions of dollars in damage to the domestic wine 
industry and causing other harm.
    Does USDA continue to support the release of non-native species to 
serve as biocontrol agents, and if so, please provide information on 
such activities and explain what actions USDA takes to ensure that 
unforeseen consequences, as with the Harmonia axyridis, do not occur?
    Answer. The USDA continues to support the release of non-native 
species to serve as biocontrol agents of pests that devastate natural 
areas and severely reduce crop production. ARS facilities overseas 
collect and evaluate the natural enemies of such designated invasive 
pests. These natural enemies are reared, and tested in quarantine to 
determine their effectiveness against the target pests, and to ensure 
that they do not attack native species (predators with a broad host 
range such as the multicolored Asian lady beetle, Harmonia, are now 
categorically excluded from importation for biocontrol). Biocontrol 
agents that have been proven to be effective and safe by this science-
based process are packaged and shipped stateside for use in classical 
biocontrol programs, and are monitored post-release for non-target 
effects. Available ARS resources will continue to be directed toward 
evaluating and improving these procedures. Some of the invasive pests 
that are currently targeted for biological control are: the melaleuca 
paper bark tree in Florida, codling moth in the Pacific northwest, 
glassy-winged sharpshooter and olive fruit flies in California, leafy 
spurge in the upper States, Asian longhorned beetle in New York and 
Illinois, and saltcedar and yellow starthistle in the West.
    Invasive species account for approximately $137 billion per year in 
damage costs in the United States alone. Non-native weeds infest at 
least 100 million acres in the United States, and increase by 8 to 20 
percent annually. ARS works with APHIS to streamline the regulatory 
process governing testing and introduction of biological control agents 
for management of invasive exotic weeds, resulting in faster approval 
for release of biological control agents.
    Damage from invasive insects costs U.S. agriculture an estimated 
$30 billion annually; typically, the more damaging invasive insects 
cost U.S. agriculture at least $1 billion each, with the glassy-winged 
sharpshooter and Asian longhorned beetle representing threats of $33 
billion and $670 billion, respectively. Invasive mite, beetle, and 
disease threats to bees threaten, through loss of pollination, $15 
billion in fruit, nut (almond), and legume crop value.
    By conservative estimates, biological control is responsible for 
saving $20 billion in damage from invasive insects annually in the 
United States. ARS is further developing biological control as a major 
cost-effective ($100 return for each $1 invested) strategy for 
management of invasive insects. Biological control programs help 
increase agricultural production while decreasing the industry's 
reliance on chemical pesticides.
    ARS firmly believes that integrated pest management (IPM) and 
areawide pest management systems, employing biologically-based or pest-
specific methods, can substantially decrease the risks from the most 
hazardous pesticides and simultaneously increase economic benefits for 
agriculture, as well as provide substitutes for at-risk pesticides 
impacted by the FQPA.
    The key to controlling insect pests and improving the health and 
effectiveness of beneficial insects such as bees and biocontrol wasps 
could be hidden in their genes. To capitalize on developing genomics 
techniques, ARS and CSREES co-sponsored the 1st International Insect 
Genomics Workshop in 2001. The workshop prioritized projects that would 
benefit from a more coordinated effort, with the honey bee (related to 
biocontrol wasps) genome emerging as the initial target for sequencing, 
followed by important pest moths, beetles, and fruit flies.
    Question. Is USDA undertaking any actions now, or proposed for 
fiscal year 2003, to combat the Harmonia axyridis either though 
research or pest management activities?
    Answer. The multicolored Asian lady beetle, Harmonia axyridis, is a 
predator of aphids and other small insects, including pests such as the 
pecan aphid, hemlock wooly adelgid, and the recently established 
Chinese soybean aphid.
    This beetle is native to Asia. In an attempt to establish the 
beetle for biological control in the United States, many Federal and 
State agencies and universities were involved in releases in 12 States. 
This effort continued intermittently from 1916 to 1983. Immediately 
following each release, the species disappeared, making it impossible 
to determine whether these releases resulted in establishment of the 
beetle. Biological control practitioners, using newly emerging 
ecological concepts, decided that further importation might be risky to 
wildlife, and importations ceased. Biological control agents such as 
this beetle, with a broad host range that included native insects, that 
could potentially out compete native natural enemies and become pests 
themselves, were no longer imported. Nevertheless, a strain of the 
beetle, which is believed to have escaped from infested cargo at 
seaport in New Orleans, Louisiana, did become established by 1988. Once 
established it has been an effective biological control agent of pecan 
aphids in Georgia and other locations. In 2001, the beetle was also 
shown to provide economic control of spirea aphid on apple and was the 
predominant lady beetle species attacking the soybean aphid.
    Beginning in the autumn of 1993, this beetle was found creating a 
nuisance in homes in Georgia, Oregon, Virginia, Maryland, Alabama, 
Delaware, New Jersey, Washington, and Pennsylvania. It has since 
expanded its range and is found as a nuisance in much of the eastern 
United States and several mid-western states and continues to expand 
its range. As do many native lady beetles, this species forms large 
swarms in the fall and moves into sheltered areas, including attics and 
crawl spaces, for overwintering. The beetles are particularly attracted 
to buildings (of all sizes, shapes and colors).
    Programs are now underway to isolate, identify, and use aggregation 
pheromones (insect-produced odors that cause the beetles to congregate 
in the fall) and repellents (odors that can be placed near homes to 
discourage beetle entry). The Chemicals Affecting Insect Behavior 
Laboratory, Beltsville, Maryland, has found two compounds that act as 
repellents; they are being evaluated. A trap has also been developed by 
Dr. Louis Tedders, formerly at ARS, and the design has been posted on 
the web by the Office of Technology Transfer, thus making it available 
to interested homeowners for use in removing the beetles from their 
homes. Through cooperation with the Extension Service, efforts are 
underway to make the ARS trap design and a pest fact sheet, produced by 
the ARS Information Service, generally available to homeowners.
    Currently, exclusion by sealing cracks in housing exteriors is the 
best way to keep the beetles from entering homes, a method that serves, 
additionally, to improve regulation of home climate and to conserve 
energy.
                    foreign agricultural assistance
    Question. As part of the U.S. policy in the Afghan theater, it has 
been suggested that this country should take actions to help shift 
local farmers from the lucrative poppy production to a form of 
agriculture that does not have implications for internal drug 
trafficking or other illegal purposes.
    Is USDA involved in helping Afghan farmers move to alternative 
forms of agriculture?
    Answer. USDA is not currently working in Afghanistan but is 
prepared to assist, if requested, by providing technical assistance and 
training to facilitate Afghanistan's recovery. USDA has extensive 
expertise that could be relevant to Afghanistan, including experience, 
albeit years ago, in working with that country regarding alternatives 
to poppy production.
    Question. Is USDA involved in other international agricultural 
development as part of a larger U.S. foreign policy strategy aside from 
pure economic development in those regions?
    Answer. USDA is involved in a number of U.S. Government inter-
agency processes focused on broad U.S. foreign policy strategies 
designed to promote political, economic, and social stability. An 
inter-agency working group meets weekly at the State Department, for 
example, to work on joint agency strategies for cooperation with 
Afghanistan, Pakistan, and other nations in the region.
    USDA is heavily involved in outreach and scientific collaboration 
on biotechnology, which along with other international research 
activities, are helping increase the capacity of the world to feed its 
hungry people, thus reducing one of the conditions that breeds 
terrorism. Similarly, work in multilateral organizations, such as the 
Food and Agriculture Organization of the United Nations, is helping 
establish the political will and strategies needed to significantly 
reduce the number of undernourished people. Some of these efforts have 
been ongoing, but are being expanded and refocused as a result of the 
September 11 events.
    USDA is developing strategies and focusing increased attention on 
policy and institutional frameworks to foster the growth of 
competitive, market-based agricultural sectors. This enhances one of 
our other strategic goals for being involved in international 
agricultural development: to expand market opportunities for U.S. 
producers.
    Several other activities are taking place under the rubric of the 
Middle East Peace Initiative. USDA is a key player in a Middle East 
integrated pest management project, training programs on environment 
management, and programs promoting scientific research cooperation 
among countries in the region.
                             illinois river
    Question. Section 745 of Public Law 107-76 directs you to 
participate in a conservation pilot project in the Illinois River 
Basin.
    Please provide information in regard to this directive.
    Answer. Over $1.1 million of Environmental Quality Incentive 
Program Funds have been committed for cost sharing on conservation 
practices to be installed in the Illinois River Basin this fiscal year. 
In addition, according to the national CREP/CRP data base, the Illinois 
CREP has enrolled 30,002 acres (1,257 contracts) at a total estimated 
cost share of over $4.6 million for fiscal year 2002.
                             biotechnology
    Question. Consumers are still distrustful of products that contain 
genetically modified organisms.
    What is USDA doing to assure the credibility of the U.S. regulatory 
system in regard to environmental and food safety of genetically 
engineered products?
    Answer. The National Economic Council has established an 
Agriculture Biotechnology Working Group (ABWG). One of the first 
priorities of this group is to work on the regulatory safety issues, 
both scientific and procedural, associated with the unintended or 
adventitious presence of genetic material in seeds introduced through 
genetic engineering. This is a complex regulatory issue that will 
involve the food safety and environmental regulatory agencies. In 
addition, the ABWG has set up a system for interagency coordination and 
communication concerning the categories of new products (pharmaceutical 
plants, fish, animals, insects) that the regulatory system is or will 
be reviewing over the next several years.
    To assure that the scientific basis of APHIS' regulatory review 
remains current, USDA contracted with the National Academy of Sciences 
(NAS) to conduct a review of the scientific basis for determination of 
non-regulated status for transgenic crops under the Plant Protection 
Act and the National Environmental Policy Act. The NAS evaluated the 
appropriateness of methodologies, the type and quality of data, and 
adequacy of issues assessed. Their report, entitled ``Environmental 
Effects of Transgenic Plants: The Scope and Adequacy of Regulation'' 
was issued on February 22, 2002. The report notes that new transgenic 
plants receive greater regulatory scrutiny than conventional plants, 
and views its recommendations ``. . .as a means to help improve an 
already functioning system.'' APHIS is now reviewing the report and 
studying its recommendations, with a view to improving our system. We 
believe NAS is a valuable resource to assure that our regulatory 
activities have high credibility in the scientific community.
    Coordination efforts are underway to establish the Federal review 
infrastructure for transgenic animals. APHIS, the Food Safety and 
Inspection Service (FSIS), and the Food and Drug Administration (FDA) 
will work to articulate a transparent process for a variety of products 
and also address overlapping jurisdictions between the agencies. 
Potential concerns over animal welfare issues could impact the Agency's 
inspection responsibilities. APHIS plans to clarify its regulatory 
approach to transgenic vectors of animal disease (transgenic 
arthropods) and coordinate this with our existing oversight approach to 
transgenic insects of plant disease.
    APHIS continues to work with the Environmental Protection Agency 
(EPA) to clarify the two agencies' respective roles in evaluating plant 
pest risk and plant pesticides; herbicide tolerant plants and herbicide 
use; and EPA's work to develop exemptions to its rule on the regulation 
of plants containing plant pesticides. In addition, the Agency is 
developing expanded guidance for applicants on information needed to 
satisfy requirements for granting a petition.
                             animal welfare
    Question. The Committee is very concerned about the Department's 
actions to support animal welfare.
    Please provide a summary of fiscal year 2001 Animal Welfare 
activities including number of investigations, the nature of 
violations, enforcement actions, and their outcomes.
    Answer. I will provide that information for the record.
    [The information follows:]

    In fiscal year 2001, APHIS continued to employ a two-pronged 
enforcement strategy. For licensees and registrants who show an 
interest in improving the conditions for their animals, we pursue 
innovative penalties that allow them to invest part or all of their 
monetary sanctions in facility improvements, employee training, 
research on animal health and welfare issues, or other initiatives to 
improve animal well-being. This approach enables the individuals to 
immediately improve the conditions for their animals while we send a 
clear message that future violations will not be tolerated. On the 
other hand, for licensees and registrants who do not improve the 
conditions for their animals, APHIS pursues enforcement action. Such 
action typically includes significant monetary penalties and/or license 
suspensions or revocations. It may also include confiscation of their 
animals and relocation of the animals to another facility if they are 
found to be suffering.
    An important component of APHIS' enforcement strategy is the high-
priority designation for certain cases. Cases are deemed high priority 
based on the following criteria:
  --Severity of animal suffering (death or severe injury)
  --Past compliance history of facility
  --Potential public or animal safety or health concerns
  --Abusive or potentially violent nature of licensee or registrant
  --Type of facility and species of animal involved
  --Severity of the issue resulting in extensive public interest
    For high priority cases, APHIS and the USDA Office of the General 
Counsel put special emphasis on investigation and enforcement to 
expedite their resolution. This measure has been successful in 
shortening the time frames of significant cases and providing quicker 
relief for animals protected under the AWA.
    Through this multifaceted enforcement strategy, APHIS and the 
Office of the General Counsel have been able to virtually eliminate the 
backlog of Animal Welfare Act violation cases awaiting resolution 
through the formal administrative process. The results have been 
shorter time frames for resolving cases and the ability to expedite 
high-priority cases. In addition, APHIS imposed penalties totaling 
almost $510,000 in fiscal year 2001.
    The following table provides detailed information on the number of 
enforcement actions conducted and resolved during fiscal year 2001:
    Numbers of Enforcement Actions Conducted and Resolved, fiscal year 
1999-2001.
    Cases Investigated and Reviewed:

                                                          NUMBERS OF ENFORCEMENT ACTIONS CONDUCTED AND RESOLVED, FISCAL YEAR 1999-2001
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Investigated and reviewed                            Cases resolved                                  Sanctions imposed
                                              --------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Submitted to
                 Fiscal year                                    investigative   Submitted for                   Stipulations   Administrative   Fines imposed                     Revocations,
                                                    Cases            and           formal         Official        offered/       law judges          by         Fines imposed   suspensions, and
                                                                 enforcement     prosecution      warnings       settled \1\    decisions \1\  administrative  by stipulation  disqualifications
                                                               services staff
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1999.........................................             313             188             104             143           89/79              28        $585,162         $82,152                16
2000.........................................             329             184             101             125          75/100              70         343,301         110,848                23
2001.........................................             276             201              51             178          130/97              74         365,875         143,440                10
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Some stipulations settled were originally offered in the previous year.

    We resolved several high-profile cases or brought charges against 
parties in fiscal year 2001. The following are just a few examples:
    In November 2000, APHIS and a zoo in Oregon settled charges that a 
handler severely beat an elephant. The zoo agreed to a civil penalty of 
$10,000. Of that amount, APHIS approved $5,000 to hire outside experts 
on elephant care and to implement all reasonable recommendations. The 
other $5,000 was paid to the U.S. Treasury. The zoo also agreed to not 
rehire the handler who beat the elephant.
    In January 2001, a USDA judicial officer upheld a decision that 
found a Missouri dealer guilty of charges that she was acting as a dog 
dealer without a license. Her $5,000 fine was suspended as long as she 
does not violate the AWA in the future. She is also permanently 
disqualified from being licensed under the AWA.
    In April 2001, a USDA administrative law judge found a Nevada 
exhibitor guilty of charges that he harassed APHIS officials and failed 
to maintain proper acquisition records, keep animal enclosures in good 
repair, protect stored food from spoilage, provide enclosures to 
protect animals from inclement weather and the elements, provide 
sufficient and potable water, control pests, properly clean enclosures, 
provide sufficient perimeter fencing, and provide sufficient space for 
animals to make normal postural and social adjustments. He was fined 
$27,500, and his license was revoked. This decision was upheld on 
appeal.
    Question. How is the Department utilizing the fiscal year 2002 
funding increases for Animal Welfare and Animal and Plant Health 
Regulatory Enforcement?
    Answer. We are using the increases to hire, train, and equip 
additional animal care inspectors and investigators in areas of the 
country where the need is most pressing. By so doing, we intend to 
improve our program of inspections and follow-up investigations and 
enforcement. Recently, we have hired ten new animal care inspectors, to 
be stationed in the following States: New York; District of Columbia; 
Georgia; Florida; Michigan; Illinois; Missouri (2 positions); Montana; 
and Texas. Before the end of fiscal year 2002 we plan to hire seven 
additional inspectors, to be stationed in West Virginia; Puerto Rico; 
California (2 positions); Colorado; Pennsylvania; and northern Indiana.
    In similar fashion, we are using the increased funding for animal 
and plant health regulatory enforcement to hire, train, and equip 
additional investigators in areas where animal care violations are most 
prevalent. Recently, we hired new investigators to be stationed in 
Arkansas, Georgia, Illinois, Nebraska, New Jersey, Pennsylvania, South 
Carolina, and Washington. We plan to hire additional investigators this 
year to be stationed in northern California, southern California, New 
York, Tennessee, North Texas, and South Texas. The result will be 
improved response time to reports of Animal Welfare Act violations and 
a greater ability to expedite higher priority cases.
    Question. The fiscal year 2003 President's budget proposes 
decreased funding for animal welfare; how will this decrease affect the 
USDA's ability to conduct necessary inspections at licensed and 
registered facilities?
    Answer. While we may reduce the absolute number of inspections, the 
effect will be partially mitigated by the newly hired inspectors having 
a full year of experience, enabling them to operate at an improved 
level of efficiency. Also offsetting the reduced funding, we incurred a 
number of one-time costs in fiscal year 2002 associated with hiring and 
equipping the new inspectors such as new vehicles ($340,000) and 
computers ($85,000). We will continue to employ a risk-based inspection 
system so as to concentrate activities on facilities where animal 
welfare concerns are the greatest.
                    boll weevil eradication program
    Question. The Committee is concerned about the President's proposal 
to decrease funding for the Boll Weevil Eradication Program.
    How is the Department working with the cotton industry in regard to 
the President's proposal to decrease the Federal cost share for active 
eradication zones of the program? Specifically, how will the proposed 
budget affect grower ability to meet program requirements and not lead 
to an increased spread of infestations?
    Answer. We work closely with the cotton industry on budget issues 
regarding the Boll Weevil Eradication Program. As we approach fiscal 
year 2003, we expect to see significant acreage move from the more 
expensive active phase of the program, into the weevil-free, post-
eradication phase. As a result, we can afford to reduce the amount of 
our total contribution, while still providing a 20 percent cost-share 
for the zones still involved in active eradication. The balance of 
program costs can be met through grower assessments, varying levels of 
State funding, and short-term loans from the Farm Service Agency (FSA). 
Growers can meet remaining program requirements through some 
combination of grower assessments, State funding, and FSA loans. In any 
case, our proposed budget will not lead to an increased spread of 
infestations.
    Question. Please provide an update on the Boll Weevil eradication 
program and the status of geographic information systems development.
    Answer. The cooperative Boll Weevil Eradication Program (BWEP) has 
been highly successful in reducing and ultimately eliminating losses 
caused by the boll weevil. Of the nearly 16 million acres of U.S. 
cotton, the BWEP has eradicated the boll weevil from 5.9 million acres 
since eradication activities began in 1983. As a result, we and our 
cooperators are very encouraged with the program's progress. The 5.9 
million acres are in the program's post-eradication phase, while nearly 
10 million acres are in the active phase, leaving less than 1?million 
acres outside the program. These final areas are expected to join the 
BWEP within the next few years. We project to eradicate boll weevil 
from all cotton growing areas of the U.S. and northern Mexico by 2005, 
in cooperation with States, the cotton industry, and Mexico.
                        chronic wasting disease
    Question. Chronic Wasting Disease (CWD) is becoming a serious 
problem in U.S. deer and elk populations.
    Please provide an update on the Department's surveillance and 
indemnity efforts for CWD in deer and elk.
    Answer. Since 1997, program officials have found CWD in 21 farmed 
elk herds in six States. We have also found CWD in the free-ranging 
deer and elk population of five States including Colorado, Wyoming, 
Nebraska, South Dakota, and most recently Wisconsin. To date, APHIS has 
tested approximately 6,200 farmed cervid with more than 2,100 of these 
animals tested this fiscal year. We have also tested more than 7,000 
free-ranging deer and elk. We expect to test an additional 1,100 free-
ranging deer and elk this fiscal year including 500 deer from Wisconsin 
sampled as a result of our recent finding of CWD in the State's wild 
deer. To date, Federal and State officials have depopulated 18 positive 
elk herds including 7 in South Dakota, 1 in Montana, 7 in Colorado, 2 
in Nebraska, and 1 in Kansas. Three herds remain, 1 in Oklahoma, 1 in 
Colorado, and 1 in Nebraska. While the Colorado herd has just recently 
been exposed to infected free-ranging deer, the Nebraska herd has 
undergone 4 years of surveillance with no further evidence of disease. 
The State of Nebraska has released the herd from quarantine. We have 
spent $3.6 million for indemnities.
    Question. There have been three recent finds of CWD in free-ranging 
deer in Wisconsin. How did CWD, which until recently had only been 
found primarily in the Rockies, suddenly appear in Wisconsin?
    Answer. Presently, APHIS does not know how the free-ranging deer in 
Wisconsin were infected with CWD. We are working with the Wisconsin 
Department of Natural Resources (DNR) to determine the source of 
infection.
    Question. What action is the Department taking to identify the 
presence of this disease and prevent it from spreading in Wisconsin and 
elsewhere?
    Answer. In fiscal year 2001, I declared an emergency and 
transferred $2.6 million from the Commodity Credit Corporation (CCC) to 
APHIS to conduct enhanced CWD surveillance in both the farmed and free-
ranging cervid populations, and to remove existing and newly infected 
herds. An additional $12.2 million has been transferred in fiscal year 
2002 to continue the emergency effort.
    Specific to Wisconsin, APHIS has cooperated with the Wisconsin 
Department of Natural Resources (DNR) to collect samples from an 
additional 500 deer killed from the area where the 3 positive animals 
were collected. This additional testing has resulted in program 
officials identifying 10 more deer as infected with CWD. We are also 
working with DNR to gather epidemiological data to determine the source 
of infection for the free-ranging deer. APHIS is encouraging the State 
to require mandatory surveillance and restrict movements from captive 
cervid herds in the area where free-ranging animals were found to be 
positive for CWD. In addition, APHIS is encouraging States to require 
additional barriers between captive and free ranging cervids in areas 
where transmission of CWD between these two groups is a risk.
                            west nile virus
    Question. West Nile Virus (WNV) is continuing to spread in the 
U.S., killing numerous horses, birds, and now humans.
    Please update the Committee on how APHIS plans to address West Nile 
Virus activities in Illinois and other States in fiscal year 2002.
    Answer. In fiscal year 2002, APHIS will enhance cooperative 
education, surveillance and monitoring efforts in the following States: 
Alabama, Georgia, Massachusetts, Maine, Connecticut, Missouri, New 
Hampshire, Vermont, New Jersey, New York, North Carolina, South 
Carolina, Virginia, Wisconsin, Minnesota, Kentucky, Tennessee, 
Nebraska, Kansas, Oklahoma, North Dakota, South Dakota, Texas and 
Puerto Rico.
    In addition, based on a fiscal year 2002 congressional directive, 
APHIS, Wildlife Services will work in the State of Illinois to enhance 
WNV surveillance efforts in wildlife through collection, sampling and 
testing of birds to complement and supplement ongoing WNV research and 
management activities associated with State Agencies and the University 
of Illinois.
    Question. Which Federal agency has the lead responsibility for 
ensuring that we are focusing adequate attention to this disease and 
what is APHIS's role in this coordinated effort?
    Answer. APHIS has the lead Federal role in protecting livestock 
from impacts of West Nile virus. The Center for Disease Control and 
Prevention is the lead Federal agency for protecting human health from 
WNV.
    Question. Should APHIS have a greater role in the effort to detect 
and prevent the spread of WNV?
    Answer. APHIS has technical and field expertise regarding the 
management and research of wildlife facilitated diseases including WNV. 
We believe that the budget provides an appropriate utilization of that 
expertise at this time.
                                 ______
                                 

             Questions Submitted by Senator Byron L. Dorgan

                         plant science research
    Question. I am very concerned about the $53,192 million cut of 
``Congressionally-designated projects'' from the plant science ARS 
account. Of particular concern to me are the cuts for National Wheat 
and Barley Scab Initiative and the National Sclerotinia Initiative, 
which is of great importance to sunflowers and other commodities. These 
two programs are national initiatives conducted in various locations 
all over the country and cannot be deemed mere ``Congressional 
earmarks'' targeted toward beefing up the research budget of any 
particular site. I think it would be a real shame to eliminate these 
national initiatives now--particularly since the National Sclerotinia 
Initiative just got off the ground last year. This initiative has great 
promise--as demonstrated by the National Wheat and Barley Scab 
Initiatives' progress in developing scab resistant varieties like the 
spring wheat variety named Alsen. The new variety is named after the 
town of Alsen, located on route 66 in Northeastern North Dakota, an 
area, which was particularly hard hit by this disease. The discovery 
would not have been possible if it were not for the National 
Sclerotinia Initiative funding.
    Does the Administration recognize the benefits of these national 
research initiatives?
    Answer. Congress appropriated $3,000,000 in fiscal year 1999 for 
the National Wheat and Barley Scab Initiative and appropriated 
increases of $1,800,000 in fiscal year 2000 and $798,200 in fiscal year 
2001. The fiscal year 2003 President's proposed budget only affects the 
fiscal year 2001 increase of $798,200. There still is $4,800,000 in the 
fiscal year 2003 President's Budget for research aimed at combating 
this devastating wheat and barley disease through the National Wheat 
and Barley Scab Initiative. The fiscal year 2003 President's proposed 
budget does target the fiscal year 2002 National Sclerotinia Initiative 
appropriation due to higher priority needs in the fiscal year 2003 
budget.
    The Agency has about 2,000 research scientists working in 100+ 
locations across the nation. In recent years, scientific research (not 
just agricultural research) has moved away for work being done by a 
single scientist or a small cohesive group of scientists working in a 
single location. Now, discoveries at ARS are far more likely to come 
from multi-disciplinary research conducted at more than one location. 
In fact, one of the principal reasons ARS created National Programs 
during the mid-1990s was to aggregate the research projects that were 
doing closely related work into a structure that would expedite 
interaction between these locations and scientists. A second benefit of 
the new National Program structure has been the strengthening of 
communication between ARS scientists and managers and the various 
customers and stakeholders in each area. The 40 National Program 
Workshops, which were held during the startup phase, were very helpful 
in defining the research agendas for each program.
    When ARS is asked to address a new or re-emerging problem we assess 
many factors. First we ascertain scope and nature of the problem 
(location, crop(s)/commodity(ies) affected, nature of the problems, 
potential options, etc.). Then we assess the Agency's capabilities 
(where are the scientific skills needed to address the problem; what 
locations have the necessary equipment and facilities to support the 
work needed to address the problem; and what other factors such as 
climatic zones, soil type, are critical to the work). Sometimes these 
analyses produce predictable decisions. But in other cases, some or all 
of the work may be done at locations far from where the problem exists 
or the commodity grows.
    ARS believes that the development of its annual budget, which is 
submitted to Congress as part of the President's budget, is the 
agency's most comprehensive statement of how it can and should proceed 
with a comprehensive research plan for addressing the issues 
confronting American agriculture. These issues are identified by 
interactions with our customers and stakeholders, the Congress, and the 
Administration.
    Question. I am also concerned about this $53.192 M cut in ARS plant 
science research because it wastes the investments that we put into 
this research in fiscal year 2001 and fiscal year 2002 Agriculture 
Appropriations bill. Let me give you an example. I have been working 
with my colleagues and a number of national commodity groups for barley 
and wheat who joined together to increase the base funding for the 
Cereal Crops Unit at the Fargo ARS, and the Subcommittee has graciously 
met our request for the last 2 years.
    But the facility has found it nearly impossible to hire researchers 
in this area because the Administration keeps cutting out this funding 
in its budget request and no reasonable person would take a position 
only to have it eliminated a year later. This is a particularly 
frustrating situation for me and the commodity groups that have waited 
so long to augment presently underfunded national research in the area 
of Cereal Crops. I have heard that this same problem is happening at 
ARS facilities across the nation.
    How does the Administration justify wasting the investments we put 
in these areas of research last year by not being able to attract 
researchers to fill these research positions?
    Answer. The increases for the base funding of the ARS Cereal Crops 
Unit, Fargo, North Dakota, in fiscal year 2001 and fiscal year 2002 
have been used effectively to address the serious problems that 
threaten the economic viability of small grains and sunflower 
producers. Funding has been used to initiate and strengthen research to 
increase genetic resistance to scab, stem and leaf rust, septoria and 
other diseases of wheat and barley. Research has been expanded to 
identify and develop new cereal and sunflower germplasm and varieties 
with enhance grain quality and oil traits. Molecular markers and 
candidate genes linked to desired traits in small grains and sunflower 
are being identified. Much of this research is facilitating use of new 
genomic discoveries to develop new, effective breeding tools for wheat, 
barley, oat and sunflower improvement programs. New research scientists 
have been hired including a sunflower molecular geneticist and a cereal 
plant pathologist. The fiscal year 2001 and fiscal year 2002 
Congressional appropriations have also been used to replace and upgrade 
laboratory equipment. The fiscal year 2001 and fiscal year 2002 
increases for the Cereal Crop Unit have been targeted for cuts in 
fiscal year 2003 due to higher priority needs in the President's budget
                        foreign food assistance
    Question. This morning's Congressional Daily, is reporting that ag 
and humanitarian groups went to the White House yesterday to tell the 
President that the USDA's budget for international food aid would 
result in a reduction in U.S. food aid and embarrass the U.S. at the UN 
World Food Summit scheduled for next June.
    As a member of this Subcommittee, I share their concerns about the 
budget request. I am very concerned that the budget would end the 
annual purchases of $500 million to $700 million in commodities under 
CCC and Food for Progress. Although the budget asks for an increase in 
the Food for Peace budget of $350 million, this increase comes at the 
expense of other things this Subcommittee needs to fund through its 
302b allocation, such as ag research, farm loans and other important 
domestic, discretionary needs. I am one of the strongest supporters of 
international food aid, and I believe the numbers in this plan simply 
don't add up. I agree that this plan would bring down the total amount 
of food distributed through international aid.
    What rationale does the Administration have for ending the annual 
purchases of commodities under the CCC and Food for Progress?
    Answer. The budget and program proposals for U.S. foreign food 
assistance activities in 2003 reflect the results of the 
Administration's recent management review of those activities. The 
purpose of the review was to rationalize and reform their 
Administration and to strengthen their effectiveness. One of the topics 
examined by the review was the number of U.S. food aid programs and the 
number of agencies involved in administering them, raising the 
possibility of an overlap of functions and inefficiencies.
    Another consideration was the recognition that future food aid 
activities should be placed on a more solid foundation by reducing 
reliance on the year-to-year availability of surplus U.S. commodities. 
The lack of assurance on the availability of surpluses creates 
uncertainties among both recipient countries and distributing agencies.
    As a result of the review, the number of programs through which 
U.S. food assistance is provided will be reduced and program 
Administration will be streamlined. USDA will continue to carry out 
government-to-government programs, while AID will assume responsibility 
for all programs carried out in cooperation with private voluntary 
organizations (PVOs), cooperatives, and the World Food Program.
    In addition, there will be a reduced reliance on the year-to-year 
availability of surplus U.S. commodities in our food aid activities, 
which should provide greater assurance and stability to those 
activities. Therefore, Section 416(b) activities that rely on the 
purchase of surplus commodities will not be continued. However, the 
section 416(b) statutory authority will continue, which will allow for 
the donation of commodities that are acquired by CCC in the normal 
course of its domestic support operations.
    It is important to note that, while section 416(b) donations will 
be scaled back, the President's budget requests an increase of $335 
million for the Public Law 480 Title II program. Donation programs that 
in recent years have been carried out in conjunction with PVOs and the 
World Food Program under section 416(b) authority will now be conducted 
under Title II.
    Food for Progress programming carried out with CCC funding will not 
be continued in 2003, as those programs generally have been conducted 
in conjunction with PVOs and such programs will now be administered by 
AID. However, Title-I funded Food for Progress programs that 
traditionally have been carried out through government-to-government 
agreements will continue.
    Another benefit of these reforms is increased budget clarity. 
Reducing reliance on mandatory CCC funding for both section 416(b) and 
Food for Progress activities will make U.S. foreign food aid activities 
subject to the annual appropriations process. This will provide more 
transparency and scrutiny in the budget management process and improve 
oversight of these activities.
    Question. Do you agree with the assessment of PVOs that this plan 
would actually bring down the U.S. provision from 5 million tons to no 
more than 3.5 million tons?
    Answer. There will be some decrease in the overall tonnage level of 
U.S. food assistance in 2003, but the PVO estimate for 2003 programming 
is too low. Our estimate for 2003 programming exceeds 3.7 million 
metric tons.
    However, it is important to note that the Administration's reforms 
place an increased emphasis on direct feeding activities in our food 
aid programs, with a corresponding reduction in the level of sales--
monetization--of food aid commodities. Much of U.S. food aid in recent 
years has been provided to support non-feeding, economic development 
activities, carried out with funding raised through the sale of the 
commodities in local markets. The Administration proposes to scale back 
the level of monetization and to support economic development 
objectives through other means. In fact, the President's budget 
proposes a substantial increase in funding for U.S. development and 
humanitarian assistance.
    By placing greater emphasis on direct feeding in our food aid 
activities, we believe the United States will continue to provide a 
leadership role in meeting global food needs despite some reduction in 
the overall level commodity programming. In addition, the 
Administration has made clear that it is prepared to release 
commodities from the Bill Emerson Humanitarian Trust should a need for 
emergency food assistance arise. As a follow-up to the management 
review, the Administration will be reviewing the procedures for use of 
the Trust to ensure their flexibility and responsiveness. There are 
currently 2.5 million metric tons of wheat in the Trust, which is 
available for release should it be warranted. Its continued 
availability provides an important backstop to our efforts to meet 
world food needs.
                            broadband grants
    Question. I see that the $24 million for broadband grants in fiscal 
year 2002 has been cut back to $2 million. I think this is a shame 
because many rural areas have slow Internet service and need help 
achieving high-speed, broadband Internet access. It's highly unlikely 
that the private sector is willing to invest funds to bridge this 
digital divide.
    Don't you agree that high-speed broadband Internet access is 
crucial to any region's economic viability?
    Answer. With the passage of the Rural Electrification Loan 
Restructuring Act of l993, all loans made by the Rural Utilities 
Service's Telecommunication Program have been for facilities that will 
provide broadband services to rural America. Since that time, small 
rural commercial and cooperative telecommunications providers have 
borrowed more than $5 billion in Federal loan dollars at an interest 
rate equal to the cost of money to the U.S. Treasury for broadband 
infrastructure, much of which is installed and providing service today.
    In fiscal year 2001, Congress appropriated $100 million in loans 
and $2 million in grants for broadband infrastructure and local dial-up 
Internet as part of a pilot program. In fiscal year 2002, Congress 
appropriated $80 million in loans and $25 million in grants. The 
President's budget requests $2 million for grants and $79.5 million 
loans. An important feature of the pilot program was an increase in the 
population level of the communities that were eligible for funding. In 
the traditional Rural Utilities Service Telecommunications Program, 
Rural Utilities Service may only loan to communities with 5,000 
inhabitants or less. Under the broadband pilot program, Rural Utilities 
Service could provide financing to communities of up to 20,000. 
Response to the pilot loan program was enormous. By the close of fiscal 
year 2002, therefore, Rural Utilities Service will have financed $180 
million in broadband infrastructure loans from fiscal year 2001 and 
2002 funds through this pilot program.
    While the task of wiring rural America for broadband service is far 
from complete, the response to both our traditional telecommunications 
loan programs and the broadband loan programs have shown that small, 
rural telecommunications systems can provide rural America with 
broadband and advanced telecommunications services capable of providing 
high-speed Internet connections as well as distance learning and 
telemedicine services with Federally-financed loans. Only the smallest 
of communities have demonstrated the need for grant funds to accomplish 
this task. Therefore, with adequate funding of the Rural Utilities 
Service loan programs and $2 million in grant assistance, we believe 
that Rural Utilities Service can continue to be the catalyst for 
broadband deployment in rural America.
                             ez/ec program
    Question. I notice that funding for rural Empowerment Zones has 
been eliminated this year. I am disappointed to see this because the 
EZ/EC program provides the tools needed by these distressed areas to 
create new businesses, meaningful jobs, decent housing, and safe 
neighborhoods. The Zones were designated based on the quality of their 
strategic plans to address these socio-economic challenges. They are 
held accountable for various performance measures that assess progress 
of both individual projects and overall effort. They also leverage 
notable support from private, public and non-profit partners.
    Last year, I wholeheartedly supported the $15 million funding level 
provided by this Subcommittee and recommended in the Administration's 
budget. Unfortunately, your budget for this year did not continue to 
support the program at the level needed to meet the annual Federal 
funding commitment made to EZ/EC during the competitive designation 
process.
    Would you support the Subcommittee in its efforts to provide this 
funding in order to fill our Federal funding commitment to this 
program?
    Answer. Only 2.6 percent of total funding received to implement 
strategic plans for the Round II Empowerment Zones/Enterprise 
Communities (EZ/EC) has come from the EZ/EC grants. Approximately half 
of the $60 million that has been appropriated so far is still available 
to EZ/ECs due to judicious management and pending final program 
regulations, which will be completed in March 2002. Available funding 
is sufficient to meet the projected needs of EZ/ECs.
                    farm service agency--farm loans
    Question. This year, the proposed total FSA loan program level is 
$3.8 billion for direct and guaranteed farm loans, which are down from 
$4.2 billion in fiscal year 2002.
    The level of funding for these programs concerns me. I have heard 
complaints from my district offices about these loan levels. Every 
year, farmers whose applications for FSA Direct Farm Ownership loans 
have been approved are turned away because the money appropriated in 
October has run out by the first of the year. The ND FSA office says 
money for farm ownership loans has run out already, and headquarters 
confirms that there is no more until next year. The fiscal year 2003 
proposed level is of particular concern because increased subsidy costs 
in 2003 have reduced the amount of program that can be supported with 
the same amount of budget authority.
    In January, North Dakota FSA already had more than a $1 million 
shortfall for direct ownership loans for 2002 and about $5 million less 
than they need for direct beginning farmer and guaranteed non-beginning 
farmer loans. Farmers who come to FSA are told that they must wait 
until at least October to get the money they have already qualified to 
receive. Does the Administration recognize the problem? What kind of 
funding level would be needed in fiscal year 2003 to ensure that FSA 
does not have to start a waiting list for farmers who want a direct 
ownership loan so early in the year?
    Answer. We are always working to assist eligible family farmers 
with FSA direct loan assistance. As you noted, increased subsidy costs 
in 2003 have made the direct loan programs more expensive to operate. 
The amount of loans that could be supported under the direct farm 
ownership and operating loan programs was reduced based on estimated 
demand.
    Guaranteed loans are a more cost-effective method of assistance. By 
maximizing the use of guaranteed loans, the limited amounts of direct 
loan funds are available to applicants who truly have nowhere else to 
turn. Administrative efforts undertaken in the guaranteed programs to 
reduce the paperwork burden on lenders and expedite the approval 
process have increased the amount of loan activity in fiscal year 2002 
compared to the previous year. This increase is most dramatic in the 
guaranteed farm ownership loan program where use has increased by 41 
percent compared to a year ago. We have also been successful in 
increasing the use of guaranteed loans to reach beginning farmers. So 
far in fiscal year 2002, guaranteed farm ownership assistance to 
beginning farmers has increased 40 percent over last year.
    This increased use of guaranteed loan programs would assist in 
fulfilling the demand for FSA loan assistance. It is critical to use 
guaranteed loans to the maximum extent possible to preserve direct 
funds for applicants who have no alternative to direct financing. The 
surge in use of the guaranteed programs by applicants previously 
seeking direct loans will also enhance the ability of non-beginning 
farmers to obtain direct loan assistance.
    Although direct loans are essential for those that need them, many 
farmers are able to use loan guarantees to stay, or start, in business. 
Diverting most, or all, of the guaranteed loan resources to the direct 
loan programs would only reduce the total number of people that FSA can 
help. We believe that the approach set forth in the President's budget 
makes the best use of the available resources.
                          rural telephone bank
    Question. The Rural Telephone Bank program has been a great tool 
for meeting telecommunication needs in rural areas but the 
Administration has eliminated the $175 million for Rural Telephone Bank 
loans again this year. Last year, the Administration requested similar 
action and this Subcommittee restored this funding upon the 
recommendation of those in rural America who thought the time was not 
right to eliminate this program. I am curious about the lack of support 
for this funding from the Administration.
    Does your proposal to eliminate the funding for new Rural Telephone 
Bank loans have the support of telephone cooperatives?
    Answer. Under statutory authority mandated by the Rural 
Electrification Act of 1936, the Rural Telephone Bank began 
privatization in 1996 by redeeming Class A stock currently owned by the 
Federal Government. Language that has appeared in each appropriations 
bill since 1996 currently restricts redemption of Class A stock to no 
more than 5 percent of the outstanding balance. Under this restriction, 
the Bank cannot privatize for more than 20 years. The six elected 
members of the Rural Telephone Bank board, 3 representing cooperative 
telecommunications providers and 3 representing commercial 
telecommunications providers, have all publicly expressed their desire 
to privatize the bank in a much shorter time frame. Toward this end, 
the Rural Telephone Bank, with funding provided by Rural Development, 
has commissioned a study to develop a plan that would provide a 
seamless transition to a privatized institution. Since the Rural 
Telephone Bank has sufficient cash to retire the remaining Federal 
equity contribution--Class A stock--the budget proposes no new Federal 
lending authority to provide the impetus for a more timely 
privatization of the Rural Telephone Bank. Privatization will provide 
the bank greater flexibility than available as a government entity. 
This flexibility will increase the banks ability to meet the changing 
telecommunication needs of rural America.
                         local television loans
    Question. The Administration has also cut the $20 million in 
funding for Local Television Loans that the Subcommittee included in 
last year's appropriations bill, but I don't see an explanation for 
this change in the budget summary. Can you explain why the 
Administration didn't request funding for these loans in its fiscal 
year 2003 budget submission?
    Answer. Access to local as well as global communications services 
is critical for the health, safety, and economic development of rural 
communities. We believe that a satellite communications system is one 
of the essential components of meeting rural citizens' information and 
multi-media services needs and Rural Utilities Service wants to play an 
integral role in this endeavor. From a philosophical standpoint, the 
need for rural communities' access to local weather and news is not a 
debatable issue. Pragmatically, however, the implementation of the Act 
has been cause for considerable debate within the industry, a debate 
that has only intensified with the recently proposed merger of DirectTV 
and Echostar. The most recent merger proposal includes provisions to 
charge uniform rates nationwide for monthly charges and installation 
charges and to broadcast local television channels in all 210 
Designated Market Areas, including full compliance with Federal must-
carry requirements. The primary players, the cable television industry 
as well as current and prospective satellite providers, are all 
rethinking their future financial feasibility in light of the proposed 
merger. We are monitoring developments in the proposed merger to 
determine an appropriate strategy before proposing additional funding 
for local television loans.
                    section 515 multi-family housing
    Question. The budget does not include funding for direct loans or 
any new multi-family housing projects pending completion of a review of 
this program. Can you give the Subcommittee a list of planned projects 
that this funding cut will affect?
    Answer. Because the Section 515 direct loan program uses a national 
Notice of Funds Availability to accept, evaluate, score and rank for 
selection project proposals, specific projects cannot be identified at 
this time for the current fiscal.
                               farm bill
    Question. I am pleased that the Administration made good on its 
promise to include the farm bill allocation of $73.5 billion over 10 
years. I am concerned, however, that other proposals will not meet the 
mandates of the farm bill when enacted. What amendments to your budget 
request do you anticipate making after the enactment of the farm bill 
later this year?
    Answer. It is too early in the process to know whether any 
adjustments would be needed to meet any mandates of the farm bill. We 
will continue to assess the budget implications as the bill is 
finalized.
    Question. Over the last several months, your Administration has 
repeatedly gone on record against the largest farms in the U.S. 
receiving the bulk of the farm program payments. These statements 
represent a position that more or less castigates present law, condemns 
the House bill, and then the Senate bill..all for the same reason. I 
know the Administration has other concerns, but this payment limit 
objection is one of the common complaints your Administration has 
consistently raised.
    Many in the Senate apparently took heed of these objections, 
because in a historic bipartisan vote, they defeated a motion to table 
the payment limitation amendment by a margin of 31 to 66. Yet, despite 
this margin--despite all of your Administration's statements condemning 
the large payments of the largest farms--a position on this amendment 
has not been forthcoming from the Administration.
    This debate has clearly shown that our current payment limits are a 
charade, due to ``blossoming triple entities,'' the use of commodity 
certificates to skirt LDP limits, and the proliferation of ``ghost 
farmers.''
    Where does the Administration stand on Payment Limitations?
    The Administration does not list payment limitations in its 5 
priorities for the farm bill. Does this absence mean that the 
Administration would not support a bill that emerges from conference 
with meaningful payment limitations--i.e. language that closes all the 
loopholes? Would the President feel compelled to veto such a bill?
    Answer. As you note, we have not identified the payment limitation 
aspects as one of the most fundamental issues we are concerned with 
from a national perspective. We believe the payment limit issue should 
be resolved by the Congress.
                                 ______
                                 

            Questions Submitted by Senator Richard J. Durbin

                            renewable fuels
    Question. What is the USDA going to do to promote the use and 
production of renewable fuels?
    Answer. The Department has a number of activities that expand use 
of biobased products and bioenergy, including programs aimed at 
increasing the use of biobased products and biofuels. For example, I 
recently issued a Memorandum to agencies directing them to increase use 
of biodiesel and ethanol in USDA fleet vehicles where practicable and 
reasonable in cost and to purchase and lease alternative fuel vehicles 
in geographic areas that offer alternative fueling. I will include for 
the record additional details on the Department's efforts in this area 
prepared by the agencies.
    [The Information follows:]

    The Department supports programs that encourage expanded use of 
biobased products, both in-house and throughout Government; conducts 
research to improve efficiency and economics of biobased products and 
fuels production; provides incentives to increase purchases of domestic 
ag commodities used for increased production of alternative fuels; and, 
provides information to those seeking to use biobased products. Some 
specific examples of how the Department is responding to this effort 
are listed below.
    Under Executive Order 13101 on Greening the Government Through 
Waste Prevention, Recycling, and Federal Acquisition, USDA is charged 
with developing and publishing a list of biobased products. Currently, 
CSREES, ARS and the Office of Energy Policy and New Uses are preparing 
a Federal Register notice to solicit public comment on criteria, such 
as minimum biobased content, that products must meet to be considered 
for the biobased products list. The list is to be used by agencies in 
modifying their procurement programs to give increased consideration of 
biobased products. Congress provided funding for this activity to the 
Department through appropriations for the Agricultural Research 
Service, and these funds are maintained in 2003 at the 2002 level of 
$0.5 million.
    The Department is actively involved in cooperative efforts with the 
Department of Energy, the Environmental Protection Agency, and the 
Office of the Federal Environmental Executive to foster increased use 
of biobased products and bioenergy. For example, USDA and DOE are 
cooperating to demonstrate the use of methane produced from dairy 
animal manure for electricity and heat production. USDA, DOE, the 
Forest Service, and the Bureau of Land Management are involved in a 
feasibility study on biomass feedstock for gasification, the results of 
which will be useful in determining USDA Rural Utilities Service loan 
guarantee amounts and economic benefits of gasification technologies.
    The Commodity Credit Corporation (CCC) is supporting the second 
year of a 2-year program of bioenergy incentive payments by providing 
up to $150 million in 2002 in bioenergy incentive payments to encourage 
increased production of fuel grade ethanol and biodiesel from grain.
    In support of the National Energy Policy goals for Building the 
Rural Infrastructure for Energy Sources, the Rural Development mission 
area supports several programs aimed at renewable energy. Funds may be 
made available for renewable and alternative energy projects under the 
Business and Industry Loan Program. The 2003 budget for RD proposes an 
increase of $2 million for cooperative research agreements to study 
emerging cooperative structures.
    A general focus of research in this area is to reduce costs for 
conversion of feedstocks and other phases of production to reduce 
overall production costs for energy/fuels production from agricultural 
biomass. Reducing production costs increases the competitiveness of the 
products compared to traditional sources. An increase of $8.8 million 
above the 2001 level is included in the 2002 Act for Agricultural 
Research Service (ARS) research on bioenergy. Building upon the 2002 
initiative, a 2003 budget increase of $3 million is proposed to improve 
quality and quantity of ag biomass feedstock. Increased funding for the 
National Research Initiative Competitive Grants Program will focus on 
conversion of biomass and co-product development, with emphasis on more 
efficient conversion of cellulosic biomass and starch to ethanol. Added 
emphasis will also be placed on new energy crop development and 
biodiesel work will be continued. There is an estimated increase of $7 
million for the NRI for all research related to bioproducts, about $2 
million of which is projected to be supportive of bioenergy research. 
An increase of $5 million is proposed for the Forest Service bioenergy 
research program to develop economic technologies for converting woody 
materials into energy; develop energy efficient processing and 
production systems for woody fiber and solid wood products; develop and 
demonstrate systems for producing energy from small diameter and low 
valued source material; and develop and demonstrate new woody cropping 
systems for energy feedstock production.
    Executive Order 13123, Greening the Government Through Efficient 
Energy Management establishes energy management and emissions reduction 
goals for the Government and requires agencies to promote energy 
efficiency, water conservation, use of renewable energy products and to 
help foster markets for emerging technologies. ARS currently estimates 
continued spending of about $0.5 million to support energy efficiency 
projects at the agency locations based on energy improvement 
implementation plans.

    Question. How can Congress work in concert with the USDA to promote 
incentives for the use and production of ethanol and biodiesel?
    Answer. The Department has worked with Congress as it works to 
complete a 2002 Farm Bill. Since Farm Bill legislation provides many of 
the Department's authorities for carrying out our mission, I view work 
on this piece of legislation as an important part of a cooperative 
effort to help ensure the best use of USDA resources to address this 
issue. We are prepared to assist Congress by providing research, data, 
analysis, or statistics for new legislation. The Administration 
supports the renewable fuels standard proposed in the Senate version of 
the Energy Bill that would enhance the use of ethanol and biodiesel.
    Question. How can a renewable fuels standard benefit all farmers?
    Answer. Increasing the use of biofuels will help stabilize farm 
income and reduce farm subsidies, decrease U.S. dependence on imported 
oil, increase demand and prices for corn and other agricultural 
biomass, create jobs, help protect the natural environment, and 
generate new rural economic activity. Many studies have been released 
that use varying assumptions and sources of data, resulting in a wide 
range of estimates for the net energy value of corn-based ethanol. A 
recent study by the USDA Office of Energy Policy and New Uses reported 
that energy in ethanol is 1.34 times the energy needed for its 
production.
    Question. Would the Department support extension of the Bioenergy 
Program in fiscal year 2003?
    Answer. The Administration's proposed budget supports the original 
commitment to fund the program for 2 years, fiscal year 2001 and fiscal 
year 2002. As part of the 2002 Farm Bill, the program is extended.
    Question. Did the Department provide an extension to the program in 
its budget submission to OMB? If so, can you explain why the provision 
was removed prior to passback?
    Answer. The Administration's proposed budget supports the original 
commitment to fund the program for 2 years, fiscal year 2001 and fiscal 
year 2002. While the program was designed to help increase production 
capacity of renewable fuels, the program was also stimulated by rising 
stocks of grains and oilseeds and low prices. Corn stocks in particular 
are now declining, and corn prices rising. The bioenergy incentive 
payments were offered to provide a temporary, added incentive to boost 
the expansion of the biofuels industry. Industry will respond to market 
demands, including changes in commodity and fuel prices, commodity 
surpluses, and demand for alternative, renewable fuels.
                          bse/mad cow disease
    Question. What actions are you taking to ensure the protection of 
the human food supply from BSE? What actions need to be implemented?
    Answer. The Department is pursuing a variety of activities aimed at 
protecting the U.S. food supply from Bovine Spongiform Encephalopathy 
(BSE). On November 30, 2001 USDA released a landmark study by Harvard 
University that shows the risk of BSE occurring in the United States is 
extremely low. The report showed that early protection systems put into 
place by the USDA and Department of Health and Human Services (HHS) 
have been largely responsible for keeping BSE out of the U.S. and would 
prevent it from spreading if it ever did enter the country. Even so, 
officials outlined a series of actions to be taken that would continue 
strengthening programs to reduce that risk even further.
    I will provide for the record a press release that identifies all 
the actions we plan to take:
    [The information follows:]
                             [news release]
    Harvard Study Shows Very Low Risk of BSE in the United States--
   Government Continues to Bolster Prevention Programs In Effort to 
   Continue Providing Important Safeguards to Protect Consumers and 
                              Agriculture
    Washington, Nov. 30, 2001--The U.S. Department of Agriculture today 
released a landmark study by Harvard University that shows the risk of 
Bovine Spongiform Encephalopathy (BSE) occurring in the United States 
is extremely low. The report showed that early protection systems put 
into place by the USDA and Department of Health and Human Services 
(HHS) have been largely responsible for keeping BSE out of the U.S. and 
would prevent it from spreading if it ever did enter the country. Even 
so, officials outlined a series of actions to be taken that would 
continue strengthening programs to reduce that risk even further.
    The risk assessment was commissioned by USDA and conducted by the 
Harvard Center for Risk Analysis. It evaluates the ways BSE could 
spread if it were to ever enter the United States. The report's purpose 
is to give agencies a scientific analysis to evaluate preventative 
measures already in place and identify additional actions that should 
be taken to minimize the risk of BSE.
    ``The study released today clearly shows that the years of early 
actions taken by the Federal Government to safeguard consumers have 
helped keep BSE from entering the United States,'' said Agriculture 
Secretary Ann M. Veneman. ``Even if BSE were to ever be introduced, it 
would be contained according to the study. However, we cannot let down 
our guard or reduce our vigilance. We must continue to strengthen these 
critical programs and today we are announcing a series of actions to 
bolster our protection systems.''
    ``Based on 3 years of thorough study, we are firmly confident that 
BSE will not become an animal or public health problem in America, `` 
said Dr. George Gray, deputy director of the Harvard Center for Risk 
Analysis and director of the project.
    In response to the report, Veneman announced a series of actions 
the USDA would take, in cooperation with HHS, to strengthen its BSE 
prevention programs and maintain the government's vigilance against the 
disease.
    First, USDA will have the risk assessment peer reviewed by a team 
of outside experts to ensure its scientific integrity.
    Second, the USDA will more than double the number of BSE tests it 
will conduct this fiscal year, with over 12,500 cattle samples targeted 
in 2002--up from 5,000 during 2001.
    Third, USDA will publish a policy options paper outlining 
additional regulatory actions that may be taken to reduce the potential 
risk of exposure and ensure potential infectious materials remain out 
of the U.S food supply. To ensure its decisions are science-based, 
options will be tested using the computer model developed through the 
risk assessment to determine the potential impact they would have on 
animal and public health.
    The options to be considered will include: prohibiting the use of 
brain and spinal cord from specified categories of animals in human 
food; prohibiting the use of central nervous system tissue in boneless 
beef products, including meat from advanced meat recovery (AMR) 
systems; and prohibiting the use of vertebral column from certain 
categories of cattle, including downed animals, in the production of 
meat from advanced meat recovery systems. USDA will invite public 
comment on the options and then proceed with appropriate regulatory 
actions.
    Fourth, USDA will issue a proposed rule to prohibit the use of 
certain stunning devices used to immobilize cattle during slaughter.
    Fifth, USDA will publish an Advance Notice of Proposed Rulemaking 
(ANPR) to consider additional regulatory options for the disposal of 
dead stock on farms and ranches. Such cattle are considered an 
important potential pathway for the spread of BSE in the animal chain.
    ``We found that even if BSE were ever introduced, it would not 
become established,'' said Gray. ``With the government programs already 
in place, even accounting for imperfect compliance, the disease in the 
cattle herd would quickly die out, and the potential for people to be 
exposed to infected cattle parts that could transmit the disease is 
very low.''
    BSE has never been detected in U.S. cattle, nor has there been a 
case of the human form of the disease, variant Creutzfeldt-Jakob 
Disease (vCJD), detected in the United States. Since 1989, USDA has 
banned the import of live ruminants, such as cattle, sheep and goats, 
and most ruminant products from the United Kingdom and other countries 
having BSE. The ban was extended to Europe in 1997. To stop the way the 
disease is thought to spread, HHS prohibited the use of most mammalian 
protein in the manufacture of animal feed intended for cows and other 
ruminants. Should a case of BSE ever be detected in this country, an 
emergency response plan has been developed to immediately control 
suspect animals and prevent them from entering the food supply.
    This summer, HHS Secretary Tommy Thompson announced an action plan 
outlining new steps to improve scientific understanding of BSE that 
incorporates a comprehensive approach to further strengthen 
surveillance, increase research resources and expand existing 
inspection efforts.
    BSE is a chronic, degenerative neurological disorder of cattle that 
belongs to a family of diseases known as transmissible spongiform 
encephalopathies. Also included in that family of illnesses is vCJD, 
which is believed to be caused by eating neural tissue, such as brain 
and spinal cord, from BSE-affected cattle.
    A complete copy of the Harvard Report can be obtained from USDA's 
official website at http://www.usda.gov/. For more information about 
BSE and the many efforts being taken to prevent its entry and spread 
into the United States, also visit http://www.usda.gov or http://
www.hhs.gov/.

    Question. How quickly can you act, now that the multi-year Harvard 
Risk Assessment is complete?
    Answer. USDA has already begun to act upon the findings of the 
Harvard BSE risk assessment. FSIS published a paper for comment in the 
January 17, 2002, Federal Register outlining additional regulatory 
actions it may take to further reduce the potential risk of BSE and to 
ensure that potentially infectious materials do not enter the U.S. food 
supply. A proposed rule is currently being drafted to prohibit the use 
of certain stunning devices used to immobilize cattle during slaughter. 
Additionally, an advance notice of proposed rulemaking is being drafted 
that will consider additional regulatory options for the disposal of 
dead stock from farms and ranches.
    Question. What methods of testing exist to detect BSE in cattle? 
How many cattle are currently being tested? Is this number adequate? 
Are you testing cattle that die on farms? If so, at what rate?
    Answer. I have asked the Animal and Plant Health Inspection Service 
to provide that information for the record.
    [The information follows:]

    The United States has actively monitored for BSE since 1990. 
Several Federal Agencies have been involved in this effort including 
the Animal and Plant Health Inspection Service (APHIS) and the Food 
Safety and Inspection Service (FSIS). The US surveillance effort 
focuses on testing high-risk cattle such as animals exhibiting signs of 
neurologic disease; animals condemned at slaughter for neurologic 
reasons and nonambulatory animals, commonly referred to as ``downer 
cattle''. Recently, we began testing cattle which have died on the 
farm. BSE can only be detected by testing brain material. Currently we 
use both histology and immunohistochemistry as our primary testing 
methodologies. Histological examination is the microscopic evaluation 
of brain tissue to look for the degenerative changes. 
Immunohistochemistry is used to detect the abnormal form of prion 
protein, which is a marker for the disease.
    As of March 31, 2002, APHIS, National Veterinary Services 
Laboratories (NVSL) has tested 25,487 brain samples for BSE. Of the 
25,487 samples, NVSL tested 8,583 in fiscal year 2002. We expect to 
test at least 4,000 additional samples in fiscal year 2002. Of the 
samples already tested this fiscal year, slightly more than 1,000 
samples have been from cattle which have died on the farm. We have 
steadily increased the level of surveillance over the last 5 years from 
3,000 samples in fiscal year 1997 to over 12,500 samples in fiscal year 
2002, an increase of over 300 percent. We feel this increased level of 
surveillance is needed to demonstrate our BSE free status.
                       single food safety agency
    Question. Following September 11, Secretary Thompson said that food 
safety should be one of our Nation's greatest concerns. Do you agree 
with his statement?
    Answer. Ensuring the safety of the food supply is one of the 
Nation's greatest concerns and has been one of USDA's top priorities 
for almost 100 years. Our food safety system was functioning 
effectively prior to September 11 and is continuing to function 
effectively.
    Question. What risks do you feel are facing our Nation's food 
supply?
    Answer. Our food safety programs are designed to reduce all types 
of hazards in the food supply, whether they are chemical, physical, or 
microbiological. One primary function is to identify and remove 
diseased and unwholesome animals. In recent years, we have emphasized 
the reduction of and control of pathogens that contribute to an 
estimated 76 million cases of foodborne illness reported by the Centers 
for Disease Control and Prevention. FSIS also continues to operate a 
strong residue control program to address chemical contamination. These 
programs have been very successful and are recognized worldwide as the 
most appropriate means for controlling food contamination, whether 
unintentional or intentional.
    Question. Do you think our current food safety system is able to 
adequately protect consumers?
    Answer. The United States has one of the safest food supplies in 
world. Even so, this Administration continues to strengthen USDA's food 
safety programs to ensure safe and wholesome meat, poultry and egg 
products. For two consecutive years, we have proposed record-level 
spending for food safety programs and strengthened our inspection 
systems to ensure regulatory compliance and safety. We will continue to 
examine prudent and sound measures that will further strengthen USDA's 
food safety programs. We are serious about protecting public health and 
we must continue to incorporate proven scientific principles throughout 
the food safety system to enhance our food safety infrastructure.
    Question. What steps do you think are needed to create a food 
safety system that will provide the best protection to consumers?
    Answer. The Administration believes that continued investment in 
the food safety infrastructure is necessary to ensure that the 
appropriate personnel, tools, and information are available to address 
the emerging food safety hazards that threaten public health and the 
viability of our agricultural system. Therefore, the 2003 budget 
includes an increase of $146 million to strengthen training and 
technology to enhance homeland security and protect agriculture and the 
food supply. Highlights of these increases include: (A) a $19 million 
increase in the AQI program for improved point-of-entry inspection 
programs; (B) a $5 million increase to strengthen the capability of 
APHIS to assess and monitor outbreaks of diseases in foreign countries 
that have the potential to spread to this country; (C) a $48 million 
increase for plant and animal health monitoring; (D) a $12 million 
increase for other APHIS programs to expand diagnostic, response, 
management, and other scientific and technical services; (E) a $28 
million increase to support FSIS food safety activities; and (F) a $34 
million to support research aimed at protecting the Nation's 
agriculture and food system.
    Question. Would you support efforts to modernize food safety 
statutes?
    Answer. I would be happy to work with Congress on any efforts to 
ensure that the U.S. has the safest food supply possible.
    Question. What should be done to create a single voice on food 
safety in the U.S., as recommended by the National Academy of Sciences?
    Answer. The Administration's report, Food and Agricultural Policy: 
Taking Stock for the New Century indicates that where possible, Federal 
policies and programs must be coordinated and integrated to reduce 
duplication of effort, regulatory burdens, and program costs. This is 
especially important where several agencies share regulatory 
responsibilities or have a role in research, development, and 
implementation of food safety policies. USDA and FDA have had a 
Memorandum of Understanding in place since 1999 to exchange information 
on an on-going basis about establishments that fall under both of our 
jurisdictions. As a result, both agencies have worked together on 
several cases in which we were jointly able to ensure the safety of 
specific food products. USDA is committed to engaging in substantive 
discussions with FDA and other agencies with food safety 
responsibilities about other areas where cooperation can and should be 
utilized.
                     national school lunch program
    Question. Why has there been an increase in foodborne illness 
outbreaks associated with the Federal school lunch program?
    Answer. Currently, Centers for Disease Control and Prevention (CDC) 
relies on States to voluntarily report outbreak information. A change 
in outbreak reporting forms and policies in 1998, showed an increase in 
the number of foodborne illness outbreaks reported. CDC does not 
consider this to be an absolute increase in the number of outbreaks 
that have occurred but rather a response to the change in the reporting 
system. Therefore, we have no reason to believe that there has been a 
recent upturn in foodborne illness events in schools.
    Question. What oversight authorities are needed by USDA to 
effectively regulate the school lunch program?
    Answer. We believe that we do not need any additional oversight 
authority in the area of food safety in the National School Lunch 
Program at this time. This is based on the longstanding practice that 
such oversight is the responsibility of State and local officials. 
These entities, working with the Centers for Disease Control, have 
systems in place intended to monitor the safety and sanitation 
procedures in food service facilities.
    In this regard, however, the Department did propose legislation 
that would require local schools to obtain health inspections at least 
twice during the school year during the last Child Nutrition Program 
reauthorization. This proposal was based on an understanding that, in 
some areas, health inspections of school food service facilities were 
not required. The proposal, as finally enacted in the William F. 
Goodling Child Nutrition Reauthorization Act of 1998, now requires 
schools to have a health inspection at least once a year where no local 
regulations apply.
    Question. What efforts are made by USDA to coordinate with State 
and local officials in regulating the school lunch program?
    Answer. Responsibility for food safety in the operation of the 
National School Lunch Program is primarily the responsibility of local 
schools and State and local health departments charged with this 
responsibility. The Department's involvement in this area is limited to 
the purchase and delivery, as well as inspection, of commodities 
purchased for the Program. Commodities are only purchased from 
manufacturers who operate under the food safety inspections of the 
Department's Food Safety and Inspection Service, the Food and Drug 
Administration and the Department of Commerce.
    In our effort to support State and local efforts above, the 
Department has a significant effort underway to provide school food 
service personnel with training and technical materials directed 
towards providing information on all aspects of food safety. These 
materials emphasize the importance of personal hygiene, preparing, 
holding and storing foods at proper temperatures and preventing the 
spread of bacteria through cross-contamination.
                        foreign food assistance
    Question. Would you please confirm whether the Administration's 
2003 budget request would increase or reduce total outlays for 
international food assistance? What would you consider an appropriate 
trend in spending for such programs?
    Answer. The 2003 budget request does include a reduction in funding 
for international food assistance activities. In part, this reflects 
the Administration's decision to provide greater stability and 
assurance to our food aid efforts by reducing their reliance on the 
year-to-year availability of surplus U.S. commodities. Hence, section 
416(b) activities that rely on the purchase of surplus commodities will 
not be continued. However, this will be offset by the requested $335 
million increase in funding for Public Law 480 Title II.
    Although the overall level of funding is reduced, it is important 
to note that the Administration's food aid reforms place an increased 
emphasis on direct feeding activities in our programs with a 
corresponding reduction in the level of monetization, or sales, of food 
aid commodities. Much of U.S. food aid in recent years has been 
provided to support non-feeding, economic development activities 
carried out with funding raised through the sale of the commodities in 
local markets. The Administration proposes to scale back the level of 
monetization and to support economic development objectives through 
other means. So, while the overall level of food aid programming may 
decline, the increased emphasis on direct feeding programs should allow 
us to continue our leadership role in responding to world food aid 
needs.
    Finally, the Administration has stated that it is prepared to 
release commodities from the Bill Emerson Humanitarian Trust should 
unanticipated, emergency food aid needs arise during 2003. As a follow-
up to the management review of foreign food aid activities, the 
Administration will be reviewing the procedures for use of the Trust to 
ensure their flexibility and responsiveness. There are 2.5 million 
metric tons of wheat in the Trust at present, which could be released 
should circumstances warrant. The availability of the Trust also will 
help to ensure we can respond to global food needs.
                  global food for education initiative
    Question. Under the consolidation of food aid programs, who would 
have responsibility for the Global Food for Education Initiative? What 
is the Administration's justification for omitting funding for GFEI in 
fiscal year 2003, given that there has not yet been any assessment of 
the pilot program's impact?
    Answer. No decision has been made on which agency would be 
responsible for administering GFEI, should the initiative be continued 
beyond the pilot program currently being implemented by USDA. No 
funding for GFEI was included in the 2003 budget because the 
Administration believes the results of the pilot program should be 
assessed before a decision is made on whether the initiative should be 
continued on a more permanent basis. However, we will be extending many 
of the GFEI country projects currently underway by using resources that 
remain from the initial $300 million program level.
          fiscal year 2002 agriculture appropriations projects
    Question. Madam Secretary, I would like to address a couple of 
matters lingering out there from last year. First, the fiscal year 2002 
Senate Report (107-41) included language under the Natural Resources 
Conservation Service's (NRCS) Watershed and Flood Prevention Operations 
that provides funding for a number of Illinois watershed projects. The 
second matter is, the Senate report included $300,000 for the 
University of Illinois and the State of Illinois for research, 
educational initiatives, and West Nile Virus disease surveillance. The 
conference report included Report Language under APHIS. To this date, 
these issues remain unresolved. Madam Secretary what does USDA intend 
to do about these projects? Could you tell me what the Department is 
waiting for?
    Answer. The fiscal year 2002 Appropriations Act provided $8.6 
million for assistance for the Embarras River Basin, Lake County 
Watershed, and DuPage County. NRCS is currently working with State and 
local officials to determine funding needs, potential projects, and 
activities, and appropriate authorities to spend the funds. We 
anticipate that the funds will be obligated by the end of the fiscal 
year, and disbursed during fiscal year 2003.
    With regards to the West Nile Virus (WNV) initiative, based on an 
fiscal year 2002 congressional directive, APHIS, Wildlife Services will 
work in the State of Illinois to enhance WNV surveillance efforts in 
wildlife through collection, sampling and testing of birds to 
complement and supplement ongoing WNV research and management 
activities associated with State Agencies and the University of 
Illinois.
                           food stamp program
    Question. Will the department weigh in with the House conferees on 
the farm bill and urge them to adopt the Senate language restoring food 
stamp eligibility for low-income legal immigrants who have lived in 
this country for at least 5 years?
    Answer. Department officials and legislative liaison personnel are 
in touch with the conferees of both houses and are working to advocate 
the provisions of the President's budget proposal.
                       wic shortfalls on funding
    Question. What information does the Department have concerning 
potential shortfalls in State WIC funds for fiscal year 2002?
    Answer. WIC State agencies were surveyed in February regarding 
potential shortfalls prior to the allocation of the $39 million 
supplemental appropriation. At that time, they reported a $78.4 million 
shortfall of food funds. The supplemental appropriation provided State 
agencies with approximately $28.5 million in food funds that helped 
reduce the estimated funding shortfall. The remaining $10.5 million was 
allocated for nutrition services and administration funding.
    In preparation for the upcoming May reallocation of prior year 
unspent funds, we are again surveying WIC State agencies. They have 
been asked to provide us with an estimated shortfall of food funds for 
fiscal year 2002 and a justification for requesting additional funds. 
We are expecting the survey forms back by early May 2002.
    Clerk's Note: On March 21, 2002, the Administration submitted an 
emergency supplemental proposal to Congress. This proposal included $75 
million for the WIC Program.
    Question. Are any States taking action to cope with this situation 
(for example, by restricting access for certain categories of eligible 
participants)?
    Answer. Several local agencies in several States have implemented 
caseload management actions. I will ask the Food and Nutrition Service 
to provide additional information for the record.
    [The information follows:]

    The following provides the current status of caseload management 
strategies:
    Restricting access.--Arizona and Michigan have established waiting 
lists for individuals in the lower nutritional risk priorities. 
Michigan currently has four local agencies with waiting lists. One of 
the local agencies has approximately 700 postpartum women and 4-year 
old children on a waiting list. Additionally, some Oregon and 
Washington local agencies are restricting access to lower priorities.
    Potential restrictions.--Many State agencies, including California, 
are predicting the need to restrict access unless additional funding is 
available. Other State agencies are considering making changes to the 
food packages to help reduce food costs (i.e., lowest prices juice, 
store brands, etc.).

    Question. How does the department plan to monitor on an ongoing 
basis whether funds are sufficient to maintain WIC participation across 
the States?
    Answer. The Food and Nutrition Service will continue to survey 
State agencies prior to each reallocation this fiscal year to determine 
the need for additional funds. This year the reallocation of funds will 
occur every other month, as mandated by law.
    Clerk's Note: On March 21, 2002, the Administration submitted an 
emergency supplemental proposal to Congress. This proposal included $75 
million for the WIC Program.
    Question. I would like to ask that the Secretary provide this 
information to the Committee on a timely basis, and work with us in the 
months ahead to assess the potential need for additional funding in the 
upcoming supplemental appropriations bill.
    Answer. We commit to work with the Committee in the upcoming months 
by providing information and assessing the potential need for 
additional funding for the WIC Program.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                             prime question
    Question. Madam Secretary, I am a strong supporter of renewable 
fuels such as ethanol. The benefits of ethanol are obvious; the 
production of ethanol leads to reduced dependence upon foreign oil, 
strengthened energy security, increased farm income, job creation and 
economic growth in rural America.
    Moreover, while concentration dominates most sectors of 
agriculture, ethanol production concentration has decreased from 67 
percent in 1999 to 49 percent today. This decline in the concentration 
of ethanol production can best be attributed to the increasing number 
of farmer-owned ethanol co-ops that have been established across the 
country.
    Of the nine ethanol plant projects currently underway in South 
Dakota, one is an innovative ethanol production and cattle feeding 
operation, known as ``PRIME'' or the Dakota Value Capture Cooperative. 
Once complete, this project will produce approximately 20 million 
gallons of ethanol, and, capture the value of the wet distillers 
grains--byproduct of ethanol production--and employ it as an input in 
the feeding of cattle in an adjacent feedlot.
    To help jump-start this innovative project, I worked to provide $6 
million in appropriations last year (one-half from the Energy 
Department and the other half from USDA). As you know, I've been trying 
to get USDA to expedite their share, ($3 million) of this grant to 
PRIME because the Energy Department has already approved funding and is 
set to devote their share, ($3 million) to PRIME within 1-2 weeks. Yet 
USDA indicates that the Energy Department must provide some confidence 
to you that the project is indeed the sole source of funding. I promise 
to work with all parties to get USDA this information. Over 700 South 
Dakota farmers and ranchers have invested over $14 million in equity 
towards this cooperatively held ethanol and cattle feeding project. 
These agriculture producers deserve the cooperation of those of us at 
the Federal level, in accordance with the enactment of the fiscal year 
2002 Agriculture Appropriations Conference Report, to do our jobs and 
help provide the grant assistance authorized last year.
    I urge you and USDA in the strongest terms possible to work with me 
to complete the process of awarding this grant, and I intend for us to 
move ahead in the following manner.
    First, that USDA make this grant to PRIME-Dakota Value Capture Co-
op on a non-competitive basis. Second, that the project receive the 
full $3 million from USDA that has been earmarked in the most 
expeditious fashion. And finally, that this matter be sanitized of any 
and all political underpinnings that may jeopardize the process and the 
project.
    Madam Secretary, first do you agree to work with me on this matter? 
Second, how will you help us move the process along to ensure the 
expeditious delivery of grant funds to the project?
    Answer. Yes, we do agree to work with you on this matter. Following 
is a status report on the results of our efforts on this matter.
    The Department of Agriculture has completed a review of Public Law 
107-76, Section 747, and documents prepared by PRIME Technologies. It 
has been determined that the grant can be awarded on a non-competitive 
basis. We are proceeding in that manner. In March 2002, the Rural 
Business-Cooperative Service Administrator expects to delegate 
authority to administer the grant funds at the State Office level to 
our Rural Development South Dakota State Director. The total project is 
projected for $60 million for the purpose of development of an 
``Integrated Ethanol Plant, Feedlot, and Animal Waste Digestion Unit.''
                  leaking agricultural market forecast
    Question. Madam Secretary, over the weekend it was reported that 
the chairman of USDA's World Agricultural Outlook Board (Mr. Gerald 
Bange) admitted that USDA provides advance information to preferred 
individuals with respect to USDA's annual crop forecasts each February 
in preparation for USDA's Annual Conference.
    On Tuesday, USDA Chief Economist Keith Collins issued a statement 
that USDA would halt the practice of disclosing details of some crop 
reports to selected commodity traders before the information is 
disclosed to the public.
    However, members of congress are already curious as to why this 
practice of sharing sensitive crop report information to preferred 
individuals was ever permitted in the first place, as reflected by 
Senator Lugar's announcement that he will ask the GAO to investigate 
USDA's Handling of the crop reports.
    While I have great respect for you, Madam Secretary, your fine 
staff and certainly for Mr. Collins, USDA should not believe that Mr. 
Collins' statement about ending this practice will also end the inquiry 
into this inflammatory matter.
    Madam Secretary, this is not entirely the fault of USDA under your 
reins, that is clear. But, what is also clear to me is that we must 
take strong steps to provide some confidence back into the producer's 
minds with respect to this market information and the way it is 
reported.
    Will you inquire within USDA as to this preferential information 
disclosure practice and use all your resources to determine if the 
information released this year was indeed ``market moving'' or 
influential upon commodity prices?
    Second, will you prepare for the members of this subcommittee the 
following:
  --the identities of the parties receiving this information?
  --when the information was distributed?
  --any written USDA policy on such information distribution?
  --the identity of the parties disclosing the information?
  --and the full range of information affected by this policy or 
        practice?
    Finally, I am also very interested in your view of the role of USDA 
in providing market information to the public in general. As you know, 
the 3-70-20 rule, which relates to the Mandatory Price Reporting 
results in blackouts of livestock market information in regions of the 
country which have little competition. Now I am a strong supporter of 
price reporting and I think the new 3-70-20 rule is much better than 
the problematic 3-60 rule. Yet, producers in some regions are at a 
disadvantage with regard to bid competition by buyers. A full 
discussion on the role of information in the marketplace would be 
helpful to the subcommittee in determining whether additional resources 
must be devoted to USDA in this regard or not.
    Answer. The Department of Agriculture takes the provision of market 
information to market participants as one of its highest priorities. We 
are committed to ensuring such information is accurate, objective, 
reliable, relevant and secure. Our key agencies that provide market 
information, such as the Economic Research Service, National 
Agricultural Statistics Service, Foreign Agricultural Service and 
Agricultural Marketing Service, issue many hundreds of reports annually 
devoted to improving the efficiency of markets and the capacity of 
market participants to engage in competitive, equitable transactions. 
These reports adhere to various protocols for clearance and release to 
the public. Some reports are prepared solely by USDA staff and are 
released under secure conditions because they are developed from 
confidential information or are judged to be more market sensitive than 
other reports. Reports based on economic trends and not on confidential 
information are minimally market sensitive, or not sensitive at all. 
Such reports are not prepared in, or released from, secure conditions 
and may involve external review.
    A February media article by Bloomberg reported on the peer review 
process used by USDA to assess the highly tentative, pre-season outlook 
presented by USDA economists at the Department's annual agricultural 
outlook Forum in February. Unfortunately, the Bloomberg article failed 
to recognize the difference between the outlook material discussed at 
the Forum, which is based solely on publicly available data, and the 
Department's monthly commodity market forecasts, which incorporate 
information from confidential survey-based reports. Each month the 
Department prepares and releases highly market-sensitive forecasts of 
production, use, stocks, and prices for a number of commodities under 
tightly secured ``lockup'' conditions. There has been no premature 
release of such information.
    Contrary to the press article by Bloomberg, no one from the World 
Agricultural Outlook Board--WAOB--or any other USDA agency, ``leaks'' 
forecasts or ``tips off'' commodity traders, researchers, or investors, 
routinely or otherwise, with early details of market moving reports 
before they are disclosed to the public. Following the Bloomberg story, 
some follow-up media articles highlighted inaccurate and inflammatory 
portions of the Bloomberg article. This has misled some in the farm 
community, traders, and the general public to incorrectly conclude that 
details of a ``crop report'' were disclosed to selected individuals. 
There is absolutely no substance to this allegation; there was no such 
disclosure.
    I will provide additional material for the record regarding the 
specific questions you raise.
    [The information follows:]

    The information presented at USDA's annual outlook Forum is of an 
entirely different nature than market sensitive ``lockup'' reports. The 
purpose of the Forum is to publicize and encourage public comment in a 
collegial environment regarding USDA's very preliminary observations on 
prospects for the forthcoming year. The pre-season projections 
presented at the Forum are simple updates of projections prepared the 
prior fall and published in the Commodity Credit Corporation Commodity 
Estimates book, released as part of the President's budget submission 
to Congress in early February. At the Forum at the end of February, 
these early-February budget-book projections are updated to reflect 
additional information available to the public after the budget 
projections are first developed. For example, on January 11 of this 
year, USDA's National Agricultural Statistics Service--NASS-published 
significantly revised planted acres, harvested acres, and yields for 
corn and soybeans for 2001. Consequently, these changes required 
private sector and USDA economists to revise their early-season 
projections for 2002/03 so that supply and demand variables would 
balance.
    The early-season projections by economists discussed in February 
are clearly different than the highly market-sensitive monthly 
forecasts released as part of the crop production report process. 
Starting in May of each year, USDA begins the monthly supply and demand 
forecasts for the new crop year, which are published in the World 
Agricultural Supply and Demand Estimates Report. These forecasts 
reflect survey-based estimates, including the first winter wheat 
production forecast to be released by NASS. It is only within the 
confined lockup area in the South Building, where all means of 
communication with the outside are cut off, that NASS developed market 
information is provided to WAOB and analysts from other agencies to 
prepare market forecasts. All monthly lockup reports are handled with 
utmost security.
    As clearly stated in USDA commodity papers presented at the Forum, 
the pre-season projections released at the Forum do not reflect any 
surveys conducted by USDA, which have not been publicly released well 
in advance of the Forum. Similar to numerous projections by private 
sector research firms and university extension specialists, USDA's 
Forum projections were developed by USDA economists. No USDA employee 
responsible for the collection, analysis, and reporting of survey 
based-data was involved in the preparation of these projections. 
Because these early-season economic projections are based solely on 
economic trends and publicly available information--and not on survey 
or confidential information--they generally reflect a consensus of 
market analysts and are, at most, minimally market sensitive.
    In the mid-1990s, USDA began inviting well-respected industry 
researchers and university analysts--not traders and investors, as was 
reported--to participate in sessions as peer reviewers of the early-
season outlook presented at the Forum. The purpose was to enrich the 
content of the Forum by stimulating feedback and discussion. This 
procedure resulted in extensive positive feedback from participants 
attending the Outlook Forum in general and, in particular, improved 
quality of the commodity outlook sessions. Peer reviewers were provided 
our assessments several days prior to the Forum, so they would have 
time to conduct their review. Peer reviewers were also entrusted to 
keep the information confidential, and we know of no violations of this 
arrangement.
    This year USDA invited two highly respected analysts to review and 
comment on USDA's outlook for grains, oilseeds, and cotton. As listed 
in the Forum program, their speech topics, names, and titles were as 
follows: ``Industry Perspective on the USDA Grain Outlook,'' Nancy 
DeVore, Vice President, Bellingham Commodity Trade Analysis, Inc.--Ms. 
DeVore addressed both USDA's grains and oilseeds outlook. ``Response to 
the USDA Outlook,'' Mark Lange, Vice President, Program and Policy 
Analysis, and Program Coordinator, National Cotton Council.
    These speakers were asked to provide their prepared remarks to the 
Forum staff 2 days prior to their presentations at the Forum. Copies of 
the outlook papers to be presented by USDA at the Forum were provided 
to these speakers several days in advance of the Forum, so they would 
have time to peer review the USDA papers and prepare their comments. 
The USDA papers were provided to the private sector reviewers by the 
Chairs of USDA's Interagency Commodity Estimates Committees for grains 
and cotton:
    Gerald R. Rector, Chair, Interagency Commodity Estimates Committees 
for Wheat and Feed Grains, WAOB.
    Carol Skelly, Chair, Interagency Commodity Estimates Committee for 
Cotton, WAOB.
    While Outlook Forum research papers and discussions do not present, 
or are based on, new survey-based information, the Forum is designed to 
stimulate alternative viewpoints and discussion of issues that may 
affect the outlook for the upcoming season. Infrequently, the results 
of discussions at the Forum have a very slight impact on commodity 
markets. However, our review indicates that there is no evidence that 
USDA outlook papers shared in advance with expert reviewers were used 
inappropriately, affected markets, or provided an unfair market 
advantage to anyone.
    Notwithstanding the benefits of the external review process to 
conference participants and the general public, the Bloomberg report 
has raised confusion and created misperceptions about USDA's procedures 
and integrity. Such misunderstandings diminish the public trust, which 
the Department has worked so hard to achieve. USDA's record is 
unblemished and the Department intends to keep it that way. 
Consequently, USDA announced on February 25 that the external review 
process has been terminated.
                          bee research program
    Question. Madam Secretary, domestic honey producers and beekeepers 
have contacted me with deep concerns about the cuts proposed in the 
fiscal year 2003 USDA budget with respect to honey bee research and the 
Agricultural Research Service (ARS). Honey producers play an important 
role in the agricultural economy in South Dakota.
    They are concerned with the reduction of bee research from $5.7 
million to less than $2.5 million, given that this program comprises 
less than 1 percent of the total budget for ARS.
    Why did the bee research program bear such a sizable reduction in 
this year's budget when the total program represents simply a small 
share of the total ARS budget?
    Did USDA seek input from honey producers, beekeepers, or 
researchers concerning these cuts? If so, what sort of meetings or 
events took place to seek input on the cuts? If not, why not?
    Answer. The President's Budget proposal actually reduces ARS' 
research on honeybees by $4 million, from $8 million in fiscal year 
2002 to some $4 million in fiscal year 2003 and represents a relatively 
small share of the total reduction of $104,486,000 proposed for ARS in 
fiscal year 2003.
    The Department based its decision to consolidate and reduce 
honeybee research in order to finance national high priority research 
initiatives in fiscal year 2003 strictly from the recommendations of 
the Strategic Planning Task Force, which conducted site visits and 
laboratory reviews at these locations.
                     farm bill payment limitations
    Question. Why does the September 2001 report, Food and Agricultural 
Policy: Taking Stock for the New Century document published by USDA 
suggest that too few farmers are receiving too many of the Federal 
Government payments, yet, USDA has not supported or even taken a 
position on the Dorgan-Johnson-Grassley payment limitations amendment 
in the Senate farm bill?
    Answer. Our policy document was primarily addressing a broader 
concern with the distribution of farm program benefits across all 
sectors of agriculture and not the narrower question/issue of the 
distribution of payments among traditional program crop producers. We 
believe that current programs have not addressed the needs of many 
producers as well as they have commercial producers of the few major 
program crops. There are many sectors of agriculture which receive 
relatively little assistance from government programs and services and 
that was one of the concerns we were addressing. The Senate payment 
limitation provision addresses a narrower concern regarding the 
distribution of payments and benefits for producers of those few 
programs crops. This is a somewhat different issue. The payment limit 
provision will have disparate effects on producers of a few major 
program crops in different regions of the country, but will not address 
the issue of providing benefits to producers of other commodities who 
also need assistance of various kinds. We believe the Congress is the 
appropriate body to address the largely regional distributional 
questions brought up by the Dorgan-Johnson-Grassley amendment.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

       office of the chief financial officer/working capital fund
    Question. The President's fiscal year 2003 budget requests a $21 
million appropriations to the Working Capital Fund. (No funds were 
appropriated for fiscal year 2002.) How has the Working Capital Fund 
been financed to date? Why is an appropriation to the Working Capital 
Fund required for fiscal year 2003? How will this appropriation be 
used? What would be the result of not providing the appropriation 
requested? Will additional appropriations to the Working Capital Fund 
be required in future fiscal years? Why or why not?
    Answer. The Working Capital Fund was established in language making 
appropriations to USDA for fiscal year 1944. This language is codified 
at 7 U.S.C. 2235 and requires that activities supported by the Fund 
recover actual or estimated costs of good and services from their 
customers. Recurring operations of the Fund are not subsidized through 
appropriations or other sources of funds.
    In the late 1980's through the early 1990's, USDA and the Congress 
engaged in a cooperative effort to recapitalize the Fund, providing 
over $30 million in direct appropriations for capital equipment 
purchases and annual authority to collect contributions from agencies 
of up to $2,000,000 in growth capital. In this way, the Fund 
replenished capital for large-scale equipment purchases. However, this 
recapitalization plan did not anticipate the significant investments 
that would be necessary in systems development as we moved to upgrade 
corporate administrative systems that in some cases were more than 20 
years old.
    Having to upgrade our systems to address concerns voiced by our 
Inspector General, the General Accounting Office, and the Congress, we 
were in the position of having to fund investments out of operating 
funds, which placed a considerable burden on the budgets of our 
customer agencies.
    By October of this year, we will have completed the implementation 
phase of our core accounting and financial management system the 
Foundation Financial Information System (FFIS). However, we are in 
great need of upgrading the systems that feed administrative and 
financial information to the core system. Investments in procurement 
systems, property, travel, and other solutions will be critical to 
USDA's success in addressing concerns over our financial management 
practices.
    The Office of the Chief Financial Officer, along with partners from 
the Assistant Secretary for Administration and the Office of the Chief 
Information Officer, have established a major initiative and task force 
to address our corporate administrative systems needs. Our work will 
serve as the basis for a new comprehensive plan to be shared with OMB 
later this year. However, work continues in developing integrated 
procurement systems and other applications, hence the need for the $21 
million in appropriated support.
    $21 million is not sufficient for all modernization efforts, 
although it is an important first step. As part of the plan shared with 
OMB last year, USDA provided an estimate to OMB of the resources needed 
over 5 years for corporate and other selected system modernizations. At 
the time, we estimated a total investment of about $300 million.
    OCFO is focused now on capturing value in the near-term 
modernization of subsystems closely related to financial management 
accountability. This is an important part of our review and revision of 
our corporate systems investment plan. Specifically, we are reviewing 
our plan for subsystems to ensure that it addresses internal control 
and audit issues.
    Not providing the appropriation would delay any progress we might 
make in addressing the financial management issues and system needs 
identified in audits and voiced as concerns by Congress. Having made 
the considerable investment of agencies' funds in bringing the core 
FFIS system on line, we need to take the next step to ensure that the 
systems supporting the core financial system can support our vision of 
providing timely, accurate, and reliable financial and administrative 
information to managers so that they can manage their programs more 
effectively. Without the appropriation, we will not have sufficient 
capital to invest in pilot projects to demonstrate the effectiveness of 
our approaches. We will not have the capital to purchase software 
applications to serve as the foundation for this new generation of 
systems. In short, we will be left for some time to come with a new 
financial information system that can serve our needs in that area, but 
it will be supported by old, ineffective, unreliable administrative 
systems.
    With respect to future investments, the need for appropriations is 
largely contingent upon other funding strategies that could be made 
available. Use of unobligated balances could be a source of funds as an 
alternative or to supplement appropriations. We can say, however, that 
the need for investment capital is there.
                           homeland security
    Question. The fiscal year 2003 request for the Office of the 
Secretary includes an increase of $28.250 million for ``building 
security and other terrorism protection costs''.
    Please explain how and when this $28.250 million will be allocated.
    How was it determined that $28.250 million will be required to meet 
these needs?
    Answer. The $28.25 million will be allocated in fiscal year 2003 to 
continue to fund those facility and operational security needs that 
cannot be covered with the Supplemental appropriations funding provided 
in 2002 and to give the Secretary the flexibility to meet unforeseen 
needs. As we move to increase the security of our infrastructure and 
people, we are faced with costs that we cannot always predict. 
Therefore, we estimated what would be a reasonable level of funding to 
meet those needs, based on the information we had at the time. We will 
continue to work with Congress as we allocate and spend funds for 
security needs.
               workforce and organizational streamlining
    Question. The fiscal year 2003 request for the Office of the 
Secretary includes an increase of $5 million ``for funding workforce 
and organization streamlining and restructuring activities.'' What 
coordination and implementation cost for office consolidation analysis 
and planning are expected to be incurred by the Office of the 
Secretary? Please be specific.
    Answer. One of the goals of this Administration is to put in place 
significant management improvements that streamline government 
operations, use the private sector as the provider of services when 
these services are commercial in nature, and increase customer service. 
These management improvements will result in efficiencies over the long 
run, but do require some upfront capital to put in place. This fund 
would be used to support some of the costs of these streamlining 
efforts.
    In recent years, the Department has co-located field offices of the 
Farm Service Agency (FSA), Natural Resources Conservation Service 
(NRCS) and Rural Development (RD) into one-stop USDA Service Centers to 
provide seamless, quality customer service to farmers and rural 
residents. Since 1993, about one-third of the country offices of the 
Service Center agencies and a number of State offices have been 
consolidated. The Department will build on the analyses and lessons 
learned from this effort and develop a plan during 2002 to initiate the 
consolidation of at least 200 additional offices in 2003. The 
Department's review will include an assessment of the costs and 
benefits of further office consolidations. The Department will also 
review other business and administrative processes in the Service 
Center agencies and develop plans to restructure or reengineer them as 
appropriate. The budget provides a $5 million increase for the Office 
of the Secretary to coordinate and implement these activities.
    Question. The Department of Agriculture clearly has a requirement 
to protect its critical information to ensure continuity of operations 
after any disaster. Presidential Decision Directives 63 and 67 
specifically address this requirement.
    The events of September 11 demonstrated the importance of this, 
when entire data centers on Wall Street, containing massive amounts of 
financial information, vanished in an instant. The financial markets, 
however, were up and running almost immediately because this critical 
information was ``mirrored'' to a geographically remote site. In other 
words, I understand the information was not ``backed up'' to tape and 
stored in a warehouse, but instead was ``mirrored'' to a secondary data 
center which was able to immediately take over all operations when the 
primary data center went down.
    Is the Department developing a secondary site and capability 
similar to that, which seems to have saved the day for our Nation's 
financial markets?
    What is required, in terms of funding or other resources, to 
establish a secondary site?
    There may be many functions that the Department performs that are 
absolutely dependent on information technology. Has the Department 
identified its mission-critical systems? Which are they?
    What direction is the Department heading with respect to an 
overarching disaster recovery/business continuance capability 
Department-wide?
    The Department's National Finance Center (NFC) in New Orleans 
processes about 40 percent of the payroll for the Federal Government, 
and also houses the Federal Government's Thrift Savings Plan.
    Does the NFC ``mirror'' its data to a secondary site that could 
quickly take over essential operations should there be an outage of any 
kind?
    What is NFC's current method for back up data storage for those 
data functions that need to be performed if there ever were an outage 
at the Center, or worse yet, if data was ever lost as a result? Has 
this system ever been tested?
    Answer. USDA recognizes that contingency planning is a critical 
component of a sound information security strategy. Re-establishing 
automated processes in the event of a malfunction or disaster is 
essential to the Department's ability to meet its mission objectives. 
No departmental-level activities are currently underway to establish a 
single secondary site with the capacity to continue operations of 
USDA's critical systems without a noticeable delay. In preparation for 
the Year 2000 Computer problem, USDA identified its most essential 
information technology systems. These 52 systems remain the focus of 
our cyber security efforts and are the first systems analyzed for risk, 
tested for vulnerabilities and monitored to ensure security measures 
are appropriate and efficient. The complete list of these 52 mission-
critical systems will be provided for the record.
    With respect to an over-arching disaster recovery/business 
continuance capability Department-wide, USDA presently has in place a 
rigorous Continuity of Operations (COOP) plan for USDA facilities in 
the Washington, D.C area. This plan was partially implemented 
successfully on September 11, 2001. USDA is currently developing a 
strategy to extend COOP planning to critical USDA facilities located 
outside the Washington, D.C area. This extended planning effort will 
include such critical facilities as the National Finance Center, 
National Information Technology Center, and USDA Bio-safety Level III 
laboratories. Many of these facilities currently have well defined 
business continuity and emergency operations plans, which will form the 
basis for future COOP plans. Upon completion of the draft COOP plan for 
these critical facilities, USDA will follow-up with a large scale COOP 
exercise in the late fiscal year 2003 timeframe to assess if the plans 
can be executed as indicated. A plan review program will be established 
to monitor annual changes and biennial updates. This will ensure that 
the plans adjust to exercise lessons learned, incorporate the latest 
policy changes, and stay current with events/conditions. USDA is also 
in the process of revising its emergency management structure to 
provide a more responsive and efficient emergency response capability.
    The decision to invest in ``mirroring'' at a secondary site and 
other more timely backup technology and processes, similar to that 
which enabled the financial markets to rapidly recover, will be based 
on the criticality of the systems, data, and technology infrastructure 
on which program delivery depends. Each agency that has not already 
done so will be conducting a risk-assessment of its critical systems 
throughout the remainder of this fiscal year. Based on the results of 
these risk assessments, appropriate disaster recovery and business 
resumption plans will be developed. To further assist in this effort, 
the Department will be using emergency supplemental funds to establish 
a standard process for preparing appropriate disaster recovery and 
business resumption plans for all of its mission-critical systems. 
Funds to continue this activity are included in the Department's fiscal 
year 2003 budget request.
    With respect to the NFC, backup tapes are created daily for all 
applications, databases, operating system software, and other business 
system files. These backup data are sent daily to an offsite storage 
facility. The NFC has contracted with SunGard Systems to provide 
recovery capabilities for the NFC at recovery centers in Philadelphia 
and Atlanta should a disaster or other outage occur that renders the 
NFC inoperable.
    The NFC's plan is to recover their critical information technology 
infrastructure and their critical application systems within 48 hours 
of the declaration of a disaster (outage). Within 6 hours of an event, 
an assessment is made and, if necessary, a disaster is declared. 
Following the declaration, notification and mobilization of the key 
recovery personnel with backup data occurs. The notification and 
mobilization occurs within 18 hours with key personnel and backup data 
arriving at the Philadelphia and Atlanta recover centers. Within the 
next 24 hours after arriving at the Philadelphia recovery center, NFC 
infrastructure is restored and operational. At the same time, the NFC 
business systems are restored and operational at the Atlanta recovery 
center. Within 48 hours, NFC's critical systems are restored and normal 
business operations resume.
    The NFC performs disaster recovery testing twice a year using the 
backup data. The tests conducted twice a year have proven generally 
successful in recovering and processing the critical systems within the 
target time frame. We believe that the context in which NFC performs 
recovery is different from that of financial markets and institutions. 
Whereas the financial entities of which you spoke require ``minute-by-
minute'' capability in their systems and recovery methods, ``point-in-
time'' service provides us with effective system and recovery 
capability for core services while allowing us to avoid the extremely 
expensive solutions that the ``minute-by-minute'' approach to recovery 
would require.
    However, the issue with the NFC's current disaster recovery process 
is that it assumes people can be contacted, and people have an ability 
to travel within specified time frames. The events of 9/11 and the 
resulting assessment and guidance of major advisory firms in this 
business area cast doubts upon the viability of the current approach. 
Therefore, we are looking at new approaches. I will provide additional 
information for the record on some of NFC's plans for increased 
security.
    [The information follows:]

  --Public Key Infrastructure (PKI).--In fiscal year 2002, NFC intends 
        to deploy a PKI system for selected applications, allowing 
        digital signatures for transactions and encrypted data 
        transmission via the Internet. The infrastructure to verify PKI 
        certificates is being deployed with secondary site ``fail 
        over'' capabilities. In the event of a total equipment failure 
        in New Orleans, the secondary site would provide authentication 
        for users of certificates issued by the National Finance 
        Center.
  --Payroll and Financial Systems.--In fiscal year 2003, the National 
        Finance Center intends to perform a pilot test of data 
        mirroring capabilities within the existing National Finance 
        Center operated facilities in New Orleans, and to perform an 
        analysis of alternatives for full mirroring capability to a 
        secondary site. The planned analysis would examine the specific 
        existing technical architecture and application design, and 
        compare specific technical alternatives for mirroring the data 
        to a secondary site. At that time, specific facility, 
        equipment, and telecommunications requirements would be 
        identified with cost estimates for each alternative.
  --Payroll and Financial Systems.--In fiscal year 2004, the National 
        Finance Center has requested a minimum level of funding for the 
        capital equipment required to establish a secondary site 
        technically capable of providing minimal recovery for the 
        critical portions of these systems within 24 hours.
  --Thrift Savings Plan System.--The Thrift Savings Plan System is 
        undergoing a transition from the application designed by the 
        National Finance Center to one designed by Materials and 
        Communications, Inc. The new system's current plan for recovery 
        is the restoration of data from tapes warehoused at an offsite 
        location. However, portions of the system are technically 
        capable of mirroring data to a secondary site. The system 
        owner, the Thrift Investment Board, has stated intentions to 
        move to an environment, which would afford 24 hour per day, 365 
        days per year availability. Mirroring capabilities figures 
        significantly in this concept.
Funding and Resources
    The estimates for funding and resources to provide full secondary 
site capabilities are not known at this time. The total cost would be 
offset by the discontinuance of the current business continuance 
contracts for tape warehousing and recovery facilities. The plans 
outlined above are estimated to cost $950,000 in fiscal year 2003 and 
$2,800,000 in fiscal year 2004. The analysis of alternatives currently 
planned for fiscal year 2003 would provide more detailed levels of 
additional funding and resources. The key areas that must be addressed 
are secondary site facilities, personnel, equipment, and 
telecommunications.
    USDA's list of Departmental Priority Systems was established as 
part of the Department's efforts to mitigate computer problems related 
to the Year 2000 computer date rollover. The criteria used to identify 
these systems are based on the economic repercussions, financial 
impact, and health and safety risks if these systems were to fail.

------------------------------------------------------------------------
                  Agency                               System
------------------------------------------------------------------------
Farm Service Agency.......................  102--Direct Deposit System
                                             SCOAP
Farm Service Agency.......................  118--Conservation Reserve
                                             Program(CRP)(SCOAP)
Farm Service Agency.......................  123--PA Payment Systems
Farm Service Agency.......................  534--Gram Inventory
                                             Management System Phase 2
Farm Service Agency.......................  540--Processed Commodity
                                             Inventory Mgmt. System
Farm Service Agency.......................  717--Automated Price Support
                                             System (APSS)--# 2
Farm Service Agency.......................  76--Check Writing System
                                             SCOAP
Farm Service Agency.......................  77--Cash Receipts System
                                             SCOAP
Farm Service Agency.......................  78--Automated Claims System
                                             (SGOAP) (ACS)
Farm Service Agency.......................  80--Common Receivable System
                                             (SCOPPS)(CRS)
Farm Service Agency.......................  86--Data Control System,
                                             SCOAP(DCS)
Farm Service Agency.......................  88--Assignment/Joint Payment
                                             System, SCOAP
Risk Management Agency....................  Actuarial Filing System
Risk Management Agency....................  Data Acceptance System
                                             (DAS)--SUN
Risk Management Agency....................  Reinsurance Accounting
                                             System (RAS)--SUN
Food Safety and Inspection Service........  Automated Import Information
                                             System (AIIS)
Food Safety and Inspection Service........  Performance Based Inspection
                                             System (PBIS)
Food Safety and Inspection Service........  Planned Compliance Program
                                             (PCP)
Food Safety and Inspection Service........  Residue Violations
                                             Information System (RVIS)
Food and Nutrition Service................  Agency Financial Management
                                             System(AFMS)
Food and Nutrition Service................  Anti-Fraud Locator using EBT
                                             Retailer Transactions
                                             (ALERT)
Food and Nutrition Service................  Coupon Requisition &
                                             Inventory Management System
                                             (CRIMS)
Food and Nutrition Service................  Disqualified Recipient
                                             Subsystem (DRS)
Food and Nutrition Service................  Food Stamp Program
                                             Integrated Information
                                             System (FSPIIS)
Food and Nutrition Service................  National Integrated Quality
                                             Control System (NIQCS)
Food and Nutrition Service................  Regional Office
                                             Administrated Program
                                             (ROAP)
Food and Nutrition Service................  Special Nutrition Program
                                             Integrated Information
                                             System (SNPIIS)
Food and Nutrition Service................  Store Tracking,
                                             Authorization and
                                             Management Subsystem
                                             (STAMS)
Agricultural Marketing Service............  Financial Information System
Agricultural Marketing Service............  Market News Information
                                             System
Animal and Plant Health Inspection Service  Export Certification Program
Animal and Plant Health Inspection Service  Generic Database (GDB)
Animal and Plant Health Inspection Service  Headquarters WADS replaces
                                             AQI-Monitoring
Animal and Plant Health Inspection Service  Laboratory Information
                                             Management System
Animal and Plant Health Inspection Service  Licensing and Registration
                                             Information System
Forest Service............................  Fire & Aviation Management--
                                             F&AM
Natural Resources Conservation Service....  CLIMSYS/CDBS
Natural Resources Conservation Service....  SNOTEL
Natural Resources ConservationService.....  WSF
Rural Development.........................  Automated Multi-Housing
                                             Accounting System
Rural Development.........................  Dedicated Loan Origination
                                             and Servicing System
Rural Development.........................  Federal Finance Bank Loan
                                             Accounting System
Rural Development.........................  Guaranteed Loan Accounting
                                             System
Rural Development.........................  Program Loan Accounting
                                             System
Rural Development.........................  Rural Telephone Bank Loan
                                             Accounting System
Rural Development.........................  Rural Utilities Loan
                                             Accounting System
OCFO/National Finance Center..............  Accounting Applications
OCFO/National Finance Center..............  Administrative Payments
OCFO/National Finance Center..............  Billings & Collections
OCFO/National Finance Center..............  Payroll/Personnel
OCFO/National Finance Center..............  Thrift Savings Plan
------------------------------------------------------------------------

                                 ______
                                 

              Question Submitted by Senator Arlen Specter

                      protecting u.s. agriculture
    Question. Secretary Veneman: Protecting the U.S. agricultural 
system is a shared responsibility between government and industry. How 
does USDA propose to ensure that warning, protection and response to 
potential threats are the result of coordinated efforts between 
government at all levels and the multiple entities in industry? What 
specific mechanisms exist or are being put in place to ensure that all 
parties are operating from common procedures and communication 
mechanisms during a crisis?
    Answer. Over the last several years, USDA has worked to modernize 
its agricultural safeguarding system to address increased threats of 
both accidental and intentional pest and disease introductions. The 
events of September 11 have heightened the sense of urgency to these 
ongoing efforts. USDA has taken several measures to strengthen 
cooperative partnerships with State/local governments and industry, and 
to improve communications. Increased information sharing, both within 
the government and agricultural community, will be essential in 
ensuring a quick and effective response to a biosecurity threat. First, 
we have established an emergency management grants program to further 
the efforts of the National Animal Health Emergency Management System 
(NAHEMS), the State-Federal-industry effort to improve the United 
States' ability to deal successfully with animal health emergencies. 
The goal of the grant program is to increase the level of animal health 
emergency preparedness throughout the country. In fiscal year 2001, 
USDA awarded close to $2 million to 31 States, 6 Tribal Nations, and 1 
university. For fiscal year 2002, the USDA will use homeland security 
supplemental funds to distribute $11 million in emergency management 
grants.
    Second, we are requesting $4 million in fiscal year 2003 to enhance 
the disease response component of our system by placing up to 35 
emergency managers throughout the country to assist States with 
establishing animal health emergency standards, to participate in local 
and State exercises, and to assist with actual animal health 
emergencies. The placement of these managers will set up an 
infrastructure for a quick and effective response to disease outbreaks 
involving one or more States. We have established an Emergency 
Operations Center with advanced networking and monitoring capabilities 
in Riverdale, Maryland. We have scheduled several training courses 
throughout the fiscal year for State animal health emergency managers 
to provide tools and information to augment their emergency management 
plans.
    In addition, USDA is using the findings of the National Association 
of State Departments of Agriculture (NASDA) Animal Health Safeguarding 
Review report to further cooperation with State, local, and university 
stakeholders. While the NASDA review found that we have been effective 
in detecting, controlling, and eradicating animal health threats, the 
escalating demand for services has strained the resources of USDA 
agencies that deal with animal health issues. In response to one of the 
review's recommendation for improved and expanded applied research and 
animal health diagnostic capabilities, USDA recently signed a 
memorandum of understanding (MOU) with the American Association of 
Veterinary Laboratory Diagnosticians (AAVLD) that, when implemented, 
should enhance the Department's ability to provide timely diagnostic 
services. The MOU permits USDA to certify States to perform diagnostic 
tests for certain foreign animal diseases and establish a formal 
network of accredited, State diagnostic laboratories. USDA is working 
with the AALVD to develop appropriate standards and an inspection 
system to ensure that State facilities meet our biosecurity 
requirements.
    USDA is committed to ensuring that its Federal, State, and industry 
stakeholders are aware of and support the Department's efforts to 
protect U.S. agriculture. We realize that close coordination and 
information with our stakeholders is crucial. We will continue to 
strengthen our partnerships with the States, as well as the 
agricultural community, to protect the health and integrity of our food 
production systems.

                          SUBCOMMITTEE RECESS

    Senator Kohl. Our next hearing will be on Thursday, March 
14th at 10 o'clock in this room where we will hear testimony 
from sub-cabinet members of the Department of Agriculture on 
the state of the farm economy and the rural sector.
    If there is no other business to come before the 
subcommittee, we stand recessed.
    [Whereupon, at 12:30 p.m. Wednesday, February 27, the 
subcommittee was recessed, the reconvene subject to the call of 
the Chair.]









AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2003

                              ----------                              


                        THURSDAY, MARCH 14, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:02 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Herb Kohl (chairman) presiding.
    Present: Senators Kohl, Dorgan, Johnson, Murray, Cochran, 
Stevens, and Burns.

                       DEPARTMENT OF AGRICULTURE

STATEMENTS OF:
        KEITH COLLINS, CHIEF ECONOMIST
        J.B. PENN, UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURE 
            SERVICES
        MARK E. REY, UNDER SECRETARY FOR NATURAL RESOURCES AND 
            ENVIRONMENT
        MICHAEL E. NERUDA, DEPUTY UNDER SECRETARY FOR RURAL DEVELOPMENT
        JOSEPH J. JEN, UNDER SECRETARY FOR RESEARCH, EDUCATION AND 
            ECONOMICS

                 OPENING STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. This hearing will come to order. Today we 
welcome our guests from the Department of Agriculture, who will 
be providing an overview of the farm economy and rural sector, 
and an explanation of how the President's fiscal year 2003 
budget applies to these subjects. We will hear today from USDA 
Chief Economist Keith Collins; J.B. Penn, Under Secretary for 
Farm and Foreign Agricultural Services; Mark Rey, Under 
Secretary for Natural Resources and the Environment; Mike 
Neruda, Deputy Under Secretary for Rural Development; and 
Joseph Jen, Under Secretary for Research, Education and 
Economics. Also joining us today is Mr. Dennis Kaplan from the 
Office of Budget and Program Analysis, and we welcome you all 
to this hearing.
    Information on the subject of today's hearing is crucial to 
the work of this subcommittee. When I was first elected to the 
Senate in 1988, I created the Wisconsin Agricultural Advisory 
Committee, which is made up of more than 20 farm and rural 
economic experts from around my State of Wisconsin, to help 
identify the emerging issues and challenges facing Wisconsin 
farmers in rural communities.
    You gentlemen here today have the experience, the staff and 
the resources to provide this subcommittee similarly valuable 
information on a national as well as an international scale. 
Your contribution is not only noted but very much appreciated.
    I want to say at the outset that there are a number of 
proposals in the budget that I find troubling. Just to mention 
a few, I question the wisdom of a proposal that greatly reduces 
United States contributions to humanitarian food assistance 
around the world when now, more than ever, that world is 
looking to this country for leadership.
    Also, I do not understand why the President would eliminate 
funding for programs designed to install flood prevention 
structures and practices, and instead adopt a policy that, 
while it will not protect your home from a flood, will 
nevertheless help you pick up the pieces after a flood.
    And when an identified unmet need for this country is a 
shortage of housing for the rural poor, I do not understand why 
this budget, for the first time in 40 years, does not provide 
funding for construction of rural rental housing units.
    Finally, I have to admit that the proposal to terminate the 
cereal product laboratory in Madison, Wisconsin, which was 
established in the 1930s, has caught my attention.
    Still, gentlemen, we appreciate the testimony you have 
prepared and it will be made part of the record. Following 
statements by Senator Cochran, or any of my other colleagues 
when they arrive, we will turn to our witnesses for a summary 
of their testimony. I do ask you to make your summaries as 
brief as possible so that we will be able to ask questions 
during our limited time this morning.
    Noting that Senator Cochran or any of my colleagues are not 
here at the moment, we will start with your testimony. First, 
we ask you, Mr. Collins, to give us your testimony.

                       STATEMENT OF KEITH COLLINS

    Mr. Collins. Thank you very much, Mr. Chairman. I 
appreciate the opportunity to be invited to join this 
distinguished panel from USDA to kick off today's hearing with 
a brief overview of the state of the farm economy, which I 
believe to be improving slowly after bottoming out in 1999.
    Overall demand for crop products is likely to be 
constrained as the global economic slowdown runs through the 
remainder of 2002. Recent data on the U.S. economy shows that 
the recession has not been as deep as once thought or predicted 
and recovery now appears to be underway. Even so, the U.S. 
economy is starting slow here at the beginning of 2002, but it 
will improve as the year unfolds, as low energy prices, low 
interest rates, the tax cut and the recently enacted stimulus 
package gradually increase consumer confidence.
    Foreign economic growth is expected to be weak again this 
year with developed economies particularly fragile, 
particularly Japan and Argentina. The prospects are improving 
for the Middle East, for East Europe, parts of Asia, and we 
think in Mexico as well.
    The value of the dollar unfortunately is expected to remain 
as high or higher than it was last year. In this environment of 
slow economic growth and a high value of the dollar, we still 
expect U.S. agricultural exports to increase to $54.5 billion, 
and that's up from about $53 billion last year. And we expect 
imports to remain unchanged, at about $39 billion.
    Farm cash receipts have gone up in each of the last 2 
years, and they are forecast to rise again this year to $204 
billion; that would be $16 billion higher than they were in 
1999. I think this growth in revenue indicates the slow but 
steady improvement in the overall market fundamentals that I 
have expressed earlier. Livestock receipts are showing the most 
strength in the farm economy and our forecast will remain near 
last year's record high level.
    The continuing decline of the Nation's cattle inventory and 
cautious expansion by hog producers resulted in a less than 1 
percent increase in meat production last year and a similar 
increase is predicted this year. Consequently, livestock prices 
have been firm or rising, except for milk, where production is 
up sharply following the pretty high returns of last year. The 
poultry market has been slowly improving but I believe that 
prospects now are linked to resolution of the Russian ban on 
U.S. poultry.
    United States crop receipts are forecast to remain well 
below the record high that was set back in 1997. They are 
pressured by large supplies in competing countries and by ample 
stocks. Nevertheless, by the end of this marketing season, 
global grain stocks are likely to be down nearly 10 percent 
from a year ago and that will be the lowest level since the 
mid-1990s. Grain prices, consequently, could move up pretty 
significantly if we were to have adverse weather that affects 
global crop production.
    Unfortunately, stock levels for cotton and rice are likely 
to be at 15-year highs this year, which I think brings 
implications for the revenues for those crops. Despite the 
improvement in overall market revenue for agriculture as a 
whole, the prospects for cash farm income are going to depend 
on the disposition of the new Farm Bill. Assuming the Farm Bill 
and other assistance legislation, then net cash income for U.S. 
agriculture as a whole in 2002 will look very similar to the 
average of recent years.
    Although dependent upon substantial government support, the 
overall financial condition of farming continues to be stable. 
In 2001 we saw a slightly larger decline in the number of farms 
in the U.S. than we had seen in recent years. However, the 
value of farm real estate rose 3 percent, and another increase 
is expected this year, keeping the farm debt to asset ratio at 
a pretty manageable level.
    Reported loan delinquency and foreclosure rates at 
agricultural banks have been low and agricultural banks overall 
are in fairly sound financial condition. In addition to large 
government payments, off-farm income continues to help make 
farms avoid more serious financial problems. For example, just 
consider those farms who say that their principal occupation is 
farming. Those farms had an average household income of $59,000 
in the year 2000, compared with $57,000 for the average income 
for all U.S. households.
    Another factor demonstrating the importance of off-farm 
income is that only 12 percent of all farms had more than 80 
percent of their household income come from farm businesses.
    To conclude, while national farm conditions appear stable, 
a combination of low prices and adverse weather has contributed 
to some regional and some sector problems. In addition, 
production agriculture consists of a very diverse group of 
farms and ranches with varying degrees of financial success and 
needs. Today we have farms that struggle to keep their 
operation going while simultaneously we have others that are on 
the cutting edge of production and marketing technology, 
creating new busy opportunities for the farm businesses.
    That concludes my statement, Mr. Chairman.
    [The statement follows:]

                  Prepared Statement of Keith Collins

    Mr. Chairman and members of the Subcommittee, thank you for the 
invitation to discuss the economic situation in U.S. agriculture. The 
generally weak markets for major crops continues, fueled by the global 
economic slowdown, the high value of the dollar, and large global 
production. Despite the reduction in major crop prices over the last 
several years, the financial condition of the farm sector has remained 
stable due in part to large government payments. Other contributing 
factors have been a reluctance of producers to take on new debt, low 
interest rates, off-farm employment opportunities, and improved prices 
and returns for livestock. In addition, prices for energy-related farm 
inputs have dropped over the past year, helping to hold down farmers' 
production expenses.
    Looking ahead, little improvement in major crop markets is expected 
over the next 12 months, unless global crop production moderates from 
recent high levels. However, the financial condition of the farm sector 
is expected to remain stable in 2002 supported by continued strength in 
livestock prices and returns, low interest rates, stable energy prices, 
and continued large government payments.
                outlook for the u.s. and world economies
    The outlook for the global economy is for a continuation of the 
current economic slowdown through 2002. The global economic slowdown is 
expected to constrain growth in demand for agricultural products, but 
will also help to stabilize farm production expenses in 2002. Prior to 
last year, the slowdown in the world economy reflected poor economic 
performance in Asian and Latin American countries. In contrast, a sharp 
downturn in the U.S. economy is a major contributor to the current 
global economic slowdown.
    U.S. Gross Domestic Product (GDP) registered a strong increase of 
5.7 percent during the second quarter of 2000 but then plunged sharply, 
declining by 1.3 percent in the third quarter of 2001. For all of 2001, 
U.S. GDP increased by 1.1 percent. Despite the sharp drop in growth and 
rising unemployment, consumer spending did not contract, helping to 
avoid an even deeper recession. The U.S. economy is forecast to 
register a second year of slow growth in 2002, with the rate of growth 
increasing to 1.6 percent and unemployment holding at about 6 percent. 
The rate of growth is expected to improve throughout the year, as low 
energy prices, low interest rates, and tax cuts gradually increase 
consumer confidence.
    Foreign GDP growth in 2001 was a very slow 1.3 percent and is 
forecast to moderate further to 1.2 percent this year (Oxford 
Economics). Developed economies will be particularly weak, especially 
Japan and Argentina, but prospects are improving in the Middle East, 
and parts of Asia. In addition, Mexico's economy is forecast to grow by 
1.4 percent in 2002 after contracting slightly last year.
                 outlook for u.s. agricultural exports
    The value of U.S. agricultural exports peaked at a record $60 
billion in fiscal year 1996. Over the next 3 years, the value of U.S. 
agricultural exports fell by nearly $11 billion, reflecting increased 
foreign competition and a strong dollar. In fiscal year 2002, the value 
of U.S. agricultural exports is forecast to reach $54.5 billion, up 
from nearly $53 billion last year. The value of U.S. agricultural 
imports is forecast to remain unchanged at $39 billion in fiscal year 
2002.
    The U.S. real agricultural trade-weighted exchange rate has 
appreciated by 30 percent relative to the currencies of countries that 
import U.S. agricultural products over the past 6 years, increasing the 
price importers must pay in terms of their own currency. And over this 
period, the U.S. dollar appreciated 40 percent relative to the 
currencies of U.S. agricultural competitors, serving as an incentive 
for foreign producers to maintain or even expand production. No major 
adjustment in the value of the dollar is anticipated in 2002. Despite 
the current U.S. economic slowdown and low interest rates, foreign 
capital continues to flow into the United States as investors continue 
to view the U. S. economy as providing the most lucrative and least 
risky investment opportunities.
    Large foreign crop production for several consecutive years in a 
row has also contributed to the weakness in U.S. agricultural exports 
over the past several years. Since the early 1970s, world wheat and 
coarse grain production per hectare has varied considerably from year-
to-year, after adjusting for trend, with yield up 1 year and followed 
by a decline the next year. These annual fluctuations in yield 
primarily reflect fluctuations in weather patterns around the world. 
There are two notable exceptions to this up-and-down pattern. The first 
notable exception is the 4-year period of 1984-87 when yields were 
quite consistent, stocks built up, and farm economic problems occurred. 
The second notable exception is the 6-year period of 1996-2001, when 
again yields have been very stable and rising.
                        outlook for farm income
    After bottoming out in 1999 at $188 billion, farm cash receipts 
reached $202 billion in 2001. In 2002, farm cash receipts are forecast 
to reach $204 billion, $3 billion below the record set in 1997 of $207 
billion. Livestock receipts are forecast to hold steady in 2002 at near 
the record of $106 billion set last year. Crop receipts are projected 
to rise $2 billion in 2002 to $98 billion, but remain well below the 
record of $111 billion in 1997. Cash receipts for grains, soybeans, and 
cotton declined from a record $57 billion in 1997 to $40 billion during 
1999-2001 but are projected to increase slightly to $41.5 billion in 
2002.
    Despite improving cash receipts, prospects for net cash farm income 
in 2002 depend on enactment of additional financial assistance to 
producers either in a new Farm Bill or supplemental assistance 
legislation. If no legislation is enacted, net cash farm income would 
decline to under $51 billion, down from the record of $59.5 billion 
last year. However, if legislation is enacted that provides payments 
equal to the average of the payments that would likely be made under 
the House and Senate passed Farm Bills, net cash farm income would be 
in the range of $56-57 billion, similar to the average of recent years. 
In 2002, farmers' total production expenses are forecast to increase by 
$0.6 billion to a record $200 billion. Repair, marketing, and labor 
costs are expected to increase in 2002, with these higher costs about 
offset by lower fertilizer and lime, fuel and oil, and interest 
expenses.
    Net cash income, excluding government payments, measures the net 
income received from the marketplace. Income earned from the market has 
risen from $34 billion in 1999 to $38 billion in 2001 and projected to 
increase to over $40 billion in 2002, reflecting a slow but steady 
improvement in market fundamentals.
    Government payments have offset much of the decline in major crop 
cash receipts since 1998, helping to maintain producers' cash flow. 
Direct government payments to farmers dropped from the record of $23 
billion in 2000 to $21 billion last year, compared with $8 billion in 
1997. In 2001, direct government payments included nearly $4 billion in 
Production Flexibility Contract (PFC) payments, $6 billion in loan 
deficiency payments and marketing loan gains, $1.7 billion in 
conservation program payments, and over $9 billion in emergency (crop 
and market loss) assistance.
    For major field crops, such as wheat, rice, corn, sorghum, oats, 
barley, cotton and soybeans, government payments have been especially 
important in maintaining cash flow. Net cash farm income for major 
field crops averaged slightly under $26 billion during 1999-2000 and is 
projected to fall below $24 billion for crop year 2001, compared with 
the average of $26 billion for the 1995-99 crops. Direct government 
payments were equal to one-third of net cash income for major field 
crops during 1995-99. For the 1999-2000 crops, direct government 
payments were equal to three-fourths of net cash income for major crops 
and account for about the same proportion of net cash income for the 
2001 crop year.
                        outlook for farm finance
    The overall financial condition of the farm sector continues to 
remain fairly strong. The value of U.S. farm real estate rose 3 percent 
during 2001, bringing the value of farm assets to $1.22 trillion, 12 
percent higher than at the end of 1998. Farm debt rose 4.8 percent in 
2001, surpassing $190 billion for the first time since 1984. As a 
result, the farm debt-to-asset ratio rose slightly in 2001 to 15.8 
percent from 15.5 percent in 1999 and 2000, but continues to remain 
well below the level reached during periods mid 1980s farm financial 
crisis.
    In 2002, the farm debt-to-asset ratio is expected to increase 
slightly to 16 percent, reflecting another year in which the value of 
farm assets rises by less than the increase in farm debt. The value of 
farm assets is expected to rise by about 1 percent in 2002, but could 
be higher depending on farm legislation, while farm debt is forecast to 
increase about 2 percent. The slight deterioration in the debt-to-asset 
ratio assumes continuation of current farm programs and may not occur 
if Congress enacts a new farm bill or provides ad hoc assistance to 
producers in 2002. Although farm debt has increased the past 2 years 
and expected to increase again in 2002, most farmers are not as heavily 
leveraged as a decade ago, face lower interest rates, and are generally 
in better financial health.
    All major lenders to agriculture, including USDA, continue to 
experience very low levels of delinquencies, foreclosures, chargeoffs 
and loan restructurings. No agricultural bank failed in 2001 and only 5 
failed during 1994-2000. In the mid 1980s, 60-70 agricultural banks 
were failing annually. Surveys find banks healthy, liquid and ready to 
make loans. Farmers are repaying loans--with the help of government 
payments--and are somewhat hesitant to take out new loans which shows 
prudent behavior on their part. However, bankers in a number of regions 
express pessimism about their borrowers financial positions.
    In addition to record government payments, improved off-farm income 
opportunities for farm households have helped avoid more serious farm 
financial problems. In recent years, about 90 percent of the total 
income of the average farm household is derived from off-farm sources. 
Earnings of farm operator households from off-farm sources averaged an 
estimated $60,000 in 2001, up from less than $36,000 in 1992. Combining 
income from farm and off-farm sources, farm operators averaged over 
$62,000 in total household income in 2001, about 9 percent higher than 
the average income of all U.S. households.
    While national farm financial conditions appear secure, regional 
and sector problems persist. The combination of low prices and adverse 
weather in the Southeast, southern plains and elsewhere has contributed 
to regional pockets of farm financial stress. In addition, production 
agriculture consists of a diverse group of farms and ranches with 
varying degrees of financial success, which a single aggregate 
performance indicator such as net farm income cannot capture.
            outlook for major crop and livestock commodities
    Major crop prices for the 2001/02 season continue to be pressured 
by large global production and ample stocks. Nevertheless, market 
fundamentals are slowly improving. At the end of this season, global 
grain stocks are projected to be down 8 percent from a year ago and the 
lowest since 1995/96. Thus, world grain prices could move up 
significantly in the coming year, if weather adversely affects global 
crop production.
    In 2001, U.S. producers planted the lowest wheat acreage since 
1973. Wheat prices this marketing year are forecast to average $2.75-
$2.85 per bushel, up from last season's $2.62. The increase in price 
reflects lower total supplies and declining world and U.S. carryover 
stocks. Total use is forecast to decrease by 168 million bushels over 
last year's nearly 2.4 billion bushels, as food use, feed use, and 
exports are all expected to decline. Wheat exports are projected to 
fall to 975 million bushels, down 86 million bushels from last season. 
A major factor contributing to lower U.S. exports this season is larger 
wheat production in importing countries. Wheat production in the major 
importing countries rose from 161 million tons last season to a 
projected 165 million tons in 2001/02. U.S. ending stocks are forecast 
to fall for the third consecutive year to 701 million bushels, which 
would be the lowest in 5 years.
    Winter wheat seeded area for 2002 of 41 million acres was down 
fractionally from 1 year ago and the lowest since 1971. Lower plantings 
and reduced carryin stocks are expected to lead to another year of 
reduced supplies. Even so, farm prices may be about unchanged during 
the upcoming season because of increased competition for export 
markets. Wheat exports could fall to 900 million bushels in 2002, the 
lowest level in 30 years. Weather reduced wheat production in Canada 
and the European Union (EU) in 2001. Winter wheat acreage in the EU was 
up sharply last fall and assuming a return to normal weather, the 
United States would face increased competition from the EU and Canada 
in 2002/2003. However, moisture levels continue to remain well below 
normal in Canada.
    The 2001/02 corn crop of 9.5 billion bushels was 4 percent below 1 
year ago, as plantings dropped by nearly 4 million acres, primarily 
reflecting less than ideal planting time weather. The average corn 
yield reached 138.2 bushels per acre in 2001, the second highest on 
record, as the weather was generally good throughout the growing 
season. The smaller crop more than offset larger beginning stocks, 
causing supplies of corn to drop from 11.6 billion bushels last season 
to 11.4 billion bushels in 2001/02. With total supplies down from 1 
year ago, ending stocks are forecast to decrease by 303 million bushels 
to 1.6 billion bushels, the lowest level since 1997/98.
    Total corn use this season is projected to reach a record 9.82 
billion bushels, compared with last season's 9.74 billion bushels, 
reflecting expanding domestic use. Both feed use and food, seed and 
industrial use are expected to reach record levels. Corn used for 
alcohol production is expected to reach 690 million bushels, up 11 
percent from a year earlier and up 74 percent from a decade ago. 
Increasing corn production in importing counties is expected to reduce 
corn exports by 10 million bushels from last season's 1,935 million 
bushels, even though excessive rains and flooding reduced Argentina's 
corn crop in 2001 and China's corn exports are forecast to decline 
because of the elimination of export subsidies following entry into the 
WTO. The farm price of corn for the 2001/02 marketing year is forecast 
to average $1.85-$2.05 per bushel, compared with last year's $1.85 per 
bushel.
    Lower natural gas prices will lower corn producers' fertilizer and 
irrigation costs in 2002. These lower costs are expected to lead to a 
slight increase corn plantings in 2002. However, total corn supplies 
could remain about unchanged from 1 year ago, assuming normal weather. 
U.S. corn exports are forecast to reach about 2 billion bushels in 
2002/03, as expanding world demand offset the effects of a rebound in 
Argentina's corn crop and ample supplies of wheat for feeding. Another 
year of rising exports, an expected expansion of 30 percent in corn 
used for ethanol, and flat supplies could lead to some strengthening of 
market prospects for corn in 2002/03.
    Soybean production was record-high in 2001, reaching nearly 2.9 
billion bushels, up 5 percent from a year earlier. The production 
increase more than offset lower carryin stocks, causing total soybean 
supplies to increase by about 3 percent in 2001/02. Most of the 
increase in supplies is expected to go into higher total use. Domestic 
crush is forecast to exceed last year's record by 2 percent and U.S. 
soybean exports could eclipse last year's record of 1 billion bushels. 
Despite the increase in use, ending stocks are forecast to increase by 
7 percent to 265 million bushels. Soybean prices for 2001/02 are 
projected to average $4.05-$4.45 per bushel, compared with last 
season's $4.54.
    The loan rate provisions of the next farm bill could influence 
soybean plantings in particular. Under the House-passed version of the 
farm bill, the soybean loan rate could be no higher than $4.92 per 
bushel, compared with this season's $5.26, whereas the Senate-passed 
version of the farm bill would reduce the soybean loan rate to $5.19 
and increase loan rates for competing crops. Either version of the farm 
bill would tend to dampen soybean plantings, compared with current law. 
The decline in soybean acreage this year could be muted by the timing 
of the farm bill, since producers may not have much time to evaluate 
the provisions of the new farm bill prior to spring planting. Assuming 
soybean plantings for 2002 are about unchanged from last year, U.S. 
soybean supplies would reach another record in 2002. In addition, large 
South American soybean inventories going into 2002/03 and further 
acreage and production expansion in 2003 will also keep soybeans prices 
under pressure next season.
    China is a major market for U.S. oilseeds. Protein consumption in 
China has increased at above 10 percent per year since 1997, led by 
increases in oilseed crushing capacity, livestock production and shifts 
toward feeding more optimal rations. Growth in production of soybeans 
and other oilseeds has not kept pace, leading to strong gains in 
Chinese imports of U.S. oilseeds. There is considerable concern that 
China may use regulations on imports of biotech products to restrict 
imports of U.S. soybeans and corn. These regulations have led to some 
cancellations of U.S. corn and soybean export sales destined for China 
in recent weeks. At this point, it is unclear to what extent China 
regulations on biotech imports will result in long-term export losses 
and lower prices to U.S. producers.
    Cotton production reached a record 20 million bales in 2001, up 17 
percent from 1 year ago. The increase in production, combined with 
larger carryin stocks, caused total supplies to increase from 21 
million bales in 2000/01 to 26 million bales this season. Despite the 
increase in total supply, U.S. cotton mill use is projected to decline 
from last season's 8.9 million bales to 7.3 million bales, as textile 
imports continue to grow with the strong dollar being a major factor. 
Excluding Mexico, the textile trade weighted value of the dollar has 
risen 30 percent since 1997. In addition, the slowdown in the U.S. 
economy has also hurt mill use. Even though domestic mill use is 
projected to decline, total use is expected to increase this season, as 
larger supplies have made the U.S. more price competitive in world 
markets. Despite a projected increase in exports of 3.5 million bales, 
stocks of cotton at the end of the 2001/02 season are projected to 
reach a burdensome 8.5 million bales, a 16-year high. From August 2001 
through January 2002, the farm price of cotton averaged 31.7 cents per 
pound, compared with last year's season average price of nearly 50 
cents.
    This season's lower price should reduce U.S. and foreign planted 
area in 2002. U.S. exports should be strong again in 2002/03. Even so, 
U.S. stocks are likely to remain large, greatly limiting the prospect 
for much of a rebound in U.S. cotton prices in 2002/03.
    Rice production, in 2001, reached 213 million cwt., up 12 percent 
from the last year and surpassing the previous record of 206 million 
cwt. set in 1999. The strong increase in production caused total 
supplies at the beginning of the crop year to rise by 26 million cwt., 
up 11 percent from the previous year. Both domestic use and exports are 
projected to exceed year ago levels, with total use rising by over 10 
million cwt., as increased supplies and lower prices have made U.S. 
rice more competitive in world markets. Total carryover stocks are 
projected to rise from 28.5 million cwt. last season to nearly 44 
million cwt. at the end of the 2001/02 season, which would be the 
largest carryover in 15 years. The farm price of rice is forecast to 
average $4.00-$4.20 per cwt. this season, the lowest since 1986/87 and 
down from last season's $5.61 per cwt.
    Sugar production dropped below 8 million tons in 2001, down 8 
percent from a year earlier. In order to reduce government inventories 
of sugar and prevent additional forfeitures, USDA announced Payment-in-
Kind (PIK) Programs for the 2000 and 2001 crops under which producers 
could elect to divert a portion of their contracted acreage from 
production in exchange for in-kind payments in the form of CCC-owned 
sugar. At the end of the current marketing year, the CCC is projected 
to hold about 300,000 tons of sugar in inventory, down from nearly 
800,000 tons at the end of last season. The PIK programs have reduced 
stocks and strengthened prices near term. Looking ahead over the next 
several years, import commitments under existing international trade 
agreements (including Mexico), the potential for over quota or second 
tier imports from Mexico, and trend growth in U.S. yields are likely to 
continue to pressure sugar prices, possibly again resulting in CCC loan 
forfeitures and stock accumulation.
    In 2001, hog prices averaged $46 per cwt. for the year, up 2 
percent from a year earlier and up one-third from 2 years ago. Despite 
relatively favorable returns in recent years, production has not 
expanded as in the past. In 2001, the number of sows farrowing was 
below a year earlier in each quarter, except for a slight increase in 
September-November. In addition to a smaller number of sows farrowing 
in 2001, the average number of pigs per litter declined slightly for 
the first time since 1988 and for only the third time in the past 20 
years. As a result, the 2001 pig crop was down 1.3 million head from 
2000. However, higher U.S. imports of hogs and an increase in dressed 
weights caused pork production to increase by 1 percent in 2001.
    Commercial pork production is forecast to be up slightly in 2002 
due primarily to heavier slaughter weights. Hog prices are forecast to 
average $42-$45 per cwt. in 2002, but rising seasonal production could 
push hog prices to the upper $30 range during the fourth quarter. U.S. 
pork exports are forecast to drop off somewhat from the brisk pace of 1 
year ago. U.S. pork exports were up about 21 percent in 2001, 
reflecting increased consumer demand for pork in Japan because of 
Bovine Spongiform Encephalopathy (BSE) and other animal disease 
concerns.
    In 2001, liquidation of the Nation's cattle herd finally led to 
reduced beef production. Beef cow slaughter rose sharply in 2001 and 
large numbers of heifers were moved into feedlots rather than retained 
for herd expansion, as the most severe winter since 1992/93 increased 
cow slaughter during the first quarter of 2001 and drought in many 
areas caused producers to reduce their herds. Despite large numbers of 
heifers moving into feedlots, the number of cattle placed on feed 
dropped 6 percent causing beef production to decline by 2.6 percent in 
2001. Fed cattle prices averaged $72.43 per cwt. in 2001, compared with 
$69.65 the previous year. Fed cattle prices peaked in the first quarter 
with prices declining through the year as the effects of last year's 
winter weather dissipated and exports slowed. The economic slowdown and 
the September terrorist attacks further pressured prices along with 
rapidly rising slaughter weights in the fourth quarter.
    Beef production in 2002 is expected to decline 2 percent from last 
year. Choice steer prices are expected to average $72-$77 per cwt. in 
2002. The February 1 Cattle report indicated that the total number of 
heifers 500 pounds and over is fractionally below last year. This would 
imply that the number of heifers which will be available to be bred in 
late spring or early summer for calving next spring will be about the 
same as last year. If the liquidation phase of the cattle cycle is to 
end, the majority of the herd retention will have to come out of calves 
born this year. These animals would be bred in 2003 for calving in 
2004. If this occurs, it is likely that beef production will not expand 
before 2005. The major constraint to expansion appears to be 
availability of forage. Given dry conditions in many cattle areas, 
producers appear to be holding back on expansion until the forage base 
shows improvement.
    Last year, U.S. beef exports dropped by 8 percent, as Japanese 
consumers reduced beef consumption because of concerns related to 
animal diseases. Prospects for recovery in U.S. beef exports in 2002 
appear remote, as economic conditions in Japan, the strong dollar, and 
continued concerns about the safety of beef will likely prevent a 
rebound in sales to Japan.
    Broiler prices are projected to average 57-61 cents per pound in 
2002, compared with 59 cents per pound in 2001. In response to 
declining prices and returns, producers began reducing the rate of 
expansion in broiler production in 2000. Broiler production rose 2.5 
percent in 2000 which followed a 7-percent increase in 1999. In 2001, 
broiler production increased by 2 percent and is forecast to increase 
by 2.8 percent in 2002.
    Broiler exports continue to show considerable strength. In 2001, 
broiler exports reached 6.2 billion pounds, up 15 percent from a year 
earlier. Increased shipments to Russia accounted for most of the 
increase in U.S. broiler exports in 2001. In 2002, broiler exports are 
expected to total about 6.35 billion pounds, as the slowing world 
economy and the continuing strength of the dollar are expected to 
moderate the growth in broiler exports. This forecast assumes Russia 
does not ban U.S. exports of chicken and turkey meat because of 
concerns related to the use of antibiotics in U.S. broiler production 
and anti-microbial rinses in U.S. poultry processing plants. Since 
Russia accounted for 37 percent of U.S. broiler exports in 2001, such a 
ban would have a very negative effect on leg quarter prices and U.S. 
exports.
    The largest annual drop in milk production since the mid 1980s 
caused milk prices to rise sharply in 2001. In 2001, the all-milk price 
averaged $14.93 per cwt., up from $12.40 in 2000 and surpassed only by 
the record of $15.46 in 1998. The drop in milk production in 2001 
reflected declining cow numbers and lower milk production per cow. 
After increasing in both 1999 and 2000, cow numbers reverted back to 
the much more typical downward trend of the past several decades in 
2001. Milk production per cow in 2001 was adversely affected by 
stressful winter weather, higher than normal summer temperatures, below 
normal forage quality, and tight supplies of replacement heifers.
    Increasing milk production at the end of last year caused milk 
prices to drop sharply and the Commodity Credit Corporation (CCC) to 
resume purchasing nonfat dry milk under the price support program. In 
calendar year 2001, 353 million pounds of nonfat dry milk were 
purchased under the price support program, compared with 558 million 
pounds the previous year. In addition, 141 million pounds of nonfat dry 
milk were exported under the Dairy Export Incentive Program (DEIP). At 
the end of 2001, the CCC held 776 million pounds of nonfat dry milk, 
less than 1 million pounds of butter, and about 4 million pounds of 
cheese in inventory.
    Milk production is expected to grow by about 2.5 percent in 2002, 
assuming a return to more normal summer temperatures and some 
improvement in forage quality. In contrast, commercial dairy product 
demand is expected to increase by less than 2.5 percent in 2002, as 
softening economic conditions lead to less rapid growth in demand for 
dairy products than in recent years. With supplies rising faster than 
demand, the all-milk price is forecast to average $12.85-$13.45 per 
cwt. in 2002, and nonfat dry milk purchases under the price support 
program could continue to remain near last year's pace, unless the 
purchase price is lowered.
    The outlook for horticultural crops is very uneven. As a group, 
cash receipts for horticultural crops are projected to be up in 2002 
and the value of exports is forecast to reach a record $11.3 billion in 
fiscal year 2002. However, farm prices for some horticultural crops, 
including apples, grapefruit, and pears are being adversely affected by 
large supplies.
                               conclusion
    Despite continued low returns in some commodity markets, a strong 
balance sheet, off-farm opportunities, lenders in good shape with ample 
loanable funds, and the prospect of new farm legislation with continued 
financial support, all suggest the farm sector is secure and in 
reasonably good shape as the planting period for the 2002/03 season 
approaches. A few key factors to watch in the coming months that will 
shape this outlook include:
  --The pace of Chinese imports and exports and crop supplies in the 
        major exporters.
  --Resolution of the U.S. farm bill debate, which will affect the 
        amount of support provided to producers and could potentially 
        affect relative loan rates and planting incentives.
  --Transparency of China's biotech regulations to be implemented 
        beginning March 20.
  --Evolution of WTO implementation in China, particularly with respect 
        to the relative incentives provided to grains and oilseed 
        producers, which may affect domestic production of these crops.
  --South American crop developments in the months ahead.
  --The U.S. and global economies.
    Mr. Chairman, that completes my testimony and I would be pleased to 
respond to questions. 











    Senator Kohl. We thank you, Mr. Collins. Before we move on 
to Mr. Penn, I would like to ask Senator Cochran whether he has 
a statement he would like to make.
    Senator Cochran. Mr. Chairman, I appreciate that. I just 
want to join you in welcoming our panel of witnesses today. We 
appreciate your cooperation with our subcommittee in our 
efforts to review and understand the President's fiscal year 
2003 budget proposals under your jurisdiction. I look forward 
to your comments, and our questions and answers that will 
follow.
    Senator Kohl. Thank you, Senator Cochran. Senator Murray, 
do you have a statement?
    Senator Murray. Thank you, Mr. Chairman, it is good to be 
here. Thank you for having this hearing. I do not have an 
opening statement. I look forward to my first full year on the 
subcommittee. Thank you.
    Senator Kohl. Thank you, Senator Murray. Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman. I have a 
statement that I will submit for the record so we can move 
ahead to the panel.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    Thank you Chairman Kohl and Senator Cochran, it is my pleasure to 
join you today in welcoming our many panelists to the subcommittee's 
hearing concerning the state of the farm economy and rural sector. I 
extend greetings to each of you and thank you all for appearing before 
this subcommittee.
    We are all here because we care about the future of rural America 
and family farmers and ranchers. Americans are the envy of the world 
because we enjoy the most affordable and safest food, spending only 11 
percent of our household income on groceries. Yet I am concerned that 
many of the advances we have been making will be lost under the 
proposed budget for USDA in fiscal year 2003. I find it disconcerting 
that USDA suggests the farm sector is secure and in reasonably good 
shape, yet in recent years, 90 percent of the total income of the 
average farm household comes from off-the-farm employment.
    Today, South Dakota farmers receive on average approximately half 
the price for crops they pocketed in 1996. Additionally, many farmers 
and ranchers are paying more each year for critical inputs such as fuel 
and fertilizer. This situates farmers in a price-cost squeeze making it 
nearly impossible to earn a decent farm income that covers total 
production expenses. Overall, the President's budget for agriculture 
fails to provide the kind of financial bridge necessary to help 
America's farmers, ranchers, and rural communities cross the divide 
between recession and prosperity.
    Notwithstanding that we are under significantly different budget 
constraints this year, I do not support the recommended decreases for 
vital rural development programs. The total rural development budget is 
proposed to be cut by $3.5 billion, with significant reductions for 
water and waste water projects, housing assistance, and cooperative 
development in rural sectors of the country. This enormous funding blow 
to ongoing rural development efforts will affect virtually every county 
in the state of South Dakota alone. Rural development is a key 
ingredient in reigniting prosperity in many of our States, and I will 
work to restore funding for rural development programs where I can.
    Furthermore, South Dakota State University (SDSU), a land grant 
institution that relies upon funds from the Cooperative State Research, 
Education, and Extension Service (CSREES) will also suffer from budget 
cuts. I am disappointed that SDSU and other land grant universities 
that provide such vital research and education outreach, have to endure 
a $10 million cut in funding. SDSU and other land-grant universities 
are making a real difference with the funding they receive to maintain 
research, education, and extension activities. American farmers and 
ranchers rely upon the information made available by land grant 
universities, in order to maintain the reputation producing the safest 
food in the world.
    Taking into account the new budget environment we find ourselves in 
today, I still cannot support the recommended cuts to the Agriculture 
Research Service (ARS) budget. It is through the research completed at 
ARS facilities across the country that ensure producers are armed with 
up to date and adequate information in order to improve production. 
Ongoing changes in today's global environment do not permit successful 
producers to be armed with anything but the most current information 
and technological advances. Cuts to agricultural research are 
counterproductive and I will work in this subcommittee to restore some 
of this funding where I can.
    I was pleased to see the President's budget including a small 
increase for the Resource Conservation and Development (RC&D) Program, 
which I consider vital to the 75 percent of the population that is 
served by the 368 RC&D councils nationwide. Yet, this increase does not 
allow for the Department to approve the many proposed councils 
throughout the country. In South Dakota alone, there are seven 
established councils with the hope to have each county involved in the 
effort to improve the quality of life and standard of living in rural 
communities.
    Our work this year will not be easy. But I am confident that if we 
work together, this subcommittee can produce a responsible and 
effective budget for the important functions of the USDA, which will 
have a truly positive impact on the farm economy and rural sector. 
Thank you all for appearing before us today and I thank the Chairman 
and the committee for their time.

    Senator Kohl. Thank you, Senator Johnson. Mr. Penn.

                         STATEMENT OF J.B. PENN

    Dr. Penn. Thank you, Mr. Chairman. I appreciate the 
opportunity to appear before the committee this morning to 
discuss the budget and programs for fiscal year 2003 for the 
Farm and Foreign Agricultural Services mission area in the 
Department. I will be very brief.
    As you know, the Farm and Foreign Agricultural Services 
mission area is at that heart of USDA efforts to assist 
American agriculture to respond to the challenges of the 21st 
century. Our mission area provides price and income supports, 
farm credit and capital assistance, risk management tools, 
conservation assistance, trade expansion and export programs, 
and together these provide a broad-based economic safety net 
for America's farmers and ranchers.
    The 2003 budget proposals fully support this range of 
activities. The proposed budget reflects the $73.5 billion 
agreed to for the new broad-based farm policies for 2002 
through 2011. It fully funds the risk management and crop 
insurance activities. It supports export expansion, provides 
for a program level of over $6 billion for the Department's 
international activities, and it provides for the delivery of 
the large and complex set of farm programs while improving the 
management and the delivery of those programs.
    Our mission area is composed of three major agencies in the 
Department, and I would like to just say a very brief remark 
about each of those and their budgets.
    Starting with the Farm Service Agency, which is our 
principal vehicle for delivering assistance directly to 
farmers, FSA will play a lead role in implementing the programs 
of the new Farm Bill and it continues to enhance its ability to 
provide first-rate service more efficiently to farmers and 
ranchers all across the country. The 2003 proposed level for 
FSA salaries and expenses supports about 5,800 Federal staff, 
11,250 non-Federal county staff, and that's the same level as 
it was in the previous year.
    Now there are some very significant workload implications 
that will arise out of the Farm Bill that's now being 
developed, but because of the provisions of that bill were 
unknown at the time we developed this budget and are still 
unknown at this time, we could not address the workload 
requirements associated with the new Farm Bill. So our budget 
projections do not include any allowances for the increased 
workload because of that bill.
    The workload, as I said, could be fairly considerable 
because the new Farm Bill could well include updating crop 
acreage basis and program yields, something that has not been 
done in many, many years. It could have, perhaps, new payment 
limit provisions, new conservation programs, new farm accounts. 
There could be a considerable number of program modifications 
and new programs that would add substantially to the work load.
    Once we know what the provisions of that bill are, then we 
will complete our assessment of the resource requirements. We 
will work within the Administration, consulting with OMB and 
the other agencies, and we will determine how to proceed from 
that point.
    I would also note that the FSA budget for 2003 supports 
nearly $4 billion in farm loans, about a quarter of which would 
be direct loans and the rest guarantees. That level is just 
slightly below what is available for 2002. By law, a 
substantial portion of the direct loans will be reserved for 
assistance to beginning, limited resource, and socially 
disadvantaged farmers and ranchers.
    Next I turn to the Risk Management Agency. The Federal crop 
insurance program is now one of the strongest parts of the 
safety net available to our Nation's agricultural producers. In 
2001, the crop insurance program provided nearly $37 billion in 
protection on over 211 million acres, which is approaching two-
thirds of the cropland base in this country. The crop insurance 
program has seen a very significant shift in business in the 
past 2 years because the producers that use insurance are 
electing higher levels of coverage as a result of the premium 
subsidies that were provided in the Agricultural Risk 
Protection Act of 2000.
    The 2003 budget requests an appropriation of such ``sums as 
necessary'' as mandatory spending for all costs associated with 
the program's Federal salaries and expenses. I would also note 
that the budget includes a proposal to cap the amount of 
underwriting gains the insurance companies may receive, and 
that proposal was based on the fact that since 1994, the 
insurance companies have received over $2 billion in 
underwriting gains, while the Federal Government has paid about 
$1 billion in excess losses.
    Now, shifting to the international arena, I think one of 
the clearest facts before us is that our farmers and ranchers 
have the capacity to produce far, far more food and fiber than 
we need to meet the domestic market requirements. So if we are 
to have a thriving, profitable farm sector, then we have to 
have access to the customers and the markets that are outside 
our own boundaries. One of the major activities of the Foreign 
Agricultural Service is trying to help with that market 
promotion and market expansion.
    The program includes a very ambitious trade agenda being 
pursued by the entire Administration, which would include 
multilateral trade negotiations under the auspices of the Doha 
agricultural round, regional negotiations such as the free 
trade area of the Americas, and bilateral trade agreements with 
several important countries, Chile and Singapore, perhaps to be 
completed this year.
    In addition, the Foreign Agricultural Service conducts a 
very ambitious program of monitoring and enforcement of the 
existing trade agreements. We try to make sure that people who 
enter into these agreements fully comply with the provisions 
that they have agreed to.
    The budget for the Foreign Agricultural Service has a 
modest increase proposed of $10 million, $6 million of that 
being for absolutely mission critical IT and the rest being for 
various other programs, including the Cochran Fellowship 
Program, which will focus in the coming year on the areas of 
biotechnology and food safety.
    Now I want to also mention in the international arena that 
the Administration conducted a review of U.S. foreign food 
assistance, as Chairman Kohl noted in his opening remarks. The 
President's budget reflects the results of that review in the 
proposal to increase Public Law 480, Titles I and II, to 
provide $1.34 billion in assistance, which would amount to 3.7 
million metric tons of food assistance. Along with the increase 
in Title II, there is a decrease for Section 416(b).
    Overall, Mr. Chairman, we think this is a good budget. It 
is a very modest budget. It doesn't reflect any major changes, 
any major departures in policy from what has existed, and the 
increases that are requested are focused on the areas of most 
urgent need.
    So with that, I will stop and I will be happy to respond to 
questions at the appropriate time.
    [The statements follow:]

                    Prepared Statement of J.B. Penn

    Mr. Chairman and Members of the Committee, I am pleased to appear 
before you today to present the 2003 budget and program proposals for 
the Farm and Foreign Agricultural Services (FFAS) mission area of the 
Department of Agriculture (USDA). With me this morning are the 
Administrators of the three agencies within our mission area: James 
Little, Administrator of the Farm Service Agency; Ross Davidson, Jr., 
Administrator of the Risk Management Agency; and Ellen Terpstra, 
Administrator of the Foreign Agricultural Service. I am also 
accompanied by Mary Chambliss, the Department's Acting General Sales 
Manager, and Stephen Dewhurst, the Department's budget officer.
    Statements by each of the Administrators providing details on the 
agencies' budget and program proposals for 2003 have already been 
submitted to the Committee. My statement will summarize those 
proposals, after which we will be pleased to respond to your questions.
    Mr. Chairman, last year, the Department released a report on food 
and agricultural policy for the 21st century--Food and Agricultural 
Policy: Taking Stock for the New Century. The report assesses the 
current state of the American food and agricultural system and 
identifies the challenges and needs it will face in the new century. 
Based on those findings, the report sets forth a set of goals and 
principles that we believe should guide the development of policy, 
programs, and institutions that will affect the growth and vitality of 
the food and agricultural sector in the new century.
    The programs and services of the FFAS mission area are at the heart 
of the Department's efforts to assist American agriculture respond to 
the challenges of the new century. Through the wide range of services 
provided by our agencies--price and income supports, farm credit 
assistance, risk management tools, conservation assistance, and trade 
expansion and export promotion programs--we provide the foundation for 
a broad-based safety net for our farmers and ranchers.
    The 2003 budget proposals we are discussing today fully support 
these activities and ensure our continued efforts on behalf of 
America's agricultural producers. In particular, the budget supports 
the development of sound policies for the domestic commodity and income 
support, conservation, trade, and related programs in the new Farm Bill 
by providing an additional $73.5 billion in mandatory funding over the 
2002-2011 period. It fully funds our risk management and crop insurance 
activities. It supports the Administration's export expansion goals by 
providing a program level of over $6 billion for the Department's 
international activities and programs. Also, it provides for the 
continued delivery of a large and complex set of farm and related 
assistance programs, while improving management and the delivery of 
those programs.
                          farm service agency
    The Farm Service Agency (FSA) is our frontline agency for 
delivering farm assistance and is the agency the majority of farmers 
and ranchers interact with most frequently. Producers come to FSA to 
participate in farm programs, including programs involving flexibility 
contract or other direct payments, commodity marketing assistance 
loans, loan deficiency payments, farm ownership and operating loans, 
disaster assistance, and conservation programs such as the Conservation 
Reserve Program (CRP). Because FSA will play a lead role in 
implementing provisions of the new Farm Bill, the budget places a 
priority on enhancing the ability of FSA to provide better service to 
our producers more efficiently.
                         farm program delivery
    Current conditions in the farm economy and the substantial level of 
assistance in new programs to be implemented will continue to reinforce 
the need to improve customer service efficiency in FSA and the other 
county-based conservation and rural development agencies. The 
substantial workload that FSA has faced over the past 3 or 4 years is 
expected to continue through 2003, as new Farm Bill programs are 
implemented.
    The proposed 2003 program level for FSA salaries and expenses of 
$1.3 billion will support a ceiling of about 5,800 Federal staff years 
and 11,250 non-Federal county staff years, unchanged from the 2001 
levels and the current estimates for 2002. At the time the budget was 
developed, the workload implications of the new Farm Bill were unclear. 
We will continue to assess the provisions of the Bill as it is 
developed to estimate the workload implications.
    The Administration also places high priority on management 
initiatives and investments in technology to deliver improved, more 
efficient services to rural customers by continuing to streamline and 
modernize the field offices and Service Centers. Although we have 
established a high number of consolidated Service Centers and have made 
major strides in replacing separate-agency, aging information 
technology systems with the Common Computing Environment and re-
engineered business processes, additional steps are needed to realize 
the full benefits.
    A key component in these efforts is the Geographic Information 
System (GIS) which will replace normal hard-copy paper maps and data 
files with an integrated digital system. The GIS will enable producers 
and the Service Center agencies to electronically share and process 
vital information on farm records, soils, and aerial photography in 
ways that can dramatically improve efficiency. The President's budget 
proposes $28 million for this GIS effort as part of the $56 million in 
appropriated funds under the Office of the Chief Information Officer 
for FSA's component of the Common Computing Environment. The Rural 
Development mission area and the Natural Resources Conservation Service 
(NRCS) will provide additional funding, as necessary, to support the 
modernization plan and Service Center initiative.
    FSA also will work on modernizing its farm credit program servicing 
activities, and we will review Service Center office processes and 
structure to explore additional ways to provide services at lower cost.
    The 2003 budget was prepared before the precise nature of a new 
Farm Bill was known, but it is anticipated that most of the programs 
FSA would be required to deliver in 2003 will be governed by the new 
legislation. FSA has been preparing for the challenges that a new bill 
could bring and is evaluating the administrative and workload issues of 
programmatic changes such as updating crop bases and other challenges 
looming for 2002, 2003, and beyond, along with opportunities for 
increased administrative efficiencies and streamlining.
                      commodity credit corporation
    Disaster and commodity price and income support programs 
administered by FSA are financed through the Commodity Credit 
Corporation (CCC). CCC also is the source of funding for a number of 
conservation programs administered by USDA, and it funds many of the 
export programs administered by the Foreign Agricultural Service. CCC 
borrows funds directly from the Treasury to finance those programs.
    Changes over the last decade in commodity, disaster, and 
conservation programs have dramatically changed the level, mission, and 
variability of CCC outlays. CCC net outlays increased from $10 billion 
in 1998 to a record of $32 billion in 2000, and were $22.1 billion in 
2001.
    CCC net outlays for 2003 are currently estimated at $11.6 billion, 
down approximately $5.8 billion from the 2002 estimated level of $17.4 
billion. These are current law baseline estimates and do not include a 
continuation of emergency assistance provided in supplemental 
appropriations acts in recent years. They also do not include program 
changes and new spending likely to be authorized in the Farm Bill. The 
budget does support increased spending for the Farm Bill at levels 
consistent with the 2002 Congressional Budget Resolution and, when this 
is taken into account, CCC net outlays in 2002 and 2003 will likely 
remain closer to the 2001 level.
    The 2002 Agriculture Appropriations Act authorizes CCC to replenish 
its borrowing authority as needed from the Treasury, up to the amount 
of realized losses at the end of the preceding fiscal year. It is 
projected that, in 2002, CCC will draw about $22 billion under that 
authority for 2001 losses. The appropriation to reimburse CCC for net 
realized losses that Congress provided for 2002 was a current, 
indefinite appropriation. This provided CCC with the flexibility to 
request funds as needed from the Treasury, up to the actual losses 
recorded for the most recent year. Without this current, indefinite 
appropriation, CCC would have been unable to replenish fully its 
borrowing authority at the beginning of 2002, and timely assistance to 
producers could have been jeopardized due to insufficient borrowing 
authority.
                         conservation programs
    Conservation program outlays will account for an estimated 10 
percent of CCC expenditures in 2002. The 1996 Federal Agriculture 
Improvement and Reform Act authorized direct CCC funding for the CRP 
administered by FSA and several conservation programs administered by 
NRCS. It also authorized CRP through 2002 and set enrollment in the 
program at 36.4 million acres. The new Farm Bill is expected to 
substantially increase conservation program levels, including those 
funded by CCC.
    At the end of 2003, about 34.9 million acres are projected to be 
enrolled in CRP. In 2001, no general signup was held but a 1-year 
extension was offered on expiring contracts. Also, 20,000 acres were 
enrolled in the Farmable Wetlands Pilot Project. A 1-year extension of 
CRP contracts has been announced for 2002 as well. About 600,000 acres 
are expected to be enrolled under the continuous, non-competitive CRP 
sign-up in 2002. In addition, about 200,000 acres are expected in the 
Farmable Wetlands Pilot Project. For 2003, new Farm Bill provisions 
will be in effect but, for purposes of the budget presentation, 
continuation of existing CRP authorities is assumed, which would allow 
for general, as well as continuous, CRP sign-ups to continue.
                     emergency conservation program
    In order to ensure timely emergency assistance to restore farmland 
damaged by natural disaster, the 2003 budget requests about $49 
million, reflecting the 10-year average, in appropriated funding for 
the Emergency Conservation Program. This will avoid the delay commonly 
faced in providing assistance when no advance funding is provided.
                           farm loan programs
    FSA plays an important role in the safety net available to our 
Nation's agricultural producers by providing a variety of direct loans 
and loan guarantees to farm families who would otherwise be unable to 
obtain the credit they need to continue their farming operations. By 
law, a substantial portion of the direct loan funds are reserved each 
year for assistance to beginning, limited resource, and socially 
disadvantaged farmers and ranchers. For 2003, 70 percent of direct farm 
ownership loans are reserved for beginning farmers and about 35 percent 
are made at a reduced interest rate to limited resource borrowers, who 
may also be beginning farmers.
    The 2003 budget includes funding for about $700 million in direct 
loans and $3 billion in guarantees. Although these levels are down 
slightly from 2002 totals, they do not reflect any change in policy. 
The reductions are due primarily to technical re-estimates of subsidy 
rates for the direct loan programs that have made those programs more 
expensive to operate. However, we believe the proposed loan levels will 
be sufficient to meet demand in 2003.
    The 2003 budget also maintains funding of $100 million for the Boll 
Weevil Eradication program and $2 million for the Indian Land 
Acquisition program, the same levels that were provided in 2002. For 
emergency disaster loans, carryover funding from 2002 is expected to 
provide sufficient credit in 2003 to producers whose farming operations 
have been damaged by natural disasters.
                         risk management agency
    The Federal crop insurance program represents one of the strongest 
safety net programs available to our Nation's agricultural producers. 
It reflects the principles set forth in the Department's report on food 
and agriculture in the 21st century by providing a safety net that is 
compatible with international trade commitments, creates products and 
services that are market driven, harnesses the strengths of both the 
public and private sectors, and reflects the diversity of the 
agricultural sector.
    In 2001, the crop insurance program provided nearly $37 billion in 
protection on over 211 million acres, which is about 5 million acres 
more than were insured in 2000. However, the crop insurance program has 
seen a significant shift in business over the past 2 years--producers 
have chosen to buy-up to higher levels of coverage as a result of 
increased premium subsidies provided in the Agricultural Risk 
Protection Act of 2000 (ARPA). Although total acres insured have not 
increased dramatically, there has been a major shift in coverage. For 
example, participation at coverage levels of 75 percent or more has 
increased by more than 50 percent. The number of policies and acres and 
levels of liability and premiums all increased more than 40 percent for 
coverage levels of 70 percent and higher.
    The 2003 budget requests an appropriation of ``such sums as 
necessary'' as mandatory spending for all costs associated with the 
program, except for Federal salaries and expenses. This level of 
funding will provide the necessary resources to meet program expenses 
at whatever level of coverage producers choose to purchase and can 
accommodate the effects on participation that might result from Farm 
Bill and other changes.
    Our current projection of mandatory funding needs for the program 
reflects a modest decrease, from $2.9 billion in 2002 to $2.8 billion 
in 2003. This projection is based on USDA's latest estimates of planted 
acreage and expected market prices for the major agricultural crops, 
and assumes that producer participation remains essentially the same as 
it was in 2001.
    The 2003 budget includes a proposal to cap the amount of 
underwriting gains the insurance companies may receive at 12.5 percent 
of their retained premium. This proposal is expected to reduce program 
costs by about $115 million annually. Since 1994, insurance companies 
have received over $2 billion in underwriting gains while the Federal 
Government has paid about $1 billion in excess losses. As a group, the 
companies have not experienced a loss since the devastating Midwestern 
floods of 1993, when they posted a combined loss of $82 million. In the 
last 8 years, they have recovered that loss nearly 25 times over.
    For salaries and expenses of the Risk Management Agency, $76 
million in discretionary spending is proposed, an increase of $1.3 
million above the 2002 level of $74.7 million.
                      foreign agricultural service
    Lowering trade barriers and opening new markets overseas are among 
the Administration's highest priorities for American agriculture. The 
basis for that commitment is established in our report on food and 
agricultural policy for the 21st century. As the report makes clear, 
trade is critical to the long-term health and prosperity of the 
American agricultural sector.
    More than 96 percent of the world's population lives outside the 
United States, so it stands to reason that is where most future growth 
in global food consumption will occur. With agricultural production in 
this country far exceeding our needs and growing at a pace faster than 
the domestic market can absorb, it is vitally important that our 
farmers and ranchers have access to growing overseas markets.
    The report on food and agricultural policy emphasizes that 
enhancing the competitiveness of U.S. agriculture in the world 
marketplace must be one of the primary objectives of our farm policy. 
It also sets forth a trade agenda for the 21st century and lays out a 
number of strategies for achieving that objective. One of the most 
important of those strategies is continuing the liberalization of 
global agricultural trade. America's farmers and ranchers stand to gain 
a great deal from further trade reform through increased access to 
markets overseas and a reduction in unfair competition in those 
markets.
    The new round of multilateral trade negotiations is at the center 
of our trade liberalization efforts. Those negotiations received an 
important boost by the negotiating framework agreed to in Doha, Qatar 
last November. With that agreement as a foundation, the United States 
can now pursue our ambitious agenda for agricultural reform 
negotiations, including substantial reductions in tariffs and increased 
market access, elimination of export subsidies, reform of state trading 
enterprises, and tighter rules on trade-distorting domestic support. 
Doha was also important as both China and Taiwan were approved formally 
for accession to the World Trade Organization (WTO), which furthers our 
pursuit of open markets and opens a wide range of new marketing 
opportunities for our producers and exporters.
    We also are pursuing trade liberalization through both regional and 
bilateral negotiations. These include negotiations to establish a Free 
Trade Area of the Americas that will encompass virtually all of the 
Western Hemisphere, as well as bilateral negotiations aimed at 
establishing free trade agreements with Chile and Singapore. Another 
important element of our trade agenda is monitoring and enforcement of 
existing trade agreements. We are working diligently to ensure that our 
trading partners comply fully with the terms of those agreements and do 
not institute technical barriers to trade that run counter to their 
spirit.
    Another strategy laid out in the report on 21st century agriculture 
is ensuring we have the proper tools needed to pursue our export 
expansion objectives in an increasingly competitive environment. At 
USDA, having the appropriate tools means having effective export 
promotion and market development programs, as well as the necessary 
infrastructure to implement them.
    Our budget proposals for the Department's international programs 
and activities for 2003 are designed to ensure that we have the 
necessary resources to achieve our export expansion objectives, using 
the statutory authorities presently available to us. We recognize that, 
in the case of the export activities funded through mandatory spending, 
the pending Farm Bill may change the level of funding that will be 
available for both this year and 2003. Indeed, a portion of the 
additional funding for the Farm Bill included in the budget estimates 
is available for these programs.
                       fas salaries and expenses
    The Foreign Agricultural Service (FAS) is the Department's lead 
agency in implementing most of our international activities and plays 
an absolutely crucial role in our trade expansion efforts. For 2003, 
the budget provides $140 million for FAS, an increase of $9.4 million 
above the 2002 level. Included in the FAS request is much-needed 
funding to support an electronic-Government initiative that will 
upgrade the agency's information technology (IT) resources and 
capabilities, and modernize its business practices and operations. Over 
the last year, FAS has faced a series of computer-related crises that 
have threatened to cripple agency operations and communications. This 
is a particularly serious problem for an agency that has offices 
situated throughout the world and must work closely on a daily basis 
with many different agencies, such as the State Department and Office 
of the U.S. Trade Representative. FAS' modernization plans have been 
reviewed and approved by both the Department's Chief Information 
Officer and the Office of Management and Budget, and have been found to 
be consistent with USDA's long-term goals and strategies for business 
process and IT reform.
    The budget also provides funding to develop a plan to establish a 
standardized information system for all U.S. foreign food aid programs 
that will be accessible via the Internet to administering agencies, 
vendors, and grantees. The system will facilitate the distribution of 
information on U.S. food aid activities and operations, as well as 
improve program administration and execution.
    The FAS proposals also include increased funding of $1 million for 
the Cochran Fellowship Program. This is a highly successful program 
that has provided training and helped to establish positive linkages 
with many agricultural officials throughout the world. The additional 
funding will expand programming in a number of important areas, 
including biotechnology, food safety, WTO accession requirements, and 
the quality and marketing of U.S. high value agricultural products.
            export promotion and market development programs
    Another key to having the proper trade expansion tools is to ensure 
adequate funding for the Department's export promotion and market 
development programs, which our budget proposals are designed to do. 
For the CCC export credit guarantee programs, the largest of our export 
programs, the budget includes a program level of $4.2 billion. This is 
an increase of $300 million above the projected 2002 level, reflecting 
continued very strong growth in the supplier credit guarantee program.
    For the Foreign Market Development (Cooperator) Program, Market 
Access Program, and Quality Samples Program, the budget includes total 
funding of $120 million, unchanged from this year's level. Both the 
House and Senate versions of the Farm Bill provide increased funding 
for both the Cooperator Program and MAP for both 2002 and 2003. As 
noted earlier, a portion of the additional funding for the Farm Bill 
included in the budget could be allocated to these activities.
    The budget also includes an estimated program level of $478 million 
for the Export Enhancement Program, the maximum level allowed under our 
WTO export subsidy reduction commitments, and $63 million for the Dairy 
Export Incentive Program, a slight increase over the current estimate 
for 2002.
                        foreign food assistance
    As the Committee is aware, the Administration has undertaken a 
review of U.S. foreign food assistance activities in order to reform 
and rationalize their implementation and to strengthen their 
effectiveness. Among the results of that review is the decision to 
reduce the number of programs through which assistance is provided and 
to redefine roles in order to eliminate overlap. As a result, USDA will 
continue to carry out government-to-government programs, while the 
Agency for International Development (AID) will assume responsibility 
for programs carried out in cooperation with private voluntary 
organizations, cooperatives, and the World Food Program. Another 
outcome is the decision to provide a more secure and predictable 
foundation for our overseas food aid activities by reducing their 
reliance on the year-to-year availability of surplus commodities. At 
the same time, these activities will largely be funded through 
discretionary sources, subject to Congressional review and approval, 
and with reduced reliance on mandatory CCC funding.
    The results of the Administration's review are reflected in the 
2003 budget and program proposals for U.S. foreign food aid activities. 
For Public Law 480 food assistance, a total program level of $1.34 
billion is provided, which is expected to support total commodity 
shipments of 3.7 million metric tons.
    This includes a program level of $160 million for Title I credit 
sales, which is expected to support approximately 700,000 metric tons 
of commodity assistance. For Title II donations, the budget provides a 
program level of $1.18 billion, an increase of $335 million above the 
2002 enacted level. The proposed program level for Title II is expected 
to support 3 million metric tons of commodity assistance.
    Consistent with the results of the food aid review, donations of 
commodities under section 416(b) authority that rely on the purchase of 
surplus commodities by CCC will not be continued in 2003. However, 
commodities that are acquired by CCC in the normal course of its 
domestic support operations will be available for donation through 
government-to-government agreements. Current CCC baseline estimates 
project a limited supply of surplus nonfat dry milk that could be made 
available for donation under section 416(b) authority in 2003.
    Finally, the 2003 budget proposes a change in the funding mechanism 
for meeting the costs of U.S. cargo preference requirements under the 
foreign food assistance programs. The Administration is proposing no 
change in the current requirement that 75 percent of all U.S. food aid 
commodities be shipped on U.S. flag vessels when they are available at 
fair and reasonable rates. However, the budget does propose to 
eliminate the current arrangement under which the Maritime 
Administration reimburses the Public Law 480 programs or, in the case 
of section 416(b) and Food for Progress donations, CCC for one-third of 
the costs of complying with cargo preference requirements. This change 
will eliminate a duplicative financing system, reduce record-keeping, 
and lower administrative costs. It will also enhance programming 
objectives by eliminating uncertainty near the end of the fiscal year 
regarding the timing and receipt of reimbursement payments.
    The 2003 budget includes $45 million in the Public Law 480 budget 
request to offset the elimination of Maritime Administration 
reimbursements, and a legislative proposal to implement the proposed 
change in financing will be transmitted to Congress in the near future.
    This concludes my statement, Mr. Chairman. The agency 
administrators and I would now be pleased to answer any questions you 
and Members of the Committee might have.
                                 ______
                                 

                    Biographical Sketch of J.B. Penn

    Dr. J.B. Penn was sworn in as under secretary for farm and foreign 
agricultural services by Agriculture Secretary Ann M. Veneman on May 
25, 2001.
    Before his appointment to USDA, Penn was Senior Vice President and 
Manager of Sparks Companies, Inc.'s Washington office. Prior to joining 
Sparks, he was President of Economic Perspectives, Inc. from 1981 to 
1988.
    Penn's government experience includes service as Deputy 
Administrator for Economics of the USDA's Economics and Statistics 
Service and as Senior Staff Economist for the President's Council of 
Economic Advisers.
    A widely respected agricultural economist, Penn has also served on 
numerous missions and task forces, including two to Poland led by Nobel 
Laureate Norman E. Borlaug. He also was a member of Presidential 
Agricultural Task Forces sent to Honduras in 1982 and Ecuador in 1984, 
as well as a similar Mission to Guatemala in 1987.
    Penn received his BS in Agriculture from Arkansas State University 
in 1965. In 1967 he earned a MS in Agricultural Economics from 
Louisiana State University. He earned a PhD in Agricultural Economics 
from Purdue University in 1973.
    Penn is a member of several professional organizations including 
the American Agricultural Economics Association; Bennett Agricultural 
Roundtable; Council on Food, Agriculture, and Resource Economics; and 
the Farm Foundation. In 1988 he became a founding member of the 
Foundation for the Development of Polish Agriculture.
    Penn has authored or co-authored numerous journal articles, 
technical reports, research monographs, book chapters and popular 
reports. He co-authored Agricultural and Food Policy (fourth edition), 
which is widely used in U.S. universities. He has been a frequent 
speaker before industry groups and associations. He also has received 
numerous awards, the most recent being Distinguished Alumnus from the 
College of Agriculture at Purdue University.
                                 ______
                                 

  Prepared Statement of James R. Little, Administrator, Farm Service 
                                 Agency

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to present the fiscal year 2003 budget for the Farm Service 
Agency (FSA).
    The President's Budget for FSA and the Commodity Credit Corporation 
(CCC) provides for spending increases of $73.5 billion over the 
baseline estimates for the fiscal year 2002-2011 period, consistent 
with the tenets of the congressional Budget Resolution for those fiscal 
years. About $69 billion of this increase covers CCC-funded activities, 
including farm commodity and income support, conservation, and export 
and related programs. Although a year-by-year distribution of this 
increase cannot be accurately determined until a new farm bill is 
enacted, ``placeholder'' estimates are reflected in the Budget for both 
fiscal year 2002 and 2003. In contrast, our Salaries and Expenses 
budget does not reflect an increase, despite the fact that our 
administrative requirements are expected to increase significantly as 
we implement and administer the new bill. For planning purposes we are 
working diligently to forecast the workload impacts and related costs 
of the potential scenarios contained in the House- and Senate-passed 
bills. Once program provisions become clarified by a conference 
agreement, we will be able to provide definitive estimates of both 
start-up and ongoing administrative costs of the new act.
    FSA will be impacted significantly by the commodity and 
conservation provisions of the new act. We are already engaged in 
preparing ourselves so we can hit the ground running and provide for 
prompt and efficient program delivery once the President signs the bill 
into law. For example, we are already examining a range of 
administrative and programmatic issues, including how we will update 
crop bases. We are also engaged in a number of other initiatives 
designed to improve the overall operation of the agency and better 
serve our customers no matter what the final shape of the new farm 
bill. I'd like to highlight a few of these areas.
Technology
    Over the last several years the Department has made considerable 
progress in its ongoing effort to collocate agencies into one-stop 
Service Centers throughout the country. To realize the full benefit of 
the new office structure, improved information management, data sharing 
between the Service Center agencies, and retooling our processes are 
essential. Through collaboration and cooperation with our sister 
agencies--the Natural Resources Conservation Service, the Rural 
Development mission area, and the Risk Management Agency--we have made 
significant progress toward achieving this goal. Some examples include:
  --FSA, on behalf of the county-based agencies, recently released 
        software to State and county offices to implement the State and 
        County Information Management System (SCIMS). This software, 
        which merges legacy name and address data into the SCIMS 
        intranet database, is an important first step in information 
        sharing among Service Center agencies. It will eliminate the 
        need for each agency to maintain its own customer 
        identification system and will lead us toward an integrated, 
        almost seamless, automated environment servicing all Service 
        Center agencies. This is one of the critical elements toward 
        putting the ``E'' in e-Government.
  --FSA is working closely with the other county-based agencies to 
        enable agricultural producers to access and file electronically 
        all forms and selected records by June 20, 2002, in compliance 
        with the mandates set forth in the Freedom to E-File Act. 
        Through collaboration with the Office of the Chief Information 
        Officer, the infrastructure has been put in place and a process 
        is being developed to ensure that all major program benefits 
        can be delivered electronically. This capability, coupled with 
        other streamlining efforts and improvements, will further 
        improve FSA's service delivery and customer satisfaction.
  --Another key component of technology improvement is the Geographic 
        Information System (GIS), which offers the potential to 
        transform the way the Service Centers do business by replacing 
        manual, hard-copy processes with an integrated digital system. 
        When fully operational, GIS will provide a seamless database 
        encompassing aerial photography, soil information, customer 
        information, and farm records, and will enable us to eliminate 
        the printing and storage of paper maps. Service Center agencies 
        have been collaboratively investing in and implementing GIS and 
        have begun the early phases of implementation. The system is 
        now at a critical juncture in providing digital geospatial data 
        and the tools to make practical use of the information 
        collected. FSA's budgetary component includes $27.8 million 
        under the Department's Common Computing Environment account to 
        accelerate progress on the GIS to help comply with the mandates 
        of the Freedom to E-File Act and Government Paperwork 
        Elimination Act. In addition, the President's Management 
        Initiatives direct the Department to explore the use of CCC 
        funding of private sector support for these initiatives. We 
        will be working with the Department to determine how best to 
        leverage our resources to achieve this mandate. Also, FSA is 
        involved with the government-wide Quicksilver initiative called 
        Geospatial One-Stop. The Department of Interior is the lead 
        agency on this initiative, which will significantly enhance the 
        implementation of e-Government by making geospatial data more 
        accessible and usable. The Geospatial One-Stop builds upon 
        existing capabilities to accelerate the development of the 
        National Spatial Data Infrastructure, technology, policies, and 
        standards that support ``one-stop'' access to the Federal 
        Government's spatial data assets.
Program Integrity
    Under the provisions of the Agricultural Risk Protection Act 
(ARPA), FSA is partnering with the Risk Management Agency (RMA) to 
enhance program integrity and compliance for RMA insurance products. 
While RMA is the lead for this effort, FSA has been working closely 
with RMA and during fiscal year 2001 trained approximately 2,500 local 
FSA personnel to assist RMA in obtaining evidence of program abuse and 
fraud. In addition, through the alliance established between FSA and 
RMA and in collaboration with insurance providers, more than $15 
million in improper insurance claim payments were recovered in fiscal 
year 2001. Efforts are also under way to reconcile data collected by 
our two agencies to ensure data consistency and compliance under 
provisions of ARPA.
Program Outreach
    FSA is committed to reaching out to producer populations that have 
been under-served by our programs. Toward this end, the Secretary 
recently signed a cooperative agreement with the National Tribal 
Development Association to implement the National FSA American Indian 
Credit Outreach Initiative. As a 4-year pilot program in Montana, this 
program has doubled the number of Montana Indians accessing FSA farm 
loans and, through pre-loan education and counseling, has achieved a 
delinquency rate that is half the national average. In order to 
replicate this success nationwide, the expanded cooperative agreement 
outlines a 3-year phased approach to ensure orderly and cost-effective 
expansion of the initiative to all Federally recognized Indian tribes 
in the contiguous 48 States. We plan to bolster other outreach efforts, 
as well, to ensure that all under-served populations are served in all 
parts of the Nation.
Recruitment
    To improve the diversity of our workforce, particularly in the 
field, FSA is taking a number of actions to improve recruitment efforts 
of minorities, especially Hispanics. These efforts are designed to 
remove barriers that often limit minorities' access to employment in 
FSA. We have established Regional Recruitment Teams that coordinate 
broad regional and agency-wide recruitment efforts to more effectively 
target minority applicants, particularly in the States and counties 
where most of our vacancies exist and/or our diversity is not 
representative of the local civilian population. These teams 
participate in recruitment fairs, conferences, and trade shows to pool 
a region's vacancies so that we have multiple occupations and vacancies 
to discuss with potential applicants. FSA is also increasing its 
mentoring programs with schools and organizations, particularly schools 
with large minority populations, where we sponsor career planning 
workshops. In addition, we are adopting an on-line application system 
that will make it easier to apply for agency vacancies.
                            budget requests
    Turning now to the specifics of the 2003 Budget, I would like to 
highlight our proposals for the commodity and conservation programs 
funded by the Commodity Credit Corporation (CCC); the farm loan 
programs of the Agricultural Credit Insurance Fund; our other 
appropriated programs; and administrative support.
                      commodity credit corporation
    Domestic farm commodity price and income support programs are 
administered by FSA and financed through CCC, a government corporation 
for which FSA provides operating personnel. Commodity support 
operations, handled primarily through loans, payment programs, and some 
limited purchase programs, currently include corn, barley, oats, grain 
sorghum, wheat and wheat products, soybeans, minor oilseed crops, 
cotton (upland and extra long staple), rice, tobacco, milk and milk 
products, peanuts, and sugar.
    CCC is also the source of funding for the Conservation Reserve 
Program (CRP) administered by FSA, as well as many of the conservation 
programs administered by the Natural Resources Conservation Service. In 
addition, CCC funds many of the export programs administered by the 
Foreign Agricultural Service. When authorized by the Secretary or 
through legislation, CCC also finances various disaster assistance 
programs.
Program Outlays
    The 2003 budget estimates largely reflect supply and demand 
assumptions for the 2002 crop, based on October 2001 data. CCC net 
expenditures for fiscal year 2003 are estimated at $11.6 billion, down 
$5.8 billion from a level of $17.4 billion in fiscal year 2002, and 
continuing the downward trend from CCC's record high of $32.3 billion 
in fiscal year 2000.
    The net decrease in projected fiscal year 2003 CCC expenditures 
primarily reflects the expiration of $10 billion in 2001 emergency and 
market loss assistance authorized by the Agricultural Risk Protection 
Act, the 2001 Agriculture Appropriations Act, and two fiscal year 2001 
supplemental appropriations. In fiscal year 2002, about $260 million in 
carryover market loss assistance payments have already been made. 
However, no such assistance payments are reflected in the Budget for 
fiscal year 2003. Other components include decreases of about $2.3 
billion in loan deficiency payments and nearly $313 million in Section 
416 ocean transportation, partially offset by increases of $20 million 
in production flexibility contract payments and $43 million in non-
insured crop assistance payments.
Reimbursement for Realized Losses
    The fiscal year 2002 Appropriations Act authorizes CCC to replenish 
its borrowing authority as needed from Treasury, up to the amount of 
realized losses recorded in CCC's financial statements at the end of 
the preceding fiscal year. Under this authority, we are projecting that 
in fiscal year 2002 CCC will draw approximately $22.1 billion for 
fiscal year 2001 losses.
Conservation Reserve Program
    The Conservation Reserve Program (CRP), administered by FSA, is 
USDA's largest conservation/environmental program. It is designed to 
cost-effectively assist farm owners and operators in conserving and 
improving soil, water, air, and wildlife resources. This assistance is 
accomplished through the conversion of highly erodible and other 
environmentally sensitive acreage from the production of agricultural 
commodities to a long-term resource-conserving cover. CRP participants 
enter into contracts for periods of 10 to 15 years in exchange for 
annual rental payments, along with cost-share and technical assistance 
for installing approved conservation practices. The authorizing 
legislation currently allows enrollment of up to 36.4 million acres. 
The program is administered through general signups, normally held 
annually through a competitive bid process, and an ongoing continuous 
signup for selected high-impact practices such as riparian buffers and 
filter strips.
    In fiscal year 2001, no general CRP signup was held, but a 1-year 
extension was offered for contracts expiring during the fiscal year. In 
addition, about 20,000 acres were enrolled in the Farmable Wetlands 
Pilot Project. For fiscal year 2002, again, no general signup is 
expected due to the uncertainty of a new farm bill and its pending 
implementation date. However, a 1-year extension opportunity was 
announced in January for the 1.7 million acres under contracts expiring 
this fiscal year. About 600,000 new acres are expected to be enrolled 
under continuous signup, including acres under the Conservation Reserve 
Enhancement Program (CREP), and about 200,000 acres are anticipated 
under the Farmable Wetlands Pilot Project. The fiscal year 2003 Budget 
assumes a general signup of about 1.8 million acres as well as 
enrollment of another 800,000 acres under continuous signup and the 
CREP.
    In fiscal year 2002, CCC will pay approximately $1.68 billion for 
rental costs and about $120 million for sharing the cost of 
establishing permanent cover on the enrolled acreage. The bulk of the 
rental payments, covering acres enrolled in regular signups, was issued 
early in the fiscal year. For fiscal year 2003, the budget projects CCC 
costs of approximately $1.86 billion, consisting of $1.73 billion for 
rental payments on previously enrolled and extended acres, and $126 
million for cost-share assistance.
                           farm loan programs
    The loan programs funded through the Agricultural Credit Insurance 
Fund provide a variety of loans and loan guarantees to farm families 
that would otherwise be unable to obtain the credit they need to 
continue their farming operations.
    The fiscal year 2003 Budget proposes a total program level of about 
$3.8 billion, a decrease of $89 million from fiscal year 2002. Of this 
total, $3 billion is requested for guaranteed loans, offered in 
cooperation with private lenders, to serve a larger proportion of 
borrowers through these programs.
    For direct farm ownership loans we are requesting a loan level of 
$100 million, a decrease of $47 million from the fiscal year 2002 
appropriated level. The proposed program level would enable FSA to 
extend credit to about 1,000 small and beginning farmers to purchase or 
maintain a family farm. In accordance with legislative authorities, FSA 
has established annual county-by-county participation targets for 
members of socially disadvantaged groups, based on demographic data. 
Also, 70 percent of direct farm ownership loans are reserved for 
beginning farmers and about 35 percent are made at a reduced interest 
rate to limited resource borrowers, who may also be beginning farmers. 
For direct farm operating loans we are requesting a program level of 
$600 million, $11 million under the fiscal year 2002 appropriated 
level, to provide nearly 14,500 loans to family farmers.
    For guaranteed farm ownership loans in fiscal year 2003, we are 
requesting a loan level of $1 billion, the same as fiscal year 2002. 
This program level will provide approximately 4,500 farmers the 
opportunity to acquire their own farm or to preserve an existing one. 
One critical use of guaranteed farm ownership loans is to allow real 
estate equity to be used to restructure short-term debt into more 
favorable long-term rates. For guaranteed farm operating loans we 
propose an fiscal year 2003 program level of $2 billion, a decrease of 
$6 million from 2002. This level will enable about 16,500 producers to 
finance their farming operations. This program enables private lenders 
to extend credit to farm customers who otherwise would not qualify for 
commercial loans and ultimately be forced to seek direct loans from 
FSA.
    In addition, our budget proposes to continue the current program 
levels of $2 million for Indian tribal land acquisition loans and $100 
million for boll weevil eradication loans. For emergency disaster 
loans, carryover funding from 2002 is expected to provide sufficient 
credit to producers whose farming operations have been damaged by 
natural disasters.
                      other appropriated programs
State Mediation Grants
    State Mediation Grants assist States in developing programs to deal 
with disputes involving a variety of agricultural issues--distressed 
farm loans, wetland determinations, conservation compliance, 
pesticides, and others. Operated primarily by State universities or 
departments of agriculture, the program provides neutral mediators to 
assist producers, primarily small farmers, in resolving disputes before 
they culminate in litigation or bankruptcy.
    States with certified mediation programs may request grants of up 
to 70 percent of the cost of operating their programs. The fiscal year 
2003 Budget requests $4 million, an increase of $507 thousand, to 
extend the program to 32 States. So far in fiscal year 2002, 28 States 
have received mediation grants.
Emergency Conservation Program
    To restore farmland damaged by natural disasters and return it to 
productive agricultural use, the fiscal year 2003 Budget requests $48.7 
million for the Emergency Conservation Program (ECP). As of March 1, 
$11.5 million has been allocated in fiscal year 2002 to share the cost 
of repairing damage caused by drought, floods, tornadoes, and other 
disasters across the country. With more than half of this fiscal year 
remaining and the hurricane season still ahead, most, if not all, of 
the available funding is likely to be allocated by the end of the year. 
An fiscal year 2003 appropriation would ensure timely emergency 
assistance to producers.
Dairy Indemnity Program
    The Dairy Indemnity Program (DIP) compensates dairy farmers and 
manufacturers who, through no fault of their own, suffer income losses 
on milk or milk products removed from commercial markets due to 
residues of certain chemicals or other toxic substances. Payees are 
required to reimburse the Government if they recover their losses 
through other sources, such as litigation. The fiscal year 2003 
appropriation request of $100 thousand, together with unobligated 
carryover funds expected to be available at the end of fiscal year 
2002, would cover a higher than normal--but not catastrophic--level of 
claims. While the usage of this program has been low in recent years, 
DIP is a potentially important element in the financial safety net for 
dairy producers in the event of a serious contamination incident.
                         administrative support
    The costs of administering all FSA programs are funded by a 
consolidated Salaries and Expenses account. The account is comprised of 
direct appropriations, transfers from program loan accounts under 
credit reform procedures, user fees, and advances and reimbursements 
from various sources.
    The fiscal year 2003 Budget requests $1.34 billion from 
appropriated sources, including credit reform transfers covering 
subsidies. Included in the request is $86 million to cover GSA rental 
payments; the accruing cost of retirement for current employees covered 
by the Civil Service Retirement System; and the accruing cost of post-
retirement health benefits for current employees. These items were 
previously funded outside of FSA's appropriations on either a 
departmentwide or a governmentwide basis. The Explanatory Notes 
provided to the Committee show comparable levels for these items in 
fiscal year 2001 and 2002.
    The Salaries and Expenses budget reflects a net increase of $49 
million in fiscal year 2003, primarily for pay-related costs, including 
the cost of maintaining permanent county office staff-years that were 
supported in 2002 with funds carried forward from 2001.
    As I mentioned previously, with divergent versions of the farm bill 
pending at the time of the budget's development, our estimates do not 
provide for any costs specifically associated with implementing or 
administering the new legislation. In the absence of farm bill workload 
assumptions, the Budget shows straightlined employment levels of 5,806 
Federal and 11,251 non-Federal county staff-years, which reflect the 
workload of recent years when significant supplemental assistance has 
been provided. However, new program requirements under the new farm 
bill are likely to call for significant resources to implement and 
administer. Once the new program provisions are in place, we will 
provide updated estimates of fiscal year 2003 staffing requirements and 
related costs.
    Mr. Chairman, this concludes my statement. I will be happy to 
answer your questions and those of the other Subcommittee Members.
                                 ______
                                 

                 Biographical Sketch of James R. Little

    James R. Little is the Administrator of USDA's Farm Service Agency 
(FSA). As Administrator, Mr. Little is responsible for the 
administration of farm commodity and conservation programs, farm loan 
programs, and certain disaster and Federal crop insurance programs. 
Many FSA programs are financed and carried out through the facilities 
of the Commodity Credit Corporation (CCC), a wholly-owned Government 
corporation with a $30 billion line of credit with the U.S. Treasury. 
Mr. Little also serves as the Executive Vice President of CCC. 
Previously, Mr. Little served as Treasurer and Controller of CCC. Prior 
to his most recent appointment, Mr. Little was FSA's Acting 
Administrator.
    Mr. Little has spent his entire professional career with USDA. 
Prior to serving in his current position, he was Associate Chief 
Financial Officer for Financial Operations. In this capacity, he 
provided oversight to USDA's overall financial operations, with an 
emphasis on ensuring that USDA's mission agencies complied with United 
States Government accounting standards and regulations involving assets 
valued at nearly $120 billion. Mr. Little is a Certified Government 
Financial Manager.
    Mr. Little began his professional career with USDA at the grass 
roots level serving as a staff accountant with the former Rural 
Electrification Administration, now a part of the Rural Development 
mission area. He worked his way up through the ranks, holding 
leadership positions in the Federal Crop Insurance Corporation, now the 
Risk Management Agency, and the former Agricultural Stabilization and 
Conservation Service, now FSA. With more than 31 years of total Federal 
service, Mr. Little has extensive financial, management, and program 
experience, particularly with USDA's county-based agencies.
    Mr. Little, a native of Charlotte, North Carolina, has a Bachelor 
of Science degree from the Virginia Polytechnic Institute in 
Blacksburg, Virginia. He and his wife Bonnie are the parents of one 
daughter.
                                 ______
                                 

   Prepared Statement of Ross J. Davidson, Jr., Administrator, Risk 
                           Management Agency

    Mr. Chairman and members of the Subcommittee, I am pleased to 
testify in support of the President's fiscal year 2003 budget for the 
Risk Management Agency (RMA). RMA is in its second year of delivering 
an innovative $8.2 billion risk management reform package under the 
Agricultural Risk Protection Act of 2000 (ARPA). Title I of that law 
contained a 5-year initiative to strengthen the safety net for 
agricultural producers by providing greater access to more affordable 
risk management tools, better protection from production and income 
loss, and improved efficiency and integrity of the Federal crop 
insurance program.
    RMA is implementing ARPA in a timely and farmer-friendly way, 
contracting for and reviewing new products, promoting risk management 
strategies, and reinsuring nearly 1.3 million policies on over 211 
million acres. In 2001 alone, RMA provided hard hit farmers 
approximately $36.7 billion of protection and paid them over $2.4 
billion in losses.
    The crop insurance program has seen a significant shift in business 
over the past 2 years--producers have chosen to buy-up to higher levels 
of coverage as a result of increased premium subsidies provided in 
ARPA. While total acres insured did not increase dramatically, total 
acres coverage levels jumped more than 50 percent to levels of 75 
percent and higher. The number of policies, acres, liability, and 
premium all increased more than 40 percent for coverage levels of 70 
percent and higher.
    Our current projection for 2003 shows a modest decrease in 
participation. This projection is based on USDA's latest estimates of 
planted acreage and expected market prices for the major agricultural 
crops, and assumes that producer participation remains essentially the 
same as it was in 2001. It is difficult to project how the program may 
grow as it expands to include new crops, more innovative policy 
options, and changes in the willingness of producers to participate in 
the program. However, there are already many new products and policy 
options that are being considered for approval by the Federal Crop 
Insurance Corporation (FCIC) Board of Directors. In addition, we have 
numerous activities underway to encourage participation, especially in 
underserved areas. In all likelihood this means that the program will 
continue to grow well into the future.
    Today, I would like to focus on and highlight our recent progress 
in helping producers manage their agricultural risk. I will also 
address areas of concerns and their solutions, and discuss a 
legislative proposal that targets reinsured company profits.
                         recent accomplishments
    Livestock Insurance Plans.--On November 15, 2001, the FCIC Board of 
Directors approved two livestock pilot programs--Livestock Gross Margin 
(LGM) and Livestock Risk Protection (LRP)--as authorized by ARPA. The 
pilot programs, which will begin in 2002, will protect Iowa swine 
producers from lower hog prices. Until ARPA, federally-backed insurance 
plans providing livestock protection were prohibited by law. If 
successful, these types of livestock insurance programs will provide 
livestock producers with risk management tools for reducing their price 
risks. Livestock products represent about one-half of the total farm 
cash receipts.
    The LRP sales are scheduled to begin in April 2002. The LGM 
insurance product is scheduled for sale in July 2002 for the August 1, 
2002-January 31, 2003 insurance period. Both products will be available 
from private insurance agents. The length of the pilot programs will be 
determined by farmer participation and the financial performance of the 
programs.
    Education and Outreach.--RMA has implemented several initiatives to 
increase awareness and service to small and limited resource farmers 
and ranchers and other under served groups and areas. In 2001, RMA 
hosted the first national outreach conference titled: Survival 
Strategies for Small and Limited Resource Farmers and Ranchers. Over 
300 professionals representing 45 States, 22 universities, and three 
foreign countries convened at this conference to share ideas and 
develop strategies to benefit the underserved communities. In addition, 
RMA entered into several cooperative agreements with community-based 
organizations and universities to address the specific needs of 
underserved communities. RMA now has partnership agreements with 12 
State departments of agriculture to provide customized risk management 
educational opportunities to producers in their States. RMA supplements 
these activities with additional risk management training in high 
schools, community colleges, and other forums.
    Educational activities also targeted Future Farmers of America 
(FFA), youth, and included production of publications, CD's, and an 
interactive simulation-based educational experience via the Internet. 
In total, 838 educational and outreach activities were conducted by RMA 
attracting more than 35,000 participants.
    Because many producers in underserved States grow crops or raise 
commodities that may not currently be insurable, RMA announced a cost-
share initiative in 11 targeted States to encourage use of the Adjusted 
Gross Revenue (AGR) insurance product. Under the program, RMA shared in 
50 percent of a producer's AGR premium cost. In addition, RMA paid the 
entire administrative fee for all eligible policies.
    About $2 million annually is earmarked to provide risk management 
educational opportunities to specialty crop producers using many of the 
same avenues used in addressing underserved States. As a result, in 
2001, more than 130 partnerships were formed to reach specialty crop 
growers. An additional $5 million was provided to the Cooperative State 
Research, Education, and Extension Service (CSREES) for a competitive 
grants program to promote risk management educational opportunities.
    Program Compliance and Integrity.--ARPA provided $23 million over 5 
years to enhance program integrity and compliance. In fiscal year 2001, 
RMA spent approximately $2.25 million providing 2,500 FSA county office 
personnel 28 hours of classroom training. This basic training enabled 
local FSA personnel to assist RMA in obtaining useful evidence of 
program abuse and fraud.
    By working proactively with insurance providers and FSA, the 
alliance prevented more than $15 million in improper claims payments in 
2001--more than double RMA's average annual recovery. In addition, the 
alliance allowed RMA, through criminal, civil and administrative 
actions, to recover about $29 million--approximately four times RMA's 
average recovery rate.
    At the same time the training initiative was launched, RMA began a 
project to apply research and technology to crop insurance data. This 
process, known as data mining, identifies potential problems and 
targets reviews that will determine whether fraud, waste, or abuse 
exist. A combination of the initial data mining efforts and the new 
alliance enabled RMA to increase the number of cases reviewed from an 
average of about 200 cases per year in 2000 to 700 cases per year in 
2001 and the number of policies reviewed from about 2,000 in 2000 to 
10,000 in 2001.
    Research and Development.--During fiscal year 2001, nearly 30 
contracts and partnership agreements, worth almost $19 million, were 
awarded to further program goals for expansion of new and improvement 
of existing crop programs and risk management strategies. Examples 
include contracts/agreements awarded to: review RMA's rating 
methodologies; review quality loss adjustment procedures to reflect 
local quality; evaluate the impact of the Federal crop insurance 
program on planted cotton acreage; and conduct feasibility studies on 
items such as multi-year coverage, wild salmon, and pasture and 
rangeland pilot programs.
    In addition, the FCIC Board of Directors considered 15 private 
product submissions, and authorized three new risk management 
products--the two livestock programs mentioned earlier, and the 
Nutrient Best Management Practices Pilot.
    Dairy Options Pilot Program.--The Dairy Options Pilot Program 
(DOPP) was expanded to include 300 counties. DOPP is an innovative 
cost-sharing program for dairy producers that encourages the use of 
milk price risk management tools. Program expansion, higher milk 
prices, and extensive outreach resulted in a dramatic increase in 
participation. During Round III in 2001, producers purchased a total of 
2,788 put options. By comparison, a total of 1,847 put options were 
purchased collectively in Round I in 1999 and Round II in 2000. An 
interactive distance learning program for DOPP is available for 
eligible producers over the Internet.
                          obstacles/solutions
    To address concerns expressed about the ``slow'' implementation of 
many sections of ARPA, RMA has done the following:
  --Initiated the ARPA Tracking System.--Implementing the first year of 
        ARPA was very difficult due, in part, to changes in program 
        development requirements. The Act requires research and 
        development of new risk management programs through 
        partnerships and contracts. Initially, the Agency was not fully 
        prepared to take on such a tremendous task. Also, since RMA 
        does not have contract authority, it relied heavily on other 
        government sources. Knowing the exact status of so many 
        documents and tracing such large amounts of funds required RMA 
        to develop the ARPA Tracking System. The tracking system 
        records the various stages of contract development and 
        approval, resulting in a more organized and productive process.
  --Set quarterly funding goals.--In an effort to expend ARPA funds 
        more efficiently and effectively, RMA has established quarterly 
        obligation goals. RMA intends to have at least 80 percent of 
        all fiscal year 2002 ARPA money either obligated or committed 
        by the end of the June, 2002. This will eliminate the 
        unnecessary flood of activity at year end that sometimes leads 
        to poor use of resources.
  --Expanded the training effort.--In order to give RMA employees the 
        knowledge and skills necessary to properly implement ARPA, a 
        comprehensive training program was established to provide a 
        series of contracting courses. RMA employees who would be 
        responsible for administering contracts and developing 
        cooperative agreements and partnerships received between 100 
        and 200 hours of classroom training on topics such as project 
        management, negotiating skills, basic contracting and contract 
        administration, task order writing, preparing performance based 
        statements of work, and source selection.
      For years, RMA employees have received very little program 
        training. For fiscal year 2002, a comprehensive needs 
        assessment was completed, identifying program, contracting, and 
        leadership skills needed to improve job performance. Based on 
        this needs assessment, priorities were established, and 
        approximately $500,000 has been set aside for this training. 
        The total budget for RMA group and individual training is $1.2 
        million in fiscal year 2002.
              administrative and operating (a&o) expenses
    Discretionary account expenses are estimated to increase by $1.3 
million from the fiscal year 2002 appropriated level of $74.8 million 
to $76.1 million for fiscal year 2003. This net increase includes an 
additional $1.4 million for pay costs, which includes $531,000 for 
annualization of the fiscal year 2002 payraise and $901,000 for the 
anticipated fiscal year 2003 pay raise; an increase of $3.3 million for 
a government-wide proposal regarding employee pension and annuitant 
health benefits; a $2.1 million increase which represents a transfer 
from the Department's central rent account for rental payments to the 
General Services Administration (GSA); and a decrease of $5.5 million 
for one-time costs and activities relating to ARPA implementation that 
would occur in fiscal year 2002 only.
                               fcic fund
    The fiscal year 2003 budget proposes that ``such sums as may be 
necessary'' be appropriated to the FCIC Fund. This would ensure that 
the program is fully funded to meet producers needs and not tied to a 
specific level of participation. Nonetheless, an estimate has been made 
of the funding needs for a projected level of participation. As 
discussed earlier, this estimate is based on USDA's latest projections 
of planted acreage and expected market prices, and shows a modest 
decline in overall funding needs, from $2.9 billion in fiscal year 2002 
to $2.8 billion in fiscal year 2003.
    This estimate includes: (1) the premium subsidy the Government 
provides, which is 100 percent for catastrophic coverage and ranges 
from 38 to 67 percent for buy-up coverage, (2) the reimbursement of 
delivery expenses incurred by private insurance companies, which is 
limited to 24.5 percent of premium for buy-up coverage, and (3) the 
Government's portion of the difference between indemnities and premium 
income, which reflects any underwriting gains or losses received by the 
companies, as well as any excess losses paid by the Government.
    The fiscal year 2003 budget estimate also reflects a proposal to 
cap underwriting gains received by the private insurance companies that 
deliver the crop insurance program to 12.5 percent of retained premium. 
Over the past decade the crop insurance program has nearly quadrupled 
in size, in large part, because of the generous government subsidies. 
The private insurance companies have benefitted form the growth in 
business, much of which has been due to producers shifting to higher 
levels of coverage rather than an increase in the number of producers 
who participate in the program. Since 1994, they have received about $2 
billion in underwriting gains, at the same time, the government has 
paid out nearly $1 billion in excess losses. This proposal, to limit 
underwriting gains, is expected to save about $115.1 million annually.
    The fiscal year 2003 budget assumes $68 million to fund ARPA 
initiatives. The $68 million includes funds for: improving program 
compliance and integrity ($3.5 million), research and development ($35 
million), pilot programs for livestock and wild salmon ($16 million), 
education and risk management assistance ($10 million), and policy 
consideration and implementation ($3.5 million).
                               conclusion
    Congress first authorized Federal crop insurance in the 1930s along 
with other initiatives to help agriculture recover from the combined 
effects of the Great Depression and the Dust Bowl. FCIC was created in 
1938 to carry out the program and, initially, was started as an 
experiment. Crop insurance activities were mostly limited to major 
crops in the main producing areas.
    Within the past decade, covered acres have increased from 80 
million to over 200 million, from one insurance product to dozens, from 
a few crops to approximately 120. The program has nearly quadrupled in 
size. In 2000 and 2001, insurers quickly and efficiently paid out in 
excess of $5.1 billion to cover losses of farmers.
    RMA has also dramatically changed the way in which we bring new 
products to market, conduct outreach, and provide oversight. ARPA has 
improved the program's ability to be a broad and effective means for 
producers to manage their production risk.
    RMA has responded deliberately and methodically to this challenge, 
and we have implemented the new provisions in a timely and farmer-
friendly way. We are committed to providing producers with effective 
crop insurance coverage at an affordable price. Additionally, RMA will 
target excessive profits while still providing an incentive for 
reinsured companies to participate in the program. Crop Insurance is 
one of the tools of a farm safety net that can best help farmers deal 
with the changing nature of agriculture in the 21st century.
    We appreciate your on-going support as we continue to transform our 
Agency and our programs to better serve the risk management needs of 
the American farmer.
                                 ______
                                 

              Biographical Sketch of Ross J. Davidson, Jr.

    Ross J. Davidson, Jr., was named Administrator of USDA's Risk 
Management Agency by Agriculture Secretary Ann M. Veneman on February 
6, 2002.
    The Administrator of RMA leads the agency that provides risk 
management protection to America's farmers through a sound crop 
insurance program and other risk management tools. RMA's administrator 
also serves as Manager of the Federal Crop Insurance Corporation.
    Most recently, Davidson was vice president-industry affairs and 
vice president-corporate finance for United Services Automobile 
Association (USAA) from 1988-2001. Prior to joining USAA, Davidson 
worked for Tesoro Petroleum Corporation as its Assistant Treasurer.
    Davidson has more than 25 years of experience in enterprise risk 
management, corporate finance, treasury, investment and related public 
policy matters in insurance and energy. He has published articles in 
professional journals and has been a frequent advisor, commentator and 
innovator on natural disaster and risk management public policy.
    Davidson received a Bachelor's degree in Economics from Brigham 
Young University in 1974, and a Master's degree in Business 
Administration there in 1976.
    Davidson has been a member of several professional organizations 
including the American Risk and Insurance Association, Financial 
Executives International, and the Association of Finance Professionals. 
He is a past president of the BYU Marriott School of Management Alumni 
Board and is on the steering committee of the Marriott School of 
Management Insurance and Financial Services Institute. He also served 
on the Managing Catastrophe Risks Advisory Board of the Wharton School, 
University of Pennsylvania.
                                 ______
                                 

     Prepared Statement of Ellen Terpstra, Administrator, Foreign 
                          Agricultural Service

    Mr. Chairman, members of the Subcommittee, I appreciate the 
opportunity to review the work of the Foreign Agricultural Service 
(FAS) and to present the President's budget request for FAS programs 
for fiscal year 2003.
    The FAS mission remains constant: we are committed to expanding 
export opportunities for U.S. agricultural, fish, and forest products, 
and to helping alleviate world hunger and food insecurity. Given 
today's management challenges, these goals must be accomplished through 
better public/private sector collaboration, strategic planning, greater 
use of technology, and resource management.
    United States agricultural exports rebounded to $52.8 billion in 
fiscal year 2001, an increase of $2 billion over 2000. FAS expects this 
trend to continue in fiscal year 2002, with agricultural exports 
forecast to reach $54.5 billion. Two-thirds of the increase forecast 
for 2002 is expected in Asia, despite slower economic growth there. 
Export prospects for 2002 are improved over the previous year for 
several commodities including corn, wheat, and horticultural products.
                         fas program activities
    To support our goal of expanding export opportunities for U.S. 
agricultural, fish, and forest products, we continue to use our long-
standing export programs vigorously. For example, the export credit 
guarantee programs facilitated sales of more than $3.2 billion in U.S. 
agricultural products last year. The GSM-102 program helped U.S. 
exporters register sales of nearly $770 million in the Caribbean, 
Central and South American regions, a doubling in sales from the 
previous year. The GSM-103 program helped U.S. exporters sell over $14 
million worth of wheat to Jordan and over $21 million worth of wheat to 
Tunisia. U.S. exporters continue to discover the benefits of the 
Supplier Credit Guarantee Program. We issued nearly $226 million in 
credit guarantees under this program in 2001.
    With the aid of the Dairy Export Incentive Program (DEIP), U.S. 
exporters sold more than 58,000 tons of dairy products in fiscal year 
2001. The Commodity Credit Corporation awarded about $8 million in 
bonuses to help U.S. dairy exporters meet prevailing world prices and 
develop foreign markets, primarily in Asia and Latin America. As in 
recent years, market conditions did not warrant large-scale use of the 
Export Enhancement Program. However, sales of frozen poultry where 
facilitated by bonuses of nearly $7 million which supported more than 
11,000 tons of exported product.
    FAS continues to stress the importance of market development. In 
2001, we allocated $90 million to 65 U.S. trade organizations, State 
regional groups, and cooperatives for export promotion activities under 
the Market Access Program (MAP), and approved marketing plans totaling 
$33.5 million for 24 trade organizations under the Foreign Market 
Development (FMD) program.
    FAS introduced 854 Cochran Fellows from 82 countries to U.S. 
products and policies in 2001--the largest number of participants in 
the program's history. These Fellows met with U.S. agribusiness; 
attended trade shows, policy and food safety seminars; and received 
technical training related to market development. The Cochran 
Fellowship Program provides USDA with a unique opportunity to educate 
foreign governments and private sectors not only about U.S. products, 
but also about U.S. regulations and policies on critical issues such as 
food safety and biotechnology.
    On the trade policy front, USDA works to open, expand, and maintain 
markets for U.S. agriculture. FAS was a key player in the successful 
launch of negotiations in November 2001 to further liberalize global 
agricultural trade under the World Trade Organization (WTO). The Doha 
Development Agenda includes an ambitious agenda and schedule for 
agricultural trade reform that will be critical if we are to achieve 
our goals of opening markets, eliminating export subsidies, and 
reducing trade-distorting domestic support around the world.
    We also worked bilaterally to create and maintain market 
opportunities for U.S. exporters. FAS worked to defend U.S. corn 
growers against charges of dumping and subsidization brought by a 
Canadian corn growers association. We worked with Brazilian officials 
to lift barriers to U.S. wheat exports. We closely monitored access for 
U.S. beef to ensure that South Korea fully complied with the WTO ruling 
that allowed full access for beef imports to that market. FAS worked 
with the American Crop Protection Association and the U.S. fresh fruit 
industry to meet import requirements on Taiwan, maintaining a $200-
million market for U.S. fruit.
    To support both our export mission and our food security mission, 
we have used food aid to move commodities from the United States to 
needy people around the world. We also collaborated with a diverse 
group of U.S. institutions in research partnerships with 51 countries. 
These research and exchange activities promoted the safe and 
appropriate development and application of products from biotechnology, 
as well as other areas such as food safety, improved nutritive value of 
crops, environmental sustainability, and pest and disease resistance of 
crops and livestock.
    In fiscal year 2001, FAS programmed more than 4.4 million metric 
tons in food aid to help feed millions of hungry people in more than 70 
countries around the world. Under the authority of section 416(b) of 
the Agricultural Act of 1949, as amended (Section 416), the Commodity 
Credit Corporation (CCC) donated approximately $650 million worth of 
commodities in fiscal year 2001. We used 480,000 tons of those 
commodities as part of our pilot Global Food for Education (GFE) 
Initiative, a program to provide school feeding and pre-school 
nutrition projects in developing countries. Concessional sales under 
Public Law 480, Title I, totaled over 750,000 metric tons valued at an 
estimated $105 million to seven countries. Another 450,000 tons of 
various U.S. commodities were donated to about 18 countries under the 
Food for Progress program, with Title I-funded Food for Progress 
donations accounting for over two-thirds of this tonnage.
    In addition to our food aid activities, FAS continues to serve as 
the coordinator for the U.S. Government's food security committee. Last 
November, at the Food and Agriculture Organization's conference, USDA 
affirmed the U.S. commitment to assist in ending world hunger. 
Secretary Veneman also urged countries to support the development of 
products from biotechnology to help feed the world's growing 
population.
                      priorities for 2002 and 2003
    Faced with continued growth in our agricultural productivity, a 
strong U.S. dollar and continued aggressive spending on market 
promotion by our competitors, we must redouble our efforts to improve 
the outlook for U.S. agricultural exports. For this year, we plan to 
continue to:
  --Pinpoint constraints to exports of U.S. agricultural, fish, and 
        forest products;
  --Work to remove trade barriers and trade-distorting practices;
  --Represent U.S. agricultural interests by strongly advocating U.S. 
        policies in the international community;
  --Help producers, processors, and exporters to strengthen their 
        export knowledge and skills;
  --Ensure that the U.S. farm, forest and fishery sectors have timely 
        and complete intelligence about emerging market opportunities;
  --Inform foreign buyers about the superior quality and reliable 
        quantities of agricultural products offered by U.S. producers, 
        and educate them about how to locate U.S. products;
  --Use our export credit guarantee programs to reach new customers for 
        U.S. agriculture;
  --Use USDA export assistance programs such as the Foreign Market 
        Development Program and the Market Access Program effectively 
        to pursue export opportunities; and
  --Work with emerging markets and developing countries to promote 
        economic development to help meet the international commitment 
        to reduce hunger.
    I would like to discuss our top priorities for fiscal years 2002 
and 2003. Last September, Secretary Veneman released a report that 
identifies critical needs for U.S. agricultural policy for the new 
century. The report, titled ``Food and Agricultural Policy: Taking 
Stock for the New Century,'' States, ``Enhancing the competitiveness of 
U.S. food and agriculture in the global marketplace should be one of 
the primary objectives of our farm policy.'' To achieve this goal, we 
will focus on several strategies.
         continuing the liberalization of trade in agriculture
    At the top of our list is moving forward in the multilateral trade 
negotiations on agriculture under the WTO. With the launch of the Doha 
Agenda last November, the United States has taken a leading role in the 
WTO negotiations underway in Geneva.
    The Doha declaration is an important step forward for U.S. 
agriculture, calling for the new negotiations to be concluded by 
January 1, 2005. The comprehensive negotiations over the next 3 years 
will be centered on expanding market access, reducing export subsidies, 
and reducing trade-distorting domestic support. The WTO multilateral 
negotiations are the best place to address needed reforms in world 
agricultural trade because it is only in the WTO that we have broad 
disciplines on market access, subsidies, and technical measures. The 
mandate also guards against creating new loopholes in the rules that 
could be used to disguise trade-distorting measures.
    Trade capacity building is also a high priority. If we are to 
achieve success in the negotiating process, we must engage the 
developing world in the creation and implementation of appropriate 
trading rules and guidelines. This will take time, but it will be worth 
the investment. These countries represent our future growth markets. If 
we are to realize our goal of liberalizing trade through multinational 
bodies such as the WTO, we must address the concerns of developing 
countries, which make up the majority of WTO members. Without the 
support of developing countries, there will be no new multilateral 
round.
    We also will continue to work with the countries that would like to 
join the WTO. Although increasing the number of members in the WTO is a 
high priority, we will continue to insist that these accessions be made 
on commercially viable terms that provide trade and investment 
opportunities for U.S. agriculture. And when membership in the WTO is 
achieved, we must continue to monitor aggressively those countries' 
compliance with their commitments. We must ensure that acceding 
countries implement trade policies and regulations that are fully 
consistent with WTO rules and obligations.
    For example, after many years of negotiations, China and Taiwan 
joined the WTO in December and January, respectively. As part of the 
WTO membership process, both countries reached agreements with the 
United States that, when fully implemented, will bring great benefits 
to our farmers and ranchers. However, in order to realize these gains, 
we must be vigilant to ensure that China and Taiwan live up to their 
WTO commitments and maintain open markets. We are expanding our staff 
resources to monitor this compliance. A priority of FAS this year will 
be the negotiating of a WTO accession agreement with Russia.
    Another important area of work for FAS is the negotiation to 
establish the Free Trade Area of the Americas (FTAA). The FTAA is 
intended to be a comprehensive free trade agreement between the 34 
democracies in the Western Hemisphere. Negotiations began in 1998 and 
are expected to conclude by 2005. By concluding the FTAA, the U.S. will 
gain liberalized access to a region of 675 million people with a 
combined consumer buying power of $1.5 trillion (excluding our NAFTA 
partners).
    We also are actively participating in the Asia Pacific Economic 
Cooperation (APEC) forum. We expect APEC to serve a key role in 
promoting continued trade liberalization within the region and in the 
WTO, and we will be working through the APEC food system to realize 
this goal. Just last month, USDA organized a meeting for high-level 
government officials of the 21-member economies of APEC to discuss 
biotech issues. The meeting was an opportunity for officials to discuss 
recent breakthroughs in biotech research, consumer awareness of biotech 
issues, capacity building for developing countries in biotechnology, 
and issues being addressed by international organizations such as Codex 
Alimentarius
    Another priority is how we deal with the issues surrounding 
products produced through biotechnology. The increasing number of 
countries around the world that are issuing regulations relating to 
products of biotechnology present a particular challenge, both for our 
infrastructure and for our food and agricultural exports. I could go on 
at length to describe our efforts at USDA to try to stay on top of the 
issue and to ensure that government actions on labeling and product 
approval in China, the European Union, and elsewhere, do not lead to 
trade restrictive policies that reduce market access for U.S. 
commodities.
    This issue will continue to be a dominant one for U.S. agriculture 
in the immediate years ahead, whether in the WTO or in our bilateral 
relationships with customer and competitor nations alike. That is why 
we have said that, when it comes to biotechnology, our focus will be on 
making sure that biotech approval regimes, wherever they exist, are 
transparent, timely, predictable, and science-based.
                   ensuring we have the proper tools
    We also continue to work on improving the way we carry out our 
market development programs. When FAS implemented its Unified Export 
Strategy (UES), our goal was to streamline the planning and application 
process for exporters who apply to participate in our market 
development programs. The UES encourages our strategic partners to 
formulate market-specific strategies for developing or expanding export 
markets. This approach facilitates a more effective use of FAS' full 
arsenal of market development programs.
    This effort grew out of our strategic planning process that 
integrates all the marketing, credit, and trade policy tools that we 
have available to maximize the market for agricultural products. This 
process lets us review the competition and all FAS-sponsored efforts in 
a given market to determine whether we have the optimal mix of programs 
and funding, given that market's potential as a buyer of U.S. 
agricultural products. It also allows us to step back and review our 
efforts regionally as well as globally.
    Let me give you a few examples of how exporters can increase their 
effectiveness by combining programs. The American Sheep Industry 
Association (ASI) used the Quality Samples Program (QSP), the FMD 
program, and its own industry funds to develop a market for U.S. wool 
in Italy. The Association used the QSP to send U.S. wool samples to 
potential buyers in Italy, and followed up with an FMD-funded trade 
mission. Prior to these efforts, U.S. wool was relatively unknown in 
Italy, and sales to that market were irregular and small. Italy is one 
of the world's most important markets for wool, and ASI's strategy and 
use of market development programs allowed the organization to make 
significant sales to major buyers in that market.
    U.S. Wheat Associates used a similar combination of programs to 
help introduce U.S. wheat to millers in Burma. Through a combination of 
QSP and FMD, U.S. Wheat provided technical assistance to show the 
millers how U.S. wheat compares to wheat from Australia. As a result of 
the efforts, several mills, which had never before bought U.S. wheat, 
purchased 16 containers of dark northern spring wheat and five 
containers of soft white wheat, with plans for additional purchases.
    We will continue to encourage U.S. exporters to develop and refine 
their marketing strategies, look to new market opportunities, and fully 
use all the FAS tools at their disposal.
                    focusing our marketing strategy
    To help exporters in this effort, FAS continues to refine its own 
global marketing strategy to target those markets that offer the most 
growth opportunity. We must protect our hard-won gains in mature 
markets, and at the same time, set aggressive but achievable growth 
targets in those markets that offer the most potential.
    Our global marketing strategy is also instrumental in our ongoing 
review of our overseas office locations and staffing. We must fully 
utilize our staffing in FAS overseas offices to ensure that we are 
positioned to take advantage of the market opportunities created by our 
market access initiatives as well as new opportunities offered by 
emerging growth markets.
                             budget request
    Mr. Chairman, we appreciate the support provided by the Committee 
in the fiscal year 2002 appropriation for FAS. The increased funding 
enabled FAS to substantially bolster our overseas market intelligence 
capabilities and maintain an increased overseas presence in Ukraine and 
Balkans. In addition to funding fiscal year 2002 pay cost increases, 
FAS was able to add new staff to enhance our technical trade resolution 
capabilities.
    Mr. Chairman, our fiscal year 2003 budget proposes a funding level 
of $139.8 million for FAS and 985 staff years. This represents an 
increase of $9.4 million over fiscal year 2002, with staffing levels 
unchanged. Although previous budgets addressed resource requirements 
arising from growing workload demand, the fiscal year 2003 budget 
primarily focuses on funding for much-needed improvements in the 
agency's infrastructure to ensure effective implementation of our 
programs. Key to infrastructure improvement is the FAS electronic 
government (e-Gov) initiative.
    The budget includes an increase of $6 million to support a 
comprehensive e-Gov initiative designed to modernize FAS business 
practices and operations and, thereby, ensure compliance with statutory 
requirements for electronic business transactions and record keeping. 
The Administration, Congress, and Department have mandated transition 
to an e-Gov model of operation, incorporating high-speed communication 
with customers, real-time collaboration across Federal agencies and 
with private-sector partners, and heavier reliance on automated 
processes for knowledge management. The Government Paperwork 
Elimination Act (GPEA) requires all Federal agencies to provide 
individuals or entities the option to submit information or transact 
business electronically, and to maintain records electronically, when 
practicable, by October 2003. These two requirements have created a 
requirement for continual improvement in use of electronic technologies 
in serving FAS' clientele. To become and remain e-Gov and GPEA 
compliant will require ongoing investments in three primary categories: 
bandwidth, modification of business practices, and software and 
hardware as follows:
Expansion of telecommunications bandwidth
    FAS operates in 93 cities overseas, almost all of which are 
connected to Washington electronically via government-operated 
telecommunications lines operated by the Department of State (DOS) 
Diplomatic Telecommunications Service (DTS). The current average 
bandwidth of 12.2 kilobit per second (kbps) was specified in a 1995 
agreement with DOS and was intended for the low-bandwidth demands of 
electronic mail of the pre-Internet era.
    Recognizing the profound impact this narrow bandwidth has on work 
performance in the new, Internet-oriented work environment, DOS is 
upgrading worldwide DTS to a minimum of 64 kbps by the end of 2002. 
This upgrade, while essential and unavoidable, is costly. At current 
rates, FAS use of the DTS at the new minimum line speed would increase 
annual costs by approximately $3.0 million.
    As a less costly alternative to the DTS, FAS proposes to lease 
bandwidth from commercial providers of telecommunications bandwidth 
where it is available, reliable, feasible, and secure. Certain high-
risk posts (e.g., Russia and China) as well as posts with no private 
Internet providers (e.g., Burma and Syria) will continue to be served 
solely by the DTS. This approach will result in a cost for minimum 64 
kbps Internet access and Washington-to-field telecommunications of 
approximately $2.049 million per year.
Support for recurring hardware and software upgrades and replacement
    The FAS e-Gov initiative includes $2.0 million to establish a 
recurring replacement cycle for mission-critical hardware and software. 
Chronic under-funding of hardware and software for the past several 
years has resulted in postponement of routine replacement of basic 
infrastructure. The bill for this neglect has come due. The requested 
funding addresses a number of problems, any of which could cripple the 
Agency including:
  --Elimination of single point of failure in the FAS computer network.
  --Replacement of backup of files and databases currently operating on 
        obsolete technology.
  --Replacement of several Internet web servers, large database 
        servers, and our main communications (e-mail) server that are 
        operating at full capacity and will be at the end of their 
        useful life cycles in 2003.
    This initiative also upgrades and modernizes FAS' remote sensing 
imagery and geographic information systems analysis capability, its 
economic analysis capability, its ability to communicate these 
findings, and its ability to enable the remote sensing unit to 
participate effectively in e-government.
E-Gov related process re-engineering, training, and software 
        development
    Many of the customer-oriented business processes, including 
application for dairy import licenses, administration of export credit 
guarantees, and reporting of export sales, use business processes last 
updated in the 1970s and in some cases dating back to the 1950s. These 
functions are now performed using office automation and database 
management software and hardware that cannot meet the requirements of 
e-Gov or the GPEA.
    This initiative provides for moving the Agency to a knowledge 
management footing, in which information collected and analyzed by 
Agency staff is indexed and clustered, and thereby made retrievable 
with minimal effort by program managers and senior policy makers. 
Current paper-based systems must be analyzed and re-engineered, 
however, as merely converting an old business process from paper to 
electronic documents would serve only to automate existing gross 
inefficiencies. The funding requested for re-engineering business 
processes will fund outside analysis of what the Agency should improve 
and provide a roadmap for concrete action. Funding for procuring 
commercial, off-the-shelf software and for software development will be 
used to implement the re-engineered processes.
    The FAS e-Gov initiative includes $2.0 million for process re-
engineering projects with the objective of moving manual processes to 
on-line, web-enabled system. Examples include:
  --paper-based food aid program development procedures;
  --paper-based ocean transportation and commodity shipment systems; 
        and
  --paper-based import license application and registration system.
    Moving to an e-Gov environment affords FAS and the public it serves 
an opportunity to realize a highly efficient and cost-effective 
interaction. The successful transition is dependent not only on 
realization of needed funding in fiscal year 2003, but also on 
sustained funding levels in future years.
    The budget also proposes an increase of $250,000 to develop a plan 
to establish a standardized information system for all U.S. foreign 
food aid programs that will be accessible via the Internet to 
administering agencies, vendors, and grantees. The system will 
facilitate the distribution of information on U.S. food aid activities 
and operations, as well as improve program administration and 
execution. FAS will work to develop this system with the Farm Service 
Agency, the U.S. Agency for International Development (USAID), and the 
Maritime Administration.
    Our fiscal year 2003 request includes an increase of $1.0 million 
for the Cochran Fellowship Program and a total appropriated level of 
$5.0 million. This increase will support 150 additional participants in 
the program and help to achieve the agency's goal of providing training 
to 1,000 participants annually. The additional programming will focus 
on several important topics, including biotechnology, food safety, 
World Trade Organization (WTO) accession requirements, and the quality 
and marketing of U.S. high value agricultural products.
    The budget includes $2.086 million to fund projected pay cost 
increases in fiscal year 2003. Absorption of these costs in fiscal year 
2003 would primarily come from reductions in agency personnel levels 
and would have a devastating effect on FAS efforts to address declining 
levels in the U.S. share of world agricultural exports.
    For fiscal year 2003, the budget proposes a total of $4.4 million 
to cover the costs of items previously paid from central accounts 
within USDA or on a government-wide basis, including GSA rental 
payments and civil service retirement and retiree health benefits. The 
2003 Explanatory Notes provided to the Committee include information on 
the comparable levels for these items in fiscal years 2001 and 2002.
                            export programs
    Mr. Chairman, the export promotion, food assistance, and foreign 
market development programs administered by FAS are key to expanding 
global market opportunities for U.S. agricultural producers.
    Export Credit Guarantee Programs.--The budget includes a projected 
overall program level of $4.2 billion for export credit guarantees in 
fiscal year 2002. As in previous years, the budget estimates reflect 
actual levels of sales expected to be registered under the programs 
rather than authorized program levels. Of the total program level, $3.4 
billion will be made available under the GSM-102 program and $57 
million will be made available under the GSM-103 program. For supplier 
credit guarantees, the budget includes an estimated program level of 
$750 million, an increase of $299 million from the fiscal year 2002 
current estimate. This increase reflects rapid growth in the level of 
sales registrations in fiscal year 2001 and the expectation of strong 
program growth in fiscal years 2002 and 2003. For facility financing 
guarantees, the budget includes an estimated program level of $60 
million, unchanged from the current estimate.
    Foreign Market Development.--The fiscal year 2003 Commodity Credit 
Corporation (CCC) program and budget estimates include $27.5 million 
for the Foreign Market Development (Cooperator) Program, unchanged from 
last year. The CCC estimates also include $2.5 million in funding from 
CCC for the Quality Samples Program. Under this program, samples of 
U.S. agricultural products are provided to foreign importers in order 
to promote a better understanding and appreciation of their high 
quality. The Quality Samples Program is carried out through commodity 
organizations and agricultural trade associations.
    Market Access Program (MAP).--The CCC estimates provide funding for 
MAP in fiscal year 2003 at $90.0 million, unchanged from fiscal year 
2002.
    Export Enhancement Program (EEP).--World supply and demand 
conditions have limited EEP programming in recent years; however, the 
fiscal year 2003 budget does include a program level of $478.0 million 
for the EEP, the maximum level permitted under the export subsidy 
reduction commitments of the Uruguay Round Agreement on Agriculture.
    Dairy Export Incentive Program (DEIP).--The budget assumes a DEIP 
program level of $63 million for fiscal year 2003, slightly above the 
fiscal year 2002 estimate of $61 million.
    The Uruguay Round subsidy reduction commitments for dairy products 
are now fully phased in. For those products announced under annual DEIP 
allocations, the CCC baseline assumes programming at the Uruguay Round 
maximum quantity limits. The estimated program level for DEIP is an 
estimate of the level of subsidy funding needed to facilitate export 
sales at the quantity limits. The program level may increase or 
decrease from the projected level depending upon the relationship 
between U.S. and world market prices during the course of the 
programming year.
                        foreign food assistance
    The Administration recently completed a management review of all 
U.S. foreign food assistance activities in order to rationalize and 
reform their administration and to strengthen their effectiveness. The 
results of the Administration's review are reflected in the 2003 budget 
and program proposals.
    Public Law 480.--For fiscal year 2003, the budget includes a total 
program level for all titles of Public Law 480 food assistance 
activities of $1.34 billion, which is expected to provide approximately 
3.7 million metric tons of commodity assistance. For Title I, the 
budget provides for a program level of $160 million, which will support 
approximately 700,000 metric tons of commodity assistance.
    For Title II donations, the budget provides a program level of 
$1.18 billion, an increase of $335 million above the fiscal year 2002 
enacted level and $146 million above the current estimate for 2002, 
which has been increased as a result of funding provided through 
emergency supplemental appropriations and funding carried over from 
prior years. The proposed Title II program level is expected to support 
3.0 million metric tons of commodity donations. As in recent budget 
submissions, no specific level of funding is requested for Title III 
grants; however, current authorities provide that up to 15 percent of 
the funds of any title of Public Law 480 may be transferred to carry 
out any other title.
    In accordance with the results of the Administration's food aid 
review, Food for Progress programming in 2003 will be limited to 
government-to-government programs funded through Public Law 480 Title 
I. CCC-funded Food for Progress programs that traditionally have been 
carried out through private voluntary organizations and cooperatives 
will not be funded as those types of programs will be the exclusive 
responsibility of USAID.
    Donations of commodities under section 416(b) authority that rely 
on the purchase of surplus commodities by CCC will not be continued in 
2003. However, commodities that are acquired by CCC in the normal 
course of its domestic support operations will be available for 
donation through government-to-government agreements. For 2003, current 
CCC baseline estimates project the availability of a limited supply of 
surplus nonfat dry milk that could be made available for programming 
under section 416(b) authority.
    The 2003 budget includes $45 million in the Public Law 480 budget 
request to offset the proposed elimination of Maritime Administration 
reimbursements This increase is associated with a proposed change in 
the financing mechanism for the costs of meeting U.S. cargo preference 
requirements under the foreign food assistance programs. The budget 
proposes to eliminate Maritime Administration reimbursements and fund 
the full costs of cargo preference through the food aid programs 
themselves. This will eliminate a duplicative financing system and 
reduce record keeping, although the Maritime Administration will 
continue to assist FAS and USAID in ensuring compliance with cargo 
preference requirements.
    This concludes my statement, Mr. Chairman. I will be glad to answer 
any questions.
                                 ______
                                 

                Biographical Sketch of A. Ellen Terpstra

    A. Ellen Terpstra was sworn in as Administrator for the Foreign 
Agricultural Service on March 1, 2002. She oversees various programs 
that foster exports of American agricultural, fish, and forest 
products. FAS works on international trade agreements and negotiations; 
coordinates USDA's role in international food aid programs; reports on 
international agricultural production and trade; administers export 
assistance programs; and provides linkages to worldwide resources and 
technologies that can benefit U.S. agriculture.
    Before her appointment to USDA, Terpstra was president and chief 
executive officer of the USA Rice Federation from 1998 to 2002. Before 
joining the Rice Federation, she was president of the U.S. Apple 
Association for 7 years.
    Terpstra's government experience has focused on international food 
and trade policy. She served as trade negotiator and policy coordinator 
for the Office of the U.S. Trade Representative and an agricultural 
policy analyst with the Congressional Research Service. She also has 
been a consultant to the Food and Agriculture Organization of the 
United Nations in Rome, Italy, and has served on several national 
agricultural advisory committees.
    Terpstra received her bachelor of science degree from Georgetown 
University's School of Foreign Service.

    Senator Kohl. Thank you, Dr. Penn. We turn now to Mr. Mark 
Rey, who is the Under Secretary for Natural Resources and the 
Environment.

                         STATEMENT OF MARK REY

    Mr. Rey. Mr. Chairman and members of the subcommittee, I am 
pleased to appear before you today to present the fiscal year 
2003 budget and program proposals for the Natural Resources 
Conservation Service.
    The President often reminds us that every day is Earth Day 
when you work on the land, and from my perspective it is clear 
that the men and women of the Natural Resources Conservation 
Service out in the field are making a tremendous difference to 
ensure that farmers and ranchers have the resources and 
expertise they need to care for natural resources and respond 
to emerging environmental challenges. This happens through the 
Natural Resources Conservation Service and specifically through 
conservation technical assistance.
    We know that farmers and ranchers are receiving exemplary 
service from NRCS's field staff. In fact, NRCS has one of the 
highest ratings for customer satisfaction among all government 
and private sector organizations. Last year, NRCS participated 
in the American Customer Satisfaction Index, which surveyed 
customers of NRCS conservation technical assistance. The ACSI 
is administered by the University of Michigan Business School. 
It is the only uniform cross-industry/government measure of 
customer satisfaction which allows benchmarking between the two 
sectors.
    The NRCS results were the highest for any USDA agency 
participating in the 2001 survey and it has been described as 
comparable to private sector companies such as Mercedes Benz 
and Ritz Carlton. We are proud of the outstanding service that 
we are providing customers through conservation technical 
assistance. Our customers have come to expect excellent service 
from the agency, and it will be a future challenge to continue 
to ensure the funding and resource support for our staff are 
sufficient to help them meet the expectations of farmers and 
ranchers.
    Turning to the Resource Conservation and Development 
program, or RC&D, because of the support of this subcommittee, 
the Secretary was able to announce the selection of 20 new RC&D 
areas earlier this year, bringing the total number of 
authorized areas to 368. On a national scale, non-Federal 
Government agencies including State, local and tribal 
governments, as well as private and not-for-profit 
organizations, are playing important roles in conservation 
policy. The RC&D program have been extremely successful in 
leveraging and matching resources among these organizations. We 
continue to receive excellent applications deserving of USDA 
recognition and we want to maintain and enhance this very 
popular program.
    Turning now to our water resources related programs. We 
know that emergency needs for watersheds resulting from natural 
disasters have been averaging $110 million per year. However, 
in the past, rather than planning for this need, we have 
historically relied on emergency supplemental appropriations to 
react to stricken communities, often months after the disaster. 
The Administration's budget proposes $111,389,000 for emergency 
watershed protection, which will allow us to respond to 
disasters and protect homeland security.
    In conclusion, the programs presented to this subcommittee 
for funding are essential to the policy objectives proposed in 
our overall agriculture conservation policy framework. In a 
sense, it really comes down to three principles that we hold 
dear.
    First, we want to provide support for the cadre of trained 
and skilled professionals out on the land working with farmers 
and ranchers every day through conservation operations. Second, 
we want to provide that workforce and the workforce of State 
and local government cooperators with the very best data, 
technical tools and training through conservation operations. 
And finally, we want to continue to foster collaboration and 
partnerships with other organizations through conservation 
operations and the resource conservation and development 
program. If we act on these three principles, I think we will 
be well positioned to meet emerging conservation challenges for 
the future and to help farmers and ranchers realize their goals 
for the land they work.
    I thank the subcommittee for the opportunity to appear and 
will be happy to respond to your questions.
    [The statements follow:]

                   Prepared Statement of Mark E. Rey

    Mr. Chairman and Members of the Committee, I am pleased to appear 
before you today to present the fiscal year 2003 budget and program 
proposals for the Natural Resources Conservation Service (NRCS) of the 
Department of Agriculture (USDA). I thank Members of the Subcommittee 
for the opportunity to appear, and I would like to express gratitude to 
the Chairman and members of this body for the support of additional 
funding for fiscal year 2002.
    Mr. Chairman, the President often reminds us that everyday is Earth 
Day when you work the land. From my perspective as Under Secretary for 
Natural Resources and Environment, it is clear that the men and women 
of NRCS out in the field are making a tremendous difference to ensure 
that farmers and ranchers have the resources and expertise they need to 
care for natural resources and respond to emerging challenges.
    In September, the Secretary released Food and Agriculture Policy: 
Taking Stock for the New Century. Conservation clearly has a central 
place in that document, and the Administration's agriculture policy as 
a whole. Our conservation policy for agriculture is founded upon the 
following seven principles:
  --Sustain past environmental gains
  --Accommodate new and emerging environmental concerns
  --Design and adopt a portfolio approach to conservation policies
  --Reaffirm market-oriented policies
  --Ensure compatibility of conservation and trade policies
  --Coordinate conservation and farm policies
  --Recognize the importance of collaboration
    Mr. Chairman, what we have put forward is a look at total 
agriculture policy, and how it interrelates with real issues on farms 
and ranches across the country and throughout the Nation's food 
delivery system. And I would submit that our success in these areas 
really depends upon what happens in this Subcommittee, because 
everything we do relates back to Conservation Operations--the 
fundamental investment in conservation assistance to farmers and 
ranchers.
                    conservation operations program
    The success of USDA's entire conservation effort depends upon the 
availability of practical scientific and technological information that 
is used by field employees who carry out a host of Federal, State, and 
local programs. NRCS develops and transfers applied technologies 
through the Field Office Technical Guide (FOTG), including technical 
manuals, handbooks, and technical references. Collectively, NRCS 
provides science-based solutions for the work carried out on the 
Nation's farms and ranches.
    We know that farmers and ranchers are receiving exemplary service 
from NRCS field staff. In fact, NRCS has one of the highest ratings for 
customer satisfaction among all government and private-sector 
organizations. Last year, NRCS participated in the American Customer 
Satisfaction Index (ACSI), which surveyed customers of NRCS 
conservation technical assistance. The ACSI is administered by the 
University of Michigan Business School. It is the only uniform, cross-
industry/government measure of customer satisfaction, which allows 
benchmarking between the two sectors. The NRCS results were the highest 
for any USDA agency participating in the 2001 survey, and has been 
described as comparable to private sector companies such as Mercedes-
Benz and Ritz-Carlton.
    We are proud of the outstanding service that we are providing 
customers. Our customers have come to expect excellent service from the 
agency, and it will be a future challenge to continue to ensure that 
funding and resource support for our staff are sufficient to help them 
meet the expectations of farmers and ranchers. Conservation Operations 
means the continued availability of nationwide cooperative soil survey 
information, climate and precipitation data and forecasting, and the 
National Resources Inventory (NRI). These technical tools ensure that 
we first have accurate baseline information regarding the natural 
resources, and also trends and changes over time. Our work in this area 
is tantamount to our success in multi-agency efforts, including our 
work with the Environmental Protection Agency on clean water issues 
relating to non-point source pollution livestock waste. Our resource 
information and science-based technology are absolutely essential to 
sound decision-making. Also, NRCS offers farmers and ranchers the 
voluntary assistance they need to meet emerging challenges. Overall, 
the Conservation Operations program is the keystone to meeting locally-
led conservation policy objectives, by providing sound scientific data 
and common sense solutions for farmers and ranchers.
                 resource conservation and development
    Mr. Chairman, because of the support of this Subcommittee, the 
Secretary was able to announce the selection of 20 new RC&D areas 
earlier this year, bringing the total number of authorized areas to 
368. On a national scale, non-Federal government agencies, including 
State, local, and Tribal governments, as well as private and not-for 
profit organizations are playing important roles in conservation 
policy. The RC&D program has been extremely successful in leveraging 
and matching resources between these organizations. These organizations 
come together at the local level to identify community needs and 
collaborate on a voluntary basis. The RC&D program is a model for the 
kind of collaboration and partnership effort that our Food and 
Agriculture Policy document describes. It provides an excellent return 
for a limited Federal investment and we appreciate the continued 
support of this Committee.
               watershed and flood prevention operations
    The President's budget for fiscal year 2003 proposes to eliminate 
Watershed Surveys and Planning, Watershed and Flood Prevention 
Operations, and the Watershed Rehabilitation Program. The budget 
requests funding for Emergency Watershed Protection (EWP) to provide 
assistance to local communities when disasters occur.
    The NRCS Emergency Watershed Protection (EWP) Program is a recovery 
program targeted to communities--as opposed to individuals--by 
relieving imminent hazards to life and property caused by floods, 
fires, windstorms, droughts and other natural occurrences. NRCS 
provides technical assistance and pays as much as 75 percent of the 
cost for emergency repairs, such as removing debris from a stream. We 
also purchase easements from willing landowners in flood prone areas to 
prevent future crop losses.
    As our Farm Policy document points out, water and agriculture are 
inextricably linked. From looking at recent fiscal years, we know that 
emergency needs for watersheds resulting from natural disasters 
averages about $110 million per year. However, rather than prepare for 
this need, we have historically relied upon emergency supplemental 
appropriations to react to stricken communities, often months after the 
disaster occurred. Therefore, for 2003, we are requesting $111 million 
in appropriated EWP funding which would better equip the Federal 
Government to respond more quickly to disasters and protect homeland 
security.
                                summary
    In conclusion, the programs presented to this Subcommittee for 
funding are absolutely essential to the policy objectives proposed in 
our overall agriculture conservation policy framework. It really comes 
down to the following three points:
  --Support the cadre of trained and skilled professionals out on the 
        land, working with farmers and ranchers everyday through 
        Conservation Operations.
  --Provide that workforce and the workforce of State and local 
        government cooperators with the very best data, technical 
        tools, and training through Conservation Operations.
  --Continue to foster collaboration and partnerships with other 
        organizations through Conservation Operations and RC&D.
    I thank the Subcommittee for the opportunity to appear and would be 
happy to respond to any questions Members might have.
                                 ______
                                 

                   Biographical Sketch of Mark E. Rey

    Mark E. Rey was sworn in as the under secretary for natural 
resources and environment by Agriculture Secretary Ann M. Veneman on 
October 2, 2001.
    In that position, he oversees the U.S. Department of Agriculture's 
Forest Service and Natural Resources Conservation Service.
    Since January 1995, Rey served as a staff member with the U.S. 
Senate Committee on Energy and Natural Resources. He was the lead staff 
person for the committee's work on national forest policy and Forest 
Service administration. He was directly involved in virtually all of 
the forestry and conservation legislation considered during the past 
several sessions of Congress, with principal responsibility for a 
number of public lands bills during this period. In addition, he worked 
on the Herger/Feinstein Quincy Library Act of 1998 and the Secure Rural 
Schools and Community Self-Determination Act of 2000. This latter law 
is considered to have been the most extensive public forestry 
legislation passed by Congress in 20 years.
    From 1992-94 Rey served as Vice President, Forest Resources for the 
American Forest and Paper Association. He served as Executive Director 
for the American Forest Resource Alliance from 1989-92. He served as 
Vice President, public forestry programs for the National Forest 
Products Association from 1984-89. From 1976-84 he served in several 
positions for the American Paper Institute/National Forest Products 
Association, a consortium of national trade associations. From 1974-75 
he worked as a staff assistant for the U.S. Department of the 
Interior's Bureau of Land Management in Billings, Mont., and 
Washington, D.C.
    Rey is a native of Canton, Ohio. He holds a Bachelor of Science 
degree in wildlife management; a Bachelor of Science degree in 
forestry, and a Master of Science degree in natural resources policy 
and administration, all from the University of Michigan in Ann Arbor.
                                 ______
                                 

    Prepared Statement of Pearlie S. Reed, Chief, Natural Resources 
                          Conservation Service

    Thank you for the opportunity to appear before you today to discuss 
our fiscal year 2003 budget request. Conservation is important to me. 
I've devoted most of my adult life and my career to helping people get 
conservation on the land. I want to thank the Committee for their 
support for conservation over the years, and especially last year 
during the fiscal year 2002 appropriations process. The terrorist 
threat and the weakening global economy forced all levels of government 
to make hard choices to balance many competing needs. Your concern for 
conservation of the Nation's priceless resource base means healthier 
land and cleaner water for people now and a more secure future for 
future generations of Americans.
    The farmers and ranchers who are the managers and caretakers of the 
Nation's agricultural lands want to be good stewards of soil and water. 
They want to protect the environment in which they and their neighbors 
live; they want to hand on to the next generation a land as productive 
and healthy as the one they received from the last generation. But they 
need help to be the good stewards they want to be.
    For the help they need, producers and other land users rely on 
NRCS. They know they can expect good service from NRCS; they value the 
usefulness, accessibility and clarity of our advice and information; 
and they appreciate the courtesy and professionalism of NRCS employees. 
Just how highly they rate NRCS's service was revealed by a recent 
survey conducted by the University of Michigan using the American 
Customer Satisfaction Index. A sample of those who received 
conservation technical assistance last year gave NRCS a score of 81 out 
of a possible 100 points. This is 10 points higher than the average for 
private sector services and 12 points higher than the average index of 
Federal Government services. Users of conservation technical assistance 
gave NRCS a trust index of 90 out of a possible 100 points.
    I hope that we will be able to work with you this year to continue 
your funding support for conservation in fiscal year 2003, and 
especially to maintain the funding level needed to ensure that the 
conservation delivery system that this Nation has built over the past 
65 years can continue to help local people care for the land.
                         discretionary funding
Conservation Operations
    The President's fiscal year 2003 budget request for Conservation 
Operations proposes an increase of $118.19 million. The increase 
includes transfers from the Office of Personnel Management and USDA's 
Departmental Administration account that are part of the President's 
government-wide management initiative for agencies to pay the full cost 
of certain employee benefits. The explanatory notes provided to the 
Committee provide information on the comparable levels for these items 
in fiscal year 2001 and fiscal year 2002.
    The Conservation Operations account funds the basic activities that 
make effective conservation of soil and water possible. It funds the 
assistance NRCS provides to conservation districts, enabling people at 
the local level to assess their needs, consider their options, and 
develop area-wide plans to conserve and use their resources. 
Conservation operations support the site-specific technical assistance 
NRCS provides to individual landowners to help them develop plans that 
are tailored to their individual economic goals, management 
capabilities, and resource conditions. It also includes developing the 
technical standards and technical guides that are used by everyone 
managing soil and water--individuals, local and state agencies and 
other Federal agencies. And it includes our Soil Survey and Snow Survey 
Programs and other natural resources inventories, which provide the 
basic information about soil and water resources that is needed to use 
these resources wisely. This basic inventory work contributes to 
homeland security as well as to the long-term sustainability of the 
Nation's natural resource base.
    In fiscal year 2001, technical assistance supported by Conservation 
Operations funds, enabled landusers to treat 9.6 million acres of 
cropland and 11.3 million acres of grazing land to the resource 
management system level (sustainable management). On 3.5 million acres 
of cropland that had been eroding at severely damaging rates, NRCS 
technical assistance enabled farmers to reduce erosion to the tolerable 
rate or less, thus preserving the productive capacity of the soil. 
Overall, NRCS provided planning assistance on more than 31.4 million 
acres of land in all uses and application assistance on more than 28.6 
million acres.
    In fiscal year 2001, NRCS continued to assist producers to respond 
to the public's concerns about water quality, concerns that are 
continuing to result in the enactment of increasingly more stringent 
regulations addressing water quality at local, State, and Federal 
levels. We provided assistance to apply conservation systems to address 
water quality concerns on 14 million acres. Practices that were applied 
to help protect water quality included: 5.4 million acres of nutrient 
management; 1.2 million acres where irrigation water management was 
improved, and 524,343 acres of buffer practices. All of these 
activities were supported by Conservation Operations. In some cases, 
funds from other Federal programs or State or local sources were 
utilized in combination with Conservation Operations.
    Adequate funding for Conservation Operations in 2003 will enable 
NRCS to maintain our level of assistance to the basic needs of 
producers all across the country. It will also enable us to increase 
our attention to critical resource concerns, such as animal feeding 
operations and grazing lands.
    Operators of animal feeding operations need increased assistance in 
order to respond to the public's growing concern that such operations 
pose a threat to the environment. NRCS has invested in technology 
development and training to ensure that agency and partner field staff 
are prepared to provide the help AFO operators need. Ensuring that 
assistance is available to all AFO operators who need it will be a 
major challenge--as many as 270,000 AFOs may need assistance. The 
President's budget provides Conservation Technical Assistance funds to 
increase AFO assistance, to the extent practicable.
    Another serious concern continues to be the health of private 
rangeland and pastureland. The Nation's 630 million acres of non-
Federal grazing lands are vital to the quality of the Nation's 
environment and the strength of its economy. In fiscal year 2001, NRCS 
provided technical assistance to land users on more than 18 million 
acres of private grazing land. Improved grazing land health on these 
lands will benefit society as well as the landowners. Healthy grazing 
lands mean reduced erosion, improved air quality, reduced potential for 
flooding, improved fisheries and aquatic systems, and healthy riparian 
areas. The plant cover on grazing lands can reduce the impacts of 
drought and sequesters millions of tons of carbon. The 2003 budget 
continues this important work.
Resource Conservation and Development
    The President's budget also includes an increase for the Resource 
Conservation and Development Program. Through the RC&D program, NRCS 
works in partnership with local volunteers organized as Resource 
Conservation and Development Councils representing multi-county areas. 
Each council consists of public and private sector sponsors and other 
local organizations that represent a diverse cross-section of community 
interests. These local councils play a vital role in improving the 
quality of life and standard of living in rural communities across the 
Nation. NRCS provides a coordinator and an office for each council. 
Currently a total of 368 RC&D areas serve more than 81 percent of the 
Nation's counties and more than 75 percent of the population. We have 
received applications from an additional 21 areas, and at least 10 
other areas are forming across the Nation. The President's budget 
proposes funding of $52.031 million for fiscal year 2003 which would 
enable continued support of the 368 authorized areas.
    For every dollar appropriated by Congress, the RC&D Councils 
provide an average of $14 from other sources to carry out projects they 
have identified as critical to helping their communities socially and 
economically. RC&D reporting data for fiscal year 2001 indicate that 
councils and their partners created 514 new businesses, helped expand 
1,830 businesses, and financially assisted 1,099 businesses. An 
estimated 7,494 jobs were created through area projects. Efforts to 
improve natural resources resulted in improvement of 878,343 acres of 
wildlife habitat, improvement of 224,871 acres of lakes, and 5,038 
miles of streams. Educational projects helped 283,249 people develop 
new skills. RC&D projects helped 778,350 economically or socially 
disadvantaged people.
Watershed Planning and Operations and Emergency Watershed Protection
    The President's budget for fiscal year 2003 proposes to eliminate 
Watershed Surveys and Planning, Watershed and Flood Prevention 
Operations, and the Watershed Rehabilitation Program. The budget 
requests funding for Emergency Watershed Protection (EWP) to provide 
assistance to local communities when disasters occur. EWP helps 
communities reduce imminent hazards to life and property caused by 
flood, fires, windstorms, and other natural occurrences. Through EWP, 
NRCS provides technical and financial assistance for immediate cleanup 
and subsequent rebuilding of damaged areas and for restoration of 
stream corridors, wetlands, and riparian areas. Emergency work includes 
establishing quick-growing vegetation on denuded land, steeply sloping 
land, and eroding banks; opening dangerously restricted channels; 
repairing diversions and levees; and purchasing flood plain easements. 
Under EWP, NRCS also provides assistance in urban planning and site 
selection to the Federal Emergency Management Agency when FEMA is 
relocating communities out of the flood plain.
    NRCS emergency watershed protection efforts have traditionally been 
dependent upon Congressional emergency supplemental appropriations 
enacted after an event has occurred. Over the past 10 years, these 
appropriations have averaged $110 million annually. The President's 
budget for fiscal year 2003 proposes to ensure more timely and 
effective response by providing an appropriation of $111.389 million so 
that assistance can be on the way as soon as a disaster occurs.
       commodity credit corporation funded conservation programs
Environmental Quality Incentives Program
    EQIP provides producers and landowners with incentives to implement 
long-term, comprehensive conservation farm plans. The final 2003 level 
for EQIP will be set when the new farm bill is passed. For planning 
purposes, the President's budget for 10 year funding for Farm Bill 
programs assumes a $1 billion level for EQIP in fiscal year 2003.
    Demand for EQIP has historically exceeded the available funding. In 
fiscal year 2001, for example, total EQIP funding was $199.9 million, 
whereas the funds requested totaled an estimated $359.4 million. Of the 
47,461 applications for program assistance received in fiscal year 
2001, only about 37 percent (17,684 applications) could be funded. The 
total unfunded backlog of EQIP applications is more than $1 billion.
    Two examples where EQIP technical and financial assistance is 
especially important are protecting the quality of water in the 
Colorado River and helping livestock producers protect the environment. 
The Nation still needs to reduce salt loading to the Colorado River by 
an additional 0.86 million tons per year to meet treaty obligations. 
Producers are willing to help achieve that goal, but they need 
technical assistance from NRCS to design and implement practical and 
effective conservation measures; and they need financial assistance. 
The current backlog of EQIP applications for salinity control measures 
reflects almost $150 million in financial assistance.
    The technical and financial assistance provided to operators of 
animal feeding operations through EQIP is an important supplement to 
the basic technical assistance provided through Conservation 
Operations. Because many comprehensive nutrient management plans 
include complex structures that are expensive to install and maintain, 
some producers simply can't implement them without financial 
assistance. The President's 2003 budget will provide for financial and 
technical assistance under EQIP for AFO-related concerns in fiscal year 
2003.
Agricultural Management Assistance
    This program, which was first implemented in fiscal year 2001, 
provides technical and cost-share assistance in 15 States where 
participation in the Federal Crop Insurance program has historically 
been low. In fiscal year 2001, NRCS administered $8.3 million to 
provide assistance in improving water management, including irrigation 
water management; planting trees for windbreaks or water quality; and 
mitigating risk through diversification or resource conservation. The 
President's budget for fiscal year 2003 assumes continued funding at 
the authorized level of $10 million in total for the program.
Closing--Partnership for Conservation
    Mr. Chairman, as you know, conservation of the resources on the 
Nation's private land is a voluntary partnership effort that relies on 
many individuals, groups, and governmental entities working together to 
achieve common goals. The foundation of this effort is the traditional 
partnership between NRCS, local conservation districts, and State 
conservation agencies. Conservation districts are units of State or 
tribal government that are responsible for setting priorities and 
developing conservation programs for their area. They are operated by 
boards of locally elected officials who serve without salary. NRCS 
provides assistance on private lands through the districts. NRCS and 
State and local employees in a field office work as a team, using the 
same case files and technical tools. District employees administer 
local and State conservation programs and help NRCS specialists in 
delivering Federal programs in the district. NRCS specialists provide 
assistance to achieve local priorities, deliver Federal programs, and 
help deliver State and local programs.
    The most important members of this conservation partnership are the 
people who own the land and make the decisions about its use.
    NRCS's role is to provide the infrastructure--the foundation of 
science and technology that is essential to using natural resources 
productively while protecting their quality and an effective delivery 
system to make that knowledge available to those who need it in forms 
that are useful to them.
    Conservation doesn't just happen. It takes all of us, including 
Congress, working together to make it happen. This concludes my 
statement. I will be glad to answer any questions.

    Senator Kohl. We thank you, Mr. Rey. And now we turn to Mr. 
Mike Neruda, who is Deputy Under Secretary for Rural 
Development.

                     STATEMENT OF MICHAEL E. NERUDA

    Mr. Neruda. Thank you, Chairman Kohl; thank you, Senator 
Cochran, members of the subcommittee. It is a real pleasure to 
be here today to present to you the President's fiscal year 
2003 budget request for the Rural Development mission area at 
USDA.
    I will, with the permission of the Chairman and the 
Subcommittee, abbreviate my remarks and have the full remarks 
for the record.
    The Rural Development mission area consists of three 
agencies, the Rural Business Cooperative Service, the Rural 
Housing Service, and the Rural Utilities Service. The mission 
area also administers the rural portion of the empowerment 
zones and enterprise communities initiative, and financially 
assists the National Rural Development Partnership, a 
nationwide network of rural development leaders and officials. 
Rural Development, as you can see, is responsible for a 
remarkably wide variety of programs to help improve the quality 
of life for rural Americans.
    I will go now into the budget. Mr. Chairman, the 
President's commitment to improving conditions in rural America 
is reflected in this budget request for fiscal year 2003. The 
Rural Development budget totals $2.6 billion in budget 
authority. Budget authority at that level will support $11.6 
billion in direct loans, loan guarantees, grants, and technical 
assistance, and pay administrative expenses. This level of 
support is consistent with the program levels achieved in 
recent years, although it is below the current appropriated 
estimate of $14.3 billion that is available for 2002.
    Implementation of new and more accurate cash flow models 
incorporating recent program experience and new economic 
assumptions resulted in changes in program subsidy rates for 
fiscal year 2003. The impacts of these new subsidy rates on 
individual program levels varies, but the net effect is a lower 
total practical level that can be supported with the same level 
of budget authority. However, our 2003 budget does not require 
an across the board reduction.
    I would like to point out that the development and 
incorporation of these cash flow models resulted just last week 
in Rural Development receiving its first unqualified audit 
opinion on its financial statements since 1993. This is a 
significant achievement and reflects the commitment and support 
of this subcommittee.
    I will now focus on specific requests.
    The Rural Utilities Service. This Administration believes 
that enhanced communications infrastructure is essential for 
rural communities to be able to compete effectively for jobs 
and income generating opportunity. For that reason, this budget 
continues the effort to support broadband transmission and 
local dial-up Internet service by providing $80 million in 
loans and $2 million in grants.
    The fiscal year 2003 budget reflects the administration's 
commitment to a fully privatized Rural Telephone Bank that does 
not require Federal funds to finance the loans it makes. The 
bank was established in 1972 to provide a supplemental source 
of credit to help establish rural telephone companies. This has 
proved to be remarkably successful, and efforts have been 
underway since 1996 to privatize the bank.
    I would also like to point out that the request for 
electric program loans is maintained at the fiscal year 2001 
appropriated program level of over $2.6 billion. This 
subcommittee generously provided over $4 billion in loan funds 
for fiscal year 2002. This increase for fiscal year 2002 will 
go a long way toward reducing the backlog of electric loan 
demands, so our 2003 request is returned to the 2001 program 
level.
    Rural Business-Cooperative Services (RBS). One key to 
creating economic opportunity in rural areas is the development 
of new business and employment opportunities. However, many 
rural areas do not have sufficient access to the capital needed 
to sustain local businesses and generate new rural growth.
    RBS programs, particularly what we call B&I loan guarantee 
program, supplement the efforts of local lending institutions 
in providing capital to stimulate job creation and economic 
expansion. RBS also provides research and technical assistance 
to assist in the identification and creation of new business 
structures that can support innovative capital formation and 
utilization in rural America.
    Included in the rural cooperative development grant request 
is $2 million for cooperative research agreements for 
cooperative energy alternatives. A comprehensive program for 
research is needed to determine how the cooperative foreign 
business can be adopted to increasing domestic fuel supplies, 
both traditional and alternative, while increasing economic 
returns to the farmers. This program will be carried out 
through cooperative research at the national office and through 
cooperative research agreements with universities and 
appropriate nonprofit program organizations.
    The Rural Housing Service. The budget request for the 
programs administered by the Rural Housing Service totals $5.2 
billion in program level. This commitment will improve housing 
conditions in rural areas, and in particular, improve home 
ownership opportunities.
    We are proposing a multi-family housing request of $60 
million for direct loans, $100 million for guaranteed loans, 
$53 million for farm labor housing loans and grants, and $712 
million for rental assistance.
    This request represents a refocusing of attention on multi-
family housing, with the $60 million loan program directed 
solely to repair and rehabilitation of existing projects. Rural 
housing has an existing multi-family housing portfolio of $12 
billion that includes over 17,600 projects. Many of these 
projects are 20 years old or older and face rehabilitation 
needs. Rural Development is taking a critical overall look at 
the multi-family housing new construction program to ensure 
that it is maintained on a proper course to provide maximum 
benefits for rural America. Our budget request also includes $2 
million for an independent study to identify alternative ways 
to fund new construction in a more cost efficient manner.
    The budget includes a total of $712 million in rental 
assistance payments, a slight increase over the current level. 
These payments are used to reduce the rent in rural rental 
housing projects to no more than 30 percent of the income of 
very-low income occupants, typically female heads of household 
with annual incomes averaging under $8,000.
    The request for community facilities funding totals $250 
million for direct loans, $210 million for guaranteed loans, 
and $17 million for grants. Community facility programs finance 
rural health facilities, child care facilities, fire and safety 
facilities, jails, education facilities, and almost any other 
type of essential community facility needed in rural America.
    As you can see, Mr. Chairman, we have a wide range of 
projects within our mission area. Again, I thank you for 
allowing me to testify and of course will take any questions at 
the end.
    [The statements follow:]

                Prepared Statement of Michael E. Neruda

    Mr. Chairman, Members of the Committee, it is a pleasure to present 
to you the President's fiscal year 2003 Budget request for the Rural 
Development Mission Area of USDA.
    The Rural Development mission area consists of three agencies, the 
Rural Business-Cooperative Service (RBS), the Rural Housing Service 
(RHS), and the Rural Utilities Service (RUS). These agencies are 
responsible for delivering programs authorized by the Consolidated Farm 
and Rural Development Act, the Farm Security Act of 1985, the Rural 
Electrification Administration Act of 1936, the Cooperative Marketing 
Act of 1926, the Agricultural Marketing Act of 1946, the Housing Act of 
1949, and the Rural Economic Development Act of 1990, as amended. The 
mission area also administers the rural portion of the Empowerment 
Zones and Enterprise Communities (EZ/EC) Initiative, and assists the 
National Rural Development Partnership, a nationwide network of rural 
development leaders and officials. This listing of responsibilities is 
suggestive of the remarkably wide variety of programs in Rural 
Development's purview, to help improve the quality of life for rural 
Americans.
    Rural Development assists rural individuals, communities, and 
businesses obtain the financial and technical assistance needed to 
address their diverse and unique situations. This financial and 
technical assistance may come solely from Rural Development or be 
combined with assistance from one of the numerous public and private 
organizations involved in the development of rural communities. Rural 
Development agencies deliver over 40 different loan, loan guarantee, 
and grant programs in the areas of business development, cooperative 
development housing, community facilities, water supply, waste 
disposal, electric power, and telecommunications, including distance 
learning and telemedicine. Rural Development staff also provides 
technical assistance to rural families and community leaders to ensure 
success of those projects it has financed. In addition to their loan-
making responsibilities, Rural Development staff are also responsible 
for the servicing and collection of a loan portfolio that exceeds $83 
billion.
    Rural Development's large portfolio displays one dimension of the 
successes of the program funding this Committee has provided. However, 
numbers do not reveal the human side of these successes. Later, in 
testimony from the agencies, you will hear clearly how the program 
funding the Committee provides dramatically improves the lives of rural 
Americans. These success stories are remarkable.
                    rural development budget request
    Mr. Chairman, the President's commitment to improving conditions in 
rural America is reflected in this budget request for fiscal year 2003. 
The Rural Development budget request totals $2.6 billion in budget 
authority. Budget authority at that level will support $11.6 billion in 
direct loans, loan guarantees, grants and technical assistance, and pay 
administrative expenses. This level of support is consistent with the 
program levels achieved in recent years, although it is below the 
appropriated estimate of $14.3 billion that is available for 2002. 
Implementation of new, more accurate cash flow models that incorporate 
recent program experience and new economic assumptions resulted in 
changes in program subsidy rates for fiscal year 2003. The impact of 
these new rates on individual program levels varies from program to 
program--some increasing and some decreasing--but the net effect is a 
lower total program level that can be supported with the same amount of 
budget authority. However, our 2003 Budget does not reflect an across 
the board reduction. Rather, we are requesting increases in certain 
programs and reductions in others, as will be described later. I will 
now discuss the requests for specific programs.
                        rural utilities service
    The Rural Utilities Service (RUS) provides financing for electric, 
telecommunications, and water and waste disposal services that are 
essential for economic development in rural areas. The RUS program 
request totals $4.8 billion, which is comprised of $2.6 billion for 
electric loan programs, $495 million for rural telecommunication loans, 
$50 million for Distance Learning and Telemedicine loans, $25 million 
for Distance Learning and Telemedicine grants, $80 million in loans and 
$2 million in grants to support broadband transmission and local dial-
up Internet service, $889 million for direct and guaranteed Water and 
Waste Disposal loans, $587 million for Water and Waste Disposal Grants, 
and $3.5 million for Solid Waste Management Grants.
    Electric program funding will benefit about 3.4 million consumers 
from systems improvement, through upgrading almost 220 rural electric 
systems. Approximately 60,000 jobs will be created as a result of 
facilities constructed with electric program funds. Almost 133,000 new 
subscribers will receive telecommunications service, over 495,000 
existing subscribers will receive improved service, and about 11,385 
jobs will be generated as a result of facilities constructed with 
Telecommunications funds. Under the Distance Learning and Telemedicine 
programs, approximately 140 schools will receive distance-learning 
facilities and 55 health care providers will receive telemedicine 
facilities. Over 38,000 jobs will be generated as a result of 
facilities constructed with Water and Waste disposal program funds, as 
540 rural water systems and about 275 rural waste systems are developed 
or expanded in compliance with the Safe Drinking Water Act and Federal 
and State environmental standards.
    The fiscal year 2003 budget reflects the Administration's 
commitment to a fully privatized RTB that does not require Federal 
funds to finance the loans it makes. The Rural Telephone Bank (RTB) was 
established in 1972 to provide a supplemental source of credit to help 
establish rural telephone companies. This has proved to be remarkably 
successful, and efforts have been underway to privatize the bank. In 
1996, the RTB began repurchasing Class ``A'' stock from the Federal 
government, thereby beginning the process of transformation from a 
Federally funded organization to a fully privatized banking 
institution. A privatized bank would be able to expand and tailor its 
lending practices beyond current limitations imposed as a government 
lender.
                  rural business-cooperative services
    One key to creating economic opportunity in rural areas is the 
development of new business and employment opportunities. However, many 
rural areas do not have sufficient access to the capital needed to 
sustain local businesses and generate new rural growth. Agricultural 
producers may not have a mechanism or information to utilize the equity 
available in farmland for other business purposes. Such equity could be 
leveraged into other activities, providing capital infusions into 
capital starved areas. Rural Business-Cooperative Services (RBS) 
programs, particularly the Business and Industry (B&I) loan guarantee 
program, supplement the efforts of local lending institutions in 
providing capital to stimulate job creation and economic expansion. RBS 
also provides research and technical assistance to assist in the 
identification and creation of new business structures that could 
support innovative capital formation and utilization in rural America.
    The RBS budget request for fiscal year 2003 totals about $844 
million in RBS loan and grant assistance, the bulk of which represents 
$733 million in B&I loan guarantees. This level of funding for the B&I 
program alone will create or save over 20,400 jobs in rural America. 
$44 million is requested for the Rural Business Enterprise Grant 
program, $3 million for the Rural Business Opportunity Grant program, 
$40 million for the Intermediary Relending Program, almost $15 million 
for Rural Economic Development loans, and $9 million for Rural 
Cooperative Development Grants. In total, the budget for RBS programs 
is expected to create or save over 89,300 rural jobs.
    Included in the Rural Cooperative Development Grant request is $2 
million for cooperative research agreements for cooperative energy 
alternatives. A comprehensive program of research is needed to 
determine how the cooperative form of business can be adopted to 
increasing domestic fuel supplies, both traditional and alternative, 
while increasing economic returns to farmers. The program will be 
carried out through cooperative research at the National Office and 
through cooperative research agreements with universities and 
appropriate nonprofit program organizations.
                         rural housing service
    The budget request for the programs administered by the Rural 
Housing Service (RHS) totals $5.2 billion. This commitment will improve 
housing conditions in rural areas, and, in particular, improve 
homeownership opportunities. The request for single family direct and 
guaranteed homeownership loans totals $3.7 billion, which will assist 
46,000 households who are unable to obtain credit elsewhere to purchase 
a home of their own. This level of construction activity will stimulate 
almost 34,000 jobs in rural areas. The RHS request also includes $35 
million for housing repair loans and almost $32 million for housing 
repair grants, which will be used to improve 12,000 existing single 
family houses, mostly occupied by low income elderly residents.
    We are proposing a multi-family housing request of $60 million for 
direct loans, $100 million for guaranteed loans, $36 million for farm 
labor housing loans $17 million for farm labor housing grants, and $712 
million in rental assistance. This request represents a refocusing of 
attention on multi-family housing, with the $60 million loan program 
directed solely to repair and rehabilitation of existing projects. RHS 
has an existing multi-family housing portfolio of $12 billion that 
includes over 17,600 projects. Many of these projects are 20 years old 
or older, and face rehabilitation needs. Rural Development is taking a 
critical overall look at the multi-family housing new construction 
program to ensure that it is maintained on a proper course, to provide 
maximum benefits for rural America. Our budget request includes $2 
million to fund an independent study to discover alternatives to fund 
new construction in a more cost efficient manner. Given the needs for 
repair/rehabilitation of existing projects, and the requested study of 
alternatives for new construction, RHS is proposing to defer making 
direct loans for new construction under the section 515 Rural Rental 
Housing program. However, direct loans would continue to be made for 
new construction under the Farm Labor Housing program. Further, funding 
for new construction would continue to be available under the Section 
538 Guaranteed Loan program.
    This budget provides an increase in the farm labor housing program 
to $53 million, which will address pressing needs for farm worker 
housing across the country. This program provides housing to the 
poorest housed workers of any sector in the economy, and supports 
agriculture's need for dependable labor to harvest the abundance 
produced by rural farms.
    The budget includes $706 million for Section 521 Rural Rental 
Assistance payments, a slight increase over the current level. These 
payments are used to reduce the rent in rural rental housing projects 
to no more than 30 percent of the income of very low-income occupants 
(typically female heads of households, with annual incomes averaging 
under $8,000). Currently, almost a quarter of a million households are 
receiving such assistance. The 2003 Budget provides for the renewal of 
expiring 5-year contracts for more than 42,000 of the units occupied by 
these households.
    The request for community facilities funding totals $250 million 
for direct loans, $210 million for guaranteed loans, and $17 million 
for grants. Community facilities programs finance rural health 
facilities, childcare facilities, fire and safety facilities, jails, 
education facilities, and almost any other type of essential community 
facility needed in rural America. These funds will support 4,000 beds 
in new or improved elder care facilities, 180 new or improved health 
care facilities, 170 new or improved fire and rescue facilities, 50 new 
or improved child care centers, and 70 new or improved schools.
                        administrative expenses
    These requested program levels provide ambitious targets for 
accomplishments, for which this Committee will be proud. However, 
delivering these programs to the remote, isolated, and low income areas 
of rural America requires administrative expenses sufficient to the 
task. With an outstanding loan portfolio exceeding $83 billion, 
fiduciary responsibilities mandate that Rural Development maintain 
adequately trained staff, employ state of the art automated financial 
systems, and monitor borrowers' activities and loan security to ensure 
protection of the public's financial interests.
    For 2003, the budget proposes a total of $685 million for Rural 
Development S&E. Within this fiscal year 2003 request, there is a total 
of $56 million to cover the costs of items previously paid from central 
accounts within USDA or on a government wide basis, including GSA 
rental payments, Federal Employees Compensation Act and Civil Service 
retirement and retiree health benefits. The Explanatory Notes provided 
to the Committee provide information on the comparable levels for these 
items in fiscal year 2001 and fiscal year 2002.
    Our request includes support for initiatives such as the multi-
family housing study mentioned earlier and maintaining the commitment 
to modernizing financial systems, along with assuming new mission area 
responsibilities for employee retirement costs and GSA leases. It also 
includes funding for new equipment to support state-of-the-art 
technologies utilized in our Centralized Servicing Center (to enhance 
servicing of single family housing borrowers), support for reviewing 
large and complex electric and telecommunications infrastructure loans, 
and increased funding for training. Rural Development is very 
appreciative of the funding provided in the fiscal year 2002 
appropriation for automated financial systems development, which 
allowed Rural Development to continue to support the development of 
systems for guaranteed loans, multi-family housing loans, Rural 
Utilities Service systems modernization, and the Program Funds Control 
System. This funding allows Rural Development to address long delayed 
automated systems development needs. The funding we are requesting for 
2003 will allow us to continue several projects that require multi-year 
funding.
    Mr. Chairman, Members of the Committee, this concludes my formal 
statement. We would be glad to answer any questions you may have. Thank 
you for the opportunity to appear before you to discuss the Rural 
Development budget request.
                                 ______
                                 

                Biographical Sketch of Michael E. Neruda

    Michael E. Neruda was appointed by Secretary Ann M. Veneman to be 
the Deputy Under Secretary for Rural Development.
    As Deputy Under Secretary, Mr. Neruda oversees the USDA Rural 
Development Mission Area, which consists of three agencies; $14 billion 
annual funding authority for loans, grants, and technical assistance to 
rural residents, communities, and businesses; and an $80 billion 
portfolio of existing loans to collect. Rural Development has over 
7,000 employees located across the United States and in Puerto Rico, 
the Virgin Islands, and the Western Pacific Trust territories. Mr. 
Neruda is the direct supervisor for the three Agency heads and the 47 
politically appointed State Directors. In addition to his 
responsibilities within Rural Development, Mr. Neruda serves as the 
chair of the National Food and Agricultural Council (NFAC). The NFAC is 
an interagency council that includes members from all USDA agencies 
that maintain a presence at the State and local level, and serves as 
the primary forum for coordinating USDA programs at the State and local 
level.
    Prior to his current appointment, Mr. Neruda served as Confidential 
Assistant to Secretary Veneman. He represented USDA at the President's 
Management Council prior to the confirmation of the Deputy Secretary 
and advised the Secretary on the implementation of President Bush's 
management agenda and other broad organizational issues impacting the 
Department.
    Mr. Neruda has extensive experience working on agricultural issues, 
in both the Legislative and Executive branches. Prior to his current 
appointments at USDA in the Bush Administration, he was Staff Director 
of the Subcommittee on General Farm Commodities, Resource Conservation 
and Credit, Committee on Agriculture, U. S. House of Representatives. 
In this position he was a key adviser to the House Agricultural 
Committee on issues related to farm commodities, trade, conservation, 
and credit. Mr. Neruda has also served on the staff of several Members 
of Congress, including Representative Fred Grandy and Senator Roger 
Jepsen, both of Iowa, and Senator Ed Zorinsky of Nebraska.
    Mr. Neruda served in the Administration of President George H.W. 
Bush at USDA as the Executive Assistant to Agriculture Secretary Edward 
Madigan. In that position he codirected a comprehensive USDA/OMB Field 
Structure Review, which resulted in a proposal for a nationwide 
restructuring of USDA client services. He also served as the Acting 
Deputy Assistant Secretary for Administration and later managed the 
Risk Management Agency's network of regional service offices.
    Mr. Neruda is a Captain in the Navy Reserve and was recalled to 
active duty for OPERATION DESERT STORM. He received the Bronze Star for 
his service in the Persian Gulf. After the war he was chosen to return 
to the USA with General Schwarzkopf to manage all aspects of the 
General's participation in public events.
    Mr. Neruda was reared on the family farm near Dorchester, Nebraska, 
and holds a M.A. in Public Administration from the University of 
Oklahoma as well as a B.S. in General Agriculture from the University 
of Nebraska-Lincoln. He is the father of two children who currently 
attend Stanford University.
                                 ______
                                 

 Prepared Statement of Hilda Gay Legg, Administrator, Rural Utilities 
                                Service

    Mr. Chairman, Members of the Subcommittee, thank you for the 
opportunity to present the President's fiscal year 2003 budget for the 
Rural Utilities Service (RUS). We appreciate the work and support you 
and the other members of this subcommittee have provided for a strong, 
dependable infrastructure in the rural United States.
    Safe, dependable, affordable, modern utility infrastructure is an 
investment in economic competitiveness and serves as a fundamental 
building block of economic development. Technology, regulatory, and 
market structure changes, combined with an aging utility infrastructure 
are occurring in the electric, telecommunications, and water sectors. 
Without the help of USDA through the RUS programs, to replace and 
enhance the utility infrastructure of Rural America the residents of 
rural communities will have a more difficult time sharing in the 
Nation's basic quality of life. Eighty percent of the Nation's landmass 
continues to be rural, encompassing 25 percent of the population. As we 
face a challenged economy, this infrastructure investment is vital to 
spurring economic growth, creating jobs and improving the quality of 
life in Rural America.
    The nearly $38 billion RUS loan portfolio includes investments in 
approximately 7,900 small community and rural water and waste disposal 
systems, and 2,000 electric and telecommunications systems serving 
rural America. The partnership RUS has with local communities, 
cooperatives, businesses and citizens is the key to the success of 
these programs.
                          a budget that leads
    The President's proposed budget will enable RUS to respond to the 
demand in rural America to meet the needs brought on by the rapidly 
changing markets and technologies. Rural America, if it is to be a part 
of today's fast changing economic landscape, must have the ability to 
meet changing needs. The ability of borrowers to respond quickly to 
changing conditions is a key to the public-private partnership between 
RUS and its borrowers. RUS continues to streamline policies, offer 
borrowers more flexibility in financing, while ensuring safe, reliable 
modern utility service to rural Americans.
                            electric program
    The RUS Electric Program budget proposes $11 million in budget 
authority to support a program level of $2.6 billion. These amounts 
include: $6.9 million in budget authority for a hardship program level 
of $121.1 million, $4.0 million in budget authority for a municipal 
rate program level of $100 million, a $700 million funding level for 
Treasury rate loans and a $1.6 billion funding level for guaranteed 
loans through the Federal Financing Bank, which do not require any 
budget authority, and $80,000 in budget authority for a $100 million 
loan guarantee program for private sector loan guarantees.
    An example of how our rural electric borrowers can improve the 
economic potential and quality of life in rural communities is the 
Hawkeye Tri-County Electric Cooperative (Hawkeye Tri-County). Hawkeye 
Tri-County of Cresco provides electric service to 6,100 consumers using 
2,100 miles of distribution line in Howard, Winneshiek, and Chickasaw 
counties in northeast Iowa. Recently, RUS awarded Hawkeye Tri-County a 
$4,245,000 loan to connect 130 consumers, construct 23 miles of 
distribution line and make other necessary system improvements.
    Hawkeye Tri-County supports the economic development efforts of 
area communities by awarding loans through its economic development 
revolving loan fund. The loans made available through this fund come in 
part from grants awarded to Hawkeye Tri-County by several different 
sources including the USDA Rural Economic Development Loan and Grant 
(REDLG) Program. For every dollar Hawkeye Tri-County invests in a 
project, $6 are received through these programs. Over the past 2 years 
Hawkeye Tri-County has funded over $1 million in local projects through 
this revolving fund. This includes funding for:
    The Dairy Education and Applied Research Laboratory in Calmar--a 
unique, state-of-the art dairy facility was built on the campus of a 
local community college with the help of a $240,000 grant from Hawkeye 
Tri-County. The cooperative also supplied one mile of three-phase line 
to serve the facility and offered rebates on energy efficient lighting.
    The Decorah Business Park and the Industrial Park in Lime Springs--
The cooperative provided over $550,000 in low-interest loans to two 
local industrial parks in order to build infrastructure to support 
additional businesses locating to the area.
                    water and enviromental programs
    This budget seeks $587 million in budget authority for Water and 
Waste Disposal (WWD) grants; $3.5 million in budget authority for solid 
waste management grants; and $92 million in budget authority to support 
$814 million in WWD direct loans and $75 million in guaranteed loans. 
This level of support is expected to improve the quality of life and 
health of an estimated 1.6 million Americans in needy communities each 
year by providing access to clean, safe drinking water. In addition, 
new or improved waste disposal facilities would be provided to an 
estimated 300,000 people living in rural areas.
    The Water and Waste Disposal program has been very successful since 
its inception over 60 years ago. A total of over $26 billion in 
financial assistance has been provided, about 70 percent of that in the 
form of loans; approximately 45 percent of the total has been provided 
during the past 10 years. Needs for water and waste disposal systems 
are still significant and are likely to grow as a result of expanding 
population in rural areas, changes to water quality standards, drought 
conditions, and similar factors. The application backlog for assistance 
continues to total about $3 billion each year. Over the last 3 years 
RUS has assisted 902 borrowers in moving up to commercial credit in 
accordance with its graduation requirement. As a result of this effort, 
nearly $2.8 billion in loans were paid off.
    Our budget request will allow third-party service providers such as 
rural water circuit riders and waste water technicians to make over 
76,000 water and wastewater system contacts to communities needing 
technical assistance and, through a clearinghouse effort, take more 
than 10,000 telephone calls and an estimated 20,000 electronic bulletin 
board and web site contacts. As a result of strong WWD technical 
assistance efforts, both from staff and third-party service providers/
contractors, loan delinquency and loan losses will remain low. 
Currently, less than 1 percent of approximately 7,900 borrowers are 
delinquent. Since the inception of the water and waste disposal 
program, only 0.1 percent of the amount loaned has been written off.
    As an example of the work we do, RUS recently assisted residents of 
the Zuni, New Mexico to develop their own safe and dependable supply of 
drinking water. The area served has a low-income level, and the water 
system was badly in need of repairs and improvements. Many of the 1,842 
residential, 24 commercial and 83 institutional customers were having 
to buy and haul drinking water, and often had to contend with low 
pressure due to distribution system and water supply problems. The 
system failed to meet 8 out of 10 applicable water quality standards. 
When construction is finished, the residents will have access to clean, 
safe, and reliable drinking water, coming from a modern, well equipped 
and managed system.
               investing where resources are most limited
    The agency is working to improve outreach, participation, and 
delivery where rural resources are most challenged. This goal addresses 
the heart of our mission. We combine our technical and financial 
resources to reach out and assist those communities, tribes and other 
groups with limited resources. The RUS outreach efforts have touched 
the vast expanse of our country-from rural Alaskan Villages to Colonias 
along the U.S.-Mexico border, communities in the Mississippi Delta, and 
the great needs of Native Americans. The end result is a stronger 
economy and a stronger America.
    Since the earliest days of rural electrification, RUS has focused 
special attention on tribal communities. One of our earliest electric 
borrowers was the Navajo Nation. Five out of the seven tribally owned 
telephone companies are RUS borrowers. RUS investments in utilities in 
Alaska provide service to some of the most remote native Alaskan 
villages.
    RUS investments in drinking water and wastewater projects serving 
tribal and rural Alaskan communities have increased by nearly 400 
percent since fiscal year 1993, and continue to grow. RUS is dedicated 
to helping unserved and under-served communities. Nearly $16 million 
was earmarked in fiscal year 2002 to benefit Native Americans. For 
fiscal year 2003, the President's proposed budget earmarks $24 million 
for Native Americans, of which $16.0 million is to be used for water 
and waste disposal grants. Additionally, we are intensifying 
coordination of funds with the Indian Health Service and State and 
other Federal agencies.
               modern telecommunications in rural america
    The building and delivery of advanced telecommunications networks 
is having a profound effect on our Nation's economy, its strength, and 
its growth. High-speed telecommunications services can literally solve 
many of the challenges facing rural residents--its students, the 
elderly and rural businesses. Children growing up on our farms and in 
our small towns can have access to the best education our Nation can 
provide. Rural citizens, particularly the elderly, will not suffer from 
inadequate health care that diminishes the quality or length of their 
lives. And rural economies will prosper and grow with new markets only 
a computer screen away. Rural economies today are so much more than 
just farm-based economies. In fact, seven out of eight rural counties 
are now dominated by varying combinations of manufacturing, service-
oriented and other non-farming activities. Today's advanced 
technologies will allow rural communities to become platforms of 
opportunity for new businesses to compete locally, nationally, and 
globally and the funding we are seeking in the 2003 budget request will 
help us continue to meet the ``new communications-needs'' of rural 
America.
             treasury rate, guaranteed, and hardship loans
    Since 1995--when RUS implemented Congress' visionary policy 
requiring all RUS-financed facilities be ``broadband capable''--every 
telephone line constructed with RUS financing is capable of providing 
advanced services using digital and fiber technologies. This loan 
program targets the most rural communities, populations that are less 
than 5,000 people.
    This year's budget includes $75 million in 5 percent interest 
hardship loans, $300 million in Treasury rate loans and $120 million in 
loan guarantee authority for the telecommunications programs. This 
amount of assistance will cost only $1.4 million in budget authority, 
most of which is needed to support the targeting of hardship loans to 
the poorest, neediest, and highest cost to serve areas.
    This budget also reflects the Administration's commitment to 
privatizing the Rural Telephone Bank and therefore does not request 
budget authority to support lending for 2003. Today, the bank operates 
as a supplemental lender to entities eligible to borrow funds from the 
RUS program. A privatized bank would be able to expand or tailor its 
lending practices beyond its current limitations imposed as a 
governmental lender, as well as use its substantial loan portfolio and 
cash reserves to extend favorable credit terms to smaller, rural 
companies. Privatization, therefore, should be pursued in a prudent, 
thoughtful manner, one consistent with the bank's enabling legislation 
thereby allowing it to continue as a private lender helping to meet the 
growing capital demands of the rural telecommunications industry.
                       broadband loans and grants
    We also propose to continue the special program of loans and grants 
to facilitate the deployment of broadband service in rural areas. This 
program was established on a pilot basis in 2001 and received funding 
for 2002. For 2003, RUS is requesting $80 million in Treasury rate 
loans and $2 million in grants.
    Broadband service not only provides critically needed economic 
stimuli for rural communities through e-commerce initiatives and by 
enticing new businesses, it creates a new ``workforce'' of students 
educated through distance learning programs with the skills necessary 
to compete globally.
    An important element of this program is that it enables RUS to fund 
broadband investment in the next level of rural America, towns with 
populations up to 20,000 inhabitants. These towns are typically caught 
in the middle--too small to attract private capital and too large to 
qualify for incentive-based programs.
          distance learning and telemedicine loans and grants
    The Distance learning and Telemedicine program continues its charge 
to improve educational and health care delivery in rural America. The 
terms ``distance learning'' and ``telemedicine'' are becoming synonyms 
for ``opportunity and hope.'' Telemedicine projects are providing new 
and improved health care services beginning with patient diagnosis, 
through surgical procedures, and post-operative treatment. New 
advancements are being made in the telepharmaceutical and 
telepsychiatry arenas providing health care options never before 
available to many medically under-served areas. Distance learning 
projects continue to provide funding for computers and Internet hookups 
in schools and libraries. The realm of study options available to rural 
students through distance learning technologies literally brings the 
world to their doorstep. The value of these services to rural parents, 
teachers, doctors and patients is immeasurable. Building on advanced 
telecommunications platforms, distance learning and telemedicine 
technologies are not only improving the quality of life in rural areas, 
but they are also making direct contributions to promoting e-commerce 
in rural areas by introducing the skills needed for a high-tech 
workforce and promoting sound health care practices, like preventative 
care initiatives.
    For 2003, RUS is requesting $25 million in grants for this program, 
and $50 million in Treasury rate loans. Since its inception, more than 
90 percent of this program's benefits has come from grant funding. 
Experience indicates that rural health care clinics, and especially 
educational providers, simply cannot afford loans to implement their 
projects. The $50 million in loans is expected to be sufficient to meet 
the demand from larger, consortium-based entities with the necessary 
resources to collateralize a loan.
                 three program areas, working together
    These three program areas, telecommunications, electric, water and 
environmental, all weave together for the fabric of infrastructure 
foundation in rural communities. They each fit, tongue and groove, with 
the rural business and rural housing programs that make up the rest of 
the Rural Development mission area. Each one being equally important to 
the economic and structural health of a community. This budget provides 
for sound, responsible, economic growth through investment in our rural 
communities.
    Every RUS Administrator before me has faced unique challenges in 
delivering ``common'' services--telephone, electricity, and water and 
waste disposal--to hard working rural Americans. People that got up 
before it was light, worked until well after dark, and fed a growing 
Nation. Today's information age poses its own unique challenges and I 
look forward to working with private and public sectors, and of course 
Congress, to meet those challenges.
                                 ______
                                 

                 Biographical Sketch of Hilda Gay Legg

    Hilda Gay Legg serves as the 15 Administrator of the Rural 
Utilities Service. She was appointed by President George W. Bush and 
confirmed by a unanimous vote of the U.S. Senate September 27, 2001. As 
Administrator of the Rural Utilities Service (RUS), Ms. Legg 
administers to the infrastructure needs of rural America through loan 
and grant funds totaling over $6 billion for Water and Environment 
Programs, Rural Telecommunications Programs and Rural Electrification 
Programs.
    Ms. Legg comes to this Administration, from The Center for Rural 
Development in Somerset, Kentucky, where she served seven years as 
Executive Director and CEO. She was responsible for the overall 
management of the state of the art facility as well as program 
development and outreach. The Center is a national model for economic 
development in rural areas in such projects as education, workforce 
training, telecommunications, arts and culture, environment, tourism 
and other economic development programs geared toward the ``total 
community development'' concept. Through the Center's advanced 
technology and operating capacity access, new opportunities have been 
provided to rural Kentucky business, industry, and research leaders 
from domestic as well as international sources.
    In 1990, Ms. Legg was appointed by President George Bush as 
Alternate Federal Co-Chairman for the Appalachian Regional Commission 
in Washington, D.C. Her primary responsibility was to represent and 
promote the economic policies for the region's 21 million people, and 
assist in the management of a $190 million budget aimed at job 
creation, building infrastructure, education and work force training 
and numerous research programs relative to rural economic development.
    During the late 1980's, Ms. Legg became Director of Admissions and 
faculty member at Lindsey Wilson College in Columbia, Kentucky. From 
1985 to 1987, she was the Field Representative in the Bowling Green 
office of U.S. Senator Mitch McConnell.
    Ms. Legg served in the Reagan Administration at the U. S. 
Department of Education. She started her professional career as a 
teacher in the Adair County Schools and is certified both as a 
secondary administrator and counselor. She remains active in education 
issues by serving as Vice Chair, Alice Lloyd College Board of Trustees, 
and Campbellsville University's Advisory Board.
    She is a graduate of Campbellsville University and received her 
master's degree at Western Kentucky University. She finished the Senior 
Executive Program at Harvard University's John F. Kennedy School of 
Government in 1992.
                                 ______
                                 

   Prepared Statement of James C. Alsop, Acting Administrator, Rural 
                            Housing Service

    Mr. Chairman and members of the Committee, thank you for this 
opportunity to testify on the Rural Housing Service's fiscal year 2003 
Budget Proposal.
    The Rural Housing Service (RHS) assists rural America in a variety 
of ways. Our loan and grant programs promote healthy rural communities 
by helping to provide decent and affordable housing as well as 
essential community services, such as fire protection, health care 
centers, and child care centers. Through partnerships with the private, 
public, and nonprofit sectors, RHS provides financial and technical 
assistance to low-income families and rural communities. RHS helps 
those who do not have effective access to credit because of the 
isolated nature or small scale of rural markets. We also provide credit 
to low-income families and communities that otherwise could not afford 
mortgage or other debt service payments.
    With the $5.2 billion program funding in the proposed fiscal year 
2003 budget, RHS will provide assistance to about 48,000 households for 
single family housing homeownership, repair and rehabilitate nearly 
6,000 rural rental housing units, and provide rental assistance to more 
than 42,000 very-low-income occupants of RHS funded rural rental units. 
Additionally, it will support more than 170 new or improved health care 
facilities, more than 150 new or improved fire and rescue facilities, 
and about 50 new or improved child care facilities. It also will create 
or preserve more than 30,000 jobs in rural America.
    In today's economic uncertainties, RHS programs ensure that the 
majority of rural America's most vulnerable members, including low-
income elderly, children, farmworkers, and Native Americans, do not 
suffer severe financial hardship. Let me show you how we plan to 
continue to do that under the Agency's fiscal year 2003 budget 
proposal.
            rhs homeownership programs reach the underserved
    For more than 50 years, RHS' Section 502 direct loan homeownership 
program has successfully worked to improve the overall quality and 
affordability of the Nation's rural housing stock. Our customers are 
happy with their homes. According to a recent Economic Research Service 
(ERS) report titled Meeting the Housing Needs of Rura/Residents, 90 
percent of recent Section 502 direct loan borrowers think that their 
current home is better than their last one. These same satisfied 
customers are people whom the private market has difficulty serving. 
Ninety percent say that without assistance from us it would have taken 
them more than 2 years to purchase a comparable home, and 44 percent 
believe they could not have purchased a home without the Section 502 
direct loan program. Twenty-nine percent of RHS borrowers are members 
of minority groups as compared to 15 percent of all recent low-income 
homeowners, and 32 percent of our customers are female single parents, 
as compared to 12 percent of all recent low-income homeowners. In 
addition, 15 percent of Section 502 households have at least one member 
with a disability. Almost three-quarters of the borrowers surveyed were 
first-time homeowners.
    In the fall of 2001, a Hidalgo County, Texas family of six moved 
into their new home thanks to the combined efforts of a number of 
organizations. Hidalgo County contains many areas, known as Colonias, 
which may lack electricity, water and sewer and garbage service. RHS 
provided a Section 502 Direct Loan for $50,000 to finance the first new 
home in this area. A community based nonprofit organization built the 
house while several other organizations contributed by providing loans, 
grants, technical services and in-kind gifts. Due to the success of 
this combined effort a number of other new homes were built in the 
area.
    The 2003 budget includes $957 million in Section 502 Direct Loans 
as well as $35 million in direct loans and $32 million in grants for 
the Section 504 Very-Low Income Repair Program. These funds will enable 
about 23,000 low-income rural Americans to become homeowners or to 
improve their substandard homes. An additional $2.75 billion in Section 
502 Guaranteed Loans will help nearly 34,000 low-and moderate-income 
rural households become homeowners. For rural Americans with very-low, 
low, and moderate incomes, the Section 502 direct and guaranteed loan 
programs continue to be the most effective housing programs available. 
Based on the estimates used by the National Association of Home 
Builders, the 2003 budget request for these programs will help create 
nearly 30,000 jobs through the construction of new homes.
    The 2003 budget also includes $34 million for the Self-Help Housing 
Technical Assistance Grants program. By allowing families to earn 
``sweat equity'' by helping to build their own homes, the Self-Help 
program makes housing affordable for many hard-working, very-low-income 
families, who otherwise would never be able to own their own homes. 
About half of the program's participants are members of minority groups 
and a significant portion is farmworkers. The program requirements are 
tough: participants must contribute 65 percent of the labor towards 
construction of their homes. Because owning a home is so important to 
them, these families are willing to work at their regular jobs and then 
put in as much as 35 hours a week, building their houses. We anticipate 
that the 2003 budget request will allow RHS to award technical 
assistance grants enabling more than 1,500 families to build their own 
homes.
    In Riverton, Wyoming, a single mother with three daughters built a 
home for her family. She joined three other families learning to work 
together to supply 65 percent of the labor needed to build their homes. 
Under Housing Partners, Inc., the four families learned to pour 
concrete, frame houses, and finish the interiors. Each home was 
financed with a $54,000 Section 502 loan from RHS. The loan amount was 
kept low because the homeowners contributed their ``sweat equity'' to 
the cost of their homes. Typically, sweat equity adds about 20 percent 
to the value of a home.
   rhs partners with private and nonprofit organizations to increase 
                      homeownership opportunities
    Homeownership can have a tremendous impact on families' lives and 
on the strength of rural communities. However, RHS cannot address this 
issue alone. We must work with partners. Leveraging has become an 
integral part of how we do business. RHS is collaborating with a number 
of private and public partners to meet the housing needs of low-income 
families and individuals. For example, the Rural Home Loan Partnership 
(RHLP) has grown into an important delivery method for providing 
homeownership opportunities throughout rural America.
    RHS originally established the RHLP as a pilot project initiated 
with the Federal Home Loan Bank System (FHLB) and the Rural Local 
Initiatives Support Corporation. Now, RHS has expanded the RHLP to 
include other partners. In the RHLP, a local nonprofit or community 
development corporation partners with a local lender and RHS to provide 
homeownership education and single-family mortgages to very-low- and 
low-income rural residents. In fiscal year 2001, the RHLP produced 
1,666 new homeowners using $105 million in RHS funds and $32.8 million 
from other lenders and grantors. For every dollar RHS invests in 
affordable housing, an RHLP partner contributes another 31 cents. The 
first year's success began with 10 local partnerships; the pilot has 
expanded each year to its current level of 267 partners.
    Last year, an RHLP partnership between Hibernia National Bank and 
RHS funded 142 loans in rural Louisiana, with the bank's 20 percent of 
the financing totaling $2 million. With the Federal Home Loan Board 
(FHLB) in Dallas, Hibernia provides down payment and closing cost 
assistance, thus enabling more families to qualify for loans and to 
afford better homes. In rural St. Martinville, LA, RHS and Hibernia 
teamed up to finance homes in the first new subdivision in the town in 
25 years. Providing this much-needed low-income housing not only helps 
individuals, but also spurs the local economy.
     rhs rental programs serve the most vulnerable rural americans
    Although RHS housing programs have been successful, many rural 
residents still live in substandard housing. According to the Housing 
Assistance Council's recent report titled The State of the Nation's 
Rural Housing, more than one million rural renter households are 
``worst case needs'' households, as defined by the Department of 
Housing and Urban Development. These are households that have incomes 
below 50 percent of the area median household income, are extremely 
cost-burdened or inadequately housed, and receive no Federal housing 
assistance. Of those rural renters with worst case needs, 62 percent 
pay 70 percent or more of their income for housing.
    Together, the RHS Section 515 Rural Rental Housing program and the 
Section 521 Rental Assistance (RA) program provide decent, safe, and 
affordable housing to those families who need it the most. The Section 
515 program provides loans at an interest rate of 1 percent for 
building affordable housing, while the Rental Assistance program 
reduces rents for tenants to pay no more than 30 percent of their 
income.
    The average annual income of our Section 515 tenants is just under 
$8,000. Fifty-two percent of our 469,000 tenant householders are 
elderly, 16 percent have a handicap or disability, 28 percent are 
members of minority groups, and 73 percent are women. In fiscal year 
2001, RHS provided $50 million to build more than 1,500 apartments and 
another $54 million to rehabilitate 5,500 apartments for our Section 
515 tenants. The fiscal year 2003 budget request of $60 million for the 
Section 515 housing will provide much-needed repairs or rehabilitation 
to 5,900 units. No funding is included for Section 515 Direct Loans for 
new construction. However, the budget includes $100 million in Section 
538 Guaranteed Loans that may be used for new construction. In 
addition, it includes $36 million in loans and $17 million in grants 
for Farm Labor Housing projects most of which will be new construction.
    The $706 million in fiscal year 2003 funding requested for the 
Section 521 Rental Assistance (RA) program is essential in ensuring the 
integrity and financial stability of our Section 515 and Section 514/
516 Farm Labor Housing loan and grant programs. The percentage of our 
RA budget devoted to ensuring that tenants currently receiving RA 
continue to receive those benefits increases each year as the 
cumulative effect of the program grows. In 2003, well over 93 percent 
of our RA budget will be used to ensure that more than 42,000 RA 
contracts are renewed and that the people living in these units can 
remain in affordable housing. The remainder of the RA funding will be 
used to keep rent affordable when repair and rehabilitation are needed 
for existing units.
    RHS maintains a multi-family housing portfolio of existing projects 
that provide housing for over 450,000 very-low and low-income families 
nationwide. Over half of these families receive rental assistance 
payments. It is becoming more difficult for RHS to meet the needs of 
the existing aging portfolio and to fund new rental units for very low-
income families currently living in substandard housing. Accordingly, 
$2 million is included in the fiscal year 2003 budget to provide for an 
evaluation of the program by an independent entity. This evaluation 
would examine budgetary funding practices, financing mechanisms, and 
program administration procedures to determine if there is a more cost-
efficient manner to deliver MFH programs and provide quality affordable 
housing to rural residents most in need.
   rhs provides essential facilities to distressed rural communities
    Along with decent and affordable housing, many communities also 
lack essential community facilities such as educational buildings, 
fire, rescue, and public safety facilities, child care centers, and 
health care facilities. This shortage not only impacts the quality of 
life for community residents but also makes it more difficult for 
communities to attract and retain businesses. Our Community Facilities 
(CF) direct and guaranteed loan and grant programs provide funding for 
these essential facilities.
    The fiscal year 2003 budget includes $477 million for the Community 
Facilities program, $250 million for Direct Loans, $210 million for 
Loan Guarantees and $17 million for grants. This level of funding allow 
us to continue our commitment to educational facilities, which are 
especially important in preparing rural children and adults to compete 
in the global economy. In fiscal year 2001, we assisted 145 communities 
by investing $81.9 million in buildings to house public schools, 
charter schools, libraries, museums, colleges, vocational schools, and 
educational facilities for the disabled. We also helped finance the 
purchase of computers and other technological equipment. Public safety 
is an often neglected need in rural communities. In fiscal year 2001, 
we invested $81.6 million in 473 facilities, including communications 
centers, police, fire and rescue stations, civil defense buildings, and 
related vehicles and equipment.
    Childcare is especially important in rural areas. A staggering 24 
percent of rural America's children live in poverty. Without adequate 
child care facilities, many rural parents face a tough choice: go to 
work to increase their family's income, but worry about whether their 
children are safe and well cared for, or live in poverty in order to 
stay home to take good care of their children. The high-quality 
childcare centers financed by the Community Facilities program allow 
parents to go to work with peace of mind.
    Ringgold County Child Care Center in Mount Ayr, Iowa, is a good 
example of how our Community Facilities (CF) program helps communities 
provide essential services. Funding was provided by a number of sources 
in addition to RHS. These included a Community Development Block Grant, 
the local school district, and various charitable and local sources. 
The center serves over 150 children, with separate areas for children 
in different age groups, ranging from infants to pre-schoolers.
    I have discussed the funding for the major RHS programs. Now, let 
me take a moment to show you how the budget will help some of our most 
vulnerable rural citizens: the elderly, farmworkers, and Native 
Americans.
rhs provides rural america's elderly with safe, affordable housing and 
                     essential community facilities
    For elderly rural people who want to remain in the homes they own, 
we provide the Section 504 very-low income loan and grant programs. 
These programs make substandard homes safe and decent by financing such 
things as indoor plumbing, electric heating and cooling systems, safe 
wiring, roof and floor repair, and the installation of features to 
accommodate disabilities. In fiscal year 2001, $61 million in loan and 
grant money was used to repair about 11,500 homes under the Section 504 
program. The President's 2003 Budget includes $31.5 million for the 
Section 504 grant program, which serves very low-income seniors, and 
$35 million for the Section 504 loan program in which about half of the 
beneficiaries are elderly. With this money, RHS can help make nearly 
12,000 substandard homes safe and decent.
    The RHS Community Facilities program finances a range of service 
centers for elderly people, including nursing homes, boarding care 
facilities, assisted care, adult day care, and intergenerational care 
centers that serve both elderly people and children at the same time. 
Since its inception in 1974, the Community Facilities program has 
invested $767 million in facilities that directly benefit seniors and 
millions more in health care services that serve both seniors and the 
general population.
                rhs programs serve america's farmworkers
    Although the housing needs of the elderly are severe, the most 
poorly housed groups in America are farm workers and Native Americans. 
Farmworkers enable America to maintain its agriculture production 
levels and compete in world markets, yet they are the lowest-paid group 
of workers in the Nation. While their labor ensures food security 
through the successful production and distribution of our Nation's 
agricultural crops, farmworkers live in substandard housing, sometimes 
without basic sanitary facilities, safe heating and cooking equipment, 
and a supply of clean water.
    RHS provides housing to farmworkers primarily through two programs: 
the Mutual Self-Help program, which I have already described, and the 
Section 514/516 Farm Labor Housing program, which is the only national 
source of farm labor housing construction funds. Participants in either 
of these programs must be permanent residents or U.S. citizens. Tenants 
in our farm labor housing must earn a substantial portion of their 
income through farm work. Eighty-nine percent of tenants in RHS-
financed farm labor housing are minorities, primarily Latino and 
African-American.
    The fiscal year 2003 budget request of nearly $53 million for the 
Farm Labor Housing program will enable us to finance construction of 
more than 1,000 new units as well as address our anticipated need to 
rehabilitate and repair about 1,200 existing units. This funding will 
be highly leveraged because RHS partners with other public and private 
funding organizations in the vast majority of its complexes.
    In addition to providing farmworkers with housing, RHS provides 
them with essential community facilities, such as child care and health 
care centers. The CF program has been successful also in meeting the 
needs of migrant farmworkers--a transient population difficult to 
serve. In conjunction with the Department of Health and Human Services, 
we have funded a number of migrant health care clinics and migrant Head 
Start centers.
              native americans benefit from rhs assistance
    Native Americans suffer greatly from inadequate housing, and lack 
of access to basic community and health services. RHS continues its 
extensive outreach to Native Americans by working to overcome barriers 
to lending on trust land and by providing grant funds whenever 
possible.
    RHS has worked hard to increase its investments, which benefit 
Native Americans. The Section 504 housing repair loan and grant 
programs are often the first RHS programs to be used on a reservation. 
Section 504 loans are especially easy to use because if the loan is 
less than $2,500, no real estate security is needed. Thus, the problem 
of lending on trust land is avoided. We also have financed numerous 
Section 515 multi-family housing complexes serving Native Americans 
across the Nation. We typically provide about 10 percent of our Housing 
Preservation Grant funds to organizations that serve Native Americans. 
Through small Section 525 Technical Assistance Grants to nonprofit 
organizations, we fund credit counseling and homebuyer education to 
Native Americans to help them qualify for RHS single family housing 
loans and become successful homeowners.
    Native American communities, especially those on reservations, have 
many needs beyond housing--needs for medical centers, libraries, 
community centers, childcare centers, Head Start facilities, and fire 
stations and trucks. The Community Facilities program provides loans 
and grants to help meet all these needs. In addition, the fiscal year 
2003 budget proposal earmarks $4 million in Community Facilities 
assistance for tribal colleges. Many of these colleges need major 
repairs and renovations to existing buildings, facilities to house new 
programs, and computers and other equipment. This earmark enables us to 
assist the tribal colleges in their efforts to provide students with 
the education needed for success in their lives.
    In South Dakota, Si Tanka College, an associate degree school run 
by the Cheyenne River Sioux Tribe, received a Community Facility (CF) 
direct loan and a guaranteed CF loan totaling more than $6 million 
enabling them to purchase a fully accredited university. The purchased 
college, Huron University, was a small private institution struggling 
to survive with declining enrollment and funding. The purchase enhances 
both colleges financially as well as in expanded curriculum. Huron will 
add a Native American curriculum and Si Tanka will be able to offer 4-
year degree programs. The courses will be taught via Internet 
technology to students on the reservation who are unable to travel the 
200 miles to the Huron campus. Huron University is a significant part 
of the local economy, so the community also benefits from the merger.
          rhs supports rural america and local community needs
    The USDA Centralized Service Center (CSC) in St. Louis, Missouri, 
provides all written and oral communication to customers in either 
English or Spanish to better serve the needs of these customers. At the 
CSC, RHS has used aggressive recruitment and retention initiatives in 
order to create a workforce, which is 11 percent bilingual and can 
supply these services. The CSC also works closely with the National 
Industries for the Blind and provides monthly mortgage statements in 
Braille for self-sufficient blind customers. National TDD phone service 
is available from CSC as well as e-mail customer responses for 
customers with hearing disabilities. Employees with disabilities, over 
10 percent of the CSC employee population, are provided special 
equipment to enhance their productivity and ability to serve customers.
    RHS's commitment to helping people become self-sufficient is also 
evident in their ongoing Welfare-to-Work initiative. CSC has worked 
with the St. Louis Transitional Hope House and the American Red Cross 
to employ former welfare recipients. Twenty-six employees referred 
through this effort started out as worker trainees. Eighteen have since 
been promoted into permanent loan processor positions. New worker 
trainees are provided with mentors and may later become mentors 
themselves as they become proficient in the work environment. One 
employee who started in the Welfare-to-Work program is now enrolled in 
college, pursuing an accounting degree. Another has obtained RHS 
financing and is now a proud single-parent homeowner.
    The CSC has received several individual and Government agency 
awards for its initiatives. These include awards from the Council for 
Employment of Individuals with Disabilities, the Hispanic Employment 
Council, and the Black Employment Council.
    I hope I have illustrated for you the many ways that RHS programs 
improve life in rural areas. We have great opportunities to assist 
rural people and their communities in becoming self-sufficient. I have 
mentioned only a few examples of how RHS makes a difference in the 
lives of so many rural Americans.
    Mr. Chairman and members of the Committee, with your continued 
support, RHS looks forward to improving the quality of life in rural 
America by helping to build competitive, active rural communities 
through our community facilities and housing programs.
                                 ______
                                 

                 Biographical Sketch of James C. Alsop

    James C. Alsop began his career with the U.S. Department of 
Agriculture on June 10, 1968, as an Extension Agent with the 
Cooperative Extension Service in Suffolk, Virginia. In 1972, Mr. Alsop 
joined the Farmers Home Administration in Tappahannock, Virginia. Mr. 
Alsop held the following positions in Virginia: Assistant County 
Supervisor, County Supervisor, Community Programs Specialist, and 
District Director. In 1979, Mr. Alsop became a Community Programs 
Specialist in the National Office in Washington, D.C. At the National 
Office, he has held the positions of Direct Loan Processing Branch 
Chief, Acting Deputy Assistant Administrator for Community and Business 
Programs, Executive Assistant to the Administrator, Rural Business-
Cooperative Service, and Deputy Administrator for Community Programs, 
Rural Housing Service. He is currently serving as the Acting 
Administrator for the Rural Housing Service.
    Mr. Alsop graduated from Virginia State College with a Bachelor of 
Science Degree in Animal Science. Mr. Alsop has completed the USDA 
Senior Executive Service Candidate Development Program and received the 
certificate of executive qualification. He has been selected as a 
member of the Senior Executive Service. He has attended numerous 
executive training seminars, including the Leadership for a Democratic 
Society at the Federal Executive Institute in Charlottesville, 
Virginia. He has received numerous outstanding merit awards for 
outstanding job performance. In June of 1997, Mr. Alsop was the team 
leader of the Community Facilities Basic Training Group that received 
one of the highest awards presented by the Secretary of Agriculture for 
superior service. This honor award for excellence was presented to the 
group for contributing to Rural Development program delivery by 
initiating improvements in customer service. He served on the National 
Reorganization Negotiating Team in 1994, developing procedures for the 
placement of Rural Development employees nationwide during the USDA 
reorganization. He served as a management representative for Rural 
Housing Service on the Rural Development Partnership Council.
    As the Deputy Administrator for Community Programs, he was 
responsible for administering the Community Facilities direct, 
guaranteed, and grant programs nationwide. There are 47 Rural 
Development State Offices that include at least one person per office 
responsible for implementing the Community Facilities program. Mr. 
Alsop managed a national program that received supportable loan and 
grant allocations totaling $499 million during fiscal year 2002. The 
outstanding Community Facilities portfolio consists of 4,771 loans or 
grants totaling $2,011,536,240. Community Programs has a current 
portfolio of 98.4 percent.
    Mr. Alsop has been serving as the Acting Administrator for the 
Rural Housing Service since January 22, 2001. He is responsible for 
providing guidance to Single Family Housing, Multi-Family Housing, 
Community Programs, Program Support Staff, and the Centralized 
Servicing Center in St. Louis, Missouri. There are 747 full-time 
equivalents designated under the National Office Rural Housing Service 
Administrator's Office. Rural Housing Service has an appropriation of 
$5.8 billion for fiscal year 2002. The outstanding portfolio, including 
direct and guaranteed loans and grants, is in excess of $50 billion.
    Mr. Alsop is married and has two sons and two granddaughters. The 
Alsops reside in Sterling, Virginia.
                                 ______
                                 

    Prepared Statement of John Rosso, Administrator, Rural Business 
                          Cooperative Service

    Mr. Chairman and members of the Subcommittee, I am pleased to 
appear before you today to present the Administration's fiscal year 
2003 Budget for the Rural Business-Cooperative Service (RBS).
    Mr. Chairman, the programs and services of RBS, in partnership with 
other public and private sectors, continue to improve the economic 
climate of rural areas through the creation or preservation of 
sustainable business opportunities and jobs in rural America. RBS 
continues to target its resources to farmers, ranchers, and to the 
under-served rural areas and populations. RBS programs fall into two 
broad categories, loan and grant programs to assist rural businesses, 
and programs of assistance to farmers, ranchers, and other rural 
residents organized on a cooperative basis.
    The programs of RBS help close the gap in opportunity for these 
under-served rural areas and populations, bringing them closer to 
sharing fully in the nation's economic growth. The $844 million 
requested in this budget for RBS programs will assist in creating or 
saving about 89,300 jobs and providing financial assistance to more 
than 3,900 businesses.
    Continued emphasis will be given to financial assistance for 
projects located in the Rural Empowerment Zone/Enterprise Communities/
Rural Economic Area Partnerships ((EZ/EC/REAP), the Mississippi Delta, 
and Native American communities. In addition, priority will be given to 
projects that support the Administration/Departmental objectives on 
value-added agricultural and alternative energy, including bioenergy 
development in rural areas.
             business and industry guaranteed loan program
    For the Business and Industry (B&I) Program, the fiscal year 2003 
budget includes $29.0 million in budget authority to support $733 
million in Guaranteed Loans. This is a slight increase in budget 
authority compared to last year. The guaranteed fee is limited to a 
maximum of 2 percent of the guaranteed portion of the loan based on 
current regulation. A regulation change is pending to allow the Agency 
to either charge a higher guaranteed fee, consider an annual fee, or a 
combination of the two. This regulation, if implemented by the 
beginning of the fiscal year, would give the Agency flexibility to 
offset some of the increasing subsidy and would allow for a larger 
supportable loan level for the same budget authority. Based on recent 
history and current economic conditions, the demand for this program 
will continue to be strong.
    We estimate that the funding requested for 2003 would create or 
save about 20,400 jobs.of an agricultural commodity raised by the 
individual farmer stockholders. This program allows lenders to better 
meet the needs of rural businesses. Through the lender's reduced 
exposure on guaranteed loans, they are able to meet the needs of more 
businesses at rates and terms the businesses can afford. B & I 
Guaranteed loans may be used by this individual farmers to purchase 
cooperative stock in a start-up cooperative established for value-added 
processing. Further, within the total funding for the program, $18 
million in B & I loans is earmarked for projects in EZ/EC and REAP 
areas.
    To illustrate how this program has improved the economic climate in 
an under-served area of rural America, I would like to share a success 
story in support of the President's Energy Policy. In July 2001, RBS 
issued a Business and Industry loan guarantee, totaling $$12,500,000, 
to Sterns Bank N.A. of St. Cloud, Minnesota, to assist Quad Country 
Corn Processors Cooperative of Galva. Iowa. This loan guarantee will be 
used to replace the interim financing of costs for developing, 
constructing and equipping an 18-million gallon per year ethanol 
facility. The startup cooperative is owned by 415 farmers who 
contributed $8.5 million in equity capital this is being used towards 
the development of the $22 million plant. This plant that will use 
nearly seven million bushels of corn to produce 18 million gallons of 
ethanol per year, along with 120,000 tons of by-product for livestock 
feed. The Quad Country Corn Processors Cooperative is expected to 
create 16 jobs at the ethanol plant, and will open new markets for our 
farmers, and help to meet the growing demand for alternative energy 
sources. In addition, 20 jobs are projected to be created at separate 
facilities owned and operated by separate companies that will take the 
carbon dioxide by-product from the ethanol plant and refine, liquefy, 
and make it into dry ice.
                     intermediary relending program
    The fiscal year 2003 Budget also includes $19.3 million in budget 
authority to support $40 million in loans under the Intermediary 
Relending Program (IRP). The initial investment of this proposed level 
of funding will create or save an estimated 9,000 jobs, but because 
these funds, over the 30-year loan term, are re-loaned three or four 
times by the intermediary, we estimate that over 30,600 jobs will 
eventually be created or saved. Within the total program level, $5.7 
million will be earmarked for EZ/EC/REAP areas, $3.6 million for Native 
Americans and $7.1 million for Mississippi Delta projects.
    Participation by other private credit funding sources is encouraged 
in the IRP program, since this program requires the intermediary to 
provide, at a minimum, 25 percent in matching funds. The demand for 
this program continues to be strong. To illustrate the benefits IRP 
provides to rural America, I would like to share with you a success 
story from Owego, N.Y.
    For example, $18,326 was initially awarded to the Tioga County 
Local Development Corporation was initially awarded an $18,326 grant in 
June 2000, and a second grant totaling $82,000 was made in April 2001 
from. Tioga County has been designated as a REAP zone because of the 
loss of several major businesses and the job and economic activity that 
they provide. An IRP loan was made in April 2000, a $300,000 IRP loan 
was made in the amount of $300,000 to the Tioga County Small Business 
Revolving Loan Fund, which they relent to local entrepreneurs, and 
relent, through the Tioga County Small Business Revolving Loan Fund, to 
local entrepreneurs. It is projected that approximately 11 businesses 
will be provided the opportunity to replace some of the jobs and 
economic activity that has been lost. As a result of this relending 
activity, it is projected that 18 jobs will be created or saved.
                rural business enterprise grant program
    For the Rural Business Enterprise Grant (RBEG) Program, the fiscal 
year 2003 Budget includes almost $44 million. We anticipate that this 
level of funding will create or save over 35,100 jobs. The demand for 
this program continues to be strong. The purpose of this program is to 
assist small and emerging businesses. It is estimated that each dollar 
of investment through the RBEG Program generates another $2.40 in 
private capital. Among the many eligible grant purposes under this 
program is the establishment of a revolving loan fund by the grantee to 
support small and emerging business development in rural areas. Within 
the total program level, $7.0 million will be earmarked for EZ/EC/REAP 
areas, $3.0 million for Native Americans, and $1.0 million for the 
Mississippi Delta Region.
    For example, in 1999, a $194,000 RBEG was awarded to the Village of 
Winchester in Winchester, Ohio of Adams County, Ohio to assist the 
Adams Agri-Business Enterprise Center support local small agriculture 
related businesses. Adams County is located in the Appalachia Region 
and is suffering from persistent poverty and out-migration, as 
unemployment rates have always been high. The grant was used to provide 
approximately half the $400,000 construction cost of a value-added 
agri-business incubator. Construction of the project was completed in 
October 2001. One of the first tenants in the building was the Farm 
Fresh Growers which is projected to jointly market their value-added 
fruit and vegetable products. This project is expected to assist at 
least 4 businesses, create 5 jobs, and save 10 jobs.
    Another example is a project located in Quincy, FL. In June of 
2001, a $99,999 RBEG was awarded to the North Florida Educational 
Development Corporation (NFEDC) for the Quincy Packinghouse Wellsprings 
Initiative. The grant funds will be used to renovate and equip an 
abandoned feed mill. It will be leased to the Big Bend Growers 
Cooperative, Inc. comprised of small and disadvantaged minority 
farmers. The cooperative's members will gain access to markets they do 
not have individually as growers. Approximately 15 farmers will be 
assisted and 12-15 new jobs will be created.
                rural economic development loan program
    The fiscal year 2003 Budget includes almost $15 million in Rural 
Economic Development Loans. This program represents a unique 
partnership, since it directly involves the rural electric and 
telecommunications borrowers in community and economic development 
projects. It provides zero interest loans to intermediaries who invest 
the funds locally. In fiscal year 2001, each dollar invested through 
these programs attracted an estimated $6.31 in other capital.
                rural business opportunity grant program
    The fiscal year 2003 budget includes $3 million for Rural Business 
Opportunity Grants (RBOG) to provide much-needed technical assistance 
and capacity building in rural areas. This level of funding includes 
$1.0 million for Native Americans and $1.0 million for Mississippi 
Delta Region Projects. The demand for this program continues to grow. 
Many rural areas need to develop economic and community development 
strategies that will attract private investment capital and Federal and 
State assistance. Also, the vast majority of rural communities are 
served by part-time officials who do not have the time or necessary 
training to compete with large communities for funding that may be 
available to them. The funds requested under this program will aid in 
providing that invaluable assistance to allow communities as they take 
their first step toward overcoming these impediments.
    To illustrate, $67,000 in grant assistance was provided under the 
RBOG program to the Adopt a Farm Family project, located in Sikeston, 
MO. The funds were used to conduct a feasibility study to determine if 
a sunoil and/or soyoil processing facility would be feasible in the 
area. If determined to be feasible, it is possible that a processing 
facility could be established. Such a facility would create new jobs 
and generate additional income for rural households in an area that has 
very high unemployment and persistent poverty.
              rural cooperative development grant program
    Another source of assistance to developing cooperatives is the 
funding of new and existing cooperative centers through the Rural 
Cooperative Development Grant Program. This partnership with 
institutions of higher learning and nonprofit associations permitted us 
to fund 20 centers for a total of $4.5 million in fiscal year 2001.
                          cooperative programs
    The functions of our cooperative programs are authorized under both 
the Cooperative Marketing Act of 1926 and the Agricultural Marketing 
Act of 1946. Our programs of research, technical assistance, education/
information, statistics and assistance in starting new cooperatives are 
designed to establish viable business entities that help individual 
farm operators and other rural residents retain access to markets and 
sources of supplies and services in a sector that is becoming rapidly 
vertically coordinated and industrialized. Cooperatives are a means for 
rural people who are typically structurally weak compared to level the 
playing field with to their buyers and suppliers, to be allowing for 
them to be treated more fairly in the marketplace.
    Since 1926, USDA has worked as a partner to farmer cooperatives, 
helping interested groups of agricultural producers form new 
cooperatives and working with existing cooperatives to improve their 
efficiency and expand the scope of services to members. These functions 
are now carried out primarily within the Rural Development mission area 
by the CS program. Our National Office and State office staff who 
specializes in research, technical assistance, statistics and 
educational/informational activities. carries out the work. It is also 
augmented by State Rural Development Offices that are identifying 
cooperative development specialists on their staffs to assist in 
starting and servicing the needs of new cooperatives. Our efforts are 
aided by partnerships with universities, State departments of 
agriculture, and non-profit associations through various program 
activities aimed at strengthening rural people's ability to use mutual 
self help efforts to earn a decent living, and to enhance their quality 
of life.
    Cooperative Services conducts studies, alone or in conjunction with 
other Federal or State institutions, to provide farmers with 
information on economic, financial, organizational, legal and social 
aspects of cooperative activity. Technical advice assists farmer 
cooperatives in the development and operation of viable organizations 
to better serve the Nation's family farmers. Educational assistance 
provides farmers and other rural residents with a proper understanding, 
use and application of the cooperative tool. A major initiative by RBS 
has been to encourage the staffing of Cooperative Development 
Specialists in each State Office. These individuals provide a more 
local source of expertise in guiding the development of new cooperative 
businesses and helping to determine their feasibility. To date, 
approximately 25 staff members in our State offices have this 
responsibility either solely or on a collateral basis. We are confident 
they will become a more important source of assistance to emerging 
business as they gain more expertise.
    An example of our technical assistance work is provided by the 
Great Plains Buffalo Cooperative (GPBP) project. RBS staff worked with 
the steering committee of this group since March 2001 and helped them 
conduct two feasibility analysis. Based on these studies, GPBC is 
moving forward to form a cooperative that will purchase an existing 
processing facility and an adjacent feedlot. The cooperatives will then 
process and market member owned buffalo products. Approximately 100 
producers from an 8-State area in the Western U.S. will be involved in 
this cooperative effort.
            appropriate technology transfer for rural areas
    The Appropriate Technology Transfer for Rural Areas (ATTRA) program 
offers producers and agribusiness advisors information on use of the 
best sustainable production practices. Encouragement of such practices 
lessens dependence on agricultural chemicals and is more 
environmentally friendly. The ATTRA program handled over 20,000 
requests this past year and continues to be a source of information 
throughout the country through its 800 number and the use of the 
Internet.
                               conclusion
    Mr. Chairman, this concludes my formal statement on the fiscal year 
2003 Budget. I would be happy to respond to any questions the 
Subcommittee may have regarding the Rural Business Cooperative Service 
programs of the Rural Development mission area.
                                 ______
                                 

                   Biographical Sketch of John Rosso

    As Administrator of the U.S. Department of Agriculture (USDA) Rural 
Business-Cooperative Service (RBS), John Rosso oversees a variety of 
programs and services that promote a dynamic business environment in 
rural America, and encompasses many varied cooperative developments and 
value-added endeavors for farmer producers.
    In fiscal year 2001, RBS, Business Programs, provided a total of 
$1.2 billion of financial assistance resulting in over 100,000 jobs 
being created/saved, and 4,889 businesses were assisted in rural 
America. In fiscal year 2001 RBS, Cooperative Services, through the 
Rural Cooperative Development Grant Program, provided 20 recipients in 
20 States with a total of $4.8 million, which assisted nearly 100 
existing or new cooperative businesses. The Cooperative Services 
Program also administered the prototype Value Added Development Grant 
(VADG) Program, reviewing over 600 applications and awarding $20 
million to 62 applicants.
    John Rosso has acted in several capacities in prior years at the 
Department of Energy and the Department of Housing and Urban 
Development, and is now serving under his third President. Prior to 
coming to Washington D.C. to serve in a national capacity, he was 
elected as the Presiding Officer/Majority Leader of the Suffolk County 
Legislature, New York, where he served as an elected official for 
several terms.
    Before retiring from the private sector and entering government 
service, John Rosso was President and Chief Executive Officer for over 
20 years of varied private companies owned and operated by him. John 
Rosso was heavily involved in commercial and residential development, 
petroleum distribution, General Insurance, retail sales and 
franchising.
    John Rosso is a native of Brooklyn, New York, growing up on the 
eastern end of Long Island where he was also active in civic affairs as 
President of the School Board, the local Hospital, Chamber of Commerce, 
and Secretary of the Northeastern Regional Fuel Dealers Association. He 
is married and the father of two adult children, and has been portrayed 
by his former constituents as a dedicated ``family man.''

    Senator Kohl. We thank you very much, Mr. Neruda, and now 
turn to Dr. Joseph Jen, who is Under Secretary for Research, 
Education and Economics. Dr. Jen.

                       STATEMENT OF JOSEPH J. JEN

    Dr. Jen. Thank you, Mr. Chairman, members of the 
subcommittee. It is my pleasure to appear before you for the 
first time to discuss the fiscal year 2003 budget for the 
Research, Education and Economics mission area. The 
administrators of the four agencies are in the audience and 
each of them has submitted written testimony for the record.
    Given today's tight budget constraints driven significantly 
by the need to shore up our homeland security and current 
economic conditions, the REE budget that we are discussing 
reflects a recognition of the crucial role of REE research, 
education, economics and statistical programs in solving the 
problems facing our Nation's agriculture and food system.
    We appreciate the support received from Congress in our 
appropriations for fiscal year 2002. The President's fiscal 
year 2003 budget proposes $2.3 billion for the four REE 
agencies. For more than 100 years, science has been the 
foundation of American agriculture. During the past century, 
research investment and scientific advances have fueled the 
tremendous rate of productive growth in the American 
agriculture sector. American public investment in agricultural 
research is a major reason the percentage of household income 
we spend on food has dropped from 20.5 percent in 1950 to 10.2 
percent in the year 2000.
    However, without continued gains in agricultural science, 
the United States cannot continue to provide affordable, safe 
and nutritious food to American consumers and the world 
population. Without continued scientific progress, we also 
cannot continue to compete effectively in global marketplace, 
nor can we develop practices that mitigate the effects of 
agriculture on the environment.
    The remarkable success enjoyed by our agricultural food 
systems and the resultant benefit that have inured to the 
Nation depend heavily on our having a reservoir of basic 
fundamental scientific knowledge. Applied mission-oriented 
research and technology development then draw on this knowledge 
reservoir to address pressing problems faced by the agriculture 
sector and society. If we are to continue the successes of the 
past, we must continue to support basic research, to replenish 
the basic fundamental knowledge reservoir, as well as applied 
mission-oriented research. USDA is committed to achieve a 
balanced research portfolio to do just that.
    The fiscal year 2003 budget proposes increases to $240 
million for the National Research Initiative, a program 
authorized in 1991 legislation at $500 million annually. 
Competitive programs such as the NRI open to all research 
communities provide the most effective mechanism for attracting 
the best minds in the Nation to conduct research in agriculture 
and food systems. The NRI program not only provides funds for 
basic fundamental research such as plant, animal, microbial and 
food genomics, but also it is proposing to increase funding in 
research on exotic and emerging plant and animal diseases, such 
as wheat scab and karnel bunt in the west, and Pierce's disease 
in California.
    The President's budget also reflects an increase in the ARS 
budget for biobased products and bioenergy research, the 
research focused on solving multiple national problems through 
finding new uses and new markets for valued added agricultural 
products such as modern fuels, which will improve our Nation's 
energy security.
    On the education side, the President's budget provides an 
increase of $2.7 million for three higher education programs in 
the CSREES. One of them is an international program for land 
grant institutions.
    Statistical and economic analysis also will see increases 
in the President's budget proposal to conduct the agricultural 
resource management survey known as ARMS. The survey is jointly 
sponsored by NASS and the ERS. Data from ARMS forms the 
foundation of research analysis, making it possible to answer 
key questions from Congress, Administration officers, USDA, and 
other decision makers about the differential impact of 
alternative policies and programs across the farm sector.
    Lastly, REE is working cooperatively with many other 
Federal agencies to stretch the research dollar. For example, 
we are working with NSF on plant genome research, and with DOD 
and DOE on biobased products and energy. We were asked by OSTP 
recently to lead a cooperative effort in domestic and animal 
genome research, involving NIH, NSF, DOD, OSTP, and various 
agencies within USDA.
    With continued investment in agricultural research, we will 
be ready to meet both future problems and take advantage of new 
opportunity presented by cutting edge science and technology. 
Thank you.
    [The statements follow:]

                Prepared Statement of Dr. Joseph J. Jen

    Mr. Chairman, Members of the Committee, it is my pleasure to appear 
before you for the first time to discuss the fiscal year 2003 budgets 
for the Research, Education, and Economics (REE) mission area agencies. 
I am accompanied by the Administrators of the four mission area 
agencies: Dr. Edward Knipling, Acting Administrator of the Agricultural 
Research Service (ARS); Dr. Colien Hefferan, Administrator of the 
Cooperative State Research, Education, and Extension Service (CSREES); 
Dr. Susan Offutt, Administrator of the Economic Research Service (ERS); 
and Mr. Ronald Bosecker, Administrator of the National Agricultural 
Statistics Service (NASS). Also present is Steve Dewhurst, Director of 
the Office of Budget and Program Analysis of the Department of 
Agriculture (USDA). Each Administrator has submitted written testimony 
for the record.
    Given today's tight budget constraints driven significantly by the 
need to shore up our homeland security and current economic conditions, 
the REE budget that we are discussing reflects a recognition of the 
critical role of REE's research, education, economics and statistics 
programs in solving the problems facing our Nation's agricultural and 
food system. We appreciate the support received from Congress in our 
appropriations for fiscal year 2002. The President's fiscal year 2003 
budget proposes $2.3 billion for the four REE agencies. The overall 
funding for the four agencies represents a balanced budget portfolio 
supporting the mission area's programs.
    REE's four agencies have a proud history over many decades of 
finding solutions to the challenges confronting farmers, ranchers and 
consumers involved in agriculture, resulting in a high return on the 
Federal investment to our Nation; a Nation that enjoys a plentiful, 
affordable, and safe food supply. For more than 100 years, science has 
been the foundation of American agriculture. During the past century, 
research investments and scientific advances, largely in the public 
sector, have fueled the tremendous rate of productivity growth in the 
American agricultural sector. In 1862, when Congress established the 
Department of Agriculture, one farmer fed five people. In 1940, one 
farmer fed 19 people. Today one American farmer feeds 129 people. 
America's public investment in agricultural research is the reason why 
the percentage of household income we spend on food has dropped from 
20.5 percent in 1950 to 10.2 percent in 2000.
    The historical success of agricultural research reflects the 
importance of science, technology, economics, and statistical 
information for the U.S. agricultural sector and the larger society. 
Without continued gains in agricultural science, the United States 
cannot continue to provide affordable, safe, and nutritious food to 
American consumers and the world population. Without continued 
scientific progress we also cannot continue to compete effectively in 
the global marketplace nor can we develop practices that mitigate the 
effects of agriculture on the environment. Agricultural research and 
analysis are essential to ensuring America's food and agricultural 
system remains productive and that our Nation's food supply remains the 
safest, most wholesome, and most plentiful in the world.
    The remarkable success enjoyed by the agricultural sector and the 
food system and the benefits that have accrued to the Nation depend 
heavily on having a reservoir of basic fundamental scientific 
knowledge. That reservoir is filled through basic fundamental research. 
Applied mission-oriented research and technology development then draw 
on that knowledge reservoir to address pressing problems faced by the 
agricultural sector and society. If we are to continue the success of 
the past, we must continue to replenish the basic fundamental knowledge 
reservoir.
    As indicated in USDA's latest policy book, Food and Agricultural 
Policy: Taking Stock for the New Century, the Department is committed 
to achieving a balanced agricultural research portfolio including an 
appropriate blend of basic fundamental research and applied mission-
oriented research. The proposed REE budget provides such a balance with 
increases in research focusing on basic fundamental science to 
replenish the knowledge reservoir and increases in applied mission-
oriented research that draws on the knowledge in the reservoir to 
develop solutions to pressing problems in agriculture. For example, the 
National Research Initiative (NRI) is USDA's premiere competitive 
research program administered by CSREES. The budget proposes to double 
the funding available to $240 million for the NRI, a program authorized 
in 1991 legislation at $500 million annually. Competitive programs, 
such as the NRI, open to all the research community, provide the most 
effective mechanism for attracting the best minds in the Nation to 
basic fundamental research in agriculture and food system. The research 
supported by the NRI principally contributes to the basic fundamental 
knowledge reservoir, which provides the basic knowledge for future 
applied research, education, and extension programs.
    Agricultural genome research is a more specific example of basic 
fundamental research receiving an increase in the President's budget. 
We are only at the dawn of the age of biotechnology, although its 
promises are well established. The science is solid and the potential 
to help producers reduce inputs and increase yields is clear. Just 
around the corner, functional foods or food products with beneficial 
health properties will emerge. However, harvesting the promise of this 
powerful technology depends on having a fundamental understanding of 
the genetic make-up of plants, animals, and microbes. The sequencing of 
genomes and identifying and mapping genes that influence resistance, 
reproduction, nutrition, and other economically important traits are 
all part of this new science, collaterally called genomics or 
biotechnology. In collaboration with other Federal agencies, USDA is 
currently participating in, and supporting, the National Plant Genome 
Initiative and the Microbe Project. We have also been asked to lead in 
the coordination of research activities related to domestic animal 
genomes. Increases in ARS's agricultural genome budget and in CSREES's 
National Research Initiative (NRI) will strengthen both agencies' 
programs and, therefore, expand our basic knowledge of genomics, moving 
us closer to harnessing the potential of biotechnology.
    The President's budget also proposes increases in applied mission-
oriented research to tackle today's problems and cultivate tomorrow's 
opportunities in agriculture. Exotic and emerging plant and animal 
diseases and pests pose severe problems throughout the United States 
and need immediate attention. For example, citrus canker threatens 
Florida's citrus industry and Pierce's disease threatens California 
vineyards. In addition, the recent outbreak of foot-and-mouth disease 
in the United Kingdom and destruction of huge numbers of animals 
resulted in immense economic losses due to domestic and international 
trade embargoes. The President's budget includes an increase of $13 
million in the ARS program to meet short-term needs, such as the 
development of new methods to rapidly and accurately detect and 
identify pathogens, as well as research to pursue long-term solutions 
for integrated control strategies.
    In closely related research, the President's budget also provides 
for an increase in the ARS budget of $5 million to fund animal and 
plant research in support of biosecurity. Because of its size, 
complexity, and integration U.S. agriculture is uniquely vulnerable to 
highly infectious diseases and pests, particularly foreign diseases not 
endemic to the United States. Disease outbreaks from malicious 
introduction of pathogens could have profound impacts on the national 
infrastructure, the domestic economy, and export markets. The proposed 
increase would support cutting-edge research to develop simple and 
rapid diagnostic tests for use by field staffs to identify the causes 
of disease outbreaks and to prevent their spread.
    The President's budget also reflects an increase in applied, 
mission-oriented research to develop and promote biobased products and 
bioenergy. This research focuses on solving multiple national problems 
through finding new uses and markets for agricultural products. Recent 
events have contributed to a renewed emphasis on expanding the use of 
biobased industrial products, including biofuels, to improve our 
Nation's energy security, our balance of payments, our environment, and 
our rural economy. The call for action is an Administration initiative 
and part of the President's National Energy Policy. The requested funds 
would support research to improve the quality and quantity of 
agricultural biomass feedstock for the production of energy and 
biobased products, using both conventional and molecular technologies.
    Increases in the budget supporting the research component of REE 
are complemented with increases in education, a second critical 
function of REE. U.S. agriculture has entered an era characterized by 
global competitiveness, food distribution inequities, environmental 
concerns, and promising technologies. Grappling with these issues 
requires a reliable supply of highly qualified scientists and other 
skilled professionals working to advance the frontiers of knowledge and 
technology in agriculture and food systems. Scientific and professional 
human capital is one of the most crucial variables affecting the future 
of our food and agriculture system. The shortage of qualified 
scientists, engineers, managers, and technical specialists threatens 
our entire food and agricultural sector. The President's budget 
provides an increase of $1.7 million for two higher education programs, 
Institution Challenge Grants to enhance institutional capacity and 
Graduate Fellowship Grants for the development of expertise. The budget 
also proposes funds for a program to incorporate an international 
component into teaching, research, and extension programs at land-grant 
institutions.
    Statistics and economic analysis also receive increases in the 
President's budget proposal for REE. Comprehensive agricultural 
statistics and an understanding of agricultural markets and the 
evolving farm sector are critical ingredients for crafting informed 
farm policy and maintaining our competitive position in the global 
economy. A core source of information for gaining this understanding is 
derived from the Agricultural Resource Management Survey, known as 
ARMS, jointly sponsored by the National Agricultural Statistics Service 
(NASS) and the Economic Research Service (ERS). Conducted annually, 
ARMS is the primary source of information about the financial 
condition, production practices, use of resources, and household 
economic well-being of America's farmers. Data from ARMS form the 
foundation of research and analyses, making it possible to answer key 
questions from Congress, Administration officials, USDA and other 
decision-makers about the differential impact of alternative policies 
and programs across the farm sector. This REE initiative proposes a 
major reengineering of ARMS so that we can continue to provide high 
quality information that accurately portrays the economic conditions 
and the rapidly changing structure of the farm sector.
    As Secretary Veneman stated in the book Food and Agricultural 
Policy: Taking Stock for the New Century, ``Every aspect of our food 
and agricultural system is fed with new knowledge, through research and 
development, data collection and information dissemination.'' This 
science base depends upon how effectively the various Federal research 
partners collaborate with each other. The challenges in our food and 
fiber system today are complex and can not only benefit from, but often 
require, collaboration with other USDA agencies and Federal departments 
to be effectively addressed. We must partner with institutions with 
complementary strengths and perspectives, if we are to effectively meet 
issues of common concern and responsibility.
    REE is making that collaboration happen. In January of this year, 
ARS and the Animal and Plant Health Inspection Service (APHIS) signed a 
Memorandum of Understanding to strengthen their working relationship in 
which ARS carries out research to support APHIS's programs. CSREES 
consults with APHIS, FSIS, and other agencies to develop requests for 
proposals (RFPs) in their competitive programs that are responsive to 
emerging issues and high priorities of the Department. ERS has 
initiated a process for systematically consulting with each of the USDA 
mission areas to facilitate ERS's responsiveness to the needs of the 
regulatory and action agencies in the Department. NASS is providing the 
Risk Management Agency statistics needed to administer their insurance 
programs. Beyond USDA, our agencies are working with the National 
Aeronautics and Space Administration on precision agriculture, with the 
National Science Foundation on plant genome research, with Department 
of Energy (DOE) on microbial genome research and with the Department of 
Defense and DOE on biobased products and bioenergy. We are also 
collaborating with the Food and Drug Administration and the Centers for 
Disease Control and Prevention on food safety, with the Office of the 
U.S. Trade Representative on trade negotiations, and with the 
Environmental Protection Agency (EPA) on implementation of the Food 
Quality Protection Act of 1996.
    In our association with these Federal departments and with the 
White House's Office of Science and Technology Policy, REE is enhancing 
understanding across the government and research community that the 
research conducted and supported by USDA is of high quality and is an 
important component of the government-wide research and technology 
agenda. REE research agencies have much to contribute to and gain from 
participation in the broader research and development agenda of the 
Federal Government. Our genomics research is world-class. ERS's 
analysis and NASS's statistics make critical contributions to sound 
policy, trade, and regulatory decisions. The more the USDA research and 
development, analysis and statistics programs are integrated in the 
Federal research and development effort, the stronger both the USDA and 
broader Federal program will be. Such participation will also benefit 
U.S. agriculture by attracting the broader scientific community to the 
issues of concern to the agricultural and food systems.
    The discussion above highlights many of the high priority REE 
initiatives in the budget. Fuller discussion can be found in the 
agencies' Explanatory Notes. I would now like to turn briefly to the 
budgets of the four REE agencies.
    Agricultural Research Service.--The Agricultural Research Service 
fiscal year 2003 budget requests over $1 billion in ongoing research, 
information programs and related activities in a wide range of high 
priority areas. Within the total, the budget proposes increases 
dedicated toward high priority programs, several which I previously 
described. Offsetting most of these increases, the budget proposes 
redirection of about $104 million in current programs to fund those 
higher priority program initiatives of national and regional 
importance. As the principal intramural biological and physical science 
research agency in the Department, ARS continues to play a critical 
role for the Department and the larger agricultural community in 
conducting both basic fundamental and applied mission-oriented 
research. Results from ARS's basic fundamental research provide the 
foundation for applied and developmental research carried out by ARS 
and many academic institutions and private industry. ARS's applied 
research and technology development also meet the research needs of 
other USDA agencies.
    The ARS budget also reflects the impact of increased world trade on 
our farm sector. Global trade and travel generate economic benefits but 
increase the risk of introducing invasive species that can adversely 
affect food and fiber production and lessen agricultural productivity. 
The ARS budget provides an increase of $2.7 million to support research 
focused on the exclusion of potential new invasive species with quicker 
detection and more effective eradication methods. It will also 
facilitate the development of more efficient long-term management of 
established known invasive species.
    Agriculture is also vulnerable to changes in climate. Rising 
temperatures, changing amounts of precipitation, increased variability 
in weather, and increases in the frequency and intensity of extreme 
weather events like drought and floods are predicted to accompany the 
intensification of the greenhouse effect. While vulnerable to these 
environmental changes, agriculture offers significant opportunities to 
mitigate the increase in greenhouse gases in the atmosphere. An 
increase of $6.5 million in the President's budget for climate change 
will support research providing information on balancing carbon storage 
and agricultural productivity in different agricultural systems across 
the Nation.
    The National Agricultural Library (NAL), one of four national 
libraries, serves as a national resource for information on agriculture 
and related sciences. The proposed increase will enhance NAL's 
information technologies, increase the volume and quality of 
information services, reduce the cost of information and services, and 
develop specialized collections. This will include the first steps 
towards developing a National Digital Library for Agriculture in 
partnership with the land-grant universities, to improve NAL's world-
wide customers' access to key digital agricultural information. NAL 
will also continue to work in concert with land-grant universities, 
Federal agencies, nonprofit organizations, and others partners through 
the Agriculture Network Information Center (AgNIC).
    To fulfill its mission, ARS must modernize its antiquated research 
facilities. The fiscal year 2003 ARS budget proposes $17 million for 
facility modernization or restoration efforts at four locations. 
Included is over $7 million for the National Agricultural Library to 
address major facility deficiencies and $3 million for the U.S. 
National Arboretum to complete the remaining phases of the greenhouse 
complex renovation and the Hickey Run stream restoration. Needed 
repairs due to tornado damage and continued restoration of facilities 
at the Henry A. Wallace Beltsville Agricultural Research Center would 
be funded with an increase of $4.2 million. A $2 million increase is 
provided for continued modernization of facilities at the Plum Island 
Animal Disease Center in Greenport, New York. The emergency 
supplemental appropriations for fiscal year 2002 have provided a total 
of $73 million for the Plum Island facility and for the Ames, Iowa 
animal disease research complex.
    Cooperative State Research, Education, and Extension Service.--The 
President's 2003 budget provides over $1 billion for the Cooperative 
State Research, Education, and Extension Service. In providing critical 
funding to the research, education, and extension programs of the Land 
Grant system and other universities and organizations across the 
country, CSREES continues to play a central role in the generation of 
new knowledge and technology and the transfer of that knowledge and 
technology to its stakeholders. Within the discretionary budget, the 
funding levels for the six formula programs remain the same as the 
fiscal year 2002 appropriations.
    In addition to the increases in the NRI and higher education 
programs described above, the CSREES budget includes increases to 
enhance the agency's capacity to serve its grantees through developing 
a new electronic grants application and reporting system and continuing 
the design and development of the Research, Education, and Economics 
Information System.
    The Government Paperwork Elimination Act (GPEA) mandates that 
electronic submission, maintenance or dissemination of information be 
available as a substitute for paper by October 21, 2003. As a grant-
making agency with responsibility for administering many programs, GPEA 
has significant implications for the management of CSREES programs. The 
CSREES budget provides $2.25 million for e-Government to develop new 
systems, as well as to modify existing systems, to meet the requirement 
of GPEA. The funds will facilitate CSREES adopting electronic 
capabilities in virtually all aspects of its granting program.
    Economic Research Service.--The Economic Research Service is 
provided $82 million in the President's fiscal year 2003 budget. As the 
Department's principal intramural economics and social science research 
agency, ERS conducts research and analysis on the efficiency, efficacy, 
and equity aspects of issues related to agriculture, food safety and 
human nutrition, the environment, and rural development.
    Complementary to an ARS increase in invasive species research, an 
ERS increase of invasive species of crop pests and livestock diseases 
within the context of increasingly global agricultural markets. A major 
focus will be to assess the role of the public sector in reducing 
economic risks to U.S. agriculture from invasive species while 
preserving economic gains from international trade and travel.
    The ERS budget also provides $2.7 million for its component of the 
joint ERS/NASS initiative to improve the Agricultural Resource 
Management Survey, as described above.
    National Agricultural Statistics Service.--The National 
Agricultural Statistics Service budget request for fiscal year 2003 is 
$149 million. This includes an increase of $4.6 million for the NASS 
component of the joint ERS/NASS ARMS initiative. NASS's comprehensive, 
reliable, and timely data are critical for policy decisions and to keep 
agricultural markets stable and ensure a level playing field for all 
users of agricultural statistics. In addition to the ARMS initiative 
described above, the President's budget provides increases in several 
other critical areas of the NASS program.
    The Census of Agriculture provides comprehensive data on the 
agricultural economy, with national, State and county level detail. The 
program increase of $15.5 million reflects the cyclical nature of this 
statistical activity associated with conducting the Census of 
Agriculture. The increase in fiscal year 2003, the peak year in the 5-
year cycle, will be used to support an array of activities associated 
with collecting, processing, and analyzing records for roughly 3 
million farmers surveyed in the 2002 Census of Agriculture. The funds 
will also be used for new equipment and software to effectively 
process, retrieve and view scanned questionnaires.
    The Government Paperwork Elimination Act mandate of electronic 
dissemination and reporting of data has major implications for a 
statistical agency such as NASS. GPEA requires the acquisition and use 
of information technology, including alternative information 
technologies that provide for electronic submission, maintenance, or 
disclosure of information as a substitute for paper. An increase of $3 
million in the NASS fiscal year 2003 budget will allow NASS to build a 
data base infrastructure to support more than 100 different surveys 
each year. By 2006, most NASS self-administered surveys will be 
available electronically and information for the 2007 Census of 
Agriculture will be electronically collected. It represents a major 
change in how NASS does business, one that we can meet with adequate 
funding.
    The events of September 11, 2001 heightened already high concerns 
about cyber-security in the Federal government. Billions of dollars in 
global commodity trade depend on NASS statistics, making computer 
security essential to protect the accuracy of its statistics and 
premature access. The budget proposes an increase of $700,000 to 
enhance NASS cyber-security and architecture systems to ensure that 
confidential respondent information is safeguarded and the integrity of 
the survey data is maintained.
                                summary
    In summary, I want to reiterate that, given an overall tight 
budget, the REE agencies' budgets present a balanced profile, 
reflecting a commitment to replenishing our reservoir of basic 
fundamental science and at the same time supporting applied mission-
oriented research addressing immediate problems. The budget also 
provides new funding in education to ensure the Nation has a strong 
cadre of professionals and in statistics and economic analysis to 
promote informed decision making for all parties involved in the food 
and agriculture system. It also reflects an understanding that 
research, education, and economics programs are essential for solving 
not only the problems American agriculture and our producers face 
today, but also to address the emerging problems of tomorrow and expand 
opportunities for consumers. With continued investment, we will be 
ready to meet those future problems and take advantage of new 
opportunities presented by cutting-edge science and technology. Thank 
you. I. welcome your questions.
                                 ______
                                 

                Biographical Sketch of Dr. Joseph J. Jen

    Joseph Jen was sworn in as the under secretary for research, 
education, and economics by Agriculture Secretary Ann. M. Veneman on 
July 17, 2001.
    He will oversee four agencies of the U.S. Department of 
Agriculture: the Agricultural Research Service, the Cooperative State 
Research, Education, and Extension Service, the Economic Research 
Service, and the National Agricultural Statistics Service.
    Jen is a widely recognized agricultural scientist and educator, 
with experience in both the public and private sectors. Since 1992, Jen 
has served as the dean of the College of Agriculture at California 
Polytechnic State University in San Luis Obispo. In this capacity, Jen 
oversaw eleven departments with 3,500 students, 250 faculty and staff, 
and a budget in excess of $30 million.
    From 1986 to 1992, Jen was division chairman of the University of 
Georgia's Division of Food Science and Technology in Athens, Georgia. 
He served as director of research at the Campbell Institute of Research 
and Technology for the Campbell Soup Company from 1980 to 1986. He was 
an associate professor at the Department of Food Science and Human 
Nutrition at Michigan State University from 1979 to 1980.
    Jen was a food science and biochemistry professor at Clemson 
University from 1969-1979. From 1975 to 1976, he served as a research 
food technologist at the Horticultural Research Institute for the U.S. 
Department of Agriculture's Agricultural Research Service in 
Beltsville, Maryland.
    As a Dean, Jen has earned the reputation as a successful 
administrator who has established several innovative cooperative 
agreements and proposals with private industry.
    Jen received his B.S. degree in agricultural chemistry from 
National Taiwan University in 1960. He earned a M.S. degree in food 
science from Washington State University in 1964 and a Ph.D degree in 
comparative biochemistry from the University of California at Berkeley 
in 1969. He also received an MBA degree from Southern Illinois 
University in 1986.
    Jen was elected as a Fellow of the Institute of Food Technologists 
in 1992 and received the Distinguished Educator Award from the National 
Association of Colleges and Teachers of Agriculture in 1999. In 2000, 
he was appointed by the White House Office of Science and Technology 
Policy to be a U.S. delegate in the U.S.-Japan Millennium Study.
                                 ______
                                 

  Prepared Statement of Dr. Edward B. Knipling, Acting Administrator, 
                     Agricultural Research Service

    Mr. Chairman, and members of the Subcommittee, I appreciate this 
opportunity to present the Agricultural Research Service's (ARS) budget 
recommendations for fiscal year 2003. The President's fiscal year 2003 
budget request for ARS is $1,014,086,000. This represents an overall 
increase of $34,622,000 over the fiscal year 2002 appropriation level 
of $979,464,000. This net increase is attributable to both additions 
and reductions, including: GSA rent and pension/annuitant health 
benefit transfers, $45,448,000; pay and operating cost increases, 
$35,603,000; program increases, $58,057,000; and program decreases, 
$104,486,000. The net change in research program dollars, excluding the 
GSA rent and benefits transfers, is a reduction of $10,826,000. The 
fiscal year 2003 budget also proposes $16,580,000 for the ARS Buildings 
and Facilities account.
                       proposed program increases
    The fiscal year 2003 President's budget includes $58,057,000 in 
program increases for the following initiatives:
    Emerging, Reemerging, and Exotic Diseases of Plants and Animals 
($13,357,000).--Emerging diseases are caused by previously unidentified 
pathogens or new manifestations of ``old'' diseases. Reemerging 
diseases occur after long quiescent periods or upon the introduction of 
a new pathogen into a native plant/animal population in a new 
geographical area. The globalization of trade, increased international 
travel of people and movement of goods, changing weather patterns, 
genetic shifts in pathogen populations, and changes in crop management 
practices all provide opportunities for the emergence or reemergence 
and spread of plant and animal diseases.
    Recent outbreaks of the highly virulent Newcastle disease of 
poultry in Australia and Mexico, and foot-and-mouth disease in Great 
Britain have required the destruction of hundreds of thousands of 
animals which has resulted in immense economic losses. The newly 
emerging disease in swine known as porcine respiratory disease complex 
is the most economically important disease currently facing the U.S. 
swine industry. Emerging plant diseases include citrus canker which 
threatens Florida's $8.5 billion citrus industry.
    ARS will use the proposed increase to develop sensitive diagnostic 
tests and vaccines to control foot-and-mouth disease and Newcastle 
disease. Prevention and control strategies will be developed for 
porcine respiratory disease complex, bovine spongiform encephalopathy, 
and Marek's disease (in chickens). Research will also be conducted on 
emerging and exotic plant diseases to minimize or prevent their 
establishment in the U.S.
    Agricultural Genomes ($6,900,000).--The Nation's agricultural 
system today faces formidable challenges including new pests and 
pathogens from water and soil pollution, environmental regulations, and 
the extinction or inaccessibility of genetic resources. Genomics and 
biotechnology are critically important for maintaining and enhancing 
the production, quality, and safety of plant- and animal-based food 
products.
    With the proposed increase, ARS will identify the genes that 
influence disease resistance, reproduction, nutrition, and other 
economically important production traits in livestock and poultry. 
Research will identify the genes in Texas cattle fever tick that 
contribute to acaracide resistance and host function for babesiosis. In 
addition, research will support genomic sequencing work on maize, 
legumes, microbes, and insects.
    Biotechnology Risk Assessment ($3,600,000).--The National Academy 
of Sciences has identified several areas that need further study, such 
as, the characteristics of genetically engineered crops and the long 
term ecological impacts of these crops; the effects of genetically 
modified organisms on non-target organisms; and the gene spread from 
crops to surrounding vegetation. ARS will use the proposed increase to: 
determine the rates of gene flow, including transgenes, from crops to 
nearby vegetation; develop and test novel strategies to prevent pest 
populations from becoming resistant to plant incorporated protectants; 
and identify and develop gene technology that will limit transgene 
activity to specific tissues.
    Invasive Species ($2,700,000).--Invasive insects, weeds, and other 
pests cost the Nation well over $100 billion each year. Weeds, 
including leafy spurge, melaleuca, salt cedar, water hyacinth, purple 
loosestrife, and jointed goat grass, currently infest at least 100 
million acres in the United States. They reduce crop yields by 
approximately 12 percent and forage yields by 20 percent. Arthropods 
(insects and mites), such as the glassy-winged sharpshooter, silverleaf 
whitefly, Asian longhorned beetle, pink hibiscus mealybug, Russian 
wheat aphid, and Chinese soybean aphid, destroy 13 percent of crop 
production each year.
    With the proposed increased, ARS will perform research to develop 
attractants and biological control technologies for managing invasive 
insects/weeds. Research will also be conducted on the relationship of 
major invasive insects and their natural enemies.
    Agricultural Genetic Resources ($4,000,000).--Present support of 
the germplasm program is inadequate to prevent the risk of extinction 
and loss of genetic diversity. With the availability of new genomic 
tools, genetic diversity is extremely valuable for improving 
production. ARS will use the proposed increase to collect, identify, 
characterize, and maintain germplasm in centralized gene banks. ARS 
will also encourage germplasm exchange and distribute research 
quantities of healthy, pure, and adequately characterized germplasm.
    Biosecurity Research ($5,000,000).--The General Accounting Office 
(GAO) has reported that certain countries are developing biological 
warfare agents directed at animal and plant agriculture. The GAO 
indicates that U.S. agriculture is a potential target. Disease 
outbreaks from a malicious introduction of pathogens could have 
profound impacts on the national infrastructure, the domestic economy, 
and export markets. Disease pathogens that could be used to debilitate 
U.S. agriculture include highly infectious viruses, bacteria, 
nematodes, fungi, and insects that attack major commodities, such as 
cattle, swine, poultry, cereals, vegetables, and fruits.
    With the proposed increase, ARS will develop more rapid and 
sensitive onsite pathogen detection and identification tests for animal 
pathogens. Also, ARS will develop a genomic analytic sequencing 
capability which will assist in determining threatening diseases'/
pathogens' geographic origin and potential for spread.
    Managing Wastes to Enhance Air and Water Quality ($5,000,000).--The 
management of waste has become increasingly important because of its 
far-reaching impacts. Properly managed it can be used to improve soil 
properties, as a nutrient source for crops, and for alternative uses, 
such as energy production. Improperly used, the waste from 280,000 
animal feeding operations around the country pose a threat to soil, 
water, and air quality, and human and animal health.
    With the proposed increase, ARS will continue to develop cost 
effective technologies and management practices which enable producers 
to capture the value of manure and other byproducts without degrading 
environmental quality or posing a threat to human and animal health.
    Biobased Products/Bioenergy from Agricultural Commodities 
($9,000,000).--Widely fluctuating energy prices and depressed 
agricultural commodity prices have contributed to a renewed emphasis on 
expanding the use of biobased industrial products (including fuels) to 
improve the Nation's energy security, balance of payments, environment, 
and rural economy. By expanding the development of biobased products 
and bioenergy, increased demand will be created for agricultural 
commodities to strengthen farm product prices and raise farm income; 
new opportunities will be provided for business development and 
employment growth in rural America; dependence on imported oil will be 
reduced and U.S. security enhanced; and environmental quality will be 
improved by reducing air pollution and greenhouse gas emissions.
    With the proposed increase, ARS will improve the quality and 
quantity of agricultural biomass feedstock for production of energy and 
biobased products. The conversion of agricultural materials and wastes 
to biofuels will be improved. In addition, technologies will be 
developed to produce biobased products from agricultural commodities 
and byproducts.
    Global Climate Change ($6,500,000).--Climate change encompasses 
global and regional changes in the Earth's atmospheric, hydrological, 
and biological systems. Agriculture is vulnerable to these 
environmental changes.
    The objective of ARS' global change research is to develop the 
information and tools necessary for agriculture to mitigate or adapt to 
climate change. ARS has research programs on carbon cycle/storage, 
trace gases (methane and nitrous oxide), agricultural ecosystem 
impacts, and weather/water cycle changes.
    ARS will use the proposed increase to develop climate change 
mitigation technologies and practices for the agricultural sector. 
Research will include land use and land management impacts on carbon 
sequestration; measurement, verification, and modeling of carbon 
storage; and assessing and managing risks to agricultural production 
and water supplies from weather variability.
    Agricultural Information Services ($2,000,000).--ARS will use the 
proposed increase to begin implementation of the digital library 
initiatives recommended by the 2001 Interagency Panel for Assessment of 
the National Agricultural Library. These initiatives will provide 
improved access to electronic resources, delivery of digital 
information to USDA customers, and archiving of USDA digital 
publications. The development of information technology to manage and 
deliver information will also be continued.
                       proposed program decreases
    The President's budget for fiscal year 2003 addresses a number of 
national needs and Administration priorities. Two issues of major 
concern to the President and the American people are national defense 
and domestic security. In this regard, the Department of Agriculture 
and ARS, along with most other Federal departments and agencies, have 
been asked to reduce or freeze spending, and assume a flat or slow rate 
of growth to accommodate the war effort and homeland defense--central 
responsibilities of this Government. Furthermore, as a result of 
additional emergency spending in fiscal year 2002 and the economic 
downturn, the Office of Management and Budget (OMB) and the 
Congressional Budget Office (CBO) both project deficit spending this 
year and in fiscal year 2003, requiring government wide fiscal belt-
tightening and the imposition of budget constraints to curtail 
spending.
    Within this context, the President's budget proposes decreases in 
selected programs in ARS. The program decreases recommended in the 
budget amount to $104,486,000. Eighty-six percent of this reduction 
($89,486,000) is derived from Congressionally-designated funding 
appropriated in fiscal years 2001 and 2002. While these projects are 
considered to be important, they are less critical at a time when 
resources are needed for higher priority programs and therefore, reduce 
the amount of funding available for these priorities within overall 
budget ceilings. Other reductions in ongoing base programs totaling 
$15,000,000 result primarily from location and laboratory closures and 
consolidations as recommended by the ``Strategic Planning Task Force.'' 
As you may recall, the Task Force was established under the 1996 Farm 
Bill to review all currently operating research facilities constructed, 
or planned to be constructed, with Federal funds. Consistent with 
specific recommendations made in this report, the ARS budget requests a 
number of location and laboratory closures and consolidations as 
follows: the closure of two research locations/worksites, the Irrigated 
Desert Research Laboratory, Brawley, California and the New England 
Plant, Soil and Water Laboratory, Orono, Maine since similar work is 
done elsewhere; and the closure of the honey bee research laboratories 
located at Baton Rouge, Louisiana; Beltsville, Maryland; and Tucson, 
Arizona. A portion of these honey bee programs will be consolidated 
with the honey bee laboratory at Weslaco, Texas. The Soft Wheat Quality 
Research Laboratory, Wooster, Ohio is proposed to be closed. The Cereal 
Quality evaluation functions carried out at the Cereal Crops Research 
Laboratories at Fargo, North Dakota and Madison, Wisconsin are to be 
closed and a portion of this effort is to be redirected to Manhattan, 
Kansas where work on wheat quality will be housed. The Avian Disease 
and Oncology Laboratory, East Lansing, Michigan is to be closed with a 
significant portion of these programs transferred to Athens, Georgia 
and Beltsville, Maryland. This move will consolidate poultry disease 
research in Athens. The Processed Foods Laboratory, Albany, California 
is also proposed for closure since major food companies are capable of 
conducting this type of research. In addition, the Crop Improvement 
Utilization program at the Western Regional Research Center is being 
reduced in scope.
                           proposed pay costs
    In addition to these program initiatives, the budget provides 
funding to cover costs associated with pay raises effective in fiscal 
years 2002 and 2003. These increases, $35,369,000, are critically 
needed to avoid Agency wide erosion of base resources. The absorption 
of these costs reduces the number of critical support staff and 
scientists needed to conduct viable programs, and reduces funds 
available for laboratory equipment and supplies essential to the 
programs. The Agency's budget also includes an increase of $234,000 to 
reimburse the Department of Labor for administering the Federal 
Employees Compensation Act (FECA) Program.
                           proposed transfers
    In addition to the proposed increases ($93.7 million) mentioned 
above, the ARS budget includes two transfers to directly pay for Agency 
obligations currently handled by other Federal agencies. One is the 
transfer of $42,641,000 to ARS to fund employee pension and annuitant 
health benefits now administered by the Office of Personnel Management. 
The second transfer is to finance the direct funding of payments to the 
General Services Administration for ARS occupied rental space, totaling 
$2,807,000. These costs are currently paid through the Department's 
Central Account.
            proposed increases for buildings and facilities
    The fiscal year 2003 budget is proposing an increase of $16,580,000 
for ARS' buildings and facilities. Many of the Agency's laboratories 
were constructed half a century ago and are in immediate need of major 
repair, renovation, or modernization. In order to attract and retain 
top scientists, solve the Nation's most critical agricultural problems, 
and address the research needs of the 21st century, ARS must have 
modern, up-to-date laboratories and facilities. Funding is proposed for 
the following projects:
    Henry A. Wallace Beltsville Agricultural Research Center, 
Beltsville, Maryland ($4,180,000).--The Beltsville Agricultural 
Research Center is the largest agricultural research center in the 
world in terms of program scope and concentration of scientists. It is 
world renowned for the quality of its research, its contributions to 
agriculture, and its prominent scientists. On September 24, 2001, the 
Beltsville Center sustained significant damage to its facilities and 
equipment from a tornado. ARS will use the proposed fiscal year 2003 
increase to continue restoration of the Center's facilities.
    Plum Island Animal Disease Center, Greenport, New York 
($2,000,000).--Plum Island is the only site in the United States where 
research can be carried out on highly contagious animal diseases, such 
as foot-and-mouth disease. The Center is also used by the Animal and
    Plant Health Inspection Service (APHIS), which performs diagnostic 
work on foreign animal diseases that are an ongoing threat to U.S. 
livestock. In 1989, ARS and APHIS began to develop a long range plan 
for the modernization of their facilities at Plum Island. As part of 
the ongoing modernization program, ARS is requesting $2 million for 
miscellaneous small projects/contingencies to support the 
modernization.
    Abraham Lincoln National Agricultural Library, Beltsville, Maryland 
($7,400,000).--The National Agricultural Library is one of four 
national libraries and the largest agricultural library in the world. 
The library houses a collection of more than 3.2 million items in 50 
different languages. It serves as a national resource for information 
on agriculture and related services. Constructed in 1968, NAL's 
building requires major renovation. In fiscal year 1998, ARS received 
funds for renovation of the Library's first floor. Renovation of other 
floors and systems have taken place since then. In fiscal year 2003, 
ARS is requesting $7.4 million to continue addressing the major 
facility deficiencies.
    U.S. National Arboretum, Washington, D.C. ($3,000,000).--The 
National Arboretum was created by an Act of Congress in 1927 as a 
center for research and education in the plant sciences. Since 1959, 
the Arboretum has also been open to the public as a display and show 
area for ornamental plant materials, as well as continuing to function 
as a center for research and education. Many of the Arboretum's major 
building systems (i.e., heating, ventilating, air conditioning, and 
electrical) and infrastructure (i.e., paving, fences, and steam and 
water lines) have either reached or surpassed their useful life 
expectancy. As part of the ongoing modernization of the Arboretum, ARS 
is requesting in fiscal year 2003, $3 million for renovation of the 
greenhouse complex and for planning, design, and construction of the 
Hickey Run stream restoration which drains onto the Arboretum's 
grounds.
    Mr. Chairman, this concludes my statement. I will be glad to answer 
any questions the Committee may have.
                                 ______
                                 

               Biographical Sketch of Edward B. Knipling

    Dr. Knipling is a native of Texas, but grew up primarily in the 
Washington, D.C. area. He earned his B.S. in 1961 in forestry from 
Virginia Tech University. He received his M.A. in 1963 and Ph.D. in 
1966 in plant physiology from Duke University.
    Dr. Knipling served in the U.S. Army 1966-68, conducting research 
on remote sensing of the environment. He began his career with the U.S. 
Department of Agriculture, Agricultural Research Service (ARS) in 1968 
as a research plant physiologist in Gainesville, Florida. He has also 
served as Area Director for ARS in Stoneville, Mississippi (1975-78), 
and in Fresno, California (1978-82), and Associate Deputy 
Administrator, National Program Staff, Beltsville, Maryland (1982-88). 
Dr. Knipling served as Director of the Beltsville Agricultural Research 
Center, Beltsville, Maryland (1988-89) and served as Deputy 
Administrator of the National Program Staff, Beltsville, Maryland, 
until October 1996. Dr. Knipling served as Acting Administrator for ARS 
from October 1996 to November 1997. Dr. Knipling was appointed 
Associate Administrator of ARS in December 1997. Dr. Knipling has been 
serving as Acting Administrator since December 2001.
                                 ______
                                 

 Prepared Statement of Dr. Colien Hefferan, Administrator, Cooperative 
            State Research, Education, and Extension Service

    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to submit the proposed fiscal year 2003 budget for the 
Cooperative State Research, Education, and Extension Service (CSREES), 
one of four agencies in the Research, Education, and Economics (REE) 
mission area of the United States Department of Agriculture (USDA).
    The CSREES fiscal year 2003 budget proposal is just over $1 
billion. CSREES works in partnership with the land-grant university 
system, other colleges and universities, and public and private 
research and education organizations, in concert with the Secretary of 
Agriculture and the intent of Congress, to initiate and develop 
agricultural research, extension, and higher education programs. This 
partnership has a breadth of expertise that is ready to deliver 
solutions to problems facing U.S. agriculture today.
    The broad portfolio of CSREES programs has supported scientific 
discovery from idea to application. Formula funds have leveraged 
dollars from other sources, provided the start-up funds needed for an 
investigator to establish a research program and build the capacity to 
compete successfully in a competitive program, and allowed for a rapid 
response to emerging problems. Competitively funded research from the 
National Research Initiative (NRI) has supported individual 
investigators undertaking basic research aimed at generating new 
knowledge. Research results are applied to real life problems through 
the Cooperative Extension System's outreach efforts. All of these 
efforts are undertaken in an environment that prepares students to meet 
the ongoing needs of agriculture, the environment, individuals and 
communities.
    CSREES continues to provide new opportunities for discoveries and 
advances in knowledge through our competitive programs such as the NRI 
and Integrated Programs. Funding for agricultural research, 
particularly that pursued at university campuses, has dramatically 
lagged behind funding for other disciplines. The fiscal year 2003 
proposed increase of $120 million in the NRI will begin to reverse 
agriculture's loss of intellectual capital in the U.S., and is a 
significant step in reaching the authorized level of $500 million. In 
particular, to support current high priority programs we will provide 
larger, more effective awards, and new targeted emphasis will be placed 
on critical areas. Increased partnerships with other Federal agencies 
on research topics of mutual interest will be possible. For example, we 
will be able to increase working relationships with the Environmental 
Protection Agency, National Aeronautics and Space Administration, and 
Department of Energy on air quality/global change issues. More funds 
will be available to strengthen agricultural research at small and mid-
sized institutions and in States that are less successful in the 
competitive grants arena. Innovative multidisciplinary research 
training will be provided for agriculture's future scientists in 
emerging areas such as agricultural biotechnology, agricultural 
bioinformatics and functional foods. The quality of agricultural 
science will increase as more of the best and brightest scientists from 
all areas of the U.S., and all institutions, submit proposals to the 
NRI.
    The increased funding for the NRI is expected to have significant 
impact that:
  --Responds to emerging and re-emerging diseases of plants and animals 
        with detection and early identification of disease agents 
        accidentally or intentionally introduced and has an emphasis on 
        the transfer of detection technology to the field. In 
        addressing these issues, focus will be on management strategies 
        for surveillance, intervention, prevention and control of 
        agricultural disease and pest threats;
  --Maintains leadership in agricultural genomics to assure the 
        availability of new and improved agricultural products that are 
        economically viable and produced with less environmental 
        impact. Studies will be conducted to expand genetic maps and 
        tools for under-funded plant, animal and microbe species to 
        develop new products, as well as, plants and animals resistant 
        to pests, diseases and environmental stresses. Studies also 
        will be conducted to discover new vaccines, alternatives to 
        antibiotics, and new industrial catalysts and enzymes;
  --Develops more effective human nutrition programs for the discovery, 
        development and appropriate use of functional foods that 
        provide health benefits beyond basic nutrition. Also creates 
        programs for research on food choice and effective nutritional 
        interventions that improve the quality of diets in the U.S. and 
        decrease the risk of chronic diseases;
  --Provides solutions to managerial challenges faced by small and mid-
        sized farms through systems research that identifies innovative 
        practices and managerial capabilities most appropriate for the 
        size, scale, and type of operation. This includes understanding 
        the best methods for translating new technologies into 
        applications; and
  --Improves air quality through understanding key agricultural 
        processes and management practices that adversely impact air 
        quality, and through development of appropriate mitigation 
        strategies.
    A provision of the fiscal year 2002 Agriculture Appropriations Act 
prohibits USDA from administering a 2002 competition for the Initiative 
for Future Agriculture and Food Systems (IFAFS) program and the 
Administration's fiscal year 2003 budget continues the prohibition in 
2003. When Congress permitted implementation of this competitive 
program in fiscal years 2000 and 2001, it fulfilled a valuable role in 
supporting integrated research, education, and extension activities 
that met the needs of the agricultural community.
    Sustained support through our formula programs is assisting the 
land-grant university system in providing leadership, research, 
information, and education to meet the challenges facing communities. 
The mix of challenges varies from one region to another and from one 
community to another with close links between the concerns of rural and 
urban communities. Some rural and urban communities struggle together 
with rapid growth, congestion, and environmental degradation, while 
others contend with increasing unemployment, out migration and loss of 
vital businesses and services. There is a growing need for the 
preservation of farmland and open spaces in rural areas. Many 
communities lack the capacity to deal with these challenges or to grasp 
alternative opportunities. The land-grant universities are receiving a 
growing number of requests to help people and communities understand 
the causes of their problems and to develop and evaluate alternative 
solutions. Formula funding helps the land-grant universities in their 
efforts to discover new knowledge that builds community capacity, 
entrepreneurial capacity, and personal capacity to create a more 
sustainable future.
    CSREES continues to expand diversity and opportunity with 
activities under 1890 formula and educational programs, and 1994 and 
Hispanic-Serving Institutions educational programs. Funding for our 
1890 formula programs provides a stable level of support for 
implementation of research and extension programming. This proven path 
of research and extension program development rapidly delivers new 
technologies, of all kinds, into the hands of our citizens, helping 
them solve problems important to their lives.
    The higher education programs respond to the development of human 
capacity and the need for a highly trained cadre of quality scientists, 
engineers, managers, and technical specialists in the food and fiber 
system. The fiscal year 2003 budget provides a $1.7 million increase in 
CSREES higher education programs for the Food and Agricultural Sciences 
National Needs Graduate Fellowship and Challenge Grants Programs. The 
International Science and Education Grants Program will incorporate 
substantive international activities into teaching, research, and 
extension programs related to food systems, agriculture and natural 
resources at U.S. land-grant and other campuses. This program also will 
provide important and unique support to Tribal Colleges, the 
Historically Black Land-Grant Colleges and Universities and the 1862 
Land-Grant Universities as they pilot important new approaches to 
globalizing their programs.
    CSREES is committed to improving the management of resources 
through the development of a new electronic grants application and 
reporting system and continuing the design and development of the 
Research, Education, and Economics Information System (REEIS). The 
fiscal year 2003 budget proposes increases of $2.3 million and $0.7 
million, respectively for these efforts. Currently, CSREES receives 
approximately 6,000 proposals annually resulting in about 2,000 grants 
and cooperative agreements annually. These numbers are expected to grow 
with anticipated increased funding. We are committed to streamlining 
the process through participation in the development of a common 
Federal electronic application and reporting system. We are developing 
rapidly the capability to electronically receive, process, and award 
proposals, including electronic distribution to reviewers nationwide, 
and support for electronic financial and technical reporting on awards. 
We also are developing the REEIS as a platform to link some 40 
different databases and serve as a single source of information on 
issues related to accountability, strategic planning, and performance 
assessment. CSREES also is examining how it can leverage its 
partnership with the land-grant university system to result in better 
access of research, education, and extension information products 
useful to the Nation as a whole. This concept, which has been termed e-
Extension, could significantly extend the ability of these universities 
and the Department to provide synthesized and meaningful information to 
the public.
    Within this fiscal year 2003 request, there is a total of $5.6 
million to cover the costs of items previously paid from central 
accounts within USDA or on a government wide basis, including GSA 
rental payments, and Civil Service retirement and retiree health 
benefits. The Explanatory Notes provided to the Committee details 
information on the comparable levels for these items in fiscal year 
2001 and fiscal year 2002.
    CSREES, in collaboration with university and other partners, 
nationwide, continually meets the many challenges facing the food and 
fiber system. The programs administered by the agency reflect the 
commitment of the Administration to further strengthen the problem-
solving capacity of Federally-supported agricultural research, 
extension, and higher education programs. In addition, we continue to 
enhance our responsiveness and flexibility in addressing critical 
agricultural issues.
                                 ______
                                 

                 Biographical Sketch of Colien Hefferan

    Dr. Hefferan became Administrator of Cooperative State Research, 
Education, and Extension Service (CSREES) on October 7, 2000.
    She joined the U.S. Department of Agriculture (USDA) in 1979 as an 
economist with the Family Economics Research Group, Agricultural 
Research Service. She transferred to the Cooperative State Research 
Service in 1988, where she served as Deputy Administrator for Natural 
Resources, Food and Social Sciences. With the establishment of CSREES, 
Dr. Hefferan was named the Deputy Administrator for Competitive 
Research Grants and Awards Management. In August 1995, she moved to the 
Office of the Administrator serving as either the Acting Administrator 
or the Associate Administrator of the Agency until 2000.
    Prior to joining USDA, she served on the faculty at the 
Pennsylvania State University, as an adjunct faculty member at the 
University of Maryland, and as a research fellow at the Australian 
National University in Canberra. She has authored more than 60 research 
articles and chapters, edited several books on economic issues and 
trends influencing families and consumers, and spoken widely on issues 
related to advance agricultural research and education. In 2000, she 
was honored with a Presidential Rank Award as a Distinguished Federal 
Executive.
    Hefferan has a Ph.D. and M.S. Degree from the University of 
Illinois, and a B.S. Degree from the University of Arizona.
                                 ______
                                 

Prepared Statement of Susan E. Offutt, Administrator, Economic Research 
                                Service

    Mr. Chairman and members of the Committee, I am pleased to have the 
opportunity to present the proposed fiscal year 2003 budget for the 
Economic Research Service (ERS).
                                mission
    The Economic Research Service informs and enhances public and 
private decision making on economic and policy issues related to 
agriculture, food, the environment, and rural development.
                                 budget
    The Agency's request for 2003 is $82 million, a net increase of 
$14.8 million from the 2002 appropriation. The net increase consists of 
five parts: a $2.7 million increase to fund the Economic Research 
Service's share of reengineering the Agricultural Resource Management 
Survey; a $2 million increase for an initiative on the effects of 
invasive pests and diseases on the global competitiveness of U.S. 
agriculture; a $1.4 million increase for pay costs; a $2.8 million 
increase for employee pension and annuitant health benefits; and a $5.9 
million increase which represents a transfer from the Department's 
central rent account for rental payments to GSA.
                ers contributions to mission area goals
    ERS shares five general goals with its fellow agencies in the 
Research, Education, and Economics (REE) mission area: (1) a highly 
competitive agricultural production system, (2) a safe and secure food 
supply, (3) a healthy and well nourished population, (4) harmony 
between agriculture and the environment, and (5) enhanced economic 
opportunity and quality of life for all Americans. These goals are 
fully consistent with the U.S. Department of Agriculture mission.
Goal 1: The U.S. agricultural production system is highly competitive 
        in the global economy.
    ERS helps the U.S. food and agriculture sector effectively adapt to 
changing market structure in rapidly globalizing, consumer-driven 
markets by analyzing the linkages between domestic and global food and 
commodity markets and the implications of alternative domestic and 
international policies on competitiveness. ERS economists analyze 
factors that drive change in the structure and performance of domestic 
and global food and agriculture markets; provide economic assessments 
of structural change and competition in the agricultural sector, 
including markets for food consumed at and away from home; analyze how 
global environmental change, international trade agreements, and 
foreign trade restrictions affect U.S. agricultural production, 
exports, imports, and income; and provide economic analyses that 
determine how fundamental commodity market relationships are adjusting 
to changing trade, domestic policy, and structural conditions. Policy 
makers and the food and agriculture industry benefit from research 
contained in reports such as Agriculture in Brazil and Argentina: 
Developments and Prospects for Major Field Crops (November 2001) that 
analyze driving forces in global markets, in this case the factors 
underlying Brazil and Argentina's growing export market share.
    ERS will continue to work closely with the World Agricultural 
Outlook Board and USDA agencies to provide short- and long-term 
projections of U.S. and world agricultural production, consumption, and 
trade. Through our Agricultural Outlook magazine, we have highlighted 
policy issues and the resulting impacts on commodity, land, and other 
markets, as well as timely analyses of commodity-related topics such as 
traceability, water supply issues, and the intersection of farm policy 
with WTO commitments. In addition, ERS has worked closely with the 
World Agricultural Outlook Board and other USDA agencies in developing 
a ``commodity centers of excellence'' initiative that would provide 
``one-stop shopping'' for key USDA data. In 2002, we are making our 
commodity outlook reports more relevant by improving their timeliness 
and quality and increasing the frequency for selected commodities. We 
will be focusing this year on the development of better data measures, 
through collaboration with industry and others, to provide our users 
with the most relevant data and analysis possible.
    ERS will expand research on how dynamics of consumer demand, 
notably growing consumption and trade in high value products, are 
shaping global markets. ERS researchers undertook a comprehensive 
assessment of the demand-side dynamics of global food and agricultural 
markets resulting in the report published in May 2001, The Changing 
Structure of Global Food Consumption and Trade, which highlighted how 
higher incomes, urbanization, other demographic shifts, improved 
transportation, and consumer perceptions regarding quality and safety 
are changing global food consumption patterns. An enhanced analytic 
understanding of these fundamental market relationships has improved 
the analytical base for USDA's foreign market analysis and projections 
activity.
    In addition, ERS will continue to work closely with the Foreign 
Agricultural Service and the Office of the U.S. Trade Representative to 
ensure that negotiations launched in Doha under the auspices of the 
World Trade Organization and regional trade agreements are successful 
and advantageous for U.S. agriculture. Research will target options and 
prospects for further liberalization in global markets, building on 
recent ERS findings such as empirical evidence that tariffs on food and 
agricultural products constitute the most significant barrier to 
increased market access for U.S. products. The ERS report released in 
May 2001, Agricultural Policy Reform in the WTO--The Road Ahead, 
provided a comprehensive assessment of alternatives to further 
liberalization in global agricultural markets negotiating proposals.
    ERS will also continue to conduct and build upon research designed 
to significantly improve understanding among decision makers of the 
changing structure in the agricultural sector (for example, the 
implications for producers of the increasing replacement of open 
markets by contractual arrangements and vertical integration). The ERS 
report, U.S. Fresh Fruit and Vegetable Marketing: Emerging Trade 
Practices, Trends, and Issues, published in January 2001, demonstrates 
the expertise that ERS has built in explaining and analyzing critical 
changes in vertical relationships in the food system, and the 
implications for producers and others throughout the supply chain. The 
report, Concentration and Technology in Agricultural Input Industries, 
published on the web-site in March 2001, examines consolidation in the 
agricultural biotechnology industry. This report examines the causes 
and consequences of consolidation and sheds light on the question of 
how consolidation affects competition and market efficiency in the 
industry. The 2001 Family Farm Report--Structural and Financial 
Characteristics of U.S. Farms, along with associated shorter brochures, 
briefings, and articles, documents the ongoing changes in farms' 
structure, financial performance, and business relationships in 
response to consumer demands, competitive pressures, and changing 
opportunities for farm families.
    ERS analyses can help guide and evaluate resource allocation and 
management of public sector agricultural research--a key to maintaining 
increases in productivity that underlie a strong competitive position 
for U.S. farmers. ERS economists track and seek to understand the 
determinants of public and private spending on agricultural research 
and development; evaluate the returns from those expenditures; and 
consider the most effective roles for public and private sector 
research entities. To address the relationship between public and 
private sector research, ERS produced in 2001 the report, Public Sector 
Plant Breeding in a Privatizing World. This report indicates how public 
sector plant breeding yields societal benefits that private sector 
efforts may not. Benefits include greater information sharing and 
development of plant varieties that are under-researched by the private 
sector. The USDA Advisory Committee on Agricultural Biotechnology drew 
extensively on the major insights from the ERS report in writing their 
August 2001 report, The Future of Public Plant Breeding Programs: 
Principles and Roles for the 21st Century.
                agricultural resource management survey
    The request for an increase of $2,700,000 in fiscal year 2003 is 
necessary to fund the Economic Research Service's share of 
reengineering the Agricultural Resource Management Survey (ARMS). ARMS 
is undertaken annually by ERS in cooperation with the National 
Agricultural Statistics Service, which conducts the survey. ARMS is the 
primary source of information about the financial condition, production 
practices, use of resources, and economic well-being of America's 
farmers. Data obtained from the ARMS survey are the foundation for the 
body of research that has led to the recognition on the part of 
decision-makers of the diversity of the farm sector and the 
differential impact of alternative policies and programs across the 
farm sector and among farm families. The reengineering activities 
supported by this initiative will expand the capability of the ARMS 
survey to achieve its desired outcome, improve the quality and content 
of the survey's data and research outputs, and lay the groundwork for a 
more efficient data collection process. In addition, larger sample 
sizes will broaden the survey's ability to inform decision-making by 
giving decision-makers a better understanding of the potential impacts 
of national farm policy alternatives for individual States and for 
different types of farms within those States.
    Based substantially on ARMS data, ERS provides regular analysis of 
the financial status of the farm sector and of farm households. In 
addition to informing Federal and State and local policy-makers about 
the viability of the farm sector and farm households, ERS income 
estimates provide official input into U.S. economic estimates 
disseminated by the Department of Commerce (DOC) and the Council of 
Economic Advisors. Further, ERS has used the ARMS data to elevate the 
debate over the viability of the farm sector from reliance on an 
aggregate measure of net farm income to micro-level analysis of 
business performance. Data from the Agricultural Resource Management 
Survey were used to compare returns earned by farm businesses with the 
returns earned by nonfarm businesses. Results show that the median rate 
of return for nonfarm businesses exceeds farm businesses by 
approximately three percentage points, but that large farms are four 
percentage points higher than nonfarm proprietorships. This work also 
showed that the net worth of households with nonfarm businesses largely 
coincides with the net worth of all households with farm businesses. In 
the case of large farm businesses, household wealth is greater than the 
wealth of households with nonfarm businesses.
Goal 2: The food production system is safe and secure.
    ERS focuses on improving the efficiency and effectiveness of public 
food safety policies and programs by analyzing the benefits of safer 
food and the costs of food safety policies; studying industry economic 
incentives to adopt food safety innovations and provide safer foods; 
and assessing consumer demand for safer foods and the roles of consumer 
information, attitudes, and behaviors regarding food safety. This 
research helps government officials design more efficient and cost-
effective approaches to promoting food safety. For example, ERS works 
closely with various USDA agencies and the Centers for Disease Control 
and Prevention (CDC) on risk assessment and pathogen reduction efforts, 
including analyzing the benefits and costs of implementing the Hazard 
Analysis and Critical Control Points (HACCP) rule. In early fiscal year 
2002, ERS began to assess results of the first post-HAACP survey of 
meat and poultry slaughter and processing plants, designed to 
understand how HAACP has affected firms' costs and investments in food 
safety control technologies. The survey was funded in part with support 
from USDA's Food Safety and Inspection Service (FSIS).
    The ERS research program provides widely cited quantitative 
estimates of the benefits of safer food, such as reducing direct 
medical costs and indirect costs associated with productivity losses 
from foodborne illnesses caused by several major microbial pathogens. 
ERS received increased funding for work under Goal 2 in fiscal year 
1999 and fiscal year 2000. Using this funding ERS administered a 
competitive process through which grants were awarded to major research 
universities. The projects, for which results are expected in 2002, are 
applying state-of-the-art valuation and survey methodologies to measure 
consumers' willingness to pay for reductions in food safety risks from 
microbial pathogens in foods. This information will be used to improve 
understanding and quantitative estimates of societal benefits of food 
safety programs and policies.
    Understanding how food prices are determined is increasingly 
important in responding to domestic and international market events and 
opportunities that promote the security of the U.S. food supply. As the 
farm share of the food dollar declines, accurate retail price forecasts 
depend more heavily on understanding the marketing system beyond the 
farmgate. ERS systematically examines the factors that help set retail 
prices, including an assessment of the roles of the transportation, 
processing, manufacturing, wholesaling and retailing sectors; the 
impact of imports and exports; and linkages to the total economy.
Goal 3: The Nation's population is healthy and well-nourished.
    ERS helps identify efficient and effective public policies that 
promote consumers' access to a wide variety of high-quality foods at 
affordable prices. ERS economists analyze factors affecting dietary 
changes as well as trends in America's eating habits; assess impacts of 
nutrition assessments and the implications for the individual, society, 
and agriculture; and provide economic evaluations of food and nutrition 
assistance programs. A Congressionally mandated study conducted by ERS 
examined the effects of tiered meal reimbursement rates for family 
child care homes participating in the Child and Adult Care Food Program 
(CACFP). The study found that the family child care homes component of 
the CACFP became substantially more targeted towards low-income 
children, and that the number and nutritional quality of meals and 
snacks in the homes with the lower reimbursement rates was maintained 
after tiering was introduced. Congress also directed ERS to assess the 
impacts of cost-containment practices that State WIC agencies often 
implement to reduce the costs of providing WIC foods. In 2001, ERS 
released Assessment of WIC Cost-Containment Practices: An Interim 
Report to Congress, which presents results from the first year of the 
study, including details on cost-containment practices, on the 
selection of six States for case studies, and on planned data 
collection efforts and subsequent analysis.
    Analyses of nutrition education efforts consider what kinds of 
information motivate changes in consumer behavior, the food costs of 
healthy diets, the influence of food assistance programs on nutrition, 
the effects of demographic shifts on dietary choices, and the 
implications of food consumption patterns and dietary choices for the 
structure of the food system. In 2001, ERS released the study, 
Overweight Children: Is Parental Nutrition Knowledge a Factor?, which 
found that greater parental nutrition knowledge is associated with 
lower prevalence of overweight children. The finding is important 
because health authorities consider obesity in children and adolescents 
to be a vexing and difficult condition to treat, and understanding the 
role of parental knowledge may be critical to success of weight control 
efforts.
    Through the Food Assistance and Nutrition Research Program (FANRP), 
ERS will continue to conduct studies and evaluations of the Nation's 
food assistance programs. FANRP research is designed to meet the 
critical needs of USDA, Congress, program managers, policy officials, 
USDA program clients, the research community, and the public at large 
in relation to the design and effectiveness of food assistance 
programs, diet quality, and nutrition education. FANRP research is 
conducted through internal research at ERS and through a portfolio of 
external research. Through partnerships with other agencies and 
organizations, FANRP is enhancing national surveys by adding a food 
assistance dimension. FANRP's long-term research themes are dietary and 
nutritional outcomes, food program targeting and delivery, and program 
dynamics and administration.
Goal 4: Agriculture and the Environment are in Harmony.
    In this area, ERS research and analytical efforts in cooperation 
with the Natural Resource Conservation Service (NRCS) support 
development of Federal farm, conservation, environmental, and rural 
policies and programs. Such efforts promote long-term sustainability 
goals, improved agricultural competitiveness, and economic growth. This 
effort requires analyses of the profitability and environmental impacts 
of alternative production management systems in addition to the cost-
effectiveness and equity impacts of public sector conservation policies 
and programs. ERS analysts focus on evaluating the benefits and costs 
of alternative agricultural and environmental policies and programs in 
order to assess the relationship between improvements in environmental 
quality and increases in agricultural competitiveness.
    In fiscal year 2001, ERS released a comprehensive study on 
conservation and environmental policy in agriculture, Agri-
environmental Policy at the Crossroads, outlining the environmental 
gains due to past policy and the issues and trade-offs that would arise 
in designing a program for environmental payments in agriculture. This 
report has served as an important reference for parties evaluating 
conservation policies for the next Farm Bill. ERS is continuing to work 
with NRCS to provide a combination of economic, farm structural, and 
geographic information to inform ongoing decision-making about the 
design of USDA conservation programs and Federal water quality 
regulations pertaining to animal waste and non-point pollution.
    In 2001, ERS published the report Confined Animal Production and 
Manure Nutrients, comparing estimates of manure nutrient production by 
large confined animal feeding operations against the capacity of nearby 
cropland and pastureland to assimilate nutrients. The results indicate 
that in areas where many animals are concentrated, traditional methods 
of proper manure management may be particularly difficult and costly 
because of inadequate amounts of nearby land for spreading manure at 
agronomic rates. ERS is currently estimating the costs of meeting 
proposed animal waste regulations through land management at the farm, 
regional, and national levels. ERS research is also contributing to an 
assessment of EPA regulatory proposals to implement the Total Maximum 
Daily Load (TMDL) provisions of the Clean Water Act, which will cover 
nonpoint source pollution from agriculture.
    In its publication, US Organic Farming Emerges in the 1990s: 
Adoption of Certified Systems, ERS has developed a new set of 
statistical indicators to monitor organic farming, one of the fastest 
growing segments of U.S. agriculture, as it responds to new regulatory 
and other conditions.
    ERS also is a research leader in developing integrated assessments 
of the agriculture sector linking bio-physical and economic modeling to 
simulate the economic effects of climate change and the economic 
opportunities for climate change mitigation strategies in U.S. 
agriculture. The agency research was an input in the Cabinet review of 
climate change issues in Spring 2001.
                      invasive pests and diseases
    The request for an increase of $2,000,000 is to initiate an ongoing 
program of work to examine the economic issues of invasive pests and 
diseases of crops and livestock within the context of increasingly 
global agricultural markets. The results of this initiative will 
provide information that can be used to help guide resource allocation 
for efforts to exclude and control invasive species. A major portion of 
this work will be to assess cost effective means of the public sector 
in reducing economic risks to U.S. agriculture from invasive species 
while preserving economic gains from trade and travel. Two research 
components to address these issues include: the economic effects of 
invasive species on crop and livestock production, commodity markets, 
trade, and regional economies, and the benefits and costs of 
alternative policies and programs to protect against the introduction 
of and/or to eradicate those species.
Goal 5: Enhanced economic opportunity and quality of life for rural 
        Americans.
    The ERS contribution to this goal is based on analysis that 
identifies how investment, technology, employment opportunities and job 
training, Federal policies, and demographic trends affect rural 
America's capacity to prosper in the global marketplace. ERS economists 
analyze rural financial markets and how the availability of credit 
(particularly Federal credit) and public spending, taxes, and 
regulations influence rural economic development. ERS analysts explore 
changing population and migration patterns for small towns and local 
areas and their implications for the growth and prosperity of local 
communities, labor markets, industries, and families. With the release 
of early results from the 2000 U.S. Census, for example, ERS is 
studying the rapid growth of Hispanics in rural areas and their role in 
affecting social and economic change in their local communities.
    ERS studies the determinants and evolution of trends in rural 
employment, earnings, education and skill levels, and the quality of 
rural jobs. Efforts focus on ways to increase the adaptability of rural 
workers to local and national economic change and assessments of rural 
development strategies to facilitate this adaptability. An ERS report 
published in October 2001, Displaced Workers, studies rural and urban 
workers displaced by economic restructuring or technological advances, 
and assesses whether Federal programs to assist and protect these 
workers evenly serve residents of both rural and urban areas. In 
addition, ERS is studying the effectiveness of education as a rural 
development strategy, analyzing the relationships between education and 
economic outcomes for the individual worker and the rural community.
    ERS continues its long tradition of economic research on the 
welfare of disadvantaged population groups in rural areas, including 
low-income families, children, the elderly, and racial/ethnic groups, 
and the Federal assistance programs that serve them. ERS leads a 
national research effort to study the rural implications of welfare 
reform. A series of papers published in the fall 2001 issue of the ERS 
periodical, Rural America, helps inform the policy debate over 
reauthorization of the Personal Responsibility and Work Opportunity Act 
of 1996. Other studies are investigating the effects of the Earned 
Income Tax Credit on the poverty, employment, and welfare status of 
rural people.
    ERS researchers are also examining Federal credit and tax policies 
to assess their impact on farm families and the intergenerational 
transfer of farm assets. Researchers are assessing the impacts of 
structural and policy changes on the costs and availability of 
electric, telecommunications, and financial services in rural America. 
ERS research has highlighted the role that Federal tax policy plays in 
farm profitability. Effects of Federal Tax Policy on Agriculture, 
released in April 2001, analyzed the then-current Federal tax code, 
determining how farming was affected by the full range of marginal 
income tax rates, deductions, and credits. The report also considered 
the effect that the social security tax, the estate and gift tax, and 
various proposals to change farmer tax burdens might have on farming, 
farmland values, and the structure of the agricultural sector.
    ERS has developed and widely disseminated a new farm typology that 
goes beyond the traditional classification of farms by sales class 
alone to a grouping that is much more reflective of operators' 
expectations from farming, stage in their life cycle, and dependence on 
agriculture for household income. Continued applications of the 
typology are bringing new understanding about the diversity of the U.S. 
farm community, factors that can enhance success among small and 
minority-owned farms, and the implications for the different types of 
farms of alternative approaches to provide safety nets for farm 
households and protect rural communities.
                 customers, partners, and stakeholders
    The ultimate beneficiaries of ERS's program are the American people 
whose well-being is improved by informed public and private 
decisionmaking leading to more effective resource allocation. ERS 
shapes its program and products principally to serve key decision 
makers who routinely make or influence public policy and program 
decisions. This clientele includes White House and USDA policy 
officials and program administrators/managers; the U.S. Congress; other 
Federal agencies and State and local government officials; and domestic 
and international environmental, consumer, and other public 
organizations, including farm and industry groups interested in public 
policy issues.
    ERS depends heavily on working relationships with other 
organizations and individuals to accomplish its mission. Key partners 
include: the National Agricultural Statistics Service for primary data 
collection; universities for research collaboration; the media as 
disseminators of ERS analyses; and other government agencies and 
departments for data information and services.
                            closing remarks
    I appreciate the support that this Committee has given ERS in the 
past and look forward to continue working with you and your staff to 
ensure that ERS makes the most effective and appropriate use of the 
public resources.
                                 ______
                                 

                 Biographical Sketch of Susan E. Offutt

    Susan E. Offutt became Administrator of the U.S. Department of 
Agriculture's Economic Research Service on January 21, 1996. The 
Economic Research Service is an agency that provides economic and other 
social science information and analysis for public and private 
decisions on agriculture, food, natural resources, and rural America. 
Prior to becoming Administrator of ERS, Susan was the Executive 
Director of the National Academy of Sciences Board on Agriculture, 
which conducts studies on a range of topics in agricultural science. 
Before taking over at the Board in January 1992, Susan was chief of the 
agriculture, ranch at the Office of Management and Budget in the 
Executive Office of the U.S. President. Susan served as assistant 
professor from 1982 to 1987 at the University of Illinois, where she 
taught econometrics and public policy in the agricultural economics 
department. She is currently President-elect of the American 
Agricultural Economics Association and an editor of the Review of 
Agricultural Economics. Susan received a B.S. degree from Allegheny 
College (1976) and a M.S. (1980) and Ph.D. (1982) from Cornell 
University.
                                 ______
                                 

   Prepared Statement of R. Ronald Bosecker, Administrator, National 
                    Agricultural Statistics Service

    Mr. Chairman and members of the Committee, I appreciate the 
opportunity to submit a statement for this Committee's consideration in 
support of the fiscal year 2003 budget request for the National 
Agricultural Statistics Service (NASS). This Agency now conducts the 
census of agriculture which was begun in 1840, and the agricultural 
statistics program created in 1842. Both programs support the basic 
mission of NASS to provide timely, accurate, and useful statistics in 
service to U.S. agriculture.
    As American farms and ranches have progressed to making greater use 
of agricultural science and technology, the need for more detailed 
information has increased. The periodic surveys and censuses conducted 
by NASS contribute significantly to the overall information base for 
policy makers, agricultural producers, handlers, processors, 
wholesalers, retailers, and ultimately, consumers. Voids in relevant, 
timely, accurate data contribute to wasteful inefficiencies throughout 
the entire production and marketing system.
    Official data collected by NASS are used for a variety of purposes. 
Absence or shortage of these data may result in a segment of 
agriculture having to operate with insufficient information; therefore, 
NASS strives to continuously produce relevant and timely reports, while 
at the same time reviewing priorities in order to consider emerging 
data needs. Potential outbreaks of animal and plant diseases, like the 
international outbreak of Foot-and-Mouth Disease (FMD), underscore the 
importance of America's food safety and supply. NASS's small area 
estimation program and the census of agriculture provide the foundation 
of data necessary to minimize the damage that would result from the 
spreading of potentially devastating diseases throughout the Nation. 
These data quickly and easily identify areas for heightened monitoring 
and in the worst case, aid in establishing logical boundaries for 
containment of the disease. Additionally, other food safety and 
environmental concerns have meant that vital data series are needed to 
accurately measure the chemicals used by the food and fiber industry. 
The globalization of agricultural commodity markets also increases the 
demand for relevant, accurate, timely, and impartial statistical 
information to assist those who sell U.S. agricultural commodities 
worldwide.
    The crop, livestock, and other related statistics are provided by 
NASS throughout the year, in cooperation with each State Department of 
Agriculture. This program, which began in 1917, has served the 
agricultural industry well and is often cited by others as an excellent 
model of successful State-Federal cooperation. The addition of the 
census of agriculture has strengthened NASS's partnership with its 
State cooperators. This joint State-Federal program helps meet State 
and national data needs while minimizing overall costs by consolidating 
both staff and resources, eliminating duplication of effort, and 
reducing the reporting burden on the Nation's farm and ranch operators. 
The success of this partnership was demonstrated when NASS, through its 
State-Federal cooperation, completed the 1997 Census of Agriculture in 
less time than previous censuses, increased the total response, and, 
through the use of a toll-free number, responded better to questions 
from farmers and ranchers completing the census questionnaires. NASS's 
46 field offices, which cover all 50 States (New England States are 
combined) and Puerto Rico, provide statistical information that serves 
national, State, and local data needs.
    NASS statistics contribute to providing fair markets where buyers 
and sellers alike have access to the same official statistics. This 
prevents markets from being unduly influenced by ``inside'' information 
which might unfairly affect market prices for the gain of an individual 
market participant. Empirical evidence indicates that an increase in 
information improves the efficiency of commodity markets. Information 
on the competitiveness of our Nation's agricultural industry will 
become increasingly important as producers rely more on the world 
market for their income.
    Through new technology, the products produced in the United States 
are changing rapidly as producers continue to become more efficient. 
This also means that the agricultural statistics program must be 
dynamic and able to respond to the demand for coverage of newly 
emerging products and changing industries. For example, during 2001, 
NASS issued the U.S. Hog Breeding Structure report. This new report 
documented changes in the makeup of the breeding herd by size of 
operation and the increasing efficiency of the breeding herds. NASS 
also issued a new report titled U.S. Cattle Supplies and Disposition. 
This report provided information on current cattle supply and 
disposition numbers, and trends which have implications for future 
cattle supplies.
    Not only are NASS statistical reports important to assess the 
current supply of and demand for agricultural commodities, but they are 
also extremely valuable to producers, agribusinesses, farm 
organizations, commodity groups, economists, public officials, and 
others who use the data for decision making. Statistical data are used 
in decisions affecting agricultural policy, foreign trade, 
infrastructure, environmental programs, research, rural development, 
and many other activities.
    All reports issued by NASS's Agricultural Statistics Board are made 
available to the public at previously announced release times to ensure 
that everyone is given equal access to the information. NASS has been a 
leader among Federal agencies in providing electronic access to 
information. All of NASS's national statistical reports and data 
products, including graphics, are available on the Internet, as well as 
in printed form. Customers are able to electronically subscribe to NASS 
reports by clicking on the appropriate release. A summary of NASS and 
other USDA statistical data are produced annually in USDA's 
Agricultural Statistics, available on the Internet through the NASS 
Home Page, on CD-ROM disc, or in hard copy. All of NASS's 46 field 
offices have Home Pages on the Internet, which provide access to 
special statistical reports and information on current local commodity 
conditions and production.
    Beginning in fiscal year 1997, NASS received funding to conduct the 
Census of Agriculture on a 5-year cycle. The transfer of the 
responsibility for the census of agriculture to USDA streamlines 
Federal agricultural data collection activities and has improved the 
efficiency, timeliness, and quality of the census data. Data collection 
for the 2002 Census of Agriculture will occur during fiscal year 2003.
    Statistical research is conducted to improve methods and techniques 
used in collecting and processing agricultural data. This research is 
directed toward providing higher quality census and survey data with 
less burden to respondents, producing more accurate and timely 
statistics for data users, and increasing the efficiency of the entire 
process. For example, NASS has been a leader in the research and 
development of satellite imagery to improve agricultural statistics. 
NASS recently provided the public a valuable new and detailed Cropland 
Data Layer for six major crop producing States. The NASS statistical 
research program strives to improve methods and techniques for 
obtaining agricultural statistics with an acceptable level of accuracy. 
The growing diversity and specialization of the Nation's farm 
operations have greatly complicated procedures for producing accurate 
agricultural statistics. Development of new sampling and survey 
methodology; data collection using mail, face-to-face interviewing, 
computer assisted telephoning, and recently Internet contacts; as well 
as computer intensive processing technology enable NASS to keep pace 
with an increasingly complex agricultural industry. Considerable new 
research has been directed at improving the 2002 Census of Agriculture, 
including the use of optical scanning and Intelligent Character 
Recognition systems. NASS is also making advancements in Electronic 
Data Reporting, with the goal of giving the Nation's farmers and 
ranchers the opportunity to electronically respond to the 2007 Census 
of Agriculture.
    Major Activities of the National Agricultural Statistics Service 
(NASS) The primary activity of NASS is to provide reliable data for 
decision making based on unbiased surveys each year, and the census of 
agriculture every 5 years, to meet the current data needs of the 
agricultural industry. Farmers, ranchers, and agribusinesses 
voluntarily respond to a series of nationwide surveys about crops, 
livestock, prices, chemical use and other agricultural activities each 
year. Periodic surveys are conducted during the growing season to 
measure the impact weather, pests, and other factors have on crop 
production. Many crop surveys are supplemented by actual field 
observations in which various plant counts and measurements are made. 
Administrative data from other State and USDA agencies, as well as data 
on imports and exports, are thoroughly analyzed and utilized as 
appropriate. NASS prepares estimates for over 120 crops and 45 
livestock items which are published annually in over 400 separate 
reports.
    The census of agriculture provides national, State, and county data 
for the United States on the agricultural economy every 5 years, 
including: number of farms, land use, production expenses, farm product 
values, value of land and buildings, farm size and characteristics of 
farm operators, market value of agricultural production sold, acreage 
of major crops, inventory of livestock and poultry, and farm irrigation 
practices. The census of agriculture is the only source for this 
information on a local level which is extremely important to the 
agricultural community. Detailed information at the county level helps 
agricultural organizations, suppliers, handlers, processors, and 
wholesalers and retailers better plan their operations. Important 
demographic information supplied by the census of agriculture also 
provides a very valuable data base for developing public policy for 
rural areas.
    Approximately 60 percent of NASS's staff are located in the 46 
field offices; 24 of these offices are collocated with State 
Departments of Agriculture or land-grant universities. NASS's State 
Statistical Offices issue approximately 9,000 different reports each 
year and maintain Internet Home Pages to electronically provide their 
State information to the public.
    NASS has developed a broad environmental statistics program under 
the Department's water quality and food safety programs. Until 1991, 
there was a complete void in the availability of reliable pesticide 
usage data. Therefore, in 1991 NASS cooperated with other USDA 
agencies, the Environmental Protection Agency (EPA), and the Food and 
Drug Administration, to implement comprehensive chemical usage surveys 
that collect data on certain crops in selected States. EPA uses the 
State and national level actual survey chemical data, rather than worst 
case scenarios, in the quantitative usage analysis for a chemical 
product's risk assessment. Beginning in fiscal year 1997, NASS also 
began survey programs to acquire more information on Integrated Pest 
Management (IPM), additional farm pesticide uses, and post-harvest 
application of pesticides and other chemicals applied to commodities 
after leaving the farm. These programs have resulted in significant new 
chemical use data, which are important additions to the data base. 
Surveys conducted in cooperation with the Economic Research Service 
also collect detailed economic and farming practice information to 
analyze the productivity and the profitability of different levels of 
chemical use. American farms and ranches manage half the land mass in 
the United States, underscoring the value of complete and accurate 
statistics on chemical use and farming practices to effectively address 
public concerns about the environmental effects of agricultural 
production.
    NASS conducts a number of special surveys as well as provides 
consulting services for many USDA agencies and other Federal, State, 
and private agencies or organizations on a cost-reimbursable basis. 
Consulting services include assistance with survey methodology, 
questionnaire and sample design, information resource management, and 
statistical analysis. NASS has been very active in assisting USDA 
agencies in programs that monitor nutrition, food safety, environmental 
quality, and customer satisfaction. In cooperation with State 
Departments of Agriculture, land-grant universities, and industry 
groups, NASS conducted 157 special surveys in fiscal year 2001 covering 
a wide range of issues such as farm injury, nursery and horticulture, 
farm finance, fruits and nuts, vegetables, and cropping practices.
    NASS provides technical assistance and training to improve 
agricultural survey programs in other countries in cooperation with 
other Government agencies on a cost-reimbursable basis. NASS's 
international programs focus on developing and emerging market 
countries in Asia, Africa, Central and South America, and Eastern 
Europe. Accurate information is essential for the orderly marketing of 
farm products. NASS works directly with countries by assisting in the 
application of modern statistical methodology, including sample survey 
techniques. This past year, NASS provided assistance to China, Ecuador, 
Ethiopia, Honduras, Kazakhstan, Mexico, Nicaragua, Oman, Philippines, 
Russia, South Africa, and Ukraine. In addition, NASS conducted training 
programs in the U.S. for 180 visitors representing 19 countries. These 
assistance and training activities promote better quality data and 
improved access to data from other countries.
    NASS annually seeks input on improvements and priorities from the 
public through: displays at major commodity meetings, data user 
meetings with representatives from agribusinesses and commodity groups, 
special briefings for agricultural leaders during the release of major 
reports, and through numerous individual contacts, especially those 
made at the grass roots level through NASS's 46 field offices. As a 
result of these activities, the Agency has made adjustments to its 
agricultural statistics program, published reports, and electronic 
access capabilities to better meet the statistical needs of customers 
and stakeholders.
                         fiscal year 2003 plans
    The fiscal year 2003 budget request is for $149,069,000. This is a 
net increase of $35,283,000 from the fiscal year 2002 appropriation.
    The fiscal year 2003 request includes increases for cyclical 
activities associated with the Census of Agriculture program 
($15,501,000); continued improvements to computer security to assure 
the integrity of market sensitive data prior to official release 
($700,000); a joint project with the Economic Research Service to 
reengineer the Agricultural Resources Management Survey and 
significantly strengthen the reliability of the data ($4,625,000); 
improvement in the statistical integrity and standardization of the 
data collection and processing activities of the Locality Based 
Agricultural County Estimates/Small Area estimation program 
($1,000,000); development of an infrastructure that integrates paper 
and e-Government data dissemination and electronic data reporting 
($3,000,000); and funding for increased pay costs, employee pension and 
annuitant health benefits, GSA rental payment, and Federal Employees' 
Compensation Act (FECA) program ($10,457,000).
    A net increase of $16,941,000 and 117 staff-years for the census of 
agriculture.
    The Census of Agriculture budget request is for $42,291,000. This 
includes a program and pay cost increase of $16,941,000 and 117 staff-
years for activities associated with the 2002 Census of Agriculture. 
The funding increase is necessary for a number of significant data 
collection activities occurring in fiscal year 2003. This is the fourth 
and peak year in a five-year funding cycle for the 2002 Census. 
Preparations include completion of the labeling and ZIP-code sorting 
operations for roughly three million mail packages; mailing and follow-
up data collection activities; and processing and analysis of all 
Census of Agriculture records. The Computer Assisted Telephone 
Interview network and data validation systems to assist census 
respondents who utilize the toll-free information telephone lines will 
be brought online from a test environment. Training programs and 
instructional guidelines will be communicated to the NASS State 
offices, Puerto Rico and the outlying areas of Northern Marianas, U.S. 
Virgin Islands, American Samoa, and Guam. NASS will also purchase and 
install new equipment and implement the software needed to effectively 
process, retrieve, and view scanned questionnaire images. NASS will 
contract with the Commerce Department's National Processing Center for 
functions not supported by NASS's infrastructure. This will serve to 
minimize costs and provide faster, more efficient processing of the 
large census work loads. Later in fiscal year 2003, the Agency will 
devote resources to tabulating and disseminating data products in both 
electronic and paper media.
    An increase of $4,625,000 and 35 staff years are requested to fund 
reengineering efforts for the Agricultural Resources Management Survey 
(ARMS) program.
    An increase of $4.625 million will support the NASS share of the 
joint effort with the Economic Research Service to improve the ARMS 
program, generating more dependable and statistically defensible 
results and making results available through web-based dissemination. 
This national survey of farms provides data and analysis to 
characterize the economic conditions and rapidly changing structure of 
the agriculture sector. As the principal source of data, ARMS makes it 
possible to answer key questions about differential impacts of 
alternative policies and programs across the farm sector.
    An increase of $700,000 and one staff year are requested for 
continued enhancements to the NASS computer security architecture and 
systems.
    Protection from cybersecurity threats is a top priority throughout 
the information technology community. Computer security is of even more 
critical importance to NASS because its mission of providing timely, 
accurate, and useful statistical information on the agricultural 
economy is based on confidential information collected from farmers, 
ranchers, and agribusinesses. Billions of dollars in global commodity 
trade depend on statistics that NASS must ensure are protected so that 
the data are not obtained prematurely or modified in any way. In 
addition, accelerated e-Government strategies promote the critical need 
for advancements in the protection of reported information. In the 
absence of new security measures, NASS's development of Internet-based 
data collection procedures to reduce reporting burden on farmers and 
ranchers, improve respondent ease-of-use, and boost survey 
participation will substantially increase the Agency's exposure to 
outside computer intrusions.
    An increase of $1,000,000 and 7 staff years to develop an annual 
integrated Locality Based Agricultural County Estimates/Small Area 
estimation program.
    Local area statistics are one of the most requested NASS data sets, 
and are widely used by private industry, Federal, State and local 
governments and universities. Data requests vary from a simple inquiry 
for county acreage, yield, and production statistics, to the 
comprehensive integrated data request for acreage, economic, 
demographic, and environmental data relating to a single or multiple 
county area, watershed, congressional district, or other special small 
areas. With the merger of the Census of Agriculture and the current 
statistics programs of NASS, there are new possibilities for combining 
census demographic and economic data with traditional county estimates 
data and environmental data sets. Thus, this initiative allows us to 
explore alternate ways of combining the Census of Agriculture with 
comprehensive annual county estimates data sets of the current 
statistics program. This linking of data sets can be combined with 
other environmental program data sets to produce comprehensive data 
sets for a new Small Area Estimation Program. Funding of this 
initiative also enables the addition of three major crop producing 
States to the popular NASS Cropland Data Layer program.
    An increase of $3,000,000 and 10 staff years for e-Government data 
dissemination and electronic reporting.
    This initiative will allow NASS to initiate actions and activities 
to address the Government Paperwork Elimination Act (GPEA) mandate that 
requires Federal agencies, by October 21, 2003, to allow individuals 
the option to submit information or transact with NASS electronically. 
NASS will begin building an infrastructure that integrates paper and 
web instruments. This integration will promote standardization, data 
handling efficiencies, and data security and provide 24 hour a day 
access, improving convenience to respondents.
    This concludes my statement, Mr. Chairman. Thank you for the 
opportunity to submit this for the record.
                                 ______
                                 

               Biographical Sketch of R. Ronald Bosecker

    Raymond R. (Ron) Bosecker grew up on a small farm in southern 
Illinois where he gained firsthand experience with hogs, cattle, corn, 
soybeans, wheat, hay, and farm upkeep. He graduated from Southern 
Illinois University (SIU) with a Bachelor of Science degree in 
Agricultural Economics in 1966 and received Master of Science degrees 
from Ohio State University in Agricultural Economics (1968) and 
Statistics (1972).
    Mr. Bosecker began his career with the National Agricultural 
Statistics Service as a student trainee in the Illinois State 
Statistical Office: Upon graduation from SIU, he moved to the Ohio 
State Statistical Office, where he served as a commodity statistician. 
In June 1972, Mr. Bosecker transferred to Washington, D.C. where he 
served as a mathematical statistician in several units, including 
Remote Sensing, Nonsampling Errors, Sampling Studies, Area Frame, and 
Statistical Methodology. In 1981, Mr. Bosecker became the Deputy State 
Statistician of the California State Statistical Office. In 1985, he 
returned to headquarters as Chief of Methods Staff, Statistics 
Division, and later became Chief of the Survey Sampling Branch, 
Research Division.
    In June 1992, he was appointed Director of the Research Division. 
As Director of NASS research, he was responsible for the NASS remote 
sensing program and the national area sampling frame, as well. as 
developing new methodology for data collection, data analysis, and 
presentation of data. In this role, he coordinated statistical research 
with universities, other statistical agencies, and a wide variety of 
data users inside and outside of USDA. He was reassigned in April 1999 
as Acting Deputy Administrator for Field Operations. This position has 
responsibility for 45 State Statistical Offices utilizing 60 percent of 
NASS resources. He was selected as Administrator in December 1999.
    He has participated internationally in the Business Survey Frames 
Roundtable and provided agricultural statistics program assistance in 
Tunisia, Haiti, Bolivia, and Argentina. He sits on the Statistics 
Canada Advisory. Committee on Agricultural Statistics and is a member 
of the U.S. Interagency Council on Statistical Methodology.

    Senator Kohl. Thank you very much, Dr. Jen. And before we 
commence our round of questions, I would ask Senator Burns if 
he has any comments.
    Senator Burns. No, Mr. Chairman, thank you.

               U.S. CONTRIBUTION TO WORLD FOOD ASSISTANCE

    Senator Kohl. Thank you very much. Secretary Penn, the 
President's budget request for fiscal year 2003 includes a 
welcome increase in the Public Law 480 Title II program, Food 
for Peace. However, it does not continue surplus purchases of 
commodities for donations per Section 416(b) in fiscal year 
2003. As a result, despite the increase in appropriations for 
food assistance, total donations are going to decrease. 
Therefore, your budget is misleading if it is meant to imply 
that the U.S. plans to maintain its role as a leader in world 
food assistance. In fact, that role of leadership will be 
diminishing.
    While the Bush Administration gets high marks for the 
successful deployment of food aid in the Afghan theater, which 
may well have prevented a human crisis in that region during 
this winter, there remains much to be done around the globe. 
Africa remains among those Nations most in need of food 
assistance, and even countries in our own hemisphere are not 
immune to chronic hunger. Combating world hunger is a challenge 
that needs a global response, and should not be tied primarily 
to foreign policy objectives in a given region.
    So, Dr. Penn, can you tell us the average value of U.S. 
donations under 416(b) and Public Law 480 for humanitarian food 
donations over the past 3 or 4 years, and how that average 
compares to the total program level for food assistance in this 
President's budget?
    Dr. Penn. Well, thank you, Mr. Chairman. Let me just say 
something initially about the international food system. These 
programs have a long history. As you know, Public Law 480 was 
enacted in 1954, and these programs have served a wide variety 
of objectives over time. They have met humanitarian objectives, 
foreign policy objectives, market development, support for our 
farmers.
    A whole host of objectives has been attempted with these 
programs, and the number of programs has increased over time, 
and the funding mechanisms have increased. So this 
Administration upon taking office saw a food assistance effort 
that I think could be characterized as being somewhat in 
disarray, and it immediately formed a task force led by the 
Office of Management and Budget and the National Security 
Council, involving the Agency for International Development, 
USDA, State Department, Treasury and others, all of the 
agencies that have some role with these programs, to try to 
sort out the food assistance efforts and to see if we could 
reduce some of the duplication, if we could reduce the number 
of programs, if we could streamline the assistance, with the 
overall goal of trying to provide as much assistance as we 
possibly can to those people around the world who are 
malnourished.
    With that objective in mind, all of the programs were 
assessed and the decision was taken to shift most of the focus 
to the Public Law 480 program and to reduce the focus on the 
416(b) program. There is an increase in funding for Public Law 
480 that is something on the order of $335 million for fiscal 
year 2003, and there is a reduction in 416(b) from what it has 
been in the past down to only $50 million for 2003.
    The budget numbers, as you know, get a little complex 
because of the supplemental. After September 11, there was $95 
million made available for Afghanistan, which shows up in the 
numbers, so comparing on that basis you are correct in assuming 
there is an overall reduction. But nonetheless, we think that 
with the program changes that have been implemented, we will be 
able to feed almost the same number of people, if not the same 
number of people, in the coming fiscal year as we did in the 
past.
    Senator Kohl. Dr. Penn, what has the removal of these 
commodities from U.S. supplies over the past several years had 
on our farm income? Would not a change in the Administration's 
decision to stop purchasing surplus commodities have a positive 
effect on farm prices?
    Dr. Penn. I don't think there will be any change in farm 
income. We are just shifting the funding source from purchasing 
and donating commodities under Section 416(b); now the 
commodities will be purchased and donated under Public Law 480, 
Title II. So the benefits to the American farmer should be the 
same, because we are purchasing the commodities from the 
domestic marketplace and we should get the same price impact 
regardless of the funding source within the budget.
    Senator Kohl. All right. It is true that CCC stocks of 
commodities reduced in recent years. However, some remain, such 
as more than 800 million pounds of non-fat dry milk, which 
could be used for donations. And beyond the totals of CCC-owned 
commodities, there are still surplus stocks that continue to 
have a depressing effect on farm prices and the rural economy. 
Can you provide us with estimates of surplus commodities, CCC-
owned or otherwise, that could be used for donations for 
humanitarian food assistance?
    Dr. Penn. Yes, Mr. Chairman, I think I can shed some light 
there. These international food assistance programs have been 
very closely connected to the farm support programs over the 
years. In fact as I said earlier, one of the main objectives of 
these programs at times in the past has been surplus disposal, 
which enabled us to provide for good use some of the excess 
supplies we had of farm commodities.
    At one time the domestic farm programs were structured such 
that the Department of Agriculture actually took ownership of 
various commodities. We were operating a price support program 
such that if the market price didn't reach a certain level then 
the farmers forfeited their commodities to USDA under the loan 
program. So we had huge stockpiles of grain, oil seeds, milk 
powder, sugar, other commodities. Well, beginning in the mid-
1980s, those programs started to be restructured and reformed, 
and by the time we got to 1996, most of those kind of loans and 
price support programs were gone. We now offer what's called a 
marketing loan program.
    And the result of that is that we give farmers payments of 
the difference between the loan rate and the market price, 
rather than actually take ownership of their commodities. So 
the end result is that today, USDA rarely takes ownership of or 
has in its own storehouses any surplus commodities.
    You correctly mentioned nonfat milk powder, and I can 
update your numbers a little bit. I was just told this morning 
that we now have 950 million pounds of nonfat dry milk that is 
owned by the Commodity Credit Corporation and is available for 
utilization in some way.
    The only other commodity that we have is sugar, and we have 
a relatively small amount, something over 200,000 tons. We're 
moving to put that back into the marketplace as soon as we 
possibly can.
    So today, when we are talking about programming 
commodities, the way the program works is that rather than 
going and physically taking stocks from USDA warehouses, the 
Secretary of Agriculture determines that certain commodities 
are in a surplus condition, and then we're able to go into the 
marketplace and buy those commodities and make them available. 
So in terms of commodities we own, we have a lot of nonfat dry 
milk powder, and we would certainly like to program more of 
that. We are looking for every possible opportunity to move 
that product into the international feeding programs and to 
move what little we can into the domestic feeding programs.
    Senator Kohl. The question I asked was not just CCC-owned 
surplus, but an estimate with respect to all surplus 
commodities. I might ask, Mr. Collins, if you would wish to 
make a comment.
    Mr. Collins. I would only echo what Dr. Penn said, that it 
is possible to come up with estimates of overall surpluses 
irrespective of whether they are owned by the government or 
not. In fact, we do that through an interagency process to 
determine programs for Public Law 480 when we make commodities 
available. When we make commodities available under Public Law 
480, we can't make them available if they will shorten the 
domestic market. So we do an analysis periodically to look at 
the overall availability of commodities that we use under 
Public Law 480.
    Of course there are other commodities where we don't do 
such analysis that you might argue would be surplus, like 
cotton right now. But it would be possible to come up with some 
rough estimate, but it is not easy, because there is no simple 
definition of when something is in surplus and when it is not, 
there is no off-on switch for that. It is judgmental about what 
the effect would be on the domestic market.
    Senator Kohl. I thank you. Dr. Penn, has the Administration 
evaluated how other countries may respond to our cutback in 
food donations? Is it not possible that without continuing 
strong U.S. leadership, donations worldwide will also go down 
and that the gains made in recent years to control world hunger 
may be reversed? I am assuming that you do not dispute the 
assumption that I am making, that the United States' level of 
food donations worldwide under the President's budget is to go 
down.
    Dr. Penn. Mr. Chairman, there are levels and there are 
numbers of people to be fed. Let me say about U.S. leadership, 
I full well agree with you that the United States has been the 
leader in providing food. In fact, we provide about half of all 
the food aid provided in the world. And one of the key 
questions in the interagency task force evaluation of the 
foreign food assistance program was, what is the appropriate 
share of total world food donations that the United States 
should be making. Is it a third or is it half? And the question 
is, how do we get other countries to step up to the plate and 
to provide more of the food assistance that's needed? Even 
though we are providing a large amount, even though it's half 
of the total, it's still in some cases far short of what's 
needed to improve the nutrition of all the people in need.
    Our assessment is, Chairman Kohl, that we're not losing 
leadership in being the greatest provider of food assistance, 
that we still have the moral authority to say to other 
countries that they should be doing more. And we think that, as 
I said earlier, even though the amount in the budget may be a 
little less because of the program changes and reductions, we 
think we will be able to feed close to the same number of 
people that we were feeding last year, even though the 
resources are somewhat less.

                       CCC COMMODITY INVENTORIES

    Senator Kohl. All right. Dr. Penn, in regard to the current 
CCC surplus of nonfat dry milk, will you work hard to include 
that supply in humanitarian food shipments this year?
    Dr. Penn. We certainly will. And as I said, this is a 
little bit of a sore point with us in that sugar and milk are 
the only two surplus commodities that we hold. We have been 
working the sugar surplus, the sugar stocks down from something 
approaching 900 million tons to something on the order of a 
couple hundred million tons, and we would like to do the same 
with nonfat dry milk.
    As I said, we have about 950 million pounds of nonfat dry 
milk in storage. Let me just put that in perspective for you. 
In the United States, in our entire market, we only use 750 
million pounds in a year, so we have an ample amount of nonfat 
dry milk. The problem is finding opportunities to put it in the 
international feeding programs. When you provide the milk 
powder, typically you need something to go with it. First of 
all you need clean water and then usually you need some other 
nutrient product to mix it with. There is a limited opportunity 
for being able to do that, but I can assure you that at every 
possible opportunity, we will be using nonfat dry milk.
    Senator Kohl. I thank you very much. Senator Cochran.

                        TIMING OF NEW FARM BILL

    Senator Cochran. Mr. Chairman, thank you. Dr. Penn, as you 
know, we are in conference with the House of Representatives on 
a new Farm Bill, and a question has arisen about how important 
is it for us to complete action in a timely fashion in terms of 
giving the Administration an opportunity to then implement the 
provisions of the new Farm Bill, particularly as they may 
relate to current crop year activities. So I ask you, what is 
the date, if you can tell us, by which the new Farm Bill would 
have to be completed or passed for the Department to implement 
it for this crop year?
    Dr. Penn. Well, Senator Cochran, I'm reluctant to give a 
specific date, as you can well imagine, but you have raised a 
very important consideration for us. This is a very complex 
situation, in that today we're administering the last year of 
the FAIR Act. So at the very moment that the House and Senate 
are in conference on a new Farm Bill which might be applicable 
to this year's crops, we're actually administering a farm bill 
for this year.
    Since the House completed action on its bill last October, 
we started going through title by title, provision by 
provision, to ascertain our workload requirements and what the 
difficulty is going to be to implement that. We also looked at 
the Senate bill, and now we're just eagerly awaiting the 
results of the conference committee to see what the final 
provisions will be.
    But I can tell you that it can't be much longer, just as a 
practical matter. As you well know, there are provisions in the 
bills, for example, that might require an updating of the 
acreage bases or an updating of program yields. We haven't done 
that for many years. That's going to require the development of 
new software, and it's going to require gathering a lot of new 
information--a lot of information from farmers themselves--and 
we're going to have to develop all of that.
    And if the farmers are given an option of whether to update 
or not, then we're going to have to provide them with what 
their current situation is, we're going to have to show them 
what the updating would be, and then we're going to have to 
spend time with them in the county offices helping them decide 
what would be in their best interest. The staff, especially the 
people in the field offices, tell us it's going to take a long 
time for the farmers to come in and sit down and work through 
all this. We think that something on the order of 4 months 
would be required to do that alone.
    So, we can't wait very much longer as a practical matter 
and do the first-class job we want to do in implementing the 
Farm Bill for the 2002 crops.
    Senator Cochran. I appreciate your understanding of the 
pressure that has been building on the Congress to act quickly 
so it would be possible for some farmers to have the benefits 
of the new Farm Bill, but I think you have given us kind of a 
dose of reality here that we need to take to heart.
    The work that you are doing in analyzing the options in 
advance is to be applauded. I appreciate knowing that. I think 
we are encouraged that the Department is moving ahead to 
prepare for whatever the likely eventualities are in connection 
with the new Farm Bill, and I congratulate you for that.

                           FARM LOAN PROGRAMS

    We are hearing from farmers in our State that some are 
unable to obtain commitments from lending agencies and bankers 
who are making loans for putting the crops in the ground this 
year because of the outlook in terms of prices. Prices are so 
low that many lenders are just not willing to make a loan 
because farmers cannot show that they will earn a profit and be 
able to repay the loan or break even.
    In that connection, we have these loan programs that direct 
loan and guaranteed loan programs, that are administered by the 
Department of Agriculture. Have there been any new estimates 
made as to what the demand is going to be for these loans, and 
do we have enough in the budget request to cover the demand 
that may be made on the Department from eligible farmers who 
can prove that they cannot get financing and who might be 
eligible for these government subsidized or guaranteed loans? 
Do you think the budget can accommodate the new demand that 
might be anticipated?
    Dr. Penn. We've looked at that pretty carefully, Senator 
Cochran, and as you correctly state, the demand for the direct 
operating loans that are offered by the Department is stronger 
this year than it has been in the past couple of years. That is 
probably because of the continuation of relatively low prices. 
We have assessed the resources that we have available, and we 
believe that we have sufficient resources to meet the demand. 
As you know, there is some flexibility in the complex of farm 
loan programs such that as you move through the year, some of 
the monies can be moved from one program to another program 
depending on need. We think that by utilizing that flexibility, 
we will have adequate resources for the year.
    Senator Cochran. You mentioned in your statement that 
opening new markets overseas and lowering trade barriers is 
most important. And I agree with you that trade is critically 
important for agriculture producers to prosper, and I 
congratulate the Department for its aggressive effort in that 
regard. In that connection, I am seriously concerned with the 
actions of Russia with respect to poultry imports from the 
United States. What is the Department doing to help solve this 
problem?
    Dr. Penn. Senator Cochran, I am as exasperated with this 
situation as you are and I can tell you that we have mounted an 
all-out effort to see if we can't get this Russian ban lifted 
immediately. This is a very major market for U.S. poultry, as 
you suggest. It's a market that is approaching $700 million 
annually. About half of all of the U.S. poultry exports go to 
the Russian market, and so we are very concerned about the 
actions.
    We think the actions of the Russians are arbitrary, we 
think that there is no basis whatsoever in terms of science or 
in terms of real concern about food safety, about the safety of 
our production. And we're somewhat perplexed as to the 
motivation, especially given that the Russians have indicated 
they want to join the World Trade Organization, given that we 
have a new improved relationship nationally with Russia. So we 
are very perplexed as to why they are doing that, but I can 
assure you that we are taking every action that we possibly 
can.
    The U.S. ambassador in Moscow has been regularly presenting 
our case. We have a team of specialists from the USDA there now 
trying to respond to any technical questions that the Russians 
might have. Ambassador Zellick has been in contact with his 
counterpart expressing our strong displeasure in this action.
    Secretary Veneman yesterday spoke to the Russian ambassador 
here and expressed our dismay in the strongest possible terms, 
and has scheduled a telephone conversation with the Russian 
minister of agriculture, who is also a deputy prime minister, 
to do the same thing. We are trying to keep this at a very high 
level and not let it get bogged down in technical talks which 
can drag out over a long period of time, because we don't think 
there is any merit in the claims that the Russians have made.
    So, I think we are doing everything that we possibly can at 
this point to apply all of the pressure that would be needed to 
get this resolved quickly.
    Senator Cochran. I appreciate your explanation and I think 
you are on the right track. I hope we can succeed in our 
efforts to reverse their decision, because it is putting a 
large segment of our economy in jeopardy and it is very 
serious.
    I saw in the newspaper this morning a report that symptoms 
in some farm animals in Kansas have been noted that are similar 
to foot-and-mouth disease symptoms. Is this something the 
Department is aware of, and are we doing anything to 
investigate this and use money that may be available to the 
Department for the animal health research programs and efforts 
to combat animal-borne diseases or threats to our country?
    Dr. Penn. Senator, let me make a general comment about the 
incident you mentioned, and then I would defer to my colleague, 
Dr. Jen, about the research aspect.
    Yes, we're very much aware of that. This country has been 
most fortunate in that we have not had an outbreak of foot-and-
mouth disease in many years, since the late 1920s, I think, and 
we have had no outbreak of BSE or any of the other major 
livestock diseases that have occurred in other parts of the 
world.
    We have systems in place of course, to try to avoid ever 
getting outbreaks. We have strengthened all of those. The 
experience of last year with foot-and-mouth disease in Europe, 
with the BSE outbreak in Europe, has made us all the more aware 
that we need to do more. And Secretary Veneman has been very 
diligent in making sure that all of our agencies have 
reexamined the situation and are doing our dead level best at 
monitoring and surveillance.
    We did check out the incident that was reported in Kansas 
City; it caused quite a bit of turmoil in the livestock market 
yesterday. It was a false alarm and we're very pleased about 
that, but we are constantly monitoring these situations. 
Anytime there is any discussion about the possibility of an 
infected animal, it is immediately tested, and we're doing 
everything that is humanly possible to try to protect the 
integrity of the food system. This is extremely important to 
the economy.

                       TERRORISM RESPONSE FUNDING

    Senator Cochran. Before Dr. Jen proceeds to comment on the 
research aspect, when the Secretary was here, we asked the 
question about whether there had been a final decision made 
about how to use the money that has been appropriated in the 
emergency supplemental in response to the terrorism attacks and 
other homeland security needs. And the response was that they 
would get back to us, that they had not really completed a 
review of all the agencies input that they had gotten 
Department-wide on this subject. Has this now been completed, 
or do you know how much is going to be allocated for research 
and other activities?
    Dr. Penn. I do know that after the Secretary's appearance 
here, that she and Deputy Secretary Moseley began discussing 
this. I don't know what the disposition of that is, but I'm 
almost certain that the allocations have been made. I just 
can't tell you what they are.
    Senator Cochran. Thank you. Dr. Jen?
    Dr. Jen. Thank you, Senator. I will also confirm what Under 
Secretary Penn said, regarding the Kansas City incident 
yesterday, we have--the preliminary results. A sample went to 
Plum Island Research and Diagnostic Lab for testing. The 
preliminary test was negative. We have to do confirmatory 
testing, which is underway.
    Chances are it's going to be negative as well. This is a 
routine type of testing that we have been doing for years, 
since 1929, and we have had a number of false alarms throughout 
the years, so we are not doing anything extraordinary at this 
time.
    In terms of the research side of it, we are doing two kinds 
of research to try to eliminate these kinds of animal diseases, 
invasive diseases and things like that. One is rapid detection, 
developing a much quicker way of detecting the results rather 
than having to wait for incubation of 3 to 4 days. We are doing 
that using a DNA type of technology.
    The second part is to try to find ways of prevention. This 
is also oriented towards genomics, investigating whether or not 
there are ways either through vaccine inoculations of animals 
or by changing the genomic makeup of the animals, so they can 
never catch foot-and-mouth disease.
    Senator Cochran. One suggestion that I heard just this last 
week from a veterinary medicine school dean from Mississippi 
State University was an idea that we need to be more aggressive 
not just in the United States but around the world, and have 
programs that would involve scientists who actually go to other 
countries and help deal with problems that are developing there 
that could end up in the United States and threaten the health 
of our animal population or be in the nature of food-borne 
illnesses that we could more effectively stop at the point of 
origin. What is your reaction to that?
    Dr. Jen. You are absolutely correct. In fact, when the 
United Kingdom had the breakout of disease, USDA had quite a 
number of scientists in the UK, on the one hand trying to help 
them deal with the disease breakout, but on the other hand, 
actually learning a lot on how to deal with such breakouts. So 
things like that are going on at all times.
    Senator Cochran. Thank you very much, Mr. Chairman.
    Senator Kohl. Thank you, Senator Cochran. Senator Murray.
    Senator Murray. Thank you very much, Mr. Chairman, and 
thank you to all the witnesses. Dr. Penn, let me start with 
you. You and Secretary Veneman have made trade an important 
part of this Administration's farm policy. I appreciate that, 
and I have been a big proponent of increasing funding for the 
Market Access Program because I think it is really a critical 
tool that helps our farmers, our businesses, and our 
cooperatives. I wanted to comment that I hope that the 
Administration in the negotiations with the Farm Bill really 
helps us with some active support in raising the amount to $200 
million as quickly as possible, hopefully in 2003.
    Dr. Penn. We are very supportive of that.

                              NAP PAYMENTS

    Senator Murray. Mr. Secretary, my State's farmers are 
hurting. I know that is common to many agricultural States, but 
this has been a very difficult time for us. I was pleased to 
hear Mr. Collins talk about the improving employment numbers, 
but I have to tell you, in my State we have, over 8 percent 
unemployment. We have the second highest level in the Nation 
behind Oregon, and our agricultural industry has been hurting 
for some time. We have especially been hit by drought and 
several storms, and a lot of my farmers are calling me to find 
out when they can expect assistance under the non-insured 
assistance program. Mr. Secretary, can you tell me when those 
NAP funds are going to get to our farmers?
    Dr. Penn. It's my understanding, Senator, that all of the 
rules and regulations have been promulgated now and that the 
checks should start being issued very shortly, if they haven't 
been already.
    Senator Murray. The checks are in the mail.
    Dr. Penn. I didn't say that, you notice, but I thought it. 
That is my understanding, and Mr. Jim Little, who is the 
Administrator of the Farm Service Agency, is in the audience.
    Senator Murray. He is listening to you say they are in the 
mail.
    Dr. Penn. Yes, he is, and I hope he's nodding. I can't see 
him back there.
    Senator Murray. We do want to encourage you to get those 
moving, and we do need those checks.
    Dr. Penn. We are working very hard on that.

                  FARM SERVICE AGENCY STAFFING LEVELS

    Senator Murray. I want to ask you about the Farm Service 
Agency's staffing levels. In your testimony you said the 
President's budget supports a ceiling of about 5,800 Federal 
staff years and 11,250 non-Federal staff years within the Farm 
Service Agency. Washington State's allocation in that budget is 
134 full-time employees and 22 to 24 temporary employees. That 
frankly doesn't feel like a very fair allocation to us in 
Washington State. Our counties are very large geographically. 
No offense to the midwest or east coast, but we tend to draw 
our counties bigger in Washington State and in the west. That 
means that our county offices have to cover a very large area.
    On top of that, we jumped right into consolidation of a lot 
of our county offices, so many of our offices are now covering 
an extremely large geographic area.
    And in addition to that, Washington State, by a lot of 
standards, is the third most diverse agricultural State in the 
entire country. So that means that these employees who cover a 
very large area have to cover very different crops as well, and 
we are very short handed.
    Could you help me look into this and see if there are some 
changes that we can make so we can better reflect the actual 
workload of those folks that are in some of these difficult and 
challenging areas?
    Dr. Penn. I will certainly do that. And let me just comment 
generally that we are in a little bit of a crunch here, as you 
can appreciate. The overall thrust has been to reduce the staff 
in the Farm Service Agency going back for 10 years or more. 
That agency has reduced the number of permanent people from 
something over 22,000 down to the present 17,057 in about 10 
years. The idea was that we can provide the same service or 
even better service to our farmer customers by doing it 
smarter, by consolidating where that makes sense, by adopting 
new technologies, certainly computerizing wherever we can. 
We've done that, and I think that most people who look at the 
overall performance of the Farm Service Agency over the years 
think that it's a real success story, that it has done more 
with less.
    And then I would point out that in the last 4 years, the 
workload of that agency has increased tremendously with the 
supplemental assistance that has been provided by the Congress. 
In 1998, 1999, 2000, and again last year, there were 
supplemental assistance packages on the order of $5.5 to $7.5 
billion. A lot of those had new programs, like for apples and 
other nontraditional crops, which required the development of 
software and gathering of information, which brought about a 
substantial increase in workload.
    Now I'm not here crying, but I am just pointing out that we 
are trying to do a lot more with a declining resource base. We 
have a lot of new initiatives underway, especially in adopting 
new technology and developing service centers, working with our 
colleagues in Rural Development and the Natural Resources 
Conservation Service. We are trying to use common data bases 
where we can, and a common computing environment where we can.
    Senator Murray. Well, some of our people don't even have 
those computers.
    Dr. Penn. I understand. We're----
    Senator Murray. I just think the system is unfair at this 
point and we are asking many of our folks to serve much more 
diverse areas, to help out more folks, and that is not working 
out for any of us.
    Dr. Penn. We will look into that. The allocation among 
States is a very key question. We were on the House side 
yesterday, and Mr. Little had the same request from another 
State, so we are really trying to juggle, but we will look into 
it.
    Senator Murray. I would like to work with you.
    Dr. Penn. We will try to make as fair an allocation as we 
possibly can to get the job done, because as I said in my 
opening statement, FSA is the front line with respect to our 
interaction with farmers, and we want to make that as positive 
as we possibly can.

                CONSERVATION RESERVE ENHANCEMENT PROGRAM

    Senator Murray. Very good.
    Well, I saved my best question for last, and I want to 
address this to you, Secretary Penn, as well as to Mr. Rey. I 
want to raise an issue that is really of absolute critical 
importance in the State of Washington, to the future of our 
farmers, and also salmon restoration efforts.
    In 1998, the U.S. Department of Agriculture and the 
Washington State Conservation Commission signed an agreement to 
administer the Conservation Reserve Enhancement Program in 
Washington State, which is really my State's primary tool for 
getting certainty under the Endangered Species Act to our 
farmers and ranchers.
    Unfortunately, the USDA is taking the position now that 
CREP funds cannot be used on lands that are subject to State 
land use laws and local ordinances. That decision has had 
serious and dramatic impacts in my home State, and is 
particularly troublesome and problematic because it came as a 
complete surprise, to our Federal, State and local officials, 
as well as our farm community.
    Mr. Secretary, I'm not going to go into the details of 
salmon recovery in Washington State. You know, I think, and so 
does Mr. Rey, the tremendous difficulties we have negotiating 
on natural resource issues. They are very difficult and 
contentious.
    If USDA's position stands, it is going to kill years of 
work and progress, and I simply want to ask both of you today 
for your commitment to work with me and other Members of 
Congress, the State of Washington and all of our constituents, 
to resolve this problem. Can I just get both of your commitment 
to work with me on this issue?
    Dr. Penn. Well, you certainly have my commitment. I'm not 
familiar with all of the details, I do know a bit about the 
CREP, but you have my commitment, we will work with you.
    Senator Murray. The problem is that CREP is now saying 
funds cannot be used on lands subject to State land use laws 
and local ordinances, and that is going to kill this program.
    Dr. Penn. I understand that. We will work with you.
    Senator Murray. Mr. Rey.
    Mr. Rey. This is the first time I have heard of it, but 
working together, we can resolve this difference.
    Senator Murray. I would like both of you to work with me 
and others to solve this problem. Thank you.
    Senator Kohl. Senator Burns.

                         AGRICULTURAL MARKETING

    Senator Burns. You didn't even notice me over here, did 
you, I was so quiet.
    With all the talk about rural development, if you just give 
us $5.00 grain, 75-cent cotton, you guys could go away, we 
would not need much out there.
    I want to just go down a couple lines of what I am 
thinking, and it probably has nothing to do here, but I can 
tell you where we have some real problems. Number one, we need 
more staff. Senator Murray hit it right on the head. You think 
they are computerized, so give us more computers. They don't 
give them out in Montana, and so we have a real shortage this 
way.
    But I have to ask, does the Department of Agriculture ever 
look into these marketing things on how we market our 
commodities off of these farms? Right now we have a situation 
in the cattle business where you have tighter areas of 
concentration and if you look at the sheep business, it's 
worse. When you have one company, one firm that controls over 
65 percent of the kill and 65 percent of the imports that come 
into this country, do we ever take a look at those folks and 
see how we could do it better? Because it seems to me the 
problem, there ain't nothing wrong on the farm except the 
price.
    And I don't see anybody in this Department of Agriculture 
yet taking a look at marketing structures, both in grain--and 
we spent a lot of time in the new Farm Bill trying to reach a 
deal with packer concentration, but we have not looked at the 
grain marketing structure in this country for a long long time. 
And I'm just to wit's end on how we can increase income, 
because that is our problem. All other problems go away.
    And I know I have some questions for you about these kinds 
of problems but I am not going to go into those today, because 
those are sort of parochial and we want to get to the end where 
the Chairman wants to go, and to take a look at appropriations 
as well. But I am telling you, we have to focus on different 
things down there other than just building a bureaucracy that 
sometimes, and I know their dedication, but by gosh, I will 
tell you one thing, delivering is something else. But I think 
we have to start looking at how we market these commodities and 
the income coming back to the farm.
    And it is just one of those things, but I cannot see, I do 
not see the Department of Agriculture going up to Justice 
saying, we have a situation out here that is pretty antitrust. 
I called this guy, I called a guy down there in Colorado and 
said I have a thousand lambs, what is the market on fat lambs 
today, and he said they would weigh 120 pounds. He told me what 
the price was. I said, I will ship them on Monday morning. He 
said well, I ain't buying them. He is the only buyer there.
    That is our problem, and we are not looking into those kind 
of situations in the Department of Agriculture. And it does not 
make any difference what administration it is, it does not make 
any difference. But that is where we are getting hammered, 
folks, and I will pass the plate after this sermon, but I have 
a few questions and I will direct them to you directly. Thank 
you, Mr. Chairman.
    Senator Kohl. Thank you very much, Senator Burns. Senator 
Dorgan.
    Senator Dorgan. Mr. Chairman, I agree with Senator Burns, 
but let me ask some questions about some specific issues. The 
points he raised are very important points. In every direction 
the family farmer looks, there is a monopoly. If they want to 
move their grain to markets, you face one or two railroads. 
They tell you what the price is and if you do not like it, 
tough luck. When you sell it, you sell it to a grain trader, 
who is selling it into a highly concentrated market. In every 
direction they are facing near monopoly, and Senator Burns is 
right about that, and we have to do something about that.
    First of all, let me say there are some encouraging things 
in this budget, the priorities like WIC, the Food Stamps, food 
safety, food inspection, I think there are some encouraging 
things that have been recommended and I appreciate that.
    Let me ask about the areas where I think we also needed to 
do better. One, the Rural Telephone Bank program, I think has 
been a very important tool for rural America, and the 
Administration has eliminated that for the second year, I 
believe, in the budget. Can you tell us what the basis is for 
recommending the elimination of that program?
    Mr. Neruda. Senator, I think I can take that question. 
There is a strong belief that the bank should be privatized and 
starting back in 1996, an effort was started to do that, and 
this is just a continuation of that process, supported by our 
board of directors on the bank board, and we think this is the 
way to go with this program.
    Senator Dorgan. You think the investment is necessary for 
rural America, you just think it ought not be a public 
investment, it ought to be a private investment?
    Mr. Neruda. Right, on this particular program, yes, sir.
    Senator Dorgan. Well, we have disagreement about that, as 
you know. I don't believe Congress agrees with you, and I 
certainly do not.
    Let me ask a couple questions about the $53 million cut of 
Congressionally-dedicated projects from the ARS account. Of 
particular concern to me are the cuts for the National Wheat 
and Barley Scab Initiative and the National Sclerotinia 
Initiative, which is of great importance to sunflowers and 
other commodities. We have had very substantial success with 
these investments. In North Dakota, for example, our farmers 
have lost financially about $2.6 billion to scab disease, and 
the investment that we have made in this research has been very 
productive, I might say. Can you tell me your vision for this 
sort of thing? I understand you might have just zeroed it off 
because the Congress said it wanted it, but you do not think it 
is unworthy to have this kind of investment in scab research, 
do you?
    Dr. Jen. Senator, I will try to answer that question. I 
think there are so many research programs USDA is carrying out. 
The Administration, I think for years, has favored a 
competitive grant program over specific projects. But from the 
program point of view and my Agency's point of view, I think 
all the programs, all the research, is worthwhile. We just 
don't have enough money to do it.
    Specific to your point, those programs that you are talking 
about are absolutely worthwhile doing. It's just in the budget 
process, the Administration had to choose some. I want to also 
say that some of them are covered in the request for increase 
in National Research Initiative so these programs can be done 
on a competitive basis and probably done even better.
    Senator Dorgan. Well, is there a basis for suggesting that 
something can be done better with respect to scab research? In 
other words, are you suggesting that what has been done has not 
been done in the most effective way?
    Dr. Jen. No, sir. I think what has been done has been done 
very very well. It's just that it is the Administration's 
belief that if a research program is open to all the research 
community to compete, we can have the best minds of the country 
to work on those programs.
    Senator Dorgan. As you know with respect to scab research, 
we had a consortium throughout the country that was doing work 
on that, and they had great great success, and it pains me to 
see a recommendation of reduced funding for that. Is this just 
a lower priority and cannot be fully funded with the amount of 
money that is available?
    Dr. Jen. No, sir, I didn't say that. I didn't say it was a 
low priority. I believe that many of these researchers will 
submit proposals through our competitive program and carry it 
out. The group of people that you talked about, came to see me 
some time ago, and we realized the importance of the research 
project. I think there will be some way that those will be 
carried out.
    Lastly, I would want to say on my Agency's behalf that I 
think the other four agencies doing the research within the 
mission area have always very diligently carried out whatever 
the final budget provisions that the Congress has appropriated 
are, and we will do so again.
    Senator Dorgan. But, let me just pursue that a bit more, 
because the Congress, we say here is the way we would like to 
do this, and by all accounts it has been highly effective, and 
I am now talking about the consortium dealing with scab 
research, but by all accounts it has been effective. And what 
you are saying is let us reduce funding, even though you are 
not suggesting that what has been done is ineffective?
    I thought I heard you suggest the reason that you threw out 
the ear marks $53 million for plant science research at ARS is 
that we did not have enough money.
    Dr. Jen. That is not what I said either. I said we didn't 
have enough money to do all the research and we are being put 
in a situation to really make choices supporting the many 
different programs that we have.
    Senator Dorgan. Well, if we do not continue the scab 
research at a robust level, and others that we have had 
underway with a consortium of many universities, that have 
yielded enormous successes, including the seed variety called 
Alsen, how will it be done another way, or will we just 
discontinue that research? I think I heard you say it will 
somehow be done in some other way. How will that happen?
    Dr. Jen. Well, one of the ways that it can possibly happen 
is the researchers that are doing it will submit proposals in 
the competitive grant programs, and they will receive fundings 
through that process to continue the research.
    Senator Dorgan. Although I appreciate the answer, I would 
observe that I think that when you have something that works 
quite well, something that the Congress, Republicans and 
Democrats from a number of States have said let us invest in 
this, and the result of that investment has been quite 
extraordinary, I do not think it is wise to not fully support 
the program. That is something that the Congress will decide 
upon, but let me ask one additional question.

                     INTERNATIONAL FOOD ASSISTANCE

    The budget request with respect to the annual purchases of 
$500 to $700 million in commodities under the CCC and Food for 
Progress programs, the budget asks for an increase in Food for 
Peace programs of $350 million. This increase of course comes 
at the expense of some other things, one of which I just 
discussed. I think international food aid is very important, 
and I think the $350 million is significant and important. But 
the commodities that were made available previously under the 
CCC and the Food for Progress program are also important, and I 
wonder if you can tell me the rationale for ending the annual 
purchase of the commodities under those two programs. The PBO 
stated, this claim will actually bring down the U.S. provision 
from 5 million tons to no more than 3.5 million tons, and I 
wonder if you could just give me your evaluation of that.
    Dr. Penn. Senator, I explained a little earlier the 
rationale that went into the evaluation of the whole foreign 
food systems sector. As you note, the decisions were taken to 
modify the overall effort somewhat, to try to reduce the number 
of programs that are utilized to distribute funding among the 
various sources and to shift responsibilities between USDA and 
USAID.
    I don't think there's any change in the commodity mix that 
has been programmed under the food assistance programs, I think 
that is going to continue to be the same. It in large part 
depends on the dietary habits of the receiving countries and 
the kind of foods that they want and can utilize. So I don't 
think there is any change in the commodity distribution at this 
stage at all.
    Senator Dorgan. I understand Senator Kohl asked you a 
similar question. I was at another committee and missed that, 
so let me submit a question for you.
    Dr. Penn. We will be happy to respond.
    Senator Dorgan. Mr. Chairman, that is all I have.
    Senator Kohl. Thank you, Senator Dorgan. Senator Stevens.
    Senator Stevens. Thank you, Mr. Chairman.
    Secretary Neruda, in most areas of America that you all are 
familiar with, the cost per kilowatt hour is about 8 to 9 
cents. In Alaska, our rural communities pay as much as 45 cents 
per kilowatt hour, 500 percent above what the rest of the 
country pays. To improve energy efficiency for rural power 
generation, the Senate at my request added $30 million to the 
Rural Development Administration's budget. And I was little 
alarmed to hear that the General Counsel's office indicated 
there may be a problem because of a legal technicality, even 
though the funds were used in the previous years under the same 
authorization.
    When I became Solicitor General Counsel at Interior, the 
General Counsel of Defense then, Mr. Decreet, told me the story 
of President Roosevelt. During World War II, he got a 
resolution from Congress forbidding the United States from 
giving or selling military supplies to our allies to get around 
it he developed the lend-lease concept. The Secretary of the 
Navy told him that his general counsel indicated the lend lease 
program technically violated the resolution, and he was not 
sure he had the authority to proceed. Mr. Deckert told me that 
the President told the Secretary of the Navy to go back to the 
Department, go through his legal department, and as soon as he 
found a lawyer that understood the problem and said that the 
technicality did not exist, he was the new General Counsel.
    I hope that does not have to happen to your general 
counsel. Can you tell me what that status is of this 
appropriation? Will you release the funds? The construction 
needs to be started, and if that money is not released almost 
immediately, it will not be available for this summer in 
construction season in Alaska.
    Mr. Neruda. Senator, I certainly appreciate the concern 
regarding Alaskan kilowatt hour cost, and I also understand 
that technicality issues when we work with our general counsel, 
having worked on a number of issues recently on technicalities. 
But I am pleased to report that our Office of General Counsel 
has worked out the problems on that issue and I have directed 
our budget office to transfer those.
    Senator Stevens. That is good news. He may have his job for 
a little while.
    Mr. Neruda. As will I.
    Senator Stevens. In the broadband grant program, again, I 
requested the Senate to increase funds for a public facilities 
program for areas of extremely high unemployment. This was the 
first time authorization to use a portion of those funds to 
deploy high-speed Internet. Most people do not know, many 
places in my State do not even have roads. You work with people 
who sit on dirt roads, and we work with people without any 
roads. And we work with people who do not even have dial up 
access, let alone high speed access.
    I know your people are working diligently on the 
regulations for that program, but again, the regulations and 
the process are holding up the distribution of that money. Can 
you tell us when those rules might be finalized so that money 
could be released to carry out that program?
    Mr. Neruda. Yes, sir, Senator. Because of some language 
changes from last year when we divided up many issues trying to 
get that money out, we have been able to effectuate that change 
so that it can now go to a State agency, and that will allow 
this to proceed. And if I could work with your staff to 
continue with this process, I think we can come to a good 
conclusion on that.
    Senator Stevens. Dr. Penn, we authorized a program of 
salmon crop insurance and as you know, the salmon industry is 
in a period of real deep crisis. As a matter of fact, I do not 
think most people realize, but very soon if we are not careful, 
Americans will be buying only Chilean salmon, Chinese 
whitefish, and all our fishermen and boats will be stranded on 
the shore because we just cannot meet the costs of their 
production.
    Those imports also are coming in from Norway. The salmon 
insurance program is critical to allow our people to come 
through periods of shortage of the natural supply as farmers 
face. The farm insurance program has worked very well for 
farmers. I do not know any reason why it will not work for 
salmon fishermen. When they have a crisis periodically of loss 
of supply caused by natural causes, predators in the sea, or 
whatever it might be, then they really have to start over 
again, and they cannot compete with foreign producers if they 
have to absorb the cost of such natural losses which would be 
borne in the farm community by the insurance program. I hope 
that you are going to be able to get that program running. 
Could you give us a report on it?
    Dr. Penn. Yes, sir, I can. The Risk Management Agency staff 
and the staff at the University of Alaska-Fairbanks have 
explored this problem to some considerable degree, I 
understand--the problem of trying to develop an actuarially 
sound insurance program for wild salmon. And the staff, I know, 
have been in contact with your staff, keeping them apprised of 
the problems. Unfortunately, the inherent nature of wild salmon 
just doesn't lend itself very well to an insurance program, and 
I don't think we are going to be able to develop an insurance 
program that we can offer in an actuarially sound manner the 
way that we have actuarially sound programs for crops and other 
livestock.
    However, in the course of doing this evaluation, we did 
discover some of the problems that your industry faces, and I 
think we have identified some possible marketing opportunities 
that we could develop with you. We do have some money remaining 
in that project, I am told, so we would be more than happy to 
try to work out some way to utilize those funds to explore some 
of the problems that have been identified and see if we can 
help with boosting prices and help the overall problem with the 
industry.
    Senator Stevens. I am sad to hear that. I am reminded of 
the time I went to the Commodity Exchange in Chicago to talk 
about the problem of not having futures in fish, and they 
reported back it was not possible. They now have futures in 
foreign imports of fish, but they do not have any futures on 
fresh fish. I really think that the ingenuity of your 
Department and of our economic system ought to be able to face 
up to that. Should we face the problem that because of the 
futures and the financing and the disasters, that the fresh 
food market will go away, and we will be entirely dependent 
upon frozen farm-raised fish?
    I think your people have a duty in that to help us find 
some solutions for this industry. And it is not just Alaska, it 
is New England, California, the Gulf. Half of the people in my 
State that have any income derive a substantial portion of that 
income from fishing and we face the grave possibility of seeing 
by the end of this decade, the fishing industry disappear from 
North America.
    Now if it does, very frankly, your Department is going to 
bear the responsibility, in my opinion, because you have always 
just ignored fish as being a food. It is fresh fish that we 
should market--I am going to try to get the Secretary to help 
us call a national conference on fish. We ought to absorb the 
fresh food market of the world using the best fish in the 
world, and that is naturally harvested fish.
    Believe me, New England is dead, the Gulf is ready to die, 
Alaska is hanging around just by a thread, except for one 
fishery, the natural pollock. The pollock is healthy and will 
continue to be brought into our markets. But again, that is a 
tough one.
    But as I say that, let me also add that we now have a 
surplus of canned pink salmon because of the enormous influx of 
fish from Chile. And I apologize for taking too long, Mr. 
Chairman, but this is very serious to me. Just as an aside, I 
hope you notice that the imports from Chile, 43 percent of the 
yearly imports came in during the time when the fresh salmon 
hit the market last summer. Now if that is not dumping, I do 
not know what is. And not one of your people noticed that at 
all, not one.
    And we now have an overhang on the market for this year of 
the canned, pink salmon that is already there. You are 
purchasing some of it for the school lunch program, but what 
about this international feeding program? Could we buy some of 
that salmon to ship out in the international feeding program? 
If it stays, the price of pinks will be so low that that market 
will collapse this year also.
    So I would urge you, I am not asking for your commitment, I 
would urge you to consider adding the surplus canned pink 
salmon to the international feeding program if at all possible. 
By the way, it is primarily in the State of Washington and 
Alaska that are suffering jointly on that one.
    Secretary Rey, I have a problem also in your area. What is 
the status of the efforts to get the OMB to release the money 
for the fire program? Mr. Chairman, Senator Cochran, understand 
this. South central Alaska, running about 245 miles from Homer 
to Wasilla, have suffered bark beetle kill. We tried under the 
last Administration to get authority to cut down those trees or 
at least treat them and were not able to do that. About 60 
percent of that forest in the area is owned by the Federal 
Government.
    We are told this will be one of the worst drought years in 
history. If a fire starts in that area with the northerly wind 
that comes up that spit, up the inlet, we will see the possible 
destruction of the entire south central Alaska, and that is 
really a very serious thing. I have tried to get us prepared 
for it, but somehow no one seems to understand the urgency. Can 
you tell me, Mr. Rey, if there is any chance at all of getting 
that money released?
    Mr. Rey. We are in the middle of discussions now with OMB 
and with your staff, and with the House Appropriations 
Committee staff, and I believe within the next couple days we 
will reach a conclusion on the release of at least a 
significant portion of that money.
    Senator Stevens. We have lost 35,000 acres already from a 
fire last year that we were lucky that it was stopped. It was 
stopped because it was on State land and the State moved in 
immediately with the help of the Forest Service, I might add, 
and we appreciate that, and they stopped that fire after it had 
destroyed 35,000 acres. We are talking about what, 2.5 million 
acres, 60 percent of it on Federal land.
    Mr. Rey. Right. It's on both the Chugach National Forest 
and the Kenai Wildlife Refuge. And one of the challenges that 
we face is that the magnitude of the infestation and die-back, 
as well as the limited markets available for the quality of the 
product that would result, makes it very difficult to do 
anything economic. We have focused a lot of attention in trying 
to reduce fuel hazard risks in the areas of wildland along the 
East Side Road going up from Homer.
    Senator Stevens. I know they are concentrating on wildlife, 
but I would point out to you, 50 percent of the population of 
Alaska stands in the path of that fire.
    Mr. Rey. That's right.
    Senator Stevens. And what helped stop that fire last year 
was a sudden rain. The good Lord helped us. If that starts and 
it funnels up that inlet, it will be a barren wasteland. I have 
never seen an area like this, and I do not understand that 
people will not let us go in and selectively cut at least fire 
breaks in there. Do you know there is not a fire break in the 
way of that fire? Not one.
    Mr. Rey. I have been to the area and I have seen that. My 
fire review sheets indicate that situation truly exists.
    Senator Stevens. Take a look. Again, I belabored this 
somewhat, Mr. Chairman, and I thank you for the time. Thank 
you, gentlemen. I would urge you to help us. We have the 
highest rate of unemployment--no, I guess we are not the 
highest now, very interestingly, because so many people left 
last year. They are not on our rolls anymore, they are down in 
California or somewhere where you can live on unemployment 
compensation, because you cannot live in Alaska on unemployment 
compensation. Thank you very much, Mr. Chairman.
    Senator Kohl. Thank you very much, Senator Stevens.

                      DAIRY OPTIONS PILOT PROGRAM

    Dr. Penn, Dr. Collins, the Dairy Options Pilot Program is 
about to expire. This affects dairy farmers in my State as well 
as other States, who need a reliable risk management tool to 
avoid the financial problems associated with widespread 
distress pertaining to production and price.
    Gentlemen, could you describe your thoughts on how well the 
program has functioned, if it should be extended, expanded, or 
if it should be modified?
    Dr. Penn. Mr. Chairman, let me respond initially and then 
Dr. Collins can respond as well. In the point of view of the 
Risk Management Agency, the dairy options pilot program has 
generated a considerable amount of interest, it has brought 
attention to the fact that the dairy industry can really use 
risk management tools, and we think in that regard, in helping 
producers manage their risks, that it has been a fair success. 
The use of that program has grown enormously from the first 
round in 1999, when it was available in 38 counties in 7 
States, and there were a relatively small number of options 
that were involved. In the last round, I'm told it is now in 
275 counties in 39 States, a large number of producers have 
been trained in the use of these options and a large number are 
now using these options.
    We plan to do a formal evaluation of the program after this 
year, but based on the anecdotal evidence and the limited 
observations that we have, the program is working as intended, 
the program seems to be working well, and I would surmise that 
it will probably be extended to be made into a permanent 
program available to a much larger area, because I think it is 
one of the few that has shown real promise.
    Senator Kohl. Thank you very much. Mr. Collins.
    Mr. Collins. I agree with Dr. Penn that it would be helpful 
if dairy producers had more risk management tools available to 
them. Traditionally, about 85 percent or 90 percent of all the 
milk in the United States is marketed through cooperatives and 
the producers have not really been interested in price risk 
very often. In general, there haven't been many tools 
available, but one of the things that the dairy options program 
has done is helped increase the volume of contracts in dairy 
products, and so I think that has helped producers. It gives 
them an opportunity to use options markets even apart from the 
DOP program itself.
    I think the other thing is, the DOP program over its life, 
which is I guess now 3 or 4 years old, has trained something on 
the order of 5,000 or 6,000 dairy producers on the use of 
options markets. We have about 200,000 dairy producers in the 
Nation, so that's not a huge percentage, but it's beginning to 
penetrate that industry. And of course, when one producer gets 
trained, they talk to other producers, they are leaders in 
their community, and by word of mouth, that's affecting other 
producers beyond the 5,000 or 6,000 that have been trained. So 
I think I would look at the Dairy Options Pilot program as an 
educational benefit, and I'm awaiting this analysis that Dr. 
Penn's folks are doing, to see if they come up with more than 
that, but it strikes me as primarily an educational program and 
I view that as probably worth continuing at some scale.
    I would point out that there have been other developments 
in the sector for mitigating price and revenue risks. For 
example, the Federal Crop Insurance Corporation has approved 
two pilot programs for revenue and price risk coverage for 
hogs. These are pilots, the first time there has been any 
insurance using price for hog producers, and it's not 
unthinkable that somewhere down the road, someone will be 
suggesting that the Federal Crop Insurance Corporation include 
some products for milk or dairy products, so I think that we're 
taking steps in that direction even apart from the Dairy 
Options Pilot Program.
    Senator Kohl. Thank you very much, Mr. Collins. Senator 
Cochran, do you have anything further?

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Cochran. Mr. Chairman, I do have some more 
questions, but I will submit them for the record. I thank the 
panel. They were very helpful to us this morning in addressing 
and discussing some of the concerns that we have, I appreciate 
their response to the questions that we have and hopefully they 
can provide answers in an expeditious way.
    Senator Kohl. Thank you, Senator Cochran.
    I do have one or two more questions I will submit for the 
record.
    I have also been asked by Senator Byrd to submit three 
questions for the record on his behalf. One is on current 
drought conditions, one is on the elimination of flood 
prevention operations funding, and the third is in regard to 
rural community water supply in Berkley County, West Virginia.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

               international humanitarian food assistance
    Question. Secretary Penn, as I stated in the March 14, 2002 hearing 
with you the United States is a leader in the area of international 
humanitarian food assistance. In recent years, your authorities under 
416(b) have been used to supplement food donations provided through the 
Public Law 480 programs. While I commended you on the increase in the 
Public Law 480 Title II program, this budget does not continue surplus 
purchases of commodities for donations through section 416(b) in fiscal 
year 2003.
    I am sure you have seen some concerns issued in various media 
reports regarding the proposed decrease in food aid as a result of this 
budget and the possible impact to farmers and this country's long 
efforts to reduce hunger in the world. In the hearing, you made a 
reference that the assistance will almost be the same amount. 
Additionally, you stated that the United States contributes 
approximately 50 percent of all world aid and the Administration was 
looking to other Nations to increase their participation.
    What is the Administration's belief regarding this country's proper 
share and I assume from your comments it will be under the 50 percent 
mark you had mentioned previously and can you tell us the historical 
value (last 10 years) of U.S. donations under 416(b) and Public Law 480 
in comparison with the combined total in the President's request for 
this budget.
    Answer. In recent years, the United States share of global food 
donations has increased to over 60 percent, which is up from about 40 
percent in 1995 (based on estimates from the Food Aid Convention). 
Although we do not have a specific target for the appropriate share of 
U.S. food aid, it is clear that other countries should be encouraged to 
increase their commitment toward meeting global food needs.
    [Regarding the historical value of United States donations, the 
information follows:]

                                              FOOD AID PROGRAMMING--COMMODITY COSTS--FISCAL YEAR 1992-2003
                                                                      [In dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Public Law 480  Public Law 480  Public Law 480                     Food for
                       Fiscal year                          title I \1\      title II        title III    Section 416(b)   Progress \2\        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1992....................................................       374,240.6       482,254.2       239,995.1       308,107.4       126,805.8     1,531,403.1
1993....................................................       332,800.0       509,149.5       231,736.0       364,944.2       923,432.1     2,362,061.8
1994....................................................       217,800.0       578,411.0       174,994.9        90,483.2       113,228.8     1,174,917.9
1995....................................................       171,703.1       457,687.5        82,552.0         7,487.0       172,970.1       892,399.7
1996....................................................       218,985.9       503,606.9        39,273.9  ..............       107,682.9       869,549.6
1997....................................................       152,708.6       413,090.5        28,101.2  ..............        79,064.2       672,964.5
1998....................................................       164,399.3       474,556.2        21,335.2  ..............       126,713.3       787,004.0
1999....................................................       420,367.2       496,336.1        13,698.8       869,030.1       306,859.6     2,106,291.8
2000....................................................       156,751.9       470,526.9  ..............       501,503.1       150,990.1     1,279,771.9
2001....................................................       105,200.0       438,675.0  ..............       629,989.6       107,110.8     1,280,975.4
2002 \3\................................................       108,400.0       500,574.8  ..............       303,346.0       109,257.9     1,021,578.7
2003 \4\................................................       106,676.0       555,000.0  ..............        49,600.0        25,000.0       736,276.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Public Law 480 Title I column includes concessional sales portion of Title I, and not Title I-funded Food for Progress.
\2\ Food for Progress column includes Title I-funded and CCC-funded Food for Progress.
\3\ Fiscal Year 2002 values represent estimates as of 4/10/02. Fiscal year 2002 Title II includes the commodity cost portion of carry-over ($94.1
  million) and supplemental funding ($95 million) enacted in response to the September attacks.
\4\ Fiscal year 2003 values are estimates submitted with fiscal year 2003 President's Budget Section 416(b) estimate is for non-fat dry milk (from CCC
  inventory).

    Question. Does the Administration support the Global Food for 
Education program and do you intend to carry it out in fiscal year 2002 
and 2003?
    Answer. In fiscal year 2002, USDA is continuing to implement the 
Global Food for Education Initiative (GFEI) pilot program. We did not 
include funds in the Administration's fiscal year 2003 budget request 
pending the results of an evaluation of the GFEI pilot. A decision on 
whether to continue GFEI will depend to a considerable extent on the 
findings of the evaluation.
    Question. Will you please provide this Committee a copy of the 
Administration's multi-agency review of food aid programs including who 
participated, the specific policy decisions that resulted from that 
review, and the rationale for those decisions?
    Answer. The review was conducted jointly by the U.S. Department of 
Agriculture, U.S. Agency for International Development, Department of 
State, Department of Treasury, National Security Council, Office of 
Management and Budget, and Office of the U.S. Trade Representative.
    [A summary of the conclusions of the food aid review follows:]
       bush administration food aid review summary of conclusions
Background
    Many conditions affecting overseas food aid have changed since the 
last Executive Branch, review of U.S. food aid programs in the 1970s. 
The Bush Administration first described the need for a review of food 
aid programs in the President's Blueprint for New Beginnings in 
February 2001. It expanded on this need and the plan for a review in 
the President's Management Agenda in August 2001.
    From August to December 2001, the Administration held a series of 
meetings to review U.S. foreign food aid programs. All relevant U.S. 
Government agencies and offices participated in the review, including 
the U.S. Department of Agriculture (USDA), U.S. Agency for 
International Development (USAID), Department of State, Department of 
Treasury, Office of Management and Budget, and Office of the U.S. Trade 
Representative. Staff of the National Security Council chaired the 
review. Although not directly part of the review, non-governmental 
organizations informed the work of U.S. government agencies and offices 
by initiating informal meetings during the period of the review.
    The purpose of the review was to examine existing food aid programs 
with the objective of improving reliability, efficiency, and 
management. This paper summarizes the results of the food aid review.
Objectives of Food Aid
    The food aid review concluded that the broad objective of U.S. food 
aid is to use the agricultural abundance of the United States to meet 
the U.S. government's humanitarian and foreign policy objectives 
related to the achievement of global food security. The United States 
will use food aid in a manner that enhances global agricultural trade 
and provides an appropriate U.S. contribution toward global food needs. 
Since the review determined that the primary function of food aid is to 
improve food security, U.S. food assistance programs should 
increasingly target the most food insecure populations. Food 
distribution is important in both emergencies and development programs 
for addressing the hunger of the people most in need of food. The 
Administration supports increased direct distribution and continues to 
support development programs.
Background to Program Adjustments
    In 1998, faced with a sharp decline in commodity prices, USDA 
sought to support American farmers and feed hungry people in dire need 
by using its authority through Section 416(b) to dispose of surplus 
food procured by the Commodity Credit Corporation (CCC) under the 
Charter Act. This food was provided to the World Food Program (WFP), 
private voluntary organizations (PVOs), and foreign governments to 
distribute to needy people and to monetize. The increased use of the 
CCC Charter Act resulted in a significant increase in the amount of 
U.S. Government food aid and development programs beginning in 1999. 
While this produced benefits, it also led to unintended distortions, 
including those described in the President's Management Agenda.
Specific Program Adjustments Resulting from the Review
    The Administration's food aid reform will shift most U.S. food 
donations from 416(b) to Public Law 480 Title II, and pursue a range of 
complementary initiatives. More specifically, the Administration plans 
to undertake the following measures:
    End most use of 416(b).--The Administration will not use the CCC 
and 416(b) mandatory authority for humanitarian or development 
programs. The authority to use 416(b), however, will remain unchanged 
(i.e., the Administration will not request that the authority be 
eliminated). The small, traditional 416(b) programs administered by 
USDA, based on actual CCC inventories, will continue.
    Increase requests for Title II.--The Administration has requested a 
$335 million increase in appropriated Title II food (which is used for 
humanitarian and development purposes) in light of ending the use of 
416(b) for such objectives.
    Undertake a careful transition.--The Administration views fiscal 
year 2002 as a transition year for the shift from 416(b) to Title II. 
It is expected that up to $400 million of food aid will be provided in 
fiscal year 2002 using 416(b) authority.
    Increase reliance on the Emerson Trust.--For future cases in which 
there is an increased need for emergency food aid, the Administration 
will use the Bill Emerson Trust. The Administration percent will review 
the procedures for use of the Trust to ensure its flexibility and 
responsiveness, and request that Congress make any required legislative 
changes.
    Focus official food aid.--The Administration will fund Food for 
Progress government-to-government food aid through its Title I 
authority, and allow Title III to remain inactive. USDA will continue 
to refine the operation of Food for Progress.
    No legislative changes are required to implement any of these 
measures.
Impact of Adjustments
    These program adjustments are expected to have many beneficial 
effects.
  --Greater focus on direct feeding of needy people.--During the 1990s, 
        a large percentage of 416(b) funding was monetized by recipient 
        governments and PVOs. The food was sold to traders to sell to 
        people, almost always below the cost to the U.S. government of 
        procuring and shipping the commodities. This resulted in total 
        development assistance being less than the cash expended by the 
        U.S. government on the food. The new shift away from 416(b) to 
        Title II will increase the amount of food under Title II that 
        is available for emergencies and can be used for direct feeding 
        of hungry people. The Administration also plans to increase 
        development assistance to make up for part of the decrease in 
        development programs from monetized food aid. Based on these 
        shifts, U.S. food aid will focus more on direct distribution to 
        needy people, and U.S. development funding on development 
        programs (avoiding the loss through monetization). To help 
        ensure that the direct distribution reaches the most needy 
        recipients, U.S. agencies will consult with other major 
        bilateral donors and the relevant multilateral organizations.
  --Increased food aid reliability.--Funding levels for 416(b) depended 
        on the changing estimates of crop surpluses, while levels for 
        Title II are pre-determined by Congress. Shifting from 416(b) 
        to Title II allows the government and aid agencies to know how 
        much food aid will be available, making it easier to plan 
        programs.
  --Improved flexibility.--The use of the Bill Emerson Trust 
        (especially with improved procedures, if required) and the 
        continued existence of 416(b) authority provide the means to 
        respond to either greater emergency food needs or large U.S. 
        surpluses.
  --Better agency specialization.--USAID will administer most PVO and 
        WFP programs as a result of the shift from 416(b) (which USDA 
        administers) to Title II (which USAID administers). USDA will 
        administer all government-to-government programs as a result of 
        the Administration funding Food for Progress programs through 
        Title I (administered by USDA) instead of Title III 
        (administered by USAID). This consolidation will allow each 
        agency to specialize and reduce the need to have duplicative 
        capabilities. The Administration will continue to refine this 
        specialization and collaboration in order to utilize the 
        expertise of both agencies.
  --Increased budget clarity.--Funding for 416(b) is not subject to the 
        Federal budget appropriations process (i.e., it is a 
        ``mandatory'' program), but levels for Title 17 are 
        appropriated annually by Congress (i.e., it is a 
        ``discretionary'' program). Shifting from 416(b) to Title II 
        increases transparency in the budget management process, 
        allowing Administration officials and lawmakers to better 
        maintain priorities and performance. Using the Emerson Trust 
        for unforeseen emergencies also increases accountability 
        because the Trust must be replenished by appropriations each 
        year it is used.
  --Ensured appropriate use of 416(b).--The sudden, sharp threat to 
        farm income in 1998 that precipitated the use of the CCC and 
        416(b), before Congress began to provide direct supplementary 
        income assistance for farmers, is no longer present. The 
        current mandatory funding and purchase of wheat, the main 
        donation crop, is harder to justify as the conditions that led 
        to the original purchases have changed. CCC will not be used as 
        a regular program to purchase commodities for 416(b) to 
        ``dispose'' overseas, and 416(b) authority will be used to 
        donate the smaller amounts of commodities in CCC inventory.
Next Steps
    Over the next several months, the Administration will work with 
Congress on appropriations and any legislative implications of the 
current reform proposals. To complement the current reforms outlined 
above, the Administration is examining several other initiatives.
    Streamline cargo preference funding.--The Administration will 
propose legislation to eliminate reimbursements by the Maritime 
Administration to other agencies for part of cargo preference costs. 
This will end time-consuming intra-governmental transfers.
    Expand Section 202(e) authority.--The Administration will propose 
legislation to allow USAID to make administrative payments for WFP 
previously made through the State Department's International 
Organizations and Programs account. This will eliminate duplication, 
and encourage more accountability in WFP finances.
    Over the next year the Administration will continue to refine its 
reforms, and to review existing programs, legislation and procedures in 
order to improve the effectiveness and efficiency of U.S. food aid.
    Question. In the hearing you mentioned an increased number of non-
fat dry milk that was more than the 800 million pounds reported 
earlier. Additionally, I was delighted for your positive remarks of 
your efforts to reduce this surplus. What are your short and long-term 
plans to bring this large surplus down?
    Answer. In terms of our international food aid programs for fiscal 
year 2002, Section 416(b) planned programming approved as of April 10, 
2002, includes funding for approximately 6,800 metric tons of non-fat 
dry milk exports. In addition, a USDA proposal is pending and approval 
is expected in the near future, which would provide funding for another 
43,600 metric tons of non-fat dry milk exports under Section 416(b). In 
fiscal year 2003, it is projected that non-fat dry milk from Commodity 
Credit Corporation (CCC) inventory will continue to be available for 
programming under Section 416(b) authority. The exact volume to be 
programmed in fiscal year 2003 will depend on commodity availability 
and viable proposals for donations.
    In addition to Section 416(b), approximately 6,500 metric tons of 
non-fat dry milk will be donated under the fiscal year 2002 Food for 
Progress program.
    Question. What is the reaction of this cut from foreign 
governments, particularly from ones of the greatest need?
    Answer. In fiscal year 2001, the World Food Program (WFP) was the 
largest recipient of Section 416(b), receiving about half of the total. 
During the recent annual bilateral meeting between the WFP and the 
United States, the WFP stated that in their view the overall change in 
U.S. food aid policy, especially the end of Section 416(b), will reduce 
the number of the hungry WFP will be able to feed from 83 million in 
2001 to 53 million in 2003.
                 barriers to u.s. agricultural exports
    Question. Secretary Penn, when Secretary Veneman appeared before 
this subcommittee last month, we discussed the problems with trade 
barriers China intends to enforce regarding agricultural commodities 
produced through biotechnology. Since then, a reprieve has been granted 
which is allowing, for the moment, U.S. shipments to continue. However, 
that remedy is only temporary. Now, we hear from the Russians that U.S. 
poultry shipments are being banned for reasons including food safety.
    Can you give us an update on these two specific problems regarding 
United States access to major foreign markets?
    Answer. As part of the interim implementation process for China's 
new biotechnology regulations process, all of the technology companies 
with commercial biotech products in the United States have intentions 
to apply for a safety certificate for these products. Monsanto has made 
their application for Roundup Ready Soybeans, the only biotech soybean 
variety commercially produced in the United States. This application 
has now been accepted by China's Ministry of Agriculture (MOA). Also, 
part of the interim process involves the ability of companies to apply 
for an interim safety certificate from MOA in China. In order to apply 
for the interim safety certificate, a company needs to: (1) show that 
an application has been made for a ``permanent'' safety certificate and 
(2) the application for the interim safety certificate has to be 
accompanied by an official document from the exporting country--or a 
third country--that the product has completed the regulation review 
process in that country. USDA/GIPSA has issued such a document for 
biotech soybeans, corn, canola, and cotton commercially produced in the 
United States. Although the implementation of the interim process is 
currently very fluid, it appears that MOA is now beginning to accept 
applications for the interim safety certificates. The interim measure 
will expire on December 20, 2002. The situation will need to be 
continually monitored.
    With respect to the Russian ban on U.S. poultry, we believe the ban 
was an inappropriate response to the concerns that Russia has 
expressed, and the issue continues to draw the attention of President 
Bush, Secretary Veneman, and other senior U.S. officials. The reasons 
given for the ban, including unquantified findings of salmonella 
bacteria and irregularities in selected export certificates, had not 
been previously raised with the United States. Throughout our extensive 
discussions with Russia, we have been provided no evidence of any 
health threat to United States or Russian consumers. Nevertheless, 
because the Russian market is important to U.S. poultry producers and 
because USDA takes health and safety issues very seriously, we will 
continue negotiations on a formal protocol to reassure the Russian 
government and Russian consumers of the safety of our poultry.
    Question. How can we continue to tell our farmers that trade 
liberalization is the answer to problems of farm income when it seems 
that for every trade barrier we knock down, two take its place?
    Answer. Trade is crucial to the health and prosperity of U.S. 
farmers and ranchers as about 25 percent of farm production is exported 
each year. Over the past decade, we have made great strides to lower 
trade barriers and reduce subsidized competition for U.S. agricultural 
exports. During the current World Trade Organization (WTO) agriculture 
negotiations, we will continue the reform process by improving market 
access opportunities for U.S. products and reducing high subsidies that 
distort international markets. In addition, we will continue to pursue 
bilateral and regional free trade agreements that are in the interest 
of the United States. We will also work bilaterally with countries to 
resolve any trade problems.
    Finally, it appears true that as more markets are opened, more 
trade problems arise. As we open markets, we must expect problems to 
arise and be prepared to address them. We should not, however, shy away 
from working to open markets because it might trigger some problems on 
a small portion of the trade opportunities that are generated.
    Question. In regard to trade barriers, some commodities are 
significantly affected and others are not. Today, the pressure seems to 
be on poultry products, soybeans and corn. Tomorrow it may be fresh 
fruits and vegetables.
    Would you comment on whether or not you feel that trade barriers, 
as they exist now and in the foreseeable future, do pick winners and 
losers among U.S. producers and if they do, what steps can USDA or the 
Congress do to equal the playing field here at home?
    Answer. Countries that erect trade barriers are usually protecting 
a domestic interest. Because the United States has a highly productive 
and efficient agricultural sector and is the world's largest trading 
partner, it appears that countries are purposefully targeting U.S. 
products. USDA will continue to work to address these trade barriers 
against U.S. products for the overall benefit of U.S. agriculture.
 rural housing and farm credit shift from direct to guaranteed lending
    Question. The Department's fiscal year 2003 budget reflects a shift 
from direct to guaranteed lending in the housing and farm loans. These 
programs also experience some of the largest backlogs in your mission 
areas, including in my home State of Wisconsin. I understand some of 
this is attributed to questionable increases in loan subsidies. In the 
real world outside the beltway, the program levels have gone down. When 
you devised the budget and allocated the resources, you were aware of 
the impact to these vital programs that serve less affluent borrowers, 
including proportionally larger numbers of minorities including women.
    In your testimony, the Bush Administration indicates that you have 
provided increased budget authority for these programs to support the 
notion that is not a cut.
    Is the Department concerned about the diminishing resources to 
assist these constituents, who have limited resources, and represent a 
higher percentage of minorities than the population served by the 
guaranteed programs and if so, how do you propose to address these 
unmet needs?
    Answer. We are concerned about our ability to assist minority and 
beginning farmers with farm credit. However, it is the increasing 
program costs and resulting increase in budget resources, not the 
reduction of resources, that is at issue. The 2003 budget will actually 
use approximately $56 million more in budget outlays for the direct 
operating and ownership loan programs. Unfortunately, because of 
increasing costs, the available program levels actually decline 
slightly even though the budget authority would increase. We do not 
believe that the increases in loan subsidy rates are questionable. The 
cost estimates are based upon valid accounting data and the same 
economic assumptions that support the rest of the President's Budget. 
The primary basis for the rates increasing is that the Agency is making 
aggressive use of loan servicing provisions. These provisions alter the 
cash flow stream and result in higher program costs.
    Guaranteed loans are a more cost-effective method of assistance. By 
maximizing the use of guaranteed loans, the limited amounts of direct 
loan funds are available to applicants who truly have nowhere else to 
turn. We have been successful in increasing the use of guaranteed loans 
to reach minority and beginning farmers. So far in fiscal year 2002, 
guaranteed operating and ownership assistance to beginning farmers has 
increased 21 and 35 percent, respectively over last year. Guaranteed 
assistance to minority farmers has increased by 30 percent over last 
year. We believe that the approach set forth in the President's budget 
makes the best use of the available resources.
    The Administration remains dedicated to providing affordable 
housing assistance to rural Americans. By leveraging our direct Section 
502 funding with outside sources such as affordable housing grants, and 
our sweat equity (Self-Help) program, we expect to continue helping the 
neediest applicants, which include minorities and women.
    Although the Section 502 housing direct loan program level for 2003 
is less than 2002, the Administration requested additional budget 
authority to keep the direct loan program level at nearly 90 percent of 
last year's level. The Administration remains committed to serving the 
neediest constituents at a time when difficult budget choices must be 
made.
    Question. These programs, the guaranteed and direct, were designed 
by Congress to compliment one another, not replace. Is it your belief 
that these guaranteed programs will serve these constituents that have 
been historically served by the direct programs?
    Answer. The farm loan guaranteed program cannot replace the direct 
program, and as previously stated, the budget devotes an additional $56 
million in budgetary resources to keep the direct program levels fairly 
close to the 2002 levels. It is critical to use guaranteed loans to the 
maximum extent possible to preserve direct funds for applicants who 
have no alternative to direct financing.
    We do not believe that the guarantee Rural Rental Housing program 
will serve the same population that has historically been served by the 
direct program. However, we do believe that the guaranteed and direct 
Single Family Housing programs complement one another. The guaranteed 
program serves primarily moderate income rural families, while the 
direct program focuses on serving low and very-low income applicants. 
Guaranteed loans are made by lenders at market interest rates and 
involve no interest subsidy, while direct loans are made by the Agency, 
and the interest rate for a given loan can be subsidized at a level 
that is based on a borrower's income. While approximately 30 percent of 
all guaranteed loans made do go to low-income borrowers, the program 
was generally designed to serve a moderate income clientele. The 
guaranteed and direct programs each serve a unique niche for rural 
homebuyers.
    Question. What steps will the Department take to effectively 
address under served individuals and communities with reduced and 
oversubscribed resources, and wouldn't your outreach efforts breed 
additional frustrations from within these target populations?
    Answer. The proposed budget levels for farm loans will meet most or 
all of the loan demand, both direct and guaranteed, from targeted 
groups. In the past, the Agency has faced challenges in fully utilizing 
targeted funds, and the increased utilization this year is the result 
of successful outreach efforts. It can be frustrating for those who 
apply for and must wait for funds, but it is certainly more frustrating 
for someone who wants to start farming or buy a farm and does not know 
there is a program that can help, even if they do have to wait for 
funds.
    Each year our Rural Development State offices determine which areas 
and populations are underserved and most needy and focus outreach 
efforts on those areas. We do not believe that these efforts create 
frustrations in our borrowers. Several of our programs have eligibility 
requirements and other statutory and regulatory provisions to ensure 
that they serve those most in need of assistance. Our outreach efforts 
complement that purpose. There are set-asides for some communities, 
such as Empowerment Zones and Enterprise Communities, and tribal 
colleges, which further ensure that those funds go to the poorest rural 
communities.
    Question. What populations and geographic areas are you targeting 
for assistance?
    Answer. Funds are targeted to Empowerment Zones, Enterprise 
Communities, Rural Economic Area Partnerships; tribal colleges; and 
communities with extreme unemployment and severe economic depression. 
Funds will also be available through the Rural Community Development 
Initiative to develop the capacity and ability of private, nonprofit, 
community-based housing and community development organizations serving 
low-income rural communities to undertake projects to improve housing, 
community facilities, and community and economic development projects 
in rural areas.
    Single Family Housing direct loan programs are targeted in rural 
areas to serve very-low, low, and moderate income families. We 
specifically target underserved counties and Colonias, Empowerment 
Zones and Enterprise Communities, Rural Economic Area Partnership 
communities and Indian Country. Five percent of our funds are set-aside 
for the ``100 Underserved Areas and Colonias''. These are counties with 
high rates of poverty and substandard housing that have not received a 
proportionate share of funding over the previous 5 years.
    Question. Dr. Penn, your testimony is filled with information 
targeting socially disadvantaged, limited resource and beginning 
farmers. Then I read you will reduce the direct farm ownership by $47 
million to $100 million. So what you are saying is the need is great 
and outreach efforts are important but we will not provide the proper 
resources to do the job?
    Answer. It is unfortunate that there will be a reduction in the 
direct farm ownership program level in spite of an additional $7.7 
million in budget authority in this program. However, every budget 
decision is a difficult choice, and we remain convinced that the 
proposed budget makes the most effective use of limited resources. The 
increase in direct farm ownership budget authority is greater than the 
total budget authority for guaranteed ownership. Although direct loans 
are essential for those that need them, many farmers need loan 
guarantees to stay in or start in business, and diverting most or all 
of those resources to the direct loan programs would only reduce the 
total number of people that FSA can help.
    Question. What is the backlog of requests for this program and how 
do you justify this reduction?
    Answer. There is currently a backlog of unfunded approved direct 
farm ownership loans of $32 million. A significant portion of these 
applications will be funded in May as a result of a pooling and 
redistribution of unused loan funds. In addition, the transfer of 
unused guaranteed operating loan funds to the direct farm ownership 
loan program, which is statutorily required to be accomplished in 
August and September of fiscal year 2002, will also satisfy a portion 
of approved loans awaiting obligation.
    Question. Mr. Neruda, The USDA Single Family homeownership program 
with a backlog of over $5 billion has dropped by over $120 million. The 
Multi-Family housing program was decreased by approximately 50 percent 
and has stopped all new construction for the first time in over 40 
years. The Rural Housing Service testimony cites studies that outline a 
large and continuous unmet need in rural America.
    I see increases in the President's request for homeownership 
programs at HUD. Then I compare what this Committee provided in fiscal 
year 1994, $665 million in budget authority for these two critical USDA 
housing programs and I now look at this request of under $200 million.
    These facts indicate that limited resource farmers and low-income 
residents and families are not on the President's agenda. Please 
explain why the Administration has chosen this policy.
    Answer. This Administration is committed to improving the lives of 
rural residents, and most particularly, low-income rural residents and 
families. The President is requesting a program level of almost $11 
billion in Rural Development programs, the bulk of which directly 
benefits low and very low-income individuals and families. The Single 
Family Housing direct program would be funded at nearly $1 billion, 
which will enable 23,000 low-income families to become homeowners. The 
budget authority supporting the Single Family housing request is over 
30 percent higher than the fiscal year 2002 appropriated level. Higher 
subsidy rates, however, resulted in a lower program level. The Very 
Low-income Housing Repair loan and grant request is up over fiscal year 
2002 levels, along with Rental Assistance and Farm Labor Housing loan 
and grant requests. In total, the budget authority requested to support 
Rural Development programs for fiscal year 2003 is only slightly lower 
than the fiscal year 2002 appropriated level.
    The budget fulfills commitments to focus on housing, 
infrastructure, and other economic assistance to rural communities. The 
Department of Agriculture provides subsidized, means-tested loans and 
loan guarantees to individuals for homes, and makes subsidized 
financing available to developers who offer housing to elderly, 
disabled, migrant farm workers, or low-income rural residents of multi-
unit housing buildings. All the programs are limited to areas with 
populations of 25,000 or less.
    In fiscal year 2003, the direct and guaranteed Single Family 
Housing program will fund $3.7 billion in loans and loan guarantees. 
This means that 51,000 low to moderate income rural families will have 
new opportunities for homeownership.
                costs of carrying out the new farm bill
    Question. Secretaries Penn, Rey and Neruda, your statements 
acknowledge that the new farm bill will involve increased workload 
requirements, that are continuing to assess what those needs may be, 
and that you will provide us updated estimates.
    Secretary Penn, in the event those estimates reveal a substantial 
shortfall in fiscal year 2003 funding, does the administration plan to 
submit a supplemental request to this subcommittee, and if not, how do 
you intend to proceed? What type of programs would you choose not to 
administer?
    Answer. We are attempting to estimate the workload requirements for 
the new farm bill, but would not know the magnitude until the final 
provisions of the bill are clarified. There may be some areas where the 
provisions of the bill may permit use of some of the funding authorized 
by the bill to address certain workload requirements such as technical 
assistance for conservation programs. In addition, the bill authorizes 
the use of approved third parties to carry out the technical assistance 
activities need by producers. Many of the new programs are mandatory 
and we will not have the luxury of not implementing those programs. Any 
activities which are not mandatory or urgent and items which could be 
postponed would be examined as we determine how to allocate available 
resources. Frankly, it is difficult to speculate what the final 
requirements may be and what the Administration's approach will be. 
However, it appears that there will likely be shortfalls in available 
resources. I am sure we will make every effort to maximize the use of 
all available resources before any supplemental request would be 
considered. We will keep the subcommittee informed when the situation 
becomes clear.
    Question. Secretary Rey and Secretary Neruda, there are new 
programs in pending versions of the farm bill that affect your mission 
areas as well. Would you please respond to this matter and Secretary 
Rey, would you specifically address the issue of the Section 11 cap 
which has restricted conservation technical assistance for the past 
several years?
    Answer. The Natural Resources Conservation Service has developed an 
analytical model that will project the technical assistance cost of 
programs. The model uses the NRCS workload analyses, timekeeping 
information, and other program information to projects staff year needs 
based on the amount of time needed to complete task associated with 
different programs. The model is designed to easily accommodate changes 
in policy, procedures funding, and participation levels and will 
provide NRCS leadership with projected staff year and technical 
assistance costs needed to implement programs. We have used the model 
to project costs using information available from the House and Senate 
bills, however, the figures will continue to change due to the changes 
in Farm Bill language and as NRCS policies and procedures for the 
programs are finalized.
    Enactment of the Federal Agriculture Improvement and Reform Act of 
1996 (the 1996 Act), limited the total dollar amount of Commodity 
Credit Corporation (CCC) funds made available for fund transfers and 
allotments to all Federal agencies. The 1996 Act amended section 11 of 
the Commodity Credit Corporation Charter Act (15 U.S.C. 714), by adding 
the following language: ``After September 30, 1996, the total amount of 
all allotments and fund transfers from the Corporation under this 
section (including allotments and transfers for automated data 
processing or information resource management activities) for a fiscal 
year may not exceed the total amount of the allotments and transfers 
made under this section in fiscal year 1995''. Under the 1996 Act, 
Subtitle E--Administration, section 161, reimbursable agreements, 
funding made available for technical assistance was limited, and held 
at the 1995 CCC spending level of approximately $35 million annually. 
Subsequently in fiscal year 2001 the section 11 cap was increased to 
approximately $56 million. In its deliberations on the 2002 farm bill, 
the Congress is considering ways of remedying the problem caused by the 
Section 11 cap on NRCS' ability to provide the needed technical 
assistance to adequately carry out the CRP and WRP.
                    crop insurance underwriting gain
    Question. Secretary Penn, the President's budget request includes a 
new general provision that would impose a cap of 12.5 percent on 
underwriting gains realized by crop insurance companies as a condition 
of a Standard Reinsurance Agreement. The rationale for this change is 
to avoid windfall profits that may occur due to the increased demand 
for crop insurance, for which premiums are subsidized by the 
government.
    When would savings resulting from this provision first be realized?
    Answer. That depends on the assumptions that are made about when 
the reinsured companies actually receive underwriting gains. It is our 
understanding that the Congressional Budget Office has scored the 
proposal as having essentially no first year outlay savings because it 
assumes that the outlay savings will be delayed until the following 
fiscal year. It is our position that the proposal has real potential 
for long term savings of about $115 million annually. The President(s 
Budget assumes that these savings will begin in fiscal year 2003 and 
savings in obligations are expected in fiscal year 2003.
    Question. Please explain what effect this provision will have on 
the availability of crop insurance to producers?
    Answer. Producers will not be affected by this proposal. There 
would be no change in the premium paid by producers or the coverage 
they receive.
    Question. What is the likelihood that this provision will force 
certain crop insurance firms out of business or impair the availability 
of new crop insurance products?
    Answer. It is questionable that this provision will force certain 
crop insurance firms out of business, as it is anticipated that the 
crop insurance companies will reduce their retained risk to correspond 
with the reduced underwriting gain potential, maintaining a balance 
between risk and return. The Agricultural Risk Protection Act of 2000 
provides for the reimbursement of development and maintenance costs on 
products approved by the FCIC Board of Directors for reinsurance, and 
if applicable, offered for sale to producers.
  tax-exempt financing, rural housing service/rural utilities service
    Question. The Guaranteed Community Facilities program and the 
Guaranteed Water and Waste Program are currently prohibited by an OMB 
circular from using tax-exempt financing.
    Wouldn't the use of a guarantee coupled with tax-exempt financing 
help rural municipalities with much lower interest rates and debt 
servicing?
    Answer. The Guaranteed Community Facility and Guaranteed Water and 
Waste programs are prohibited from using tax-exempt financing by 
Section 149(b) of the U.S. Tax Code. The OMB Circular only replicates 
the law. That being said, the use of a guarantee coupled with tax-
exempt financing would result in a lower interest rate and thus provide 
savings in debt repayment for rural municipalities and public entities 
that can issue tax-exempt debt.
    Question. Has the Department conducted an analysis for the policy 
impacts of such a change?
    Answer. We have conducted some preliminary analysis that indicates 
that the authority to guarantee tax-exempt debt would result in greater 
utilization of guaranteed loans and would reduce demand for the limited 
direct loan dollars.
    Question. The RHS Section 538 program and several other Federal 
programs currently have this authority. Why is this not extended to the 
CF and WW programs?
    Answer. Section 149(b) of the U.S. Tax Code specifies that any 
Federal guarantee is nullified if it is financed with tax-exempt bonds. 
The section goes on to list the exemptions to this rule. In general, 
all Federal housing programs are exempt along with a few other specific 
programs. The Community Facility (CF) and Water and Waste (W&W) loan 
guarantees do not fall under any of the exemptions. That is why Section 
538 and several other Federal guarantee loan programs are using tax-
exempt financing and CF and W&W are not.
    Question. Wouldn't this change allow limited direct funds to be 
used in communities of greater need?
    Answer. We have conducted some preliminary analysis that indicates 
that the authority to guarantee tax-exempt debt would result in greater 
utilization of guaranteed loans and would reduce demand for the limited 
direct loan dollars.
                   congressional spending priorities
    Question. Secretary Jen, the President's request eliminates items 
that were funded in the fiscal year 2001 and 2002 appropriations bills 
at the initiative of the Congress. These items, largely in the areas of 
research, have provided major contributions to the advancement of our 
understanding of the agricultural sciences and other important fields. 
Instead, USDA has continuingly preferred competitive research programs 
through which, I note, the University of Wisconsin performs very well. 
The position of this subcommittee has been that we need a balance of 
the two.
    Do you not agree that research funded at the direction of the 
Congress has provided important contributions to agriculture, the 
environment, food safety, and many other areas?
    Answer. Yes, research funded at the direction of Congress has made 
significant contributions, and we are committed to a balanced 
agricultural research funding portfolio. However, the Administration 
believes that peer-reviewed competitive programs that meet national 
needs are a much more effective use of taxpayer dollars than earmarks 
that are provided to a specific recipient. Competitive programs, such 
as the National Research Initiative (NRI) open to all the research 
community, provide the most effective mechanism for attracting the best 
minds in the Nation to conduct research in agriculture and food 
systems. Some broad aspects of many research topics currently addressed 
with earmarked projects may be included in the scope of the NRI program 
in 2003. Other topics may be addressed under other broader based, 
competitively-awarded Federal programs or programs supported with 
Federal and non-Federal funds administered by State-level scientific 
program managers.
    Question. What performance standards does USDA use in awarding 
funds through competitive research programs?
    Answer. Awards made under CSREES' competitive research programs are 
peer reviewed by panel members and/or ad hoc reviewers. Peer review 
panel members and ad hoc reviewers are selected based upon their 
training and experience in relevant scientific or technical fields 
taking into account certain factors--i.e., the level of formal 
scientific or technical education and other relevant experience of the 
individual, as well as the extent to which an individual is engaged in 
relevant research and other relevant activities. The panel and 
reviewers are provided with evaluation factors in order to rank and 
select projects to be recommended for funding. The evaluation factors 
may differ for each program depending on the program requirements. The 
evaluation factors are published annually in the program's request for 
applications or guidelines.
    Question. What safeguards are built into USDA competitive research 
grant programs that will ensure attention to specific problems that may 
not receive the attention of the major participants in agricultural 
research, who traditionally are more successful in securing competitive 
funds?
    Answer. Success in securing competitive funds is dependent upon, 
among other things, the ability to address the specific problem being 
studied under the program and the ability to provide a research 
proposal that fully covers the criteria outlined in the request for 
applications. Each program has evaluation factors against which 
projects submitted are judged. These evaluations factors are published 
annually in the program's request for applications or program 
guidelines. Therefore, all applicants are aware of the criteria that 
will be used to select projects for funding. In addition, CSREES 
participates in stakeholder meetings, workshops, and conferences, in 
which our State partners have an opportunity to discuss the grant 
awards process. For example the NRI program conducts a major regional 
grant-writing workshop annually that is open to all United States 
institutions. At the workshop, NRI Program Directors are present and 
available for small group and one-on-one interactive discussions with 
potential applicants regarding the program.
           initiative for future agriculture and food systems
    Question. Since the Administration favors competitive research 
programs as the most efficient means of securing the best research, why 
does the President's proposal recommend eliminating the Initiative for 
Future Agriculture and Food Systems program?
    Answer. A provision of the fiscal year 2002 Agriculture 
Appropriations Act prohibits USDA from administering a 2002 competition 
for the Initiative for Future Agriculture and Food Systems program and 
the fiscal year 2003 budget request continues this policy. Since this 
program was not funded by Congress in fiscal year 2002, the savings 
were used to fund discretionary programs.
    When Congress permitted implementation of this competitive program 
in fiscal years 2000 and 2001, it fulfilled a valuable role in 
supporting integrated research, education, and extension activities 
that met the needs of the agricultural community. The Administration 
continues to favor competitively awarded grant programs. We stand ready 
to administer any program that Congress directs us to implement.
                    section 515 multi-family housing
    Question. The President's fiscal year 2003 request proposes to 
eliminate all new construction for the Section 515 Multi Family Housing 
program. All funding will go towards rehabilitation and equity loan 
needs. I also understand the proposal would use approximately $2 
million in salaries and expenses to conduct a thorough review of 
alternatives for both making new loans and servicing the existing 
portfolio of about 17,800 projects. The President's Millennium Housing 
Commission and the Commission on Affordable Housing and Health Facility 
Related Needs for Seniors is also given a similar task. The backlog is 
tremendous and the need and deficiencies in rural areas are reflected 
in national studies including the USDA Economic Research Service. 
Additionally, the average resident income of this program is 
approximately $8,000.00. In my home State of Wisconsin, 79 percent or 
approximately 8,000 units (7,896) are for elderly residents. 
Nationally, this figure is 57.8 percent or 243,979 units. America, 
including our rural sections, is growing older.
    The appropriations levels for this program have dropped 
significantly over the last 10 years. Congress took steps to address 
weaknesses in the program and reduce the cost by changing the loan term 
from 50 to 30 years. Why are we still talking about cutting cost for 
Rural Rental Housing?
    Answer. Although progress has been made, this administration is 
dedicated to further improvement of the program. We suggest there is an 
opportunity to find other areas of the program that can be made more 
cost efficient. A task force has been established to complete a 
comprehensive review of program alternatives, focusing on more 
efficient ways of funding new construction and servicing the existing 
portfolio of about 17,800 projects. The task force will make 
recommendations to the Under Secretary regarding program direction and 
funding.
    Question. What positive steps, both legislative and administrative, 
has the Department performed since 1992 to address weaknesses outlined 
by Congress?
    Answer. The Department has taken a number of positive steps in both 
loan processing and loan servicing activities. A loan scoring system 
was developed to ensure nationwide consistency in selecting requests, 
and national funding competition now ensures that funds are directed to 
the areas of greatest need in the country. The Department's build and 
fill policy, implemented in 1994, has been extremely effective in 
ensuring that communities are not over-developed. This policy ensures 
that a property is fully occupied before another one is built in the 
same community. Also, to ensure that the amount of assistance provided 
to an applicant is no more than necessary, Rural Development has 
implemented a subsidy layering review. Rural Development State Offices 
have executed Memorandums of Understanding with State tax credit 
agencies to share cost data at several stages of processing. Rural 
Housing Service also uses a computer-based analysis to evaluate each 
loan proposal throughout loan processing.
    Question. What is the current default rate and delinquency compared 
to the previous 10 years?
    Answer. The Multi-Family Housing program loan delinquency rate at 
the end of fiscal year 2001 was 1.5 percent for all loans. This is an 
all time low and the fifth straight year of decreasing delinquency 
rates. Ten years ago the rate was 3 percent. This rate is less than or 
equal to rates achieved by other governmental and non-governmental 
Multi-Family Housing lenders. The Department continues to work 
aggressively to resolve loan delinquencies to solidify the overall 
integrity of the portfolio.
    Question. Has the financial return to the developer been severely 
reduced as a result of the subsidy layering provisions?
    Answer. The Department implemented a ``subsidy layering'' financial 
feasibility model for the evaluation of all loans starting in 1997. 
This model, coupled with Memorandums of Understanding between State tax 
credit administering agencies and Rural Housing Service, has reduced 
the incidence of excess assistance to a project developer.
    Question. Why do you propose to stop new construction and what will 
be done as you conduct this study to address the need?
    Answer. Funding under Section 515 for new construction is not being 
requested in fiscal year 2003, as we believe it is appropriate during 
this period to perform a comprehensive review of the program that will 
focus on finding more efficient ways to fund new construction. Support 
for existing occupants in rural rental housing projects will continue 
to be provided through the rental assistance payments program. 
Additionally, direct loans will continue to be used for repair, 
rehabilitation and related purposes, and guaranteed loans will remain 
available for both new construction and repair and rehabilitation.
    Question. What is the clear purpose of the Multi-Family Housing 
Study in your request and what do expect to do with the findings?
    Answer. The Multi-Family Housing study will perform a comprehensive 
review of program alternatives, focusing on more efficient ways of 
funding new construction and servicing the existing portfolio. The task 
force will report their findings to the Department so that needed 
changes, if any, can be made.
    Question. What evidence do you have to support the notion that this 
assistance can be provided to the same low-income population at a 
reduced cost to justify halting new construction?
    Answer. We will examine alternatives or possible modifications to 
the Section 515 program developed both by our task force and proposed 
by the Millennial Housing Commission to make the program more 
efficient. Also we will examine the existing housing with the intent to 
develop comprehensive estimates of future rehabilitation needs of the 
portfolio.
    Question. What other Federal programs assist the same income 
populations in rural America and are these less costly?
    Answer. There are a few other Federal programs that can reach the 
same populations, albeit in a limited way. Federal Low Income Housing 
Tax Credits provide tax credits for private investments in the 
production of new and rehabilitated affordable housing units consistent 
with State-determined housing priorities. Housing and Urban Development 
Section 8 vouchers address the issue of affordability but do not 
provide funds for adding to the housing stock. Federal costs are about 
50 percent greater for tax credits units than for vouchers. Coupled 
together, tax credits and Section 8 vouchers can reach the same 
populations. However, to date, developers of low-income housing have 
been reluctant to invest time and funds in developing small properties 
in rural areas without Rural Housing Service participation. The Housing 
and Urban Development Home Program is a Community Development Block 
Grants program offered under the Department of Housing and Urban 
Development. The Housing and Urban Development Home Program funds can 
also be used to expand the supply of decent, safe, sanitary, and 
affordable housing, particularly rental housing, for very low-income 
and low-income families.
    Question. How will you serve additional needs in fiscal year 2003, 
including the elderly?
    Answer. Direct loans will continue to be used for repair, 
rehabilitation and related purposes. Ways in which the elderly have 
been assisted in this manner include building or increasing the size of 
community rooms and ensuring that the property is handicapped 
accessible. The Department will continue in its effort to help the 
elderly maintain their privacy and live independently.
    Question. On the topic of preservation, I understand that 
approximately two-thirds of the 17,000 portfolio is more than 15 years 
old. What plans do you have for rehabilitating and updating these 
properties as the needs arise?
    Answer. To maximize the affect of limited rehabilitation funding, 
the Department has made extensive efforts to leverage funds from other 
funding sources. In recent years, borrowers who have received Section 
515 loans have leveraged on average another 45 percent of the 
development funds from sources such as tax credit proceeds or The 
Housing and Urban Development Home Program funds. In addition, the 
Department has subordinated its loans to other funding sources to 
facilitate new construction and preservation.
    Question. Is there enough money flowing in these properties to 
conduct general repairs?
    Answer. In most cases, there are sufficient funds flowing from 
project cash flow to conduct general repairs. However, many projects 
are unable to generate sufficient income to set aside funds to meet 
long-term capital replacement needs. Projects most vulnerable are those 
located in weak housing markets with few or no deep tenant subsidy 
units available to allow rents to be affordable by very-low and low-
income tenants.
    Question. How is the Agency using other resources such as Section 
8, LIHTC, Home and Federal Home Loan Bank funds in these projects?
    Answer. We have worked with State tax credit agencies to obtain set 
asides of tax credits for Rural Development properties in several 
States. We currently have funding partnerships with Fannie Mae, the 
Federal Home Loan Banks and State agencies administering The Housing 
and Urban Development Home Program funds. Section 8 vouchers are used 
in some instances to supplement rent payments in low income housing 
when Rural Housing Service rental assistance is not available.
    Question. If the Committee restored additional funding to this 
program, what would be the priorities regarding preservation, 
maintaining the portfolio for low-income residents and providing 
property owners with incentives that have been promised? Please include 
associated rental assistance needs?
    Answer. A survey of our State Rural Development offices reported a 
need for $139.5 million for immediate critical repairs. This levels of 
funding would require $65.1 million in Budget Authority. In addition, 
we estimate that $45 million rental assistance would be needed to 
facilitate that level of funding.
    Prepayment statutes require the Department to offer incentives to 
borrowers who request to prepay in an attempt to retain the properties' 
use as affordable housing. We currently have waiting lists for the two 
most important incentives, equity loans (over $9 million) and Rental 
Assistance (under $1 million). We estimate that there could be a 
significant demand of about $40 million in equity loans and $30 million 
in Rental Assistance for inventories to added prepayments.
    Question. How many projects are currently eligible for prepayment? 
What is the average time for an owner once they make the request and 
are in the system? What percentage of owners that request prepayment 
and are eligible are actually allowed to prepay?
    Answer. Approximately 11,000 Multi-Family Housing projects were 
funded prior to 1989 and are eligible for prepayment. This represents 
approximately two-thirds of the Multi-Family Housing portfolio. We have 
not determined the average amount of time between the acceptance of a 
completed application by the Department and a final action, which 
typically is either prepayment or the receipt of an incentive to 
continue participating in the program. Final action most often depends 
on the availability of resources such as equity loans and preservation 
rental assistance. However, we do know that approximately half of the 
applications currently recorded in our prepayment tracking system have 
been filed during the last year. During fiscal year 2001, of the 119 
prepayment requests accepted by the Department, 24 were retained with 
incentives (20 percent) and 95 projects (80 percent) were authorized to 
prepay. Of the 95 prepayments accepted, 64 were prepaid with 
restrictive use agreements (67 percent) and 31 were prepaid without 
restrictive use agreements (33 percent).
    Question. I understand the Agency has been attempting to overhaul 
the operation regulations (3560) for several years. Why haven't these 
regulations been proposed to the public for comments and when do you 
plan to have them completed?
    Answer. The new 3560 regulations are a complete overhaul of the 
multi-family housing programs within Rural Housing Service. The process 
of reviewing this extensive regulation has taken longer than expected, 
due to the complexity of the subject matter. With recent actions taken 
to address concerns of reviewers, we anticipate that the regulation 
will be published for final review in the near future.
    Question. The budget request implies that the farm labor community 
has priority over the standard Section 515 Multi-Family Housing 
applicants. The Farm Labor Housing program is very specific, serving a 
limited population within certain geographic locations. Additionally, 
if you are stopping new construction in the Section 515 Multi-Family 
Housing program, this program is identical with the exception that 
additional grant funds or subsidy is driven into the project, which 
makes it more costly.
    If you are looking at ways to reduce the cost for low-income rental 
housing, why are you continuing with this more costly housing than the 
standard 515 program?
    Answer. The Nation's farmworkers are among the poorest of the poor 
and an overwhelming unmet need for farmworker housing persists 
throughout America. Farmworkers are a difficult and costly population 
to serve and the Section 514/516 programs are the only Federal programs 
serving farmworkers exclusively. Unlike projects serving the general 
population, many farmworker projects cannot qualify for the Housing and 
Urban Development Home Program funds or Low Income Housing Tax Credits. 
In addition, many States do not have special housing programs for 
farmworkers.
    Question. Rising insurance rates are having a negative impact on 
affordable housing stock throughout this Nation. Rural housing is 
certainly not exempt from these costs.
    Has the agency allowed the deductibles to be increased as a result 
of these increased costs to projects?
    Answer. Currently, Rural Housing Service regulations provide 
guidance regarding the amount of deductibles allowed for Multi-Family 
Housing properties. If owners are unable to obtain the required 
deductible, other options are provided in the regulations. The owner 
may make a cash deposit to the reserve account which will be set aside 
to cover the gap between the required deductible and the obtainable 
deductible, or the owner may set aside a portion of the existing 
reserve account to cover the gap.
    Question. Is this change in the proposed 3560 servicing regulations 
and if so what kind of relief can you offer prior to issuing the final 
regulation?
    Answer. The proposed 3560 servicing regulations do provide 
flexibility in determining the maximum deductible allowed. However, the 
current regulations already provide the owners with some relief. The 
Department continues to work with our field staff, owner and management 
groups and the insurance community to better address this issue.
    Question. According to a 1997 GAO Report, titled ``Opportunities to 
Improve Oversight of the Low Income Housing Program'' questions were 
raised as to whether there are sufficient reserves to address major 
repairs.
    Does the majority of the portfolio that has reached the 20 year 
mark have sufficient reserves to handle major repairs and if not what 
do you propose to do to address this problem?
    Answer. While the great majority of the properties have been well 
maintained, they are experiencing normal wear and tear. The reserve 
accounts were established based on the development cost at the time of 
construction and did not factor in an inflation rate. This has caused 
many reserve accounts to be at an insufficient level to cover current 
and future repairs needs. The Department works with owners to conduct 
capital needs assessments to determine the expected need and timing for 
rehabilitation, specific to their properties. With the information from 
a comprehensive needs analysis, the Department and owner are able to 
reassess the reserve account funding levels.
    Question. Are you allowing projects to increase their rents to 
assist in building up the reserve accounts and who determines if rent 
increase requests are honored, the Rural Development Managers, State 
Director or National Office and is there a national policy for this 
issue?
    Answer. The Department encourages borrowers to increase rents when 
necessary to build up reserve accounts. However, the rent levels for 
the units must remain marketable and affordable in communities, 
particularly when rental assistance is not available at the property. 
When a significant number of units in a project are receiving Rental 
Assistance, the availability of funding of such Rental Assistance needs 
to be considered in terms of absorbing the impact of a rent increase. 
The Rural Development Multi-Family Housing Servicing Officials have 
been provided the authority to approve changes to rents and reserve 
account levels. The authorities are provided in Rural Housing Service 
regulations.
    Question. Several years ago the occupancy surcharge was eliminated. 
What can accumulated funds from this surcharge be used for?
    Answer. The Department of Agriculture currently has approximately 
$15.5 million plus interest accrual of $6 million in occupancy 
surcharge collections. These funds were collected by Rural Housing 
Service and deposited in the Rural Housing Insurance Fund in such a 
manner as to accrue interest on the total amount of funds collected. 
Under statute, the monies are to be made available only to guarantee 
the payments of principal and interest on equity loans for developments 
financed after 1989. Payment from the occupancy surcharge account are 
to be in only amounts necessary to ensure that additional project 
expense from the incurred guaranteed equity loan does not raise rent 
payments above prescribed maximum rent levels necessary to operate the 
project. Public Law 194-193, enacted August 22, 1996, eliminated the 
collection of occupancy surcharge payments. Rural Housing Service would 
like to work closely with the Committee in the future to examine 
alternative uses for these funds for these funds that may more 
immediately benefit the portfolio.
    Question. How much rental assistance that is allocated in the 
States is currently unused and how do you increase efficiency with the 
use these funds in the States and the national office?
    Answer. Currently, the Rental Assistance usage rate is 
approximately at 92 percent of available units. With current occupancy 
levels at a 93 percent rate, the Rental Assistance usage rate lines up 
directly with the occupancy rate. There are areas of the country where 
out-migration has taken place resulting in the unused Rental Assistance 
usage rate being higher than average. We are working with the States 
affected to effectively use unused Rental Assistance. Rural Housing 
Service field staff evaluates efforts made by owners and managers to 
market vacant units to Rental Assistance eligible applicants. Rural 
Development State Directors may authorize the transfer of unused Rental 
Assistance to another eligible borrower after a borrower has not used a 
portion of the Rental Assistance units for a 12-month period. During 
the past few years, the Agency has been successful in significantly 
increasing the number of transferred unused Rental Assistance units. 
The Rural Housing Service National Office will continue to monitor and 
work with field offices to maximize the usage of this valuable 
resource.
    Question. Considering the concern for preserving the portfolio for 
low-income residents, would you support a pilot initiative that would 
allow multi-family projects to be acquired and rehabilitated by public, 
non-profit entities with a sole mission of preservation, provided that 
such an entity maintains the rent and use restrictions and there is no 
additional RA or RHS subsequent loans used in the projects? Would this 
allow entities with experience throughout the country to use creative 
financing and other methods to come up with best practices to address 
this problem now and in the future?
    Answer. Such a pilot proposal could be acceptable provided that 
there are reasonable assurances that long-term capital needs will be 
adequately addressed without creating additional debt. We also expect 
that any non-profit or public body participant would be able to meet 
the existing eligibility criteria currently contained in Section 50(c) 
of the Housing Act of 1949.
                            rhs 502 housing
    Question. Direct program-I noticed the President's budget for HUD 
has substantial increases for homeownership, which includes the down 
payment assistance program and the self-help ownership program. The 
USDA 502 program has been extremely successful and since inception. I 
also understand a new model has been created that increased the subsidy 
costs of this program. Since the creation of the Centralized Service 
Center, the delinquency and default rate have decreased.
    What are the factors that caused the increase in the subsidy rate 
for this program?
    Answer. Rural Development implemented new cash flow models for the 
2003 Budget for the following programs:
    Increased Subsidy Rate from 2002 to 2003: Direct Section 502 
Single-Family Housing Loans; Direct Section 515 Multi-Family Housing 
Loans; Section 524 Housing Site Development Loans; and Multi-Family 
Credit Sales of Acquired Property Loans.
    Decreased Subsidy Rate from 2002 to 2003: Section 523 Self-Help 
Land Development Loans; and Single-Family Credit Sales of Acquired 
Property Loans.
    Methodologies used by these new models for calculating defaults, 
recoveries, payment assistance, and scheduled collections differ from 
the old models. Program performance assumptions used by these new 
models are based on historic program performance and proxy data from 
comparable programs run by the Federal Housing Administration and Small 
Business Administration. Previously, program performance assumptions 
were based on program staff expertise. These changes were a 
collaborative effort between the Department of Agriculture, Office of 
Management and Budget, and the General Accounting Office. The changes 
to these models were made to more accurately reflect the true cost of 
these programs to the taxpayers, which will allow lawmakers to better 
determine Federal-funding allocations. This better reflection of the 
true cost in these models will also help the Department of Agriculture 
obtain a clean audit opinion on its credit programs. The current 
interest rate assumptions as well as the most recent program 
performance data are also included in the new model.
    Question. The previous administration placed a great deal of 
emphasis on leveraging Federal resources with other funding to stretch 
limited dollars. The 502 Direct Leverage Program initiatives allowed 
private lenders to finance as little as 20 percent of the loan and take 
a first lien position. Depending on the lender's rate, the 80 percent 
financed by RHS could have driven up the subsidy cost to make it 
affordable to a low-income borrower.
    Has this impacted the subsidy of the 502 Direct Program?
    Answer. The subsidy the borrower receives on the direct loan is 
based on the amount of the loan and the borrower's income. This subsidy 
is one of several factors that impact on the subsidy cost of the 
program, which according to the new model is higher than prior years' 
estimates. However, there is no evidence to suggest that leverage has 
increased the subsidy rate on direct loans.
    Question. What risk does the private lender incur?
    Answer. There is little security risk incurred by a private lender 
when leveraging with a Section 502 direct loan.
    Question. What is the average blend of government versus private 
funds in these leveraged deals?
    Answer. The average blend of leveraged loans for fiscal year 2001 
was as follows: government funds, 77.82 percent; private lender funds, 
18.38 percent; and other types of funds (such as forgivable loans and 
grants) 3.71 percent.
    Question. Have you conducted a cost comparison to see if the 
government could have saved money if RHS financed the entire loan and 
not just a portion?
    Answer. To date, no formal study of the cost differentials between 
leveraging and non-leveraging has been conducted. Five years of data 
has been collected which may be enough to establish some trends.
    Question. Should the Department continue this initiative, isn't 
this program based on borrower affordability and not cost to the 
government?
    Answer. Leveraged lending continues to be an important component of 
the direct loan program. This initiative is intended to maximize the 
number of low and very low-income families afforded the opportunity of 
homeownership.
    In fiscal year 2001, Rural Housing Service leveraged 7,772 Section 
502 Single Family Housing direct loans. Leveraging provided 
approximately $124 million in loans and grants from other sources to 
supplement the Section 502 Single Family Housing direct program.
    Families assisted are only asked to leverage an amount consistent 
with their repayment ability. By leveraging Agency funds with other 
lending institutions and grant programs, we are able to stretch our 
loan dollars to assist more families in obtaining the American dream of 
homeownership.
    Question. Why wouldn't you limit this program to below market rate 
loans to encourage lenders and non-profits to use low interest loans 
and/or grants to enhance affordability and allow lender to receive CRA 
credit?
    Answer. The leveraging program is designed to include the widest 
possible spectrum of funding sources. We strive to encourage a broad 
range of participation and strengthen ties with our local partners. In 
addition, the customer benefits through homeownership education and 
establishes ties to the local community through partners and local 
lenders. To limit our program to below market rate loans would reduce 
the number of smaller lenders and non-profit groups who could 
participate in our program.
    The Community Reinvestment Act has been a great tool in promoting 
our leverage loan program to the small community lenders. Many of them 
retain all the mortgages they make and our leverage loan allows them to 
put more dollars back into their local communities and meet their 
Community Reinvestment Act requirements.
    We believe that the leveraging program has provided a valuable tool 
to engage lenders into low-income mortgage finance in which they would 
not otherwise participate.
    Question. What is the limit a private lender can charge under this 
initiative for their interest rate?
    Answer. Leveraged lenders are expected to charge reasonable and 
customary interest rates and fees. Besides monitoring the lending 
practices of leveraged lenders, Agency staff counsel applicants on how 
to shop for the best mortgage to supplement our funding.
    While the Agency has not set specific limits regarding the interest 
rate that private lenders may charge, the Agency monitors the lending 
practices of leveraged lenders to protect borrowers from abusive 
tactics like excessively high fees, high interest rates and packing, 
the practice of adding credit insurance or other extras to increase the 
lender's profit on a loan.
    Since the leveraging of Single Family Housing loans is fairly new 
to the Agency, we are continuously learning and making improvements. We 
are currently developing guidance to our field offices to ensure 
consistency and protection for our customers.
    Question. The 502 Direct Program serves individuals and families in 
small rural communities with an average income of $17,000.00 and/or 
approximately 55 percent of their respective county median income. 
Additionally, Department of Housing and Urban Development has never 
effectively penetrated remote rural areas.
    Do the HUD homeownership programs serve the same low-income rural 
population?
    Answer. According to the General Accounting Office study published 
in September 2000, Department of Housing and Urban Development does not 
offer to rural populations a program comparable to the direct Section 
502 Single Family Housing direct loan program.
    Question. If the President's request provided additional resources 
for homeownership at HUD, why not the rural programs?
    Answer. The fiscal year 2003 budget request reflects a continued 
commitment for rural programs. The Section 502 Single Family Housing 
direct budget authority was increased in the President's budget by $43 
million from the fiscal year 2002 level. The decrease in deliverable 
program funds is due to the increase in the cost of the program.
    Question. The Payment Assistance program for the Direct 502 program 
is tied to the median county income and the relationship to the 
borrower's income. Borrowers must contribute 22 percent, 24 percent or 
26 percent of their adjusted income towards their mortgage payments. In 
some cases a borrower could cross a county line and drop from 26 
percent to 22 percent and lower their payment significantly.
     Is this a complicated system to administer and does it cause 
confusion or resentment with the potential customers?
    Answer. Administering payment subsidies is not complicated. Rural 
Housing Service staff uses an automated system to calculate the 
appropriate payment subsidy based upon the borrower's adjusted annual 
income, the applicable area median income, and the monthly taxes and 
insurance for the property. Our partners will soon be able to access 
this system electronically as a result of our e-government initiatives.
    A few of our partners have voiced concerns that an applicant in one 
area can qualify for a higher loan amount than an applicant located in 
another area when all other factors are equal. This occurrence is 
attributed to differences in the area median income, which can vary 
widely within a state and is not within the Agency's control.
    Question. Have you looked at any alternatives to this current 
system and can you make changes administratively?
    Answer. Payment Assistance, which replaced the previous interest 
credit method of calculating borrower subsidy assistance, has been in 
existence since 1996. This system was adopted in an effort to reduce 
the cost of the program. Prior to Payment Assistance, interest credit 
afforded borrowers a more generous subsidy by basing their mortgage 
payments on 20 percent of their income. Now that payment assistance has 
been in existence for several years, we believe there is sufficient 
data to conduct a study of payment assistance. If a study identifies 
the need for changes to the payment assistance calculations, the Agency 
can determine whether changes can be made administratively or if 
regulatory or statutory changes would be necessary.
    Question. Are individuals and families in the mid-range (24 
percent) encountering more difficulty in the approval process that the 
other two categories?
    Answer. We have not received feedback that mid-range income 
individuals and families are encountering more difficulties in the loan 
approval process than other income category applicants. If the 
committee has documented cases, we would be pleased to look into the 
matter.
    Question. Have you considered a more family friendly option in the 
calculation of the subsidy for the mortgage rate that would encourage 
families to stay intact and waive the income of elderly parents and/or 
grandparents including children that attend college?
    Answer. We consider the income of all members of the household in 
determining subsidy except for full-time college students, which is 
consistent with the Department of Housing and Urban Development and the 
governing statutes. Many families with part-time college students or 
elderly family members who come to live in the household are impacted 
by an increase in payments, although these family members may not have 
the capacity to contribute financially towards the mortgage payments.
                           guaranteed housing
    Question. Last year, the Department requested and Congress approved 
an increased guarantee fee from 1 percent to 2 percent to drive down 
the program cost. After that increase, HUD dropped their rate from 
approximately 2.5 percent to 1.5 percent. Additionally, FHA and VA 
guaranteed programs allow mortgage insurance premiums and/or a 
guarantee fee on top of their established LTVR restrictions. Rural 
Housing Service is currently prohibited from going over 100 percent of 
appraisal value for purchase loans. This barrier will only allow fees 
to be incorporated in the loan only if the appraisal is determined to 
be 98 percent or lower of the LTVR.
    What has been the policy impact on borrowers and lenders from this 
fee increase, both for the borrowers and private lenders?
    Answer. The fee is charged by the Agency to the lender, however the 
lender typically passes this charge off to the borrower as a closing 
cost expense. Consequently, the higher fee has increased borrower 
closing costs associated with the guaranteed program. The fee can be 
paid out of the borrower's own pocket, financed into the loan if the 
appraised value of the property being purchased supports including the 
fee, or it can be paid by the seller as a seller sales concession. In 
comparison to the Federal Housing Administration insured or Veteran's 
Administration guaranteed homeownership programs, the fee being charged 
for the Rural Housing Service guarantee is considered high but not 
excessive.
    Question. The Department has the authority to charge up to 2 
percent guarantee fee. Have you considered lowering the rate to react 
to market changes and other Federal housing programs?
    Answer. For guaranteed loan purchase transactions, lowering the 
rate has not been considered an option due to the impact that a lower 
rate would have on the budget. For instance, lowering the fee rate by 
0.5 percent would increase the budget authority required to fund this 
fiscal year's program level ($3.15 billion) by over $15 million. The 
Federal Housing Administration currently charges an up-front fee of 1.5 
percent of the loan amount, but on top of this fee, Federal Housing 
Administration charges customers an annual fee of 0.5 percent of the 
outstanding principal balances of their loans.
    Question. FHA and VA have had a long-standing policy to allow 
mortgage insurance and guarantee fees to be included in the loan. Do 
you believe this change would negatively impact the portfolio and cause 
an increase on the subsidy cost?
    Answer. Rural Housing Service already allows fees to be included in 
the loan amount provided the loan to value ratio does not exceed 100 
percent. Allowing fees to be included for up to 102 percent would 
likely increase the risk of loss and therefore, increase the subsidy 
rate. A precise estimate is not available.
    Question. Your mission for the 502 Guaranteed Program indicates 
this program is to serve moderate-income families and individuals in 
rural areas who can't obtain conventional mortgage financing?
    Does this requirement fit the current overall mission today and 
does it hinder the administration of this program?
    Answer. The guaranteed program is designed to serve customers who 
do not qualify for conventional credit. Additionally, guaranteed loans 
are limited to families with household income that are categorized as 
``moderate'' (115 percent of area median income, or less). Generally, 
these requirements serve our mission because they allow the Agency to 
concentrate its financial resources on those applicants who are truly 
in need. However, there are pockets of rural areas where home prices 
have escalated to a point where a family with a moderate level of 
income simply cannot afford to buy a modest home.
    Question. Does HUD or VA have this requirement on any of their 
programs?
    Answer. No, Housing and Urban Development and Veteran's 
Administration do not restrict use of their programs based on a 
family's household income or ability to obtain ``conventional'' credit.
    Question. One of the missions of the USDA housing programs is to 
graduate borrowers who receive subsidized housing to commercial credit. 
In fiscal year 2001, Congress allowed refinancing using the 502 
Guaranteed Loan Program. Additionally, it also allowed refinancing 
direct loans with guaranteed loans. However, the Department is 
currently prohibited from refinancing a direct subsidized loan to a 
private lender's guaranteed loan if the new rate is higher than the 
current note rate.
    If a direct borrower is currently paying 7 percent and wants to 
move to a 30 year private mortgage loan with a rate of 8 percent, 
shouldn't that borrower be allowed to do so and isn't this in the best 
interest of the government and the borrower?
    Answer. If they are eligible to refinance, direct program borrowers 
must graduate their loans, even if it means accepting a higher interest 
rate. However, graduating a direct loan to a guaranteed loan is 
currently limited statutorily to those cases where a borrower will 
receive the same or a lower interest rate on the new loan. This 
restricts some direct borrowers from utilizing the guaranteed program 
as a graduation tool. Removing the interest rate increase restriction 
on direct to guaranteed refinances would allow more borrowers to 
qualify for graduation.
    Question. Additionally, if a current guaranteed borrower wants to 
refinance his/her loan with another guaranteed loan, the Department is 
requiring that the borrower pay the 2 percent for refinancing.
    What other Federal housing programs have this requirement?
    Answer. No other programs have this requirement. Rural Housing 
Service currently charges a 2 percent fee for all guaranteed purchase 
transactions, including another full 2 percent fee to be paid if an 
existing borrower wants to refinance his/her loan through the program. 
The funding fee for Veteran's Administration purchase loans is 
generally 2 percent, yet the fee for a Veteran's Administration 
refinance transaction is always a flat 0.5 percent. For Federal Housing 
Administration refinance transactions, a new up-front 1.5 percent 
mortgage insurance premium is charged, but a prorated portion of the 
up-front fee that was charged for the initial Federal Housing 
Administration loan is rebated to the customer.
    Question. How many borrowers have taken advantage of this authority 
to refinance loans?
    Answer. So far during fiscal year 2002, we have obligated 278 
refinance transactions representing approximately $24.5 million.
    Question. If you go to a lower interest rate in the guaranteed 
refinancing, wouldn't this loan be more secure and in the best interest 
of the government?
    Answer. Guaranteed refinanced loans are limited to performing 
borrowers already in the portfolio, or to graduation-eligible direct 
Section 502 borrowers. Only unpaid principal and interest, and 
reasonable loan closing costs can be refinanced. Guaranteed refinance 
loans may not include ``cash out'' to the borrower or the refinancing 
of subordinate liens. Allowing existing guaranteed borrowers who have 
paid satisfactorily to lower their interest rates through a guaranteed 
refinance should reduce risk and help to ensure successful 
homeownership.
    Question. Could you give the borrower credit for the first fee paid 
or possibly a prorated credit for loan exposure instead of the full 2 
percent?
    Answer. Yes, we have the statutory authority to reduce the fee. In 
order to do this, data needs to be gathered, or factual estimates made, 
on how guaranteed refinance transactions will perform over time. 
Without performance data or valid estimates for guaranteed refinance 
transactions, the subsidy rate assigned to these loans is the same as 
that assigned to new loans. Given the lack of guaranteed refinance 
performance data, we are currently unable to reduce the rate. Better 
performance data is needed in order to estimate a new subsidy rate, and 
the Agency plans to make that a priority during fiscal year 2003.
    Question. What is the lending community and/or public interest 
groups' reaction to this requirement to pay the full 2 percent 
refinancing fee?
    Answer. Lenders and public interest groups feel that the 2 percent 
fee is too high to warrant their active promotion of the guaranteed 
loan refinance program. The cost to refinance with a new guaranteed 
loan doesn't make economic sense in many cases.
    Question. I understand that if a current 502 Guarantee borrower 
wishes to refinance their loan to a lower rate, but their income has 
risen above the moderate income level for this program, they are 
prohibited from refinancing with another USDA Guaranteed Loan.
    Wouldn't the customer and the government be best served by allowing 
them to move to a lower interest rate?
    Answer. Borrowers would benefit from lower interest rates on their 
loans. The government's risk position could benefit, as well, whenever 
housing costs become more affordable for existing guaranteed borrowers. 
However, allowing borrowers the option to refinance their loans at more 
liberal terms would encourage them to stay in the program, rather than 
moving on to a conventional credit.
    Question. What is the percentage of low-income residents served by 
the guaranteed program?
    Answer. Over the course of each of the past three fiscal years, 
nearly 30 percent of all guaranteed loans have gone to low-income (80 
percent of median or less) families.
    Question. Have you looked at an area population limitation increase 
to be consistent with other Federal housing guarantee products and what 
would be the policy implications for market share, attracting lenders 
and serving borrowers?
    Answer. The Agency feels that its existing eligible areas for 
lending activities are reasonable. Expanding the eligible areas to 
include higher population would certainly increase activity and demand 
for the guaranteed program. But the question is whether higher 
population areas meet Rural Housing Service's mission of serving rural 
economic needs. Generally, the existing parameters that define rural 
areas for the guaranteed program appear to be adequate.
    Question. Each year this program has a slow period at the beginning 
of the fiscal year as funds are allocated through the appropriation 
allotment process. Each year, loan approvals slow down and have to be 
prioritized because of limited funding authority. I am told FHA and VA 
do not experience this slow period.
    With the valuable gains you have made in attracting lenders and 
increasing participation in this program, doesn't it make sense to 
allow the funding to carryover and not disrupt this integrity of this 
program?
    Answer. Because of the lead-time required to process a loan, any 
interruption in a lender's ability to reserve guaranteed funds may 
cause them to question whether they should continue participating in 
the program. Maintaining a flow of funds throughout the year is 
something RHS strives to ensure. However, making the funds no year does 
not alleviate breaks in program delivery for the 502 guarantee single 
family housing program. If demand for funds exceeds the amount of funds 
available for the year in the 502 guarantee single family housing 
program, there would be no funds to carryover and lenders would be 
disaffected with the break in program delivery until a subsequent 
appropriation. Plus, the Budget request anticipates the expected demand 
and no carryover funds are anticipated. Additionally, if the 
appropriation is signed before the fiscal year begins, there is no 
break in service. What would help to alleviate breaks in program 
delivery would be inclusion of specific language for the program in the 
first continuing resolution of a fiscal year that would make available 
25 percent of the previous year's loan level on October 1 (the budget 
authority calculated at the current year subsidy rate). This would 
provide assurance of continued funding without regard to carryover 
balances.
    Question. Can you estimate how many lenders and/or borrowers you 
have lost during this down time in October and November?
    Answer. Estimates of lenders and borrowers who may have lost 
interest in the program are not available. However, we would note that 
the demand for guaranteed loans remains strong.
                           farm labor housing
    Question. Is the request for rental assistance enough to 
accommodate adequate subsidy for new construction in the Farm Labor 
Housing Program?
    Answer. In fiscal year 2002, the Rural Housing Service expects to 
fund the construction of approximately 800 units of farm labor housing 
through the section 514/516 programs. Six hundred units of Rental 
Assistance from the national allocation have been earmarked for section 
514/516 new construction units, allowing full coverage of the RA 
demand. Recently, the section 514/516 programs have received modest 
increases. If a funding level increase is made to the section 514/516 
programs, a corresponding increase to the Rental Assistance program is 
necessary.
    Question. Does the Farm Labor Housing Program have a set-aside for 
rental assistance?
    Answer. There is no formal set-aside for Section 514/516 new 
construction Rental Assistance. At the beginning of each fiscal year, 
staff estimate the number of Rental Assistance units needed to 
accommodate the estimated new construction units that will be built. It 
is expected that the Rental Assistance funds will be used for renewals 
first and then for Farm Labor Housing. Anything left is used for 
Section 515 new construction and debt reduction.
    Question. Is there anyway to determine the true need and demand 
while using a NOFA system?
    Answer. It is difficult to measure need and demand while using a 
Notice of Funds Availability system. However, the purpose of a Notice 
of Funds Availability system is not to measure need and demand, but to 
provide a clean, structured process to make appropriate funding 
decisions with limited funding. Under a Notice of Funds Availability 
system, Rural Housing Service can allocate funds based on merit and 
overall project need which is difficult to achieve under a ``first-
come, first-served'' process
                   guarantee 538 multi family housing
    Question. What is the average household income and rent for this 
program in comparison to the 515 program?
    Answer. The average rent at a Section 515 property is approximately 
$300 per month. This low rent is attainable primarily because of the 1 
percent interest rate and rental assistance available under the 
program, which in turn allows the Section 515 property to predominately 
serve very-low to low income households. Under the Section 515 program, 
over 90 percent of the households are in the very-low income range, 
with average adjusted household incomes of $8,105.
    Under the Section 538 program, the average rent range is between 
$450 and $550. It is also important to note that approximately 85 
percent of the Section 538 projects utilize tax credits to finance the 
development, which means these properties serve tenants with household 
incomes that range between 50 and 60 percent of median income. The 
average median income served is approximately $35,000.
    Question. Why have only a few projects been constructed and why was 
only one loan approved last year?
    Answer. The Department is aware of certain changes that need to be 
made to the program to attract participation from the secondary market. 
Upon conducting stakeholder meetings with members of the secondary 
market and rating agencies, the Department is moving forward with the 
necessary regulation changes. Moreover, we have been assured by the 
rating agencies that these policy changes, once implemented, will make 
the Section 538 program a very important component of affordable rural 
housing.
    Additionally, the fiscal year 2001 Notice Of Funds Availability did 
not allow enough time to complete reviews required by the National 
Environmental Protection Act. These reviews must be completed before a 
commitment of Federal dollars can be made. The Notice Of Funds 
Availability utilized for fiscal year 2002 shortened the period for 
receipt of request for guarantees, which should allow the Department 
adequate time to complete the National Environmental Protection Act 
process before the end of the fiscal year. Any request received during 
fiscal year 2001 that was approved for submission of the full 
application and not funded during the fiscal year was carried over for 
guarantee commitment during fiscal year 2002. Additionally, the 
Department is seeking a reclassification of appropriations to allow 
funds appropriated during a fiscal year to be available for commitment 
during the subsequent fiscal year.
    Question. Have you looked at an area population limitation increase 
to be consistent with other Federal housing guarantee products and what 
would be the policy implications for market share, attracting lenders 
and serving borrowers?
    Answer. The population limitation of Rural Development's Rural 
Business Cooperative Service is 50,000. Business development is often 
limited because the employer is not able to attract employees due to a 
lack of affordable housing in the area. Because of the lack of 
affordable housing, the rural community loses out two-fold; first, by 
losing the tax base of the prospective employer, who decides to choose 
another location that would be more attractive to recruiting employees. 
Secondly, the community loses the tax base of the prospective employee 
who cannot locate in the community due to lack of affordable housing. 
The same principle holds true for the rural community's inability to 
attract teachers, nurses, police officers, firefighters and other 
essential occupations necessary to make a community viable.
    Raising the population limit would make the Section 538 program 
inconsistent with the other principal Rural Housing Service rental 
housing program, the Section 515 program. Raising the population 
limitation to 50,000 would enable the Section 538 to work hand in hand 
with the Business and Industry and other guaranteed loan programs. It 
would likely open the program to more moderate income families.
    Question. Would you consider a sliding scale on the guarantee fee, 
for example a higher guarantee fee the entity has over 25 percent of 
leveraged funds and would the private sector and housing community 
react positively towards this change?
    Answer. The Department has discussed this issue with members of the 
private sector and the housing community. There is an agreement that 
the 1 percent initial guarantee fee is acceptable, but that the one-
half percent annual renewal fee has a negative impact on debt service 
coverage ratios. As a result, the Department is currently working on 
several changes to the regulations, which includes the reduction of the 
annual renewal fee from one-half percent to one-fourth percent. We 
believe that the lower annual renewal fee will help create greater 
affordability. However, lowering of the annual fee could result in a 
higher subsidy rate.
    Question. How many loans have closed since program inception and 
how many closures went forward when there was an obligation but when 
the loan closed a decision was made not to continue with the guarantee?
    Answer. To date, the Agency has closed 13 guarantees, totaling 
$19,438 million to provide 672 units. There are now over 29 guarantee 
commitments in the pipeline, which are in different stages of 
completion. The pipeline currently totals approximately $35 million and 
will produce 1,300 affordable rural housing units.
    There are several instances in which the lender decided to continue 
with the loan and development of the housing, without continuing to 
pursue the guarantee. In such cases, we believe the Section 538 Notice 
Of Funds Availability served as a catalyst for the development of 
housing in rural areas. Without Section 538, the lender might not have 
even considered the development of housing projects in rural areas.
    Question. What alterations can you make to increase activity with 
this program to serve rural America?
    Answer. The Agency is moving forward with several regulation 
changes designed to make the program more industry friendly. They 
include:
    Implementing the same investor repurchase provisions that are found 
in the Rural Business Service Business and Industry Program. This 
change would ensure the industry prompt payment of the guarantee and 
provide better ratings by the rating agencies.
    Lowering the annual renewal fee from 0.5 percent to 0.25 percent.
    Reworking the liquidation time periods to be more consistent with 
the secondary market.
                        rural utilities service
    Question. What has been the effect of electric power deregulation 
on rural electric cooperatives?
    Answer. Maintaining access to reliable and affordable electric 
service in rural areas is one of the greatest challenges in the 
deregulation (or restructuring) of the electric industry. The Rural 
Utilities Service believes that rural areas can share the benefits of 
more competitive electric markets, if market rules include effective 
oversight, consumer protections, and reliability of service is ensured. 
Increased competition among electric providers is being pursued at the 
wholesale and retail level.
    To date 24 States and the District of Columbia have adopted 
measures to open retail markets to competition. However, experiences 
with volatile wholesale electric markets in California and elsewhere, 
have led eight of these States to reverse or delay retail competition 
(Arkansas, California, Montana, Nevada, New Mexico, Oklahoma, Oregon, 
and West Virginia). Many of the remaining States, including largely 
rural States in the Midwest, South, and West, have also deferred or 
rejected proposals to open their retail markets.
    Experience with retail competition in cooperative service areas is 
limited. Nine States (Arizona, Arkansas, Delaware, Maine, Maryland, 
Michigan, New Hampshire, Pennsylvania, and Virginia) required consumer-
owned electric cooperatives to allow competitive providers to sell 
electricity to their retail customers. Other States have generally 
exempted cooperatives or allowed them to opt into competitive retail 
markets. Retail competition has been slow in coming to rural areas. For 
example, in Pennsylvania where cooperatives opened their retail markets 
on January 1, 1999, ahead of the State's investor-owned utilities, not 
a single competitive provider has yet sought State approval to serve 
the largely residential customers of the cooperatives. In Maine and New 
Hampshire, retail customers of cooperatives have seen rate reductions 
under retail choice. However, the savings were largely attributable to 
a pass through of savings from replacement of existing wholesale power 
contracts with lower cost power from the competitive market. 
Implementation of retail competition in co-op territory in other States 
has been slow, as few competitive providers have expressed interest in 
serving rural consumers.
    The lack of competitive interest in rural areas is not surprising. 
It is important to recognize that utilities serving rural areas are 
particularly challenged in providing reliable, affordable service by 
the combined influences of distance, topography, weather, and lower 
customer density. These factors contribute to the generally higher 
costs of serving rural customers compared to urban and suburban 
customers. Electric service in rural areas typically requires more 
capital investment, has higher operation and maintenance costs, and 
yields lower revenue per mile of line than in urban and suburban areas.
    At the wholesale level, the Federal Energy Regulatory Commission 
has been aggressively pursuing measures to open up electric 
transmission systems to support broader, more competitive wholesale 
electric markets. Electric cooperatives have been largely supportive of 
the Federal Energy Regulatory Commission's efforts on wholesale markets 
and open access transmission because almost all electric cooperatives 
derive a portion of their electricity from competitive markets and are 
dependent on the transmission lines of other utilities to deliver power 
to their distribution systems. Competitive markets and open 
transmission access give cooperatives more opportunities to secure 
lower cost and reliable power to serve their customers. Open access 
also offers cooperatives broader markets in which to sell any surplus 
cooperative generated power and helps lower their costs.
    The efforts at deregulating wholesale markets have increased 
uncertainties and risks for Rural Utilities Service borrowers. 
Substantial benefits to cooperatives of competitive markets and open 
access have been slow to materialize.
    The Rural Utilities Service borrowers have been stung by 
unprecedented price spikes in Western and Midwestern electric markets. 
Some have had to raise retail rates to cover higher prices. In 
response, several cooperative-based entities have been formed to help 
cooperatives cope with market volatility. Power marketers and other 
entities now offer risk management services to help cooperatives better 
manage their loads in emerging competitive markets. Volatile wholesale 
market prices are a major concern in financing new generation. The 
Rural Utilities Service encourages all borrowers to develop effective 
market risk mitigation strategies and includes an examination of 
borrowers' risk management in loan reviews. Implementation by the 
Federal Energy Regulatory Commission of effective market oversight and 
enforcement tools is also important.
    Implementation of new transmission arrangements has resulted in 
increased costs for transmission services in several regions. Federal 
Energy Regulatory Commission's proposed new regional transmission 
organizations offer potential benefits to Rural Utilities Service 
borrowers, but one-size-fits-all approaches may not meet the needs of 
rural systems. An additional concern for transmission dependent 
cooperatives is that the new regional transmission arrangements may 
bring increased costs, loss of existing transmission rights, and 
inadequate payments for use of cooperative transmission facilities. 
Complaints raising these issues are pending before the Federal Energy 
Regulatory Commission.
    The Rural Utilities Service shares these borrower concerns. In 
recent years, the Rural Utilities Service has invested several hundred 
million dollars in loans to expand and upgrade transmission in rural 
areas. Transition to regional transmission organizations should not 
undermine security for and repayment of the Federal investment in these 
facilities. Rural Utilities Service is committed to working with our 
borrowers, other rural utilities, the Federal Energy Regulatory 
Commission, and State regulators to develop regional transmission 
arrangements that support truly competitive wholesale markets, preserve 
reliable electric service, protect retail consumers, and include 
adequate protections for Federal debt.
    Question. To what extent has the trend changed from generation to 
distribution in lending activity?
    Answer. The trends for the Rural Utilities Service Electric Loan 
program for the past 5 years are clearly demonstrated by the following 
table.

                           APPROVED FUNDING FOR GENERATION AND TRANSMISSION BORROWERS
                                             [Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                     Fiscal year
                                   -----------------------------------------------------------------------------
                                        1996         1997         1998         1999         2000         2001
----------------------------------------------------------------------------------------------------------------
Borrower type-distribution:
    Number of Loans...............          123          129          168          251          138          209
    Amount of Loans...............     $653,000     $611,000     $846,000       $1,485       $1,122       $1,564
    Percent of Loans..............           94           95           98           98           91           92
    Percent of Amount.............           79           74           91           81           53           60
Borrower type-power supply:
    Number of Loans...............            8            7            3            6           13           17
    Amount of Loans...............     $169,000     $213,000      $79,000     $340,000     $995,000   $1,052,000
    Percent of Loans..............            6            7            2            2            9            8
    Percent of Amount.............           21           26            9           19           47           40
----------------------------------------------------------------------------------------------------------------

    The table above shows an increase in the number of loans and the 
amount of funding approved for generation and transmission borrowers 
during the past 5 years. We expect this trend to continue for the 
foreseeable future.
    The uncertainty of the wholesale power market has caused power 
supply (generation and transmission) borrowers serving rural America to 
explore new generation and transmission projects in an effort to manage 
their electricity supply portfolio to ensure reliable electric service 
at a competitive price. Many borrowers are building new power 
generation and transmission facilities in response to the deregulation 
of electricity and the movement to establish large regional 
transmission organizations.
    Question. What percentage of Rural America has access to Internet 
and broadband communications capabilities on a scale comparable to most 
urban areas in this country?
    Answer. With regard to rural Internet access on a comparable scale 
of quality to urban access, the Rural Utilities Service estimates that 
48 percent of rural Americans have dial-up Internet availability that 
is significantly below urban quality. Urban quality dial-up access is 
defined as connecting at speeds of 35 Kb/s or greater. With regard to 
broadband access, it is important to note that true broadband service 
must be ``two-way'' high-speed service, not just ``one-way'' high-speed 
Internet access. Using the Federal Communications Commission's 
definition of broadband (at least 200 Kb/s each way), the Rural 
Utilities Service estimates that, between Digital Subscriber Line and 
cable modem availability in urban areas, about 60 percent of urban 
customers can receive broadband. In rural areas, Rural Utilities 
Service believes that between 20 and 25 percent of all households can 
receive broadband, and two-thirds of those are in Rural Utilities 
Service's borrower-served areas.
    Question. In an exchange with Senator Craig, Secretary Veneman 
indicated that she is working closely with EPA on water systems where 
EPA has found serious inadequacies with the water quality and is 
imposing large fines on these water associations. Additionally, last 
year the EPA Administrator Christine Todd Whitman approved new 
regulations addressing arsenic standards for drinking water and was 
concerned that some public systems would shut down as a result.
     How many systems under the RUS portfolio has ceased to operate as 
a result of the new regulation?
    Answer. No Rural Utilities Service financed projects at present 
have ceased to operate as a result of the new Environmental Protection 
Agency's arsenic regulation. The new standard does not begin to take 
effect until December 2006.
    Question. How many systems are you working with in partnership with 
EPA to address arsenic and other problems where EPA has imposed 
sanctions and/or fines and are these projects given priority in funding 
on the state and national level?
    Answer. Rural Utilities Service is working with the Environmental 
Protection Agency on many types of projects to assist rural communities 
in meeting their water and wastewater needs. Rural Utilities Service 
gives priority for funding to many types of situations small 
communities face, of which arsenic would qualify. Since the new arsenic 
standard was only recently promulgated and will not go into effect 
until 2006, we are only just beginning to see a few applications that 
involve arsenic removal. Applicants are not required to disclose 
whether the Environmental Protection Agency has imposed sanctions or 
fines on the applicant's system and our management information system 
does not track whether sanctions or fines have been imposed on systems 
in our portfolio.
    Question. Please provide information on the backlog of applications 
for the water and wastewater loan and grants program.
    Answer. There are currently 497 incomplete applications 
(applications that have been filed but are not considered complete 
applications as they are missing documents such as the engineering and 
environmental reports) and 504 applications (applications that are 
ready to be further processed once funding becomes available) on hand 
for Water and Waste Grants for a total of 1,001. The total amount 
requested by these applications is $507,727,679 for incomplete 
applications and $498,880,923 for applications for a total of 
$1,006,608,602. There are currently 831 incomplete applications and 722 
applications on hand for Water and Waste loans for a total of 1,553. 
The total amount requested by these applications is $1,362,365,191 for 
incomplete applications and $1,014,868,140 for applications for a total 
of $2,377,233,331.
    Question. The Emergency Community Water Assistance Grant Programs 
was a success in the years it was appropriated. Considering the rural 
water needs and the expected drought conditions in many parts of 
America, can you foresee a need for this program in the near future?
    Answer. During fiscal year 2001 we utilized $20 million in 
Emergency Community Water Assistance Grant funding. Our projections 
indicate that we can fund most of the increased demand because of 
emergencies with our regular funds. Major disasters are handled by the 
Federal Emergency Management Agency.
    Question. If the Committee appropriated funds for this program, do 
you believe it should be expanded to include emergency waste needs 
also?
    Answer. No, we do not have a demand for emergency waste grants at 
this time.
               rbs-guaranteed business and industry loans
    Question. The program level for the B&I program will drop 
significantly from recent program levels.
    Do you see a decrease in loan activity or demand?
    Answer. As of the end of March, we had obligated approximately $220 
million less than we had at the same time last year ($510 million 
versus $290 million). However, a large demand for the program 
continues, with $610,441,393 in preapplications and $258,346,212 in 
applications, totaling $868,787,605, pending as of the end of March 
2002. The purpose of a preapplication is to allow a lender and borrower 
to submit a limited amount of information, most of which should be 
easily obtained, so that the Agency can determine and advise the lender 
whether the request is likely to meet the requirements of the Business 
and Industry program. An application involves the submission of all 
information required by regulation. The Agency evaluates the 
application and determines whether the borrower is eligible, the 
proposed loan is for an eligible purpose, there is reasonable assurance 
of repayment ability, there is sufficient collateral and equity, and 
the proposed loan complies with all applicable statues and regulations.
    Question. Do you anticipate an increased demand for energy 
generation or distribution in for new facilities and refinancing 
existing operations in this low interest environment?
    Answer. We currently observed an increase in loans to refinance 
existing operations. We have also recently reviewed two proposed 
ethanol projects from the Midwest at the National Office level and have 
five preapplications (no applications) totaling $69.1 million pending.
    Question. What is the backlog and how will you address future 
needs?
    Answer. At the end of March 2002, there were 190 preapplications 
and 177 applications on hand totaling $868,787,605. Regulations outline 
selection priorities when more demand exists for the program than there 
is available funding. This priority selection process will be 
implemented if the demand exceeds available funding. Any projects not 
funded this fiscal year will be carried forward to next fiscal year.
    Question. Has there been any discussion to move to a preferred 
lender program similar to SBA?
    Answer. Authority to establish this category of lender, as an 
enhancement to delivery of the program, was included in the 1996 Farm 
Bill. A legal concern was raised concerning the Agency's authority to 
delegate environmental assessment responsibilities to a preferred 
certified lender. This concern has not been resolved and would require 
a statutory change.
    Question. Do you have adequate resources to provide the proper 
training, specifically in field offices, to adequately underwrite and 
service B&I loans and, if not, what additional resources would you 
need?
    Answer. Yes, we do have adequate resources to provide much needed 
training to field personnel. Field staff training is an on-going 
requirement. The lending arena is far more complex, with the onslaught 
of creative methods of financing, new business start-ups, mergers, 
sales, etc. The staff requires more in-depth training to fully 
understand and counter the difficult issues arising from this complex 
lending arena. Our resources are being redirected to provide the in-
depth training needed to address this issue.
    Question. Considering recent Government Accounting Office reports 
and a rise in defaults and delinquencies, how much of this can be 
directly attributed to training and staff recruitment to properly 
administer this program?
    Answer. Some of the responsibility for defaults and delinquencies 
in this program lies in the ability of our staff to properly review and 
underwrite the potential loan applications and to conduct the necessary 
lender monitoring. With that in mind, we have taken significant steps 
toward ensuring that our field office staff is adequately trained and 
motivated to improve their loan underwriting and lender monitoring 
skills. The agency has initiated internal measures to address these 
concerns including assessment review of State Office operations, 
rescission of State Office approval authority until training of staff 
occurs, and implementation of financial analysis software (currently in 
the final stages of acquisition) to assist State Office assessment of 
applications.
    Question. What impact do you perceive from the elimination of the 
B&I Direct Loan Program?
    Answer. By discontinuing funding for the B&I direct loan program, 
USDA will no longer provide the promise of job creation in rural areas 
and will prevent situations where borrowers are very likely to default. 
The funding level for the B&I program was never fully utilized. The 
program had authority to provide $50 million in loans since fiscal year 
1997 (the first year of the program), but never used near that amount. 
Further, the subsidy rate went from negative in fiscal year 1997 
through fiscal year 2000, to 6 percent in fiscal year 2001, to 28 
percent for fiscal year 2002, indicating a much higher default rate 
than anyone anticipated. The rate rose dramatically, even though lower 
discount rates between fiscal year 2001 and fiscal year 2002 made 
direct loans less expensive. Direct B&I borrowers must have been 
rejected from a private bank in order to qualify. Program performance 
over the last 5 years indicates a high risk situation not appropriate 
for a program whose goal is economic development and job creation for 
rural America. The high default rate indicates that businesses are 
folding and that the program is not providing long-term, stable jobs to 
rural America. The lack of demand and the poor program results made it 
appropriate to discontinue funding.
                  rural community advancement program
    Question. What additional flexibility would you request in this 
account and do you have sufficient data to reflect the shifting needs 
in each of the states?
    Answer. We currently have ample flexibility in the Rural Community 
Advancement Program (RCAP). Full implementation of provisions of the 
1996 Farm Bill would not only allow transferring funds within funding 
streams but also among streams. However, there has not been a demand 
from the RCAP beneficiaries for this added flexibility.
          empowerment zones and enterprise communities earmark
    Question. All earmarked funding for EZ/EZ areas are eliminated and 
carryover funds are cited.
    How will you continue to address these areas of greatest need?
    Answer. While the 2003 budget does not include grants for the 
Empowerment Zones and Enterprise Communities grants initiative, it 
maintains the targeting of Rural Development program funds to these 
areas. We will also continue to provide a significant and critical 
amount of technical assistance from both the National Office and State 
and Area Offices to Empowerment Zones and Enterprise Communities. This 
includes training in such things as grantsmanship, project management, 
financial management, conflict resolution, and building effective 
inter-organizational partnerships. In addition, we will continue 
provide a significant amount of support through Internet-based 
information systems.
    Question. Your justification indicates sufficient resources will be 
available. Do you believe these designated areas will receive the same 
amount of resources in fiscal year 2003 as in fiscal year 2002?
    Answer. In general, the ability of rural Empowerment Zones and 
Enterprise Communities to obtain resources from other Federal, State, 
local, private, and non-profit sources tends to rise as these 
communities gain knowledge of the range of programs and experience in 
working with funding programs and organizational partners who help 
implement the community strategies. From our experience working with 
these Round II Empowerment Zones and Enterprise Communities, we believe 
that most are at a point where they can manage to continue their 
programs for the next year without additional Empowerment Zones and 
Enterprise Communities grants.
    Question. Have the designated Rural EZ/EC areas come into the 
mainstream economically due to past funding?
    Answer. The Empowerment Zones and Enterprise Communities have 
created over 32,000 jobs, made nearly 1,000 business loans, and started 
or attracted over 850 businesses. Some have gone beyond job creation to 
build economic specializations such as the luxury yacht industry in the 
Kentucky Highlands Empowerment Zone. While more of this has occurred in 
the Round I Empowerment Zones and Enterprise Communities than in the 
Round II Empowerment Zones and Enterprise Communities, this is 
principally a matter of time, and as the Round II communities are able 
to build on the groundwork laid by their early projects, the 
enhancements in the strength and vitality of their economies will 
follow as it has for the Round I Empowerment Zones and Enterprise 
Communities.
                 national rural development partnership
    Question. How many States are active with their respective State 
Rural Development Councils? Please describe activities.
    Answer. The National Rural Development Partnership currently 
includes 40 State Rural Development Councils, 39 of which receive 
Federal funding. The Arizona Rural Development Councils has not yet 
received any Federal funds. The State Rural Development Councils work 
on a wide variety of issue areas, ranging from health care to 
transportation, environmental issues, agriculture, education, and 
economic development. Descriptions of these contributions provide a 
sample of the breadth and depth of State Rural Development Councils 
activities and are provided below:
Minnesota Rural Partners
    The State Rural Development Councils for Minnesota has created a 
unique alliance with four foundations, twelve corporations, and three 
levels of government entities to support development of the Minnesota 
Farmers' Market Hall, an initiative that fits with Minnesota Rural 
Partners' plan to help diversify agriculture.
New Hampshire Rural Development Council
    In 2001, the Council worked diligently with several local, State 
and Federal partners to develop plans for the Community Kitchen 
Program, a model for small-scale, shared-use community kitchen 
facilities which maximizes use of existing community assets and local 
leadership. Three of these kitchens are in development in New Hampshire 
with over ten micro-food enterprises participating.
Pennsylvania Rural Development Council
    The Pennsylvania Rural Development Council collaborated with the 
State departments of Public Welfare, Health and Insurance in 2001 on a 
mini-grant initiative to support development of outreach efforts to 
increase access to health care coverage for Pennsylvania's low-income 
children and families, promote preventive care and good health 
planning, and lower the incidence of uncompensated care. This effort 
resulted in 9 grants to 12 rural communities for a total of $358,824.
Wyoming Council on Rural Development
    Inspired by the difficulties many Federal, State and local 
government agencies, as well as private businesses, were having working 
with tribal entities in Wyoming, the Council sponsored a workshop that 
provided these officials and business leaders the knowledge necessary 
to develop and conduct effective working relationships with Indian 
Tribes and organizations.
    Question. After the Department requested and Congress approved of 
the reorganization of the Department of Agriculture, wasn't the Rural 
Development Agency designed to change the mission and conduct a 
coordinated effort with State and local entities?
    Answer. From its inception in 1990, the National Rural Development 
Partnership has been a vehicle that the Department of Agriculture uses 
to conduct a coordinated effort with State and local entities. The 
central role of State Rural Development Councils in building Federal, 
State, and local collaborations has not changed over the past decade.
    Question. Since many of the Rural Development programs have been 
reduced in the fiscal year 2003 request, did the Administration 
consider using funds targeted for the NRDP to support critical 
shortfalls like low-income housing?
    Answer. Since it's founding in 1990, the National Rural Development 
Partnership (NRDP) has been funded by the Federal government only from 
the voluntary contribution of discretionary agency funds. Each State 
Rural Development Council is required to fund at least 25 percent of 
its annual budget from non-Federal funds. The National Rural 
Development Partnership is housed in the Department of Agriculture, but 
it is funded by several Federal agencies. During the 9-year period, 
fiscal years 1993 through 2001, five Federal agencies provided funding 
for the National Rural Development Partnership (Department of 
Agriculture-Rural Development, Labor, Transportation, Veterans, and 
Health and Human Services). It is the Department of Agriculture's 
intention to broaden the set of financial supporters of the National 
Rural Development Partnership for fiscal years 2002 and 2003. Total 
funding for the NRDP has been about $2 to $3 million annually, which is 
a relatively small portion of the cost of our Rural Development 
programs.
    Question. Are the efforts within the Office of Outreach duplicative 
to the efforts of the NRDP and the 2501 program? Please explain.
    Answer. No, the efforts of the National Rural Development 
Partnership and the Office of Outreach are not duplicative. In fact, 
the National Rural Development Partnership and the Office of Outreach/
2501 Program have very different missions. Whereas the 2501 Program 
fills a very important but narrow niche, serving the needs of socially 
disadvantaged farmers and ranchers by heightening awareness of the 
Department of Agriculture programs, the National Rural Development 
Partnership seeks to improve the quality of life for all rural 
Americans by fostering inter-agency collaborations.
    Question. Is there any way to measure success of the NRDP efforts? 
Do they actively help entities that lack capacity to develop strategic 
plans, grant writing or reporting activities after they receive Federal 
and/or State funds?
    Answer. The National Rural Development Partnership can and does 
measure the many and varied successes of the 40 State Rural Development 
Councils. In fact, over 200 success stories are submitted to the 
National Rural Development Partnership by State Rural Development 
Councils in any given year. The National Rural Development Partnership 
network allows us to disseminate these stories widely so that 
successful work in one State can be adapted and implemented by the 
State Rural Development Councils in other States.
    The National Partnership Office of the National Rural Development 
Partnership is currently developing a new State Rural Development 
Councils Accountability System designed to further capture the 
successes and strengths of our Councils. This Accountability System 
will further enhance our ability to share best practices and make a 
difference for rural Americans. An early version of this system is to 
be in place on October 1, 2002 and the full system is slated to be 
complete by October 1, 2005.
                       centralized service center
    Question. The creation of the CSC was a large effort by the 
Department that I believe has been a great success. One of the CSC 
justifications was it facilitates the best of both worlds, state-of-
the-art software and technology from the private sector combined with 
Federal supervised credit.
    Does the CSC have the adequate resources to continue efficient 
service in the current environment and what are your plans to keep 
their resources up to date?
    Answer. The Centralized Servicing Center currently has adequate 
resources to provide efficient services for homeowners. Major factors 
for continuing effective, efficient servicing in the future are 
technology and human resources. The technology used at Centralized 
Servicing Center is currently state of the art. However, constant 
reviews, education, and enhancements are required to integrate new 
technology and services as they emerge. For example, a new service 
offered this year is payment by phone. Homeowners can now call the 
Centralized Servicing Center and provide basic information from the 
front of a personal check and the payment can then be electronically 
made. There is no cost to the homeowner for this service and this 
process is less costly to the government than the standard payment 
remittance process. Also, all homeowner mortgage documents and 
communications are imaged and retained within the servicing system. By 
the end of this fiscal year our local Field Office staff will have 
access to these images. This will further enhance seamless servicing 
for our homeowners. This enhancement and others are a result of annual 
strategic planning sessions to identify and plan for future needs and 
ensure that technology and staff are allocated to changing needs. In 
addition, through periodic visits to other major Private Industry 
Mortgage Servicers, participation in the Commercial Service Bureau 
Users Group and participation in the Mortgage Bankers Association 
Technology work groups, our staff is educated on changing technology 
and services. In the near future, we plan to provide our customers 
Internet access to Centralized Servicing Center.
    Question. There were discussions in the past that the CSC would 
become a Federal collection center for other Federal loans. Can you 
provide an update?
    Answer. In March 2001, Treasury declined our proposal to collect 
Single Family Housing debt that remained following property disposition 
and our request to be considered to become a Federal Debt Collection 
Center. It is our understanding that Treasury plans to service these 
debts itself.
                            fsa farm credit
    Question. The fiscal year 2003 Budget Summary includes a 
justification for the shift from Direct Operating and Ownership Farm 
Loans to Guaranteed, continuing a trend of the last decade. 
Additionally, the program levels in the President's budget reflect the 
ability for FSA to provide operating loans to 31,000 farmers in the 
guaranteed program and 14,500 with the direct. For ownership loan 
programs, levels would provide assistance to 4,500 farmers with the 
guaranteed farm program and 1,000 with the direct farm program. This 
shift will affect at risk farmers that have nowhere to turn.
    The Direct Operating and Ownership Loan Programs were designed to 
assist farmers that could not obtain credit elsewhere. The guaranteed 
programs do not take the place of the direct programs in serving the 
same population. What will be the impact of the reduction in direct 
farm operating and ownership programs?
    Answer. Administrative efforts undertaken in the guaranteed 
programs to reduce the paperwork burden on lenders and expedite the 
approval process have increased the amount of loan activity in fiscal 
year 2002 compared to the previous year. This increase is most dramatic 
in the guaranteed farm ownership loan program where use has increased 
by 46 percent compared to a year ago. This increased use of guaranteed 
loan programs will assist in fulfilling the demand for FSA loan 
assistance. This surge in use of the guaranteed programs by applicants 
previously seeking direct loans will enhance the ability of at-risk 
beginning and minority farmers to obtain direct loan assistance.
    Question. What are the current backlog and the rate of obligations 
of funds in comparison to the previous year?
    Answer. Use of direct operating loan funds is consistent with a 
year ago at this time. Use of the guaranteed loan programs has 
increased compared with a year ago--in the operating program, the usage 
has increased by 8 percent and the farm ownership program is 
experiencing a 46 percent increase compared to a year ago. The demand 
for low-interest emergency disaster loans is 57 percent less than the 
previous year.
    Question. How will this change affect minority and beginning 
farmers?
    Answer. Due to increased use of the guaranteed loan program by 
applicants previously seeking and obtaining direct loan funds, low-
income minority and beginning farmers will have increased access to 
direct loan resources to fulfill their credit needs.
  economic research service/national agricultural statistics service 
                agricultural resources management survey
    Question. The President's budget includes a $2.7 million increase 
for ERS and a $4.6 million increase for NASS in order to improve the 
Agricultural Resource Management Survey (ARMS). This survey gathers 
information from family farmers all over the country in order to 
provide USDA and other organizations with the most recent data 
available. The budget also proposes in increase of $15.5 million for 
NASS in order to fund the activities associated with conducting the 
2002 Census of Agriculture.
    Please explain the differences between ARMS, which gathers 
information every year, and the Census of Agriculture, which gathers 
information every five years. Is the information gathered duplicative?
    Answer. The Agricultural Resource Management Survey (ARMS) is an 
annual survey of about 1 percent of U.S. farms and obtains detailed 
information that can be used to measure the economic performance of 
farms. In addition, the ARMS is specifically designed to provide a 
research data base that can be used to analyze many different 
agricultural and resource policy issues. The ARMS is USDA's primary 
source of information about the current status of and changes in the 
financial condition, production practices, use of resources, and 
household economic well being of America's farmers. The ARMS supports 
the official USDA annual farm income estimates and the sector net 
income reported to the Bureau of Economic Analysis for developing 
annual GDP and personal income for the U.S. economy. The ARMS survey 
supports the Congressionally mandated commodity cost of production 
estimates (corn, oats, barley, sorghum, wheat, cotton and dairy) and 7 
additional commodities (rice, tobacco, peanuts, sugarbeets, hogs, and 
cow-calf production) for which ERS receives many requests for policy 
analysis.
    The Census of Agriculture provides county, State, and national 
estimates of general farm and farm operator characteristics at 5-year 
intervals. The estimates are based on completed questionnaires mailed 
to all farms. The Census reports are widely used to make spatial and 
temporal comparison of farm numbers, land in farms, crop and livestock 
production and inventories, and other farm and farm operator 
characteristics. The information content from the Census can be used to 
conduct economic analysis on farm policies at the farm level but lacks 
the detail needed to conduct economic analysis on farm policies for 
individual commodities.
    Prior to the 1997 Census of Agriculture, there was duplication 
between the Census, ARMS, and other NASS surveys in collecting crop and 
livestock inventories, agricultural production, and sales. For the 1997 
and 2002 Census of Agriculture, NASS and ERS made major efforts to 
establish consistent definitions and to minimize the duplicative data 
collection and overlap with ARMS. For the 2007 Census of Agriculture, 
steps are being taken to integrate and coordinate ARMS and other 
economic surveys to further remove duplicate reporting. The integrated 
effort will prevent duplicate reporting by farmers and reduce 
respondent burden.
    Question. Please explain what the effect would be of merging the 
two surveys, and whether this has been considered previously.
    Answer. The reengineering of ARMS and its integration with the 
Census of Agriculture will not change the overall objectives and uses 
of either survey. However, respondent burden will be reduced by 
preventing duplicate reports by farmers. The reengineered ARMS and e-
Government initiative will build a questionnaire repository for 
``customizing'' instruments to a respondent's profile. The process will 
be dependent on the use of a complex sampling design and a data 
warehouse containing individual reported survey and Census data. With 
the transfer of responsibility for the Census of Agriculture to USDA, 
some efforts were made to coordinate the 2002 Census of Agriculture 
with the ARMS data collection. Changes were made in the information 
content so the reported estimates would be consistent and 
complementary. With the proposed reengineering of ARMS, both data 
collection efforts would be fully coordinated and integrated in the 
2007 Census of Agriculture.
    Question. Is the ARMS survey carried out on years that the Census 
of Agriculture questionnaires are carried out, or is there an effort to 
streamline efforts during those times?
    Answer. The ARMS survey is conducted in the same year as the Census 
of Agriculture. The ARMS is necessary to be able to produce the annual 
farm sector income and balance sheet estimates. The coordination of the 
data collection between the Census and ARMS, however, will ensure that 
a respondent selected for both surveys is only contacted once.
    Question. Is the Administration expecting to continue increasing 
funding for ARMS annually, or do the increases in the President's 
budget raise base funding for this activity to an acceptable level?
    Answer. Continued increases should not be necessary if this 
increase is provided. The survey sample size would be reinstated to its 
original level while at the same time providing resources to modernize 
survey methods and better coordinate the collection and reporting of 
economic data. The requested $7.3 million for NASS and ERS raises the 
base annual funding level for ARMS to an adequate level. The level of 
funding would increase the size of the ARMS survey sample to an 
adequate level to generate statistically defensible results for the 
U.S, farm production regions, and the 15 leading States in terms of 
farm value of production. The funding would also provide coverage of 
commodities in the cost of production phase of the survey to meet 
legislative mandates. Without the additional funding to cover 
escalating survey cost, only national level estimates for the sector 
could be developed and with the increasing interval between the 
commodity cost of production survey estimates, would no longer be 
defensible in terms of production technologies.
                       economic research service
             food assistance and nutrition research program
    Question. Does ERS solicit input from FNS on study and evaluation 
needs for the domestic food assistance programs? If so, does FNS 
receive feedback on how their input has been utilized? Do you believe 
there are gaps in the current research?
    Answer. In developing priorities for the Food Assistance and 
Nutrition Research Program, the Economic Research Service (ERS) works 
closely with the Food and Nutrition Service (FNS), the agency 
responsible for administering the Department's food assistance 
programs. As one part of this effort, ERS requests and FNS provides a 
written list of priorities each year. ERS then meets with FNS to 
discuss their priorities and how ERS can help meet their needs. During 
the past 5 years, ERS has consistently incorporated some, but not all 
of FNS priorities into its research plan. Limited and declining 
research funds for food assistance research dictate that some projects 
will not be funded. Beginning in fiscal year 2002, the President's 
budget has provided some research funds to FNS that allow FNS to 
initiate some priorities directly.
                       rhs demonstration program
    Question. In fiscal year 2001, Rural Housing Service was authorized 
to create a housing demonstration program for agriculture, aquaculture 
and seafood processor worker housing. What is the status of the 
demonstration program and what lessons were learned?
    Answer. Public Law 106-387 Department of Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies Act, 
2001--authorized Rural Housing Service to establish a demonstration 
program to provide financial assistance grants--for agriculture, 
aquaculture and seafood processor workers in Mississippi and Alaska. A 
Request for Proposals was issued on February 12, 2001. Nine proposals 
were received in response to the Request for Proposals. Seven proposals 
were received from sponsors in Mississippi and two proposals were 
received from sponsors in Alaska. Four proposals in Mississippi and two 
Alaska were selected for funding.
    As of March 31, 2002, one project has been completed in Alaska and 
will be ready for occupancy by processing workers during the 2002 
season. The sponsors of the other five proposals are continuing to work 
toward construction and we anticipate these projects getting, underway 
within the next 12 months.
    It is too early to tell how successful this demonstration will be. 
It is clear, though, that there is an overwhelming unmet need for 
processor worker housing in many parts of the country. Our staff 
recently attended a roundtable discussion on processor worker housing 
issues. This roundtable brought to light the unique problems we are 
facing when trying to deal with the problem. Due to agricultural 
producer integration, many new processing facilities have sprung up in 
small communities ill-equipped to handle an influx of hundreds or 
thousands of low--income families. As a result, many of these workers 
find themselves renting over-priced, substandard housing units or even 
sleeping in shifts in order to make the housing affordable. There are 
few resources available to assist these small communities in providing 
adequate housing for these low--income residents. Rural Housing 
Services's Section 514/516 Farm Labor Housing program definition does 
not include processor workers and is not adequately funded to deal with 
the problem. The Rural Housing Service Section 515 Rural Rental Housing 
program could be used to house processor workers if there were adequate 
funding, but in recent years funding levels have been low.
    If a new program serving processor workers was authorized, we 
suggest that it would be beneficial to conduct a national pilot 
program. The structure of the program would be similar to the 
demonstration and many of the lessons learned in the demonstration 
could be applied to the pilot program.
                                 ______
                                 

             Questions Submitted by Senator Robert C. Byrd

                         risk management agency
           usda response to drought conditions-ag production
    Question. Weather conditions again this year do not appear 
promising for our Nation's farmers and ranchers. Drought conditions in 
the eastern United States already are resulting in water shortages, 
calls for restrictions on access to aquifers, and a general concern 
that this year's drought will be worse than those of the past 2 years. 
On the west coast, earlier reports of high snow packs have turned to 
disappointment due to a two month dry spell. In spite of these reports, 
the President's request does not include any funding for emergency 
loans and, instead, relies on carryover funds to meet anticipated needs 
which, according to your statement Secretary Penn, will be sufficient 
this year.
    In 1999, drought took hold of West Virginia, along with other 
States, and caused long-term harm to farmers and ranchers. Cattlemen 
had to liquidate their herds due to lack of forage and water. I don't 
see how we can sit idly by when we know what is on the near horizon. 
According to the U.S. Drought Monitor released on March 5th, parts of 
the country has been in drought conditions for a period of years and 
the East Coast States have been suffering abnormally dry conditions 
since last fall. The entire State of West Virginia falls in the ranges 
of moderate to extreme drought.
    Do you believe that crop insurance and other risk management tools 
are satisfactory to meet the challenges farmers and ranchers are sure 
to face this year due to adverse weather conditions?
    Answer. Yes, the Risk Management Agency (RMA) has launched 
initiatives to satisfactorily insure that farmers and ranchers are 
provided with crop insurance and other risk management tools. The 
Agriculture Risk Protection Act of 2000 (ARPA) constituted major 
legislative changes that RMA implemented in stages. Premium subsidies 
were increased as provided by the Act. This provided producers more 
than $36.7 billion in protection on over 211 million insured acres 
through nearly 1.3 million policies for causes of loss due to adverse 
weather conditions, such as drought, inability to plant due to drought, 
and failure of irrigation water supply.
    The Dairy Options Pilot Program (DOPP) was expanded to include 300 
counties. DOPP is an innovative cost-share program for dairy producers 
that helps dairy farmers put a ``floor'' under the price they receive 
for milk using futures and options markets.
    RMA has cooperative agreements with 12 State Departments of 
Agriculture to provide customized risk management educational 
opportunities to producers in the States of Pennsylvania, Maryland, 
Vermont, Rhode Island, New York, Delaware, West Virginia, Maine, New 
Jersey, Connecticut, New Hampshire, and Utah. RMA supplements these 
activities with additional risk management training in high schools, 
community colleges, and other forums.
    RMA is continuing to develop, expand and improve its risk 
management tools so producers can plan, grow, and market their crops 
with confidence because they are backed by affordable, tailored 
policies that provide substantial risk protection.
    Question. If Congress were to develop a disaster program this year 
due to weather conditions, how would you suggest it be crafted so as to 
not discourage people from buying crop insurance in the future?
    Answer. Consider structuring any disaster benefits based on whether 
the producer had purchased insurance and slightly enhance the amounts 
for those who had insurance.
    Question. As you work with the farm bill conferees on a package 
that may include assistance for the 2002 crop year, will you support 
efforts to provide assistance to farmers and ranchers who may suffer 
from weather-related losses this year?
    Answer. The Administration continues to rely on Federal crop 
insurance as the primary safety net for agricultural producers. We are 
fully confident that crop insurance, along with other risk management 
tools, can provide adequate protection to meet the challenges of 
producers. There has been a high rate of participation in the program 
over the past few years and we expect to provide farmers with immediate 
payoffs when, and if, losses are realized. Where there isn't adequate 
coverage for producers, USDA also offers the Noninsured Assistance 
Program and emergency loans.
    Question. Does the Department have a contingency plan to assist 
farmers and ranchers this year in the event weather conditions continue 
to worsen?
    Answer. USDA's primary safety net for agricultural producers 
continues to be the Federal crop insurance program. Because it is far 
too early in the year to determine the degree of loss due to adverse 
weather conditions, we plan to continue monitoring the situation. If 
and when losses are realized, we are committed to provide farmers with 
immediate indemnity payments.
        elimination of watershed and flood prevention activities
    Question. The President's budget request eliminates funding for 
ongoing watershed operations activities, including a program to 
rehabilitate flood control structures that are posing dangers to public 
health and safety. Instead, the President proposes to shift funding 
into a contingency fund for the Emergency Watershed Protection Program. 
This way, I understand, funds would be available for flood recovery 
operations when disaster strikes.
    While I agree that a contingency fund for the Emergency Watershed 
Protection Program makes sense as a way to expedite emergency 
assistance to stricken areas, I find it troubling that we would have to 
eliminate funding for preventing measures at the same time. This 
strategy brings to mind the old adage of an ounce of prevention being 
worth a pound of cure.
    There are many examples of how watershed operations have made a 
difference to rural communities. During May and July of 2001, 
catastrophic rains flooded 22 counties in Southern West Virginia. 
Although Raleigh County West Virginia was hit hard by these heavy 
rains, one small town called Sophia was spared massive damages. Why? 
Because the Soak Creek watershed project protected 205 homes, 46 
businesses, six churches, and one school from massive flooding damage. 
Even in non-disaster years, this $10.5 million watershed project 
provides an annual flood benefit of $625,400. Without the Soak Creek 
Channel watershed project, the rains of 2001 would have been more 
devastating for this community.
    Secretary Rey, don't you agree that a sound investment in flood 
control would help avoid the need for emergency response to a disaster 
and reduce overall costs in both dollar and human terms?
    Answer. I agree that prevention and avoidance can help avoid 
emergency response to disasters. The Administration's proposal is to 
terminate funding to the Watershed Protection and Flood Control program 
and to rely more on programs administered by the Corps of Engineers and 
FEMA.
    Question. Since the Corps of Engineers has jurisdiction for flood 
control only in large watersheds, if USDA does not have a role in flood 
control in small watersheds, which comprise most of rural America, who 
will?
    Answer. The Corps of Engineers jurisdiction is not limited to only 
large watersheds and they are presently assisting several communities 
in small watersheds in rural America. FEMA's programs are also working 
with communities in rural America in helping to resolve natural 
resource concerns. Presently, many States have existing programs that 
assist communities in small watersheds in solving the natural resource 
concerns. These existing programs are more efficient than the USDA's 
watershed program.
    Question. Would you not agree that existing flood control 
structures and measures funded through USDA have prevented substantial 
damages over the years, and if so, why would you now want to eliminate 
a program that prevents floods and replace it with a program that will 
be forever chasing flood waters after they have already done their 
damage?
    Answer. The small watershed has been in existence since 1944 with 
enactment of Public Law 534 and then expanded in 1954 with Public Law 
566 and have prevented substantial damages in the past 58 years 
throughout America. The past watershed projects installed will continue 
to provide benefits in the future, but as times have changed, we need 
to reexamine the programs and fund those that are more cost effective 
like the programs administered by the Corps and FEMA. We also need to 
recognize that existing programs at the State and local level are also 
addressing many of these issues.
         usda response to drought conditions--rural communities
    Question. Secretary Neruda, drought conditions do not affect only 
farmers and ranchers. Rural communities also suffer. Today, Berkeley 
County, West Virginia, is experiencing its worse water crisis of 
record. The county had made plans to develop a more efficient water 
delivery system to serve its people, but the current drought conditions 
have made their problems immediate and extremely serious. The springs 
that had been used for water supply are producing far below their norm. 
Quarries, which used to supplement these springs, are being pumped dry. 
They have appealed to me to help and I am bringing this to your 
attention.
    Over the years, I have fought to increase the levels of funding for 
rural water and wastewater programs at USDA. I strongly believe that it 
is our obligation, as representatives of the people, to ensure that our 
citizens have access, at least, to the most basic of services. Without 
water there is no life. The drought conditions we now face have only 
made worse an unacceptable condition.
    Berkeley County will soon be submitting an application to USDA for 
rural water assistance. I would like assurance from you that this 
application will receive your personal attention.
    Answer. Rural Development officials have met with the Board of 
Directors of the Berkeley County Public Service District to discuss 
their circumstances. The Public Service District has identified needs 
that must be addressed, and is currently planning how to best meet 
those needs. An application for Rural Utilities Service funding was 
discussed; however, the Public Service District indicated that it was 
pursuing other possible sources of funds at this time. I will ensure 
that my office monitors the progress of an application if one is 
submitted.
    Question. Will you please advise me when you have received this 
application and keep me apprised of the actions of USDA in regard to 
its disposition?
    Answer. The Water and Waste Disposal program is conducted primarily 
at the State level. Because of that, I believe the most efficient 
approach would be to have my West Virginia Rural Development staff keep 
your staff at the State level informed of actions relating to filing 
and development of an application.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                                 prime
    Question. One of 9 ethanol projects currently underway in South 
Dakota, is an innovative ethanol production and cattle feeding 
operation, known as (PRIME( or the Dakota Value Capture Co-op. Once 
complete, this project will produce approximately 20 million gallons of 
ethanol, and, capture the value of the wet distillers grains (byproduct 
from ethanol production) and employ it as an input in the feeding of 
cattle in an adjacent feedlot.
    To help jump-start this innovative project, I worked to provide $6 
million in appropriations last year. As you know, I've been trying to 
get USDA to expedite their share, $3 million, of this grant to PRIME 
because the Energy Dept. has already approved funding and is set to 
devote their share, $3 million, to PRIME within 1-2 weeks. In a letter 
sent to William Hagy, Deputy Administrator of Business Programs at 
USDA, John Ferrell, from the Office of Fuels Development at DOE, 
indicates that the department intends to fund PRIME, LLC of South 
Dakota for an integrated ethanol complex, including an ethanol unit, 
waste treatment system and enclosed cattle feed lot. The application 
received by DOE is being processed at this time. Their disbursement of 
$2.82 million is expected by the end of March 2002. The Department 
states that it does not have any other open or planned solicitations or 
funding for a similar type project. That letter was sent to USDA on 
February 28, 2002.
    More than 700 South Dakota farmers and ranchers have invested over 
$14 million in equity toward this cooperatively held ethanol and cattle 
feeding project. These Ag producers deserve the cooperation of those of 
us at the Federal level, in accordance with the enactment of the fiscal 
year 2002. Agriculture Appropriations Conference Report, to do our jobs 
and help provide the grant assistance authorized last year.
     Can you give me an update on the status of this matter and when 
the USDA grant will be made?
    Answer. On March 29, 2002, Rural Business-Cooperative Service 
Administrator, John Rosso delegated authority to administer the grant 
funds at the State Office level to our Rural Development South Dakota 
State Director. The State Office is currently working with officials of 
Dakota Value Capture Cooperative to process and administer the 
Department of Agriculture grant funds. This will allow Dakota Value 
Capture Cooperative to work closely with the State Office to expedite 
this process.
    Question. How will you help move the process along to ensure the 
expeditious delivery of grant funds to the project?
    Answer. Mr. Rosso contacted representatives of Dakota Value Capture 
Cooperative on April 3, 2002, to express the need for and explain 
exactly what the Agency will require in order to timely process the 
grant. Rural Business-Cooperative Service has established a working 
relationship with the Department of Energy Project Officer, Dakota 
Value Capture Cooperative, and others to ensure that the grant funds 
are delivered as expeditiously as possible.
                  ewe lamb expansion program and lmaap
    Question. Last October USDA announced extending the Lamb Meat 
Adjustment Assistance Program (LMAAP) to July 31, 2003. New rules to 
extend LMAAP have yet to be published in the Federal Register. 
Additionally, USDA announced plans to implement a ewe lamb expansion 
program (through LMAAP) that would provide incentives for producers to 
purchase or retain breeding ewes, expand their herds, and increase the 
available supply of domestic lamb meat. These are the only details 
producers have received about this new program that was announced in 
October.
    What is the status of the new rules extending LMAAP?
    Answer. New rules to extend the LMAAP will be published in the 
Federal Register on March 26, 2002.
    Question. When will the ewe lamb expansion program be released and 
implemented?
    Answer. Information regarding the ewe-lamb expansion program will 
be provided on April 8, 2002, via an update to USDA document 10-LD, 
Lamb Meat Adjustment Assistance Program.
                               loan rates
    Question. It's my hope and goal that Congress enacts a new farm 
bill soon in order to provide a level of predictability to farmers with 
respect to what loan rates and other safety-net mechanisms will be for 
the 2002 crop year and beyond. Should the farm bill conferees fail to 
produce a final conference report on the farm bill prior to March 22nd 
(the so-called Easter Recess deadline), what will USDA do with respect 
to loan rates for the 2002 crop year?
    Answer. USDA is still optimistic that Congress will complete the 
Farm Bill in time to set loan rates for the 2002 crop.
                             updated yields
    Question. Farmers capitalized upon advances in production-
agriculture technology to become more efficient and competitive. In 
South Dakota, producers have matched this technology with their know-
how to achieve measurable crop yield improvements in recent years. The 
Senate farm bill recognizes this fact and allows farmers to update 
their yield and acreage data used to calculate farm payments. However, 
the House bill relies upon old yield from the 1981-1985 period to 
figure support.
    Understanding that implementation of the new farm bill will 
complicated no matter the final product, what is USDA's position with 
respect to whether or not producers should have the choice of updating 
their yields used to calculate program payments?
    Answer. The process of updating yields would be time consuming, so 
USDA hopes the new Farm Bill can be finalized in a way to permit this 
to be done in an orderly manner. We recognize that many producers have 
program yields which do not currently reflect their production history 
of recent years for some crops.
                     farm bill payment limitations
    Question. Why does the September 2001 report, ``Food and 
Agriculture Policy-Taking Stock for the New Century'' document 
published by USDA suggest that too few farmers are receiving too many 
of the Federal Government payments, yet, USDA has not supported or even 
taken a position on the Dorgan-Johnson-Grassley payment limitations 
amendments in the Senate farm bill?
    Answer. Our policy document was primarily addressing a broader 
concern with the distribution of farm program benefits across all 
sectors of agriculture and not the narrower question/issue of the 
distribution of payments among traditional program crop producers. We 
believe that current programs have not addressed the needs of many 
producers as well as they have commercial producers of the few major 
program crops. There are many sectors of agriculture which receive 
relatively little assistance from Government programs and services and 
that was one of the concerns we were addressing. The Senate payment 
limitation provision addresses a narrower concern regarding the 
distribution of payments and benefits for producers of those few 
program crops. This is a somewhat different issue. The payment limit 
provision will have disparate effects on producers of a few major 
program crops in different regions of the country, but will not address 
the issue of providing benefits to producers of other commodities who 
also need assistance of various kinds. We believe the Congress is the 
appropriate body to address the largely regional distributional 
questions brought up by the Dorgan-Johnson-Grassley amendment.
                           honey bee research
    Question. Mister Secretary, domestic honey producers and beekeepers 
have contacted me with deep concerns about the cuts proposed in the 
fiscal year 2003 USDA budget with respect to honey bee research and the 
Agricultural Research Service (ARS). Honey producers play an important 
role in the agricultural economy in South Dakota.
    They are concerned with the reduction of bee research from $5.7 
million to less than $2.5 million, given that this program comprises 
less than 1 percent of the total budget for ARS.
    Why did the bee research program bear such a sizable reduction in 
this year's budget when the total program represents simply a small 
share of the total ARS budget?
    Did USDA seek input from honey producers, beekeepers, or 
researchers concerning these cuts? If so, what sort of meetings or 
events took place to seek input on the cuts? If not, why not?
    Answer. The President's Budget proposal actually reduces ARS' 
research on honeybees by $4 million, from $8 million in fiscal year 
2002 to some $4 million in fiscal year 2003 and represents a relatively 
small share of the total reduction of $104,486,000 proposed for ARS in 
fiscal year 2003.
    The Department based its decision to consolidate and reduce 
honeybee research in order to finance national high priority research 
initiatives in fiscal year 2002 strictly from the recommendations of 
the Strategic Planning Task Force, which conducted site visits and 
laboratory reviews at these locations. Difficult decisions had to be 
made within the context of overall budget limitations and the need to 
provide increases for high priority national initiatives such as 
invasive species and counter-terrorism research.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

                   proposal to cap underwriting gains
    Question. The President's fiscal year 2003 assumes $155.2 million 
in savings from a proposed appropriations bill general provision to cap 
crop insurance underwriting gains at 12.5 percent.
    To what extent have the legislative enhancements to the crop 
insurance program in 2000 yielded (windfall) profits for the private 
insurance companies?
    Answer. In 1999 and 2000, Congress provided emergency funding which 
USDA used to discount the premium producers were required to pay for 
crop insurance. As a result of this discount, the total acreage 
enrolled in the crop insurance program increased and some producers 
began purchasing higher levels of coverage. The Agricultural Risk 
Protection Act of 2000 (ARPA) further encouraged producers to shift to 
higher levels of coverage. ARPA increased the premium subsidy to about 
60 percent for the typical policy; however, there was a larger 
percentage increase in subsidy at the higher levels of coverage. In 
1998, the crop insurance program provided coverage on about 182 million 
acres with total premiums of about $1.9 billion, and in 2003 we 
estimate net acres insured will be about 208 million acres with total 
premiums of about $2.8 billion. In other words, due to the higher 
Government subsidy, the insurance companies are selling higher value 
policies to essentially the same customers. As a result, the companies 
have benefited from both higher administrative expense reimbursements 
and higher underwriting gains.
    Question. If the proposed cap is imposed, would sufficient 
incentives exist for companies to participate in the program?
    Answer. The last year that companies experienced a loss was 1993 
(-$83 million). Since then companies have made approximately $1.6 
billion in underwriting gains, half of which was generated under the 
1998 (2000 reinsurance years. These underwriting gains represent a 
substantial reserve in the event of another loss year.
    Question. Why is legislative authority being requested to do this? 
Doesn't the Department have the administrative authority to impose this 
cap?
    Answer. Yes, we could cap underwriting gains administratively by 
renegotiating the Standard Reinsurance Agreement (SRA). While the 
Department has been prohibited from renegotiating the SRA for several 
years, Congress provided authority in the Agricultural Risk Protection 
Act of 2000, to renegotiate the SRA once before 2005. However, our 
legislative proposal would amend Section 508(k) of the Federal Crop 
Insurance Act to provide permanent authority capping underwriting gains 
at 12.5 percent. This would also allow Congress to consider the 
appropriate level of underwriting gains in the same way that it has 
considered the appropriate level of delivery expense reimbursement; 
which is currently capped at 24.5 percent. In addition, implementing 
the cap through a general provision in the appropriations bill would 
allow the savings to begin to accrue immediately.
    Question. As you may be aware, CBO has re-estimated the savings 
from this proposal. Rather than the $155 million in budget authority 
and outlay savings included in the President's budget, CBO estimates 
that the proposal would save $62 million in budget authority and no 
outlays in fiscal year 2003. What is the basis for the fiscal year 2003 
budget authority and outlay savings estimates in the President's 
budget? How were they calculated?
    Answer. The projected savings of $115 million annually is based on 
actual program experience. The Department's estimate assumes the cap 
will be placed on each individual reinsured company. While it is a 
realistic estimate for a typical year with normal production 
conditions, the results are likely to vary from year to year. Further, 
The amount of savings in budget outlays that can be achieved in the 
first year depends upon the assumptions that are made about when the 
companies actually receive underwriting gains. The President's Budget 
assumes that these savings will be reflected in fiscal year 2003.
    It is our understanding that the Congressional Budget Office's 
(CBO) estimate of $62 million caps all insurance companies combined, 
resulting in less savings. CBO has also scored the proposal as having 
essentially no first year outlay savings because it assumes that the 
outlay savings will be delayed until the following fiscal year. While 
we acknowledge these differences, it is our position that the proposal 
has real potential for long term savings of about $115 million 
annually.
    Question. I understand that producers purchased higher levels of 
coverage in 2000-2001 as a result of changes made to the program in 
2000. Has there also been a significant change in program 
participation?
    Answer. No, there has been no other real change in program 
participation. Total acres covered have not increased substantially, 
rather, producers have chosen to shift to higher coverage levels. In 
1999 and 2000, USDA used emergency funding to increase the premium 
subsidy as an incentive for producers to buy higher levels of coverage. 
ARPA further encouraged the shift to higher levels of coverage by 
increasing the premium subsidy to about 60 percent of the typical 
policy premium.
    Question. What has been the impact of the fiscal year 2002 
appropriations Act limitation on funding for risk management education 
programs authorized by the Federal Crop Insurance?
    Answer. As a result of this funding limitation, the Risk Management 
Agency (RMA) and the Cooperative State Research, Education, and 
Extension Service (CSREES) have had to significantly reduce the level 
of educational partnering with State departments of agriculture, 1890 
and 1862 Land Grant universities, and other public and private 
organizations. Consequently, agricultural producers will have far fewer 
educational opportunities to learn about existing and emerging risk 
management tools.
    Question. What would be the consequence of continuing fiscal year 
2003 funding for these programs at the fiscal year 2002 level?
    Answer. State and local farm organizations have consistently 
indicated to RMA and CSREES that farmers and ranchers need strong, 
well-funded risk management education and information programs to help 
them deal with the increased pace of change in today's farming sector. 
Education programs for small and limited resource farmers are 
especially critical. The Agricultural Risk Protection Act of 2000 
(ARPA) recognized the need for education and provided funding that is 
appropriate for that need. Programs funded at a reduced level for 
fiscal year 2003 would not be able to fully meet expectations for 
farmers and ranchers who need to be well informed on risk management, 
as envisioned in ARPA.
  conservation programs/natural resources conservation service (nrcs)
    Question. The budget proposes termination of USDA's ongoing 
watershed operations on the basis that the program provides a marginal 
cost-benefit ratio in terms of economic returns and environmental 
benefits for each dollar invested, as compared to the FEMA and Corps of 
Engineers' programs. Should these USDA projects, which are smaller in 
scale and protect rural communities, be expected to get the same return 
as those projects undertaken by the Corps of Engineers?
    Answer. Typically, the smaller watershed projects protect lower 
value property, which results in lower benefits. Additionally, the 
majority of the active USDA watershed projects have non-monetary 
benefits such as improved water quality or wildlife habitat, which are 
not included in the benefit/cost ratio.
    Question. Given that the Corps of Engineers currently has the 
authority to carry out Public Law 566 watershed and flood prevention 
operations but typically does not choose to carry out these smaller 
projects, do you believe that rural America will receive the support it 
needs and not be passed over for the larger projects that affect urban 
populations that the Corps typically funds? Will the Corps be required 
to support the smaller projects if the Administration's proposal is 
adopted?
    Answer. Although the Corps of Engineers may work on any size 
watershed under other authorities, it is not authorized to work on 
Public Law 566 projects. It is our understanding that every Corps 
project must be Congressionally authorized. The Administration will 
direct the Corps to evaluate authorized Public Law 566 projects and 
seek Congressional authorization on those it considers a priority 
within overall spending limits.
    Question. With the tremendous benefits that the Forestry Incentives 
Program carries out such as water quality improvement and the creation 
of wildlife habitats with minimal budgetary commitment, why has the 
President's budget proposed to terminate this program?
    Answer. According to the President's budget request, the Forestry 
Incentives Program falls within the category of having not performed 
well, having a limited scope, or having goals that can be better 
addressed through other programs.
    Question. Both the Senate and House versions of the Farm Bill 
include an increase in acreage for the Conservation Reserve Program 
over the current capped level of 36.4 million acres. What impact would 
an increase in enrollment of Conservation Reserve Program acres have on 
commodity prices?
    Answer. Both the House and Senate farm bills would increase the CRP 
enrollment cap to around 40 million acres. The extent of commodity 
supply and price impacts of expanding CRP largely depend on actual net 
changes in planted acreage that occur as a result of the change in CRP 
enrollment levels. Typically plantings decline, but by a lesser amount 
than CRP acreage increases. This plus international production response 
mitigates commodity supply and price effects.
    A recent analysis of price impacts of expanding CRP enrollment from 
36.4 million acres to 40 million acres provides an indication of the 
magnitude of expected price changes with a higher CRP enrollment cap. 
This analysis evaluates the impacts of enrolling the additional 3.6 
million acres in signups held in 2003 and 2004 and estimates that 
average prices over 2004 through 2011 would increase $0.05 to $0.09 per 
bushel for wheat, $0.02 to $0.06 for corn and other feed grains, $0.07 
to $0.11 for soybeans, and around $0.01 to $0.03 per pound for cotton. 
Ranges are provided because of uncertainties inherent in long-term 
price projections and potential changes in future farm programs.
                  agricultural research service (ars)
                    research program implementation
    Question. What impact is the President's budget proposal to 
terminate funding for Congressional add-ons having on the agency's 
ability to implement research activities funded for fiscal year 2002? 
(For example, how successful are your efforts to recruit scientists and 
research staff funded for fiscal year 2002 if the President's budget 
proposes to terminate funding for these positions in fiscal year 2003)?
    Answer. The President's Budget proposal to terminate fiscal year 
2002 Congressionally-designated research projects in fiscal year 2003 
affects the agency's ability to compete with both private and public 
science and technology organizations in the recruitment for the best 
and highly qualified scientists. As to be expected, highly qualified 
scientists are not likely to apply and the agency is forced to select 
from applicants not as highly qualified, in order to implement the 
research program. This hiring handicap can impact the quality of the 
research project and the long-term success of the program.
                         base funding reduction
    Question. How did you decide where to take the $15 million 
reduction in base funding proposed in the budget, i.e., which programs 
and locations to close or consolidate to achieve this savings?
    Answer. In order to achieve the savings of $15 million to finance 
proposed increases in the fiscal year 2003 ARS Budget, the Department 
adopted the recommendations of the Strategic Planning Task Force which 
conducted site visits and laboratory reviews. The Task Force was 
established as required by the 1996 Farm Bill, which required a 10-year 
strategic plan for Federal ag research facilities. The programs and 
locations identified for consolidation and closure in the fiscal year 
2003 budget were specifically recommended in the Task Force Report.
    Question. The budget proposes to close the Orono, Maine, and 
Brawley, California, ARS locations. This is a proposal we have seen in 
past Administration budgets. Is your current recommendation based on a 
recent review of these locations? What were your specific findings?
    Answer. The decisions to close Orono, Maine and Brawley, California 
were strictly based on the Task Force recommendations and not from any 
recent review of these locations. However, the factors that lead to the 
findings and recommendations of the Task Force in 1999 are still 
relevant today.
                           honey bee research
    Question. The budget proposes to close the honey bee research 
programs at Baton Rouge, LA; Beltsville, MD; and Tucson, AZ, and 
consolidate portions of these programs into the program at Weslaco, TX. 
The result is that the fiscal year 2003 budget proposes to reduce bee 
and honey research funding by 50 percent (falls from $8 to $4 million). 
Is it realistic to assume that this program consolidation will produce 
this level of savings and that all the honey bee research for the 
benefit of the United States can be conducted in one laboratory in 
subtropical, south Texas? For example, can genetics study really be 
carried out in the presence of the Africanized honey bee population in 
Texas?
    Answer. Changes in bee research activity reflect budget priorities 
within the President's fiscal year 2003 budget. The budget reduces ARS' 
bee research effort from 19 to 9 scientists, with a reduction in 
funding of $3.7 million out of $6.4 million total. Since bee 
pollination provides $15 billion in added value to crops, particularly 
those with a high vitamin and nutritional content, ARS will make every 
effort to continue critical research efforts.
    The budget allows for the following bee research programs to be 
continued: Africanized honey bee research; some almond pollination 
research; bee germplasm preservation research (although the germplasm 
repository will be closed); miticide development for Varroa mite 
control (at a reduced level of effort); research in a subtropical 
climate applicable only to the dwindling (because of presence of the 
Africanized honey bee) fraction of beekeepers that overwinter their 
hives in the Lower Rio Grande Valley]; antibiotics for American 
foulbrood (at a very reduced level of effort); and honey bee vigor 
research (at a very reduced level of effort).
    The following programs will be terminated: all bee breeding 
programs (since bees cannot be bred in the Africanized honey bee 
infested Weslaco area); the Baton Rouge Breeder Colony Service (a 
service that allows beekeepers to analyze hives for mite resistance); 
bee nutrition and artificial diet research previously conducted at 
Tucson; the Bee Disease Diagnosis Service at Beltsville; the 
Africanized Honey Bee Identification Service at Beltsville; integrated 
pest management (IPM) for Varroa mites; IPM for the small hive beetle; 
and most research on honey bee vigor.
                    lower mississippi delta research
    Question. I understand that The Lower Mississippi Delta Nutrition 
Intervention Research Initiative is ready to proceed to the design and 
implementation phase and that additional funds above the base fiscal 
year 2002 level will be required. What is the current (fiscal year 
2002) level of funding for this project? How much is included in the 
fiscal year 2003 request for this project? Is the fiscal year 2003 
proposed level adequate to move to the planned phase of this project? 
If not, what additional amount will be required? Please provide a 
status report on this project, including the work planned for fiscal 
year 2003 and each subsequent fiscal year to completion of the project, 
including the funding required in each fiscal year to carry out the 
work scheduled.
    Answer. The current level of funding for this project is 
$3,153,000. No additional funds were requested for fiscal year 2003. 
Five major surveys have been completed. They are: (1) Key Informant 
Survey; which determined nutrition/health problems, and strength and 
weaknesses of counties; (2) FOODS 2000; which determined foods eaten, 
food insecurity, health perceptions, participation in USDA nutrition 
programs, and shopping information; (3) Community Assessment; which 
determined assets of counties relative to nutrition interventions, 
location of resources, and demographic information; (4) Grocery Survey; 
which determined the availability and accessibility of foods in the 36 
counties; (5) Focus Group Survey; which determined attitudes and 
knowledge about shopping for foods, food insecurity, healthy food 
choices, and behavioral changes.
    Pretest instruments for determining food choice behaviors in low-
income African-American youth were completed. Two pilot nutrition 
intervention projects were completed: church-based nutrition and 
wellness intervention for African-American women with hypertension in 
Louisiana, and community clinic-based nutrition and health promotion 
intervention for adults in rural Mississippi.
    Studies proposed for each for the next 5 fiscal years if funds are 
available are as follows:
    An additional $6,353,000 would support the following studies: (1) 
pilot test measures for increasing fruit and vegetable consumption of 
African-American youth on the campuses of Alcorn State University, 
University of Arkansas at Pine Bluff, and Southern University and A&M 
College in Louisiana ($1,103,000); (2) establish Community Partners in 
three counties/parishes: Phillips County, AR; Washington County, MS and 
Franklin Parish, LA. ($2,250,000); (3) collaborate with additional 
Partners (for example: College of Public Health, AR; Delta State 
University, MS; Delta Health Alliance, MS; MS Valley State; LA, to be 
determined). They will be necessary for recruiting and training 
community nutrition workers needed for the intervention research 
($700,000); and (4) maintenance of the Capacity of the Consortium 
($2,300,000).
    An additional $6,470,000 will provide support for the following 
studies: (1) designing nutrition intervention research with communities 
in Arkansas, Louisiana, and Mississippi and developing data collection 
and monitoring instruments, and procedures, and begin to build 
community capacity. ($2,250,000); (2) new Delta partners begin 
recruiting and testing training materials for community workers in the 
intervention research ($1,000,000); (3) implement measures for 
increasing fruit and vegetable consumption of low income African-
American youths on campuses of Alcorn State University, University of 
Arkansas at Pine Bluff and Southern University and A&M College 
($1,170,000); and (4) maintain capacity of Delta NIRI Consortium 
(including the completion of the validation of the Delta NIRI Food 
Frequency Questionnaire with the Jackson Heart Study) ($2,050,000).
    An additional $9,522,000 would support the following studies: (1) 
pretest instruments for nutrition interventions and build necessary 
capacity in the communities in Arkansas, Louisiana, and Mississippi. 
($3,000,000); (2) recruit and train interviewers, data collectors, 
community nutrition workers for the interventions in Arkansas, 
Louisiana, and Mississippi. ($3,500,000); (3) finalize data collection 
and analysis from the low-income African-American fruit and vegetable 
intervention, and publish ($972,000); and (4) maintain capacity of 
Delta NIRI Consortium ($2,050,000).
    An additional $10,400,000 would support for the following studies: 
(1) data collection, nutrition education, training of communities, 
implementing the nutrition interventions in Arkansas, Louisiana, and 
Mississippi. Maintain the capacity in communities ($3,000,000); (2) 
continue the recruitment and training of community workers and assist 
in the beginning of analysis. ($2,500,000); (3) pilot test the Fruit 
and Vegetable intervention in three other settings, including one for 
white low-income youth ($2,000,000); (4) maintain the capacity of Delta 
NIRI Consortium ($1,900,000); and (5) plan and develop additional pilot 
nutrition interventions for additional counties in Arkansas, Louisiana, 
and Mississippi ($1,000,000).
    An additional $10,400,000 supports the following studies: (1) 
analyze intermediate variables in the interventions, while continuing 
the monitoring and implementation of the interventions in Arkansas, 
Louisiana, and Mississippi. ($2,000,000); (2) recruitment and training 
of additional community workers for the new pilot interventions and to 
keep the pool of workers available for the original interventions 
($2,500,000); (3) implement the Fruit and Vegetable interventions in 
the additional settings ($2,000,000); (4) maintain the capacity of 
Delta NIRI Consortium ($1,900,000); and (5) implement one additional 
nutrition intervention in other communities in Arkansas, Louisiana, and 
Mississippi ($2,000,000).
                           homeland security
    Question. For fiscal year 2002, additional supplemental emergency 
appropriations were provided for the ARS to address homeland security 
needs. An additional $40 million was provided for ARS salaries and 
expenses, of which at least $21.7 million was to be made available for 
facility and operational security needs, and an additional $73 million 
was provided for the National Animal Disease facilities at Ames, Iowa 
(+$50 million), and Plum Island, New York ($23 million).
    Could you please update us on the agency's additional homeland 
security requirements and how the emergency appropriations made 
available for fiscal year 2002 are being spent to address these needs?
    Answer. The fiscal year 2002 Supplemental appropriation provided 
$40 million under the Salaries and Expenses account for operational 
security needs of ARS facilities and for increased biosecurity 
research. The Secretary approved an initial allocation of $37 million 
for these purposes and held $3 million in reserve to be allocated at a 
later date.
    ARS will obligate $21.7 million for physical security upgrades at 
the Agency's highest priority research facilities located at Plum 
Island, NY; Ames, IA; Laramie, WY; Athens, GA; Frederick, MD; Newark, 
DE; Beltsville, MD; Ft. Collins, CO; Albany, CA; New Orleans, LA; 
Peoria, IL; Wyndmoor, PA; and East Lansing, MI.
    The remainder of the $37 million, or $15.3 million, will be used to 
finance critically needed research to support the biosecurity 
protection of agricultural animal and plant resources. ARS has 
allocated $13.8 million for the development of rapid detection capacity 
for all priority threat agents. ARS will develop a comprehensive suite 
of tests for action agencies that detect pathogens at the site of the 
problem. The pathogens will be detected using DNA fingerprinting 
technology. ARS will cooperate with a consortium of university and 
private sector partners, but work on high consequence pathogens will be 
restricted to ARS Biosafety Level 3 facilities at Ames, IA; Plum 
Island, NY; Laramie, WY; Athens, GA; and Ft. Detrick, MD.
    An additional $1.5 million was allocated for research on 
Information Systems. Funding for this research will be committed to 
develop a database for foot and mouth disease. Genomic databases such 
as this will be useful in diagnostics and vaccine development. They 
will also be valuable to law enforcement agencies to pinpoint the 
origin of an outbreak.
    Question. What is the appropriate research role of ARS relative to 
homeland security?
    Answer. The most serious threats to American agriculture are those 
that are regulated in international trade or could destroy the 
confidence of Americans in their food supply. Animal pathogens, such as 
foot and mouth disease virus that recently ravaged England, are seen as 
the most potent threat. The Office of International Epizootics (OIE) 
provides a list of pathogens that are regulated in international 
commerce. USDA experts were asked to assess the animal pathogens from 
that list (List A) for threat potential reflecting their likely 
economic impact on the American economy, the availability of rapid and 
reliable detection or diagnostics for the disease, the availability of 
control measures including vaccines, and the ease of spread of these 
diseases and then to provide an overall assessment based on these 
factors. Additionally, analysis furnished by the USDA Office of the 
Chief Economist also supported the expert's assessment by concluding 
that all pathogens selected would indeed have a major economic impact 
in the event of an outbreak.
    A number of zoonotic agents, which affect both animals and man, are 
currently the subject of research or control measures by other 
agencies, but may need to have expanded programs for research and 
control based specifically on their impact on animals. Among these are 
the causative agents of West Nile Virus, Rift Valley Fever, Nipah 
encephalitis, Hendra encephalitis, Western Equine Encephalitis and 
other encephalites. The transmissible spongiform encephalopathy, Bovine 
Spongiform Encephalopathy, is included as an agent of concern, as its 
presence in a country can have a significant negative financial impact 
and depressing effect on the food supply. These effects are recently 
observed in Japan and earlier in England and Europe.
    Plants as well as animals may be subject to terrorist attack. The 
list of pathogens that could be used to deliberately attack crops is 
large and less well defined than for animals. As USDA prepares for the 
next phase of Homeland Security research and control measures, the 
Department will revise the lists as necessary to include expanding them 
based on updated information and additionally identified needs for 
research information and control measures. These lists of pathogens and 
vectors, where appropriate, will be a driver for the USDA approach to 
providing security for the agricultural system and confidence in the 
food supply of this country.
    As the USDA enhances its laboratory and surveillance systems to 
protect American agriculture from the deliberate introduction of threat 
agents, one of the foremost needs will be tests which can rapidly and 
with great accuracy and sensitivity detect the presence of pathogens in 
animal and plant tissues. In the case of an outbreak, portability of 
the detection systems would aid regulatory diagnosticians in limiting 
the spread of disease while preventing excessive culling of suspect 
populations. These rapid field tests are needed immediately because 
adequate vaccines are not available for the most threatening pathogens.
    The Agricultural Research Service (ARS) will utilize genomic 
sequencing of multiple strains of threat agents of plants and animals 
to provide information for development of rapid nucleic acid based 
tests for pathogen detection and also for information for antigens for 
vaccine development in subsequent phases of Homeland Security. For 
animal pathogen rapid detections systems, ARS will work closely with 
the Animal and Plant Health Inspection Service to validate tests and 
assist in transfer of reagents and protocols to regulatory 
laboratories. Plant research will begin to seek resistant germplasm. 
ARS will also develop bioinformatics tools, including pathogen 
databases, to support detection system and vaccine development.
    Question. ARS partners with land grant universities and other 
research institutions to conduct research. Which of these institutions 
have an existing capability in homeland security/bioterrorism research? 
Please provide a specific list, including the institution and its 
existing expertise.
    Answer. ARS scientists will identify university collaborators whose 
research capacity will complement their own in fulfilling the ARS 
Homeland Security research mission. The scientists will identify 
collaborators with strengths in genomics of pathogens, development of 
detection systems, and in the validation of detection systems. Each 
university collaborator will be chosen to allow ARS to rapidly conduct 
its research to deliver validated rapid detection systems for threat 
agents.
    Question. The conferees directed that funds for planning and design 
at Plum Island not be obligated until the Secretary submits the House 
and Senate Appropriations Committees the results of the Department's 
review of security issues at Plum Island and other locations. What is 
the status of this review and when can we expect to receive that 
report?
    Answer. ARS entered into a contract on May 5, 2002 with Science 
Applications International Corporation for two feasibility studies 
dealing with (a) the national need for a Biosafety Level 4 Laboratory 
and (b) the overall operational and financial merits of rebuilding the 
Plum Island Animal Disease Center in place on Plum Island or siting it 
elsewhere. These studies are scheduled for completion on August 5, 
2002.
                       economic research service
                agricultural resource management survey
    Question. The President's fiscal year 2003 budget Proposal includes 
an increase of $2.7 million for the Economic Research Service (ERS) to 
assist the National Agricultural Statistics Service (NASS) in 
reengineering the Agricultural Resource Management Survey (ARMS).
    Please explain the need for reengineering the ARMS survey in fiscal 
year 2003.
    Answer. ARMS funding has not kept pace with survey costs. The cost 
for conducting ARMS at the level of its inception in 1996 has increased 
about 35 percent. With static funds for ERS sponsored surveys, the 
sample size and scope of ARMS had to be reduced to offset these cost 
increases. Without additional funds for reengineering the ARMS, the 
2003 sample size will be approximately one-half of what it was in 1996 
and will seriously jeopardize ERS's ability to meet USDA data needs and 
provide high quality information. Instead of surveying commodities in a 
3-year cycle for commodity cost of production, commodities are now 
surveyed on a 7-year cycle at one commodity per year. The national 
sample of all farms in 2003 will only support national level estimates 
of farm income and sector economic performance.
    Question. What would be the specific role of ERS in reengineering 
the ARMS survey?
    Answer. ERS has responsibility for determining which commodity cost 
of production estimates are made each year, assuring that the 
information content reflects the changing technology and structure of 
agriculture, and addressing current policy issues. ERS staff will work 
closely with NASS staff in all phases of the survey administration, 
including the determination of appropriate sample designs, 
questionnaire development, enumerator training, development of 
computerized data edit procedures, and data analysis.
    Question. How would the additional $2.7 million be allocated within 
ERS?
    Answer. Of the $2,700,000, $2,315,000 will be transferred to NASS 
to restore the sample size of ARMS to the level of its inception in 
1996 and to provide the added samples that will allow state-level farm 
income estimates in the 15 major production States. In 
addition,$135,000 is targeted to improve the survey response rate with 
promotional materials and a training workshop for survey enumerators. 
ERS will use $250,000 to develop on-line WEB based data tabulation and 
distribution system for ERS customers. With this system, customers 
would be able to acquire customized summary tables from the ARMS 
database.
                      invasive species initiative
    Question. The budget for fiscal year 2003 also includes an increase 
of $2 million to initiate a program of work to examine the economic 
effects of invasive pests and diseases on the global competitiveness of 
U.S. agriculture.
    What specific information does ERS expect to obtain through this 
initiative that could not be extracted from other ongoing research?
    Answer. The budget initiative will fund efforts to work jointly 
with USDA's Animal and Plant Health Inspection Service in adding an 
economic dimension to invasive species risk assessment. Knowing the 
value associated with various pest and disease risks, and comparing 
this with the costs of alternative approaches to the problem 
(exclusion, monitoring and detection, eradication, management, 
indemnity, etc.) provides a sounder basis for making decisions about 
effort and fund allocation among multiple pest and disease threats, and 
different Federal plant and animal protection programs. There is no 
other ongoing research that addresses this need.
    Question. What would be the practical application of this research?
    Answer. In addition to providing information to make sounder 
decisions for fund allocation, the capability to quickly develop 
intelligence on the economic consequences of various pest-related 
scenarios is also potentially useful in addressing emergency outbreaks. 
The initiative would provide for an ongoing program in the economics of 
invasive species' threats to agriculture.
    Question. How long do you project it will take to complete this new 
program, and what are the anticipated out-year costs?
    Answer. Since specific pest threats, and the economic and trade 
conditions under which they emerge, vary from year to year, it is 
envisioned that specific projects would continuously be initiated and 
completed under the ongoing program of work, thus providing an economic 
basis for addressing unanticipated requests for compensation for pest 
damage. Annual out-year costs are expected to be constant at the $2 
million level, but may change when the fiscal year 2004 budget is 
submitted.
                national agricultural statistics service
                agricultural resource management survey
    Question. The President's fiscal year 2003 budget includes an 
increase of $4.625 million for the National Agricultural Statistics 
Service (NASS) to assist the Economic Research Service (ERS) in re-
engineering the Agricultural Resource Management Survey (ARMS).
    Please explain the need for re-engineering the ARMS survey in 
fiscal year 2003.
    Answer. ARMS is an integrated survey effort to annually monitor the 
overall financial status and well-being of American agriculture. This 
re-engineering effort will allow for consolidation of data collections 
and permit efficiencies in processing, leading to an overall reduction 
in respondent burden. To continue the collection of essential 
information to accurately portray the economic conditions and the 
production practices of the rapidly changing agricultural sector, a 
thorough re-engineering effort is required. Several related data series 
will be researched for opportunities to collaborate with the ARMS 
design.
    The ARMS costs have increased approximately 35 percent in the past 
5 years without any funding increases, resulting in significant program 
cuts and eroding statistical quality. In addition, the collection of 
Congressionally mandated cost of production data for the ERS has been 
delayed from a 3-year cycle to a 7-year cycle. Without funding to 
restore the program and funding to integrate and rebuild an efficient 
system, farm income and expenditure estimates as well as data for 
research and policy analysis will continue to erode.
    Question. What would be the specific role of NASS in re-engineering 
the ARMS survey?
    Answer. NASS is responsible for conducting the ARMS survey to 
ensure a quality and timely statistical data product for the use of 
both ERS and NASS. ERS works jointly with NASS to determine annual 
survey content and associated survey design issues. The vast majority 
of the survey re-engineering and infrastructure responsibilities fall 
to NASS. NASS designs the survey, maintains the sampling frames, 
selects the sample, develops the survey data collection instruments, 
conducts the data collection, builds the survey processing systems, and 
edits and summarizes the data. The integration of ARMS with other 
economic survey data collections will result in the re-engineering of 
these survey components. NASS has primary responsibility for the 
integrity of the ARMS data.
    Question. How would the additional $4.625 million be allocated 
within NASS?
    Answer. A large portion of the funds allocated to NASS for the re-
engineering effort will be devoted to staff resources. Resources have 
been pulled from other program areas over time to maintain the ARMS 
program, but for the last few years maintaining the program at an 
optimal level has not been possible; consequently the scope of the 
survey, sample sizes and commodity coverage have been trimmed. To bring 
the ARMS program back to optimal levels for providing high quality 
information and to re-engineer it for efficiencies, staff must be 
dedicated to planning, integrating associated data collections, re-
designing, re-programming, and processing the Agricultural Resource 
Management Survey. Significant funds will also be allocated to data 
collection costs and other direct costs such as computer charges for 
data processing, printing, training, and survey promotion.
    Question. What are the key differences between the ARMS survey and 
the Census of Agriculture that NASS conducts every 5 years?
    Answer. ARMS is USDA's primary source of information about the 
current status of and changes in the financial condition, production 
practices, environmental impacts, use of resources, and household 
economic well being of America's farmers. This detailed farm and 
enterprise level economic information is the foundation of USDA's 
research and analyses that answer key questions from the Department, 
Congress, Executive Branch officials, and other decision-makers about 
the differential impacts of alternative policies and programs across 
the farm sector. In addition, ARMS provides data for the annual 
estimates of average farm income, annual estimates of farm 
expenditures, and provides the data for the Congressionally mandated 
cost of production estimates for 14 agricultural commodities.
    The Census of Agriculture, conducted every 5 years, is essential 
for a periodic evaluation of the changing structure and demographics of 
American agriculture. It is the only source of consistent, comparable 
data at the county level. Census collected production agriculture and 
inventory data are comprehensive and include information for minor 
commodities and all States, while ARMS focuses on specific commodities, 
environmental practices, and financial and management issues in 
selected major producing States and regions.
                         census of agriculture
    Question. For the Census of Agriculture, the President's Budget 
requests an increase of $15.935 million, due to the fact that fiscal 
year 2003 will be the peak year in the 5 year cycle of the Census.
    Which specific activities take place during this peak year 
requiring so much additional funding?
    Answer. The increased funding requested in fiscal year 2003 is 
needed due to many significant data collection activities occurring in 
2003: completion of the labeling and ZIP-code sorting operations for 
roughly 3 million mail packages; mailing and follow-up data collection 
activities; and the processing and analysis of all Census of 
Agriculture records. The Computer Assisted Telephone Interview network 
and data validation systems to assist census respondents who utilize 
the toll-free information telephone lines will be brought online from a 
test environment. Training programs and instructional guidelines will 
be communicated to the NASS State offices, Puerto Rico and the outlying 
areas of Northern Marianas, Virgin Islands, and Guam. NASS will also 
purchase and install new equipment and implement the software needed to 
effectively and efficiently process, retrieve and view scanned 
questionnaire images. NASS will contract with the Commerce Department's 
National Processing Center for functions not supported by NASS's 
infrastructure. This will serve to minimize costs and provide faster, 
more efficient processing of the large census work loads. Later in 
fiscal year 2003, the Agency will devote resources to the analysis and 
summarization of census data.
    Question. What would be the affect of making the Census no-year 
funding, in the event that we hit a budget year when it might not be 
possible to increase funding for the Census to meet its cyclical needs?
    Answer. The census appropriations are no-year funds. NASS has been 
working to make program adjustments which would flatten the annual 
levels of funding; however, it is difficult to compress the collection 
and processing time and not have a funding spike. Providing data 
products as soon after the reference year as possible necessitates a 
funding increase proportional to the work requirements.
                 locality based agricultural estimates
    Question. The Budget request for fiscal year 2003 includes an 
increase of $1 million to develop an annual integrated Locality Based 
Agricultural County Estimates/Small Area estimation program. Please 
explain the need to develop this new program. Is it not possible to 
extract the local area statistics that are being requested from the 
Census data?
    Answer. The Locality Based Agricultural County Estimates/Small Area 
Estimation Program provides small area estimates on an annual basis as 
opposed to once every 5 years from the Census of Agriculture.
    The initiative will enhance the current county estimates program by 
increasing the accuracy of the statistics and will allow exploration of 
alternate ways of integrating the Census of Agriculture with the 
comprehensive annual county estimates data sets. The county estimates 
program provides annually over 125,250 estimates to the Risk Management 
Agency (RMA). These estimates are currently used directly in the 
indemnity calculations for RMA's Group Risk Plans and the Group Risk 
Revenue Plans. RMA also uses NASS county estimates yield as a proxy 
when an individual farmer's yield history is not available. The county 
estimates are used as part of the risk rating process and thus have an 
impact on premium levels paid by producers. NASS county estimates have 
become even more critical to agricultural producers and RMA since the 
passage of The Agricultural Risk Protection Act of 2000 which provides 
an additional Federal investment of $8.2 billion in the program over 5 
years and mandates group-risk alternatives in the Catastrophic Risk 
Protection coverage.
    In addition, funding of this initiative will allow satellite 
technology to be expanded into 3 additional major crop producing States 
to provide a valuable geographic information system (GIS) data layer on 
crops for areas other than counties. Data layers can be drawn numerous 
ways; for example, watersheds, townships, Indian Reservations, grain 
transportation zones, potential crop disease outbreak zones, and animal 
habitats. This allows aggregate commodity totals to be calculated for 
various geographic areas and uses.
                              e-government
    Question. The fiscal year 2003 budget request includes an increase 
of $3 million for e-Government data dissemination and electronic data 
reporting to address the Government Paperwork Elimination Act (GPEA) 
allowing individuals to transact with NASS electronically.
    What specific activities are necessary to comply with the 
Government Paperwork Elimination Act?
    Answer. The GPEA mandates that agencies must offer electronic 
methods of transacting business with our customers, when practicable, 
by October 2003. NASS, USDA's statistical agency, collects primary 
agricultural information from voluntary responses by farmers and agri-
businesses on hundreds of surveys and disseminates information to the 
public. Farmer reported data are protected by law. NASS published data, 
already electronically available, should be made more user friendly. 
The NASS focus to meet GPEA requirements is to develop electronic data 
reporting (EDR) capabilities so data providers can supply needed 
information in ways and times more convenient to them. To offer EDR, 
NASS must ensure that the EDR process does not degrade data quality, 
that response rates do not decline due to respondent frustration, and 
that the security of the reported data is not compromised. NASS has a 
business plan to develop the EDR architecture with a pilot scheduled 
for 2002. The EDR system will be deployed in 2003. NASS has identified 
30 ``simple and repetitive'' surveys to offer Web reporting as an 
option for respondents in 2003. Complex surveys will not be 
``practicable'' for EDR until they have been studied and useability 
tests conducted to insure data quality. In 2004, thirty additional 
``complex'' surveys will offer web reporting. By 2006 all surveys that 
should offer EDR will be available, and in 2007, the Census of 
Agriculture will be offered electronically for data reporting. 
Development of the EDR system which addresses the GPEA mandate is just 
the first phase of transforming NASS for e-Government.
    Question. How would the $3 million be allocated within NASS in 
order to comply with the Government Paperwork Elimination Act?
    Answer. The $3 million will be allocated to the following areas to 
support the development of the NASS EDR system: EDR security including 
hardware, licenses, certificates, and support staff; software puchases 
or development, training, and supporting staff; conversion of 
questionnaire metadata to a new metadata repository; setup costs, 
travel, training and staff for useability testing; technical and 
general support to internal and external customers; the development of 
tools to link processes; training; marketing of EDR; and a project 
manager to oversee the implementation of the plan.
 cooperative state research, education, and extension service (csrees)
                         integrated activities
    Question. The fiscal year 2003 budget for the Cooperative State 
Research, Education, and Extension Service (CSREES) proposes to move 
the Critical Issues and Regional Rural Development Centers programs 
from the Research, Education, and Extension Activities account to the 
competitive Integrated Activities account. Previously, in the fiscal 
year 2000 budget, USDA requested and the Congress moved funding for 
programs such as Water Quality, Food Safety, and Pesticide Impact 
Assessment to the newly-authorized Integrated Activities account.
    What has been the advantage of funding programs under Integrated 
Activities as opposed to research and education and extension accounts?
    Answer. Programs funded under the Integrated Activities account use 
several authorities that CSREES has to fund projects that address the 
agency's research, education, and extension mission. These authorities 
encourage technology transfer.
    Funding research, education, and extension under Section 406 of 
AREERA holds several advantages. The integrated program is open to a 
broad array of colleges and universities. All colleges and 
universities, including the 1890 institutions, Hispanic-serving 
institutions and non-land-grant colleges are eligible to compete for 
funds under these programs, thereby broadening the range of topics 
proposed and building research, extension, and education capacity in 
the agricultural programs of non-1862 land grant institutions. Grants 
under the Section 406 integrated authority are awarded competitively, 
as required by law; therefore all proposals are judged on technical 
merit with only the best projects funded. Most importantly, the 
integrated program more closely links the research activities with 
extension and education activities, and are designed to transfer 
results of the research to producers and the general public more 
quickly than pure research programs.
    The Agricultural Research, Extension, and Education Reform Act of 
1998, (AREERA) expanded the Special Grant authority to include 
extension and education activities. The Critical Issues and Regional 
Rural Development Centers programs will be conducted under the Special 
Grant authority, Section 2(c)(1)(B) of Public Law 89-106, as amended. 
This will allow these programs to focus on research, education, and 
extension activities in keeping with the expanded Special Grant 
authority.
    Question. Why are Critical Issues and Regional Rural Development 
Centers appropriate candidates to be moved to the Integrated Activities 
account?
    Answer. The proposed realignment of the Critical Issues Special 
Grant to the Integrated Activities account will achieve greater 
integration of research and extension activities. The Critical Issues 
Special Grant will address new or re-emerging plant and animal pests 
and diseases issues and will be awarded on a peer-reviewed competitive 
basis. The proposed combining of the Rural Development research and 
extension activities into a single program in the Integrated Activities 
account will achieve greater integration of research and extension 
activities. Funding in fiscal year 2003 will continue to support 
research and extension activities at the four Rural Development Centers 
located at Pennsylvania State University, Iowa State University, 
Mississippi State University, and Utah State University. Each Center 
addresses stakeholder-driven priorities within its region to enhance 
rural communities and foster economic development.
    Question. Are there other research and extension programs that you 
suggest might be better served by being moved to the competitive 
Integrated Activities account?
    Answer. Section 406 of the Agricultural Research, Extension, and 
Education Reform Act of 1998, authorizes an integrated, multifunctional 
research, education, and extension competitive grants program. Using 
this authority, funding has supported not only the linkage of research, 
education, and extension activities but also projects and programs 
which span and combine all three activities into one cohesive effort. 
As with the Food Safety and Water Quality program, an issue whose 
resolution spans research, education, and extension would lend itself 
to an integrated, multifunctional program.
                           rural development
    Question. The President's budget for fiscal year 2003 does not 
provide for new construction of rural multi-family housing and limits 
funding to loans for repair, rehabilitation, and preservation. As part 
of this proposal, USDA has initiated a study of the entire multi-family 
housing portfolio to determine ways to carry out the program more 
efficiently. Do you believe that an interruption in construction of new 
rural multi-family housing would be detrimental to very low-income 
tenants that utilize this rural housing program?
    Answer. Rural Housing Service has an excellent track record of 
providing Multi-Family Housing to rural America and will continue to do 
so. We currently provide affordable rental homes to approximately 
468,000 rural households at 17,500 properties nationwide. We provide 
subsidized rental units in 1,870 counties of the United States. The 
majority of these rental homes are occupied by some of the most 
vulnerable households in America, single, elderly women, and families 
headed by women. The average adjusted household income of residents in 
Rural Housing Service multifamily housing is $8,100, a figure below 30 
percent of the median rural income.
    Although we have not proposed funding new construction under the 
Section 515 program in fiscal year 2003, we believe it is appropriate 
during this period to analyze the ongoing needs in rural America for 
multi-family housing and the costs associated with providing funding 
under the program. From the analysis, we will better be able to 
determine if the Section 515 program is the most effective method, in 
terms of cost to the Federal government and in delivery, in which to 
meet these needs.
    Question. A significant decrease ($250 million) in distance 
learning and telemedicine direct loans is proposed for fiscal year 
2003. Do you not believe that such a large decrease in loans could 
result in a backlog for this important program that provides a crucial 
link between rural communities and urban medical facilities?
    Answer. Since the Distance Learning and Telemedicine Program's 
inception, more than 90 percent of this program's benefits have come 
from grant funding. Experience indicates that rural health care 
clinics, and especially educational providers, simply cannot afford 
loans to implement their projects. In addition, schools and school 
districts are prohibited by law from entering into long-term debt 
agreements in many States. Since the program began to make loans in 
1997, only $13 million in loans have been approved over 5 years. The 
$50 million in lending authority requested is sufficient to meet the 
demand from larger, consortium-based entities with the necessary 
resources to collateralize a loan.
    Question. An important part of the rural development portfolio is 
the Rural Community Advancement Program (RCAP) which includes water and 
waste disposal grants and loans. Last year, increasing funding for the 
water and waste programs was a priority of this Committee. Can you give 
us the total backlog for the water and waste disposal program to date?
    Answer. There are currently 497 incomplete applications and 504 
applications on hand for water and waste grants for a total of 1,001. 
The amount requested by these applications is $507,727,679 incomplete 
applications and $498,880,923 applications for a total of 
$1,006,608,602. There are currently 831 incomplete applications and 722 
applications on hand for water and waste loans for a total of 1,553. 
The amount requested by these applications is $1,362,365,191 incomplete 
applications and $1,014,868,140 applications for a total of 
$2,377,233,331.
    Question. In the Senate Farm Bill that is now in conference with 
the House a provision has been included that would alleviate the 
backlog for not only the water and waste programs but also other 
programs within the rural development area. The Congressional Budget 
Office (CBO) scored this provision at $454 million. This seems to be a 
rather conservative estimate of the backlog. Do you agree with this 
estimate? If the backlog for water and waste programs is cleared, where 
will this bring us in our effort to deliver safe drinking water and 
proper waste water systems to all households in America?
    Answer. The $454 million is a reasonable figure for the backlog of 
complete applications. It accounts for the funds already available for 
obligation in fiscal year 2002. The amount of applications changes 
daily as applications are approved and additional applicants apply for 
assistance. Also, the amount of budget authority needed changes as 
applications progress as some applicants will need less grant and more 
loan than originally applied for. The $454 million will certainly go a 
long way in getting us closer in our efforts to deliver safe drinking 
water and proper wastewater systems to all households in America.
    Question. The technical assistance that circuit riders provide to 
communities in order to conform with the increase in drinking water 
regulations that affect small systems is invaluable and has been a 
priority of this Committee. An additional fifteen States are expected 
to receive a much needed third circuit rider this year due to the $1.5 
million increase provided. Do you believe that additional States would 
benefit from a third circuit rider if increased funds were available 
for fiscal year 2003?
    Answer. We believe that additional States would benefit from an 
additional circuit rider if increased funds were available for fiscal 
year 2003. However, we had to make tough choices when developing our 
budget. The budget does not provide funding for additional circuit 
riders.
 farm service agency (fsa), rural development (rd), natural resources 
               conservation service (nrcs) field offices
    Question. Would you please outline your plan and time line for the 
review of the field office structure mentioned in the budget?
    Answer. We have established a working group under the direction of 
the National Food and Agriculture Council to review the field office 
structure of the Farm Service Agency, Natural Resources Conservation 
Service and Rural Development agencies and to develop a plan for 
consolidating field office operations in order to improve efficiency. 
The target for completion of the review and implementation plan is no 
later than September 30, 2002.
    Question. How was the goal of co-locating at least 200 addition 
offices in 2003 established and how will it be accomplished?
    Answer. This number was arrived at during budget negotiations. The 
criteria used to determine the 200 offices reflects Farm Service Agency 
and Natural Resources Conservation Service offices that: (1) were 
slated for closure as part of the 1994 reorganization plans, (2) are 
within 25 miles drive of another office, (3) are stand-alone offices 
with only one agency represented, or (4) have 3 or fewer employees. The 
working group mentioned in the previous question is reviewing these 
criteria and offices, but has not completed their analysis or 
recommendations to date.
    Question. With respect to restructuring or consolidating the 
administrative support of field offices, what are your plans and time 
frames? What are the ``administrative support'' services and functions 
for these offices that will be part of this effort?
    Answer. We have established a working group for restructuring 
administrative functions under the National Food and Agriculture 
Council. The team established task groups in mid-March with plans for 
completing assessments and initial reports by mid-May. The 
administrative areas that are being reviewed include Civil Rights, 
procurement and contracting, administrative directives, and human 
resources. The project goal is to provide realistic and achievable 
options for significantly increasing efficiency of the administrative 
operations in Service Center agencies.
    Question. What is your plan for centralizing loan servicing 
functions now performed by these offices?
    Answer. During the development of the President's fiscal year 2003 
budget, the Office of Management and Budget requested an analysis of 
the Farm Service Agency's (FSA) Farm Loan Program to ascertain if 
functions of that program could be centralized. The FSA has performed 
an internal analysis of its loan servicing methodology to determine 
which phases of the process might lend themselves to centralization. 
The next step in this analysis will be to perform a detailed cost-
benefit assessment to determine if any cost savings or other 
efficiencies could be realized by centralizing some loan servicing 
activities. This cost-benefit analysis will take into consideration not 
only any potential cost saving, but also the impact centralization may 
have on loan repayments, loan subsidy rates, and overall program 
integrity. We expect to have the results of this assessment available 
in time to prepare the President's fiscal year 2004 budget.
                       cochran fellowship program
    Question. I am pleased that the budget proposes a $1 million 
increase in appropriations for the Cochran Fellowship Program. I note 
that this increase would not only support an additional 150 program 
participants but the initiation of new programs in Jordan and Lebanon. 
Are there any other countries seeking entry into the program?
    Answer. In addition to Jordan and Lebanon, we expect that the most 
likely new country for fiscal year 2003 will be Egypt. The majority of 
the additional funding will be used to increase the size of the program 
in current countries, most likely in Asia and Latin America.
    Question. In past years, additional support for the Cochran 
Fellowship Program has been provided through the emerging markets 
program and by AID. Is this additional support expected to continue 
this year and in fiscal year 2003?
    Answer. In fiscal year 2002, the Cochran Fellowship Program 
received additional support from both AID and the emerging markets 
program: $1.4 million from AID to support Cochran Program activities in 
the former Soviet Union, and $675,000 from the emerging markets program 
to support Cochran Program activities in Russia, Latin America, and the 
Caribbean. We expect similar support in fiscal year 2003.
                                food aid
    Question. While the budget requests a substantial increase in 
appropriations for Public Law 480 Title II to consolidate and 
``improve'' the delivery of food aid, food aid provided through the 
Commodity Credit Corporation Food for Progress and 416(b) programs is 
to be severely curtailed. Won't this proposal sharply reduce food aid 
tonnage, as compared to levels estimated to be provided this fiscal 
year and in fiscal year 2001? Just what is that comparison, i.e., the 
level of food aid tonnage proposed in the fiscal year 2003 budget as 
compared to the total levels estimated to be provided for fiscal year 
2002 and provided in fiscal year 2001? Please provide both in terms of 
value of commodities and in terms of million metric tons of grain.
    Answer. The fiscal year 2002 program level for Section 416(b) 
consists of $400 million in new funding, plus carry in from fiscal year 
2001. While Section 416(b) donations that rely on CCC purchases are to 
be phased out in fiscal year 2003, much of that reduction is offset by 
the $335 million increase in Title II funding. In addition, Section 
416(b) authority will be retained and USDA plans to use it to move 
existing surpluses of non-fat dry milk. The availability of the Bill 
Emerson Humanitarian Trust will allow for greater flexibility in 
meeting emergency food needs.
    [Regarding the food aid levels for fiscal years 2001--2003, the 
information follows:]

                                                       FOOD AID PROGRAMMING--FISCAL YEAR 2001-2003
                                                                     [In thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Public Law 480  Public Law 480  Public Law 480                      Food in
                       Fiscal year                          title I \1\      title II        title III    Section 416(b)   progress \2\        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commodity Costs:
    2001................................................      $105,200.0      $438,675.0  ..............      $629,989.6      $107,110.8    $1,280,975.4
    2002 \3\............................................      $108,400.0      $500,574.8  ..............      $303,346.0      $109,257.9   $41,021,578.7
    2003 \4\............................................      $106,676.0      $555,000.0  ..............       $49,600.0       $25,000.0      $736,276.0
Metric Tons:
    2001................................................           753.2         2,134.0  ..............         3,039.1           436.3         6,362.6
    2002 \3\............................................           628.3         2,545.0  ..............         1,415.8           394.2         4,983.2
    2003 \4\............................................           530.0         2,765.0  ..............            25.0           125.0         3,445.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Public Law 480 Title I column includes concessional sales portion of Title I, and not Title I-funded Food for Progress.
\2\ Food for Progress column includes Title I-funded and CCC-funded Food for Progress.
\3\ Fiscal year 2002 values represent estimates as of 4/10/02. Fiscal year 2002 Title II includes the commodity cost portion of carry-over ($94.1
  million) and supplemental funding ($95 million) enacted in response to the September attacks.
\4\ Fiscal year 2003 values are estimates submitted with fiscal year 2003 President's Budget. Section 416(b) estimate is for non-fat dry milk (from CCC
  inventory).
 
Note: Tonnages are provided in actual metric tons Metric ton grain equivalents are not available for all programs.

    Question. Which agencies participated in the review of the food aid 
programs that produced the reform proposals included in the President's 
fiscal year 2003 budget? What was the focus and extent of this review? 
Is there a report?
    Answer. The U.S. Department of Agriculture, U.S. Agency for 
International Development, Department of State, Department of Treasury, 
National Security Council, Office of Management and Budget, and Office 
of the U.S. Trade Representative participated in the review. The 
National Security Council chaired the review.
    The objective of the review was to improve the reliability, 
efficiency, and management of food aid programs. As a result of the 
review there will be increased emphasis on Public Law 480 Title II, 
which is the primary U.S. overseas food aid donation program. The 
Administration has requested a $335 million increase in Title II 
funding (which is used for humanitarian and development purposes) in 
light of the decision to phase out Section 416(b) donations that rely 
on the purchase of surplus commodities by CCC.
    Question. The U.S. Maritime Administration now reimburses USDA for 
one-third of the ``cargo preference'' law that requires 75 percent of 
all food aid be shipped on U.S. flag vessels when feasible. The budget 
proposes that these costs be fully borne by USDA. Why?
    Answer. The budget proposes to eliminate reimbursements by the 
Maritime Administration to other agencies for part of cargo preference 
costs. The full costs of cargo preference will be funded directly 
through the food aid programs. The 2003 budget includes $45 million in 
the Public Law 480 budget request to offset the elimination of Maritime 
Administration reimbursements. The Maritime Administration will 
continue to assist FAS and USAID in ensuring compliance with cargo 
preference requirements.
    There are a number of different considerations behind this 
proposal. First, it will end problems that have arisen associated with 
trying to coordinate funding for shipments of food aid commodities 
among different agencies. Difficulties in identifying what actually 
constitutes increased freight costs and the time necessary to gather, 
transmit, and review documentation evidencing the increase have greatly 
added to the administrative burden and costs of operating our foreign 
food aid programs.
    Second, in the interest of increased governmental efficiency, this 
proposal will eliminate a duplication in financing mechanisms for 
payment of cargo preference costs and an inefficient inter-governmental 
transfer of funds.
    Third, the proposed change will eliminate delays associated with 
receipt of reimbursement payments, which can hamper shipments at the 
end of the fiscal year and affect our ability to meet program goals.
    For these reasons, USDA strongly supports this proposal.

                          SUBCOMMITTEE RECESS

    Senator Kohl. Our next hearing will be on Wednesday, March 
20 at 2 p.m., in this room, when we will hear from 
representatives of the CFTC, the FDA, and the Department of 
Agriculture on issues of public health, nutrition and 
regulatory programs.
    If there is no other business to come before the committee, 
we are recessed.
    [Whereupon, at 11:53 a.m., Thursday, March 14, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]










AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2003

                              ----------                              


                       WEDNESDAY, MARCH 20, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Herb Kohl (chairman) presiding.
    Present: Senators Kohl, Durbin, Cochran, and Stevens.

                  COMMODITY FUTURES TRADING COMMISSION

STATEMENT OF JAMES E. NEWSOME, CHAIRMAN

                 OPENING STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. The subcommittee will come to order. We 
welcome all of our guests here today. The number of witnesses 
we have and the complexity and the importance of the issues 
that will be covered is daunting. I cannot think of more 
important work than that with which you are charged here today.
    Americans rely on you for nothing less than the safety and 
the quality of the food we eat and the drugs that we need to 
stay healthy. I want to make special mention of our first 
witness, Dr. James Newsome, chairman of the Commodity Futures 
Trading Commission. All the members of this subcommittee were 
extremely relieved that all of your employees were able to 
escape the Twin Towers on September 11. We commend you and all 
the CFTC employees for the exemplary manner in which you were 
able to continue your work and to look after one another 
immediately following the tragedy.
    Our second panel here today will consist of Dr. Elsa 
Murano, USDA Under Secretary for Food Safety; Mr. William 
Hawks, Under Secretary for Marketing and Regulatory Programs; 
and Mr. Eric Bost, Under Secretary for Food, Nutrition and 
Consumer Services. The primary responsibility of these 
departments is keeping food safe and available at every point 
in the supply chain for food coming to our tables. This 
involves ensuring that devastating plant and animal diseases 
such as BSE and Foot and Mouth disease never cross our borders. 
It includes responsibility for expanding domestic and 
international marketing of U.S. agricultural products, and for 
working to resolve agricultural trade problems such as those 
now involving China and Russia.
    Most importantly, it means running the programs that combat 
hunger in America. Hunger dulls the student. It distracts the 
worker, weakens the elderly and cripples the very young. 
Without adequate nutrition, none of our other attempts to 
improve the lives of Americans through government policy will 
mean very much.
    Finally, on our third panel, we will hear from Dr. Lester 
Crawford, newly appointed as Deputy Administrator of the Food 
and Drug Administration. Yesterday it was reported that FDA 
plans to lift the requirement that drug makers test their 
products to make sure they are safe for children. I have been 
monitoring this situation and expect Dr. Crawford to address 
this at today's hearing.
    We have many issues to cover today. Personally, I am 
interested to see how each agency is spending the supplemental 
funding we provided last year, and I am hopeful this 
information will be available at this, our last hearing on the 
President's budget. Following opening statements made by 
Senator Cochran and my other colleagues, we will hear opening 
statements from and ask questions of each panel individually.
    We have a very full hearing today, so we ask all of our 
witnesses to keep their summaries brief in order to maximize 
the amount of time we have for questions. I will now turn to my 
friend and distinguished ranking member of this Committee for 
his opening statement.

                   STATEMENT OF SENATOR THAD COCHRAN

    Senator Cochran. Mr. Chairman, thank you very much. I am 
pleased to welcome the witnesses who are here to testify before 
our subcommittee today. We appreciate your cooperation with our 
subcommittee as we review the budget request submitted to the 
Congress by the President. The areas coming under the 
jurisdiction of the agencies that are represented here today 
are very important and I am not going to take the time of the 
witnesses to make an elaborate opening statement, except to say 
that we are very interested in your comments about the budget 
request. Your assistance in helping us understand the request, 
the highlights and the importance of these activities, is 
greatly appreciated. So, we thank you for your presence.
    Senator Kohl. Thank you, Senator Cochran. Before we turn to 
our first witness, I would ask Senator Stevens to make a few 
comments if he wishes.

                    STATEMENT OF SENATOR TED STEVENS

    Senator Stevens. I will have a question when the time 
comes, Mr. Chairman.
    Senator Kohl. Thank you, Senator Stevens. Mr. Newsome, we 
welcome you here today, as well as Mr. Bevill. It has been a 
while since we have asked you to come testify before us, so we 
appreciate your being here today. And now you may begin your 
testimony.

                     STATEMENT OF JAMES E. NEWSOME

    Mr. Newsome. Thank you very much, Mr. Chairman, Senator 
Cochran, Senator Stevens. I appreciate the opportunity to be 
here to testify on behalf of the Commodity Futures Trading 
Commission. I have included detailed background information in 
the Commission's written testimony, so therefore I will be 
brief with you this morning.
    Congress has charged the Commission with maintaining market 
integrity, and protecting market participants against 
fraudulent and abusive practices. These markets continue to 
increase in complexity and volume, with trading volumes 
doubling in just the last 10 years. Yet, the Commission 
fulfills its mission with just over five hundred employees. 
Last year, in addition to our normal responsibilities, we were 
tasked with implementing the Commodity Futures Modernization 
Act. However, unforseen events would increase our workload even 
more.
    First, two of the four largest futures exchanges were based 
in lower Manhattan: the New York Board of Trade and New York 
Mercantile Exchange. The Commission worked to assist the 
industry in restoring the operation of these important markets. 
Additionally, Mr. Chairman, as you so noted, the CFTC's New 
York regional office was located on the 37th floor of the first 
World Trade Center. Again, we are thankful that all of our 
employees escaped without any major physical injury.
    We are particularly appreciative and grateful for the 
assistance of this subcommittee in securing the supplemental 
funding which was needed to recover and to prepare adequately 
for the future. We have recently completed a detailed report on 
both our own and our industry's efforts to recover from the 
attacks and to prepare, as we must, for future disasters we 
hope never to face. A copy of that is attached to the written 
statement.
    Second, Enron's rapid financial deterioration last fall 
caused concern over whether its futures positions could be 
closed out without causing undue volatility or reducing 
liquidity. Because Enron was a large trader of energy-based 
contracts on the New York Merc, its trading activity has been 
monitored by our market surveillance staff for quite some time. 
The Commission staff worked closely with the clearing house and 
affected futures commission merchants and helped ensure an 
orderly closeout of Enron's positions.
    The markets themselves reacted well with little or no 
adverse impact on volatility or liquidity. We have opened a 
formal investigation and have made inquiries both to Enron and 
other Federal agencies that are investigating Enron to 
determine whether their conduct violated the Commodity Exchange 
Act. Separately, at the request of the President, we are 
working with the SEC, the Fed and the Treasury to review 
potential improvements in accounting, auditing and disclosure 
practices by publicly held companies.
    The President's fiscal year 2003 budget request for the 
Commission is $82.8 million with a staffing level of 537 full-
time equivalents. This request represents an increase of $9.1 
million, or 12 percent, above the 2002 appropriation. The 
request also calls for an increase of 27 staff years above the 
current base of 510, which is the lowest staffing level since 
1988. Approximately $5.9 million of the increase is required 
for the Commission to maintain its current level of services. 
The remaining $3.2 million would support the additional 27 
staff positions.
    This request would increase and enhance the Commission's 
information technology capacity, as well as increasing staffing 
for our enforcement, market surveillance and CFMA 
implementation efforts. The largest portion of the requested 
increase, an additional 10 staff years, will be applied to 
ensuring that our technological capacities will provide 
effective oversight of an industry with platforms and products 
that are constantly evolving based upon technological 
innovations. This increase will assist all of our divisions.
    The requested increase will also cover two additional 
positions for the enforcement program. These positions will be 
augmented by the dollar resources available from the anti-
terrorism supplement funds which will go toward our E-law 
project. We believe the increase the President has requested 
for fiscal year 2003 is essential for the Commission to fulfill 
its Congressional mandate.
    Our staff level has been at 592 in recent years, but I 
believe that we can effectively fulfill our current 
responsibilities with fewer than 540 FTEs if they are 
sufficiently well skilled and experienced. This budget request 
does not include funds to provide pay parity with other Federal 
financial regulators. However, as the only financial regulator 
still limited by the pay restrictions in Title V, we have 
recently had to pay retention allowances to our attorneys and 
economists in an attempt to reduce our very high turnover 
rates. Despite this effort, our turnover rate for 2001 of 10 
percent was almost twice the government-wide average.
    Among attorneys, a large professional component of our 
staff, the rate was 16 percent versus a government-wide average 
of 7 percent and an SEC rate of 10 percent. The year before it 
was 20 percent, and our 5 year average is now 18 percent among 
attorneys. Three-quarters of those who leave report doing so 
for financial reasons. But, fully half of these go not to the 
private sector, but rather to other Federal financial 
regulators.

                           PREPARED STATEMENT

    Mr. Chairman, I respectfully request this committee's 
support in removing the agency from Title V restrictions 
regarding pay so we may successfully compete with other 
financial regulators in hiring and retaining the dedicated 
staff we need to accomplish our mission. Thank you very much, 
Mr. Chairman.
    [The statement follows:]

                 Prepared Statement of James E. Newsome

    Thank you, Chairman Kohl, and members of the Subcommittee. I am 
pleased to be here to testify before you on behalf of the Commodity 
Futures Trading Commission and I appreciate the opportunity to discuss 
issues related to the Commission's budget. I would like also to briefly 
review the important role of the futures markets in our economy and the 
role of the CFTC in overseeing those markets--and how that role has 
changed under the Commodity Futures Modernization Act of 2000.
Background
    Futures based on agricultural products, non-agricultural physicals, 
and financial items have come to serve the risk management needs of 
businesses in virtually every sector of the U.S. economy. While farmers 
and ranchers continue to use futures contracts to safely lock in the 
prices for their crops and herds months before they come to market, 
manufacturers now also use futures contracts to plan their raw material 
costs. Exporters reduce uncertainty over the prices they receive for 
finished products sold overseas. Mutual fund managers and individual 
investors use stock index futures to protect against market volatility. 
And electricity generators use futures contracts to secure stable 
pricing for their coal and natural gas needs.
    Although the primary purpose of futures markets is risk management, 
it should be noted that many futures markets play another important 
role in the economy, that of price discovery. Many investors and 
businesses that are not direct participants in the futures markets 
nonetheless refer to the quoted prices of futures market transactions 
as reference points or benchmarks for other types of transactions and 
decisions. This is particularly important in many agricultural markets 
where no other means of price discovery exists outside of the quoted 
futures prices, but it is also true in other sectors, including many 
energy markets.
    Congress created the Commission in 1974 as an independent agency 
and charged it with deterring and preventing price manipulation and 
other disruptions to market integrity, ensuring the financial integrity 
of transactions to avoid systemic risk, promoting responsible 
innovation and fair competition in these markets, and protecting all 
market participants against fraudulent or other abusive sales practices 
and from misuse of customer assets. The CFTC has traditionally had 
three operational divisions: Economic Analysis (DEA), Trading and 
Markets (T&M), and Enforcement (DOE). DEA has helped the Commission--
through market surveillance, market analysis, and market research--to 
fulfill its responsibility to promote competitive markets free of 
manipulation or congestion. T&M has developed, implemented, and 
interpreted regulations that protect customers, prevent trading and 
sales practice abuses, and assure the financial integrity of firms that 
hold customer funds. DOE has investigated and prosecuted alleged 
violations of the Commodity Exchange Act and the Commission's rules.
    Recently, to ensure its ability to properly oversee trading in 
single stock futures and the many other innovative products and 
platforms that I believe will flourish under the CFMA, we restructured 
our staff to make the agency more responsive, more effective, and more 
efficient. The main thrust of the new structure will be that functions 
previously performed by T&M and DEA will now be performed by two new 
divisions and one new office: the Division of Market Oversight, the 
Division of Clearing and Intermediary Oversight, and the Office of 
Chief Economist. Additionally, the Offices of Public Affairs and of 
Legislative and Intergovernmental Affairs were combined to form the new 
Office of External Affairs.
How the CFTC Performs Its Mission
    In seeking to fulfill its mission, the Commission focuses on issues 
of integrity. We seek to protect the economic integrity of the futures 
markets so that they may operate free from manipulation or congestion. 
We seek to protect the financial integrity of the futures markets so 
that the insolvency of a single market participant does not become a 
systemic problem affecting other market participants or financial 
institutions. We seek to protect the operational integrity of the 
futures markets so that transactions are executed fairly, so that 
proper disclosures are made to customers, and so that fraudulent sales 
practices are not tolerated.
    The Commission pursues these goals through a multi-pronged approach 
to market oversight. We seek to protect the economic integrity of the 
markets against manipulation and congestion through direct market 
surveillance and through oversight of the surveillance efforts of the 
exchanges themselves. The heart of the Commission's direct market 
surveillance is a large-trader reporting system, under which clearing 
members of exchanges, futures commission merchants (FCMs), and foreign 
brokers electronically file daily reports with the Commission. These 
reports show all trader positions above specific reporting levels set 
by CFTC regulations. Because a trader may carry futures positions 
through more than one FCM and because a customer may control more than 
one account, the Commission routinely collects information that enables 
its surveillance staff to aggregate information across FCMs and for 
related accounts.
    Using these reports, the Commission's surveillance staff closely 
monitors the futures and option market activity of all traders whose 
positions are large enough to potentially impact the orderly operation 
of a market. For contracts which at expiration are settled through 
physical delivery, such as contracts in the energy complex, staff 
carefully analyzes the adequacy of potential deliverable supply. In 
addition, staff monitors futures and cash markets for unusual movements 
in price relationships, such as cash/futures basis relationships and 
inter-temporal futures spread relationships, which often provide early 
indications of a potential problem.
    The Commissioners and senior staff are kept apprised of market 
events and potential problems at weekly surveillance meetings and more 
frequently when needed. At these meetings, surveillance staff briefs 
the Commission on broad economic and financial developments and on 
specific market developments in futures and option markets of 
particular concern.
    If indications of attempted manipulation are found, the DOE 
investigates and prosecutes alleged violations of the Act or 
regulations. Subject to such actions are all individuals who are or 
should be registered with the Commission, those who engage in trading 
on any domestic exchange, and those who improperly market commodity 
futures or option contracts. The Commission has available to it a 
variety of administrative sanctions against wrongdoers, including 
revocation or suspension of registration, prohibitions on futures 
trading, cease and desist orders, civil monetary penalties, and 
restitution orders. The Commission may seek Federal court injunctions, 
restraining orders, asset freezes, receiver appointments, and 
disgorgement orders. If evidence of criminal activity is found, matters 
may be referred to State authorities or the Justice Department for 
prosecution of violations not only of the Commodity Exchange Act but 
also of State or Federal criminal statutes, such as mail fraud, wire 
fraud, and conspiracy. Over the years, the Commission has brought 
numerous enforcement actions and imposed sanctions against firms and 
individual traders for attempting to manipulate prices, including the 
well-publicized cases against Sumitomo for alleged manipulation of 
copper prices and against the Hunt brothers for manipulation of the 
silver markets.
    In protecting the financial integrity of the futures markets, the 
Commission's two main priorities are to avoid disruptions to the system 
for clearing and settling contract obligations and to protect the funds 
that customers entrust to FCMs. Clearinghouses and FCMs are the 
backbone of the exchange system: together, they protect against the 
financial difficulties of one trader becoming a systemic problem for 
other traders. Several aspects of the oversight framework help the 
Commission achieve these goals with respect to traders: (1) requiring 
that market participants post margin to secure their ability to fulfill 
obligations; (2) requiring participants on the losing side of trades to 
meet their obligations, in cash, through daily (sometimes intraday) 
margin calls; and (3) requiring FCMs to segregate customer funds from 
their own funds.
    The Commission also works with the exchanges and the National 
Futures Association (NFA) to closely monitor the financial condition of 
the FCMs themselves, who must provide the Commission, exchanges, and 
NFA with various monthly, quarterly, and annual financial reports. The 
exchanges and NFA also conduct annual audits and daily financial 
surveillance of their respective member FCMs. Part of this financial 
surveillance involves looking at each FCM's exposure to losses from 
large customer positions that it carries. As an oversight regulator, 
the Commission reviews the audit and financial surveillance work of the 
exchanges and NFA but also monitors the health of FCMs directly, as 
appropriate. We also periodically review clearinghouse procedures for 
monitoring risks and protecting customer funds.
    As with attempts at manipulation, DOE investigates and prosecutes 
FCMs alleged to have violated financial and capitalization requirements 
or to have committed other supervisory or compliance failures in 
connection with the handling of customer business. Such cases can 
result in substantial remedial changes in the supervisory structures 
and systems of FCMs and can influence the way particular firms conduct 
business. This is an important part of fulfilling the Commission's 
responsibility for ensuring that sound practices are followed by FCMs.
    Protecting the operational integrity of the futures markets is also 
accomplished through the efforts of several divisions. T&M has 
promulgated requirements that mandate appropriate disclosure and 
customer account reporting, as well as fair sales and trading practices 
by registrants. T&M has sought to maintain appropriate sales practices 
by screening the fitness of industry professionals and by requiring 
proficiency testing, continuing education, and supervision of these 
persons. Extensive recordkeeping of all futures transactions is also 
required. T&M has also monitored compliance with those requirements and 
supervised the work of the exchanges and NFA in enforcing the 
requirements.
    As with the Commission's efforts to protect the economic and 
financial integrity of the futures markets, DOE also plays an important 
role in deterring behavior that could compromise the operational 
integrity of the markets by investigating a variety of trade and sales 
practice abuses that affect customers. For example, the Commission 
brings actions alleging unlawful trade allocations, trading ahead of 
customer orders, misappropriating customer trades, and non-competitive 
trading. We also take action against unscrupulous commodity 
professionals who engage in a wide variety of fraudulent sales 
practices against the public.
September 11 and Enron
    The Commission began last year with a full plate of tasks relating 
to implementation of the Commodity Futures Modernization Act, but two 
unforeseen events would increase its workload even more: the World 
Trade Center attacks and the Enron bankruptcy. The New York Regional 
Office of the Commission was located on the 37th floor of 1 World Trade 
Center. Thankfully, all of our employees escaped without major physical 
injury. Using backup systems and with help from staff of the Chicago 
Regional Office and D.C. headquarters, we provided ongoing surveillance 
of futures markets in the hours and days immediately following the 
tragedy.
    Two of the four largest commodity futures exchanges regulated by 
the CFTC were based in Lower Manhattan: the New York Board of Trade and 
the New York Mercantile Exchange. Both were drastically impacted on 
September 11 and trading did not resume on either exchange for several 
days. Other futures exchanges, in Chicago and elsewhere, were also 
impacted by events in New York, particularly by the closing of the 
stock markets, and experienced temporary interruptions in trading. 
However, in its preparedness and by its responses to this unprecedented 
disaster, the futures industry demonstrated foresight, resilience, and 
determination. Steady leadership, thoughtful contingency plans, prudent 
investments in redundant facilities and backup systems, the ingenuity 
of technical staffs, and the courage and tenacity of everyone in the 
industry, made possible a remarkably fast and effective resumption of 
trading, restoring for the U.S. economy rapid access to risk-management 
and price-discovery tools uniquely provided by the futures industry. 
The Commission, in coordination with local authorities, other Federal 
financial regulators in the President's Working Group on Financial 
Markets, the Congress, and the White House, strove to assist the 
industry in restoring operation of these important markets.
    The Commission has been working steadily for the last 6 months to 
fully reestablish its permanent presence in New York City. At the end 
of April, the Commission will move into permanent space in Lower 
Manhattan from our temporary quarters in Jersey City, New Jersey. The 
Commission and its staff are particularly appreciative and grateful for 
the assistance of this Subcommittee in securing the supplemental 
funding we needed to recover and to prepare adequately for the future. 
The Commission has completed a detailed report on both its own and the 
industry's efforts to recover from the attacks and to prepare, as we 
all must, for future disasters we hope never to face. A copy of that 
report is attached hereto.
    The Commission also found itself with new challenges following 
initial disclosures of Enron's financial difficulties last autumn. 
Because Enron was a large trader of energy-based contracts traded on 
NYMEX, its on-exchange activity had been monitored by our market 
surveillance staff for some time. However, the rapid financial 
deterioration of Enron last year presented an additional concern for 
the Commission: Could Enron's on-exchange futures positions be closed 
out without causing sudden price volatility or unduly reducing 
liquidity? In fact, Enron was but one of many significant participants 
in these large and liquid markets and the markets proved to be quite 
resilient. When its financial difficulties became known and Enron 
voluntarily closed out its positions, the futures markets reacted well, 
with little or no adverse impact on price volatility or liquidity.
    As would the financial difficulties of any large futures customer, 
Enron's difficulties also raised concerns about the ability of the FCM, 
that carried Enron's on-exchange futures positions to successfully 
close out those positions if Enron were to fail to meet margin calls. 
When Enron's financial troubles became known last fall, T&M staff 
worked closely with the NYMEX clearinghouse and the affected FCMs to 
monitor and manage the closing out of these positions. By appropriately 
adjusting margin requirements, the clearinghouse was able to ensure 
that adequate Enron funds remained on deposit at the FCMs. By the time 
of Enron's bankruptcy filing, the risks to which FCMs were exposed, as 
measured by standard margin requirements, had dropped by 80 percent 
from only a week earlier. By mid-December, all of Enron's positions on 
the regulated exchanges had been liquidated. I believe this episode was 
a success for the system of financial controls in on-exchange futures 
markets. There were no disruptions to clearance and settlement system. 
Enron met all its obligations. No customer lost funds entrusted to any 
FCM. Obviously, as an oversight regulator, we will continue to look at 
how and why markets respond the way they do, whether well or poorly, to 
a situation such as this one.
    As the facts surrounding Enron's collapse have unfolded over the 
last several months, the Commission has made a variety of inquiries 
both to Enron and other Federal agencies investigating Enron to 
determine whether Enron's conduct may have violated the Commodity 
Exchange Act. We are obtaining information from Enron and other sources 
to determine how it conducted its trading business and whether it 
functioned within the bounds of applicable exclusions and exemptions 
under the Act. The Commission is also working with the SEC, FERC, and 
the Justice Department to ensure that we keep each other apprised of 
relevant information developed in our respective investigations.
    Separately, as a member of the President's Working Group on 
Financial Markets, I have worked with Secretary O'Neill, Chairman 
Greenspan, and Chairman Pitt to review for the President potential 
improvements in accounting, auditing, and disclosure practices by 
publicly-held companies.
Implementation of the Commodity Futures Modernization Act
    Certainly events last year caused many of us to pull attention away 
from previous plans and intended courses of action. But implementation 
of the CFMA remains the most important task before this Commission. And 
notwithstanding the unexpected challenges, solid progress was made last 
year on security futures products. We are continuing to move toward 
permitting trading of these new products at the earliest possible date.
    As many of you know, we have issued final rules on notice 
registration, listing standards, self-certification of rules and rule 
amendments, data reporting, speculative position limits, and dual 
trading of single-stock futures. Together with the SEC, we have also 
issued final rules on determining if an index is a narrow-based index 
subject to joint regulation or a broad-based index subject only to our 
rules. With the SEC, we have published proposed rules on margin, 
customer funds protection issues, cash settlements, and trading halts. 
The NFA has developed numerous rules required by its new capacity as a 
limited-purpose national securities association.
    Chairman Pitt and I agreed generally last year on how to best 
address the issues that remain before us and we issued a joint 
statement on December 21st, 2001, the first anniversary of the CFMA's 
enactment, expressing our commitment to promulgation of final rules on 
margin and customer funds protection at the earliest possible date, 
with a goal of permitting actual trading by early in the second quarter 
of this year. I remain committed to meeting that objective but I 
believe that in the long term issuing the right rules is as important 
as issuing rules quickly.
    We are also looking forward to completing the intermediary study 
called for by the CFMA and are considering proposals for rule 
modernization. We have finalized our timeline for the phases of this 
important project, including individual interviews which we hope to 
conduct in late March and early April, public hearings planned for late 
April, circulation of a final report prior to June 21st, and 
promulgation of rule amendments as appropriate.
Budget Request for Fiscal Year 2003
    The President's fiscal year 2003 budget request for the CFTC is 
$82.8 million. That sum represents an increase of $9.1 million (or 12 
percent) over the fiscal year 2002 regular appropriation. Of that $9.1 
million, approximately $5.9 million is required to maintain the current 
level of services and operations. The remaining $3.2 million is being 
requested for an additional 27 staff years over the current base of 510 
FTEs, which is the lowest staffing level since fiscal year 1988.
           overview of funding levels and operational effects
    The Commission's top budget priorities are to dedicate resources to 
fully implement the CFMA and to invest in the technology improvements 
needed to increase the Commission's ability to continue fulfilling its 
mission in the face of the rapid technological change that is sweeping 
the futures industry.
    Our request for 27 additional positions should improve our ability 
to keep pace with the rapid growth in volume, innovative products and 
transactions, new trading systems, evolving market practices, 
technological advances, and market globalization. The largest staff 
increase--an increase of ten--will go to information technology because 
the effective use of information technology is critical to our ability 
to fulfill our mission. It is critical that our information technology 
capacity stay on par with industry practices so that we can provide the 
timely and accurate information in a relevant format to our 
investigators, analysts, and attorneys.
    The budget also calls for an increase in two staff years for the 
Enforcement program. This staff growth will be augmented by 
supplemental anti-terrorism intended to allow us to significantly 
upgrade our litigation, case, and document imaging and management 
systems through implementation of the ``E-law'' project. this system 
will enable staff to image all documents received or created during 
investigations and litigation. Those imaged documents--as well as all 
on-line annotations, notes, work products, and case information 
relevant to each matter (such as names and phone numbers for witnesses, 
counsel, and staff at other agencies involved in the matter, etc.)--
will be available to Commission staff despite destruction of the paper 
documents, as happened in New York. We expect this system to increase 
productivity in DOE as well as to assist the Office of General Counsel 
and the Office of Proceedings.
    In fiscal year 2003, the Market Surveillance, Analysis, and 
Research program will gain five positions. This 7 percent increase 
should allow us to keep pace with the growth in new types of exchanges 
and products, such as single-stock futures, as well as provide the 
proper level of surveillance, exchange oversight, contract design 
review, and market and product studies. However, it is difficult to be 
sure that resource levels are adequate because so much is not known at 
this time about the direction of the markets. If, for example, growth 
in the industry outpaces the resources available to oversee the 
industry, several risks are introduced, including the increased 
possibility of undetected price manipulations and abusive trading 
practices. A key goal of the Commission is to ensure that its 
regulatory policies reflect industry developments and do not to impede 
beneficial market innovation. But because these markets and the 
products traded on them are increasingly complex, it will be difficult 
to meet this goal without the proper level of staff resources.
    The T&M programs which will become part of our new Market Oversight 
and Clearing and Intermediary Oversight will together gain four 
positions, or 4 percent of staff, in fiscal year 2003. These functions 
play important roles in developing regulatory reform initiatives are 
key to full implementation of the CFMA. In fiscal year 2003, in 
addition to providing guidance to the public and industry professionals 
concerning compliance with the CEA, the programs will continue to 
review Commission rules to determine if they should be streamlined 
further in light of technological and market developments, to provide 
guidance to foster innovative transactions and electronic trading 
systems, and to monitor the risks to regulated industry participants by 
unregulated derivatives activities as well as the risks posed to 
registrants by their unregistered affiliates. In addition, these 
programs help maintain U.S. leadership in setting internationally 
acceptable standards for the regulation of markets and trading. Again, 
however, we cannot say with certainly that this increase will be 
sufficient because the pace of industry transition is uncertain. It is 
the Commission's objective to be equipped to respond as quickly as 
desired to these critical challenges and their associated interested 
parties.
    Finally, the Office of the General Counsel is slated for an 
increase of one FTE to ensure it is able to provide for the timely 
review of contract market designation applications, rule changes, and 
proposed enforcement actions; to provide for thorough and timely review 
and analysis of legislation and proposed legislation affecting the 
Commission and in defending the Commission in appellate and other 
litigation; and to assist the Commission in the performance of its 
adjudicatory functions.
                   employee attrition and pay parity
    The Commission continues to face a serious challenge in attracting 
and retaining the type of highly skilled and experienced staff that is 
needed to operate effectively with our new responsibilities under the 
CFMA. The Commission must move from the role of a front-line regulator 
to a more flexible oversight role. Some might believe that, in this new 
capacity, the agency will need fewer resources than in the past. In the 
near term, anyway, just the opposite is true. The CFMA liberated 
markets and allowed innovation to flourish, creating new financial 
products and new trading platforms and permitting clearinghouses to 
respond in kind. I believe we have seen only the beginning of this 
exciting process.
    This growth and innovation in the marketplace will provide real 
benefits to participants, customers, and the economy as a whole. 
However, because our fundamental duties have not changed, this growth 
and innovation will place increasingly greater demands on our 
resources. With new exchanges and alternate trading platforms, there is 
no longer a ``template'' to follow; rather, oversight must now be 
tailored to fit a variety of markets along a spectrum of regulatory 
classifications from basic fraud and manipulation protections to full 
oversight. To continue to fulfill our mission to promote markets free 
from congestion and manipulation and to protect market participants 
from fraud and abusive practices, we must have staff with the proper 
training and with solid experience in the markets we oversee.
    All too often, however, we lose good people just as they are coming 
into their own as economists, commodity lawyers, and trading 
specialists. Our overall turnover rate is twice the Federal average. 
Among attorneys it is almost 20 percent annually and we have seen the 
average tenure of a new attorney decrease from 5 years to 3 years. In 
most, if not all, cases our ability to compensate skilled people lags 
not only far behind that of the private sector, but also well behind 
that of the other Federal financial regulators, where turnover rates 
are significantly lower. We are now the only Federal financial 
regulator still subject to the pay restrictions of Title V. The SEC 
recently was exempted from Title V but their recruitment and retention 
problems, according to the statistics, are less serious than our own. 
It is difficult enough to accept the loss of a productive employee to a 
higher-paying job in the private-sector but it is downright frustrating 
to lose such an employee to another Federal agency because of disparate 
pay scales. Therefore, Mr. Chairman, I respectfully request this 
Committee's support for removing the Commission from Title V pay 
restrictions so we may successfully hire and retain the dedicated staff 
we need to accomplish the important mission that we have in front of 
us.
    Thank you for the opportunity to present our mission, 
responsibilities, and resource needs. I would be happy to provide 
answers to any questions you may have.
                                 ______
                                 
 Commodity Futures Trading Commission on the Futures Industry Response 
                            to September 11
                    the role of the futures markets
    The Commodity Futures Trading Commission (the Commission or CFTC) 
is charged under the Commodity Exchange Act with deterring and 
preventing price manipulation and other disruptions to market 
integrity, ensuring the financial integrity of transactions in the 
commodity futures and option markets so as to avoid systemic risk, 
promoting responsible innovation and fair competition in these markets, 
and protecting all market participants against fraudulent or other 
abusive sales practices and from misuse of customer assets. Through 
oversight regulation, the CFTC enables the futures markets to serve 
better their two key functions in the economy: a mechanism for managing 
risk and a means of price discovery.
    Futures markets exist primarily to provide a mechanism for managing 
risk, principally price risk. Producers, distributors, and users of 
physical commodities--as well as those exposed to fluctuation in 
financials such as currencies, interest rates, and stock index values--
use futures contracts to manage (or ``hedge'') their exposure to risk. 
Thus, disruption of a futures market can cause significant economic 
hardship for the users of these hedging tools.
    Futures markets also perform a second function: they enable other 
markets to discover appropriate prices for commodities (and the 
products or services derived from commodities) by referencing quoted 
futures markets transactions. Businesses, investors, and even 
government entities throughout the economy depend upon these important 
price discovery mechanisms. Thus, disruption of a futures market can 
cause widespread economic hardship for those who look to it for price 
discovery information. For example, observers have noted that had the 
New York Mercantile Exchange, Inc. not succeeded in restoring operation 
of its market for futures contracts based on crude oil so quickly and 
smoothly after the attacks, then the domestic and global stock markets 
might have suffered drastically.
    There are 16 domestic futures exchanges designated by the 
Commission as contract markets. Approximately 65,000 persons are 
registered as floor brokers, floor traders, introducing brokers, 
associated persons, futures commission merchants, and commodity trading 
advisors. Although contracts for agricultural commodities have been 
traded in the U.S. for almost 150 years, the industry has in recent 
years expanded rapidly into many new markets. Futures and option 
contracts are now offered in a vast array of financial instruments, 
including foreign currencies, domestic and foreign government 
securities, and domestic and foreign stock indices.
    There are more than 240 contracts actively traded on U.S. futures 
exchanges, twice as many as a decade ago, and the volume of trading has 
also doubled in the last 10 years. The four largest exchanges are the 
Chicago Board of Trade (CBT), Chicago Mercantile Exchange (CME), New 
York Mercantile Exchange, Inc. (NYMEX), and New York Board of Trade 
(NYBOT) but there are other futures exchanges, regional and electronic, 
that also play important roles.
                          the role of the cftc
    Congress created the Commission in 1974 as an independent agency 
with the mandate to regulate commodity futures and option markets in 
the United States. The Commission consists of five Commissioners who 
are appointed by the President and confirmed by the Senate, one of whom 
is designated by the President to serve as Chairman. The CFTC 
headquarter offices are located in Washington, D.C. The Commission also 
maintains large regional offices in Chicago and New York, and smaller 
regional offices in Kansas City, Los Angeles, and Minneapolis.
    The CFTC has three operational divisions: the Division of Economic 
Analysis (DEA), Division of Trading and Markets (T&M), and Division of 
Enforcement (DOE). DEA helps the Commission--through market 
surveillance, market analysis, and market research--to fulfill its 
responsibility to promote markets free of manipulation or congestion so 
that they best serve the risk-shifting and price-discovery needs of the 
U.S. and world economies. T&M develops, implements, and interprets 
regulations that protect customers, prevent trading and sales practice 
abuses, and assure the financial integrity of firms that hold customer 
funds. DOE investigates and prosecutes alleged violations of the 
Commodity Exchange Act and the Commission's rules.\1\
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    \1\ The Commission recently announced a reorganization plan to 
combine key elements of DEA and T&M into a single market oversight 
function, and will use other elements of T&M to oversee intermediaries. 
A separate office of chief economist will also be established.
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    The Commission also has an Office of the General Counsel (OGC), 
which serves as its legal advisor, and an Office of the Executive 
Director (OED), which provides management services to support the 
Commission's programs. The Office of the Chairman includes the Office 
of International Affairs (OIA), which assists the Commission in 
responding to global market and regulatory changes by coordinating the 
Commission's international activities; the Office of Legislative and 
Intergovernmental Affairs (OLIA), which facilitates communications with 
Congress, other Federal agencies, and State Governments; and the Office 
of Public Affairs (OPA), which serves as the Commission's liaison with 
the news media, user groups, and the general public.\2\
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    \2\ The reorganization will also combine OLIA and OPA into a single 
Office of External Affairs (OEA).
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Impact of the Terrorist Attacks
    The futures industry demonstrated preparedness, resilience, and 
flexibility in the aftermath of the attacks. NYMEX and NYBOT, despite 
being directly and severely impacted by the September 11 attacks, 
successfully responded by following established contingency plans and/
or by skillfully adapting to unforeseen challenges and new operational 
realities. NYMEX initially resumed trading on Friday, September 14th, 
using internet access to its electronic trading platform. It resumed 
open outcry trading on Monday, September 17th, after remarkable efforts 
to restore the functionality of its floor trading facility located only 
one block from the World Trade Center. NYBOT, whose facilities in 4 
World Trade Center were destroyed, moved quickly into a well-conceived, 
well-resourced backup facility in Queens, complete with trading rings, 
and resumed its open-outcry trading operations on Monday, September 
17th.
    The Chicago exchanges were not physically impacted and, after 
closing their markets to observe an industrywide day of recognition on 
September 12th, resumed trading in all but their equity-based contracts 
on September 13th. Trading by all exchanges in contracts based on U.S. 
equities was suspended until the reopening of the underlying stock 
markets.
    All clearing organizations for the futures exchanges and the banks 
that they utilize were prepared to function as soon as the exchanges 
reopened. Clearing operations were fully successful upon this 
resumption of trading. Virtually all reporting firms (futures 
commission merchants, clearing members, and foreign brokers) that are 
required to submit large trader data to the CFTC were able to do so as 
soon as trading activities resumed. This was accomplished through 
either their main computing facilities or backup locations. The CFTC's 
market surveillance large trader automated computer system was not 
disabled in any way.
Preparedness Efforts
    The firms, clearinghouses, exchanges, and industry associations 
that make up this important industry had in place prior to the 
terrorist attacks a variety of preparedness measures and contingency 
plans for disaster recovery and business continuity. This event 
produced an unprecedented opportunity for plans and preparations to be 
tested and, as it turned out, some organizations were better able to 
withstand and recover from the disruption. Plans and measures that 
proved most effective in preparing certain market participants to 
better handle this disaster can and should be held up as benchmarks, 
guidance, and inspiration to all market participants as the industry 
seeks to prepare itself, as it must, for disasters that it hopes never 
to face.
    The CFTC, like other financial regulators, learned much about the 
adequacy of its own contingency plans. The CFTC had in place a Market 
Disruption Contingency Plan that set forth appropriate procedures to 
implement and relevant information to collect in the event of extreme 
market volatility, financial emergency, or disruption to physical or 
electronic facilities. During a period of such market disruption, 
designated CFTC staff are responsible under the Plan for: (i) 
collecting and analyzing information from various markets, market 
participants, and different self-regulatory organizations; (ii) 
communicating information to the Commission concerning market events 
and conditions and possible regulatory responses; and (iii) 
disseminating information and regulatory responses to markets, market 
participants, regulatory and self-regulatory organizations, other 
Federal financial regulators, Congress, and the public.
    The appropriate regulatory responses under the Plan vary from one 
market event to another but fall broadly into the categories of: 
identification and oversight of market moves, ``first day'' responses, 
subsequent follow-up and intensified oversight, and responses to 
particular market-related emergencies (such as the distress of a 
financial institution, physical emergencies, and major system 
malfunctions). In addition, the Commission prepared itself for 
potential problems connected with the year 2000 date rollover by 
developing contingency plans focused on failures in building 
infrastructure services and mission-critical information systems.
    It is fair to say, however, that neither the Market Disruption 
Contingency Plan nor the Commission's Y2K contingency plan contemplated 
the scope of disaster experienced on September 11, which included the 
destruction or dislocation of two major exchanges and numerous trading 
firms combined with the destruction of a regional office of the 
Commission itself. Accordingly, the Commission, like many market 
participants, must now undertake a strategic review of every facet of 
its preparedness and contingency plans, both in terms of disaster 
recovery and business continuity. From instituting better backups of 
data and more complete archiving of institutional knowledge, to 
enhancing organizational flexibility and responsiveness in times of 
crisis, the Commission faces the challenge of ensuring the effective 
survival of its abilities to fulfill its core mission and accomplish 
its public policy goals.
    It is the Commission's hope that--by sharing through this initial 
report what it has learned thus far about its own preparedness as a 
Federal financial regulator, and about the preparedness efforts of the 
exchanges, clearinghouses, and firms that it oversees--it may benefit 
both other financial regulators and financial services firms in other 
industry sectors that are also reexamining their policies, procedures, 
and practices in the aftermath of September 11.
    This report is organized into three parts. The first part describes 
the efforts of the futures industry to resume operations as quickly as 
possible. The second part summarizes the Commission's efforts to 
restore its own operational capabilities and respond to administrative 
challenges in the aftermath of the attacks, challenges of the type also 
faced by many market participants displaced from the World Trade Center 
and surrounding area. Finally, the third part reviews what has been 
learned thus far about the disaster recovery and business continuity 
plans of both market participants and the Commission and discusses 
areas where further discussion, analysis, and cooperation within the 
industry and with the Commission may prove fruitful.
                     reopening the futures markets
    Two of the four largest commodity futures exchanges regulated by 
the CFTC were based in Lower Manhattan: NYBOT and NYMEX. Both were 
drastically impacted on September 11 and trading did not resume on 
either exchange for several days. Other futures exchanges, in Chicago 
and elsewhere, were also impacted by events in New York, particularly 
by the closing of the stock markets, and experienced temporary 
interruptions in trading.
    In its preparedness and by its responses to this unprecedented 
disaster, the futures industry demonstrated foresight, resilience, and 
determination. Steady leadership, the creativity of technical staffs, 
and the courage and tenacity of everyone in the industry, made possible 
a remarkably fast and effective resumption of trading, restoring for 
the U.S. economy rapid access to risk-management and price-discovery 
tools uniquely provided by the futures industry. The Commission, in 
cooperation with other Federal financial regulators, Congress, and the 
White House, strove to assist the industry in restoring operation of 
these important markets.
Tuesday, September 11
            The New York Board of Trade
    NYBOT and its subsidiary exchanges were located in the World Trade 
Center complex. The Coffee, Sugar & Cocoa Exchange (CSCE) and the New 
York Cotton Exchange (NYCE) shared a trading floor in 4 World Trade 
Center.\3\
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    \3\ CSCE comprises Division A of NYBOT. NYCE, which includes two 
subsidiary exchanges, the New York Futures Exchange and the Citrus 
Associates of the New York Cotton Exchange, Inc., constitutes Division 
B of NYBOT. NYCE's Financial Instrument Exchange (Finex) Division also 
trades various currency futures products on a trading floor located in 
Dublin, Ireland, during non-trading hours in New York.
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    The Cantor Financial Futures Exchange (CX) had its central matching 
computer and terminal operations in 1 World Trade Center.\4\ At 8:45 
a.m. on September 11, NYBOT suspended trading and successfully 
evacuated all of its staff and members from its facilities at 4 World 
Trade Center. By that time, the following NYBOT markets had opened for 
trading: NYCE's Finex Division, at 8:05 a.m., and CSCE's Cocoa market, 
at 8:30 a.m.\5\
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    \4\ Although not a subsidiary of NYBOT, CX is owned by NYCE and 
NYBOT members and NYBOT provides regulatory services for CX. CX trades 
various U.S. Treasury futures products.
    \5\ The Finex Division had been open for trading on the Dublin 
trading floor from 3:00 a.m. to 8:00 a.m., New York time, on September 
11. Finex trades executed prior to the attack on September 11 cleared 
on the 11 using settlements from the 10th. With respect to other NYBOT 
markets, all open orders from September 11 were declared cancelled and 
any trades executed in the Cocoa market during the 15 minutes it was 
open were declared null and void and none were accepted for matching or 
clearing.
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    The other NYBOT markets had not yet opened when the evacuation was 
ordered. The Cantor facilities were located on the highest floors of 1 
World Trade Center and were destroyed with a horrendous loss of life 
before any evacuation could be effected. At the time of the attack, 
trading at CX was open on its 23-hour trading platform.\6\
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    \6\ No trades were executed during the CX trading session on 
September 11. All open positions on CX were subsequently closed 
pursuant to block transactions and trading in futures contracts was 
suspended effective September 17th. Trading on CX remains suspended at 
this time.
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    NYBOT had in place a remarkably well thought out, well resourced 
contingency plan and immediately began preparing to resume trading from 
its back-up facility in Queens, which had been established after the 
1993 bombing of the World Trade Center. It includes both a data center 
and a trading floor equipped with two open-outcry pits. All NYBOT 
trading and clearing data were fully backed up and kept current at this 
alternate site.
            The New York Mercantile Exchange
    NYMEX moved several years ago from the World Trade Center complex 
to One North End Avenue, several blocks away. Shortly after 9:00 a.m. 
on September 11, NYMEX suspended trading and successfully evacuated its 
facilities. At that time, the following markets had opened: on the 
COMEX Division, the metals markets (copper, aluminum, gold and silver) 
had opened at various times between 7:50 a.m. and 8:25 a.m. and the 
FTSE Eurotop contracts had opened at 5:00 a.m. and on the NYMEX 
Division, the metals markets (platinum and palladium) and the propane 
markets had opened at various times between 8:10 a.m. and 8:30 a.m.\7\ 
Other NYMEX markets, including crude oil, unleaded gas, natural gas, 
and heating oil, had not opened by the time of the evacuation.\8\
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    \7\ The NYMEX ACCESS trading session, which had opened for most 
contracts at 4:00 p.m. on September 10th, ended at 9:00 a.m. on 
September 11. Except for the FTSE Eurotop contracts, all NYMEX futures 
contracts could be traded on NYMEX ACCESSR.
    \8\ All NYMEX and COMEX Division trades executed on September 11 
were subsequently matched and cleared. However, due to system and 
processing differences between the two divisions, the procedures varied 
slightly. NYMEX trades executed on the trade date of September 11 were 
ultimately cleared using settlements from September 10th, the prior 
trade date. COMEX Division trades executed on the trade date of 
September 11 were ultimately cleared with trades done in the NYMEX 
ACCESSR system for the trade date of September 14th. Banking functions 
associated with this trading activity for both divisions were conducted 
on Monday, September 17th.
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    Although it did not maintain a backup facility for open-outcry 
trading, NYMEX did have backup computer and data storage systems in 
place to support its trading and clearing activities. However, these 
systems were housed on Cortland Street, only one block east of the 
World Trade Center complex, and were inaccessible to NYMEX staff. \9\
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    \9\ NYMEX did subsequently move computers and other equipment to 
establish back-up systems at a location in New Jersey.
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    NYMEX began holding emergency meetings of its board of directors on 
the morning of the 11. These meetings, conducted initially by 
conference call and later in the homes of exchange managers and hotel 
ballrooms, would continue around the clock. NYMEX was successful early 
on in contacting the White House, emphasizing the important price 
discovery role played by energy-based futures markets such as that for 
West Texas Intermediate Crude, and securing a commitment from the 
Federal Emergency Management Agency (FEMA) to provide its ``full 
support'' to NYMEX's recovery effort.
            Other Commodity Futures Exchanges
    At the time of the attack, the agricultural futures and option 
markets had not yet opened in Chicago, Kansas City, or Minneapolis and 
each of the exchanges in those cities decided not to open for trading 
that day. The financial contracts (interest rates and foreign exchange) 
had opened and were promptly closed. The New York Stock Exchange and 
the Nasdaq Stock Market, which do not open until 9:30 a.m., never 
opened on September 11. By early in the afternoon, all of the exchanges 
had begun discussing the issue of whether or not to attempt to resume 
trading on Wednesday, September 12th.
            The Regulators--Communication and Coordination
    After making the decision on Tuesday morning to send all non-
essential personnel in the D.C. and other regional offices home for the 
remainder of the day and establishing a procedure for contacting 
Commission employees who had been evacuated from the New York regional 
office in 1 World Trade Center, the Commission's Acting Chairman 
convened a meeting of senior staff to address several issues of 
immediate concern: (1) ensuring that unauthorized access to futures 
exchanges would be blocked in the event economic terrorism was being 
contemplated from any quarter; (2) discovering as quickly as possible 
the situation facing each of the New York futures exchanges and 
providing whatever support or information possible to those exchanges; 
and (3) coordinating with other Federal financial regulators to keep 
the White House and Congress informed on the condition of the U.S. 
financial markets.
    Concerns in the first category were quickly allayed as the 
Commission confirmed that all boards of trade under its supervision 
were closed. Commission staff next began contacting exchanges and 
industry associations to gather contact telephone numbers for managers 
of the New York exchanges. By mid-afternoon, the Commission was able to 
reach executives of both NYMEX and NYBOT at their homes and to learn 
basic information about the status of the exchanges: that the NYMEX 
facility appeared to be intact but might be inaccessible for some time, 
that the primary NYBOT facility was likely destroyed but that a backup 
facility existed in Queens, and, most importantly, that both exchanges 
appeared to have been successful in getting most of their people safely 
out of the World Trade Center complex.
    Coordination with other Federal financial regulators had already 
begun by this time, enabling the Commission to inform the New York 
exchanges that other futures exchanges in Chicago and elsewhere, as 
well as the securities exchanges, had decided on their own not to open 
for any trading on Wednesday, September 12th, in recognition of the 
tragedy that had befallen their colleagues in New York's financial 
district.
    Before noon, the CFTC had participated in a password-protected 
``all markets'' call hosted by Nasdaq with market participants and 
regulators representing the stock, options, and commodity futures 
markets. At 1:00 p.m., the CFTC participated in the first call among 
the President's Working Group on Financial Markets (PWG), which is 
normally chaired by the Secretary of the Treasury and also includes the 
Chairmen of the Federal Reserve Board (Fed), the Securities and 
Exchange Commission (SEC), and the CFTC. Although meetings of the PWG 
are normally hosted at the Treasury Department, security concerns near 
the White House had led to closure of key Treasury offices and the PWG 
conference calls during this period were therefore hosted by the Vice 
Chairman of the Fed.
    The Acting Chairman of the CFTC emphasized to the other PWG members 
that the futures exchanges had expressed strong concerns, with which he 
agreed, that it was imperative for banks, financial markets, and 
regulators to closely coordinate their responses to market 
interruptions. During this initial call, the PWG discussed the need for 
coordinated reopenings of the financial markets following what by then 
appeared would be an almost certain day of voluntary closures by all 
U.S. exchanges on Wednesday, September 12th. The members agreed to a 
convene for a series of conference calls to ensure coordination of 
their efforts.
    In a subsequent conference call on Tuesday, the PWG members 
confirmed that each supported the voluntary decisions of exchanges to 
remain closed on Wednesday, September 12th, as prudent in light of 
security, access, and safety concerns at some exchanges and as 
respectful of the tragedy that had befallen colleagues and associates. 
Also discussed was the assessment that the nation's financial 
infrastructure remained intact and strong and that trading in all 
financial products would resume as soon as practicable.
    On Tuesday evening, the CFTC participated in another all-markets 
call hosted by Nasdaq, during which the major stock exchanges agreed to 
announce their decision to remain closed on Wednesday. Participants 
also discussed various operational issues. Later in the evening, the 
CFTC spoke again with NYBOT managers to discuss various issues, 
including NYBOT's offer to share scarce space and trading time at its 
backup facility with NYMEX. This spirit of cooperation echoed a 
separate invitation by NYMEX for NYBOT to share space in the NYMEX 
facility when access thereto could be restored.
    The Commission also kept Congress apprised of events on Tuesday, 
September 11. Before 11:00 a.m., the Commission's Office of Legislative 
and Intergovernmental Affairs (OLIA) had notified the staffs of key 
committees of the loss of the New York regional office, the decision to 
send home non-essential staff, and the apparent voluntary closure of 
all futures exchanges. The Commission also monitored international 
developments.
    On September 11, staff of the Commission's Office of International 
Affairs (OIA) were at the Washington, D.C. offices of the Federal 
Reserve, meeting with the 28 members of the joint task force on 
securities clearing and settlement systems, which includes members of 
the Committee on Payment and Settlement Systems of the Bank for 
International Settlements, composed of central bankers from the G10 
countries and the International Organization of Securities Commissions 
(IOSCO), which represents securities regulators from more than 100 
jurisdictions. That evening, OIA contacted the Futures Industry 
Association (FIA) to offer assistance and to receive any information 
that would be of interest to non-U.S. regulatory authorities.
Wednesday, September 12th through Friday, September 14th
            NYBOT
    NYBOT was able to make effective use of its website, updating it 
four or five times each day with information for traders, employees, 
and others, as the exchange continued to ready its backup facility and 
its members for the resumption of open-outcry trading there.
            NYMEX
    NYMEX reported that its first priority, after ascertaining the 
safety of evacuated staff, was to assess its facilities. Well before 
dawn on Wednesday, a team of managers volunteered to investigate the 
condition of the exchange's primary facility. New York City Police 
officers escorted them for part of the trip but they had to walk in the 
last eight blocks. The team found that emergency generators were 
running and that the building appeared to be in very good shape.
    Notwithstanding the absence of significant damage to the facility, 
it would still take several days and would require overcoming many 
challenges, including the lack of electricity and water utilities and 
the need to transport large numbers staff into Manhattan via water 
ferry, before NYMEX could resume even its electronic trading.\10\ NYMEX 
was successful in doing just that, getting key people into the facility 
and overcoming connectivity issues, security considerations, and 
software compatibility challenges in order to reopen the trading of 
NYMEX products on a never-before-utilized web-based version of its 
electronic trading platform, NYMEX ACCESSR.\11\ Beta testing was 
conducted on the morning of the 14th, and trading on the system 
commenced at 2:30 p.m. that day.\12\
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    \10\ Problems with AT&T frame relay circuits in Lower Manhattan 
made it impossible to accomplish electronic trading without an 
immediate migration from NYMEX's proprietary communications network to 
the internet.
    \11\ Prior to the attack, NYMEX ACCESSR utilized a closed 
proprietary network exclusively. The launch of the new web-based 
version of NYMEX ACCESSR had been scheduled for early September but had 
been delayed for various reasons.
    \12\ A pre-opening session was held from 2:00-2:30 p.m. NYMEX 
ACCESSR went down from 2:38-4:00 p.m. to correct a problem with user 
profiles and trading rights. Once resolved, NYMEX ACCESSR remained open 
until 6:00 p.m.
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            Other Exchanges
    On Thursday, September 13th, all futures exchanges outside of New 
York reopened for trading. With respect to CBT and CME, the key issue 
was whether member firms with offices and banks located in or near the 
World Trade Center were able to conduct business, in particular whether 
they were able to meet their financial and data transmission 
obligations to the clearing organizations. Stock index futures and 
option markets remained closed because the U.S. equities exchanges, 
particularly the New York Stock Exchange, had not yet reopened.
            The Regulators
    The Commission continued to participate actively in multiple daily 
calls among industry participants, both directly and through the all-
markets calls hosted by Nasdaq, and among the members of the PWG. To 
optimize the Commission's information-gathering efforts, Acting 
Chairman Newsome delegated to Commissioner Holum responsibility for 
overseeing coordination and communication with international markets 
and regulators, to Commissioner Spears responsibility for monitoring 
the agricultural and physical commodity markets, and to Commissioner 
Erickson responsibility for fielding issues with respect to technology 
and operational matters. These delegations proved to be very useful. 
For example, through the efforts of Commissioner Spears, the Commission 
was able to assist NYMEX in its efforts to regain access to its 
facility for key technical staff by communicating clearly and quickly 
to the National Economic Council, which served as liaison to FEMA, the 
importance and urgency of NYMEX's need.
    Commissioner Erickson and his staff participated in conference 
calls coordinated by the FIA that focused on the immediate needs of 
futures commission merchants (FCMs) and exchange clearing members, many 
of whom were directly impacted by the attacks. These firms needed to 
re-establish electronic contact with the clearinghouses and clearing 
banks so that the necessary transfers of records and funds could be 
made among firms, clearinghouses, and exchanges. The Managed Funds 
Association (MFA) was also actively reaching out to its memberships, 
including commodity pool operators and commodity trading advisors 
registered with the Commission, to facilitate communication of 
information to, from, and about affected members in New York.
    On the market surveillance front, the Commission's DEA staff 
examined the positions of large traders and clearing members in equity 
index futures to assess financial exposures prior to the resumption of 
trading in equities on September 17th. CFTC staff also provided large 
trader position data to the surveillance staffs of NYMEX and NYBOT 
until they could gain access to their own surveillance systems.
    OLIA continued to keep Congressional staff informed of developments 
and, by that afternoon, was able to update its reports to Congressional 
staff to inform them of the confirmed destruction of NYBOT's primary 
facility, the apparent survival but inaccessibility of NYMEX's 
facility, the availability of a NYBOT backup facility, generous offers 
of support within the futures community (such as CME's offer to provide 
NYMEX with electronic trading capability and the Minneapolis Grain 
Exchange's offer of space on its trading floor), the cooperative 
efforts of the Chicago exchanges to coordinate their reopenings in non-
equity contracts, the apparent success of all clearing activities, and 
the cooperative efforts of the Federal financial regulators.
    By Thursday morning, OLIA was able to report to Congressional staff 
that the safety of every employee in the Commission's New York office 
had been confirmed. Congressional and White House staff were invited to 
attend a special meeting of the Commission on Thursday to discuss the 
reopening of trading in non-equity based futures contracts and other 
market surveillance issues. Key White House and Congressional staff, as 
well as representatives from the Department of Agriculture, attended 
this meeting. As the markets closed on the first day of trading in non-
equity futures contracts, OLIA reported to Congressional staff that 
trading was active but orderly with adequate liquidity and price 
variations within normal ranges on the Chicago and other Midwest 
exchanges.
    Also during this period, OLIA kept the CFTC's Acting Chief of 
Staff, Executive Director, and finance staff apprised of Congressional 
developments pertaining to emergency funding. By Friday afternoon, OLIA 
was able to respond to requests from Congressional staff for 
information on additional funding that the Commission would need to 
cover both the costs of returning to normal operations in New York and 
the costs of additional security and emergency preparedness measures 
for the Commission's facilities.
    On September 12th, OIA, in coordination with the Office of 
Commissioner Holum and at the request of Acting Chairman Newsome, took 
several steps to ensure that non-U.S. regulators and market authorities 
had open lines of communication with the Commission about both the 
post-attack responses of U.S. firms and markets and the consequences of 
the attack that might be relevant to the oversight of their own firms 
and markets.
    OIA provided a continuously manned contact number for foreign 
regulators and market authorities that needed more information about 
specific U.S. firms or markets. In addition to assuring that CFTC 
contact information on the password-protected members page of the IOSCO 
website was kept up-to-date and communicating separately with the U.K. 
and German authorities (where the bulk of U.S.-related trading is 
conducted), OIA posted specific contact information for non-U.S. 
inquiries on the IOSCO web site. Discussions with other authorities 
allowed OIA to learn early on that European authorities had suspended 
trading in U.S.-based derivatives. OIA responded to requests from firms 
doing business in multiple jurisdictions for information on personnel 
and possible regulatory relief available in the U.S. OIA was in contact 
with Treasury's International Division and served as a conduit for 
certain inquiries from that section to other parts of the CFTC. OIA 
also worked with IOSCO to communicate information on trading 
resumptions in U.S. equity markets. IOSCO members shared with OIA 
information about their markets, including information on the pricing 
of collective investments and derivatives with exposures to the U.S. 
markets and rumors of suspicious transactions.
The Weekend, September 15th and 16th
             NYBOT
    Having resolved to open for trading on Monday, September 17th, 
NYBOT conducted a successful mock trading session for traders on 
Saturday, September 15th at its backup facility which confirmed that 
all of its systems for trading, price dissemination, and clearing were 
fully operational. At that time, members also were assigned booths and 
phone lines, and various security measures were instituted to ensure 
access only by authorized members and clerks. These efforts ensured 
that both the exchange and the traders were prepared for a successful 
launch of open-outcry trading on Monday.
            NYMEX
    Although it had succeeded in rolling out its new internet trading 
platform, NYMEX still faced numerous operational challenges to overcome 
before it could resume open-outcry trading. In addition to securing 
electricity, water, and other utilities for its primary trading 
facility, the exchange had to arrange for water transportation into 
Lower Manhattan of more than 2,000 employees, traders, and support 
staff. The exchange also faced unexpected challenges, such as the 
failure of a backup generator. Nonetheless, by Monday morning, the 
NYMEX trading facility was the only building open in the World 
Financial Center-Battery Park City complex.
            The Regulators
    Over the weekend, CFTC staff continued to participate in several 
all-markets calls, which were also joined by other Federal financial 
regulators, in anticipation of a closely coordinated, and tightly 
monitored reopening of all stock, option, and equity-based futures 
markets on Monday morning. The regulators and exchanges agreed upon 
protocols for continuously open lines of communication throughout the 
trading day and clarified their plans for moments of observed silence 
at or before the opening bells.
Monday, September 17th
            NYBOT
    Because its backup facility in Queens is smaller than was NYBOT's 
World Trade Center facility (two trading rings, one for futures and one 
for related options, versus thirteen in the World Trade Center), NYBOT 
decided to operate reduced trading hours for each commodity, with 
different contracts being traded consecutively rather than 
concurrently. When NYBOT reopened for trading on Monday, its official 
trading hours for the two trading rings were as follows:\13\
---------------------------------------------------------------------------
    \13\ In addition to the CSCE and NYCE contracts that traded in the 
rings in the backup facility, NYFE contracts traded at a post in a 
separate room: the NYSE Composite Index and Large Composite Index and 
the Russell 1000 Index and 1000 Large Index contracts were traded from 
9:30 a.m. to 4:15 p.m., and the CRB Index and the SPCI were traded from 
10:45 a.m. to 2:00 p.m. (later extended to 10:00 a.m. to 4:00 p.m.). 
Finex products were traded in New York at a post in the trading room 
from 8:05 a.m. to 3:00 p.m. (later changed to 9:35 a.m. to 3:00 p.m.); 
Finex products were traded in Dublin from 3:00 a.m. to 8:00 a.m. (EST) 
(later extended to 9:30 a.m.).
---------------------------------------------------------------------------
    Cocoa--7:30 to 9:00 a.m.; Coffee--9:30 to 11:00 a.m.; Sugar--11:30 
a.m. to 1:00 p.m.; Cotton--1:30 to 3:00 p.m.; and FCOJ 3:30 to 5:00 
p.m.
    The backup facility also had only 100 booths (compared to 
approximately 500 in the World Trade Center) and originally had only 
two phone lines per booth. Because of the limitation on phone lines, 
the same phone number was used by customers to place orders for 
different futures contracts, depending on the time of day (i.e. 
customers were asked to call the number in the booth during the time 
the market they were interested in was trading in the ring). To offset 
this limitation, NYBOT obtained approximately 200 cell phones for use 
by members.
            NYMEX
    NYMEX resumed open outcry trading at One North End Avenue on 
Monday, September 17th, following a memorial observation, at 
approximately 11:45 a.m. Trading hours for the remainder of that week 
were as follows:
  --COMEX metals and NYMEX metals and propane futures and option 
        contracts traded in various staggered 3-hour trading sessions 
        between 9:30 a.m. and 12:40 p.m.
  --FTSE Eurotop futures contracts opened at 10:00 a.m. and closed at 
        11:00 a.m.
  --NYMEX energy futures and option contracts traded in various 
        staggered trading sessions between 10:30 a.m. and 1:45 p.m.
  --Coal futures contracts opened at 11:30 a.m. and closed at 1:15 p.m.
  --NYMEX ACCESSR was open from 5:00 p.m. to 8:00 p.m. and reopened at 
        5:00 a.m. with metals and propane contracts closing at 9:00 
        a.m. and other energy contracts closing at 10:00 a.m.\14\
---------------------------------------------------------------------------
    \14\ On September 20th, NYMEX extended NYMEX ACCESSR trading hours 
for the natural gas futures. NYMEX ACCESSR was open from 2:00 p.m. 
until 8:00 p.m. and from 5:00 a.m. until 10:00 a.m.
---------------------------------------------------------------------------
            Other Exchanges
    In Chicago, trading in stock index futures and option contracts 
recommenced on Monday morning in perfect coordination with the 
reopening of the securities markets.
            The Regulators
    The Commission monitored the functioning of the futures markets 
closely on Monday as markets came back on line in coordination with the 
opening of the securities markets. DEA monitored market activity as the 
equity-based contract prices fell slightly but remained within very 
normal ranges, as energy prices also fell slightly within normal 
ranges. T&M monitored the financial integrity of the clearing and 
payment systems, confirming that intraday settlement cycles went 
smoothly, that customer margin obligations were being met, and that no 
significant operational difficulties were encountered. At mid-morning, 
Acting Chairman Newsome reported to the PWG that trading was proceeding 
in an orderly manner and that pricing generally appeared to be 
responding to fundamentals rather than to fear or alarm.
Moving Forward, September 18th to the Present
            NYBOT
    The use of exchange-issued cell phones was only a temporary 
solution at the backup facility. Accordingly, NYBOT had a new telephone 
switch installed on the weekend of September 22nd and additional lines 
the following week. In November, NYBOT added two trading rings to the 
backup facility and two more rings were opened on February 11, bringing 
the total to six. The new rings occupy some of the additional 16,000 
square feet that NYBOT secured at this location, with some portion 
being utilized for support activities. The abbreviated trading hours 
were extended somewhat in early November with the opening of the third 
and fourth rings. NYBOT again extended the trading hours for each of 
its agricultural products when additional support space and trading 
rings came on line in February.
    NYBOT suffered an interruption of trading at its backup (now 
primary) facility on November 12th when American Airlines Flight 587 
crashed on Long Island, disrupting telephone service in the area. The 
exchange expressed concern over continuing trading when some customers 
might not be able to reach their floor brokers. Trading resumed the 
next day.
            NYMEX
    Since September 17th, NYMEX has slowly expanded the trading hours 
for both floor trading and NYMEX ACCESSR trading. At this time, trading 
hours are not as extensive as before September 11.
            Other Exchanges
    All of the commodity futures exchanges, including those in New 
York, have undertaken efforts to review and update their contingency 
plans, both for disaster recovery plans and business continuity, in the 
aftermath of September 11.
            The Regulators
    The Commission participated in daily conference calls of the PWG, 
which continued through the week of September 17th. As part of its 
efforts to assist FCMs, introducing brokers (IBs), commodity pool 
operators, and commodity trading advisors as they resumed operations 
with the full reopening of the futures and securities markets, the 
Commission announced on September 19th a broad package of regulatory 
relief measures designed to assist these market intermediaries in 
carrying on with business in the face of challenges presented by the 
attacks on the World Trade Center.
    These formal measures complemented the CFTC's initial responses to 
issues of immediate concern to firms and exchanges as they prepared for 
the resumption of trading, which began the previous week in many non-
equity-based futures contracts. The Commission also encouraged firms 
whose particular circumstances warranted relief beyond that provided in 
the general measures to contact the CFTC, the National Futures 
Association, or their designated self-regulatory organizations.
    The relief announced included notice that the CFTC would not 
consider September 11 through 14 as business days for the purposes of 
specified reporting and minimum capital requirements, notice of bulk 
transfer obligations, and records inspection requirements imposed by 
CFTC regulations. This effectively extended certain reporting deadlines 
and recognized that firms may have had difficulty during that week in 
moving funds, issuing notices, providing customers with access to 
records, or precisely measuring portfolio values.
    Firms whose physical operations were disrupted as a result of the 
attacks and which were consequently unable to comply with regulations 
requiring that records be readily accessible and that the means to 
translate records stored on electronic or micrographic media be 
available at all times would not be required to do so for the 31-day 
period from September 11 through October 11. Such disrupted firms that 
were unable on September 11, 12, 13, or 14 to comply with requirements 
of specified regulations concerning the calculation of segregated funds 
and secured amounts were also excused from those requirements for those 
4 days. For such firms that were unable to comply with the confirmation 
statement, transaction application, and position closeout requirements 
of other specified regulations on September 11 through 14, those days 
would not be counted by the CFTC as either business or calendar days in 
determining such compliance.
    Some firms whose operations were disrupted by the attacks quickly 
resumed operations but in alternate facilities or with limited 
resources and, consequently, may have had difficulty complying with 
noon deadlines for certain segregated funds calculations. Such firms 
were permitted, until October 11, to extend those deadlines to the 
close of business on the applicable business days. Similarly, firms 
that were unable to access time-stamping equipment were permitted to 
substitute the use of reasonable alternative methods during the 10-day 
period from September 11 through 21st.
    On October 5th, T&M issued an advisory to clarify for market 
participants that certain exemptive relief granted by the SEC to 
registered securities broker-dealers in connection with the events of 
September 11 would also apply to FCMs and IBs. This clarification was 
useful because the Commission's rule regarding minimum financial 
requirements for FCMs and IBs, Rule 1.17, incorporates by reference 
certain provisions of specified SEC rules, including SEC Rule 15c3-1, 
and, in connection with the events of September 11, the SEC had 
previously granted relief from this and certain other rules.
    For example, the SEC determined that broker-dealers, when computing 
the amount of net capital on hand under SEC Rule 150-1, need not 
consider the days through October 5th as business or calendar days for 
purposes of taking required deductions from net capital because of 
failures to complete government securities transactions. Accordingly, 
and pursuant to authority delegated by the Commission to the Director 
of T&M under CFTC Rule 140.91, T&M determined to incorporate by 
reference any relief granted by the SEC as a consequence of the events 
of September 11 that pertained to any SEC rules that are incorporated 
by reference into the CFTC's rules. The benefit for market participants 
was, to the extent that capital calculations by FCMs and IBs might 
incorporate certain of the requirements of SEC Rule 150-1, to extend 
the relief granted by the SEC to securities broker-dealers with respect 
to those provisions to FCMs and IBs in an equal manner.
    The Commission has continued to address the particularized needs of 
market participants. For example, T&M has issued an Advisory setting 
forth a mechanism by which registrants that had records lost or 
destroyed in the attacks may obtain regulatory relief. These 
registrants are permitted to submit an inventory of the lost or 
destroyed records that identifies them by category and date. The 
registrants will then only be required to reconstruct certain 
information specified in T&M's advisory and will be permitted to 
replace lost records with duplicates, if available. T&M will continue 
to work with individual market participants or groups that face 
challenges not addressed by the forms of regulatory relief announced 
thus far.
    In addition to providing regulatory relief, the Commission 
monitored international developments and cooperated with foreign 
regulators. In September, OIA staff attended a meeting in Madrid of the 
IOSCO Technical Committee's Standing Committee 3 (SC3) on Regulation of 
Market Intermediaries and participated in SC3's discussions relating to 
regulatory responses to the attacks, including issues related to:
  --Contingency planning regarding emergency communications with firms;
  --Contingency planning regarding firms' secondary ``hot pad'' 
        computer facilities;
  --Contingency planning regarding lost data recovery;
  --Firms' experiences regarding liquidity needs;
  --Regulators' granting of temporary relief from capital requirements; 
        and
  --Issues relating to suspension of trading on some markets or of 
        certain products.
    The committee chairman suggested that SC3 conduct additional work 
on contingency planning and disaster recovery to take account of 
experiences on and after September 11.
    Staff attended the Council of the Securities Regulators of the 
Americas (COSRA) meeting in Montreal in October, at which COSRA adopted 
a resolution on readiness for market disruptions that urged each 
jurisdiction to review the transparency and accessibility of 
marketplace rules (including those related to disruptions and defaults) 
and the sufficiency of disaster recovery arrangements. Also during 
October, OIA participated in a meeting of the IOSCO Technical Committee 
in Rome, at which the committee appointed a special project team to 
review contingency planning, client identification, and expanded 
cooperation and information sharing among securities regulators. At 
that time, OIA staff also attended a meeting of the IOSCO Technical 
Committee's Standing Committee 2 on Secondary Markets (SC2), during 
which OIA contributed to discussions on supervisory issues and 
regulatory responses. SC2 expanded its ongoing study on trading halts 
to examine whether existing available supervisory powers were adequate 
to address market emergencies posed by September 11.
            Cooperation with Law Enforcement Authorities
    DOE requested information from foreign authorities that regulate 
markets for derivatives products whose prices might have been sensitive 
to the terrorist attacks. Specifically, the Division focused on energy 
products, precious metals, interest rates, currencies, and securities 
indexes because these products could conceivably have been utilized by 
terrorists or their associates to profit from the attacks. Based on a 
review of derivatives markets worldwide, requests were sent to 
regulators in the major market centers for activity in commodities of a 
sensitive nature.
    After receiving prior approval from the Federal Bureau of 
Investigation (FBI), DOE requested the following information from 
foreign regulators:
  --Whether any person on a confidential FBI watch list was regulated 
        by the authority or had participated in derivatives trading, 
        either on-exchange or over-the-counter; and
  --For the period from August 17th to the date of request, any 
        suspicious transactions in any cash or derivatives market 
        (including, but not limited to, energy products; precious 
        metals, interest rates, currencies, and securities indexes) 
        where a customer could have benefited from the events on 
        September
    In addition to this general request, DOE sent more specific 
requests for assistance to two foreign regulators. To date, no 
regulators have reported to DOE any suspicious transactions or persons 
participating in their derivatives markets. The foreign regulators 
continue to monitor the markets for suspicious activity that may relate 
to the September 11 attacks.
                    restoring commission operations
    Beginning on the morning of September 11, the Commission and its 
staff faced the challenge of responding simultaneously to unprecedented 
situations on two fronts. First, as the oversight regulator for an 
important segment of the financial services industry, the Commission 
needed to assess the condition of the futures markets, to monitor and 
assist in whatever manner possible with their recovery, and to keep the 
executive and legislative branches of the Federal Government informed 
of the situation. These efforts were described in Part I of this 
report.
    Fulfilling its responsibilities to the markets and the public 
required the Commission and its staff to simultaneously overcome an 
internal challenge: restoring the full functionality of an agency that 
had lost one of its two largest regional offices and had been forced by 
security concerns to evacuate most of staff from its Washington, D.C. 
headquarters and its remaining regional offices. This involved 
extraordinary efforts in personnel management, facilities acquisition, 
telecommunications, budget modification, and even mail handling. Those 
efforts are described in this part of the report. Challenges in the 
area of information technology that faced the Commission are described 
in Part III.
The First Two Weeks
    Events unfolded rapidly during the morning of September 11 and the 
Commission had to respond to administrative challenges on multiple 
fronts. First, all employees except essential senior staff were 
evacuated from headquarters and regional offices. Essential staff 
remained to coordinate efforts with other Federal financial regulators 
and the exchanges, to locate New York staff, and to respond to 
questions from the public.
    OED quickly established a ``control room'' in the Commission's 
executive conference room in Washington, D.C. and equipped it with a 
bank of phone lines. Key staff manned these phone lines on September 11 
and 12, locating New York staff, sharing information on the Employee 
Assistance Program (EAP), and fielding incoming calls.
    Immediately after the first attack, OED began compiling a list of 
New York employees and home phone numbers. An ongoing attempt to 
contact each employee began. The task was difficult due to the lack of 
a central database of emergency contact information, the absence of 
current phone numbers and addresses in the personnel files of some 
employees, and the difficulty of getting calls through to New York. The 
Enforcement staff in New York had established a phone tree prior to 
this event, and as a result, the New York Division of Enforcement was 
able to contact its staff quickly. Diligence and internet search tools 
proved useful in contacting other New York staff. The last New York 
employee was tracked down on Thursday morning.
    The Commission used its outgoing voicemail system to communicate 
information about the status of the Washington, D.C. office and about 
the National Futures Association (NFA) Hotline, which offered to assist 
in fielding calls from the public and the industry. NFA subsequently 
issued a press release about its availability to assist in answering 
questions.
    The Commission's EAP provider was instructed to provide immediate 
counseling for employees and their families, particularly in New York, 
which included 24-hour one-on-one telephone counseling, face-to-face 
individual and family counseling for New York employees, and the 
formation of EAP-facilitated support groups. On September 20th, New 
York employees were provided the opportunity to share their experiences 
with each other at a hotel in Newark. Commissioners, division 
directors, and other senior managers attended the session.
    Other employee issues presented administrative challenges. (For 
example, payroll data was to have been entered on the 10 and 11. In 
spite of the disruptions, all payroll data was successfully entered and 
D.C. timekeepers continued to enter payroll data for the New York staff 
through November.) The Commission's website, www.cftc.gov, proved to be 
a valuable tool during this period. Because it was operated by another 
entity and hosted at a remote location, the website was updated and 
operated without interruption even when CFTC staff were evacuated and 
CFTC servers were taken off-line for security reasons. As a result, 
CFTC employees, including displaced New York employees accessing the 
internet from home computers, had access to up-to-date Commission 
information. OED continued to add information to the Commission's 
public website and its intranet, including information on the NFA 
hotline, EAP information, and links to other relevant websites. OED 
established a special section of the website for password access by New 
York staff.
    To enable those New York employees who felt ready to do so to 
participate in the efforts to restore market operations, OED acquired 
phone cards and temporary cell phones and configured laptop computers. 
New York phone numbers were forwarded to all CFTC offices and new e-
mail addresses and a new network for New York were set up on the 
servers in Washington, D.C.
    With its offices in the World Trade Center destroyed, an immediate 
priority for the Commission was finding temporary and long-term 
replacement space. The General Accounting Office confirmed that the 
Commission could accept an offer of free temporary space from Burson-
Marsteller, a public relations firm, which supplied fifty New York 
employees with phones, cubicles, office supplies, and fax and copying 
capabilities. Commission staff covered many administrative details, 
such as notifying all Commission registrants that filings which had 
previously been sent to New York should now be sent to Washington, D.C. 
or Chicago. Meanwhile, Commission staff coordinated with the agency's 
real estate agent to begin the search for permanent space in a markedly 
different Manhattan office market.
    To deal with the unforeseen costs arising from the events in New 
York, the Commission submitted a supplemental appropriations request to 
OMB on September 13th to cover expenses in three categories: immediate 
responses, recovery efforts, and going-forward preparedness. The 
request was later amended on October 4th to reflect higher than 
expected costs to acquire and build-out replacement office space and a 
variety of human resource needs not fully reflected in the original 
submission. OMB immediately approved certain emergency funds for 
apportionment by the end of the 2001 fiscal year.
The Next Four Weeks
    The Commission's administrative staff were largely occupied during 
the remainder of September and most of October with negotiating leases 
for both short-term office space in Jersey City, New Jersey, and 
permanent space in Lower Manhattan. OED also arranged additional EAP 
counseling sessions. Weekly meetings with a permanent space project 
team--consisting of the Commission's real estate representative, 
project manager, a data and security consultant, an architectural firm, 
an engineering firm, and a construction company--proved effective, 
particularly with the inclusion of a manager from the New York regional 
office who could relay the concerns of New York staff.
    On the human front, the Commission arranged a ceremony to recognize 
the special sacrifices and dedication to service of the New York 
employees. The program included a presentation of the Commission flag 
to the New York staff and follow-up consultations with EAP counselors.
    The White House submitted on October 17th a recommended 
supplemental budget request for the CFTC to cover the costs of 
restoring the New York office to its previous capabilities and 
additional funds to cover the cost of developing an information 
technology disaster recovery plan.
Moving beyond the Immediate Aftermath
    Once a final agreement for temporary space in Jersey City was 
reached, the Commission next arranged for equipment rental, moving 
services, and the configuration of computer and telecommunications 
networks to enable an early December move-in date. Meanwhile, the lease 
for permanent space at 140 Broadway was finalized and buildout plans 
developed.
    On the budget front, the Commission received a confirmed 
supplemental appropriation of $16.9 million to fund restoration of the 
New York regional office and various preparedness needs, including 
network redundancy, security program enhancements, fault tolerant 
system designs, and operational continuity.
    Administrative challenges continued to complicate the Commission's 
full return to normal operations. For example, the anthrax threat 
forced OED to consult the Center for Disease Control, the General 
Services Administration, and the Office of Personnel Management in 
preparing a response to mail contamination. Ultimately, the Commission 
asked the U.S. Postal Service to hold all Washington, D.C. mail pending 
test results and any required treatment of CFTC facilities. Mail for 
the New York office, which was being routed through Washington, D.C. 
was held as a precautionary measure. OED found alternative means of 
managing Commission business by, for example, working with vendors to 
develop alternative methods of invoicing. All tests results were 
negative and mail service resumed in early December.
What Worked Well
    Various aspects of the Commission's response to the attacks and the 
loss of its New York regional office were very successful. The EAP, 
which was not in place in 1993 when many of the current New York 
staffers were also with the Commission, was effective in providing 
immediate support. Cooperation and teamwork among the Commissioners 
also proved to be a success story. For example, Commissioner Erickson's 
help was key in locating the interim temporary space for New York 
staff. More generally, communication technologies, such as cellular 
phones and laptop computers, but most particularly a website accessible 
from virtually anywhere a displaced New York employee might be, proved 
invaluable in keeping the organization working together as a cohesive 
team.
Issues to Address
    Although the CFTC had some emergency procedures in place, these 
should be improved. The Commission must develop an effective emergency 
procedures manual to specify roles and responsibilities and should 
distribute both home and office copies of this manual to all employees. 
In addition, employees should be given updated procedures on how to 
contact each other and a central point of contact. Emergency 
procedures, including communication protocols, should be periodically 
updated and employees should receive regular training therein.
    If the CFTC's Washington, D.C. telephone contractor had not 
happened to have been in the building at the time of the attacks, OED 
may not have been able to set up the bank of phones in the control 
room. Thus, emergency access to the vendor or the development of such 
skills with the staff is advisable. It may also be advisable to 
establish a toll-free number for employees and employees in all offices 
should have an emergency procedures card with clear instructions on how 
to call-in. A global emergency message should be prepared for 
distribution to the main phone line as well as individual phones at any 
affected location. The ability to reach every employee at home should 
be improved by maintaining an up-to-date database of employee contact 
information. Toward that end, OED is working on such a database and is 
evaluating the manner in which to collect and maintain employee home 
phone, address, and emergency contact information, in light of concerns 
with privacy, security, and rapid accessibility in case of need. OED is 
also evaluating e-mail and other alternatives to cell phone contacts, 
for use when call volume spikes and calls will not go through. Other 
administrative responsibilities also merit attention. For example, the 
Commission must ensure that property records are updated on a regular 
basis. An incomplete inventory of furniture, equipment, and supplies in 
the New York office complicated recovery efforts.
    Perhaps, most importantly, and as discussed in Part III of this 
report, the Commission must analyze and improve upon its data backup, 
redundancy, storage, and retrieval capabilities to better ensure that 
critical information, whether first created at headquarters or at one 
of the regional offices, is not lost in a disaster.
                 initial review of preparedness efforts
    In this segment of the report, the Commission reviews what has been 
learned thus far about the preparedness--particularly contingency plans 
for disaster recovery and business continuity (DRBC plans)--of both 
itself as a Federal financial regulator and of the various market 
participants that play such important roles in the smooth, reliable, 
and efficient operation of the commodity futures markets. In addition 
to conducting internal analyses of the various responses to the 
attacks, the Commission has solicited the input of market participants 
in several ways thus far. In October, Acting Chairman Newsome wrote to 
the exchanges, clearinghouses, and NFA to request their assistance in 
completing an initial survey, which is described below. In November, 
Commissioner Erickson chaired a meeting in Chicago of the Commission's 
Technology Advisory Committee, which was attended by Acting Chairman 
Newsome and numerous industry leaders, to discuss the responses of 
market participants to the attacks and their aftermath. These initial 
outreach efforts, together with informal discussions with market 
participants, have already provided invaluable insights--many of which 
are reflected below--and the Commission looks forward to a continued 
productive dialogue with market participants.
Preparedness of Market Participants
    To learn more about the preparedness of market participants, both 
prior to September 11 and moving forward, a survey approach was taken. 
Two dozen of the largest FCMs were asked to describe both their 
immediate reactions to the disaster and their contingency plans. The 
U.S. futures exchanges, their affiliated clearinghouses, and the NFA 
were each asked to summarize immediate responses to the disaster, to 
assess which responses were most effective, to describe potential 
improvements identified thus far, and to suggest industry-wide 
initiatives or regulatory actions that may be desirable. These 
institutions also submitted to the Commission copies of their existing 
contingency plans.
            The Futures Commission Merchants
    FCMs play a crucial risk intermediation role in the commodity 
futures markets by serving as the front-line defense against the 
financial difficulties of individual traders rippling through and 
becoming systemic problems. Accordingly, because of their importance to 
the integrity and smooth functioning of the markets and because many 
FCMs were directly affected by the attacks upon the World Trade Center, 
the Commission and the NFA cooperatively undertook a survey of two 
dozen of the largest FCMs to learn about the State of their DRBC 
efforts. All firms responded. This survey covered topics including the 
level of detail in formal DRBC plans, how such plans actually worked 
during the disaster, and any anticipated changes or improvements 
identified thus far.
    The survey results revealed that nearly all firms had documented 
disaster recovery plans in place and that these were periodically 
tested and kept up-to-date on an ongoing basis. The plans generally 
contemplated interruptions in the availability of public utilities and 
provided for the use of alternative trading platforms or substitute 
marketplaces. The firms differed in their approaches to communicating 
these plans to employees, however, with some firms communicating plans 
throughout their organizations periodically but others not heretofore 
having contemplated doing so until after an event occurs. The plans 
generally included provisions for alternative office space and 
transportation to such space.
    All firms duplicated essential computer and telecommunications 
systems at backup facilities and routinely backed up essential data. 
Most backup facilities and data storage facilities are located some 
distance from the main facilities, but a few are close, some within a 
mile or less. In the latter cases, these firms are revisiting their 
plans in light of September 11. Nearly all firms have duplicated 
critical staff competencies to some extent. They use various methods to 
accomplish this duplication, including cross-training, having employees 
perform similar functions at geographically dispersed sites, and 
designating back-up duties.
    Of the 18 firms surveyed that were directly impacted by the events 
of September 11, all were generally satisfied with the performance of 
their disaster recovery and business continuity plans. Concerns were 
expressed, however, that such plans did not fully anticipate the 
severity of these events in terms of the geographic scope and duration 
of the disruptions, and the impact on communications systems. Many 
firms had difficulties caused by the widespread nature of the disaster 
and the disruptions to telecommunications services. Many firms noted 
the importance of locating backup facilities a safe distance from 
primary sites, given the unfavorable experiences they or their 
competitors had with backup facilities that were in the same disaster 
zone as the primary facilities. A few firms noted the difficulties 
presented by a long-term dislocation.
    Many firms are modifying their plans in light of September 11. 
These modifications include improving systems and increasing capacity 
at disaster recovery facilities, improving network connectivity and 
communications with exchanges, and improving capacity to conduct 
business functions from geographically dispersed offices. A few firms 
mentioned the issue of ``interdependent'' failures; that is, failures 
at other institutions with which an FCM may have one or more mission-
critical relationships. Planning for such failures presents unique 
challenges.
            The Exchanges, Clearinghouses, and NFA
    In addition to surveying FCMs on reactions and preparedness, the 
Commission surveyed the major U.S. futures exchanges and their 
affiliated clearing organization, which together with NFA constitute 
the industry's self-regulatory organizations (SROs), as to both their 
own preparedness as trading facilities and their responses as SROs.\15\
---------------------------------------------------------------------------
    \15\ These included NYBOT, CBT, CME, NYMEX, the Kansas City Board 
of Trade (KCBOT), Minneapolis Grain Exchange (MGE), CX, New York 
Clearing Corporation (NYCC), Board of Trade Clearing Corporation 
(BOTCC), Chicago Mercantile Exchange Clearing House (CMECC), Kansas 
City Board of Trade Clearing Corporation (KCBOTCC), and NFA.
---------------------------------------------------------------------------
    Each entity was asked to describe the steps it took in response to 
the events of September 11, to assess the effectiveness of the 
industry's disaster recovery efforts following September 11, to discuss 
any modifications of its individual DRBC plans thus far being 
considered, and to make suggestions for improving the industry's 
preparedness. All entities responded to the request and those responses 
are summarized below.
            Immediate Reactions to the Disaster
    All of the U.S. futures exchanges and clearing organizations 
undertook prompt and ongoing efforts to communicate with employees, 
members, other exchanges, and the Commission in the wake of the 
September 11 attacks. They also cooperated in a coordinated shutdown 
and reopening of futures and option trading that took into 
consideration the closure of the securities markets. The various 
organizations exhibited great resilience and flexibility in taking 
advantage of the different resources and alternatives available to 
them. Examples of such reactions included:
  --Utilizing backup trading facilities for open outcry trading or 
        electronic trading;
  --Implementing electronic trading for contracts normally traded by 
        open outcry;
  --Quickly securing new data center, backup data center, or office 
        facilities;
  --Establishing executive command centers at remote locations;
  --Coordinating with foreign exchanges on clearing member issues;
  --Maintaining 24-hour operations to assist members with trade 
        entries; and
  --Identifying regulatory requirements from which relief might be 
        needed.
    In general, the exchanges reported encountering little, if any, 
difficulty as a direct result of the suspension and subsequent 
resumption of trading. The New York exchanges reported far greater 
difficulties, on the other hand, in such areas as communicating with 
member firms. NYMEX, in particular, also reported problems in gaining 
access to facilities, and finding sources of electricity and water.
    The exchanges readily identified a number of actions that were 
deemed very effective. For example, daily industry-wide conference 
calls coordinated by FIA were noted as particularly useful. Other steps 
noted as effective included:
  --Contact with other exchanges, including foreign exchanges, to 
        coordinate disaster responses;
  --Commission efforts to coordinate information and market reopenings 
        and to relax regulatory requirements;
  --Disaster assistance and offers of assistance from others in the 
        industry; and
  --Using websites to communicate information to employees, traders, 
        and other affected parties.
    The exchanges also identified a number of challenges they faced in 
connection with both individualized and industry-wide disaster recovery 
efforts, which included:
  --Lack of geographically-remote emergency backup facilities for some 
        clearing members and for some settlement and custody banks;
  --Inability of telecommunications vendors and other utilities to 
        provide uninterrupted service or seamless switching to backup 
        sites;
  --Trouble getting adequate information from settlement and custody 
        banks; and
  --Relocation of large numbers of clearing members and associated 
        communication difficulties.
            Contingency Plans
    Some of the institutions among the exchanges, clearinghouses and 
one industry association that were surveyed, responded by submitting 
copies of written contingency plans, which varied in both scope and 
detail. Two such plans could be described as comprehensive, while 
others were limited, for example, to recovery of information processing 
capabilities but not recovery of other key capabilities. Several 
institutions provided summary descriptions of their strategies for 
disaster recovery and/or business continuity.
    The submitted plans and summaries indicated that these institutions 
had heretofore been somewhat better prepared to respond to problems 
related to partial system failures than to total disasters. Four 
respondents provided copies of contingency plans for problems less 
severe than a catastrophe. Two others provided summary descriptions, 
strategies, and business practices for partial system failures.
    Many of the responding organizations reported that they have 
already identified areas of significant potential modification in their 
pre-September 11 contingency plans. The modifications being considered 
within the industry include the following:
  --Acquisition or expansion of geographically-remote backup trading 
        facilities;
  --Securing emergency access to alternate trading facilities at 
        another exchange;
  --Establishing geographically-remote disaster recovery sites for 
        data;
  --Giving greater attention to the disaster recovery capabilities of 
        vendors and partners, including testing of their respective 
        disaster sites and circuits; and
  --Formalizing previously informal plans or plan components.\16\
---------------------------------------------------------------------------
    \16\ Aspects of a comprehensive contingency plan frequently listed 
by information management professionals include:
---------------------------------------------------------------------------
            Suggestions for Industry-wide Initiatives
    Many institutions also made useful suggestions for improving 
industry-wide preparedness, which reflected both the common experiences 
of many organizations and the differing impact of events on industry 
participants. These suggestions focused on steps which the suggesting 
organizations believed to be important, but which would require 
coordination and cooperation on an industry-wide basis. They included:
  --Identifying best practices for emergency voice and data 
        communications, via the Internet and otherwise, among all 
        industry participants, including exchanges, clearing 
        organizations, and members;
  --Establishing emergency procedures, tested annually, on an industry-
        wide basis, including participation by the Federal Reserve and 
        banks involved in the futures industry;
  --Designating a central clearinghouse, such as the website of the 
        Institute for Financial Markets, for information from and for 
        all market participants;
  --Maintaining an industry-wide emergency contact directory, covering 
        all exchanges, clearing organizations, and FCMs, including home 
        and cellular telephone numbers as well as e-mail addresses;
  --Prearranging post-disaster priority treatment for industry members 
        by key telecommunications and utility providers;
  --Planning for coordinated, expedited post-disaster resumption of 
        futures trading;
  --Bilateral meetings between the Commission and each exchange to 
        review individual DRBC plans; and
  --Providing disaster recovery training for all industry employees.
            Previous Reviews of Contingency Plans
    Since IOSCO's adoption in 1990 of Principles for Screen-Based 
Trading Systems--which included guidance for exchanges and 
clearinghouses that ``[b]efore implementation, and on a periodic basis 
thereafter, [any electronic trading] system and system interfaces 
should be subject to an objective risk assessment to identify 
vulnerabilities (e.g., the risk of unauthorized access, internal 
failures, human errors, attacks, and natural catastrophes) which may 
exist in the system design, development, or implementation''--the 
Commission has reviewed contingency plans of new applicants, if 
submitted voluntarily, for consistency with the IOSCO guidance.
    In anticipation of the year 2000 date rollover, the Commission 
obtained and reviewed the contingency plans of exchanges and 
clearinghouses. Developing these plans afforded these institutions the 
opportunity to assess the vulnerabilities of their information 
management and communications technologies and to explore alternative 
backup resources. Some of these were put into place as a result of this 
review, including backup facilities with mirrored data and the capacity 
to operate on the electronic platform of overseas partners.
    Nonetheless, it is fair to say that neither the reviews of 
contingency plans voluntarily submitted by new applicants nor the 
review of Y2K plans focused on preparedness for a large-scale disaster 
such as September 11. Accordingly, the CFTC, like many market 
participants, is now undertaking a strategic review of every facet of 
its preparedness and its contingency plans, both in terms of disaster 
recovery and business continuity. From instituting better backups of 
data, offsite storage, and more complete archiving, to enhancing 
organizational flexibility and responsiveness in times of crisis, the 
Commission faces the challenge of ensuring the effective survival of 
its abilities to fulfill its core mission and accomplish its public 
policy goals.
Preparedness of the CFTC
            Immediate Reactions to the Disaster
    The Commission had to respond to the disaster on several fronts 
simultaneously. The Commission's reaction to the destruction of its New 
York regional office, the efforts to verify the safe evacuation of New 
York staff, the precautionary evacuation of non-essential staff in 
other offices, and the restoration of Commission operations are 
detailed in Part III of this report.
    Because a state of emergency was declared in Washington, D.C. early 
on September 11, the CFTC network was shut down to ensure the safety of 
the Commission's data. The network for the executive offices was 
restored relatively quickly to retain access to international market 
and news information through the Internet. Because information on the 
Integrated Surveillance System (ISS), which is used to conduct daily 
surveillance of the futures and option markets, and the Exchange 
Database System (EDBS), which contains trade data from the exchanges, 
is stored on servers in Washington, D.C. and Chicago, respectively, no 
surveillance or trade data was lost. (This data is also secured by 
routine off-site back ups.) The Commission's information system 
firewall was modified to enable the Division of Trading and Markets to 
directly monitor trading activity, which was essential to the 
Commission's ability to approve startup of NYMEX's internet platform, 
as discussed in Part I.
            The Benefits of Y2K Preparations
    During 1999, the Commission's Office of Information Resources 
Management (OIRM) worked with all parts of the Commission to develop a 
contingency plan in preparation for the year 2000 date rollover. That 
plan was published on September 15, 1999, and addressed two areas of 
concern: (1) building infrastructure failures; and (2) mission-critical 
information system failures. The Commission's strategy for responding 
to a building infrastructure failure was to install communications 
equipment in each of its three main offices (Washington D.C., Chicago, 
and New York City) and to equip essential staff with laptop computers 
for remote access to essential network services. The Commission's 
strategy for responding to the failure of either of its two mission-
critical systems was to arrange with the SROs for access to information 
contained within comparable SRO systems.
    The Commission developed a schedule for deployment of resources 
required to implement the plan under either contingency, a list of 
essential staff positions, a cost estimate and funding strategy, and an 
implementation plan. The Commission tested, implemented, and verified 
the effectiveness of these plans during the fall of 1999. The 
Commission did not experience any building infrastructure or 
information system failures during the date rollover.
    Because the Commission's New York office was located in 1 World 
Trade Center, both the remote access facilities and the arrangements 
with the SROs for access to their information proved helpful to the 
Commission in responding to the logistical challenges presented by the 
attacks. Many of the New York office staff were able to work from home, 
dialing into the Commission's remote access facilities using laptops 
provided by the Commission. Other staff members were provided temporary 
work space and access to necessary information at the offices of the 
New York SROs.
            Protecting Market Surveillance Capabilities
    The Market Surveillance Section of DEA, in conjunction with the 
agency's Chief Information Officer (CIO), is currently working to meet 
the requirements of the Government Information Security Reform Act 
(GISRA). A documented assessment of market surveillance program 
security has been completed using the CIO Council's Federal Information 
Technology Security Assessment Framework. Based upon this assessment, a 
draft security plan has been produced in compliance with NIST Special 
Publication 800-18, Guide for Developing Security Plans for Information 
Technology Systems. Other upcoming milestones include a program Risk 
Assessment and Rules of Behavior.
            General Information Security Issues before September 11
    In the spring of 2000, OED arranged for an Information Technology 
Assessment to be performed externally, which resulted in a report that 
recommended several new initiatives. As a result, the Commission has 
taken a number of steps to enhance information security, including 
assigning a senior staff person to develop an information security 
program and having the CIO work with the information security 
specialist and program offices to conduct security self-assessments of 
the Commission's computer systems.
            Increased Emphasis on Security Issues after September 11
    Immediately after the attacks, OIRM began assessing its ability to 
restore computing services. That assessment identified a number of 
deficiencies in existing contingency plans. During the first 2 weeks 
after September 11, OIRM developed an action plan to remedy those 
critical deficiencies for which sufficient resources were available and 
developed a supplemental budget request to remedy those deficiencies 
that would require additional resources. (This request was funded in a 
supplemental appropriation.) That action plan includes such things as 
improving the program for creation and offsite storage of backup tapes 
and offsite retention of system documentation. OIRM has initiated 
discussions with those program offices that rely upon the Commission's 
mission-critical systems to begin the process of identifying the 
disaster recovery requirements for those systems.
            Moving Forward--What's the Next Step?
    The Commission believes that it is appropriate to continue to 
solicit the views of market participants, both individually and through 
their associations, to determine whether and how to best encourage the 
development of guidance, standards, or best practices in the areas of 
disaster preparedness, disaster recovery, and business continuity. 
Invaluable insights have been gained in the Commission's initial 
outreach efforts through the DRBC surveys and the November 2001 
Technology Advisory Committee meeting. In addition to those discussed 
above, these insights have included the following observations, many of 
which were received from market participants directly involved in the 
New York recovery efforts:
  --Every single aspect of operational needs (including, without 
        limitation, electricity, water, natural gas, fuel oil, 
        telecommunications, personnel transport, food and drinking 
        water provision) must be considered in emergency planning 
        efforts or critical dependencies will be missed (e.g. having 
        electricity for computers but not being able to run air 
        conditioning systems to maintain safe computer operating 
        temperatures);
  --Feasibility of backup operations should be confirmed in advance to 
        avoid legal or regulatory impediments (e.g. special air quality 
        permits that might be required for the sustained operation of 
        diesel generators);
  --Communication protocols among staff, with regulators and other 
        government authorities, with other organizations on whom an 
        organization depends for mission critical functions, and even 
        the media must be planned and tested exhaustively;
  --It is not enough for key staff to understand the organization's own 
        contingency plans, they must also understand the contingency 
        plans of other organizations with whom important business 
        relationships exist;
  --People are an organization's most valuable asset and contingency 
        plans must include providing staff (and relevant market 
        participants such as traders) with the means to reach the 
        organization, giving them the tools they need, and making sure 
        they are safe, secure, and comfortable (for example, staff and 
        market participants expected to use a backup trading facility 
        should have phone numbers, driving directions, mass transit 
        options, parking alternatives, restaurant recommendations, and 
        so forth);
  --Regular testing is essential to successful implementation of 
        contingency plans when needed (for example, NYBOT conducted 
        quarterly tests up to July 2001);
  --Regular backups should mirror every aspect of an organization's 
        systems; and
  --Telecommunications dependencies must be scrutinized for single 
        points of vulnerability.
    As one possible avenue for continued cooperation, the Institute for 
Financial Markets (IFM) has offered to evaluate issues surrounding the 
promulgation of guidance on coordinating disaster recovery plans among 
different institutions, an area of preparedness whose importance was 
emphasized by the ripple effect of the attacks across institutions that 
routinely rely on one another in the performance of mission-critical 
functions. Such an effort--led by the IFM, for example, in cooperation 
with other market participants--could take whatever form those 
participants believe will be most effective in identifying challenges, 
approaches, and solutions.
    Some of the areas in which such efforts may yield substantial 
benefits include:
  --communications, both telephonic and internet-based;
  --backup facilities, both for computers and key operations such as 
        trading;
  --protocols and up-to-date information to support communications 
        within and across institutions, firms, and regulators during a 
        crisis;
  --non-financial support services, such as access to power and water 
        necessary to sustain operations; and
  --effective access to government authorities (at local, State, and 
        Federal levels).
    The relative priority of each of these areas, the appropriate 
participants in such efforts, and the suggestion of other areas of 
fruitful cooperation will be the subject of both intra-industry and 
industry-regulatory dialogues.
    It is also important to emphasize that the scope of analysis 
undertaken in consideration of these preparedness issues should not be 
limited only to terrorist threats. Other types of catastrophe could 
threaten the stability of the futures and options markets. Thus, the 
scope of analysis should include, at a minimum, consideration of:
  --natural disasters, such as floods and earthquakes that affect 
        multiple entities;
  --failures in the telecommunications infrastructure;
  --other types of infrastructure failure, such as massive or prolonged 
        power outages;
  --the bankruptcy or other collapse of a key institution, particularly 
        one that creates a ripple or ``domino'' effect on other market 
        participants; and
  --fraud or other malfeasance on a sufficiently large scale to 
        undermine the credibility of one or more key markets or market 
        participants.
    In all such analyses, two overriding factors should be kept in 
mind: the continuing globalization of the markets and, again, the 
critically important but not always obvious interconnections among 
entities that present the threat of network failures in mission-
critical functions.
    The Commission hopes that this report will be helpful, both as an 
analysis of the events on and after September 11 and in planning for 
the future. The Commission looks forward to working, both internally 
and with market participants, to build upon the successes witnessed 
last year as contingency plans were put into action. We must all 
realize that these measures can and should be continuously improved and 
the lessons learned thus far will improve our ability to do so. Though 
we hope never to again face such a tragedy, it is nonetheless incumbent 
upon each of us to do our very best to prepare this sector of the 
financial system to recover promptly from adversity and to continue to 
perform its critically important role in the economy.

    Senator Kohl. Thank you very much, Mr. Newsome. This 
subcommittee was able to provide CFTC with $16.9 million in 
supplemental funding last year to try and help your agency and 
employees in New York rebuild, as you know. Could you please 
give the Committee a breakdown of how you spent the 
supplemental funding which was provided?
    Mr. Newsome. Yes, sir, I would be more than happy to, Mr. 
Chairman. Again, the commission fully appreciates that 
supplemental funding. Today, approximately 20 percent, or $3.5 
million of the $17.1 million appropriated, has been committed. 
The largest portion has been committed to the immediate 
recovery needs arising from the total destruction of our New 
York regional office. We plan to move back into the lower 
Manhattan financial district next month, and at that point we 
will turn our full attention to the development of the 
contingency planning disaster preparedness and damage 
mitigation efforts that the balance of the supplemental funds 
were intended to cover.
    In detail, the supplemental appropriation of the $17.1 
million was allocated and will be spent as follows: $750,000 
for human resource needs, including counseling, reimbursement 
of losses and workers compensation claims; $6.2 million for the 
physical recovery itself; $1.5 million for the development of 
information technology recovery plans, procedures and, then, 
implementation; $8.6 (million) for IT preparedness and 
mitigation efforts, a continuity of operations site and the E-
law project that I mentioned earlier, which will assist with 
collection, storage and retrieval of information gathered or 
developed during investigations and litigation.
    Senator Kohl. We thank you, and we congratulate you on 
being the first witness to testify before the subcommittee who 
actually is able to give us specific information on how your 
supplemental funding has been spent. Hopefully, the rest of our 
witnesses will be able to do the same.
    Mr. Newsome, recent revelations about Enron Corporation 
sent shock waves throughout the financial markets. We 
understand the CFTC's regulatory issues are limited to the 
futures industry and as such have limited relevance to the 
Enron investigation. Is there any reason for concern that any 
segment of the futures industry, over which you do have 
jurisdiction, may be prone to the sort of trading 
irregularities we saw in the Enron case? And more specifically, 
could activities that the CFTC conducts help prevent those 
sorts of problems?
    Mr. Newsome. Mr. Chairman, I think the Enron situation is a 
good example because they operated on the fully regulated 
exchanges in which we have full regulatory oversight, and they 
also operated in OTC markets in which we have anti-fraud and 
anti-manipulation authority. I will explain the difference in 
both, quickly.
    When the Enron situation came about, the first thing we did 
was turn to the regulated futures markets, primarily the New 
York Mercantile Exchange, to look at the positions in which 
Enron was a substantial player in that marketplace. As I 
commented, we worked very closely with the Exchange, with the 
clearinghouse, and with the futures commissions, merchants, to 
orderly unwind the contracts that Enron had at NYMEX. I think 
the market participants, and the CFTC as the regulator, were 
very coordinated in those efforts.
    We were able to unwind the Enron positions to make sure 
that it did not create volatility and dry up the liquidity in 
those markets, and I think both from the market's standpoint 
and from the regulatory standpoint we were very successful 
there. We are currently working with NYMEX to look at the 
positions that Enron held in the market through our market 
surveillance program, in which we look at those positions on a 
daily basis to determine whether or not an industry participant 
is maybe trying to manipulate those markets. We continue to 
cooperate with NYMEX in looking at those, and are continuing 
our investigation into those efforts.
    In the OTC market, our approach is different because simply 
we have the anti-fraud, anti-manipulation authority. Typically 
as we address that side of the market, as we would in other 
basically unregulated markets, the bucket shops, the fore-x 
shops that we bring charges against, because we have no upfront 
surveillance method, we rely on market participants to provide 
us information in terms of what is going on there, if there are 
any problems. And I would have to say that prior to the Enron 
situation, we had received absolutely no calls from any of the 
participants who felt they were being unfairly treated or that 
markets were being manipulated because of Enron.
    However, again, we are investigating that portion of Enron 
and that investigation is ongoing. And as we are able to draw 
facts we will certainly make that information, as well as our 
recommendations, available to the Congress for further debate.
    Senator Kohl. Thank you very much. Senator Cochran.
    Senator Cochran. Thank you Mr. Chairman. Chairman Newsome, 
I noticed that there is a part of the budget request that 
includes a user fee. This is relying on, as I understand it, 
the enactment of a user fee on transactions, to provide the 
Commission with the necessary funding to carry out its 
responsibilities during the next fiscal year. Let me ask you 
this, if a user fee is not enacted, what would be the effect on 
the commission, and would any additional funding need to be 
appropriated to make up for the lack of funding from a user 
fee?
    Mr. Newsome. Senator, as the OMB budget has been passed 
out, without removing us from Title V, if things remained as 
is, that funding level is adequate to fund the commission for 
the next year without any fees. If we were moved out from under 
Title V and then the committee chose to fund that, then there 
could be an amount, we are currently looking into that. I could 
not give you an amount right now of what that would be.
    Senator Cochran. I remember hearing your discussion on this 
problem before and I remember being impressed with the 
seriousness of the situation at that time, and your testimony 
today reconfirms that in my mind as something that ought to be 
done in terms of the legislative process. So, this committee, I 
do not think, has jurisdiction to do that. We are not a 
legislative committee. We just appropriate the money for the 
agencies and the department to carry out their 
responsibilities. At what stage is the effort to secure 
legislation that would give you this authority?
    Mr. Newsome. At one point, as Senator Feinstein was 
drafting her amendment to the Energy Committee, that language 
was included. It is my understanding that language has since 
been pulled out of that amendment, and so I am not aware of any 
substantial effort ongoing to include that language in any bill 
that might have jurisdiction over us.
    Senator Cochran. I presume if someone like, well, Senator 
Kohl decided he wanted to introduce a bill to grant that 
particular outcome on Title V, that would probably be referred 
to the Agriculture Committee in the Senate, would it not?
    Mr. Newsome. That is my understanding, Senator, because we 
are under the total jurisdiction of the Agriculture Committee.
    Senator Cochran. One other question, last week we had 
before this committee some witnesses who asked a question about 
the report of a foot-and-mouth disease case in Kansas, and we 
were assured at that time by the witnesses that it was a false 
alarm, that there was no factual basis to support a fear that 
there had been a foot-and-mouth case in Kansas. There was a lot 
of other conversation on that issue, but I understand now that 
there was a sell off of livestock futures as a result of that 
report. Has the CFTC looked into that situation, and were there 
any irregularities that we need to know about? Is there 
anything we need to do in connection with this appropriations 
bill that would enable you to fully investigate that situation?
    Mr. Newsome. We are very aware of the situation and are 
currently looking into that right now, Senator Cochran. 
Certainly there was some volatility in the live cattle market, 
on the Chicago Mercantile Exchange last week. We currently have 
a team from our enforcement division and our market 
surveillance division who are discussing the issue with USDA, 
and officials at the Chicago Mercantile Exchange.
    And as we develop the scenario, the time frames on when 
information was released and how the markets responded to that, 
we will certainly make that information available. 
Additionally, if we find that there were any violations of the 
Commodity Exchange Act, the commission will take the 
appropriate action. In terms of how that relates to our 
appropriations funding, I think we certainly have the adequate 
resources to address a situation such as that in the market.
    Senator Cochran. I appreciate your responses to the 
questions. I think, given the experience you had on September 
11 and the challenges that resulted from that, you have really 
had your hands full, that this agency, the Commodities Futures 
Trading Commission, has continued to function and carry on its 
responsibilities, as I understand it, and we commend you for 
that great effort.

                     ADDITIONAL COMMITTEE QUESTIONS

    Mr. Newsome. Thank you very much.
    Senator Kohl. Thank you, Senator Cochran, and thank you, 
Mr. Newsome, for being with us today.
    Mr. Newsome. Thank you, Mr. Chairman.
    [The following questions were not asked at the hearing, but 
were submitted to the Commission for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

                           president's budget
    Question. The President's budget this year will provide for an 
increase of 27 staff years. Your testimony provided information on how 
these employees will be used.
    Taking into consideration the extremely high turnover rate among 
employees you discussed, and the fact that the future direction of the 
markets is unknown, do you believe these additional 27 employees will 
truly be enough to ensure that CFTC has the ability to fulfill its 
mission?
    Answer. The Commission places a high priority on responsiveness in 
order to protect the interests of market users and to ensure that our 
efforts do not stifle market innovation and evolution. The Commission's 
budget request to OMB for an additional 64 FTEs was made in the context 
of the current level of compensation, which is below the levels of 
other Federal financial regulators. The high turnover rate experienced 
by the CFTC is a direct result of that lack of pay comparability. The 
flexibility needed in the personnel area to meet the challenges posed 
by the implementation of the Commodity Futures Modernization Act of 
2000 and to keep pace with the rapidly evolving changes, especially 
technological changes, taking place in the markets that we oversee can 
be best provided by paying Commission staff at levels comparable to the 
other Federal financial regulators.
    Question. We provided funding last year to provide retention 
bonuses to employees whose occupations have historically experienced 
the highest turnover rate at CFTC. Do you know what effect the 
retention bonuses have had on turnover so far?
    Answer. The group retention bonuses for attorneys and economists 
were in effect for only the last half of fiscal year 2001; therefore, 
it may be too early to draw any firm conclusions at this point. 
However, the rate of attrition among attorneys was 16 percent in fiscal 
year 2001, down from 20 percent in fiscal year 2000. Among economists, 
the rate was 5 percent, down from 15 percent in fiscal year 2000. 
Overall, attrition among full-time permanent employees was 10 percent 
in fiscal year 2001, down from 11 percent in fiscal year 2000. Fiscal 
year 2001 was the fifth straight fiscal year that the Commission has 
experienced double-digit turnover rates among full-time permanent 
staff--a rate that is almost double the government-wide average.
                        proposed transaction fee
    Question. Finally, the President's budget proposes a transaction 
fee beginning April 1, 2003 that is supposed to generate $33 million in 
fiscal year 2003 alone.
    Could you please elaborate on what this fee is for, how the $33 
million estimate was derived, and if it is agreed to by the Congress, 
whether these funds will supplement your current budget request of 
$82.8 million or substitute Congressional appropriations?
    Answer. According to OMB, the fee would be imposed only on 
transactions with public customers. The proposal would be phased in 
over the first year and would assess a fee of 31 cents per contract on 
transactions overseen by the Commission for 6 months of fiscal year 
2003, which is estimated to yield $33 million. It is my understanding 
that fee-generated funds would be in lieu of $33 million in 
appropriations, rather than an additional $33 million.
    Question. In your statement, you ask for the Committee's support of 
the removal of Title V pay restrictions for CFTC employees, as you are 
the sole Federal financial regulator still under these restrictions, 
and it is the driving force behind your high employee turnover rate. I 
am aware that you have submitted legislation to the House and Senate 
Agriculture Committees that would remove the Title V restrictions. If 
this legislation were adopted, and we funded full pay parity with other 
Federal financial regulators, according to the CFTC's numbers, it would 
cost approximately $16 million in fiscal year 2003.
    If the Title V restrictions were lifted, could the receipts from 
this proposed transaction fee be used to ensure pay parity for your 
employees?
    Answer. It is my understanding that OMB proposed these fees to be 
offsetting collections, which would make them available for any salary 
or expense need of the Commission for which the Commission is 
authorized to use its appropriated funds.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

             hiring and retaining high-level professionals
    Question. I am aware that an ongoing problem for CFTC has been the 
ability to hire and retain qualified professionals to effectively 
execute the oversight and regulatory responsibilities of the agency. It 
is my understanding that CFTC continues to lose top-level personnel to 
the private sector and to other Federal regulatory agencies, such as 
the Securities and Exchange Commission (SEC). In the absence of pay 
parity legislation, what measures have been taken to attract needed 
professionals to CFTC?
    Answer. The Commission uses a wide variety of human resources 
flexibilities available to it within Title V. They include:
  --Recruitment, Retention & Relocation Allowances.--The Commission's 
        attorneys and economists--which comprise almost 40 percent of 
        staff--are paid a 10 percent retention allowance. Although this 
        pay does not count toward retirement, it does serve as both an 
        incentive to keep some valuable employees from leaving service 
        at the CFTC and a selling point to attract prospective 
        employees. The Commission in the past has paid recruitment 
        allowances when deemed necessary to lure highly desirable 
        applicants to the Commission, although use of this authority is 
        subject to fund availability. The Commission does pay, when 
        appropriate, relocation costs for eligible employees.
  --Superior Qualification Authority.--The Commission has used this 
        authority to appoint new hires from the private sector at rates 
        of pay above step one of the grade for which they qualify.
  --Non-pay Benefits.--The Commission has looked beyond pay to other 
        benefits that may be meaningful to the quality of life of our 
        employees and have sought to use them including: Flexi-time, 
        non-taxable transit subsidy allowances, and a small in-house 
        fitness center.
    Question. I know that retention bonuses have been used to entice 
top-level professionals to stay. Has this been successful? What other 
efforts has CFTC made to retain personnel?
    Answer. As stated earlier, the group retention bonuses for 
attorneys and economists were in effect for only the last half of 
fiscal year 2001; therefore, it may be too early to draw any firm 
conclusions at this point. However, the rate of attrition among 
attorneys was 16 percent in fiscal year 2001, down from 20 percent in 
fiscal year 2000. Among economists the rate was 5 percent, down from 15 
percent for the same period. Overall, attrition among full-time 
permanent employees was 10 percent in fiscal year 2001, down from 11 
percent in fiscal year 2000.
    Also as stated earlier, the Commission has used a wide variety of 
human resources flexibilities available to it within Title V, including 
recruitment, retention, and relocation allowances, superior 
qualification authority, Flexi-time, and non-taxable transit subsidy 
allowances. We believe that without the use of these flexibilities our 
turnover problem would be even more severe.
                 regulatory authority over derivatives
    Question. Senator Feinstein has proposed an amendment to the Energy 
Bill giving CFTC the authority to regulate energy derivatives trading 
in order to increase consumer awareness of the energy market. What is 
CFTC's view on having regulatory authority over energy derivatives?
    Answer. The Commission believes that it would be premature to make 
any changes to the current law prior to the completion of Congress's 
hearings the Enron matter and the inquiries being made by the 
Commission and other agencies. Should the evidence show that 
legislative changes are necessary appropriate, the Commission is ready 
to assist Congress in advancing our mission of protecting the public 
from fraud, manipulation, and abusive practices.
    Question. How would this affect the agency's budget request for 
fiscal year 2003?
    Answer. With these caveats in mind, the Commission notes that any 
amendment to the Commodity Exchange Act that will increase the 
Commission's oversight authority will necessarily require a substantial 
increase in the Commission's budget request. Further, the greater the 
change to the Commission's oversight authority, the greater the 
requested increase would be.
                       DEPARTMENT OF AGRICULTURE

                              Food Safety

STATEMENT OF ELSA MURANO, UNDER SECRETARY FOR FOOD 
            SAFETY
ACCOMPANIED BY:
        MERLE D. PIERSON, DEPUTY UNDER SECRETARY FOR FOOD SAFETY
        MARGARET O'K. GLAVIN, ACTING ADMINISTRATOR
        DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM 
            ANALYSIS

                            OPENING REMARKS

    Senator Kohl. At this point we would ask our second panel 
of witnesses to make their way to the table. Here on our second 
panel we welcome Dr. Murano, from USDA, Under Secretary for 
Food Safety; Mr. Hawks, Under Secretary for Marketing and 
Regulatory Programs; Mr. Bost, Under Secretary for Food, 
Nutrition and Consumer Services; as well as staff members that 
each of you have brought along. And we also have at the table 
Mr. Dennis Kaplan, from the Office of Budget and Program 
Analysis. We have reviewed your full testimony and so it is not 
necessary to go through that in its entirety. If you could 
summarize the elements of the full statement we would 
appreciate that at this time. And we will call on Dr. Murano 
first.

                        STATEMENT OF ELSA MURANO

    Dr. Murano. Thank you, Mr. Chairman, Mr. Chairman and Mr. 
Cochran. I am pleased to appear before you today to discuss the 
fiscal year 2003 budget for food safety within the Department 
of Agriculture. I am Dr. Elsa Murano, Under Secretary for Food 
Safety, and with me today are Dr. Merle Pierson, Deputy Under 
Secretary for Food Safety; Ms. Margaret Glavin, Acting 
Administrator of the Food Safety and Inspection Service, and 
our deputy administrators.
    Since this is my first time here, I would like to introduce 
myself to you. I am a native of Havana, Cuba. I am a scientist 
by profession, having earned an M.S. degree in anaerobic 
microbiology and a Ph.D. in food science and food microbiology 
from Virginia Tech. The last 12 years I have dedicated my life 
to the study of food safety as a professor and researcher at 
both Iowa State and Texas A&M Universities.
    At USDA our number one goal is to protect the meat and 
poultry supply for consumers here and abroad. Every day, 7,600 
inspection personnel ensure that plants are meeting food safety 
rules. The pathogen reduction final rule has been implemented 
nationwide in plants of all sizes. The success of the rule has 
been proven in a number of ways. First, through salmonella 
testing data which shows that the prevalence of this pathogen 
has significantly decreased in all product categories. And 
secondly, data from the Centers for Disease Control show 
significant reductions in foodborne illness, which CDC has 
stated are likely due to implementation of the rule.

                             GOALS OF FSIS

    Today I would like to briefly mention the five goals that I 
believe will help us take food safety to a new level. I 
strongly believe they need to be pursued simultaneously in 
order to achieve our mission of protecting the public's health. 
Our first goal is to improve the management and effectiveness 
of FSIS programs. Performance expectations, lines of authority 
and accountability for ensuring compliance with regulatory 
requirements is essential to meet our public health objectives. 
This especially includes our field operations where we need to 
have the best trained and best supervised work force possible.
    In addition, we need to have systems in place that will 
ensure that we are vigilant regarding meat and poultry 
inspection, including adherence to humane slaughter practices.
    Our second goal is to enhance the coordination of food 
safety activities within and outside USDA. We have several 
efforts underway. Outside USDA we are working with the Food and 
Drug Administration exchanging information on an ongoing basis 
about dual jurisdiction establishments. I believe there are 
other opportunities for us to enhance coordination with the FDA 
in these types of establishments to further leverage our 
resources for the maximum public health benefit. One includes 
the possibility of deputizing FSIS inspectors in emergency 
situations to help FDA address threats to the food supply.
    The third goal is to enhance the scientific basis of 
existing food safety policy systems. Achievement of this goal 
is essential if we are to make sound decisions on protecting 
the public's health. One way to accomplish this is to use risk 
assessment as a way to identify hazards and provide a basis for 
making risk management decisions. Another way is through the 
application of performance standards as an important 
verification tool for HACCP. As you know, we have turned to the 
scientific community to get input on this issue. Both the 
National Advisory Committee on Microbiological Criteria for 
Foods and the National Academy of Sciences will provide us 
recommendations by the end of this year.
    As another effort to ensure our policy decisions are 
science-based, and the process is transparent and inclusive of 
all interested parties, we have planned a series of meetings to 
discuss how FSIS can integrate scientific principles into its 
activities and decisionmaking. In January, we hosted a two-day 
public meeting to discuss the role of epidemiology in 
investigating foodborne illness outbreaks and initiating 
product recalls. We are planning a scientific meeting for May 6 
and 7 in Washington to discuss the state of pathogen reduction 
measures, including HACCP, and to discuss the role of 
performance standards.
    Our fourth goal is to enhance outreach and public education 
efforts. We will host a food safety education conference in 
September of this year, cosponsored by HHS and the Partnership 
for Food Safety Education. It will provide an opportunity for 
food safety education and communication leaders from across the 
country to present and share projects, assess current trends 
and plan for the future.
    And lastly, our final goal is to ensure that our meat and 
poultry are safe from intentional contamination. We have taken 
specific steps to accomplish this within the USDA Homeland 
Security Council. We created the Food Biosecurity Action Team 
to coordinate and facilitate all activities pertaining to food 
security and emergency preparedness. In addition, and in 
partnership with HHS, we created the Food Threat Preparedness 
Network, or PrepNet, which includes all food safety agencies of 
the Federal Government. Both of these entities are fully 
engaged in the development of plans to quickly respond to 
biosecurity threats, as well as preparedness strategies 
designed to prevent or contain events to the greatest extent 
possible.
    We have made headway in food safety and we are on the right 
track. To help us continue our efforts the fiscal year 2003 
budget includes a funding request for the Food Safety 
Inspection Service of $804 million, a $28 million increase 
above 2002. Let me very briefly discuss the four specific 
components of the request.

                            BUDGET REQUESTS

    First, $10.8 million is for pay and benefit increases for 
our workforce. Second, we are requesting $14.5 million to 
implement the FSIS Automated Corporate Technology Suite 
(FACTS). This is an initiative to replace our existing, 
disjointed information systems with a system that has data 
sharing capabilities, making program data available at all 
levels of the organization. Third, our budget includes a $1.5 
million request to expand risk prevention and management 
efforts in small and very small meat, poultry and egg 
establishments. And fourth, our budget contains a request of 
$1.2 million to conduct targeted epidemiological surveys at 
slaughter establishments as part of this effort. Samples will 
be taken at meat and poultry operations and analyzed for the 
presence of lesions and drug or chemical residues.

                          PREPARED STATEMENTS

    I am committed to realizing these five goals and, in doing 
so, strengthening the safety of our meat, poultry and egg 
product supply. This concludes my statement. Thank you for 
listening and I certainly look forward to any questions you may 
have.
    Senator Kohl. We thank you.
    [The statements follow:]

                 Prepared Statement of Dr. Elsa Murano

    Mr. Chairman and Members of the Subcommittee, I am pleased to 
appear before you today to discuss the fiscal year 2003 budget for food 
safety within the Department of Agriculture (USDA). I am Dr. Elsa 
Murano, Under Secretary for Food Safety. With me today are Dr. Merle D. 
Pierson, Deputy Under Secretary for Food Safety; Margaret Glavin, 
Acting Administrator of the Food Safety and Inspection Service (FSIS); 
and USDA's Budget Director, Stephen Dewhurst. Other FSIS 
representatives here today are Ron Hicks, Acting Associate 
Administrator, Jeanne Axtell, Acting Deputy Administrator for the 
Office of Management, and members of the Budget Division staff.
    Since this is my first time here, I would like to introduce myself 
to you. I am a native of Havana, Cuba. My family and I emigrated to the 
United States 40 years ago. So many of my compatriots have lost their 
lives in shark-infested waters, seeking the very freedom and 
opportunities that led to my being here today. So as a Cuban-American, 
I thank the United States, my adopted country, for being the beacon of 
liberty for the world.
    I am a scientist by profession. I graduated with a B.S. in Biology 
from Florida International University. I developed a deep interest in 
the medical field and in public health, which led me to earn an M.S. 
degree in Anaerobic Microbiology, and a Ph.D. in Food Science from 
Virginia Tech. I also developed an appreciation for the field of food 
microbiology, and decided to dedicate my life to the study of bacteria, 
which although microscopic, are capable of causing so many cases of 
foodborne illness each year in our country, and throughout the world.
    I have been a researcher and teacher in the field of food safety, 
both at Iowa State and Texas A&M Universities. My research efforts have 
led me to investigate organisms like Escherichia coli O157:H7, Listeria 
monocytogenes, and Salmonella, all the bad actors that have become 
household words. My approach in this work has been to determine where 
these pathogens are found, and to investigate safe methods that can be 
used to control or eliminate them from farm to table.
    Throughout my career as a researcher, I have become keenly aware of 
the importance of sound scientific studies, and how these can help 
provide us with the critical information we need to make decisions that 
will truly reduce the risk of foodborne illness. I have also observed 
the need for a proactive approach, one that does not react to food 
safety crises, but rather anticipates risks and prepares to mitigate 
the potential for harm. The events of September 11 are a reminder to 
all of us that we need to be diligent in order to prevent threats to 
our food supply as much as humanly possible.
    Since September 11, the question has been asked, ``What is USDA now 
doing to ensure the safety of the nation's meat, poultry, and egg 
products supply?'' Recent events have caused us to examine every aspect 
of our food safety system at USDA. After close scrutiny, I am confident 
that we are in a strong position due to our food safety infrastructure. 
We have a daily presence of inspectors in every meat, poultry, and egg 
products facility, strong sampling and laboratory resources, a science-
based regulatory inspection system, and an import reinspection, audit, 
and verification program that permits free trade while ensuring that 
product entering the U.S. is as safe as domestic product. I would like 
to thank you for your support, because the full funding that FSIS 
received in fiscal year 2002 enables us to fulfill our responsibility 
to the American people by ensuring that the U.S. food supply remains 
among the safest in the world.
                               my vision
    It is truly an honor to have been asked by President Bush and 
Secretary Veneman to serve as Under Secretary for Food Safety. To have 
the chance to really make a difference in the food safety arena is a 
golden opportunity that I do not take lightly. I would like to share 
with you my vision for the future of food safety and inspection for 
meat, poultry, and egg products and how the fiscal year 2003 budget 
request supports that vision.
    When I began the job last fall, I indicated that I would spend some 
time assessing where we are and what has been accomplished before 
deciding where we needed to go. I have determined that we have a strong 
food safety infrastructure. Within FSIS alone, more than 7,600 
inspection personnel verify the safety of meat, poultry, and egg 
products nationwide. Combined with the resources of other government 
agencies at the Federal, State and local levels, we have an extensive 
system of protection. A vital part of our infrastructure is the 
Pathogen Reduction (PR)/Hazard Analysis and Critical Control Point 
(HACCP) regulation, which came into effect for all meat and poultry 
plants in 2000.
    Our food safety infrastructure is designed to address both 
intentional and unintentional threats to the safety of our food supply. 
Thus, we must continue to strengthen it, and to increase its 
flexibility in responding to food safety threats, if we are to maintain 
consumer confidence in our food supply and our regulatory programs.
    I have five goals I want to pursue in the coming year to ensure 
that we are proactive in protecting the public's health. These goals 
are not listed in any particular order because they must all be pursued 
with equal vigor in order to ensure the safety of the nation's food 
supply. My five goals are to:
  --Protect meat, poultry, and egg products against intentional harm;
  --Improve upon the overall management and effectiveness of FSIS 
        programs;
  --Enhance coordination of food safety activities within and outside 
        of USDA;
  --Use science to guide our future policy decisions; and
  --Significantly enhance outreach and public education efforts.
Protect Against Intentional Harm
    Since September 11, we have placed increased attention on the need 
for coordinated efforts to ensure biosecurity. As I mentioned earlier, 
due to our extensive food safety systems, we have not needed to make 
dramatic changes to our operations to respond to possible terrorist 
threats. However, I want to assure you that we have taken specific 
steps to continue to protect the safety of our meat, poultry, and egg 
products, with a special emphasis on intentional contamination. Allow 
me to describe some of these steps, which have as their hallmark an 
improved coordination in the prevention, as well as response to 
biosecurity threats.
    Within the Department, the USDA Homeland Security Council is the 
lead group in our effort to ensure the safety of our food supply. The 
Council is responsible for overall USDA Homeland Security policy, 
coordination of Department-wide homeland security issues, tracking USDA 
progress on homeland security objectives, and appointing 
representatives to inter-agency or external groups. The Council also 
ensures that information, research, and resources are shared, and 
activities are coordinated with other Federal agencies.
    The USDA Homeland Security Council has three subcouncils that 
provide coordination between mission areas and agencies, as well as 
information to the Secretary and other key decision-makers. One of 
these, the Protection of the Food Supply and Agriculture Production 
(PFSAP) subcouncil, is charged with protection of the food supply and 
agricultural production. The Under Secretary for Marketing and 
Regulatory Programs and I are co-chairs of this subcouncil, which is 
responsible for:
  --Coordination of activities within USDA mission areas in response to 
        a terrorist threat to agricultural production;
  --Coordination of activities within USDA mission areas in response to 
        a terrorist threat to meat, poultry, and egg products;
  --Border surveillance and protection to prevent introduction of plant 
        and animal pests and diseases;
    With specific regards to protection of meat, poultry, and egg 
products, there are three entities through which activities are carried 
out, both within and outside USDA. First, is the Food Biosecurity 
Action Team, or F-BAT. F-BAT is an internal FSIS group, which we 
created in response to the September 11 attacks; second is the Food 
Emergency Rapid Response and Evaluation Team (FERRET), which involves 
all of USDA and which existed prior to September 11; and third is the 
Food Threat Preparedness Network (PrepNet), which includes all food 
safety agencies of the Federal Government, and which was created after 
September 11. I would like to explain to you in more detail what each 
of these three entities brings in fighting bioterrorism.
    Let's begin at the level of FSIS' preparedness. First, the Food 
Biosecurity Action Team (F-BAT) was formed to coordinate and facilitate 
all activities pertaining to biosecurity, countering terrorism, and 
emergency preparedness within the Agency. F-BAT also serves as FSIS' 
voice with other government agencies, and internal and external 
constituents on biosecurity issues.
    F-BAT is charged with 5 goals:
  --Ensuring the continuation of FSIS essential functions during 
        emergencies;
  --Ensuring employee safety pertaining to terrorism, bioterrorism and 
        catastrophic emergencies;
  --Ensuring that FSIS is prepared to prevent and respond to 
        agricultural terrorism or attacks on the food supply;
  --Ensuring proper communication with FSIS employees, USDA, industry, 
        trade associations, consumers, media, and Congress; and
  --Ensuring the security of our laboratories.
    F-BAT has been instrumental in several initiatives to improve food 
safety and security. These include:
  --Assessing potential vulnerabilities along the farm-to-table 
        continuum;
  --Providing guidelines to industry on food security and increased 
        plant security, particularly in small and very small plants;
  --Strengthening FSIS coordination and cooperation with law 
        enforcement agencies; and
  --Enhancing security features at all FSIS laboratories, and 
        increasing the capacity of its laboratories to test for 
        additional food safety hazards and biological agents.
    In conjunction with F-BAT, FSIS is integrating bio-security 
responsibilities into new veterinary medical specialist positions being 
established in each district office. These individuals will serve as 
points of contact in each district on biosecurity issues.
    Next, I'll describe our Department-wide mechanism to ensure 
expeditious and effective response in the event of a food security 
threat--that mechanism is called FERRET--the Food Emergency Rapid 
Response and Evaluation Team.
    As I mentioned before, FERRET existed before September 11, having 
been established in 1998 to provide a quick and appropriate USDA 
response across agencies to food safety emergencies. FERRET is chaired 
by me, as the Under Secretary for Food Safety, and emergency response 
activities are coordinated by FSIS. As I said earlier, the USDA formed 
its Homeland Security Council in response to September 11, with one 
subcouncil in charge of protecting the food supply and agricultural 
production. So, if a food-related biosecurity event occurs, FERRET and 
this subcouncil become one; however, if there is a food emergency that 
is not biosecurity-related, only FERRET will function.
    The third pillar of our biosecurity efforts is the Food Threat 
Preparedness Network, also known as PrepNet. This group functions 
across departments to ensure food security throughout the government. 
PrepNet is co-chaired by the Administrator of FSIS and the Director of 
the Center for Food Safety and Applied Nutrition at the Food and Drug 
Administration (FDA). It is a strong example of our commitment to 
working with our sister public health agencies to take proactive 
measures against bioterrorist threats. Other members of PrepNet include 
APHIS, the Centers for Disease Control and Prevention (CDC), the 
Department of Defense (DOD), and the Environmental Protection Agency 
(EPA). The focus of this group is on preventive activities to 
proactively protect the food supply, as well as rapid response in case 
of an emergency. PrepNet, which works in conjunction with Governor 
Ridge's Office of Homeland Security, is reviewing each agency's 
statutory authorities and is conducting an assessment of needs with 
plans to fill the statutory gaps. PrepNet members also share scientific 
and laboratory assets.
Improve Overall Management and Effectiveness
    Now permit me to continue with goal number two of my plans, which 
deals with improving the management and effectiveness of FSIS programs. 
Many of the efforts related to this goal started before I came on 
board. Two examples are the restructuring of our district offices, and 
improving the technical background of our workforce.
    Last February, FSIS formed an internal working group to review the 
role and functions of the district offices. Based on the findings and 
recommendations from this group, FSIS will realign its field offices 
and personnel. The result of the realignment will be a reduction of 
district offices from 17 to 15, with two current offices serving as 
sub-district offices. Further adjustments in the district office 
structure may be needed as changes occur in the regulated industry.
    Regarding our workforce, FSIS recognized sometime ago that it needs 
to ensure that field employees have the training and expertise needed 
to operate in a more science-based environment. As part of our efforts 
to ensure a strong science-based workforce, and therefore a solid 
infrastructure, FSIS has introduced the new Consumer Safety Officers 
(CSO) position. CSOs conduct on-site food safety and other consumer 
protection assessments in meat and poultry establishments, and make 
determinations about the scientific efficacy of a plant's HACCP 
operating plan. This new occupation advances the Agency's 
transformation to a public health regulatory agency by changing the 
focus of inspection personnel from being merely process observers to 
professionals who verify the effectiveness of risk mitigation and 
reduction activities employed in food production processes. FSIS has 
already selected and trained thirty-five CSOs. They began new 
assignments in December 2001. We plan to select and train, from among 
our existing personnel, additional CSOs during fiscal year 2002. The 
next class of CSOs is expected to enter training early this summer. 
This is part of our effort to gradually increase the proportion of 
scientific and technical professionals in FSIS and make available at 
the frontline more personnel with scientific and technical expertise in 
meat and poultry facilities.
    Along with the CSO, our veterinarians play a key role in ensuring 
that our mission is carried out. To that end, we are conducting a pilot 
test to explore improving the role of veterinarians in FSIS as well as 
implementing new strategies to recruit and retain these valuable 
professionals. We have established a new veterinary presence in the 
field with the introduction of the District Veterinary Medical 
Specialists (DVMS) position. The DVMS will serve as the primary contact 
for humane handling and slaughter issues, including verification and 
enforcement activities, information dissemination, training, 
documentation, and generation of recommendations for reports to senior 
management on future policies. We appreciate the Committee's funding 
support for these positions in the fiscal year 2001 Supplemental 
Appropriations bill. These DVMS' will make an important difference in 
the Agency's continued efforts to ensure full compliance with humane 
handling and slaughter regulations, as well as facilitate coordination 
of other activities in the field. In the wake of September 11, we will 
now also rely on these professionals to serve as the Agency's first 
point of coordination and response to intentional threats to the food 
supply. Their presence in the field makes them uniquely qualified to 
also serve as the FSIS point of contact on matters of biosecurity for 
industry, the Agency's field workforce, and food safety authorities at 
the Federal, State, and local level. They also work closely with FSIS' 
field epidemiologists as liaisons to State and foreign public health 
systems.
    These are important steps, but not enough. We have no intention of 
leaving behind over 6,000 FSIS inspectors who are so important to our 
mission. They, too, must be able to operate in the new, more science-
based FSIS. Our inspectors need to further their understanding of HACCP 
and how it enhances their authority. We intend to review training 
procedures for inspectors and enhance HACCP training to ensure that 
inspectors clearly understand and carry out their responsibilities. We 
are also pilot testing different inspection roles under the HACCP-based 
Inspection Models Project, or HIMP, which are discussed later in my 
statement.
    In order for these efforts to work, the Agency needs a strong 
supervisory and management infrastructure. Supervisors need to be held 
accountable for their decisions and they need the authority to hold 
their subordinates responsible for their actions. Clear performance 
expectations, lines of authority, and accountability for assuring 
compliance with regulatory requirements can forge a strong link among 
managers, supervisors, and employees to meet food safety objectives. I 
am convinced that through strong management, FSIS will be able to carry 
out its mission of ensuring the safest food supply in the world.
Enhance Coordination of Food Safety Activities
    My third goal is that of enhancing coordination of food safety 
activities within and outside USDA. I have come to believe very 
strongly that by working together, we can best leverage our resources 
to ensure a safe food supply. One example of how this could be done is 
through the cataloguing of Federal, State and local partners' 
capabilities regarding identification techniques and laboratory 
resources, so that we can quickly determine which agency is best able 
to respond to a particular situation, and how to coordinate the 
response to that incident among all agencies.
    Such strategic leveraging has already begun within USDA, through 
our recent partnering with the Animal and Plant Health Inspection 
Service, or APHIS, on the subject of veterinary training. We have 
established joint training opportunities in foreign animal diseases, 
coordinated emergency preparedness, and reviewed food biosecurity from 
a collaborative veterinary corps perspective. Our partnership with 
APHIS also extends beyond training activities. We are requesting 
funding for fiscal year 2003 to establish an integrated surveillance 
system with APHIS that would conduct more comprehensive sampling at 
slaughter and correlate the data with on-farm data collected in the 
APHIS National Animal Health Monitoring System (NAHMS). The system 
would provide more seamless data coverage from farm to table, and 
present opportunities to better understand the types of risk reduction 
strategies that producers and processors can employ. FSIS is also 
exploring the possibility of co-locating its laboratories with APHIS 
and the Agriculture Research Services' (ARS) laboratories.
    Strategic partnering must also occur between FSIS and agencies 
outside of USDA. I am proud of our recent coordination efforts with FDA 
to combat pathogens. As you may know, FSIS and FDA have had a 
Memorandum of Understanding since 1999 to exchange information on an 
on-going basis about establishments that fall under both of our 
jurisdictions. As a result, we have worked together on several cases in 
which we were jointly able to ensure the safety of specific food 
products.
    I believe there are other opportunities for us to work with FDA to 
further leverage our resources for the maximum public health benefit. 
In fact, we are currently working on initiatives with FDA that will be 
truly groundbreaking in this area. We are exploring ways to increase 
coordination and sharing of resources to prevent overlap and 
duplication in the food safety arena. We hope to have an announcement 
in the near future of additional joint FSIS-FDA initiatives.
    I would also like to make note of my commitment to working with our 
international partners in ensuring a safe food supply worldwide. FSIS 
is actively engaged in the CODEX Alimentarius Commission, a standard 
setting body for food safety. Last year, we received an additional 
$100,000 in appropriated funds to further our food safety agenda at 
this international level. By working with our international partners to 
establish internationally recognized food safety standards, we are 
ensuring that the U.S. government has a voice in the dialogue.
    Our international efforts also include ensuring that imported 
product is safe for consumption and held to the highest standards of 
food safety. As you may know, recent reports of poor sanitary 
conditions in meat plants in Mexico have raised questions concerning 
USDA's auditing and plant certification in Mexico. I take these 
allegations very seriously. For this reason and at the request of 
Secretary Veneman, I recently traveled to Mexico to get an assessment 
of the situation. During this visit, I, along with the FSIS Acting 
Administrator and other USDA officials, met with Dr. Javier Trujillo, 
Director of Food Safety for Mexico, and other Mexican government 
officials to measure their level of commitment to maintaining a meat 
inspection system that is equivalent to the United States. We also took 
the opportunity to visit several plants in question to see the sanitary 
conditions first hand. I will continue to ensure that every effort is 
being made in Mexico and all other eligible exporting countries to 
maintain the highest level of sanitary conditions and will keep you 
apprised of the progress.
Use Science to Guide Policy
    My background as a researcher in food safety has shown me the 
importance of science and how it should influence regulatory policy. 
Thus, my fourth goal is one of injecting science into the process of 
rulemaking. I'm open to new solutions and new ways of doing business 
only if they stand on the firm foundation of science. Enhancing the 
scientific foundation of existing food safety policies and systems is 
paramount, and it is one of my highest priorities. One way to 
accomplish this is to seek an open dialogue with the scientific 
community. Towards this end, I am pleased to announce plans to hold a 
science symposium this spring on pathogen reduction and microbial 
testing. This will be an opportunity for academia, consumers, and 
industry, to share their expertise and comment on the future direction 
of these important issues.
    In addition to hosting scientific symposia, scientific advisory 
committees and other science-based organizations can help FSIS improve 
its scientific decision-making. One notable example is the question of 
performance standards. At the direction of Congress, we have turned to 
both the National Advisory Committee on Microbiological Criteria for 
Foods, and to the National Academy of Sciences (NAS), which are 
comprised of the nation's top scientists and foremost experts in the 
food safety discipline, in order to determine the best course of action 
on this issue. Performance standards are an important verification tool 
for HACCP. The work of the Advisory Committee and the NAS is more than 
just an academic exercise. Their expert opinion will go a long way 
towards helping us determine how to select the right standards, and 
whether the standards have an effect on public health.
    Performance standards serve as a measure of the success of food 
safety programs. However, it is not enough to set just any performance 
standard--for the wrong standard can mislead us into believing that 
systems designed to control hazards are working when maybe they are 
not. Thus, we must set performance standards that are reliable, and 
that are accurate in terms of reflecting when HACCP is not working and 
control of hazards has been lost.
    The issue of performance standards was most recently showcased in 
the Supreme Beef case. This case has confused many into thinking that 
FSIS can no longer shut down meat and poultry plants. The fact of the 
matter is that USDA has the authority to shut down plants for 
sanitation or other food safety reasons, just as it always has. 
However, since the Supreme Beef decision, FSIS can no longer rely 
solely on Salmonella data to shut down plants. I must emphasize that 
Salmonella testing in grinding operations has not stopped. The 
difference is that now we are using the performance standard data in 
conjunction with other measures, to verify that the establishment's 
HACCP plan and Sanitary Standard Operating Procedures (SSOPs) are 
working. As you know, our inspectors are charged with such verification 
activities. Thus, record reviews, monitoring of plant personnel, as 
well as microbial sampling are the tools they use to determine whether 
HACCP and SSOPs are working.
    In addition to continuing our use of HACCP to control foodborne 
hazards, we are piloting novel ideas such as HIMP, to address the on-
line slaughter process. I like to think of HIMP as a total food safety 
and process control system. As you know, under HIMP, volunteer plants 
take a more active role in the carcass sorting process, while our 
inspectors concentrate on more intense inspection and verification 
activities. The true value of this pilot project is that it is 
demonstrating how real-time data gathering can help plants maintain 
control over product, and how increasing the time that inspectors can 
spend in verification activities improves their ability to detect 
deviations. HIMP is still in its infancy, and FSIS is continuing to 
evaluate it and improve it. FSIS has received numerous comments through 
public meetings and Federal Register notices about the project, and the 
General Accounting Office (GAO) has released its own review of HIMP. We 
welcome all of these comments and are always willing to consider 
changes that will result in improvements and enhancements in food 
safety.
    In fact, we plan to have all of the data collected thus far on the 
HIMP project reviewed by a scientific institution, in order to ensure 
that any conclusions we draw are sound and supported by science. Later 
this year, it is our plan to publish a Federal Register notice on the 
HIMP program for young chickens, to propose several improvements. We 
encourage all interested parties to submit their ideas to FSIS for 
consideration. It is important to remember that HIMP is a pilot 
project, and we are constantly improving it. It is not yet ready to be 
implemented nation-wide. When it is, we will communicate this in a 
transparent and open manner, and it will only take place when the data 
shows that HIMP represents an improvement over the traditional 
inspection system.
    Our laboratories also play a significant role in our efforts to use 
science to improve FSIS' effectiveness. They are key to ensuring that 
we have the science to base our policy on, and to take enforcement 
action when necessary. For the last 3 years, FSIS has been working to 
gain accreditation for its laboratories under International 
Organization for Standardization (ISO) standard 17025. This standard is 
internationally recognized as a comprehensive and rigorous standard for 
food testing laboratories. Earlier this year, our Microbial Outbreaks 
and Special Projects Branch laboratory in Athens, Georgia was 
accredited by the American Association for Laboratory Accreditation, 
the accrediting body in the United States recognized by ISO. The 
American Association for Laboratory Accreditation has audited our three 
regulatory laboratories. FSIS is pleased to announce that its Athens, 
Georgia laboratory was accredited in February and its St. Louis, 
Missouri, and Alameda, California, laboratories were accredited earlier 
this month.
    Another important way to utilize science as the foundation for 
decision-making is to use the tool of risk assessment. Simply stated, 
risk assessment is the process by which risks to the food supply, such 
as bacteria, are identified, and their probability of causing harm 
characterized. Mathematical models are developed with these data, and 
used in order to determine whether changing certain practices will 
reduce or increase the risk to consumers. Risk assessment is an 
important part of policy making, because it helps us make the best 
decisions based on science.
    An example is the Bovine Spongiform Encephalopathy (BSE) Risk 
Assessment that was recently completed by Harvard University's Center 
for Risk Analysis. The purpose was to evaluate the ability of U.S. 
measures to prevent the spread of BSE to animals and humans, if it were 
to arise in this country. The risk assessment provided valuable data 
showing that we are in a strong position to prevent the entry of BSE 
into the U.S. As the Harvard University risk assessors put it ``the 
U.S. is highly resistant to BSE.''
    Filling data gaps needed for risk assessments is a priority, 
because a risk assessment model is only as robust as the data used to 
develop it. In instances where we don't have the needed data, we must 
work with researchers to fill the gaps. As you may know, FSIS meets 
with ARS each year to discuss our research agenda. The work that both 
FSIS and ARS do to prioritize research needs and carry out that 
research is very important to our policy making efforts. In the future, 
I plan to explore additional partnerships--such as with academia--to 
fill data gaps.
Enhance Outreach and Public Education Efforts
    My fifth goal for the coming year is to enhance our outreach and 
public education efforts. I'm pursuing an aggressive education and 
communication program to ensure that consumers have confidence in our 
food safety system. This program extends beyond the traditional 
outreach effort FSIS has engaged in--educating consumers about safe 
handling practices and educating industry on the Agency's regulatory 
requirements. My public education and outreach agenda expands the 
definition of the public to the broadest sense by including consumers, 
industry, FSIS employees, our public health sister agencies, State and 
local health departments, and foreign food safety officials.
    While I recognize that FSIS excels at developing materials to 
educate the public on food safety, the distribution of the materials is 
very costly. It is my goal to work with our partners to find a cost-
effective and shared means of ensuring that these important food safety 
messages reach their targeted audiences.
    One example of our joint efforts to educate the public is our 
upcoming food safety education conference. The conference will be 
sponsored by USDA and the Department of Health and Human Services 
(HHS), in cooperation with the Partnership for Food Safety Education. 
We're planning the conference for September to provide an opportunity 
for food safety education and communication leaders from across the 
country to present and share projects, assess current trends, and plan 
for the future.
    Another way we're working towards this goal is through a number of 
cooperative agreements to foster improved education and understanding 
of the risks associated with the handling of meat, poultry and egg 
products by retail stores and food service facilities. Last year, FSIS 
entered into 18 cooperative agreements with State retail food safety 
task forces, municipalities, and colleges and universities that work 
with the underserved or economically disadvantaged communities. And 
this year, we are working to fulfill those agreements as well as expand 
the number of agreements we have to reach even more individuals.
    In addition, FSIS has entered into a cooperative agreement with the 
Association of Food and Drug Officials (AFDO) to provide train-the-
trainer educational programs nationwide to State and local sanitarians 
who inspect these establishments, as well as small retail store and 
food service facility owners and managers.
    A seamless communication network involving all who play a role in 
ensuring the safety of the food supply--from the regulators down to the 
consumers--is essential to our mission. Coordinated efforts and a 
strong public education campaign will provide the framework for this 
communication network.
    Consumers look to the government for guidance regarding food 
safety. I am seeking an aggressive education and risk communications 
program coordinated with HHS to ensure that our efforts are recognized, 
and that consumers have confidence in our system.
    Having reviewed the overall mission and organization of the Agency, 
I would like to discuss some of the operational changes underway in 
FSIS to support the President's Management Agenda.
                     president's management agenda
    As you are aware, President Bush has made improving government 
performance a priority for this Administration. The need for reform is 
not news. Overlapping missions and competing agendas grow up alongside 
one another, wasting money and baffling the public. This Administration 
believes that government not only needs to reform its operations--how 
it goes about its business, and how it treats the people it serves; it 
also must rethink its purpose--how it defines what its business is and 
what services it should provide.
    President Bush has called for a government that is active but 
limited--which focuses on priorities and does them well. And the 
President's Management Agenda focuses on improving Federal management 
and delivering results that matter to the American people. As I pursue 
the five goals I have identified in my vision for USDA's Food Safety 
mission area, I will be assuring that the intent of the President's 
Management Agenda is fully realized.
    FSIS has already taken significant steps in improving the 
management and effectiveness of its programs and operations. For 
example, FSIS has been engaged in on-going efforts to flatten its 
organizational structure and increase the number of employees involved 
with program delivery since the mid-1990's. This earlier effort was 
intended to provide the organizational structure to support the 
implementation of the Pathogen Reduction and HACCP regulation and 
assure re-direction of resources to the front-line activities of the 
Agency. Today, FSIS has turned its attention towards transitioning its 
workforce. The goal is to have a front-line inspection workforce that 
is equipped with the scientific knowledge and technical skills to 
operate in a public health regulatory environment. Creating this 
transformation requires the introduction of changes in the workforce 
composition, changes in the education and training of inspection 
personnel, and changes in the performance expectations for managers and 
employees at all levels.
    A significant percentage of FSIS resources (92 percent) are 
involved directly and indirectly in the food safety inspection of meat, 
poultry, and egg products establishments. These functions can be 
enhanced through a variety of partnership activities with Federal, 
State, and local governments, the regulated industry, and consumers to 
meet our mission goals. Using new budget authority made available 
through the Homeland Security Supplemental appropriation, FSIS is 
exploring opportunities with other Federal agencies to leverage 
resources to enhance the security of the food supply. FSIS is 
developing closer ties, through cooperative agreements, with CDC, FDA, 
and U.S. Customs Service, and State and Federal law enforcement 
agencies, on threat recognition and interdiction activities associated 
with acts of bioterrorism involving the food supply. There are also 
significant roles for academia and the private sector to accomplish the 
vital work of homeland security. Private sector resources in academic 
and the commercial sector can play vital roles in training and 
education, in laboratory studies, and in information technology.
    FSIS also plans to continue its work with those States conducting 
State inspection programs. Presently, roughly 40 percent of meat, 
poultry, and egg products inspection is carried out under State-
operated inspection programs. USDA provides grants to the States, which 
then administer inspection programs that must be certified as ``equal 
to'' the Federal program. Currently, 27 States participate with FSIS as 
``equal to'' partners. Maine is seeking to establish its own State 
program and is expected to be certified as early as this summer.
    Accurate and timely financial information is key to achieving the 
highest measure of accountability and the best operating performance 
among Federal programs. The Food Safety mission area is committed to 
ensuring that Federal financial systems produce accurate and timely 
information to support the operating, budget, and policy decisions for 
public health and food safety regulation.
    For its part, FSIS has been one of the lead agencies within USDA in 
converting to a new accounting system designed to meet the goals of 
improved financial performance. In fiscal year 2002, FSIS is continuing 
to improve its financial performance by implementing new business 
processes within the district offices and by establishing new resource 
management performance expectations for field managers.
    The President's Management Agenda champions citizen-centered e-
government as a primary means of improving the Federal government's 
value to the citizen. Under the leadership of USDA's Office of the 
Chief Information Officer, FSIS has been working with other USDA 
agencies to identify specific strategic and enabling e-government 
initiatives. These ``Smart Choices,'' as they are known, will form the 
core of the USDA e-government Strategic Plan. Working towards an 
electronic government is essential to my vision for an expanded 
outreach and education effort. Improved access to food safety 
information and timely data sharing is key to my vision as well.
    As part of the USDA e-government Strategic Plan, FSIS has the lead 
in implementing the proposed Food Safety and Security Tools initiative. 
This initiative promotes interdepartmental collaboration, real-time 
data collection, and tracking and retrieval of port- and plant-specific 
data regarding food and livestock. Specifically, its focus is to:
  --Share information among agencies more rapidly and effectively;
  --Equip field inspectors with upgraded wireless and telephone service 
        to enable them to enter and receive data and to communicate 
        with each other and with management in a wider range of work 
        settings; and
  --Enhance communication in times of crisis to ensure that essential 
        food safety-related coordination and communication occurs.
    As you can see, my vision for the future of food safety and the 
inspection of meat, poultry, and egg products is expansive. FSIS' 
efforts to realize this vision and at the same time, to meet the goals 
of the President's Management Agenda will not be easy, but we recognize 
the reward if we are able to do so--the safest food supply possible. At 
this time, I would like to focus on the food safety budget request for 
fiscal year 2003 and show you how our funding request relates to 
achieving this goal.
                    fiscal year 2003 budget request
    The FSIS budget request for fiscal year 2003 supports the Agency's 
basic mission of providing continuous food safety inspection in each 
meat, poultry, and egg products establishment in the country. The 
increase over the fiscal year 2002 appropriation ensures a level of 
funding necessary to cover increased salary and benefit costs, thus 
assuming continued support for an in-plant inspection workforce of 
7,600 employees. The budget request provides funding for a much-needed 
overhaul of the Agency's data sharing and information management 
capabilities. The budget request anticipates no change in the Agency's 
current overtime and user fee structure in fiscal year 2003. FSIS will, 
however, review and propose changes to overtime fees and propose an 
annual licensing fee. Both of these would take effect in fiscal year 
2004.
    In fiscal year 2003, FSIS is requesting $803.6 million, a net 
increase in appropriated funds of $28 million. Of this proposed 
increase, $10.8 million is for pay and benefit increases. FSIS employee 
salaries, benefits, and inspector travel between plants take up nearly 
90 percent of the FSIS budget. This increase also includes $1.2 million 
for the Grants-to-States program, primarily for increased pay costs at 
the State level. It is imperative that States are fully funded for 
their share of the cooperative programs to permit continued 
coordination between Federal and State authorities on inspection 
activities and emerging food safety threats. If not fully funded, 
Federal and State pay raises, benefits, and increases in health 
insurance and retirement benefits place a significant burden on our 
ability to adequately staff inspection activities in meat, poultry, and 
egg products establishments.
    Earlier, I mentioned the need to overhaul FSIS' data sharing and 
information management capabilities. FSIS' fiscal year 2003 budget 
includes a request of $14.5 million to implement the FSIS Automated 
Corporate Technology Suite (FACTS). FACTS is an initiative to replace 
FSIS' existing disjointed information systems, with a system that has 
data-sharing capabilities, making program data available at all levels 
of the organization. All projects managed within FACTS will be 
interrelated through the single database, which will provide a central 
point of access, decreasing data redundancy and inaccuracy. A primary 
emphasis of this initiative will be to provide timely, up-to-the-minute 
data on in-plant inspection and performance. This will dramatically 
improve the ability of our inspectors and other professionals to make 
decisions quickly, and will allow FSIS to focus its resources on areas 
of greatest risk. The data sharing attributes of FACTS will also 
improve the coordination of risk management efforts both within USDA 
and between Federal, State, and local food safety authorities. Thus, 
acquisition and implementation of FACTS is key, and I strongly believe 
that the Agency cannot afford not to have this system if it is to do a 
top-notch job of protecting the public's health. Certainly, efficiency 
will be increased, since by increasing the on-line access to 
information, FACTS will help reduce paperwork and administrative costs 
and expedite the handling of information requests. FACTS should be 
viewed in conjunction with our Field Automation and Information 
Management initiative (FAIM). While FAIM provides the tools for 
inspector communications, training, and data collection and analysis in 
the field, FACTS provides the software, servers, and telecommunications 
in the office. From that foundation, FACTS will develop systems that 
will support program experts in headquarters, while integrating data 
collection from (and data dissemination to) the inspection workforce.
    FSIS' fiscal year 2003 budget also includes a $1.5 million request 
to expand risk prevention and management efforts in small and very 
small meat, poultry, and egg establishments. Concerns with food safety 
have caused major changes in food production, processing, and marketing 
in recent years. The advent of HACCP controls in inspected meat and 
poultry establishments and increasingly stringent standards by leading 
retail customers and foreign importers are all helping to drive these 
changes. Large firms are adapting, and often leading the way. Small and 
very small firms cannot adapt as readily because they frequently lack 
the resources to implement cost-effective practices that will better 
protect public health. To address this, FSIS will develop and provide 
information and outreach to small and very small processors to help 
them improve their HACCP systems. Working cooperatively with other food 
safety agencies at the State and international level, as well as 
academia, industry, consumer groups, and other relevant stakeholders, 
FSIS proposes to establish a data sharing system to distribute food 
safety information to small meat, poultry, and egg producers and 
processors.
    Another new initiative included in the fiscal year 2003 budget 
request is $1.2 million to conduct targeted epidemiological surveys at 
slaughter establishments. These surveys represent the data collection 
part of an effort to improve the overall quality and availability of 
data now found in disparate animal health databases, such as the 
National Animal Health Monitoring System (NAHMS) and the National Anti-
Microbial Resistance Monitoring System (NARMS). The goal is also to 
develop a unified animal-based public health surveillance system.
    As part of this effort, raw product samples will be taken at meat 
and poultry slaughter operations and analyzed for the presence of 
lesions, and drug or chemical residues. Data from the samples will be 
analyzed for possible links to emerging diseases, priority pathogens, 
or other significant threats to public health. This information will 
allow the Agency to better assist producers and processors in the 
prevention of pathogens and other food safety hazards. It will also 
enable FSIS to refine its risk-based inspection strategies in 
collaboration with other Federal and State officials who have 
regulatory authority for farm-to-table food safety. FSIS will work with 
APHIS, FDA, CDC, and the States to prioritize the data collection needs 
associated with the survey program.
                                closing
    At this point, I would like to reiterate my five goals:
  --Protect meat, poultry, and egg products against intentional harm;
  --Improve upon the overall management and effectiveness of FSIS 
        programs;
  --Enhance coordination of food safety activities within and outside 
        of USDA;
  --Use science to guide our future policy decisions; and
  --Significantly enhance outreach and public education efforts.
    I am committed to realizing these goals and in doing so, 
strengthening the safety of our meat, poultry, and egg products supply. 
This concludes my statement. Thank you for the opportunity to testify 
before you on behalf of USDA's Office of Food Safety. I welcome your 
questions.
                                 ______
                                 

                 Biographical Sketch of Elsa A. Murano

    Dr. Elsa A. Murano was sworn in as under secretary for food safety 
by Agriculture Secretary Ann M. Veneman on October 2, 2001. In this 
position, she oversees the policies and programs of the Food Safety and 
Inspection Service.
    Murano has extensive public and private experience in the field of 
food safety as both a manager and educator. During the past 6 years, 
from 1995 until her recent swearing-in, Murano held several positions 
with Texas A&M University at College Station, Texas. Most recently, 
since 1997 she served as the director of the university's Center for 
Food Safety within the Institute of Food Science and Engineering. 
During this time she also served on the university's Department of 
Animal Science Research Advisory Committee and the Food Safety Response 
Team of the Texas Agriculture Extension Service, and served from 1999-
2001 as the Chair of the Food Safety State Initiative Committee of the 
Texas Agriculture Experiment Station. She held the position of the 
Center for Food Safety's associate director from 1995 to 1997. In 2000 
she was appointed professor in the Department of Animal Science, after 
having been an associate professor in that same department from 1995-
2000. In addition, in 2000 Murano was awarded the Sadie Hatfield 
Endowed Professorship in Agriculture.
    Murano served as a professor-in-charge of research programs at the 
Linear Accelerator Facility at Iowa State University Service 
Laboratories in Ames, Iowa from 1992 to 1995. She was an assistant 
professor in the Department of Microbiology, Immunology, and Preventive 
Medicine at that university since 1990.
    Before joining USDA, from 2001 until her recent appointment, Murano 
served as a member of the USDA National Advisory Committee for Meat and 
Poultry Inspection. Since 1998 she also served on the National Alliance 
for Food Safety Operations Committee, which she chaired during 2000. 
She was a member of several professional organizations, which included 
the American Society for Microbiology, the Association of Meat Science, 
the Institute of Food Technologists, the Poultry Science Association, 
and the International Association of Food Protection.
    A native of Havana, Cuba, Murano holds a B.S. degree in biological 
sciences from Florida International University in Miami. She also holds 
a M.S. degree in anaerobic microbiology and a Ph.D. in food science and 
technology, both from Virginia Polytechnic Institute and State 
University in Blacksburg, Va.
                                 ______
                                 

              Biographical Sketch of Dr. Merle D. Pierson

    Agriculture Secretary Ann M. Veneman today announced the selection 
of Dr. Merle D. Pierson as deputy under secretary for food safety.
    ``I'm extremely pleased that Merle Pierson is joining the USDA 
team,'' said Veneman. ``His scientific expertise in food safety will 
serve USDA well as we continue to develop sound food safety policies 
based on science.''
    Pierson is internationally recognized for his work with Hazard 
Analysis and Critical Control Point (HACCP) systems and research on the 
reduction and control of foodborne pathogens, having authored or co-
authored more than 100 journal articles and five books on food safety 
and quality.
    Prior to his appointment, Pierson served as professor of food 
microbiology and safety at Virginia Polytechnic Institute and State 
University (VPI). During his tenure at VPI, he served as head of the 
Department of Food Science and Technology from 1985 to 1994, and acting 
superintendent of the Center for Seafood Extension and Research from 
1992 to 1994. He served as a member of the National Advisory Committee 
on Microbiological Criteria for Foods from 1990-1997. Additionally, he 
has been actively involved in various capacities with the work of the 
Codex Alimentarius Commission--an international body that seeks to 
protect the health of consumers and ensure fair practices in food trade 
through adoption and implementation by governments of food standards, 
codes of practice, and other guidelines. He has served as a consultant 
to government and industry on a number of food safety issues, including 
HACCP.
    A native of South Dakota, Pierson received his B.S in biochemistry 
from Iowa State University and his M.S. and Ph.D. in food science from 
the University of Illinois.
                                 ______
                                 

               Prepared Statement of Margaret O'K. Glavin

    Mr. Chairman and Members of the Subcommittee, I am pleased to have 
the opportunity to submit a statement for the record on the current 
status of Food Safety and Inspection Service (FSIS) programs and on the 
fiscal year 2003 budget request for food safety within the U.S. 
Department of Agriculture.
    FSIS has a long, proud history of protecting public health. 
Although the Agency under the current name was established by the 
Secretary of Agriculture on June 17, 1981, its history dates back to 
1906. It is the mission of FSIS to ensure that meat, poultry, and egg 
products prepared for distribution in interstate and foreign commerce 
for use as human food are safe, wholesome, and accurately labeled. FSIS 
is charged with administering and enforcing the Federal Meat Inspection 
Act (FMIA), the Poultry Products Inspection Act (PPIA), the Egg 
Products Inspection Act (EPIA), and the regulations that implement 
these laws.
    Over the course of the past year, FSIS began a comprehensive review 
of the Agency's statute mandated mission of ensuring the safest food 
system possible. The Agency is focusing on improvements we can make to 
enable us to more effectively carry out our mission. We are identifying 
and introducing steps to enhance our performance and to better serve 
the public health interests of the American public.
                             infrastructure
    With the Hazard Analysis and Critical Control Point (HACCP) System 
fully implemented, the Agency is turning its attention to ways to 
improve our infrastructure as a means of better supporting our science-
based inspection system.
    FSIS is a large agency, with approximately 9,500 employees. This 
includes more than 7,600 inspection personnel stationed in 
approximately 6,000 meat, poultry, and egg products plants who inspect 
more than 139 million head of livestock, 8.2 billion birds, and 3.1 
billion pounds of liquid egg products annually. In fiscal year 2001, 
FSIS facilitated the export of over 11 billion pounds of meat and 
poultry to approximately 100 countries throughout the world and began 
work on a new system to automate the certification of meat and poultry 
exports. Agency personnel also reinspected 3.8 billion pounds of 
imported meat and poultry from 30 countries, of which 8 million pounds 
were refused entry into the United States. 7.8 million pounds of egg 
products were imported from Canada, of which 30 pounds were refused 
entry. Canada and The Netherlands, remain the only countries certified 
to export egg products to the United States, although The Netherlands 
exported no egg products to this country last year. Mexico submitted a 
request to determine equivalency and eligibility to export egg products 
and processed poultry. The Agency is working with Mexico and awaiting 
additional information before making a determination of equivalence.
    As you may know, recent reports of poor sanitary conditions in meat 
plants in Mexico have raised questions concerning USDA's auditing and 
plant certification in Mexico. I take these allegations very seriously. 
For this reason and at the request of Secretary Veneman, I recently 
traveled to Mexico to get an assessment of the situation. During this 
visit, I, along with the Under Secretary for Food Safety and other USDA 
officials, met with Dr. Javier Trujillo, Director of Food Safety for 
Mexico, and other Mexican government officials to measure their level 
of commitment to maintaining a meat inspection system that is 
equivalent to the United States. We also took the opportunity to visit 
several plants in question to see the sanitary conditions first hand. I 
will continue to ensure that every effort is being made in Mexico and 
all other eligible exporting countries to maintain the highest level of 
sanitary conditions and will keep you apprised of the progress.
    To ensure the safety of imported products, FSIS maintains a 
comprehensive system of import inspection, linking all U.S. ports of 
entry through a central computer system. This allows FSIS to establish 
compliance histories for countries and plants exporting to the U.S. and 
to communicate instantly among ports when problems are found at any 
individual port of entry. This system is one part of FSIS' efforts to 
verify the effectiveness of foreign inspection systems and also to 
support our sister agency, the Animal and Plant Health Inspection 
Service (APHIS) in preventing the entry of meat or poultry products 
that present an animal disease threat to U.S. livestock. While FSIS has 
had a Memorandum of Understanding (MOU) with APHIS since 1985, the two 
agencies recently updated the MOU to further strengthen communication 
and cooperation for imported products at ports of entry and for audited 
products. The MOU is an example of how the two agencies are working 
together to assure product from restricted countries is not imported 
and does not pose a threat to public health.
    In light of recent animal health diseases in Europe and 
bioterrorist threats both in the United States and abroad, FSIS' 
certification process for foreign inspection programs has become a 
subject of heightened interest. Annually, we review all foreign 
inspection systems in countries eligible to export meat and poultry to 
the United States. In fiscal year 2001, FSIS reviewed the documentation 
of and performed on-site audits in 27 of the 32 countries eligible to 
export meat and poultry products to the United States, as well as two 
countries requesting eligibility, and was satisfied that all 29 
countries had implemented Sanitation Standard Operating Procedures 
(SSOPs), HACCP systems, and pathogen testing programs. These audits 
included visits to 217 slaughter and processing establishments and 82 
laboratories. FSIS did not audit four countries (Austria, Ireland, 
Northern Ireland, and England) in 2001 because the September 11 events 
disrupted planned travel. The fifth (Uruguay) was delayed because of 
foot and mouth disease concerns that might have resulted in its 
delistment. Those issues were resolved, and Uruguay was audited from 
January 14 through February 1, 2002. There were no major deficiencies. 
FSIS has rescheduled the four remaining audits for 2002.
    FSIS is also responsible for assessing State inspection programs 
that regulate meat and poultry products that may be sold only within 
the State in which they were produced. The 1967 Wholesome Meat Act and 
the 1968 Wholesome Poultry Products Act require State inspection 
programs to be ``at least equal to'' the Federal inspection program. If 
a State chooses to end its inspection program or cannot maintain the 
``at least equal to'' standard, FSIS must assume responsibility for 
inspection. There are currently 27 States that have a State meat or 
poultry inspection program and operate under cooperative agreements 
with FSIS. In these States, Federal funding is provided for up to one-
half of the States' cooperative inspection program, as long as the 
State maintains a program ``at least equal to'' the Federal program. 
Maine is in the process of establishing its own State program and could 
be certified as the 28th State with a State inspection program as early 
as this summer.
    FSIS also conducts compliance and enforcement activities to address 
situations where unsafe, unwholesome, or inaccurately labeled products 
have been produced or shipped. The objective of these activities is 
two-fold--one, to make a critical appraisal of compliance with meat and 
poultry regulations, and two, as a result of certain critical 
appraisals, to take enforcement action where necessary. In fiscal year 
2001, more than 32,000 compliance reviews were conducted. As a result 
of these reviews and other activities, approximately 17 million pounds 
of meat, poultry, and egg products were detained for noncompliance with 
the respective laws, and nine criminal convictions were obtained 
against firms and individuals for violations of the meat and poultry 
inspection laws. In addition, FSIS assisted in 66 voluntary recalls of 
meat, poultry, and egg products during fiscal year 2001.
Biosecurity Efforts
    Since September 11, we have placed increased attention on the need 
to coordinate our biosecurity efforts within the Agency and Department, 
as well as with other Federal, State, and local agencies, consumer and 
industry groups. The Agency has a strong emergency preparedness plan in 
place and I am secure in its ability to respond to an intentional 
attack on the meat, poultry, or egg products supply. FSIS recently 
formed the Food Biosecurity Action Team (F-BAT) to coordinate and 
facilitate all activities pertaining to biosecurity, countering 
terrorism, and emergency preparedness within the Agency. F-BAT also 
serves as FSIS' voice with other government agencies, and internal and 
external constituents on biosecurity issues.
    F-BAT is charged with 5 goals:
  --Ensuring the continuation of FSIS essential functions during 
        emergencies;
  --Ensuring employee safety pertaining to terrorism, bioterrorism and 
        catastrophic emergencies;
  --Ensuring that FSIS is prepared to prevent and respond to 
        agricultural terrorism or attacks on the food supply;
  --Ensuring proper communication with FSIS employees, USDA, industry, 
        trade associations, consumers, media, and Congress; and
  --Ensuring the security of our laboratories.
    F-BAT has been instrumental in several initiatives to improve food 
safety and security. These include:
  --Assessing potential vulnerabilities along the farm-to-table 
        continuum;
  --Providing guidelines to industry on food security and increased 
        plant security, particularly in small and very small plants;
  --Strengthening FSIS coordination and cooperation with law 
        enforcement agencies; and
  --Enhancing security features at all FSIS laboratories, and 
        increasing the capacity of its laboratories to test for 
        additional food safety hazards and biological agents.
    F-BAT coordinates with FERRET--the Food Emergency Rapid Response 
and Evaluation Team--the Department-wide mechanism to ensure 
expeditious and effective response in the event of a food security 
threat. The Agency also is a participant in the Food Threat 
Preparedness Network, (PrepNet), which functions across departments to 
ensure food security throughout the government. PrepNet is co-chaired 
by the FSIS Administrator and the Director of the Center for Food 
Safety and Applied Nutrition (CFSAN) at the Food and Drug 
Administration (FDA). This group is a strong example of our commitment 
to working with our sister public health agencies to take proactive 
measures against bioterrorist threats. Other members of PrepNet include 
APHIS, the Centers for Disease Control and Prevention (CDC), the 
Department of Defense (DOD), and the Environmental Protection Agency 
(EPA). The focus of this group is on preventive activities to 
proactively protect the food supply, as well as rapid response.
    With these collaborative groups in place, FSIS is well situated to 
respond to food safety threats to our nation's food supply, regardless 
of whether they occur as a result of intentional or accidental action. 
FSIS will continue to coordinate its prevention and response activities 
on all levels, both internally and externally among all stakeholders.
                        enhancing effectiveness
    We are moving to enhance our effectiveness by focusing on employee 
performance and accountability. We will give our employees the tools 
they need to perform in a HACCP-based, scientifically designed program 
environment. We have invested heavily in the training and education of 
our workforce to ensure that they are able to apply sound science to 
the decisions they make on a daily basis. We will enter into training 
partnerships with the private sector to ensure that our workforce 
continue to have access to state-of-the art training and education. We 
are redesigning our performance measurement and appraisal system to 
ensure that our employees receive appropriate oversight and 
supervision. We are testing new tools such as correlation reviews, web-
based chat rooms for training and information sharing, pilot programs 
to make more effective use of the skill and training of our veterinary 
corps, and revised supervisory structures for our field offices. We are 
moving to implement the recommendations of several work groups that 
have studied the structure and workings of our field force so as to 
improve coordination, management oversight, and correlation across the 
work force. This will improve the consistency and quality of our 
decisions. Our program design has become increasingly science-based; 
our program delivery must be modernized to keep pace.
    We are also making strides in our financial accountability. We 
continue to invest in our financial and budget systems and to inject 
discipline and professionalism into our resource management. Resource 
allocation modernization is an important initiative to ensure that we 
are maximizing the use of the resources we have.
    In making these improvements we must seek the advice and input of 
our stakeholders. We have formed a Standing Subcommittee on Field 
Accountability of the National Advisory Committee on Meat and Poultry 
Inspection. This Subcommittee, which will meet for the first time in 
April, will provide guidance and oversight to our efforts to enhance 
our efficiency and effectiveness.
Modernization of FSIS Information Technology
    The Agency is also taking aggressive steps to enhance efficiency by 
replacing outdated hardware, software, and other computer-related 
systems. These upgrades will help our employees in the field function 
more efficiently and will enhance communication, increase the 
availability of real-time information, and enable us to track actions 
taken by inspectors. Our efforts are twofold. The first includes the 
Field Automation and Information Management (FAIM) initiative, which is 
the major vehicle by which FSIS is providing its dispersed field 
workforce with the technology tools to support HACCP-based regulatory 
determinations and actions in the field. The second is our FSIS 
Automated Corporate Technology Suite (FACTS), a new initiative to 
replace FSIS' existing information systems with an enterprise 
architecture of data-sharing capabilities that will make the data 
available to all levels of the organization.
    FACTS began as an effort to improve the accessibility of 
information to all users throughout the Agency. From 1997 through 1998, 
FSIS conducted a Business Process and Data Analysis project. The 
purpose was to analyze the Agency's core business processes and data 
needs from a strategic, enterprise-wide view. FACTS is an integrated 
initiative to address FSIS' current and future information technology 
(IT) needs. FACTS will focus on the FSIS corporate applications and 
data management projects, including our nationwide telecommunications 
and security infrastructure. In conjunction with the field 
infrastructure established by the ongoing FAIM effort, FACTS will 
promote a science- and risk-based meat, poultry and processed egg 
inspection program through the use of modern information technology.
    In fulfilling FSIS business requirements, FACTS will fully support 
the USDA infrastructure, architecture and security specifications 
through a web-enabled, centralized data source across the mission area, 
maximize use of commercial off-the-shelf products, and cyber-security 
oriented preparedness. FACTS will also facilitate data and information 
exchange among Federal, State, local and, as appropriate, private 
sector entities. This will enable FSIS to comply with, by October 2003, 
the Government Paperwork Elimination Act (GPEA), which requires Federal 
agencies to provide individuals or entities the option to submit 
information or transact with the agency electronically, and to maintain 
records electronically when practicable.
Laboratory Improvements
    An essential component of FSIS' mission to protect public health is 
the work of our Agency's four multidisciplinary laboratories. The three 
field service regulatory laboratories conduct laboratory testing for 
microbiological contamination, chemical and antibiotic residues, 
pathological conditions, processed product composition, and economic 
adulteration. In fiscal year 2001, FSIS' three regulatory labs 
performed conducted 737,139 analyses on 159,401 meat, poultry, and egg 
product samples. The fourth laboratory is the Microbial Outbreaks and 
Special Projects Branch (MOSPB) laboratory in Athens, Georgia, which 
conducts special projects for FSIS and assists in the event of an 
outbreak of foodborne illness.
    I am proud to announce that FSIS was recently awarded accreditation 
under International Organization for Standardization (ISO) Standard 
17025 for procedures that the Agency conducts at its MOSPB laboratory. 
The Agency's three field service regulatory laboratories in St. Louis, 
Missouri, Alameda, California, and Athens, Georgia have also been 
awarded accreditation.
    Accreditation encourages uniform laboratory practices and increases 
credibility. The ISO Standard 17025 is internationally recognized as a 
comprehensive and rigorous standard for food testing laboratories. In 
order to maintain accreditation, the FSIS quality manual and work 
instructions must be continually updated. Each laboratory will also be 
audited by A2LA once a year, with an in-depth audit occurring every 
other year. In addition, the FSIS Laboratory Quality Assurance Division 
conducts annual and special audits of the four FSIS laboratories.
                   risk-based, science-based programs
Pathogen Reduction (PR)/HACCP
    The risk-based, science-based modernization of the meat, poultry, 
and egg products inspection programs, begun in 1996 through the PR/
HACCP final rule, has resulted in significant food safety improvements. 
Reductions in the prevalence of many microbiological contaminants, such 
as Salmonella, have occurred across all categories of meat and poultry 
products, and these have been accompanied by reductions in foodborne 
illness. Since its implementation in January of 1997, this science-
based regulatory system has changed the food safety landscape for the 
better. CDC has attributed the decline in foodborne illness to the 
implementation of HACCP. These improvements would not have been 
possible without the consistent support of you, Mr. Chairman, and the 
Members of this Committee. This support has enabled FSIS to complete 
implementation of the PR/HACCP system and to consolidate the resulting 
gains into a sound plan for the future.
    Under PR/HACCP, plants identify critical control points during 
their processes where hazards such as microbial contamination can 
occur, establish controls to prevent or reduce those hazards, and 
maintain records documenting that the controls are working as intended. 
FSIS believes that HACCP-based process control is the most effective 
means available for ensuring the safety of food.
    The PR/HACCP rule continues to be FSIS' most important tool for 
ensuring the safety of meat and poultry. However, the Supreme Beef case 
has confused many into thinking that FSIS can no longer shut down a 
plant. In fact, USDA has the authority to shut down plants for 
sanitation or other food safety reasons. The only change resulting from 
the Supreme Beef case is that FSIS can no longer rely solely on 
Salmonella data to shut down plants. I must emphasize that Salmonella 
testing has not stopped. We are using the performance standard, in 
conjunction with other measures, to verify that the establishment's 
HACCP plan and Sanitary Standard Operating Procedures (SSOPs) are 
working. As you know, our inspectors are charged with such verification 
activities. Thus, record reviews, monitoring of plant procedures and 
personnel, and sampling are the tools they will use to determine 
whether HACCP and SSOPs are working.
    In response to the court's ruling, FSIS has developed new actions 
to take if an establishment fails to meet the Salmonella standard. FSIS 
is using the failure as an indicator that further investigation is 
needed to determine the cause of the failure. Therefore, after the 
first set of microbiological samples indicates Salmonella is present at 
levels above the standard, FSIS will assess the plant's HACCP system 
and sanitation procedures, then develop a plan to verify corrective 
actions implemented by the plant. If the plant fails a second set of 
Salmonella tests, FSIS will document the failure with plant management. 
This record requires the plant to take action to correct the reasons 
for the failure. FSIS also will conduct an in-depth review of the 
plant's corrective and preventive actions and will initiate a third 
sample set once those actions have been completed. If FSIS finds that 
the corrections are inadequate to address the cause of the failure, 
then we will initiate enforcement action. Failure of a third Salmonella 
test set will require FSIS to determine whether the HACCP system has 
failed to prevent, eliminate, or reduce to an acceptable level, the 
occurrence of the identified food safety hazard. If this determination 
is made, FSIS will initiate additional enforcement action.
    The conference report accompanying the fiscal year 2001 agriculture 
spending bill directed the Secretary to request reports from the 
National Research Council's National Academy of Science (NAS) and the 
National Advisory Committee on Microbiological Criteria for Foods 
(NACMCF), which are comprised of the nation's top scientists and 
foremost experts in the food safety discipline. The NAS study is in its 
early stages and is expected to be completed in approximately 14 
months. The NACMCF study is also in its early stages and it is unknown 
when it will be complete.
HACCP-based Inspection Models Project (HIMP)
    In addition to moving forward with HACCP, we are continuing to 
pursue innovative ideas such as the HACCP-based Inspection Models 
Project, or HIMP, to further address the on-line slaughter process and 
enhance the safety of food products. HIMP is best described as a total 
food safety and process control system. Under HIMP, volunteer plants 
take a more active role in the carcass sorting process, while our 
inspectors concentrate on more intense inspection and verification 
activities. The true value of this pilot project is that it is 
demonstrating how real-time data gathering can help plants maintain 
control over product, and how increasing the time that inspectors can 
spend in verification activities improves their ability to detect 
deviations. HIMP is still in its infancy, and FSIS is continuing to 
evaluate it and striving to improve it. FSIS has received numerous 
comments through public meetings and Federal Register notices, and the 
General Accounting Office (GAO) has released its own review of HIMP. We 
welcome all of these comments and will make changes that result in 
improvements and further enhancements in food safety.
    We will continue to seek advice and input on HIMP from all of our 
stakeholders. This year, we plan to develop a proposed rule for public 
comment on the HIMP program for young chickens. The proposal will 
include the several improvements to the pilot program.
Science Based Risk Assessments
    To further guide the Agency's policy making, several risk 
assessments have been conducted or are underway to evaluate the risk 
associated with certain microbiological pathogens. FSIS and APHIS, 
through Harvard University's School of Public Health, have recently 
completed a risk assessment on bovine spongiform encephalopathy (BSE). 
A risk assessment for Listeria monocytogenes in ready-to-eat products 
has been completed, and a draft risk assessment for E.coli O157H:7 in 
ground beef has been submitted to the NAS for peer review. The Agency 
is in the early stages of initiating a risk assessment on E.coli 
O157H:7 in trim. These risk assessments represent the first step in a 
policy making process. Risk assessments look at possible ways that FSIS 
could protect public health through the implementation of regulations 
created to diminish the risks posed by foodborne hazards in products 
regulated by FSIS.
Bovine Spongiform Encephalopathy (BSE)
    To date, no confirmed cases of BSE have ever been found in the 
United States despite more than 11 years of active surveillance, nor 
have there been any reported cases of vCJD, the human variant of BSE. 
Because of controls put in place by the U.S. government, it is unlikely 
that meat purchased in the United States would be contaminated with the 
BSE agent.
    In April of 1998, the USDA commissioned Harvard University's Center 
for Risk Analysis at the School of Public Health, in conjunction with 
the Tuskegee University Center for Computational Epidemiology and Risk 
Analysis, to conduct a risk assessment to analyze and evaluate USDA's 
measures to prevent BSE. The risk assessment reviewed current 
scientific information, assessed the ways that BSE could potentially 
enter the United States, and evaluated existing USDA regulations and 
policies to prevent the spread of BSE within the United States if it 
were to occur.
    The results of the risk assessment were released on November 30, 
2001, and indicate that the risk of BSE occurring in the United States 
is extremely low. Additionally, the report showed that early protection 
systems put into place by the USDA and HHS have been largely 
responsible for keeping BSE out of the United States and would prevent 
it from spreading if it ever did enter the country.
    Based on a preliminary review of the risk assessment, USDA 
announced a series of actions to be taken that would continue 
strengthening programs to reduce the risk of BSE even further. These 
actions include the following:
  --USDA has arranged for the risk assessment to be peer-reviewed by a 
        team of independent experts to validate its scientific 
        integrity. These experts are looking at whether the data have 
        been correctly interpreted and whether the computer model can 
        be used easily by USDA scientists to evaluate ``what if'' 
        scenarios.
  --APHIS continues to increase testing for BSE, with more than 12,500 
        cattle samples targeted in fiscal year 2002-up from 5,000 
        during fiscal year 2001. Surveillance is a critical part of 
        USDA's multifaceted strategy. APHIS is on target to meet this 
        goal, having already tested 3,312 cattle as of December 31, 
        2001.
    On January 17, 2002, FSIS published an options paper in the Federal 
Register that outlines additional possible regulatory actions to limit 
the risk of BSE exposure. To ensure these options are science-based, 
they will be tested using the computer model developed by Harvard to 
see what impact they would have on further reducing risk.
    The options include: prohibiting the use of brain and spinal cord 
from specified cattle in human food; prohibiting the use of central 
nervous system tissue in boneless beef products, including meat from 
advanced meat recovery systems; and prohibiting the use of the 
vertebral column from certain categories of cattle, including downed 
animals, in the production of meat from advanced meat recovery systems. 
USDA has invited public comment on the options and will then proceed to 
develop appropriate regulatory proposals.
    USDA is also drafting a proposal to prohibit the use of certain 
stunning devices used to immobilize cattle during slaughter, and an 
advance notice of proposed rulemaking to consider disposal options for 
dead and downer animals, because such cattle are considered an 
important potential pathway for the spread of BSE in the animal chain.
Listeria monocytogenes (Listeria)
    On February 27, 2001, FSIS proposed a rule, which was published in 
the Federal Register to help prevent contamination by Listeria and 
other harmful pathogens in ready-to-eat meat and poultry products. The 
proposed regulation would require meat and poultry establishments to 
conduct food contact surface testing for generic Listeria or address 
post-lethality contamination in their Hazard Analysis and Critical 
Control Point (HACCP) plans.
    The comment period was extended several times and finally closed 
195 days later on September 10, 2001. FSIS received approximately 3,000 
comments with 50 of them being substantive in nature and the remaining 
comments being non-substantive form letters.
    In order to facilitate public input and gather additional 
information during the comment period for this proposed rulemaking, 
FSIS held a scientific conference and a public meeting in May 2001, to 
discuss the proposed provisions, especially those that would require 
certain establishments to conduct environmental testing for non-
pathogenic Listeria.
    The proposed rule identified additional needs for scientific 
information and analytical data that if addressed, could strengthen the 
scientific foundation of the rule. It is extremely important that the 
regulations be based on sound science and common sense measures 
involving significant public comment.
    Before moving forward with a final rule, FSIS expects to evaluate 
outstanding data needs identified during the comment period. These data 
needs include:
  --Analysis of Listeria contamination of ready-to-eat hotdogs by the 
        Agricultural Research Service;
  --Reevaluation of the Listeria risk assessment to take into account 
        contamination during processing and in-plant mitigation 
        strategies; and,
  --Assessment of the effectiveness of HACCP verification sampling by 
        FSIS.
E-coli O157:H7 in Ground Beef
    In 1998, FSIS initiated the process of conducting a risk assessment 
for illnesses associated with E. coli O157:H7 in ground beef. The draft 
risk assessment shows that the risk of illness to consumers is low; 
very few cooked ground beef servings are likely to have surviving 
pathogens present. The best estimates predicted from the assessment is 
that the risk of E. coli O157:H7 illness for the general population is 
less than one for each million servings of ground beef consumed. The 
occurrence and extent of E. coli O157:H7 contamination in ground beef 
is most influenced by factors such as the prevalence of the pathogen 
among cattle and the level of contamination on the carcass. The 
prevalence of E. coli O157:H7 in ground beef increases in the summer 
months and decreases during the winter; therefore, the assessment 
predicts the risk of illnesses is higher in summer months.
    This draft risk assessment was completed in November 2001 and has 
been presented to the National Academy of Science (NAS) for peer 
review. The assessment produces scientific support for:
  --estimating the likelihood of human morbidity and mortality 
        associated with specific numbers of E. coli O157:H7 in ground 
        beef servings;
  --development of regulatory impact assessments to provide the basis 
        for FSIS rulemaking;
  --identification of critical control points and critical limits in 
        Hazard Analysis and Critical Control Point (HACCP) systems for 
        ground beef;
  --development of risk-based sampling plans for FSIS inspectors to 
        verify that industry HACCP systems are meeting regulatory 
        standards for E. coli O157:H7 in ground beef; and
  --identification of future food safety research areas on E. coli 
        O157:H7 in ground beef.
    Ultimately, the risk assessment will serve as an important policy 
making tool as the Agency considers what steps to take to enhance food 
safety.
                        workforce of the future
    Another way in which FSIS seeks to maximize its effectiveness as a 
regulatory and public health agency is by increasing the scientific 
expertise of its workforce. The Agency's frontline workforce needs a 
broader scientific and analytical background in order to verify PR/
HACCP requirements and deal more effectively with high priority and 
emerging food safety hazards. FSIS is also working to increase the 
depth of its scientifically trained workforce through recruitment of 
commissioned officers of the Public Health Service with medical and 
public health backgrounds, and the implementation of the Food Safety 
Fellows. In addition, the Agency has undertaken efforts to enhance the 
education, training, and professional skills of its employees in order 
to build a world class food safety protection workforce.
    FSIS has already begun transitioning its workforce. In fiscal year 
2001, FSIS hired and trained 35 Consumer Safety Officers (CSO) and 
conducted 4 weeks of intensive training before assigning them to the 
district offices. CSOs are professional positions requiring a general 
scientific background and individuals are responsible for conducting 
onsite food safety and other consumer protection verification and 
evaluation activities in establishments operating under a grant of 
Federal inspection. CSOs assess the scientific adequacy of HACCP plans, 
SSOPs, and plant microbiological verification sampling strategies. They 
also monitor the interaction of systems within the establishment in 
order to ensure food safety and other consumer protections. 
Additionally, CSOs focus particular attention on assisting small and 
very small plants in the design and implementation of HACCP plans, 
SSOPs, E.coli monitoring plans, and microbiological control strategies. 
In doing so, CSOs help FSIS comply with the Small Business Regulatory 
Enforcement Flexibility Act (SBREFA), which requires that Federal 
agencies act to mitigate the adverse impact of new regulations on small 
business by providing them assistance and guidance.
    FSIS believes that introducing into the district offices, CSOs with 
scientific and analytical skills will improve our ability to fully 
modernize our inspection system and will ensure the consistent 
application of new inspection procedures designed to verify that 
official establishments meet regulatory requirements. We were grateful 
for the Committee's support for our introduction of CSOs in fiscal year 
2001 and have high expectations for the important role these positions 
will play in the effort to further enhance our workforce and the level 
of food safety in the United States.
    FSIS also recognizes that its veterinarians play a key role in 
moving towards the professionally trained workforce of the future. The 
Agency's workgroups continue to make progress on the recommendations 
from the taskforce report, ``The Future of FSIS Veterinarians: Public 
Health Professionals for the 21st Century.'' The Agency's Chief 
Veterinary Medical Officer, is serving as Executive Sponsor and will 
ensure the recommendations from the report are fully implemented. In 
December 2001 the Agency also hired 17 more Veterinary Medical Officers 
(VMOs) to serve as District Veterinary Medical Specialist (DVMS). The 
DVMS' completed 2 weeks of intensive training in January 2002 and have 
now been assigned to the district offices in a liaison capacity. The 
DVMS' will serve as the primary contact for humane handling and 
slaughter issues, including verification and enforcement activities, 
information dissemination, training, documentation, and generation of 
recommendations for reports to senior management on future policies. We 
appreciate the Committee's funding support for these positions in the 
fiscal year 2001 Supplemental Appropriations bill. These DVMS' will 
make an important difference in the Agency's continued efforts to 
ensure full compliance with humane handling and slaughter regulations, 
as well as facilitate coordination of other activities in the field.
    As we move towards a more science-based workforce, training and 
education is a high priority for the Agency. In July 1999, FSIS began 
the process of assessing the knowledge and training requirements of our 
future workforce by establishing the Workforce of the Future Steering 
Committee (WOFSC). The Committee was asked to integrate, coordinate, 
and oversee the Agency's workforce planning activities and to guide 
this transition of the workforce. The Committee ensures that the 
transition of the workforce of the future is carried out efficiently, 
cost effectively, and with consistency across the Agency. The Steering 
Committee, which is comprised of all major FSIS program areas, as well 
as representatives of the National Joint Council of Food Inspection 
Locals, the National Association of Federal Veterinarians, and the 
Association of Technical and Supervisory Professionals, has developed 
guiding principles for managing this change. The guiding principles 
were adopted by the Agency and are aimed at ensuring consistency in 
Agency decision-making, procedures, and communication, in order to 
maintain employee support for the transition to the workforce of the 
future.
    The Agency also established the FSIS Training and Education 
Committee for 2001 and Beyond (TEC 2001) to examine our current 
education and training activities, conduct an assessment of Agency 
needs, develop an education vision for the Agency, and develop a 
strategy for educating and training our employees for the 21st century. 
The TEC 2001 Committee reviewed the current status of training within 
the Agency and made several recommendations about steps FSIS should 
take to develop a more effective program for the future. The final 
report encourages the Agency to take the following actions:
  --Develop an individualized curriculum for each occupation in FSIS;
  --Conduct an assessment of individual FSIS employees to determine a 
        baseline of skills already possessed and identify the gaps that 
        need to be filled;
  --Develop distance learning applications to deliver training on a 
        variety of topics to employees;
  --Establish a formal evaluation effort of training and education 
        activities;
  --Reorganize the Agency's training resources to consolidate them and 
        place them directly under the Office of the Administrator as a 
        separate entity;
  --Create a Board of Directors to provide guidance and oversight to 
        the Agency program;
  --Develop a centralized, interactive database to allow both employees 
        and programs to track training and related activities (classes, 
        costs, travel, credits, etc.);
  --Establish a Training Administrator position in each district 
        office;
  --Centralize funding for training program activities; and
  --Evaluate the number and type of personnel resources that should be 
        dedicated to managing an effective training program.
    These activities will form the foundation for a corporate approach 
to training and education of FSIS employees and ensure that an 
effective mission-based training program exists within the Agency.
               food safety education and outreach efforts
    FSIS' mission encompasses more than just ``regulatory'' activities. 
The Agency's mission also includes a ``public health'' element that 
requires extensive communication with stakeholder groups. Our 
communication programs seek to increase understanding by these groups 
of our mission, authority, regulations, and procedures. Successfully 
carrying out these functions is an important and preventive measure the 
Agency engages in to reduce the threats of foodborne disease outbreaks 
and further protect the public health.
    While the Agency's infrastructure plays an important role in 
protecting public health and safety from the threats posed by 
microbiological hazards, strong partnerships with stakeholders are 
needed to ensure the public is fully educated and aware about their 
role in preventing foodborne illness outbreaks. Preventing foodborne 
illnesses involves more than government inspection, regulations, and 
enforcement, it requires proper handling at the retail, transport, and 
consumer levels. FSIS believes that in order to ``do its part'' the 
public must have good information about what steps they can take to 
assist in reducing the number of foodborne illnesses.
Consumer and Food Safety Education
    FSIS education programs are designed to prevent foodborne illness. 
We develop outreach materials and activities based on current 
scientific and consumer research, social marketing, and educational 
research to develop products that will effectively educate the public 
about the dangers of foodborne illnesses and how these outbreaks can be 
prevented. Many programs target consumers who are at greatest risk from 
foodborne illness--the very young, the elderly, pregnant women, people 
who have chronic diseases, and people with compromised immune systems.
    Among these activities, the USDA Meat and Poultry Hotline has for 
17 years provided a toll-free national service to consumers, 
information multipliers and professionals with questions about safe 
preparation of meat, poultry, and other foods, and foodborne illness 
prevention. In fiscal year 2001, the Hotline handled almost 86,000 
calls. The Agency also received nearly 5,400 inquiries via e-mail. Both 
of these tools have proven to be an effective means of facilitating 
two-way communication with consumers and others interested in issues 
related to FSIS.
    In fiscal year 2001, FSIS initiated an outreach pilot project for 
the Spanish speaking population. The USDA Meat and Poultry Hotline set 
up a 3 month long Spanish language outreach pilot aimed at providing 
Hispanic consumers with bilingual service. The pilot outreach efforts 
were focused and advertised in Miami, Florida; San Diego, California; 
and Newark, New Jersey. The pilot offered callers a choice of speaking 
to hotline operators and/or hearing recorded information in Spanish or 
English.
    We also reach out to consumers and others with food safety 
education campaigns. In May 2000, the ThermyTM campaign was 
launched to promote the use of food thermometers in the home and is 
continuing. In 2001, ThermyTM, along with other USDA 
characters, appeared in the Macy's Thanksgiving Day Parade. 
ThermyTM has also teamed up with Wal-Mart's 800 
Supercenters nationwide, along with local cooperative extension agents 
to educate and demonstrate the use of a variety of food thermometers. 
ThermyTM brochures and other materials promoting the 
importance of cooking foods to safe temperatures have been distributed 
at these and other events. Partnerships and other efforts are being 
undertaken to further promote the ThermyTM message and 
tailor the material for the food service industry.
    Another highly successful campaign, Fight BACTM, has 
taught safe handling practices to millions and shows no signs of 
slowing in popularity. The Partnership for Food Safety Education, made 
up of Federal agencies, industry organizations, and consumer groups, 
combined resources for this campaign.
Federal, State, and Industry Partnerships
    Another example of joint efforts to educate the public is our 
upcoming food safety education conference. The conference will be 
sponsored by the U.S. Department of Agriculture and U.S. Department of 
Health and Human Services, in cooperation with the Partnership for Food 
Safety Education. FSIS will convene the conference in September to 
provide an opportunity for food safety education and communication 
leaders from across the country to present and share projects, assess 
current trends, and plan for the future.
    We are also working to enhance our public education efforts through 
a number of cooperative agreements to foster improved education and 
understanding of the risks associated with the handling of meat, 
poultry, and egg products by retail stores and food service facilities. 
Last year, FSIS entered into 18 cooperative agreements with State 
retail food safety task forces, municipalities, and colleges and 
universities that work with the underserved or economically 
disadvantaged communities. And this year we are working to fulfill 
those agreements, as well as expand the number of agreements we have, 
in order to reach even more individuals.
    In addition, FSIS has entered into a cooperative agreement with the 
Association of Food and Drug Officials (AFDO) to provide train-the-
trainer educational programs nationwide to the State and local 
sanitarians who inspect these state-regulated establishments, as well 
as small retail store and food service facility owners and managers. 
Because meat and poultry produced at retail is exempt from Federal 
inspection, State and local agencies must ensure food safety in retail 
environments.
    FSIS' partnerships are not limited to educational efforts. FSIS 
works closely with State and local public health and food safety 
authorities, as well as with its sister public health agencies, such as 
FDA and the CDC, to coordinate food safety strategies and emergency 
response activities.
    Nationwide surveillance of foodborne illness is a long-standing 
example of intrastate cooperation that is coordinated by FSIS and CDC. 
The system by which this information is coordinated is known as the 
Foodborne Diseases Active Surveillance Network (FoodNet). Under an 
agreement between the two agencies, CDC conducts active population-
based surveillance of foodborne diseases. This involves the on-going 
and systematic collection of foodborne illness data to detect outbreaks 
and monitor disease trends and patterns. Data collected are used to 
determine the need for public health emergency response and to assess 
the effectiveness of efforts to prevent foodborne disease and outbreaks 
over time.
    A companion system, the PulseNet computerized database, matches the 
DNA fingerprint of foodborne pathogens and accelerates the traceback 
process to the source of the contamination. PulseNet has been 
especially successful in identifying dispersed illnesses with 
potentially common sources of implicated product and alerting the 
regulatory agencies so that they can take appropriate action.
    Each year, FSIS also participates in the Conference for Food 
Protection (CFP), which is a bi-annual forum for Federal, State, and 
local government representatives to meet with industry, academia, and 
consumers on recommended changes to the Food Code. FSIS collaborates 
with FDA on publication of the Code in order to provide Federal 
guidance to the States and others with regulatory responsibility for 
retail food safety. Adoption of the Code increases uniformity of food 
safety regulation among jurisdictions, which benefits both commerce and 
consumers.
                        international activities
Codex Alimentarius Commission (Codex)
    FSIS also plays a leading role in the United States' participation 
in global dialogue on the setting of international food safety 
standards. The GATT Uruguay Round Agreements Act designated USDA as the 
lead agency for U.S. participation in the sanitary and phyto-sanitary 
standard setting activities of the Codex Alimentarius Commission. The 
U.S. Codex Office, located within FSIS, coordinates all U.S. government 
and non-government participation in these activities. Through notices 
published in the Federal Register, FSIS advises the public of the 
standard-setting activities of the Commission, as well as of the dates 
and agendas of its meetings.
    Codex plays an important role in FSIS' ability to fulfill its 
mission. First, its sanitary and phytosanitary standard-setting 
activities protect consumers by improving food safety. Second, these 
activities help ensure that sound science is the basis for establishing 
international food safety standards. In this way, Codex helps 
facilitate fair trade in agricultural products.
    Codex has grown in importance since it was designated as one of the 
three international standard-setting organizations whose health and 
safety standards serve as key reference points in settling trade 
disputes under the Agreement on Sanitary and Phytosanitary Measures. 
Currently, more than 160 nations are members of Codex.
    As an active member of Codex, the United States has the opportunity 
to make the international food safety standard setting process work 
better. We have taken the position that Codex is the organization that 
the world's governments should use to discuss food safety issues and to 
set standards. We have also proposed changes in many areas where we 
believe that progress is needed.
                    fiscal year 2003 budget request
    With that, I have concluded my discussion of FSIS' programs and 
would like to provide and overview of the fiscal year 2003 budget 
request for FSIS. The budget request for fiscal year 2003 compliments 
the programs previously described as part of our regulatory mission and 
public health protection responsibility.
    The FSIS budget request for fiscal year 2003 supports the Agency's 
basic mission of providing continuous food safety inspection in each 
meat, poultry, and egg products establishment in the country. The 
increase over the fiscal year 2002 appropriation ensures a level of 
funding necessary to cover increased salary and benefit costs, thus 
assuring continued support for an in-plant inspection workforce of 
7,600 employees. The budget request provides funding for a much-needed 
overhaul of the Agency's data sharing and information management 
capabilities. The budget request anticipates future changes in the 
Agency's current overtime and user fee structure beginning in fiscal 
year 2004. FSIS will review how it assesses overtime fees and, based on 
needs identified through this assessment and propose an annual 
licensing fee that would take effect in fiscal year 2004.
    In fiscal year 2003, FSIS is requesting $803.6 million, a net 
increase in appropriated funds of $28 million. Of this proposed 
increase, $10.8 million is for pay and benefit increases. FSIS employee 
salary, benefits, and inspector travel between plants take up nearly 90 
percent of the FSIS budget. This increase also includes $1.2 million 
for the Grants-to-States program, primarily for increased pay costs at 
the State level. It is imperative that States are fully funded for 
their share of the cooperative programs to permit continued 
coordination between Federal and State authorities on inspection 
activities and emerging food safety threats. Less than full funding for 
Federal and State pay raises, benefits, and increases in health 
insurance and retirement benefits place a significant burden on our 
ability to adequately staff inspection activities in meat, poultry, and 
egg products establishments.
    Earlier, I mentioned the need to overhaul FSIS' data sharing and 
information management capabilities. FSIS' fiscal year 2003 budget 
includes a request of $14.5 million to implement the FACTS initiative. 
FACTS will support the FSIS mission by substantially improving the 
ability to provide information that is accurate, complete, and timely 
for use by Agency decision-makers. FACTS will provide a single location 
for storing data that is accessible to Agency decision-makers in a 
timely manner, unlike the current data collection systems which are 
stored in various locations. Using a single storage location will also 
reduce data redundancy. The data will also be more secure because it 
will be stored in one location, and information sharing, analysis, and 
availability will improve because data will be centralized.
    A primary emphasis of this initiative is to provide timely, up-to-
the-minute data on in-plant inspection and performance, thereby 
improving regulatory decisions made by Agency personnel and allowing 
FSIS to focus its resources on areas of greatest risk. The data sharing 
attributes of FACTS will also improve the coordination of risk 
management efforts both within USDA and between Federal, State, and 
local food safety authorities. By increasing the on-line access to 
information, FACTS will help reduce paperwork and administrative costs 
and expedite the handling of information requests. This will enable 
FSIS to comply with, by October 2003, the Government Paperwork 
Elimination Act (GPEA), which requires Federal agencies to provide 
individuals or entities the option to submit information or transact 
with the agency electronically, and to maintain records electronically 
when practicable. FSIS' fiscal year 2003 budget also includes a $1.5 
million request to expand risk prevention and management efforts in 
small and very small meat, poultry, and egg establishments. Concerns 
with food safety have caused major changes in food production, 
processing, and marketing in recent years. The advent of PR/HACCP 
controls in inspected meat and poultry establishments, the anticipated 
rulemaking to mandate PR/HACCP in egg products establishments, and 
increasingly stringent standards by leading retail customers and 
foreign importers, are all helping to drive these changes. Large firms 
are adapting, and often leading the way. Small and very small firms 
cannot adapt as readily because they frequently have neither the 
information nor the capabilities to implement cost-effective practices 
that will produce safer meat and poultry. To address this, FSIS will 
develop and provide information and outreach to small and very small 
processors to help them improve their PR/HACCP systems. Working 
cooperatively with other food safety agencies at the State and 
international level, as well as academia, industry, consumer groups, 
and other relevant stakeholders, FSIS proposes to establish a data 
sharing system to distribute food safety information to small meat, 
poultry, and egg producers and processors.
    Another new initiative included in the fiscal year 2003 budget 
request is $1.2 million to conduct targeted epidemiological surveys at 
slaughter establishments. These surveys represent the data collection 
part of an effort to improve the overall quality and availability of 
data now resident in disparate animal health databases, such as the 
National Animal Health Monitoring System (NAHMS) and the National Anti-
Microbial Resistance Monitoring System (NARMS). The goal is also to 
develop a unified animal-based public health surveillance system.
    As part of this effort, raw product samples will be taken at meat 
and poultry slaughter operations and analyzed for the presence of 
lesions, and drug or chemical residues. Data from the samples will be 
analyzed for possible links to emerging diseases, priority pathogens, 
or other significant threats to public health. This information will 
allow the Agency to better assist producers and processors in the 
prevention of pathogens and other food safety hazards. It will also 
enable FSIS to refine its risk-based inspection strategies in 
collaboration with other Federal and State officials who have 
regulatory authority for farm-to-table food safety. FSIS will work with 
the FDA, USDA's APHIS, the CDC, and the States to prioritize the data 
collection needs associated with the survey program.
                               conclusion
    Mr. Chairman, this concludes my prepared statement. Thank you for 
your continued support. Thank you also for the opportunity to submit 
testimony to the Subcommittee on how FSIS is working with Congress and 
other partners to become a regulatory public health agency that uses 
science-based decision making to implement policies to assure the 
safety of meat, poultry, and egg products for American consumers.
                                 ______
                                 

              Biographical Sketch of Margaret O'K. Glavin

    Margaret O'K. Glavin is the Acting Administrator for USDA's Food 
Safety and Inspection Service (FSIS).
    From January 1999 until October 2001, Ms. Glavin served as FSIS 
Associate Administrator. As Associate Administrator, she assisted the 
Administrator in the general management of the Agency.
    From November 1996 until January 1999, Ms. Glavin was Deputy 
Administrator of the Office of Policy, Program Development and 
Evaluation for FSIS. As Deputy Administrator, she was responsible for 
formulating policy, establishing and modifying regulations, and for the 
design and evaluation of significant new programs and systems.
    From 1994 to 1996, Ms. Glavin served as one of three associate 
administrators, where she had responsibility for the day to day 
management of the Agency. She led the development of the reorganization 
of the Agency's field and headquarters structure and oversaw the 
planning for implementation of that structure. Prior to 1994, Glavin 
was Deputy Administrator for Administrative Management, where she had 
responsibility for the Agency's personnel, budget, Information Resource 
Management activities, training programs, management of Agency 
property, and procurement and contracting.
    Ms. Glavin has been with FSIS since 1983. She served in several 
other Agency positions, including Deputy Administrator for Regulatory 
Programs, Director of the Review and Evaluation Staff, and Director of 
the Standards and Labeling Division.
    Before coming to FSIS, she spent 14 years working in the special 
nutrition programs for the Food and Nutrition Service of USDA. Her 
particular emphasis was on the school lunch program and other feeding 
programs for children.
    Ms. Glavin holds a B.A. degree in English from Trinity College, 
Washington, DC, and a M.A. degree in government from Georgetown 
University, in Washington, DC.
                   Marketing and Regulatory Programs

STATEMENT OF WILLIAM T. HAWKS, UNDER SECRETARY FOR 
            MARKETING AND REGULATORY PROGRAMS
ACCOMPANIED BY:
        BOBBY R. ACORD, ADMINISTRATOR, ANIMAL AND PLANT HEALTH 
            INSPECTION SERVICE
        A.J. YATES, ADMINISTRATOR, AGRICULTURAL MARKETING SERVICE
        DAVID R. SHIPMAN, ACTING ADMINSTRATOR, GRAIN INSPECTION, 
            PACKERS AND STOCKYARDS ADMINISTRATION AND
        DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM 
            ANALYSIS

                       STATEMENT OF WILLIAM HAWKS

    Senator Kohl. Mr. Hawks.
    Mr. Hawks. Thank you, Mr. Chairman, Senator Cochran. It is 
certainly a pleasure to be here today to discuss the marketing 
and regulatory programs of the U.S. Department of Agriculture 
and the budget for 2003. I have with me today Dave Shipman, 
Acting Administrator of GIPSA. I have Bob Acord, Administrator 
of APHIS, and A.J. Yates, Administrator of AMS.
    I have a philosophy that I always abide by, and that is 
working together works. And I have worked with my agencies to 
draft goals for which we can be held accountable, and I intend 
to see that the marketing and regulatory programs of USDA work. 
And I want to share those goals with you.
    The first goal is building broader bridges. We will 
increase cooperation and strategic partnership with farmers, 
ranchers, States, foreign governments, Congressional offices 
and other interested parties to ensure that our policies 
benefit producers and consumers alike.
    Our second goal is to move more product. We will facilitate 
expanded domestic and international marketing opportunities for 
U.S. agricultural products, including value-enhanced products 
and products of biotechnology.
    Our third goal is investing in infrastructure. Agriculture 
that is healthy both biologically and economically is 
marketable agriculture.
    Our fourth goal is growing our people. We will make a 
concerted effort to recruit, recognize, and reward 
accomplishments and inspire current and future leaders within 
MRP.
    Our fifth goal is one that is near and dear to my heart, 
and that is selling agriculture as a profession. We will 
creatively market the vital role agriculture plays in every 
American's life to assist our effort to recruit and retain the 
highest-caliber workforce for marketing and regulatory programs 
in the USDA.
    The funding requests that we are making today are both 
requests for taxpayer funds and the benefit that is funded by 
beneficiaries of the program services. They carry out the 
programs we have, that consist of nearly $1.5 billion, and over 
$500 million is funded by user fees that are paid by the 
beneficiaries of this service. On the appropriations side the 
APHIS request is for $795.4 million, of which $13.2 million is 
for buildings and facilities. AMS is requesting $105.2 million. 
And the GIPSA request is for $42.9 million.
    Agriculture Marketing Services (AMS) activities are an 
integral component of the USDA-wide effort to assist the U.S. 
agricultural industry in marketing their products and finding 
ways to improve their profitability. Many of the programs 
administered by AMS are aimed at building cooperative and 
strategic partnerships with the agricultural community and the 
State institutions that support it.
    The Animal and Plant Health Inspection Service's primary 
mission is to manage issues involving animal and plant health, 
conflicts with wildlife, environmental stewardship and the 
well-being of animals. Together with the States and industry, 
APHIS protects and promotes U.S. agricultural health, 
preserving and expanding domestic and international markets for 
U.S. agricultural products.
    The Grain Inspection, Packers and Stockyards Administration 
mission is to facilitate the marketing of livestock, meat, 
poultry, cereal, grain, oilseeds and related agricultural 
products, to promote fair and competitive trade for the benefit 
of consumers and American agriculture. It helps move more U.S. 
product domestically and abroad by investing in domestic 
infrastructure that supports marketing with the grain, poultry, 
livestock and meat industries.

                          PREPARED STATEMENTS

    This concludes my statement, and I hope working together 
works as we proceed in the appropriation of the 2003 budget. We 
believe that the proposed funding amounts are vital to 
providing the infrastructure to protect American agriculture 
from pests and disease, and for moving more product. It will 
provide the level of services expected by our customers, the 
farmers and ranchers, the agricultural marketing industry and 
the consumers. I thank you for the opportunity to be heard and 
look forward to answering your questions.
    Senator Kohl. Thank you.
    We thank you, Mr. Hawks.
    [The statements follow:]

                 Prepared Statement of William T. Hawks

    Mr. Chairman and members of the Committee, I am pleased to appear 
before you to discuss the activities of the Marketing and Regulatory 
Programs of the U.S. Department of Agriculture and to present our 
fiscal year 2003 budget proposals for the Agricultural Marketing 
Service (AMS), the Animal and Plant Health Inspection Service (APHIS), 
and the Grain Inspection, Packers and Stockyards Administration 
(GIPSA).
    With me today are Dr. James Butler, Deputy Under Secretary for MRP; 
Mr. A. J. Yates, Administrator of the AMS; Mr. Bobby Acord, 
Administrator of APHIS; and Mr. David Shipman, Acting Administrator of 
the GIPSA. They have statements for the record and will answer 
questions regarding specific budget proposals.
                            making our mark
    Under my leadership, the Marketing and Regulatory Programs have 
identified several broad goals and objectives which will leave a legacy 
for this Administration. I intend to hold us accountable for:
    Building Broader Bridges.--We will increase cooperation and 
strategic partnerships with farmers and ranchers, States, foreign 
governments, congressional offices, agricultural commodity and industry 
associations, agricultural scientific groups, and other interested 
parties to ensure that our policies and programs provide the most 
benefits they can to the affected people.
    Moving More Product.--We will facilitate expanded domestic and 
international market opportunities for U.S. agriculture products 
including value enhanced products and products of biotechnology. We 
will work closely with the Foreign Agricultural Service and the U.S. 
Trade Representative to aggressively and creatively resolve sanitary, 
phytosanitary, biotechnology, grain inspection, commodity grading and 
other trading issues that limit our potential for growth in 
international trade.
    Investing in Infrastructure.--Agriculture that is healthy, both 
biologically and economically, is marketable agriculture. We will 
invest in stronger border security, pest and disease surveillance and 
monitoring, bricks and mortar such as National Veterinary in Ames, 
increased market news on export markets, improvements in e-Government, 
enhanced investigations of anti-competitive market practices and 
greater support for biotechnology.
    Growing Our People.--We will make a concerted effort to recruit, 
recognize and reward accomplishment and inspire current and future 
leaders within MRP. We will make MRP a place where the best and 
brightest want to be--including promising men and women in diverse 
fields that include not only agriculture but also journalism, 
accounting, and economics. And,
    Selling Agriculture as a Profession.--We will creatively market the 
vital role that agriculture plays in every American's life to assist 
our efforts to recruit and retain the highest calibre workforce for MRP 
and USDA.
                            funding sources
    The Marketing and Regulatory Programs activities are funded by both 
the taxpayers and beneficiaries of program services. They carry out 
programs costing nearly $1.5 billion; over $500 million is funded by 
user fees paid by the beneficiaries of the services.
    On the appropriation side, the Animal and Plant Health Inspection 
Service is requesting $795.4 million of which $13.2 million is for 
buildings and facilities; the Agricultural Marketing Service is 
requesting $105.2 million; and the Grain Inspection, Packers and 
Stockyards Administration is requesting $42.9 million.
    Legislation will be submitted, which if enacted would recover $34 
million more in user fees. This legislation would authorize new license 
fees to recover the cost of administering the Packers and Stockyards 
(P&S) Act, additional license fees for facilities regulated under the 
Animal Welfare Act, and additional grain inspection fees for developing 
grain standards. I will use the remainder of my time to highlight the 
major activities and budget requests for the Marketing and Regulatory 
Programs.
                     agricultural marketing service
    AMS activities are an integral component of USDA-wide efforts to 
assist the U.S. agricultural industry in marketing their products and 
in finding ways to improve their profitability. AMS' mission is to 
facilitate the marketing of agricultural products in the domestic and 
international marketplace, ensure fair trading practices, and promote a 
competitive and efficient marketplace to the benefit of producers, 
traders, and consumers of U.S. food and fiber products.
Building Cooperative and Strategic Partnerships
    Many of the programs administered by AMS are aimed at building 
cooperative and strategic partnerships with the agricultural community 
and the State institutions that support it. AMS' oversight of marketing 
agreements and orders provides producers the marketing tools they need 
to create dependable markets to ensure adequate supplies at a 
reasonable price throughout the year. In addition, AMS provides 
oversight to research and promotion programs that allow producers, 
handlers, processors, or importers to collaborate to solve marketing 
problems and to increase sales domestically and abroad. USDA continues 
to believe that national commodity research and promotion programs 
offer opportunities to maintain, develop and expand markets for 
agricultural products both at home and abroad. The market news, shell 
egg surveillance, commodity grading, pesticide data, pesticide 
recordkeeping, and Federal seed programs depend on support from their 
State partners to collect and disseminate information, provide 
inspections, and otherwise improve the efficiency of both State and 
Federal programs by sharing human and capitol resources.
    An example of recent success is the implementation of the National 
Organic Standards Program. AMS has worked closely with producers of 
organic products to develop and implement the National Organic 
Certification Program. This program will facilitate trading of organic 
products by verifying for buyers and consumers, across the U.S. and 
internationally, that organic food labeling is accurate and consistent. 
The program has established national standards for organic production 
and handling, and is now accrediting certification agents who will 
conduct annual on-site inspections to verify that organic products meet 
these standards. The program's 18-month implementation period began 
April 21, 2001, and ends October 21, 2002, when the official USDA 
organic seal will be permitted for use on certified organic fresh and 
processed products. The program estimates that within a few years of 
operation, the program will oversee the certification of approximately 
14,000 organic producers and handlers.
Moving More Product More Efficiently
    U.S. agriculture is facing continual and rapid changes in the 
industry, Federal and State regulations and support, domestic and 
international consumer preferences, and an ever-expanding dependence on 
export markets.
    AMS support of international market opportunities for U.S. 
agricultural products will yield enormous dividends for the farm 
economy, national and world economies. With funding received in 2002, 
AMS has increased its participation in international forums that 
establish international agricultural trading standards. By working more 
closely with international organizations, AMS is better able to ensure 
that U.S. agricultural interests are represented in development of 
international standards that govern the movement of commodities in 
international commerce. This will allow U.S. agriculture to remain 
competitive in foreign markets.
    Major changes in transportation services and marketing practices 
have increased the need for impact and policy analysis and economic 
research to ensure the efficient flow of agricultural commodities 
through the distribution system. To address these complex problems, AMS 
brings together a unique combination marketing and transportation 
specialists that conduct analyses to support the maintenance of an 
efficient transportation system for rural America and enhance the 
overall effectiveness of the food marketing system.
Investing in the Agriculture Infrastructure
    As highlighted in the Administration's report, Food and 
Agricultural Policy: Taking Stock for the New Century, the success of 
U.S. agriculture depends on investment in basic services that not only 
protect producers from external threats such as pests and disease, but 
also provide the market information and data necessary for competitive 
and efficient markets. AMS has been able to capitalize on its broad 
expertise and experience in these matters to develop effective programs 
and partnerships that provide objective, consistent market data 
necessary for decisionmaking.
    The Livestock Mandatory Price Reporting System has been a 
successful effort to provide livestock market information on a near 
real-time basis over the Internet. To manage the data, AMS developed an 
automated system capable of accepting thousands of pieces of market 
information from the livestock industry and that would generate market 
news reports in as little as 1 hour after receipt of the data. 
Beginning with the first day of the program, packers have been 
successful in submitting data to AMS via the secure Internet 
connection. Over 130 different packing plants report transaction data 
by lot, several times a day. The system is handling over 90 percent of 
the volume reported as slaughtered daily, which equates to 110,000 
cattle, 330,000 swine, and 15,000 lambs. On August 20, 2001, revised 
confidentiality guidelines were implemented in order to increase the 
number of reports available, while still protecting the identity of 
market participants. Implementation of the revised confidentiality 
guidelines last August has allowed AMS to provide more complete 
information and also increase the number of reports available while 
protecting the identity of market participants. The Pesticide Data 
Program (PDP) has been instrumental in providing data that addresses 
domestic and international public concerns about the effects of 
agricultural pesticides on human health and environmental quality. The 
program provides unbiased, statistically valid data on pesticide 
residues in food and water. The information PDP provides to the 
Environmental Protection Agency--EPA--is vital for conducting realistic 
assessments of dietary risk from pesticides on food commodities 
available in the marketplace. These realistic risk assessments will 
assure that U.S. agriculture has the necessary inputs for being 
competitive. In addition, PDP data supports the international marketing 
of U.S. commodities by assuring foreign governments and buyers that 
U.S. agricultural commodities are safe for consumption. Newly released 
data collected in 2000 indicates that only 0.2 percent of the samples 
exceeded the established tolerance level, of which over one third 
resulted from post harvest applications.
                        ams' 2003 budget request
    For 2003, AMS requests $105 million from appropriated and Section 
32; a total increase of $4.3 million. The 2003 budget includes the 
following programmatic changes for AMS:
    For Global Market News, AMS requests an increase of $1 million. The 
agricultural infrastructure will be improved by expanding global 
marketing activities for American producers by increasing international 
market news reporting for grains and feeds, oilseeds, livestock, 
poultry, dairy, and horticultural markets in Central America, South 
America, and Asia. Increasing the availability of accurate, timely, and 
unbiased international market information is critical if American 
producers are to be competitive in a global economy.
    For the Pesticide Data Program, AMS requests an increase of $0.5 
million. Funding will be provided to States participating in the 
program to offset increased operational costs and to complete 
international accreditation for their laboratories. Increased testing 
will be conducted on foods generally consumed by children and other 
commodities with significant dietary consumption.
    For the Organic Certification Program, AMS proposes a decrease of 
$0.6 million. This reduction recognizes that initial accreditation of 
organic certification agents was provided during fiscal year 2002 and 
that future Federal accreditation of organic certification agents will 
be user-funded.
    For the Federal Seed Act Program, AMS requests an increase of $1.1 
million. The funds will be used to upgrade computer systems used to 
identify and track seed samples as they progress through the testing 
process, improve seed testing equipment, and increase the number of 
scientific staff. This increased funding will also allow laboratory 
upgrades that are necessary to meet international seed accreditation 
requirements. Improved productivity will permit AMS to provide 
increased protection to seed buyers in States that have reduced or 
eliminated seed testing programs.
    For the Commodity Purchase Program, the budget includes an increase 
of $0.3 million to improve AMS' ability to verify that the purchased 
commodities are all domestically produced.
    For Marketing Agreements and Orders, the budget includes an 
increase of $0.6 million to permit AMS to hire additional marketing 
specialists that are necessary to ensure prompt response to industry 
requests for new marketing order amendments and provide effective 
oversight.
               animal and plant health inspection service
    The fundamental mission of APHIS is to anticipate and respond to 
issues involving animal and plant health, conflicts with wildlife, 
environmental stewardship, and animal well-being. Together with their 
customers and stakeholders, APHIS promotes the health of animal and 
plant resources to facilitate their movement in the global marketplace 
and to ensure abundant agricultural products and services for U.S. 
customers. The APHIS mission satisfies 5 strategic goals. They include:
  --safeguarding plant and animal resources from foreign pests and 
        diseases;
  --minimizing production losses and export market disruptions by 
        quickly detecting and responding to outbreaks of agricultural 
        pests and diseases;
  --minimizing risks to agricultural production, natural resources, and 
        human health and safety by effectively managing pests and 
        diseases and wildlife damages;
  --ensuring the humane care and treatment of animals; and
  --developing safe and effective scientific pest and disease control 
        methods.
    APHIS builds broader bridges by working in concert with its 
stakeholders--States, industry, and the public--to maintain and expand 
export market opportunities and to prevent the introduction and/or to 
respond to new threats of plant and animal pests and diseases. APHIS 
invests in the agricultural marketing infrastructure that helps protect 
the agricultural sector from pests and diseases while at the same time 
helping move more U.S. product.
Safeguarding Animals and Plants
    Recent events have highlighted the need to protect the security of 
our agricultural production sector and food supply. However, well 
before the events of September 11, and long before foot-and-mouth 
disease (FMD) crippled the British agricultural sector, APHIS has been 
engaged in activities that include monitoring and surveillance for 
foreign animal disease (FAD) threats beyond our borders, enhanced 
inspection for animal and plant health threats at our borders, and 
surveillance within our borders to quickly detect and respond to an 
animal or plant pest or disease outbreak. Our actions, together with 
those of stakeholders and the American public, have successfully 
protected the health of the U.S. livestock and poultry industries 
against devastating diseases such as FMD and bovine spongiform 
encephalopathy (BSE, or ``Mad Cow'' disease) in fiscal year 2001.
    The Agricultural Quarantine Inspection (AQI) program has inspectors 
assigned to ports of entry and land borders to scrutinize passengers 
and cargo to prevent pest and disease introduction into the United 
States. In 2001 AQI inspectors processed 92.5 million international 
air, maritime, and land border passengers/pedestrians at over 300 ports 
of entry. This is an increase of 4.5 percent over fiscal year 2000. 
While about 95 percent of international travelers and 96 percent of 
border vehicles were in compliance with AQI regulations, APHIS seized 
more than 310,000 prohibited animal products and byproducts. We 
enhanced the APHIS Smuggling Interdiction and Trade Compliance program 
by hiring additional officers and investigators. Most of this activity 
is funded through user fees, though appropriations from the General 
Fund are needed to pay for inspections along the Canadian and Mexican 
borders and in Hawaii and Puerto Rico.
    The sterile Mediterranean fruit fly (Medfly) preventive release 
program in California and Florida shields our fruit growers. APHIS 
works with State and Federal agriculture officials to prevent and 
respond to Medfly outbreaks. In California, APHIS is cooperating in 
strong statewide detection efforts that identified several harmful 
fruit flies entering the United States at California ports. In Florida, 
our goal is to detect new introductions quickly enough to begin 
mitigation measures before the flies can get established. Overseas 
activities are intended to create a sustainable barrier south of our 
border. Our program also keeps our multi-billion dollar citrus export 
markets open. If the Medfly would become established on American soil, 
U.S. producers could lose an estimated $5 billion annually. The APHIS 
screwworm program is another example of the safeguarding system in 
place to exclude plant and animal pests and diseases. The program 
provides a land barrier between North America and South America. In 
fiscal year 2001, APHIS continued keeping screwworms out of the United 
States and further reduced the likelihood that they will ever return. 
The eradication program is close to achieving its goal of establishing 
a permanent sterile screwworm barrier in the eastern third of Panama.
Moving More Product
    The APHIS import/export inspection program protects U.S. livestock, 
poultry, and wildlife populations from restricted diseases, including 
those transmissible to humans. APHIS regulates animal and animal 
product imports and promotes the American export of these products by 
ensuring U.S. animals and animal products meet health and welfare 
requirements of recipient countries. This program also participates in 
negotiations on trade of animals and animal products that face 
potential sanitary restrictions. In fiscal year 2001 APHIS issued point 
of origin export certificates for the export of approximately 752,000 
head of livestock, 60 million doses of semen, and more than 15,000 
bovine embryos. It also supervised the importation of approximately 8 
million animals, 11 million poultry, 2.5 million doses of semen, and 
1,220 embryos.
    The Trade Issues Resolution and Management efforts are key to 
ensuring fair trade of all agricultural products. APHIS staff help 
resolve trade issues abroad which enhance American commerce. In fiscal 
year 2001, APHIS helped:
  --Reopen the Brazilian market to U.S. wheat, what had been a $176 
        million U.S. market before Brazil halted imports in 1996.
  --Open the Argentine market to Florida citrus and expanded access for 
        California citrus and stone fruit; market potential could be as 
        high as $3 million for U.S. citrus and $5 million for U.S. 
        stone fruit.
  --Open the Chilean market to more than $1 million in apple and pear 
        exports from Oregon and Idaho, and an even greater value of 
        citrus sales from Arizona. And,
  --Gain access to the Japanese market for U.S. Chilean cherries, which 
        could yield about $10 million in export sales.
    Further, the International Plant Protection Convention adopted a 
standard advocated by APHIS which will ensure that U.S. exports are not 
unfairly discriminated against for pests that are of not of quarantine 
significance to the importing country. APHIS staff negotiate sanitary 
and phytosanitary (SPS) standards, resolve SPS issues, and provide 
clarity on regulating imports and certifying exports which improves the 
infrastructure for a smoothly functioning market in international 
trade.
Monitoring Agricultural Pests and Diseases
    A key part of the APHIS strategy to protect U.S. agriculture is its 
ability to quickly detect outbreaks of foreign agricultural pests and 
diseases. APHIS accomplishes its monitoring functions in a cooperative 
effort with Federal and State governments and industry. Specifically, 
the monitoring program has four components: surveillance, regulatory 
enforcement, emergency management, and pest detection. Surveillance 
investigations are accomplished through the APHIS National Animal 
Health Monitoring System (NAHMS). In fiscal year 2001, APHIS conducted 
about 800 investigations compared to fiscal year 2000's total of 385 
because of increasing concern over the FMD outbreaks in Europe. APHIS 
also is on the lookout for an outbreak of BSE. To date, no cases of BSE 
have ever been detected in the United States. However, in March 2001, 
APHIS disposed of the two remaining herds of Belgian sheep in Vermont 
suspected of having a transmissible spongiform encephalopathy (TSE).
    In November 2001, USDA released results of a Harvard University 
risk assessment that showed that the risk of BSE occurring in the 
United States is extremely low. The report showed that early protection 
systems put into place by USDA and the Department of Health and Human 
Services have been largely responsible for keeping BSE out of the 
United States and would prevent it from spreading if it ever did enter 
the country. However, we continue to be aggressive in protecting the 
American consumer and the livestock industry from this disease. We are 
already planning to more than double the number of cattle samples 
tested in fiscal year 2002 compared to fiscal year 2001.
    Concerns over the threat of bioterrorism have further demonstrated 
the need for a comprehensive national detection system for safeguarding 
the country's food production capacity and natural ecosystems. The 
Homeland Security Supplemental appropriation will enable APHIS to jump 
start proposed activities in the fiscal year 2003 budget. APHIS will 
coordinate and oversee early detection surveys in cooperation with the 
States. APHIS and the States conduct detection surveys for incipient 
infestations of exotic pests that could cause economic damage if they 
spread and become established, such as weeds, plant diseases, insects, 
nematodes, and other invertebrate organisms. Such activities not only 
act to protect U.S. agriculture, but support U.S. exports as well. For 
example, surveillance for the Khapra beetle verifies that the United 
States is free of this pest, one of the world's worst pests of grain/
commodities, and thus able to maintain billions of export dollars.
    The APHIS emergency management system is a joint Federal-State-
industry effort to improve our ability to deal successfully with animal 
health emergencies, whether natural or unintentional introductions or 
deliberate acts of bioterrorism. During fiscal year 2001, APHIS began 
an emergency management grant program to assist States and Tribal 
Nations to improve their animal health emergency management systems. 
About $2 million was provided to 31 States, 6 Tribal Nations, and 1 
university.
Controlling Losses from Pests and Diseases
    Pest and disease control techniques are employed by APHIS to 
minimize plant and animal losses, and wildlife damage. APHIS 
collaborates with States to help manage or eradicate pests and diseases 
harmful to American agriculture. The Agency regulates various shipments 
of plants, livestock, and related products to prevent the spread of 
diseases. For example, APHIS has such efforts as the cooperative boll 
weevil program, the cooperative brucellosis program, the Asian long-
horned beetle eradication program, the Accelerated Psuedorabies 
Program, the Bovine Tuberculosis program, and the scrapie eradication 
program. In fiscal year 2001, the Department released $336 million of 
funding from the Commodity Credit Corporation to address pest and 
disease emergencies for Asian long-horned beetle, chronic wasting 
disease, citrus canker, Karnal bunt, Medflies, plum pox, pseudorabies, 
rabies, and tuberculosis. Also included are funds made available for 
purchase and disposal of imported sheep potentially infected with a 
TSE.
    Another component of APHIS pest management is found in Wildlife 
Services operations. American wildlife is an active trans-boundary 
resource, which in some situations poses a risk to human health and 
safety, as well as natural resources. APHIS, in partnership with the 
U.S. Fish and Wildlife Service and industry representatives, manages 
the increase in wolf activity due to reintroduction initiatives 
throughout the United States. APHIS also protects the sunflower 
industry from blackbird predation in the Dakotas, by reducing cattail 
densities as habitat for migrating blackbirds. The Agency also assists 
in rabies mitigation in racoons, which continues to spread north 
throughout the eastern seaboard. In fiscal year 2001, APHIS conducted 
livestock protection activities for approximately 10,000 resource 
owners in cooperation with private individuals and State, Federal, and 
local governments. APHIS personnel also provide wildlife hazard 
management assistance to almost 400 airports to help minimize wildlife 
strikes, which can be a threat to human safety.
Animal Care
    APHIS ensures the humane care and treatment of animals by enforcing 
uniform compliance with Federal laws and regulations. It performs this 
function through sound enforcement and strong educational outreach 
efforts to all regulated entities. The Agency uses risk assessments to 
target inspection resources at the facilities where animal welfare 
concerns are the greatest. In fiscal year 2001, APHIS, hired an 
additional 9 animal care inspectors and boosted inspection by almost 10 
percent from fiscal year 2000.
Scientific and Technical Services
    APHIS must also develop safe and effective scientific pest and 
disease control methods and methods for reducing wildlife/agricultural 
conflicts.
    APHIS regulates the movement and releases of biotechnology products 
to ensure that they do not pose a threat to agriculture and the 
environment. In fiscal year 2001, APHIS provided 2,600 movement and 
release notifications and permits; up from 2,200 provided in fiscal 
year 2000. Since the program's inception in 1987, APHIS has deregulated 
54 genetically engineered crop varieties, with one new crop deregulated 
in fiscal year 2001.
    The APHIS veterinary biologics program prevents the importation, 
production, and distribution of impure, ineffective, unsafe, or 
impotent veterinary biological products in the United States. This 
activity includes licensing, inspection, testing statistically-based 
samples, and issuing permits for product importation. In fiscal year 
2001, APHIS issued 113 new product licenses, so that veterinarians can 
now diagnose, treat, and prevent animal diseases with 26 new market 
products. Animal drug producers requested approval to market over 
17,000 veterinary biological products in fiscal year 2001. APHIS did 
not act on 27 requests because producers failed to meet these 
requirements. The APHIS National Veterinary Services Laboratories 
(NVSL) in Ames, Iowa, tested tens of thousands of submissions in fiscal 
year 2001 on import/export samples, dip samples for pesticide 
concentration in the cattle tick program, pseudorabies, scrapie, 
brucellosis, tuberculosis, and BSE samples. In the recent anthrax 
attacks, APHIS processed environmental samples from USDA offices across 
the United States.
    The Wildlife Services Methods Development program addresses the 
research needs to reduce bird damage to the agriculture, aquaculture, 
and aviation industries; mammal damage to the timber industry and to 
rangeland; coyote damage to the livestock industry; and predation of 
threatened and endangered species. The National Wildlife Research 
Center develops traditional, nonlethal methods such as improved traps 
and snares, maintenance of registered uses for particular chemical 
pesticides, repellants and attractants, as well as novel approaches 
such as reproduction inhibitors/immunocontraceptives.
                       aphis' 2003 budget request
    The budget request proposes $782 million for salaries and expenses, 
a $120 million increase above the current fiscal year 2002 adjusted 
base. Notable requests include:
    An increase of $14 million for Agricultural Quarantine Inspection 
(AQI).--The AQI program is the Nation's front-line defense against the 
introduction of dangerous agricultural pests and diseases from other 
countries. For example, AQI activities play a key role in protecting 
the U.S. livestock sector from bovine spongiform encephalopathy (BSE or 
mad cow disease) and foot-and-mouth disease (FMD). User fees are 
charged for inspection of international passengers, aircraft, ships, 
railcars, and trucks. The 2003 budget proposes $347 million for AQI 
activities for improved point-of-entry inspection programs by providing 
additional inspectors, canine teams and state-of-the art high-
definition x-ray machines at high risk ports-of-entry on the Canadian 
and Mexican borders, in Hawaii, and elsewhere. Expansion of the global 
economy and free trade have caused an increase in the volume of 
passengers and cargo arriving in the U.S. at additional ports of entry, 
with additional facilities at existing ports of entry. APHIS has an 85 
percent success rate in clearing international passengers within 30 
minutes or less. Likewise, 85 percent of passengers crossing at U.S. 
land border points, in non-peak traffic periods, are now cleared 
through the inspection system in 30 minutes or less.
    An increase of $5 million for Foreign Pest and Disease Exclusion.--
This increase will strengthen the capability of APHIS to assess and 
monitor outbreaks of diseases in foreign countries that have the 
potential to spread to the United States.
    An increase of $49 million for Plant and Animal Health 
Monitoring.--Experience in Europe from FMD and BSE highlights the need 
for rapid detection and response to agricultural health threats. While 
longstanding efforts have kept FMD and BSE out of the United States, 
vigilant surveillance and monitoring are still needed and would be 
supported by an increase of about $21 million. Funding for plant pest 
detection would increase by $20 million. Funding to improve the 
emergency management system, in place to coordinate and implement a 
quick response to an animal or plant pest or disease outbreak, would be 
boosted by about $7 million.
    Shifts $162 million of emergency Commodity Credit Corporation (CCC) 
funding to annual appropriations for pest and disease management 
programs.--These funds will continue control and eradication efforts 
begun in 2002 and prior years. Funds will be used to combat species 
such as the Asian long-horned beetle, citrus canker, chronic wasting 
disease, Medfly, plum pox, rabies, scrapie, and tuberculosis. Successes 
in boll weevil eradication and brucellosis efforts allow $45 million of 
program reductions as programs rely on loans and shift toward less 
expensive monitoring efforts.
    For Emergency Funding, the Secretary retains authority to use funds 
from CCC to combat any new emergency pest and disease outbreaks. Since 
these emergencies cannot be predicted, no estimates are available at 
this time. However, the Administration is concerned about rising 
Federal costs of emergency pest and disease control activities and 
expects to seek public comment before the end of the year on ways to 
share the costs with States and the private sector.
    An increase of $12 million for Scientific and Technical Services.--
Resources for expanded diagnostic, response, management and other 
technical services are increased. This will enhance our ability to 
quickly diagnose an outbreak of a foreign animal disease.
        grain inspection, packers and stockyards administration
    GIPSA's mission is to facilitate the marketing of livestock, meat, 
poultry, cereals, oilseeds, and related agricultural products and to 
promote fair and competitive trade for the benefit of consumers and 
American agriculture. It helps move more U.S. product both domestically 
and abroad by investing in domestic infrastructure that supports 
marketing within the grain and livestock industry. GIPSA fulfills this 
through both service and regulatory functions in two programs: the 
Packers and Stockyards Programs (P&SP) and the Federal grain inspection 
service (FGIS).
Packers and Stockyards Programs
    The strategic goal for the Packers and Stockyards Programs (P&SP) 
is to promote a fair, open and competitive marketing environment for 
the livestock, meat, and poultry industries. Currently, with only 166 
employees, P&SP monitors the livestock, meatpacking, and poultry 
industries, estimated by the Department of Commerce in fiscal year 2001 
to have an annual wholesale value of $125 billion. Legal specialists 
and economic, financial, marketing, and weighing experts work together 
to monitor emerging technology, evolving industry and market structural 
changes, and other issues affecting the livestock, meatpacking, and 
poultry industries that the Agency regulates.
    Last year, P&SP conducted over 1,600 investigations. Our Rapid 
Response Teams remain a powerful tool to address urgent industry issues 
and to immediately notify the public about a stockyard's or market 
agency's fiduciary problems. Last year, 94 P&SP investigators were 
deployed soon after being notified of a crisis to investigate 51 
potentially serious situations across the Nation. During fiscal year 
2001, these rapid response investigations found violations of the P&S 
Act, and contributed to returning $6.1 million to livestock producers 
and poultry growers.
    P&SP also is strengthening investigations and assessments of 
competitive implications of structural change in the livestock, 
meatpacking, and poultry industries. Throughout fiscal year 2001, P&SP 
incorporated economic, statistical, and legal expertise into 
investigations to increase the efficiency and effectiveness of our 
investigations of anticompetitive and unfair practices, and our 
enforcement of the P&S Act. Increased cross-utilization of our 
economists, legal specialists, auditors, marketing specialists, and 
industrial specialists from headquarters and field locations has 
brought targeted investigative and analytical skills to specific 
investigations. P&SP also pursued cooperative agreements with qualified 
researchers and research institutions that contribute valuable 
information to P&SP's economic understanding of the livestock, 
meatpacking, and poultry industries.
    The Swine Contract Library was mandated in the Agricultural Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Act of 2000 (Public Law 106-78). It amended the P&S Act 
to require P&SP to establish and maintain a library of contract 
provisions offered by packers to swine producers for the purchase of 
swine and to make these provisions available to the public. P&SP 
received 11 comments on the proposed rule published on September 5, 
2000. A final rule to implement the swine contract library is underway, 
but we are finding that our ability to address confidentiality concerns 
and unique data requirements may depend on the IT improvements 
requested in the fiscal year 2003 budget. Once complete, the Web-based 
library will offer summarized information on contract terms and monthly 
reports on the number of swine under contract.
    The Grain Standards and Warehouse Improvement Act of 2000 (Public 
Law 106-472) required GIPSA to implement the GAO's recommendations to 
improve investigations of competitive practices and report on actions 
taken to improve investigations of competitive practices by November 9, 
2001. We recently submitted that report and I apologize for the delay 
in the response. In accordance with GAO's recommendations, and based on 
required input from the Department of Justice (DOJ) and the Federal 
Trade Commission (FTC), in fiscal year 2001, the Agency implemented 
investigation planning, development, implementation, and review 
processes to ensure appropriate investigation planning and oversight 
within P&SP and with the USDA Office of the General Counsel (OGC). Also 
during the fiscal year, OGC added more attorneys to address P&SP 
matters; Agency economists and legal specialists received additional 
specialized training; and P&SP issued its first annual assessment of 
the cattle and hog industries to report on changes in those industries. 
P&SP is currently finalizing its second annual assessment report.
Federal Grain Inspection Service
    GIPSA's Federal Grain Inspection Service (FGIS) facilitates the 
marketing of U.S. grain and related commodities under the authority of 
the U.S. Grain Standards Act (USGSA) and the Agricultural Marketing Act 
of 1946 (AMA). As an impartial, third-party in the market, we advance 
the orderly and efficient marketing and effective distribution of U.S. 
grain and other assigned commodities from the Nation's farms to 
domestic and international buyers. We are part of the infrastructure 
that undergirds the agricultural sector.
    Since the emergence of value-enhanced grains and oilseeds, niche 
markets have been developing for non-biotech commodities, and 
establishment of new regulatory requirements by U.S. trading partners 
has created a need for greater product differentiation in the 
marketplace. To meet this need, market participants are relying, in 
part, on testing for accurate information about products in the 
marketing chain and to comply with the new market demands. The 
efficiency of the marketing system will, therefore, depend on the 
availability of accurate and reliable testing which FGIS is prepared to 
supply.
    In the international arena, FGIS has been working to maintain 
strong markets for U.S. grains and oilseeds. Working with the Foreign 
Agricultural Service and the Japanese government, FGIS developed a 
Protocol for Food Corn Exported to Japan. This protocol, which was 
adopted by the grain industry, enabled the United States to continue 
exporting corn to Japan by providing assurance that exported corn did 
not contain significant levels of StarLinkTM corn. This 
protocol has been considered a model for other countries to which the 
U.S. exports corn.
    FGIS also is keeping pace with the grain industry's move from paper 
to e-commerce to streamline, automate, and improve business 
transactions. FGIS is keeping pace with our customers' migration toward 
an electronic marketing process. We are taking part in pilot tests and 
demonstrations with electronic commerce vendors; developing a system to 
send inspection information generated at multiple locations directly to 
a customer; preparing to submit electronic inspection information into 
a vendor's document handling system at the request of applicants; and 
pilot testing a computer generated inspection certificate for export 
cargoes. By harnessing the latest hardware, software, and available 
technology, we will be prepared to enter and participate in the 
electronic commerce arena.
    All of our efforts to improve and streamline our programs and 
services are paying off for our customers, both in terms of their 
bottom lines and in greater customer satisfaction. FGIS' service 
delivery costs (adjusted for inflation), decreased from $0.27 per 
metric ton in fiscal year 1994 to $0.26 per metric ton in fiscal year 
2001. With the USDA export certificates that grain exporters received 
at this cost, exporters marketed over $20 billion worth of cereals and 
oilseeds. Likewise, here at home, buyers and handlers requested over 
1.9 million domestic inspections that facilitated the trading of more 
than 128 million metric tons of cereals and oilseeds.
    One indicator of the success of our outreach and educational 
initiatives is the number of foreign complaints lodged with FGIS 
regarding the quality or quantity of U.S. grain exports. In fiscal year 
2001, FGIS received only 15 quality complaints and no quantity 
complaints from importers on grains inspected under the U.S. Grain 
Standards Act. These involved 494,267 metric tons, or about 0.5 percent 
by weight, of the total amount of grain exported during the year.
GIPSA's 2003 Budget Request
    For 2003, the budget proposes a program level for salaries and 
expenses of $43 million. Of this amount, $20 million is devoted to 
grain inspection activities for standardization, compliance, and 
methods development and $23 million is for Packers and Stockyards 
Programs. The 2003 budget includes:
    An increase of $3.4 million to provide enhanced information 
technology applications. With the requested funding, GIPSA would be 
able to establish and implement e-Government electronic interfaces to 
allow secure receipt and delivery of electronic data between the agency 
and its customers. Further, it will enable GIPSA to integrate existing 
disparate database information systems into a unified system.
    An increase of $2 million to help ensure efficient market 
functioning. Carcass weight and quality are major determinants of 
price. Carcass quality characteristics, often measured electronically, 
are an increasingly important determinant of carcass value. A portion 
of the requested increase will allow GIPSA to monitor the livestock and 
meatpacking industries' use of electronic carcass evaluation 
technologies. Another portion of the budget increase will enable GIPSA 
to significantly improve enforcement of the anti-competitive and other 
provisions of the Packers and Stockyards Act. And,
    An increase of $0.5 million is requested to enable GIPSA to expand 
its newly established biotechnology program to keep pace with the rapid 
introduction of new products and the need for commodity certification.
    The GIPSA budget also includes two user fee proposals. New user 
fees would be charged to recover the costs of developing, reviewing, 
and maintaining official U.S. grain standards used by the grain 
industry. Those who receive, ship, store, or process grain would be 
charged fees estimated to total $5.6 million to cover these costs. 
Also, the Packers and Stockyards program would be funded by new license 
fees of $23.3 million that would be required of packers, live poultry 
dealers, stockyard owners, market agencies and dealers, as defined 
under the Packers and Stockyards Act.
                               conclusion
    This concludes my statement. I am looking forward to working with 
the Committee on the 2003 budget for the Marketing and Regulatory 
Programs. We believe the proposed funding amounts and sources of 
funding are vital to providing the infrastructure to protect American 
agriculture from pests and diseases and for moving more product, 
especially for increasing exports to foreign markets. It will provide 
the level of service expected by our customers--the farmers and 
ranchers, the agricultural marketing industry, and consumers. We are 
happy to answer any questions.
                                 ______
                                 

                  Prepared Statement of Bobby R. Acord

    Mr. Chairman and members of the Subcommittee, it is indeed a 
pleasure for me to represent the Animal and Plant Health Inspection 
Service (APHIS) before you today. I have spent a good portion of my 
career serving this agency and there is none better. Simply put, APHIS 
is the guardian of U.S. agriculture. A substantial portion of the U.S. 
economy and the health of our food supply depend on APHIS' ability to 
prevent foreign pests and diseases from entering the country as well as 
quickly detecting and controlling them if they do. Safeguarding 
American agricultural health is vital to providing an affordable food 
supply for all U.S. consumers. Further, it helps U.S. farmers by 
preserving and expanding both domestic and international markets for 
U.S.-produced food and fiber, which must be pest- and disease-free to 
be sold.
    Overseas activities, exclusion efforts at the border, and 
monitoring and managing agricultural pests and diseases existing in the 
United States are intrinsic and inseparable components of the larger 
function of ensuring the health and marketability of U.S. agriculture 
worldwide. Our efforts also protect animals from inhumane treatment and 
resolve human and agriculture conflicts with wildlife. For all of these 
activities, APHIS constantly employs new technologies, scientific 
improvements, and innovations to complete our work more effectively and 
efficiently. Our statement will cover what we are doing in fiscal year 
2002, our fiscal year 2001 highlights, and our fiscal year 2003 budget 
request.
    Recent events have led Americans--perhaps for the first time--to 
worry about the security of our food supply. The need for protecting 
U.S. agriculture, however, is not new to APHIS. Our safeguarding system 
consists of four tiers: (1) international activities to prevent 
problems from getting to U.S. shores; (2) border exclusion once 
passengers and products are attempting to enter the U.S.; (3) domestic 
monitoring, surveillance, and emergency response to quickly detect and 
respond to problems; and (4) ongoing eradication and control activities 
for pests and diseases; and wildlife management activities. This 
strategy of successive lines of defense has been effective. For 
example, we have kept foot-and-mouth (FMD) disease out of this country 
since 1929 and have kept any Mediterranean Fruit Fly (Medfly) 
incursions in check. Nevertheless, the current realities of 
international trade and travel, as well as the threat of those who 
would use pests and diseases to terrorize our people and harm our 
economy, make safeguarding American agriculture increasingly difficult. 
We must remain vigilant in all of these efforts.
    Our international activities reduce the threat of agricultural pest 
and diseases approaching U.S. borders.
    APHIS performs three complementary international functions. First, 
APHIS monitors and controls or eradicates pests or diseases in 
locations where they threaten U.S. agriculture. In many ways, for us 
the first ``border'' is the one that separates areas with pests and 
diseases from those free of plagues. We want to deal with problems 
where they exist before they arrive at our shores. Second, APHIS 
programs regulate trade to ensure its safety to U.S. agriculture. We 
must ensure that the same trade that brings people and products to our 
nation does not bring us unintended visitors like pests and diseases. 
Third, APHIS promotes U.S. exports, using expertise in pests and 
diseases to prevent unnecessary trade barriers. American farmers have 
the best and healthiest products in the world. If the playing field is 
level, they will prevail. Related line items include Foreign Animal 
Disease (FAD)/Foot and Mouth Disease (FMD), Fruit Fly Exclusion and 
Detection, Screwworm, Tropical Bont Tick, Trade Issues Resolution and 
Management, and Import/Export.
    Foreign Animal Disease(FAD)/FMD.--APHIS' first line of defense 
against FADs is understanding where the threats from overseas lie and 
using that information to prevent those diseases from coming to the 
United States. APHIS' efforts successfully protected the biological and 
commercial health of the $76 billion livestock and poultry industries 
in the United States against devastating diseases in fiscal year 2001. 
Excluding FMD and other FADs is critical to protecting U.S. farmers and 
consumers against losses in productivity, higher food prices, and lost 
export markets. Our FAD activities overseas include cooperative 
agreements with several countries, including Mexico and the countries 
of Central America. These collaborative efforts support FMD and other 
FAD surveillance and ensure that the United States is prepared to 
address the threat of disease entry. APHIS' FMD line item currently 
focuses on Colombia, because it is the nearest threat of overland 
transmittal to the United States. Considering the increasing numbers of 
passengers and commodities from other regions arriving by air and 
water, APHIS has been expanding its efforts to other regions. For 
example, experts believe that the recent United Kingdom FMD outbreak 
originated in China. This expanded effort is reflected in the fiscal 
year 2003 President's budget.
    Fruit Fly Exclusion and Detection.--APHIS is eradicating Medfly in 
Guatemala and Mexico through Moscamed, a cooperative cost-sharing 
program with Mexico, Guatemala, and Belize. APHIS has eliminated Medfly 
outbreaks from northern Guatemala, Belize, and all but the State of 
Chiapas, Mexico, since 1998 incursions into previously free areas lead 
experts to predict that the pest would soon establish itself in the 
United States, with a $5 billion per-year cost to U.S. producers. 
Emergency authority has been used to transfer funds from the Commodity 
Credit Corporation (CCC) since fiscal year 1999 to get on top of the 
immediate threat. The eradication program, which includes aerial and 
ground bait spray treatments as well as release of sterile flies, is 
preventing the fly from moving north through Mexico into the United 
States. The goal of the current emergency effort is to create a 
sustainable barrier by eradicating Medflies from Guatemala to the 
border of Honduras and El Salvador. This program also keeps our multi-
billion dollar citrus export markets open. In fiscal year 2001, APHIS 
conducted cooperative fruit fly detection programs in States that are 
susceptible to the pests. In Florida, our goal is to detect a new 
introduction quickly enough to begin mitigation measures before the 
flies can get established. APHIS and California also continued strong 
statewide detection efforts that identified several harmful fruit flies 
entering the U.S. at California entry ports. In response to these 
detections, the program is increasing trapping and establishing 
quarantines, where necessary, to prevent the artificial spread of fruit 
flies beyond affected areas.
    Screwworm.--In fiscal year 2001, APHIS continued keeping screwworms 
out of the United States and further reduced the likelihood that they 
will ever return. The eradication program is close to achieving its 
goal of establishing a permanent sterile screwworm barrier in the 
eastern third of Panama. Establishing the barrier at Panama's narrowest 
point will result in significant savings over any other location in 
Mexico or Central America. Pushing the barrier zone more than 2,000 
miles and 7 countries away from the United States by land has provided 
ever increasing protection for the U.S. livestock industry, thereby 
preventing economic loss to U.S. producers. Our efforts include sterile 
fly production in Tuxtla Gutierrez, Mexico, where we produced and 
distributed an average of 116 million sterile flies per week in fiscal 
year 2001. APHIS is currently examining options secure of an adequate 
number of quality sterile flies to maintain the barrier in Panama, 
eradicate isolated outbreaks, and provide flies to other countries and 
international organizations wishing to begin eradication programs.
    Tropical Bont Tick (TBT).--The Caribbean Amblyomma Program (CAP), 
initiated in 1995, focuses on a regional approach to eradicating the 
TBT and preventing the introduction of the tick and its associated 
diseases, heartwater and dermatophilosis, into U.S. livestock and 
wildlife populations. APHIS provides technical expertise, program 
guidance, and funding through cooperative agreements with the CAP 
program and recently assigned a veterinarian to oversee the program. 
APHIS cooperates with the Food and Agriculture Organization of the 
United Nations and the Caribbean Community to exclude the pest from the 
U.S. This is an example of fighting a problem at the ``border'' other 
than our own. An eradication program in the U.S. territories or the 
mainland would be extremely difficult and expensive, but a modest 
investment in the Caribbean offers the U.S. protection against that 
dire prospect.
    Trade Issues Resolution and Management.--APHIS attaches overseas 
monitor and respond quickly to emerging foreign pest and disease 
threats at their origin before they to reach U.S. ports. These attaches 
also resolve problems associated with shipments of U.S. commodities, 
enabling them to clear the border and enter into the country's market. 
Overseas personnel collaborate with headquarters staff to present the 
correct mix of protecting U.S. agriculture and ensuring that U.S. 
agricultural export products receive fair, science-based treatment in 
trade negotiations. In fiscal year 2000, APHIS was directly involved in 
resolving 67 sanitary and phytosanitary (SPS) related trade issues 
involving U.S. agricultural exports, removing restrictions to trade 
worth over $2.5 billion. APHIS attaches abroad are positioned to 
resolve any difficulties that may impede the importation of U.S. 
agricultural shipments. Overseas technical assistance efforts also 
benefit U.S. exports by emphasizing the application of SPS concepts, 
such as appropriate risk assessment methodologies and harmonization 
with international standards. One area of growing concern is 
biotechnology. APHIS personnel worked to ensure that decisions on 
products derived from biotechnology received the same fair, science-
based treatment as all agricultural products.
    Import/Export.--APHIS protects U.S. livestock, poultry, and 
wildlife populations from incursions of exotic diseases and parasites 
including those transmissible from animals to humans. APHIS regulates 
the importation of animals and animal products, determining if products 
can safely enter the U.S. without detrimental effects to U.S. 
agriculture. APHIS also promotes U.S. exports to markets abroad by 
ensuring that U.S. origin animals and animal products meet health and 
welfare requirements of recipient countries. This program also 
participates in negotiations on trade of animals and animal products 
that face potential sanitary restrictions. Fulfilling this mission in 
fiscal year 2001, APHIS observed the importation of 7.8 million 
animals; 10.6 million poultry; 2.5 million doses of semen; and 1,221 
embryos. The program issued point of origin certificates for the export 
of approximately 752,000 head of livestock, 60.4 million doses of 
semen, and 15,246 bovine embryos. Without APHIS' efforts, U.S. farmers 
would lose these lucrative exports.
    Border exclusion is our first domestic line of defense to keep 
harmful agricultural pests and diseases out of the United States.
    United States border activities encompass the largest component of 
APHIS' tiered safeguarding system. Border inspections complement the 
protection aspect of APHIS international activities, as well as promote 
the free flow of trade in agricultural and other products. These 
activities give APHIS the opportunity to stop any threats that have 
arrived at U.S. shores and borders. The border activities include the 
Agricultural Quarantine and Inspection (AQI) line items, as well as the 
Cattle Fever Tick program. It is important to note that we are 
concerned not only with political borders, but ``pest and disease'' 
borders as well. For that reason, we inspect people and things leaving 
Hawaii and Puerto Rico destined for the mainland United States. We must 
do so because pests and disease present in those areas could spread to 
mainland States currently free of the problems.
    Agricultural Quarantine Inspection (AQI).--This program reduces the 
risk of introduction of invasive species into the United States to 
protect American agricultural resources, maintain the marketability of 
agricultural products, and facilitate the movement of people and 
commodities across the borders. With appropriated funding, APHIS 
minimizes the threat of pests and diseases entering the U.S. by 
conducting point-of-entry inspections of travelers and cargo along the 
Mexican and Canadian borders and pre departure inspections of 
passengers and cargo traveling from Hawaii and Puerto Rico to the 
mainland.
    With AQI user fees collections, APHIS inspects arriving passengers' 
baggage, commercial aircraft, and commercial vessels from foreign 
countries; commercial trucks crossing the U.S.-Mexico border; and 
railroad cars crossing the U.S.-Mexico border. As a result of the 
heightened focus on security, the need to enhance inspections to 
protect U.S. agriculture from possible biosecurity invasions is a major 
priority. Using fee collections along with funding from the Homeland 
Security Supplemental appropriation, we will enhance our efforts and 
successfully protect U.S. agriculture.
    In response to the FMD outbreak in the United Kingdom and other 
parts of Europe during fiscal year 2001, the Secretary of Agriculture 
made $13.5 million available from the AQI user fee reserve to increase 
inspection efforts at our ports. APHIS enhanced the surveillance of 
animal products from the European Union (EU) and implemented 100 
percent inspection of all passengers on flights originating from 
affected EU member States. In fiscal year 2001, APHIS inspected 
approximately 92.5 million maritime and airport passengers; pre-
departure passengers in Puerto Rico and Hawaii, pre-clearance 
passengers in Bermuda and the Bahamas, and pedestrians and bus/vehicle 
passengers arriving in the U.S. at over 300 ports of entry. This is an 
increase of 4.5 million over fiscal year 2000. Our ports of entry are 
pathways for plant and animal contraband materials. While 95.4 percent 
of the international travelers and 96 percent of border vehicles were 
in compliance with our AQI regulations, we seized 314,641 prohibited 
animal products and byproducts. We also maintained 100 trained beagle 
teams at 35 major U.S. airports, land borders, maritime ports, and post 
offices. These beagles undergo a 12-week training course with their 
proposed handlers at the Agency's National Detector Dog Training Center 
in Orlando, Florida. APHIS continues to maintain X-ray scanning 
equipment as a screening tool in passenger baggage clearance at all 
foreign-arrival and pre-departure sites, as well as at several land 
border ports on the Mexican border.
    In fiscal year 2001, we enhanced our Smuggling Interdiction and 
Trade Compliance (SITC) program by hiring additional officers and 
investigators. SITC officers analyze pathways, prosecute smugglers, and 
provide outreach to industry on regulatory requirements. In addition, 
we work closely with several Federal agencies, State Departments of 
Agriculture, the Office of the General Counsel, and State and local 
police. The fiscal year 2003 Budget and additional funds from the 
Homeland Security Supplemental appropriation reflect a commitment to 
provide heightened security by upgrading security clearances for all 
SITC officers to retrieve high levels of intelligence information and 
receive formalized training in this area. SITC must work with other 
intelligence groups like the Federal Bureau of Investigation (FBI), 
U.S. Customs, and the Office of Homeland Security to collect 
information necessary for determining appropriate targets and 
interdiction activities to prevent prohibited biological agents from 
entering the United States. We conducted two major blitzes on the 
Canadian border focusing on vehicle traffic. The SITC program 
confiscated over 3,000 pounds of exotic fruits, herbs, and meats at 
three western New York crossings during a 3 day blitz.
    Cattle Fever Tick.--This program is designed, through the 
inspection of cattle and horses, to rapidly identify tick incursions, 
eradicate them, and prevent their spread. In addition, the program 
prevents the introduction of cattle fever ticks into the United States 
from Mexico by using horseback patrols to apprehend stray cattle and 
horses and enforce systematic quarantines along the Rio Grande River. 
This program, begun in 1906, was the first cooperative Federal-State 
eradication effort in the United States. In 1943, we eradicated two 
species of the cattle fever tick from the Southwestern United States, 
with the exception of a permanent quarantine zone between Texas and 
Mexico. Today, the permanent quarantine zone extends over 900 miles 
from Del Rio to the Gulf of Mexico and is up to six miles wide. In 
fiscal year 2001, during horseback patrols for cattle and horses in the 
permanent quarantine zone, APHIS apprehended a total of 144 stray and 
smuggled animals from Mexico, 114 of which were infested with cattle 
fever ticks.
    Stakeholders have proposed enhancements to the APHIS safeguarding 
mission, particularly at the borders. To ensure that the Agency is 
prepared to meet new challenges and stay ahead of potential problems, 
APHIS commissioned thorough evaluations of its plant and animal health 
safeguarding programs. After an in-depth review, the National Plant 
Board, which recognized APHIS programs as strong, vital and necessary 
to the survival and U.S. producers, presented APHIS with its 
recommendations for strengthening plant health safeguarding programs in 
July 1999. Since then, APHIS has incorporated a number of the Plant 
Board's most important recommendations into its operations. These 
include establishing the SITC program, securing Congressional approval 
of the updated Plant Protection Act, and strengthening risk 
assessments. These achievements have significantly strengthened APHIS' 
ability to prevent harmful agricultural pests and diseases from 
entering the country. In response to other Plant Board recommendations, 
APHIS is examining ways of retooling and strengthening its risk 
management strategies. These activities, including increased offshore 
risk mitigation strategies, improvements in the collection and use of 
international pest information, and further strengthening our 
scientific and analytical base, would augment inspections at U.S. ports 
of entry.
    The National Association of State Departments of Agriculture 
(NASDA) Research Foundation conducted a similar review of APHIS' animal 
health safeguarding programs in 2001. We believe this review will 
strengthen animal health programs in much the same way the Plant 
Board's review has benefited plant health safeguarding efforts. The 
Animal Health Protection Act--similar in scope to the Plant Protection 
Act--was recently introduced in Congress. The Act would consolidate and 
streamline the more than 20 animal quarantine and related laws that are 
now on the books, some of which have not changed since the 1880s. The 
Act would enable APHIS to establish a more efficient, effective system 
for regulating the import, export, and interstate movement of animals 
and animal products. It also would help strengthen APHIS' efforts to 
deter people from deliberately bringing in prohibited animals, animal 
products, and even animal disease agents. We need these prohibitions 
and investigative tools now more than ever before.
    Domestic monitoring, surveillance, and emergency response reduces 
agricultural production losses and export market disruptions.
    The next tier in APHIS' safeguarding system includes monitoring and 
rapidly responding to any threats to animal or plant health. The animal 
health monitoring and surveillance (AHMS) and the pest detection line 
items constitute the Agency's key surveillance efforts. The emergency 
management system (EMS) line item helps to quickly respond to animal 
disease threats. The Homeland Security Supplemental appropriation will 
enable us to jump start proposed activities in the fiscal year 2003 
Budget.
    AHMS.--The AHMS program covers foreign animal disease 
investigations, surveillance for animal disease programs, certification 
programs, animal identification, and risk assessments. Collaborative 
information sharing and producer confidentiality are cornerstones of 
the AHMS program. Through effective partnerships with animal commodity 
producer groups--and with State governments, university researchers, 
and other Federal agencies--the program met producers' and the U.S. 
public's information demands in a cost-effective, collaborative manner.
    With increased focus on animal health security in fiscal year 2001, 
APHIS increased foreign animal disease (FAD) investigations. In fiscal 
year 2001, APHIS conducted 801 investigations, a substantial increase 
over fiscal year 2000's total of 385 because of increasing concern over 
the FMD outbreaks in Europe. To prevent FAD incursions and the 
potential for additional intentional acts that may impact national 
security, APHIS thoroughly investigates all suspicious situations. This 
includes another FAD, bovine spongiform encephalopathy (BSE). To date, 
no case of BSE has ever been detected in the United States. APHIS has 
tested more than 13,900 brain samples. The annual number more than 
doubled, from 2,303 in fiscal year 2000 to 5,056 in fiscal year 2001. 
This is the largest single-year total since surveillance began in 1990. 
This enhanced testing helps support and validate the United States' 
BSE-free status.
    BSE is a transmissible spongiform encephalopathy (TSE). The TSE 
family of diseases affects a number of animals, and some also affect 
humans. One of those, variant Creutzfeldt-Jakob disease (vCJD) has been 
linked to BSE. The Centers for Disease Control and Prevention's ongoing 
surveillance program has not detected vCJD to date in the United 
States, with the exception of an ill U.K. resident who sought medical 
care in the United States. Taking no chances, in March 2001, APHIS 
removed and disposed of the two remaining herds of Belgian sheep in 
Vermont suspected of having the TSE marker, a sign of potential 
disease. APHIS disposed of the first herd in July 2000.
    The U.S. Department of Agriculture has conducted several risk 
assessments examining the possibility of BSE emerging in the United 
States. All the assessments have concluded that the potential risk of 
BSE emerging in the United States is low. In November 2001, the Harvard 
School of Public Health, Center for Risk Analysis, completed a three-
year study of the risk of introducing BSE into the United States. They 
concluded that the U.S. Government's actions have successfully 
minimized the risk of BSE in the United States, to the point that even 
if a few infected animals were detected, the disease would not become 
established. Nevertheless, the adverse economic impact of even a single 
case of BSE in the United States would likely be similar to that 
experienced in the United Kingdom because of consumer concern and the 
trade implications. Because of insufficient technical information about 
TSEs, importing countries block many animal products from countries 
with BSE. To prevent a similar scenario from occurring in the United 
States, the fiscal year 2003 budget includes $7 million in grants to 
States for BSE, FMD, and other FAD surveillance. Disease outbreaks in 
the UK and other European countries demand that we accelerate our 
safeguarding efforts. To continue to keep FADs from entering the U.S., 
we must enhance surveillance and monitoring activities as proposed in 
the fiscal year 2003 budget.
    Our AHMS program also conducts monitoring and surveillance for 
several poultry, equine, and livestock diseases, which complement our 
eradication efforts. For example, the National Poultry Improvement Plan 
(NPIP), an industry-State-Federal program, continued to protect and 
serve the $25 billion poultry industry in fiscal year 2001. The 
provisions of the NPIP, developed jointly by industry members, and 
State and Federal officials, established standards for evaluating 
poultry breeding stock and hatchery products for freedom from hatchery-
disseminated and egg-transmitted diseases. In fiscal year 2001, we 
tested 2,756 samples from live-bird markets in the Northeastern United 
States for the presence of the avian influenza virus (AIV) and isolated 
it in 419 of the samples. We also tested the 2 million horses in fiscal 
year 2001 for equine infectious anemia (EIA). Of the horses tested, .03 
percent tested positive. EIA is a viral disease that causes fever, 
anemia, progressive weakness, and weight loss.
    APHIS is actively partnering with the National Johne's Working 
Group whose membership includes representation from Federal and State 
agencies, Universities, biologics, and livestock industry 
organizations. Johne's is a chronic bacterial disease that can have 
major economic influence on individual cattle producers and 
international cattle markets. At the end of fiscal year 2001, the 
Johne's disease program included 1,950 herds that had control plans or 
risk assessments filed with States, including 514 enrolled during the 
year. Approximately 140 advanced within their program to higher levels 
of assurance for test negative status. In fiscal year 2002, Congress 
established the Johne's disease program as a separate line item.
    As progress continues toward the eventual eradication of 
brucellosis from the U.S. domestic livestock, the Agency is placing 
more emphasis on surveillance activities to ensure that we find the 
last affected herd. In fiscal year 2001, we tested 11.1 million cattle, 
300,000 more than in fiscal year 2000. We must maintain adequate 
surveillance after eradication to prove to our trading partners that we 
are disease free. Similarly, APHIS continued to monitor the incidence 
of tuberculosis throughout the United States. Emphasizing national 
surveillance, the Agency more than doubled its testing of tuberculosis 
suspect tissues submitted by meat inspection personnel from slaughtered 
cattle from 1,028 in fiscal year 2000 to 2, 991 in fiscal year 2001. 
APHIS identified 71 samples as positive.
    Pest detection.--Concerns over the threat of bioterrorism have 
further demonstrated the need for a comprehensive national detection 
system for safeguarding the country's food production capacity and 
natural ecosystems. The Homeland Security Supplemental appropriation 
will enable us to jump start proposed activities in the fiscal year 
2003 Budget. APHIS will train personnel in key locations throughout the 
country and coordinate and oversee early detection surveys in 
cooperation with States. APHIS and the States participate in the 
Cooperative Agricultural Pest Survey (CAPS) program, which provides the 
network for APHIS and the States to target invasive plant pest species 
and response activities. This program must increase and enhance the 
domestic infrastructure for early detection of weeds, plant diseases, 
insects, nematodes, and other invertebrate organisms which can gain 
entry into the country or into an area previously free of the pests. 
APHIS and the States conduct detection surveys for incipient 
infestations of exotic pests that could cause economic damage if they 
spread and become established in the United States. CAPS provides an 
electronic information exchange through the National Agricultural Pest 
Information System (NAPIS) database, web sites and e-mail systems, and 
provides strong interagency and interpersonal networks. NAPIS provides 
a summary database of pest survey results that are useful in tracking 
the spread of pests within the United States, demonstrating their 
absence, and planning their control to support U.S. exports. APHIS 
makes hundreds of thousands of observations, such as taking grain 
samples for Karnal bunt, setting traps for fruit flies, or checking 
trees for citrus canker and plum pox. Both positive and negative 
results yield valuable and useful information as can be seen with 
Khapra beetle. Khapra beetle is one of the world's worst pests of 
grain/commodities. Our surveillance verifies that the United States is 
free of this pest and thus able to maintain billions of dollars of 
exports.
    Emergency Management System (EMS).--This program is a joint 
Federal-State-industry effort to improve our ability to deal 
successfully with animal health emergencies ranging from natural 
disasters to introductions of FADs. In addition to unintentional 
introductions of FADs, the EMS addresses intentional introductions and 
emerging diseases which could pose a threat to trade. With full 
readiness to deal with animal health outbreaks, we can mitigate the 
damage of outbreaks on the Nation's food supply and economic well-
being. APHIS provided assistance to the UK during its fiscal year 2001 
outbreak of FMD by coordinating teams of Federal and State 
veterinarians, including 158 veterinarians from APHIS, to travel to the 
UK to assist with eradication efforts. In addition to helping an 
important ally and trading partner, our veterinarians gained valuable 
knowledge and experience.
    During fiscal year 2001, the Agency began an emergency management 
grant program to assist States and Tribal Nations to meet or exceed the 
National Animal Health Emergency Management System State Standards. Of 
the 38 grants we awarded, 31 went to States, 6 to Tribal Nations, and 1 
to a University. We established State Standards to identify critical 
issues in emergency animal health preparedness. APHIS also conducted a 
tripartite exercise with Canada and Mexico to develop, practice, and 
evaluate a North American emergency response plan for an FMD outbreak. 
The exercise focused primarily on communications and the use of 
vaccines.
    Ongoing eradication and control activities minimize risks to 
agriculture production, natural resources, and human health and safety.
    The final tier of the APHIS safeguarding system is eradicating and 
controlling pests and diseases already established in the U.S. to 
minimize the losses they cause, prevent their spread, and reduce trade 
restrictions on U.S. exports. Selected programs include the Boll 
Weevil, Biological Control, Emerging Plant Pests, Golden Nematode, 
Gypsy Moth, Pink Bollworm, Pseudorabies, Scrapie, and Wildlife Services 
Operations line items.
    Boll Weevil.--The cooperative boll weevil eradication program 
(BWEP) has been highly successful in reducing losses. Nationwide, the 
fiscal year 2001 program spent approximately $274 million, with 26 
percent of that amount provided in Federal cost-share funds. The BWEP 
has eradicated boll weevil from 5.9 million acres out of nearly 16 
million acres of cotton production since 1983. As a result, APHIS and 
program cooperators are very encouraged with the program's progress and 
10 million acres are in active eradication. In fiscal year 2001, the 
Farm Services Agency issued $94.6 million in low-interest loans to 
grower foundations to fund startup costs for new eradication programs 
and operating capital for existing programs. After fiscal year 2002, 
the need for these loans should begin to decline rapidly.
    Biological control.--APHIS provides resources for survey, release, 
and establishment activities to control pests of economic significance 
using natural enemies. APHIS' National Biological Control Institute 
supports cooperative pest management partnerships through its 
competitive grant programs. We approved 35 grants to Federal agencies, 
State Departments of Agriculture, industry, and universities in fiscal 
year 2001 to develop and supply educational materials and services and 
to implement the safe and effective use of biological controls in pest 
management programs. Just a few of the initiatives included biological 
control of salt cedar, spotted and diffuse knapweed, imported fire ant, 
and Asian longhorn beetle (ALB). We also continued our offshore 
biological control program against the pink hibiscus mealybug and 
papaya mealybug.
    Emerging Plant Pests.--APHIS addresses a wide range of plant pest 
infestations and diseases not covered through ongoing programs. Program 
activities include delimiting surveys, control or eradication 
treatments, epidemiological studies, laboratory diagnostics, and 
parasite releases to combat emerging pests. In fiscal year 2001, we 
focused on ALB, Japanese beetle, and pine shoot beetle. Our first 
priority is to prevent the spread of these pests to non-infested areas 
of the United States. This is an example of where the pest and disease 
``borders'' exist within the U.S., borders that do not match State 
borders. To further ALB survey, regulatory, and control efforts in New 
York and Illinois, APHIS spent $29.9 million in emergency funds. Since 
this emergency program began in 1997, APHIS has drastically reduced ALB 
populations, thus reducing the risk of spread to uninfested areas.
    Golden Nematode (GN).--By conducting a statewide GN survey, this 
cooperative program enabled the export and interstate shipment of 
potatoes valued at over $90 million without GN-related phytosanitary 
restrictions. In fiscal year 2001, APHIS collected 11,323 soil samples 
from 6,361 acres in 20 New York State counties and found no new GN 
detections.
    Gypsy Moth (GM).--APHIS works to prevent the artificial, long 
distance movement of the European gypsy moth to uninfested areas of the 
United States. We conduct survey activities in cooperation with the 
States to detect and delimit isolated populations outside the generally 
infested area. During fiscal year 2001, APHIS and cooperators placed 
approximately 300,000 pest detection and delimitation traps throughout 
the United States. Our efforts limited major outbreaks of over 640 
acres to 4 outside the regulated area which met our performance goal.
    Pink bollworm (PBW).--We continued the cooperative PBW sterile 
release program to protect cotton in the San Joaquin Valley of 
California. The program trapped 70 native (non-sterile) moths, 
demonstrating a reduced risk to cotton, compared to the 154 trapped in 
fiscal year 2000. APHIS produced 800 million sterile moths at the 
Phoenix, Arizona, rearing facility for incremental releases in the San 
Joaquin Valley. APHIS also coordinated an extensive PBW survey 
involving all cotton acreage in New Mexico, Oklahoma, and Texas. Survey 
results confirmed the absence of PBW in Oklahoma and most of Texas, 
allowing APHIS to further delimit the regulated area.
    Pseudorabies.--At the beginning of fiscal year 2001, the United 
States had 434 pseudorabies quarantined premises. The program released 
all but twelve quarantines at the end of fiscal year 2001. Slaughter 
surveillance continues to play an important role in identifying newly 
infected herds. Thirty-six States are now participating in Major Packer 
Surveillance. In fiscal year 2001, the Secretary authorized the 
transfer of an additional $56.1 million in emergency funds to continue 
the very successful accelerated program of indemnity, surveillance, 
vaccination, compliance, and enforcement. As of January 15, 2002, there 
were no herds under quarantine compared to 1,305 at the beginning of 
fiscal year 1999 before the accelerated program started. This program 
is a good example of how monitoring and cooperation from producers for 
depopulation can eliminate animal disease.
    Scrapie.--The Voluntary Scrapie Flock Certification Program (VSFCP) 
monitors participating flocks and certifies those flocks as free of 
scrapie once they have been in continuous compliance with the program 
standards for 5 years. As of October 1, 2001, there were 861 flocks 
enrolled in the program. This represents a 38 percent increase in 
participation during fiscal year 2001. On August 12, 2001, APHIS 
published the final rule ``Scrapie in Sheep and Goats; Interstate 
Movement Restrictions and Indemnity Program.'' The rule requires 
identification of animals for interstate movement, provides indemnity 
for destroyed animals, establishes standards for handling infected and 
exposed flocks and for approving tests and laboratories, and sets 
standards for the State scrapie control program. This rule will 
substantially improve APHIS' ability to trace infected and exposed 
animals which will make it easier to find and clean up flocks.
    Wildlife Services Operations.--APHIS provides Federal leadership in 
managing wildlife conflict. The American people consider wildlife as a 
valuable public resource even though it can cause damage to 
agricultural and industrial resources, pose risks to human health and 
safety, and affect other natural resources. Our responsibility is 
resolving problems that occur when human activity and wildlife conflict 
with one another.
    The Agency conducted livestock protection activities for 
approximately 10,000 resource owners in fiscal year 2001 in cooperation 
with private individuals and State, Federal, and local governments. 
Aerial operations are an important part of an integrated approach to 
our activities. This activity is critical, not only for livestock and 
wildlife protection activities, but also for such operations as wolf 
capture and relocation, assisting in search and rescue operations, 
wildlife surveys and census gathering, and in the aerial distribution 
of oral rabies vaccine units. APHIS continues to implement the safety 
recommendations from the 1998 report, Safety Review, Evaluation, and 
Recommendations Concerning the USDA, APHIS Wildlife Services Aviation 
Program.
    In addition to threatening livestock and other agricultural 
resources, wildlife can pose dangers to human health. Airports report 
approximately 3,600 wildlife strikes to civil aircraft each year and 
the U.S. Air Force alone reports more than 2,500 strikes. The requests 
for assistance in managing wildlife hazards at airports and military 
air bases continue to increase. In fiscal year 2001, our personnel 
provided wildlife hazard management assistance to 393 airports. Our 
wildlife biologists conducted 118 direct assistance and technical 
assistance projects on these airports for the protection of property, 
and human safety. Another human health threat is the spread of gray fox 
and raccoon rabies. In fiscal year 2001, the Secretary transferred $4.2 
million in emergency funds to continue the oral rabies vaccination 
program (ORVP) in the eastern United States and Texas.
    APHIS continues to cooperate with various State and Federal 
agencies to protect reintroduced black-footed ferrets from predators 
and to monitor for diseases. We continue to assist State and Federal 
wildlife officials in California and Nevada with protecting Sierra 
Nevada and Desert bighorn sheep from mountain lion predations. In 
fiscal year 2001, APHIS began collaborative efforts with State agencies 
in Georgia, Alabama, and Florida for the Wildlife Management and Game 
Bird Restoration Program. The major focus of this tri-State, Federal, 
and private industry program is to identify how professional predation 
management enhances population numbers and productivity for a variety 
of ground nesting birds.
    Developing and applying scientific methods that benefit 
agricultural producers and consumers protects the health of animal and 
plant resources and sustains agricultural ecosystems.
    APHIS conducts programs to develop new or improved methods for 
reducing wildlife/agricultural conflicts, controlling or eradicating 
harmful plant and animal pests and diseases, and applying new 
technology to assure that the latest genetically engineered viral 
vaccines are pure, safe, potent, and effective. We also conduct 
laboratory tests to support disease and pest control and/or eradication 
programs. These activities are included under the Biotechnology/
Environmental Protection, Veterinary Biologics, Veterinary Diagnostics, 
and Wildlife Services Methods Development line items.
    Biotechnology/Environmental Protection.--This program regulates the 
movement and release of biotechnology products to ensure that they do 
not pose a threat to agriculture and the environment. APHIS processes 
permits, notifications, and petitions related to transgenic plants 
tested in the field and entering the marketplace. In fiscal year 2001, 
APHIS increased the number of movement and release notifications and 
permits processed to 2,638 from fiscal year 2000 levels of 2,161. We 
also processed 8 comprehensive permits which allow numerous requests on 
one permit. Since the program's inception in 1987, APHIS has 
deregulated 54 genetically engineered crop varieties, with one new crop 
deregulated in fiscal year 2001. In December 2001, APHIS had six 
pending deregulation applications.
    APHIS continues to foster international regulatory harmonization 
for genetically-engineered plants and microorganisms. APHIS held an 
AgBiotech bilateral meeting with Canada which resulted in a draft 
Bilateral Agreement on environmental assessment criteria for transgenic 
plants and future areas of cooperation. APHIS continued a joint project 
under the Transatlantic Economic Partnership (TEP) aimed at having 
regulatory authorities in the European Union and the United States 
accepting common data requirements that affect each other's decisions 
regarding approval of biotechnology products. Success in the TEP will 
facilitate a harmonized approval process for genetically modified 
plants between North America and Europe.
    Veterinary Biologics.--APHIS strives to prevent the importation, 
production, and distribution of impure, ineffective, or impotent 
veterinary biological products in the United States. In fiscal year 
2001, APHIS issued 113 product licenses. Veterinarians and animal 
owners now have 26 new products for the diagnosis, prevention, or 
treatment of animal diseases. APHIS provided oversight for 2,481 active 
licensed or permitted products for the control of 197 animal diseases. 
APHIS approved 17,185 serials of veterinary biologics, while rejecting 
27 serials for failing to meet Agency requirements. Our Veterinary 
Biologics Program also continued efforts to reduce trade barriers that 
limit the sale of veterinary biological products overseas. Program 
officials continued technical discussions with representatives of the 
European and U.S. biologics industries and with regulatory officials 
from the European Union.
    Veterinary Diagnostics.--APHIS develops and maintains national and 
international laboratory diagnostic support for our animal disease 
prevention, detection, control, and eradication programs. We provide 
assistance to State and other Federal agencies and laboratories, 
educational institutions, and foreign governments in animal disease 
diagnosis. We also maintain national and international laboratory 
reference assistance and conduct developmental projects for rapidly 
advancing technologies.
    In fiscal year 2001, our National Veterinary Services Laboratories 
(NVSL) in Ames, Iowa, conducted tens of thousands of tests on import/
export samples, dip samples for pesticide concentration in the cattle 
tick program, pseudorabies, scrapie, brucellosis, tuberculosis, and BSE 
samples. We also processed over 1,300 proficiency exams to certify 
laboratories to conduct testing on equine infectious anemia, 
bluetongue, Johne's disease, and other diseases and provided training 
to State, Federal, private, and foreign participants on domestic and 
foreign animal diseases. In the recent anthrax scare, NVSL processed 
environmental samples from USDA offices across the U.S., testing for 
the bacterium. While all samples tested negative, APHIS devoted 
immediate resources to secure the NVSL facility and to conduct anthrax 
testing.
    Wildlife Services Methods Development.--This program provides 
research for APHIS' Wildlife Services program. Our National Wildlife 
Research Center (NWRC) provides scientific information for the 
development and implementation of effective, practical, and socially-
acceptable methods for wildlife damage management. With this research, 
we can protect crops, livestock, natural resources, property, and 
public health and safety.
    Our NWRC national headquarters is on the Foothills Campus of 
Colorado State University in Fort Collins, Colorado with a 25,000 
square foot indoor Animal Research Building and a leased 82,000 square 
foot Wildlife Science Building on the 43 acre site. During fiscal year 
2001, General Services Administration awarded a lease construction 
contract for an outdoor animal research complex with projected 
completion in 2002. We also completed a design and issued bid documents 
for a new support wing addition to the existing indoor Animal Research 
Building. Construction of this wing should begin in fiscal year 2002 
with occupancy in fiscal year 2003.
    NWRC researchers continue to make progress toward developing 
integrated strategies for non-lethal control in integrated pest 
management programs. These include contraceptives like vaccines for 
white-tailed deer and nicarbazin for controlling Canada goose 
populations. We continue to develop humane wildlife capture devices and 
to coordinate a national trap testing program to improve animal 
welfare, meeting our commitment to the European Union.
    Inspecting and monitoring animals covered under the Animal Welfare 
Act and various laws protecting horses ensures humane care and 
treatment.
    APHIS has the responsibility, in addition to protecting 
agriculture, to ensure that animals receive humane treatment under the 
law. This responsibility is carried out by our Animal Welfare and Horse 
Protection Programs.
    Animal Welfare.--APHIS continues to focus on conducting quality 
inspections under the Animal Welfare Act (AWA) at USDA licensed and 
registered facilities. The program's risk-based inspection system 
concentrates activities on facilities where animal welfare concerns are 
the greatest. In fiscal year 2001, APHIS hired nine new animal care 
inspectors--bringing the total to 82 after reaching a low of 64 in 
fiscal year 1998--boosting inspections by 9.5 percent after a 1.5 
percent decrease in fiscal year 2000. We are adding more inspectors in 
fiscal year 2002 to continue this trend. The program continues to make 
improvements in its computer technology with all field personnel 
producing an easy-to-understand inspection report. We have expanded the 
use of digital cameras, with field personnel documenting incidents of 
noncompliance and, when necessary, immediately transmitting their 
photographs to investigators or headquarters staff or both. As part of 
the program's e-business improvements, research facilities can now file 
their annual report online through the Internet. In fiscal year 2001, 
APHIS inspectors continued a series of specialized training courses on 
care and handling of elephants, use of animals in research, and basic 
training for newly hired inspectors.
    Horse Protection.--APHIS also administers the Horse Protection Act 
(HPA) of 1970 which prohibits the showing, sale, auction, exhibition, 
or transport of sored horses. Inspectors monitor shows and sales for 
compliance and oversee an industry self-regulation system, the 
Designated Qualified Person (DQP) program which is the primary means of 
detecting sored horses. Horse Industry Organizations (HIOs) maintaining 
certified DQP programs participate with APHIS in yearly DQP training 
seminars and refresher courses. In November 2000, APHIS1 presented to 
nine HIOs a draft multi-year operating plan to improve the program. Six 
of the nine HIOs elected to follow the multi-year plan. Consequently, 
for the other three, we must prosecute violations of the HPA as Federal 
cases. At those shows where the HIO agreed to the plan, the respective 
HIO may assess penalties for violations. Although there remain a few 
minor problems with enforcement using the multi-year plan, APHIS plans 
to continue offering it, possibly with minor modifications.
                  our fiscal year 2003 budget request
    The value of American agriculture is enormous. Our bounty is 
multiplied when you consider the economic benefits of trading our 
agricultural products overseas for other goods and services. Our 
agricultural wealth, however, cannot be taken for granted. When people 
and commodities move freely across our political and pest and disease 
borders, the security of our agricultural products is threatened. Our 
only defense, when encouraging free travel and trade, is to safeguard 
through inspection and surveillance activities. When an agricultural 
pest or disease gets past our free border, we must take aggressive 
action to eradicate it. To carry out these activities, we request 
$782.2 million, an increase of $120.4 million over the adjusted fiscal 
year 2002 base in our salaries and expenses account. In our building 
and facilities account, we request $13.2 million, an increase of $6 
million over fiscal year 2002.
    The challenges facing American farmers and ranchers are increasing 
due to economic and trade pressures. To help ease these pressures, 
APHIS programs must safeguard producers from foreign pests and diseases 
and facilitate and resolve trade barriers and issues. Our first 
priority is to address expanding trade and travel which could leave us 
vulnerable--both to disease and pest threats, and to unfair trading 
practices. We request a $62 million increase to prevent foreign animal 
diseases such as FMD or BSE from entering the U.S. Our efforts include:
  --Enhanced border crossing and cargo inspections;
  --Increased surveillance assistance overseas to define international 
        disease borders;
  --Additional domestic surveillance throughout the U.S. animal 
        populations for early detection;
  --Increased surveillance of cloven hoofed wildlife that may harbor 
        any diseases;
  --Technical assistance to foreign countries;
  --Placing emergency managers in States;
  --Foreign animal disease testing and ensuring laboratory quality 
        standards;
  --Increased reptile and amphibian inspection for exotic ticks; and
  --Risk assessments to respond to international and domestic 
        responsibilities for regionalization.
    To expand agricultural trade, we must be able to prove that we do 
not have associated pests or diseases. We request a $25.8 million 
increase to prove our pest and disease free status with additional 
surveillance, testing, and information technology support. We must also 
assure employee safety when using our aircraft. These needs include:
  --Enhanced pest detection system to rapidly detect any incursion made 
        past our borders;
  --Harmonization activities and licensing requirements for veterinary 
        biologics products;
  --Implement safety recommendations for our aerial operations program; 
        and
  --Maintain information technology equipment and provide for new 
        program applications and e-Government initiatives.
    Equally important is our need to address the eradication and 
suppression of diseases and pests once they have become established in 
the U.S. Many of our traditional eradication programs are cooperative 
in nature and have a long history of support from industries and other 
stakeholders. We must continue ongoing emergency programs which are 
currently being funded by transfers from the CCC, and establish a 
program to control grasshoppers and Mormon crickets. Our increase 
includes $166.5 million to:
  --Enhance our chronic wasting disease program to include on-farm 
        inspections, sample collections, testing, education, and 
        depopulation;
  --Establish a grasshopper/Mormon cricket program to effectively 
        predict and suppress these pests from western Federal, tribal, 
        State, and private range lands;
  --Create an ongoing plum pox surveillance and control program to 
        protect stone fruit industries;
  --Continue the Medfly program in Mexico and Guatemala to prevent 
        Medflies from moving northward through Mexico to the U.S.;
  --Continue eradication efforts for citrus canker in Florida and ALB 
        in Illinois and New York;
  --Enhance scrapie surveillance, testing, indemnity, and flock clean 
        up;
  --Enhance tuberculosis testing, training, and Mexico eradication 
        efforts; and
  --Continue oral rabies vaccination efforts in Texas and several 
        eastern and northeastern States.
    Our request contains a decrease of $43.4 million in the boll weevil 
program where there are fewer acres in active eradication and producers 
have access to Federal loans to ensure adequate cash flow. We request a 
net increase of $13.6 million in wildlife services operations to expand 
work on FMD in wild animals, ensure continued safety of aerial 
operations and continue rabies vaccination efforts, while assuming that 
cooperators will cover a larger share of the cost of wildlife 
management programs.
    We request an increase of $6 million in our buildings and 
facilities account to maintain our laboratory and inspection stations 
and to complete construction of the new animal and plant facility on 
the site currently occupied by the Miami Animal Import Center, Miami, 
Florida..
    Pest and disease eradication programs.--I would like to discuss two 
issues related to the USDA/APHIS activities to control infestations. 
The first is funding ongoing emergencies and the second is cost sharing 
responsibility.
    Funding ongoing emergencies.--In recent years the cost of 
controlling and eradicating infestations of plant and animal pests and 
diseases through transfers from the Commodity Credit Corporation has 
increased significantly, from $24 million in fiscal year 1998 to $335 
million in fiscal year 2001. In addition, the number of infestations 
for which funding was provided and the average cost to combat each 
infestation have also grown, to the extent that it is not uncommon to 
have to allocate over $50 million to a single disease in one year.
    The $335 million of CCC funding provided in fiscal year 2001, which 
is equal to 60 percent of the total discretionary appropriation for 
salaries and expenses in that year represented a major expenditure of 
Federal resources. The Administration continues to be concerned that 
the use of CCC ongoing programs, that can last five years or more is 
not consistent with the emergency nature of these funds. Therefore, the 
Administration has proposed to delete the transfer authority from the 
APHIS appropriation and substitute amended authority under the 
Agricultural Risk Protection Act of 2001, that would limit the use of 
emergency transfers to infestations that were not funded in the 
previous fiscal year (unexpected needs). At the same time, the fiscal 
year 2003 discretionary budget includes significant increases to fully 
fund ongoing eradication programs. These actions will have the 
following benefits:
  --Requesting Congress to appropriate funding for eradication requests 
        for ongoing programs.
  --Continue to allow the use of CCC for real emergencies.
  --Allow for planned, predictable financing of ongoing, long-term 
        eradication programs.
    Cost sharing responsibilities.--As the Federal commitment to 
eradicate infestations has increased, we wish to establish flexible 
criteria to define the responsibility of the affected partners--the 
Federal government, State and local governments, industry, and growers. 
Currently, the Federal government often pays over 90 percent of costs, 
including indemnities to affected producers. Therefore, the Department 
and the Office of Management and Budget will be establishing how 
funding responsibility will be allocated, to be published as a 
rulemaking for public comment by the end of 2002. When these criteria 
are published, they will:
  --Allow State and local governments to plan future budget needs;
  --Provide for the rational, transparent and predictable allocation of 
        resources;
  --Allow all infestations to be treated in a relatively consistent 
        way;
  --Speed the internal review process.
                               conclusion
    Our safeguarding system consists of four levels of defense: (1) 
international activities; (2) border exclusion: (3) domestic 
monitoring: and (4) control and eradication. This strategy of 
successive lines of defense has been effective in keeping the most 
harmful pests and diseases out of the country. This system, however 
successful in the past, needs strengthening. With last year's terrorist 
actions, the threat of intentional foreign pest or disease introduction 
now seems more real than ever. Accordingly, APHIS has an enormous job 
to ensure our integrated agricultural safeguarding system can meet the 
challenges we face. Our focus centers around a more modern, efficient, 
and integrated system that protects American producers from pest and 
disease threats at a different kind of border: the area separating pest 
and disease affected areas from free ones. These borders may be in 
foreign locations, along our U.S. borders, or within the U.S. We are 
confident that proving our disease free status will allow our 
agricultural products to compete effectively in the global market 
place. We commit to effective use of the resources you entrust to us.
    We appreciate all of your past support and look forward to even 
closer working ties in the future. We are happy to answer any question 
you may have.
                                 ______
                                 

                    Prepared Statement of A.J. Yates

    Mr. Chairman and Members of the Committee, I am pleased to have 
this opportunity to represent the Agricultural Marketing Service in 
presenting our fiscal year 2003 budget proposal.
                                mission
    AMS activities are an integral component of USDA-wide efforts to 
assist the U.S. agricultural industry in marketing their products and 
in finding ways to improve their profitability. AMS' mission is to 
facilitate the marketing of agricultural products in the domestic and 
international marketplace, ensure fair trading practices, and promote a 
competitive and efficient marketplace to the benefit of producers, 
traders, and consumers of U.S. food and fiber products. We accomplish 
this mission through a variety of activities funded from appropriations 
and from fees charged for services.
    We are responsive to our customers' changing needs. The nature of 
our services such as market reporting and grading enables us to 
maintain close contact with our customers. To improve our service, AMS 
is actively pursuing new ways to provide public electronic access. We 
encourage the public to electronically comment on rulemaking. We offer 
online market news reports, application for services, filing for 
protection under the Perishable Agricultural Commodities Act, and 
bidding on Federal commodity purchases.
    Furthermore, since most of our user-funded services are voluntary, 
we must always remain conscious of cost while being responsive to 
customer needs. To carry out our mission, AMS maintains strong 
cooperative partnerships with State programs and other Federal 
agencies. Our Market News, Shell Egg Surveillance, Pesticide Data, 
Microbiological Data, Pesticide Recordkeeping, and Federal Seed 
programs depend on support from their State partners to collect and 
disseminate information, provide inspections, and otherwise improve the 
efficiency of both State and Federal programs by sharing human and 
capital resources.
    Before I discuss our proposed increases for fiscal year 2003 in 
more detail, I would like to briefly describe some of the marketing 
issues facing U.S. farmers and a few of AMS' significant 
accomplishments during fiscal year 2001, and plans for 2002.
                     global agricultural marketing
    U.S. agriculture is facing continual and rapid changes in the 
industry, Federal and State regulations, financial assistance, domestic 
and international consumer preferences, and an ever-expanding 
dependence on export markets. AMS support of international market 
opportunities for U.S. agricultural products will yield enormous 
dividends for the farm economy, national and world economies. High 
production levels for many U.S. agricultural commodities make it 
necessary for U.S. producers to increase their global market share and 
develop sustainable export sales. America's consumers also benefit from 
a consistent year-round source of agricultural products from our 
trading partners.
    AMS has been modifying Agency activities to include international 
as well as domestic markets so that our programs more fully serve the 
needs of U.S. agriculture. For example, our Transportation Services and 
Pesticide Data Programs provide information that facilitates 
agricultural commodity exports, AMS grading programs offer 
certification to export specifications, and AMS laboratory testing 
programs allow foreign buyers and government requirements to be met.
    In 2002, the Agency received funding for a new Global Market 
Expansion activity that delivers additional support to agricultural 
producers, growers, and exporters in the international marketing of 
U.S. food and fiber products. This activity allows the Agency to 
provide its technical expertise in a variety of international forums 
where international trading standards are being developed. By working 
with international organizations, AMS is able to affect the design of 
food quality standards and model inspection protocols so that they are 
fair to U.S. shippers and they do not become non-tariff barriers to 
U.S. agricultural trade. In addition to serving as a language of 
commerce, trade standards help resolve commodity trade disputes with 
foreign governments and buyers. U.S. Cotton standards, for example, are 
universally used and accepted by the cotton industry and are used in 
settling international trading disputes. In addition, all international 
seed shipments exported to Europe must be certified using Organization 
of Economic Cooperation and Development specifications, or OECD Seed 
Schemes. As the U.S. Accreditation Authority to the International Seed 
Testing Association, AMS works to develop rules for sampling and 
testing of seed in international trade and for accrediting seed testing 
laboratories. Recently, AMS developed U.S. Trade Description Standards 
for Poultry and is working with the United Nations Economic Commission 
for Europe to have these U.S. standards adopted as the international 
standard. The U.S. standards were designed to facilitate and enhance 
wholesale trading of poultry products in both domestic and 
international markets. Agency experts are now working with the turkey 
industry to develop similar U.S. Trade Descriptions.
                         pesticide data program
    Our Pesticide Data Program, or PDP, provides information of a 
different sort, but still ultimately benefits growers and facilitates 
marketing. PDP has been instrumental in providing data that addresses 
domestic and international public concerns about the effects of 
agricultural pesticides on human health and environmental quality. The 
program provides unbiased, statistically valid data on pesticide 
residues in food and water. The information PDP provides to the 
Environmental Protection Agency--EPA--is vital for conducting realistic 
assessments of dietary risk from pesticides on food commodities 
available in the marketplace. In addition, PDP data supports the 
international marketing of U.S. commodities by assuring foreign 
governments and buyers that U.S. agricultural commodities are safe for 
consumption.
    The program is built on a Federal-State partnership with 10 
States--California, Colorado, Florida, Maryland, Michigan, New York, 
Ohio, Texas, Washington and Wisconsin. These States collect and test 
commodities for pesticide residues. PDP laboratory procedures are 
designed to detect, verify, and report low-level pesticide 
concentrations using uniform laboratory procedures and an effective 
quality assurance program based on EPA Good Laboratory Practices.
    Over the past 10 years, the program has tested 51 commodities. The 
results from PDP testing provide comparative pesticide residue data 
between fresh versus processed commodities, and an in-depth comparison 
for selected domestic versus imported commodities.
    Newly released data collected in 2000 is based on a total of 10,907 
samples of fruit and vegetables, rice, peanut butter, and poultry. 
Approximately 80 percent of the tested samples were domestically 
produced, 19 percent were imported, and 1 percent were of unknown 
origin. Pesticide residues only exceeded the established tolerance 
level in two-tenths of 1 percent of the samples. While residues were 
detected on 67 percent of the fruit and vegetable, 33 percent of the 
rice, 26 percent of the peanut butter, and 3 percent of the poultry 
samples tested during 2000, they were significantly below tolerance 
levels. Post-harvest applications accounted for over one-third of the 
detected residues in fresh and processed fruit and vegetables. EPA has 
used PDP data in the re-registration of 43 pesticides--data based on 
actual residue levels. Without PDP data, EPA previously used worst case 
assumptions that farmers applied pesticides at the maximum approved 
levels. In addition, the data are used in determinations regarding 
Section 18 Quarantine Exemptions and pre- and post-harvest use 
registrations. The information has also been used to examine pesticide 
residue issues relating to good agricultural and integrated pest 
management practices.
    In March 2001 we began testing finished drinking water samples at 
11 sites in the States of California and New York. We selected these 
sampling sites as a good representation of a variety of population 
segments including major urban areas, hydro-geographic regions and land 
uses. In January 2002, the program expanded water sampling and testing 
to include five sites in Colorado, Kansas and Texas, to provide 
monitoring data for areas not covered by EPA drinking water models.
                        national organic program
    AMS' National Organic Certification program will facilitate trading 
of organic products by verifying for buyers and consumers, across the 
U.S. and internationally, that organic food labeling is accurate and 
consistent. The program has established national standards for organic 
production and handling, and is now accrediting certification agents 
who will conduct annual on-site inspections to verify that organic 
products meet these standards. The program's 18-month implementation 
period began April 21, 2001, and ends October 21, 2002, when the 
official USDA organic seal will be permitted for use on certified 
organic fresh and processed products. With a few years of operation, 
the program is expected to oversee the certification of approximately 
14,000 organic producers and handlers.
    The Agricultural Risk Protection Act of 2000 provided funding 
intended to defray some of the certification costs for organic 
producers. AMS will distribute certification cost-share funding through 
agreements with the 15 States targeted for the program. The States will 
distribute the funds to organic producers who request reimbursement and 
whose production operations are inspected and certified between 
December 2000 and October 2002 by an approved certification agent. All 
of the payments will be completed by November 2002.
                    mandatory price reporting system
    AMS' Livestock Mandatory Price Reporting addresses concerns about 
market concentration in the livestock industry and resulting price 
discovery problems in the marketplace. On April 2, 2001, AMS 
implemented the Livestock Mandatory Price Reporting, or LMPR, System to 
meet the requirements of the Livestock Mandatory Reporting Act. The Act 
required USDA to develop a program to provide information on the 
marketing of cattle, swine, lamb, boxed beef, lamb carcasses, and boxed 
lamb. This is the first regulation that requires the industry to 
electronically report proprietary information on daily market 
transactions.
    LMPR is an ambitious effort to provide livestock market information 
on a near real-time basis over the Internet. To manage the data, AMS 
developed an automated system capable of processing thousands of pieces 
of market information from the livestock industry and generating market 
news reports in as little as 1 hour after receipt of the data. 
Beginning with the first day of the program, packers have been 
successful in submitting data to AMS via the secure Internet 
connection. Over 130 different packing plants report transaction data 
by lot, several times a day. The system is handling over 90 percent of 
the volume reported as slaughtered daily, which equates to 110,000 
cattle, 330,000 swine, and 15,000 lambs. In addition, transaction data 
includes specifics for various aspects of the lot such as weight and 
carcass characteristics. Of the 94 reports developed for mandatory 
reporting, 83 are now being released. The system is designed to protect 
the confidentiality of packers. No data have been released that 
compromise the identity of source packers.
                    electronic goverment initiatives
    To make our services more accessible to our customers, AMS is 
moving aggressively to implement several electronic government, or e-
government, initiatives. With the assistance of outside experts, AMS 
developed a master technology business plan to guide the Agency in an 
intelligent integration of e-government technology. Guided by this 
plan, we will establish a business process management system that 
accepts electronic information from the public over the Internet and 
routes each electronic submission to the appropriate office for 
response. Working in conjunction with other USDA agencies, AMS will 
pilot the use of an Internet web portal to deliver customized access to 
market news reports for public use. We will also add a corporate portal 
for AMS decision-makers to allow them to efficiently search and 
retrieve information across the Agency. Additionally, our new web 
content management system will enable employees to easily move content 
to the web and ensure that the web content is current, consistently 
presented, and auditable.
    We plan to harden security around our information technology 
assets. We redesigned the security architecture of the AMS Internet web 
site to deny potentially damaging scans and intrusions from 
unauthorized public sources. This redesign will expand protections 
provided by the existing AMS security program, and furnish our 
employees with the necessary web-based security awareness training.
    AMS is also providing electronic marketing assistance to the 
agricultural industry. We are partnering with the meat and poultry 
industry to establish an industry-based, non-profit electronic business 
standards forum. The standards produced by this forum will be used to 
facilitate the rapid industry-wide adoption of Internet-based systems 
for electronically trading meat and poultry products. AMS' support will 
ensure broad industry participation and the development and use of fair 
standards.
    In 2001 AMS revised existing Agency web pages to comply with the 
Rehabilitation Act of 1973. Also, we can now post rulemaking actions on 
the AMS web site using a consistent format, accept e-mail comments from 
the public, or provide the public with on-line web forms to capture 
their comments. When appropriate, we can post the comments we receive 
on our web site to facilitate public review and to encourage public 
participation.
             protection of agriculture and the food supply
    While we are not requesting additional funding in 2003 for 
protection of agriculture and the food supply, AMS is doing its part in 
the Department's efforts to guard against potential threats. In 
addition to improved cyber-security, AMS has developed strategies to 
upgrade the security of agency operations and facilities to ensure the 
continuation of our services to the agricultural industry. We are 
strengthening physical security at laboratory facilities to improve 
protection for Agency employees and the public. Security measures 
include entry control, surveillance and emergency power systems. To 
ensure continuity of service, AMS established emergency alternate 
headquarters locations.
                            budget proposal
    In 2003 we propose to capitalize on the Agency's marketing 
expertise and further assist U.S. agricultural producers and traders by 
expanding our Global Market Expansion program to make more 
international market information available. We are also requesting 
funds to improve the infrastructure of our Federal Seed and Pesticide 
Data programs. These improvements will ensure that the programs can 
deliver the services and information they were established to provide.
    For fiscal year 2003 we are requesting program increases of $2.6 
million in Marketing Services for the Global Market Expansion, Federal 
Seed, and the Pesticide Data programs. These increases are partially 
offset by a decrease in one-time Organic Certification funds. We are 
also requesting an increase of $1.3 million from permanent 
appropriations for Section 32 administrative funding.
                        global market expansion
    We are requesting an additional $1 million for Global Market 
Expansion. To remain competitive in export markets, producers must have 
access to a centralized, consistent, public source of timely 
information on international prices and trade volume. This is 
especially critical to the growth and economic stability of smaller and 
medium-sized enterprises. The U.S. dairy industry, for example, is 
looking for timely market information on Asia and certain Latin 
American countries, most notably on high value products such as 
specialty cheeses, ice cream and frozen desserts. The U.S. poultry 
industry is seeking to expand its market opportunities beyond Asia and 
Mexico. AMS' Market News system will provide the information they need 
by significantly increasing the international trading volume and price 
information we gather, analyze and report.
    The pending Free Trade Area of the Americas agreement will open 
significant markets in Central and South America to U.S. trade, and AMS 
will be ideally situated to provide timely market information from 
across the Americas to the benefit of U.S. interests. A major part of 
the AMS proposal to expand international market reporting is focused on 
the development of stronger relationships with market information 
agencies in key competitor countries. AMS has established a strategic 
alignment with the Market Information Organization of the Americas 
network, whose primary goal is facilitating the consistent exchange of 
current market information between the countries of the Americas.
    Market reporters based in Washington, D.C., will develop new 
reports, expand the information provided in current reports to meet 
industry requests, and offer increased technical assistance programs.
                              federal seed
    We are requesting an increase of $1.1 million for the Federal Seed 
program so that we can implement basic infrastructure improvements that 
will allow AMS to continue to support and protect market 
competitiveness in the seed industry and for all U.S. producers. The 
program is also vital to international sales of U.S. seed.
    The International Seed Testing Association cited specific critical 
deficiencies in its recent program accreditation audit of the AMS seed 
laboratory. If we fail to address these deficiencies, we risk losing 
our international accreditation and consequently our ability to 
facilitate international seed sales. The Association's specific 
recommendations include the replacement of outdated seed testing 
equipment with newer, more reliable and more efficient models. The 
laboratory equipment currently used for testing seed samples to verify 
germination is over 20 years old and constantly in need of repair.
    To effectively protect seed buyers from mislabeled seed, AMS--
Federal Seed program must also upgrade its computer equipment and 
database, and increase staffing to expand seed inspection. The 
program's database, developed in the 1980's, is desperately in need of 
an upgrade. AMS uses its seed database to identify and track seed 
samples through the testing process, generate test reports, track 
Federal Seed Act investigations, and generate investigative reports.
    To adequately protect buyers of seed shipped from States without 
inspection programs, AMS must increase its staff of seed specialists 
and botanists to collect and test seed from States without inspection 
programs. Budget reductions in many States have virtually eliminated 
their State seed inspection programs. Currently, an estimated 15 
percent of the seed sold in States without active seed control programs 
is mislabeled. The higher level of mislabeled seed will surely continue 
to increase without an effective monitoring program.
                         pesticide data program
    We are also requesting an increase for infrastructure improvements 
to the Pesticide Data Program. Increased funding of $500,000 will allow 
the program to monitor changes in residue profiles required by the Food 
Quality Protection Act of 1996, and to add data on new commodities and 
residues. For example, the program must develop data analysis methods 
for organophosphate replacements. Many of these pesticides are used 
extensively in the European Union and Canada and are likely to be found 
in crops exported to the United States. Approximately 70 percent of the 
increase requested will be used to offset rising operational costs at 
the State level. Funds will also be used to complete International 
Standards Organization accreditation for PDP laboratories. Overall, 
these improvements will enable PDP to deliver approximately 15 percent 
more pesticide residue data, covering additional children's foods and 
other commodities with significant dietary consumption.
                      commodity purchase services
    We are requesting increased funding from Section 32 permanent 
appropriations to improve administration of commodity purchase 
activities. An increase of $306,000 will enable AMS to better verify 
that the commodities purchased are all domestically produced. We will 
also work with the industry to make the procurement system more 
efficient.
    AMS purchases approximately 683 million pounds of fruits and 
vegetables per year for domestic food assistance programs at a cost of 
about $340 million. The purchasing contracts for those commodities 
require that all of the food products meet the published specifications 
and that they originate from produce 100 percent grown, processed and 
packaged in the United States. To ensure seller compliance with the 
domestic origin requirement, we will increase our domestic review 
activities. These domestic reviews involve the collection of additional 
data to identify, track, and report on commodities purchased under 
Federal procurement contracts. We will also conduct weekly product 
reviews, provide the findings to the purchaser and bidder, and maintain 
a database of these findings for future reference.
                    marketing agreements and orders
    We request an additional $600,000 for Marketing Agreements and 
Orders administration to improve oversight and program review 
activities. AMS marketing agreement and order programs play a critical 
role in helping to stabilize market conditions for more than 60,000 
producers, with crops valued at more than $5 billion annually. AMS 
program resources, faced with increases in regulatory and policy 
requirements, are stretched to their limit in processing informal and 
formal rulemaking recommendations in a timely manner, monitoring 
marketing order and Section 8e imported commodity compliance, and 
ensuring effective program oversight. Consequently, the program has 
been unable to respond quickly to recent requests from industry for new 
marketing orders and amendments. Additional funding will allow the 
program to improve its efficiency and better serve the industry in 
establishing new programs and processing amendments to existing 
programs.
                         budget request summary
    That concludes our budget presentation for fiscal year 2003. By 
fund, our total budget request includes $77.7 million for Marketing 
Services, a net increase of $3.1 million. In addition to the program 
increases I have outlined, our request includes a decrease in one-time 
funding for Organic Certification of $639,000, an increase for pay 
costs of $1.1 million, and adjustments for employee pensions and 
annuitant health benefits and the Federal Employees' Compensation Act. 
We are requesting the current funding level of $1.3 million for 
Federal-State Marketing Improvement Program grants under Payments to 
States. Our request for $26.2 million in Section 32 Administrative 
funds includes a program increase of $900 thousand and an increase for 
pay costs of $400 thousand, for a total increase of $1.3 million. This 
budget request allows AMS to build on its strengths to assist the 
agricultural industry by facilitating domestic and international 
marketing and provides for infrastructure improvements necessary to 
ensure effective delivery of services to our customers.
    Thank you for this opportunity to present our budget proposal.
                                 ______
                                 

                 Prepared Statement of David R. Shipman

    Mr. Chairman and members of the Committee, I am pleased to 
highlight the accomplishments of the Grain Inspection, Packers and 
Stockyards Administration (GIPSA), and to submit our fiscal year 2003 
budget proposal.
    GIPSA is part of USDA's Marketing and Regulatory Programs, which 
works to ensure a productive and competitive global marketplace for 
U.S. agricultural products. Our mission is to facilitate the marketing 
of livestock, poultry, meat, cereals, oilseeds, and related 
agricultural products, and to promote fair and competitive trading 
practices for the overall benefit of consumers and American 
agriculture.
    GIPSA has both regulatory and service roles. Our Packers and 
Stockyards Programs (P&SP) promotes a fair, open, and competitive 
marketing environment for the livestock, meat, and poultry industries. 
The Agency's Federal Grain Inspection Service (FGIS) provides the U.S. 
grain market with Federal quality standards, a uniform system for 
applying them, and impartial, accurate grain quality measurements that 
promote an equitable and efficient U.S. grain marketing system. 
Overall, GIPSA helps promote and ensure fair and competitive marketing 
systems for all involved in the merchandising of livestock, meat, 
poultry, and grain and related products.
                              organization
    GIPSA is headquartered in Washington, DC. Our P&SP, which 
administers the Packers and Stockyards Act of 1921, as amended (P&S 
Act), currently has 166 employees at headquarters and in three regional 
offices. The Atlanta Regional Office is primarily responsible for 
enforcement issues relating to the poultry industry; the Denver office 
for enforcement issues related to the cattle and sheep industries; and 
the Des Moines office for enforcement issues related to the hog 
industry. Legal specialists, economic, financial, marketing, and 
weighing experts from the various locations work together to address 
issues, and to monitor emerging technology, evolving industry and 
market structural changes, and other issues affecting the livestock, 
meatpacking, and poultry industries the Agency regulates.
    FGIS personnel work in a unique public-private partnership with 
over 2,000 State and private inspectors to provide high-quality 
inspection and weighing services on a user-fee basis across the Nation. 
Federal inspectors service 38 export elevators in Georgia, Illinois, 
Indiana, Louisiana, Maryland, New York, Ohio, Oregon, and Texas. Eight 
delegated State departments of agriculture provide service at an 
additional 19 export elevators in Alabama, California, Minnesota, 
Mississippi, South Carolina, Virginia, Washington, and Wisconsin. In 
Canada, the Canadian Grain Commission provides official service on U.S. 
grain transported through Canadian ports under a cooperative agreement 
at seven locations, with GIPSA oversight. Fifty-nine (59) designated 
private agencies serve the domestic market under GIPSA supervision. In 
fiscal year 2001, this unique mix of Federal, State, and private 
inspection agencies provided over 2 million inspections on nearly 235 
million metric tons of grains and oilseeds; weighed over 100 million 
metric tons of grain; and issued more than 89,000 official weight 
certificates.
    Our Technical Center in Kansas City, Missouri, is GIPSA's central 
laboratory for technical leadership and support for the official grain 
inspection system and U.S. grain industry, and home of the Agency's 
Biotechnology Reference Laboratory.
                gipsa's packers and stockyards programs
    GIPSA's Packers and Stockyards Programs (P&SP) administers the P&S 
Act to promote fair and open competition, fair trade practices, and 
financial protection in the livestock, meat packing, meat marketing, 
and poultry industries. The objective of the P&S Act is to protect 
producers, growers, competitors, and consumers against unfair, unjustly 
discriminatory, or deceptive practices that might be carried out by 
those subject to the P&S Act. To meet this objective, GIPSA seeks to 
deter individuals and firms subject to the P&S Act from engaging in 
anti-competitive behavior, engaging in unfair, deceptive, or unjustly 
discriminatory trade practices, and failing to pay livestock producers 
and poultry growers; and to initiate appropriate corrective action when 
there is evidence of anti-competitive, trade, payment or financial 
practices that violate the P&S Act.
    The livestock, meat, and poultry industries are important to 
American agriculture and the Nation's economy. With only 166 employees, 
GIPSA regulates these industries, estimated by the Department of 
Commerce in fiscal year 2001 to have an annual wholesale value of $125 
billion. At the close of fiscal year 2001 there were 6,241 market 
agencies and dealers, and 2,050 packer buyers registered with GIPSA. In 
addition, 1,525 facilities providing stockyard services, an estimated 
6,000 slaughtering and processing packers, meat distributors, brokers 
and dealers, and 205 poultry firms are subject to the P&S Act.
    Last year, GIPSA conducted over 1,600 investigations. Most 
violations of the P&S Act were corrected voluntarily, with many 
resulting in livestock and poultry producers receiving additional funds 
for the sale of their products. During fiscal year 2001, 15 
administrative or justice complaints were issued to bring subject firms 
into compliance with the P&S Act.
    GIPSA continues to provide payment protection to livestock 
producers. Financial investigations last year resulted in $6.3 million 
being restored to custodial accounts established and maintained for the 
benefit of livestock sellers. This is nearly triple the $2.7 million 
restored in fiscal year 1999, and $400,000 more than the $5.9 million 
restored in fiscal year 2000. Livestock sellers recovered over $844,000 
under the P&S Act's packer trust provisions. During fiscal year 2001, 
47 insolvent dealers and market agencies corrected or reduced their 
insolvencies by $2.9 million; insolvent packers corrected or reduced 
their insolvencies by $1.9 million.
    To ensure that producers and growers are aware of the protections 
the P&S Act provides, GIPSA has increased its outreach activities to 
better educate the industry about the P&S Act and GIPSA's regulatory 
role in the market. In fiscal year 2001, GIPSA continued a series of 
poultry ``town hall'' meetings that it hosted for poultry growers, 
integrators, and affiliated industries. The ``town hall'' meetings 
prompted multiple requests for additional presentations from growers, 
integrators, and industry organizations about GIPSA's authority in the 
poultry industry, which were honored as GIPSA personnel had the time 
and resources to do so. GIPSA also conducted 23 orientation sessions 
for new auction market owners and managers to educate them about their 
fiduciary and other responsibilities under the P&S Act. These visits in 
the early stages of a market's operations also protect livestock 
producers who rely on the market to be a competitive, fair, and 
financially sound marketplace. Further, GIPSA personnel regularly met 
with industry associations at the local, State, and national levels. 
GIPSA participated in these meetings to remain abreast of problems and 
concerns in the livestock, meat, and poultry industries, and to better 
understand the marketing options and constraints these industries face. 
On the front lines, GIPSA's resident agents, situated at 28 locations 
across the Nation, maintain open communications with State officials to 
discuss areas of overlapping jurisdiction. GIPSA recognizes that it is 
essential to stay in touch with growers, producers, and Federal and 
State representatives to understand, stay abreast of, and anticipate 
issues confronting the industries it regulates. GIPSA's outreach 
efforts have fostered a broader base of understanding with growers and 
producers. We will continue and expand this effort.
    Our regulatory responsibilities are the heart of our mission to 
enforce the P&S Act. To this end, GIPSA closely monitors practices that 
may impede the free trade of livestock, meat, and poultry. 
Investigating complaints alleging anti-competitive, unjustly 
discriminatory, or unfair practices in the livestock, meat, and poultry 
industries remains a top priority. GIPSA continues to initiate 
appropriate corrective action if we discover evidence of these 
practices.
    GIPSA's Rapid Response Teams remain a powerful tool to address 
urgent industry issues and to immediately notify the public about a 
firm's fiduciary or financial problems. Last year, 94 GIPSA 
investigators were deployed soon after being notified of a crisis to 
investigate 51 potentially serious situations across the Nation. During 
fiscal year 2001, these rapid response investigations contributed to 
returning $6.1 million to livestock producers and poultry growers.
    The Agency also provides a hotline (1-800-998-3447) by which 
constituents may anonymously voice their concerns. Last year GIPSA 
responded to and investigated issues raised by 124 callers. These calls 
were in addition to calls received in our regional offices.
    GIPSA is also strengthening investigations and assessments of 
competitive implications of structural change in the livestock, 
meatpacking, and poultry industries. Throughout fiscal year 2001, GIPSA 
incorporated economic, statistical, and legal expertise into 
investigations to increase the efficiency and effectiveness of our 
investigations of anti-competitive and unfair practices, and our 
enforcement of the P&S Act. Increased cross-utilization of our 
economists, legal specialists, auditors, marketing specialists, and 
industrial specialists from headquarters and field locations has 
brought targeted investigative and analytical skills to specific 
investigations. GIPSA also pursued cooperative agreements with 
qualified researchers and research institutions that contribute 
valuable information to GIPSA's economic understanding of the 
livestock, meatpacking, and poultry industries.
    In addition to our normal regulatory duties, GIPSA has fulfilled 
several Congressional mandates in fiscal year 2001 and continues work 
on others: Captive Supply Study, annual Assessment the Cattle and Hog 
Industries, implementing the recommendations in the GAO Report and the 
Swine Contract Library.
    House Report No. 106-948 directed GIPSA to complete a comprehensive 
study of the captive supply issue. USDA released ``Captive Supply of 
Cattle and GIPSA's Reporting of Captive Supply'' on January 18, 2002. 
The report clarifies GIPSA's definition of the term ``captive supply,'' 
and compares GIPSA's captive supply statistics to those published by 
other organizations. GIPSA found that differences in captive supply 
statistics reported by various organizations result from conflicting 
definitions of captive supply and variations in the geographical bases 
of the data collection. The report also compares 1999 procurement 
transactions data of the top four beef packers to summary captive 
supply data the packers submitted to GIPSA. GIPSA found that captive 
supplies accounted for 32.3 percent of the firms' total slaughter 
rather than 25.2 percent, as reported in the packers' annual reports to 
GIPSA. The data discrepancies are attributed to misunderstandings about 
captive supply definitions and computational errors. GIPSA will take 
several actions in response to the study findings. GIPSA will (1) 
publish our definition of captive supply in the Federal Register 
(livestock that is owned or fed by a packer more than 14 days prior to 
slaughter; livestock that is procured by a packer through a contract or 
marketing agreement that has been in place for more than 14 days prior 
to slaughter; and livestock that is otherwise committed to a packer 
more than 14 days prior to slaughter); (2) clarify the reporting 
definitions on the Packer Annual Report form; (3) audit future Packer 
Annual Reports; and (4) report captive supply information in more 
detail.
    Amendments to the Packers and Stockyards Act in the Grain Standards 
and Warehouse Improvement Act of 2000 (Public Law 106-472) require 
GIPSA to submit an assessment of the cattle and hog industries to 
Congress each year. GIPSA's ``Assessment of the Cattle and Hog 
Industries, Calendar Year 2000'' (issued in June 2001) describes the 
general economic state of the cattle and hog industries during 2000, 
changing business practices in those industries, and activities that 
raise concerns under the P&S Act. The assessment found that technology, 
consumer demands, and competitive forces are driving substantial 
changes in the structure and behavior of firms in the livestock and 
meatpacking industries. Many of the changes may benefit the industries 
involved, consumers, and the Nation as a whole. Some may foster 
unlawful anti-competitive behavior or unfair trade practices. GIPSA 
will address the concerns discussed in the report by monitoring changes 
in industry structure and behavior, and examining practices that may be 
unlawful under the P&S Act. GIPSA also may formally investigate, 
undertake regulatory initiatives, or further research and analyze the 
economic, competitive, and trade practice implications of the 
structural and behavioral changes. GIPSA is currently finalizing its 
second annual assessment report.
    Another mandate began with the General Accounting Office's (GAO) 
Report to Congress, issued in September 2000, ``Actions Needed to 
Improve Investigations of Competitive Practices.'' The Grain Standards 
and Warehouse Improvement Act of 2000 (Public Law 106-472) required 
GIPSA to implement the GAO's recommendations and report on actions 
taken to improve investigations of competitive practices by November 9, 
2001. In accordance with GAO's recommendations, and based on required 
input from the Department of Justice (DOJ) and the Federal Trade 
Commission (FTC), in fiscal year 2001, the Agency implemented 
investigation planning, development, implementation, and review 
processes to ensure appropriate investigation planning and oversight 
within GIPSA and with the USDA Office of the General Counsel (OGC). 
Also during the fiscal year, OGC added more attorneys to address GIPSA 
matters; Agency economists and legal specialists received additional 
specialized training; and GIPSA issued its first annual assessment of 
the cattle and hog industries to report on changes in those industries. 
The report to Congress has been delayed, in large part, by GIPSA's 
increased workload resulting from implementation of GAO 
recommendations, and the Agency's report on captive supplies in the 
cattle industry, which was completed and submitted to Congress on 
January 18, 2002.
    The Swine Contract Library was mandated in the Agricultural Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Act of 2000 (Public Law 106-78). It amended the P&S Act 
to require GIPSA to establish and maintain a library of contract 
provisions offered by packers to swine producers for the purchase of 
swine and to make these provisions available to the public. Publication 
of the final rule is contingent on development and deployment of a Web-
based system capable of receiving contracts, extracting unique contract 
provisions, and posting summary information in a manner that complies 
with the confidentiality requirements of the P&S Act and is useful to 
market participants. This is a sizeable and complex undertaking. GIPSA 
has been appropriated approximately $200,000 annually to develop and 
operate the Swine Contract Library. Additional funding may be necessary 
in the future. GIPSA is exploring ways to expedite the development and 
implementation of the electronic process and final rule. Once complete, 
the Web-based library will offer summarized information on contract 
terms and monthly reports on the number of swine under contract.
    GIPSA will continue to provide payment protection to livestock and 
poultry producers; increase the number of competition and trade 
practice investigations of potential violations of the P&S Act; pursue 
voluntary corrections of violations of the P&S Act which will likely 
result in livestock and poultry producers receiving additional funds; 
continue outreach efforts to educate our constituencies about the 
benefits and protections offered to livestock and poultry producers 
under the P&S Act; monitor and respond rapidly to complaints of anti-
competitive, unjustly discriminatory, or unfair behavior in the 
livestock, meat and poultry industries that violates the P&S Act; 
pursue cooperative agreements that contribute valuable information to 
GIPSA's economic understanding of the regulated industries; address 
violations of the P&S Act through formal corrective actions; respond 
thoroughly and responsibly to all governmental inquiries and 
Congressional mandates; and pursue rulemaking that enhances GIPSA's 
ability to investigate and litigate violations of the P&S Act.
                gipsa's federal grain inspection service
    GIPSA's grain inspection program facilitates the marketing of U.S. 
grain and related commodities under the authority of the U.S. Grain 
Standards Act (USGSA) and the Agricultural Marketing Act of 1946 (AMA). 
GIPSA provides the market with descriptions (grades) and testing 
methodologies to measure the quality and quantity of grain, rice, 
edible beans, and related commodities; provides an array of inspection 
and weighing services, on a fee basis, through a unique partnership of 
Federal, State, and private laboratories; and ensures that the 
standards are applied and the weights recorded fairly and accurately. 
As an impartial, third-party in the market, we advance the orderly and 
efficient marketing and effective distribution of U.S. grain and other 
assigned commodities from the Nation's farms to domestic and 
international buyers.
    For an average cost of 26 cents per metric ton of grain in fiscal 
year 2001, exporters received USDA export certificates from GIPSA that 
they used to market over $20 billion worth of cereals and oilseeds. 
Likewise, here at home, buyers and handlers requested over 1.9 million 
domestic inspections that facilitated the trading of more than 128 
million metric tons of cereals and oilseeds.
    Traditionally, the official grain inspection system has operated in 
a supply driven food chain. Grain was produced, delivered to the 
elevator, and marketed as a commodity with buyers relying on the grades 
and standards to describe the general quality of a product.
    The emergence of value-enhanced grains and oilseeds, development of 
niche markets for non-biotech commodities, and establishment of new 
regulatory requirements by U.S. trading partners has created a need for 
greater product differentiation in the marketplace. To meet this need, 
market participants are relying, in part, on various quality assurance 
mechanisms, such as process verification, and testing for accurate 
information about products in the marketing chain and to comply with 
the new market demands. The efficiency of the marketing system will, 
therefore, depend on the availability of accurate and reliable quality 
assurance and testing processes.
    To ascertain USDA's place in today's evolving marketplace, during 
fiscal year 2001, GIPSA published an advance notice of proposed 
rulemaking seeking public comment on the Department's role in 
facilitating the marketing of grains, oilseeds, fruits, vegetables, and 
nuts. GIPSA coordinated the Department's effort to explore how it can 
continue to foster the marketing of agricultural products in an 
evolving marketplace characterized by biotech and non-biotech crops, as 
well as by an increasing number of crops with specific end-use quality 
attributes. Two themes emerged in comments pertaining to USDA's role in 
market facilitation: (1) USDA should continue and expand existing 
programs to standardize testing methodology, and (2) USDA may have a 
role to play in developing process verification programs for grains, 
oilseeds, and related agricultural products.
    To address the public's comments, and to meet the greater need of 
providing all players in the market with the information they need to 
effectively market all U.S. grain, whether derived conventionally or 
through biotechnology, in fiscal year 2001, GIPSA opened a 
biotechnology reference laboratory.
    In fiscal year 2002, building on its previous efforts, GIPSA began 
expanding its Rapid Test Performance Evaluation Program to assess the 
performance of rapid tests developed to detect commercially produced 
biotechnology events in grains and oilseeds, and confirm that the tests 
operate in accordance with manufacturers' claims. Initially, this 
program was used to evaluate rapid tests developed to detect the 
presence of the Cry9C protein produced in StarLinkTM corn.
    Based on findings of a fiscal year 2001 study which found that U.S. 
and European private and government laboratories' capabilities to 
analyze for biotechnology events varied significantly, on February 7, 
2002, GIPSA began offering a Proficiency Program for organizations that 
test for biotechnology-derived grains and oilseeds. The program will 
enable organizations to enhance testing reliability and help the grain 
industry determine the proficiency of commercial labs that provide 
testing services.
    GIPSA also is exploring the feasibility of providing a voluntary 
Process Verification Program to facilitate the marketing of grains, 
oilseeds, and related agricultural commodities. The market is adopting 
a variety of new marketing mechanisms, such as process verification, to 
augment traditional marketing approaches, in response to changing 
consumer demands. GIPSA plans to assess how the Agency can add value 
through process verification for these commodities by augmenting 
existing market mechanisms.
    GIPSA also is continuing to collaborate with the National Institute 
of Standards and Technology (NIST), and standards organizations in the 
United States and other countries to establish internationally 
recognized standard reference materials and standard methodologies for 
agricultural biotechnology events.
    Our efforts to respond to the market's needs for services to 
facilitate the marketing of biotech and non-biotech grains have been 
substantial. But a great deal of activity has been underway in other 
areas as well.
    GIPSA continuously evaluates and implements new technology in the 
official inspection system to respond to market needs. Further, the 
performance of existing official inspection methods is routinely 
evaluated and improvements are developed as needed. Official inspection 
methods (including calibration equations) are made available to 
commercial inspection users to enhance consistency between official and 
commercial grain inspection results. We are in the process of 
implementing several types of new technology for grain inspection:
  --Digital imaging was piloted in fiscal year 2000 to certify the 
        percentage of broken kernels in long-grain milled, long-grain 
        parboiled, and short-grain milled rice. GIPSA is refining a 
        quality control system for this new technology and plans to 
        expand its use for official rice inspection. We also are using 
        digital imaging to measure the vitreousness of Hard Red Spring 
        and Durum wheats. GIPSA, in a joint program with the Canadian 
        Grain Commission (CGC), also plans to investigate the use of 
        flatbed scanner technology for imaging and differentiating 
        white and red wheat kernels. This new technology could greatly 
        improve the accuracy, consistency, and objectivity of 
        inspection and grading.
  --GIPSA's work on mycotoxin analysis continues to expand. We have 
        established a zearalenone reference method and began evaluating 
        zearalenone test kits for use in the official inspection 
        system.
  --Working with the North American Export Grain Association (NAEGA), 
        GIPSA developed a prototype automated grain inspection system 
        that will speed inspections, reduce costs to the industry, and 
        enhance GIPSA's efficiency. We are operating the prototype 
        system throughout fiscal year 2002 to gather performance data 
        and identify required enhancements.
  --GIPSA is working with researchers from academia and the USDA 
        Agricultural Research Service to define wheat protein quality 
        and to develop practical, rapid methods for assessing wheat 
        protein quality in marketing channels.
  --We continue to cooperate with Canadian, Australian, and several 
        European entities to develop and test a ``global'' near-
        infrared transmission (NIRT) calibration to measure the 
        quantity of protein in wheat and barley. The calibration, based 
        on tests of nearly 40,000 samples of wheat and barley, uses 
        artificial neural network technology to achieve excellent 
        accuracy for very diverse grain types.
  --GIPSA has received ISO 9002:1994 registration of its moisture 
        reference, protein reference, oil extraction reference, 
        mycotoxin reference, mycotoxin test kit evaluation, and 
        pesticide data program laboratories. In addition, the pesticide 
        analysis service has recently received its recommendation for 
        registration. We are currently updating our program to the ISO 
        9001:2000 standard. Two additional programs, the Pesticide Data 
        Program and the Biotechnology Branch, are currently working 
        toward ISO 17025:1999 accreditation.
    GIPSA also is keeping pace with the grain industry's move from 
paper to e-commerce to streamline, automate, and improve business 
transactions. Recent advances in information technology have provided 
the U.S. grain marketing system with tools to provide instantaneous 
exchange of electronic documents and data among all parties in the 
trade chain. GIPSA is keeping pace with our customers' migration toward 
this marketing process. We are taking part in pilot tests and 
demonstrations with electronic commerce vendors; developing a system to 
send inspection information generated at multiple locations directly to 
a customer; preparing to submit electronic inspection information into 
a vendor's document handling system at the request of applicants; and 
pilot testing a computer generated inspection certificate for export 
cargoes. By harnessing the latest hardware, software, and available 
technology, we will be prepared to enter and participate in the 
electronic commerce arena.
    All of our efforts to improve and streamline our programs and 
services are paying off for our customers, both in terms of their 
bottom lines and in greater customer satisfaction. GIPSA's service 
delivery costs (adjusted for inflation), decreased from $0.27 per 
metric ton in fiscal year 1994 to $0.26 per metric ton in fiscal year 
2001.
    We are an integral part of America's grain handling 
infrastructure--a superior infrastructure of storage facilities, rail 
lines, and waterways that makes American agriculture preeminently 
successful in the global marketplace. We recognize our role and will 
continue to provide all members of the U.S. grain handling system with 
the innovative, high-quality official inspection services they need to 
efficiently and effectively meet the challenges of a changing marketing 
environment.
    Our outreach and educational efforts to our international customers 
are maintaining strong open markets for America's grains and oilseeds. 
In fiscal year 2001, GIPSA began producing multimedia tools to educate 
the domestic and international grain industries. GIPSA now offers CDs 
on wheat, corn, and soybean grading; a grain grading overview; rough 
rice milling yield, and testing corn for StarLinkTM to the 
public. In fiscal year 2001, GIPSA distributed over 2,000 new CDs and 
5,000 revised brochures to official inspection offices, grain handling 
and processing firms, producers, foreign grain buyers, government 
agencies, and educational institutions, and posted the brochures in 
electronic format on the Internet. We are now producing CDs on grain 
sampling methods and sample variability, container stowage exams, and 
rail sampling safety.
    One indicator of the success of our outreach and educational 
initiatives is the number of foreign complaints lodged with GIPSA 
regarding the quality or quantity of U.S. grain exports. In fiscal year 
2001, GIPSA received 15 quality and quantity complaints from importers 
on grains inspected under the U.S. Grain Standards Act, involving 
494,267 metric tons, or about 0.5 percent by weight, of the total 
amount of grain exported during the year.
    Exporters, importers, and end users of U.S. grains and oilseeds, as 
well as other USDA agencies, USDA cooperator organizations, and other 
governments, frequently ask for GIPSA expertise overseas. In fiscal 
year 2001, we responded to 10 requests for technical assistance 
overseas. We helped Zambia, Kenya, Tanzania, and Uganda develop grain 
standards and inspection methods; conducted a weight review on a U.S. 
wheat shipment to the Philippines; met several times with Japanese 
officials to address their concerns over StarLink 
corn; participated in several international biotech conferences; and 
assisted USDA cooperators with rice grading seminars in Nicaragua, 
Costa Rica, and Guatemala, and grain quality seminars in several other 
countries.
    At home, GIPSA regularly holds seminars and meetings to educate 
foreign visitors and customers about the quality and value of U.S. 
grain exports. In fiscal year 2001, GIPSA representatives met in the 
United States with 75 teams from 32 countries, to provide information, 
technical guidance, and educational seminars. These international 
outreach efforts help promote greater harmony between U.S. and 
international standards, and foster a better understanding of the U.S. 
grain marketing system, the official U.S. grain standards, the national 
inspection system. This, in turn, reduces the risk of new barriers in 
today's open and freer global marketplace, enhances purchasers' 
confidence in U.S. grain, and facilitates the export of U.S. 
agricultural products.
    The grain program will continue to work to ensure our relevance and 
value to American agriculture. We are reaffirming our commitment to 
facilitating the marketing of U.S. grain by responding to our 
customers' needs and providing the highest quality grain inspection and 
weighing services to all whom we serve.
                    fiscal year 2003 budget request
    To fund these important initiatives and to enable GIPSA to remain a 
valuable part of American agriculture, GIPSA's budget request for 
fiscal year 2003 is $42.9 million under current law for salaries and 
expenses and $42.5 million for our Inspection and Weighing Services. 
There is also an additional increase of $733,000 for pay costs 
contained in the budget. GIPSA also is submitting legislation to 
collect $28.8 million in new user fees in fiscal year 2003, $5.6 for 
the grain program and $23.3 million for PSP.
    The President's fiscal year 2003 budget proposes a current law 
request for grain inspection of $19.6 million. There are proposed 
increases of $850,000 to build unified data warehouse; and $450,000 for 
detection of new added value crops and biotechnology traits.
    The $850,000 increase for a data warehouse would allow GIPSA to 
harness advances in information technology to integrate existing 
disparate database information systems to enhance the efficiency of our 
oversight and management of the official grain inspection system.
    The $450,000 increase will help ensure that the accelerated 
introduction of new added value crops, whether derived through modern 
biotechnology or conventional breeding, does not outpace GIPSA's 
ability to evaluate testing methods and accredit laboratories. The 
ability to distinguish specific crops will be driven by added market 
value, customer demands, and the regulatory requirements of our trading 
partners. The proliferation of regulatory requirements around the world 
concerning biotechnology-derived crops, including the eventual 
implementation of the international Biosafety Protocol (estimated for 
late 2002), will place further demands on the grain industry to 
distinguish certain crops. The market demand to segregate higher valued 
crops will also place a greater need on being able to identify specific 
varieties or qualities of grain. The increased funds will enable GIPSA 
to expand its newly established biotechnology program to keep pace with 
the rapid introduction of new products. This will involve expanding the 
ability to validate rapid protein-based tests, keep pace with the rapid 
development of DNA-based methods, and develop reference methods for 
traditional end-use traits such as fatty acid profiles, amino acid 
profiles, phytate content, and other nutritional qualities.
    The President's fiscal year 2003 budget proposes a current law 
request for Packers and Stockyards Program of $23.3 million. There are 
proposed increases of $1,000,000 to improve enforcement of the anti-
competitive and other provision of the Packers and Stockyards Act; 
$1,200,000 for the development of Web applications for PSP; $1,000,000 
to monitor the livestock and meatpacking industries' use of electronic 
carcass evaluation technologies.
    The $1,000,000 increase for anti-competitive enforcement stems from 
a General Accounting Office recommendation that attorneys be more 
actively involved in the investigative process for anti-competitive 
practice investigations. Congress later mandated that GIPSA fully 
implement the GAO's recommendations. This staffing increase will allow 
GIPSA to fully integrate attorneys to the extent recommended by the GAO 
into the more complex anti-competitive, financial, and trade practice 
investigations.
    The increase of $1,200,000 will allow GIPSA to implement 
eGovernment initiatives within the Packers and Stockyards Program. 
Currently, GIPSA has no web programmers or web designers that would 
allow it to rapidly and accurately deploy Web-based applications to 
meet eGov applications. These funds would be used to contract-out the 
design, development, implementation, and maintenance of important 
eGovernment Web initiatives.
    The final increase of $1,000,000 for the PSP would enable GIPSA to 
increase its monitoring and regulatory presence as the livestock and 
meatpacking industries increase their use of electronic carcass 
evaluation technologies. Increasingly, to meet consumer demand and 
provide greater ``value,'' packers began purchasing livestock through 
contract and marketing agreement or formula-priced transactions, and 
began using new means of automating the evaluation of cattle and hog 
carcasses based on new technologies, including among other methods, 
ultrasound and photographic imaging. Although carcass merit purchasing 
has been used for decades in the livestock and meatpacking industries, 
the technologies and their applications for evaluating carcass merit 
are changing at an accelerating pace. Previously, carcass merit 
purchases were generally based on a carcass weight and often one or two 
grades assigned by USDA graders. Today, packers increasingly rely on 
internally assigned measures of carcass quality using modern and 
complex technologies. The technologies now being implemented by packers 
have a direct effect in determining the prices paid to producers for 
livestock. These changes introduce new risks for producers, since these 
new technologies are not standardized and their accuracy is 
inconsistent. This lack of standardization and inconsistent accuracy 
leaves producers vulnerable to unfair and unjustly discriminatory 
practices by unscrupulous members of the meat packing industry.
    There are additional increases in the budget that will benefit both 
the grain inspection and Packers and Stockyards programs: $83,000 for 
employee pension and annuitant health benefits; $790,000 for a web 
server farm; $565,000 to meet information technology security 
requirements; and $41,000 for the Federal Employees' Compensation Act 
(FECA) program.
    The increase of $83,000 for employee pension and annuitant health 
will allow GIPSA to pay the full share of accruing employee pensions 
and annuitant health benefits beginning in fiscal year 2003.
    The $790,000 for a web server farm will support GIPSA's internet 
and intranet. The Agency must establish standard Web hardware, 
software, and facilities to implement the developing eGovernment 
electronic interface. This will provide a common information technology 
environment required for GIPSA to deliver data to and collect 
information from our customers. The Web server farm, comprised of 
multiple, high performance servers, will be able to implement a wide 
range of Web based interactive applications, and accommodate large data 
transfers from customers and field locations to existing Agency 
computer systems.
    The $565,000 increase will ensure that GIPSA's information 
technology security measures are effective and meet USDA standards. 
This will require the addition of software, hardware, and additional 
servers to provide for data security, backups, and recovery 
capabilities. This funding will ensure that GIPSA is a full participant 
in USDA's IT security programs.
    Finally, GIPSA has requested a $41,000 increase to cover the cost 
of the Department of Labor's administrative surcharge for the Agency's 
FECA benefits.
    The Department request reflects legislation that would fund the 
grain standardization and packers programs through fees. Fees are 
appropriate when a Federally financed activity clearly provides a 
direct benefit for a specific group of people. In such instances, the 
costs of those programs should be borne by the benefiting group rather 
than by all taxpayers. Both of these programs do provide a direct 
benefit to a specific group--by setting up standards to improve the 
marketing of grain and by improving the financial integrity and fair 
and open marketing of the livestock industry. In addition, there is 
precedent for charging fees for these types of activities in the 
Agricultural Marketing Services' standardization program, and the 
Perishable Agricultural Commodities Act program, which also charges a 
licensing fee for participation.
    Authorizing legislation has already been submitted for the 
standardization fee, and we anticipate submitting legislation for the 
packers licensing fee in the near future.
    Conclusion
    Mr. Chairman, this concludes my statement. I appreciate the 
opportunity to testify on behalf of the Grain Inspection, Packers and 
Stockyards Administration (GIPSA). I will be happy to answer any 
questions the Committee may have.
                 Food, Nutrition, and Consumer Services

STATEMENT OF ERIC M. BOST, UNDER SECRETARY FOR FOOD, 
            NUTRITION AND CONSUMER SERVICES
ACCOMPANIED BY:
        SUZANNE M. BIERMANN, DEPUTY UNDER SECRETARY FOR FOOD, 
            NUTRITION, AND CONSUMER SERVICES
        GEORGE A. BRALEY, ACTING ADMINISTRATOR, FOOD AND NUTRITION 
            SERVICE
        DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM 
            ANALYSIS

                       STATEMENT OF ERIC M. BOST

    Senator Kohl. Mr. Bost, we will turn to you.
    Mr. Bost. Mr. Chairman, Senator Cochran, good afternoon and 
thank you for having me here today. I would also like to thank 
you for providing me the opportunity to present FNCS's budget 
request for fiscal year 2003. I would like to introduce three 
new members of my team: Suzanne Biermann, Deputy Under 
Secretary; Dr. Peter Murano, Deputy Administrator for Special 
Nutrition Programs; and Steve Christensen, Acting Deputy 
Director for the Center for Nutrition Policy and Promotion.
    Since this is the first time I have appeared before the 
committee, I would like to take a minute to introduce myself. I 
was confirmed last June. Prior to becoming Under Secretary, I 
was commissioner of the Texas Department of Human Services 
under then-Governor Bush, an agency which included the 
responsibility for administering many of the programs that I am 
responsible for now, in addition to the Temporary Assistance to 
Needy Families Program, and also long term care.
    These programs mean a great deal to me personally and I 
also believe that this is a unique time for all of us, given 
that both the food stamp and child nutrition programs are going 
through reauthorization: food stamps in 2002; child nutrition 
in 2003. The Administration, and my team and I, look forward to 
working with you and the commission staff as we move forward to 
effectively and efficiently manage these nutrition programs.
    We have some very clear goals, we believe. One, to simplify 
the programs. Two, to improve access to the programs while 
maintaining integrity. We want to create simple policies that 
make the programs understandable to those who administer them 
and also those persons who receive the benefits. We want to 
ensure full access to the programs by those who are eligible 
for the services, and also--this is important--sound public 
stewardship of the funds appropriated for these critical 
programs.
    I say they are critical because I believe that they are. 
Food Stamps, WIC, National School Lunch and Breakfast, Summer 
Feeding Programs, all of the nutrition programs are important 
to low income individuals and families who need and also want 
to be healthy and productive members of our society. I view my 
responsibility as Under Secretary in two very broad and 
important objectives, to ensure that those who are eligible to 
participate in Federal nutrition assistance programs have the 
opportunity to do so, and also to ensure and maintain the 
integrity of our programs.

                                  WIC

    The President's budget requested a total of $41.9 billion 
in budget authority for fiscal year 2003, which supports the 
operations of these programs, and I would like to talk about a 
couple of them. First and foremost is WIC. The President's 
budget of $4.8 billion for WIC reflects a growing demand for 
this program, and also the Administration's firm commitment to 
ensure resources are directed carefully to programs that make a 
real difference in the lives of people that we serve. The 
requested increase of $364 million will support a monthly 
average of almost 8 million needy women, infants and children 
in 2003. This also includes a $150 million contingency fund if 
participation exceeds current estimates.

                             FARMERS MARKET

    One program Nutrition that has received particular 
attention is the Farmers Marketing Program. Focusing resources 
on the important priorities also means making very tough 
choices. The President's budget does not provide for the 
Farmers Market Nutrition Program for fiscal year 2003. We agree 
this is a very good program, that it supports American farmers 
and provides low income families access to fruits and 
vegetables. However, it is a program that does not operate in 
all States. It is not operated statewide in the States that do 
participate, and it provides limited benefits to only some of 
the participants. The Administration is making a very difficult 
choice in discontinuing the funding in this effort. We are 
attempting to focus on broad-based, more universally 
established programs.

                              FOOD STAMPS

    Let us talk about food stamps. The President's budget 
request, $26.2 billion for the Food Stamp Program, would serve 
an average of 20.6 million persons each month, over 3 million 
more than it did a year ago. Also, some of our legislative 
proposals would simplify the rules, support work, improve 
access and also improve accountability. There is also a $2 
billion reserve in this program. We expect to use the 2002 
reserve, but do not expect a supplemental appropriation 
request.

                            CHILD NUTRITION

    The Administration's budget includes $10.6 billion for the 
child nutrition programs, which would continue programs that 
provide millions of nutritious meals to children in schools and 
child care settings.

                           PROGRAM INTEGRITY

    I would like to talk about program integrity. I mention it 
because I feel it is so important, especially when you look at 
the administration of our Food Stamp Program. For fiscal year 
2000, 91.1 percent of all food stamp benefits were issued 
correctly, which is the best that it has ever been in the 
history of the Food Stamp Program.
    However, it still means that 6.5 percent of food stamp 
benefits were over-issued and approximately 2.4 percent of the 
benefits were under-issued. One point I want to make about 
this, which I think is so important having had the experience 
of managing the program in Texas, one percentage point 
represents a $200 million improper payment. I think this is 
really important in terms of our budget proposals--we need a 
comprehensive and balanced approach to reforming the system.
    We are hoping to balance accountability with other measures 
such as program outcomes that discuss the services, customer 
service, and to address those States that have the most serious 
problems in administering this program. And on the other hand, 
the system rewards and provides a bonus of $70 million for 
those folks from those States who do an outstanding job of 
administration of this program.

                             CERTIFICATION

    One of the issues that is also really important is the 
accuracy and the certification of the students in our school 
programs. There is evidence that many of the students who are 
certified for free or reduced priced meals, who appear to be 
eligible, are, in fact, not eligible. In the short period of 
time that I have been here, it appears that trend is getting a 
little bit worse. Most recent data shows that significantly 
more children were certified than were eligible. But I would 
also like to mention too that this is a very complicated issue 
we are attempting to address. We are taking some very 
definitive steps to address it, because as I said, we are 
interested in ensuring that we maintain a high level of 
integrity in all of our programs.

                          PREPARED STATEMENTS

    With that in mind, I would like to conclude and say thank 
you for your time and patience. This concludes my testimony and 
I am happy to address any questions you may have of me.
    [The statements follows:]

                   Prepared Statement of Eric M. Bost

    Thank you, Mr. Chairman, and members of the Subcommittee for 
allowing me this opportunity to present our budget request for fiscal 
year 2003. As this is my first appearance before the Committee, I would 
like to introduce myself briefly.
    I was confirmed as Under Secretary for Food, Nutrition, and 
Consumer Services (FNCS) in June 2001. Prior to that time, I served for 
almost four years as Commissioner of the Texas Department of Human 
Services, one of the Nation's largest human services agencies, under 
then-Governor George W. Bush. As Commissioner, I was responsible for 
administering State and Federal programs that served more than 2 
million needy, aged or disabled Texans each month. I took that position 
after more than twenty years of experience managing human services 
agencies across the country including Arizona, Pennsylvania, Florida, 
North Carolina and the District of Columbia.
    With your permission I would also like to introduce three new 
members of the FNCS team. Suzanne Biermann, the Deputy Under Secretary 
for Food, Nutrition, and Consumer Services, Dr. Peter Murano, the 
Deputy Administrator for Special Nutrition Programs at the Food and 
Nutrition Service, and Steven Christensen, the Acting Deputy Director 
of the Center for Nutrition Policy and Promotion.
    When President Bush and Secretary Veneman asked me to join the team 
at the Department of Agriculture, I was extremely pleased to have the 
opportunity to put my experience to work to effectively manage and 
improve the Federal nutrition assistance programs--programs that use 
the abundance of American agriculture to promote the nutrition and 
health of our Nation. I feel especially fortunate to have the 
opportunity to personally participate in the reauthorization of the 
Food Stamp and Child Nutrition Programs. All of us at FNCS look forward 
to working with you and committee staff to do the best job possible 
managing the nutrition assistance programs. Everyone here knows how 
important these programs are, but I would like to cite just a few facts 
that underscore their importance:
  --We know that a poor diet is a significant factor in 4 of the 10 
        leading causes of death in the United States--coronary heart 
        disease, cancer, hypertension and stroke, and diabetes;
  --We know that poor nutrition and lack of physical activity account 
        for 300,000 deaths per year;
  --We know that the economic cost of poor nutrition accounts for at 
        least $200 billion per year in medical costs and lost 
        productivity; and
  --We know that participation in the school feeding programs leads to 
        improved education outcomes.
    Federal nutrition assistance programs have a critical role to play 
in promoting health and preventing diet-related health problems by 
ensuring access to nutritious food to those who need it, and by 
promoting better diets and physical activity through nutrition 
education and promotion to program participants. The need to improve 
diets to fight overweight and obesity extends to the general public. 
Our request also supports USDA's Center for Nutrition Policy and 
Promotion, which works with the Department of Health and Human Services 
and other agencies to promote good nutrition to all Americans.
    I view the focus of my responsibility as Under Secretary in terms 
of two broad objectives: first, to ensure that all those eligible to 
participate in Federal nutrition assistance programs have the 
opportunity to do so, if they wish; second, and equally important to 
ensure the integrity of the programs through solid public stewardship. 
The President's Budget requests a total of $41.9 billion in budget 
authority for Food, Nutrition, and Consumer Services for fiscal year 
2003. This supports the operation of Federal nutrition assistance 
programs, as well as a number of important initiatives that should 
advance our program access and integrity. In the remainder of my 
remarks, I would like to highlight a few key components of our request.
                      highest-ever funding for wic
    The President's budget includes $4.8 billion for the Special 
Supplemental Nutrition Program for Women, Infants and Children, the WIC 
program. The requested level, an increase of $364 million over fiscal 
year 2002, would allow local communities to provide food, nutrition 
education, and a link to health care to a monthly average of 7.8 
million needy women, infants and children during fiscal year 2003. The 
request includes a $150 million contingency fund, which can be used as 
needed if food costs or participation exceed current estimates.
    This request reflects the growing demand for WIC during fiscal year 
2001 and continuing into this fiscal year; participation reached 7.53 
million in October 2002, a record high. It also reflects a firm 
commitment by this Administration to ensure that resources are directed 
carefully to programs that make a real difference in people's lives. 
WIC is just such a program, with an impressive body of research showing 
that it is a sound investment of the taxpayer's dollar. As the 
President said in his January radio address that highlighted his 
budget, we must set priorities for the government to meet the most 
important needs for the Nation. Our request for WIC does just that.
                   farmer's market nutrition program
    At the same time that we are focusing resources on the most 
important priorities, we must also be willing to make the tough choices 
not to fund programs that, however worthy, do not most effectively 
support those priorities. This, too, is reflected in our request.
    The President's budget does not provide funding for the Farmer's 
Market Nutrition Program in fiscal year 2003. While all can agree that 
supporting America's farmers and providing low-income families access 
to fresh fruits and vegetables is a laudable goal, the FMNP is a small 
program that does not operate in all States, is not operated State-wide 
by any participating State, and provides limited benefits to only some 
WIC participants. While the FMNP is a worthy program, the 
Administration is making the difficult choice of discontinuing the 
funding in an effort to focus on broad-based, more universally 
established programs. This kind of hard choice is central to the 
Administration's responsibilities and we accept the need and 
responsibility for making tough choices.
Maintaining the Food Stamp Program Benefit Reserve
    Our fiscal year 2003 request also sustains the full $2 billion Food 
Stamp benefit reserve Congress appropriated in fiscal year 2002. As you 
know, one of the greatest strengths of the Federal nutrition safety net 
is its ability to respond to economic change. The current economic 
difficulties are no exception. In December 2001, the Food Stamp Program 
served 18.7 million people, 1.6 million more than a year ago. Nearly 
all States are serving more people than they did a year ago, and 
participation has increased in 15 of the 17 months between July 2000 
and December 2001. We expect to use most of the $2 billion reserve this 
year, but we do not believe we will need a supplemental appropriation. 
For the coming fiscal year, we recommend continuation of the benefit 
reserve at the $2 billion level.
Program Integrity Initiatives
    As I mentioned before, I view effective stewardship of Federal 
funds as a central responsibility for our mission area, and for me 
personally. I'm pleased to report on some successes in this area, but 
also to note substantial continued challenges. Our request includes 
funding to support increased program integrity activity to address a 
number of critically important issues:
Food Stamp Payment Accuracy
    The Food Stamp Program is the cornerstone of our Nation's defense 
against hunger and a powerful tool to improve nutrition among low-
income families and individuals. But for the program to be effective in 
serving this neediest population, it must accurately target benefits. 
Those who are eligible for program benefits should have easy access to 
them and the amount they receive should be the amount allowed under 
law--no more, no less.
    As you may know, the accuracy of food stamp payments is at its 
highest level ever. In fiscal year 2000, 91.1 percent of all food stamp 
benefits were issued correctly. Unfortunately, this still means that 
States overissued about 6.5 percent more in benefits than they should 
have and underissued about 2.4 percent (people that should have 
received more benefit actually received less). The result of which is 
that $1.33 billion in erroneous payments were made--$970 million in 
overpayments and $360 million in underpayments. This occurred under the 
existing Quality Control system, which we propose to refine and improve 
via proposals I helped craft in the President's budget. On a personal 
note, I have a good sense of how QC works at the State level, and, I am 
proud to point out, that as Commissioner in the State of Texas I was 
able to substantially improve the payment accuracy in our Food Stamp 
Program and for three years in a row achieved enhanced funding for 
maintaining an error rate well below that of the national average. 
However, despite Texas' achievement, and the recent progress nationally 
on error rates, the costs of errors are still too high Every percentage 
point increase in the error rate represents about $200 million in 
improper payments.
    Rising overpayments, which go to a fraction of the caseload, 
reflect a real loss to American taxpayers and could erode support for 
the program and its participants Equally important, rising 
underpayments reflect a real loss to low-income families and 
individuals who need assistance.
    The President's budget proposes a comprehensive and balanced 
approach to reforming the current QC system that not only ensures a 
high degree of program integrity but also simplifies the program for 
States who administer the program and makes it easier for citizens to 
understand and comply with program requirements. The Administration's 
proposal would focus sanctions on States with the most serious and 
consistently high error rates, and replace current enhanced funding 
with $70 million in annual performance bonuses that would balance 
payment accuracy with customer service and other measures of program 
outcomes.
    I seek your support in reforming the QC system in a way that 
provides some relief to States while balancing the need to maintain and 
improve integrity in our program.
    Food stamp caseloads are rising in response to the current 
recession, State administrative resources are stretched then, and with 
growing pressures to eliminate State budget deficits, attention to 
program management and payment accuracy may suffer if there is not a QC 
system that holds States accountable.
Food Stamp Trafficking
    Trafficking of food stamp benefits for cash by authorized retailers 
remains a serious concern. While the most recent data, for 1996 through 
1998, showed a substantial decrease in trafficking from previous 
estimates, the volume of misused benefits--estimated at $660 million 
annually--is still far too high. Our request supports additional 
efforts to identify and take action against traffickers through the 
analysis of electronic benefit transfer data, and through increases in 
FNS retailer compliance staff.
School Meals Certification Accuracy
    The evidence is strong that more students are certified for free or 
reduced-price school meals than appear to be eligible. The trend has 
worsened significantly in recent years. The most recent data shows 
that, in 1999, significantly more children were certified for free 
meals than survey data showed to be eligible. Although we are not 
certain of the exact scope of the problem including those who are 
eligible but not served, we are seeking a solution to address it.
    While the cost of such errors is unclear, FNS is strongly committed 
to improving program integrity without overburdening schools or 
compromising access to the programs for eligible children. We are 
pilot-testing potential policy changes to improve the certification 
process. This issue is complicated because certification data is used 
to distribute billions of dollars in education aid, telecommunications 
funds and other funding. We must work with the education and other 
affected communities in developing a solution. Our request supports 
these efforts, as well as additional oversight of State and local 
program operations in this area.
Child Care Integrity
    The integrity of the Child Care and Adult Care Food Program has 
been a focus of concern and action for a number of years. FNS has 
intensified management evaluations at the State and local levels, 
developed and trained program staff on improved management procedures, 
and developed legislative proposals to strengthen program management. 
Despite these efforts, additional resources are needed to effect 
lasting improvements in child care integrity, and our request supports 
modest increases in this area. Program integrity is fundamental to the 
Department's stewardship responsibilities; just as importantly, it is 
fundamental to the success of the programs themselves, for funds lost 
or misused due to poor integrity represent a lost opportunity for the 
program to better serve those truly in need. I know you share my 
commitment to program integrity, and I look forward to working with you 
in this important area.
    I will now touch briefly on the more general programmatic 
components of our request:
Food Stamp Program
    The President's budget requests $26.2 billion for the Food Stamp 
Program, enough to serve an average of 20.6 million people each month. 
As noted before, we have proposed to maintain the $2 billion benefit 
reserve appropriated last year. Our request also reflects a number of 
proposals for legislative changes, designed to further the goals of the 
program by simplifying rules, better supporting work, strengthening the 
nutrition safety net, and improving accountability. These proposals 
have a net cost of $29 million in fiscal year 2003 and $4.2 billion 
over ten years.
special supplemental nutrition program for women, infants and children 
                                 (wic)
    As I noted previously, the President's budget includes $4.8 billion 
for WIC in fiscal year 2003, including a $150 million contingency fund. 
It does not include funding for the WIC Farmer's Market Nutrition 
Program.
                        child nutrition programs
    The budget requests $10.6 billion for the Child Nutrition Programs, 
which continue to provide millions of nutritious meals to all children 
in schools and in child care settings every day. The budgeted increases 
in these programs are due to economic conditions that increase the need 
for assistance, rising school enrollment, and increases in payment 
rates to cover inflation.
The Emergency Food Assistance Program (TEFAP)
    The budget requests $50 million for States' storage and 
distribution costs and $100 million for food purchases for this 
important program. We project that the current high volume of surplus 
commodities will continue to be available to TEFAP in fiscal year 2003. 
Such donations triple the amount of commodities that we purchase with 
appropriated funds. In addition to the $100 million available under the 
food stamp account, we are requesting funds for $50 million for States' 
storage and distribution costs in fiscal year 2003, the maximum amount 
authorized.
Commodity Supplemental Food Program (CSFP)
    The budget requests $95.0 million for CSFP, which also benefits 
from surplus donations to serve elderly people and women with infants 
and young children. The funds requested plus surplus donations and 
commodities currently in inventory will be sufficient to continue 
expansion in States that joined the program prior to this year. It will 
also allow the six States that recently initiated programs to expand 
their participation up to their assigned caseload, including North and 
South Dakota, Wisconsin, Pennsylvania, Missouri and Washington.
Food Program Administration (FPA)
    We are requesting $155.9 million in this account, this includes an 
increase of $7 million and 58 staff years in our administrative budget, 
which supports the program integrity initiatives I have described, as 
well as pay cost adjustments. We are also requesting that $19 million 
previously appropriated to other accounts be appropriated in the FPA 
account. This repositioning request reflects the President's initiative 
to show the full cost of support services, retirement and other non-
direct costs with the program activities these costs support.
    In sum, our request sets the right priorities to ensure access to 
the Federal nutrition assistance programs for the children and low-
income people who need them, while maintaining and improving their 
integrity. Thank you for your attention; I would be happy to answer any 
questions you may have.
                                 ______
                                 

Biographical Sketch of Peter S. Murano, Ph.D., Deputy Administrator for 
         Special Nutrition Programs, Food and Nutrition Service

    Peter S. Murano Ph.D. currently serves as Deputy Administrator for 
Special Nutrition Programs of the Food and Nutrition Service, U.S. 
Department of Agriculture. Dr. Murano is responsible for the 
administration of 13 nutrition assistance programs including the Child 
Nutrition Programs, the Special Supplemental Nutrition Program for 
Women, Infants and Children (WIC), and the Commodity Nutrition 
Programs. Prior to his December 2001 appointment as Deputy 
Administrator, Dr. Murano was an Associate Professor in Food Science 
and Technology at Texas A&M University's Department of Animal Science 
where he taught general nutrition, food science, and food chemistry, 
served as undergraduate student advisor, and performed research in the 
area of functional food product development and testing. He also led 
the development of the undergraduate program in food science and 
technology. Under his supervision, the program enrollment more than 
doubled, classroom and lab space expanded, and many new student awards, 
scholarships, internships, and employment opportunities were secured.
    Dr. Murano received the Masters and Doctorate degrees in Human 
Nutrition and Foods from Virginia Polytechnic Institute and State 
University, and then went on to perform research on irradiated meats 
and to teach microbiology at Iowa State University. He has published 
widely in professional literature such as the Journal of Food Science, 
National Association of Colleges and Teachers of Agriculture, and 
others, and has presented at international and national conferences in 
the areas of food irradiation, nutrition, and food toxicology. He has 
just completed the manuscript for a 500-page undergraduate textbook for 
Wadsworth Publishing, ``Understanding Food Science and Technology'' due 
for publication in the summer of 2002.
    He considers it a tremendous privilege to work at USDA in serving 
others. He is particularly sensitive to the needs of children, for ``if 
we neglect our children, we neglect our future.''
                                 ______
                                 
                 Prepared Statement of George A. Braley
    Thank you, Mr. Chairman, and members of the Subcommittee for 
allowing me this opportunity to present our budget request for fiscal 
year 2003.
    The mission of the Food and Nutrition Service is to increase food 
security and reduce hunger together with cooperating organizations by 
providing children and low-income people access to food and nutrition 
education in a manner that inspires public confidence and supports 
American Agriculture. We are requesting a total of $41.9 billion to 
fulfill our commitment to provide a strong nutrition safety net and 
nutrition education. Our programs can be effective in helping to reduce 
hunger and to combat obesity and diet-related diseases such as 
hypertension, osteoporosis, heart disease, some cancers and stroke 
through nutritious food and nutrition education.
The Food Stamp Program Responds To Changing Demands
    This budget demonstrates how the Nutrition Assistance Programs 
react when needed to provide a strong nutrition safety net for 
Americans. We estimate that the Food Stamp Program will serve a monthly 
average of 19.8 million people in fiscal year 2002 and use most of the 
$2 billion benefit reserve that the Congress appropriated. Our budget 
request for fiscal year 2003 will support an increase of over 800,000 
in monthly average participation and will fund the program at $26.2 
billion. Following your lead, we have included a $2 billion reserve in 
our request.
Highest-Ever Funding And Participation In The WIC Program
    As President Bush said in his radio address on January 12, 2002, 
WIC is one of those vital programs that have proven their value. This 
committee also has a history of strong support for the WIC program. We 
are proposing a budget of $4.8 billion. As Under Secretary Bost pointed 
out in his testimony, this would enable us to provide benefits to a 
monthly average of 7.8 million needy women, infants and children and 
potentially to reach 8 million people by the end of fiscal year 2003, 
far more than ever before. We believe this funding will provide 
benefits and services to all who are eligible and wish to participate. 
Just in case more people than we currently estimate need and apply for 
benefits and services, our request includes a $150 million reserve. 
This reserve will ensure that we can properly serve them. In October of 
2001, WIC participation reached a record high of over 7,533,000 
participants. As expected, participation has fallen since then. 
Historically, it is lower in the winter months than during the rest of 
the year. We expect program demand to grow throughout the spring and 
summer.
Program Integrity
    Our mission challenges us, not just to improve food security and 
reduce hunger, but also to do so in a manner that inspires public 
confidence. In fiscal year 2001, working together with the States, we 
have achieved a record low food stamp payment error rate of 8.91 
percent. Our plans for the coming fiscal years call for increased 
effort to drive the rate even lower. We are requesting an increase of 
58 staff years and $4.5 million that will enable us to work toward even 
lower error rates than last year's record low. The funding and staff 
requested will also allow us to strengthen our integrity efforts in the 
Child Nutrition programs. We are concerned that more students may be 
certified for free or reduced-price school meals than appear to be 
eligible. FNS is strongly committed to improving program integrity 
without overburdening schools or compromising access for eligible 
children. Therefore, we are pilot-testing potential policy changes to 
improve the certification process. Certification data is used not just 
for our programs but also to target billions of dollars in education 
aid, telecommunication funds, and other funding. We are working with 
the education community in developing solutions to this serious 
problem. We believe that the additional program integrity efforts we 
are proposing are modest investments necessary to fulfill our 
responsibility as good stewards of public resources.
Food Program Administration
    Our Food Program Administration (FPA) request for fiscal year 2003 
is $155.9 million, an increase of almost $7 million over the amount 
provided by this committee in fiscal year 2002 after accounting for an 
$18.9 million shift of charges from other appropriations to our Agency 
salary and expenses appropriation. The shift reflects the 
Administration's cost integration legislation that intends to budget 
and present the full costs of Federal employees and related support 
costs in the accounts and programs where the Federal staff is employed. 
The full government share of Federal employee pension contributions and 
post-retirement health benefits for current civilian employees of $7.9 
million and $11 million for rental payments are included in our $155.9 
million request. We are requesting approximately $3.5 million for pay 
costs and, as I previously mentioned, $4.5 million to fund 58 
additional staff years to improve the oversight of both the Food Stamp 
and Child Nutrition programs. In the Food Stamp Program, the additional 
staff will support: (1) an augmented investigative and sanctioning 
capability through analysis of retailer transactions; (2) increased 
retailer compliance investigative capability; (3) maintenance and 
enhancement of the quality control system and (4) increased initiatives 
to reduce error rates. EBT is now almost nationwide and produces a 
wealth of information. We would use the additional staff to check 
retailer transactions. With these additional resources, we could use 
this information to successfully identify abuse and fraud. We would put 
the additional resources into efforts to maintain the accuracy of the 
Quality Control System and to increase targeted store visits where the 
EBT data suggested there were problems.
    In the Child Nutrition Programs, FNS will devote additional staff 
to combating clear instances of fraud in the Child and Adult Care Food 
Program and safeguard the expenditure of significant Federal dollars. 
FNS has refocused its management evaluations to assess State-level 
administration of the CACFP in greater depth and will publish 
regulations designed to improve State-level management of the Program. 
In fiscal year 2003, FNS will conduct training for FNS and State staff 
on implementation of program changes required by new regulations and 
revise Management Improvement Guidance to reflect those regulations. We 
will conduct an in depth evaluation of the school lunch pilot projects 
I mentioned previously. These pilots are testing alternatives to the 
current school lunch eligibility determination process. The results of 
these pilots will be used, as appropriate, to initiate regulatory and 
legislative initiatives to improve the certification process. In 
addition, we will continue collaboration with State agencies on 
implementation of procedures to reduce over-certification and will 
utilize a contractor to identify integrity problems in the operations 
of the National School Lunch and Breakfast Programs at the State and 
school levels.
Child Nutrition Programs
    For these programs, we are requesting a total of $10.6 billion, an 
increase of $489 million over the level provided for fiscal year 2002. 
Our projections of increases in meals to be served in the School Lunch 
and Breakfast programs are primarily due to increases in school 
enrollment. Our estimates for increases in the Child and Adult Care 
Food Program are based on trends that we have seen for many years. In 
addition to increased meal service, costs in the Child Nutrition 
Programs are due to increasing payment rates that rise to cover 
inflation.
The Emergency Food Assistance Program
    We are requesting $150 million for this program in fiscal year 
2003, the maximum amount authorized. Of this, $100 million is used for 
commodity purchases, and $50 million is used for administrative costs. 
We project that the current high volume of surplus commodities will 
continue to be available to the Emergency Food Assistance Program. 
These donations triple the amount of commodities that we purchase with 
appropriated funds. Commodities from private donations are also 
provided to soup kitchens, emergency shelters and needy families 
together with those from the Federal Government. States and Emergency 
Feeding Organizations use the funds appropriated for storage and 
distribution to handle all of these commodities from the varied 
sources.
Commodity Supplemental Food Program
    The combination of surplus donations, that partially offset the 
cost of purchasing commodities for distribution, and reducing inventory 
instead of making new purchases enable this program to serve expanding 
participation with a minimal budget increase. We are requesting $95 
million for fiscal year 2003 that would allow States with well-
established programs to continue increasing participation and provide 
funding for the six States that recently initiated programs to expand 
their participation up to their assigned caseload. These States include 
North and South Dakota, Wisconsin, Pennsylvania, Missouri and 
Washington.
    Mr. Chairman, this concludes my statement. I would be happy to 
answer any questions you or the other members may have.

    Senator Kohl. Thank you very much, Mr. Bost. We will start 
our questions with you, Mr. Hawks. As you can understand, Mr. 
Hawks, I am seriously disturbed about the recent chronic 
wasting disease discoveries from my State in Dane County. 
Wisconsin, which is recognized as one of the top deer hunting 
States in the country, could suffer significant economic 
hardship if the chronic wasting disease spreads throughout our 
wildlife populations.

                        CHRONIC WASTING DISEASE

    I understand the Wisconsin Department of Natural Resources 
is currently coordinating increased sampling for chronic 
wasting disease in deer, from both Dane County and neighboring 
Iowa County. Mr. Hawks, could you please inform this Committee 
of your efforts to test and identify the presence of this 
disease and explain how it suddenly appeared in Buchanan, 
Wisconsin, and how to prevent it from spreading throughout 
Wisconsin and our country?
    Mr. Hawks. Yes sir, I would be happy to. As you know, Mr. 
Chairman, there were three positives out of a routine sampling 
or routine testing of harvested deer. What we have agreed to do 
is increase the sampling by 500. APHIS will do that. We are 
working with the epidemiologist up there to try to determine 
where the source of this is. We are working with the State 
Department of Agriculture to try to get them to restrict the 
movement of the captive herds there.
    And so we are trying to get to the bottom of it, but the 
one thing that I can tell you for certain is that we are doing 
increased sampling. We have gone to work with the State 
Department of Agriculture there to make sure that we find out 
what transpired there. This is just as disturbing to me as it 
is to you.
    Senator Kohl. Well, Mr. Hawks, Monday of this week our 
Governor wrote to Secretary Veneman requesting emergency 
assistance to combat chronic wasting disease in Wisconsin. Can 
you assure us the Department will promptly act on this request?
    Mr. Hawks. Yes, sir, we will promptly act on that request.

                             IMPORTED MEAT

    Senator Kohl. I thank you. Turning to Dr. Murano, I 
appreciate your stopping by to see me last week, Dr. Murano, to 
discuss some of the concerns I raised at Secretary Veneman's 
hearing on February 27th, regarding the safety of imported 
meat. As you recall, I raised this issue partially because of a 
Washington Post article of February 25th, which reported that 
several Mexican and French plants were found to have numerous 
sanitation and safety problems, but were still exporting meat 
to the United States without ever being reinspected by USDA. 
This article raised several red flags for me, for you, and for 
consumers all across the country.
    So, I would like to give you this opportunity to respond to 
the February 25th Washington Post article publicly now, for the 
record. In your response, please include information on some of 
the suggestions you gave to me during our earlier meeting about 
a possible program of sending inspectors to Mexico for extended 
periods of time, and how you would suggest setting up such a 
program.
    Dr. Murano. Thank you, Mr. Chairman, I would be happy to 
and I thank you for the opportunity to do this. As you know and 
as you just stated, that article in the Washington Post was 
very disturbing. And as you also know, this article was written 
after I was interviewed by the reporter.
    When I was interviewed for the article I was asked to 
briefly comment on our system of import inspection. I explained 
to the reporter our three-pronged approach in which we require 
an exporting country to have an equivalent system of inspection 
to that of the United States. We require them to provide 
evidence of System equivalence, not only by producing 
certifying documents, but also through on-site audits conducted 
in these countries by our foreign program reviews to verify 
that equivalent public health safeguards are contained in their 
systems. We visit foreign plants and make our determination 
that way.
    The second prong of this three-pronged approach is that 
when imported product is received at 124 import inspection 
houses located in the United States, we have inspectors perform 
a reinspection of the product. We reinspect product lots 
according to the volume of product being imported from a given 
country. Reinspection assignments are based on computer-
generated statistical models that let us know how many lots to 
reinspect.
    The third prong of the approach is that periodically, at 
least once a year, we go back to these countries and do audits 
of their plants. Having explained all of that, it was very 
surprising to me when I saw that article and the first thing I 
did was try to determine if some of the things that were 
written in the article were true. An example of an inaccurate 
statement found in that article mentioned a company in Mexico, 
CarnesValmo, as being a plant that had exported product to the 
United States even though it had actually been delisted in 
1999.
    We have gone through all the records, not only here in our 
country, but also in Mexico. There is absolutely not one pound 
of product that has been exported to the United States from 
that plant. What I found out in my investigation is that plant 
actually, was delisted in May of 1999, when the agency did an 
audit, as it regularly does. And that plant has not exported 
any product to us since. In fact, in 2001, Mexico did not even 
include Carnes Valmo on its list of companies certified to 
export to the United States.
    That was something that I was certainly glad to find out. I 
will tell you this, and I told this to the reporter, that after 
having been a professor at Iowa State University and Texas A&M 
and doing many projects throughout Latin America and other 
countries, I know that there are certainly differences in the 
systems countries have in place. I take very seriously my 
responsibility to make sure that the countries that we approve 
as being able to export to the United States have an equivalent 
system to ours.
    We have been to Mexico three times this year, in November, 
and two or three times last year. In November 2001, our audit 
of Mexican plants resulted in the delistment of three plants. 
At that time, I was brand new in my position at USDA. I had 
only been here for a month. As soon as the agency team told me 
that during their audit they found that three plants needed to 
be delisted because they were not operating with government 
inspectors, Mexican government inspectors, present, which they 
are supposed to have, not only did we delist them but 
immediately I contacted my counterpart, Dr. Javier Trujillo in 
Mexico, to make sure that he realized what was going on and 
that we were going to delist those three plants.
    I am happy to tell you that he immediately responded and 
certified to us that those three plants were now going to 
operate with Mexican Federal inspectors. The absence of 
inspectors is the reason why we delisted them. As a result of 
this incident, we decided to do a 100 percent reinspection of 
all product coming from Mexico. The philosophy of trust but 
verify is one that I really adhere to. Even though I know 
Javier Trujillo very well, I thought this is something that is 
too important, to make sure that we have the safest meat supply 
possible, whether it is domestic or imported from other 
countries.
    To this day, we are reinspecting every meat and poultry 
shipment that comes from Mexico. Next month we are scheduled to 
make another audit visit to Mexico and we will be able to 
assess at that point the condition of other plants. As you also 
know, Mr. Chairman, 2 weeks ago today myself and two members of 
the FSIS team went to Mexico and we visited Dr. Trujillo and 
spoke about all of these issues.
    We visited a couple of plants, one of which had been 
delisted in November because of not operating with government 
inspectors, and had a frank discussion with him about 
establishing some of the long term solutions to this problem. 
In that discussion we talked about some of the things that we 
should be doing. One of the ideas that we discussed was for a 
certain period of time having some of our inspection teams or 
audit teams based in Mexico. We are considering whether to have 
a team of auditors that stay there for a 3 month period or for 
an entire year. We will have the aduitors stay as long as 
necessary to ensure to our satisfaction that all the plants 
certified to export to the United States have equivalent 
systems of inspection to what we have.
    Senator Kohl. I thank you. Is it nevertheless accurate to 
say that the plant in question, the Mexican plant in question 
mentioned in the Post article, was in May of 1999 when USDA 
inspectors visited it, certified to export meat to the United 
States?
    Dr. Murano. Yes, sir, it was. In May when we visited it we 
decertified it or delisted it.
    Senator Kohl. Are you able to say with absolute certainty, 
Dr. Murano, that meat from that plant could never have slipped 
through our random border checks and ended up at American 
supermarkets as well as on family dinner tables?
    Dr. Murano. I can tell you that for this reason. Even if 
the plant changed its name, tried to sneak through if you will 
and we go by the establishment number, and this is something 
that does not change if the company is sold and it changes 
names. Our system of import inspection at these 124 import 
houses logs all product coming to the United States by 
establishment number. Those are the records that I am telling 
you let us know that we have not received any product from 
them.
    Senator Kohl. How could you say with certainty that even 
though meat had not been shipped from that plant, had it been 
shipped from that plant, I do not believe there is any way for 
you to be able to say with certainty that that meat could not 
have wound up in American consumers' hands.
    Dr. Murano. If that plant had shipped product to the United 
States it would have to go through those border inspection 
stations. I am not sure that is what you mean or if you mean if 
they had already shipped product.
    Senator Kohl. When they do the border inspection stations, 
they are inspecting 100 percent of all the meat that is coming 
through?
    Dr. Murano. No sir, no. They have to log it in anyway, 
whether they look at the shipments or not. It has got to be 
logged in. But, let us say, and I think this is where you are 
going with your question, and forgive me if I am misstating 
this on your behalf, if that company had already shipped 
product could we have caught it at the border? Maybe that is 
the question you are asking? Certainly because we were not 
doing 100 percent of the inspection we would not have 
possibly----
    Senator Kohl. Which you are doing now?
    Dr. Murano. Correct.

                           IMPORTED PRODUCTS

    Senator Kohl. With respect to imported products, as opposed 
to those that are domestically produced, can you tell us how 
much of the total meat and poultry products imported into the 
United States are physically inspected by FSIS personnel to the 
same degree as domestic products?
    Dr. Murano. To the same degree is not going to be very 
much, and the reason why is because in this country we are the 
inspectors of domestic products. Obviously, we inspect our 
products. Product that is produced in other countries is 
inspected by their inspectors according to equivalent standards 
to ours. We just simply do a reinspection. If we are asking the 
question in general are those products inspected just as much 
as our products, the answer would be yes, but not by our 
inspectors.
    Senator Kohl. Can you certify that all the meat, poultry 
and egg products currently sold to the American consumers meet 
the minimum basic USDA standards?
    Dr. Murano. Yes, they have to because they have to have 
equivalent systems. If we find in audits that is not the case, 
or upon inspection we find out that is not the case, we take 
immediate action.
    Senator Kohl. Can you tell us how many voluntary recalls 
were issued to meat and poultry products last year?
    Dr. Murano. I am being told 86. That is how many recalls we 
have conducted.
    Senator Kohl. How many did you say?
    Dr. Murano. Eighty-six.
    Senator Kohl. Dr. Murano, under current law USDA has no 
mandatory authority to remove tainted food from the 
marketplace, as you know. In other words, if a product on the 
market is found to be contaminated, USDA has no authority to 
force the company responsible to retrieve that product, no 
matter how deadly that product may be. As you know, we have to 
rely upon the companies for recalls.
    I understand that Federal agencies can themselves go into 
stores and remove products found to be unsafe. But, 
practically, it would seem to be impossible for FSIS to get a 
court order deputizing agents to send them into stores to 
intercept products before they reach consumers. Is it your 
opinion that FSIS should have the authority to issue recalls 
when unsafe products might slip through the cracks and reach 
American supermarkets, if such authority would in no way 
diminish the liability of individual companies?
    Dr. Murano. Thank you for that question. When I think about 
recalls, whether they are voluntary or mandatory, there are two 
important goals: one is to enact that recall as soon as 
possible to minimize the impact to consumers; the other is to 
be able to retrieve as much product as possible in that recall. 
Those are, I think, principles we can all agree with.
    Our current system, as you said, is voluntary in the sense 
that we, FSIS, cannot mandate a recall. Companies have to 
recall their own product. But, I will tell you that in all the 
years that the system has been in place, there has only been 
one instance where a company, when FSIS recommended that a 
recall be issued, refused to do so. What we then did is we 
detained the product.
    What you described, Senator, was a seizure activity, which 
we also have authority for. We have authority for detention and 
we do not need a court order for that. In this single instance 
I will tell you that immediately upon detaining the product 
they issued the recall.

                       MANDATORY RECALL AUTHORITY

    Our experience has been that we have not needed to have 
mandatory recall authority: If there was a need to have it in 
spite of our detention authority. If companies all of the 
sudden decided they were not going to listen to us, they were 
not going to recall product, that is another story. But so far, 
history has been that our voluntary recall system works.
    And philosophically, Senator, I have to tell you that I 
tell this to the industry when I make speeches to them--I tell 
them you are responsible for the food that you produce, for the 
safety of it. You are the ones who produce it. They have to 
take that responsibility, and have been doing so.
    I was looking at some of the data recently in preparation 
for the hearing, and I know that last year, for example, about 
30 percent of these voluntary recalls performed by industry 
were done as the result of industry itself finding that their 
products had a contaminant. They themselves called us and said, 
FSIS, the product that we just produced had such-and-such a 
contaminant and we are issuing a voluntary recall. It was not 
because of our testing. It was their testing.
    Senator Kohl. Well, there is no doubt that the overwhelming 
majority, almost universally, of the number of companies in the 
United States are sensitive to the whole issue to the extent 
that you wish them to be sensitive. But, we only need one to 
produce a catastrophe. So I guess the question I ask, again, 
because it has come up legislatively and we have never been 
able to get the legislative approval to give USDA the 
authority: There isn't a down side to having the authority even 
if you used it just once in 50 years to avert catastrophe; 
there is no down side to having the authority.
    Dr. Murano. Certainly there would not be any down side if 
FSIS would not be held liable, which is what you mentioned, and 
you are correct.
    Senator Kohl. Thank you. Mr. Bost, I was concerned to read 
stories in the last week that one of every five children 
receiving free or discounted school lunches may actually be 
ineligible. To correct this problem it is important to make 
sure that ineligible children do not receive free and reduced 
price lunches, but not in any way to hinder participation by 
those children who are eligible, many of whom receive their 
only nutritious meal of the day through the school lunch 
program. How do you intend to work with the Department of 
Education to try and balance these two goals?
    Mr. Bost. Thank you, Mr. Chairman, you are absolutely 
right. Let me provide you with just a little bit of background 
and then I will get to exactly what steps we are taking to 
address this issue. First and foremost, realize this is not 
something that just happened. This is an ongoing issue that I 
found when I got here.
    The second point is that in terms of how this program 
operates, eligibility is determined through self declaration. 
Basically, kids take a form home. Parents fill the form out, 
and send it back to the school. Based on the form, they are 
eligible to receive free meals. And I think that self 
declaration is causing some of the issues that we are 
addressing now.
    The third issue that is of concern is I do not know at this 
point to what degree over-certification is a problem. I think 
that the reporter took some privilege in coming up with those 
numbers, that we are still in the midst of trying to make a 
determination of exactly how serious this problem is. The 
parameters I have established in terms of the problem are 
essentially the two you spoke to.
    We want to ensure every single child who is eligible does 
receive a free or reduced price meal. We do not want to deter 
folks that may be interested in the program. I am interested in 
ensuring that we do not put in place any significant 
administrative barriers for the school persons in terms of 
determining eligibility. They are not in the business of 
determining eligibility. They are in the business of feeding 
and educating our children. With that in mind, there are some 
things that we are doing.
    One, we are conducting some pilot projects across the 
country to test some alternatives to current certification 
procedures. We are looking at the current certification process 
that we have in place in terms of requiring self declaration 
plus some additional financial information. We have 
communicated with the State child nutrition directors about my 
concerns and the severity of this problem.
    In addition to that, you make reference to us working with 
the Department of Education. We are working with the Department 
of Education, but we are also working with the American School 
Food Services Association that is responsible for the food 
service directors and those folks for all of the schools in 
terms of ensuring that we work with them, and work to get those 
two parameters that are established. And last but not least, as 
I mentioned in my testimony, the reauthorization of the Child 
Nutrition Programs comes up next year and so we are working and 
looking at any possible legislation that we might need to put 
forward to address this issue as a part of reauthorization.
    So, we are taking some very specific and definitive steps 
to address the over-certification problem. I would close by 
emphasizing this point. We do not want to deter at all, by any 
means, any child that is eligible to receive a free or reduced 
lunch.
    Senator Kohl. There are some school districts that have 
been working on this problem for the past several years, some 
22 school districts. Would you care to comment on some of their 
efforts and some of the successes and failures?
    Mr. Bost. Well, some of the same things I said we were 
looking at in terms of some of the pilots. I think we are in 
the process now of evaluating some of the steps that they have 
taken relative to whether they are going to work or not, and 
whether they are going to be successful. I think that the real 
issue for me, as I said previously, was to ensure that we do 
not put in place overwhelming administrative paperwork burdens 
that they are responsible for doing. But, on the other hand, I 
am interested in maintaining the integrity of the programs. So, 
we are interested in looking at what they are doing. We will 
evaluate their results and tie those into all of the steps that 
I know, in terms of one, attempting to correct the problem, but 
two, preparing for reauthorizing of the child nutrition 
programs.
    Senator Kohl. Thank you. Senator Cochran.

                  SUPPLEMENTAL APPROPRIATIONS FOR FSIS

    Senator Cochran. Dr. Murano, the Department of Defense and 
Emergency Supplemental Appropriations Act for Recovery from the 
Response to Terrorist Attacks in the United States provides $15 
million to the Food Safety Inspection Service. I am curious to 
know whether you have put in place plans to use those funds? 
Have they been spent or how do you expect to spend them?
    Dr. Murano. I will be glad to, Senator. As you know, the 
appropriation was for $15 million for protection of meat and 
poultry and egg products, which is what is under our 
jurisdiction. We can look at dividing it basically into two 
pots, one consisting of $5 million which is concerned mainly 
with improving the physical security and cybersecurity of our 
various facilities, such as our Technical Services Center in 
Nebraska, our financial processing center in Iowa, and our 
laboratories.
    As concerns in regard to the other $10 million, we have 
very specific plans on utilizing those monies to educate our 
workforce and our laboratory personnel about new threats to the 
food supply, especially the very precise types of hazards that 
could be intentionally introduced to our meat and poultry and 
egg products. These funds will also be used to provide 
technical assistance for States and education for some of the 
small and very small plants that need a lot of assistance. They 
typically are not able to hire educational consultants and 
therefore do not receive the training that they need.
    Part of the money will be used to expand the testing 
capabilities of our laboratories so that we can engage in 
looking for certain agents of disease we currently do not look 
for as they are not typically found in meat, poultry and egg 
products. These might be the agents that terrorists choose to 
utilize.
    Senator Cochran. You mentioned in your statement to the 
committee this afternoon that you were targeting some small and 
very small plants for special assistance. I think you said you 
were going to spend an additional $1.5 million to expand risk 
prevention and management efforts at these plants. How are you 
figuring out which plants are going to be eligible for these 
funds and how will the money actually be used?
    Dr. Murano. The amounts I talked about in my testimony had 
to do with education in terms of food safety programs that we 
have, and sanitation and so forth. Small and very small plants 
need a lot more hand holding than larger plants do, and they 
need help improving their understanding and ability to 
implement sanitation procedures. We are planning to use 
supplemental funds also for technical assistance, except it 
would be in terms of biosecurity.
    It is a good way for us to leverage the $1.5 million budget 
request in our normal budget for assistance of small and very 
small plants. We will leverage that with the supplemental 
request we have for biosecurity. In that way we will be able to 
really do a more thorough job of training these folks and 
giving them as much assistance as possible.
    Senator Cochran. Mr. Hawks, I would ask you a similar 
question. The funds that were made available in the emergency 
supplemental, some of those were appropriated to the Animal and 
Plant and Health Inspection Service. Could you tell us how 
those funds are being used and how much money you have to work 
with?

                 SUPPLEMENTAL APPROPRIATIONS FOR APHIS

    Mr. Hawks. Yes sir. The supplemental appropriation 
allocated $105 million in funding to APHIS and allocated $14.1 
million for buildings and facilities. The $14.1 million will go 
to the Ames facility in Iowa. We are working now within USDA 
through a process of identifying the specific areas that these 
funds are most needed. But, some of, the majority of the funds, 
will be used to increase our inspection, to start--to jump 
start, if you will--our 2003 funding request. It will give us 
an opportunity to move a little quicker, to start more 
surveillance and early detection. And rapid response in our 
business, within APHIS, is very important. So, that is where we 
are headed with those funds.
    We are also looking at greater cooperation with the States, 
allocating some of those funds to go to the States to help them 
with their emergency preparedness and planning. So we are in 
that process. I do not know whether Dennis would like to add 
anything to that or not, on the budgeting process within USDA 
or not.
    Mr. Kaplan. You did a good job.
    Senator Cochran. There has been a good bit of discussion 
and speculation about a proposal to centralize all border 
operations, combining the, INS, the Customs Service, the Coast 
Guard, and perhaps some parts of other agencies. What effect 
would that have on your responsibilities? You have collateral 
responsibilities, or you work with these agencies. How would 
USDA be affected by that?
    Mr. Hawks. It is our belief, within USDA, that we can 
obviously perform much better as a stand alone agency. I have 
been working very closely with Customs, with INS, with the 
Coast Guard, as well as others within USDA to look at all 
possibilities for improving our borders. And I think that is 
what we will be looking at, is how we improve the security of 
our borders. There are a lot of ways we can do that. One is 
obviously better reporting and cooperation. I am taking this 
very seriously.
    Since September the 11 I have been from the northeast Maine 
border crossing in Canada to San Francisco in one day to look 
at that, at the port out there. I have been to Miami. The 
Deputy Secretary went to Miami with me. We toured the airport. 
We toured the cargo facility. I have been to Chicago's O'Hare 
to look at our process there. I have been to Kennedy. I have 
been to Orlando. I have been to the Port of New Orleans.
    And we are doing a pretty good job, I have to say, with 
these in coordination with Customs. We obviously need a fully 
integrated and fully interactive database with them in order 
that we can have more information. In our budget request for 
this year we have asked for an additional $4 million to station 
veterinarians in foreign countries to improve monitoring and 
surveillance for foreign animal diseases. We need to look at 
what is going on in other countries in order to have a better 
idea of what to look for. Senator Cochran, I would say that we 
need to work smarter as well as harder.
    Senator Cochran. Well, we appreciate your dedicated 
efforts. In that regard, let me ask you about a parochial issue 
that has been brought to my attention. I am told that at the 
Stennis Space Center in Hancock County, Mississippi, there is a 
new technology that is under development that holds promise for 
the detection of toxins in our food supply. There are some 
toxins that are lethal, of course, such as aflatoxin, that 
could easily be mass produced, I am told. And this technology 
may give us a new tool in our arsenal, a new weapon against 
this kind of terrorist activity. Do you consider this 
technology--or are you familiar with it enough to say whether 
it has practical application in the Department of Agriculture? 
What are your thoughts about it?
    Mr. Hawks. I had a briefing on it this morning. It is 
hyperspectral imaging and it was developed by NASA, and they 
have gone from the huge equipment down to, as they described it 
to me, an instrument the size of a loaf of bread. It certainly 
was a very exciting briefing that I had this morning. It 
certainly has promise. We are always looking for anything that 
we can use to rapidly detect toxins or other harmful agents. 
But it had a lot of promise this morning, and this morning is 
the first time that I had seen this. I have not had a lot of 
research into it, but it is still promising.
    Senator Cochran. Mr. Chairman, I have a couple of questions 
for Mr. Bost, then I would be happy to yield. If I can proceed 
to ask them? For the WIC program, Mr. Bost, the funding 
requested has increased from the current year. Will the funding 
request be sufficient to meet all of the program costs and 
participation demands in your opinion?
    Mr. Bost. As a part of, in terms of the President's budget 
request?
    Senator Cochran. Yes, for the WIC program.
    Mr. Bost. As a part of the President's budget request, this 
is an unprecedented budget request for WIC. I think that 
demonstrates a real commitment on the part of this 
Administration to address the needs of everyone who needs this 
service. I would say at this juncture, based upon our best 
estimation, yes the budget will meet program costs and 
participation demands.
    Senator Cochran. There is a contingency fund. I noticed 
$150 million included in the budget proposal for that. This is 
a new contingency fund. My question is, what is the benefit of 
establishing this fund at the beginning of the fiscal year 
rather than appropriating these funds at the outset of the year 
or having a supplemental when you see that it is needed?
    Mr. Bost. I think it is fairly easily available to us to 
use because we look at tracking utilization by State almost on 
a monthly basis. If we see a significant increase in the number 
of persons who require WIC benefits, then the money is there 
and available for us to utilize to meet their needs. Research 
on the WIC program has indicated that it is one of the most 
successful programs in terms of early intervention and in terms 
of meeting the needs of women and children in this country, so 
it is a very important program. If the money is there and there 
is an identified need, then we are able to quickly respond to 
that need.
    Senator Cochran. There is a supplemental that is in the 
works now. Has OMB, to your knowledge, included any provision 
for WIC funding in the supplemental that is being submitted by 
OMB tomorrow?
    Mr. Bost. We currently have ongoing discussions on that. I 
do not think the final decision has been made.
    Senator Cochran. You have in the budget request $2 billion 
as a contingency reserve for the Food Stamp Program. This is 
the same amount that was in the fiscal year 2002 budget. How 
much of this $2 billion contingency reserve do you think you 
will use in fiscal year 2002, and have you projected the need 
for $2 billion more in 2003 already?
    Mr. Bost. If we look at the current utilization in the Food 
Stamp Program, I think we are going to use all of that money. 
Let me give you an example of what has occurred. Over the 
course of the last several years we saw a significant decrease 
in the number of people in this country applying and receiving 
food stamps--unprecedented. In Texas alone, there was almost a 
50 or 55 percent decrease.
    However, during the course of the last year, from last year 
to now, we have seen an increase in about 1.5, 1.6 million 
person increase, or about 17.4 up to about 18.6 million. With a 
number of things going on, you have an economy, you have a 
number of States doing significant access and outreach, 
changing their applications. I think that we will continue to 
see a significant utilization of the Food Stamp Program in this 
country.
    Senator Cochran. Senator Stevens was here earlier and 
indicated he had some questions that he wanted asked to you, 
Mr. Bost, and we will submit those to you rather than my 
reading them to you.
    And you can just respond for the record, if you would, and 
furnish a copy to Senator Stevens at his office in S-146 of the 
Capitol? Can you do that and make a note of that?
    Mr. Bost. Yes sir. We will be more than happy to do so.
    Senator Cochran. We want to keep him happy, right?
    Mr. Bost. Absolutely, and you too.
    Senator Kohl. Senator Durbin.

                            VOLUNTARY RECALL

    Senator Durbin. Dr. Murano, in your testimony you talk 
about the efforts being made on coal mine security, and make 
reference to a number of new agencies that are being created: 
food biosecurity action teams, food emergency rapid response 
evaluation teams, food threat preparedness network. All of 
these, apparently, are in response to September 11 and our fear 
of bioterrorism. Secretary Thompson from HHS, Secretary Veneman 
and others have noted the vulnerability of our food supply to 
sabotage or to potential harm. I wanted to ask you a question 
about this effort in light of the Chairman's earlier questions.
    Clearly, through all of this new effort and all of these 
new agencies, if you established that someone had an intention 
to contaminate the food supply with a dangerous chemical that 
was life threatening, would you in that situation contact the 
company that had issued the product and ask them to voluntarily 
recall it? Or, would you in that situation seize the product as 
quickly as possible?
    Dr. Murano. Senator, if we had such a theoretical event 
there would be a number of people that would be made aware of 
what is taking place. The company definitely would have to be 
one of them, for one important reason, they are the ones who 
would know, where the product ended in terms of who they were 
selling to and what lot numbers may be implicated. We have to 
involve them and as a result they would be involved, very 
quickly, simply because we need the information they would have 
to provide to us.
    Senator Durbin. I am not asking about consulting the 
company. You are in a situation where someone has just called 
you and said we have an emergency on our hands. A terrorist has 
contaminated the food supply. We know what it is. We know what 
the product is. We have the company on the line. We think we 
know where it is. At this point you call the head of the 
company and say, ``Would you consider voluntarily taking that 
product off the shelf?'' Is that the response you would take?
    Dr. Murano. Basically what I would say to the head of that 
company is ``Sir, we have evidence that the product produced in 
your plant is contaminated with Agent X. We need you to recall 
it as soon as possible.'' And that is exactly what I would 
expect to happen.
    Senator Durbin. So you would not have the authority to make 
that happen? You would say we expect that to happen. That is as 
far as you would want to go?
    Dr. Murano. It is as far as I am able to go right now.
    Senator Durbin. Let us talk about where you ought to be 
able to go. I think that was the line of the Chairman's 
questioning. I think in that circumstance I would expect you to 
move heaven and earth to pull that product off the shelf, not 
to wait for a corporate decision, a judicial order or 
depositions to be taken. Would not you as a person in America 
want your government to respond quickly with the authority to 
remove that product?
    Dr. Murano. Moving heaven and earth is exactly what I would 
do. This is the kind of a situation, obviously, where law 
enforcement has to be called in. Simultaneously, you have got 
the FBI involved and so forth. So, detaining that product and 
seizing it would not be something that would take a lot of 
time, I have been assured by law enforcement.
    Senator Durbin. Let me try to get to the bottom of this. If 
we are prepared to move heaven and earth, the question I am 
asking is, is the Administration prepared to move Congress to 
give them new legal authority so that it is very clear that in 
that emergency, whether we are talking about intentional 
contamination or accidental contamination, in either instance 
Americans are at risk and Americans are in danger.
    I hope I am not speaking for the Chairman here, but this is 
a line of questioning that has been raised time and again. Why 
is the Administration reluctant to ask for the authority to 
take a dangerous product off the shelf as quickly as possible?
    Dr. Murano. Well, I am going to speak about our system at 
FSIS, and as I explained, it is a voluntary recall system. If 
it is a system that does not work because the product is not 
recalled as quickly as possible, I would be the first person to 
say we need that authority. But, the voluntary recall system 
has been working. This is something we deal with on practically 
day-to-day basis, in the sense that we have to respond to 
outbreaks or instances where a product has contaminants that 
would be injurious to consumers. It is something we have 
experience with, as I said before, Senator, and excuse me for 
repeating it. We have not had, except for that one instance, 
and we quickly detained product in that case and the company 
quickly issued the recall.
    Senator Durbin. In 1999 what percent of recalled meat and 
poultry products were recovered by your agency?
    Dr. Murano. If you will give me a second.
    Senator Durbin. While you are looking for it, I will tell 
you it was 24 percent in the year 2000. What percent of the 
recalled meat and poultry products were recovered by your 
agency?
    Dr. Murano. I would imagine it was probably about that.
    Senator Durbin. Twenty-five percent. So under the current 
system you are recovering about a fourth of the recalled meat 
and poultry products that you consider to be dangerous. I think 
when we are talking about homeland security, intentional 
contamination, chemical agents that could be devastating to 
individuals, as opposed to a bad night's sleep, for a healthy 
person and worse for children and the elderly, that we want a 
better response.
    Dr. Murano. You had better believe it, and Senator, I will 
tell you this, though. If we had the authority to recall we 
would not get any more retrieved product. There are many 
reasons why we do not get as much actual product back as the 
amount that is actually issued on a recall. It is a complex 
answer to give you, but just to give you an example of part of 
the explanation.
    There was a case several years ago where there was a large 
outbreak of salmonella involving ice cream. This was produced 
by a company that sells door to door. Because they sell door to 
door they knew exactly who they sold to, which is typically not 
the case. When you have a situation where you are selling food 
at a supermarket you do not know who buys it.
    But in this case they knew exactly who they sold it to, so 
when they had to recall the product, which of course they did, 
they could go door to door. The company knew exactly who their 
clients were. The CDC conducted a survey after the fact to see 
how good the recall response was and what were some of the 
factors that affected the product being recalled. And you will 
be surprised, because I certainly was, to read the following.
    Thirty-one percent of the households that had implicated 
product, this was ice cream, knew that there was supposed to be 
a recall and the ice cream had a contaminant. This 31 percent 
of households went ahead and ate it anyway, because they did 
not believe the recall. It is amazing. I mean, it, truly is 
amazing. You read that and you say, my goodness. What do you 
have to do, go in like Gestapo and raid their refrigerators?
    So it is very frustrating to me, I will tell you, Senator, 
and I feel exactly as you do. I would love to retrieve every 
ounce of product that is contaminated.
    Senator Durbin. I just want to give you the tools to do it, 
then. Frankly, I want the Administration to ask for those tools 
because I do not think they could use them effectively without 
that. And I will concede no system is foolproof. No system is 
100 percent.
    But now that we have graduated from our last hearing, when 
we discussed this agency's appropriation, we have graduated 
into a new level of thinking here. I hope we have. And you have 
given us ample evidence of a lot of people sitting in your 
agency thinking about some terrible possibilities, as you say, 
to respond to attacks on the food supply.
    I am not talking about naturally occurring contamination, 
and I just think that we have to be much more aggressive. And 
to be much more aggressive, you need better tools. I do not 
hear you saying you are not going to ask for them, but I do not 
hear you saying affirmatively you are going to move this up.
    You have an extraordinary vitae and background in food 
safety. I read it again today. And what I found, after sitting 
for 16 years before people at this table representing the same 
agency, is they bring this great academic background into this 
institution and they start thinking institutionally. And then 
when they leave, they are liberated again and come back to us 
and say, we have got good ideas again. And I am just hoping 
that while you are there, that you will use some of this 
creative, innovative thinking to come up with some new tools.
    I also hope that you will give me an explanation about your 
statement on the Supreme Beef case. I am not sure I understand 
this. Here is what you said. ``Since the Supreme Beef decision, 
FSIS no longer relies solely on salmonella data to shut down a 
plant.'' Then you go on to say, ``I must emphasize that 
salmonella testing has not stopped. The difference is that now 
we are using the performance standard data in conjunction with 
other measures to verify that the establishment's plant is in a 
sanitary standard operating procedure.'' Do I take it from that 
that even though the Administration has not come forward and 
asked for legislation to overcome the scrutiny, are you telling 
us you found a way around it, that you can enforce salmonella 
standards even though the court case said you could not?

                              HACCP SYSTEM

    Dr. Murano. I will be happy to explain, Senator. As a 
microbiologist and as someone who has done a lot of HACCP 
training in my day--of industry both domestically and in other 
countries--I know that HACCP was developed so that microbial 
testing would be a part of it, a very important part of it, one 
that would verify if control of a hazard is being maintained by 
the HACCP system. And so to directly answer your question, what 
takes place is simply this. By testing for salmonella, as we 
always have and--which we are continuing to do even after the 
Supreme Court decision--that testing, it is our marker to say 
look carefully or scrutinize with more detail the HAACP plan 
and the sanitation plans of that operation, because something 
may be wrong. What we do now, and this is in contrast to what 
was done before Supreme Beef, we would rely on the salmonella 
performance standards as verification the HACCP plan is working 
or not working. After Supreme Beef, if there was a third set 
failure as we call it, testing for the third time, that is when 
the enforcement action was taken.
    Now what we do is we are using the salmonella test as a 
verification, as a marker. As if you are checking your 
cholesterol level. If it indicates if you have a high blood 
cholesterol, you maybe need to do something about your diet or 
your exercise and so forth.
    Senator Durbin. I have heard this many times. Go ahead.
    Dr. Murano. So the same way, we use that analogy. It may 
not be the perfect analogy. The salmonella microbial test is 
our indicator, to look more closely. What we do now is when a 
plant--we do this test and we find that the salmonella levels 
exceed a certain standard that was established when the HAACP 
plan was first implemented, we go into the HAACP plan because 
HAACP and sanitation are the process controls that are going to 
ensure that the food will be as safe as possible.
    Senator Durbin. I follow your answer. I would like to ask 
as a favor if you would take a look at the legislation Senator 
Harkin and I introduced, S. 2013, the Meat and Poultry Pathogen 
Enforcement Act, which we hope will give even more tools to do 
this job effectively.
    I have one last question. Mr. Bost, your answer to Senator 
Cochran's question about the adequacy of the WIC program, have 
you taken into consideration the increased cost to the program 
within the last year when you say you will be able to meet the 
national needs?
    Mr. Bost. Yes, we believe we will, when you look at the 
amount that is in the contingency fund. We believe, as I said, 
the request can serve up to 8 million persons per month. This 
is unprecedented. And I would be really surprised if we hit 
that amount.
    Senator Durbin. The amount of $4.387 billion for WIC, 
appropriated in fiscal year 2002, was supposed to support an 
anticipation of 7.6 million people. It now looks like it will 
support participation of 7.4 million because of an increase in 
food costs. And this falls below the January 2002 participation 
level, which was 7.5 million. And so I hope that as you are 
making these calculations, and rightfully with pride noting 
historic levels of funding for WIC, that you will also note 
that you are dealing with rising food costs and rising 
participation at the same time.
    Mr. Bost. Absolutely. Again, Senator, I want to make sure 
that we are clear. I am talking about the President's proposal 
in terms of 2003, and that is what you are talking about?
    Senator Durbin. Yes.
    Mr. Bost. Yes, I believe that I would be very surprised if 
we were not able to meet it.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. I hope we can keep in close contact.
    Mr. Bost. Absolutely. We track this and look at those 
numbers, like I said, on an almost monthly basis to see where 
we are. And if anything changes I will be the very first to 
come and talk with you.
    Senator Durbin. Thank you very much. Thank you, Mr. 
Chairman.
    [The following questions were not asked at the hearing, but 
were submitted to the Agency for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

               targeted slaughter epidemiological surveys
    Question. The President's budget proposes an increase of $1.2 
million to conduct targeted slaughter epidemiological surveys, in 
coordination with other Federal agencies.
    What portion of the total funding for this pilot project is being 
provided by FSIS?
    Answer. The $1.2 million FSIS is requesting for the project will 
fund all the sampling, laboratory, and survey costs related to the 
project. Other agencies will incur only the incidental costs associated 
with the staff time by employees participating in the project.
    Question. Please provide detailed information on the objectives, 
length of time, and amount needed for future years?
    Answer. This project is expected to require $1.2 million in funding 
each of the next 3 years. Assuming the $1.2 million requested in fiscal 
year 2003 remains in FSIS's base appropriation, no additional funds 
will be required after fiscal year 2003.
    The over-all objective of the project is to establish an integrated 
surveillance system with APHIS and our public health partners providing 
ante-and-post mortem data on animal diseases and emerging pathogens. An 
initial working group with APHIS will be formed this year to prioritize 
and determine how best to link this project with data collection 
systems already in place at APHIS and FSIS. First, the work group will 
analyze existing databases in FSIS, APHIS and CDC to determine how a 
coordinated information system could be developed utilizing existing 
surveillance and inspection systems and databases. An expert system 
will be designed that will provide aggregate data that can be studied 
in real time. Confidentiality of data will be addressed and processes 
to ensure that will be put in place.
    During the first year the objective is to have data already 
collected to be able to be used in real time by epidemiologists for 
local, regional, national and seasonal trends in animal and human 
health. The first year will include a joint study with APHIS NAHMS, FDA 
NARHMS and CDC to plan in-plant surveys to potentially link with the 
next NAHMS study (which usually includes on-farm pathogen surveys). 
Data collected in sentinel plants for each slaughter class that NAHMS 
studies would enhance understanding and control of pathogens and other 
hazards. If successful, studies in sentinel plants for each slaughter 
class could be rotated on a 3-to-5 year basis in parallel with NAHMS 
studies to provide meaningful baseline and trend information from the 
farm through the to where product leaves the plant.
    Project funding would be used primarily for increased sampling of 
animals/raw products for analyses, laboratory costs, microbial and 
chemical epidemiological studies of pathogens, travel, and meetings 
with partners and stakeholders to develop the demonstration project. 
The development of software to integrate Federal animal health and food 
safety data systems is part of the project as is epidemiological and 
surveillance training of field veterinarians.
    The third year of the project would include an extensive evaluation 
process and a second NAHMS-linked study.
    Question. Does this conflict or overlap with NARMS, NAHMS?
    Answer. No conflict is intended. A Blue Ribbon Task Group that 
included experts from APHIS, FDA, FSIS, AVMA, and other public and 
private groups plus a public meeting process developed this project 
proposal. The project will make use of their existing databases and 
FSIS' data to develop an expert system. In addition, FSIS would augment 
their work by collecting needed diagnostic pathology, microbiology, 
anti-microbial resistance, residue analyses, serology and gross 
pathology data that epidemiologists need to provide early warning 
surveillance system to detect emerging animal and human pathogens, 
disease trends and additional animal heath and food safety baseline 
data. Slaughter facilities are a concentrating point for monitoring 
food animal diseases and residue and for detecting emerging pathogens. 
The integrated data system would provide real-time scientific data for 
science-based risk analysis.
                    school breakfast start-up grants
    Question. I worked to continue funding last year for my State of 
Wisconsin to encourage schools to participate in USDA school breakfast 
programs. Test results have shown on more than one occasion that a 
nutritional breakfast each morning greatly increases students' ability 
to learn. Please provide an update on the effectiveness of these start-
up grants. How many school districts have participated?
    Answer. In accordance with the provisions contained in the fiscal 
year 2001 Agriculture Appropriations Act, the Food and Nutrition 
Service entered into a Grant Agreement with the Wisconsin Department of 
Public Instruction (WDPI) to implement a breakfast program outreach 
project. During fiscal years 2001 and 2002, $500,000 was provided to 
WDPI for grants to schools wishing to start programs. In fiscal year 
2001, this funding enabled 105 new schools in 56 school districts to 
join the School Breakfast Program. Approximately 17 percent of the 
enrolled children at those schools received a breakfast on an average 
day.
    Question. Does the USDA believe that the expansion of school 
breakfast start-up grants to other States would result in increased 
participation in USDA school breakfast programs nationwide?
    Answer. While expansion of breakfast start-up grants to other 
States would probably result in some small increased participation in 
the School Breakfast Program (SBP), we do not believe that this is an 
effective way of reaching more children with the Program. As you know, 
we administered a series of breakfast outreach grants from fiscal years 
1990 through 1996. During this period, a significant number of schools 
joined the SBP, to the end that currently approximately 77 percent of 
the schools that offer the National School Lunch Program (NSLP) now 
offer the SBP. However, since only 28 percent of the number of children 
participating in the NSLP participate in the SBP, we believe that 
efforts to bring more children into the SBP should be primarily focused 
on children in current SBP schools. In this regard, the Administration 
has identified SBP expansion as a current priority. Among our 
activities under this priority are partnerships with national advocacy 
organizations that are geared toward bringing more children into the 
SBP and development and distribution of informational materials for 
local school officials and parents.
    Question. Please provide an update on these start-up grants. How 
many school districts have participated? How does the number of 
applications for fiscal year 2002 compare to fiscal year 2001?
    Answer. In fiscal year 2001, the Food and Nutrition Service 
provided $500,000 to the Wisconsin Department of Public Instruction 
(WDPI) to implement a breakfast program outreach project. This funding 
was, in turn, provided by WDPI to schools wishing to start programs. 
This funding enabled 105 new schools in 56 school districts to join the 
School Breakfast Program. Approximately 17 percent of the enrolled 
children at those schools received a breakfast on an average day.
    WDPI has received requests for fiscal year 2002 funding from an 
additional 34 schools in 25 different school districts. WDPI is 
currently reviewing these requests and will be awarding funds to 
approved schools within the next several months.
                    wic electronic benefits transfer
    Question. Please provide an update on the implementation of the 
Electronic Benefits Transfer system, funds in the President's budget 
available specifically for this purpose, and information on the current 
number of States participating or preparing for participation.
    Answer. FNS has requested $14 million in the fiscal year 2003 
budget for multi-purpose grants to support the development of WIC State 
management information systems, nutrition education, breastfeeding 
promotion, and to continue supporting WIC State agencies pursuing 
Electronic Benefits Transfer (EBT). Of this amount, up to $6 million 
will be dedicated to support EBT development. FNS awards annual EBT 
grants to WIC State agencies through a competitive solicitation and 
proposal process. WIC EBT grants are intended for up-front design, 
development, and implementation, with the understanding that on-going 
operations must be sustainable within the State agency's nutrition 
services and administration (NSA) grant. Currently there is one 
statewide operational WIC EBT system (Wyoming), two operational pilots 
(Nevada and Ohio), three State agencies with plans to launch systems in 
2002 (Texas, New Mexico, and Michigan), and six State agencies in the 
planning phase (Connecticut, Maine, Massachusetts, New Hampshire, New 
Jersey, Rhode Island).
                       wic childhood immunization
    Question. I worked to continue funding last year for my State of 
Wisconsin to encourage schools to participate in USDA school breakfast 
programs. Test results have shown on more than one occasion that a 
nutritional breakfast each morning greatly increases students' ability 
to learn.
    Please provide information on the report requested in the fiscal 
year 2002 appropriations bill regarding agency responsibilities for 
childhood immunization. What steps have been taken to ensure that while 
WIC providers are playing a role in improving immunization rates among 
children, these activities are not interfering with the core WIC 
objectives?
    Answer. In response to the Committee's directive in its report 
accompanying the fiscal year 2002 Agriculture, Rural Development, Food 
and Drug Administration and Related Agencies Appropriations Act, the 
Department submitted, on February 15, 2002, a copy of a WIC-
Immunization Action Plan. That plan, developed jointly with the Centers 
for Disease Control and Prevention (CDC) and five other partner 
organizations, delineates agency responsibilities for carrying out 
activities necessary to improve immunization rates of children 
participating in WIC. Working collaboratively, the partner 
organizations are making significant progress in addressing the 
objectives contained in the plan.
    USDA and DHHS are working together to implement this plan using 
existing resources. For example, as directed by the Executive 
Memorandum of December 11, 2000: Improving Immunization Rates for 
Children at Risk, a standardized procedure for immunization screening 
and referral using a documented immunization record will be implemented 
in WIC by October 1, 2002. The cost of local level assessments and 
referrals remain WIC-allowable costs. CDC will fund training and 
educational materials necessary for WIC to implement this new 
procedure. The training takes places this summer. CDC also funded a 
study that evaluated the effectiveness of WIC's new standardized 
procedure.
    The Department has worked hard to ensure that WIC's role in 
immunization screening and referral activities allows WIC to 
effectively fulfill one of its core objectives to serve as an adjunct 
to health care without sacrificing other core objectives such as 
nutrition education. For example, WIC's new standardized procedure for 
screening and referral was specifically developed to be efficient in 
terms of time savings, simplicity, and accuracy for WIC staff. In 
addition, a videoconference is being developed for State WIC Directors 
and Immunization program managers that will identify the roles and 
responsibilities of WIC and Immunization programs and define key 
features of successful coordination. The goal of the workshop is to 
promote strategies that enhance the public health goals of both WIC and 
immunization programs, reduce barriers to service in both programs, and 
empower mutual program beneficiaries to achieve optimal nutritional 
well-being and up-to-date immunization status.
                            wic food package
    Question. Please provide an update on the Department's activities 
to develop a food prescription rule that takes into consideration 
ethnic and cultural sensitivities.
    Answer. FNS is working on a proposed rule that would take into 
consideration, among other issues, ethnic and cultural sensitivities. 
We expect to publish this proposed rule sometime this fiscal year.
                  wic farmers market nutrition program
    Question. Please provide an update on how this program is currently 
being administered, including how many States are participating or have 
submitted applications, compared to previous years.
    Answer. The WIC Farmers' Market Nutrition Program (FMNP) is usually 
administered at the State level by either the State agriculture 
department or the health department (WIC Program). In addition, any 
Federally-recognized Indian Tribal Organization is eligible to 
administer the FMNP. The Food and Nutrition service provides cash 
grants to State agencies who must administer their programs in 
accordance with regulations established at 7 CFR Part 248.
    The FMNP is currently authorized in certain areas of 40 States: 
Alabama, Alaska, Arkansas, the Chickasaw Nation, California, 
Connecticut, District of Columbia, Florida, Georgia, Guam, Illinois, 
Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, 
Minnesota, Mississippi, Mississippi Choctaw, Missouri, New Hampshire, 
New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Osage 
Tribal Council, Pennsylvania, Pueblo of San Felipe, Rhode Island, South 
Carolina, Tennessee, Texas, Vermont, Washington, West Virginia and 
Wisconsin. In fiscal year 2001, 41 State agencies participated in the 
FMNP, the additional State being Louisiana. Louisiana declined to 
continue operations in fiscal year 2002.
    Currently, five State agencies (Arizona, Five Sandoval Indian 
Pueblos, Hawaii, Montana, and Puerto Rico) submitted fiscal year 2002 
State Plans to begin FMNP operations.
                senior farmers' market nutrition program
    Question. Please provide an update on the expenditure of the $10 
million provided through CAP in fiscal year 2002. Include in your 
answer the number of participating States, the number of applications 
received, and the funding amounts requested and received.
    Answer. The Food and Nutrition Service received 43 grant 
applications, of which 27 received grant awards to participate in the 
Seniors Farmers' Market Nutrition Program in 2002.
    The information is provided for the record.
    [The information follows:]

                FISCAL YEAR 2002--SFMNP GRANT APPLICANTS
                              [In dollars]
------------------------------------------------------------------------
                                             Requested        Offered
------------------------------------------------------------------------
Successful SFMNP Grant Applicants:
    Alabama.............................       2,161,400         633,169
    Alaska..............................         100,000          45,316
    Arkansas............................         100,000          72,288
    California..........................       2,000,000         906,325
    Chickasaw Nation of Oklahoma........         143,280          94,767
    District of Columbia................         280,000         129,641
    Hawaii..............................         378,000         342,591
    Illinois............................       1,225,000         859,410
    Indiana \1\.........................          59,850          45,316
    Iowa................................         560,000         282,958
    Louisiana...........................         672,000         311,964
    Maine...............................         971,000         671,405
    Maryland............................         900,000         153,581
    Massachusetts.......................         275,000          47,781
    Minnesota...........................         100,000          66,760
    Missouri \1\........................         504,000         366,558
    Montana.............................          99,000          40,785
    Nebraska............................         495,000         147,910
    New Hampshire.......................          78,000          64,315
    New York............................       2,000,000       1,139,018
    Ohio................................       1,318,000       1,194,536
    Oregon..............................       1,280,000         838,351
    Pennsylvania \1\....................       2,000,000         906,325
    Tennessee...........................         600,000         260,783
    Vermont.............................          43,000          29,270
    Virginia............................         415,000         251,537
    Washington..........................         389,510          97,339
                                         -------------------------------
      TOTALS............................      19,147,040      10,000,000
                                         ===============================
Unsuccessful SFMNP Grant Applicants:
    Connecticut \2\.....................         111,300               0
    Florida \2\.........................         260,000               0
    Grand Traverse (ITO) \2\............          13,500               0
    New Jersey \2\......................       1,000,000               0
    North Carolina \2\..................         133,091               0
    Osage Tribal Council \2\............          55,000               0
    South Carolina \2\..................         850,000               0
    West Virginia \2\...................       1,200,000               0
    Five Sandoval \3\...................          80,000               0
    Kentucky............................         224,500               0
    Nevada..............................         128,250               0
    New Mexico..........................         120,000               0
    Rhode Island........................         400,000               0
    San Felipe \3\......................          32,320               0
    Wichita Affiliated Tribes \3\.......          35,000               0
    Wisconsin...........................         612,500
                                         -------------------------------
      TOTAL.............................       5,255,461              0
------------------------------------------------------------------------
\1\ New State agency for 2002.
\2\ Participated in SFMNP during 2001 pilot year.
\3\ Federally Recognized Indian Tribal Government or Organization.

    Question. How does the number of applications and funding for 
fiscal year 2002 compare to fiscal year 2001? If the number of 
applications and funding requests has increased in fiscal year 2002, 
please explain the Secretary's decision to not use CCC funds to 
supplement the program.
    Answer. In 2001, the Food and Nutrition Service (FNS) received 45 
grant applications requesting a total of $18.2 million, of which 36 
grants were awarded totaling $15 million. In 2002, FNS received 43 
grant applications requesting a total of $24 million, of which 27 
grants were awarded totaling $10 million. Currently, the option of 
using CCC funds to supplement the $10 million in appropriated funds is 
still being considered.
    Clerk's Note: Section 4402(a) of the Farm Bill (Public Law 107-171) 
provided an additional $5 million in CCC funds for the Senior Farmers' 
Market Program.
    Question. What are some of the expressed benefits of the SFMNP, as 
well as some of the expressed problems?
    Answer. Over 400,000 low-income seniors and 3,700 farmers benefited 
directly from the pilot Seniors Farmers' Market Nutrition Program 
(SFMNP) in 2001. The SFMNP provides seniors with fresh, nutritious, 
unprepared locally grown fruits and vegetables. Additionally, the 
program provides limited financial support to small farmers at 
participating farmers' markets, roadside stands, and community 
supported agriculture programs across the country.
    A major problem expressed by the SFMNP grantees is the lack of 
administrative funding. In addition, the program is only available on a 
limited basis.
                        studies and evaluations
    Question. In recent years, FNS has received funding to conduct 
program evaluation and operational research. In fiscal year 2002, FNS 
received $3 million for this purpose. Is that amount sufficient to meet 
FNS' specific needs? If not, what types of projects are not being 
pursued, either within FNS or through other agencies, and what would 
the cost of pursuing those projects be?
    Answer. The overall studies and evaluation budget, considering both 
FNS and ERS funding has been cut by about 50 percent in the past 
decade, taking into account appropriations and the effects of 
inflation. The $3 million appropriated to FNS for performance 
measurement and program assessment in fiscal year 2002 is not 
sufficient to meet the needs of the nation's domestic food assistance 
programs by itself. In addition to the funds appropriated to FNS, 
Congress appropriated just over $9 million to the Economic Research 
Service for studies and evaluations of food assistance programs. These 
funding levels are equal to the levels requested in the President's 
fiscal year 2002 budget. Earlier this year, as we have done in previous 
years, FNS identified several areas where ERS could be helpful in 
meeting high priority policy information and research needs, and 
recommended that ERS use funds from the $9 million appropriation for 
this purpose. To the best of our knowledge, ERS has not yet made final 
funding decisions for this year, but early indications suggest that 
they will accept some, but not all, of FNS' recommendations.
    The major priorities identified by FNS and requested of ERS include 
a Congressionally-requested study of the cost of preparing school meals 
and the adequacy of the school meal reimbursement rates, an examination 
of the reasons for interstate variation in the cost of the WIC food 
package, and an assessment of the burden and accuracy of various food 
stamp reporting options and redetermination strategies. To do an 
effective job on these studies, to provide information on which program 
managers can rely for decisions for each of these important topics, 
more funding would be needed. While these projects would address the 
programs' most pressing needs, there is a range of other projects that 
would be worth pursuing to ensure that the Nation's multi-billion 
dollar annual investment in nutrition assistance is used as effectively 
as possible.
    Question. I have been informed that FNS does not feel their 
requests to ERS to conduct program evaluation of FNS-sponsored 
demonstration projects, or other special projects funding with FNS 
grants to States, receives high enough priority by ERS. FNS feels that 
such projects would be more useful if they received more rigorous 
evaluation to test for outcomes and potential for dissemination to 
other locales. Do you have any suggestions for how this situation could 
be rectified?
    Answer. FNS and ERS approach the research needs of the food 
assistance programs from significantly different perspectives. FNS is 
keenly interested in sharply focused studies that address specific 
operational and policy needs of Federal, State, and local program 
administrators and the clients we serve. ERS' interests are not without 
merit, but they frequently differ from those of the line agency 
responsible for policymaking and program administration.
    Question. What sort of input does FNS provide into the ERS study 
and evaluation agenda for the domestic food assistance program? What 
sort of feedback does FNS receive from ERS on how this information has 
been utilized?
    Answer. Since fiscal year 1998, we have provided ERS 
recommendations endorsed by the Under Secretary and the Agency 
Administrator identifying what we believe to be the most critical 
policy information and research needs for the domestic food assistance 
programs for which we are responsible. These recommendations are based 
on the cumulative experience of Agency staff, managers, and executives, 
as well as that of our State and local partners and other stakeholders. 
The recommendations typically identify a set of research questions, 
explain their relevance to current or potential policy discussions, and 
outline a suggested approach.
    ERS staff has met with FNS staff to clarify our recommendations. 
FNS staff has also participated in periodic ERS-sponsored conferences 
on research priorities, along with staff from other Federal and State 
agencies, academic institutions, community organizations, and private 
research groups. FNS has not participated in ERS' decision-making 
process for projects to be undertaken, nor have we received more than 
informal feedback on the factors that affected those decisions.
    Question. Please provide information on any gaps that FNS feels may 
exist in FNS related research currently underway by ERS.
    Answer. FNS is primarily interested in study, evaluation and 
research results that help the nation's food assistance program 
managers address operational and policy issues. We have not been 
successful in persuading ERS to invest significant resources to assess 
how to improve program integrity in the Child and Adult Care Food 
Program and the accuracy of the school meal application and eligibility 
determination process. We are concerned that our inability to obtain 
prompt research support for these emerging issues has, at best, delayed 
the Agency's ability to assess current levels of performance, test 
alternative solutions, and implement effective controls.
                 the child and adult care food program
    Question. In previous years, the Agriculture Appropriations bill 
has included a general provision eliminating the requirement that 
eligible children receive Title 20 funds in order to receive the CACFP 
meal subsidy. This allows proprietary centers to participate in CACFP 
if at least 25 percent of the children they serve are eligible for a 
free or reduced price meal. This language has been taken out in the 
President's fiscal year 2003 budget.
    How many children received the CACFP meal subsidy during last year 
prior to the aforementioned language being inserted into an 
appropriations bill? How many children have been served each year the 
Title 20 restriction has been lifted?
    Answer. In fiscal year 2000, the year before the aforementioned 
language was inserted in the Agriculture Appropriations bill, 
approximately 372,000 children were served in child care centers that 
participated in CACFP because at least 25 percent of the children they 
served qualified for Title XX funds. Beginning in December of fiscal 
year 2001, for-profit centers were allowed to participate if 25 percent 
of the children they served were eligible for free or reduced price 
meals. Since that time, the number of children attending for-profit 
centers that participate in CACFP rose to 433,000 in fiscal year 2001 
and 457,000 in fiscal year 2002.
    Question. Please explain why the Administration chose to re-impose 
these restrictions in the fiscal year 2003 budget.
    Answer. While the Department is not opposed to extending Child and 
Adult Care Food Program (CACFP) eligibility to for-profit child care 
centers, we do not believe that extending it on a year-to-year basis is 
in the best interest of over all program management and operations. 
Inherent in that approach is an uncertainty as to ongoing program 
availability for such centers. This results in a reluctance on the part 
of State administering agencies to make the significant commitment of 
resources necessary to outreach to these centers, properly train them 
and provide oversight of their operations to help ensure their 
successful operations, if these efforts may have only short term 
benefit.
                      food program administration
    Question. I have been informed that resources available for program 
administration have been reduced in real terms over the past several 
years while the Federal nutrition assistance programs have increased in 
both size and complexity.
    What functions would be strengthened or initiated if additional 
resources for program administration were to be made available?
    Answer. With additional resources, FNS proposes to undertake the 
following initiatives:
Proposal 1. Enhanced Program Integrity in FNS Programs
    To meet the goal of improved stewardship of Federal funds, FNS 
would allocate $4,500,000 to improve the oversight of both the Food 
Stamp and Child Nutrition programs. In the Food Stamp Program, 
$3,500,000 will provide up to 45 additional staff years to support 
improvements in payment accuracy. In the Child Nutrition Programs, FNS 
will devote $1 million for 13 additional staff years to combating clear 
instances of sponsor fraud and mismanagement and safeguard the proper 
expenditure of significant Federal dollars.
Proposal 2. Financial Statement Audits
    To meet the goal of improved stewardship of Federal funds, FNS 
would assign $1,100,000 to fund and administer contracts with Certified 
Public Accounting firms for the mandated financial statement audits of 
FNS programs. FNS has established a track record as one of the few 
agencies to achieve an ``unqualified'' (``clean'') opinion on its 
financial statement audit while completing the statements and the audit 
on time. FNS is now ready to contract out this annual requirement 
formerly performed by the Office of the Inspector General.
Proposal 3. Increase Financial Systems Integrity and Accountability
    To meet the goal of improved stewardship of Federal funds, FNS 
would devote substantial resources to FNS mission-critical systems that 
are dedicated to improving benefit accuracy and reducing fraud. For 
example, FNS would incorporate upgrades to the Agency's information 
systems into an integrated data warehouse/analysis system capable of 
providing access to both program and financial data for enhanced 
analysis and tracking capabilities.
                            ams--cranberries
    Question. Wisconsin is the nation's leading producer of 
cranberries. Over the past 2 years, prices have fluctuated greatly and 
have threatened the profitability of growers in my State and throughout 
the country. Can you please share with this Subcommittee what impact 
last year's cranberry marketing order had on prices to growers?
    Answer. In the 2000/01 crop year, the cranberry industry, through 
the Cranberry Marketing Committee, used a producer allotment program 
authorized under its Federal marketing order and set a total allotment 
at 5.468 million barrels. Government purchases of cranberry products 
over the 2000/01 and 2001/02 crop years are estimated at more than 
500,000 barrels. For the 2000/01 crop year, sales increased by 847,157 
barrels, including government purchases. In addition, per capita 
consumption of processed cranberries increased from 1.60 pounds in 
1999/2000 to 1.87 pounds in 2000/01.
    A key sign that a turnaround in the industry may be occurring is 
the rapid reduction of inventory. This reduction in inventory is due to 
the producer allotment program, government purchases, and increased 
sales. The producer allotment program has resulted in a reduction in 
acres harvested from a high of 37,500 acres in 1999/2000 to 34,300 
acres in 2001/02.
    While prices have fallen from a high of $65.90 per barrel in 1996 
to $17.20 per barrel in 1999, prices have improved slightly during the 
past two crop years when the producer allotment program was used and 
inventories were reduced to more manageable levels. The reported price 
of $22.90 per barrel for the 2001/02 crop year is still below the 
estimated cost of production of about $30-35 per barrel.
    Question. Can you also provide this Subcommittee with information 
on how membership for the Cranberry Marketing Committee is selected? 
Included in your answer will you please provide information on the 
names of all handlers and the percentage that each has in the national 
market?
    Answer. Committee membership and the selection process are 
established under the Federal marketing order for cranberries grown in 
ten States, codified in 7 CFR Part 929.
    There are eight members on the Committee. Each member has an 
alternate. Four members and their alternates represent the cooperative 
marketing organization that handles over two-thirds of the production 
during the year nominations are made. Three members and their 
alternates represent ``independent'' growers who are not members of the 
major cooperative. The nominated members and alternates must be growers 
or employees, agents, or duly authorized representatives of growers. A 
public member and alternate are nominated by the seven Committee 
members after they have been selected by the Secretary.
    The 10-State production area is divided into four districts. Each 
district is represented by at least one member and one alternate member 
from that district. District 1 includes the States of Massachusetts, 
Rhode Island and Connecticut; District 2, the State of New Jersey and 
Long Island, New York; District 3, the States of Wisconsin, Michigan, 
and Minnesota; and District 4, the States of Oregon and Washington.
    Since promulgation of the Order in 1962, Ocean Spray Cranberries, 
Inc., has had four members and alternates on the Committee. At least 
one of the four members must be from either Oregon or Washington. Ocean 
Spray's members are nominated by Ocean Spray's board of directors, who 
normally nominate one grower from each of the four districts.
    The independent growers in Districts 1, 2, and 3 gather in 
locations central to their respective districts to elect one member and 
alternate representative for each district. The independent growers in 
District 4 may attend and participate in the District 3 meeting. 
District 4 growers who do not attend the meeting have an opportunity to 
cast mail votes for the nominee of their choice.
    The nomination meetings and Ocean Spray's board meeting are held in 
May of every even-numbered year. The nominations, along with brief 
biographical information on each nominee and a statement of each 
nominee's willingness to serve, must be submitted to the Department of 
Agriculture (USDA) by July 1. The Secretary approves the nominees by 
August 1, the beginning of the term of office.
    Ocean Spray has always handled more than two-thirds of the 
industry's production and, thus, has always had four members and 
alternates on the Committee. Last year, Ocean Spray's production fell 
just below the two-thirds minimum requirement to seat four members. 
However, the marketing order does not provide guidance on how to 
proceed if this should happen. The Committee has initiated a formal 
rulemaking process to amend the marketing order. Amendments are 
proposed to increase membership and to provide for a ``swing member'' 
who represents the segment of the industry with 50 percent or more of 
the production. USDA will expedite consideration of those amendments. 
Until the Order is amended, USDA has determined that the current Ocean 
Spray members and alternates should continue to serve on the Committee. 
The process to nominate independent members and alternates will 
continue, as scheduled, in May.
    Cranberry handlers are: Ocean Spray Cranberries, Inc., Northland 
Cranberries, Inc., Decas Brothers Sales Company, Cliffstar Corporation, 
Clement Pappas Co., and Hiller Cranberry Sales. Information on each 
handler's percentage of national production is proprietary. The six 
handlers listed above account for approximately 97 percent of annual 
U.S. cranberry production. Small growers handle the remaining 3 
percent. These small growers also handle their own production.
                           codex alimentarius
    Question. In fiscal year 2002, we provided FSIS with additional 
funds to be used on Codex Alimentarius activities.
    Please provide an update on how those funds are being spent, and 
how the activities being funded are expanded from previous years.
    Answer. In fiscal year 2002 the U.S. Codex office continued to plan 
and develop educational and technical outreach activities to other 
nations in support of U.S. trade and food safety positions in Codex. 
The additional funds were folded into the existing budget for outreach 
activities and allowed for expanded programs.
    The U.S. Codex Office developed and presented a Technical Seminar 
in Hong Kong for countries from the Far East on January 17-19, 2002. 
The workshop featured presentations on the World Trade Organization, 
Risk Analysis, Equivalence, Traceability, the Labeling of Biotech Foods 
and the General Standard for Food Additives. There were 47 participants 
in the session including representatives of 14 countries as well as 
foreign nationals employed by the Foreign Agricultural Service and 
Agriculture Attaches.
    On February 11-13, the U.S. Codex Office hosted a strategic 
planning meeting in Washington, D.C., for the Codex Coordinating 
Committee for Latin America and the Caribbean (CCLAC). This meeting 
stemmed from previous U.S. outreach efforts in the region. The meeting, 
attended by 10 Latin countries and Canada, included extensive 
discussion on a strategic plan for the region and on developing closer 
cooperation between North and South America on Codex issues. The U.S. 
Codex Office is planning and anticipating conducting a Technical 
Seminar for South Asia in India in September. This seminar will include 
presentations on how to form a National Codex Committee structure.
    Question. Please explain why funding for Codex Alimentarius 
decreased in this budget, including any effects this decrease will have 
on activities funded previously.
    Answer. The decrease in funding available for Codex Alimentarius in 
the fiscal year 2003 President's Budget is attributed to the 
Administration's proposal to charge the full cost of Federal employee 
and health pension benefits to Agencies. FSIS will experience a net 
decrease in these costs in fiscal year 2003; for Codex this decrease 
amounts to $30,000.
    Salmonella A recent article in the Washington Post outlined the 
number of turkeys processed at various plants throughout the country 
that tested positive for Salmonella. The article stated that the 
average contamination rate in 38 plants tested by USDA last year was 13 
percent. While there is an argument that turkey products aren't eaten 
raw, and proper cooking eliminates the risk of salmonella, USDA has set 
limits for chicken processors.
    Question. What is the salmonella limit for chicken processors? Is 
it the USDA's belief that there is a higher percentage of raw or rare 
chickens eaten than turkeys of turkey products? Why isn't the 
salmonella limit for turkeys the same as the one for chickens? Answer. 
Chicken processors are required to have 12 or less salmonella positive 
samples within a set of 51 samples. Due to the timing of data made 
available through microbiological baseline studies for Salmonella in 
chicken, and the time involved in associated rulemaking, the Agency has 
so far only developed a standard for chicken. The article goes on to 
say that USDA is waiting for the National Academy of Sciences to finish 
a study of bacteria standards before deciding whether to set limits for 
turkeys.
    Question. When do you anticipate the completion of this study? Once 
the study is completed, what is the time frame for USDA to make 
decision on salmonella limits for turkey processors? Answer. We 
anticipate that the study will be completed in April of 2003. 
Subsequent to the completion of the study, the time frame for a 
decision on establishing performance standards for salmonella in 
turkeys is dependent both upon the information contained in the study 
and the public comment requirements of the rule making process.
    Question. Please explain the potential impact, if any, this will 
have on ensuring a safe meat supply to the public. Include other 
options available for USDA to ensure unsafe meat doesn't reach public 
supermarkets. Answer. The decision of the U.S. Court of Appeals 
represents a change in the way USDA uses one of its enforcement tools. 
While the ruling affects USDA's ability to withhold, suspend, or 
withdraw inspection from plants that fail to meet Salmonella 
performance standards, it does not restrict USDA's ability to take 
these actions in plants that are not producing safe products. The 
Salmonella performance standard continues to be part of USDA's Pathogen 
Reduction/HACCP inspection system. Salmonella testing in grinding 
plants will be used in conjunction with other information to verify 
that Pathogen Reduction/HACCP systems and sanitation systems are under 
control. If a plant fails two sample sets, USDA will immediately 
conduct an in-depth review of the plant's food safety systems and 
identify corrective actions to be taken. Failure by the plant to 
address any deficiencies will result in suspension or withdrawal of 
inspection, which would shut down plant operations.
    Question. Is the USDA appealing the ruling? If so, please provide 
an update on the current situation. Answer. USDA has no plans at this 
time to appeal the ruling. The ruling should not be misinterpreted as 
undercutting USDA's authority to take action against plants that 
produce unsafe meat and poultry products. Salmonella testing in 
grinding operations has not stopped. FSIS continues to use Salmonella 
testing as one way to verify whether either the Hazard Analysis and 
Critical Control Point (HACCP) system or sanitation operating 
procedures (SSOPs) implemented by industry are successfully controlling 
hazards reasonably likely to occur. FSIS inspectors are charged with 
such verification activities. Agency inspectors use record reviews, 
visual monitoring of plant personnel, and testing for Salmonella as 
tools to determine whether HACCP and sanitation systems are working. 
The Agency will continue to take action against those plants that fail 
to produce safe product.
               fsis automated corporate technology suite
    Question. As stated in your testimony, the President's budget 
requests an increase of $14.5 million to implement an integrated 
computer system.
    Please provide the estimated cost of this system over the next 5 
years.
    Answer. The budget year and out-year costs of the FSIS Automated 
Corporate Technology Suite are as follows:
    Fiscal year 2003--$14.5 million; fiscal year 2004--$10.5 million; 
fiscal year 2005--$10.3 million; fiscal year 2006--$11.8 million; 
fiscal year 2007--$10.5 million.
    Question. Will this system be integrated with other systems in the 
Department?
    Answer. FACTS will provide FSIS with the capability to link to 
other systems both inside and outside the Department.
                              cattle ticks
    Question. How is APHIS utilizing the funding increase in fiscal 
year 2002 for the cattle tick eradication program?
    Answer. APHIS used the funding increase in fiscal year 2002 to hire 
two inspector positions (1 in Brownsville; 1 in Laredo), and purchase 9 
vehicles and radio equipment necessary to update the system.
    Question. What actions are you taking in response to your workforce 
utilization study of Cattle Fever Tick program?
    Answer. We are still reviewing the workforce utilization study and 
considering implementing several of the recommendations.
                   fruit fly exclusion and detection
    Question. Please provide an update on how APHIS is utilizing the 
additional funding provided in fiscal year 2002 to address the 
inequitable distribution of funds for fruit fly trapping in California 
and Florida and what efforts exist to address the olive fruit fly 
problem.
    Answer. We will transfer the additional funds to the California 
Department of Food and Agriculture (CDFA). With these funds, the CDFA 
will increase trapping densities in counties such as Los Angeles and 
Orange County that are high-risk because past fly finds. They also will 
increase trapping densities in counties that are high-risk because of 
their urban-rural interface (in other words, where rural areas are 
being developed for urban use). To conduct these additional trapping 
activities, the CDFA will purchase additional traps and lures. In 
addition, they will direct $150,000 of the increase toward the 
purchase, deployment, and monitoring of Olive Fruit Fly traps in olive 
production counties in California. These counties include Shasta and 
Tehama Counties to the north, and Tulare and Kern Counties to the 
south. The CDFA has met several times with industry groups to determine 
ideal sites for these traps and will provide oversight and technical 
expertise to local entities, who will actually set the traps.
                               screwworm
    Question. How is APHIS utilizing the fiscal year 2002 funding 
increase to ensure that screwworm reintroduction into the U.S. does not 
occur?
    Answer. The Screwworm increase in fiscal year 2002 was limited to 
covering pay costs, which allows us to continue progress in creating a 
barrier against screwworm far from U.S. shores. APHIS has eradicated 
the pest throughout Central America into Panama. The barrier will be in 
place before the end of fiscal year 2002, then the program will convert 
to maintaining the barrier in Panama to ensure that screwworm does not 
reintroduce itself in the U.S. The cooperative programs have left 
behind an infrastructure to prevent future reintroduction of the pest 
and to monitor for other animal diseases emerging in the region. APHIS 
is also supporting other countries efforts to eradicate screwworm. For 
example, APHIS' cooperative screwworm production facility in Mexico is 
selling sterile flies to Jamaica for an eradication effort there in 
fiscal year 2002.
                 trade issue resolution and management
    Question. Please provide an update on how APHIS is utilizing the 
fiscal year 2002 funding increase to safeguard the U.S. from foreign 
pests and disease threats and support marketing opportunities for our 
agricultural products worldwide.
    Answer. APHIS is utilizing the fiscal year 2002 increase in the 
TIRM line item on both trade facilitation and safeguarding initiatives. 
APHIS attaches overseas facilitate trade by working with host countries 
to remove trade barriers or work out protocols for importing U.S. 
products. They also are able to intervene when shipments are detained 
at ports of entry, resolving the issues and preventing the loss of 
products. In fiscal year 2002, APHIS is placing additional personnel in 
Asia. A veterinarian will go to China to respond to the increasing 
number of trade issues affecting U.S. products there and build 
relationships to improve our knowledge of their pest and disease 
situation. We are also opening an office in Southeast Asia to better 
respond to emerging plant and animal health issues in this region. A 
single APHIS attache in South Korea has had to respond to the myriad 
trade issues in 14 different countries. Adding another office will 
relieve some responsibility, allowing us to provide more efficient 
service for animal and plant health issues.
    APHIS will also hire two animal commodity specialists to work with 
private and public sector stakeholders. These specialists will enhance 
export activities and will serve as resources for gathering information 
needed for risk assessments. We will also hire five risk analysts to 
conduct risk assessments at the Agency's Center for Epidemiology and 
Animal Health in Fort Collins, Colorado. These risk analysts will 
evaluate the risks associated with regionalization requests from other 
countries. In addition, APHIS will enhance the use of E-GOV with 
customers for the collection and maintenance of data and records used 
in the evaluation and regionalization process for import of animals and 
animal products from foreign countries. APHIS also will enhance 
harmonization efforts with international organizations and trading 
partners for veterinary biologics. This increased level of funding will 
allow APHIS to resolve export animal health trade barriers as quickly 
as possible and safeguard U.S agricultural commodities.
                              aquaculture
    Question. The Congress provided additional funding in fiscal year 
2002 to allow APHIS to continue telemetry and population dynamics 
studies on depredating species of wildlife in the Southeast. Please 
provide an update on these activities.
    Answer. During fiscal year 2002, APHIS completed the second year of 
a satellite radio-telemetry study to determine the regional and 
continental movements of double-crested cormorants that impact 
aquaculture farms in the southeastern United States. Additionally, we 
initiated the first season of a multi-year satellite radio-telemetry 
study to determine the regional and continental movements of American 
white pelicans that impact aquaculture in the southeastern United 
States. The data from these studies will allow APHIS biologists to (1) 
evaluate current measures and develop new strategies for managing 
depredations by these two species on southeastern aquaculture farms; 
(2) determine the role that pelicans play in transmitting fish diseases 
among aquaculture ponds and farms; and (3) determine regional and 
continental movements of cormorants and pelicans and develop regional 
and flyway-based management plans for each of these species.
                           biological control
    Question. How is APHIS utilizing the fiscal year 2002 funding 
increase for biological control activities?
    Answer. We requested the increase for pay costs in anticipation of 
the January 2001 Federal pay raise and for annualization of the January 
2001 pay increase. We are using the funds to maintain the current 
activities which have incurred higher costs due to the Federal pay 
raise.
                              pest threats
    Question. Please provide an update on the status of growing pest 
threats in Washington State related to abandoned apple orchards; 
southern pine beetle infestations in Tennessee which may pose sudden 
and serious fire hazards; and the discovery of the Columbia Rootrot 
Nematode which may threaten potato exports to Mexico.
    Answer. When apple orchards reach the end of their useful life, 
growers normally remove and replant them. Currently, there is an 
oversupply of many types of apples, and growers may not find it 
economically practical to replant these orchards. The costs of removing 
orchards is between one and two thousand dollars per acre. Therefore, 
growers may choose to abandon these orchards until market conditions 
improve. Abandoned orchards can serve as sources of insects and 
diseases, since normal pest management is not carried out at these 
properties. In many cases, pests and diseases may move from abandoned 
orchards to actively managed orchards and increase pest and disease 
problems there. At this time, we are not aware of any exotic pest 
problems associated with abandoned orchards. Also, we believe that this 
problem is best addressed by State officials.
    Regarding the southern pine beetle (SPB) infestations, the Forest 
Service (FS) is the main USDA agency addressing that issue. In fiscal 
year 2001, nine States had outbreak-level populations, and losses in 
the southern United States were approximately $300 million. That year, 
the FS funded suppression projects on State and private lands in 
Alabama, Florida, North Carolina, South Carolina, Tennessee, and 
Virginia. The FS also funded projects on Federal lands in Alabama, 
Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North 
Carolina, South Carolina, Tennessee, and Texas. The most severely 
affected area was the southern Appalachian Mountains from southern 
Virginia into Kentucky, North Carolina, and South Carolina. They expect 
SPB populations to remain high in 2002 and 2003, and the FS plans to 
spend $1.8 million in each of these years to continue infestation 
treatments and other management applications. Their goal in these 
activities is to reduce beetle populations to a low level as rapidly as 
possible and to prevent further tree mortality.
    In the spring of 2001, several potato shipments originating in the 
United States were intercepted at the Mexican border because of the 
presence of Columbia Rootrot Nematode. Based on this and other 
interceptions, we began an investigation in late 2001 to determine if 
there was a problem in the way we ship our potatoes to Mexico. That 
investigation is still in progress. Currently, Mexico is not accepting 
potatoes from several States because of the perceived phytosanitary 
risks. However, we and our counterparts in Mexico are committed to 
reaching a resolution that will enable resumed export of our potatoes 
to Mexico. In fact, Agriculture Secretaries from both countries signed 
a statement in a Memorandum of Understanding affirming their desire to 
retain the historical market access of U.S potatoes in Mexico. Both 
sides hope to resolve this issue soon.
    Question. What is the Department doing to establish new procedural 
and/or treatment methods to allow shipments of Hawaii fruit during 
winter months without jeopardizing pest introductions to mainland 
agriculture?
    Answer. Currently, APHIS uses both vapor heat and irradiation to 
treat different types of commodities leaving Hawaii for the mainland 
U.S. to prevent pests from harming mainland agriculture. Using these 
methods, Hawaii producers can ship papayas, mangoes, and other tropical 
fruits during the winter months. When a shipper or treatment facility 
would like to add commodities they can send, we work with them to 
determine the best pest risk mitigation method. Any new requests must 
go through a thorough risk assessment, including public comment period, 
before APHIS will begin a program.
    APHIS also is encouraging other methods to increase the quantity of 
fruit Hawaii can market in the U.S. For example, the Medfly is one of 
the pests hindering shipments of fruits from Hawaii. APHIS supports 
establishing a Medfly control program and establishing Medfly-free 
zones to allow producers in those areas to ship to the mainland without 
treatment.
    Question. Please provide an update on the Departments efforts to 
combat Plum Pox, Pierces Disease, Asian longhorned beetles, and Mormon 
crickets and grasshoppers.
    Answer. Since fiscal year 2000, we have been working with the 
Pennsylvania Department of Agriculture to eradicate Plum Pox Virus in 
that State. Our efforts are showing excellent results. We removed all 
known infected orchards promptly and took steps to reduce the disease's 
spread. In doing so, we can assure stone fruit growers that PPV does 
not currently exist in the U.S. nursery system. However, emergency 
program activities--consisting of surveys, tree removal, site 
preparation, and replanting--will need to continue to verify 
eradication. We expect to be able to declare eradication by fiscal year 
2006.
    APHIS is leading a cooperative program to develop strategies that 
growers can utilize in managing the Glassy-winged Sharpshooter (GWSS), 
a vector of Pierce's Disease (PD). We initiated a pilot study in Kern 
County, California, in fiscal year 2001 to develop effective plant pest 
management strategies at the farm level. Because citrus is the primary 
host plant during the winter months, our strategy involves the 
treatment of citrus with a foliar insecticide whenever GWSS are in the 
groves during late winter. This combined with follow-up treatments with 
a systemic insecticide has maintained GWSS populations at non-
detectable levels throughout the year. This GWSS population reduction 
is essential in the management of PD in the multicrop agricultural 
area. By reducing GWSS populations in citrus, there are fewer disease 
vectors that can return to the vineyards in the spring when the vines 
again become a satisfactory food source. In areas where PD has been 
identified in the vineyards, this reduction in GWSS helps break the 
disease-vector-host triangle and reduces the potential for large 
numbers of insects to vector the disease. Results from the initial year 
of work indicate that area-wide management strategies that bring 
growers in an area together to work in a systematic fashion can 
significantly reduce the incidence of this insect.
    In fiscal year 2002, we will continue to monitor the impact of 
control strategies of GWSS in the study area and include investigations 
into the potential of using biological control strategies that are less 
intrusive in the environment. We will continue to search for softer, 
environmentally friendly compounds to reduce populations of GWSS. We 
will also focus on disease mitigation in identified vineyards to 
provide methods to reduce or prevent the spread of PD by the vector. 
Also in fiscal year 2002, we will begin transferring the strategies 
developed in the pilot study in fiscal year 2001 to the County 
Departments of Agriculture to begin the implementation of an area-wide 
management program. This technology transfer is being accomplished with 
the same cooperative spirit that characterized and contributed to the 
effectiveness of the earlier pilot study. We have entered into a 
cooperative agreement with the California Department of Food and 
Agriculture to conduct statewide surveys for GWSS. This effort is 
essential to understanding the current infestation and any new areas 
that may become infested. Regulatory programs are now in place that aid 
in preventing the spread of the insect from infested counties in the 
southern part of the State to those counties in the north. Also, 
treatment programs are in place that have successfully eradicated the 
insect whenever found in the urban areas in these northern counties. 
These new insect finds are typically associated with ornamental plants 
used in these urban areas. APHIS has provided funds to State and 
Federal scientists who are studying novel approaches to managing PD. 
These approaches are more long-term in nature, and are aimed at 
developing and providing disease resistant varieties of grapes, the 
possibility of treating diseased vines with a curative material, and 
investigating the potential for biological control of the disease with 
similar but competitive organisms.
    We are continuing an Asian Longhorned Beetle (ALB) eradication 
program in New York State (NYS) and Illinois. Since this program began 
in fiscal year 1997, we have drastically reduced ALB populations in 
areas that had been heavily infested and the tree removal effort has 
made outstanding progress. Our goal is to eliminate the ALB from the 
U.S. and prevent future introductions without jeopardizing the $116 
billion trade market between the U.S. and China. However, the beetle 
continues to spread in metropolitan areas and infested trees continue 
to be found in the regulated areas. By fiscal year 2006, we expect the 
program to consist almost exclusively of surveys to ensure that we have 
eradicated this pest. We plan to achieve eradication in Illinois in 
2008 and in NYS in 2009.
    In fiscal year 2002, APHIS will continue to focus services on 
technical assistance and evaluation surveys on rangelands in all or 
part of the 17 Western States. This will include providing technical 
expertise and maps based on survey results. We will conduct Grasshopper 
and Mormon cricket treatments in Utah, as necessary, under the cost-
share provisions contained in the Plant Protection Act. In all other 
States, the focus of treatments will be on Federally managed lands, to 
be funded either by APHIS or the Federal land management agency. We 
will give priority to rangeland areas that border cropland. APHIS plans 
to publish a final Environmental Impact Statement in May 2002 that 
examines the environmental effects of suppression alternatives 
available to the agency, including the use of insecticides and a no-
action alternative. We will use it for planning and decision making and 
to inform the public about the environmental effects of APHIS' 
rangeland grasshopper and Mormon cricket suppression activities. Now 
that that process has been completed, site-specific environmental 
assessments will be required for all programs. In addition, APHIS must 
prepare a biological assessment (BA) in accordance with the provisions 
of the Endangered Species Act, to determine whether a proposed action 
is likely to adversely affect listed species, proposed species, or 
designated critical habitat. APHIS is also fulfilling its obligations 
under the Endangered Species Act by consulting with the responsible 
Federal Agencies on almost 300 species. This consultation is expected 
to last through the fiscal year.
                            golden nematode
    Question. How is APHIS utilizing the fiscal year 2002 funding 
increase for golden nematode control efforts in New York?
    Answer. We are using the fiscal year 2002 funding increase for 
golden nematode control efforts in several ways. First, we have 
increased the cooperative agreement with Cornell University to 
accelerate development of potato varieties resistant to the Ro2 race, 
to develop a DNA probe to rapidly identify golden nematode Ro2 suspect 
cysts, develop a Polymerase chain reaction (PCR) test to determine 
resistance in new potato varieties. Second, we have increased survey 
efforts for the Ro2 race of golden nematode. Lastly, we are replacing 
equipment and making badly needed repairs to the Westhampton, New York, 
facility where we provide space to our State cooperators. Equipment 
includes a tractor for soil sampling, a dual-wheel pickup truck, and an 
equipment trailer. Repairs include replacement of a heating and air 
conditioning unit; doors, windows, and repairs to two buildings, 
perimeter fencing, and electrical system repairs.
                           imported fire ant
    Question. How is APHIS utilizing the fiscal year 2002 funding 
increase for imported fire ant control management and eradication?
    Answer. In fiscal year 2002 APHIS is providing funds to 18 States 
to conduct surveys that locate imported fire ant (IFA) infestations. 
The States are as follows: Arizona, California, Delaware, Hawaii, 
Kentucky, Maryland, North Carolina, New Mexico, Nevada, Oklahoma, 
Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, and West 
Virginia. In addition, we are providing funds in fiscal year 2002 to 13 
States situated entirely or partially within the IFA quarantine area 
(Alabama, Arkansas, California, Florida, Georgia, Louisiana, 
Mississippi, North Carolina, New Mexico, Oklahoma, South Carolina, 
Tennessee, and Texas) for quarantine enforcement.
    We are also working with the States to prevent further IFA spread 
by enforcing the Federal Quarantine and cooperating with IFA-infested 
States to regulate articles such as nursery stock and soil-moving 
equipment. In fiscal year 2002, we will work with State cooperators to 
jointly conduct road enforcement blitzes in Tennessee, North Carolina, 
and other States to inspect nursery material moving out of the 
quarantine area. If shipments are found to be in violation of the 
quarantine, we will return them to their point of origin, or treat or 
destroy them. Violators will be subject to a fine. We will work with 
State cooperators to conduct nursery compliance agreement oversight in 
fiscal year 2002. In addition, we are revising the regulations in 7 CFR 
301.81 to add fipronil as an approved treatment for nursery stock and 
grass sod. APHIS is also working with States to mass-rear and release 
phorid flies, a promising biological control agent. We expect to have 
sufficient phorid flies available to carry out releases in three States 
in May 2002, and in eight additional States by September 2002.
                             noxious weeds
    Question. Please update the Committee on how the fiscal year 2002 
funding increase for noxious weeds is increasing the availability and 
distribution of biological control organisms used in the integrated 
weed management system.
    Answer. APHIS is devoting the entire increase to establish a 
cooperative agreement to work with the Nez Perce Bio-Control Center 
(NPBC) to increase the availability and distribution of biological 
organisms used to control such invasive weeds as yellow starthistle 
(Centaurea solstitialis), spotted and diffuse knapweeds (C. maculosa & 
C. diffusa), Dalmatian toadflax (Linaria dalmatica), and additional 
invasive rangeland plants. NPBC is operated by the Nez Perce Native 
American Tribe, located in Lapwai, Idaho.
    Through the agreement, NPBC will carry out the following major 
field activities: (1) continue ongoing efforts to establish rearing 
nurseries to increase the availability of biological control organisms 
to be used alone or in integrated weed control programs, (2) provide 
regional technology transfer seminars to Cooperative Weed Management 
Area (CWMA) partners in Idaho and to other cooperators throughout the 
region, (3) work to distribute biological control organisms throughout 
targeted weed infestations on privately managed lands, and (4) monitor 
target and nontarget effects at selected release sites to document the 
impact of biological controls. NPBC also will function as a centralized 
clearinghouse for information and other resources, and will develop and 
manage a standardized biological control agent release and tracking 
system database. Work under the agreement began in the second quarter 
of fiscal year 2002 and will continue through the second quarter of 
fiscal year 2003.
                             pink bollworm
    Question. Please provide an update on how APHIS is utilizing 
additional funding provided in fiscal year 2002 for pink bollworm 
eradication activities in support of sterile moth release in the San 
Joaquin Valley of California and in Texas and New Mexico.
    Answer. With an increase of approximately $300,000, we have 
increased our cost-share for the Texas Pink Bollworm (PBW) Eradication 
Program from 10 percent in fiscal year 2001 to 23 percent in fiscal 
year 2002. The total funding level for the Texas program will the same 
as in fiscal year 2001. This program consists of heavy-density 
trapping, pheromone trapping, planting Bacillus thuringiensis (Bt) 
cotton, and applications of PBW pheromones for mating disruption. Also 
in fiscal year 2002, we have redirected approximately $330,000 from 
eastern States to begin funding trapping and control activities in New 
Mexico. This was based on a survey conducted over the last couple of 
years that indicated an absence of PBW populations in Eastern States 
while infestations continue to be extremely high in Western States. In 
addition, our sterile release program continues to successfully protect 
cotton in the San Joaquin Valley (SJV) of California. Our trapping of 
fewer native moths in SJV in fiscal year 2001 as opposed to fiscal year 
2000 demonstrates a reduced risk to cotton in that area. Also, we will 
continue to monitored the over 10,000 traps in the SJV to detect any 
new PBW introductions.
    Question. How will the fiscal year 2003 requested funding decrease 
for pink bollworm affect eradication programs in Arizona, California, 
New Mexico, and Texas?
    Answer. The requested funding decrease will not significantly 
affect eradication programs in Arizona, California, New Mexico, and 
Texas. We can afford to absorb this slight reduction because we have 
improved our rearing efficiency and maintained production using less 
diet material, thereby reducing cost. Despite this decrease, we will 
still be able to sufficiently protect cotton and control the pink 
bollworm population in the San Joaquin Valley through the cooperative 
sterile release program, as well as cultural practices (crop rotation, 
stalk destruction, alternate planting dates, and irrigation 
restrictions).
                      wildlife services operations
    Question. What is the status of the national rabies management 
plan?
    Answer. During fiscal year 2001, several States, including Vermont, 
New York, Pennsylvania, Ohio, and West Virginia, participated in a 
coordinated oral rabies vaccination program--ORVP. The objective of the 
ORVP was to prevent raccoon rabies from spreading into uninfected areas 
in the Midwest and further into Ontario and Quebec. Our current 
strategy consists of the distribution of fish-scented baits, mostly by 
air, that contain vaccine effective in orally immunizing raccoons in 
defined barriers. To prevent raccoon rabies from spreading beyond the 
barrier, immune barriers were created at strategic locations along the 
leading edge of the current distribution of raccoon rabies.
    In fiscal year 2001, we assisted cooperators by distributing 
approximately 3 million oral rabies vaccine baits over an 8,500 square 
mile area in Ohio, West Virginia, Pennsylvania, New York, and Vermont. 
To date, these oral vaccination efforts show good promise for 
containing raccoon rabies. Additionally, in fiscal year 2001 we 
participated in several smaller raccoon ORVP and rabies surveillance 
projects in Florida, Alabama, Virginia, Maryland, and Massachusetts. 
APHIS continues to cooperate with the State of Texas to prevent the 
canine strain of rabies from re-emerging in coyotes in the U.S. The 
Agency is also an important funding and operational partner with the 
Texas Department of Health in ORVP efforts to contain gray fox variant 
of rabies in west central Texas.
    In fiscal year 2001, we completed several key steps toward 
formulating a viable National Rabies Control Plan. We completed a 
programmatic environmental assessment with no negative public comment 
on the preferred alternative which relies on strategic use of oral 
vaccination to control terrestrial wildlife rabies. We also completed a 
comprehensive business plan for the next three years. To complete phase 
one of the rabies control plan, we will establish a barrier in Alabama, 
Florida, and in Maine. This would result in a vaccination barrier 
integrated with land features to contain the spread of raccoon rabies. 
Once contained, we will begin work toward eliminating the raccoon 
strain along portions of the existing ORV barrier in Ohio, West 
Virginia, Pennsylvania, and New York. The program will continue to push 
the gray fox variant back to the Rio Grande and provide spot treatment 
if reinfection occurs from Mexico.
    Question. How much do you plan to spend for rabies control efforts 
in fiscal year 2002?
    Answer. In fiscal year 2002, APHIS will use $11.75 million in 
appropriated funds for rabies control efforts and an additional $6.6 
million in emergency funds. This will allow us to control gray fox 
rabies in Texas; skunk rabies in Wyoming and California; and raccoon 
rabies in Florida, New York, Ohio, Pennsylvania, Tennessee, Virginia, 
West Virginia, and Vermont. In fiscal year 2002, we must continue to 
extend the barrier in West Virginia south through western Virginia, 
terminating at the higher elevations of the Appalachian Mountains in 
eastern Tennessee. In addition, we must extend the northern portion of 
the barrier from Vermont into New Hampshire, and including parts of 
eastern Maine, to protect the eastern terminus of the existing barrier; 
failing to do so will compromise the current ORV barriers leading to 
the westward spread of raccoon rabies through mountain gaps or through 
river valleys that serve as high risk movement corridors for the 
disease.
    Question. Please provide an update on additional funding you 
received in fiscal year 2002 to complete an environmental impact 
statement for blackbird control in North Dakota and operations in South 
Dakota and Louisiana.
    Answer. With the increase, we developed and distributed a scoping 
document to approximately 500 agencies, organizations, and individuals 
in December 2001. We will use scoping information to write a draft 
Environmental Impact Statement (EIS). We expect to complete a final EIS 
in the fall and publish a record of decision by the end of December 
2002.
    Question. How is APHIS utilizing additional funding provided in 
fiscal year 2002 for predator control activities in Montana, Wyoming, 
and Idaho?
    Answer. We are using this increase to maintain the additional 
permanent and temporary employees hired for predator control work; to 
buy additional vehicles, equipment and trapping supplies; and increase 
aerial operations to enhance our ability to respond to predator attacks 
on livestock in Montana, Idaho, and Wyoming.
    Question. What is the status of APHIS' efforts to increase the 
safety of its aerial operations?
    Answer. In fiscal year 2002, APHIS continued to comply with the 
recommendations set forth in the 1998 Aviation Program Safety Review. 
We are using the $1 million increase to convert piston-driven 
helicopters to turbine engine helicopters; modify agency-owned aircraft 
to bring them into air worthiness compliance; and acquire additional 
leased aircraft. We continue to standardize pilot salaries and grades; 
provide aviation management training for managers; increase flight crew 
training; and conduct recurrent check rides and safety inspections. In 
addition, we are implementing the revised Aviation Operations Manual, 
paralleling Federal Aviation Administration's (FAA) Part 135 
regulations, and are developing an aviation safety program.
    The review committee estimated that the total cost of replacing 
equipment and training personnel will be more than $4 million, 
excluding recurring annual costs such as maintenance and monitoring. 
The fiscal year 2002 Appropriations Act included an additional $1 
million for aerial safety (for a total of $3.2 million) and the fiscal 
year 2003 President's Budget includes an increase of $1.6 million (for 
a total of $4.8 million) that will allow APHIS to fully implement the 
recommendations of the Aviation Operations' activities. We will 
complete the committee's recommendations by December 2002.
    All Agency and contract aerial operations will then parallel FAA 
regulations and standards, which include mandatory safety, training, 
and maintenance personnel; written and approved operations and training 
manuals; hazardous training materials; specific aircraft maintenance, 
and modification standards; and specific requirements for aerial crew 
training and check rides. Aerial operations are critical to oral rabies 
vaccination, predation management efforts including those involving 
wolf capture activities, migratory bird surveys, and activities to 
protect threatened and endangered species. APHIS' first priority is to 
ensure employee safety while conducting these activities.
    Question. How have you utilized the additional funding provided in 
fiscal year 2002 for wildlife management activities in Texas?
    Answer. We will use the additional funding to reduce the inequity 
of Federal funding versus cooperative funding. To increase the Federal 
cost share, we will reimburse cooperative employees monthly travel 
expenses.
    We also will establish two Assistant District Supervisor positions. 
We plan to fill these positions on or about June 1, 2002, in our 
College Station and Fort Worth districts. We also plan to fund a 
minority student in the wildlife management curriculum at Texas A&M at 
Kingsville, TX. This program would begin in the summer of 2002, and is 
dependent upon student qualifications and availability. We will use the 
remaining funds for the purchase of new computers, replacement 
vehicles, and miscellaneous other new and replacement equipment. The 
additional funds reduced the inequity of the Federal funding versus 
cooperative funding ratio.
    Question. What actions have you taken to meet the growing demands 
of controlling predatory, nuisance, and diseased animals in South 
Dakota?
    Answer. In South Dakota (SD), APHIS provides a grant to reimburse 
SD Game, Fish, and Parks (SDGFP) for expenditures involved with 
delivering wildlife damage management services. Our funding in this 
program was increased in fiscal year 2002 from $300,000 to $600,000. 
All wildlife damage management activities in SD are carried out under 
the direction of SDGFP with its own employees and equipment and 
additional funding provided by the State of SD. It is anticipated that 
the Federal funding increase in fiscal year 2002 will enhance the 
State's ability to control predatory, nuisance, and diseased animals in 
SD.
    Question. What actions has APHIS taken to establish a beaver 
control cost share program with interested parish governments in 
Louisiana?
    Answer. The Louisiana Wildlife Services program has amended all 
existing cooperative agreements for beaver control with Parish 
governments to cost share 25 percent of the project costs, including 
purchases of new beaver control equipment, supplies to replace outdated 
equipment, and salary increases to bring employees up to national 
standards. Wildlife Services is also in the process of notifying other 
Parish governments who have expressed interest concerning beaver 
control efforts. The directed Federal funds will cover approximately 
seven full-time Parish beaver control projects. Additional funds would 
be needed to expand the cost sharing program for beaver control to 
other Parishes or to cost share the maximum authorized amount of 50 
percent with Parish governments.
    Question. Please provide an update on how APHIS is using additional 
funding provided in fiscal year 2002 to improve the wildlife services 
facilities near Stuttgart, Arkansas.
    Answer. APHIS will use the funds for improvements to existing 
office/storage facility near Stuttgart District Office. Our office is 
located on property owned by USDA Agricultural Research Service (ARS). 
Presently, we are negotiating a long-term interagency agreement between 
ARS and APHIS before initiating the improvement project.
    Question. Will these improvements be complete in fiscal year 2002?
    Answer. If the interagency agreement is completed, and there are no 
complications with the subsequent bidding process, we anticipate that 
the appropriated funds will be obligated and construction implemented 
prior to the end of fiscal year 2002. The project could be completed 
within 4 to 6 weeks after construction begins.
    Question. What actions has APHIS taken to address increased bird 
strikes to aircraft in Florida?
    Answer. Florida has over 76 airports for which we provide limited 
technical assistance. Florida airports have the second highest rate of 
reported wildlife strikes in the nation and these strikes have 
increased annually, more than quadrupling over the last 10 years. At 
present, APHIS lacks the resources to specifically assign employees to 
work exclusively with airports; therefore, we are limited in responding 
to requests for assistance in a timely manner.
    Question. The fiscal year 2003 budget proposes a decrease of almost 
$10 million for Wildlife Services Operations to allow cooperators to 
assume a larger share of the cost of wildlife management programs. How, 
specifically, will this decrease affect ongoing activities?
    Answer. The budget request calls for cooperators to assume a larger 
share of the cost of wildlife management programs such as predator 
damage to livestock throughout the United States, migratory bird and 
other wildlife damage to crops and aquaculture, invasive species 
damage, property damage, and protection of threatened and endangered 
species. If the cooperators assume the larger share, the ongoing 
activities would continue, but through cooperator rather than Federal 
funding. If cooperators do not assume a greater share, we would reduce 
218 staff years to implement the $10 million reduction and reduce 
program activities accordingly.
    Question. What will be the impact for providing resolutions to 
wolf/livestock conflicts, as well as to resolutions to other human/
wildlife conflicts that Wildlife Services provides on private lands in 
Wisconsin?
    Answer. Unless cooperators assume a larger share of the cost of 
wildlife management programs such as predator control damage to 
livestock throughout the United States, ongoing program activities that 
Wildlife Services provide would be reduced.
    Question. What is the comparison of Federal funding to cooperative 
funding for the Wildlife Services Operations program, by state? Please 
provide total dollars spent for each State in fiscal year 2001, along 
with the Federal and cooperative percentages of total program costs for 
each State.
    Answer. The following table contains the amount of net Federal 
appropriated funds provided to States and State cooperator funds 
contributed in fiscal year 2001. The Federal dollars fund Congressional 
directives, human health and safety work, protection of endangered 
species, migratory bird work, and basic program infrastructure costs. 
The Federal amounts listed do not include agency support costs, program 
investment activities--such as management information systems and 
certain agreements, regional office support, and field program delivery 
charges--such as National Finance Center costs, directly paid at the 
headquarters level.

                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                                         Fiscal year 2001           Percent of
                              State                              --------------------------------  state/program
                                                                      Federal       Cooperative        cost
----------------------------------------------------------------------------------------------------------------
Alabama.........................................................        $334,502        $200,402            37.5
Alaska..........................................................         187,651         666,179            78.0
Arizona.........................................................         485,347         590,440            54.9
Arkansas........................................................         256,673          267336            51.0
California......................................................       1,466,235       4,318,816            74.7
Colorado........................................................         745,013         470,306            38.7
Connecticut.....................................................           8,844           1,500            14.5
Delaware........................................................           1,822               0               0
District of Columbia............................................              75               0               0
Florida/Puerto Rico.............................................         327,552         510,579            60.9
Georgia.........................................................         648,850         151,161            18.9
Guam............................................................         173,555       2,021,067            92.1
Hawaii..........................................................         439,382       1,256,747            74.1
Idaho...........................................................       1,251,668         628,123            33.4
Illinois........................................................         111,033         498,068            81.8
Indiana.........................................................          95,781          69,870            42.2
Iowa............................................................          18,220          34,504            65.4
Kansas..........................................................          73,543         101,317            57.9
Kentucky........................................................         161,648         348,310            68.3
Louisiana.......................................................         394,418         389,946            49.7
Maine...........................................................         137,362         284,161            67.4
Maryland........................................................         214,334          97,446            31.3
Massachusetts...................................................         178,604         113,948            38.9
Michigan........................................................         830,043         271,998            24.7
Minnesota.......................................................         239,700          62,022            20.6
Mississippi.....................................................         854,591         784,943            47.9
Missouri........................................................         383,091         221,994            36.7
Montana.........................................................       1,430,363       1,785,566            55.5
Nebraska........................................................         331,883         441,688            57.1
Nevada..........................................................         773,891         931,310            54.6
New Hampshire...................................................         520,240         200,217            27.8
New Jersey......................................................         127,432         172,672            57.5
New Mexico......................................................       1,232,293       1,019,658            45.3
New York........................................................         858,311         414,230            32.6
North Carolina..................................................         197,103       1,248,883            86.4
North Dakota....................................................         777,549         528,793            40.5
Ohio............................................................       1,034,159         121,419            10.5
Oklahoma........................................................         746,175       1,863,786            71.4
Oregon..........................................................         939,705       1,204,729            56.2
Pennsylvania....................................................         158,038         239,875            60.3
Rhode Island....................................................           3,287           4,700            58.8
South Carolina..................................................         179,865         612,018            77.3
South Dakota....................................................         321,896       1,120,104            77.7
Tennessee.......................................................         161,649         721,683            81.7
Texas...........................................................       4,478,608       6,701,024            59.9
Utah............................................................         935,580       1,026,649            52.3
Vermont.........................................................         626,041          54,175             8.0
Virginia........................................................         348,703         962,706            73.4
Washington......................................................         547,722       1,531,117            73.7
West Virginia...................................................       2,178,464         298,332            12.0
Wisconsin.......................................................         525,505       1,293,903            71.1
Wyoming.........................................................       1,238,322         596,567            32.5
                                                                 -----------------------------------------------
      TOTALS....................................................      30,692,321      39,456,987            56.2
----------------------------------------------------------------------------------------------------------------

    Question. How does APHIS propose to enforce cooperating agencies 
and individuals to assume a larger share of the costs for projects that 
are currently underway?
    Answer. If cooperators do not assume a greater share, APHIS would 
reduce its program contribution to more closely match that of the 
States. At the full $10 million level, assuming no increase in 
cooperative funding, we would reduce 218 staff years.
                              wolf control
    Question. Depredating wolves pose a significant threat to the U.S. 
livestock industry.
    What is the status of growing wolf populations in the U.S., and 
APHIS' actions to address them?
    Answer. Wolf populations continue to expand across the northern 
United States from the Great Lakes region to the Pacific Coast. In 
addition to naturally occurring populations moving south into the 
United States from Canada and east from Minnesota into Wisconsin and 
Michigan, the Federal government has reintroduced wolves into portions 
of the northern Rocky Mountains and into New Mexico and Arizona. APHIS 
has increased efforts to address increasing wolf populations on 
livestock. We have active programs in Minnesota and the Northern Rocky 
Mountains to reduce wolf depredation; however, more wolves in Wisconsin 
and Michigan and reintroduction into Northern Rocky Mountain region, 
New Mexico, and Arizona have outdistanced our capacity to adequately 
address wolf impacts.
    Question. Please provide the Committee with information on various 
regional problems with wolves, such as gray wolves in the Northern 
Rockies, timber wolves in the upper Midwest, and Mexican wolves in the 
Southwest.
    Answer. Wolves in the upper Midwest are expanding at a rate that 
has led the U.S. Fish and Wildlife Service (FWS) to consider removing 
them from the Federal endangered and threatened species list. FWS has 
taken regulatory actions to reduce the protection status of wolves in 
Wisconsin and Michigan from ``endangered'' to ``threatened.'' Until the 
protection status changes, the wolf population will continue to grow in 
Minnesota with significant numbers of wolves moving east primarily into 
Wisconsin with a secondary movement into Michigan.
    APHIS cooperates with the FWS by providing wildlife damage support 
to Mexican wolf recovery efforts in New Mexico and Arizona. The entire 
Mexican wolf population, approximately 30 animals in New Mexico and 
Arizona, is comprised of reintroduced animals and resulting pups. We 
are not providing direct assistance to livestock producers in New 
Mexico and Arizona; however, with the continued implementation of the 
Mexican wolf recovery program and its potential impact to livestock 
producers, we anticipate increased demand for our wildlife service 
programs in these States. During fiscal year 2001, we responded to 
approximately 30 requests for assistance involving Mexican wolf-human 
encounters and livestock predation.
    Question. How does the number of livestock killed by wolves and the 
number of wolf complaints that you have received in the Great Lakes 
States compare to the Western States over the last 10 years?
    Answer. The gray wolf in the Great Lakes region is naturally 
occurring and expanding. The number of livestock killed or injured by 
wolves in the Western Great Lakes States over the last 10 years was 
8,211 animals, compared to 1,932 in the three western States of Idaho, 
Montana and Wyoming. The number of complaints in the three Great Lakes 
States over the last 10 years that required WS technical assistance was 
1,072, compared to 188 in the three western States.
    Question. If the numbers lean heavily toward the Great Lakes 
States, why is there so much funding disparity between these two 
geographic regions for Wildlife Services to respond to wolf depredation 
on livestock?
    Answer. Unless funds are in the form of a Congressional Directive 
with specific language, WS does not have a line-item for wolf control 
in our budget. The budget increase for WY, MT, and ID ($1 million in 
fiscal year 2001 and $300,000 in fiscal year 2002) were directives from 
Congress earmarked for predator control in general, and not 
specifically for wolf depredation on livestock. Although some of these 
funds are being used to address wolf damage to livestock, overall they 
are being used to deal with other major predators of livestock in these 
three States (i.e., coyotes, mountain lions, bears).
    Question. The Committee understands that the Wildlife Services 
program in Wisconsin has a Federal budget of $5,000 to address wolf 
depredation to livestock. What is your long-term strategy for 
addressing the problem of wolves killing livestock in Wisconsin?
    Answer. With a Federal budget of $5,000 to conduct wolf depredation 
management activities in Wisconsin, the Wildlife Services program is 
providing statewide technical assistance to citizens experiencing wolf 
damage. The Wisconsin WS' office long term goal is to work 
cooperatively with the State and local producers to determine the most 
cost-effective strategy to alleviate livestock damage while ensuring 
public acceptance of wolves, resulting in support of wolf recovery.
    Question. What efforts has APHIS made to evaluate the distribution 
of funds for wolf depredation activities in all States?
    Answer. Because APHIS cannot fund new projects out of existing 
funding without negatively impacting other parts of the program, new 
programs are encouraged to seek additional funding from other sources. 
In Idaho, Wyoming, and Montana, Congress has recognized that additional 
funds are needed to off-set the impacts wolves have on livestock and 
other routine programs and has provided additional funds for ``predator 
control'', including wolves. These additional funds were directed for 
those States so as not to negatively impact the other State programs. 
In some States the Department of Interior has chosen to provide limited 
funding for this purpose (New Mexico/Arizona--$100,000, and Idaho/
Wyoming/Montana--$100,000). These funds help cover APHIS' efforts in 
controlling wolves.
                            invasive species
    Question. The Committee is concerned about the number of invasive 
species that continue to threaten American agriculture. Please identify 
the most significant invasive species threats facing Wisconsin and what 
the Department is doing to eradicate or manage these species?
    Answer. The most significant invasive species threats facing 
Wisconsin are zebra mussel, multiflora rose, purple loosestrife, garlic 
mustard, small hive beetle, gypsy moth, and Asian longhorned beetle. 
APHIS conducts work there for the following species:
    Purple Loosestrife.--Purple loosestrife was brought to the U.S. 
from wetland areas in Europe in the early 1800's, most likely because 
of its ornamental value. It crowds out the native plants that support 
bird and animals populations in marshy areas. It got its start in New 
England and spread rapidly north into Canada, south into Virginia, and 
west through the States bordering the Great Lakes. Currently, it can be 
found throughout the U.S. and is menacing the wetlands in the Northeast 
and upper Midwest.
    APHIS is releasing leaf-feeding beetles with the intent of 
establishing an insectary. During 1999-2001, APHIS shipped 37,000 
Galerucella leaf-feeding beetles to Wisconsin as well as several 
biocontrol organisms in fiscal year 2002.
    In fiscal year 2001, APHIS conducted natural enemy releases and 
evaluated release sites. We visited researchers at New York's Cornell 
University to observe and document rearing techniques. APHIS may 
partner with Cornell University to increase the number and availability 
of natural enemies for project participants in 15 States.
    Small Hive Beetle.--The small hive beetle is a native of South 
Africa and is a widespread pest of honey bees. It was first detected in 
Florida in 1998. The beetle has spread to seven States, including 
Georgia, North Carolina, Minnesota, Ohio, Pennsylvania, New Jersey, and 
South Carolina. In 2001, we found the small hive beetle in four 
additional States: Alabama, Maryland, Massachusetts, and Vermont.
    APHIS provides funding from the Cooperative Agricultural Pest 
Survey (CAPS) to the Wisconsin Department of Agriculture for survey of 
wood boring beetles, like Asian longhorned beetle and small hive 
beetle. There is no control or regulatory program in Wisconsin since we 
have detected no noticeable damage. The cold climate probably limits 
the beetle's ability to function.
    Gypsy Moth.--Gypsy Moth was introduced in Massachusetts in 1869. It 
is the most important hardwood defoliator in the United States. Twenty-
two States, including Wisconsin, are either partially or totally 
regulated. Historically, APHIS has conducted control programs 
cooperatively with States and other Federal agencies using contingency 
funds.
    APHIS works collaboratively with the State of Wisconsin to control 
and minimize the artificial movement of gypsy moth from regulated 
counties to other parts of the State, and the nation that are not 
regulated. APHIS also cooperates with Wisconsin and the U.S. Forest 
Service to slow the natural spread of gypsy moth and thereby delay the 
impact this insect has when it establishes itself beyond the current 
infested areas. The U.S. Forest Service conducts yearly suppression 
work in front of the natural gypsy moth line in approximately 10 
States. APHIS provided the Wisconsin Department of Agriculture with a 
grant of $35,000 in 2001 and $40,000 in 2002 from its contingency fund 
to conduct regulatory control activities.
    Asian Longhorned Beetle (ALB).--The ALB was first discovered in 
1996 in the Greenpoint neighborhood of Brooklyn, NY. We believe that 
ALB entered the United States inside solid wood packing material from 
China. In 1998, despite USDA's National Asian longhorned beetle pest 
alert campaign, a separate infestation was discovered in the Ravenswood 
area of Chicago. This discovery prompted APHIS to amend its existing 
quarantine of wood movement in infested areas and place additional 
restrictions on the importation of solid wood packing material into the 
United States from China and Hong Kong.
    APHIS is working to prevent the spread of the ALB to new areas. 
Since we began eradication activities in fiscal year 1997, we have 
drastically reduced ALB populations in areas that had been heavily 
infested and our tree removal effort has made outstanding progress. In 
addition, our regulatory program is effectively minimizing the risk of 
ALB introductions into uninfested areas such as Wisconsin. Currently, 
we are eradicating the beetle where we know it to exist and conducting 
surveys up to 25 miles around infestations to reduce chance of spread. 
These activities and ALB moving naturally less than 1.5 miles per year 
should prevent any introductions in new areas such as Wisconsin.
    Question. Please describe USDA efforts to work with foreign nations 
to help avoid the introduction of these species.
    Answer. APHIS has personnel worldwide to provide their counterparts 
with assistance in monitoring outbreaks of invasive pests and to 
control them. This helps ensure that they do not inadvertently enter 
the U.S. from these countries. APHIS has programs working with foreign 
countries and international organizations on specific pests that are 
particularly harmful to U.S. agriculture.
    APHIS has cooperative agreements with Mexico and Guatemala to 
prevent outbreaks of Medflies in the U.S. To control Medfly 
populations, the trilateral Moscamed program uses bait applications and 
the sterile insect technique. In Mexico, most serious Medfly outbreaks 
occur in the South. APHIS participates in trapping, bait applications, 
and sterile fly production there. To further move Medflies from U.S. 
shores and make the border more secure, APHIS has heightened the 
program in Guatemala. The goal of the program, using bait applications 
and sterile Medflies, is to establish a Medfly barrier at the border of 
Guatemala with Honduras and El Salvador.
    The screwworm program is another example of a successful program to 
prevent an invasive species from entering the U.S. APHIS has worked 
with the governments of Mexico, Central America, and Panama to 
eradicate the pest from all of Central America into Panama. The program 
educates local farmers to control individual outbreaks and releases 
sterile flies to completely remove the pest from the area. Now the 
program is establishing a barrier in Panama and then will focus on 
maintaining that barrier. The program has also left an infrastructure 
in Central America to prevent reintroduction of the pest.
    The tropical bont tick (TBT) program is another example of a 
successful invasive species program overseas, this one involving the 
Food and Agriculture Organization (FAO). The Caribbean program has been 
eradicating TBT from islands whose proximity to the U.S. cause an 
unacceptable risk of transferring the pest to U.S. islands, Puerto 
Rico, and possibly the mainland. The TBT carries heartwater, an 
important disease in cattle which could have devastating effects on 
U.S. industry. Through education and a series of bait applications 
followed by monitoring and surveillance, the FAO program has been able 
to declare four of the nine islands provisionally free of TBT.
             nonlethal predator control methods development
    Question. In fiscal year 2001, the Committees advised APHIS to 
begin a pilot program within its wildlife services division to 
demonstrate the effectiveness of nonlethal methods to control predating 
species. Please provide a status of this project.
    Answer. In fiscal year 2001, in cooperation with the Humane Society 
of the United States (HSUS) and Defenders of Wildlife, APHIS completed 
a protocol for pilot studies to evaluate the relative effectiveness of 
currently available nonlethal predator management methods only versus 
the integrated wildlife damage management approach APHIS uses.
    APHIS pursued cooperators in California, Idaho, and West Virginia 
to participate in the pilot studies. We cooperated with the HSUS to 
create a small compensation fund to defray the cost of predator losses 
for cooperators who solely used nonlethal assistance during the first 
year of the study. Because the study would last several years and 
require additional compensation funds, we explored the possibility of 
using commercial insurance policies as a method for covering losses. 
APHIS planned to have National Wildlife Research Center scientists 
direct the project with three to five specialists involved in each of 
the three States. However, we decided to postpone the studies due to 
lack of adequate funding to conduct them in a scientifically sound 
manner. We are considering pursuing these activities as part of our 
fiscal year 2004 budget request.
    Question. Please update the Committee on how you are utilizing 
increased funds in fiscal year 2002 to address infrastructure 
deficiencies at the National Wildlife Research Center and nonlethal 
predator control methods development.
    Answer.
    Infrastructure deficiencies.--We are using the fiscal year 2002 
appropriation increase to correct the most urgent operating and 
maintenance deficiencies. These included replacement or repair of 
roofs, windows, and ventilation; purchase of building security devices; 
implementation of energy conservation measures; and coverage of rising 
facility utility costs.
    Non-lethal Predator Control Methods Development.--NWRC is 
developing and testing several promising new non-lethal predator 
control methods, such as surgical sterilization to reduce depredation 
associated with animals provisioning their young; animal activated 
frightening devices that inhibit movement of predators into areas with 
vulnerable livestock; and several capture devices that could reduce 
reliance on padded foothold traps. We are investigating attractant 
systems, including visual, sound, and odor applications, necessary to 
support field use of these methods. We make all research results 
accessible to the public via the APHIS and Wildlife Services web sites.
    Question. What is the current status of the infrastructure 
deficiencies at the NWRC?
    Answer. We are using the fiscal year 2002 appropriation increase to 
correct the most urgent operating and maintenance deficiencies. These 
included replacement or repair of roofs, windows, and ventilation; 
purchase of building security devices; implementation of energy 
conservation measures; and coverage of rising facility utility costs.
    The new wildlife research pen complex in Fort Collins, Colorado 
will be completed in July 2002, and will more than double the potential 
output of methods for managing wildlife damage and risks. Current 
research priorities and ongoing research projects require all currently 
available financial and scientific staff resources.
                  emergency management system program
    Question. How has APHIS used increased funding for the Emergency 
Management System Program provided in fiscal year 2002 to respond to 
crisis that threaten the economic health of the animal industry?
    Answer. For fiscal year 2002, APHIS expects to place emergency 
managers in 5 of the 10 Federal Emergency Management Agency (FEMA) 
regional offices throughout the United States. These managers will 
serve as FEMA liaisons and will deal with emergency management issues 
at each region. Currently, we are reviewing and classifying these 
positions. APHIS will continue the emergency management grants program 
begun in fiscal year 2001. In fiscal year 2001, APHIS awarded 38 
grants. Of these 38 grants, APHIS awarded 31 to States, 6 to Tribal 
Nations, and 1 to a University. The objective of the grant program is 
to assist States with meeting and exceeding the National Animal Health 
Emergency Management System (NAHEM) State Standards. These standards 
were established to identify critical issues in emergency animal health 
preparedness. APHIS has recently begun the process for distributing the 
awards for fiscal year 2002.
     universal animal identification and database retrieval system
    Question. Please provide an update on the Department's pilot 
project with the Wisconsin Animal Health Consortium to create a 
universal identification and database retrieval system for tracking the 
movement of animal and animal-based food products.
    Answer. APHIS is working with the Wisconsin Animal ID Consortium to 
draft a cooperative agreement. The group has met, established a board, 
elected officers, and selected a Chief Operating Officer.
                              brucellosis
    Question. What actions is the Department taking to coordinate 
Federal, State, and private activities to eliminate brucellosis from 
bison, elk, and other wildlife in the Greater Yellowstone area?
    Answer. In fiscal year 2001, the Departments of Agriculture and 
Interior signed a Record of Decision (ROD) for a bison management plan 
for the State of Montana and the Yellowstone National Park (YNP). The 
State of Montana also published a ROD, incorporating the same bison 
management plan. While the plan does not actually focus on eradicating 
brucellosis from the Greater Yellowstone Area (GYA), it does focus on 
managing bison to minimize the risk of brucellosis transmission. APHIS' 
next step is to work with involved agencies to develop a brucellosis 
elimination plan for the GYA. For fiscal year 2002, APHIS will assist 
the States and the National Park Service (NPS) with liaison activities, 
planning, bison capture, sampling and testing, and laboratory support. 
In addition, APHIS is collaborating with the State of Montana and the 
NPS on several research projects including ones on brucella viability 
and fetal disappearance. The findings from these projects are expected 
to be useful in developing an elimination plan.
                            johne's disease
    Question. Please provide an update on the Department's coordinated 
efforts with the National Johne's Working Group and the States to 
develop national programs to ensure greater uniformity and equity among 
Johne's disease State programs.
    Answer. APHIS is continuing to participate on the National Johne's 
Working Group (NJWG). The working group consists of members from the 
Federal and State governments, universities, and biologic and livestock 
industry organizations. The NJWG has developed national programs to 
ensure greater uniformity and equity among Johne's disease State 
programs. APHIS has developed State standards for these programs. 
Program officials are using these standards to identify negative herds, 
establish positive herds interested in eliminating the disease, and 
develop criteria for herd testing.
    By fiscal year 2002, producers had enrolled 1,950 herds in State 
control program and 514 herds in State certification programs. Of the 
herds enrolled in State certification programs, 140 advanced within 
their programs to higher levels of assurance for test negative status. 
Of the 50 States, 39 have established advisory committees for Johne's 
disease with Federal representation. Eleven States are actively using 
APHIS resources including Florida, Illinois, Indiana, Kansas, Maine, 
Minnesota, New Jersey, New York, Ohio, Pennsylvania, and Wisconsin. By 
fiscal year 2003, we expect to more than double the number of herds 
advancing in Johne's certification programs.
                              tuberculosis
    Question. The spread of bovine tuberculosis could be devastating 
for U.S. cattle farmers. Please provide an update on the Department's 
survey and eradication efforts for bovine tuberculosis in Michigan and 
Texas for fiscal year 2002.
    Answer. To address bovine tuberculosis in Michigan, program 
officials have tested all 300 thousand dairy cattle in the State. In 
addition, officials are in the process of testing the State's beef 
cattle population consisting of 1 million animals. This past winter 
season, we assisted the Department of Natural Resources (DNR) with 
collecting and testing samples from the 2001/2002 hunter-killed deer 
survey in Michigan. In addition, we are working with Michigan to 
develop split State requirements. Split-state status allows a portion 
of the State to declare itself free from disease while the other 
portion remains under quarantine or modified accredited status. In 
February 2002, the State of Michigan submitted its application to APHIS 
for split-state status. We are reviewing the application.
    In addition, the Agency will provide technical and operational 
assistance to Michigan producers to prevent or reduce the transmission 
of tuberculosis between cattle and wildlife. Examples include exploring 
fencing designs that may separate livestock from wildlife and removing 
wildlife that present a threat to livestock. The Agency's National 
Wildlife Research Center is researching a model to evaluate management 
practices and potential barriers to minimize the interaction between 
wildlife and livestock.
    Presently, no herds are under quarantine for tuberculosis in the El 
Paso, Texas milkshed area. However, based on past experience, we 
anticipate at least one of the large dairy herds in this area to be 
reinfected within 3 to 5 years. For this reason, APHIS will remove the 
high-risk dairy herds in this area to create a buffer zone between the 
United States and Mexico. APHIS is in the process of finalizing 
regulations to purchase high-risk herds. Our current authority allows 
us to purchase only infected and/or exposed animals. The State of Texas 
is actively pursuing legislation that will disallow others from 
starting up dairy operations in the area and will allow the affected 
dairy producers to have a tax extension on capital gains. Presently, we 
are in the regulatory process of reclassifying the status of the 
remaining portion of Texas (excluding Hudspeth and El Paso Counties). 
This portion of Texas will be losing its accredited free status because 
we identified two epidemiologically independent infected cattle herds 
in less than a 24-month period. State officials have since depopulated 
the two infected herds and have conducted complete investigations. 
Potentially, the State could regain the status for this area within 2 
years. APHIS will work with the State to ensure it regains its status 
as quickly as possible.
    Question. The fiscal year 2001 Status of Program indicates that the 
most serious barrier to the success of the bovine tuberculosis 
eradication project is infection in wildlife and in susceptible species 
that could transmit disease to domestic livestock; what actions is the 
Department taking to address this problem?
    Answer. To address this problem and others in the tuberculosis 
program, the Secretary of Agriculture transferred $60 million from the 
Commodity Credit Corporation (CCC) to APHIS in fiscal year 2001. APHIS 
is using a portion of these funds to specifically address the disease 
in the wild white-tailed deer population in Michigan. We must control 
the outbreak in Michigan because domestic livestock can become infected 
by exposure to infected wild animals such as deer. APHIS has identified 
artificial feeding as the main source of disease transmission from deer 
to deer. As a result, program officials have banned artificial feeding. 
Since the emergency declaration, program officials have tested 
approximately 300 thousand dairy cows in Michigan and are beginning to 
test the State's beef cow population, estimated at 1 million animals. 
We have also assisted Michigan officials with testing more than 20 
thousand samples from the 2001/2002 hunter-killed deer survey.
    We are also continuing to provide technical and operational 
assistance to Michigan producers including developing and implementing 
activities to benefit local producers such as exploring fencing designs 
and depopulating white-tailed deer which present a threat to livestock. 
In addition, we are continuing to conduct research at the Agency's 
National Wildlife Research Center to evaluate management practices and 
test potential barriers to minimize the interaction between cattle and 
wildlife. If funding continues at the requested level, APHIS expects to 
control the situation in Michigan's wildlife population within the next 
several years.
                          veterinary biologics
    Question. American farmers, ranchers, and veterinarians need the 
necessary tools to prevent and control animal disease. The Committee 
has expressed concerns in the past that the USDA Center for Veterinary 
Biologics loses valuable personnel necessary to adequately review and 
approve veterinary biologics to serve this purpose and provided 
increased funding in fiscal year 2002 to support enhancement of the 
center. What steps is the Department taking to ensure that this center 
is adequately equipped to support timely and consistent review of 
submissions from the biologics industry?
    Answer. To ensure that the Center for Veterinary Biologics is 
adequately equipped to support timely and consistent review of 
submissions, the Department will use the fiscal year 2002 funding 
increase to fill several vacant positions for biologics specialists, 
veterinary medical officers, and a statistician. In addition, APHIS has 
hired four reviewers, one specifically to review transgenic plant 
submissions. In addition, APHIS has replaced some obsolete laboratory 
equipment this year. APHIS expects that the filling these positions and 
purchasing equipment will enhance the services provided to the 
biologics industry.
                          inspection services
    Question. What is USDA doing to promote flexible hiring staff 
deployment arrangements in Hawaii to provide cost-effective inspection 
services to agricultural shippers?
    Answer. APHIS uses a mix of full-time, permanent inspection 
officers as well as temporary employees to inspect cargo in Hawaii. We 
constantly review the program's needs to determine the most cost-
effective mix. We plan to convert a portion of the temporary positions 
to permanent because that will likely reduce overtime costs and save 
money. To make services more cost-effective, APHIS recognizes a shipper 
or a treatment facility with a history of compliance. In that case, we 
would only do spot checks on that facility. APHIS currently has this 
arrangement with many treatment facilities and cut flower shippers' 
costs and the time they need to get full clearance for their products.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin

                  supreme beef and pathogen standards
    Question. In light of the Fifth Circuit's Supreme Beef decision, 
does the USDA still believe that it needs statutory authority to 
enforce pathogen reduction performance standards? If not, why? If so, 
will the Department support efforts to restore USDA's authority to set 
and enforce pathogen reduction standards?
    Answer. The court's ruling in the Supreme Beef case did not impact 
the Department's ability to use the pathogen reduction performance 
standards as a way to measure the effectiveness of food safety programs 
within plants, nor did it impair USDA's ability to close plants that do 
not meet the statutory and regulatory requirements of the law for 
processing meat and poultry. FSIS continues to use Salmonella 
performance testing as one way to verify whether either the Hazard 
Analysis and Critical Control Point (HACCP) System or sanitation 
standard operating procedures (SSOPs) implemented by industry are 
successfully controlling hazards reasonably likely to occur. FSIS 
inspectors are charged with such verification activities. Agency 
inspectors use record reviews, visual monitoring of plant personnel, 
and testing for Salmonella as tools to determine whether HACCP and 
sanitation systems are working. The Agency will continue to take action 
against those plants that fail to produce safe product.
            listeria monocytogenes in ready-to-eat products
    Question. What are your agencies doing today to protect consumers 
from Lm-contaminated foods? What are the current monitoring programs 
for Listeria monocytogenes in the products your agencies regulate? Dr. 
Murano, what are you doing to speed the rulemaking process? What, if 
any, regulatory action is FDA considering to reduce the risk to 
consumers from food that may contain Listeria?
    Answer. FSIS conducts microbiological testing as a part of its 
pathogen reduction program for meat, poultry, and egg products. 
Thousands of samples are collected by inspectors each week and analyzed 
at FSIS' three laboratories. FSIS uses screening tests to reduce the 
resources needed to analyze samples. A screening test indicates if a 
sample is potentially positive for a pathogen. If a sample tests 
negative for a pathogen screening test, no further analysis is done. If 
the screening test indicates a potential positive, further testing is 
done to confirm the screen results.
    FSIS is planning to evaluate a new HBAX method to screen ready-to-
eat products for Listeria monocytogenes. The evaluation will determine 
if the new test is comparable to FSIS's current screening methods. The 
evaluation is part of the Agency's ongoing process of evaluating 
procedures to shorten the time it takes to obtain test results, while 
maintaining analytical quality.
    FSIS also conducts a variety of public education programs to 
clarify technical and regulatory issues involving food safety. This 
outreach involves the use of backgrounders, technical papers, issue 
papers, and other educational materials that explain the complex, 
technical aspects of Salmonella performance standards, ``zero'' 
tolerance for E. coli O157:H7 in ground beef and Listeria monocytogenes 
in ready-to-eat products, product recalls, and Agency enforcement 
issues.
    The Food Safety and Inspection Service (FSIS), has been working to 
educate pregnant women on the risks associated with Listeria 
monocytogenes. Working in partnership with the Food and Drug 
Administration, the Centers for Disease Control and Prevention, the 
International Food Information Council Foundation, and the Association 
of Women's Health, Obstetric, and Neonatal Nurses, FSIS developed a 
patient education sheet, Listeriosis and Pregnancy: What is Your Risk? 
The sheet provides much needed information on how to reduce the risk of 
Listeriosis for pregnant women and their unborn babies. Listeriosis and 
Pregnancy: What is Your Risk is being distributed by obstetricians and 
other healthcare providers that work with pregnant women.
    With respect to Agency's pending rule on Listeria in ready-to-eat 
products, FSIS already has adopted a zero tolerance policy regarding 
this pathogen in ready-to-eat products and is in the process of 
evaluating outstanding data needs identified during the proposed rule's 
comment period before proceeding with the publication of a final rule. 
These data needs include analysis of Listeria contamination of ready-
to-eat hotdogs by the Agricultural Research Service; reevaluation of 
the Listeria risk assessment to take into account contamination during 
processing and in-plant mitigation strategies; and assessment of the 
effectiveness of HACCP verification sampling by FSIS. The Agency is 
working diligently to respond to all the comments received on the 
proposed rule and to develop a sound scientific basis for the final 
rule.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                       country of origin labeling
    Question. On Friday March 15th, you were quoted in the Washington 
Post as saying ``country of origin labeling doesn't matter''. This came 
after a statement that you have declined offers from lawmakers to 
expand your legal authority to close plants, recall tainted meat 
products or require labeling on foreign meat.
    Virtually every single farm, ranch and consumer group in the 
country supports country of origin labeling on meat products. Arthur 
Jaeger, Associate Director of the Consumer Federation of America, 
stated in a letter to the Washington Post editor, that while country of 
origin labeling is not a food safety program, it provides consumers 
important information about the source of their food. I don't think the 
issue of labeling has ever been considered a food safety issue. But 
when the largest consumer groups indicate that consumers would rather 
purchase domestic products over imported goods, I think it is clear 
where the public is on this issue.
    In addition to supporting the basic label, they further their 
position to support a ``born, raised and slaughtered'' standard for 
products receiving the ``USA'' label. Your comments on labeling are 
specifically regarding meat. I am curious as to why you and the 
Department have singled out meat as not worthy of labeling.
    So I offer the following questions:
    Were you representing the views of the Department in saying 
``country of origin doesn't matter?'' Or is this a personal view you 
hold?
    Answer. The full context of my remarks was not captured in that 
article. What I have maintained is that because all imported meat 
shipments are reinspected upon arrival at U.S. ports of entry prior to 
being allowed to continue on to a U.S. plant for further processing, 
country of origin labeling in no way affects the safety of imported 
product. The inspection it receives is the same as domestic product. 
The determinations as to whether it is fit or unfit for human 
consumption are the same. So country-of-origin is not a food safety 
issue; it is a marketing issue.
    Question. Why do you think consumers do not have the right to know 
the origin of the food they feed their families when virtually all 
other consumer item bears a country of origin label?
    Answer. That is not my view. As a matter of fact, voluntary 
labeling of domestic product does exist under FSIS meat and poultry 
regulations, however, there has not been a single company that has 
taken advantage of that program.
    Question. What is your explanation to the American public, who has 
asked for country of origin labeling, yet are being ignored by the 
Department?
    Answer. The public is not being ignored by the Department. FSIS 
already requires country-of-origin labeling on all meat carcasses, 
parts of carcasses, and retail packages entering the United States. 
Imported individual retail packages or consumer size packages must be 
labeled, in English, with the country of origin, establishment number, 
and name or descriptive designation of the meat products so consumers 
know the origin of the product. Furthermore, on August 7, 2001, FSIS 
published an Advance Notice of proposed Rulemaking (ANPR) entitled, 
``Product Labeling: Defining United States Cattle and United States 
Fresh Beef Products.'' FSIS requested comments on whether these beef 
products should bear labeling claims that are different from those 
permitted under current Agency policy. Those comments are now being 
reviewed.
                       school meal reimbursements
    Question. As I stated earlier, I have some concern about the 
adequacy of school meal reimbursements. It's my understanding that the 
Department has not conducted a comprehensive cost assessment for the 
school meal programs in a decade. It goes without saying that 
conditions in this industry have changed significantly since then. Last 
year we asked about a cost study, and were told that the Agency did not 
have the resources to do it. With Congress reauthorizing child 
nutrition programs next year, this would be very valuable information. 
My question is three fold. Initially, does the Agency have any data to 
indicate whether we are providing enough resources to schools to meet 
the nutrition standards and meal pattern requirements of the program? 
How much would it cost to conduct such a study? And finally, how 
quickly could you report back to us with the results?
    Answer. The last comprehensive study that examined the cost of 
producing reimbursable meals in the National School Lunch Program and 
School Breakfast Program collected data in School Year 1992-93. At that 
time, the combined Federal subsidy for free lunches and breakfasts 
covered the cost of producing these meals. While it is true that 
conditions may have changed since then, the annual reimbursement rates 
attempt to accommodate these changes by making adjustments based on 
changes in the Food Away From Home series of the Consumer Price Index 
for All Urban Consumers.
    The Agency does have data to suggest that most schools are able to 
offer meals that are consistent with the Dietary Guidelines for 
Americans with their existing resources. Data collected in School Year 
1998-99 for the School Nutrition Dietary Assessment Study--II, indicate 
that 82 percent of elementary schools and 91 percent of the secondary 
schools offered students the opportunity to select lunches that 
provided no more than 30 percent of calories from fat over the course 
of a week. However, only 21 percent of the elementary schools and 14 
percent of the secondary schools met the program standards for total 
fat for the average lunch served. The study does not examine the 
relationship between meeting the program standards and financial 
resources available to those schools.
    To develop national estimates of the cost of producing reimbursable 
meals in the National School Lunch Program and School Breakfast Program 
(SBP) would require significant time and money. The cost of the 
previous meal cost study was about $1.8 million and it did not examine 
the relationship of meal cost to nutrient content of meals. The time 
needed to select an evaluation contractor, select a nationally-
representative sample of schools, obtain OMB clearance on the design 
and data collection instruments, collect and analyze the data, and 
write a final report would take about 3 years. A replication of the 
previous meal cost study would cost at least $2.5 million today and 
would not provide answers to the question about the relationship of 
meal costs to meeting nutrition standards.
    Examining the relationship of meal costs to nutrient content of 
meals would require a much larger study. Integrating the data 
collection needed for an analysis of meal costs with the nutrient 
content of school meals offered to students is a more efficient use of 
scarce research funds. Such a study today would cost approximately $4-5 
million and could be expanded to include an examination of after school 
snacks for which there is currently no meal cost data available.
    It is expected that a large study examining the nutrient content of 
school meals offered to students will be conducted in 2005. The USDA 
Strategic Plan 2000 to 2005 seeks improvement in the nutritional 
quality of meals, commodities and other program benefits. Performance 
measures will be needed to determine if the targets established for 
schools meals (i.e., meeting the School Meals Initiative nutrition 
standards) are met by 2005. The new nutrition standards maintain long-
standing goals of providing one-third (lunches) and one-fourth 
(breakfasts) of students' daily needs for calories and key nutrients as 
well as goals for fat and saturated fat content that are consistent 
with the USDA/HHS Dietary Guidelines for Americans recommendations.
                       increases in obesity rates
    Question. Studies by the Department of Agriculture and other 
outside associations have shown a steady increase in obesity in this 
country, especially in children. I understand that the Department has 
taken notice of this rise, held symposiums, and released studies, but 
given that this trend does not show signs of changing, what steps does 
the Department plan to take in the next year, and upcoming years, to 
address this disturbing trend, and what resources does it need from 
this Subcommittee in order to do so in an effective way?
    Answer. There is no question that obesity and overweight are 
critical public health issues, with significant consequences for our 
Nation's future. We are committed to taking action using all available 
opportunities and resources to promote healthy weight and prevent 
overweight and obesity.
    FNCS responsibilities related to overweight and obesity are in two 
areas: the effort to promote healthy weight among the general public, 
led by the Center on Nutrition Policy and Promotion (CNPP), and efforts 
to encourage healthy eating and physical activity among those served by 
Federal nutrition assistance programs, managed through the Food and 
Nutrition Service (FNS).
    CNPP is developing an initiative to help change consumer's eating 
behaviors through focused, individualized messages and a multifaceted 
and long-term educational campaign that not only emphasizes what 
constitutes a healthy diet but also actually puts that knowledge into 
practice. The focus of this initiative is to identify real-life 
solutions and practical approaches that will help Americans make 
sensible food choices. Specific projects recently completed or in the 
planning stages include:
  --Forums. Breaking the Barriers: Practical Approaches to Improve 
        Americans' Eating Behaviors and Breaking the Barriers.--Helping 
        Americans Eat Smaller Portions. Experts in nutrition, behavior, 
        the media and potential partners in this effort were invited to 
        advise USDA at two forums. In addition, these forums inform 
        these experts about the initiatives that USDA is promoting to 
        improve health and reduce obesity in America, as well as to 
        begin to define roles and contributions of potential partners. 
        The discussion at these forums is being used to plan new USDA 
        initiatives.
  --Consumer brochure. How Much are You Eating.--A consumer friendly 
        brochure to help consumers become more aware of how much food 
        is on their plate and to link the amount they eat to Food Guide 
        Pyramid recommendations. The brochure will be released in April 
        2002, and made available on the CNPP website as well as through 
        print copies.
  --Media campaign.--Organize press conferences, appearances, and media 
        events to raise the public's awareness through the media. Media 
        opportunities include USA Weekend, Parade Magazine, and other 
        monthly women's magazines.
  --Promotion and education materials.--Consumer-friendly materials are 
        being developed to increase awareness of food choices, and 
        offer practical tips on making sensible decisions in real life 
        situations such as snacking, fast foods, and restaurants.
  --Conference on portion awareness.--To present the scientific 
        evidence on portion sizes, awareness by individuals of how much 
        they are eating, the impact of these on obesity, and to 
        increase media interest in the subject. Noted speakers will 
        discuss different aspects of portion awareness.
  --Food Label Initiative.--Collaborate with the food industry to 
        design and implement nutrition education information on the 
        food label to help consumers relate the amount of food they're 
        eating to the recommendation in the Food Guide Pyramid.
  --Interactive Food Guide Pyramid.--Develop a computer based 
        interactive food guide pyramid to help consumers personalize 
        their food choices and build their own pyramid. This would link 
        with the Interactive Healthy Eating Index (IHEI) and provide 
        consumers with more information about their food choices.
    The Center plans to continue collaboration with potential partners 
to leverage CNPP resources to reach the largest possible audience with 
our messages. CNPP will strive to initiate a number of private/public 
partnerships to promote the Dietary Guidelines, 2000. FNCS is also 
involved in developing collaborative partnership efforts such as 5-A-
Day with the Centers for Disease Control (CDC) and the National Cancer 
Institute (NCI), to promote consumption of fruits and vegetables.
    FNS is working to better address obesity through Federal nutrition 
assistance programs by improving program standards and nutrition 
education, and expanding partnerships and collaborations. Key 
activities include:
  --The Food Stamp Program (FSP).--Is developing educational and 
        promotional materials for low literacy and Spanish language 
        groups that will support maintaining a healthy weight and 
        adherence to the Dietary Guidelines.
  --Updated nutrition standards in the school meals programs that have 
        contributed to dramatic improvements in the number of schools 
        offering students the opportunity to select a low-fat lunch; 
        FNS is working to support further improvements through:
    --An action kit, Changing the Scene: Improving the School Nutrition 
            Environment, to help schools provide students with skills, 
            opportunities and encouragement to adopt healthy eating 
            patterns;
    --Improvements in the nutritional quality of commodity foods, 
            including lowering fat levels and increasing the quantity 
            and variety of produce for schools; and
    --Team Nutrition Grants and cooperative agreements to support 
            comprehensive school-based efforts to promote healthy 
            eating and physical activity.
  --Activities in the WIC Program to address overweight and obesity 
        include:
    --Revitalizing Quality Nutrition Services (RQNS) in WIC by revising 
            nutrition services standards and promoting effective 
            nutrition education strategies;
    --Consistent program nutrition risk criteria to identify infants 
            and children at risk of becoming overweight and to 
            facilitate early intervention; and
    --FIT WIC Demonstration Grants to State Agencies to identify ways 
        that WIC might be changed to help prevent childhood overweight 
        and obesity.
    Cross-program activities.--That support healthy eating and physical 
activity are also underway, including the EAT SMART. PLAY HARD. 
TM campaign designed to improve long-term health by 
encouraging behaviors consistent with the Dietary Guidelines and the 
Food Guide Pyramid, and new educational resources in English and 
Spanish to help make good dietary practices and physical activity easy 
for parents and children.
    Recognizing the need to set priorities, USDA is working within 
existing resources to address overweight and obesity. However, policy 
changes could improve our ability to use resources effectively. In late 
1999, FNS submitted a report to Congress, ``Promoting Healthy Eating: 
An Investment in The Future,'' which outlined a framework for nutrition 
education to enable the Agency and its State partners to reach all 
potential eligible persons across program lines. The framework's 
components include:
  --Authorized funding for cross-program coordination.--To allow FNS 
        and States the flexibility to direct nutrition education to 
        potential participants across program lines.
  --A funding mechanism to support sustained nutrition education for 
        all programs.--Ensuring that such efforts are a regular part of 
        annual budgets and work plans.
  --Cross-program coordination of messages and materials.--To ensure 
        that all programs use consistent, science-based nutrition 
        education materials and messages that are accessible and 
        appropriate for the FNS population.
  --Expanding the reach of nutrition education by offering grants and 
        State incentives.--To better reach FNS target and special 
        populations.
  --Leveraging Federal resources with public-private partnerships.--
        That could result in greater opportunities to encourage healthy 
        dietary behavior and promote American agricultural products 
        using multi-dimensional public and private sector strategies.
  --Investing in evaluation.--Of nutrition education delivery and 
        infrastructure, as well as participant nutrition behaviors, to 
        ensure the effectiveness of current efforts, address gaps and 
        improve services.
  --Partnership activities.--That advance sound dietary practices, such 
        as 5-a-Day Partnership with CDC and NCI to promote increased 
        consumption of fruits and vegetables.
                     usda veterinarian overtime pay
    Question. In early January, I wrote a letter to the Department 
regarding USDA veterinarian overtime pay and the Poultry Products 
Inspection Act. Many of my constituents who are veterinarians for USDA 
are required to work overtime at the request of the specific industry 
receiving inspection. At this time of heightened security and greater 
security around our borders. I am concerned that we are expecting the 
protectors of our borders to increase their output, while not 
adequately compensating them.
    The Secretary has the authority to set the reimbursed per hour rate 
through rule making, which is allowed under the Meat Inspection Act and 
the Import Export Inspection Act. However, the Poultry Products 
Inspection Act does not contain this provision. My office has yet to 
receive a response to my correspondence, so I will take this 
opportunity to seek prompt attention to this matter with the following 
questions.
    What is the Secretary doing to ensure those responsible for 
inspections are being adequately compensated for their contributions?
    Answer. Federal employees who are not covered by the Fair Labor 
Standards Act receive compensation under Title 5 of the U.S. Code. For 
this group of Federal employees, which includes FSIS veterinarians, the 
overtime rate is capped at one and one-half times the GS-10, Step 1, 
hourly rate. The Title 5 cap means that veterinarians at the higher 
steps of the GS-12 grade are paid at an hourly overtime rate that is 
less than their hourly rate of basic pay. The Secretary of Agriculture 
is authorized by Title 7, section 394, of the U.S. Code to pay 
employees performing inspection under the FMIA for overtime work at 
such rates as the Secretary may determine. However, no comparable 
provision exists for employees performing inspection under the PPIA. 
Therefore, in fairness to all our employees, the authority to establish 
overtime pay rates in excess of the Title 5 limitation has not been 
used for veterinarians providing inspection services under the FMIA.
    Question. Will the Secretary advocate for the Poultry Products 
Inspection Act to contain the provision allowing her office to set the 
reimbursed per hour rate?
    Answer. Legislation has been introduced to address the issue of 
overtime pay for veterinarians. H.R. 3390 seeks to ``provide consistent 
treatment of overtime, night, and holiday inspection and quarantine 
services performed by employees of the Department of Agriculture.'' 
Currently, FSIS is reviewing this and other options on the issue of 
overtime pay for FSIS veterinarians. The Agency acknowledges the need 
to address pay reform and equity issues across the diverse array of 
Federal job occupations, and supports pay reform and equity among 
personnel performing like regulatory inspection work.
    Question. Can I receive a commitment from you today to work with me 
in looking into this discrepancy?
    Answer. We look forward to working with Congress on this issue.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

               food safety and inspection service (fsis)
    Question. In a Washington Post article on Friday, March 15, 2002, 
entitled ``U.S. Vows Tougher Inspections of Imported Meat'', Homeland 
Security Director Tom Ridge is quoted as saying ``one of the questions 
we need to answer is--whether or not we need multiple agencies dealing 
with food safety responsibilities.''
    How would you answer that question?
    Answer. As you know, the Administration's report, Food and 
Agricultural Policy: Taking Stock for the New Century indicates that 
where possible, Federal policies and programs must be coordinated and 
integrated to reduce duplication of effort, regulatory burdens, and 
program costs. This is especially important where several agencies 
share regulatory responsibilities or have a role in research, 
development, and implementation of food safety policies.
    Question. Is the work FSIS conducts duplicative of any work done by 
FDA or any other Federal agency? If so, is this appropriate?
    Answer. FSIS is responsible for ensuring that meat, poultry, and 
processed egg products are safe, wholesome, and accurately labeled. 
FSIS enforces the Federal Meat Inspection Act, the Poultry Products 
Inspection Act, and the Egg Products Inspection Act, which require 
Federal inspection and regulation of meat, poultry, and processed egg 
products prepared for distribution in commerce for use as human food. 
The Food and Drug Administration (FDA) of the Department of Health and 
Human Services (HHS) has jurisdiction over all other food products. 
This structure is a reflection of these different missions, as well as 
the different statutes formulated at different times for different 
reasons. However, FSIS and FDA have had a Memorandum of Understanding 
in place since 1999 to exchange information on an on-going basis about 
establishments that fall under both of our jurisdictions. As a result, 
both agencies have worked together on several cases in which we were 
jointly able to ensure the safety of specific food products.
    Question. Should Federal food safety inspection activities be 
streamlined so that we don't have multiple government agencies working 
on different aspects of food safety, but rather a cohesive unit working 
to ensure the safety of America's food supply?
    Answer. FSIS is committed to engaging in substantive discussion 
with FDA and other agencies with food safety responsibilities about 
other areas where cooperation can and should be utilized. USDA has 
actively engaged in efforts to increase inter-departmental and agency 
cooperation between itself and the Department of Health and Human 
Services (HHS). The Department is committed to ensuring efficient use 
of resources between food safety regulatory agencies in an effort to 
maximize the safety of the U.S. food supply and protect the public 
health.
    USDA is pursuing the concept of inter-departmental cooperation and 
has set as one of the Department's highest priorities the need to work 
together across department and agency jurisdictions. USDA has 
aggressively engaged in steps to enhance cooperation, communication, 
and efficiency in the food safety arena through the establishment of 
the Food Threat Preparatory Network (Prep-Net). This group, which 
includes USDA and HHS officials, was established to coordinate both 
preventive and crisis response efforts throughout the Federal 
government to food safety issues.
    The President's fiscal year 2003 budget includes a new licensing 
fee proposal to make funds available in fiscal year 2004 and subsequent 
years for FSIS to invest in food safety technology. A new licensing fee 
would require legislative action by the authorizing committee, the 
Committee on Agriculture, not this appropriations subcommittee.
    Question. What plans has FSIS made to pursue this new licensing 
fee?
    Answer. We are currently reviewing the overtime fee structure to 
identify whether there are inequities in the assessment of overtime 
fees. We are also reviewing options for the imposition of an annual 
licensing fee that all plants would pay, the revenue from which would 
be used by the Agency to invest in and upgrade food safety inspection 
technology.
    Question. To whom would the licensing fee apply?
    Answer. It is likely that all establishments would be assessed the 
licensing fee.
    Question. How does the food safety technology FSIS plans to invest 
in differ from the food safety technology the agency currently uses?
    Answer. Revenue generated by the fee would be used to expand and 
accelerate the Agency's existing program for pilot testing new food 
safety technologies, as well as to support their development through 
cooperative agreements with universities and other research 
institutions.
    Question. How will food safety technology needs be met prior to 
introduction of the licensing fee, or in the event that the licensing 
fee is not authorized by the Agriculture Committee?
    Answer. These needs are now met on a limited basis through the 
funding of pilot projects to test new food safety inspection 
technologies in meat and poultry establishments. Revenue from the 
licensing fee would support an expansion of these activities.
    Also included in the budget is a plan to replace the existing 
overtime fee structure for meat, poultry and egg products inspection 
with revised structure to reduce overtime rates and include a charge 
for inspections for during second and third shifts.
    Question. Can you explain the revised overtime fee structure 
proposed?
    Answer. The Federal Meat Inspection Act (FMIA), Poultry Products 
Inspection Act (PPIA), and the Egg Products Inspection Act (EPIA), 
provide for mandatory Federal inspection of livestock and poultry 
slaughter at official establishments, and meat and poultry processing 
at official establishments, and of egg products processing at official 
plants. FSIS bears the cost of mandatory inspection provided during all 
regularly scheduled and approved shifts of operation. Establishments 
and plants pay for inspection services performed on holidays or on an 
overtime basis. They also pay FSIS to perform a range of voluntary 
inspection, certification, and identification services to assist in the 
orderly marketing of various animal products and byproducts. FSIS also 
recovers the cost of certain laboratory services provided at the 
request of industry.
    The 2003 budget for FSIS includes a proposal to review how overtime 
fees are currently applied to determine which types of establishments 
receive inspection services beyond one eight hour daily shift without 
reimbursing the Government, and those that have to pay fees. If this 
review identifies inequities in the assessment of overtime fees, then a 
revised structure would be considered that would charge establishments 
equitably for inspection services provided outside one eight hour daily 
shift.
    Question. I understand there will be no budget impact in fiscal 
year 2003. What is the estimated impact in future years?
    Answer. The future budgetary impact is dependent upon the 
implementation of the proposed fee structure, which is not anticipated 
to be complete in 2003.
    The Administration proposed an increase of $14.5 million to improve 
FSIS' information technology infrastructure.
    Question. Will there be additional out-year costs associated with 
this system upgrade? Answer. The budget year and out-year costs of the 
FSIS Automated Corporate Technology Suite are as follows:
    Fiscal year 2003--$14.5 million; fiscal year 2004--$10.5 million; 
fiscal year 2005--$10.3 million; fiscal year 2006--$11.8 million; 
fiscal year 2007--$10.5 million.
    The President's fiscal year 2003 budget requests an increase of 
$1.2 million to conduct targeted slaughter epidemiological surveys. It 
is my understanding that this funding will be used to conduct an 
analysis of current animal-based databases and to develop a pilot 
project focusing on the specific needs of a public health surveillance 
system.
    Question. What plans have been made for this pilot project? How 
extensive will it be? How long will it last?
    Answer. The over-all objective of the project is to establish an 
integrated surveillance system with the Animal and Plant Health 
Inspection Service (APHIS) and our public health partners providing 
ante-and-post mortem data on animal diseases and emerging pathogens. 
Current plans are based on a project time frame of 3 years. An initial 
working group with APHIS will be formed this year to prioritize and 
determine how best to link this project with data collection systems 
already in place at APHIS and FSIS. First, the work group will analyze 
existing databases in FSIS, APHIS and CDC to determine how a 
coordinated information system could be developed utilizing existing 
surveillance and inspection systems and databases. An expert system 
will be designed that will provide aggregate data that can be studied 
in real time. Confidentiality of data will be addressed and processes 
to ensure that will be put in place.
    During the first year the objective is to have data already 
collected to be able to be used in real time by epidemiologists for 
local, regional, national and seasonal trends in animal and human 
health. The first year will include a joint study with APHIS NAHMS, FDA 
NARHMS and CDC to plan in-plant surveys to potentially link with the 
next NAHMS study (which usually includes on-farm pathogen surveys). 
Data collected in sentinel plants for each slaughter class that NAHMS 
studies would enhance understanding and control of pathogens and other 
hazards. If successful, studies in sentinel plants for each slaughter 
class could be rotated on a three-to-five year basis in parallel with 
NAHMS studies to provide meaningful baseline and trend information from 
the farm through the to where product leaves the plant.
    Project funding would be used primarily for increased sampling of 
animals/raw products for analyses, laboratory costs, microbial and 
chemical epidemiological studies of pathogens, travel, and meetings 
with partners and stakeholders to develop the demonstration project. 
The development of software to integrate Federal animal health and food 
safety data systems is part of the project as is epidemiological and 
surveillance training of field veterinarians.
    The third year of the project would include an extensive evaluation 
process and a second NAHMS-linked study.
    Question. Will there be additional costs in future years associated 
with this pilot project?
    Answer. This project is expected to require $1.2 million in funding 
each of the next three years. Assuming the $1.2 million requested in 
fiscal year 2003 remains in FSIS's base appropriation, no additional 
funds will be required after fiscal year 2003.
                  agricultural marketing service (ams)
    Question. In its prepared testimony, the Agriculture Marketing 
Service points out that it has taken preventive steps to upgrade the 
security for operations and facilities to make sure that services to 
the agricultural sector are not interrupted. A few of the precautions 
that are noted include surveillance, physical security, and emergency 
power systems as well as emergency alternate headquarters locations all 
without the request for any additional funding to provide for these new 
safety measures. How are these costs being met? Are the emergency 
supplemental appropriations provided to the Department by Public Law 
107-117 being allocated to cover these costs?
    Answer. The Agricultural Marketing Service has already begun to 
improve the security of its operations and facilities by upgrading 
cyber-security and physical security, and by restricting access to 
laboratory facilities. Some upgrades were relatively inexpensive such 
as securing alternate access points to facilities by locking side and 
rear doors, using single access points that are continuously monitored 
by existing personnel, and replacing old locks with high security 
locks. Existing facilities outside Washington, D.C., were identified as 
emergency headquarters locations. Those facilities are already equipped 
with most of the equipment needed to assume command and control of 
field operations. AMS will use additional funding received under Public 
Law 107-117 for the installation of more expensive upgrades such as 
emergency power systems, video surveillance systems, and contract 
security guards.
                       wic program participation
    Question. Is WIC program participation linked to unemployment or 
any other economic factor? Has any analysis on this been done by the 
Department? If so, what has it indicated?
    Answer. We do not have a model for projecting future demand for WIC 
based on economic projections. Since program participation has been 
constrained by funding for most of WIC's history, little historical 
data is available upon which to build a model.
    USDA is working to improve its estimates of the WIC eligible 
population and WIC participants. In fiscal year 2002, USDA provided 
funding to the National Academy of Sciences (NAS) to develop 
alternative estimation procedures. This effort will build on an earlier 
report issued by NAS that identified parts of the estimation 
methodology for which improvements could be made.
    Question. The fiscal year 2003 budget request for WIC would support 
an average monthly participation of 7.8 million women, infants, and 
children, an increase of approximately 300,000 higher than the 
projected fiscal year 2002 participation level? What is the basis for 
that estimate?
    Answer. It is very difficult to forecast demand for the WIC program 
with a high degree of precision. The President's Budget, recognizing 
WIC's strong track record of success, seeks to remedy this situation. 
The program has been shown to reduce infant mortality, premature births 
and low birth weight and has helped reduce anemia rates and increase 
childhood immunization rates. Given WIC's proven effectiveness, the 
President is committed to ensuring that adequate funds are provided to 
WIC to meet program demand. The request includes a $150 million 
contingency fund, which could be used to support additional 
participation if demand in fiscal year 2003 is greater than current 
projections. Adequate and stable funding for WIC is a vital part of the 
President's commitment to set priorities to meet the nation's most 
important needs.
                      wic vendor management study
    Question. The fiscal year 2003 proposal for WIC includes a $2 
million increase to conduct a WIC vendor management study. The final 
report on 1998 WIC vendor management study was just submitted to this 
Committee in August 2001. What is the need for this additional study?
    Answer. The WIC program spends about $5 billion per year in over 
45,000 retail grocers (vendors) throughout the country. Although we 
have recently completed a study of WIC vendor management, given the 
size and scope of the program, there is a need to continually update 
this information.
    More importantly, this study is needed to allow us to examine the 
effects of the Food Delivery Systems final rule that was published on 
December 29, 2000. This rule strengthens vendor management in retail 
food delivery systems by establishing mandatory selection criteria, 
training requirements, criteria to be used to identify high-risk 
vendors, and monitoring requirements, including compliance 
investigations. In addition, the rule strengthens food instrument 
accountability and sanctions for participants who violate program 
requirements. It also streamlines the vendor appeals process.
    Finally, the new vendor management study will allow us to examine 
areas that have not been examined in previous WIC vendor management 
studies, such as trafficking in the WIC program.
    Question. Why is this study proposed to be funded through the WIC 
program account rather than as part of the nutrition studies and 
evaluation program funded through the Food and Nutrition Service 
``Program Administration'' appropriation.
    Answer. In the past, studies and evaluations conducted by FNS have 
been funded out of the program to which the benefits of the work 
accrue. As you know, the WIC statute in Section 17(g)(5) authorizes up 
to one-half of 1 percent of the appropriation, up to $5,000,000 a year, 
to be used for evaluating WIC performance, health benefits, participant 
characteristics and providing technical assistance. While Congress has 
in recent years generally prohibited the use of funding in the food 
assistance program accounts for study and evaluation work, it has 
authorized the use of these funds for specific projects. We view 
projects of this kind as a necessary and appropriate cost of operating 
these programs effectively. The FNS Program Administration request does 
not include funds to support this study.
                      wic-immunization action plan
    Question. In its report accompanying the fiscal year 2002 
Agriculture, Rural Development, Food and Drug Administration and 
Related Agencies Appropriations Act, the Committee directed the 
Secretary of Agriculture to consult with the Secretary of Health and 
Human Services to delineate departmental financial and operational 
responsibilities necessary to promote the objectives of the Executive 
Memorandum of December 11, 2000, for improving immunization rates for 
children. In response to that directive, the Department submitted to 
the Committee a copy of its recently developed ``WIC-Immunization 
Action Plan''. The letter indicates that the WIC-Immunization Action 
Plan is a working document that will be revised and updated as 
necessary. Can the Committee expect to receive copies of revisions and 
updates to the plan as they are made?
    Answer. We will be pleased to provide the Committee revised and 
updated versions of the WIC-Immunization Action Plan demonstrating 
progress being made on the goals and objectives outlined in the plan. 
Updated copies will be sent to the Committee on a bi-annual basis.
    Question. When can the Committee expect to receive the report it 
requested as to how the Departments of Agriculture and Health and Human 
Services have delineated financial and operational responsibilities for 
carrying out this plan?
    Answer. The WIC-Immunization Action Plan previously submitted to 
the Committee is intended to serve as the document that delineates 
financial and operational responsibilities for carrying out the plan. 
It outlines goals, objectives, responsibilities, and a timeline for 
completion of collaborative activities designed to improve immunization 
rates for children participating in WIC.
    Question. In the interim, what is the Department of Agriculture's 
current agreement with the Department of Health and Human Services 
regarding the financial and operational responsibilities of the two 
departments in carrying out the goals of the Executive Memorandum?
    Answer. USDA and DHHS are working together to implement this plan 
using existing resources. For example, as directed by the Executive 
Memorandum, WIC now has a standardized procedure for screening the 
immunization status of children using a documented procedure. The cost 
of local level assessments and referrals remain WIC-allowable costs. 
The Centers for Disease Control and Prevention (CDC) will fund training 
and educational materials necessary for WIC to implement this new 
procedure. The training takes places this summer. CDC also funded a 
study that evaluated the effectiveness of WIC's new standardized 
procedure.
                       wic infrastructure grants
    Question. The fiscal year 2003 WIC request also includes a $4 
million increase from the fiscal year 2002 level for infrastructure 
grants. What is the need for this additional funding and which 
additional projects would be funded if this increase is provided?
    Answer. The two primary areas that would receive additional funding 
should FNS receive the $4 million increase to the WIC multi-purpose 
funding are: 1) general infrastructure funding, which provides grant 
monies to WIC State agencies primarily for management information 
systems; and 2) electronic benefit transfer (EBT) development. 
Currently, funding requests from States in both of these critical 
program areas exceed funds available for these purposes.
            reimbursement rates in child nutrition programs
    Question. The Child Nutrition Programs are up for reauthorization 
next year, and one item that has been brought to my attention by 
constituents in Mississippi is the inadequate reimbursement rates for 
school meals. It is my understanding that the intent of the 
reimbursement rates is to cover the full costs of the food, actual 
production or preparation of the meal, and the labor involved. 
Currently the rate of reimbursement for a free lunch in the continental 
United States is $2.09 (this figure is slightly higher in Alaska and 
Hawaii, while the average cost of a school lunch in Mississippi is 
$2.20. How is the reimbursement rate determined?
    Answer. Reimbursement rates for lunches served under the National 
School Lunch Program are established in sections 4 and 11 of the 
Richard B. Russell National School Lunch Act. Section 4 authorizes a 
flat per-meal reimbursement that is provided for all meals served under 
the Program; section 11, an additional amount for meals served free and 
at a reduced price. In all cases, the statute establishes a base rate 
for each meal type and requires the Department to annually adjust these 
rates to reflect changes in the ``series for food away from home of the 
Consumer Price Index for all Urban Consumers'' published by the Bureau 
of Labor Statistics. Section 12 of the Act authorizes the Department to 
make adjustments to the established rates to reflect higher costs 
associated with providing meals in Alaska, Hawaii, Guam, American 
Samoa, Puerto Rico, the Virgin Islands and the Commonwealth of the 
Northern Marianas. In addition, meals receive a per meal commodity 
reimbursement, which in the upcoming fiscal year will be 15.6 cents per 
meal.
    Question. Although reimbursements are made for Alaska and Hawaii, 
how can each of the 48 contiguous States be expected to survive on the 
same reimbursement rate with such varying economics?
    Answer. Historically, program statutes have provided for single, 
program-wide reimbursement rates for free, reduced price and paid 
school lunches. The only exceptions to these rates (also established in 
the statute) exist for needy schools that are entitled to an additional 
two cents per lunch and additional funding for breakfasts, as well as 
for the non-contiguous States and territories where the Department may 
provide higher rates to reflect the greater cost of producing a lunch.
    The current system of using a single national reimbursement rate 
for the contiguous States has been successful in achieving high levels 
of participation by schools in the National School Lunch Program and 
providing nutritious meals to school-aged children. However, this 
method of reimbursement clearly does not take into account the numerous 
variables that cause these rates to be adequate or inadequate to cover 
the cost of preparing meals in different States, cities or school 
districts. We believe that it would be useful to once again study the 
costs of providing school lunches to get an overall sense of how things 
may have changed since the last study. However, given all the variables 
involved, we feel that it would be extremely difficult to establish 
differing reimbursement rates that sufficiently accommodate these 
variables.
    Question. In preparation for reauthorization of the Child Nutrition 
programs, would you agree that a study should be conducted regarding 
the reimbursement rates for school meals and the adequacy of those 
rates on a state-by-state basis?
    Answer. The Agency agrees that it is time to reexamine the adequacy 
of reimbursement rates for school meals and perhaps even examine the 
adequacy of cash reimbursements for after-school snacks. However, the 
results would not be available in time for reauthorization. The last 
comprehensive study that examined the cost of producing reimbursable 
meals in the National School Lunch Program and School Breakfast Program 
collected data in School Year 1992-93. That study developed national 
estimates, excluding Alaska and Hawaii based on data from 540 schools 
in 98 school districts. It did not develop state-level estimates. It 
took about three years to complete and cost about $1.8 million. 
Clearly, if a similar study were to be conducted, the results would not 
be available for upcoming discussions on reauthorization of the Child 
Nutrition Programs.
    Determining the adequacy of reimbursement rates for school meals on 
a state-by-state basis will entail significant time and costs. Samples 
would have to be sufficiently large in each State to ensure that the 
state-level cost estimates of producing reimbursable meals were of 
adequate precision to be meaningful. This would make the study very 
expensive. In addition, it is unclear how useful these state-level 
estimates of the cost of producing reimbursable meals would be in 
determining the adequacy of the reimbursement rates. While there may be 
considerable variability in the school meal costs across individual 
States, there is probably just as much variability within States. 
Calculating a meal cost estimate for the State of New York may not 
provide much insight into whether the reimbursement rates are adequate 
in Ithaca, NY or Long Island, NY. Similarly meal costs in and around 
Jackson, Mississippi may not help estimate costs in Corinth or Tupelo, 
Mississippi. It may not be cost effective to spend valuable research 
resources to develop state-level estimates on a recurring basis. The 
current system of utilizing a single national reimbursement rate for 
the continental U.S. has been successful in achieving high levels of 
school participation in the National School Lunch Program and providing 
nutritious meals to school-aged children.
               legal immigrants in the food stamp program
    Question. The Senate-passed version of the Farm Bill includes a 
provision to allow legal immigrants who have been in this country for 
five years or more to apply for food stamps. Is this identical to the 
President's fiscal year 2003 budget proposal, and is full funding for 
this provision included in the fiscal year 2003 and each subsequent 
fiscal year? What are those out-year costs?
    Answer. The Senate-passed provision to extend food stamp 
eligibility to legal immigrants after five years of residence and the 
President's budget proposal are substantively the same. The President's 
budget request fully funds the immigrant proposal. In the first year 
this costs $66 million; over ten years, this proposal costs $2.099 
billion.

Out-year costs for President's immigrant proposal

                              [In millions]

2003..............................................................   $66
2004..............................................................   130
2005..............................................................   195
2006..............................................................   205
2007..............................................................   219
2008..............................................................   232
2009..............................................................   245
2010..............................................................   259
2011..............................................................   271
2012..............................................................   277
                                                                  ______
    Ten year total................................................ 2,099
       commodity supplemental food program administrative funding
    Question. The President's budget decreases funding for the 
Commodity Supplemental Food Program (CSFP) administrative expenses by 
$4 million. The Senate-passed version of the Farm Bill reauthorizes the 
CSFP and includes a provision for a grant per caseload slot for 
administrative expenses incurred by State and local agencies operating 
the CSFP. If this provision is retained in the final version of the 
Farm Bill, will the President's budget support the grant for the 2003 
caseload? If not, what percentage of the 2003 caseload could be served 
given the President's proposal?
    Answer. If the Farm Bill provision basing CSFP administrative 
expense grants on a per caseload slot formula becomes law, the 
resources requested in the fiscal year 2003 budget may not be 
sufficient to support the proposed caseload and participation levels.
    Assuming that the provision's administrative funding per caseload 
slot would be adjusted upward with inflation, as proposed, from $50.00, 
as cited in the Bill, to $51.50 for fiscal year 2003, the incremental 
cost to the program might be as great as $6.5 million at a caseload of 
495,683. CSFP resource management is very dynamic and is effected by a 
variety of factors that are difficult to anticipate.
    To the extent that caseload utilization rates and food cost 
inflation are lower than assumed in the budget request or there are 
more commodity donations than currently projected, the need for 
additional funds to support the costs of the Senate Farm Bill 
provisions may be offset.
    Given the assumptions for fiscal year 2003 in the budget, if the 
program is to absorb this additional cost and stay within the requested 
amount, participation could be supported at 93 percent of the level 
cited in the budget.
    Question. How much additional funding would be needed to fully 
support the 2003 caseload if this provision becomes law?
    Answer. Up to an additional $6.5 million may be required to fund 
the Senate Farm Bill provision and maintain planned program 
participation. This estimate is based on the fiscal year 2003 budget 
request and the assumption that the provision's administrative funding 
per caseload slot would be adjusted upward with inflation, as required 
by the provision, from $50.00, as cited in the Bill, to $51.50.
    To the extent that caseload utilization rates and food cost 
inflation are lower than assumed in the budget request or there are 
more commodity donations than currently projected, the need for 
additional funds to support the costs of the Senate Farm Bill 
provisions would be less than this estimate.
    Question. Would the Department be willing to recommend that OMB 
submit a budget amendment if necessary to cover the additional funding 
needs? If not, what would be the consequences to the CSFP?
    Answer. The Department does not anticipate the need to submit a 
budget amendment for CSFP at this time. Estimates of the incremental 
cost imposed on the program by the Farm Bill's administrative cost 
provisions are conservative--abiding strictly by the program 
performance assumptions of the fiscal year 2003 budget. However, CSFP 
resource management is very dynamic and is effected by a variety of 
factors that are difficult to anticipate. To the extent that caseload 
utilization rates and food cost inflation are lower than assumed in the 
budget request or there are more commodity donations than currently 
projected, the need for additional funds to support the costs of the 
Senate Farm Bill provisions may be offset. The Department intends to 
maintain continuity of CSFP operations, within the fiscal year 2003 
request, whether or not the Farm Bill provisions are enacted.
                      food program administration
    Question. Within the Food Program Administration account, the 
budget requests an increase of $4.5 million for program integrity for 
Food Stamp and Child Nutrition Programs. How will this funding be 
distributed between the two programs?
    Answer. The Food and Nutrition Service will distribute $3.5 million 
to the Food Stamp Program and $1.0 million to the Child Nutrition 
Program.
    Question. Within each program, how will this funding be allocated? 
What are the guidelines or activities for testing program integrity?
    Answer. For fiscal year 2003, FNS has requested $3,500,000 in 
additional funding and up to 45 additional staff years for enhanced 
Food Stamp program integrity efforts. Approximately half of the 
resources would go to payment accuracy and quality control efforts 
aimed at reducing erroneous payments to recipients. The other half 
would be devoted to retailer integrity.
    The error reduction resources would support a new headquarters unit 
focused exclusively on payment accuracy and expanded program integrity 
efforts within FNS regional offices. The newly formed payment accuracy 
unit would: (1) encourage States to focus on error causes that are in 
their control; and (2) address program management issues. The outcome 
of this effort will be an improved stewardship of Federal dollars. The 
new resources would spearhead in-depth analyses of error causes, 
promote problem-solving techniques, and act as a catalyst to achieve 
changes in the way States do business. This renewed focus will 
highlight two major problems: (1) State agencies' failure to act on 
known information; and (2) their failure to utilize resources that 
offer assistance in determining recipients' initial and ongoing 
eligibility.
    Retailer integrity resources will be devoted to better analysis of 
electronic benefit transfer (EBT) data and increased investigator 
capacity to identify and remove fraudulent retailers from the program. 
They would also be used to augment retailer investigative and 
sanctioning capability through analysis of data provided by the Anti-
fraud Locator using EBT Retailer Transactions (ALERT) system, and 
increase retailer compliance investigative capability. Using average 
production figures for the last five years, each additional compliance 
investigator would result in 103 more stores investigated each year, of 
which approximately 44 would be found violating and 12 trafficking.
    The guidelines/activities for testing program integrity regarding 
erroneous payments are regulations, handbooks and policies that support 
the Food Stamp Program Quality Control System. Under that system, State 
personnel perform second party reviews of a sample of cases and a sub-
sample is reviewed by Federal personnel. The results of those reviews 
are used to develop statistically valid State error rates. With regard 
to retailers we have two measures that will be used. The first is a 
measure of trafficking. FNS has done two studies and is now doing a 
third to estimate the rate of trafficking. These studies, done over 
time, give us an indication of the extent of trafficking and the 
effectiveness of what we are doing to address this problem. In 
addition, the agency is looking at other measures of retail integrity 
that, if proven, could give us an indication of the size of the issue 
and whether progress is being made at confronting it.
    The request for the Child Nutrition Programs is $1 million and 13 
staff years. The additional resources would be used to conduct 
intensive, focused program evaluation and oversight reviews of State 
and local program operators which target the most pressing management 
improvement problems. The structure of the reviews will be based on 
existing review procedures for individual CN programs, such as the 
Coordinated Review Effort for the National School Lunch Program and the 
Management Improvement Guidance for the Child and Adult Care Food 
Program, with modifications as necessary to conform procedures to new 
regulatory requirements and to provide greater scrutiny of identified 
program integrity problems. Information developed from these reviews 
will be compiled and analyzed to evaluate the effectiveness of 
regulatory and policy changes aimed at improving program integrity and 
to identify areas in which further policy, regulatory, or statutory 
changes may be required.
                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                      Food and Drug Administration

STATEMENT OF LESTER CRAWFORD, DEPUTY COMMISSIONER
ACCOMPANIED BY:
        DR. MURRAY LUMPKIN, PRINCIPAL SENIOR ASSOCIATE COMMISSIONER
        JEFF WEBER, SENIOR ASSOCIATE COMMISSIONER FOR MANAGEMENT AND 
            SYSTEMS
        KERRY WEEMS, ACTING DEPUTY ASSISTANT SECRETARY FOR BUDGET

    Senator Kohl. Thank you very much. Our last panelist today 
is Dr. Lester Crawford, who is the newly appointed Deputy 
Administrator for the Food and Drug Administration. Before you 
begin your statements, I just want to inform you that one of 
our major interests is the high cost of pharmaceutical drugs, 
and the degree to which the FDA is or is not in a position to 
make a positive impact on this problem in our society.
    But it is such a complicated issue all by itself, and so 
many different angles to it, we are considering a separate 
hearing on it, on pharmaceutical prices and the FDA's role in 
that. And we hope very much that if we call this hearing you 
will make yourself available to respond to our questions and 
some of our thoughts, as well as to give us your thoughts. 
Having said that, we would love to hear a summary of your 
testimony here today.

                      STATEMENT OF LESTER CRAWFORD

    Dr. Crawford. Thank you, Mr. Chairman, and members of the 
subcommittee. Good afternoon. Allow me to introduce myself. I 
am Lester Crawford, Deputy Commissioner for Food and Drugs, an 
agency of the Department of Health and Human Services. This is 
my fourth stint at FDA. I also served as Administrator of the 
Food Safety Inspection Service from 1987 to 1991.
    I am joined at the table by Dr. Murray Lumpkin, who is 
Principal Senior Associate Commissioner; Mr. Jeff Weber, who is 
Senior Associate Commissioner for Management and Systems; and 
by Mr. Kerry Weems, who is Acting Deputy Assistant Secretary 
for Budget. Mr. Chairman and members of the subcommittee, I am 
honored to be here to discuss the President's budget for the 
Food and Drug Administration for fiscal year 2003. Speaking for 
myself, I have always firmly believed in this process and 
believe that it is a commitment to the taxpayers as to what we 
will do in the coming year.
    I am pleased to say the document before us fully meets this 
test. The origins of the Food and Drug Administration go back 
to the Food and Drug Act of 1906, which expressed the will of 
the Congress to protect Americans against misbranded and 
adulterated food, drinks and drugs in interstate commerce. That 
was but the first step.
    Over the years, Congress saw fit to enlarge the FDA's 
public health mandates to cover not only 80 percent of the 
national food supply, but also all human drugs, vaccines, blood 
for transfusion and blood products, tissues for 
transplantation, medical devices and devices that emit 
radiation, cosmetics and all food and drugs for animals. Today 
our agency is responsible for the safety and effectiveness of 
$1 trillion worth of products on which Americans depend daily 
for their lives, nutrition and good health.
    The FDA's overall success in performing this mission is 
reflected in the traditionally well protected public health and 
the high quality of life that are among America's most widely 
admired hallmarks. In this sense, the international reputation 
and leadership of FDA are without parallel. The more specific 
recent achievements of the agency are discussed in my written 
testimony, which describes some of the agency's actions to meet 
its considerable responsibilities in the last year. It is a 
record we are proud of, especially those accomplishments 
relating to FDA's rapid and effective responses to terrorist 
attacks last September.
    It is a record that I believe measures up to the confidence 
that Congress has placed in our agency. Among other subjects, 
my written testimony briefly outlines FDA's contribution to the 
continually improving safety and security of the Nation's food, 
FDA's important role in the system of safeguards against bovine 
spongiform encephalopathy, or mad cow disease, and the agency's 
actions to prevent the development of antimicrobial resistance 
and protect human participants in clinical trials.
    The document also lists some of the hundreds of highly 
complex and innovative health care products that the FDA last 
year approved for marketing: drugs, biological medications and 
medical devices that have tremendous potential to relieve human 
suffering as well as stimulate our economy.
    It is on this record of accomplishment that the President 
has based this budget request of $1.7 billion, $295 million of 
which is in user fees, for the FDA in the next fiscal year. Our 
budget seeks resources to maintain our counterterrorism 
efforts, fully fund the proposed pay increase for our 
employees, expand our efforts at patient safety and generic 
drugs, and continue funding for a new financial management 
system.
    Mr. Chairman, members of this subcommittee, as taxpayers as 
well as civil servants, we at FDA fully appreciate the 
importance of maintaining strict budgetary discipline. We are 
also conscious of the imperative of protecting the health of 
the American people in an environment that is constantly 
evolving. As we look ahead, we must complete a number of 
significant projects, projects that are vital to this Nation of 
ours.
    We must continue to improve our counter terrorism 
preparedness. That means insuring the safety of the products 
the FDA regulates, and safeguarding the availability of 
vaccines and other medications that can mitigate the potential 
impact of terrorism in America. We must satisfy the high 
expectations of American consumers. They demand and deserve 
effective public health protection, and ready access to health 
related information even as their demographic and consumption 
patterns are becoming more diverse.
    We must prepare for the coming arrival of a new generation 
of efficacious medical products. These new drugs and devices 
can transform the practice of medicine and bring unprecedented 
health benefits to millions. But first, their safety and 
effectiveness must be assessed by our agency. We must continue 
in a comprehensive and open manner our evaluation of 
genetically modified food products. The technology is 
increasingly used to make American food yet more available and 
plentiful. But, international acceptance of this technology is 
not yet complete.
    We must make sure that our public health activities are in 
harmony with the new world of international trade. These are 
meaningful goals and I can assure you that the FDA will address 
them thoughtfully and effectively. Our most effective 
instrument, as always, will be science, which is a firm, 
factual and objective ground on which the FDA places its 
product evaluations, its regulations and its public health 
policies. And our most critical need, as always, will be a 
steady resource commitment and continued support from the 
United States Congress.
    We are grateful for the support this committee has provided 
in recent years. The FDA looks to you, Mr. Chairman, your 
subcommittee and Congress to sustain our efforts to provide the 
American people with public health protection that is the envy 
of the world. In closing, let me also mention that FDA fully 
ascribes to the one HHS policy of Secretary Thompson. This 
assures that our resources and expertise will be enhanced by a 
seamless system of cooperation and coordination with the CDC, 
the NIH and the Office of the Surgeon General, as well as the 
other public health resources of the Department of Health and 
Human Services.

                           PREPARED STATEMENT

    My colleagues and I will be pleased to respond to your 
questions. Thank you.
    [The statement follows:]

                 Prepared Statement of Lester Crawford

    Good afternoon Mr. Chairman and Members of the Subcommittee. My 
name is Lester M. Crawford, D.V.M, Ph.D. I am the new Deputy 
Commissioner for the Food and Drug Administration. Some of my previous 
positions include Director of the Center for Food and Nutrition Policy 
at Virginia Tech, Administrator of the U.S. Department of Agriculture 
Food Safety and Inspection Service, and Director of the Center for 
Veterinary Medicine at the Food and Drug Administration. I am honored 
to be with you here today to discuss public health and the President's 
fiscal year 2003 budget for the Food and Drug Administration.
    As we lay the groundwork to address the challenges of this new 
century, we need to understand where we have been, what has been 
accomplished, how much has changed and how much still remains to be 
done. For FDA, the events of September 11, 2001, and subsequent 
incidents involving anthrax contamination underscored the importance of 
our role in protecting the public health, and reinforce the fundamental 
principles required for public health protection. The events of the 
past year have highlighted to all of us that the products FDA 
regulates--human and animal foods, drugs, biologicals and medical 
devices--could be used intentionally to cause widespread harm. This 
situation has raised our awareness of the challenges being faced in the 
public health sector, including:
  --Increasing consumer anxiety about the safety and security of FDA-
        regulated products;
  --Increasing expectations of consumers with changing demographics and 
        consumption habits to easily obtain medical, research and risk-
        related information;
  --Continuing rapid transformation and complexity of the science and 
        technology that generates the products FDA must regulate; and
  --Expanding and evolving composition of global trade and production.
    Let me assure you, FDA is deeply committed to our 100 year public 
health mandate--to provide the U.S. citizen with the world's best 
public health promotion and protection. Today, more than ever, in order 
for FDA to continue to fulfill the public's expectations of safe and 
effective medical products and a safe food supply, FDA needs a strong 
science foundation.
    Science will always play a defining role in our Agency's work. The 
U.S. continues to lead the world in an era of extraordinary scientific 
achievements in research, product development, and collaboration--all 
of which can yield unprecedented advancements for health and 
nourishment. We continue to marvel at scientific achievements in fields 
as diverse as cell and gene therapy; genomics-based drugs; state-of-
the-art surgical robotics; medical devices that reduce trauma to 
patients; and bioengineered plants and animals. These achievements 
represent an enormous potential for saving lives, improving the quality 
of life and stimulating economic growth. I caution that along with the 
potential benefits, there exists the possibility for harm if these new 
technologies and products are not appropriately monitored by well 
trained investigators who understand the risks involved as well as the 
potential rewards.
    It is important to mention that for many of these innovative 
products, the most significant hurdle to their acceptance is not the 
technology itself, but consumers' distrust of unfamiliar features, and 
the newness itself. The public expects that food, from farm-to-fork, 
will be safe and wholesome; that new medical products will be 
accessible and available in a timely manner; will have scientifically 
demonstrated real benefits that outweigh their known risks; and that 
product information and labeling will be accurate, and understandable.
    As an Agency, FDA has always been proud of its commitment to 
maintain high standards which helps us maintain consumer trust and 
confidence. Maintaining that trust requires constant vigilance. 
Responding to the new dangers we face is a job that requires time, 
resources, and careful planning. We will not rest on the 
accomplishments of the past and we realize the enormity of the job that 
lies ahead of us.
    With that in mind let me discuss some of our recent accomplishments 
and summarize our budget request which speaks to the immediate and 
long-term challenges that we face.
                   accomplishments--counter terrorism
    Public health agencies have long assumed that a terrorist attack 
targeting the U.S. food supply was possible. Given the September 11, 
2001, events, and the supplemental funding of $151 million in fiscal 
year 2002, it is gratifying to know that we have the resources to 
better equip ourselves to prepare for, and respond to, a terrorism 
attack. I want to thank you for the additional resources provided to 
FDA in the fiscal year 2002 Emergency Supplemental Appropriation.
    Responding to emergencies is not new to the FDA. Our Office of 
Emergency Operations responds to all types of emergencies and is 
routinely working behind the scenes on a day-to-day and hour-by-hour 
basis on public health crises. FDA staff has well-established 
experience on a wide range of emergencies, from outbreaks of foodborne 
illness to product tamperings and now, to deliberate exposure to 
anthrax.
    Counter Terrorism resources recently provided by Congress will 
allow our Agency to hire 218 staff to pursue the work required to fully 
support the regulation of the development and licensure of new drugs, 
vaccines, medical devices, and radiological products for protection and 
treatment against terrorism-related diseases. Toward that end, we are 
working to develop new bioterrorism tools by accelerating the 
availability of medical products necessary to ensure public health 
preparedness. One such element is the expeditious development and 
licensing of products to diagnose, treat or prevent outbreaks from 
exposure to the pathogens that have been identified as bioterrorist 
agents. This process is extremely complex and early involvement by 
staff is crucial to the success of the expedited review process. These 
products must be reviewed and approved prior to the large-scale 
productions necessary to create and maintain a stockpile. Staff must 
guide the products throughout the regulatory process, including the 
manufacturing process, pre-clinical testing, clinical trials, and the 
licensing and approval process. Experts in these areas are needed to 
expedite the availability of these products.
    The supplemental funding also will support our efforts to enter 
into various research contracts and Interagency Agreements (IAGs) with 
other Federal agencies, such as the Department of Defense (DOD), the 
National Institutes of Health (NIH), and the Centers for Disease 
Control and Prevention (CDC), to develop protocols, conduct animal 
studies, and define reference databases on treatment and alternative 
therapies for infectious diseases caused by the intentional use of 
biological agents. In addition we plan to use a portion of the 
resources to improve internal scientific knowledge and capabilities, 
conduct research to assess in vitro diagnostic technology used to 
detect biothreat agents, conduct a market assessment to identify 
potential device shortages, and educate health professionals and 
consumers on the use of medical biowarfare products. We have high 
expectations that our efforts to target Agency resources simultaneously 
toward research and risk assessment; an expanded science base; and 
education, outreach, and consultations to customers will help maximize 
and leverage our work efforts effectively.
    Thus far FDA has developed strategies to strengthen the protection 
of all regulated products against willful contamination, and to improve 
the availability of medical products for the prevention or treatment of 
injuries caused by biological, chemical or nuclear agents. For example, 
FDA took the initiative to issue a notice which clarified that the 
antibiotics doxycycline and penicillin G-procaine are effective and 
approved for use in treating all forms of anthrax infections. This 
notice included explicit dosing based on FDA's review of scientific 
literature and data that had been used to support the August 2000 
approval of ciprofloxacin for anthrax. The assurance that the three 
drugs are effective against all forms of anthrax infection eased the 
public's concerns about a potential shortage of medication for victims 
of the mailed anthrax powder. Further we stepped up work on measures to 
encourage the development of new drugs to counter the toxic effects of 
chemical, biological, radiological and nuclear weapons.
    FDA is working closely with industry and other government agencies 
in an effort to assure an adequate supply of products for immunization 
against anthrax, smallpox and other substances that might be used by 
terrorists, and to evaluate adverse experiences reported after 
administration of anthrax vaccine in order to optimize its safe use.
    FDA contributed to the development of methodology for the detection 
of biological agents for potential use by terrorists, and cooperated 
with the National Institutes of Health in developing a guidance on the 
use of potassium iodide to reduce the risk of thyroid cancer in 
radiation emergencies.
    FDA is increasing its emergency response capability by reassessing 
and strengthening its emergency response plans. For example, we 
targeted certain FDA activities to better support the protection of 
regulated products (food and animal feed, radiologic devices, the blood 
supply, drugs, and vaccines) from contamination and tampering and 
shifted resources to ensure the availability of medical products 
necessary for public health preparedness and for use against anthrax 
and other biological, chemical, or nuclear agents. We revisited how 
best to communicate with manufacturers to ensure the availability of 
products needed to treat biological agents. We have expedited our 
efforts to develop strategies to seize illicit or contaminated products 
and to provide regulatory and scientific guidance to government 
agencies responsible for the use of medical products in a public health 
emergency. We have met with key staff from the medical device and 
electrical manufacturers associations to identify potential device 
shortages and to ensure an adequate and safe supply of medical products 
nationwide. We have had numerous discussions with industry 
representatives, manufacturers, and innovative technology developers to 
discuss product design for devices that can detect biological and 
chemical weapons and agents.
    The supplemental funding also will enable FDA to enhance its 
surveillance of imported and domestic foods thus allowing us to 
strengthen our deterrence and prevention capability. These resources 
will allow the Agency to hire 673 investigators, laboratory analysts, 
compliance officers and support staff. The additional import 
investigators will increase our ability to monitor food as it enters 
the U.S. We plan to increase physical examination of imported foods 
four fold from 12,000 to 48,000 line-entries per year. In addition, we 
will increase the number of investigators to survey critical product 
safety points in the domestic food production and distribution system, 
and the added laboratory support will increase the number of food 
samples tested for possible contamination. A portion of the 
supplemental funding will enhance the capability of the Operational and 
Administrative System for Import Support, (OASIS), system to better 
identify those imports warranting closer scrutiny with both--initial 
and follow-up inspections and other surveillance activities and provide 
better access to data in other Agency systems. We need to continue to 
improve the OASIS system, which has an impressive track record for 
detecting the admission of contaminated food.
    In conjunction with our Counter terrorism Initiative, we intend to 
take a comprehensive approach that addresses all food safety hazards--
including dietary supplements microbiological, chemical, and physical--
for products under FDA's jurisdiction. We also expect to continue to 
provide guidance on food security and preparedness to industry and 
other Federal agencies.
                              food safety
    The American food supply continues to be among the safest in the 
world. Great strides have been made in recent years that have 
strengthened the Federal food safety system. The Federal food safety 
program includes new surveillance systems, stronger prevention programs 
and faster outbreak response. These programs are supported by a new 
risk-based inspection strategy, better coordinated and focused research 
and risk assessment activities, and enhanced education. Food safety 
agencies are working together more closely than ever before. Thanks to 
the budgetary support provided by Congress, this multi-agency effort 
has successfully built a strong foundation for a state-of-the-art, 
science-based food safety system and has promoted partnering among the 
key Federal agencies, States, academia, industry, and consumers. We now 
have in place newer surveillance systems such as Foodnet, Pulsenet, 
NARMS and pilots for eLexnet. Stronger preventive controls implemented 
by the Federal agencies, such as good agricultural practices for 
produce and HACCP systems for seafood, meat and poultry and juice, have 
already shown results. The numerous interagency and Federal/State 
partnerships have demonstrably improved the efficiency of our outbreak 
response systems.
    Recent accomplishments in research and risk assessment include the 
establishment of a microbiology laboratory especially designed for 
rapid throughput of imported food samples collected for microbiological 
analysis at FDA's Northeast Regional Laboratory in New York. Using 
specialized methods and equipment, this laboratory was able to cut 
analysis time from over 20 hours to less than 8 hours per sample. We 
intend to expand this concept to other field microbiology laboratories. 
We also installed new mass spectrometry equipment in our field 
pesticide laboratories, and trained analysts in the use of a method 
developed by one of our scientists which can detect over 100 
pesticides, previously undetectable by older methods.
    The diversity and types of scientific expertise and knowledge are 
ever-expanding. Consequently, we recognize that we must leverage both 
academia and industry expertise through cooperative agreements or 
consortia. The National Center for Food Safety and Technology (NCFST) 
at the Illinois Institute of Technology is devoted to research and 
evaluation of better food processing and packaging technology. The 
Joint Institute for Food Safety and Nutrition at the University of 
Maryland is devoted to risk assessment, agricultural practices and 
education, such as international Good Agricultural Practices training 
programs, and establishment of the Center for Risk Analysis and 
clearinghouse for risk assessment.
    The University of Mississippi and FDA are collaborating in the area 
of the safety of dietary supplements. The University's Center for 
National Products Research will help strengthen our science base in 
this emerging field. At the same time, the New Mexico State 
University's Physical Science Laboratory and FDA continue their second 
year of collaboration to conduct method evaluation of rapid testing 
methods of fresh fruits and vegetables for microbial contamination. In 
addition, we continue to work with the Interstate Shellfish Sanitary 
Commission (ISSC) to promote educational and research activities 
related to shellfish safety in general, and Vibrio vulnificus in 
particular. We are committed to assuring the safety and quality of 
shellfish and development of shellfish regulation. FDA will work to 
strengthen these existing collaborations and will develop additional 
partnerships with other universities that have strong food safety and 
security research programs.
    In the extramural area, we have strengthened our scientific 
foundation by providing over $24 million through extramural research 
grants. These grants have gone to over 30 States to support research in 
the areas of Bovine Spongiform Encephalopathy, produce safety, egg 
safety, HACCP system validation, food service or retail practices, 
antimicrobial research and consumer practices. Our association and 
reliance on these grants have continued to provide our Agency a 
tremendous resource to improve our scientific expertise.
    Food safety education programs have also been greatly enhanced. In 
fact, the National Academy of Television Arts and Sciences Mid-Atlantic 
Region awarded an Emmy to FDA and the National Science Teachers 
Association's for their video ``Dr. X and the Quest for Food Safety.'' 
The video, part of the curriculum in ``Science and Our Food Supply'', 
competed in the Outstanding Children's Program category.
                 bovine spongiform encephalopathy (bse)
    We must continue to carry out effective steps to keep the agent of 
BSE out of the American food supply. The cost of not doing so is far 
greater than we realize. Let us not forget the European and Japanese 
experiences and the costs they have incurred. In 2001 ``Mad Cow 
Disease'', more properly known as Bovine Spongiform Encephalophy (BSE), 
cases continued to occur in a number of Western European countries, 
e.g. Finland recently discovered its first case followed by a similar 
announcement by Austria. Outside Western Europe, in September 2001, 
Japan announced its first confirmed case of BSE. First identified in 
the U.K. in 1986, the brain-wasting disease is fatal to animals and is 
believed to be transmissible to people who consume infected beef 
products. World-wide, there are just over 100 people known to suffer 
this disease, with no cases documented in the U.S. There is a great 
deal that is not known or understood well about BSE and other 
Transmissible Spongiform Encephalopathies, TSEs, hence the important 
emphasis on the science/research aspect of this disease. With this in 
mind, inspection of feed and import monitoring for BSE continues to be 
a top priority for our Agency.
    The Department of Health and Human Services, (HHS), the U.S. 
Department of Agriculture, USDA, and other partners have spearheaded 
comprehensive efforts to safeguard the nation's food supply and 
strengthen protections already in place. We continue to try to ensure 
that the feed comply with the bans on the use of sheep and cattle 
proteins in feeds, and that contaminated material is not imported. We 
have begun to accelerate oversight of bovine derived products used in 
drugs, vaccines, medical devices, food products, dietary supplements, 
and cosmetics. Resources provided in this year's budget have helped 
intensify these efforts.
    The Department BSE/TSE action plan outlines steps to improve 
scientific understanding of BSE and other TSEs. The DHHS action plan 
outlines four areas of responsibility-surveillance, protection, 
research and oversight. This effort will be coordinated with other 
government agencies, the private sector, and the international 
community to contain this epidemic and assist those affected by it. The 
plan incorporates a comprehensive approach to further strengthen 
surveillance, increase research resources within the FDA budget level, 
and expand existing inspection efforts to prevent BSE from entering or 
taking hold in the U.S. This plan lays out a course of action to expand 
our understanding of the underlying science of TSE and their potential 
for transmission to humans.
    Protecting our borders against banned import products is a full 
time enforcement and compliance activity. To meet this challenge, we 
reinforced the existing import ban, in collaboration with USDA/APHIS, 
with more specific product information on FDA-regulated products, 
including food products, dietary supplements and cosmetics that contain 
bovine materials from BSE-identified countries, so that we an better 
identify and detain prohibited potentially harmful products. As the 
result of funding received in fiscal year 2002 from Congress we are 
also hiring additional investigators to reinforce our responsibilities 
in this area.
    With regard to the U.S. animal feeding industry, we designed a new 
database and data entry procedures for BSE inspections as well as a new 
BSE inspection checklist to better target firms for re-inspections and 
for collection of better data from both FDA & FDA State-Contract 
inspectors. By the end of fiscal year 2001 we had inspected over 12,000 
firms since 1997 for compliance with our BSE related feed regulations.
    In terms of our outreach and education efforts, we conducted two 
training sessions for Federal and State investigators on BSE to enhance 
the conduct and quality of domestic inspections, ensure timely and 
accurate reporting of inspectional findings, and provide updates on the 
science of BSE and animal protein detection methods. And, we held a 
public meeting in Kansas city to get public input regarding ways to 
further improve the feed ban regulation and compliance with the rule.
    Regarding some strides made in the research area, we are in the 
final stages of developing a test which will provide a quick yes/no 
answer on whether there is a potential animal derived material of 
concern in a sample of ruminant feed.
                         antibiotic resistance
    The prevention of antimicrobial resistance is another longstanding 
effort by FDA to promote stronger and better public health within our 
food chain from farm-to-fork. The link between antibiotic resistance in 
human foodborne bacterial pathogens and the use of antimicrobials in 
food-producing animals continues to be documented by an increasing 
amount of scientific evidence. The focus between the use of 
antimicrobial products in food-producing animals and human food safety 
is necessary because foods of animal origin are frequently identified 
as the source of foodborne disease in humans.
    Due to concerns that people are acquiring resistant infections from 
foods because of the use of these drugs in livestock and poultry, we 
continue to monitor this work very carefully and scrutinize the most 
up-to-date scientific findings available. For example, FDA recently 
published a notice of opportunity for a hearing (NOOH) to withdraw 
approvals of new animal drug applications (NADAs) for use of the 
fluoroquinolone antimicrobial enrofloxacin in poultry due to new 
evidence that the product has not been shown to be safe. This is an 
excellent example of how FDA has addressed the dangers of antibiotic 
resistance in response to refined and updated scientific research and 
findings.
    We are committed fully to leveraging with other agencies in our 
battle to tackle public health concerns regarding antimicrobial 
resistance. For example, the recently completed work on our annual 
interagency agreements with the U.S. Department of Agriculture's Animal 
Research Service (USDA/ARS) and Centers for Disease Control and 
Prevention's National Center for Infectious Diseases (CDC/NCID) 
continues to provide funding for conduct of animal and human isolate 
testing. The two arms of the National Antimicrobial Resistance 
Monitoring System (NARMS), human and animal, are an integral component 
of this monitoring system. FDA used the data to track the changes in 
susceptibility among isolates from both sources. We have also expanded 
NARMS to include monitoring resistance emergence in retail food and 
animal feed.
    We continue to rely on FoodNet, a data gathering tool to expedite 
our access to large amounts of information that assist our work on 
antimicrobial resistance. We added a third testing site for NARMS at 
FDA to test samples from retail meats to determine the prevalence and 
antimicrobial resistance patterns of foodborne bacteria in commonly 
consumed meats.
                    biotechnology--medical products
    Biotechnology is fundamentally transforming the practice of 
medicine. For example in February of this year, scientists from FDA and 
the National Cancer Institute, (NCI) reported research findings that 
may lead to a new way to determine the presence of ovarian cancer 
through a simple finger stick blood screening.
    The research behind this advance depends on two disciplines--
proteomics and computer intelligence. The diagnostic test relies on 
software that can detect patterns of key proteins in the blood. Using a 
sophisticated artificial intelligence computer program, scientists were 
able to ``train'' the computer to tell the difference between patterns 
of small proteins found in the blood of cancer patients versus control 
samples. Also, we are actively engaged in exploring the use of the new 
technologies of genomics, proteomics, and information technology to 
provide better biomarkers to help us track and avert adverse health 
effects, to rapidly identify micro-organisms that may reach FDA 
products via intentional or adventitious routes, and to provide better 
and more rapid diagnostic tests.
    In July of last year, FDA approved two new medical tests which use 
biotechnology techniques to diagnose infection of the hepatitis C 
virus. The hepatitis C virus chronically infects several million 
Americans and causes hepatitis C and other liver diseases in many 
people. The devices, the Amplicor and COBAS Hepatitis C Virus tests, 
are the first tests approved to use nucleic acid amplification to 
diagnose hepatitis C infection and monitor therapy. These highly 
accurate tests use genetic material from the patient's blood along with 
enzymes to produce the information needed for a reliable laboratory 
diagnosis.
                             generic drugs
    Generic drugs provide Americans with safe and effective lower-cost 
alternatives to brand name prescription drugs. The American public can 
be confident that when a generic drug product is approved by the 
Agency, it has met the rigorous standards established by FDA with 
respect to identity, strength, quality, purity, and potency.
    Over the years, FDA has approved several thousand generic drugs 
that have been used successfully by millions of patients. The 
Congressional Budget Office reported in a study completed in 1998 that 
the purchase of generic drugs reduced the cost to the public of 
prescriptions drugs (at retail prices) by roughly $8 to $10 billion. 
The most recently approved generic drugs are for anxiety, heartburn, 
depression, and pain management. Given that the cost of prescription 
drugs has continued to rise over the last decade, many retired 
Americans, living on fixed incomes, have continued to face 
affordability issues for medications on which they depend.
    Congress has continued its support and increased funding for the 
generic drug program. We have continued to make improvements in the 
process itself and to educate the public in the safe and effective use 
of generic drugs. We have started to recruit and hire additional 
medical officers and scientists to help reduce the approval time for 
abbreviated new drug applications (ANDAs) and increase the efficiency 
of bioequivalence assessments.
                     patient safety/medical errors
    This past year the media paid a great deal of attention to human 
clinical trials--both favorable and not so favorable. Thus, an 
important focus of the Department's activities in 2001, was the 
strengthening of patient protections through programs and measures 
designed to enhance the ethical standards of clinical trials and the 
safety and effectiveness of approved health care products. We 
acknowledge that the Agency has a very important oversight role to 
protect patients involved in clinical trials. We must ensure the 
accuracy, safety and effectiveness of the data gathered from these 
trials and submitted in product applications. We have made important 
strides to address some of these limitations. FDA's Office for Good 
Clinical Practice (OGCP) is responsible for improving the conduct and 
oversight of clinical research and ensuring the protection of 
participants in FDA-regulated clinical research. We are committed to 
ensuring that the data and reported results are credible and accurate 
and that the rights, safety and well being of trial subjects are 
protected. We require that the biomedical research that we regulate 
conform to Good Clinical Practice, (GCP) standards as articulated the 
FDA regulations. GCP standards address all aspects of clinical research 
submitted to the Agency in support of product applications and serve to 
enhance the integrity of such applications. We also published draft 
guidance for clinical trial sponsors on the operation of data safety 
monitoring committees. In addition to promoting the protection of human 
research participants, and supporting the quality and integrity of 
clinical trials and applications submitted to FDA, OGCP works with our 
international colleagues in support of global harmonization.
    FDA issued an interim rule to provide additional safeguards for 
children participating in clinical studies. The new rule provides 
specific criteria, such as an assurance of informed consent by the 
children and their parents, which have to be maintained by the 
Institutional Review Boards that oversee the trials. In addition, FDA 
proposed a regulation covering the methods, facilities and controls 
used to manufacture human cellular and tissue-based products. Another 
new measure, which is of particular significance for people with AIDS, 
is an agreement between FDA and the Department of Veterans Affairs (VA) 
to improve clinical knowledge of adverse effects of drugs used to treat 
HIV infections. Recipients of blood products will be better protected 
thanks to FDA's licensing of the first nucleic acid test systems 
intended for screening of plasma donors by permitting earlier detection 
of HIV and HCV infections in donors.
    The safety of hospital patients has been improved by two new 
measures. One of them is FDA's requirement of evidence that all but the 
lowest-risk reprocessed single-use medical devices--such instruments as 
laparoscopy scissors and balloon angioplasty catheters--are as safe and 
effective as the original products. The other new measure is an FDA 
guidance for the safe use of bed rails, which have been involved in 
nearly 400 reported accidents in hospitals, nursing homes and home use.
    In addition, FDA awarded several contracts that will enable FDA to 
access commercial data bases on the actual use of marketed prescription 
drugs in adults and children. The information, which does not reveal 
the identity of patients, helps FDA determine the public health 
significance of reports it receives through its Adverse Event Reporting 
System (AERS).
    Last year, FDA announced the creation of a new Drug Safety and Risk 
Management Subcommittee to the Advisory Committee for Pharmaceutical 
Science. The new subcommittee, which consists of nationally-recognized 
experts in areas related to risk perception and management, 
pharmacology and other related disciplines, will advise FDA on general 
and product-specific safety issues.
    In 2001, FDA and the Department's Office of Women's Health awarded 
two contracts to study labetalol and atenolol, medications that are 
used by pregnant women to treat high blood pressure despite scant 
clinical data on the use of these products in this patient population. 
The studies are to determine appropriate dosages of greatest benefit 
and least risk for pregnant women and their babies. Correct and 
appropriate guidance on drug usage is critical to our efforts to 
decrease the number of medical errors. To support these efforts, we 
have proposed a new prescription drug labeling rule. The proposed new 
labeling will reduce practitioners' time spent looking for information, 
decrease the number of preventable medical errors, and improve 
treatment effectiveness.
    An example of FDA's strong commitment to department-wide 
coordination and information sharing is FDA's active participation in 
the Patient Safety Task Force established within DHHS. FDA helps 
integrate medical error data collection efforts; coordinates research 
and analysis efforts, and develop strategies to implement patient 
safety programs. We also worked to develop plans to utilize existing 
vaccine and blood event reporting systems to reduce medical errors and 
improvement of patient safety.
                               safe blood
    Safe and accessible blood is essential to our American health care 
system. Recent terrorist attacks have shed light on the need to 
increase our efforts to protect, maintain, and ensure access to a safe 
blood supply. The Blood Safety Action Plan begun in 1997, is currently 
being implemented among other agencies of the Department, CDC, NIH, and 
the Centers for Medicare and Medicaid Services, (CMS). Our goal is to 
strike a careful balance between increasing the safety of the blood 
supply while ensuring that life-saving blood and blood products remain 
available.
    FDA's Blood Safety Action Plan specifically addresses issues of how 
to increase speed, efficiency, and coordination of an FDA response to 
an emergency affecting the blood safety. To that end, we have continued 
to work with the Department to enlist national philanthropic and other 
private sector organizations to take a lead role in promoting blood 
donations during times of shortage. These and other similar efforts are 
designed to improve the ability to predict and respond to blood 
shortages and increase the availability and elasticity of the blood 
supply. We have also made strides to reduce the number of exemptions to 
outdated regulations as well as the number of guidance documents 
lacking enforceability through regulations. Further, we have targeted 
our efforts to increase industry's compliance with published standards, 
improved execution of GMPs and quality assurance. A current database of 
potential threats to the blood supply has been developed and includes 
appropriate teams to address each threat which has allowed us to make 
improvements to streamline coordination among the Department's agencies 
and to address emerging infectious diseases and the prevention of 
transfusion of transmitted diseases.
                              gene therapy
    FDA, with primary lead role being performed by its Center for 
Biologics, Evaluation and Research, (CBER) is developing a Gene Therapy 
Patient Tracking System, (GTPTS), to supplement and/or replace current 
systems for assessing and promoting the safety of gene therapy human 
subjects/patients. The system is designed to provide oversight with 
regard to what information should be collected, how best to collect 
that information, how to store the data, how to analyze the data, and 
how to report and use the data. The system will consist of many 
components including databases, procedures, policies, and guidance. 
Additionally, FDA and the National Institutes of Health (NIH), Office 
of Biotechnology Activities (OBA), are jointly developing a database 
application, the Genetic Modification Clinical Research Information 
System (GeMCRIS), to facilitate the evaluation and analysis of human 
gene therapy clinical information. This joint database application is a 
component of the GTPTS.
                         new products approved
    As part of its public health mission, FDA last year evaluated and 
approved many new pharmaceutical products and medical devices that 
advanced the frontiers of modern medicine. FDA's Center for Drug, 
Evaluation and Research, (CDER) approved 66 new drugs, 24 of which were 
new molecular entities (NMEs) which are drugs containing active 
ingredients never before marketed in the U.S. Ten of the 66 new drugs 
(7 of the NMEs) received priority review status and were reviewed and 
approved in the median time of 6 months. CBER reviewed a total of 16 
complex biological license applications (BLAs) in the median time of 
13.8 months and approved them in the median time of 20.3 months. Two of 
the BLAs, which were classified as priority products, were reviewed in 
the median time of 11.5 months and approved in the median approval of 
13.2 months. Most of the products approved by CBER were designed to 
detect or treat infectious diseases. The Center for Devices and 
Radiological Health, (CDRH) was no different, they approved 54 
premarket approvals (PMAs), of which 24 were for devices with novel 
technologies or new uses. The median total approval time for the 54 
products was 11.3 months.
    These major product approvals are expected to benefit a large 
number of different groups of clients and include breakthrough 
medicines for patients with cancer, heart disease, diabetes and certain 
infectious diseases.
                            cancer patients
    Again this year, several newly approved products contribute to the 
prevention, early diagnosis or treatment of cancer--the second 
deadliest disease in the United States. One of FDA's most important 
approvals last year was Gleevec (Imatinib Mesylate), a new oral 
treatment for patients with chronic myeloid leukemia, a rare life-
threatening form of cancer. Gleevec was developed for use in a U.S. 
patient population below 200,000, and was therefore designated by FDA 
as an ``orphan drug.'' Sponsors of such products receive inducements 
that include seven-year marketing exclusivity, tax credit for the 
product-associated clinical research, research design assistance by 
FDA, and grants of up to $200,000 per year. FDA reviewed the drug in 
2\1/2\ and approved it under a special procedure that permits the 
marketing of important therapies on the basis of their effect on 
surrogate markers. In addition FDA approved a new biological product, 
Campath (alemtuzumab), for the treatment of patients with B-cell 
chronic lymphocytic leukemia.
    For women, FDA approved two breast cancer products. One is a 
combination of two drugs, Xeloda (capecitabine) and Taxotere 
(docetaxel). The other approval was a new indication for Femara 
(letrozole) as a first-line treatment for advanced or metastatic breast 
cancer in postmenopausal women with hormone receptor positive or 
unknown disease.
    FDA also cleared a new device that can facilitate early detection 
of cancer of the small intestine. The Given Diagnostic Imaging System 
is a swallowable capsule containing a tiny camera that snaps pictures 
twice a second as it is moved by natural muscular waves of the 
digestive track trough the small intestine. The device enables the 
physician to see areas that are not reachable by endoscope.
                             heart patients
    FDA approved five highly advanced medical devices for heart 
patients. One important device was for children. The Heartstream FR2 
AED is the first automatic external defibrillator system for use on 
infants and young children who experience cardiac arrest. The device is 
designed to restore normal heart rhythm by using conductive adhesive 
pads to administer an electric shock through the chest wall.
    Two of the devices are new, one-of-a-kind pacemakers. The Biotronik 
Home Monitoring System, the first implanted pacemaker that includes a 
tiny transmitter capable of automatic, remote data transmission. The 
device can be programmed to collect data on the patient's heart 
condition and at certain intervals automatically send them to the 
patient's physician. The second pacemaker, is the InSync Biventricular 
Cardiac Pacing System, is a new type of pacemaker that sends specially 
timed electrical impulses to the heart's lower chambers to treat the 
symptoms of moderate to severe congestive heart failure. The impulses 
are generated by an implanted pulse generator and delivered to the 
heart by three wires.
    Another first-of-a-kind product is the WCD System, a vest like 
device that is worn under clothing to monitor and treat abnormal heart 
rhythms in people at risk of dying from sudden cardiac arrest.
    FDA also approved PercuSurge, a device consisting of balloon and 
aspiration catheters. The device is used to collect and remove blood 
clots and other debris created by angioplasty and stenting of a blocked 
bypass vein graft.
    One important new drug approved last year for cardiac patients is 
Natrecor (nesiritide) injection for the treatment of acute congestive 
heart failure. The medication, which was developed with the use of 
recombinant DNA technology, is a synthetic version of a human hormone 
that dilates veins and arteries.
                          infectious diseases
    Five new products to fight infectious diseases were approved by FDA 
last year. The first, biologic treatment Xigris, was approved for the 
most serious forms of life-threatening sepsis, which claims 225,000 
lives in the U.S. each year. The new treatment is a genetically 
engineered version of a naturally occurring human protein, Activated 
Protein C, which interferes with some of the body's harmful responses 
to severe infection. PEG-Intron (peginteferon alfa 2b) injection was 
approved for the treatment of patients with chronic hepatitis C, an 
infectious disease responsible for as many as 10,000 deaths per year in 
the U.S. A new combination vaccine was approved that protects adults 
against diseases caused by the hepatitis A virus (HAV) and the 
hepatitis B virus (HBV). The vaccine, called Twinrix, combines two 
already approved vaccines, Havrix (Hepatitis A Vaccine, Inactivated) 
and Engerix-B [Hepatitis B Vaccine (Recombinant)] so that people at 
high risk for exposure to both viruses can be immunized against both at 
the same time. Twinrix is recommended for travelers who are at high 
risk for HBV, and who are visiting countries where there is a 
substantial incidence of both HAV and HBV disease. A new anti-fungal 
medication Cancidas (caspofungin acetate) intravenous infusion was 
approved for patients not responsive to or unable to tolerate standard 
therapies for the invasive form of aspergillosis. This is the first 
approval in a new class of drugs called echinocandins, which are 
believed to work by disrupting the formation of fungal cell walls. 
Another novel product approved last year is Viread (tenofovir 
disoproxil fumarate), a new anti-viral drug for the treatment of HIV-1 
infection in combination with other antiretroviral medicines. Viread is 
the first nucleotide analog approved for HIV-1 treatment.
                                diabetes
    The number of people diagnosed annually with diabetes has increased 
more than sixfold from 1.6 million in 1958 to 10 million in 1997, 
according to the CDC. Today, some 16 million people have the disease--
making it a leading cause of death in the United States. About 2,200 
people are diagnosed with diabetes every day, and that close to 800,000 
will be diagnosed with the disease this year, according to the American 
Diabetes Association (ADA). Many people don't know they have diabetes 
until they develop a serious complication such as blindness, kidney 
disease, nerve disease requiring amputation, heart disease, or stroke.
    The FDA's Office of Women's Health, the ADA, the National 
Association of Chain Drug Stores, and 80 other organizations nationwide 
are planning a campaign that will focus on the early identification and 
control of diabetes. The campaign will highlight the fact that about 
8.1 million women in the United States have diabetes. Diabetes is a 
unique condition for women. When compared with men, women have a 50 
percent greater risk of diabetic coma, a condition brought on by poorly 
controlled diabetes and lack of insulin. Women with diabetes have heart 
disease rates similar to men, but more women with diabetes die from a 
first heart attack than do men with diabetes.
    Diabetes-related brochures, wallet-sized calendars, and recipe 
cards for nutritious meals will be distributed at grocery stores and 
pharmacies in several cities: Atlanta, Baltimore, Chicago, Dallas, 
Detroit, Indianapolis, Los Angeles, Miami, New Orleans, Philadelphia 
and Phoenix.
    FDA also is funding ongoing diabetes outreach through the Indian 
Health Service (IHS). ``Portion control is an important message to get 
out to women in order to impact the escalating diabetes and obesity 
rates among American Indians and Alaska Natives,'' says Sandra Dodge, 
an IHS women's health coordinator. IHS is developing culturally-
appropriate handouts to help American Indian women with diabetes manage 
portion sizes for meals. The project will target certain urban areas, 
as well as American Indian reservations. The overall prevalence of Type 
2 diabetes is just over 12 percent in Native Americans versus 5 percent 
of the general population. In some tribes, half of the population has 
diabetes.
    In addition, new technology for monitoring glucose levels in people 
with diabetes is moving ahead rapidly, and FDA has been working with a 
number of companies to help bring it to market. A novel device approved 
last year is the GlucoWatch, a wristwatch-like device that provides 
adult diabetics with more information for managing their disease. This 
device is one of the first steps in developing new products that may 
one day completely eliminate the need for daily finger-prick tests. The 
Gluco-Watch extracts the wearer's fluid every 20 minutes by sending out 
tiny electric currents, and sounds an alarm if the glucose level 
reaches dangerous levels. FDA also approved a new device to aid 
diabetics with foot ulcers. The Dermagraft is a skin substitute made 
from human cells, which helps replace and rebuild damaged tissue in 
diabetic foot ulcers that have been present for more than 6 weeks and 
extend deep into the skin. The Dermagraft can remain on a shelf for up 
to 6 months, a major advantage over similar types.
    global trade and global production--international standards and 
                             harmonization
    Working closely with international organizations to harmonize 
technical requirements and standards for products regulated by our 
Agency remains an important priority. This work recognizes the 
international nature of our regulated industries. Equally important is 
the recognition of our collective need to share expertise concerning 
new products throughout an entire life cycle. We cannot allow 
international borders to stem the flow of information as foodborne 
pathogens, adverse events, and terrorist activities have no boundaries.
    For example, our Agency, along with USDA, and Mexico's Secretary of 
Agriculture signed a cooperative agreement in September 2001 to enhance 
existing food safety measures through expanding programs, sharing 
information and coordinating specific activities. The agreement will 
allow us to share information on the sources of fresh produce and to 
investigate the causes of any contamination of these imported food 
products. These efforts are expected to ensure that borders remain open 
and that safe products continue to flow freely between the countries. 
The arrangement, in conjunction with other cooperative measures, will 
help reduce the incidence of foodborne illnesses on both sides of the 
border. The agencies will also collaborate on other specific projects 
to achieve common understanding on issues of mutual concern.
    We have also continued a project with Mexico on a monitoring system 
for antimicrobial resistance in Salmonella camphylobacter and E. coli. 
The increase in international trade in food has increased the risk from 
cross-border transmission of foodborne pathogens and underscores the 
need to use international surveillance systems to monitor the 
prevalence of resistance to antimicrobials of importance to human 
medical therapy. A cooperative agreement was signed in the Fall of 2001 
with human hospitals and veterinary medical schools in four 
agricultural States in Mexico to develop a monitoring system compatible 
with NARMS.
    FDA has established itself as a preeminent leader in international 
food safety harmonization efforts as exemplified via our association 
and work with Codex Alimentarious. Codex is sponsored jointly by the 
United Nations World Health Organization (WHO), and the United Nations 
Food and Agricultural Organization (FAO). We helped plan and 
participated in the Global Forum of Food Safety Regulators, a 
conference designed to enhance communication among food safety 
regulators worldwide that was held in Morocco in January. The intent is 
to increase the level of food safety as well as food security, which 
will result in safer products being exported to the U.S.
    Other Federal agencies look to FDA for guidance and input that 
promote public health policies consistent with our mission. In 
particular, we provided advice and analysis to the Office of the U.S. 
Trade Representative, the Department of Commerce, and the USDA Foreign 
Agriculture Service on a broad range of trade negotiations and issues, 
pursuant to the Food and Drug Administration Modernization Act (FDAMA) 
to further U.S. trade objectives in ways that would not compromise 
FDA's health and consumer protection mandate. We continued efforts to 
eliminate potential barriers in the global marketing of products that 
are approved for use in the U.S. These efforts facilitate the Agency's 
efforts to promote mutual recognition and international harmonization 
aimed at approval systems as well as product surveillance. Our 
leadership on the Global Harmonization Task Force provides oversight 
and technical expertise in the development of international guidance of 
the premarket review and post market patient safety of medical 
products. We have also worked with the European Union to train 
qualified auditors to conduct FDA quality inspections for products 
purchased by the U.S. consumer.
                               challenges
    Each year we find ourselves confronted with more challenges to the 
way we do our business. As we have seen, some of these challenges 
present a higher degree of risk and harm to the general public if not 
addressed. Issues are increasingly complex and the breadth of FDA's 
responsibility ever expanding. Whereas, many of our constituents 
primarily focus on the product marketing application review process, it 
has become clear FDA attention must oversee and regulate the full life 
cycle of all the products that we regulate. We continue to see the 
changes and challenges that are outgrowths of the successful mapping of 
the human genome. We continue to explore a new and unchartered 
scientific frontier that promises to deliver the hope that we will be 
in a position to transform the diagnosis, treatment, and even 
prevention of diseases that afflict groups within our society. The 
pipeline of new genetic information remains immense. Genome research is 
only in its infancy and of the hundreds of genetic tests in development 
and available in the U.S., still only a few have been submitted to and 
approved by our Agency. We continue to refine how we coordinate drug 
and genetic diagnostic development together. Products will need to 
evolve from the research laboratory to the well-characterized 
therapeutics with established safety and effectiveness. To make these 
critical decisions, we need to ensure that our scientists remain on the 
leading edge in their specific scientific disciplines.
    The fiscal year 2003 Budget lays out proposed funding levels for 
the President's initiatives, identifies resources that can be 
redirected to higher priority activities, and highlights some potential 
opportunities for management and financial reform and streamlining. The 
President is proposing a total budget for the FDA of $1.7 billion that 
includes $1.4 billion in budget authority and $286.7 million in user 
fees. Counter terrorism funding includes $159.048 million of the total 
funding and annualizes the generous supplemental funds received from 
Congress in fiscal year 2002. The request also includes increases of 
$28.552 million for pay related inflationary costs; $5.0 million for 
patient safety/medical errors; $4.582 million for generic drug review; 
and $5.2 million for continued development of the Department's Unified 
Financial Management System.
                       our most valuable resource
    Our Agency work is a blending of science and law directed at 
protecting consumers by focusing on patient, food and consumer safety. 
The public trusts us to ensure that food on the family table will be 
safe and wholesome; new medical products, drugs, biological products, 
and medical devices are available in a timely manner with demonstrated 
benefits that outweigh risks; and, product information is useful and 
understandable. FDA's ability to maintain the public's trust is 
dependent on having a high performing science-based professionals carry 
out its mission. FDA is always challenged to make sure we have the 
personnel in the scientific disciplines needed. The aftermath of the 
September 11 tragedy is a perfect example of changing needs and 
increased human resource levels needed in specific scientific 
disciplines. Approximately 45 percent of FDA's workforce are dedicated 
to ``front line'' efforts, such as import monitoring and inspections, 
coordination with States' efforts, and cooperative education programs 
with industry, States and consumers.
    The $28.5 million requested will fund the mandatory pay increase. 
This increase for base resources focuses on pay adjustments because 
personnel are so essential to accomplishing the Agency's mission. These 
resources will enable FDA to maintain current levels of performance, 
and to continue to improve the drug review process. Payroll increases 
are needed to cover about half of the staff involved in the drug 
application review process not supported by PDUFA user fees; to improve 
the ability to assure the safety of regulated products; to inspect and 
investigate domestic and foreign manufacturers; and, to participate in 
harmonization efforts with countries to establish global standards for 
foods, pharmaceuticals and devices. We need now, more than ever, your 
continued support to assure FDA is ready to respond to the challenges 
of counter terrorism as well as a new medical age.
                           counter terrorism
    The Counter Terrorism request of $159 million reflects the 
President's commitment to promote and protect the public health by 
ensuring that safe and effective products reach the market in a timely 
way, and to monitor products for continued safety after they are in 
use. Funding will continue the activities begun in fiscal year 2002 for 
the safety of imported foods through expanded inspection and 
surveillance of imports; and activities related to medical products, 
including measures to help patients exposed to terrorist agents such as 
anthrax, smallpox and plague. In some cases, we expect to reframe 
existing Agency strategies to anticipate possible terrorist threats 
that may translate into risk situations that FDA has not yet addressed.
    The tragedy of the attacks of September 11 and subsequent national 
events resulted in an accelerated and intensified need for attention to 
activities related to Counter Terrorism. A combination of public health 
and law enforcement responsibilities requires FDA involvement in 
preparedness for and response to a terrorist act. FDA's 
responsibilities encompass both the civilian and military sectors of 
the population. FDA activities include surveillance, investigation and 
laboratory support for detection and management of product 
contamination; provision of regulatory guidance to manufacturers and 
other government agencies to assure the availability of medical 
products, including blood; and establishment of a communications 
network that optimizes emergency preparedness within FDA and across the 
Federal Government.
    Our Counter Terrorism initiative prescribes a strategic blueprint 
for protecting the U.S. citizens in the event of future terrorist 
attacks. The Initiative will be supported by a Counter Terrorist Action 
Plan that will more specifically outline the blueprint. We have 
structured the Agency's Counter Terrorism Initiative with the following 
four goals:
  --Protection of regulated products;
  --Medical counter measures;
  --Preparedness and response; and
  --Radiation safety.
    Today our world is faced with new and more complicated challenges. 
In our endeavors to address Counter Terrorism issues, our time and 
resources will be thoroughly engaged on threat and vulnerability 
assessment to guide and target our risk-based strategies; integrated 
intelligence and how to identify, gather, assess, and react to the 
data; effective collaboration and the ability of multiple organizations 
to share information in a timely and accessible manner; and appropriate 
intervention to reduce threats as well as a validation and performance 
assessment tool to determine output measures and success rates.
Counter Terrorism--Food Safety
    In the aftermath of September 11, we realize how our role to ensure 
a safe U.S. food supply has become exponentially more important and 
complex. It is important to state that we have no credible information 
identifying food as a target of terrorist activity. But we know that it 
is possible, and that food could be a vector making people sick shaking 
public confidence.
    Thus our efforts to address emerging public health threats must now 
include not only unintentional agents but intentional as well. We have 
heightened our awareness to the repercussions and impact of the latter 
and our workforce and resources are being reframed accordingly. We will 
be challenged to make sure that our role is appropriate for the 
anticipated and unforeseen possibilities.
    FDA's Counter Terrorism strategy for foods is three-fold. First we 
must try to anticipate threats by collecting better information. 
Second, we must be prepared to respond should an outbreak occur. Most 
importantly, we must expand our inspectional presence particularly at 
the border so we can deter terrorist activity. Prevention will be our 
best long-term solution.
    FDA's food security responsibilities extend throughout the food 
chain, and employ research and risk assessment and prevention 
strategies through a nation-wide inspection and surveillance 
partnership program with the States. To protect the nation's food 
supply, we address aspects of food production, manufacture, and 
transport in the country of origin, at the U.S. port of entry, and in 
domestic commerce. We must continue to enhance the frequency and 
quality of imported food inspections, and modernize our import data 
system to enable better detection and detention of contaminated food.
    We know that further food safety successes require us to work hand-
in-hand with our partners to ensure the quality and safety of our 
nation's food supply. The main results of this cooperation--more 
effective prevention programs, new surveillance systems, and faster 
foodborne illness outbreak response capabilities--have already enabled 
FDA to protect the safety of our food supply against natural and 
accidental threats. Every significant element of our Counter Terrorism 
Initiative will require successful collaborative efforts between our 
staff and other organizations, including other health, scientific, and 
law enforcement agencies operating at international, Federal, and State 
levels.
    Although investigators will continue their role in protecting the 
public health, the Agency's relatively small number of personnel will 
limit the effectiveness of efforts that rely only on people. Key to the 
Agency's Counter Terrorism Initiative will be FDA's ability to gather 
and assimilate pertinent information about products, hazards, 
establishments, suspect individuals, distribution and consumption 
patterns and then bring the right combination of information and 
resources to crucial decision points.
Counter Terrorism--Medical Product Safety
    Those of us in the field of science know too well that this 
discipline does not fit neatly into a square box with four well-defined 
walls. If one factors into the science equation suspect actors with 
terrorism on the agenda, then the ability to predict outcomes becomes 
more difficult. Preparedness for and response to an attack involving 
biological agents are complicated by the large number of potential 
agents (some of which are rarely encountered naturally), their 
sometimes long incubation periods and consequent delayed onset of 
disease, and their potential for secondary transmission. In addition to 
naturally occurring pathogens, agents used by bioterrorists may be 
genetically engineered to resist current therapies and evade vaccine-
induced immunity. Pathogens that have been identified as potential 
biological warfare agents include those that cause smallpox, anthrax, 
plague, botulism, tularemia, and hemorrhagic fevers.
    We must ensure sufficient availability of safe and effective 
medical products and a safe blood supply to support the development, 
maintenance; and deployment of stockpiles of medical countermeasures, 
as well as support post-event follow-up and data collection initiatives 
for these products, some of which may be investigational. The challenge 
will be to identify all of the respective threats and vulnerabilities 
assessments and then use intelligence and collaboration to fully 
understand the most dangerous intersections of the two and how best to 
respond. All of this entails a great deal of planning, dedication, and 
execution on our part to reframe our fundamental principles used to 
protect the public health mandate. As I have mentioned before, we are 
committed to our public health mandate and will continue to play a 
pivotal role in counter terrorism preparedness and response via a 
combination of regulatory and law enforcement responsibilities.
Counter Terrorism--Physical Security
    Congress also provided us critical resources to enhance and tighten 
our Agency's physical security by expanding existing service contracts 
for facility guards and augmenting equipment to safeguard building 
access, laboratory equipment, and protect proprietary research and 
information. FDA personnel and facility locations are dispersed 
throughout the U.S. We must ensure that our employees have access to 
secure and safe locations and that they are able to pursue their work 
responsibilities under an ideal work environment without fear for their 
well being.
                     patient safety/medical errors
    Our fiscal year 2003 increase request of $5 million builds on the 
growing momentum from last year's work to further enhance the 
identification of risks associated with the use of medical products and 
to reduce the occurrence of adverse events. This initiative, which also 
provides for the enhancement of the adverse events data system and 
linkages with other health care systems, is a growing initiative that 
requires ongoing support to tap into the volume of information within a 
large and extremely diverse public health community.
    As an Agency, we have to achieve better ways to communicate with 
the growing universe of people impacted by FDA regulated products--
education, outreach, information technology, or what is most likely a 
heightened combination of all elements. Many patient deaths and 
injuries are associated with the use of FDA-regulated products. We 
believe that as many as half of these could be avoided by fully 
implementing its strategies to prevent Medical Errors.
    In light of the rapid scientific advancements and the increasing 
volumes of sheer medical information, our ability to effectively 
oversee these products must be maintained. The rapid transformation of 
the science and technology that generate the products we must regulate 
has a direct correlation on the growing workload in our Agency--both on 
the premarket as well as postmarket oversight. Systems have to be 
arranged to capture, track, monitor, and process the growing pockets of 
information. All of these issues must be weighed against the increasing 
expectations of consumers with changing demographics and consumption 
habits, and then these issues must be factored into the expanding and 
evolving composition of global trade and production which will further 
necessitate greater coordination and sharing of information.
    FDA sees firsthand the technological advances in healthcare as new 
medical devices are reviewed and cleared for marketing. FDA must have 
quality information about post market problems with devices, especially 
how they are used in the clinical setting. FDA has planned designed, 
and is implementing a pilot program that will lead to a national 
surveillance network, called the Medical Product Surveillance Network 
(MedSun), composed of well-trained clinical facilities, to provide high 
quality data on medical devices in clinical use. There are currently 50 
hospitals enrolled in the program. Recruitment will continue over the 
next 2 years, with a target final complement of 225 facilities enrolled 
in the pilot program.
                             generic drugs
    The costs and availability of affordable pharmaceuticals will 
always be a concern for the consumer. The safety and effectiveness of 
the drugs, as well as costs issues, will always be a concern for our 
Agency. We recognize that bridging of these concerns for all 
stakeholders is a complicated and delicate process and consumer 
expectations are difficult to easily measure.
    Advancements in the Generic Drug Program are a product of 
Congressional support, additional resources, and high quality FDA 
staff. The requested increase of $4.6 million will provide for 
improvements to the generic drug review program and allow FDA to review 
and act upon 75 percent of fileable original generic drug applications 
within 6 months.
                     president's management agendas
    The President's Management Agenda provides an outline for our 
Agency to pursue the five presidential initiatives. The challenges for 
us will be to tailor these initiatives to FDA's unique public health 
mandate with the goal to further enhance our citizen focus and bring us 
closer to the consumer on a day-by-day basis. Given that our Agency is 
overwhelmingly labor intensive, the ability to successfully connect 100 
percent of the time with our external customers will be daunting.
    FDA's first step to helping the Department improve program 
performance and service delivery is to manage more strategically human 
capital and to ensure that resources are directed toward national 
priorities. To this end, FDA is realigning functions to achieve 
efficiencies. For example, during fiscal year 2003, 25 administrative/
management positions will be eliminated resulting in $2.6 million in 
efficiencies. Additionally, the fiscal year 2003 budget shows the 
consolidation of staff associated with public affairs and legislative 
affairs functions at the Department level, for $7.3 million in 
efficiencies. FDA has also begun a study of the current organizational 
structure to identify opportunities to consolidate and streamline other 
administrative functions.
    As a part of the FDA Revitalization Act, we have embarked on a 
multi-year plan to relocate the major portion of its headquarters 
personnel to White Oak, Maryland. This project, coupled with on-going 
efforts to reduce supervisory ratios, consolidate administrative 
functions and delayer headquarters staff, will afford FDA maximum 
flexibility to move resources closer to the day-to-day ``front line'' 
programmatic work of the Agency. In the meantime, we recognize that 
there will be temporary work interruptions during transition periods.
    The Agency is integrating information systems and databases, where 
possible, with related DHHS systems, and external stakeholders, such as 
health providers, academia, other government agencies, regulated 
industry, and consumers. This is an ambitious but necessary schedule 
that requires a great deal of coordination and planning.
    Maintaining a high standard of excellence and then trying to 
improve upon that during a time of change requires patience. We are 
aiming high in terms of expediting FDA's product review processes by 
ensuring sponsors know what is required, eliminating unnecessary 
requirements, and soliciting proposals and nominations for consensus 
standards from manufacturers to use to satisfy some review 
requirements.
                               pdufa iii
    FDA has collected significantly less in PDUFA fees than estimated 
due to a reduced number of new drug applications and an increased 
proportion of submissions whose fees were waived. The Agency has been 
able to meet nearly all of the PDUFA performance goals so far. The 
Agency's efforts to meet the PDUFA II goals may have had an unintended 
impact on approval times of standard new drug and biologics 
applications. Preliminary data indicates that approval times have begun 
to increase because more applications require multiple review cycles to 
reach approval. The Agency is watching this situation closely. However, 
for PDUFA to continue its strong record of success it must be on a 
sound financial footing.
    FDA is also concerned about the safety of new drugs and biologics 
following approval and marketing. In recent years fully 50 percent of 
all new drugs world-wide have been launched in the U.S., and American 
patients have had access to 78 percent of the world's new drugs within 
the first year of their introduction. More rigorous safety monitoring 
of newly approved drugs in the first few years after a product is on 
the market could help to detect unanticipated problems earlier.
    To protect American patients, FDA needs to strengthen its ability 
to carry out post-market drug surveillance and other non-user fee 
functions it carries out in conjunction with PDUFA. The Agency will 
continue to work with industry, the Congress, and all other 
stakeholders on a reauthorization of the PDUFA program that will 
continue to bring benefits to American consumers by bringing important 
new therapies to market quickly without compromising scientific review 
standards.
                                closing
    I thank you for the opportunity to share with you the breadth of 
FDA's responsibilities. FDA touches the life of every citizen through 
the medicines we take or feed for our animals, the blood products we 
may need one day, through the food we eat, the cosmetics we use, and, 
the medical devices in use today. Americans expect FDA to remain 
vigilant, to promote their health and well being, and to protect them 
from unacceptable hazards to our population at large, and to assure 
that they are adequately informed about the myriad hazards about which 
they will have to decide as individuals whether or not they are willing 
to accept. Significant investments must be made to keep this Agency 
strong and at the forefront of the science upon which its regulatory 
mandate is based. The returns on that investment will be an Agency that 
is equal to the challenges it faces and able to keep the confidence and 
trust of the American public. A strong FDA is clearly good for the 
consumer and industry alike, which in turn is good for the economy and 
health of our great nation. Thank you once again for the opportunity to 
express our views and for your interest in the Food and Drug 
Administration and its mission of protecting the public health. I 
appreciate your interest and continued support of the Agency and its 
public health mission. I expect this year to be another exciting one 
for the Agency and I look forward to working with you as we face the 
challenges ahead. I welcome any questions you may have.

                             PEDIATRIC RULE

    Senator Kohl. We thank you, Dr. Crawford. Dr. Crawford, I 
will read the first sentence of an article that appeared in 
yesterday's Washington Post: ``The Bush Administration plans to 
suspend the Federal requirement that drug makers test their 
products to determine whether they are safe and effective for 
children.'' In this article, a number of people long associated 
with public health, including a former FDA Commissioner, stated 
that this action is unfortunate and will put children at risk 
for pharmaceuticals that may actually in fact place their lives 
in danger.
    Anyone who reads this article will think that the 
Government is taking action that is harmful to children; I 
think it is important that you respond. So, let us get to the 
heart of this issue. If this rule is lifted, will FDA lose any 
of its current authorities to make sure that drugs our children 
take are safe? And what actions do you intend to take to make 
sure that child safety is never compromised?
    Dr. Crawford. Thank you, sir. We have been, as you know, in 
constant contact with your staff and with others in dealing 
with this, what we believe to be a misperception. HHS is taking 
action based on the issue that you mentioned to remove any 
doubt about its determination to make sure that children's 
medications are safe and used properly. The health of America's 
children is a top priority of the Administration, and having 
drugs that are properly studied for use in children is an 
integral part of assuring that our children receive the safe 
and effective medical care they deserve.
    The Department has reiterated its commitment to 
implementing all provisions of the Best Pharmaceuticals for 
Children Act, or BPCA, which was passed by the Congress and 
signed by the President in January of this year. We are going 
to do that as quickly as possible, including the new provisions 
regarding the funding of studies involving important drugs that 
do not benefit from other types of pediatric development 
incentives. The Department believes Congress, with this 
legislation, has provided the Government with a very important 
new tool to address the specific pediatric needs.
    With this new law and its tools now available, questions 
have been raised regarding the continued need for and the 
legality of the so-called Pediatric Rule, which was promulgated 
by FDA in 1998. The Department is aware of certain parts of the 
rule that have been instrumental in assuring that the needs of 
children are evaluated during the drug development process so 
that decisions about further development can be made. To date, 
however, FDA has not found it necessary to enforce all the 
parts of that rule.
    To clarify the situation now that Congress has provided the 
new tools in the BPCA, or the Best Pharmaceuticals for Children 
Act, the FDA will be reviewing the present rule over the next 
few weeks and will be announcing thereafter its findings for 
which parts of the pediatric rule should be retained to cover 
potential gaps not addressed in the present legislation, and 
which parts of the rule should be abandoned as unnecessary now. 
So, we had in effect a law that came in supplanting part of 
this regulation that we have had for some years. Then we also 
had a lawsuit challenging the validity of the regulation.
    So, we have to harmonize all of that. But, I can assure you 
that the protections that children have enjoyed under the 
regulation, and that we believe they will enjoy under the law, 
will continue to be sustained by FDA. We are sorry for any 
misperceptions that may have occurred in the media reports 
based upon a court filing that was placed on Monday of this 
week.

                      DECISIONS ON PEDIATRIC RULE

    Senator Kohl. I appreciate your comments, Dr. Crawford. 
But, naturally at this time you can understand how many of us 
are concerned that in place of a requirement in the law on the 
pharmaceutical companies, we now are hearing something much 
less, that you say will accomplish the result and that we 
should, in effect, trust that you will do the right thing. And, 
of course, we do trust. But as one President said, we trust and 
we verify, and that is our job, and I am sure you understand 
that. And I think I heard you say that you are in the process 
of thinking this problem through?
    Dr. Crawford. Yes, sir.
    Senator Kohl. And you are going to be making some concrete 
decisions very soon?
    Dr. Crawford. Yes, sir.
    Senator Kohl. And I would like to request that you get back 
to this committee with those concrete decisions 2 weeks from 
now. Is that reasonable?
    Dr. Crawford. We certainly will be able to make a progress 
report and I can assure you we will have thought it through and 
can tell you what we intend doing in a couple of weeks. Yes, 
sir.

                            NARMS ACTIVITIES

    Senator Kohl. Okay. As you mentioned in your statement, Dr. 
Crawford, the link between antibiotic resistance in humans and 
the use of antibiotics in animal feed continues to be 
documented with scientific evidence. Every American, especially 
parents, are watching this story closely and warily. They want 
and need to know what the FDA is doing to keep necessary 
antibiotics effective. The National Antimicrobial Resistance 
Monitoring System, funded through the FDA, monitors the link 
between antibiotics in animal feed and antibiotic resistance in 
human beings. So, would you describe the current activities of 
NARMS and submit for the record information on funding proposed 
for NARMS activities in the President's budget?
    Dr. Crawford. Yes sir. We will submit that information. The 
National Antibiotic Resistance Monitoring System (NARMS) has 
been in place for some few years. The notion of it, the 
philosophy of it, is that we need a benchmark to know whether 
antibiotic resistance is actually increasing, or whether it 
decreases some years and increases others. And this is, I 
think, a very effective means of assessing that. Antibiotic 
resistance is one of the big medical problems that is facing 
this country, Europe and virtually the whole world.
    We probably have researched virtually all of the naturally 
occurring antibiotics that exist. We are down now to creating 
some synthetic antibiotics or antibiotic-like substances in 
order to deal with this terrible problem of antibiotic 
resistance. It comes from multiple sources and we are dealing 
with those in an effective manner. Physician misusage is a 
problem as well as the perception, at least, of misusage on 
farms and in horticulture and a variety of other ways. There is 
a right way and a wrong way to use these antibiotics and it is 
up to the FDA to pave the way for what is called approved 
usage, and we are committed to that.
    Senator Kohl. I thank you, Dr. Crawford. Senator Cochran.

               PROGRESS ON COUNTERTERRORISM SUPPLEMENTAL

    Senator Cochran. Dr. Crawford, congratulations on your new 
responsibilities. We appreciate your presence here today 
presenting the fiscal year 2003 budget request to our 
subcommittee. In the written testimony you have submitted, you 
indicate how FDA is using the $151 million in supplemental 
emergency appropriations funding which was provided to the 
agency for homeland security. Most of the money, I understand, 
is being used for increased staffing. My question is, how far 
along are you in that process?
    Dr. Crawford. We have done the interviewing, hired some 
people and made offers to approximately half of the people we 
will be hiring. Our goal and commitment is to get all of them 
on board by the end of this fiscal year. It will be done much 
quicker than that because we are already half way there.
    It is important, as you would know better than I, to get 
the right people because this is a large infusion of agency 
resources. Our numbers will increase about 10 percent as a 
result of this. And this is, in very real ways, the future of 
FDA.
    A lot of the people we are hiring are younger than in the 
past. They also are what we call consumer safety officers, 
which means they have a college degree, and they will move 
throughout FDA into positions of responsibility over the next 
quarter of a century or so. And we have to be very careful 
about it, but our personnel office has risen to meet the 
challenge and we are about halfway there. And we will keep this 
committee posted with each benchmark we make.

                   SURVEILLANCE AND COUNTERTERRORISM

    Senator Cochran. There was some concern too about using 
funds in the supplemental for strengthening the surveillance of 
drugs and medical devices, following the events of September 
11. Are there any new procedures that have been put in place in 
this connection?
    Dr. Crawford. There are, but I would like to ask my 
colleague Dr. Lumpkin to respond to that if I may.
    Dr. Lumpkin. I think in answer to your question, Senator, 
we obviously in the world of patient safety--from the products 
we oversee as far as drugs, human drugs, human biologics, human 
devices--are involved in several initiatives to try to improve 
several aspects of that. One is improving our knowledge of what 
is going on in the outside, expanding our ability to get 
information, not only from the traditional passive system, the 
passive reporting system of adverse events that we have had in 
the past, but also looking at other epidemiological ways of 
getting information in a much more active sense, looking at 
cohorts over time to see if indeed we can look at what is 
happening as far as the use patterns of products and how that 
reflects on the safety information that comes from that.
    I think we also, in respect to the question you asked about 
the events of September the 11, obviously we have a very keen 
interest in what happens with products that we use in 
bioterrorism, and products that we have had to bring to the 
forefront as bioterrorism products, and what kinds of safety 
profiles those will have. And those, obviously, are a very 
different kind of situation. Those are products that we all 
hope and pray we never have to use. And yet, we need to develop 
them and we need to have them. And so they are presenting us 
with interesting challenges on how you develop the safety 
information both before the products become available and then 
if, like we have had to with the anthrax situation, how you 
follow up after that, to see if indeed you not only did a good 
thing by treating people who had been exposed, but what kind of 
safety concerns might have arisen from that.
    So, those are the kinds of things we have been focusing on 
since that point in time.

                         INTERNET SALE OF DRUGS

    Senator Cochran. There had been some interest and concern 
with Internet drug sales a couple of years ago. Have the events 
of September 11 had any effect on that concern? Is there 
anything new that FDA is doing in that connection relative to 
enforcement of rules or regulations?
    Dr. Crawford. We have a difficult time--we have always had 
some problem with drugs being brought into the country. With 
the Internet, though, this has taken on an entirely different 
perspective because it is possible now to buy drugs from all 
over the world by way of the Internet and have them shipped 
here. And FDA needs a new and more inventive strategy to deal 
with that, because some of these drugs are approved in the 
United States, but the formulation that might be exported to 
this country may not be approved. The dosage directions may not 
be understandable. They do pose a risk to our people. It is not 
something that we can get more people at the border to stop.
    So, what we are going to have to do is take some rather 
severe actions. One of our problems is that each time we take 
action against these kinds of products, we have to give the 
perpetrators the opportunity for a hearing. And you would 
understand very quickly that we just do not have the resources 
to give all of these kinds of hearings. We probably need to 
consult with this committee and others about some kind of 
legislation or tweaking of existing law in order to enable us 
to deal with this problem of having to grant these hearings. 
And if I might offer, I would like to work with your staffs on 
that possibility, because we do have a developing problem that 
could break out and embarrass all of us. It is getting more and 
more severe all the time.

                         STOCKPILES OF PRODUCTS

    Senator Cochran. We appreciate your concerns and also your 
efforts to look at the law and help us understand how we can be 
more helpful to you in this regard.
    What about current stockpiles of blood and medical 
products? Are they adequate? What if anything else needs to be 
done in that connection and what is your role in that?
    Dr. Crawford. Well, our role is considerable. May I ask Dr. 
Kathryn Zoon to come to the table? She is the director of our 
Center for Biologics and is directly involved in that process.
    Dr. Zoon. Thank you. One of the areas--I will address blood 
first because obviously that is one that we are focusing on. On 
September 11 a number of events required a number of actions we 
are continuing to work on right now. We needed to prepare 
emergency guidance for giving relief, for training and 
transport of blood, not to affect the safety and quality of 
blood, but to allow the facilitation of blood collection and 
the very quick training of people to collect blood in an 
emergency situation. This worked very well to move the blood 
into New York very quickly. What we found is that there were 
additional areas we need to focus on, particularly in the blood 
arena, which involve transport and interactions with the 
Federal Aviation Committee and other agencies, etcetera to deal 
with transport.
    Also, the issue of supply has actually been an ongoing 
issue over the years. And having an adequate supply, especially 
in the absence of an emergency, has been with a very small 
margin of overage. In fact, we have been working with the 
Department, HHS, to develop a surveillance system that works 
with 26 surveillance sites and trying to get critical 
parameters on the adequacy of the blood supply, and also 
working with the Department and encouraging blood donations, 
both increasing the number of blood donors as well as 
increasing the number of donations per donor.
    In the medical supply area, I can speak to biologics, and 
particularly our responsibility in smallpox vaccine and anthrax 
vaccine and related products, immunoglobulin products. We have 
been working with a number of the manufacturers and the 
Department to look at the stockpiles of this, which are key to 
the public health and safety. This has been a primary action 
that we have focused on over this past year. We have spent an 
enormous amount of resources in trying to facilitate the 
development of these products, both conventional vaccines as 
well as the development of new vaccines, and are committed to 
do so until we get the problem solved.

                     PHYSICAL SECURITY ENHANCEMENTS

    Senator Cochran. Thank you very much. Some of the 
supplemental funds are being used to enhance physical security 
at FDA. What enhancements have been made so far and do you have 
plans to establish new procedures relative to people who work 
at FDA, doing background checks and that kind of thing?
    Dr. Crawford. May I ask Mr. Jeffrey Weber to respond to 
that, please?
    Mr. Weber. Thank you. Yes, we are revising our background 
procedure. We are hiring additional guards to monitor our 
facilities. The department has instituted new procedures for 
monitoring select agents and protecting select agents in our 
laboratories. We have done an inventory of all of our 
facilities to determine what type of additional security 
procedures are needed at them, and we are in the process of 
contracting for things like bollards in the parking lots, 
additional locks on refrigerators where we store select agents, 
additional cameras, etcetera. So we are improving the security 
of all of our facilities that handle those select agents.

                       BACKLOG OF PRODUCT REVIEW

    Senator Cochran. In terms of the application and review 
performance there has been some concern in the past about the 
gaps between the statutory requirements and the reality of 
approving applications in a timely way. There has been a 
backlog of food and color additive petitions, of animal drug 
applications. I have heard about that from constituents. What 
is the status of the effort to deal with these backlog 
problems?
    Dr. Crawford. Starting first with the Center for Veterinary 
Medicine, this past year they had an initiative to try to cut 
the backlog considerably. They were able to reduce it by about 
50 percent. And they have a new commitment this year, with some 
new personnel in place, to continue to whittle it down. It is 
going to be difficult for them to sustain that with present 
resources, but I am committed to doing what I can as Deputy 
Commissioner to help them in that process, and I applaud what 
they have done.
    Senator Cochran. What progress has FDA made in reducing the 
review times for medical devices?
    Dr. Crawford. We do have an initiative on that also, and I 
would like to ask Dr. David Feigal to come forward if I could.
    Dr. Feigal. Thank you for the question. There are actually 
at this present time no backlogs in medical devices. The 
average review time, total time, is as good as it has been in a 
decade. But there are definitely areas where we are committed 
to improving. One of the areas that has been identified by 
industry is the treatment of products which are designated for 
expedited review. These have not moved particularly quicker 
than our other products. The average is about a year to a year 
and a half from the application to market. And we have begun 
working with industry to find ways to work together to improve 
the application process so that those particular products which 
are breakthrough products will come to market more quickly.

                MEDICAL DEVICE AND ANIMAL DRUG USER FEES

    Senator Cochran. Have there been any discussion with the 
medical device and animal health industry with respect to user 
fees to help deal with this?
    Dr. Crawford. Yes, we have met with the Animal Health 
Institute, which represents the animal health industry, and 
they informed us just this past week that they are interested 
in the user fee concept based somewhat on the Prescription Drug 
User Fee Act that has been successful for both FDA and, we 
believe, for consumers.
    The medical device industry, I believe it is correct to say 
there are some elements of it that favor user fees, and some 
that have not yet committed. And I think it is fair to say with 
them, if Dr. Feigal agrees, that the debate and discussions 
have just begun and we do not know where that is going to go. 
But, with animal drugs it appears that the notion of user fees 
is popular and that it will be pressed.

                            BSE INSPECTIONS

    Senator Cochran. One of the issues that is topical because 
of the recent foot-and-mouth disease scare in Kansas and the 
terrorist attacks on the United States is the BSE feed and 
import monitoring for these animal diseases. It has been an FDA 
priority, as I understand it. In your testimony, you indicate 
that FDA has inspected over 12,000 firms since 1997 for 
compliance with its BSE-related feed regulations. How many 
firms have not been inspected and what is FDA doing to monitor 
the compliance of those firms already inspected?
    Dr. Crawford. Thank you for the question. I would like to 
ask Dr. Steve Sundlof to come forward and respond to that. He 
has monitored this effort and directed it ever since it began. 
He was on board when the first cases of the human form of BSE 
occurred, then was instrumental in putting this process in 
place. He is the Director of our Center for Veterinary 
Medicine.
    Dr. Sundlof. Thank you and thank you, Senator Cochran. In 
terms of how many have not been inspected, we have inspected--
to our knowledge--we have inspected all of the firms with the 
exception of the individual farms, which represents millions of 
farmers. But, we made a commitment that we would inspect 100 
percent of firms that, in any way, handle the prohibited 
material, and we have done this.
    We are in the process now, with the appropriations we 
received in 2002, to dramatically increase the inspection force 
for BSE, and we will be inspecting again all 100 percent of the 
firms that handled the prohibited material that, if 
incorporated in feed, could produce mad cow disease.
    We are going back in a priority manner such that people who 
were not found to be in compliance on the last inspection are 
the first people that are going to be inspected this time. 
Furthermore, we are looking at ``for cause'' inspections on the 
farm where we believe that, through our intelligence, that 
there may be use of prohibited animal feed in cattle. So, we 
have really ramped up the inspection for BSE. We have also 
increased our inspection at the borders so that any material 
that might be imported into the country that could spread the 
BSE agent is being looked at much more closely. In our program 
right now we are really starting to get to the point where it 
is going to be very much self sustaining.

                              BSE FUNDING

    Senator Cochran. We added $15 million to the funding level 
in 2002 for these BSE activities. What is the total proposed 
funding level for these activities for 2003?
    Dr. Sundlof. In terms of increasing the amount for BSE, I 
do not believe, I think we are staying at that same level or 
very close to that level for 2003. But, this will get us to our 
goal of 100 percent inspections every single year, so every 
firm will be inspected at least once every single year. And 
again, we have really increased the surveillance at the border. 
That $10 million bought 100 inspectors that are out there now 
that we did not have before.
    Senator Cochran. But you are going to keep them? You are 
proposing to keep them?
    Dr. Sundlof. Yes, we are going to continue that. In 
addition, we have increased our contracts with the States so 
that the States are now funded to do more of the inspections 
for us. And that is very important because a lot of these feed 
mills are in places where it is hard for FDA district 
inspectors to get to because they may be in remote parts of the 
State. So, having the States out there working with us has 
really helped us. In fact, they are doing about 80 percent of 
the inspections.

                          DIETARY SUPPLEMENTS

    Senator Cochran. My last question has to do with botanical 
dietary supplements. Has there been a study done to assess the 
overall quality of dietary supplements that are being sold in 
the U.S.?
    Dr. Crawford. We regulate those under the Dietary 
Supplements and Health Education Act, and Mr. Joe Levitt is 
Director of our Center for Food Safety and Applied Nutrition, 
and I would like to ask him to talk about any such studies as 
he may be aware of, those and those that might be planned.
    Mr. Levitt. Thank you. There is no single, comprehensive 
study. There are a number of areas that are being looked at at 
the universities. We are also working very closely now with the 
University of Mississippi to get better data on what is out 
there in dietary supplement products, with the Center for 
National Products Research at the University of Mississippi.
    Senator Cochran. Do you think the Food and Drug 
Administration will be able to take advantage of partnerships 
such as this where there is expertise in these research areas?
    Mr. Levitt. Yes, we are very excited about collaborations 
such as these. We can take the expertise, we at the FDA can 
really combine that in a positive, synergistic way with 
expertise in academia. So we see this as vital to the future of 
us having a strong scientific foundation to regulate this group 
of products.
    Senator Cochran. Do you foresee the possibility of having 
FDA scientists located in these research facilities as well?
    Mr. Levitt. There is nothing in this year's budget that 
addresses that. We do have a collaboration in Chicago on food 
processing, food safety that does have FDA employees on site as 
part of that facility. And that is a model we are looking at in 
terms of how can we take and apply that model elsewhere.
    Senator Cochran. Thank you very much. Thank you, Mr. 
Chairman.

                         ANTIBIOTIC RESISTANCE

    Senator Kohl. Thank you, Senator Cochran. Just one last 
question. Going back to the link between antibiotic resistance 
in humans, and the use of antibiotics in animal feed, I have 
received many letters from people in my State of Wisconsin 
regarding the use of one particular antibiotic, the drug 
Baytril in food additives. It is my understanding this drug is 
similar to Cipro, the drug used to combat several food-borne 
illnesses, and as we know now, anthrax.
    Due to a significant increase in resistance among humans a 
drug similar to Baytril was approved in 1995 to treat chickens. 
The FDA proposed in October of 2000 to ban this class of 
antibiotics from use in poultry. And now I have been informed 
that this ban is being challenged. Could you comment on that 
please?
    Dr. Crawford. Yes sir. The state of that situation is that 
the FDA did in fact move to question the antibiotic Baytril, 
which is a fluoroquinolone, which is of the same family, as you 
pointed out, as ciprofloxacin comes from. And two companies 
marketed these particular products for chickens. And what FDA 
did was publish a notice of an opportunity for a hearing to 
have the company come in and explain why their product should 
stay on the market or, in effect, defend its license.

                     ADDITIONAL COMMITTEE QUESTIONS

    One of the companies did not wish to avail themselves of 
that possibility and voluntarily withdrew that poultry drug 
from the marketplace. The second company has chosen to contest 
FDA's findings and have asked for a hearing. And a notice of a 
hearing has been sent to that company. And as you know, this 
means that in time it will be heard by an administrative law 
judge. Then the administrative law judge will submit his 
findings to me and we will evaluate that and take the 
appropriate action.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                Questions Submitted by Senator Herb Kohl

                     antimicrobial resistance/narms
    Question. There have been several news stories recently about the 
decrease in antibiotic use by the poultry industry. This has been 
fueled, at least in part, by the refusal of some corporate consumers, 
such as McDonald's and Wendy's fast food restaurants, to buy chicken 
treated with certain antibiotics, due to evidence regarding the links 
between antibiotic overuse and drug-resistant bacteria, and public 
awareness of this issue.
    To what extent has FDA played a role in promoting the reduction of 
antibiotics fed to healthy chickens?
    Answer. FDA supports judicious use of antimicrobials. Further, in 
fiscal year 1977 FDA published a prohibition against extralabel use of 
fluoroquinolone to ensure the drug is used therapeutically.
    Since there has been concern about the use of antibiotics in 
agriculture, other approaches are being evaluated to minimize 
contamination of animal products with foodborne human pathogens. 
Reducing colonization of animals by pathogenic bacteria by using 
competitive exclusion treatments, phage therapy, vaccines and farm 
hygiene is being considered as an alternative to antimicrobial feed 
additives.
    Competitive exclusion products must adhere to FDA regulations that 
the bacterial mixtures be well defined. For commercial use, competitive 
exclusion preparations for poultry must be free from all known human 
and avian pathogens and from any microorganisms with unusually high 
resistance to antimicrobials. The FDA has approved a competitive 
exclusion product designed to prevent the colonization of chicken 
intestines by pathogenic bacteria, such as Salmonella spp., 
Campylobacter spp., and E. coli, and also to reduce the use of 
antibiotics and the spread of antibiotic-resistant genes. Researchers 
in the Division of Microbiology have standardized a quick and accurate 
in vitro assay for determining the efficacy of potential competitive 
exclusion products. In addition, researchers have characterized 
vancomycin-resistant isolates from a competitive exclusion product. Our 
studies indicate that FDA will need to standardize the identification 
techniques used to characterize the components of competitive exclusion 
products.
    Question. What do you believe is an acceptable level of antibiotic 
use in food animals, taking into consideration the most recent 
information gathered by NARMS? Do you believe that the reduction of 
antibiotics by major poultry producers will lower the level of 
antibiotic resistance in humans to this acceptable level?
    Answer. The science behind the issue of antimicrobial resistance 
resulting from the consumption of food animals is complex and requires 
a multi-faceted approach by all stakeholders, including the Federal 
government, industry, veterinarians and food animal producers, in order 
to be successful.
    FDA currently does not have accurate estimates as to the amounts of 
antimicrobials consumed by food-producing animals. FDA requires the 
submission of certain drug sales information as part of the annual drug 
experience report for approved drug products. However, the information 
submitted is limited and difficult to interpret; for example, many 
products are used in both food animals and companion animals yet only 
total amounts of drugs produced are reported. The Framework Document 
identifies the need for the pharmaceutical industry to submit more 
detailed antimicrobial drug sales information as part of its annual 
report. The goal of this additional monitoring is to obtain objective 
quantitative information to evaluate usage patterns by antimicrobial 
agent or class, animal species, route of administration and type of 
use, that is therapeutic or growth promotion, in order to better 
evaluate antimicrobial exposure. More comprehensive data are essential 
for risk analysis and planning, can be helpful in interpreting 
resistance surveillance data obtained through NARMS, and can assist in 
the response to problems of antimicrobial resistance in a more precise 
and targeted way than is currently possible. FDA is developing new 
requirements for antimicrobial drug use information through a notice 
and comment rule-making process.
    Question. What efforts have been made to decrease antibiotic use in 
animals other than poultry? Have these efforts been successful, and if 
not, what steps are being taken by FDA, alone and in conjunction with 
other non-governmental and government agencies, to enhance these 
efforts?
    Answer. FDA has taken an active role in educating veterinarians and 
food animal producers by funding AVMA efforts to develop prudent drug 
use principles and disseminating the resulting guidelines. Guidelines 
for prudent or judicious use principles have been developed for beef, 
dairy, swine and poultry practitioners and for poultry and swine 
producers. FDA recently printed these principles in booklet form and 
produced two videotapes for educational purposes and distributed the 
educational items to appropriate veterinary practitioners. Additional 
booklets designed to provide beef and dairy food animal producers the 
background to the judicious use principles are under development. In 
addition, two projects on prudent drug use activities on dairy farms 
were supported in California and Michigan and similar projects in swine 
at Tufts University and The Ohio State University were funded in late 
2001.
    FDA believes that development and dissemination of prudent drug use 
principles, is an essential first step, to ensure that the principles 
are followed in practice. FDA intends to continue monitoring 
development of antimicrobial resistance through the National 
Antimicrobial Resistance Monitoring System, NARMS, as one means to 
determine if the prudent use principles are effective in slowing or 
stopping the development of resistance in foodborne pathogens. Another 
method to assess the success of prudent drug use initiatives is to 
monitor the use of antimicrobial drugs in food-producing animals, as 
described above. The data gathered from the enhanced reporting by drug 
sponsors on antimicrobial drug use can be used to evaluate the 
effectiveness of mitigation strategies implemented in response to 
trends of increasing resistance and to assess the success of prudent 
drug use initiatives.
    It is important to recognize that there have been notable changes 
during the past several years within the Federal government's public 
health infrastructure in the approach to addressing the antimicrobial 
resistance problem. The Federal Public Health Action Plan, promising a 
coordinated focus on, among other areas, education, surveillance, 
research, and product development, was published in January 2001. FDA 
has served as co-chair of the Interagency Task Force, which developed 
the plan. The Task Force is now overseeing the implementation of the 
plan and expects to have a report completed by June 2002 on progress 
made to date. Copies of this plan are available at the Centers for 
Disease Control and Prevention website, http://www.cdc.gov/
drugresistance/actionplan/.
    Question. Please provide information on the current activities of 
NARMS, including all funding proposed for NARMS activities in the 
President's budget and its' proposed uses. What was the total funding 
FDA spent or anticipates spending on NARMS activities in fiscal year 
2001 and fiscal year 2002? What is the status of the report requested 
by the Subcommittee on NARMS that is due May 1?
    Answer. FDA expended $8.3 million on NARMS in fiscal year 2001 and 
expects to expend the same amount in fiscal year 2002 and fiscal year 
2003. There is no new funding included in the fiscal year 2003 
President's Budget. The National Antimicrobial Resistance Monitoring 
System is a surveillance tool that monitors change in susceptibilities 
to antimicrobial drugs of pathogens from human and animal specimens. 
Surveillance includes non-typhoidal Salmonella, Escherichia coli O157, 
Campylobacter and Enterococcus isolated from human stool samples, 
animals at slaughter, and retail meat, as well as human isolates of 
Shigella, Vibrio, Listeria and Salmonella Typhi. NARMS is integral to 
our strategy of reducing antimicrobial resistance, and is a 
collaboration between the FDA, the Centers for Disease Control and 
Prevention, and the United States Department of Agriculture. Early 
identification of emerging resistance will facilitate management of the 
problem, initiate appropriate educational efforts and promote judicious 
use, prolonging the effectiveness of approved drugs for humans and 
animals.
    The NARMS program includes partners from 27 State and local public 
health laboratories that represent 63 percent of the U.S. population. 
NARMS consists of three testing sites, or arms, all using identical 
isolation, identification, and susceptibility testing procedures, and 
each testing site has the expertise of a molecular biologist to 
facilitate associated analytical microbiological research on the 
isolates, including molecular characterization such as pulsed-field gel 
electrophoresis, polymerase chain reaction, ribotyping, or other 
appropriate method. The three arms include human, animal, and retail 
meats.
    In fiscal year 2001 NARMS was greatly expanded to include 
additional bacterial pathogens and to improve the usefulness of the 
program by giving more capability to monitor changes in antimicrobial 
susceptibilities and increase the statistical robustness of the 
program. This included adding retail meat testing. Retail meat 
represents the point of exposure that is closest to the consumer and, 
when combined with data from slaughter plant samples, provides a more 
representative picture of the prevalence of resistant pathogens in 
products derived from food-producing animals.
    In fiscal year 2002 FDA expanded NARMS to the retail meat program 
by adding five testing and collection sites in Connecticut, Georgia, 
Maryland, Minnesota and Tennessee for retail meats. The collection 
sites have adopted a standard method to isolate Campylobacter, E. coli, 
Salmonella and enterococci from a sample of meat and poultry from 
selected grocery stores in the participating States, and cultures each 
sample for the presence of Salmonella and Campylobacter. In addition 
Georgia, Maryland and Tennessee culture for E. coli and enterococci. 
These cultures are then sent to the FDA Center for Veterinary 
Medicine's Office of Research for antimicrobial susceptibility testing, 
using the same procedures as those used at the CDC and USDA NARMS 
testing sites.
    In addition, a 3 year cooperative agreement was signed on September 
29, 2001 with investigators from four agricultural States in Mexico to 
establish an antimicrobial resistance monitoring program comparable to 
NARMS. This program will use surveillance to detect resistance among 
Salmonella, Campylobacter, and Escherichia coli collected from humans, 
animal derived food products and live farm animals. Finally, each NARMS 
testing site now has the expertise of a molecular biologist to 
facilitate associated analytical microbiological research on the 
isolates, including molecular characterization such as pulsed-field gel 
electrophoresis, polymerase chain reaction, ribotyping, or other 
appropriate method.
    Since its inception, NARMS data have been used to identify public 
health threats and initiate responses. Federal agencies undertake joint 
field investigations of outbreaks of illness marked by pathogens that 
display unusual antimicrobial resistance patterns. FDA has used NARMS 
data to assess the human health impact of fluoroquinolone use in 
poultry. All the participating agencies have used the data to improve 
knowledge of risk factors associated with the development of resistance 
and to stimulate research in the molecular characteristics of 
resistance emergence and transfer. The program has also triggered 
broader research projects relating to prudent antimicrobial use in 
animals and the role of the environment in the emergence and spread of 
antimicrobial resistance.
    The NARMS report to Congress is expected to be delivered to 
Congress by May 1, 2002. The draft report is currently under review.
    Question. What portion of NARMS funding is transferred to USDA?
    Answer. In fiscal year 2002 FDA plans to spend $8.3 million on the 
NARMS program. The NARMS program is a joint effort between FDA, the 
Department of Agriculture, or USDA, and the Centers for Disease Control 
and Prevention or CDC. In fiscal year 2001 $1,340,000 went to USDA and 
$1,550,000 went to CDC through interagency agreements and supplies/
services contracts. In addition, USDA and CDC contribute resources to 
NARMS. In fiscal year 2001 CDC contributed approximately $1,100,000 and 
USDA's Agriculture Research Service contributed $950,000.
    Question. There have been concerns raised about the scientific 
validity of NARMS data, since the specimens studied are taken from a 
limited sampling base. There have also been concerns raised regarding 
using NARMS data as the basis for regulatory action. How would you 
respond to these concerns?
    Answer. The NARMS program is integral to FDA's strategy of enhanced 
pre-approval assessment, post-approval surveillance, and regulatory 
controls in order to better characterize and control the development of 
antimicrobial resistance. Early identification of emerging resistance 
will facilitate management of the problem. For more information on the 
operations of NARMS, we are preparing a comprehensive NARMS report 
which is expected to be delivered to Congress by May 1, 2002.
    The NARMS was substantially expanded under the National Food Safety 
Initiative, which resulted in a very robust, statistically valid 
sampling plan for the human arm of NARMS. Ten additional State public 
health laboratories are submitting human isolates in 2002, for a total 
of 27 sites that represents approximately 63 percent of the U.S. 
population. The animal arm of NARMS is a robust and scientifically 
valid source for Salmonella isolates. These isolates originate from raw 
products collected from federally inspected slaughter and processing 
establishments. Salmonella was selected as the target for pathogen 
reduction efforts by the USDA Food Safety and Inspection Service in 
implementing the--Pathogen Reduction: Hazard Analysis and Critical 
Control Point, or HACCP, Systems--Final Rule that published on July 25, 
1996. Salmonella testing includes carcass samples from cattle, swine 
and chicken, as well as raw ground samples from beef, turkey and 
chicken. As long as USDA continues to do Salmonella testing in 
federally inspected slaughter and processing plants, NARMS will have a 
valid and robust source of Salmonella isolates for susceptibility 
testing. For pathogens other than Salmonella, however, the animal arm 
of NARMS is not sufficiently robust.
    In order to correct this problem, retail meat testing was added to 
NARMS in 2001 as a pilot program in Iowa. Retail meat represents the 
point of exposure that is closest to the consumer and, when sufficient 
samples are collected from a variety of product categories, provides a 
representative picture of the prevalence of resistant pathogens in 
meat. In fiscal year 2002, FDA has expanded the retail meat program by 
adding five testing and collection sites in Connecticut, Georgia, 
Maryland, Minnesota and Tennessee. The collection sites have adopted a 
standard method to isolate Campylobacter, E. coli, Salmonella and 
enterococci from a sample of meat and poultry from selected grocery 
stores in the participating States, and cultures each sample for the 
presence of Salmonella and Campylobacter. In addition, Georgia, 
Maryland and Tennessee culture for E. coli and enterococci. These 
samples are sent to the microbiology laboratory at FDA's Center for 
Veterinary Medicine's Office of Research where all pathogens present in 
the sample can be isolated. The FDA laboratory follows the same 
protocols and testing procedures as the human and animal arms of NARMS. 
We anticipate that the retail food arm of NARMS will become a very 
important source of antimicrobial resistance information on pathogens 
other than Salmonella, such as Campylobacter, E. coli, and Enterococcus 
species.
    In addition, each NARMS testing site now has the expertise of a 
molecular biologist to facilitate associated analytical microbiological 
research on the NARMS isolates, including molecular characterization. 
This work better enables FDA to determine the source of the resistant 
pathogen. FDA has also added an animal feed component to NARMS in order 
to provide additional information as to possible sources of resistant 
pathogens at the farm level and may serve as an area to focus 
mitigation efforts. In 2002, FDA field representatives are sampling 
animal feed at U.S. rendering plants and the Office of Research in the 
Center for Veterinary Medicine is isolating and susceptibility testing 
the organisms.
    Question. If there are problems with the scientific validity of 
NARMS data, what would be needed to make NARMS statistically valid, 
including samples collected and analysis costs?
    Answer. Maintaining the funding of each of the three testing sites, 
human, animal and retail meat, is necessary for maintaining a robust 
program. FDA is expanding the retail meat arm of the program. This arm 
of NARMS has the potential to be the most resource intensive because of 
the need for a valid sampling scheme and the large numbers of pathogens 
that may be isolated for susceptibility testing. We anticipate there 
could be additional needs for this expansion but the Agency currently 
is in the early stages of developing this arm of the program.
    Question. Please provide information on the NARMS pilot projects in 
Mexico monitoring antimicrobial resistance in Salmonella. Are other 
international NARMS projects currently under consideration? If so, 
please provide information on them, including the objectives of all 
international pilot projects.
    Answer. A 3-year cooperative agreement was signed on September 29, 
2001 with investigators from four agricultural states in Mexico. The 
primary objective is to establish an antimicrobial resistance 
monitoring system for foodborne pathogens in Mexico comparable to 
NARMS. The long-term objective is to improve the understanding of the 
epidemiology of Salmonella, Campylobacter, and E. coli isolates in the 
four Mexican states and to better define the susceptibility patterns of 
the pathogens and the risk factors associated with drug resistance. 
This project will aid in the development of an international database 
that will have similar and eventually standardized testing 
methodologies with NARMS and other international monitoring programs. 
Such a database will allow comparison of trends observed among 
countries and enhance food safety activities globally. A multinational 
surveillance program will allow improved detection of epidemics and 
earlier responses to identified emerging pathogens on an international 
scale and provide greater public health protection against multi-drug 
resistant pathogens. A potential long-term benefit of this grant is the 
ability to design and implement data-driven prudent drug use practices 
in the United States and Mexico based on information gained in the 
study. There are no plans for additional international NARMS projects 
at this time.
    Question. Has the Agency sought or received public input in the 
past year concerning the NARMS program, and specifically, the 
international expansion of NARMS?
    Answer. The Food and Drug Administration held a two day public 
meeting on March 15 and 16, 2001 to discuss the results from the 
National Antimicrobial Resistance Monitoring System and related 
antimicrobial resistance research. One of the topics presented and 
discussed was the Resistvet Project, which is the US-Mexico 
Antimicrobial Resistance Monitoring Program for Foodborne Pathogens.
    The next NARMS meeting, hosted by the United States Department of 
Agriculture--ARS, is tentatively scheduled for November, 2002. This 
will be an opportunity to get additional input concerning the NARMS 
program.
                             animal cloning
    Question. There has been much attention in the media recently about 
the latest cloned animal, CC the cat. Obviously, this adds fuel to the 
already raging cloning debate. There have been articles in the 
Milwaukee Journal-Sentinel, and other newspapers, regarding the patent 
disputes surrounding cloned animals. One such article was published in 
a recent Boston Globe, and stated that the FDA is likely to allow 
clone-derived meat and dairy products to be sold as soon as this 
spring. The article also reported that over twenty cloned dairy cows, 
with the ability to produce milk at a much more efficient rate, have 
been sold in anticipation of this ruling.
    When was an application first received by the FDA in regard to the 
safety of clone-derived meat and dairy products? When is a ruling on 
this, and all other similar applications, expected?
    Answer. FDA has been considering the suitability of clones of 
animals of high genetic merit for food and feed production since it 
became apparent in late 2000 that some commercial firms intended to 
market such animals for use in breeding and food production programs. 
FDA met with firms conducting research and producing clones of cattle, 
hogs, sheep, goats, and chickens during 2001 to learn of their business 
models, the types and numbers of clones that they planned to produce, 
and to encourage the firms to publish as much data as possible relating 
to the safety of these animals and their progeny for use in food 
production. FDA also identified this issue as the highest priority for 
a National Academy of Sciences/National Research Council, NAS/NRC, 
expert committee to consider. The NAS/NRC report is expected in June 
2002. A determination by FDA on what, if any, safety concerns exist 
with regard to clone-derived meat and dairy products incorporating the 
NAS/NRC recommendations and any additional scientific data available is 
projected by the end of calendar year 2002.
    Until an FDA finding has been issued, clone companies have agreed 
to withhold all cloned animals, food derived from them and their 
progeny from the food and feed supply.
    Question. Please provide a timeframe and summary of steps that FDA 
has taken to conclude whether these products are safe for human 
consumption. Taking into consideration that animal cloning is still in 
relatively early stages, have possible long-term health risks been 
considered?
    Answer. FDA is in the information gathering stage for science-based 
decision making on the safety of food derived from clones of animals 
that are not genetically engineered. FDA began this process in late 
2000, contracting with National Academy of Sciences/National Research 
Council, or NAS/NRC for an assessment of risks associated with cloning, 
in addition to other animal biotechnology products. In 2002, FDA will 
receive the NAS/NRC recommendations, determine whether any additional 
data are available that would be useful in an assessment of safety 
concerns, and release its findings. FDA also is in the planning stages 
to co-sponsor a public meeting this fall on animal cloning that might 
gain additional information.
    As part of any food safety assessment at FDA, possible long-term 
health risks are considered as a matter of course.
    Question. Has the agency taken into consideration the possible need 
to label products derived from cloned animals?
    Answer. The need to label food products derived from cloned animals 
will be considered as part of any FDA finding as to the safety of these 
products and the appropriate level of regulation warranted, based on 
the science. Food labeling is generally based on whether there is a 
difference in food qualities or safety that warrants a label.
    Question. Has the agency received applications for approval of 
clone-derived pharmaceuticals? If so, please provide the status of 
these applications. If not, please provide information on what FDA is 
doing to prepare for the receipt of such applications, and whether the 
same procedures will be used to study the safety and efficacy of clone-
derived pharmaceuticals as opposed to other pharmaceuticals.
    Answer. A clone derived phamaceutical includes a variety of 
products. One such product might involve xenotransplantation. FDA has 
not received any applications for xenotransplantation products that are 
derived from cloned animals. A cloned animal is not derived by mating, 
that is, by sperm plus egg, but rather by injecting all of the genetic 
material of the founder animal into an enucleated--host egg, that is an 
egg with of its genetic material removed. This procedure results in 
offspring that are nearly genetically identical to the founder animal. 
Some U.S. companies are attempting to produce cloned animals for 
xenotransplantation products in order to reduce the host's immune 
response, product rejection and the need for immunosuppressive agents. 
Currently, FDA is not doing anything different to prepare for the 
receipt of such applications, and the same procedures will be used for 
the study of safety, purity and potency of xenotransplantation products 
from clone-derived animals as those derived from wild type or 
transgenic animals. For many years, FDA has had a guidance document on 
biologics produced in transgenic animals and our expectations for the 
industry.
                          dietary supplements
    Question. In fiscal year 2002, the Committee provided increases for 
FDA's Dietary Supplement Adverse Event Reporting System and the 
National Center for Natural Products Research.
    Please provide an update on the effectiveness of the Dietary 
Supplement AERS, and the activities of the National Center for Natural 
Products Research. What has been accomplished due to the funding 
increase provided in fiscal year 2002?
    Answer. I would be happy to answer that for the record.
    [The information follows:]
        fda's dietary supplement adverse event reporting system
    Fiscal year 2002 funds are being used for the design, development, 
implementation, and maintenance of the CFSAN Adverse Event Reporting 
System (CAERS). The FDA intends to use fiscal year 2002 funds for:
  --Scanning and redaction of adverse event reports;
  --Data entry of adverse event reports;
  --Alert letters to manufacturers;
  --Design and development of the CAERS database;
  --Migration of legacy adverse event data into CAERS;
  --An electronic link to the FDA Office of Regulatory Affairs Field 
        Accomplishment Compliance Tracking System (FACTS); and,
  --CFSAN thesaurus development.
    CAERS is currently undergoing user acceptance testing, training, 
and some technological improvements.
    In September 2001, FDA implemented a cooperative agreement with the 
National Center for Natural Products Research (NCNPR). This agreement 
between FDA and NCNPR created a partnership that allows for more 
efficient use of resources to identify and analyze specific components 
in botanical dietary ingredients, thereby enhancing overall public 
health by ensuring that botanical dietary supplements are safe and 
their labeling is not misleading.
    The NCNPR cooperative agreement for fiscal year 2001 was awarded on 
September 28, 2001. Since the total Project Period is 5 years, the 
additional 4 years of funding up to $1 million per year will depend 
upon acceptable performance and the availability of future fiscal year 
funding. In accordance with the procedures for supplementing 
cooperative agreements, FDA must announce its intent, through a Request 
for Application (RFA), to increase funding up to an additional $1 
million to the NCNPR cooperative agreement in the Federal Register. 
Once announced, NCNPR must submit a grant application to demonstrate 
how it will meet the objectives of the RFA. The application will go 
through a dual review process and FDA anticipates completing this 
process and awarding the money to NCNPR in September 2002.
    To date, the awarded monies (from fiscal year 2001) have been used 
to collect a number of authenticated botanical species for chemical 
profiling and characterization. The species include ephedrine alkaloid-
containing species (e.g., ephedra, ma huang), aristolochic acid-
containing botanicals, comfrey, germander, and blue and black cohosh. 
The NCNPR scientists are collaborating with FDA scientists to ensure 
usefulness for evaluating potential safety issues and to coordinate 
related FDA and NCNPR research activities. In this regard, FDA and 
NCNPR scientists have jointly presented results of their scientific 
collaborations at a professional meeting and are currently preparing 
co-authored scientific manuscripts for publication in peer-reviewed 
journals. The NCNPR is also completing plans for a scientific workshop 
on authenticating botanical ingredients for use in dietary supplements. 
The workshop will be held in August 2002 and will provide a basis for 
scientists from academia, government and industry to discuss the 
scientific issues involved in the authentication of botanical 
ingredients. The issues discussed in this workshop will have broad 
relevance for research, manufacturing and regulatory applications.

    Question. What activities does FDA take to inform the public of all 
possible health effects of dietary supplements, such as the anti-
anxiety herb kava, which has recently been reported as the cause of 
serious liver problems? What further effective steps could FDA take 
with increased funding?
    Answer. With available resources, FDA's ability to inform the 
public of possible adverse health effects associated with the use of 
dietary supplements is limited to the most serious risks presented to 
the public. Consumer advisories, MedWatch Safety Alerts, letters to 
health care professionals, and information papers are several tools FDA 
uses to inform the public of important health information. For example, 
FDA issued an advisory on March 25, 2002, informing consumers of the 
potential risk of severe liver injury associated with the use of kava-
containing dietary supplements.
    With respect to further steps that FDA could take, in January 2000, 
FDA published a Dietary Supplement Strategic Plan. Built on law and 
science, the Plan sets out clear program goals for a science-based 
regulatory program, that will fully implement DSHEA, thereby providing 
consumers with a high level of confidence in the safety, composition, 
and labeling of dietary supplements. The Plan identifies activities in 
six areas: safety, labeling, boundaries, enforcement, science-base and 
outreach. The outreach section addresses, among other things, the 
Agency goals with respect to communicating information about potential 
adverse effects associated with dietary supplements to the general 
public. In response to a request from Congress, the Agency is 
developing a report detailing the cost of implementing our Dietary 
Supplement Strategic Plan.
                            fda commissioner
    Question. Taking into consideration the fact that last year over 20 
percent of all the money spent by American consumers was on products 
regulated by the FDA, I believe it is safe to say that this agency has 
an incredibly important mission. Also, taking into consideration the 
events of September 11, the agency has been thrust into the spotlight 
like never before because of the important role FDA plays in protecting 
America's homeland, and ensuring the products we use and the food we 
eat is safe. Finally, when we consider the wide variety of issues 
facing the FDA in today's society, ranging from the importation of 
pharmaceuticals, to bioterrorism, to the approval of cloned-animal 
products, to the influx of potential medical breakthroughs as a result 
of doubled NIH funding, it seems that this is definitely an agency that 
would benefit greatly from having a Commissioner. We are over a year 
into this Administration, and it doesn't seem that a nominee is even on 
the horizon.
    What effect has the lack of a Commissioner had on the activities of 
the FDA, and what functions will be improved once a Commissioner has 
been named?
    Answer. We at the Food and Drug Administration have been very 
fortunate to have within our ranks, incredibly competent and gifted 
managers who are outstanding leaders in their respective areas of 
expertise. It is because of the foresight of previous FDA 
Commissioners, that even during an extended period where the position 
of Commissioner is vacant that one among our ranks can be called upon 
to successfully lead and guide our Agency. As Deputy Commissioner of 
the Agency, I meet with the Secretary regularly.
    The Agency has not suffered at all from the lack of a Commissioner. 
All responsibilities and activities of the Agency have continued, 
focused on the Agency's mission to protect the public health from 
impure, misbranded, adulterated, or ineffective products. Once a new 
Commissioner is selected, he or she, will come to an Agency that has 
continued to operate in an efficient, effective manner; responding to 
the needs of our stakeholders, and continuing to enforce the highest 
standards for regulated industry.
    Question. What information can be provided on the search for a new 
Commissioner, and when one might be nominated?
    Answer. The search for a Commissioner for FDA is a priority for the 
Administration. However, there is no timetable for submitting a 
nomination at this time.
                             generic drugs
    Question. Why was the decision made to request such a significant 
increase for Generic Drugs? How are these funds proposed to be spent?
    Answer. The Generic Drugs Program has the primary responsibility 
for approving new generic drug applications. According to the 
Congressional Budget Office, generic drugs save consumers an estimated 
$8 to $10 billion a year at retail pharmacies. Even more is saved when 
hospitals use generic drugs. With the requested increase of $4,582,000, 
FDA plans to hire additional reviewers and other staff to accelerate 
the review and approval of Abbreviated New Drug Applications; improve 
the review of ANDAs without sacrificing product quality to allow the 
Agency to reach its goal of reviewing 75 percent of ANDAs within 6 
months after submission; hire additional inspectors to increase 
inspections of domestic and foreign firms associated with generic drug 
production, an activity critical to reducing total approval times; and, 
increase coverage of imported generic drugs to better monitor the 
quality of finished drug products and bulk drug substances from 
overseas. Additionally, the increase will also be used to conduct 
research that will allow us to address specific scientific questions 
regarding bioequivalence and chemistry of generic products. This 
research will be directed at evaluating ways to enable approval of 
generic drugs in areas that currently lack generic alternatives, such 
as inhalational or topical drug products.
    Question. Congress provided specific funds to be used for Generic 
Drug Education in fiscal year 2002. How have these funds been spent? 
What is the total amount of funding spent by the FDA on Generic Drug 
education? In what forms, and to what States, is information provided? 
Could more funds be used to improve this effort?
    Answer. In fiscal year 2002, FDA has been charged with funding 
$400,000 for generic education. FDA believes this funding is sufficient 
to support the program. The work for fiscal year 2002 is building upon 
plans established in fiscal year 2001 to develop a standard message for 
the public. Plans are underway for using physician focus groups to 
determine attitudes and knowledge gaps about generic drug products in 
that community. Based upon that information, continuing medical 
education programs will be developed. Pharmacy continuing education in 
coordination with the Association of the State Boards of Pharmacy, is 
also planned.
    Standard messages for the public will be communicated through media 
such as print ads, radio public service announcements and convention 
exhibit booths. The material will also be distributed nation wide. Some 
of the professional education will involve staff travel to professional 
organization meetings to present information on the generic drug 
approval process that assures the quality of the drug products. Experts 
in the field will also be contracted to provide educational information 
on these topics.
                              blood safety
    Question. There is a $5 million increase for Blood Safety 
activities in the President's Budget. Please explain how these funds, 
if approved by Congress, will be used, and how they will supplement 
current activities.
    Answer. FDA will continue to provide oversight of the U.S. blood 
system to include updating the blood regulations and addressing 
emerging infectious diseases in addition to responding to emerging 
potential threats to the blood supply in a timely and coordinated 
approach. We will be happy to provide specific information for the 
record.
    [The information follows:]
    FDA has requested funding of $5 million for blood safety issues as 
part of the overall fiscal year 2003 Biologics Program funding request 
for counter terrorism. The following needs have been identified:
Fiscal Year 2003 Request for Blood Safety
    Develop possible responses to disruptions in the blood supply;
    Assure rapid testing and release of licensed products;
    Evaluate current plasma therapies for use in terrorist attacks;
    Evaluate current supplies of botulinum immune globulin;
    Interact with blood organizations and establishments to develop 
contingency standard operating procedures;
    Work with establishments to develop means to handle single large 
influxes of donors; and,
    Interact with other government agencies to allow shipment of 
samples for testing during times of limited distribution methods.
                         pediatric exclusivity
    Question. On December 12 of last year, the Senate passed 
legislation by unanimous consent to extend until October of 2007 the 
current law granting pharmaceutical companies an additional 6 months of 
exclusivity on a drug, in addition to any patent rights, if the company 
conducts at least one clinical investigation studying the effects of 
the drug on children. While many people feel this is an effective 
incentive for pharmaceutical companies to ensure the safety and 
efficacy of their products on children as well as adults, the true 
beneficiaries of this law have also been questioned. According to a 
recent CATO article, the FDA recently estimated that drug manufacturers 
will earn an additional $30 billion over the next twenty years as 
nearly 100 new drugs receive additional market exclusivity for 
conducting clinical trials involving children. My calculations show 
that this averages to approximately an additional $300 million per drug 
due to market exclusivity.
    What is the average cost of a clinical trial studying the effects 
of a new pharmaceutical on children?
    Answer. We do not have precise data on study costs as this is not 
information typically obtained by FDA. However, we do know that the 
costs vary depending on the type of study, number of children 
participating in the study, and the type of drug under study. The 
General Accounting Office, or GAO testimony on May 8, 2001, before the 
Senate Committee on Health, Education, Labor and Pensions estimated 
some of these costs. The GAO estimated that a safety and efficacy study 
may cost between $1 million and $7.5 million, while the cost of a 
pharmacokinetic, or PK study can range from $250,000 to $750,000 per 
age group. In addition, the GAO indicated that limited data provided by 
the Pharmaceutical Research Manufacturers of America, or PhRMA 
suggested higher study costs, ranging from under $5 million to more 
than $35 million. In addition, the GAO found that another study, The 
Pediatric Studies Incentive: Equal Medicines for All, Christopher-Paul 
Milne, Tufts Center for the Study of Drug Development, published in 
April 2001, indicated that, based on a survey of drug companies, the 
cost of pediatric studies can average $3.87 million per written 
request. We will be happy to provide a table for the record that shows 
the number of different types of pediatrics studies we have requested 
as of March 1, 2002.
    [The information follows:]

               TYPES OF PEDIATRID STUDIES REQUESTED 1 2 3
                          [As of March 1, 2002]
------------------------------------------------------------------------
              Type of study                     No.           Percent
------------------------------------------------------------------------
Efficacy & Safety.......................             197              34
PK & Safety.............................             169              30
PK/PD...................................              56              10
Safety..................................              96              17
Other...................................              50               9
                                         -------------------------------
      Total.............................             568
------------------------------------------------------------------------
\1\ 568 studies (241 Written Requests issed).
\2\ No. of studies which specified # of patients to be studied: 325.
\3\ Projected total # patients in requested studies: 33,055+.

    Question. How many products that have received this market 
exclusivity are developed solely for use in children? Please provide 
information on these products.
    Answer. As of March 31, 2002, we have issued 241 Written Requests 
for pediatric studies under the pediatric exclusivity program and 
sponsors have submitted completed studies in response to 63 of the 
studies. Of the 63 drugs for which studies were submitted, 56 were 
granted pediatric exclusivity, and 7 were denied exclusivity. For the 
record, we will provide a table that identifies the 56 drugs that have 
received pediatric exclusivity.
    [The information follows:]

                 PRODUCTS GRANTED PEDIATRIC EXCLUSIVITY
------------------------------------------------------------------------
       Drug (active moiety)                        Sponsor
------------------------------------------------------------------------
Abacavir..........................  Glaxo Wellcome, Inc.
Amlodipine........................  Pfizer
Ammonium lactate..................  Westwood-Squibb
Atorvastatin......................  Pfizer
Azelastine........................  Asta Medica
Bisoprolol........................  Wyeth Ayerst
Brimonidine.......................  Allergan
Buspirone.........................  Bristol-Myers Squibb
Busulfan..........................  Orphan Medical
Calcitriol........................  Abbott Laboratories
Cetirizine........................  Pfizer
Cromolyn..........................  Pharmacia and Upjohn
Didanosine........................  Bristol-Myers Squibb
Enalapril.........................  Merck
Etodolac..........................  Wyeth Ayerst
Famotidine........................  Merck
Felodipine........................  Astra Zeneca
Fluoxetine........................  Lilly
Fluvoxamine.......................  Solvay Pharmaceuticals
Gabapentin........................  Parke-Davis
Ibuprofen.........................  McNeil Consumer Products Co.
Ibuprofen.........................  Whitehall-Robbins Healthcare
Insulin glargine..................  Aventis
Isotretinoin......................  Hoffman-La Roche, Inc.
Ketorolac.........................  Allergan
Lisinopril........................  Astra Zeneca
Lisinopril........................  Merck
Lamivudine \1\....................  Glaxo Wellcome, Inc
Loratadine........................  Schering Corporation
Losartan..........................  Merck
Lovastatin........................  Merck
Metformin.........................  Bristol Myers Squibb
Midazolam.........................  Hoffmann-La Roche, Inc.
Milrinone.........................  Sanofi-Synthelabo
Mometasone........................  Schering Corporation
Montelukast.......................  Merck
Nabumetone........................  SmithKline
Nevirapine........................  Boehringer Ingelheim
Omeprazole........................  Astra Zeneca
Oxaprozin.........................  Searle
Oxybutynin........................  Alza
Pemirolast........................  Santen
Pimecrolimus......................  Novartis
Propofol..........................  Zeneca Pharmaceuticals
Ranitidine........................  Glaxo Wellcome, Inc.
Remifentanil......................  Abbott Laboratories
Ribavirin/Intron A................  Schering Corporation
Sertraline........................  Pfizer
Sevoflurane.......................  Abbott Laboratories
Simvastatin.......................  Merck
Sotalol...........................  Berlex Laboratories
Stavudine.........................  Bristol-Myers Squibb
Tramadol..........................  R.W. Johnson
------------------------------------------------------------------------
\1\ Active Moieties Granted Second Period of Pediatric Exclusivity Also,
  note that 2 drugs granted exclusivity have not yet been approved,
  therefore, we cannot disclose their names.

    None of the 56 drugs granted exclusivity were developed solely for 
use in children. However, Elidel (pimercrolimus), for atopic 
dermatitis, was developed primarily for use in children. Also, one of 
the yet unapproved drugs that was granted exclusivity was also 
primarily studied for an indication that occurs in children. Both of 
these drugs were new molecular entities (NMEs).
    Question. How many products that have received this market 
exclusivity have been prescribed to children on a broad scale prior to 
conducting the clinical trial resulting in the market exclusivity?
    Answer. Although we do not have specific information on each of the 
56 drugs that have been granted exclusivity, I can tell you that in 
preparing our January 2001 Report to Congress, and in responding to the 
U.S. General Accounting Office in May 2001, we developed the following 
information on 28 of the 56 drugs granted exclusivity based on data 
from IMS HEALTH data. We will provide the information for the record.
    [The information follows:] 



    




    Question. Does the market exclusivity apply solely to the pediatric 
formulation of the drug, for which the clinical trial was performed?
    Answer. Section 505A of the Federal Food, Drug, and Cosmetic Act, 
the Act, does not limit the pediatric exclusivity to a pediatric 
formulation. Under section 505A of the Act, pediatric exclusivity 
assumes the character of the type of exclusivity to which it attaches. 
The 6-months of pediatric exclusivity is added to any of the sponsor's 
listed patents or previous non-expired grants of exclusivity on drug 
products containing the active moiety that was studied. We believe that 
this interpretation is the most consistent with the language and 
purpose of the pediatric exclusivity provision. The statutory provision 
did not limit the exclusivity. The exclusivities that existed prior to 
pediatric exclusivity had not resulted in the pediatric studies the 
Agency desired, so FDA determined that the pediatric exclusivity had to 
provide an adequate incentive. Since pediatric exclusivity attached to 
all existing exclusivities and the 5 year exclusivity under Waxman-
Hatch applies to the active moiety, this result was most consistent 
with the statute. As a necessary corollary of this interpretation, we 
have construed the provision to permit the Agency to include within a 
single Written Request pediatric studies on any drug products 
containing the active moiety, if such drug products have significant 
uses in the pediatric population.
                            fda orange book
    Question. In the Conference Report of last year's appropriations 
bill, the Committee expressed concern regarding the possible abuse of 
patent extensions by pharmaceutical companies with regard to the FDA 
``Orange Book.'' While the FDA has little expertise in patent law and 
patent determinations, orange book listings do have a direct effect on 
the length of time a pharmaceutical company can potentially prohibit a 
generic drug from entering the market. With this in mind, we requested 
that the Secretary instruct FDA to work with the Federal Trade 
Commission to prepare a report relating to pharmaceutical industry 
practices relating to patent law and extensions.
    Has the FDA begun any preliminary work with the FTC on such a 
report? Please provide an update on any action that has been taken to 
date, as well as any planned actions.
    Answer. During the past year, the FDA's Office of Generic Drugs 
within the Center for Drug Evaluation and Research, provided the 
Federal Trade Commission, FTC, with data on numerous occasions to help 
them prepare this report. The FTC also participated in a forum the FDA 
Office of Chief Counsel coordinated to obtain information from the 
innovator and generic pharmaceutical industry on their interpretation 
of the applicable statutes, including Orange Book issues.
    Question. It is my understanding that FDA guidelines require any 
generic firm, when introducing a new product, must certify to FDA that 
their drug would not infringe on a patent listed in the Orange Book. 
For a more specific study of the Orange Book listings themselves, the 
Committee requested a report by March 1, 2002 on the best methods to 
collect and disseminate information on the nature of patent extensions 
that have been granted on products appearing in the Orange Book, the 
effect those extensions have had on the cost of pharmaceuticals, and a 
societal cost/benefit analysis in regard to those extensions. We 
anticipate that the contents of this report will be helpful in studying 
potential ways to lower the cost of pharmaceuticals.Could you please 
provide the status of the report at this time?
    Answer. The report is under administrative review and will be 
provided to the committee within the next several weeks.
    Question. Will the contents of this report enable FDA to perform a 
comprehensive study to determine whether patents listed in the ``Orange 
Book'' are related solely to the chemical makeup of the drug, as 
opposed to patent extension for changes such as the size, shape, or 
method of delivery of the drug?
    Answer. Under the Food, Drug and Cosmetic Act, we are required to 
publish patent information for approved drug products upon receipt of 
that information from the sponsor of the new drug application. The 
statute does not assign FDA any independent action with respect to 
patent submissions or otherwise direct it to look beyond the face of 
the submitted patent information. Instead, generic and innovator firms 
must resolve any disputes concerning the patent or patent coverage in 
private litigation. With regard to exclusivity, there is also no 
statutory requirement that FDA consider the costs to consumers or the 
societal benefits accrued in granting the extensions. FDA's public 
health mission is to evaluate the safety and effectiveness of drug 
products presented for marketing approval. At the time the different 
exclusivities, for example Waxman-Hatch, Orphan, Pediatric, were 
enacted into law, there was debate and consideration of the costs to 
consumers and societal cost/benefit issues. The resulting exclusivities 
and extensions were considered to be justified in order to achieve the 
goals of the particular programs such as greater development of drugs 
to treat orphan diseases, better labeling for pediatric treatment and 
knowledge of pediatric use, and to promote a balance between new drug 
innovation and generic drug competition. The Administration is 
concerned about the cost of pharmaceuticals and FDA will certainly 
participate in efforts that involve matters within the Agency's 
jurisdiction and authority.
              personal importation and internet drug sales
    Question. What actions is FDA currently taking to prevent and 
monitor the sale of pharmaceutical and pharmaceutical products over the 
Internet? Is the FDA working with any other private or government 
entities in this effort? What oversight authorities do you have, or 
need, in order to most effectively deal with this problem?
    Answer. The growth of the Internet in recent years has enabled many 
consumers to purchase medicines online. More than half of all U.S. 
homes now have an Internet subscription. There are online pharmacies 
that provide legitimate prescription services. Unfortunately, there are 
also questionable sites that make purchasing medicines online risky.
    In order to assess Internet drug sales and monitor the sale of 
these products, FDA established an Agency-wide triage team that meets 
monthly to prioritize Internet-related enforcement activities on 
unapproved new drugs, health fraud, and prescription drugs sold online 
without a valid prescription. This year, FDA has evaluated over 500 web 
sites for possible regulatory or criminal action, resulting in 11 
Warning Letters, 1 seizure, 22 untitled letters, and 57 cyber letters. 
In October and November 2001, the Agency issued 11 cyber letters to 
foreign web sites marketing unapproved ciprofloxacin, the generic name 
for Cipro, to American consumers. Of the 11 web sites issued cyber 
letters, 8 have stopped selling Ciprofloxacin. FDA is working with 
foreign regulatory authorities to address the other sites.
    FDA also has established another working group which meets 
regularly to address public education on Internet sales, and FDA and 
the Federal Trade Commission are working together to protect the public 
from those who try to take advantage of Internet consumers through a 
program known as Operation Cure All. This partnership includes Health 
Canada, the Canadian Federal health department, and various state 
attorneys general and state health departments, and combines a law 
enforcement effort with a consumer education campaign. The effort 
focuses on web sites that offer products with false or deceptive claims 
about treating or curing cancer, HIV/AIDS, arthritis, hepatitis, 
Alzheimer's disease, diabetes, and many other diseases. The objectives 
of Operation Cure All are to educate businesses making serious disease 
claims on the Internet that such claims must be truthful, nondeceptive, 
and substantiated, and that the drugs they sell to treat these diseases 
must be FDA approved. The program seeks to deter future violations by 
such businesses, educate consumers to be wary of curative claims 
concerning serious diseases and medical conditions, and identify 
targets for possible enforcement actions. To ensure that consumers are 
offered FDA-approved medicines by properly licensed retailers, the 
Agency must be enabled to increase surveillance and enforcement 
activities; leverage resources with other Federal and State agencies; 
and continue to engage in public outreach and education.
    Question. Please explain FDA's importation policy and how, if at 
all, it has changed over the past 2 years. Has FDA seen an increase in 
people buying pharmaceuticals outside of the US? What effect has the 
internet had on this situation?
    Answer. FDA's current personal importation policy was created in 
1954 to address importation through the mail. At that time, the size 
and number of personal imports was significantly smaller than it is 
today. The policy was expanded in 1977 for personal baggage and again 
in 1988 to respond to the unavailability of treatments for AIDS 
patients.
    In recent years, consumers increasingly have been purchasing and 
importing lower-priced medications from foreign countries. Under the 
Federal, Food, Drug, and Cosmetic Act, FDA may refuse importation of 
any unapproved drug when offered for importation into this country. 
However, FDA staff may use enforcement discretion to allow the 
importation under certain conditions of particular unapproved drugs 
into the U.S. There are several factors that FDA personnel consider 
when determining whether to exercise enforcement discretion. First, 
when the intended use of the unapproved drug is to treat a serious 
condition for which effective treatment may not be available 
domestically. Secondly, there is no known commercialization or 
promotion to persons residing in the U.S. by those importing the drug. 
Thirdly, the unapproved product is considered not to represent and 
unreasonable risk. Finally, the person seeking to import the unapproved 
drug affirms in writing that it is for the person's own use, generally 
not more than a 3-month supply, and provides the name and address of 
the doctor licensed in the U.S. responsible for his or her treatment 
with the product, or provides evidence that the product is for the 
continuation of a treatment begun in a foreign country. Consumers are 
also increasingly using the Internet to order prescription medications 
from foreign pharmacies, which are sometimes available without a 
prescription or by doing nothing more than filling out an online 
questionnaire. This concern only increased after September 11 when 
consumers began ordering Cipro for prophylactic use. FDA and the US 
Customs Service continue to work together to address issues of concern 
regarding imported drugs. It is important that we work to develop 
better ways to address this important public health issue. FDA will 
also explore additional consumer education efforts in this area.
                           homeland security
    Question. I was pleased to see in your testimony a relatively 
detailed explanation of some of the activities you have undertaken with 
the use of the $151 million in supplemental funding provided to you 
last year.
    How many total new employees will eventually be hired as a result 
of the supplemental funding, what will their functions be including 
their location, and have their positions been annualized in the 
President's fiscal year 2003 request?
    Answer. FDA expects to hire all 832 personnel--655 personnel for 
FDA's field component, the Office of Regulatory Affairs, ORA, and 177 
personnel for those non-field components--associated with the fiscal 
year 2002 Counter Terrorism supplemental budget. FDA annualized all 832 
positions in the fiscal year 2003 Congressional Justification. As of 
March 18, 2002, ORA has hired 365 of the 655 authorized by the 
supplemental budget. I would be happy to provide a breakout of these 
personnel.
    [The information follows:]
                           hiring activities
    A total of 655 personnel will be hired in ORA to support FDA's 
counter terrorism efforts in the field. The breakout of the 635 
personnel for Food Safety efforts in the field is primarily split 
between import and domestic operations. 433 employees will be assigned 
to help assure the safety of imported products. These employees consist 
of import consumer safety officers, import laboratory analysts, and 
criminal investigators. 212 domestic compliance officers and domestic 
investigators will be available to go to district offices to follow-up 
on import enforcement needs and support domestic inspections. The 
remaining field personnel will be responsible for supervisory and/or 
coordination efforts associated with the increased responsibilities 
related to counter terrorism.
    The initial training provided to the Import Consumer Safety 
Officers will concentrate on specific import/border duties. These 
duties include working with Customs personnel; learning how to collect, 
package and ship samples; fill out collection reports; and conduct 
field examinations of shipments, including such activities as visual 
inspections for the appearance or smell of a product, swollen can 
seams, etc. These employees should be able to contribute to basic 
assignments within 2 months.
    The domestic compliance officers and investigators will work with 
industry to assist them in identifying potentially vulnerable access 
points in their manufacturing processes for possible terrorism acts, 
and work with them to develop procedures and guidelines for minimizing 
vulnerability.
    Laboratory analysts assigned to both domestic and import operations 
will be available to support increased sample analysis functions, 
including analysis for chemical and microbiological contamination. 
Employees hired for these positions include chemists, microbiologists, 
and physical science technicians.
    Thirty employees, within the total of 665 personnel assigned to 
Food Safety efforts, will be utilized by the Center for Food Safety and 
Nutrition and the Center for Veterinary Medicine to conduct risk 
assessments, develop compliance policy for imported animal drugs and 
feeds, and foods, collaborate on the development of new methods, and 
conduct risk assessments of the results of laboratory analyses of 
imported products.
    144 new personnel will be hired in science based positions to 
address the need for safe and effective medical products, specifically 
to expedite FDA's work relating to vaccines, drug therapies, diagnostic 
tests, development of computational techniques to strengthen detection 
and response capabilities, and consultation with other governmental 
agencies and private industry.
    Three new personnel to monitor security standards at all 
facilities, develop plans for improved security measures and 
procedures, and assure effective coordination with all FDA components 
and building managers.

    Question. Please outline the other activities that are being 
carried out with last year's supplemental funding, including the impact 
of this funding on food safety.
    Answer. The September 11 terrorist attacks and subsequent incidents 
involving anthrax contamination raised the frightening prospect that, 
in this new world, products regulated by the FDA--human and animal food 
and drugs, biological products, and devices--could be used 
intentionally to cause widespread harm to U.S. citizens. The American 
public will have to depend on the Agency now, more than ever, to 
safeguard their public health interests. FDA is in the process of 
developing a Counter Terrorism Strategic Plan and Action Plan that 
outlines ways FDA will reduce the potential for threats to the Nation's 
supply of food and medical products, and ensure that appropriate 
emergency and medical countermeasures are in place to minimize the 
effects of terrorist attacks.
    FDA is currently engaged in numerous Counter Terrorism activities 
with the support of the Supplemental Funds. Of 655 new hires in FDA's 
field operations, 635 are authorized for food safety activities in the 
field with 600 for the foods program, and 35 for the animal drugs and 
feeds program. FDA will also enhance the Operational and Administrative 
System for Import Support, OASIS, to include real-time screening with 
multi-agency import databases to help target inspection resources. The 
Agency will increase import filer evaluations to ensure integrity of 
importers and import entry data, increase collections of samples for 
laboratory analysis; and increase use of field physical examinations of 
imported products to ensure safety. The Agency will expand the 
Electronic Laboratory Exchange Network or eLEXNET, to provide better 
nationwide access to information on food pathogens and select agents. 
FDA will also enhance the capacity for, and develop, rapid methods that 
can be used for rapid analysis of suspect foods for select agents or 
toxins.
    FDA's efforts to ensure the safety and effectiveness of medical 
products cover human drugs, biologics including vaccines and blood, and 
medical devices and radiological health. FDA must review and give 
approval, at least on a temporary basis, to every new drug, 
therapeutic, vaccine, anti-toxin that is to be administered to humans 
and every diagnostic tool that is to be used clinically must be 
reviewed and approved by FDA. Since this regulatory process is lengthy, 
complex and fraught at times with the unforeseen, it is essential, and 
in the interest of national security and public health, that FDA 
engages in the process as early as possible with sponsors and 
organizations that are developing the therapeutics, vaccines and rapid 
diagnostics. This means that FDA must maintain a pro-active role and 
work with other organizations from the very outset, starting with 
outlining the individual steps that must be taken to obtain FDA 
approval, through pre-clinical toxicity testing, the development of 
protocols for conducting the clinical trials, to the review and 
analysis of the trial results, review of the proposed manufacturing 
procedures, inspection of the manufacturing process to assure 
compliance with Good Manufacturing Practices and post-marketing 
surveillance of adverse events. FDA must also participate in exercises 
related to responding to a bioterrorist attack.
    In the Biologics program, funds will be used to expedite work on 
bioterrorism vaccines, and in support of blood safety activities. For 
vaccines FDA will provide consulting services to other Federal agencies 
and industry, accelerating emergency vaccine lot releases, and 
preparing to evaluate new vaccines whose efficacy cannot be tested buy 
exposing people to the pathogen. In the blood safety area, FDA will 
expedite licensure issues related to storing of blood and expedite 
release of test kits and reagents use for blood screening and reviewing 
and processing expedited lot releases. These activities are 
accomplished through the regulation of the development and licensure of 
new vaccines, therapeutics, and blood products for protection and 
treatment against bioterrorism-related threat diseases. The personnel 
hired will be targeted toward the range of disciplines necessary to 
accomplish the activities described above and include biologists, 
chemists, consumer safety officers, medical officers, microbiologists, 
compliance officers/technicians, public affairs specialists/
technicians, computer systems analysts, management analysts, personnel 
specialists/technicians and program support personnel.
    In the Human Drugs program, funds will be used to assure product 
availability through an expansion of the drug shortage program as well 
as plans to develop protocols for the study of alternative therapies 
for biological agents. The latter will be conducted through contractual 
work to define animal model programs for relevant diseases such as 
smallpox, pneumonic, plague, that provide early and proactive 
regulatory guidance to develop data for potential drug therapies. In 
additional, the Agency will need to develop a framework for addressing 
future regulatory applications that use a combination of vaccine and 
drug.
    The drug program's new hires will closely match the current mix of 
employees in the review process--Medical Officers, Epidemiologists, 
Microbiologists, Pharmacokineticists, Mathematical Statisticians, 
Biologists, Consumer Safety Officers--CSOs, and other related 
disciplines. However, the recruitment process will need to focus on 
finding employees with specialized training in infectious diseases, 
neuropharmacology, and radiologic products. Veterinarians with 
experience with primates and animal modeling will also be hired. The 
program plans to enter into various research and development contracts 
and Interagency Agreements, IAGs, with other Federal agencies, such as 
Department of Defense, DOD, National Institutes of Health, NIH, and 
Centers for Disease Control and Prevention, CDC, and private sector 
entities to develop protocols, conduct animal studies, and define 
reference databases on treatment and alternative therapies for 
infectious diseases caused by the intentional use of bioterrorist 
threat agents.
    The Device and Radiological Health program will accelerate review 
of new diagnostics testing for biological and radiological agents. This 
program will hire personnel to respond to terrorist threats and 
attacks. This involves recruiting and training staff to review new 
devices, participating in standard development and recognition, 
developing guidances, predicting device shortages associated with an 
emergency response, and developing an outreach program focused on 
educating health professionals, consumers, and industry on using 
medical devices to counter terrorism. Funds will be used to improve 
internal scientific knowledge and capabilities, conduct research to 
assess in vitro diagnostic technology used to detect biothreat agents, 
conduct a market assessment to identify potential device shortages, and 
educate health professionals and consumers on the use of medical device 
biowarfare products.
    Lastly, FDA's National Center for Toxicological Research, NCTR, 
expects to improve detection of the virulence, toxicity, and antibiotic 
resistance of pathogens, and diagnostic tools for food contaminants. 
The Center plans on recruiting and equipping personnel with additional 
expertise as computer scientists, protein chemists and microbiologists. 
Due to the Center's research responsibilities, it expects to upgrade 
designated laboratory facilities at NCTR to a BioSafety Level 3, BSL-3, 
to support microbial bioterrorism research. BSL-3 facilities have 
containment capability that allows work with indigenous or exotic 
agents that may cause serious or potentially lethal disease such as 
potential bioterrorist agents. By utilizing the expertise of a 
contractor, the upgrade of designated laboratory space can be expedited 
thus allowing microbial bioterrorism research to proceed within fiscal 
year 2002. Additionally, the Center will outfit upgraded laboratory 
facilities with infrastructure to include containment hoods, and 
appropriate filtering and monitoring devices. This will allow 
identification and rapid detection and assignment of terrorist agents 
such as bacterial strains of pathogens and chemicals. To conduct these 
studies, FDA will acquire biological agents, chemicals and laboratory 
supplies that will allow researchers to characterize multiple strains, 
construct a library or database of constituent proteins and test the 
library or database to find toxin related markers.
    The impact of the fiscal year 2002 supplemental funding for food 
safety will result in numerous productive actions in addressing the 
safety and security of the nation's food supply. FDA will strengthen 
current import and domestic surveillance systems so that a greater 
percentage of high-risk food products and adverse events associated 
with their consumption can be assessed using state-of-the art 
technology. Rapid field test methods will be developed to identify 
hazards that may have been released by terrorists. The PulseNet System 
will be enhanced to quickly apply DNA fingerprinting over a wider range 
of biological threats. In the event of an identified threat, FDA will 
deploy disaster response teams who can work with other Federal, State, 
and local agencies to eliminate or contain the hazard and reduce public 
health risks. In addition, FDA will work with HHS and other government 
counterparts to ensure that consumers get up-to-date information about 
risks if an incident occurs.
    Question. Where do you think is the biggest threat to the Nation's 
food supply?
    Answer. FDA does not believe there is an inherently greater risk in 
either imported or domestically produced goods--human and animal food 
and drugs, biological products, or devices. Rather, FDA is committed to 
ensuring that regulated products, regardless of where they originate, 
are safe, secure, authentic, of the highest quality, properly labeled 
and are approved and/or licensed, where required. FDA will be vigilant 
in all operations, including domestic operations.
    Question. How many food import inspections will FDA do in 2002? How 
much has this number increased due to the supplemental funding provided 
by Congress last year?
    Answer. FDA classifies import coverage as a combination of import 
field examinations and import laboratory analyses, which are both 
physical evaluations of the product offered for entry. Import coverage 
is the sum of these two activities as a percent of the number of line 
entries. Import field exams are physical examinations performed at the 
entry point. In fiscal year 2001, FDA performed about 12,000 food 
import field exams and analyzed nearly 15,000 import samples. So for 
fiscal year 2001, the Agency conducted physical examinations on 0.6 
percent of the foods offered for import into this country of the total 
line entries of 4.6 million. In fiscal year 2002, we will begin to see 
real gains in our import coverage because of the increased funding. The 
counter-terrorism funding will permit the field to double the number of 
import field examinations and increase the number of samples analyzed 
by nearly 50 percent in fiscal year 2002. In fiscal year 2003, when the 
new investigators are more fully trained and the number of food imports 
is expected to increase to 5.4 million line entries, the number of 
import field exams will increase to 48,000. Import coverage will then 
increase to approximately 1.3 percent of the total food entries.
    Question. Last year, you told us that it would cost $270 million to 
get to 10 percent coverage of food imports--how much coverage is 
provided in this year's budget request? How much could you reasonably 
be expected to do with more funds?
    Answer. In fiscal year 2001 food import coverage was 0.6 percent. 
With the addition of counter-terrorism resources it is expected to 
increase to 0.9 percent in fiscal year 2002 and 1.3 percent in fiscal 
year 2003 if food line entry growth remains at 10 percent per year.
    In fiscal year 2003 and beyond, FDA's import straegy needs to be a 
flexible blend of the use of people, technology, information and 
partnerships to protect Americans from unsafe imported products. Thus, 
the current FDA import strategy is to inspect food products at ports of 
entry; increase physical examination and scientific analysis of 
products sampled at the border; increase cooperation with other 
Federal, State and local agencies, and foreign governments involving 
information exchanges; continue foreign inspections and assessments; 
and, enhance the automated entry review process or OASIS, through 
efficient interfaces with other Agency systems, and improve the 
integrity of imported product data submitted to Customs and FDA through 
increased evaluations of filers for imported shipments.
    The long term solution to a higher level of confidence in the 
security and safety of imported food products lies in information 
technology that will merge information on products, producers and 
intelligence on anticipated risks to target the products for physical 
and laboratory examination. The greater use of information technology 
relies on data integrity activities that reduce the opportunity for 
products to be incorrectly identified at ports. It also relies upon 
cooperation from producers so that FDA can identify sources that are 
unlikely to need physical testing. Even with such specific targeting of 
risks, improvements are limited by the available methodologies for 
assessing threat agents and our ability to predict which tests ought to 
be used.
    Question. How is FDA improving border activities? Does this include 
improving communications with other Federal and State agencies?
    Answer. Initially, FDA's goal is to provide a greater import 
presence than we have been able to provide in the past. An increased 
presence can enhance our capacity and capability to perform our normal 
import operations such as sample collection and analysis, field 
examinations, inspections and also will provide a deterrent effect.
    Our first priority is to perform more of these basic operations, 
particularly import field examinations and sample analyses, which are 
critical in detecting problems in the products we regulate. In 
addition, we have emphasized those types of examinations that will 
increase the likelihood of detecting intentional acts of potential 
terrorism, such as looking for inconsistencies between shipping 
documents and the physical product, evidence of tampering, 
substitution, or counterfeiting, or suspicious or damaged merchandise. 
Not including the new counter-terrorism efforts, much of the additional 
basic operations work will be similar to our already designed workplan 
assignments. It will include data integrity checks through filer 
evaluations and entry review where aspects of the data being reviewed 
are checked against existing information within the Agency.
    Additional samples will be collected with the additional resources 
that have been allocated towards counter-terrorism measures. Analyses 
will be performed to detect toxins, poisons and microorganisms. As 
additional screening methods are developed in our labs and other labs, 
a greater array of analyses can be applied to samples collected. For 
example, FDA's Forensic Chemistry Center plans to adapt an FDA toxin 
screening method for application as a surveillance tool.
    Physical checks of samples will be increased with a greater 
presence at the borders. Exams will focus on evidence of manipulation 
of shipments, verification against declaration, substitution, and out 
of the ordinary physical conditions. During import filer audits, we 
will be working with the regulated industry to ensure its attention to 
potential terrorist activities, especially as they relate to raw 
material receipt, inventory quarantine procedures, sourcing of foreign 
products or ingredients, and vulnerable operations.
    In the future, we will increase the level of sophistication that we 
employ in our import operations, to include better information, better 
examination techniques, and more powerful analytical tools.
    FDA is increasing its cooperation and coordination with Federal and 
State agencies on several different fronts. The Federal Government's 
response to Counter Terrorism resulted in increased reciprocal training 
between FDA and U.S. Customs. This training is expected to improve 
product integrity of goods offered for import and increase enforcement 
actions by Customs to deter willful violations of U.S. laws and 
regulations. FDA and USDA jointly chair the newly formed PrepNet, the 
Food Threats Preparedness Network. With monthly meetings, PrepNet works 
to improve coordination among agencies in non-crisis times to prepare 
for terrorist threats and activities related to human foods. Other 
participating parties include the Environmental Protection Agency, the 
Center's for Disease Control and Prevention, Department of Defense, and 
New York State, the State Advisor. FDA also works heavily with its 
State partners. FDA interacts regularly with State feed control 
officials, both individually on an as-needed basis and collectively 
through the Association of American Feed Control Officials. FDA's 
Office of Criminal Investigation, OCI, will work closely with the FBI 
and other agencies in the conduct of criminal investigations, including 
the intentional contamination of FDA-regulated products. In addition, 
OCI will use its established lines of communication with the 
intelligence community and international law enforcement--in 
cooperation with the FBI--to gather information and follow leads in 
other countries.
    Question. What kind of vaccine work is planned to counter-terrorism 
in fiscal year 2003?
    Answer. The Biologics program will use the funds to help ensure the 
safety of approved vaccines, support the continued development, 
maintenance and deployment of stockpiles, and expedite the product 
evaluation process, including lot release activities, inspection of 
manufacturing facilities, assessment of product availability, and 
surveillance and compliance activities. FDA will continue efforts to 
facilitate the development of biological products, including anthrax 
vaccine, smallpox vaccine, and other vaccines such as botulism anti-
toxin, plaque vaccine, tularemia vaccine, and vaccines for filoviruses 
and arenaviruses. Emphasis will be placed on programs to develop and 
improve novel testing methods for evaluation of vaccines in order to 
help ensure their safety, purity, and effectiveness. FDA will also 
place emphasis on determining the types of non-clinical data that may 
be acceptable for product licensure if pre-licensure clinical studies 
are not feasible or ethical to treat human diseases caused by exposure 
to a biological weapon.
    Question. Finally, the President's FDA budget request for fiscal 
year 2003 provides significant increases for counter-terrorism 
activities, partially to annualize some of the activities funded in the 
supplemental. While this is a completely understandable use of funds 
during this time, we must ensure that these increases do not come at 
the expense of other FDA programs and activities. How would you respond 
to a consumer with these concerns?
    Answer. As you have noted, FDA's fiscal year 2003 Congressional 
budget request annualized nearly all of the costs associated with 
Counter Terrorism activities begun in fiscal year 2002. Consumers 
should understand that we requested these funds for two reasons--one, 
that Counter Terrorism is one of our highest priorities in protecting 
the consumer from potential contamination of foods and medical 
products, and two, that a continuation of the funds would prevent the 
Agency from having to sacrifice the current measures in place to 
protect consumers from injury or harm. The Agency acknowledges that it 
did have to temporarily devote time and effort in review of counter 
terrorism measures following the events of September 11, 2001 and 
subsequent terrorist activities, but the fiscal year 2002 Supplemental 
Appropriation provided the financial support to negate the need to 
reprioritize existing activities and corresponding resources.
                                  bse
    Question. Dr. Crawford, I'm sure you are aware that along with the 
introduction of Foot and Mouth Disease, there might be nothing more 
harmful to the U.S. cattle industry than evidence of BSE (Mad Cow 
Disease) in this country. So far, we have been fortunate. But our 
global economy and substantial borders do not provide an easy, sure-
fire, safeguard that contaminated feed or livestock products will never 
cross our borders. FDA import inspections, feed regulations, and other 
practices are the best assurances we have that U.S. consumers can feel 
confident that BSE will remain a foreign disease. A recent letter to 
the editor of a newspaper far removed from Washington, D.C. asked the 
question, ``If mad cow disease struck the U.S., would we ever know?'' I 
suppose the answer to that question is yes, but the better question 
might be ``When would we know?'' Please give us an update on the import 
inspection practices at FDA to guard against the importation of any 
materials that might include BSE contamination. How have you reinforced 
the existing import ban, as your statement indicates, and how many 
additional investigators will ultimately be hired for this effort?
    Answer. FDA continues to work to reduce the risk that imported 
items could introduce BSE into the United States. We have placed 
screening criteria in FDA's import data system, to flag imported 
products that may contain animal protein. We request that the importer 
provide information about the nature and origin of the product and to 
identify if any ingredients may be of ruminant origin. If it appears 
that a product contains ruminant material from a ``BSE-affected'' 
country, we refer the entry to USDA's Animal and Plant Health 
Inspection Service, APHIS, for review and possible regulatory action 
under USDA's authority.
    In addition to reviewing imported product and ingredient 
information, FDA may also physically examine the product and it's 
labeling for any indication that it contains ruminant material. FDA has 
issued a field assignment to its district offices to sample shipments 
of animal feed and feed ingredients from BSE-affected countries for the 
presence of undeclared animal product ingredients. We are also 
providing intensive line entry and label review of an anticipated 
175,000 import line entries for use in domestic commerce for the Animal 
Drugs and Feeds Program.
    In the fiscal year 2002 budget Congress provided 98 FTE to increase 
Field efforts to prevent the occurrence of BSE in the country. These 
resources are increasing import surveillance at ports of entry, the 
information technology used to monitor imports and domestic activities, 
collaboration with the States, and training for FDA staff, State 
Officials and import filers and brokers. Although these FTE are not 
split exclusively for import and domestic activities, I estimate that 
more than 50 percent are devoted to improving import controls. FDA is 
instructing all investigators working on import controls to monitor 
imports for BSE, rather than devoting investigators exclusively to BSE 
activities.
    Question. You also note in your statement that FDA has taken steps 
to improve BSE inspections in the U.S. animal feeding industry. Has the 
FDA stepped up its review of domestic feed mills, or taken any 
enforcement actions against firms that have been not following 
prescribed practices to guard against BSE contamination?
    Answer. Yes, FDA has stepped up its review of domestic feed mills. 
FDA has prioritized the inspection process so that any firms found to 
be out of compliance in their last inspection are placed in first 
priority to be re-inspected. Firms that continue to be in violation 
will be considered for appropriate enforcement action to correct the 
problem. In addition, FDA will conduct yearly BSE inspections of all 
known renderers and feed mills handling prohibited material, and for-
cause inspections, that is as a result of a sampling assignment. 
Contracts for State inspections were increased and FDA and the States 
will conduct inspections of randomly selected processors that are not 
using prohibited material to ensure compliance with the regulation by 
this segment of the industry.
    In support of the domestic BSE inspection plan, during fiscal year 
2002 FDA has conducted two training sessions for Federal and State 
investigators in order to enhance the conduct, quality, timeliness and 
accuracy of inspection findings and reporting; and provide updates on 
the science of BSE and animal protein detection methods. FDA is also 
implementing a new BSE inspection checklist, data entry procedures and 
database in order to facilitate better, more timely collection and 
distribution of data; the development and validation of detection 
methods for prohibited mammalian protein in ruminant feed, in 
collaboration with experts and foreign scientists; the development of a 
domestic sampling plan which will collect and analyze 600 domestic feed 
and feed component samples for BSE-related contaminants; the 
development of a BSE feed ban Compliance program that will provide 
clear inspection and enforcement guidance to the FDA field staff for 
conducting BSE feed ban inspections and appropriate follow-up and 
enforcement; and two workshops for FDA and State inspectors to provide 
training on the new Compliance program and updates on BSE inspection 
and compliance.
    Question. What percent of the industry do you expect to cover this 
year, including work contracted out to the States? What percent of the 
work will be done by FDA, and what percent will be done by the States?
    Answer. Starting in fiscal year 2002, FDA will conduct yearly 
inspections of all known renderers, protein handlers, and feed mills 
handling prohibited material. FDA also has prioritized the inspection 
process so that any firm found to be out of compliance in their last 
inspection are placed in first priority to be re-inspected. In 
addition, FDA will conduct for-cause inspections, that is as a result 
of a sampling assignment, and FDA and the States will also conduct 
inspections of randomly selected processors that are not using 
prohibited material to ensure compliance with the regulation by this 
segment of the industry. Currently the States do approximately 80 
percent of the domestic feed mill inspections. Many of the inspections 
handled by the States are located in places that are remote from our 
district offices, and it is imperative that we have people to get out 
to the remote areas of the State to ensure the safety of the animal 
feed.
    The Agency has also implemented a domestic sampling plan to collect 
and analyze 600 domestic feed and feed component samples for the 
presence of mammalian protein which additional inspection may determine 
to be prohibited from use in ruminant feed.
    Question. Finally, you outline some of the ways FDA has been 
coordinating with USDA on the prevention of BSE in this country. Please 
elaborate on those efforts, and explain how they are funded in the 
Administration's fiscal year 2003 budget.
    Answer. FDA works closely with the U.S. Department of Agriculture, 
USDA, the Food Safety Inspection Service, FSIS, the Animal Plant and 
Health Inspection Service, APHIS, the Department of Defense, DOD, and 
State agricultural and veterinary agencies regarding BSE issues. This 
includes implementation of the Bovine Spongiform Encephalopathy 
regulation and controlling imported products that might introduce BSE 
into the United States.
    The US Department of Agriculture, USDA has and enforces regulations 
governing products of animal origin which pose a risk of harboring 
animal disease agents for FDA regulated products with BSE-related 
concerns. FDA issues import alerts and bulletins, carries out import 
inspections at the border and airports, and inspects domestic 
manufacturers. FDA also worked closely with the USDA in developing the 
import alerts and bulletins issued by FDA to ensure all animal products 
that might contain the BSE agent are identified and listed in the 
alerts or bulletins and are prevented from entering the United States.
    FDA, APHIS, and Customs have coordinated their response to the 
potential importation of BSE-related products. After APHIS issued their 
prohibition on the importation of BSE materials on December 7, 2000, 
FDA issued Import Bulletin 71B-02 requesting that FDA's field offices 
notify their local APHIS offices of any import suspected of containing 
BSE material. FDA issued a new Import alert on January 20, 2001, and a 
new Import Bulletin on March 1, 2001. These import documents provide a 
detailed system for identifying at the ports products about which FDA 
has potential BSE concerns.
    FDA also coordinates with USDA through an interagency working group 
on BSE. This group was started in 1996 and is comprised of 
representatives from USDA's APHIS, FSIS, Agricultural Research Service, 
or ARS, FDA, NIH, CDC, and DOD. This group shares information, 
evaluates ideas and issues, and makes recommendations to participating 
agencies.
    With the increased resources provided in fiscal year 2002 and 
continuing into fiscal year 2003, FDA will enhance its working 
relationship with USDA. With resources available at this time, FDA 
intends to continue BSE activities mentioned above and also plans to 
update Federal and State inspectors on USDA/APHIS authority and 
approach to BSE; reinforce the existing import ban, in collaboration 
with USDA/APHIS, with more specific product information on FDA-
regulated products, including food products, dietary supplements and 
cosmetics that contain bovine materials from BSE-identified countries, 
so that banned products do not enter the U.S.; and coordinate with 
APHIS and FSIS the testing of FDA's BSE Contingency Plans for use in 
the event that BSE is discovered in the U.S.
                     president's management agenda
    Question. As you have stated, the Administration's FDA budget 
request for fiscal year 2003 reflects a decrease in some of the 
administrative functions performed by the FDA. Specifically, the budget 
reflects a $2.6 million decrease due to the elimination of 25 
administrative and management positions, and a $7.3 million decrease as 
a result of moving FDA's Public Affairs and Legislative Offices to 
DHHS. I must admit, due to the sensitive and scientific nature of many 
of FDA's activities, I wonder what effect these funding decreases will 
have, specifically the consolidation of FDA's Public Affairs and 
Legislative Offices to the Department. I'm not certain that when 
competing with subjects as broad and equally important as Medicare and 
mental health parity, FDA activities and the issues we examine in this 
Subcommittee will receive the attention they deserve.
    Please explain the benefits of consolidating the public affairs and 
legislative affairs functions at a Department-wide level. Do you feel 
that this consolidation will enhance the ability of FDA to respond 
quickly and accurately to Congressional and public requests for 
information?
    Answer. In fiscal year 2003, FDA will transfer the public affairs 
and legislative affairs functions to the Department to improve 
communications and achieve cost savings. Advantages of the 
consolidation will ensure a streamlined and efficient hierarchy that is 
more efficient and effective. This will free personnel to focus on the 
customer service efforts of the Agency. The consolidation will permit 
the Agency to speak with one voice as a Department so that information 
provided is clear and consistent.
    Question. The Agency's restructuring plan appears to be 
centralizing resources that have been recently de-centralized. What are 
the reasons for this latest approach? Have you determined your overall 
cost savings as a result of this centralization? Does this plan mean 
that FDA will reduce its resource needs in these areas?
    Answer. This proposal is part of an HHS initiative aimed at 
efficiency in the operation of our Department. A key objective of the 
President's Management Agenda is a responsive, more citizen centered, 
Federal government. In few Federal agencies is the need for 
organizational reform more acute than at HHS, where a long history of 
decentralized decision-making has produced a Department with 13 
operating divisions, functioning with relative autonomy. As a result, a 
complex web of ever-proliferating offices has distanced HHS, from the 
citizens it serves and has produced a patchwork of uncoordinated and 
duplicative management practices that hinder its efforts to accomplish 
its mission efficiently. The Administration supports and is committed 
to solving this problem through Secretary Thompson's One Department 
initiative, which will eliminate unnecessary layers of bureaucracy and 
consolidate duplicative functions into unified offices. Streamlining 
efforts in 2003 will focus on HHS' human resources, public affairs, 
legislative affairs, and building and facilities management functions.
    In fiscal year 2002 we plan to study the current organizational 
structure to identify opportunities to consolidate and streamline 
administrative functions. An administrative study services contract was 
awarded in January 2002. The study is to evaluate all of our 
administrative functions. The study will generate a comprehensive plan 
to meet the requirements of the President's Management Agenda, the 
Secretary's desire to implement management improvements, and the 
Agency's goal of improving service to its customers. Thus the cost 
savings and resource needs are still being identified.
    Question. Besides the ones already proposed in this year's budget 
request, are there plans to consolidate other administrative functions 
at the Department? What are the advantages besides the cost savings in 
the fiscal year 2003 budget? Have you determined out-year cost savings?
    Answer. Personnel operations will be streamlined from six offices 
to one, and EEO complaints management functions are being considered 
for consolidation at the Department. The consolidation initiatives will 
enable the FDA to more effectively carry out its mission of protecting 
the health and safety of the U.S. citizen and will free personnel to 
focus on the customer service efforts of the Agency. Out-year cost 
savings have not yet been determined.
    Question. Does FDA expect to re-program GSA rent funds at the end 
of fiscal year 2002 as was done in the previous 2 years? Please 
explain.
    Answer. No. There are several reasons why the Agency does not 
anticipate having excess GSA rent funds which would be available for 
reprogramming. First, there are rent increases for several locations 
due to inflation adjustments by GSA, or because FDA has moved its 
offices within the same metropolitan area. Second, FDA is in the 
process of acquiring a number of new offices around the country due to 
our increased staffing in the Field, and the costs for some of these 
locations will impact on our fiscal year 2002 costs. Also, the Center 
for Food Safety and Applied Nutrition occupied its new building in 
College Park, Maryland, in October of 2001, and the rent on this 
facility is higher than the rent FDA was paying in fiscal year 2001 for 
Federal Building 8 in Washington, which is being vacated by FDA.
                              medical gas
    Question. In fiscal year 2002, this Subcommittee strongly 
encouraged the FDA to reconsider its approach to AS validation 
requirements through an enhanced good guidance process that would 
include extensive industry input and interaction and formal response by 
FDA to all significant comments. I understand that FDA representatives 
and the Compressed Gas Association (CGA) recently met to initiate this 
effort and that it was agreed that the FDA and CGA would undertake a 
series of meetings to facilitate an in-depth exploration of ASU 
validation issues and a better understanding of the views of the 
regulated community. At the conclusion of this process, FDA will issue 
a draft guidance that would then provide the basis for further comment 
and refinement. Is my understanding of the procedural status of this 
matter correct? Have any of the meetings mentioned above been scheduled 
to date?
    Answer. Yes, the Agency is currently in the process of developing 
draft guidance on medical gas Current Good Manufacturing Process, or 
CGMP, that addresses Air Separation Units, or ASU, validation 
requirements. The guidance development process will be consistent with 
the Agency's good guidance practices and will allow for extensive 
industry input and interaction. The Agency did meet with the Compressed 
Gas Association, or CGA, on March 7, 2002, to discuss ASU validation 
issues, and we are trying to arrange meetings for April, May, and June 
to continue that discussion. Once a draft guidance is issued, there 
will be a comment period, and the Agency will review and seriously 
consider all comments received during the comment period before 
finalizing the guidance.
    Question. I have also been informed that FDA will, in the near 
future, be issuing a draft guidance on medical gas issues other than 
ASU validation matters, and that it will allow for extensive industry 
input and interaction on this draft guidance, address and respond to 
each significant comment received as it would in a rulemaking process, 
and refine this draft guidance as necessary in response to those 
comments. Is this an accurate assessment of the situation? Please 
provide an update on the status of this draft guidance.
    Answer. Yes, the Agency is also currently working on draft guidance 
for the medical gas industry on CGMP requirements relating to issues 
others than ASU validation. Again, there will be ample opportunity for 
comment before the guidance is finalized, and the Agency will review 
and seriously consider all comments received during the comment period.
    Question. Please provide for the record the amount of funds 
utilized by the FDA in fiscal years 2001 and 2002, and the amount of 
funds projected to be utilized in 2003, for activities related to 
medical gas oversight, regulation and enforcement. How does this amount 
compare to other pharmaceutical regulation activities performed by FDA?
    Answer. I would be happy to provide the Agency resources used and 
projected for oversight, regulation, and enforcement of manufacturing 
quality requirements for medical gas products. In fiscal year 2001 the 
Agency expended about $2 million in this area. It is estimated we will 
expend about the same amount in fiscal year 2002 and fiscal year 2003.
    The vast majority of FDA activities with respect to general 
pharmaceutical regulation can be categorized as pharmaceutical 
oversight, regulation, and enforcement. Funds utilized for field 
activities related to oversight, regulation, and enforcement of other 
pharmaceutical regulation activities include domestic drug process 
inspections, foreign drug process inspections, domestic drug 
surveillance including sampling, import drug surveillance, and pharmacy 
compounding and laboratory methods. In fiscal year 2001, the Agency 
expended about $27 million for these activities. It is estimated we 
will expend around $35 million in fiscal year 2002 and 2003.
                                staffing
    Question. Can you explain what progress FDA has made in all areas 
with regard to hiring of new personnel for increases included in the 
fiscal year 2002 appropriation, as well as the fiscal year 2002 
supplemental?
    Answer. FDA expects to hire all 832 personnel--655 personnel for 
FDA's field component or Office of Regulatory Affairs, ORA, and 177 
personnel for those non-field components--associated with the fiscal 
year 2002 Counter Terrorism supplemental budget by the end of the 2002 
fiscal year. As of March 18, 2002, ORA has hired 365 of the 655 
authorized by the supplemental budget
    Question. At what point will you notify Congress if you find you 
are unable to hire the number of personnel planned? Do you plan to ask 
to reprogram any of those funds?
    Answer. The Agency expects to fully utilize the full-time 
equivalent employees, or FTE, requested in the budget through the use 
of full-time, part-time, and intermittent employees. It is not 
anticipated, at this time, that a request to reprogram funds will be 
made.
    Question. If there are lapsed funds, what does the Agency plan to 
do with them?
    Answer. The Agency anticipates a lapse rate in hiring staff, and 
intends to use these resources for information technology equipment and 
other equipment needs of the Agency.
                                  mqsa
    Question. Can you tell us from a public health perspective what the 
recent articles on mammography effectiveness mean? What is FDA's 
position on the information contained in the articles?
    Answer. FDA would defer to the National Cancer Institute, NCI, 
which has the epidemiological and research expertise, to appropriately 
address the specific statistical issues raised by recent articles on 
mammography effectiveness. However, we would like to point out that NCI 
data shows that the mortality rate from breast cancer has decreased 
significantly since the widespread use of screening mammography became 
commonplace. This is likely due to a combination of factors, including 
mammographic detection of earlier cancers, changes in women's 
lifestyles, and better treatment methods. Since the recent media 
attention, NCI has reaffirmed its support for screening mammography.
    FDA fully supports HHS Secretary Tommy G. Thompson's recommendation 
as stated by the U.S. Preventive Services Task Force, USPSTF, that 
calls for screening mammography, with or without clinical breast 
examination, every one to 2 years for women ages 40 and over. The 
USPSTF's recommendation is largely based on the review of eight 
randomized controlled trials of mammography--four of mammography alone 
and four of mammography plus clinical breast examination--that have 
reported results with 11 to 20 years of follow up.
                                 pdufa
    Question. What is the status of your discussions with industry?
    Answer. During the past 18 months, FDA has conducted a fair and 
balanced effort to hear from all parties that have a viewpoint about 
the Prescription Drug User Fee Act (PDUFA). In preparation for 
submitting the Administration's PDUFA III proposal to Congress, the 
Agency engaged in a comprehensive initiative to involve all PDUFA 
stakeholders--consumers, health providers, patient groups, and the 
manufacturers of drugs and biologics--in the development of PDUFA III 
proposals. This process included two public hearings; Listening 
sessions with consumer and patient groups; consumer roundtables where 
PDUFA was a major topic of discussion; and, meetings with drug and 
biologic manufacturers.
    At our public hearings, FDA received 12 hours of testimony. Of the 
total of 28 witnesses who provided testimony, 23 were representatives 
from consumer, patient and health provider groups. Seventy-five 
consumer, patient and health provider groups were also represented at 
the ``listening'' sessions and roundtables. This is evidence of the 
broad representation that served as a foundation for the 
Administration's PDUFA III proposal and the development of the PDUFA 
III performance goals.
    These discussions allowed FDA to develop a draft reauthorization 
proposal for PDUFA. The Administration forwarded this proposal to the 
Congress in March, 2002.
    Question. Please explain how the new PDUFA will be different from 
the current PDUFA, including why the changes are necessary and the 
effect they will have.
    Answer. The most significant change in PDUFA is that it will 
generate substantially more revenue to support the FDA drug review 
process. With the additional revenue provided FDA should be able to 
substantially strengthen its review program and improve the working 
conditions and training opportunities in its drug review operations. 
The additional revenue provided should enable the agency to employ 
about 195 additional staff for drug review in fiscal year 2003, and 
that number will increase to a little over 450 additional staff in 
fiscal year 2006 and 2007. This will allow us to continue to meet the 
PDUFA II performance goals and some additional new goals agreed to for 
PDUFA III Cassuming continuation of appropriations at a level that 
sustains the half of the drug review program funded by appropriations.
    We are pleased that the proposed changes will also permit FDA to 
spend fee revenues on risk management activities that span the approval 
process and include the first 2 to 3 years after a product is approved. 
The resources provided should permit the agency to double the size of 
its current headquarters product safety staffsCnow about 100 FTE.
    To further respond to your question I will submit for the record a 
narrative explanation of most of the changes that are being proposed to 
the financial provisions of PDUFA.
    [The information follows:]

             Changes in Financial Provisions for PDUFA III

              pdufa ii revenue model and workload adjuster
    Under PDUFA II, application fee amounts were set in statute and 
were increased each year by an inflation adjustment. The number of 
applications that would pay fees was estimated at the beginning of each 
year, based on an analysis of the number of fee-paying applications 
received since PDUFA was initiated. Total application fee revenue was 
then estimated at the beginning of each fiscal year by multiplying the 
amount of the statutory application fee, adjusted for inflation, by the 
estimated number of fee-paying applications FDA would receive.
    The estimated amount of application fee revenue then became the 
revenue target for the amount FDA would collect for both product fees 
and establishment fees. The number of fee-paying applications thus 
became the de-facto workload adjuster--the surrogate for all FDA review 
workload. But FDA experience has identified two major problems with 
this approach.
Problem 1: Fee-Paying Applications are Not a Good Surrogate for FDA 
        Workload
    Much of FDA's workload in reviewing applications is not captured by 
this surrogate. A large and growing portion of FDA's review workload 
occurs before a marketing application is ever submitted. The number of 
investigational new drug (IND) documents submitted to FDA has grown 
substantially and consistently each year since 1993, and they were not 
captured by the PDUFA II workload adjuster. Further, many of the goals 
under PUDFA II require additional work that FDA must do at the IND 
review stage. This additional IND work includes:
  --increase the number, complexity and timeliness of several kinds of 
        FDA meetings with industry,
  --more rapid completion of action on complete responses from industry 
        on holds FDA placed on clinical investigations, and
  --protocol assessments.
    In addition, the number of manufacturing supplements submitted by 
industry has been growing rapidly each year, and starting in 1998 these 
submissions were also subject to PDUFA performance goals. A workload 
adjuster is needed that takes these aspects of FDA's review workload 
into consideration, as well as the number of marketing applications 
submitted to FDA--whether or not an application is exempt from fees or 
the fees are waived.
Problem 2: PDUFA II Over-adjusts after a Decline in Applications
    Based on experience from 1993 through 1997, when the number of fee-
paying applications increased consistently from year to year by 7 
percent, both FDA and industry expected that fee-paying applications, 
and product and establishment fee revenues, would increase consistently 
each year through 2002.
    In fact, however, in two of the four years of PDUFA II, the number 
of fee-paying applications fell significantly. In years when fee-paying 
applications fall, FDA faces a double financial penalty. The experience 
of fiscal year 2001 is a good example of this.
  --At the beginning of fiscal year 2001, based on a linear regression 
        analysis of past fee-paying applications, FDA projected a total 
        of 164 fee-paying applications that would produce a total of 
        $51 million in application fee revenue. As the fiscal year 
        progressed, however, fee-paying applications dropped 
        precipitously, due in large part to an increase in the number 
        of applications exempt from fees. By year-end FDA had received 
        only 108 fee-paying applications that generated only $33 
        million--a shortfall of about $18 million.
  --At the beginning of fiscal year 2001, linear regression analysis 
        projected that FDA would receive 171 fee-paying applications in 
        fiscal year 2002. This would provide $53 million in application 
        fee revenue and $159 in total revenue--since product and 
        establishment fees would each be set to generate the same 
        amount of fees that applications generate. But the 108 fee-
        paying applications were factored into the linear regression 
        analysis at the beginning of fiscal year 2002, revised 
        projections forecast only 146 fee-paying applications in fiscal 
        year 2002, generating $46 million from application fees, and a 
        total of $138 million from all fees. This was $21 million less 
        than earlier forecasts.
    The projection of an additional drop of $21 million in PDUFA 
revenue in fiscal year 2002, on top of the $18 million loss in fiscal 
year 2001, causes a total drop of $39 million over two years--all in 
response to the drop in fee paying applications in fiscal year 2001. 
Both FDA and industry agree that this drop in revenues is out of 
proportion to any change in workload. Revenues have been too volatile 
under PDUFA II. Both FDA and industry support a change in how revenues 
and workload are structured beginning in fiscal year 2003.
                  proposed revenue model for pdufa iii
    The proposed statutory language uses a revenue model that 
incorporates aspects of both PDUFA I and PDUFA II, but that would 
eliminate the problems with the volatility of revenues that occurred in 
PDUFA II. The major elements include:
  --Setting the revenue levels in Section 736(b) for each year, not the 
        amounts of application fees
  --Keeping the current inflation adjuster and applying it to the 
        statutory revenue levels.
  --Incorporating a new workload adjustment provision that accounts for 
        the major components of FDA's review work--(1) new marketing 
        applications, whether or not they pay fees, (2) efficacy 
        supplements, whether or not they pay fees, (3) commercial 
        investigational new drug submissions, and (4) manufacturing 
        supplements. This is a major improvement over using fee-paying 
        applications as a surrogate for workload as was the case in 
        PDUFA II.
                           workload adjuster
    Section 736(c)(2) provides for annual revenue adjustments for 
changes in review workload, after inflation adjustments are made. The 
adjustment is to be determined by the Secretary, based on a weighted 
average of the changes in the total number of:
  --Human drug applications
  --Commercial investigational new drug applications
  --Efficacy supplements, and
  --Manufacturing supplements.
    The Secretary shall publish in the Federal Register the fees 
resulting from this adjustment and the supporting methodologies.
    Each of the 4 components is a defined category of applications that 
FDA currently counts. Each component will be given a weighting factor 
that corresponds to its percent of FDA review workload. The percent of 
FDA review workload assigned to each of the components in a study 
recently completed study by KPMG is:
  --44.4 percent for human drug applications, whether or not they pay 
        fees;
  --40.2 percent for commercial investigational new drug submissions;
  --6.2 percent for efficacy supplements; and
  --9.2 percent for manufacturing supplements.
    These are the weights that the Secretary would use in calculating 
the workload adjuster, and the percents that have also been disclosed 
by FDA soon after they were initially reported to them by their 
contractor, KPMG.
    The workload adjuster envisioned for each component has as its base 
the average number of applications of each particular type that FDA 
received over the 5-year period of PDUFA II. It requires that a rolling 
average of submissions also be calculated each year for the latest 
five-year period that ends on June 30 before the end of each fiscal 
year beginning on or after October 1, 2002. The percent change in the 
latest 5-year average, compared to the base year, is then multiplied by 
the weighting factor for that component. Then all 4 components of the 
workload adjuster are added together, and the total percent that 
results is the workload adjuster that will be used to further adjust 
the inflation-adjusted statutory revenue levels each year after fiscal 
year 2003. Use of 5-year rolling averages in this process dampens the 
impact of revenue fluctuations--both up and down.
    The revenue adjuster will never result in revenues lower than the 
inflation-adjusted statutory revenue levels. The reason for this is 
that in years when fee-paying applications fall below projections, FDA 
will automatically experience a shortfall in revenues as a result of 
that shortfall in fee-paying applications. Further downward adjustment 
of the revenues would over-compensate for such a decline in workload. 
This is a lesson learned form experience from 1998 through 2002.
    If such a model had been in place for the past 5 years, revenues 
during PDUFA II would have been much more predictable year to year 
rather than exhibiting the volatility FDA experienced. Industry and FDA 
both support this concept. Attachment I is a worksheet that shows how 
this workload adjuster would have performed if it had been in effect 
for the past five years. Both FDA and industry staff support this 
approach to adjusting workload for revenues in PDUFA III.
            change in due date for annual fees to october 1
    The date annual fees are due and payable is being changed from 
January 31 to October 1, the first day of the fiscal year. Currently 
PDUFA specifies that two-thirds of the fees are due January 31, 4 
months into the fiscal year. This has necessitated carrying forward 
funds from a previous year to sustain operations for the first 4 months 
of each new fiscal year. By changing the date for annual fees to be 
paid to FDA, the necessity of carrying forward these large cash 
surpluses from year to year is eliminated. Also, by making this change, 
FDA will have access to revenue as early in fiscal year 2003 as it can 
issue invoices and collect fees rather than having to wait until 
January 31 to collect funds. This is especially important for FDA 
operations in fiscal year 2003 because the agency does not expect to 
have any appreciable carryover funds at the end of fiscal year 2002.
    Making this change necessitates several other changes in the law. 
In the past annual inflation adjustments were keyed to the higher of 
the Federal pay raise applicable for employees in the fiscal year for 
which the fees were set or the CPI for the previous year. In order to 
collect fees on October 1, FDA will have to set fees and issue invoices 
in August of each year, well before the pay-raise determination for the 
next fiscal year is made. For this reason the inflation adjustment 
factors are changed to the higher of the Federal pay raise for 
employees in the Washington DC area for the previous fiscal year, or 
the change in the CPI for the 12 month period ending June 30 before 
fees are set for the following fiscal year, whichever is higher. Both 
of these figures will be available in August when fees must be set. As 
was the case previously, these inflationary changes will continue to be 
cumulative and compounded.
    Making the fee due and payable on October 1 necessitates a few 
other changes as well. The word ``assessed'' is changed to ``retained'' 
in section 736(f)(1) and the word ``collected'' is changed to 
``retained'' in section 736(g)(2)(A). Both of these changes are made to 
permit FDA to issue invoices and collect fees before an appropriation 
is actually made for the fiscal year. The change in wording keeps the 
original intent of these two provisions intact, however, by asserting 
that the conditions originally specified in each of those sections must 
be fulfilled when all appropriations for the fiscal year, including any 
supplemental appropriations, are enacted. If the conditions are not 
fulfilled, FDA may not retain the fees it collects.
                         final year adjustment
    A new subsection (c)(3) also allows FDA to make a one-time increase 
in fees in fiscal year 2007, if necessary, to assure that the agency 
will have no less than 3 months of operating reserves on hand at the 
end of fiscal year 2007 when this legislation will expire. This will 
allow the agency to operate for up to 3 months in fiscal year 2008 if 
there is any delay in reauthorization of PDUFA at the end of fiscal 
year 2007. Further, delaying this payment from industry until fiscal 
year 2007 minimizes the need for FDA to carry large balances over from 
year to year, reducing industry outlays until they are necessary to 
support operations.
 adding tolerance to the trigger governing spending from appropriations
    Currently the provision in Section 736(g)(2)(B) dissolves FDA's 
authority to collect and spend fees in any year that FDA fails to spend 
from appropriations as much as it spent in fiscal year 1997, adjusted 
for inflation. Under spending by even $1 causes the whole user fee 
program to cease operation, presenting serious difficulties for the 
drug review program. This would force FDA into a reduction-in-force and 
other drastic actions.
    The trigger is based on the amount FDA spends from appropriations 
on the drug review process each year. FDA's accounting system measures 
spending by organization component. Spending on the drug review 
process, however, is usually only a portion of spending of organization 
components in CDER, CBER and ORA. That determination can only be made 
definitively by merging information from FDA's accounting system, after 
the close of the fiscal year, with results from the time reporting 
system that reflect the percent of time each organization component 
spends on the drug review process. This provides the total dollar 
figure that FDA spent on the drug review process. From this total, FDA 
subtracts the amount of fee revenue that was spent to determine the 
amount of spending on the process that came from appropriations. Since 
this process does not finally identify exactly how much was spent from 
appropriations until after the end of the fiscal year, FDA always 
overspends to be sure that the agency is not in peril of spending less 
than the trigger requires and causing the program to collapse.
    The table below shows the amount of spending, in excess of the 
amount required by the law, since PDUFA began in 1993:

----------------------------------------------------------------------------------------------------------------
                                                          Minimum
                                                         spending         Actual
                     Fiscal year                        required by    spending from    Difference      Percent
                                                          section     appropriations                  difference
                                                       736(g)(2)(B)
----------------------------------------------------------------------------------------------------------------
1993................................................    $120,057,253    $126,515,577      $6,458,324           5
1994................................................     123,380,438     129,337,138       5,956,700           5
1995................................................     126,958,144     139,830,318      12,872,174          10
1996................................................     124,302,476     152,289,387      27,986,911          23
1997................................................     125,872,166     147,959,689      22,087,523          18
1998................................................     147,959,689     151,836,635       3,876,946           3
1999................................................     150,083,954     159,669,575       9,585,621           6
2000................................................     153,508,177     167,646,122      14,137,945           9
2001................................................     158,213,295     162,691,657       4,478,362           3
----------------------------------------------------------------------------------------------------------------

    An addition is proposed to section 736(g)(2)(B) to provide FDA a 
margin of error in its effort to meet this requirement of the law. This 
section is being modified so that if FDA's spending is within 5 percent 
of the amount required by this provision of law, the requirement of 
this section is considered satisfied. If FDA under-spends by 3 percent 
or less, there is no penalty. If FDA under-spends by more that 3 
percent but not more than 5 percent, FDA will be required to reduce 
collections in a subsequent year by the amount in excess of 3 percent 
by which FDA under-spent from appropriations. The intent is to relieve 
FDA of the need to overspend from appropriations each year, as it has 
done consistently since 1993, to assure that this trigger is met. 
Spending from appropriations on the drug review process each year is 
still expected to be at or very close to the amount specified by this 
trigger, and may never be more than 5 percent less than the trigger 
amount.
       changes to improve efficiency of billing for product fees
    Amendments are proposed to allow the Secretary to use the 
Prescription Drug Product List (the active portion) in the ``Approved 
Drug Products with Therapeutic Equivalence Evaluations,'' (Orange Book) 
as the basis for identifying which products should be considered to be 
prescription drug products for fee assessment purposes. These proposed 
changes should lead to a more efficient, less burdensome, billing 
procedure. Under current law, any product eligible for drug listing is 
subject to product fees. Determining eligibility for listing is 
administratively complex and sometimes resource intensive. In addition, 
listing is often controlled by a re-packer or distributor rather than 
by the sponsor, but the sponsor must pay the product fee. The use of 
the Orange Book, which is found on FDA's Internet site, as the basis to 
identify products for user fee assessment purposes should not be 
construed to affect the legal status of the book or the products in the 
book. The purpose of using this method is merely a tool for the 
Secretary to provide a public, efficient billing process. It also 
provides sponsors an easier way to remove products from the list that 
is the basis for billing. Also, the addition of the reference to the 
list of products approved under human drug applications under section 
351 of the Public Health Service Act created and maintained by the 
Secretary refers to the current FDA method of identifying biological 
products considered to be prescription drug products for fee assessment 
determinations. This is not intended to be a change in practice; rather 
it documents FDA's current practice. The list is to be provided on 
FDA's Internet site
    The proposal to delete the clause ``does not include a large volume 
parenteral drug product approved before September 1, 1992'' would mean 
that any large volume parenteral (LVP) product is a prescription drug 
product and subject to a fee. However, coupled with a corresponding 
change proposed to section 736(a)(3)(B), all LVP's would be exempt from 
product fees in PDUFA III, including ones that were approved after 
September 1, 1992. This change is intended to decrease FDA's 
administrative burden in determining which products should be billed.
     minor changes in the definition of prescription drug products
    Amendments are proposed to Section 735(1)(A) and (B) that would 
eliminate reference to 505(b)(1) and 505(b)(2) under the definition of 
what is considered a human drug application for user fee purposes. The 
change would state that any application submitted for approval under 
section 505(b) would be considered a human drug application. The 
changes in these sections mean that all new drug applications, whether 
they are a 505(b)(1) or a 505(b)(2), would be subject to user fees 
unless otherwise exempted. This technical change would greatly decrease 
the Agency's administrative burden in the collection of fees and would 
eliminate any controversy over whether any 505(b)(2) application is fee 
liable. Further, since the non-fee paying 505(b)(2) applications have 
been reviewed under the same rigorous performance goals as the fee 
paying applications (505(b)(1)'s and 505(b)(2)'s), this change would 
create a level playing field for all new drug applications. It is 
expected that this technical change would not significantly increase 
the revenue for the Agency because most of the 505(b)(2) applications 
have already been assessed fees. The elimination of section 735(1)(B) 
would also mean that all 505(b)(2) applications would be subject to 
product fees (unless otherwise exempted).
    This change would also allow FDA to collect application fees for 
505(b)(2) supplements to 505(j) applications (see 21 CFR 314.54) that 
require clinical data for approval. This change to the statute would 
create a level playing field so that any supplement that requires 
clinical data for approval would be subject to a fee.


    Question. What will be the effect if PDUFA is not re-authorized 
this year?
    Answer. If PDUFA is not reauthorized promptly the effect would be 
serious long-term harm to the drug review program. FDA currently has 
about 2,400 staff-years devoted to the drug review process, and half of 
the funds to support them come from PDUFA Fees. FDA will have virtually 
no carryover PDUFA funds available to pay our employees when the fiscal 
year ends on September 30, 2002.
    That means that FDA will not have funds to pay about 1,200 of our 
current employees working on drug review after September 30. No 
reauthorization by then could lead to a furlough or reduction in force 
at that time, and notices to employees of that possibility would have 
to go out in advance. As we learned when PDUFA II was about to expire, 
the atmosphere of uncertainty caused by the notice of a possibility of 
a furlough or reduciton in force will result in FDA losing many well-
trained employees who will be difficult to replace.
    To avoid this unfortunate outcome, we are hopeful that Congress 
will reauthorize PDUFA as soon as possible. This would enable us to 
avoid having to send notices to our employees that will certainly cause 
distress and trigger an acceleration of turnover. Your help in this 
effort will greatly advance the public health mission of our Agency and 
will be sincerely appreciated.
                         los angeles laboratory
    Question. What is the status of the Los Angeles laboratory?
    Answer. Phase II completes the mechanical and electrical 
infrastructure and completely fits-out both the laboratory and the 
office at an estimated cost of $23.0 million. The total estimated 
construction cost of the project is $43.0 million.
    The contract for Phase II construction was awarded on November 29, 
2001. The Los Angeles Laboratory project is on schedule with a 
completion date of June 8, 2003, and the scheduled move-in is to begin 
in August, 2003. As of March, 2002, the total project is approximately 
45 percent complete.
    Currently, operating and maintenance costs at the present location 
are estimated at $779,000 for fiscal year 2002. When the Los Angeles 
Laboratory project is completed and fully operational, we expect the 
operating and maintenance costs to increase.
                      arkansas regional laboratory
    Question. Why is work at the Arkansas Regional Laboratory being 
``paused?'' When will the construction be completed? What effect will 
this have on FDA activities? What amount of funds is necessary to fully 
complete this project?
    Answer. The first two phases of construction for Building 50 
completed exterior demolition, structural work, roofing repair, 
installation of an elevator and installation of a new exterior brick 
facade. The interior architectural fit-out of the space has not been 
completed nor has the installation of mechanical and electrical 
infrastructure. Once funds have been appropriated, the remaining phases 
will be completed within one year. The estimated buy-out cost in fiscal 
year 2003 for completing Phase III of ARL is $4.2 million. This amount 
was not included in the fiscal year 2003 request as higher Counter 
Terrorism priorities took precedence.
                         bar coding initiative
    Question. Please describe FDA's bar coding initiative.
    Answer. In 2000, in response to the Institute of Medicine--IOM--
report titled, ``To Err is Human: Building a Safer Health System,'' the 
Secretary of Health and Human Services instructed FDA to explore 
possible regulatory approaches to reduce preventable medication errors. 
Medication errors are a subset of the wider category of medical errors. 
Medication errors are defined by the National Coordinating Council for 
Medication Error Reporting and Prevention as--any preventable event 
that may cause or lead to inappropriate medication use or patient harm 
while the medication is in the control of the healthcare professional, 
patient, or consumer. Such events may be related to professional 
practice; healthcare products, procedures, and systems, including 
prescribing; order communication; product labeling, packaging, and 
nomenclature; compounding; dispensing; distribution; administration; 
education; monitoring; and use.
    Medication errors can lead to adverse drug events. It is estimated 
that 770,000 adverse drug events leading to injury or death occur 
yearly in U.S. hospitals alone, and that between 28 and 95 percent of 
these are preventable, that is, they can be defined as errors. 
Computerized hospital medication use and monitoring systems could 
prevent many of these medication errors.
    Errors related to dispensing and administration can be minimized 
through the use of bar codes. For example, if a health professional 
could use a bar code scanner to compare the bar code on a human drug 
product to a specific patient's drug regimen, the health professional 
would be able to verify that the right patient is receiving the right 
drug, at the right dose, and at the right time. Bar code advocates have 
recommended that the bar code contain a unique numerical code that is 
dose specific to identify the manufacturer, product, and package size 
or type, lot number, and expiration date.
    The availability of bar codes for pharmaceuticals would also 
facilitate other patient safety initiatives, for example, automated 
drug prescribing or ordering, automated monitoring for drug toxicities 
in hospitals, and as a component of the automated medical record. 
Automation of the drug prescribing and ordering system, if linked to a 
bar coding system, has the potential to not only minimize drug mix-ups, 
but also to make sure prescribers have access to crucial information at 
the point of prescribing.
    We are considering whether to require human drug products, 
including certain biologic products, to be bar coded. The bar code 
would contain certain information about the product, such as a dose-
specific individually identifying number. We are considering whether to 
require the bar code to contain other information, such as the drug 
product's expiration date and lot number, to make it easier to identify 
expired drugs and recalled drugs that may not be safe and effective for 
use. The bar code, when used in conjunction with bar code scanners and 
computer equipment, will enable health professionals to decrease the 
medication error rate. We are also exploring issues surrounding bar 
codes on medical devices.
    We are planning to hold a public meeting this Summer to discuss the 
technical issues regarding the development and implementation of a 
possible bar code label. We anticipate that discussions will include 
presentations from invited speakers as well as from members of the 
public.
    Once we have received this public input, we plan to proceed on 
proposing a rule that will go through the formal procedures of notice 
and comment rulemaking on the use of barcodes on labeling. At the same 
time, FDA is working with a contractor to obtain cost estimates for a 
possible bar code requirement that should be complete around mid-2002.
    As additional background information, the IOM report released in 
1999 cited research that there are an estimated 100,000 deaths in the 
United States every year from preventable medical errors in hospitals 
alone. The range of deaths reported, between 44,000 and 98,000 deaths, 
was based on the 1984 Harvard Medical Practice Study and confirmatory 
studies done in Colorado and Utah. These numbers reflect the entire 
area of medical errors--including, for example, surgical errors, 
iatrogenic infections, medication errors, and incorrect medical product 
use. Of the projected 100,000 deaths, we believe that approximately 30 
percent to 50 percent are associated with errors involving FDA-
regulated medical products, that is, drugs, devices, blood and blood 
products, or vaccines. In addition to the human cost of errors 
involving drugs, there are also significant economic costs. An article 
published in 1995 estimated the direct cost of preventable drug-related 
mortality and morbidity to be $76.6 billion, with drug-related hospital 
admissions accounting for much of the cost. Another article published 
in 2001, used updated cost estimates derived from current medical and 
pharmaceutical literature to revise the $76.6 billion estimate to 
exceed $177.4 billion; of which hospital admissions accounted for 
$121.5 billion in costs, and long-term care admissions accounted for 
another $32.8 billion.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin

                              methylmecury
    Question. How many seafood samples did FDA take last year for its 
mercury monitoring program? What types of species were sampled? In 
addition to its consumption advisories, how will FDA revise its 
regulatory strategy for methylmercury or take other actions to prevent 
tainted seafood from reaching consumers?
    Answer. FDA did no sampling in fiscal year 2001 for methylmercury 
monitoring. The public health question relating to methylmercury 
focuses on how much methylmercury consumers accumulate from consumption 
of seafood over time. This question requires data on both how much 
seafood people are consuming and how much methymercury are in 
commercial species. There is already considerable knowledge on both 
points.
    FDA recognizes the long term importance of upgrading and adding to 
its database on average concentrations of methylmercury in commercial 
fish and is planning on collecting and analyzing additional samples for 
this purpose. The timing of this sampling program is subject to FDA's 
overall sample collection and analysis priorities, including those 
related to food security. Fortunately, our experience has been that 
methylmercury concentrations in commercial species are stable over 
time, so the need to accumulate new data is regarded as prudent but not 
immediate.
    FDA is committed to reviewing its overall public health strategy 
for methylmercury. FDA developed an action level for methylmercury in 
the late 1970's. Since then, a considerable amount of new data have 
become available, both from epidemiological studies that provide 
insight into the effects of methylmercury in humans, and from exposure 
data that indicate how much methylmercury is in fish and how much fish 
U.S. consumers are eating. The Agency is taking advantage of these new 
data by re-examining its entire public health strategy for 
methylmercury, including the action level.
    In addition, FDA has announced that it will soon schedule a meeting 
of its Food Advisory Committee to review issues surrounding 
methylmercury in commercial seafood, including a re-examination of the 
consumer advisory.
                                listeria
    Question. What are your agencies doing today to protect consumers 
from Lm-contaminated foods? What are the current monitoring programs 
for Listeria monocytogenesin the products your agencies regulate? Dr. 
Murano, what are you doing to speed the rulemaking process? What, if 
any, regulatory action is FDA considering to reduce the risk to 
consumers from foods that may contain Listeria?
    Answer. The FDA conducted a draft Listeria monocytogenes (Lm) risk 
assessment in collaboration with the U.S. Department of Agriculture's 
Food Safety and Inspection Service, USDA/FSIS and in consultation with 
the Centers for Disease Control and Prevention, CDC. The draft risk 
assessment estimates the potential relative risk of listeriosis from 
eating certain ready-to-eat foods. The draft risk assessment and a 
draft action plan designed to reduce the risk of foodborne illness 
caused by Lm were issued Jan 19, 2001 for public comment.
    The comment period for the draft risk assessment and action plan 
closed July 18, 2001. We anticipate issuing the revised risk assessment 
in 2002. I will be happy to provide you more specific information for 
the record.
    [The information follows:]
        highlights of the draft risk assessment and action plan
    Consumer and health care provider information and education efforts 
have been expanded through outreach to:
  --Medical and health professionals through a continuing medical 
        education program developed in cooperation with the American 
        Medical Association, Diagnosis and Management of Foodborne 
        Illnesses--A Primer for Physicians, which includes a 
        reproducible patient handout alerting at-risk persons, 
        especially pregnant women, to the importance of avoiding foods 
        that may be a source of Listeria monocytogenes. Released in 
        January 2001, approximately 36,000 physicians and other health 
        professionals have received copies of the Primer;
  --Some 50,000 State and local public health department health 
        educators, extension agents and school nurses across the 
        country who receive the FDA/USDA National Food Safety Education 
        Month (September) Consumer Education Planning Guide, which 
        included a reproducible Listeria monocytogenes consumer 
        education handout in 2001 and will again in 2002;
  --Consumers, via release in June 2001, with USDA, CDC and the 
        International Food Information Council, of a consumer/patient 
        handout distributed through physicians' offices, public health 
        departments, and FDA and USDA field staff; and,
  --The mass media through a media release and follow-up distribution 
        beginning June 2001 of a ``drop-in'' feature story on Listeria 
        monocytogenes which to date has generated 204 newspaper 
        articles with a potential readership of more than 15 million.
    The following action items are completed, in progress, or are being 
initiated:
  --FDA Processor Guidance has been drafted for public comment
  --Revision of the FDA Food Code (2003)
  --Develop computer-based training for industry and food safety 
        regulatory employees (fiscal year 2002).
  --Enforcement and regulatory strategies have been reviewed and 
        redirected and include microbial product sampling as 
        appropriate (FDA high risk food inspections, soft cheese 
        surveillance program, fiscal year 2002)
  --FDA and FSIS are seeking the advice from the National Advisory 
        Committee on Microbiological Criteria for Foods on developing a 
        scientific framework for the establishment of safety-based 
        ``use by'' date labeling. Expected completion in 2003
  --Enhance disease surveillance and outbreak response through case 
        control studies (fiscal year 2002)
  --In fiscal year 2001 the National Food Processors Association 
        completed a prevalence study of Listeria monocytogenes in 
        select, ready-to-eat foods at retail funded by FDA. Data from 
        this study will be incorporated into the next version of the 
        risk assessment.
  --An FSIS/FDA collaborative study to develop Listeria monocytogenes 
        detection and enumeration methods for concentrations of 
        Listeria monocytogenes less than 1cfu/gm (fiscal year 2002).
                                 ______
                                 

            Questions Submitted by Senator Richard J. Durbin

                      gene therapy tracking system
    Question. I believe the FDA is planning on modifying their gene 
therapy proposal so that it meets the congressional intent of tracking 
patients rather than merely being an adverse events monitoring system. 
Is that correct?
    Answer. FDA is pursuing the development of a comprehensive Gene 
Therapy Patient Tracking System--GTPTS--to help ensure the appropriate 
oversight and safe development of these therapies. The GTPTS is a 
system for the collection, analysis, and reporting of information 
pertinent to the safety of gene therapy recipients. Far more than an 
adverse event database, it represents a comprehensive, integrated 
collection of procedures, policies, programs, databases and report 
structures pertinent to the conduct of studies; the collection of 
short-term and long-term outcomes information from recipients; the 
transmission of information to FDA; the storage of information in 
electronic databases in an accessible and analyzable format; and the 
analysis and use of the information to make informed regulatory 
decisions and to increase the understanding of researchers, subjects, 
and the public. The GTPTS is to supplement or replace current systems 
for assessing and promoting the safety of gene therapy so that the 
oversight system will be optimized for dealing with some of the issues 
specific to gene therapy.
    Many types of outcomes and health status data were considered for 
collection in the GTPTS database. Determination of which data to 
include requires careful consideration of several factors. The GTPTS 
should focus on capturing data that are important to safety assessment 
and that can be collected with an adequate degree of reliability and 
completeness. Collection of unnecessary data not only may be costly, 
but also can make it harder to recognize critical findings. Collection 
of unreliable or substantially incomplete data would impair the 
validity of the analyses.
    Most gene therapy patients have serious underlying diseases and 
receive a variety of therapies, drug and otherwise, in addition to the 
gene therapy. Each patient typically experiences many adverse events as 
a result of disease, other therapies, and concomitant illnesses. The 
collection of all such events, while creating a tremendous burden on 
patients, sponsors, and investigators, would create a huge amount of 
irrelevant data potentially obscuring important information. For these 
reasons, it was decided that the GTPTS would only include adverse 
events associated with treatment. Data regarding adverse events that 
are deemed by the sponsor and investigator to have no reasonable 
possibility of having resulted from the therapy would not be included 
in the database. In addition, for each patient there is a vast amount 
of health status data that comes from medical history, physical exam, 
laboratory testing, medical imaging, etc. When not rising to the level 
of an adverse event, such data, that is normal laboratory findings, 
symptoms related to a disease not under therapy, can only be 
interpreted in the context of the individual patient and would add 
little or no value to the gene therapy database. This type of clinical 
information will not be included in the gene therapy databases.
    Long-term clinical data collection is an important and relatively 
unique aspect of gene therapy assessment. Storage and facilitation of 
analysis of such data is a critical function of the gene therapy 
databases. This is particularly true because current medical and 
regulatory systems were not originally designed to identify late-
occurring treatment-related toxicities, that is, years later, or to 
examine the causal association of these toxicities with gene therapy.
    FDA did substantial background work investigating the types of 
long-term concerns, the classes of gene therapy products to which they 
apply, and the feasibility of various approaches to collecting such 
data. In these efforts, we gave careful consideration and deliberation 
not only to the safety issues that need to be addressed, but also to 
the practical difficulties in reliably collecting such data.
    In considering these data, FDA sought the advice of its Biological 
Response Modifiers Advisory Committee--BRMAC. In its deliberations, 
BRMAC advised that the most significant risks associated with gene 
transfer studies include treatment-related cancers, and hematologic, 
neurologic, and autoimmune disorders. The Committee concluded that in 
most cases, these conditions are expected to develop months or a few 
years after initial administration of gene transfer product; however, 
potential risks existed for initial presentation of second cancers and 
some other treatment-related toxicities, 10 years or longer after 
therapy. The Advisory Committee recommended that sponsors of gene 
transfer trials collect specific clinical information on all subjects 
for at least 15 years. However, the Committee also repeatedly cautioned 
that FDA must take care to simplify long-term data collection and focus 
it on critical information in order to have successful data collection. 
Based on the recommendations of the BRMAC, the GTPTS will be expanded 
to capture the necessary long-term clinical monitoring information.
    Question. Will the gene therapy tracking system track health status 
information, so that a Data System Monitor Board like entity can use it 
to assess risk from specific protocols and vectors?
    Answer. Through experience in the review and regulation of gene 
therapy products, FDA has identified several concerns and issues raised 
by gene therapy products that differ from those typically raised by 
more traditional products. FDA agrees that public discussion of summary 
safety information stemming from the GTPTS will promote awareness among 
gene therapy study sponsors, research investigators, and the general 
public of emerging issues in the medical, scientific, and ethical 
aspects of clinical gene therapy research.
    In the past, FDA has used existing systems to prepare summary 
safety reports for presentation at FDA advisory committees--BRMAC--the 
Recombinant DNA Advisory Committee--RAC--and various public forums 
including the Drug Information Association--DIA--annual meetings and a 
special satellite broadcast co-sponsored by DIA and FDA; the annual 
meetings of the Society of Toxicology, the American College of 
Toxicology and the International Society for Genetic Anticancer Agents; 
meetings of the Pharmaceutical Research and Manufacturer's Association; 
and the annual meetings of the American Society of Gene Therapy. In the 
future, FDA intends to use the GTPTS in preparation of periodic gene 
therapy safety reports intended both to solicit expert feedback from 
FDA advisory committees and to disseminate information. Furthermore, 
FDA will take part in a Gene Transfer Safety Assessment Board--GTSAB, a 
working group established under the auspices of the NIH Recombinant DNA 
Advisory Committee--RAC--by the NIH Office of Biotechnology Activity-
OBA. The GTSAB's specific functions will include reviewing in closed 
session relevant safety information and analyses; identifying 
significant trends or single events; reporting aggregated data and 
assessment to the RAC; and, facilitating the dissemination of safety 
information among gene therapy investigators and participants. This 
Board is expected to enhance overview of gene therapy safety and 
improve public understanding and awareness of the safety of human gene 
transfer research studies as well as inform the decision-making of 
potential trial participants.
    Question. Given the problems with reporting by researchers of 
adverse events, the tracking of health status information should be 
carried out by FDA rather than by the clinical trial sponsor. Does the 
FDA understand that it is the agency who has oversight responsibility 
here and that such responsibility should not be delegated?
    Answer. FDA is responsible for the regulatory oversight of gene 
therapy clinical trials. In particular, 21 CFR 312.22 (a) states--FDA's 
primary objectives in reviewing an IND are, in all phases of the 
investigation, to assure the safety and rights of subjects, and, in 
Phase 2 and 3, to help assure that the quality of the scientific 
evaluation of drugs is adequate to permit an evaluation of the drug's 
effectiveness and safety.''
    Question. When can the committee expect that FDA to actually 
provide us with a full budget and detailed implementation plan for the 
gene therapy individual patient tracking system ?
    Answer. The Gene Therapy Patient Tracking System detailed 
implementation plan and cost estimate is under administrative review 
and will be provided to the committee within the next several weeks.
                        reuse of medical devices
    Question. Given the fact that multiple Senate offices including 
requests from the staff of the Chairman and Ranking Member of the HELP 
committee asked the agency to refrain from extending the deadline for 
compliance with the reprocessing rules for 510(k) devices, it is 
curious that the FDA decided to ignore these requests. Does the FDA not 
agree that the public deserves better than to be exposed to devices of 
questionable safety and efficacy?
    Answer. Protecting the American public from harmful, unsafe medical 
products is a part of our mission at FDA. We initially declined the 
third party reprocessors' request to extend the deadline for obtaining 
clearance for their Class II reprocessed single use devices. The DHHS 
received over 50 letters from reprocessors, healthcare professionals, 
hospitals, elected officials, and from several members of the U.S. 
Senate and the House of Representatives, urging FDA to extend the 
February 14, 2002, deadline. The letters from healthcare professionals 
and hospitals stated that if FDA did not extend the deadline, hospitals 
would face a medical device shortage problem which could result in a 
serious financial hardship if the hospitals were suddenly required to 
purchase large volumes of new single use devices. The letters from the 
State officials reminded the Agency that many employees risk immediate 
unemployment if the commercial reprocessors were forced to shutdown if 
the February due date was not extended. The letters from members of 
Congress encouraged FDA to consider extending the deadline if the 
reprocessors had demonstrated ``good faith effort'' in meeting the 
Agency's original due date.
    After further deliberation, FDA granted a 6-month extension for 
active enforcement of premarket notification submission requirements 
for Class II single use devices until August 14, 2002. It is important 
to note that the extension was granted with three very stringent 
caveats. These caveats are that the reprocessor must have submitted a 
510(k) by August 14, 2001; have not received a not substantially 
equivalent determination; and, provide timely responses to FDA's 
requests for additional information about their device in accordance 
with 21 C.F.R. Sec. 807.87(1).
    Like members of Congress and their staff, FDA believes that the 
American people should not be exposed to devices of questionable safety 
and efficacy. The Agency does not believe there is any significant risk 
to the public from the limited extension for firms that have already 
submitted their applications and are providing timely responses to the 
Agency's information requests in accordance with 21 C.F.R. 
Sec. 807.87(1).
    Question. In the case of Class II reprocessed devices, the agency 
has been meeting its statutory review time and in fact has approved 
many devices prior to the original deadline of Feb.14, 2002. Only 
submissions that were incomplete were still unapproved by the time of 
the deadline. Why would the agency grant an extension for a product 
whose submission was incomplete and for which the agency required more 
data?
    Answer. Many of the Class II single use devices that FDA has thus 
far cleared for marketing are lower risk Class II devices that, in 
general, are less complicated than other devices sharing the same 
classification grouping. For this reason, FDA may require additional 
information for more complex Class II devices. In addition, FDA is 
aware that preparing 510(k) submissions is a new undertaking for single 
use device reprocessors. FDA acknowledges that there may be a learning 
curve for commercial reprocessors as they become familiar with FDA's 
requirements as to what constitutes a ``complete'' 510(k) submission.
    Question. Some of these submissions were still incomplete as of the 
deadline, yet FDA allowed them to stay on the market without any 
indication that their submission was even forthcoming. Can the agency 
assure Congress that it will not extend these deadlines any further and 
will ensure that patients are no longer exposed to reused devices of 
questionable safety and efficacy?
    Answer. The Agency wishes to assure Congress and the American 
public that it intends to continue to fulfill its mission to protect 
public health by only approving or clearing medical devices for which 
reasonable assurance of safety and effectiveness has been established, 
regardless of whether they are reprocessed single use devices or 
devices manufactured by original equipment manufacturers. FDA recently 
denied a third party reprocessor's request to extend the premarket 
application submission deadline for reprocessed Class III devices.
    Question. Is FDA actively enforcing the premarket regulations 
against hospitals and third party reprocessors that reprocess Class III 
devices?
    Answer. Yes, FDA is actively enforcing the premarket regulations 
for hospitals and third party reprocessors that reprocess Class III 
devices. Shortly after implementation of FDA's reuse policy, the Agency 
issued assignments to a cadre of field investigators who were 
specifically trained to perform inspections of single use device 
reprocessors. These investigators visited 35 hospitals. The inspections 
revealed one hospital that was actively engaged in in-house 
reprocessing of single use devices despite FDA's new reuse policy. The 
investigator issued a FDA 483 or Notice of Adverse Findings to the 
hospital's Chief Executive Officer who assured the Agency that the 
hospital would immediately cease all reprocessing activities.
    FDA also intends to issue assignments to the District Offices to do 
follow-up inspections of the four commercial reprocessors who submitted 
premarket applications, PMAs, for Class III cardiac ablation catheters 
on August 14, 2002, but were unable to obtain FDA approval for these 
devices by February 14, 2002. The purpose of these inspections will be 
to ensure that these reprocessors have ceased reprocessing and 
distributing reprocessed cardiac ablation catheters.
    Question. Does FDA plan to investigate whether hospitals who have 
reprocessed devices like ablation catheters in the past (and have 
testified to Congress that they reprocess these devices) have 
discontinued this practice?
    Answer. Yes, FDA does plan to investigate whether hospitals that 
have reprocessed devices like ablation catheters in the past have 
discontinued this practice. FDA has learned that six hospitals may 
possibly be engaged in in-house reprocessing of invasive cardiac 
catheters despite the publication of FDA's reuse policy on August 14, 
2000. The Agency has prepared high priority assignments to the District 
Offices requesting that field investigators visit these six hospitals.
    Question. When can we expect to see the first strong FDA 
enforcement action against entities not complying with the FDA's 
premarket policy for reprocessed devices?
    Answer. The Agency cannot predict when such actions will take 
place. FDA wishes to assure Congress that we plan to take appropriate 
enforcement action against any reprocessor that is not in compliance 
with FDA's reprocessing and reuse policy for both premarket and 
postmarket requirements.
                        tissue and blood safety
    Question. How much have you set aside in this budget request for 
the implementation of the new tissue rules ?
    Answer. There are many competing priorities to consider in 
developing the Agency's budget request. The proposed increase of $123 
million or nearly 8 percent above the fiscal year 2002 estimate 
reflects the Agency's central role in the Nation's defenses against the 
threat of terrorism, as well as FDA's strong performance as the gateway 
for medical products. The Agency's fiscal year 2003 budget does not 
contain a specific request to fund the implementation of the proposed 
approach for the regulation of human tissues for transplantation.
    Question. I sent a letter asking for this budget information in 
January 2001, when do you think FDA is likely to respond?
    Answer. FDA and DHHS staff met with members of your staff on March 
18, 2002 to discuss issues related to the Agency's proposed approach 
for the regulation of human tissue cells and cellular and tissue-based 
products. During that meeting information, was provided in response to 
budget information raised in your January 2001 letter to the Agency. If 
there is additional information needed on this issue, we would be happy 
to provide it. We appreciate your support and interest in this 
important public health issue.
    Question. As you know Brian Lykins, a 23 yr-old student in 
Minnesota, died due to contaminated tissue. There have also been 
several infections recently from a disease called Chagas disease and 
one such infection led to a death. Given these tragic events, is FDA 
moving quickly to finalize both the donor suitability and the good 
manufacturing practice rules?
    Answer. FDA has been moving to finalize both proposed rules. The 
proposed rule, Suitability Determination for Donors of Human Cellular 
and Tissue-Based Products, published on Sept. 30, 1999, with a 90 day 
public comment period. In response to requests for an extension, FDA 
re-opened the comment period on April 18, 2000, for an additional 90 
days. FDA received over 500 comments to the docket, many of them about 
scientifically controversial issues. FDA met with industry groups to 
clarify their concerns and brought several issues to its advisory 
committees. Another proposed rule, Current Good Tissue Practice for 
Manufacturers of Human Cellular and Tissue-Based Products; Inspection 
and Enforcement, published on Jan. 8, 2001, with a 120-day comment 
period. FDA received 47 comments to this proposed rule. FDA is 
proceeding with the necessary steps to finalize and publish the final 
rules.
    FDA is investigating recent reports of allograft-associated 
bacterial infections. FDA recently issued a guidance, Validation of 
Procedures for Processing of Human Tissue Intended for Transplantation, 
in March 2002 for immediate implementation to remind tissue banks about 
current FDA regulations for validation of procedures to prevent 
contamination and cross-contamination during tissue processing.
    The three cases of Chagas disease reported in the recipients of 
organs are also of concern to FDA, but please note that organ 
transplantation is not regulated by FDA, but rather by the Heath 
Resources Services Administration, HRSA. There is currently no FDA-
approved test for donor screening for infection with Chagas disease. 
Because of the shortage in organ donors, HRSA and the Centers for 
Disease Control and Prevention, CDC have been reviewing the 
appropriateness of donor screening questions in the organ transplant 
setting. According to HRSA, the United Network for Organ Sharing, UNOS, 
the organization under contract with HRSA to operate the nation's Organ 
Procurement and Transplantation Network, is working with the Centers 
for Disease Control and Prevention on drafting recommendations for 
screening potential donors for T. cruzi infection. There have been no 
reported cases of transmission of Chagas disease by transplanted 
tissues, although the parasite has been found in liver, spleen, 
cardiac, smooth and skeletal muscle, nerve tissue, intestinal mucosa, 
skin, gonad, bone marrow, and placenta.
    Question. Are the rules that were previously proposed sufficient to 
ensure the health and well being of tissue recipients or do the 
screening and manufacturing requirements need to be strengthened in the 
light of these recent illnesses and tragic deaths?
    Answer. FDA believes that the proposed rules, when finalized, will 
strengthen public health protection. In general, the FDA's proposed 
regulations are written in broad language, for two primary reasons. 
One, they can be flexibly applied to account for new scientific 
knowledge and future technological advances. Two, establishments can 
tailor control measures to their particular circumstances to meet 
standards contained in the regulations.
    It is important to note that FDA review, inspection, and compliance 
activities to monitor and enforce compliance with the regulations are 
an integral and critical aspects of Federal oversight. These activities 
are resource intensive.
    Question. The Agriculture Appropriations conference report 
contained language expressing our concern with the pooling of tissue 
during processing. Given the lack of a detection system for the 
detection of prions, can the FDA assure the Committee that they will 
not grant any tissue processor a waiver from the pooling prohibition, 
when the GMP rule is made final?
    Answer. FDA's proposed Good Tissue Practice, GTP, rule, which 
published on January 8, 2001, proposed prohibiting pooling of tissue 
from two or more donors. FDA received comments about pooling, some of 
which supported an absolute prohibition, and others that did not. FDA 
recognizes the possibility that, as technology and scientific knowledge 
advance, new methods may be developed that could be used in the 
manufacture of human cells, tissues, and cellular and tissue-based 
products or other unanticipated circumstances may arise that warrant a 
departure from an approach detailed in the proposed regulations. The 
proposed GTP rule, section 1271.155, included a provision that would 
permit establishments to apply for an exemption or alternative from any 
of the requirements in subpart C or D of part 1271. As proposed, such 
an exemption could be granted if it is consistent with the goals of 
preventing the introduction, transmission, and spread of communicable 
disease, and if the information submitted with the request justifies 
the exemption. FDA recognizes the need to encourage development of 
validated procedures to address contamination and cross-contamination 
with TSE-associated prions. The FDA intends to bring this issue for 
public discussion before its Transmissible Spongiform Encephalopathies 
Advisory Committee.
    Question. Would the agency support legislative language that 
further strengthens the legal authority of the agency to safeguard the 
public from defective or contaminated tissue?
    Answer. We would be pleased to discuss with you possible actions to 
strengthen this authority while maintaining the flexibility to regulate 
human cells, tissues, and cellular and tissue products appropriately 
according to risk.
    Question. Voluntary blood recalls have increased over 4.5 fold 
since 1994. Can the agency explain some of the reasons for this 
increase? Can you also provide us with a break out the numbers with 
respect to Class I, II and III violations?
    Answer. I would be happy to provide that for the record.
    [The information follows:]

                                           BIOLOGIC RECALLS CLASSIFIED
----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year
                MFR type                 -----------------------------------------------------------------------
                                            1994     1995     1996     1997     1998     1999     2000     2001
----------------------------------------------------------------------------------------------------------------
Blood...................................      400      592      669    1,423    1,524    1,202    1,196    1,817
Source plasma...........................       27       19       23       27       38       36       28      105
Blood derivative........................        8        3        4       26        4       11        4        7
IVD.....................................        7       18        5       14        8        6        4       16
Vaccine.................................        1        0        1        2        0        1        0        3
Therapeutic.............................        0        0        0        3        0        4        2        5
Allergenic..............................       10        0        0        6        4       13       22       16
Device..................................       13       11        2       16       15        6        9        3
Tissue..................................        3        5        3        2        5       19       24       34
                                         -----------------------------------------------------------------------
      Total.............................      469      648      707    1,519    1,598    1,298    1,289    2,006
----------------------------------------------------------------------------------------------------------------

    It is clear that there has been a significant increase in blood 
recalls during this time frame. There are a number of reasons for these 
increases. Between the years 1993-1997, a number of firms in the blood 
area entered into Consent Decrees with the FDA. These Consent Decrees 
mandated correction of donor suitability records, resulting in 
increased reporting and recalls. FDA investigators have also identified 
more violations requiring recalls during the course of inspections, and 
industry is also more vigilant in this regard. FDA has also issued a 
number of memoranda and guidance documents to the industry. These 
documents describe current good manufacturing practice in blood 
establishments. The evolution of current good manufacturing practice 
standards has contributed to increased warnings and recalls. A summary 
of the content of these documents is listed below with their date of 
issue:
  --Recommendation for Deferral of Donors for Malarial Risk--July 26, 
        1994
  --Donor Deferral due to RBC-red blood cell-Loss During Collection of 
        Source Plasma by Automated Plasmapheresis--December 4, 1995
  --Recommendation for the Deferral of Current and Recent Inmates of 
        Correctional Institutions--June 8, 1995
  --Recommendation for Labeling and Use of Units from Donors with 
        Elevated Levels of ALT-alanine aminotransferase--August 8, 1995
  --Disposition of Products Derived from Donors Diagnosed with, or at 
        Known High Risk for Creutzfeldt-Jakob Disease--CJD--August 8, 
        1995
  --Precautionary Measures to Further Reduce the Possible Risk of 
        Transmission of CJD by Blood and Blood Products--August 8, 1995
  --Interim Recommendation for Deferral of Donors at Increased Risk for 
        HIV-1 Group O Infection--December 11, 1996
  --Recommendation for the Quarantine and Disposition of Units from 
        Prior Collections from Donors with Repeat Reactive Screen Tests 
        for Hepatitis B Virus--HBV--Hepatitis C Virus-HCV- and Human T-
        Lymphotropic Virus-HTLV-I--July 19, 1996
  --Donor Screening for Antibodies to HTLV-II--August 1997
  --Withdrawal of Human Blood Derived Materials because Donor Diagnosed 
        with, or at Increased Risk for CJD--December 11, 1997
  --Blood and Blood Components: (1) Quarantine and Disposition of Units 
        from Prior Collections from Donors with Repeat Reactive Screen 
        Tests for Antibody to HCV; (2) Supplemental Testing and 
        Notification of Consignees and Blood Recipients of Donor 
        Testing Results of anti-HCV--September 1998
  --Pre-Storage Leukocyte Reduction of Whole Blood and Blood Components 
        Intended for Transfusion (draft guidance 1/23/01)
  --Biologic Product Deviation Reporting--August 10, 2001
  --Revised Measures to Reduce the Possible Risk of Transmission of CJD 
        and new variant Creutzfeldt-Jakob Disease (vCJD) by Blood and 
        Blood Products--January 9, 2002
    In addition, it has been FDA's experience that there is an increase 
in reporting and recalls in the period following implementation of new 
test methods. Since 1994, the following new methods have been 
introduced:
  --Coulter HIV-1 p24 3/14/96 (first HIV p24 donor screen)
  --Abbott HIVAg monoclonal 4/23/96 (HIV p24)
  --Ortho HCV 3.0 ELISA 5/20/96 (new generation HCV EIA)
  --Abbott HTLV-I/HTLV-II EIA 8/15/97 (added HTLV-II specificity)
  --Vironostika HTLV-I/II Microelisa System 1/17/98 (added HTLV-II 
        specificity)
  --Chiron RIBA HCV 3.0 Immunoblot 2/11/99 (lookback and other policy 
        implications)
    With regard to the classification of recalls, the following table 
addresses the breakdown for all CBER regulated products. As indicated 
in table 1, the majority of these are in the blood area:

                                              RECALL CLASSIFICATION
----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year
                                         -----------------------------------------------------------------------
                                            1994     1995     1996     1997     1998     1999     2000     2001
----------------------------------------------------------------------------------------------------------------
 Class I................................        9        5        0        4        0        1        2        6
Class II................................      300      408      504    1,160    1,270      944    1,021    1,513
Class III...............................      157      230      200      355      328      353      266      487
----------------------------------------------------------------------------------------------------------------

    The Class I recalls for blood were nine in fiscal year 1994, five 
in fiscal year 1995, and one in fiscal year 1999. The remainder was for 
other CBER regulated products. It is also important to note that tissue 
recalls were not classified until fiscal year 1997. The majority of 
recalls has consistently been Class II by regulatory definition, and 
represent situations where the probability of serious adverse health 
consequences is remote. As these data show, there has been an increase 
in recalls over the years.
    Question. The agency is currently seeking court approval to fine a 
blood center for repeated violations of the rules for biologics. Such 
litigation is cumbersome and takes up valuable resources of the agency 
that might be better spent on increased enforcement. Would the agency 
support legislation that would give the agency authority to levy civil 
monetary penalties for such violations similar to the authority 
available for violations of the device laws without the necessity of 
court action?
    Answer. FDA's Center for Biologics currently has limited civil 
money penalty authority under the provisions of the National Childhood 
Vaccine Injury Act. Broader authority for violations of the provisions 
of the PHS Act and the FD&C Act relating to biologics may be useful if 
the additions were an effective enforcement option and did not preclude 
other administrative or legal actions. However, the Administration has 
no position on such legislative changes at this time.
                            latex allergies
    Question. The fiscal year 2002 Agriculture Appropriations requires 
FDA to report to Congress on a plan to eliminate latex exposure from 
food handling. What is the status of that report?
    Answer. The report which is due in August 2002, is under currently 
being developed.
    Question. Does FDA have legal authority to ban latex gloves because 
they adulterate food with latex proteins?
    Answer. Natural rubber latex, or NRL, is an approved indirect food 
additive under 21 CFR 177.2600, rubber articles intended for repeated 
use. As such, NRL may be used in the manufacture of gloves worn by food 
processors and food handlers, including those in restaurants. If FDA 
were to develop a sound scientific basis for concluding that natural 
rubber latex is not a safe food additive, it could propose a rule to 
amend or repeal the food additive regulation, in whole or in part. If 
FDA were to repeal the food additive regulation pertaining to the use 
of NRL, then its use in the manufacture of gloves used by food 
processors and food handlers would be deemed to be unsafe, and thus, 
unlawful under section 409 of the Federal Food Drug and Cosmetic Act.
    The Agency is examining available information on potential risks of 
allergic responses in consumers posed by the use of NRL in gloves worn 
by food service workers. To date the Agency does not have sufficient 
information to propose a repeal of the regulation in 21 CFR 177.2600, 
nor has anyone petitioned the Agency to take such action A caution 
concerning latex gloves has been added in the model guidelines for 
retail food service operations--the 2001 Food Code.
    Question. Could FDA modify their food code to accomplish the 
purpose of eliminating exposure to latex from food handling?
    Answer. The Food Code has certainly been an important tool in 
alerting the food industry to questions that have arisen about the safe 
use of latex gloves in food preparation. However, the Food Code is 
voluntary model code for regulatory agencies; it is neither Federal law 
nor Federal regulation. Eliminating the use of latex as an indirect 
food additive would require notice and comment rulemaking by the FDA in 
accordance with the Administrative Procedure Act. The Agency is 
examining available information on potential risks of allergic 
responses to NRL from used in latex gloves worn by food service workers 
to determine whether there is sufficient information to propose a 
regulatory action. If FDA finds that there is a sound scientific basis 
for concluding that natural rubber latex is not a safe food additive, 
the Agency could propose to amend or repeal 21 CFR 177.2600, in whole 
or in part. Such Agency action would make a revision of the Food Code, 
to accomplish the purpose of eliminating exposure to latex from food 
handling, unnecessary.
    The Conference for Food Protection provides a forum for government, 
FDA, the Food Safety and Inspection Service, and the Centers for 
Disease Control and Prevention as well as State and local agencies, 
territories, and local and tribal nations, consumer, industry and 
academia discussion of food safety issues as they relate to the model 
Food Code. The Conference's Assembly of Delegates, through the 
Conference's formal process, may recommend that FDA further revise the 
model Food Code based on its findings regarding latex food service 
gloves or in response to regulatory changes. This formal process 
assures that all parties having a stake in setting food safety 
standards are heard, before changes are made that may have a broad 
impact. Revisions to the Food Code are accomplished through the 
Conference for Food Protection, which recommends Food Code changes to 
FDA. In 1999, a caution was added to the Food Code stating that NRL 
gloves have been reported to cause allergic reactions in individuals 
who wear latex gloves and even in individuals eating food prepared by 
employees wearing latex gloves.
                             seafood haccp
    Question. What has FDA done in the past year to further improve 
industry-wide compliance with the seafood HACCP regulation?
    Answer. In 2001, FDA increased inspectional emphasis on the control 
of pathogens by processors of cooked, ready to eat seafood and smoked 
seafood, and on the control of scombrotoxin by processors of scombroid 
species. This action was taken because these areas represent the most 
urgent public health issues identified in the evaluation for the 
previous years. This mid-course correction included multiple 
inspections of processors of these types of products when the 
inspectional history of the firm documented significant noncompliance 
with the regulation. Significant improvement was detected in 2001 in 
the cooked, ready to eat segment. However, further problems were 
uncovered in the breaded seafood segment. As a result, that segment was 
added for priority coverage in 2002.
    Additionally, FDA published the third edition of its Fish and 
Fishery Products Hazards and Controls Guidance in June 2001. This 
guidance provides up-to-date information on the hazards that affect 
seafood and recommends preventive measures to reduce the risk of their 
occurrence. The latest edition includes significant new information on 
the control of scombrotoxin, which FDA anticipates will facilitate 
compliance by the industry in that area. A satellite training course 
was held in December 2001 to familiarize Federal and State regulators, 
academia, and the seafood industry with the changes in the guidance and 
to discuss continuing areas of concern, especially related to 
scombrotoxin and pathogen control.
    Question. What percentage of seafood firms have HACCP plans and are 
adequately implementing them?
    Answer. In fiscal year 2001, 88 percent of seafood establishments 
had a HACCP plan or did not need one because no hazards were reasonably 
likely to occur. Approximately 85 percent of the establishments 
inspected in fiscal year 2001 were in substantial compliance with the 
Seafood HACCP Regulation; that is, as a result of inspection, these 
establishments were classified as either ``no action indicated,'' NAI, 
or voluntary action indicated, VAI. A firm classified as NAI has 
essentially no significant deficiencies; a firm classified as VAI has 
one or more deficiencies, but they are not an imminent public health 
threat and the firm is making satisfactory progress in correcting them. 
Overall, significant progress continues to be made in reducing the 
number and types of deficiencies, as indicated by fewer VAI 
classifications and more NAI classifications.
    Question. How frequently does FDA currently inspect domestic 
seafood firms?
    Answer. The Seafood HACCP program was accompanied by a significant 
increase in the frequency of government--that is, FDA or State 
regulatory agencies under contract with FDA or in partnership with 
FDA--inspections of U.S. processors from an average of once every 4 
years to approximately once every year. In fiscal year 2001, 85 percent 
of the seafood establishment inventory was inspected by either FDA or 
by State inspectors on our behalf, including virtually all seafood 
firms who process seafood products classified as high risk. In 
addition, raw molluscan seafood processors are inspected every year by 
State regulatory agencies under a cooperative Federal-Ftate program.
    Question. Does FDA plan to develop baseline data and performance 
standards for seafood HACCP systems? How and when will this be 
implemented?
    Answer. This question addresses the issue of how the seafood HACCP 
system should best be evaluated, and the extent to which evaluation 
should focus on numerically based criteria, such as numbers of 
illnesses or amounts of contaminants either present or absent. These 
are questions that FDA continues to examine.
    It is well known that reductions in illness are often not always 
easily measured due to under reporting of illnesses, the skewing of 
reported illnesses toward those that are easily diagnosable, and 
similar factors. FDA is interested in determining whether illness 
reduction could, at some point, serve as a direct indicator of program 
success, but doing so has not been regarded as feasible so far. 
Consequently, FDA has evaluated its program by measuring the extent to 
which industry has adopted HACCP-based controls. It is reasonable to 
conclude that processors that are effectively implementing adequate 
HACCP plans are controlling seafood-related hazards. This is because 
the cornerstone of the seafood HACCP program is hazard prevention 
through the application of controls that are scientifically known to 
work. For example, where it is known through scientific analysis that a 
cooking step at a certain temperature and duration during commercial 
processing will kill all pathogens, a valid indicator of public health 
prevention is whether the processor's cooking step achieved that 
temperature and duration. FDA has data about the application of 
preventive controls before initiation of the HACCP program, and has 
used that data as a baseline for measuring progress.
    Another possibility for evaluation involves measurement of 
contaminant levels, either on a firm-by-firm basis, or industry-wide, 
or both. FDA is in the process of significantly increasing its sampling 
as an adjunct to its HACCP-based inspections and is studying whether 
and how program evaluations could take advantage of these kinds of 
data. There are a number of issues that the Agency must take into 
account. For example, in searching for an appropriate numerical 
performance standard for seafood based on contaminant levels, it is 
important to recognize that seafood is subject to many potential 
hazards but suffers from no single pressing problem. In this respect, 
seafood is fundamentally different from meat and poultry. Selecting a 
single numerical measure under such circumstances would be of limited 
value because, for example, monitoring fishery products for the 
presence of a pathogen would provide no indication of how other hazards 
are being controlled. Also, the frequency and occurrence of pathogens, 
such as salmonella, tends to be low, partly because fish are cold-
blooded. This fact was confirmed in a baseline study FDA conducted on 
salmonella in seafood. Nonetheless, the Agency is examining whether 
several numerical indicators that are directed toward the most 
significant hazards would be both feasible and appropriate as 
indicators of program progress.
                              food safety
    Question. If not, how will FDA ensure that establishments have 
HACCP systems that are adequately identifying and controlling food 
safety hazards?
    Answer. FDA has evaluated its program by measuring the extent to 
which industry has adopted HACCP-based controls. It is reasonable to 
conclude that processors that are effectively implementing adequate 
HACCP plans are controlling seafood-related hazards. This is because 
the cornerstone of the seafood HACCP program is hazard prevention 
through the application of controls that are scientifically known to 
work. For example, where it is known through scientific analysis that a 
cooking step at a certain temperature and duration during commercial 
processing will kill all pathogens, a valid indicator of public health 
prevention is whether the processor's cooking step achieved that 
temperature and duration. FDA has data about the application of 
preventive controls before initiation of the HACCP program, and has 
used that data as a baseline for measuring progress.
    Question. How does FDA plan to spend its fiscal year 2002 
supplemental to better protect the food supply?
    Answer. The Agency has developed a Food Counter Terrorism Plan 
focusing on three strategies--Deterrence, Surveillance and Threat 
Assessment, and Containment Through Rapid Response--to achieve the goal 
of protecting the food supply. FDA's plan to better protect the food 
supply will be executed on both the import and domestic fronts.
    As part of its deterrence strategy, FDA's goal is to provide a 
greater import presence than we have been able to provide in the past. 
An increased presence can enhance our capacity and capability to 
perform our normal import operations such as sample collection and 
analysis, field examinations, inspections and will provide a deterrent 
effect.
    Our first priority is to perform more of these basic operations, 
particularly import field examinations and sample analyses, which are 
critical in detecting problems in the products we regulate. In 
addition, we have emphasized those types of examinations that will 
increase the likelihood of detecting intentional acts of potential 
terrorism, such as looking for inconsistencies between shipping 
documents and the physical product, evidence of tampering, 
substitution, or counterfeiting, or suspicious or damaged merchandise. 
Not including the new counter-terrorism efforts, much of the additional 
basic operations work will be similar to our already designed workplan 
assignments. It will include data integrity checks through filer 
evaluations and entry review where aspects of the data being reviewed 
are checked against existing information within the Agency.
    Additional samples will be collected with the additional resources 
that have been allocated towards counter-terrorism measures. Analyses 
will be performed to detect toxins, poisons and microorganisms. As 
additional screening methods are developed in our labs and other labs, 
a greater array of analyses can be applied to samples collected. For 
example, FDA's Forensic Chemistry Center plans to adapt an FDA toxin 
screening method for application as a surveillance tool.
    Physical checks of samples will be increased with a greater 
presence at the borders. Exams will focus on evidence of manipulation 
of shipments, verification against declaration, substitution, and out 
of the ordinary physical conditions.
    During domestic investigations and import filer audits, we will be 
working with the regulated industry to ensure its attention to 
potential terrorist activities, especially as they relate to raw 
material receipt, inventory quarantine procedures, sourcing of foreign 
products or ingredients, and vulnerable operations.
    In the future, we will increase the level of sophistication that we 
employ in our import operations, to include better information, better 
examination techniques, and more powerful analytical tools.
    Domestically, FDA will execute its deterrence strategy by regularly 
inspecting foods and facilities deemed to be a strategic risk. 
Additionally, the Agency will be involved in increased communication 
and coordination with its stakeholders. It has already met with 
consumer groups, the industry and other Federal agencies and held two 
50 State conference calls to discuss preventive measures and steps that 
can be taken to protect the nation's food supply from a terrorist 
attack.
    The Surveillance and Vulnerability Assessment strategy will be 
supported by FDA's current import and domestic surveillance systems, 
that is the Field Accomplishment and Compliance Tracking System, FACTS, 
the Operational and Administrative System for Import Support, OASIS, 
the Electronic Laboratory Exchange Network, eLEXNET, and the CFSAN 
Adverse Event Reporting System, CAERS. These systems must be 
strengthened so that a greater percentage of high risk food products 
and adverse events associated with their consumption can be assessed 
using state-of-the art technology. These systems must be able to 
produce timely and pertinent product, company, and country information 
that directly influence our decision to allow a food product to enter 
the marketplace. FDA's surveillance systems must be closely coordinated 
with other agencies, with foreign governments, and with the anti-
terrorist intelligence systems of the Federal intelligence agencies. 
FDA must work with its partners to develop profiles of possible or 
probable food threats and points of attack. This will permit rapid 
response to suspected vulnerabilities.
    Lastly, its strategy of Containment Through Rapid Response is an 
attempt to develop the processes in place to readily respond to food 
contamination. The quicker the Agency can respond to such a threat to 
the food supply, the greater chance the Agency has to reduce the number 
of injuries, illnesses or death. FDA must have the capacity to quickly 
and accurately identify outbreaks that may be happening or about to 
occur at any point in the food chain, and take prompt action to 
mitigate their effects. Rapid field test methods will be developed to 
identify hazards that may have been released by terrorists. The 
PulseNet System should be enhanced to quickly apply DNA fingerprinting 
over a wider range of biological threats. In the event of an identified 
threat, FDA will deploy disaster response teams who can work with other 
Federal, State, and local agencies to eliminate or contain the hazard 
and reduce public health risks. In addition, FDA will work with HHS and 
other government counterparts to ensure that consumers get update 
information about risk indicators.
    Question. How many new food inspectors will FDA hire with this 
money? How many new inspectors have been hired to date?
    Answer. FDA will increase the number of investigators and 
analytical staff to provide more of a presence at borders, ports, 
international mail facilities and courier hubs, as well as enhance our 
domestic workforce capabilities. The Agency plans to hire a total of 
655 new staff members for its field component. Of these, 635 are 
authorized for food safety activities in the field with 600 for the 
foods program, and 35 for the animal drugs and feeds program. As of 
March 18, 2002, ORA anticipates that when all of the new hires are on 
board, over 400 will either be stationed at border locations, or will 
be working specifically on imports. Regardless of their physical 
location, however, ORA anticipates that all new hires will be trained 
in both import and domestic operations. The hires will be made up of 
import consumer safety officers, import laboratory analysts, and import 
criminal investigators. On the domestic side, the Agency plans to hire 
143 domestic consumer safety officers and 49 domestic laboratory 
analysts.
    Question. When these positions are filled, what percentage of 
imports and domestically produced foods will be inspected by FDA? What 
percentage of these inspections will be conducted by States?
    Answer. Generally, inspection frequencies vary depending on the 
products produced and the nature of the establishment. In some of our 
compliance programs, however, non-high-risk inspection frequencies are 
established by FDA, such as in our Domestic Seafood Program, where the 
frequency is every other year after achieving HACCP compliance. In most 
of our other programs, instead of frequencies, specific Agency 
priorities direct inspection priorities. The priorities may be based on 
a firm's compliance history or coverage of new firms that have not been 
previously inspected, such as in the Domestic Food Safety Program. FDA 
districts would then apply their available level of non-high-risk 
resources to cover non high-risk firms according to their priorities in 
these programs. On average, with available resources, and including 
State inspections, FDA has been inspecting these establishments about 
once every 7 years.
    Question. Does FDA support mandatory recall authority?
    Answer. Current authority contained in 21 CFR parts 7, 107, 806 and 
810 provide the means by which FDA can reasonably ensure that products 
on the market are safe and effective.
    Question. If not, how does FDA deal with instances where companies 
refuse to recall a product or do not provide distribution information?
    Answer. The answer depends on several factors including which FDA 
Center involved, the seriousness of the health hazard involved with the 
product defect, and the FDA regulations pertaining to the particular 
product. FDA has very few instances in which firm's choose not to 
recall a product that FDA considers in violation of the FD&C Act. In 
the vast majority of recall situations, FDA regulated industry conducts 
recalls voluntarily when it learns of a violative product and recalling 
firms usually provide FDA with requested distribution information. 
However, if a firm refuses to recall a violative product, FDA does have 
some options. I would be happy to provide instances where companies 
refuse to recall a product or do not provide distribution information 
for the record.
    [The information follows:]
instances where companies refuse to recall a product or do not provide 
                        distribution information
    FDA does not have the authority to order recalls of foods--except 
for infant formula--cosmetics, dietary supplements, and human and 
veterinary drugs. There are, however, specific areas where FDA does 
have the authority to order a recall, or where the FD&C Act requires a 
company to recall if FDA determines the product to be in violation.
    The Agency has the authority to require a recall under section 412 
of the FD&C Act for infant formula. Section 412 of the FD&C Act 
specifies that when FDA determines that an infant formula presents a 
risk to human health, a manufacturer must recall infant formula 
consistent with recall regulations and guidelines issued by the FDA. 
Thus, any recall by industry of such an infant formula would be a 
requirement of the Act.
    FDA has the authority to order recalls under Section 518 (e) of the 
Act for medical devices when the ``Secretary finds that there is a 
reasonable probability that a device intended for human use would cause 
serious, adverse health consequences or death.'' This requires an 
administrative proceeding which may take several to 10 days or more to 
implement. This authority has rarely been used. The device industry 
usually conducts voluntary recalls when it learns of violative 
conditions or they are brought to its attention by FDA. Additionally, 
21 CFR Part 806.10, Reports of Corrections and Removals, paragraph 
(c)(11) requires all firms conducting removals or corrections of 
products meeting the Class I or Class II recall definition to provide 
``The names, addresses, and telephone numbers of all domestic and 
foreign consignees of the device and dates and number of devices 
distributed to each consignee. Based on 806 requirements, it is rare 
that appropriate distribution for medical device recalls are not 
provided to FDA.
    In the case of human or veterinary drugs, should FDA and a firm 
enter into a Consent Decree of Permanent Injunction based on failure to 
meet Good Manufacturing Practice requirements, the consent decree may 
contain a clause which requires the involved firm to conduct a 
recall(s) if FDA inspection determines that violative products are on 
the market and concludes that a recall is appropriate.
    FDA has authority under the Public Health Service Act (PHS Act) to 
order the recall of certain biological products (42 U.S.C. 262). 
Consequently, if a determination is made that a batch, lot, or other 
quantity of a product licensed under the PHS Act presents an imminent 
or substantial hazard to the public health, the Secretary has the 
authority to issue an order for the immediate recall of such batch, 
lot, or other quantity of such product. The Agency has not had to use 
this authority to date.
    FDA also has the authority to order the recall or destruction of 
banked human tissue such as bone, ligaments, tendons, cartilage, skin, 
fascia, and corneas intended for transplantation that have been 
collected or distributed in violation of regulations. FDA developed 
these regulatory requirements under the legal authority of section 361 
of the PHS Act (42 U.S.C. 264). The rule is in 21 CFR Part 1270.
    For those products for which FDA does not have recall authority, 
FDA may use one of several other options for removing a product from 
the market, including:
  --The Agency may sample and seize the product under court order. 
        (This option is generally not as good as a recall as it is 
        difficult to seize all products that may be in the marketplace 
        and, of course, it doesn't remove products from consumer or 
        user hands.)
  --We may formally request that the firm recall the product(s). This 
        written request from the Associate Commissioner for Regulatory 
        Affairs is usually limited to serious health hazard situations. 
        The request usually contains a statement to the effect that the 
        FDA is prepared to take appropriate regulatory action should 
        the firm refuse the request and that the Agency will issue a 
        press statement alerting the general public about the hazardous 
        product and the firm's refusal to recall. This written request, 
        or verbal notice to the firm that FDA is prepared to issue such 
        a request. usually results in the necessary recall action.
  --We may notify and coordinate activities with State health agencies 
        having jurisdiction over the product in question. On occasion, 
        State agencies are able to embargo violative products and/or 
        require recalls.
  --In addition to these options, FDA may order recalls in selected 
        situations.
    With respect to the refusal to provide distribution records, the 
Agency has less recourse than the options listed for recalls. 
Prescription and OTC drug and medical device distribution records are 
required to be provided to, or made available for copying, to the FDA. 
In addition, for infant formula recalls, manufacturers must provide FDA 
under 21 CFR part 107, copies of recall communications with consignees, 
distributors, retailers, and member of the public. Generally, FDA 
investigators or other FDA district office personnel who interface with 
recalling firms are able to convince them that distribution records are 
necessary to FDA so that we may conduct audit checks at the firm's 
consignees to assess the effectiveness of the recall. If the recalling 
firm refuses to provide records, we can ``issue press'' by working with 
State agencies to see if they have the authority to obtain the records. 
Otherwise, there is little that can be done about such refusals except 
to more closely monitor the firm's recall effort by reviewing its 
records of notification and product returns as well as any 
effectiveness checks that it may have done.

    Question. What can FDA do to ensure that a product is fully 
recovered when recalled?
    Answer. Recalling firms have the responsibility for assuring that 
their recall is effective in that the recalled product is actually 
pulled off the store shelves and properly disposed of. FDA's role is to 
monitor and/or audit the firm's efforts to remove the product from 
channels of commerce and oversee proper disposition of the product. FDA 
accomplishes this monitoring role through audits. Audits are conducted 
by reviewing periodic recall status reports received from the recalling 
firm and/or reviewing documentation of the recall operation and its 
effectiveness during actual visits to the firm's consignees. In 
addition, a manufacturer conducting a mandatory recall in accordance 
with 21 CFR 810 is required to provide periodic reports to FDA on the 
status of the recall, under 21 CFR 810.16.
    Question. What precautions are being taking to ensure the safety of 
our food since September 11?
    Answer. Since September 2001, FDA has engaged in numerous types of 
activities to ensure the safety of the food supply. These activities 
range from enhanced and strategically focused import activities to 
outreach with industry.
    The supplemental funding for food safety has allowed FDA to develop 
a Food Counter Terrorism Plan to achieve the goal of protecting the 
food supply. FDA's will strengthen current import and domestic 
surveillance systems so that a greater percentage of high-risk food 
products and adverse events associated with their consumption can be 
assessed using state-of-the art technology. Rapid field test methods 
will be developed to identify hazards that may have been released by 
terrorists. The PulseNet System will be enhanced to quickly apply DNA 
fingerprinting over a wider range of biological threats. In the event 
of an identified threat, FDA will deploy disaster response teams who 
can work with other Federal, State, and local agencies to eliminate or 
contain the hazard and reduce public health risks. Consumers will be 
informed about risks in the event that an incident occurs.
    Generally, FDA's primary goal in import activities is, to the 
extent possible, to prevent and deter products from entering into the 
U.S. that are adulterated or otherwise unsafe by reason of tampering, 
misbranding, substitution, counterfeiting, or contraband. FDA will hire 
and deploy 633 field personnel to include investigators for border 
locations where FDA receives significant amounts of regulatory 
products. To achieve this goal, FDA will seek to increase the 
percentage of imported goods that are physically examined or sampled 
and increase coordination with other Federal agencies including Customs 
and the U.S. Department of Agriculture. FDA will focus this 
coordination effort in the areas of enforcement, information and 
surveillance of imported products and importers. FDA also will seek to 
tighten import review and document management procedures, develop more 
rigorous filer evaluation procedures, increase physical port presence 
and surveillance, and apply new investigation, inspection and 
analytical techniques and technologies as possible.
    FDA continues to discuss security issues and the viability of 
security devices, including anti-counterfeiting and anti-tampering 
devices and technologies, with industry. FDA has also begun exploring 
the value of track and trace technologies that industry might be able 
to incorporate to increase transparency of the international 
distribution chain. We continually encourage our industry partners to 
work to combat potential threats by being observant, vigilant, and wise 
in their negotiations for the purchase of goods and their receipt of 
goods.
    FDA has decided to expand an already existing contract with a 
university for assistance in establishing, facilitating and documenting 
several joint agency industry-working groups. These working groups 
would be tasked with evaluating vulnerabilities in a particular 
industry, that is foods, drugs or biologic products from the point of 
manufacturing or processing, through international commerce and the 
border process, into domestic distribution and down to the retail and 
consumer level. The working groups would then consider technology 
solutions for addressing those vulnerabilities. The vulnerabilities may 
be identified as product counterfeiting, product security, product 
tampering, weak distribution or supply chain transparency or control, 
or container integrity. This will assist FDA's fight against product 
counterfeiting or tampering through partnering with representatives 
from multiple industry sectors, other Federal agencies, such as 
Customs, the U.S. Postal Service, USDA, the Department of 
Transportation, and State and foreign governments.
    FDA also meets often with regulated firms and their trade 
organizations in formal and informal settings. During such meetings, 
FDA always stresses the need for security in all phases of company 
operations. OCI has established relationships and open lines of 
communications with security directors at manufacturing, 
transportation, wholesale, and retail firms in several industries.
    FDA has conducted a number of training sessions for importers and 
brokers. For example, this past January the Northeast Region 
coordinated with the American Association of Exporters and Importers in 
producing a seminar in Jamaica, N.Y., attended by over 160 importers 
and filers. The main topic of this seminar was the security of imported 
foods and pharmaceuticals. The draft guidance on food security issued 
on January 9, 2002, by CFSAN to the domestic and imported foods 
industry was a point of discussion. FDA expects to conduct similar 
seminars in other FDA regions throughout this year. FDA districts have 
begun to work with various segments of both the import and domestic 
industries on the issue of security. Whenever FDA interfaces with 
industry on product security matters, we always urge them to notify 
their local district offices if they identify a suspect shipment.
    In addition to general Agency/Industry interactions on security 
issues, FDA's Center for Food Safety and Applied Nutrition, CFSAN, has 
been actively engaged with the food industry through more than 80 trade 
associations and many individual firms. These meetings have focused on 
a systematic approach to assessing risk and what preventive measures 
may be implemented from a cost/benefit ratio. The food industry, in 
turn, has formed an Alliance for Food Security convening on a weekly 
basis to share information and collaborate on effective preventive 
measures. The National Food Processors Association hosts the Alliance.
    Also, FDA's Center for Veterinary Medicine along with the Animal 
Health Institute and the National Renderers Association participated 
with the American Feed Industry Association, AFIA, to produce a guide 
intended to raise the level of awareness of biosecurity issues facing 
animal agriculture. Representatives from those organizations served on 
a special biosecurity task force and made significant contributions to 
the document's development. The guide, published in November 2001, on 
the AFIA website offers a concise set of suggestions covering several 
different areas of industry operations. These include, among other 
things, facility security, ingredient integrity, product integrity, 
distribution, product recall, housekeeping, and personnel.
    Question. Is our current food safety system able to adequately 
protect consumers? What steps are needed to create a food safety system 
that will provide the best protection to consumers?
    Answer. The American food supply is among the safest in the world. 
Ensuring the safety of the food supply has become increasingly 
difficult in the United States. New challenges such as increased 
variety of foods grown or produced in distant places, more meals eaten 
outside the home, new and more deadly pathogens, and an increasingly 
vulnerable population have all contributed to the 76 million foodborne 
illnesses each year, resulting in 325,000 hospitalizations and 5,000 
deaths. FDA's food safety efforts concentrate on what can be done to 
better ensure that consumers have access to a safe and wholesome food 
supply and on reducing foodborne illness to the greatest extent 
possible.
    The foundation of any successful food safety system must be built 
on strong science. FDA must keep pace by learning more about foodborne 
diseases and their causes, and by developing new scientific methods for 
detecting and preventing foodborne hazards. A strong science base is a 
prerequisite to meeting these food safety challenges and to maintaining 
our leadership role both nationally and in the new global economy.
    To gain a better understanding of foodborne disease, we must be 
able to monitor not only human illness that has occurred but also the 
human food and animal feed supply to identify new and emerging risks to 
public health. New types of foods, evolving foodborne hazards, changing 
eating habits, new production technologies, and increased trade between 
all countries make this a challenging task.
    The most significant reduction in foodborne illness will be 
achieved through the development and implementation of successful 
prevention programs. FDA has made important progress on establishing 
prevention standards for some product categories, including seafood and 
juice. However, additional standards are needed to prevent 
contamination of all human foods and animal feeds over the farm-to-
table continuum whether such foods are produced domestically or abroad. 
As FDA develops new prevention programs, vigorous education and 
training are needed to make them work. Providing information on safe 
food handling practices across the farm-to-table continuum lies at the 
core of an effective food safety system.
    A food safety system that will provide the best protection to 
consumers must also inspect and monitor the food industry to ensure 
application of appropriate preventative controls and must ensure that 
imported foods meet the same level of consumer protection as domestic 
foods. The safety of imported foods is ensured through inspections and 
sampling at the border. Such inspections need to be complemented by an 
enforcement program when needed.
    Finally, a food safety system needs to have tools for measuring 
progress in reducing foodborne illness so that strategies can be 
modified, as needed.
    With all of these steps in place, the result will be a stronger and 
more credible food safety system that minimizes foodborne illness and 
injury and maximizes consumer confidence.
    Question. Does FDA support efforts to modernize food safety 
statutes?
    Answer. FDA welcomes efforts to modernize food safety statutes and 
encourages dialogue on suggested modifications to them. For example, 
the Administration recently submitted a bill addressing bioterrorism 
involving foods that would provide FDA with significant new 
authorities.
    Question. What should be done to create a single voice on food 
safety in the U.S., as recommended by the National Academy of Sciences?
    Answer. The current food safety system is having real and 
measurable positive effects. Through a surveillance system called 
FoodNet, CDC has documented reductions in foodborne illness for a 
number of important food pathogens.
    The current system would benefit from being updated by regulatory 
fixes and full funding of the President's Budget. Statutes are in need 
of being modernized and resource shortfalls need to be addressed. The 
statutes do not adequately recognize the need to assess risks 
associated with foods, to put into place controls to prevent food 
contamination, to allocate resources based on risk, and to measure 
results. In addition, GAO issued a report in February 2001 that 
identified the significant disparity between food safety resources and 
FDA's food safety responsibilities.
                          dietary supplements
    Question. What is the current FDA time line for release of Good 
Manufacturing Practices (GMPs) for dietary supplements?
    Answer. FDA's goal is to publish the proposed Current Good 
Manufacturing Practices, CGMPs, for dietary supplements by the end of 
fiscal year 2002.
    Question. Will these GMPs incorporate elements from existing food 
and drug GMP regulations or will they be based on food GMPs alone? What 
is the rationale for this decision?
    Answer. The statute lays out the framework for dietary supplement 
Current Good Manufacturing Practices, CGMPs, and we are working within 
that framework. The proposed CGMP regulation for dietary supplements 
should provide the proper balance of regulation for the unique 
properties of dietary ingredients and dietary supplements, including 
vitamins, minerals, and botanicals, and should ensure that products, 
whether manufactured as tablets, capsules, powders or liquids, have the 
identity, purity, quality, strength, and composition that the 
manufacturer intends.
    Question. Would you agree that if a claim is made for a supplement 
that it acts like, for instance, an anti-depressant, it would be more 
appropriate to regulate it similar to other pharmaceutical products 
that make such claims?
    Answer. As discussed in the preamble to FDA's January 6, 2000 final 
rule on structure or function claims, the Dietary Supplement Health and 
Education Act of 1994, DSHEA, did not alter the legal treatment of 
dietary supplement claims related to disease. Section 403(r)(6) of the 
Federal Food, Drug, and Cosmetic Act added by DSHEA, specifically 
provides that statements permitted to be made for dietary supplements 
under that section may not claim to diagnose, mitigate, treat, cure, or 
prevent a specific disease or class of diseases. Clearly, when a 
product is claimed to be a member of a category of drugs intended to 
treat a disease, the product is implicitly being represented to treat 
the disease. Accordingly, when a dietary supplement is claimed to be a 
member of a class of drugs intended to treat disease or a substitute 
for such a drug, the dietary supplement meets the definition of a drug 
and is subject to regulation as a drug.
    Moreover, as also described in the January 6, 2000 preamble, there 
are sound public health reasons that we should insist that such 
products be regulated as drugs. While FDA believes that dietary 
supplements have potential benefits for consumers, those labeled with 
unproven disease claims, meaning those that have not met the 
requirements of health claim authorization, new drug approval, or an 
over-the-counter drug monograph, can pose serious risks. Such claims 
may encourage consumers to self-treat for serious diseases without 
benefit of medical diagnosis and may cause consumers to substitute 
potentially ineffective products for proven ones, thus foregoing or 
delaying effective treatment. Consumers may rely on disease prevention 
claims and feel sufficiently protected from developing serious diseases 
that they delay or forego regular screenings and thereby forfeit the 
opportunity for early medical treatment that may be critical to 
survival. And finally, using dietary supplements to treat disease may 
increase the risk of adverse reactions due to the interaction of the 
dietary supplement with other compounds a consumer is taking for that 
disease or for other conditions.
    Question. Without GMPs, how does a consumer know that the 
supplements they are taking are uncontaminated? (Attached is a recent 
report on contaminated supplements, also recent press on Olympic 
athletes and supposed supplement contamination with hormones leading to 
disqualification.)
    Answer. Dietary Supplement Current Good Manufacturing Practice, 
CGMP, are a useful tool for both the industry and FDA. Such would 
provide a road map for the industry to help assure the purity and 
consistency of dietary supplement products. CGMPs are also, an 
important regulatory tool for consumer protection.
    Question. Given that our Olympic athletes have exposure to the best 
medical care, health and nutrition information, and yet they have been 
exposed to potentially harmful supplements unknowingly, how is the 
average US citizen to know what is actually in the supplements they are 
using?
    Answer. The law requires that manufacturers correctly label their 
products' contents. The Dietary Supplement Current Good Manufacturing 
Practices proposed rule we are developing would propose manufacturing 
practices that would ensure consistency between what is on the label 
and what is in the product.
    Question. We have a system for reporting adverse events caused by 
other FDA regulated products such as medical devices, drugs or 
biologics. Last year, additional funding was appropriated to improve 
the system of adverse event reporting for dietary supplements (as 
current estimates suggest that FDA is notified of fewer than 1 percent 
of supplement-related adverse events). What is the current status of 
that system? How does FDA plan to make consumers and healthcare 
professionals more aware of/more likely to use the AER system?
    Answer. The first phase of FDA's Centralized Adverse Event 
Reporting System, CAERS, is about one-half completed. CAERS is 
currently undergoing user acceptance testing, training, and some 
technological improvements.
    In September 2001, FDA implemented a cooperative agreement with the 
National Center for Natural Products Research, NCNPR. This agreement 
between FDA and NCNPR created a partnership that allows for more 
efficient use of resources to identify and analyze specific components 
in botanical dietary ingredients, thereby enhancing overall public 
health by ensuring that dietary supplements are safe and their labeling 
is not misleading.
    The NCNPR cooperative agreement for fiscal year 2001 was awarded on 
September 28, 2001. Since the total Project Period is 5 years, the 
additional 4 years of funding up to $1 million per year will depend 
upon acceptable performance and the availability of future fiscal year 
funding. In accordance with the procedures for supplementing 
cooperative agreements, FDA must announce its intent, through a Request 
for Application, RFA, to increase funding up to an additional $1 
million to the NCNPR cooperative agreement in the Federal Register. 
Once announced, NCNPR must submit a grant application to demonstrate 
how it will meet the objectives of the RFA. The application will go 
through a dual review process and FDA anticipates completing this 
process and awarding the money to NCNPR in September 2002.
    To date, the awarded monies from fiscal year 2001 have been used to 
collect a number of authenticated botanical species for chemical 
profiling and characterization. The species include ephedrine alkaloid-
containing species, for example ephedra, ma huang, aristolochic acid-
containing botanicals, comfrey, germander, and blue and black cohosh. 
The NCNPR scientists are collaborating with FDA scientists to ensure 
usefulness for evaluating potential safety issues and to coordinate 
related FDA and NCNPR research activities. In this regard, FDA and 
NCNPR scientists have jointly presented results of their scientific 
collaborations at a professional meeting and are currently preparing 
co-authored scientific manuscripts for publication in peer-reviewed 
journals. The NCNPR is also completing plans for a scientific workshop 
on authenticating botanical ingredients for use in dietary supplements. 
The workshop will be held in August 2002, and will provide a basis for 
scientists from academia, government and industry to discuss the 
scientific issues involved in the authentication of botanical 
ingredients. The issues discussed in this workshop will have broad 
relevance for research, manufacturing and regulatory applications.
    Question. Would the agency support a requirement that manufacturers 
of dietary supplements report all adverse events known by the 
manufacturer to the agency?
    Answer. In April 2001, the Office of the Inspector General of the 
Department of Health and Human Services issued a comprehensive report 
on FDA's Adverse Event Reporting System for dietary supplements. The 
report included a recommendation that such reporting be mandatory for 
dietary supplement manufacturers. As stated in FDA's response to that 
report, the DSHEA is silent on the subject of Adverse Event Reporting, 
and FDA is evaluating whether or not such reporting could be required 
under current law.
    Question. How does FDA plan to make consumers and healthcare 
professionals more aware of the potential risks of dietary supplements 
(information contained within its AER system)?
    Answer. When fully implemented, CAERS will provide information to 
FDA on emerging potential hazards associated with dietary supplements, 
food and food additives, and cosmetics. When the review of adverse 
event reports identifies an association with a product, FDA will inform 
the public using traditional tools including consumer advisories, press 
releases, talk papers, MedWatch Safety Alerts, and letters to health 
care professionals.
    Question. FDA has purchased adverse event information from the 
association of poison control centers in the past. What are FDA's plans 
to purchase this information in the near future? How much money has 
been requested in the FDA budget for this purpose?
    Answer. In the past, FDA has purchased adverse event information 
from the Association of Poison Control Centers for dietary supplements 
that contain Kava, ephedrine alkaloids and gamma butyrolactone, or GBL. 
FDA will continue to purchase such data on an as needed basis. No 
additional funds for this particular purpose have been requested in 
FDA's fiscal year 2003 budget.
    Question. What other authorities or resources does FDA need to 
ensure the safety of dietary supplements?
    Answer. In January 2000, FDA published an overall Dietary 
Supplement Strategic Plan. This plan incorporates substantial 
stakeholder input and provides a road map to fully implement DSHEA. It 
is a science-based regulatory program that will provide assurances for 
safety, composition, and labeling of dietary supplements. The Plan 
addresses activities that focus on safety, labeling, boundary issues, 
enforcement, developing a science base, and outreach. In response to a 
request from Congress, the Agency is developing a report to Congress on 
the estimated cost to implement the Strategic Plan.
    In the case of the current Administration, should there be 
legislative proposals that are relevant to ensuring the safety of 
dietary supplements or related topics, they would be submitted through 
the appropriate and prescribed legislative channels.
    Question. Other countries have seen instances of harm from dietary 
supplements such as Kava. Under the current law, is the FDA able to 
take action once another country has determined a supplement is 
dangerous?
    Answer. I do not believe that action by another country will 
generally be enough to provide the sole basis for action by FDA. 
Clearly, when another country takes action, we should be concerned and 
carefully examine the reasons that country took the actions that it 
did. But, we need to look at the underlying scientific and medical 
evidence for the other country's action to determine what action, if 
any, is appropriate under our regulatory framework.
    Question. Do you think that we should always have to wait until 
Americans are harmed before the FDA acts?
    Answer. FDA uses data from many sources in order to address issues 
related to dietary supplement safety, including published literature, 
human studies--where available--conducted in vitro and in a variety of 
animal species, as well as information gleaned from adverse event 
reports. The Dietary Supplement Health and Education Act, DSHEA gives 
FDA authority to take action against dietary supplements that are 
adulterated because, for example, they present a significant or 
unreasonable risk of illness or injury. FDA will continue to seek, to 
the extent that resources allow, the best and most appropriate 
approaches to detecting and establishing significant or unreasonable 
risk of dietary supplement products.
    Question. How many adverse events relating to ephedra use has the 
FDA received?
    Answer. Between 1993 and March 2002, FDA has received approximately 
1700 complaints of illnesses and injuries reportedly associated with 
the use of ephedrine alkaloid-containing dietary supplements.
    Question. How many more American's need to be harmed before the 
agency moves to remove ephedra from the market?
    Answer. The number of adverse reports received associated with the 
use of ephedra is not the determining factor, but rather the overall 
quality of available clinical data and other information addressing the 
safety of the product.
    Question. Why has FDA not yet taken action alerting consumers to 
the dangers of ephedra- or Kava-containing supplements?
    Answer. On March 25, 2002, FDA issued an advisory informing 
consumers of the potential risk of severe liver injury associated with 
the use of kava-containing dietary supplements.
    With respect to ephedra-containing dietary supplements, over the 
past 7 years, FDA has issued several press statements related to the 
potential adverse health effects associated with the use of these 
products. For example, in September 1994, FDA issued a medical bulletin 
concerning adverse events associated with the use of ephedra and other 
botanical dietary supplements. In February 1995, FDA warned consumers 
against the use of a specific ephedrine alkaloid containing dietary 
supplement, Nature's Nutrition Formula One. In April 1996, FDA issued a 
statement warning consumers about the hazards associated with street 
drug alternatives containing ephedrine alkaloids. In March 2000, FDA 
announced in a talk paper the availability of documents related to 
dietary supplements containing ephedrine alkaloids, including 
information concerning adverse event reports associated with the use of 
these products.
    In conjunction with the Agency's ongoing effort to assess the 
safety of these products, the United States Public Health Service 
sponsored a public meeting designed to seek information on the safety 
of dietary supplements containing ephedrine alkaloids in August 2000. 
The meeting did not result in the resolution of the safety questions 
surrounding the use of these products. Concerning future action, the 
Agency has received a citizen's petition which requests, among other 
things, that FDA issue an advisory to consumers advising them to stop 
the use of ephedrine alkaloid containing dietary supplements due to the 
established risk of injury. The petition is presently under review.
    Question. Does FDA have plans to require St. John's Wort-containing 
supplements to include warnings on the label regarding potential drug 
interactions with St. Johns' Wort?
    Answer. The use of warning statements on the label of St. John's 
Wort--containing supplements is the subject of a petition currently 
before the FDA. We are evaluating the information submitted in the 
petition, other relevant scientific information, and current statutory 
provisions, to determine what actions are warranted to ensure that St. 
John's Wort as well as other dietary supplements are labeled in a 
manner that adequately informs the consumer about the safe use of the 
product.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                        office of generic drugs
    Question. I would like to address a few issues related to the 
Generic Drug Program at the Office of Generic Drugs. Many South 
Dakotans and others across the country concerned about access to 
affordable and safe prescription drugs, and FDA's Office of Generic 
Drugs (OGD) is charged with the responsibility of approving and 
marketing new generic drugs as patents on brand-name drugs expire. 
However, I believe more should be done to make health care providers, 
managed care organizations, health insurers and consumer organizations 
better informed and educated on the approval of generic drugs as 
therapeutic equivalents to brand name pharmaceuticals. Lack of 
knowledge and awareness about generic drugs reduces the likelihood that 
these groups will recommend or use generic drugs when they are 
available as a substitute to brand pharmaceutical products. In fact, 
studies have indicated that a 1 percent increase in the use of generic 
drugs will result in over $1 billion in savings to consumers and health 
care providers. Last year, I inquired about the Office of Generic Drugs 
implementing a consumer education program designed to increase the 
awareness and safety of FDA approved generic drugs.
    The FDA's fiscal year 2002 budget included funding for an education 
campaign. Therefore, can you update me on the status of that education 
campaign, and furthermore, if provided with additional funding, how 
would that campaign be expanded?
    Answer. The work for fiscal year 2002 is building upon plans 
established in fiscal year 2001 to develop a standard message for the 
public. Plans are in motion for physician focus groups to determine 
attitudes and knowledge gaps about generic drug products in that 
community. Based upon that information, continuing medical education 
programs will be developed. Pharmacy continuing education is also 
planned in coordination with the Association of the State Boards of 
Pharmacy.
    Standard messages for the public will appear in such media as print 
ads, radio public service announcements and convention exhibit booths. 
The material will also be distributed nation wide. Some of the 
professional education will involve staff travel to professional 
organizational meetings to present information on the generic drug 
approval process that assures the quality of the drug products. Experts 
in the field will also be contracted to provide educational information 
on the topics.
                     direct-to-consumer advertising
    Question. In relation to the FDA's enforcement and review of 
direct-to-consumer (DTC) advertising, I have become increasingly 
concerned over the increase of promotional consumer advertising and 
healthcare professional promotion. I understand that FDA's Division of 
Drug Marketing, Advertising and Communications is currently going 
through a reorganization and hiring of additional DTC reviewers and 
regulatory counsel.
    In this effort, I would encourage the FDA to continue it's 
vigilance in closely monitoring DTC advertising and, at this time, 
would welcome any further information as to what the agency's on-going 
review plan entails?
    Answer. In 2001, the FDA reviewed about 130 proposed direct-to-
consumer, DTC, broadcast advertisements and about 250 DTC broadcast 
advertisements that aired on television. FDA receives over 32,000 
promotional pieces annually, of which approximately 5,000 are DTC 
materials, including, magazine advertisements, patient brochures, and 
mailers.
    Since 1997, FDA's Division of Drug Marketing, Advertising, and 
Communications, DDMAC has been in the process of hiring staff to fill 
additional positions for a total of 39 staff members. Of the 39 staff 
members, 20 will be primary reviewers and 5 will be secondary 
reviewers. These reviewers are responsible for both professional and 
DTC promotional material reviews. DDMAC applies a team approach to the 
review of promotional material. A team comprised of the primary 
reviewer, consumer promotional analyst, social scientists, and branch 
chief completes the review of DTC broadcast advertisements. The team 
ensures that the advertisements are accurate, balanced, and presented 
in language that is easily understood by consumers. The most common 
objections that DDMAC raises in DTC broadcast advertisements involve 
inadequate communication of risk information, overstatement of 
effectiveness, and implication of use for patients beyond the indicated 
patient population.
    In issuing both the draft and the final broadcast advertisement 
guidance, FDA stated its intent to assess the impact of the guidance, 
and of DTC promotion in general on the public health. As a part of this 
assessment, FDA is currently conducting a repeat survey of patients, as 
well as a survey of physicians. FDA intends to carefully examine all 
available data in determining whether additional measures should be 
taken to help ensure that the public health is protected.
    In April 2001, FDA issued draft guidance on the required risk 
disclosure for consumer-directed print advertisements. The guidance is 
intended to improve the usefulness of risk disclosure associated with 
DTC print advertisements. The guidance indicates that FDA does not 
intend to object to the use of certain FDA-approved patient labeling, 
written to be understandable to patients, as a ``brief summary'' for 
DTC print advertisements. It is a focused guidance that does not 
address all aspects of DTC advertising. FDA is also evaluating the 
need, if any, to revise current regulations in light of DTC 
advertising.
                  fda review times for medical devices
    Question. I remain concerned with the current premarket review 
times for medical devices at the Center for Devices and Radiological 
Health (CDRH). It is my understanding that the average review time for 
medical device premarket reviews is currently 411 days, wherein the 
statutory review deadline is 180 days. It is my hope that FDA will 
address its mission of ensuring timely patient access to safe and 
effective medical technology.
    However, I would like to find out why the current medical device 
review times are over 400 days, and if additional resources are needed 
to address this deficiency?
    Answer. At this time, FDA is unable to provide the Committee with a 
thorough and comprehensive review of resource estimates needed to meet 
the statutory deadlines for all categories of medical device 
applications. Device technology advances and global impact will 
continue to effect review performance. In addition, submissions are 
becoming increasingly more complex, which also contributes to review 
performance. FDA received an increase of $1.5 million and 7 FTE in 
fiscal year 2002, which will help us to meet some of our regulatory 
responsibilities with respect to this program but not all. A recent 
Inspector General report stated that FDA currently inspects 
approximately 3.5 percent of the clinical investigators that are 
conducting studies in a given year.
                            mad cow disease
    Question. Last year, I met with the Director of FDA's Center for 
Veterinary Medicine to discuss the efficacy of a 1997 rule that U.S. 
rendering plants and feed mills end the mixing of animal protein in 
manufactured ruminant feed, and that feed mills apply cautionary labels 
on feed products with ingredients that may contain ``non-approved'' 
mammalian protein. This ban is critical to the ongoing success this 
nation has had in preventing the outbreak of bovine spongiform 
encephalopathy (BSE or mad cow disease).
    Answer. As of March 11, 2002, 94 percent of all feed mills and 
renderers that handle prohibited material were determined to be in 
compliance with the Ruminant Feed Ban rule. Many feed mills and 
renderers have ceased handling prohibited material as a direct result 
of the Ruminant Feed Ban rule.
    The Agency is in the process of inspecting all renderers and feed 
mills handling prohibited material on an annual basis, regardless of 
previous inspectional findings. Further, the Agency is closely 
examining the non-compliant firms, noted above. Enforcement measures 
are being considered for the renderers and feed mills found to have 
significant violations of the BSE regulations. These enforcement 
measures include seizure, injunction or prosecution. Additionally, the 
Agency is working closely with State feed control officials to develop 
additional approaches to obtain compliance with the ruminant feed ban.
                                 ______
                                 

              Questions Submitted by Senator Thad Cochran

                           import inspections
    Question. As I recall, when FDA testified before this Committee 
last year, less than 1 percent of all entries offered for import into 
the United States were being examined.
    What level of physical inspection of imports do you expect to 
achieve in fiscal year 2002 with the supplemental funds FDA received to 
enhance its import inspection capabilities?
    Answer. FDA classifies import coverage as a combination of import 
field examinations and import laboratory analyses, which are both 
physical evaluations of the product offered for entry. Import coverage 
is the sum of these two activities as a percent of the number of line 
entries. Import field exams are physical examinations performed at the 
entry point. In fiscal year 2001, FDA performed about 12,000 food 
import field exams and analyzed nearly 15,000 import samples. So for 
fiscal year 2001, the Agency conducted physical examinations on 0.6 
percent of the foods offered for import into this country of the total 
line entries of 4.6 million. In fiscal year 2002, we will begin to see 
real gains in our import coverage because of the increased funding. The 
counter-terrorism funding will permit the field to double the number of 
import field examinations and increase the number of samples analyzed 
by nearly 50 percent in fiscal year 2002. Even with the number of food 
import line entries increasing to 5.1 million, an increase of 10 
percent, we will increase the coverage to 0.9 percent. In fiscal year 
2003, when the new investigators are more fully trained and the number 
of food imports is expected to increase to 5.4 million line entries, 
the number of import field exams will increase to 48,000. Import 
coverage will then increase to approximately 1.3 percent of the total 
food entries.
    Question. What do you consider to be the optimal level, in terms of 
the percentage of imports that should be physically examined to 
maintain a proper level of deterrence and surveillance? What additional 
funding would be needed in each future fiscal year to reach this level?
    Answer. FDA is thankful for the additional funding we received for 
the inspection of domestic firms and for inspections of imported foods. 
FDA did provide some preliminary information last year on funding 
needed in both areas. However, the Agency has not conducted the 
analysis necessary to develop long-range estimates for resource 
increases of this magnitude and FTE needs in these areas. Additionally, 
until such time as the Agency has realized the full potential of the 
funding and personnel received with fiscal year 2002 for counter 
terrorism we will be struggling to carry out such an analysis. Also, 
the question suggests what is an optimal level of inspections in these 
two areas. Due to constantly changing environments of operation, for 
example, counter-terrorism and BSE, our domestic inspection and import 
strategy cannot be defined in terms of a percentage of coverage through 
inspections, physical examinations and sample analyses. It needs to be 
a flexible blend of the use of people, technology, information and 
partnerships to protect Americans from unsafe imported products.
    The long term solution to a higher level of confidence in the 
security and safety of food products lies in information technology 
that will merge information on products, producers and intelligence on 
anticipated risks to target the products for physical and laboratory 
examination. It relies on data integrity activities that reduce the 
opportunity for products to be incorrectly identified at ports. It 
relies on cooperation from producers so that FDA can identify sources 
that are unlikely to need physical testing. Even with such targeting, 
improvements are limited by the available methodologies for assessing 
threat agents and our ability to predict which tests ought to be used.
    The relentless growth in the volume of domestic as well as imported 
food products, which are increasingly in ready for consumer sale 
packaging, means that FDA is unlikely to have budget increases to keep 
pace. Food imports are now growing at 10 percent per year. 
Historically, FDA import resource budgets have not kept pace. FDA needs 
to use all the potential tools available to improve confidence in food 
security and safety.
    In short, while we are ramping up our food inspections, we need to 
inspect smarter, not just more. That is why FDA is making significant 
investments in technology and information resources. We are using funds 
to work to further improve targeting and using force multipliers such 
as IT.
                     application review performance
    Question. In which product areas do there continue to be gaps in 
application review performance versus statutory requirements? What is 
FDA's plan for closing these gaps?
    Answer. I would be happy to provide statutory requirement 
information for the record. I would like to point out, however, that 
the most current data is taken from our fiscal year 2001 Performance 
Report to Congress. It reflects actions as of September 30, 2001. At 
that time, action was still pending upon most of the applications 
submitted in fiscal year 2001. More meaningful data on the fiscal year 
2001 cohort of applications will be available next year.
    [The information follows:] 
    
    
                            medical devices
    Question. I understand that 10 percent of all devices requiring 
510(k) clearance are actually reviewed by the Center for Biologics 
Evaluation and Research (CBER), and a significant number of devices 
that are designated as combination products require CBER to consult 
back to the Center for Devices and Radiological Health (CDRH). I 
further understand that devices that require reviews or consults by 
CBER are often subject to substantial delays. What can be done to 
reduce the delays encountered by devices that require a CBER review or 
consult?
    Answer. It is difficult to compare review times for CDRH, and CBER 
because of the complexity of the devices reviewed in CBER. 
Approximately half of the 510(k)s submitted to CBER contain clinical 
data whereas approximately 8 percent of the CDRH 510(k)s include such 
data. In addition, in discussions with representatives of the device 
industry, the methods for calculations of our review times, backlog, 
and cycles last year were called into question. We are committed to 
work with industry to determine the methods of analysis to parallel 
their methods and to ensure that CBER's device review performance 
statistics are developed in the same manner as CDRH's. We have taken 
some positive steps to address this, but have not formalized those 
steps in standard operating procedures. It should be noted that the 
blood screening test kits are regulated as licensed biologics and these 
follow the timelines and managed review standards that we use for all 
licensed biologics. We meet these timelines.
    Blood safety and availability are considered to be one of the 
highest priorities of FDA and the Department of Health and Human 
Services, DHHS. CBER's approach to regulation of blood encompasses 
related tests because of the interrelation of testing and blood safety. 
Performance of these tests is part of product manufacturing. CBER's 
jurisdiction over in vitro diagnostic devices used to screen blood 
donors is intended to promote a consistent and efficient overall 
approach to blood regulation since testing is an integral part of blood 
safety. The quality and safety of the blood product cannot be 
determined independent of the performance characteristics of the tests 
and the characteristics of screening tests suitable for use in the 
blood bank setting may differ substantially from medical diagnostics in 
general. For example, donor-screening tests for AIDS and hepatitis must 
maintain sensitivity and specificity higher than in a diagnostic 
setting since in a donor setting, test errors cannot be mitigated by 
medical judgments. Also, blood-related screening tests must be designed 
for automation in handling, high throughput and non-subjective readouts 
compatible with the level of technician training that exists in blood 
establishments.
    CBER employs the licensing authorities of the Public Health Service 
Act, the PHS Act, to approve recommended blood screening tests used to 
ensure blood safety. Licensing of blood donor screening tests antedates 
the Device Amendments of 1976. Application of the licensing provisions 
of the PHS Act provides FDA with the ability to ensure the safest 
possible blood products through requirements for manufacturing of the 
blood screening tests under stringent current good manufacturing 
practices, or CGMP's; controlled clinical studies to validate 
performance of the tests; and lot-by-lot release to assure potency of 
manufactured kit lots.
    Question. The report titled Science at Work in CDRH: A Report on 
the Role of Science in the Regulatory Process expresses concern 
regarding whether CDRH has appropriate in-house expertise to assess the 
technologies that will come before the agency in the form of future, 
breakthrough medical device products. What options are being considered 
that will help the Center for Devices and Radiological Health (CDRH) 
access the necessary expertise to review these future breakthrough 
products?
    Answer. CDRH agrees with the Science Board's recommendation that we 
need to enhance our ability to review the breakthrough technology 
devices. We will employ various strategies including leveraging the 
available expertise from other Centers within FDA, other agencies, 
panel members, and outside experts; utilizing outside expertise via 
contracts and consultants; and hiring additional personnel with 
specialized experience.
                 prescription drug user fee act (pdufa)
    Question. The user fee program for prescription drug review (PDUFA) 
must be reauthorized this year. What are the agency's primary concerns 
in negotiating the next phase of PDUFA?
    Answer. We have three major concerns which are to assure the 
continuation of resources for the program in fiscal year 2003 and 
beyond without interruption; assure that the level of resources 
provided from fees must be substantially increased if the Agency is to 
be able to continue to meet the challenging goals agreed to in PDUFA 
II, and, to include the risk management of new drugs within the set of 
activities that are supported by user fees under PDUFA III. We believe 
that the proposal that the Administration has sent to Congress 
satisfies all of these concerns.
    Question. Dr. Crawford, you indicate in your written statement that 
one of the problems with the second reauthorization of the Prescription 
Drug User Fee Act (PDUFA II) has been that FDA collected significantly 
less in fees than projected due to a reduced number of new drug 
applications and an increased number of submissions whose fees were 
waived. What is being done to correct this problem in the next 
reauthorization bill, i.e., to make sure that the resources are 
adequate for FDA to achieve the goals it commits to?
    Answer. Two things have been included in the Administration's 
proposal to prevent the kind of resource variability we have 
experienced in PDUFA II. First, instead of setting the fees in statute, 
and having all of the revenue received vary up or down with application 
fee receipts for each year, the Administration's proposal sets revenue 
levels in the statute and gives FDA the ability to set fees each year 
to achieve these revenue levels. This will result in a much more 
predictable revenue stream from year to year. Second, a new workload 
adjuster has been incorporated into the Administration's proposal. This 
new workload adjuster is much broader than the one used in PDUFA II, 
and is more representative of FDA's total review workload. We believe 
that, if enacted, these two major improvements will provide much more 
stability and predictability in our revenues for the next 5 years.
    Question. What would be the impact on FDA of not reauthorizing 
PDUFA by the beginning of fiscal year 2003? At what point this year 
must this reauthorization be signed into law to avoid preparations for 
a staffing reduction at the beginning of fiscal year 2003?
    Answer. FDA currently has about 2,400 staff-years devoted to the 
drug review process, and half of the funds to support them come from 
Fees. FDA will have virtually no carryover PDUFA funds available to pay 
our employees when the fiscal year ends on September 30, 2002. To avoid 
the possibility of staff reductions, we want to ensure a continuation 
of the program and work closely with Congress to attain PDUFA 
reauthorization before the end of this fiscal year.
                     patient safety/medical errors
    Question. Dr. Crawford, in the written statement you have 
submitted, you indicate that FDA has awarded several contracts to 
enable FDA to access commercial data bases on the actual use of 
marketed prescription drugs in adults and children. Would you please 
explain how this will help FDA determine the public health significance 
of reports received through its Adverse Event Reporting System (AERS)?
    Answer. Passive adverse event monitoring systems--like the current 
Adverse Event Report System or AERS and MedWatch system--suffer from 
problems of underreporting and the inability to determine the number of 
adverse events in the context of actual use of a drug. In other words, 
AERS reports provide the numerator in a ratio of number of adverse 
events per number of people exposed to the drug. To supplement passive 
surveillance, other systems must be used to provide the denominator for 
the ratio--that is, the number of people actually using the drug. Some 
of the other systems we have connected with, or are working to connect 
with, include managed care system databases--wherein, both the number 
of adverse events and the use are reported in the same system, third 
party payer claims data systems, and population-based 
pharmacoepidemiologic databases. By having information available for 
both the number of adverse events and the actual use of the drug, we 
can better evaluate the risk of a product.
    In order to obtain actual use data in various forms, we have 
obtained access to several databases through cooperative agreements or 
contracts. We will provide a list for the record. All of these systems 
help us better understand the risks associated with drug products.
    [The information follows:]
                        adverse event databases
    MS Health--this system provides data on the number of prescriptions 
dispensed for drugs
    Harvard-Pilgrim/Health Partners--this cooperative agreement 
provides use data from three managed care/HMO systems
    Kaiser Northern California--this system provides data from a 
managed care organization on drug use, adverse events, and some details 
of clinical care related to adverse events in a ``closed'' population
    United Health Group--this system provides claims data from its 
multi-state membership
    Tennessee Medicaid--this system provides claims data from a 
publicly funded medical care system
    Johns Hopkins University and the Veterans Administration--these 
systems provide use and clinical care data from their HIV/AIDS 
populations
    Child Health Corporation of America--this system provides use data 
specific to the pediatric population
    Advance PCS--this system will provide use data from an outpatient 
population--including length of time on drugs and combinations of drugs 
prescribed
    Premier, Inc.--this system will provide data similar to Advance PCS 
in a hospitalized population
    United Kingdom's General Practice Research Database--this is the 
world's largest pharmacoepidemiologic database with the highest quality 
data based on 3 million participants over a 10 year period. This 
database is used for hypothesis testing when a signal is ascertained 
from AERS data.

    Question. Dr. Crawford, your written statement also indicates that 
FDA has proposed a new prescription drug labeling rule to support its 
efforts to decrease medical errors. Would you please give us a brief 
summary of what this proposed new rule requires?
    Answer. This rule would revise current regulations to require that 
the labeling of new and recently approved products include a section 
containing highlights of prescribing information and a section 
containing an index to prescribing information, reorder currently 
required information and make minor changes to its content, and 
establish minimum graphical requirements. These revisions would make it 
easier for health care practitioners to access, read, and use 
information in prescription drug labeling and would enhance the safe 
and effective use of prescription drug products. This rule would also 
amend prescription drug labeling requirements for older drugs to 
require that certain types of statements currently appearing in 
labeling be removed if they are not sufficiently supported. Finally, 
the rule would eliminate certain unnecessary statements that are 
currently required to appear on prescription drug product labels and 
move other, less important information to labeling. These changes would 
simplify drug product labels and reduce the possibility of medication 
errors.
    Question. Also, in your statement, you claim that half the deaths 
and injuries associated with the use of FDA-regulated products could be 
avoided by fully implementing FDA strategies to prevent medical errors. 
What strategies, specifically, are you referring to?
    Answer. The causes of medical errors are numerous and are related 
to the various complex systems in which health care operates today. 
FDA's hope is that it could reduce the number of deaths by 50 percent 
for those errors associated with those causes over which FDA has some 
influence. We have identified four areas in which we could improve our 
functions and thereby improve medical product safety; risk 
identification; risk communications; regulatory tools; and, research 
and technological means.
    The $5 million requested in the budget does not represent a fully 
implemented plan, but only a part of that plan. A fully implemented 
system would help to ensure that products are safe throughout the 
entire life cycle by using surveillance systems to monitor the safety 
of products, their use, and their consumption, and would prevent 
unnecessary injury and death to the American public caused by adverse 
drug reactions, injuries, medication errors, and product problems. In 
order to achieve this goal, we are planning to use a stepwise, phased-
in approach. I will provide for the record a list of how the $5 million 
requested for fiscal year 2003 will help us.
    [The information follows:]
                        fiscal year 2003 request
    Continue improving the Adverse Event Reporting System (AERS) to 
include electronic data entry initiatives. This will encourage more 
reporting by making it easier for drug manufacturers to submit reports. 
The Agency will continue drafting regulations to support electronic 
submissions;
    Further enhance Agency postmarket surveillance through 
implementation of International Conference on Harmonization (ICH) 
commitments in the U.S. In addition, the Agency will participate in ICH 
initiatives, including global analysis and evaluation of adverse event 
reports and assessment of a product's risk versus benefits profile;
    Implement the third phase of the Medical Device Surveillance 
Network (MeDSuN) to include drug products. MeDSuN is a pilot program 
designed to train hospital personnel to accurately identify and report 
injuries and deaths associated with medical products;
    Conduct additional risk management and risk communication research, 
including pilot initiatives to minimize preventable adverse drug 
reactions and medication errors;
    Continue participation in DHHS' Patient Safety Task Force. The DHHS 
task force coordinates the collection and analysis of data from 
existing Federal systems; develops efforts to help avert risks to 
patient safety; and communicates with other entities regarding 
reporting systems and safe practices;
    Continue developing an electronic drug registration and listing 
system that will enable FDA to obtain more accurate information on 
drugs currently marketed; and,
    Enhance communications with the medical community on import drug 
issues.

    Question. The fiscal year 2003 request proposes an increase of $5 
million to enhance FDA's existing efforts to identify risks associated 
with the use of medical products and reduce the occurrence of adverse 
events. What specific activities will be enhanced and/or undertaken 
with the increased funding proposed?
    Answer. In fiscal year 2002, FDA received an increase of $10 
million to fund a portion of its systems approach to identifying and 
responding to adverse events reported in the U.S. An important aspect 
of this approach is the expansion of the MeDSuN system to additional 
hospitals and user facilities for the reporting of adverse event 
reports, as well as enhancing and linking other existing databases. 
Additionally, FDA is expanding associated medical errors education 
programs for consumer and health care professional, and increasing the 
number of analyses and reports evaluated.
    The $5 million requested in fiscal year 2003 will continue to build 
on collaborative efforts with other Federal and State governmental 
agencies, regulated industry, and the American public to ensure that 
the safest and most effective products possible are made available in a 
timely manner; and, that critical product safety information is relayed 
quickly to the American public and health care professionals.
    Question. Many new drugs are coming onto the market and are 
available to patients more quickly. It is FDA's task to balance the 
need to move products to market against an acceptable level of safety. 
How many products approved each year have to be removed from the market 
because of side effects? Has the percentage of products that need to be 
removed from the market increased?
    Answer. The rate of withdrawal of new drugs for safety reasons has 
remained constant. Although recently the number of drugs withdrawn from 
the market due to safety has increased, the number of drugs approved 
for marketing has also increased. When analyzed by year of approval, 
the rate of new drug withdrawals for safety in the United States has 
been less than 2.8 percent for the last 3 decades.
    The Agency continually monitors trends associated with withdrawals 
and routinely calculates the rate of withdrawals and publicizes the 
information. In 1999, senior officials at the Agency published an 
article in the May 12, 1999 volume of the Journal of the American 
Medical Association describing trends and withdrawals over the past 
years.
                              food safety
    Question. In a Washington Post article on Friday, March 15, 2002, 
entitled ``U.S. Vows Tougher Inspections of Imported Meat'', Homeland 
Security Director Tom Ridge is quoted as saying ``one of the questions 
we need to answer is--whether or not we need multiple agencies dealing 
with food safety responsibilities.'' How would you answer that 
question?
    Answer. Today, almost everyone says that if you had to start out de 
novo with a new food safety system, you would have it in one Agency. We 
did start out de novo at one point and all of it was in the Department 
of Agriculture. Over time, for various reasons, many of those areas 
have been spun off. The FDA was spun off in the 1940s, ending up in 
what became the Department of Health Education and Welfare, now the 
Department of Health and Human Services. The Environmental Protection 
Agency didn't leave until the 1970s and then as a separate Agency 
entirely.
    So in one sense, we have been there and done that. But in another 
sense, there is this tension and also these ambiguities in regulation 
that are occasioned by having food safety in so many different 
agencies. It was a problem to me when I was the administrator of the 
Food Safety Inspection Service in terms of communication. I have been 
around here long enough to know what the problem would be here, so I 
can say that based on experience.
    When we thought seriously about seafood inspection--and there was a 
Congressional bill that passed the Senate and failed in the House some 
12 years ago--the problem we ran into, quite frankly, was the 
overlapping legislative authorities that was this mass of laws that had 
been passed for good reasons. How to reconcile them, even just for 
seafood, so that we could consolidate all seafood inspection into one 
Agency was formidable indeed. I believe the record will show that there 
were nine Congressional hearings on the subject and there were nine 
subcommittees or committees that believed that seafood inspection was 
in their jurisdiction. I remember having to agree that it was theirs 
about nine times, and I think that is the issue.
    With or without organizational changes, there is a need to 
modernize food safety laws, particularly to fill important gaps in 
FDA's regulatory tools. FDA lacks clear authority to inspect records of 
food establishments and manufacturers, and cannot order recalls, impose 
civil money penalties, or require registration of food establishments 
and listing of products. Changes in the Federal food safety laws would 
strengthen FDA's ability to provide a high level of public health 
protection from foodborne hazards and make existing programs even more 
efficient and effective.
    Moreover, significant legislative changes would be needed for any 
food safety consolidation to be effective. This is because it is the 
law and not the organizations that require meat inspectors to inspect 
meat plants, poultry inspectors to inspect poultry plants, etc. The 
General Accounting Office recognized this need for legislative change 
in their most recent report.
    Question. Is the work FDA conducts duplicative of any work done by 
USDA? If so, is this appropriate?
    Answer. As with any division of duties, work done by FDA and USDA 
may address similar issues. However, USDA and FDA make efforts to 
communicate and collaborate to minimize duplication. Consequently, the 
overwhelming majority of work done by either Agency addresses only 
those issues or commodities specific to that Agency.
    Question. Should Federal food safety inspection activities be 
streamlined so that we don't have multiple government agencies working 
on different aspects of food safety, but rather a cohesive unit working 
to ensure the safety of America's food supply?
    Answer. The current food safety system is having real and 
measurable positive effects. Through a surveillance system called 
FoodNet, CDC has documented reductions in foodborne illness for a 
number of important food pathogens.
    The current system would benefit from being updated by regulatory 
fixes and full funding of the President's Budget. Statutes are in need 
of being modernized and resource shortfalls need to be addressed. The 
statutes do not adequately recognize the need to assess risks 
associated with foods, to put into place controls to prevent food 
contamination, to allocate resources based on risk, and to measure 
results. In addition, GAO issued a report in February 2001 that 
identified the significant disparity between food safety resources and 
FDA's food safety responsibilities.
    Question. Dr. Crawford, you mention in your prepared statement that 
we have in place newer surveillance systems such as Foodnet, Pulsenet, 
NARMS, and pilots for eLexNet which, in recent years, have strengthened 
the safety of the Federal food system. I am not very familiar with 
eLexNet. Could you please tell us more about that?
    Answer. The electronic Laboratory Exchange Network--or eLEXNET--is 
the nation's first internet-based, inter-agency food testing reporting 
system. eLEXNET was developed by FDA to provide access to critical food 
testing data in Federal, State, and local food safety laboratories. The 
eLEXNET system was successfully piloted in 2000 with two Federal 
laboratories, four State laboratories, and two local government Agency 
laboratories. The eight laboratories that participated in the eLEXNET 
pilot were the FDA's Southeast Regional Laboratory, USDA's Food Safety 
and Inspection Service's Eastern Laboratory, Massachusetts Department 
of Public Health, New Hampshire Public Health Laboratories, Florida 
Department of Agriculture and Consumer Services, Tennessee Department 
of Agriculture, City of Milwaukee Health Department, and the City of 
Cincinnati Health Department.
    While the initial pilot only included Escherichia coli O157:H7 
data, the system was expanded in April 2001 and now includes data on 
four other pathogens: all salmonella species, Listeria monocytogenes, 
Campylobacter jejuni, and E. coli. FDA is currently working to expand 
further the system to include at least two laboratories from each 
State--a public health lab and an agriculture lab--to the project. As 
of April 2002, 36 laboratories in 24 States are participating in 
eLEXNET--this includes 7 FDA field laboratories and the Department of 
Defense's Army Veterinary Command or VETCOM. To enhance the current 
capabilities of eLEXNET, FDA in 2002 also plans to increase eLEXNET's 
breadth from selected microbiological pathogens to other agents that 
could endanger the food supply, such as chemical agents, mycotoxins, 
and radionuclides.
    ELEXNET will facilitate data information sharing and communication 
and provide a means for increased collaboration among food safety 
experts. It will significantly improve our nation's ability to exchange 
seamlessly data, recognize problem products, and perform risk 
assessments.
    Question. Please provide a comparison, by Center and activity, of 
FDA funding for food safety initiatives for each of fiscal years 1999 
through 2002, and the funding requested for fiscal year 2003. Please 
include the definition of ``food safety initiative'' used in each 
fiscal year (1999-2003) and explain the reason for any changes to this 
definition.
    Answer. The old Food Safety Initiative or FSI definition originally 
included only microbiological safety of foods and was used from the 
inception of FSI through fiscal year 2001. In fiscal year 2002, the 
definition was expanded to a new, broader definition that includes 
chemical safety of foods and pesticides. Also in fiscal year 2002, 
premarket, BSE, and counter terrorism were added to the food safety 
definition. We do not distinguish what portion of the counter terrorism 
supplemental is for microbiological pathogen work versus the new, 
expanded definition, which adds chemical safety work. The events of 
September 11, have changed the emphasis for the food safety field 
program as all food safety activities are now considered part of 
Counter Terrorism.
    I would be happy to provide a chart with a 5 year history of FDA 
food safety resources by activity and another by program. We will also 
provide a more detailed chart with a comparison, by Center and 
activity, of FDA funding for food safety initiatives for each of fiscal 
years 1997 through 2002, and the funding requested for fiscal year 
2003.
    [The information follows:]

                                        FOOD SAFETY RESOURCES BY ACTIVITY
                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                       Food safety initiative definition   Expanded food safety
                                                     ------------------------------------       definition
                    Activity \1\                                                         -----------------------
                                                        Fiscal      Fiscal      Fiscal      Fiscal      Fiscal
                                                       year 1999   year 2000   year 2001   year 2002   year 2003
----------------------------------------------------------------------------------------------------------------
Microbiological Safety..............................     55.000      68.100      84.534      91.490      91.490
Chemical/Pesticide Safety...........................  ..........  ..........  ..........     79.030      79.030
BSE.................................................  ..........  ..........  ..........     22.082      22.082
Inspection Activities...............................    103.300     119.100     132.140     134.737     134.737
Premarket...........................................  ..........  ..........  ..........     44.098      44.098
Counter Terrorism...................................  ..........  ..........  ..........     97.925      98.048
Pay Increases.......................................  ..........  ..........  ..........     13.842      23.442
Dietary Supplements, Nutrition, labeling............  ..........  ..........  ..........  ..........      9.336
                                                     -----------------------------------------------------------
      Center Subtotal...............................     66.300      94.222      94.222     214.125     223.822
                                                     ===========================================================
      Field Subtotal................................     92.000     122.452     122.452     269.079     278.441
                                                     -----------------------------------------------------------
      Total.........................................    158.300     216.674     216.674     483.204     502.263
                                                     ===========================================================
Foods B Center......................................     51,700      60,100      67,151     137,862     144,369
Foods B Field.......................................     92,000     108,400     122,452     241,745     250,560
Foods Program Subtotal (non-add)....................   (143,700)   (168,500)   (189,603)   (379,607)   (394,929)
Animal Drugs & Feeds B Center.......................      5,400       9,100      15,398      54,297      56,260
Animal Drugs & Feeds B Field........................          0           0      10,330      27,334      27,881
                                                     -----------------------------------------------------------
Animal Drugs & Feeds Program Subtotal (non-add).....     (5,400)     (9,100)    (25,728)    (81,631)    (84,141)
                                                     ===========================================================
NCTR................................................        500       1,000       3,000       4,596       4,688
Other Activities....................................      8,700       8,700       8,673      13,807      14,424
Other Programs......................................  ..........  ..........  ..........      3,562       4,080
                                                     -----------------------------------------------------------
      Total.........................................    158,300     187,300     216,674     483,204     502,263
----------------------------------------------------------------------------------------------------------------
\1\ Activity splits are estimates for fiscal 2002 and 2003.


                                        CROSSWALK OF FDA FOOD SAFETY RESOURCES--FOOD SAFETY MICROBIOLOGICAL BASE
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal
          Food safety initiative categories            year 1997  year 1998  year 1999  year 1999  year 2000  year 2000  year 2001  year 2001  year 2002
                                                          base     increase     base     increase     base     increase     base     increase     base
--------------------------------------------------------------------------------------------------------------------------------------------------------
Surveillance.........................................       $0.7       $3.1       $3.8       $0.8       $4.6       $6.4      $11.0       $5.4      $16.4
    Foods/CFSAN......................................        0.6        1.6        2.2        0.0        2.2        1.8        4.0        0.0        4.0
    Foods/Field......................................        0.0        0.0        0.0        0.1        0.1        3.2        3.3        0.0        3.3
    Animal Drugs & Feeds/CVM.........................        0.1        1.5        1.6        0.7        2.3        1.4        3.7        5.4        9.1
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Other Activities.................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
Coordination.........................................        7.2        0.5        7.7        0.2        7.9        0.0        7.9        0.0        7.9
    Foods/CFSAN......................................        3.6        0.5        4.1        0.2        4.3        0.0        4.3        0.0        4.3
    Foods/Field......................................        3.0        0.0        3.0        0.0        3.0        0.0        3.0        0.0        3.0
    Animal Drugs & Feeds/CVM.........................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Other Activities.................................        0.6  .........        0.6        0.0        0.6        0.0        0.6        0.0        0.6
Inspections..........................................       73.2        9.0       82.2       21.1      103.3       15.8      119.1       17.0      136.1
    Foods/CFSAN......................................        9.9        1.0       10.9        7.8       18.7        4.1       22.8        2.5       25.3
    Foods/Field......................................       57.5        8.0       65.5       13.3       78.8       11.7       90.5       14.5      105.0
    Animal Drugs & Feeds/CVM.........................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Other Activities.................................        5.8        0.0        5.8        0.0        5.8        0.0        5.8        0.0        5.8
Education............................................        4.8        1.8        6.6        0.5        7.1        1.5        8.7        0.0        8.7
    Foods/CFSAN......................................        2.4        1.8        4.2        0.1        4.3        0.5        4.8        0.0        4.8
    Foods/Field......................................        2.0        0.0        2.0        0.3        2.3        0.5        2.8        0.0        2.8
    Animal Drugs & Feeds/CVM.........................        0.0        0.0        0.0        0.1        0.1        0.5        0.7        0.0       0.65
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    Other Activities.................................        0.4        0.0        0.4        0.0        0.4        0.0        0.4        0.0        0.4
Research & Risk Assessment...........................       23.4        9.6       33.0        2.4       35.4        5.2       40.6        7.6       48.2
    Foods/CFSAN......................................       14.2        7.1       21.3        0.9       22.2        2.0       24.2        4.6       28.8
    Foods/Field......................................        7.3        0.0        7.3        0.5        7.8        1.0        8.8        0.0        8.8
    Animal Drugs & Feeds/CVM.........................        0.0        2.5        2.5        0.5        3.0        1.7        4.7        1.0        5.7
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.5        0.5        0.5        1.0        2.0        3.0
    Other Activities.................................        1.9        0.0        1.9        0.0        1.9        0.0        1.9        0.0        1.9
Total FSI Program....................................      109.3       24.0      133.3       25.0      158.3       28.9      187.3       30.0      217.2
    Foods/CFSAN......................................       30.7       12.0       42.7        9.0       51.7        8.4       60.1        7.1       67.2
    Foods/Field......................................       69.8        8.0       77.8       14.2       92.0       16.4      108.4       14.5      122.9
    Animal Drugs & Feeds/CVM.........................        0.1        4.0        4.1        1.3        5.4        3.6        9.1        6.4       15.4
    Animal Drugs & Feeds/Field.......................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
    NCTR.............................................        0.0        0.0        0.0        0.5        0.5        0.5        1.0        2.0        3.0
    Other Activities.................................        8.7        0.0        8.7        0.0        8.7        0.0        8.7        0.0        8.7
--------------------------------------------------------------------------------------------------------------------------------------------------------


                     CROSSWALK OF FDA FOOD SAFETY RESOURCES--EXPANDED FOOD SAFETY DEFINITION
----------------------------------------------------------------------------------------------------------------
                                                                   Adj.                          Exp. definition
                                      Fiscal year     Fiscal      fiscal    Add chem     Add       fiscal year
   Food safety action categories       2001 food     year 2001  year 2002/   safety   premarket     2002/food
                                      safety base   rescission  FSAP base     base       base      safety base
----------------------------------------------------------------------------------------------------------------
Science Base.......................        $47.950  ..........    $47.950    $21.599  .........          $69.5
    Foods/CFSAN....................         28.800  ..........     28.800     16.800  .........           45.600
    Foods/Field....................          8.800  ..........      8.800      0.000  .........            8.800
    Animal Drugs & Feeds/CVM.......          5.450  ..........      5.450      4.134  .........            9.584
    Animal Drugs & Feeds/Field.....          0.000  ..........      0.000      0.000  .........            0.000
    NCTR...........................          3.000  ..........      3.000      0.000  .........            3.000
    Other Activities...............          1.900  ..........      1.900      0.665  .........            2.565
Surveillance Systems...............         15.934  ..........     15.934      2.202  .........           18.136
    Foods/CFSAN....................          4.000  ..........      4.000      0.500  .........            4.500
    Foods/Field....................          3.300  ..........      3.300      0.000  .........            3.300
    Animal Drugs & Feeds/CVM.......          8.634  ..........      8.634      1.702  .........           10.336
    Animal Drugs & Feeds/Field.....          0.000  ..........      0.000      0.000  .........            0.000
    NCTR...........................          0.000  ..........      0.000      0.000  .........            0.000
    Other Activities...............          0.000  ..........      0.000      0.000  .........            0.000
Prevention Standards...............         12.000  ..........     12.000     12.280    $42.598           66.877
    Foods/CFSAN....................         11.700  ..........     11.700      3.200     28.932           43.832
    Foods/Field....................          0.000  ..........      0.000      0.000      0.000            0.000
    Animal Drugs & Feeds/CVM.......          0.300  ..........      0.300      9.080     13.666           23.045
    Animal Drugs & Feeds/Field.....          0.000  ..........      0.000      0.000      0.000            0.000
    NCTR...........................          0.000  ..........      0.000      0.000      0.000            0.000
    Other Activities...............          0.000  ..........      0.000      0.000      0.000            0.000
    Education and Training.........          8.7    ..........      8.650      1.876  .........           10.526
    Foods/CFSAN....................          4.800  ..........      4.800      0.500  .........            5.300
    Foods/Field....................          2.800  ..........      2.800      0.000  .........            2.800
    Animal Drugs & Feeds/CVM.......          0.650  ..........      0.650      1.376  .........            2.026
    Animal Drugs & Feeds/Field.....          0.000  ..........      0.000      0.000  .........            0.000
    NCTR...........................          0.000  ..........      0.000      0.000  .........            0.000
    Other Activities...............          0.400  ..........      0.400      0.000  .........            0.400
Domestic Inspections...............         88.7      ($0.526)     88.126     29.680  .........          117.806
    Foods/CFSAN....................          8.300     (0.049)      8.251      1.000  .........            9.251
    Foods/Field....................         75.500     (0.448)     75.052     15.400  .........           90.452
    Animal Drugs & Feeds/CVM.......          0.366     (0.002)      0.364      1.120  .........            1.484
    Animal Drugs & Feeds/Field.....          0.000      0.000       0.000      9.917  .........            9.917
    NCTR...........................          0.000      0.000       0.000      0.000  .........            0.000
    Other Activities...............          4.486     (0.027)      4.459      2.243  .........            6.702
Imports............................  .............  ..........     44.014      8.949  .........           52.963
    Foods/CFSAN....................          9.600  ..........      9.600      2.700  .........           12.300
    Foods/Field....................         32.500  ..........     32.500      5.100  .........           37.600
    Animal Drugs & Feeds/CVM.......          0.000  ..........      0.000      0.000  .........            0.000
    Animal Drugs & Feeds/Field.....          0.000  ..........      0.000      0.412  .........            0.412
    NCTR...........................          0.000  ..........      0.000      0.000  .........            0.000
    Other Activities...............          1.914  ..........      1.914      0.737  .........            2.651
Total Food Safety Program:
    Foods/CFSAN....................         67.200     (0.049)     67.151     24.700     28.932          120.783
    Foods/Field....................        122.900     (0.448)    122.452     20.500      0.000          142.952
    Animal Drugs & Feeds/CVM.......         15.400     (0.002)     15.398     17.412     13.666           46.476
    Animal Drugs & Feeds/Field.....          0.000      0.000       0.000     10.330      0.000           10.330
    NCTR...........................          3.000      0.000       3.000      0.000      0.000            3.000
    Other Activities...............          8.700     (0.027)      8.673      3.645      0.000           12.318
                                    ----------------------------------------------------------------------------
      Total........................        217.200     (0.526)    216.674     76.587     42.598          335.858
----------------------------------------------------------------------------------------------------------------


                                                         CROSSWALK OF FDA FOOD SAFETY RESOURCES
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Adjusted    Fiscal                                                   Total
                                                                 Add BSE     fiscal   year 2002    Fiscal   Fiscal year    Fiscal                fiscal
              Food safety action plan categories                   base    year 2002     food    year 2002      2002     year cost   Earmarks  year 2002
                                                                              base      safety      BSE     inspections  of living             increases
--------------------------------------------------------------------------------------------------------------------------------------------------------
Science Base..................................................     $1.781    $71.330     $1.200     $1.600  ...........     $1.668  .........     $4.468
    Foods/CFSAN...............................................      0.847     46.447      0.500      1.100  ...........      0.650  .........      2.250
    Foods/Field...............................................      0.000      8.800      0.000      0.000  ...........      0.401  .........      0.401
    Animal Drugs & Feeds/CVM..................................      0.934     10.518      0.300      0.500  ...........      0.341  .........      1.141
    Animal Drugs & Feeds/Field................................      0.000      0.000      0.000      0.000  ...........      0.000  .........      0.000
    NCTR......................................................      0.000      3.000      0.400      0.000  ...........      0.196  .........      0.596
    Other Activities..........................................      0.000      2.565      0.000      0.000  ...........      0.079  .........      0.079
Surveillance Systems..........................................  .........     18.136      1.500  .........  ...........      1.028     $0.300      2.828
    Foods/CFSAN...............................................  .........      4.500      1.000  .........  ...........      0.591      0.000      1.591
    Foods/Field...............................................  .........      3.300      0.000  .........  ...........      0.148      0.000      0.148
    Animal Drugs & Feeds/CVM..................................  .........     10.336      0.400  .........  ...........      0.289      0.300      0.989
    Animal Drugs & Feeds/Field................................  .........      0.000      0.000  .........  ...........      0.000      0.000      0.000
    NCTR......................................................  .........      0.000      0.000  .........  ...........      0.000      0.000      0.000
    Other Activities..........................................  .........      0.000      0.100  .........  ...........      0.000      0.000      0.100
Prevention Standards..........................................      0.676     67.553      1.200      0.300  ...........      1.440      1.200      4.140
    Foods/CFSAN...............................................      0.000     43.832      0.500      0.000  ...........      0.916      0.000      1.416
    Foods/Field...............................................      0.000      0.000      0.000      0.000  ...........      0.000      0.000      0.000
    Animal Drugs & Feeds/CVM..................................      0.000     23.045      0.700      0.000  ...........      0.525      1.200      2.425
    Animal Drugs & Feeds/Field................................      0.000      0.000      0.000      0.000  ...........      0.000      0.000      0.000
    NCTR......................................................      0.000      0.000      0.000      0.000  ...........      0.000      0.000      0.000
    Other Activities..........................................      0.676      0.676      0.000      0.300  ...........      0.000      0.000      0.300
Education and Training........................................  .........     10.526      0.100      0.520  ...........      1.142  .........      1.762
    Foods/CFSAN...............................................  .........      5.300      0.000      0.000  ...........      0.916  .........      0.916
    Foods/Field...............................................  .........      2.800      0.000      0.000  ...........      0.131  .........      0.131
    Animal Drugs & Feeds/CVM..................................  .........      2.026      0.100      0.520  ...........      0.079  .........      0.699
    Animal Drugs & Feeds/Field................................  .........      0.000      0.000      0.000  ...........      0.000  .........      0.000
    NCTR......................................................  .........      0.000      0.000      0.000  ...........      0.000  .........      0.000
    Other Activities..........................................  .........      0.400      0.000      0.000  ...........      0.017  .........      0.017
Domestic Inspections..........................................      1.563    119.369      2.700      7.460      $0.300       5.739  .........     16.199
    Foods/CFSAN...............................................      0.000      9.251      0.000      0.000       0.000       0.591  .........      0.591
    Foods/Field...............................................      0.000     90.452      2.700      0.000       0.000       4.230  .........      6.930
    Animal Drugs & Feeds/CVM..................................      0.000      1.484      0.000      1.180       0.100       0.079  .........      1.359
    Animal Drugs & Feeds/Field................................      1.563     11.480      0.000      6.280       0.200       0.652  .........      7.132
    NCTR......................................................      0.000      0.000      0.000      0.000       0.000       0.000  .........      0.000
    Other Activities..........................................      0.000      6.702      0.000      0.000       0.000       0.188  .........      0.188
Imports.......................................................  .........     52.963      2.700      4.620       2.297       2.826  .........     12.443
    Foods/CFSAN...............................................  .........     12.300      0.000      0.000       0.700       0.824  .........      1.524
    Foods/Field...............................................  .........     37.600      2.700      0.000       1.597       1.885  .........      6.182
    Animal Drugs & Feeds/CVM..................................  .........      0.000      0.000      0.000       0.000       0.000  .........      0.000
    Animal Drugs & Feeds/Field................................  .........      0.412      0.000      4.620       0.000       0.038  .........      4.658
    NCTR......................................................  .........      0.000      0.000      0.000       0.000       0.000  .........      0.000
    Other Activities..........................................  .........      2.651      0.000      0.000       0.000       0.079  .........      0.079
Total Food Safety Program.....................................  .........  .........  .........  .........  ...........  .........  .........  .........
    Foods/CFSAN...............................................      0.847    121.630      2.000      1.100       0.700       4.487      0.000      8.287
    Foods/Field...............................................      0.000    142.952      5.400      0.000       1.597       6.795      0.000     13.792
    Animal Drugs & Feeds/CVM..................................      0.934     47.409      1.500      2.200       0.100       1.312      1.500      6.612
    Animal Drugs & Feeds/Field................................      1.563     11.893      0.000     10.900       0.200       0.689      0.000     11.789
    NCTR......................................................      0.000      3.000      0.400      0.000       0.000       0.196      0.000      0.596
    Other Activities..........................................      0.676     12.994      0.100      0.300       0.000       0.363      0.000      0.763
                                                               -----------------------------------------------------------------------------------------
      Total...................................................      4.020    339.878      9.400     14.500       2.597      13.842      1.500     41.839
                                                                    3.062                            0.500
                                                                    7.082    342.940                15.000
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                          CROSSWALK OF FDA FOOD SAFETY RESOURCES
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Fiscal year 2003 changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Fiscal    Starting               Fiscal     Fiscal     Fiscal
                                                                    Fiscal    Counter   year 2002    fiscal    Add D/S   year 2003  year 2003  year 2003
               Food safety plan/action categories                 year 2002  Terrorism      CT     year 2003  nutrition      CT        pay     ending FS
                                                                   FS base      base     Suppl.l    FS base      base     increase   increase     base
--------------------------------------------------------------------------------------------------------------------------------------------------------
Science Base....................................................    $75.798  .........     $1.050    $76.848     $1.842    -$0.825     $1.131    $78.996
    Foods/CFSAN.................................................     48.697  .........      0.000     48.697      1.051      0.000      0.473     50.221
    Foods/Field.................................................      9.201  .........      0.000      9.201      0.000      0.000      0.316      9.517
    Animal Drugs & Feeds/CVM....................................     11.659  .........      0.000     11.659      0.000      0.000      0.266     11.925
    Animal Drugs & Feeds/Field..................................      0.000  .........      0.000      0.000      0.000      0.000      0.000      0.000
    NCTR........................................................      3.596  .........      1.000      4.596      0.791     -0.775      0.076      4.688
    Other Activities............................................      2.644  .........      0.050      2.694      0.000     -0.050      0.000      2.644
Surveillance Systems............................................     20.964  .........     10.500     31.464      1.350  .........      0.693     33.507
    Foods/CFSAN.................................................      6.091  .........      0.000      6.091      1.100  .........      0.395      7.586
    Foods/Field.................................................      3.448  .........     10.500     13.948      0.000  .........      0.079     14.027
Animal Drugs & Feeds/CVM........................................     11.325  .........      0.000     11.325      0.000  .........      0.219     11.544
    Animal Drugs & Feeds/Field..................................      0.000  .........      0.000      0.000      0.000  .........      0.000      0.000
    NCTR........................................................      0.000  .........      0.000      0.000      0.000  .........      0.000      0.000
    Other Activities............................................      0.100  .........      0.000      0.100      0.250  .........      0.000      0.350
Prevention Standards............................................     71.694  .........  .........     71.694      1.013  .........      1.038     73.745
    Foods/CFSAN.................................................     45.248  .........  .........     45.248      1.013  .........      0.632     46.893
    Foods/Field.................................................      0.000  .........  .........      0.000      0.000  .........      0.000      0.000
    Animal Drugs & Feeds/CVM....................................     25.470  .........  .........     25.470      0.000  .........      0.406     25.876
    Animal Drugs & Feeds/Field..................................      0.000  .........  .........      0.000      0.000  .........      0.000      0.000
    NCTR........................................................      0.000  .........  .........      0.000      0.000  .........      0.000      0.000
    Other Activities............................................      0.976  .........  .........      0.976      0.000  .........      0.000      0.976
Education and Training..........................................     12.288  .........  .........     12.288  .........  .........      0.773     13.061
    Foods/CFSAN.................................................      6.216  .........  .........      6.216  .........  .........      0.632      6.848
    Foods/Field.................................................      2.931  .........  .........      2.931  .........  .........      0.079      3.010
    Animal Drugs & Feeds/CVM....................................      2.725  .........  .........      2.725  .........  .........      0.062      2.787
    Animal Drugs & Feeds/Field..................................      0.000  .........  .........      0.000  .........  .........      0.000      0.000
    NCTR........................................................      0.000  .........  .........      0.000  .........  .........      0.000      0.000
    Other Activities............................................      0.417  .........  .........      0.417  .........  .........      0.000      0.417
Domestic Inspections............................................    135.568     $0.825     28.967    165.360      3.881  .........      3.972    173.213
    Foods/CFSAN.................................................      9.841      0.296      2.525     12.662      0.131  .........      0.395     13.188
    Foods/Field.................................................     97.382      0.101     24.552    122.035      3.400  .........      2.999    128.434
    Animal Drugs & Feeds/CVM....................................      2.843      0.276      0.000      3.119      0.000  .........      0.062      3.181
    Animal Drugs & Feeds/Field..................................     18.612      0.152      1.890     20.654      0.000  .........      0.516     21.170
    NCTR........................................................      0.000      0.000      0.000      0.000      0.000  .........      0.000      0.000
    Other Activities............................................      6.890      0.000      0.000      6.890      0.350  .........      0.000      7.240
Imports.........................................................     65.406  .........     56.584    121.989      0.731      0.948      1.993    125.662
    Foods/CFSAN.................................................     13.824  .........      5.126     18.950      0.131      0.000      0.553     19.634
    Foods/Field.................................................     43.782  .........     49.848     93.630      0.600      0.000      1.342     95.572
    Animal Drugs & Feeds/CVM....................................      0.000  .........      0.000      0.000      0.000      0.948      0.000      0.948
    Animal Drugs & Feeds/Field..................................      5.070  .........      1.610      6.680      0.000      0.000      0.031      6.711
    NCTR........................................................      0.000  .........      0.000      0.000      0.000      0.000      0.000      0.000
    Other Activities............................................      2.730  .........      0.000      2.730      0.000      0.000      0.067      2.797
Total Food Safety Program.......................................  .........  .........  .........  .........  .........  .........  .........  .........
    Foods/CFSAN.................................................    129.916      0.296      7.650    137.862      3.427      0.000      3.080    144.369
    Foods/Field.................................................    156.744      0.101     84.900    241.745      4.000      0.000      4.815    250.560
    Animal Drugs & Feeds/CVM....................................     54.021      0.276      0.000     54.297      0.000      0.948      1.015     56.260
    Animal Drugs & Feeds/Field..................................     23.682      0.152      3.500     27.334      0.000      0.000      0.547     27.881
    NCTR........................................................      3.596      0.000      1.000      4.596      0.791      0.775      0.076      4.688
    Other Activities............................................     13.757      0.000      0.050     13.807      0.600     -0.050      0.067     14.424
                                                                 ---------------------------------------------------------------------------------------
      Total.....................................................    381.717      0.825     97.100    479.642      8.818      0.123      9.600    498.183
Non Food Safety BSE & Dietary Supplements.......................  .........  .........      0.518  .........  .........      4.080
                                                                 ---------------------------------------------------------------------------------------
      Total w/ Non FS BSE, D/S..................................    385.279  .........  .........    483.204      9.336  .........  .........    502.263
--------------------------------------------------------------------------------------------------------------------------------------------------------

                             generic drugs
    Question. The budget requests an increase of $4.6 million to 
improve the generic drug review programs and to allow FDA to act upon 
75 percent of fileable original generic drug applications within 6 
months. How does this compare to the current review time?
    Answer. FDA is requesting an increase of $4.6 million in fiscal 
year 2003 for the generic drugs program. Our goal is to review 75 
percent of generic drug applications within the statutory timeframe by 
the end of fiscal year 2003. FDA has been successful in achieving our 
fiscal year 2001 goal of reviewing 50 percent of generic drug 
applications within 180 days and anticipates achieving the fiscal year 
2002 goal of reviewing 65 percent within 180 days.
    Question. Increased funding has been provided to the Office of 
Generic Drugs over the past few fiscal years. How have the increased 
resources been utilized to speed-up the generic drug review process?
    Answer. The fiscal year 2001 increase was used to annualize the 
positions added in fiscal year 2000 and add several additional FTE. The 
Office of Generic Drugs, OGD, continues to refine the review process to 
increase efficiency. With these funds the Agency is exploring ways to 
increase resources devoted to information technology for the review of 
generic drug applications. The fiscal year 2002 increase of $2.5 
million was used by the Office of Generic Drugs to increase the 
efficiency of the review process and decrease the total time to 
approval of generic drugs. This increase has allowed us to decrease the 
average approval time by 2 months even with an increase in the number 
of actual approvals. The increase will also be used to conduct research 
that will allow us to address specific scientific questions regarding 
bioequivalence and chemistry of generic products. This research will be 
directed at evaluating ways to enable approval of generic drugs in 
areas that currently lack generic alternatives such as, inhalational or 
topical drug products.
    Question. Provide a comparison of the funding for the Office of 
Generic Drugs for each of the past five fiscal years, including that 
proposed for fiscal year 2003.
    Answer. I would be happy to provide that information for the 
record.
    [The information follows:]

                                        OFFICE OF GENERIC DRUGS RESOURCES
----------------------------------------------------------------------------------------------------------------
                                                                   FTE on board
                           Fiscal year                                  \1\         Ceiling \2\    Millions \3\
----------------------------------------------------------------------------------------------------------------
1995............................................................             137             144            12.8
1996............................................................             121             125            10.3
1997............................................................             121             127            10.3
1998............................................................             123             132            10.0
1999 (base).....................................................             130             119            11.2
1999 (actual with increase).....................................             130             129            12.5
2000 (base).....................................................             134             129            13.6
2000 (actual with increase).....................................             134             139            14.8
2001 (base).....................................................             141             132            13.3
2001 (actual with increase).....................................             141             143            14.0
2002 (projected)................................................  ..............             157            16.8
2003 (projected)................................................  ..............             187           20.4
----------------------------------------------------------------------------------------------------------------
\1\ On Board figure for fiscal year 2001 is as of 9/30/01; for fiscal year 2002, as of 2/6/02.
\2\ Ceiling includes increases of 10 FTE for fiscal year 2000, 11 FTE for fiscal year 2001, and 14 FTE for
  fiscal year 2002.
\3\ Funding level for fiscal year 2001 consists of actual total payroll and operating costs for OGD. Funding
  level for fiscal year 2002 based on projected payroll and operating costs for OGD as of 2/6/02; projected OGD
  payroll costs are based on an estimated average of $93,000 per FTE for fiscal year 2002. Funding level for
  fiscal year 2003 based on projected payroll and operating costs for OGD as of 2/6/02; projected OGD payroll
  costs are based on an estimated average of $96,000 per FTE for fiscal year 2003; projected OGD costs include
  generic drugs program increase of $3.346M requested in fiscal year 2003 President's Budget.

                         antibiotic resistance
    Question. FDA has been analyzing the effects of antibiotic use in 
food-producing animals through the National Antimicrobial Resistance 
Monitoring System (NARMS), specifically looking at antimicrobial 
resistance. What agency decisions or priorities have been affected by 
use of the NARMS data?
    Answer. The NARMS data were used in the development of the 
Campylobacter risk assessment. Based partly on the results of the 
Campylobacter risk assessment, FDA proposed to withdraw approval of the 
new animal drug application for use of the fluoroquinolone 
antimicrobial drug enrofloxacin in poultry. The basis for this proposal 
is the information indicating that the use of fluoroquinolone in 
poultry has led to an increase in the level of human fluoroquinolone 
resistance.
    Since its inception, NARMS data have been used to identify public 
health threats and initiate response. Federal agencies undertake joint 
field investigations of outbreaks of illness marked by pathogens that 
display unusual antimicrobial resistance patterns. All the 
participating agencies have used the data to improve knowledge of risk 
factors associated with the development of resistance and to stimulate 
research in the molecular characteristics of resistance emergence and 
transfer. The program has also triggered broader research projects 
relating to prudent antimicrobial use in animals and the role of the 
environment in the emergence and spread of antimicrobial resistance.
                     management/efficiency savings
    Question. The fiscal year 2003 budget request indicates that FDA 
will achieve $7.3 million in savings from the proposed consolidation of 
staff associated with its public affairs and legislative functions at 
the Department level.
    What percent of FDA's current (fiscal year 2002) legislative and 
affairs functions does this $7.3 million in proposed savings represent?
    Answer. The proposed transfer represents all of FDA's staff in the 
Office of Legislative Affairs and the Office of Public Affairs. These 
two Offices combined have an estimated staffing level for fiscal year 
2002 of 82 FTE. FDA estimates that two of these FTE can be saved 
through administrative streamlining, and the remaining 80 FTE are 
proposed to be transferred in fiscal year 2003 to the Department level 
for these functions.
    Question. How many legislative and public affairs full-time 
equivalent positions does FDA currently have (i.e., fiscal year 2002 
FTE level)? How many of these positions would be transferred to the 
Department of Health and Human Services?
    Answer. There are currently in fiscal year 2002 staffing levels of 
48 FTE in the Office of Public Affairs and 34 FTE in the Office of 
Legislation. Therefore, these two Offices combined have an estimated 
staffing level for fiscal year 2002 of 82 FTE. FDA estimates that two 
of these FTE can be saved through administrative streamlining, and the 
remaining 80 FTE are proposed to be transferred in fiscal year 2003 to 
the Department level for these functions.
    Question. Will the transfer of FDA's legislative and public affairs 
functions to the Department adequately serve FDA as a Federal 
regulatory agency? How?
    Answer. This proposal is part of an HHS initiative aimed at greater 
efficiency in the operation of our Department. A key objective of the 
President's Management Agenda is a more responsive, more ``citizen-
centered'' Federal government. In few Federal agencies is the need for 
organizational reform more acute than at HHS, where a long history of 
decentralized decision-making has produced a Department with 13 
operating divisions, functioning with relative autonomy. As a result, a 
complex web of ever-proliferating offices has distanced HHS, from the 
citizens it serves and has produced a patchwork of uncoordinated and 
duplicative management practices that hinder its efforts to accomplish 
efficiently. The Administration supports and is committed to solving 
this problem through Secretary Thompson's ``One Department'' 
initiative, which will eliminate unnecessary layers of bureaucracy and 
consolidate duplicative functions into unified offices. Streamlining 
efforts in 2003 will focus on HHS' human resources, public affairs, 
legislative affairs, and building and facilities management functions.
    Question. Specifically how was the savings included in the budget 
request calculated?
    Answer. The amount of $7.3 million for the proposed transfer of 
these functions was based on the payroll and other operating costs for 
the 80 FTE to be transferred to DHHS. Most of the cost is the cost of 
salaries and benefits for the staff involved. Also included in the 
proposed transfer are $345,000 for the applicable portion of central 
services under the Other Activities program, and $320,000 for GSA Rent 
for these staffs.
    Question. The fiscal year 2003 budget also proposes to save $2.6 
million in efficiency savings through the elimination of 25 
administrative/management positions. Which positions will be eliminated 
and how was this savings calculated?
    Answer. As part of the President's Management Agenda, FDA is 
reviewing its organizational structure and administrative processes to 
seek increased efficiencies and reduce organizational layers of 
management. The estimate of 25 FTE to be saved in fiscal year 2003 is 
not based on specific positions, but on a projection that this many FTE 
can be saved through the efforts under way to streamline the Agency. 
The estimate of $2.6 million is based on the payroll and other 
operating costs for the 25 FTE to be reduced, and includes small 
reductions in all of the program lines that include FTE in FDA's budget 
request. These reductions will be accomplished through attrition or by 
assigning staff to other duties. The Agency estimates that two of these 
FTE will be saved in the legislative and public affairs functions 
before they are transferred to DHHS as proposed in the fiscal year 2003 
request.
                     botanical dietary supplements
    Question. What kinds of scientific studies should be performed on 
dietary supplement products that are on the shelf in order to assess 
their quality?
    Answer. The quality of marketed products can be assessed by 
analysis of product composition to determine that the claimed 
ingredients are present in claimed amounts and that the product is 
within tolerable limits for contaminants such as pesticides and heavy 
metals. The scientific studies that are needed to provide the tools 
necessary to do these assessments include the chemical and genetic 
characterization of authenticated botanical and other ingredient 
sources, the development and validation of analytical methods for 
identifying and quantifying the key biologically active components and 
contaminants in ingredient sources, and the development of validated 
and standardized reference materials to provide a basis for analytical 
laboratories to confirm the accuracy and reliability of the analyses 
done in their own laboratories. Studies are also needed to identify 
factors that affect the stability of ingredients through processing and 
shelf-life.
    Question. What scientific information is needed to help the FDA 
determine if the dietary supplements on the market are safe?
    Answer. Ingredients need to be characterized to identify the 
components with biological activity, and the conditions of use under 
which these components are effective and safe. An assessment of the 
biological effects of combinations of product components and 
ingredients is also needed. Also needed are evaluations of the 
potential for lifestyle and other factors that may affect the safety of 
marketed products, including the possibility of adverse interactions 
with drugs being used by consumers. The investigations of biological 
activity and safe conditions of use by consumers rely on laboratory 
that is in vitro evaluation of biomarkers of biological activity, 
animal and human studies.
    Question. Has a study been done to assess the overall safety of 
dietary supplements that are being sold in the U.S.?
    Answer. The safety of dietary supplements being sold in the U.S. is 
generally assessed on an ingredient- and product-specific basis. To 
date, a limited number of such studies have been done. On a more global 
basis, FDA has several activities underway to monitor the overall 
safety of marketed dietary supplements. Through its MEDWATCH program, 
FDA routinely monitors and evaluates reports of adverse events 
associated with the use of dietary supplement products. FDA has 
contracted with the Institute of Medicine of the National Academy of 
Sciences to develop a framework and model monographs for evaluating 
dietary supplement ingredient safety issues. FDA has also recently 
instituted a Dietary Supplement Subcommittee under the Agency's Food 
Advisory Committee to advise the Agency on dietary supplement 
scientific issues, including issues relating to the safety of dietary 
supplement products.
    Question. How will the public be served better by conducting these 
scientific studies?
    Answer. Results from scientific studies on dietary supplement 
ingredients and products can be used to provide greater understanding 
of the biological effects of these products, the conditions of use 
associated with both effectiveness and safety concerns, and the 
development of more sophisticated tools to ensure that marketed 
products contain what they claim to contain, do not contain 
contaminants at unsafe levels, and have adequate scientific 
substantiation for label information and claims. Thus scientific 
studies will enhance our ability to define and monitor the safety of 
products under their intended conditions of use, to evaluate the 
truthfulness of label information, and to identify conditions of use 
that are contraindicated and for which label warnings are needed.
    Question. How would the FDA use the additional funds that you have 
requested to improve the quality of dietary supplements?
    Answer. I would be happy to answer that for the record.
    [The information follows:]
                                 caers
    Fiscal year 2002 funds are being used for the design, development, 
implementation, and maintenance of the CFSAN Adverse Event Reporting 
System (CAERS). The FDA intends to use fiscal year 2002 funds for:
  --Scanning and redaction of adverse event reports,
  --Data entry of adverse event reports,
  --Alert letters to manufacturers,
  --Design and development of the CAERS database,
  --Migration of legacy adverse event data into CAERS,
  --An electronic link to the FDA Office of Regulatory Affairs Field 
        Accomplishment Compliance Tracking System (FACTS), and,
  --CFSAN thesaurus development.
    CAERS is currently undergoing user acceptance testing, training, 
and some technological improvements.
    In September 2001, FDA implemented a cooperative agreement with the 
National Center for Natural Products Research (NCNPR). This agreement 
between FDA and NCNPR created a partnership that allows for more 
efficient use of resources to identify and analyze specific components 
in botanical dietary ingredients, thereby enhancing overall public 
health by ensuring that dietary supplements are safe and their labeling 
is not misleading.
    The NCNPR cooperative agreement for fiscal year 2001 was awarded on 
September 28, 2001. Since the total Project Period is five (5) years, 
the additional 4 years of funding up to $1 million per year will depend 
upon acceptable performance and the availability of future fiscal year 
funding. In accordance with the procedures for supplementing 
cooperative agreements, FDA must announce its intent, through a Request 
for Application (RFA), to increase funding up to an additional $1 
million to the NCNPR cooperative agreement in the Federal Register. 
Once announced, NCNPR must submit a grant application to demonstrate 
how it will meet the objectives of the RFA. The application will go 
through a dual review process and FDA anticipates completing this 
process and awarding the money to NCNPR in September 2002.
    To date, the awarded monies (from fiscal year 2001) have been used 
to collect a number of authenticated botanical species for chemical 
profiling and characterization. The species include ephedrine alkaloid-
containing species (e.g., ephedra, ma huang), aristolochic acid-
containing botanicals, comfrey, germander, and blue and black cohosh. 
The NCNPR scientists are collaborating with FDA scientists to ensure 
usefulness for evaluating potential safety issues and to coordinate 
related FDA and NCNPR research activities. In this regard, FDA and 
NCNPR scientists have jointly presented results of their scientific 
collaborations at a professional meeting and are currently preparing 
co-authored scientific manuscripts for publication in peer-reviewed 
journals. The NCNPR is also completing plans for a scientific workshop 
on authenticating botanical ingredients for use in dietary supplements. 
The workshop will be held in August 2002 and will provide a basis for 
scientists from academia, government and industry to discuss the 
scientific issues involved in the authentication of botanical 
ingredients. The issues discussed in this workshop will have broad 
relevance for research, manufacturing and regulatory applications.
                         los angeles laboratory
    Question. Funding to complete the new Los Angeles laboratory was 
provided in the fiscal year 2002 Appropriations Act. Please provide a 
progress report on this project.
    Answer. Phase II completes the mechanical and electrical 
infrastructure and completely fits-out both the laboratory and the 
office at an estimated cost of $23.0 million. The total estimated 
construction cost of the project is $43.0 million.
    The contract for Phase II construction was awarded on November 29, 
2001. The Los Angeles Laboratory project is on schedule with a 
completion date of June 8, 2003, and the scheduled move-in is to begin 
in August, 2003. As of March, 2002, the total project is approximately 
45 percent complete.
    Currently, operating and maintenance costs at the present location 
are estimated at $779,000 for fiscal year 2002. When the Los Angeles 
Laboratory project is completed and fully operational, we expect the 
operating and maintenance costs to increase.
                      arkansas regional laboratory
    Question. No additional funding is included in the fiscal year 
request for the continued renovation of the Arkansas Regional 
Laboratory. Please provide us with an update on this project. What 
additional funds are needed to complete all phases of this project? 
Could construction funds be used in fiscal year 2003 to continue work 
on this project? How much would be needed?
    Answer. The first two phases of construction for Building 50 
completed exterior demolition, structural work, roofing repair, 
installation of an elevator and installation of a new exterior brick 
facade. The interior architectural fit-out of the space has not been 
completed nor has the installation of mechanical and electrical 
infrastructure. Once funds have been appropriated, the remaining phases 
will be completed within one year. The estimated buy-out cost in fiscal 
year 2003 for completing Phase III of ARL is $4.2 million. This amount 
was not included in the fiscal year 2003 request as higher Counter 
Terrorism priorities took precedence.
                                 ______
                                 

              Question Submitted by Senator Arlen Specter

                             food labeling
    Question. I understand that FDA has been sent a letter from the 
Center for Science in the Public Interest urging enforcement action 
regarding deceptive labeling of a product being marketed as a line of 
``Quorn'' foods, containing a mycoprotein ingredient. This ingredient 
is identified as ``mushroom in origin.'' Additionally, you may have 
received a letter from two professors in the Department of Plant 
Pathology at the Pennsylvania State University concerning the 
misrepresentation of this labeling and the need for further testing of 
the product's safety.
    Pennsylvania produces over 50 percent of all the commercially 
cultivated mushrooms in the United States. Consumers recognize this 
commodity in the produce section of the grocery store, as ingredients 
in prepared foods, or in restaurants as mushrooms. It is my 
understanding that these ``Quorn'' products do not, in fact, contain 
mushrooms.
    What is the current status of this issue before your Agency? I 
would like to be made aware of any response you have regarding this 
topic.
    Answer. FDA is currently evaluating the appropriateness of the use 
of the statement ``mushroom in origin'' in the labeling of Quorn food 
products containing a mycoprotein ingredient and whether this statement 
is false or misleading under section 403 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 343). If we determine that the labeling of 
these products is false or misleading, we will take appropriate 
enforcement action as warranted.

                         CONCLUSION OF HEARINGS

    Senator Kohl. We thank you, Dr. Crawford, gentlemen, for 
your testimony today. If there are no other questions or 
comments, this hearing stands recessed.
    [Whereupon, at 2:46 p.m., Wednesday, March 20, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]










AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2003

                              ----------                              

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

                       NONDEPARTMENTAL WITNESSES

    [The following testimonies were received by the 
Subcommittee on Agriculture, Rural Development, and Related 
Agencies for inclusion in the record. The submitted materials 
relate to the fiscal year 2003 budget request for programs 
within the subcommittee's jurisdiction.]

               Prepared Statement of the Ad Hoc Coalition

    Mr. Chairman, Members of the Subcommittee, this statement is 
respectfully submitted on behalf of the ad hoc coalition \1\ composed 
of the organizations listed below. The coalition supports sustained 
funding for Title I of Public Law 480 at a baseline program level that 
will ensure the continued viability of the program as a long-term food 
aid and market development initiative for American agriculture.
---------------------------------------------------------------------------
    \1\ The ad hoc coalition is composed of the National Council of 
Farmer Cooperatives, U.S.A. Rice Federation, National Association of 
Wheat Growers, U.S. Wheat Associates, Wheat Export Trade Education 
Committee, American Soybean Association, U.S. Canola Association, 
National Sunflower Association, American Maritime Congress, Maritime 
Institute for Research and Industrial Development, Transportation 
Institute, Sealift, Inc., TECO Transport Corporation, and Liberty 
Maritime Corporation.
---------------------------------------------------------------------------
    This statement is submitted at a time when the future of American 
food assistance programs is uncertain. The administration has proposed 
sharp reductions in total food aid for fiscal year 2003 and beyond, as 
well as a major restructuring of the Food for Progress program, which 
complements the assistance provided under both Title I and Title II of 
Public Law 480. The authorizing committees are in conference on the 
2002 Farm Bill, and both Houses of Congress have passed versions of the 
bill which would make significant changes in the statutory framework 
that governs the delivery of food aid to scores of countries throughout 
the world with at-risk populations. Notwithstanding this uncertainty, 
the Congress through the appropriations process must ensure that the 
guiding principles of U.S. food assistance policy are respected in the 
fiscal year 2003 budget cycle and beyond.
                 guiding principles of food aid policy
    Mr. Chairman, the coalition respectfully suggests that American 
food assistance policy is well-established and founded on certain 
guiding principles, including the following:
  --Meeting America's humanitarian obligation to sustain food 
        assistance programs, participation in which currently represent 
        more than 50 percent of all food aid worldwide.
  --Employing food assistance programs to promote long-term market 
        development for American agriculture on commercial terms.
  --Employing food assistance programs to promote respect worldwide for 
        American values and our economic system, thereby enhancing 
        goodwill toward America among disadvantaged populations that 
        are the breeding grounds for terrorism.
                    current food aid program levels
    Mr. Chairman, these principles of American food assistance policy 
have been supported strongly in recent years which is why America is 
the world leader in humanitarian assistance and food aid. In fiscal 
year 2000, programmed U.S. food aid reached 95 countries, and involved 
donations or concessional sales of 35 different commodities. The fiscal 
year 2000 program consisted of more than 6.7 million metric tons of 
grain equivalent, valued at more than $1.4 billion. In fiscal year 
2001, the final data, as reported on February 28, 2002 by the Foreign 
Agricultural Service, show that the United States shipped 6.36 million 
metric tons to 45 countries; consisting of 26 different commodities 
valued at more than $1.28 billion. The administration's USDA budget 
summary for fiscal year 2003 reports that the commodity value of 
shipments for the current fiscal year (2002) will be reduced in the 
section 416(b) donation program account alone by approximately $274 
million, resulting in the loss of more than 1.3 million metric tons of 
food aid shipments, as compared to the previous year's program levels.
            the administration's budget for fiscal year 2003
    Mr. Chairman, the administration proposes a further reduction in 
total food aid programming for fiscal year 2003. Food for Progress 
shipments supported by CCC funds would be eliminated; section 416(b) 
programming would be virtually phased out, with a drop in program 
levels from $650 million in fiscal year 2002 to an estimated $57 
million in fiscal year 2003.
    Overall, the administration's budget for fiscal year 2003 proposes 
food aid programming of approximately 3.9 million metric tons of grain 
equivalent. This consists of 3.7 million tons under the combined Food 
for Progress and Public Law 480 programs and approximately 200,000 
metric tons under the 416(b) donation program. The administration's 
proposal, in other words, calls for a one-year reduction in total food 
aid tonnage of 27 percent, with a 42 percent reduction of such 
shipments in just 3 years.
                  restoration of food aid programming
    Mr. Chairman, the coalition urges that food aid programming be 
restored to sustainable levels in the range of 5.0 million to 7.0 
million metric tons of grain equivalent in each fiscal year, beginning 
in fiscal year 2003.
    The administration proposes to increase baseline funding for the 
Title II program of Food for Peace from $850 million in fiscal year 
2002 to $1,185 million in fiscal year 2003. The coalition commends the 
administration for this initiative, which represents an increase in 
appropriated funding of nearly 40 percent over baseline. This request 
reflects the importance of the Title II program, and should be strongly 
supported by the subcommittee.
    The coalition, however, recommends that Congress, in restoring food 
assistance programming, recognize the significance and importance of 
the Title I program, which has been a pillar of American foreign policy 
for nearly half a century.
                   advantages of the title i program
    Mr. Chairman, the Title I program offers countries long-term loans 
and concessional payment terms for the purchase of U.S. agricultural 
commodities. As such, Title I has advantages over other food aid 
programs.
  --Resource Efficient.--Because Title I is a concessional loan 
        program, appropriations required to support Title I, under the 
        terms of the Federal Credit Reform Act of 1990, cover only the 
        subsidy cost, and not the full commodity value. In the 
        President's budget for fiscal year 2003, the subsidy cost of 
        the Title I program is established for the fiscal year at 75.11 
        percent. Thus, under the Title I program, Congress ships $1.00 
        worth of U.S. agricultural products at an appropriated cost of 
        just over 75 cents. Moreover, the Title I program currently 
        recovers more dollars for the U.S. Treasury in loan repayments 
        than it costs in annual outlays.
  --GATT-Legal.--The Title I program promotes market development while 
        remaining fully sanctioned by international trade 
        organizations. The high degree of concessionality of the Title 
        I program has resulted in its classification as a donation 
        program for GATT purposes.
  --Commercial Sales Stepping Stone.--The Title I program is designed 
        to operate in markets which are neither poor enough to warrant 
        donations nor rich enough to purchase commodities on commercial 
        terms. Over the decades, numerous countries have graduated from 
        Title I partners to commercial markets for a broad range of 
        U.S. agricultural products. In fact, 43 of the top 50 consumer 
        nations of American agricultural products were once recipients 
        of U.S. foreign aid in some form. Tomorrow's commercial 
        commodity markets are today's Title I partners.
                    conclusions and recommendations
    Mr. Chairman, the coalition is committed to maintaining U.S. food 
assistance programs at responsible levels designed to meet world food 
needs and promote the interests of American agriculture. Our 
recommendation is to maintain annual shipments of food assistance at 
program levels between 5.0 million and 7.0 million metric tons of grain 
equivalent. This can be accomplished, as in the past, with a blend of 
programs supported by direct appropriations and by CCC funding.
    The administration proposes an appropriation for Title I which 
would support a loan authorization level of $132 million at the 75.11 
percent subsidy rate. This is well below the appropriated level for 
fiscal year 2002, which supported new loans amounting to $154.7 million 
in commodity value. Because the administration proposes to fund all 
Food for Progress shipments from the Title I appropriated account, the 
effect of this policy choice would be to eliminate more than $100 
million in Food for Progress shipments made annually in recent years 
with CCC funding.
    The coalition recommends the following:
  --Title I program levels should be increased in fiscal year 2003, and 
        increased responsibly in each succeeding year so that the 
        unique advantages of the program, highlighted above, are not 
        lost.
  --Congress--through the fiscal year 2003 Agriculture Appropriations 
        Act--should direct the administration to establish a program 
        level for Food for Progress at not less than $100 million using 
        CCC funding (absent a Presidential declaration that such 
        amounts of food assistance are not required to protect American 
        interests).
  --Congress should ensure that the Global Food for Education Program 
        is codified, and that the Program is supported with adequate 
        funding, either through CCC funding or direct appropriations, 
        or a combination of both.
    Mr. Chairman, American farmers require strong commercial markets to 
maintain their share of the world trade in commodities. These markets 
are developed and often revitalized by Title I concessional sales. This 
program, which has been a bulwark of American food aid policy since the 
days of the Marshall Plan, deserves the strong support of your 
subcommittee, the Congress and the entire nation.
    The Title I program delivers more food assistance per dollar of 
investment than any other program. For this reason, Congress should 
reaffirm the principles which underlie Title I and provide increased 
funding for the program. Moreover, the Title I program is fully 
consistent with the administration's recently announced position that 
aid to developing countries be tied to their adoption of reforms and 
policies that make development lasting and effective.
    Together with other food aid programs, supported both with direct 
appropriations and CCC donations, the Title I program of Food for Peace 
will continue to promote American commercial and humanitarian interests 
and advance the cause of peace in the world thus ensuring America's 
continued leadership in humanitarian assistance and food aid and the 
prosperity of America's farmers.
    Thank you, Mr. Chairman.
                                 ______
                                 

 Prepared Statement of the Alachua County Board of County Commissioners

    Mr. Chairman: Thank you for allowing the Alachua County Board of 
County Commissioners to submit this written testimony before your 
Subcommittee regarding two significant projects. They are the Partners 
for a Productive Community Enhancement Initiative, and the Critical 
Services to Underserved Areas Initiative.
   partners for a productive community enhancement initiative ($2.3 
                     million in funding requested)
    In response to a spiraling crime rate in southwest Alachua County, 
the Alachua County Sheriffs Office requested help from the Board of 
County Commissioners in 1993. Specifically, the Sheriff reported that 
57 percent of its 911 calls came from an area that had only 3.2 percent 
of the County's population.
    The County Commission responded by providing $38,000 in funding for 
a Program Manager to staff the Partners for a Productive Community 
(PPC) Program in fiscal year 1994. The PPC was launched as a strategic 
planning effort with three goals: the establishment of neighborhood-
based services, the development of public/private partnerships and a 
focus on crime prevention. This Program has enjoyed great success due 
to the coordinated efforts of the Sheriffs Office, the Courts and the 
Alachua County Department of Community Support Services. Furthermore, 
since the inception of this Program, the County has budgeted over $1.6 
million to support the Program through the Community Support Services 
Department and Sheriff's Office. Additionally, over $2.4 million has 
been leverage from other county departments, local social service 
providers and the Sheriff's Office through a local law enforcement 
grant.
    The goal of the Sheriff's Office was to reduce the number of calls 
from the area, and to develop a relationship of trust with the area's 
residents. The goal of the Courts was to help with the swift 
prosecution of cases, and to increase personnel in key areas. Finally, 
the goal of the County's Department of Community Support Services was 
to develop and implement a neighborhood needs assessment, and to 
determine the social service needs in accordance with the results of 
the assessment. The Community Support Services Department was also 
responsible for developing public/private community partnerships, and 
community based organizations comprised of tenants, property owners and 
managers. Thus, this project represents a multi-agency strategy to 
stabilize, revitalize and sustain five specific neighborhoods of 
Alachua County. In addition to improving the area's basic 
infrastructure, Federal funding is also being requested to provide 
community recreational programs for the area's youth. These activities 
will provide positive alternatives to crime, and allow youth to 
participate first hand in community improvement programs. In doing so, 
these programs will build and encourage positive self-esteem, 
leadership skills and academic achievement. To complement these 
programs, additional improvements will be made in the community Safe 
Havens. Finally, the requested funding will also allow the PPC to 
expand this successful demonstration program into other at risk Alachua 
County communities such as Archer, Florida. Specifically, the PPC will 
develop a partnership strategy to address the unmet needs of health 
care, education, training, employment, youth recreation and 
transportation for the residents of Archer.
    This request for Federal funding is justified by the tremendous 
improvements and accomplishments that have been made in these 
neighborhoods since 1995. These achievements include: free community 
day care for 75 children, 30 community day care slots, 24 in-home day 
care slots, the creation of 30 new jobs by the Early Progress Center, 
the reduction in 911 calls from 57 percent to 14 percent of total calls 
in the area, and substantial increases in the property values for four 
of the five neighborhoods.
    Furthermore, the implementation of seasonal recreation programs in 
the targeted communities by the Y.M.C.A. has been instrumental in 
providing positive, character building activities for children, 
teenagers and adults. Day camps are provided during the summer months, 
and back-yard sports are provided at the end of the school day during 
the school year. In addition, two 4-H Clubs serving 60 neighborhood 
children were established along with after school and community teen 
programs. Adult literacy and GED classes were made available at a 
nearby school campus. Finally, other programs have been established for 
the purpose of creating a sustainable neighborhood. These programs 
include quarterly informational forums concerning small business 
development, educational opportunities, self-help seminars, budget 
management and landlord/tenant issues.
    With respect to community-wide improvement programs, a total of 
nine neighborhood cleanups were completed this year. With the active 
involvement of the residents of the neighborhoods, the Alachua County 
Office of Codes Enforcement has been able to reduce from twenty to two 
the number of abandoned and vandalized buildings. Furthermore, a new 
Waste Collection Ordinance which was supported by the PPC permits the 
efficient and timely citation of violators.
    The sustaining factor within this Program is the formally organized 
Partners for a Productive Community Council. The Council is the guiding 
force that deals with issues and determines unmet needs. For example, a 
block captain organization was started this year with the assistance of 
the PPC Council, and the Alachua County Sheriff's Office. This group 
monitors and manages crime prevention programs block by block.
    In recognition of the numerous accomplishments described above, the 
PPC received the National Association of Counties' Achievement Award in 
1996 for distinguished and innovative contributions to improving county 
government. Additionally, the League of Women Voters presented the 
County with a similar award for outstanding community service.
    Furthermore, in December 1999 Alachua County received Official 
Recognition from the Executive Office of Weed and Seed for two of the 
neighborhoods being served by the Partners for a Productive Community 
Program. Pursuant to this recognition, these communities have been 
awarded a $175,000 Weed and Seed Grant for prevention and intervention 
strategies focusing on Cedar Ridge and Linton Oaks neighborhoods. This 
grant will further strengthen the long-term efforts to improve the 
quality of life in these neighborhoods.
    As noted above, the Federal funding requested will also be used to 
expand the successful Partners Initiative into the rural community of 
Archer, which is located in the southwestern portion of Alachua County. 
Archer and the rural areas surrounding it have a population of 6,348, 
of which 16 percent fall below the poverty level. While the City of 
Archer has one elementary school, emerge fire and police services are 
contracted from Gainesville/Alachua County. There are also two public 
housing communities, and a small obsolete community center which is 
used as a congregate meal site for senior citizens. Consequently, many 
of Archer's residents travel to Gainesville for employment, social 
services, recreational activities, adult and continuing education and 
health care.
    Recently, the University of Florida, School of Nursing received 
$200,000 from the Florida Legislature to provide primary health care 
through a clinic based in Archer. Presently, this clinic is on the 
State Department of Health's list to be eliminated due to the limited 
area that it serves. Should this occur, there will be a need for 
additional funds to meet the health care needs in this area. Thus, a 
portion of the Federal funding in this request could be channeled 
through the Alachua County Health Department in our continuing effort 
to develop partnerships, maximize resources and expand services to the 
citizens of Alachua County through our rural service initiative.
    Employment opportunities, recreation for teens and outreach social 
services continue to be a challenge for the community of Archer. 
According to the Alachua County Sheriff's Office, Archer's crime rate 
is disproportionately high for a community its size. In 2000, the 
Alachua County Sheriff's Office received 2,657 calls for service. Of 
the dispatched calls, 30 were assaults and batteries, and 5 were for 
sexual battery. The largest number of dispatched calls (869) concerned 
burglary and theft.
    In conclusion, Alachua County is requesting $2.3 million in Federal 
funding to continue its highly successful and award winning 
neighborhood revitalization programs; and to expand these successful 
model programs to other neighborhoods, including the City of Archer, 
Florida.
   critical services to underserved areas ($1.81 million in funding 
                               requested)
    Without a safe and reliable source of public utilities, the 
residents who live in the southeastern portion of the City of 
Gainesville and Alachua County must rely upon the use of obsolete 
private water systems, septic tanks and propane gas for their utility 
services. In addition to the health and safety concerns, this lack of a 
public utility infrastructure serves as a deterrent to the area's 
economic revitalization.
    While several subdivisions in the target area are in immediate need 
of a public utility infrastructure, it is the County's intent to 
approach this model program by focusing on the Kincaid Road subdivision 
as Phase I of the Initiative. This subdivision currently has over 150 
homes on septic tanks, with many of them also using propane gas for 
heating. Historically, there are numerous health risks associated with 
malfunctioning septic tanks, including the possible contamination of 
ground water which could lead to the development of diseases within the 
area.
    Gainesville Regional Utilities (GRU) indicates that the 
infrastructure needed to provide wastewater service to this area 
includes: the wastewater collection system lift stations; grinder pumps 
and on-site plumbing to connect to a new gravity sewer system. GRU 
estimates that the construction and extension of a central wastewater 
system to the Kincaid Road subdivision will cost approximately 
$1,585,000, while the extension of the natural gas lines is estimated 
at about $225,000. Thus, the total cost of Phase I of this model 
program is $1.81 million. Finally, it's important to note that GRU is 
currently planning wastewater facilities to serve the Kincaid Road 
subdivision, and may perform additional engineering work as in-kind 
services. The additional engineering work is estimated to cost 
approximately $121,000.
    While Alachua County is requesting assistance from the Federal 
Government in funding this portion of the model program for the area's 
revitalization, the County has already begun numerous other programs 
and projects that have had an positive, significant impact on the 
area's redevelopment. For example, in July of 1996, the County began a 
series of neighborhood meetings in Greentree Village, which is a 
subdivision of about 60 households in the target area. Residents were 
encouraged to express their concerns about the area's problems and 
establish priorities. As a result of these meetings, the County 
assisted Greentree Village in the establishment of a crime watch 
program and the creation of a backyard recreation program through the 
Y.M.C.A.
    Several new public buildings and facilities have also been located 
within the target area to encourage its redevelopment. During 1998/99, 
Alachua County expended about $5.5 million to purchase and renovate the 
Eastgate Shopping Center for the Alachua County Sheriffs Office. This 
new facility is 56,200 square feet in area, and it serves as the base 
of operations for the County's 239 sworn deputies, and 260 non-sworn 
administrative and support personnel. Completing this law enforcement 
complex is the new Alachua County Communications and Emergency 
Operations Center which recently opened adjacent to the new Sheriffs 
Office. This facility cost about $5.3 million and operates as a joint 
center for both Alachua County and the City of Gainesville.
    Finally, with a contribution of approximately $430,000 from Alachua 
County, the City of Gainesville has completed a new Technology 
Enterprise Center (TEC) within the target area. This $3.0 million 
business incubator consists of a new, two-story 30,000 square foot 
facility located in the City of Gainesville Enterprise Zone. Over 60 
percent of the construction funds for the TEC were provided by a grant 
from the U.S. Economic Development Administration. The purpose of 
business incubators is to promote the growth and development of new 
enterprises by providing flexible space at affordable rates, a variety 
of support services, access to management, technical and financial 
assistance, and opportunities to interact with other entrepreneurs and 
business experts. Even though this facility has just recently opened, 
about 13,000 square feet of the TEC has already been leased to a 
leading technology accelerator company specializing in speeding 
pioneering technology entrepreneurs to the market. It is expected that 
when fully operating, the TEC will foster the creation of higher wage 
jobs, the expansion of the tax base and the augmentation of new 
business development within the target area.
    In conclusion, Alachua County is undertaking the redevelopment of 
an existing urbanized area, which includes the modernization of its 
utility infrastructure. These improvements will build upon numerous 
previous programs and projects that have already had a positive impact 
upon the area. Phase I of this model program includes the extension of 
a central wastewater system to the Kincaid Road subdivision, as well as 
the extension of natural gas lines. The support of this Phase of the 
project through Federal funding will serve as an impetus for the 
continued revitalization of these residential areas.
               concluding comments for written testimony
    The two initiatives described above represent well-conceived 
programs that address the social, physical and economic needs of the 
citizens of Alachua County. Furthermore, they demonstrate the County's 
continuing commitment to programs that emphasize a balance between 
environmental protection, economic development and social equity for 
all of the residents of the County. Therefore, we hope that the 
Subcommittee will find these two critically important projects worthy 
of your support. Thank you for your consideration.
                                 ______
                                 

 Prepared Statement of the Alliance for Continuing Nutrition Monitoring

    Mr. Chairman and other members of the Subcommittee, thank you for 
allowing the Alliance for Continuing Nutrition Monitoring the 
opportunity to submit this testimony to this Subcommittee. The alliance 
consists of 12 groups representing farmers, health professionals, 
physicians, scientists, food technologists, educators, and food 
manufacturers. The alliance is a diverse constituency of approximately 
15 million individuals, and is united in its support of human nutrition 
monitoring. The true tally of supporters could include the entire 
population because everyone gains from the valuable contributions of 
human nutrition research, as we illustrate in our testimony. I am Nancy 
Chapman, a public health nutritionist, member, and volunteer of several 
of the groups represented here today. I have used the health and 
dietary information from the Federal surveys and the findings of 
Federal nutrition research throughout my professional career as an 
evaluator, educator, policy analyst, and communicator.
    Chairman Kohl, you and your committee members have long been 
champions of agriculture and human health and recognize that the 
advances in these areas depend in large measure on high quality 
research, conducted in both public and private institutions. Because of 
your on-going support of USDA's role in food security and WIC, as well 
as your concerns about prudent fiscal spending, the Alliance asks for 
your support of data collection essential to policy making in all of 
these areas. The Alliance wants to describe to you and your esteemed 
colleagues the numerous uses that policy-makers, public health 
professionals, food companies, commodity groups, food technologists, 
and scientists have made of dietary data. Health and dietary 
information gathered from the USDA/DHHS survey is critical to the 
nation and plays a key role in shaping a variety of policies and 
programs including food safety, food labeling, child nutrition 
programs, food assistance, and dietary guidance. Human nutrition 
monitoring helps:
  --Establish a benchmark of what Americans usually eat that is 
        essential to identifying sub-populations that might be at risk 
        of intentional or unintentional contaminants (i.e. food 
        additives, food-borne illnesses, or pesticides)
  --Develop a targeted WIC package that meets the needs of a growing 
        diverse constituency
  --Determine the Thrifty Food Plan that forms the basis for food stamp 
        benefits
  --Identify specific groups at-risk of malnutrition and diet-related 
        diseases such as obesity, heart disease, cancer, and diabetes 
        to implement effective public health programs targeting the 
        most nutritionally vulnerable individuals
  --Analyze non-typical foods, phytochemicals and other health 
        promoting components in our food supply that enhances the 
        world-renowned USDA food composition database
  --Create and enhance nutrition education and marketing campaigns, 
        such as the National 5-A-Day for Better Health Program
  --Formulate nutrition labeling policies and monitoring food 
        fortification programs, such as the effectiveness of folate 
        fortification to reduce the incidence of neural tube defects 
        (NTD)
Return on Investment
    Conservatively, the approximate $7 million investment in USDA 
nutrition monitoring guides over $40 billion in food assistance 
expenditures. The Federal investment in USDA dietary survey activities 
has also guided the well-known nutrition labeling program and the USDA/
DHHS Dietary Guidelines for Americans. Research also guides the 
nutrition education programs in schools, preschools, hospitals, and 
elderly feeding programs as well as such public campaigns as, Five-A-
Day for Better Health. These and other nutrition education programs 
have the potential for reducing some of the $200 billion annual costs 
for treatment and care of diseases linked strongly to nutrition, such 
as cardiovascular diseases, high blood pressure, diabetes, cancer, 
obesity, and osteoporosis. Virtually all major chronic and degenerative 
diseases are linked to nutrition. This will become increasingly 
important as our country's population ages.
Request for Congressional Support
    To ensure that the USDA/ARS nutrition monitoring activities for 
fiscal year 2003 continue and include 2 days of dietary recall on 5,000 
individuals, interviews for diet and health knowledge, food program 
information, continued updating of food composition data, and prompt 
coding and processing information, Congress should appropriate $7 
million or an increase of $4 million above the fiscal year 2002 budget.
                       justification for request
    Under an agreement between the Department of Health and Human 
Services Centers for Disease Control and Prevention (CDC), National 
Center for Health Statistics (NCHS), and the United States Department 
of Agriculture Agricultural Research Service (ARS/USDA), the ARS and 
NCHS agreed to collaborate on a program of national nutritional 
monitoring. This agreement establishes a cooperative diet and nutrition 
monitoring program integrating the previously conducted Continuing 
Survey of Food Intakes by Individuals (CSFII) and the National Health 
and Nutrition Examination Survey (NHANES) in 2002.
    The Department of Agriculture, through its Agricultural Research 
Service, has conducted the CSFII, which was designed to assess food 
consumption and related behavior in the U.S. population using personal 
interviews. The CSFII was conducted periodically with the most recent 
survey being conducted in 1998. The Department of Health and Human 
Services, through its National Center for Health Statistics (part of 
the Centers for Disease Control and Prevention), conducts the NHANES, 
which was designed to assess the health and nutritional status of the 
U.S. population using personal interviews and direct physical 
examination. NHANES, previously periodic, began continuous operation in 
1999.
    The backdrop for integrating the CSFII and NHANES is the National 
Nutrition Monitoring and Related Research Act (NNMRRA) of 1990, which 
set goals and mechanisms to bring about greater coordination of 
nutrition monitoring activities across agencies. More recently, 
leadership of DHHS and USDA has identified more comprehensive 
integration of these two surveys as a major priority.
              nutrition monitoring beginning january 2002
    Data are being collected from a nationally representative sample of 
5,000 persons each year as part of the NHANES. The contents of the 
nutrition component of the survey will include initially two 24-hour 
recalls (first in person, second by telephone), a dietary supplement 
interview, body measures, and nutritional biochemistries. In 2003, the 
USDA dietary survey activities will require approximately $7 million in 
fiscal year 2003, a $4 million increase over the 2002 budget, to 
collect, code, and process promptly 2 days of dietary recalls of 5,000 
individuals, collect information on food program participation and diet 
and health knowledge, and update continuously the food composition data 
with information and comprehensive nutrition monitoring system. Without 
adequate funding to carry out these basic USDA nutrition monitoring 
activities, several critical uses of dietary and food composition data 
are at risk:
Food Assistance
    To focus Federal food programs where they are most needed.
  --Food consumption data underpin the Thrifty Food Plan (TFP) on which 
        the food stamp benefit levels are based.
  --Survey data are used by programs such as the Supplemental Food 
        Assistance Program for Women, Infants, and Children (WIC) in 
        determining what nutrients and foods should be targeted in the 
        WIC food package for recipients; data are also used to 
        determine the size of the potential WIC population.
Dietary Guidance and Nutrition Education
    To devise strategies to lower the risk of malnutrition as well as 
chronic diseases such as heart disease, cancer, diabetes, and 
osteoporosis.
  --The nutrition monitoring system provides information that assesses 
        changes in food consumption patterns of populations that may be 
        of relevance to health.
  --USDA's Food and Nutrition Services use the Diet and Health 
        Knowledge Survey to develop nutrition education programs.
  --USDA/DHHS Dietary Guidelines Advisory Committee uses dietary data 
        in evaluating the Dietary Guidelines for Americans.
  --USDA uses the dietary data to develop and evaluate the Food Guide 
        Pyramid.
  --NCI and Produce for Better Health Foundation use food consumption 
        data to track progress toward the ``5 servings of fruits and 
        vegetables-a-day'' goal.
Biosecurity
    To obtain reliable estimates of the prevalence of eating certain 
foods which may be the vehicles for intentional or unintentional 
bioterrorist attacks.
  --USDA could identify segments of populations at risk if specific 
        foods are found to be contaminated and obtain enough 
        information to craft useful educational messages for consumers 
        if such an attack occurs.
Public and Private Health Programs
    To assess the nutritional data on the quality of diets and the 
effects of health outcomes for the population and reduce health care 
costs due to lower incidence of chronic diseases.
  --The FDA uses the nutrition monitoring system to formulate food 
        fortification policies, define public health needs, determine 
        target and non-target populations for fortification, track how 
        fortification affects the population, and determine how 
        consumers use dietary supplements.
  --The NIH, CDC, public health agencies, and voluntary health 
        organizations use the nutritional status data to identify 
        populations at risk of obesity, heart disease, cancer, and 
        other diet-related diseases.
Food Safety Regulations
    To provide data for estimation of possible intake of incidental 
contaminants, pesticides, and naturally occurring toxic substances as 
part of regulating the use of certain substances.
  --With passage of the Food Quality Protection Act, EPA relies on 
        USDA's dietary consumption data as a critical component in its 
        risk assessments and pesticide decisions. EPA incorporates USDA 
        data on dietary consumption, pesticide residues found on food 
        and in water, and actual pesticide use on crops to measure 
        exposure to pesticides when registering or reassessing a 
        pesticide product. If anything, EPA needs more USDA dietary 
        intake data, not less, in order to enhance good science in FQPA 
        implementation. A reduction in available dietary intake data 
        will hinder EPA's ability to make FQPA decisions.
  --The Codex Alimentarius, an international policy making 
        organization, utilizes the food consumption data for policy 
        decisions regarding food additives, pesticides, food labeling, 
        and other critical issues.
Food Product Development and Marketing
    To generate a more nutritious food supply by identifying health-
promoting properties of plants and animal foods in a balanced diet and 
to identify public health problems that can be impacted through 
nutrient fortification, macronutrient modification, and interventions 
to prevent obesity.
  --Farmers have bred livestock and plants to improve nutritional 
        composition and appeal to health-conscious consumers. 
        Monitoring data are essential in assessing these new foods.
  --U.S. food industry currently uses the nutrition monitoring system 
        data to reformulate products, and create new ingredients and 
        products. Monitoring data are used when a new additive or 
        processing method is introduced.
    An additional $4 million of funding will be needed to better 
estimate nutritional risk, exposure to environmental contaminants, and 
dietary exposure to pesticides and other substances based on usual food 
intake. This supplement in the budget is critical in light of EPA's 
review of pest control substances under the Food Quality and Protection 
Act.
Food Composition data must reflect the current food supply
    USDA has progressed in revising and maintaining food composition 
tables to analyze the food consumption data from the combined NHANES 
and CSFII, however, much more is necessary to make the nutrient 
database more efficient and effective. With the rapid advancements in 
technology to lower fat, sodium, and calories in foods and added 
nutrient fortification, estimates of food and nutrient intakes would be 
rendered inaccurate if food composition databases are not kept current. 
Also, as science identifies health-promoting food components, USDA 
needs to identify and quantify these substances (i.e., phytochemicals) 
in a large array of foods. Forming partnerships with the food industry 
and commodity groups would permit updating databases, using information 
developed for nutrition labeling or similar purposes.
Role of private sector in advancing human nutrition research and 
        monitoring
    Alliance members have supported basic nutrition research and 
clinical trials, conducted food and nutrition research, surveyed 
consumers about dietary and health behaviors, and assessed food 
consumption patterns for selected groups. We all agree that the Federal 
Government must maintain the primary responsibility for gathering 
comprehensive data on all population groups and building the foundation 
of fundamental nutrition monitoring research.
Conclusion
    Senators, you face difficult decisions about how to set priorities 
for agriculture research dollars. The practical public and private uses 
of the data from nutrition research and monitoring efforts at USDA, 
outlined in our testimony, are clear evidence that USDA nutrition 
monitoring activities warrant your continued support. The Alliance 
wants you to view nutrition research as a safeguard on Federal 
expenditures. For every $1 spent on USDA nutrition monitoring research, 
we assure that $5,000 of Federal funds allocated for USDA food 
assistance programs are spent wisely. Factoring in the various ways the 
USDA nutrition monitoring research data are applied, this multiplier 
would be astronomical.
    We thank you for giving the alliance a voice to explain the 
significant benefits of nutritional research to agriculture and the 
public well-being.
Group supporters
    American Dietetic Association, American Heart Association, American 
Institute for Cancer Research, American Public Health Association, 
Consumer Federation of America, CropLife America, Grocery Manufacturers 
of America, Institute of Food Technologists, National Food Processors 
Association, National Association of WIC Directors, and Produce for 
Better Health Foundation.
                                 ______
                                 

       Prepared Statement of the American Farm Bureau Federation

    The American Farm Bureau Federation has identified four USDA 
program areas for which priority fiscal year 2003 funding is essential. 
They are:
  --programs key to the proper implementation of the Food Quality 
        Protection Act (FQPA);
  --programs to expand foreign markets for agriculture;
  --programs to ensure the development and use of biotechnology 
        products; and
  --programs to guarantee proper implementation of CAFO regulations.
    These priorities are highlighted in the first portion of this 
statement. The second portion contains a list of additional programs 
supported by Farm Bureau.
     programs key to the proper implementation of the food quality 
                         protection act (fqpa)
    USDA has a critical role in achieving satisfactory implementation 
of the Food Quality Protection Act (FQPA). Over the next 5 years (by 
the FQPA deadline of 2006), USDA must work with EPA, agricultural 
producers, food processors and registrants to ensure that agricultural 
data and interests are fully considered in the tolerance reassessment 
and pesticide re-registration process. During that time, between 5,000 
and 6,000 separate food and feed tolerances must be reassessed for 
nearly 400 different active ingredients. That process will affect 
nearly 600 specialty crops, all major row crops and animal production. 
USDA must have the resources to provide crucial economic benefits and 
use information to the EPA to participate fully and effectively in the 
tolerance reassessment process.
    The following offices and programs are critical to proper 
implementation of FQPA and must be funded at increased levels:
    Office of Pest Management Policy (OPMP).--Primary responsibility 
for coordination of USDA's FQPA obligations and interaction with EPA. 
Major funding increases are necessary to review the tolerance 
reassessments, particularly dietary and worker exposure information; to 
identify critical use, benefit and alternatives information; and, to 
work with grower organizations to develop strategic pest management 
plans.
    Agriculture Research Service (ARS).--Integrated Pest Management 
(IPM) research, minor use tolerance research (IR-4) and research on 
alternatives to methyl bromide. The Office of Pest Management Policy 
should also be funded at increased levels with funding being designated 
under the Secretary of Agriculture's office, rather than ARS.
    Cooperative State Research, Education and Extension Service 
(CSREES).--IPM research grant, IPM application work, pest management 
alternatives program, expert IPM decision support system, minor crop 
pest management project (IR-4), crops at risk from FQPA implementation, 
FQPA risk avoidance and mitigation program for major food crop systems, 
methyl bromide transition program, regional crop information and policy 
centers, Pesticide Impact Assessment Program (PIAP) and the pesticide 
applicator training program.
    Economic Research Service (ERS).--IPM research, pesticide use 
analysis program and the National Agriculture Pesticide Impact 
Assessment Program (NAPIAP).
    Additional funding for FQPA implementation activities is needed in 
the following programs.--National Agriculture Statistics Service (NASS) 
pesticide use surveys, Food Safety Inspection Service (FSIS) increased 
residue sampling and analysis, Agriculture Marketing Service (AMS) and 
the Pesticide Data Program (PDP).
        programs to expand foreign markets for u.s. agriculture
    Creating new overseas markets and expanding those that we have is 
essential for a healthy agricultural economy. Continued funding of 
export development programs is fundamental to improving farm income in 
the short and long term. We recommend maximum funding of all export 
development programs consistent with our commitments under the World 
Trade Organization trade rules.
    Foreign Agricultural Service (FAS).--AFBF supports an overall 
increase in funding for the Foreign Agricultural Service's 
International Programs and Activities. While AFBF supports proposed 
budget increases in export credit and export subsidy programs and 
maintenance of market development program areas, it is nonetheless 
disappointed that funding for foreign food assistance programs, 
particularly the Food for Progress and Section 416(b) programs have 
been reduced by more than $260 million. One consequence of this 
reduction is proposed to be the Global Food for Education (GFE) 
program. AFBF strongly supports the GFE as a means to eliminate hunger 
and foster educational improvement in developing countries. Funding for 
the GFE program should be restored to at least its fiscal year 2002 
level.
    Public Law 480.--We support increased funding for Public Law 480 
programs, the primary means by which the United States provides foreign 
food assistance. The Public Law 480 programs provide humanitarian and 
public relations benefits, positively impact market prices and help 
develop long term commercial export markets. AFBF is opposed to the 
transfer of all Public Law 480 Title II funding and program 
responsibility to USAID. USDA is better positioned to administer the 
program and its funding in close cooperation with the agricultural 
community.
    GSM Credits.--AFBF supports the full funding of the GSM credit 
guarantee programs. These important export credit guarantee programs 
can help make commercial financing available for imports of U.S. food 
and agricultural products on deferred payment terms.
    Market Access Program (MAP) and Foreign Market Development Program 
(FMD).--Congress should fully fund the MAP and FMD programs. These 
programs need the expertise of a fully supported Foreign Agricultural 
Service that is expanded to cover all existing and potential market 
posts.
    Export Enhancement Program (EEP).--The 1996 FAIR Act authorizes 
direct export subsidies of U.S. agricultural products through the EEP 
program through fiscal year 2002 to counter the unfair trading 
practices of foreign countries. AFBF supports the full funding and use 
of this program in all countries, and for all commodities, where the 
U.S. faces unfair competition.
    Dairy Export Programs.--Farm Bureau supports full funding and use 
of the Dairy Export Incentive Program to allow U.S. dairy producers to 
compete with foreign nations that subsidize their commodity exports.
    Sanitary and Phytosanitary Management.--To address the need for 
additional inspections created by increased volumes of imports and 
exports, Farm Bureau supports increased funding for USDA's Animal and 
Plant Health Inspection Service (APHIS).
  programs to ensure the development and use of biotechnology products
    USDA must take the lead in biotechnology coordination efforts. It 
is essential that the Department act in a timely manner to evaluate and 
move approved products and technologies to the marketplace. USDA should 
develop a positive national strategy for biotechnology research, 
development and consumer education.
    APHIS plays an important role in overseeing the permit process for 
products of biotechnology. Funding and personnel are essential for 
ensuring public confidence in biotechnology.
    Grain Inspection, Packers and Stockyards Administration (GIPSA).--
Farm Bureau supports sufficient funding for the establishment and 
maintenance of a GIPSA biotechnology test certification laboratory. The 
creation of such a laboratory is a key element to the acceptance of 
biotechnology. The ability to accurately test and identify products of 
biotechnology for identity preserved and segregation purposes are 
essential.
    Codex Alimentarius Commission.--Farm Bureau supports adequate 
funding for the U.S. CODEX office so that it can adequately represent 
American interests in this important body which develops the 
international food safety standards used as guidance by the World Trade 
Organization. Increasingly, biotechnology is the focus of CODEX 
discussions where an ongoing international effort is being led by the 
European Union to place limits on our ability to export products of 
biotechnology by incorporating the precautionary principle into the 
CODEX general principles or biotechnology labeling discussions.
    Agriculture Research Service (ARS).--Farm Bureau supports 
sufficient funding for plant-breeding research programs because they 
are important for maintaining a broad-based research and assuring 
advancement of the technology.
                  proper implementation of cafo rules
    The proposed Concentrated Animal Feeding Operation (CAFO) 
regulation would impose billions of dollars in costs on agriculture 
across the country. This attempt at regulatory expansion over 
agriculture is not necessary to achieve improvement to nonpoint source 
water quality. Voluntary, incentive-based programs have proven 
effective by directly assisting farmers to obtain results while 
maintaining the farm business.
    Environmental Quality Incentives Program (EQIP).--EQIP is an 
important program for assisting producers in dealing with increased 
water quality regulation. We support a substantial increase in EQIP 
funding over the previous years.
    Conservation Technical Assistance (Natural Resources Conservation 
Service).--Conservation program delivery and technical assistance must 
be a priority for NRCS funding. Emphasis should be placed on 
traditional technical assistance and the development of reliable 
resource data for assisting producers dealing with nutrient management.
                         other issues: research
    For over a century the food and agricultural research, extension 
and education system has propelled U.S. agriculture into world 
preeminence. It is imperative that the system supports, builds and 
maintains facilities and a critical mass of well-trained scientists in 
the public sector to ensure that the U.S. remains the leader in global 
agricultural production. Farm Bureau recommends a doubling in 
agriculture research funding over the next 5 years.
    Emerging Diseases and Exotic Pests Research.--Disease has a direct 
impact on food safety and is fundamental to international trade. 
Funding is urgently needed to develop rapid diagnostics, vaccines and 
products necessary to protect U.S. plants and animals from disease 
outbreaks that occur naturally as well as those that could be 
intentionally introduced. Farm Bureau supports full funding for ARS 
emerging diseases and exotic pests research, including ways to prevent 
the importation of exotic species in the ballast tanks of cargo ships.
    Animal Pest Research.--Farm Bureau believes the control of plant 
and animal pests is an important factor in reducing farm costs. Farm 
Bureau supports research funding for TSE (Transmissible Spongiform 
Encephalopathies)--especially scrapie, Johne's, PRRS (porcine 
reproductive and respiratory syndrome), anthrax, cryptosporidosis, FMD 
(foot-and-mouth disease), VS (vesicular stomatitis), BSE (bovine 
spongiform encephalopathy), pseudorabies, hog cholera, salmonella, blue 
tongue in livestock, E.coli, fire ants, and ways to immunize wildlife 
against rabies.
    Plant Pest Research.--Farm Bureau recommends continued research and 
implementation of detection, exclusion, control and eradication 
measures for plant pests including research for:
  --prevention of aflatoxins and the use of aflatoxin-affected 
        commodities;
  --lessening the impact of gypsy moth and the southern pine bark 
        beetle;
  --methods to halt the spread of the Asian Longhorned Beetle, a deadly 
        threat to maple trees;
  --an effective control of fire ants and ways to provide safer, 
        effective and practical treatments of multiyear certification 
        of field and container-grown nursery stock;
  --ways to manage domestic European honeybees in the area where 
        Africanized honeybees exist;
  --reducing the threat of the root-lesion nematode, Pratylenchus 
        neglectus; and,
  --smut and bunt diseases of cereals, including karnal bunt. Farm 
        Bureau supports funding for the Pest Detection Initiative.
    Food Quality and Safety Research.--Farm Bureau supports funding for 
research to ensure the safety of food. Specifically we support funding 
for research:
  --to ensure the safety of food additives;
  --on the irradiation (cold pasteurization) of food;
  --on inspection methods to eliminate the risk from pathogens;
  --food safety technology advances; and,
  --voluntary food safety guidelines to help prevent microbial 
        contamination of fresh produce.
    Aquaculture Research.--Farm Bureau supports full funding for the 
regional aquaculture centers and supports federally funded U.S. 
aquaculture research priorities that are developed with industry input 
and direction.
    Binational Agricultural Research and Development Fund.--Farm Bureau 
supports increased funding for BARD and other similar programs that 
maximize cooperative research efforts.
    Genome Research.--Access to diverse genetic resource materials is 
crucial for the development of new plant varieties that are more 
resistant to insect infestation and disease and more tolerant to other 
adverse environmental conditions. Genomic research is also important to 
improving the economical traits of importance in livestock and poultry 
that affect animal health and reproductive efficiency. Farm Bureau 
supports additional money for plant, animal and microbial genome 
research at USDA.
    Natural Resources Research.--Farm Bureau supports funding to study 
carbon credits and carbon sequestration. We favor continued research on 
reuse of water; conversion of saline waters; air and water pollution; 
water and soil conservation; recharging of groundwater basins; 
drainage; forestry management and utilization; restoration of strip-
mined areas; weather forecasting and modification; treatment of 
domestic, industrial and animal waste; coal desulfurization; causes of 
pfiesteria and other natural resource problems. We support aggressive 
research to address the inadequate scientific information concerning 
phosphorus.
    Research for new Products for Ag Commodities.--Farm Bureau supports 
increased funding for research and development for new commodities and 
for new uses of commodities currently under production, including 
biomass, biofuels and ethanol.
    Wildlife Pest and Predator Control Research.-- Farm Bureau supports 
funding for research to develop practical recommendations on methods to 
control wildlife pests. We also endorse research to document the losses 
of livestock and game animals caused by predators and the resultant 
economic loss.
    Health and Nutrition Research.--Farm Bureau supports funding of 
nutrition research on relationships between agricultural products and 
coronary heart disease and cancer. We urge more education and research 
on the impact of Lyme's Disease on animals and humans, and measures to 
control West Nile Virus.
                 other issues: animal and plant health
    Animal Health Emergency Management.--Farm Bureau supports funding 
to protect agriculture and the nation's food supply, especially in 
light of the terrorist attacks on September 11. Farm Bureau supports 
funding for animal health monitoring, the Agriculture Quarantine 
Inspection Program, programs to strengthen the capability of APHIS to 
assess and monitor outbreaks of diseases in foreign countries, funding 
for FSIS to improve the information technology infrastructure to 
improve risk management systems, research to develop improved 
detection, identification, diagnostic and vaccination methods to 
identify and control threats to animal and plant agriculture.
    USDA Biocontainment Facilities.--Farm Bureau appreciates the 
funding received last year for upgrading USDA facilities and security, 
however, more is needed. We support full funding for a joint APHIS and 
ARS facility at Ames, Iowa, to meet national needs for research, 
diagnosis and product testing for animal health. The existing 
facilities are antiquated and inefficient and without this new 
laboratory facility, the U.S. will fail to meet international standards 
and to provide the level of animal disease protection necessary to 
achieve a world-class National Animal Health Emergency Management 
System. We support adequate funding for USDA biocontainment facilities 
that are critical to maintaining world-class research on both foreign 
and domestic diseases. Adequate funding is needed for the Animal 
Disease Center, the National Veterinary Services Laboratory, the Center 
for Veterinary Biologics and the Poison Plant Disease Center.
    National Animal Health Emergency Management System.--Farm Bureau 
supports full funding for the National Animal Health Emergency 
Management System that was developed in cooperation with the states, 
industry and the veterinary profession. These monies will enhance 
APHIS's emergency preparedness and response capabilities to address 
emergency animal disease issues that threaten the U.S. food supply.
    Plant Pest Control.--Farm Bureau supports expansion of Plant 
Protection and Quarantine personnel and facilities to take care of 
increased plant imports and recommends support for the Q-37 plant 
import protocol. Farm Bureau supports funding for control and/or 
eradication programs for plant and animal pests including: 
grasshoppers; multiflora rose; autumn olive; Johnsongrass and other 
designated noxious weeds; eradication of fruit flies; Russian Wheat 
Aphid; gypsy moth; southern pine bark beetles; and Plumpox virus.
    Boll Weevil Eradication.--Farm Bureau recommends $77 million of 
funding for boll weevil eradication to provide a 30 percent match with 
producer funding and to facilitate the orderly eradication and/or 
containment of the pest across the balance of the cotton-growing area. 
County FSA offices should be required to maintain the collection of 
funds and acreage information for the program.
    Food Animal Residue Avoidance Databank (FARAD).--Farm Bureau 
supports adequate funding for FARAD to allow for continued, fair, 
immediate expert consultation to livestock owners and veterinarians in 
the event of accidental drug or toxin exposure to livestock or poultry.
    Pseudorabies.--Farm Bureau supports adequate funding to ensure that 
psuedorabies stays eradicated in the U.S.
    Brucellosis.--Farm Bureau supports funding for a brucellosis 
control program leading to eradication of this disease in cattle. The 
federal government should continue full funding of brucellosis control 
activities in all infected states. Because brucellosis is communicable 
from wildlife to domestic livestock and humans, we support funding to 
compensate livestock owners for losses brought about by contact with 
wildlife.
    Johne's Disease.--Farm Bureau supports funding to develop an 
accurate blood test for Johne's disease; to reduce producers' cost to 
test for Johne's disease; and for a multi-year program to identify 
Johne's disease-infected animals and to provide an indemnity payment 
for the disposal of these infected animals.
    Inspection and Grading of Meat and Poultry.--Farm Bureau recommends 
that funding for any new federally mandated seafood inspection program 
should be consistent with existing funding for other food commodities.
                       other issues: conservation
    Conservation Operations.--We continue to be concerned about 
adequate Natural Resources Conservation Service (NRCS) conservation 
operation funding. Conservation program delivery and technical 
assistance should be a priority for NRCS funding. Emphasis should be 
placed on traditional technical assistance and the development of 
reliable resource data for assisting producers to deal with nutrient 
management and other conservation concerns.
    Grazing Lands Conservation Initiative (GLCI).--We support funding 
for technical assistance under the GLCI.
    Environmental Quality Incentive Program (EQIP).--With regard to 
conservation programs under the Commodity Credit Corporation Program 
(CCC), we believe that emphasis should be placed on EQIP. EQIP is an 
important program for assisting producers dealing with increased water 
quality regulation and other conservation concerns. We support a 
substantial increase in EQIP funding over the previous years.
    Forestry Incentive Program (FIP).--Farm Bureau supports funding the 
Forestry Incentive Program and adequate funding for Reforestation 
Programs and for the Stewardship Incentive Program.
    Farmland Protection Program.--Farm Bureau supports funding for the 
Farmland Protection Program.
                          miscellaneous issues
    Wildlife Services.--Wildlife Services should receive increased 
funding for both operational and research programs.
    Ag in the Classroom.--Most students no longer have firsthand farm 
experience and, therefore, lack a basic understanding of our food and 
fiber system. The Agriculture in the Classroom program provides real 
world examples that teach about agriculture production, food safety, 
nutrition and healthy lifestyles and career opportunities. Farm Bureau 
supports an increase for Ag in the Classroom under CSREES.
    Risk Management Agency.--Farm Bureau supports long-term funding for 
the Risk Management Agency.
    Ag Marketing Equity Capital Fund.--Farm Bureau supports funding for 
the Agricultural Marketing Equity Capital Fund to help producers 
develop value-added enterprises.
    WIC Farmers Market Nutrition Program.--Farm Bureau is opposed to 
elimination of both the Farmers Market Nutrition Program and the Senior 
Farmers Market Nutrition Program. These programs provide locally grown 
fresh fruits and vegetables for targeted at-risk populations while 
providing income assistance to fruit and vegetable producers that is 
not otherwise available from USDA programs.
    Rural Development.--In the Rural Housing Service, Farm Bureau 
supports increased funding for the Farm Labor Housing Program.
                                 ______
                                 

Prepared Statement of the American Federation of Government Employees, 
Local 3354, and the American Federation of State, County, and Municipal 
                         Employees, Local 3870

              protecting inherently governmental functions
    The loan and grant programs of Rural Development and Farm Service 
Agency enable very low to moderate-income rural Americans to become 
successful homeowners, small family farmers, and to provide economic 
development in small rural communities. As the ``lender of last 
resort'', these USDA agencies provide subsidies and supervised credit 
loan servicing options to lower income citizens who cannot successfully 
obtain credit from private sources. These specialized services include 
eligibility determinations for interest credit, interest rate 
adjustments, borrower's assistance, reamortizations, moratoriums, debt 
settlements, deferrals, set-asides, rescheduling, write-downs, write-
offs, and net recovery buyouts, affecting the amount of government 
funds that USDA customers receive and/or pay back to the government. 
USDA employees in these agencies also disburse, collect, and account 
for the government subsidies and loan funds.
    Under OMB Circular A-76, only commercial activities, not inherently 
governmental functions, are to be subjected to cost comparisons for 
potential contracting out. This OMB policy is designed to avoid an 
unacceptable transfer of official responsibility to Government 
contractors. OMB's Office of Federal Procurement Policy (OFPP) Policy 
Letter 92-1 defines an ``inherently governmental function'' as

    ``. . . function that is so intimately related to the public 
interest as to mandate performance by Government employees' 
Governmental functions normally fall into two categories: (1) the act 
of governing, i.e., the discretionary exercise of Government authority, 
and (2) monetary transactions and entitlement. . . An inherently 
governmental function involves, among other things, the interpretation 
and execution of the laws of the United States so as to:
    ``. . . bind the United States to take or not to take some action 
by contract, policy, regulation, authorization, order, or otherwise;
    ``. . . significantly affect the life, liberty, or property of 
private persons;
    ``. . . exert ultimate control over the acquisition, use, or 
disposition of the property, real or personal, tangible or intangible, 
of the United States, including the collection, control, or 
disbursement of appropriated and other Federal funds. . .''

    Clearly, the above-mentioned activities of the Farm Service Agency 
and Rural Development are included in this OMB policy definition of 
inherently governmental functions. In recognition of this fact, the 
loan servicing activities of Rural Development have been removed from 
that agency's list of commercial activities suitable for A-76 
contracting out cost comparisons.
    However, the farm loan activities of the Farm Service Agency that 
are located in St. Louis, Missouri, have been listed in that agency's 
inventory of commercial activities. Reportedly, some of these 
activities are scheduled for an A-76 contracting out cost comparison in 
2002 or 2003.
    An effort to contract out any of the farm loan servicing functions 
would violate the policy against contracting out of inherently 
governmental functions. It would also cause the entire farm loan 
servicing program throughout the country to be up for grabs. No private 
sector entity would be interested in a portion of these activities 
without trying to take over all of them. References in the USDA Budget 
Blueprint to possible centralization of farm loan servicing activities 
also suggest the danger of contracting out all such activities.
    The success of USDA employees in servicing the farm loan programs 
is described by the delinquency figures displayed in the following 
chart. Since 1996, the rate of delinquency has dropped over 10 percent 
for Direct Loans and over 2 percent for Guaranteed Loans.

------------------------------------------------------------------------
               Fiscal year                 Direct loans      Guarantee
------------------------------------------------------------------------
1996....................................           26.58            4.44
1997....................................           21.74            4.62
1998....................................           19.68            4.97
1999....................................           14.72            4.95
2000....................................           17.06            3.54
2001....................................           15.86            2.23
------------------------------------------------------------------------

    Therefore, we are seeking inclusion of the following language in 
the 2003 Agriculture Appropriations bill:
Inherently Government Functions
    SEC. 7____. None of the funds appropriated or otherwise made 
available by this or any other Act shall be available to enter into or 
renew a contract at a total cost of $25,000 or more for the performance 
of any function that affects eligibility determination, disbursement, 
collection or accounting for government subsidies provided under any of 
the direct or guaranteed loan programs of the Rural Development mission 
area or the Farm Service Agency.
    Such language may also be needed in a 2002 Supplemental 
Appropriations bill, or other means may be necessary to keep this 
contracting out from taking place during fiscal year 2002.
               stop usda attempts at electronic snooping!
    The Rural Housing Centralized Servicing Center (CSC) initiated an 
effort to implement electronic surveillance and recording of low-income 
rural homeowners who call the CSC for servicing assistance and 
counseling. The Agency has not identified benefits in customer service 
over and above the existing quality control mechanisms that would 
result from such electronic surveillance--certainly not enough to 
justify the invasion of borrowers' privacy or to outweigh the costs of 
both the technology and the increased job stress to the employees.
    The Rural Housing Service provides vital opportunities for rural 
low-income borrowers, who otherwise would not be able to become 
homeowners. Borrowers reveal important income and debt information, as 
well as family obligations, during their calls with the Center. This 
information assists RHS in its service to these families, by helping 
families to work out any financial problems. Borrowers must have the 
confidence in RHS to reveal personal information. Their privacy must 
remain protected.
    When Agriculture Secretary Ann Veneman appeared before the Senate 
Agriculture Appropriations Subcommittee on February 27, 2002, Senator 
Cochran (R-MS), on behalf of Senator Bond (R-MO), who was on the floor 
helping manage the Election Reform bill, raised an issue that impacts 
the Rural Housing Centralized Servicing Center in St. Louis and 
citizens applying for low-income rural housing loans. Senator Cochran 
asked Secretary Veneman to delay implementation of a new phone 
conversation recording system until a series of Senator Bond's 
questions that have been provided to the Department are answered.
    Upon review of USDA's responses, the Senator has asked the 
Secretary to permanently halt this effort. Should USDA implement 
despite the Senator's request, we ask the Subcommittee to develop 
appropriate bill language to ensure that USDA does not record telephone 
conversations between customers and employees. We have developed the 
following language to achieve that purpose, should it become necessary:
Electronic Surveillance
    SEC. 7____. None of the funds appropriated or otherwise made 
available by this or any other Act shall be available to record 
telephone conversations between USDA employees and USDA customers.
   afge and afscme funding priorities for agriculture appropriations
    Increased Salaries & Expenses funding for the Department of 
Agriculture's Rural Development mission area remains our No. 1 funding 
priority for the Subcommittee's Appropriations for Agriculture, Rural 
Development, and Related Agencies! We also support sufficient S&E 
funding for the Farm Service Agency to at least maintain current 
staffing levels.
    Since 1995, the Congress has increased Rural Development programs 
by 69 percent overall; yet, our staffing levels have been cut by 28 
percent. Our servicing areas in the Field, and our workload in the 
National and Finance Offices, has doubled or tripled. With decreased 
staffing, customer service suffers. Almost no funds have been allocated 
to training for the past six years! The situation has deteriorated to 
the point where State Directors have had to stop most overtime work. 
Use of privately owned vehicles for official travel has been 
prohibited, and use of government-owned vehicles has been limited. 
These restrictions on travel and overtime make it next to impossible 
for our employees to do our jobs! Timely inspections are not completed. 
Interviews of potential borrowers have to be conducted by phone. Night 
meetings of housing developers, water districts, and community 
development committees cannot be attended.
    It is laborers and white and blue-collar workers that are the 
infrastructure of our rural communities, in addition to our farmers. If 
we can't provide housing, utilities, and jobs to enable them to be 
productive taxpaying citizens, how can we say the cost outweighs the 
benefits? Low-income rural Americans need public servants, with 
sufficient expense funds to support travel, overtime, training and 
information technology, to deliver these housing, community, and 
business development programs.
    The Rural Development (RD) loan and grant programs are just as 
important, even more so in terms of number of people reached, as the 
various programs delivered by FSA. RD needs staff to deliver these 
programs, just like FSA needs staff to deliver its programs! It is even 
more imperative that Congress increase the appropriated S&E funding for 
Rural Development because RD does not have access to CCC funds, 
university grants, user fees, or any other outside source of funds to 
help support its employees.
    Due to the President's proposal to charge retirement and health 
expenses to individual agency Salaries & Expense accounts, a proposal 
which we oppose, it is difficult to determine exactly what S&E amount 
is proposed. It is our understanding that the proposal would maintain 
essentially level staffing for Rural Development and Farm Service 
Agency. This is an absolute must.
    The House Budget resolution included a provision to ensure parity 
in pay increases between the military and civilian employees. We 
request the Subcommittee add sufficient additional funds to ensure that 
existing staff levels can at least be maintained, assuming pay parity 
between civilian and military employees again in 2003.
    Increased public investments in Rural Housing are needed to provide 
economic security and stimulus.
    Since its inception in 1950, the Section 502 direct program has 
produced over 1.9 million units of safe, decent, sanitary housing and 
supported a variety of innovative housing development opportunities 
such as the mutual self-help housing program (sweat equity). Over the 
past ten years, however, the program's production capacity has declined 
41 percent, from 26,203 units in 1988 to only 15,561 in 1998. It is 
even more startling to compare the paltry 1998 production to the over 
132,000 units produced in 1976.
    There is currently a $5 billion backlog in applications for 502 
direct loans. Especially considering that the cost per house to the 
government has been only $10,000, Congress should invest much more in 
the 502 direct loan program in order to provide relief for homelessness 
and an economic stimulus to rural America.
    AFGE and AFSCME support significant changes in Federal funding 
levels for housing, including the following recommendations of the 
Housing Assistance Council and coalitions in which AFGE participates to 
increase Federal housing funds by $15 billion.
  --Increase Federal housing funds by $15 billion. This spending will 
        open the door to economic recovery. It will give more than half 
        a million American families (including many senior citizens) a 
        decent, affordable place to call home. Today, these families 
        are spending more than half their incomes on housing or are 
        living in dilapidated or unsafe conditions. These funds would 
        spur the production of 85,000 new homes and preserve an 
        additional 225,000 through rehabilitation. This investment also 
        would provide a significant boost to the economy by creating 
        250,000 new jobs.
  --Ensure that Federal housing programs' first priority is serving 
        people who are most in need, including poor rural households.
  --Adopt the administration's proposed homeownership tax credit.
  --Create a National Housing Trust Fund, as described by the National 
        Housing Trust Fund Campaign at www.nhtf.org. The fund should be 
        used primarily for rental housing, both new production and the 
        preservation or rehabilitation of existing housing that is 
        affordable for low-income people. The Trust Fund should be 
        capitalized with ongoing, permanent, dedicated and sufficient 
        sources of revenue to meet the goal of providing 1,500,000 
        housing units by 2010. At least 75 percent of the Trust Fund 
        dollars should be used for housing that is affordable for 
        extremely low income households, that is, those with incomes 
        under 30 percent of the area median.
  --Recognize the interdependence of housing programs. For example, it 
        is counterproductive to increase SHOP funding while cutting 
        Section 502 loans. In rural areas, most homebuyers 
        participating in self-help production assisted by SHOP funds 
        get their mortgages from Section 502 because their incomes are 
        too low for conventional loans.
  --Maintain 2002 funding levels for HUD's Rural Housing and Economic 
        Development program ($25 million) and for USDA's Rural Capacity 
        Development Initiative ($6 million). Local organizations in 
        many high-need rural areas need to increase their capacity to 
        meet their communities' needs. Both programs have helped to 
        achieve that goal.
    At a minimum, we urge the Agriculture Appropriations Subcommittees 
to
  --increase 502 Direct loan funding to $1.5 billion for 2003, and
  --increase 515 Rental loan funding to $300 million for 2003.
    The recent GAO report (GAO-02-76), comparing the characteristics 
and costs of Federal rental housing assistance, supports our contention 
that 515 is a good program, the best for low and very low income rural 
Americans. It would be a mistake to transfer this program to HUD, as 
some have proposed.
    AFGE and AFSCME urge Congress to re-examine the 515 Rural Rental 
Housing program. Past problems were limited in scope and have been 
corrected. 515 is being starved for appropriations, even though the GAO 
report shows it to be one of the best rental programs the government 
has--certainly the best for rural America. It is time to restore 
realistic appropriations.
    In the past two years alone there were approximately $137 million 
requests for new construction and $270 million requests for repair and 
rehabilitation. RHS spent all of its available funds, amounting to $100 
million in new construction and $100 million for repair/rehab. It is 
already estimated that for fiscal year 2003, there will be $120 million 
in requests for new construction and $140 million for repair/rehab. 
Additional rental assistance would also be needed to support this 
additional new construction.
    Section 515 serves the most needy of rural residents--fulfilling 
USDA's stated Strategic Goal. Almost 1,000,000 rural renters suffer 
from multiple housing problems including substandard living conditions 
and cost burden. Section 515 has a low delinquency rate of only 1.6 
percent. The average annual tenant income is $7,980, which is below 30 
percent of the nation's rural median household income.
    Public investments in Limited Resource and Beginning Farmers will 
also improve homeland security and provide much-needed economic 
stimulus to rural America.
    Investment in the Farm Ownership Direct Loan program needs to be 
increased, at least back to fiscal year 2000 levels. In many states, as 
much as 70 percent of the farm land will change ownership over the next 
fifteen years. Unless the direct farm ownership loan program is 
significantly enhanced, most of that farm land will go to the existing 
large farms, and the benefits and productivity of family farming will 
continue to be wiped out.
    We also ask the Subcommittee to provide the authorized amount of 
$10 million for Outreach and Technical Assistance Program for Minority 
Farmers. The Outreach and Technical Assistance program is the most 
effective tool developed to carry out the mission of USDA as the 
technical provider for small farmers. For a very small investment, the 
program has significant multiplier effects in poor communities where 
there exist few other possibilities for sustainable economic 
development.
                                 ______
                                 

 Prepared Statement of the American Honey Producers Association, Inc., 
                 and the American Beekeeping Federation

    My name is Lyle Johnston of Rocky Ford, Colorado. I am President of 
the American Honey Producers Association. With me is Pat Heitkam of 
Orland, California, President of the American Beekeeping Federation. We 
are submitting this joint statement on behalf of both of our 
organizations. The American Honey Producers Association is a national 
organization of commercial beekeepers actively engaged in honey 
production throughout the country. The American Beekeeping Federation 
has members in every state who are involved in all facets of the 
beekeeping and honey industry.
    First, both organizations wish to thank the Subcommittee for the 
support it is has provided in the past for agricultural research 
activities on behalf of the beekeeping industry. Such support has 
enabled the Agricultural Research Service (``ARS'') to meet the 
critical needs of the industry. To continue this valuable research, our 
organizations request that Congress maintain Federal honey bee research 
funding at the fiscal year 2002 levels.
                    the president's budget proposal
    The President's fiscal year 2003 budget proposes deep cuts for four 
Honey Bee Research Laboratories operated by ARS and located at Weslaco, 
Texas; Baton Rouge, Louisiana; Beltsville, Maryland; and Tucson, 
Arizona. These cuts, totaling more than $3.2 million--or 56 percent--of 
the laboratories' current $5.7 million budget, would have a devastating 
effect on the honey industry as well as on all pollination-dependent 
agriculture and many native plants.
    In the President's fiscal year 2003 budget, the research programs 
conducted by these laboratories would sustain a disproportionate 
setback. While suffering a 56 percent cut in funding, the ARS Honey Bee 
Research Laboratories would bear almost one-third of the total net ARS 
budget reductions for fiscal year 2003. This seems particularly 
inappropriate considering the substantial benefits that flow from this 
program, which helps assure the vitality of the American honey industry 
and U.S. agriculture.
    These four ARS laboratories provide the first line of defense 
against exotic parasite mites, Africanized bees, brood diseases and 
other new pests and pathogens that pose serious threats to the 
viability and productivity of honey bees and the plants they pollinate. 
The President's budget requires shuttering three of the four honey bee 
research laboratories and eliminating over 50 percent of the personnel 
supporting these research efforts. If such cuts were enacted, 
scientists at the remaining laboratory at Weslaco would be overburdened 
and forced to discontinue essential research, thereby jeopardizing the 
U.S. honey bee industry and the production of agricultural crops that 
require pollination by honey bees.
            the importance of honey bees to u.s. agriculture
    Honey bees fill a unique position in contemporary U.S. agriculture. 
They pollinate more than 90 food, fiber, and seed crops. Honey bees are 
necessary for the production of such diverse crops as almonds, apples, 
oranges, melons, vegetables, alfalfa, soybeans, sunflower, and cotton, 
among others. A Cornell University study, published in 2000, estimated 
that the annual value of agriculture production attributable to honey 
bee pollination exceeds $14.6 billion. The increased value of such 
crops comes in the form of both better yields and improved quality. In 
addition, honey bees are responsible for the production of an average 
of 200 million pounds of honey annually, the sales of which helps 
sustain this Nation's beekeepers.
    Since 1984, the survival of the honey bee has been threatened by 
continuing infestations of mites and pests for which appropriate 
controls are being developed by scientists at the four ARS 
laboratories. These pests and diseases, especially Varroa mites and the 
bacterium causing American foulbrood, are now resistant to chemical 
controls in many regions of the country. Unfortunately, there is no 
simple solution to these problems, and the honey bee industry is too 
small to support the cost of the needed research, particularly with the 
current depressed state of the industry. Further, there are no funds, 
facilities, or personnel elsewhere available in the private sector for 
this purpose. Accordingly, the beekeeping industry is dependent on 
research from public sources for the scientific answers to these 
threats. The key to the survival of the honey industry lies with the 
honey bee research programs conducted by ARS.
          the work of the ars honey bee research laboratories
    The ARS Honey Bee Research Laboratories work together to provide 
research solutions to problems facing businesses dependent on the 
health and vitality of honey bees. The findings of these laboratories 
are used by honey producers to protect their producing colonies and by 
farmers and agribusinesses to ensure the efficient pollination of 
crops. Each of the four ARS laboratories focuses on different problems 
facing the U.S. honey industry and undertakes research that is vital to 
sustaining honey production in this country. Furthermore, each 
laboratory has unique strengths and each is situated and equipped to 
support independent research programs which would be difficult, and in 
many cases impossible, to conduct elsewhere. Even consolidating these 
laboratories would severely undercut recent gains in research because 
of the uniqueness of localized conditions. Consequently, research 
conducted at one location is not necessarily applicable to another due 
to differences in climate.
Research at the ARS Weslaco Laboratory
    Both the American Honey Producers Association and the American 
Beekeepers Federation recommend that the appropriation for the Weslaco 
laboratory be approved at not less than current levels. This facility 
focuses its research efforts on developing technologies to manage honey 
bees in the presence of Africanized honey bees, parasitic mites, and 
other pests. In order to ensure that further pests are not introduced 
into the U.S., scientists at the Weslaco facility provide technical 
assistance to agriculture departments in foreign countries on the 
control of parasitic mites. The laboratory has worked with officials in 
Guatemala, Costa Rica, Mexico, and South Africa to protect the U.S. 
honey bee population from further devastation by infestation of foreign 
parasites, diseases, and other pests. This inter-governmental 
cooperation is necessary to ensure the continued viability of the U.S. 
honey bee industry.
    Retaining the current (fiscal year 2002) level of funding for the 
Weslaco laboratory will enable it to continue its work in finding a 
chemical solution to parasitic mites that are causing a crisis for the 
U.S. beekeeping and pollination industries. Varroa mites are causing 
the loss of hundreds of thousands of domestic honey bee colonies 
annually as well as devastating wild bee colonies. The only chemical 
which has received a general registration for Varroa mite control, 
fluvalinate, is being rendered ineffective by the development of 
resistant mite populations. The ARS laboratory at Weslaco has been 
developing alternative chemicals to control the Varroa mite. It appears 
that the laboratory has found a chemical, coumaphos, with the potential 
of being equally effective as fluvalinate. This is a real breakthrough 
for the bee industry, but as of today we have only been able to obtain 
section 18 emergency registrations. Much work remains to be done before 
a section 3 general registration is granted by EPA.
    Additionally, the laboratory is researching methods that may 
control the small hive beetle. Since its discovery in Florida in 1998, 
this pest has caused severe bee colony losses in California, Florida, 
Georgia, South Carolina, North Carolina, Pennsylvania, Ohio, and 
Minnesota. Estimates put these losses in just one season at over 30,000 
colonies. The beetles are now spreading to other areas in the East 
coast. Although it seems that coumaphos may help control this insect as 
well as the Varroa mite, it has not yet received a section 3 
registration. The ARS honey bee research scientists at the Weslaco 
laboratory have been working overtime to find chemicals, techniques, 
pheromones, or other methods of controlling the beetle. Time is of the 
essence, as a control must be found immediately as all the bee colonies 
in the Western Hemisphere are at risk.
Research at the ARS Baton Rouge Laboratory
    Our organizations also recommend that the appropriation for the ARS 
laboratory at Baton Rouge, Louisiana be kept at current levels. The 
Baton Rouge facility is the only laboratory in the U.S. developing 
long-term, genetic-based solutions to the Varroa mite. Existing stocks 
of U.S. honey bees are being tested to find stocks which exhibit 
resistance to the parasitic mites. Research scientists with the 
laboratory have also been to the far corners of the world looking for 
mite resistant bees. For example, in eastern Russia, they found bees 
that have co-existed for decades with the mites and survived. Using 
these bees, the laboratory develops stocks of honey bees resistant to 
the parasites. Before these new stocks are distributed to American 
beekeepers, the laboratory ensures that the resistance holds up under a 
wide range of environmental and beekeeping conditions, testing 
attributes such as vigor, pollination, and honey.
    The Baton Rouge facility also operates the only honey bee 
quarantine and mating station approved by the Animal and Plant 
Inspection Service. These stations are necessary to ensure that new 
lines of bees brought into the U.S for research and development are 
free of diseases unknown in the U.S.
    In addition, Baton Rouge research scientists are focused on the 
applications of new technologies of genomics. This work has the 
potential to enhance the proven value of honey bee breeding for 
producing solutions to the multiple biological problems that diminish 
the profitability of beekeeping.
Research at the ARS Tucson Laboratory
    Both of our organizations also request that funding for the ARS 
Honey Bee Research Laboratory in Tucson be kept at the current level 
for fiscal year 2003. This research center is the only honey bee 
laboratory serving the needs of beekeepers and farmers in the western 
U.S. The facility works to improve crop pollination and honey bee 
colony productivity through quantitative ecological studies of honey 
bee behavior, physiology, pest and diseases, and feral honey bee 
bionomics.
    Because more than one million colonies are transported from across 
the country for pollination into crops grown in the western U.S., the 
Tucson research center addresses problems that arise from transporting 
and introducing colonies for pollination of crops such as almonds, 
plums, apricots, apples, cherries, citrus, alfalfa, vegetable seed, 
melons, and berries. This research center has been instrumental in 
disseminating information on technical issues associated with the 
transport of bee colonies across state lines. Additionally, in order to 
ensure that transported colony populations remain stable during 
transport and also during periods before the crop to be pollinated 
comes into bloom, scientists at the laboratory have developed an 
artificial diet that stimulates brood production in colonies. A large 
bee population is necessary to ensure that efficient pollination 
occurs, creating superior quality crops.
Research at the ARS Beltsville Laboratory
    Again, both organizations request that that funding for the ARS 
Honey Bee Research Laboratory in Beltsville remain at fiscal year 2002 
levels. This facility, the oldest of the Federal bee research centers, 
conducts research on the biology and control of honey bee parasites, 
diseases, and pests to ensure an adequate supply of bees for 
pollination and honey production. Using biological, molecular, 
chemical, and non-chemical approaches, scientists in Beltsville are 
developing new, cost-effective strategies for controlling parasitic 
mites, bacterial diseases, and emergent pests that threaten honey bees 
and the production of honey.
    The laboratory also develops preservation techniques for honey bee 
germplasm in order to maintain genetic diversity and superior honey bee 
stock. Scientists at the facility also provide authoritative 
identification of Africanized honey bees and diagnosis of bee diseases 
and pests for Federal and State regulatory agencies and beekeepers on a 
worldwide basis. In operating this bee disease diagnosis service, the 
Beltsville facility receives over 2,000 samples annually from across 
the U.S.
                               conclusion
    In conclusion, we wish to thank you again for your support of honey 
bee research in the past. Both the American Honey Producers Association 
and the American Beekeeping Federation would appreciate your continued 
support by restoring the current level of funding for each of the four 
ARS Honey Bee Research Laboratories located in Weslaco, Texas; Baton 
Rouge, Louisiana; Beltsville, Maryland; and Tucson, Arizona. Only 
through research can we have a viable U.S. beekeeping industry and 
continue to provide stable and affordable supplies of bee pollinated 
crops which make up fully one-third of the U.S. diet.
    Furthermore, we urge you to reject any effort to cut the operating 
budgets of these vitally important research laboratories by 
consolidating their functions. If enacted, the proposed consolidation 
and its resulting budget and staff reductions would significantly 
diminish the quality of research conducted by these laboratories, 
harming honey producers as well as farmers who harvest pollination-
dependent agriculture. Congress cannot allow these cuts to occur and 
must restore this funding to the ARS Honey Research Laboratories.
    Mr. Heitkam and I would be pleased to respond to any questions that 
you or your colleagues may have.
                                 ______
                                 

 Prepared Statement of the American Indian Higher Education Consortium

    Mr. Chairman and Members of the Subcommittee, on behalf of the 
American Indian Higher Education Consortium (AIHEC) and the 30 Tribal 
Colleges and Universities that comprise the 1994 Land Grant 
Institutions, we thank you for this opportunity to share our funding 
requests for fiscal year 2003.
    This statement is presented in three parts: (a) a summary of our 
fiscal year 2003 funding request, (b) a brief background on Tribal 
Colleges and Universities, and (c) an outline of the 1994 Tribal 
College Land Grant Institutions' plan using our authorized land grant 
programs, and the Rural Communities Advancement Program (RCAP), to 
fulfill the agricultural potential of American Indian communities, and 
to ensure that American Indians have the skills needed to maximize the 
economic development potential of our resources.
                          summary of requests
    We respectfully request the following funding levels for fiscal 
year 2003 for our established land grant programs. Specifically, we 
request: $5 million for the 1994 institutions' extension grants 
program; $12 million payment to the Native American endowment fund; $3 
million for the higher education equity grants; and $3 million for the 
1994 institutions' research grants program.
    In addition, we request $5 million be set aside out of the Native 
American--Rural Community Advancement Program, for the 1994 Tribal 
College Land Grant Institutions to help address the critical facilities 
and infrastructure needs at the colleges that impede our ability to 
participate fully as land grant partners.
             background on tribal colleges and universities
    Today, 140 years after enactment of the first land grant 
legislation, tribal colleges, more than any other higher education 
institutions, truly exemplify the original intent of the land grant 
legislation. The first Morrill Act was enacted in 1862 specifically to 
bring education to the people and to serve their fundamental needs. The 
1994 land grants fit this definition well, as they are community-based 
institutions.
    The Tribal College Movement was launched in 1968 with the 
establishment of Navajo Community College, now Dine College, serving 
the Navajo Nation. A succession of tribal colleges soon followed, 
primarily in the Northern Plains region. In 1972, the first six 
tribally controlled colleges established the American Indian Higher 
Education Consortium to provide a support network for member 
institutions. Today, AIHEC represents 32 Tribal Colleges and 
Universities located in 12 states, begun specifically to serve the 
higher education needs of American Indian students. Collectively, they 
serve approximately 30,000 full and part-time students from over 250 
Federally recognized tribes.
    Tribal colleges offer primarily 2-year degrees, although in recent 
years some institutions have begun to offer baccalaureate and graduate-
level degrees. The vast majority of the tribal colleges are fully 
accredited by independent, regional accreditation agencies.\1\ Tribal 
colleges serve as community centers, providing libraries, tribal 
archives, career centers, economic development and business centers, 
public meeting places, and child care centers. Despite our many 
obligations, functions, and notable achievements, tribal colleges 
remain the most poorly funded institutions of higher education in this 
country. Most of the 1994 Land Grant Institutions are reservation 
based, located on Federal trust territory. States have no obligation 
and in most cases, provide no funding to tribal colleges. In fact, most 
states do not even fund our institutions for the non-Indian state 
resident students who attend our colleges despite the fact that non-
Indian enrollment at the tribal colleges averages 20 percent.
---------------------------------------------------------------------------
    \1\ The Tribal Colleges and Universities are accredited by regional 
accreditation agencies and like all institutions, must undergo 
stringent performance reviews on a periodic basis. The higher education 
division of the respective regional accreditation agency accredits 
twenty-seven of the TCUs. Two TCUs are at the Pre-candidate stage as 
they complete work to attain Candidate status; one TCU is at Candidate 
status. Two TCUs are accredited as ``Vocational/Adult Schools'' by the 
respective regional accreditation agency.
---------------------------------------------------------------------------
    Today, one in five American Indians live on reservations. As a 
result of 200 years of Federal Indian policy--including policies of 
termination, assimilation and relocation--many reservation residents 
live in abject poverty comparable to that found in Third World nations. 
Through the efforts of tribal colleges, American Indian communities are 
receiving services they need to reestablish themselves as responsible, 
productive, and self-reliant. It would be tragic not to expand the 
modest investment in, and capitalize on, the human resources that will 
help open new avenues to economic development, specifically through 
enhancing the tribal colleges' land grant programs, and adequate access 
to information technology.
     1994 land grant programs--ambitious efforts to reach economic 
                         development potential
    Tragically, due to lack of expertise and training, millions of 
acres on our reservations lie fallow, under-used, or have been 
developed through methods that render the resources non-renewable. The 
Equity in Educational Land Grant Status Act of 1994 is our hope for 
turning this situation around. Our current land grant programs are 
modest, yet vitally important to us. It is essential that American 
Indians learn more about new and evolving technologies for managing our 
lands. We are committed to being productive contributors to the 
agricultural base of the nation and the world.
    Extension Programs.--The 1994 Institutions' extension programs help 
address economic development through land use. These programs have 
grown substantially in idea and scope since they were initially 
implemented in fiscal year 1996. The current single-year competitive 
grants process, for what have developed into flourishing multiyear 
projects, is no longer an effective or efficient way to administer 
these important programs. A mechanism for multi-year funding needs to 
be implemented to give these programs much needed financial stability.
    In fiscal year 2002, the 1994 institutions were awarded $3,280,000 
for extension grants. Additional funding is needed to support these 
programs, designed to address the inadequate extension services 
provided on Indian reservations by the states. It is important to note 
that the 1994 extension program is specifically designed to complement 
and build upon the Indian Reservation Extension Agent program, and is 
not duplicative of other extension activities.
    For the reasons outlined above, we request Congress support this 
program by appropriating funding at the authorized level of $5 million, 
and include report language to encourage the implementation of a multi-
year program model to sustain the growth and further success of these 
essential community based programs.
    Native American Endowment Fund.--Endowment installments paid into 
the 1994 Institutions' account remain with the U.S. Treasury--only the 
interest is distributed annually to our colleges. The latest annual 
interest payment (fiscal year 2001) distributed among all 30 of the 
1994 Land Grant Institutions totaled $1,192,019.
    Just as other land grant institutions historically received large 
grants of land or endowments in lieu of land, this sum assists 1994 
Land Grant Institutions in establishing and strengthening our academic 
programs in such areas as curricula development, faculty preparation, 
instruction delivery, and beginning with the funds distributed this 
year, to address our critical infrastructure issues. Many of the 
colleges have used the endowment funds in conjunction with the 
Education Equity grants funds to develop and implement programs. In 
fiscal year 2001, language was included adding construction, 
renovation, and repair of our facilities to the list of eligible uses 
of the endowment funds. The first funds to be used for infrastructure/
construction needs are those that were disseminated to the 1994 
Institutions this year. As earlier stated, tribal colleges often serve 
as primary community centers and although conditions at some have 
improved substantially, many of the colleges still operate under 
deplorable conditions. Most of the tribal colleges report facilities 
needs as one of their top priorities. Fort Belknap College in Harlem, 
MT is planning on using a portion of their limited land grant endowment 
funds for work on a GIS/GPS project on the campus and reservation. The 
focus of the project is to provide a detailed map necessary for 
strategic planning for campus facilities. When asked how the 1994 
Institutions plan to use their endowment funds with regard to 
facilities needs, the responses received echo one common message, 
increased funds for facilities are essential for the colleges to 
implement the various phases of their individual campus renovation/
upgrade and construction plans. However, the amount that each college 
currently receives from this endowment is too little to address 
curricula development and instruction delivery, and the necessary 
facilities projects at the colleges. In order for the 1994 Institutions 
to become full partners in this nation's great land grant system, we 
need and deserve the facilities and infrastructure necessary to engage 
in education and research programs vital to the future health and well-
being of our reservation communities. We respectfully request Congress 
build upon this much-needed base fund by increasing the fiscal year 
2003 endowment fund payment to $12 million.
    1994 Institutions' Educational Equity Grant Program.--Closely 
linked with the endowment fund, this program provides $51,619 per 1994 
Institution to assist in academic programs. Through the modest 
appropriations made available since fiscal year 1996, the tribal 
colleges have been able to begin to support vital courses and planning 
activities specifically targeted to meet the unique needs of our 
respective communities.
    The 1994 Institutions have developed and implemented courses and 
programs in natural resource management, environmental sciences, 
horticulture, forestry, buffalo production and management, and food 
science and nutrition--to address epidemic rates of diabetes and 
cardiovascular disease on reservations. If more funding were available 
through the Educational Equity Grant Program, tribal colleges could use 
their endowment funds to supplement other sources of funding for 
facilities available to address their critical infrastructure issues. 
We respectfully request an increase in funding to $3 million, to allow 
the colleges to build upon the courses and activities that the initial 
funding launched.
    1994 Research Program.--As the 1994 Land Grant Institutions have 
begun to enter into partnerships with 1862/1890 land grants through 
research projects, impressive efforts to address economic development 
through land use have come to light. Our research program illustrates 
an ideal combination of Federal resources and tribal college-state 
institution expertise, with the overall impact being far greater than 
the sum of its parts. We are requesting increased funding for our 
research program, which was authorized in the Agriculture Research, 
Extension, and Education Reform Act of 1998, at ``such sums as 
necessary.'' We recognize the budget constraints that Congress is 
working under. However, we believe that $998,000, our fiscal year 2002 
appropriated level, is simply not adequate when there are 30 
institutions competing for these precious research dollars. This 
research program is vital to ensuring that tribal colleges finally 
become full partners in the nation's land grant system. Many of our 
institutions are currently conducting agriculture-based applied 
research, yet finding the resources to conduct this research to meet 
their communities' needs is a constant challenge. This research 
authority opens the door to new funding opportunities to maintain and 
expand the research projects begun at the 1994 Institutions, but only 
if adequate funds are appropriated. The following is an example of the 
first projects to be funded under this vital new program.
    Chief Dull Knife College in Lame Deer, Montana has launched a 
research project to determine the ecological role of indigenous 
functional plant groups as they relate to an invasive plant species. 
The nutrient and hydrologic cycles as well as the energy (biomass) flow 
of the non-indigenous invader (knapweed) and that of indigenous 
functional plant groups will be determined. From this, ecological 
processes on weed management and ecological impacts can be defined. The 
evaluation phase of the project will be to implement invasive plant 
management techniques on spotted knapweed infested rangeland on the 
Northern Cheyenne Reservation. Results will be shared with the 
cooperating institutions and disseminated through public interpretive 
and informational meetings.
    Other projects launched in the initial round of programs funded 
include soil and water quality projects, amphibian propagation, 
pesticide and wildlife research, range cattle species enhancement, and 
native plant preservation for medicinal and economic purposes. We 
strongly urge Congress to fund this program at $3 million to enable our 
institutions to develop and strengthen their research potential.
    Rural Community Advancement Program (RCAP).--In fiscal year 2001, 
$24 million of the RCAP funds were appropriated for loans and grants to 
benefit Federally recognized Native American Tribes. Report language 
declared that the conference committee expected $4 million be made 
available for community facility grants for Tribal College 
improvements. As stated earlier, the facilities at many of the 1994 
Land Grant Institutions are in desperate need of repair and in many 
cases replacement. We urge the Subcommittee to designate $5 million of 
the Native American RCAP funds to address the critical need for 
improving the facilities at the 30 Tribal College Land Grant 
Institutions. Additionally, we respectfully request report language 
directing the Department of Agriculture to set aside a minimum of $5 
million of these RCAP program funds for each of the next 5 fiscal years 
to allow our institutions the means to solidly address our facilities 
needs.
                               conclusion
    The 1994 Land Grant Institutions have proven to be efficient and 
effective tools for bringing education opportunities to American 
Indians and hope for self-sufficiency to some of this nation's poorest 
regions. The modest Federal investment in the tribal colleges has 
already paid great dividends in terms of increased employment, 
education, and economic development. Continuation of this investment 
makes sound moral and fiscal sense. American Indian reservation 
communities are second to none in their need for effective land grant 
programs and as earlier stated, no institutions better exemplify the 
original intent of the land grant concept than the 1994 (tribal 
colleges) Institutions.
    We appreciate your long-standing support of the Tribal Colleges and 
Universities and are also grateful for your commitment to making our 
communities self-sufficient. We look forward to continuing our 
partnership with you, the U.S. Department of Agriculture, and the other 
members of the nation's land grant system--a partnership that will 
bring equal educational, agricultural, and economic opportunities to 
Indian Country.
    Thank you for this opportunity to present our funding requests 
before this Subcommittee. We respectfully request your continued 
support and full consideration of our fiscal year 2003 appropriations 
requests.
                                 ______
                                 

               Prepared Statement of the American Rivers

    This year, American Rivers was joined by over 600 local, regional 
and national conservation organizations \1\ from all 50 states in 
calling for significantly increased funding for the Environmental 
Quality Incentives Program (EQIP), the Wildlife Habitat Incentives 
Program (WHIP) and in supporting an expansion of the Conservation 
Reserve Program (CRP) and Wetlands Reserve Program (WRP) acreage limits 
in fiscal year 2003. Each of these programs incorporates voluntary 
landowner participation with a Federal investment in conservation of 
the nation's farmlands and environment for future generations. I urge 
that these increases be incorporated in the Agriculture Appropriations 
bill for fiscal year 2003.
---------------------------------------------------------------------------
    \1\ These groups have endorsed ``The River Budget 2003'', a report 
of national funding priorities for local river conservation. A list of 
groups endorsing the River Budget can be viewed at http://
www.americanrivers.org/riverbudget/default.htm.
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            environmental quality incentives program (eqip)
    The health of America's agricultural lands is fundamental to the 
nation's well-being. These lands support an industry of great value, 
provide important habitat for a large portion of the nation's birds, 
fish, and wildlife, and have a significant impact on river health. The 
Environmental Quality Incentives Program (EQIP) is a voluntary program 
that helps farmers and ranchers facing threats to soil, water, and 
other natural resources develop and implement successful conservation 
practices.
    EQIP focuses largely on lands that face significant natural 
resource problems or are particularly environmentally sensitive. As 
these priority areas are identified locally, conservation districts 
convene working groups of key Federal, State, and local agency 
representatives to propose conservation plans for these areas. 
Communities play a significant role in the planning process, ensuring 
that the plans fully reflect local needs and priorities. Once Natural 
Resources Conservation Service representatives select conservation 
plans, EQIP staff provide technical, educational, and financial 
assistance to farmers and ranchers to help them implement management 
plans for nutrients, manure, pests, irrigation, water, and wildlife 
habitat practices. Farmers may also apply for 5- to 10-year EQIP 
contracts that provide financial incentives and cost-sharing assistance 
to implement conservation practices outlined in the conservation plan.
    Congress should appropriate at least $350 million for the EQIP 
program, or the full amount of funding authorized in the Conference 
Report of the 2002 Farm Bill.
               wildlife habitat incentives program (whip)
    In many rural areas, farms are the most abundant and essential 
source of wildlife habitat. This program helps landowners voluntarily 
develop and implement practices that will protect and preserve 
important wildlife habitat. By helping restore habitat, WHIP can have a 
positive impact both on the quality of life for participants and on 
local economies. For example, according to the Fish and Wildlife 
Service, wildlife watchers spent $29.2 billion on trips, equipment, and 
other related expenditures in 1996 alone.
    Under a WHIP agreement, participants develop wildlife habitat plans 
with assistance from local conservation districts. Each plan describes 
the landowner's goals for improving wildlife habitat, includes a list 
of practices, and details what must be done to maintain the habitat for 
the life of the agreement. There are many possible sources of funding 
and expert advice for a project including the Natural Resources 
Conservation Service, cooperating state wildlife agencies, nonprofits, 
and private organizations. The Department of Agriculture covers up to 
75 percent of the plan's implementation costs. Demand for WHIP funds 
has been so great that the program exhausted the $50 million 
appropriated for 1997-2002 in two years.
    Congress should appropriate at least $100 million for the WHIP 
program, or the full amount of funding authorized in the Conference 
Report of the 2002 Farm Bill.
                     wetlands reserve program (wrp)
    Wetlands are a critical component of many ecosystems, providing 
myriad benefits for people and wildlife. They filter sediment and 
pollutants from runoff water, protect water quality, provide critical 
habitat for millions of birds and other wildlife, absorb water to 
reduce floods, and improve soil moisture for vegetation. The economic 
benefits of healthy wetlands are many, including improved wildlife 
watching and photography. In 1991, almost 109 million people spent $59 
billion on fishing, hunting, and wildlife watching and photography.
    The Wetlands Reserve Program (WRP) is a volunteer program aimed at 
protecting and restoring the nation's wetlands, bringing tangible 
economic and environmental benefits to rural communities, 
recreationists, landowners, and family farmers nationwide. 
Participating landowners receive technical and financial assistance 
from the Natural Resources Conservation Service to restore wetlands, 
including marginal agricultural land. In exchange for selling a 
conservation easement or entering into a cost-share restoration 
agreement, landowners receive all or a percentage of restoration costs 
and/or an annual payment. The program currently has more than 5,230 
contracts in 48 states. Participating landowners retain control over 
access to their lands and may lease them for undeveloped recreational 
activities and other uses that are consistent with wetland protection 
and enhancement.
    The WRP program has helped stem the tide of wetlands loss in the 
United States, and contributed significantly to implementation of the 
North American Waterfowl Management Plan. Wetlands restored by WRP also 
help reduce the ``dead zone'' in the Gulf of Mexico by intercepting 
polluted runoff from farms and city streets along the Mississippi 
River.
    Congress should expand the program's total acreage cap and allow 
WRP to enroll 250,000 acres annually.
                   conservation reserve program (crp)
    With the Dust Bowl of the 1930s, the United States learned the hard 
way about the destructiveness of agricultural erosion. In the years 
since, the nation has also come to recognize the damage caused by 
runoff that carries pollutants into rivers, lakes, and other bodies of 
water.
    One of the Federal Government's largest and most effective 
environmental improvement programs grew out of concern about the 
impacts of agricultural soil erosion and polluted runoff. The 
Conservation Reserve Program (CRP), a voluntary program that partners 
the Department of Agriculture with farmers and ranchers, helps protect 
millions of acres of the nation's agricultural lands from erosion while 
increasing wildlife habitat and protecting ground and surface waters. 
The program provides incentives for farmers and ranchers to voluntarily 
implement long-term conservation practices on erodible and 
environmentally sensitive lands in return for annual rental payments 
and cost-share assistance.
    The benefits of CRP are clear. The total acreage of new wildlife 
habitat created by the program is twice that of the National Wildlife 
Refuge System and all state-owned wildlife areas in the contiguous 48 
states combined. According to Natural Resources Conservation Service, 
each acre enrolled in CRP reduces topsoil erosion by an average of 19 
tons per year, improving water quality in lakes, rivers, and other 
water bodies. USDA estimates show that, over the life of the initial 
36.4 million-acre enrollment, CRP has resulted in a $2.1-$6.3 billion 
increase in net farm income, $3.3 billion in future timber resources, 
and up to $4.2 billion in surface water quality improvements. The Fish 
and Wildlife Service estimates that the wildlife benefits total $1.4 
billion for waterfowl hunting and $4.1 billion for non-consumptive 
wildlife benefits such as photography and wildlife watching.
    Congress should expand the program's acreage limit to 45 million 
acres.
                                 ______
                                 

     Prepared Statement of the American Sheep Industry Association

    The American Sheep Industry Association (ASI) is a federation of 
state member associations representing the nearly 67,000 sheep 
producers in the United States. The sheep industry views numerous 
agencies and programs of the U.S. Department of Agriculture as 
important to lamb and wool production. Sheep industry priorities 
include rebuilding and strengthening our infrastructure primarily 
through the National Sheep Industry Improvement Center, critical 
predator control activities, fully funded our national animal health 
efforts, and expanding research capabilities.
    The rapid changes that have occurred in the domestic sheep industry 
and continue to take place put further emphasis on the importance of 
adequately funding the U.S. Department of Agriculture programs 
important to lamb and wool producers.
    We appreciate this opportunity to comment on those portions of the 
USDA fiscal year 2003 budget.
                           rural development
    The National Sheep Industry Improvement Center is critical to the 
industry and we fully support an appropriation of $5 million for fiscal 
year 2003. The Sheep Center is currently involved with three major 
initiatives, first, the Center has an Intermediary Low Interest Direct 
Loan Program, which became operational in 2000 and has committed $14 
million for lamb, wool and goat projects. Loans are being used to fund 
a variety of large and small projects in every region of the country 
with emphasis on targeting different marketing challenges through value 
added and niche marketing initiatives. The second focus area involves 
the use of $4.8 million in the Center starting in 2000 to fund American 
Lamb product development, marketing, and promotion with projects in 
every region of the United States. The third initiative is a direct 
grant program that was started in 2002 and has already funded grants 
this year with another round of grant awards planned for later this 
fiscal year.
    There are additional special initiatives planned in 2002 to address 
specific industry needs, including a meats lab project. Most 
importantly, we understand that loan proposals currently under 
consideration will fully use the available funds. The demand for the 
Center's funds is increasing and additional appropriations will be 
required in fiscal year 2003 to meet the new project requests. 
Furthermore the authority of the Center to receive Federal funds allows 
for another $24.5 million during the next four fiscal years. ASI 
supports appropriations at $5 million each fiscal year as a priority 
for our industry and believes this is a better approach than waiting 
and requesting half of more of the funds in the last 2 years of the 
authorization.a The Center is a premier vehicle of the U.S. sheep 
industry's adjustment plan and adequate funding is critical to the 
industry.
           animal and plant health inspection service (aphis)
Wildlife Services
    With well over one-quarter million sheep and lambs lost to 
predators each year, the Wildlife Services (WS) program of USDA-APHIS 
is vital to the economic survival of the sheep industry. The value of 
sheep and lambs lost to predators and predator control expenses are 
second only to feed costs for sheep production. Costs associated with 
depredation currently exceed our industry's veterinary, labor and 
transportation costs.
    Wildlife Service's cooperative nature has made it the most cost 
effective and efficient program within Federal government in the areas 
of wildlife management and public health and safety. Wildlife Services 
has over 2,000 cooperative agreements with agriculture, forestry 
groups, private industry, state game and fish departments, departments 
of health, schools, county and local governments and others to mitigate 
the damage and danger that the public's wildlife can inflict on private 
property and public health and safety. WS is one of the few Federal 
programs that have been consistently at or above the 50:50 Federal to 
cooperative funding ratios. In fiscal year 2001, cooperator funding 
made up 52 percent of the total operational budget.
    ASI is very concerned with the Administrations` proposed $10 
million cut in operations funding for Wildlife Services. Wildlife 
Services would not just lose $9.96 million in funding, but would lose 
an estimated $11.1 in Federal matching monies for airport safety, 
endangered species, invasive species management and the protection of 
livestock, crops and private property. Analysis also shows that $19.3 
million in cooperative funding would be lost along with 596 Fderal in 
cooperative staff years. A loss of over $40 million in funding and 
almost 600 staff years would be devastating to the program, and ASI 
must therefore oppose such cuts.
    ASI is appreciative of the funds provided the National Wildlife 
Research Center in fiscal year 2002 to offset building maintenance 
costs. In June 2002, the National Wildlife Research Center will 
complete construction of it new outdoor animal research pen complex. An 
additional $1.5 is needed in the next budget year to maintain and staff 
this new complex. The completion and funding of this complex should 
greatly accelerate research on new non-lethal and selective lethal 
methods of managing wildlife related conflicts.
    Aerial hunting is one of Wildlife Service's most efficient and 
cost-effective core programs. It is used not only to protect livestock, 
wildlife and endangered species, but is a critical component of the 
Wildlife Services rabies control program. ASI is very supportive of the 
Administrations` $1.6 million budget recommendation to fully implement 
the recommendations of the Aviation Safety Review Committee by the 
December 2002 deadline.
    Expansion of Federally protected wolf populations in Montana, 
Idaho, Wyoming, Minnesota, New Mexico, Arizona, Wisconsin and Michigan 
continue to create increased demand for assistance in managing wolf 
depredation. Last year there were over 300 requests for assistance in 
the management of wolf related conflicts. Wolf numbers in Montana, 
Wyoming and Idaho now total 500. Minnesota has a wolf population of 
nearly 3,000, and wolf numbers in Michigan and Wisconsin are now 
increasing at rates of 34 percent and 30 percent respectively. An 
additional $950,000 in funding is needed in fiscal year 2003 to manage 
wolf related conflicts. A total of $750,000 in additional funds is 
needed to manage current conflicts in Minnesota, Michigan and 
Wisconsin. $200,000 in additional funding is needed to manage wolf 
conflicts in Arizona and New Mexico.
    Wildlife Services must document its operations in order to conduct 
program analysis and comply with Federal reporting requirements. The 
agency's current information technology support system has become 
antiquated which could result in incomplete data collection and 
analysis. To update and maintain the information system, an additional 
$700,000 is needed.
                                scrapie
    Adequate funding for scrapie eradication and other supportive 
efforts, such as the Voluntary Scrapie Flock Certification Program and 
the National Scrapie Slaughter Surveillance Study are of critical 
importance to the sheep industry, as well as all segments of the 
livestock industries. The regulation for scrapie eradication was 
finalized by USDA in 2001 and is being implemented across the country. 
The importance of this eradication program is supported by the 
Administration's budget request of $26.621 million. ASI strongly 
supports this funding level. We are aware that animal disease 
eradication programs are now largely funded through CCC and we expect 
that this will be the case with scrapie as well. However, it is 
critical that USDA/APHIS receive adequate appropriated funds to conduct 
``base-program'' activities such as hiring full-time personnel. We 
therefore urge the subcommittee to support the Administration's request 
of $26.621 million with a $5 million increase in appropriated funds 
over the 2002 level of $3.1 million for a total of $8.1 million in the 
appropriated budget for scrapie. As with the successful animal disease 
eradication programs conducted by USDA/APHIS in the past, strong 
programs at the State level are key. We therefore urge the subcommittee 
to send a clear message to USDA to budget significant funding toward 
cooperative agreements with the State animal health regulatory 
partners.
                     agricultural marketing service
Lamb Market Information and Price Discovery Systems
    The sheep industry strongly supports the fiscal year 2003 budget 
for Market News of USDA-Agricultural Marketing Service. Furthermore ASI 
supports necessary increases in appropriations for the full 
implementation of the mandatory price reporting system for livestock. 
We expect AMS will be fully implementing the price reporting system 
this fiscal year with the inclusion of the imported lamb meat price 
report.
                   foreign agricultural service (fas)
    The sheep industry participates in FAS programs such as the Market 
Access Program (MAP) and the Foreign Market Development Program. ASI 
strongly supports continued appropriations at the current level for 
these critical Foreign Agricultural Service programs. ASI is the 
cooperator for American wool and sheep pelts and has achieved solid 
success in increasing exports of domestic product. Exports of American 
wool have been increased dramatically with approximately 30 percent of 
U.S. production competing overseas.
             natural resources conservation service (nrcs)
    ASI urges increased appropriations for the range programs of the 
Soil Conservation Service to benefit the private range and pasture 
lands of the United States with conservation assistance. We support the 
budget item and recommend an increased level for the Grazing Lands 
Conservation Initiative, which ASI has worked with, along with other 
livestock and range management organizations, to address this important 
effort for rangelands in the U.S.
                   research, education and economics
    Our industry is striving to be profitable and sustainable as a user 
of and contributor to our natural resource base. Research, both basic 
and applied, and modern educational programming is essential if we are 
to succeed. We have been disappointed in the decline in resources USDA 
has been targeting toward sheep research and out-reach programs. With 
net increases in the animal systems category of the agriculture 
research budget, for example, sheep and wool research has either 
declined or remained static for the past several years. In order for 
the sheep industry to be more globally competitive in the future, we 
must invest in the discovery and adoption of new technologies for 
producing, processing and marketing lamb and wool. We urge the 
subcommittee to send a strong message to USDA supporting sheep research 
and education funding increases.

                     Agricultural Research Service

    Emerging, Reemerging and Exotic Diseases of Plants and Animals.--We 
request the subcommittee's support for the administration's allocation 
of $13.357 million in this area. The animal disease portion should be 
substantial and is urgently needed to protect the U.S. livestock 
industry. We appreciate the $5 million allocated in 2002 for BSE 
research. We agree that BSE is an extremely important disease issue 
globally and believe that research is needed to help keep the U.S. free 
of this devastating disease. With this in mind, we remind the 
subcommittee that scrapie is a TSE that is endemic in the U.S. and we 
recommend that these monies for BSE research be utilized in such a 
manner that the resultant research assists with scrapie eradication 
needs. We also respectively remind the subcommittee that scientists in 
the Animal Disease Research Unit (ADRU), ARS, Pullman Washington, have 
made significant progress in the early diagnosis of TSEs, in 
understanding genetic resistance to TSEs and in understanding 
mechanisms of TSE transmission, which are all important in eradication 
of TSEs. The programs of these scientists at ADRU should be enhanced 
and expanded to include, for instance, the development of further 
improvements in rapid and accurate TSE detection methods and to provide 
an understanding of the role of environmental sources of the TSE agent 
in the transmission of TSEs within the United States and world and to 
further understand the basis of genetic resistance and susceptibility 
to these devastating diseases.
    We urge your support to restore the $300,000 for collaborative 
research between ARS Animal Disease Research Unit in Pullman, 
Washington and the U.S. sheep experiment station in Dubois, Idaho 
concerning malignant catarrhal fever (MCF) research. These monies were 
established by congressional action in 2000 and have been successfully 
utilized to perform research leading to control methods for this 
important disease of sheep and cattle. Health and disease management 
was one of the four focus areas included in President's Section 201 
relief decision. This funding is key in helping us address and develop 
vaccines for this very important disease.
    Research into Johne's disease has received additional funding 
through ARS over the past several years, focusing on cattle. Johne's 
disease is also endemic in the U.S. sheep population and is not well 
understood as a sheep disease. The same food safety concerns exist in 
both sheep and cattle; other countries are also very concerned about 
Johne's in sheep. We urge the subcommittee to send a strong message to 
ARS that Johne's disease in sheep should receive more attention at the 
National Animal Disease Research Center (NADC) with an emphasis on 
diagnostics.
                       economic research service
    For over 20 years, there has been no publicly available retail 
price data on lamb. Our industry suffers because of this void. We urge 
the subcommittee to send a strong message to ERS that the publication 
of a retail price series is imperative to pricing efficiency in the 
lamb industry and that funding for mandatory price reporting include 
collection and reporting of retail lamb price data.
  cooperative state research education and extension service (csrees)
    Minor Use Animal Drugs is a ``Special Research Grant'' that has had 
great benefit to the U.S. sheep industry. The research under this 
category and the companion ``NRSP-7'' program through FDA/CVM has 
provided research information on therapeutic drugs that are needed for 
the approval process. Without this program, American sheep producers 
would not have effective products to keep their sheep healthy. We 
appreciate the Administration's request of $588,000 for this program 
and we urge the subcommittee to recommend that it be funded at least at 
this level to help meet the needs of our rapidly changing industry.
    On-going funding for the Food Animal Residue Avoidance Databank 
(FARAD) program is critically important for the livestock industry in 
general and especially for ``minor species'' industries such as sheep 
where extra-label use of therapeutic products is more the norm rather 
than the exception. FARAD provides veterinarians the ability to 
accurately prescribe products with appropriate withdrawal times 
protecting both animal and human health. We urge the subcommittee to 
restore funding for FARAD at least to the 2002 level of $800,000.
    Ongoing research in wool is critically important to the sheep 
industry. ASI urges the subcommittee's support of $294,000 for fiscal 
year 2003 through the special grants program of the CSREES for wool 
research.
    ASI appreciates the special research grant funding in 2002 for the 
Montana Sheep Institute and for recognizing that sheep can be a 
powerful contributor to environmental enhancement in the northern Great 
Plains. We encourage the subcommittee to recommend funding of this 
program in 2003.
    The industry greatly appreciates this opportunity to discuss these 
programs and appropriations important to the sheep industry.
                                 ______
                                 

      Prepared Statement of the American Society for Microbiology

    The Food and Drug Administration (FDA) represents a pivotal 
position in national health and safety and successfully performs a 
wide-range of duties as a protector of public health in the United 
States. Last year the FDA reviewed the safety and efficacy of consumer 
products worth $1 trillion, and monitored more than 100,000 U.S. firms 
that manufacture or process these products. Agency inspectors annually 
screen almost 8 million shipments of import goods at our national ports 
of entry. Today heightened threats to our national security demand even 
more vigilance and scientific expertise from FDA personnel. The 
American Society for Microbiology (ASM), the largest single life 
sciences society representing over 40,000 scientists, strongly supports 
the Administration's fiscal year 2003 budget request of $1.7 billion 
for FDA, an increase of $123 million, or nearly eight percent (8 
percent) above the fiscal year 2002 level.
    Increased funding for the FDA will help to expand both science-
based programs and well-trained personnel capable of responding to more 
urgent and more complex demands for public protection. The ASM also 
concurs with the programs given priority in the proposed budget: that 
is, enhancing FDA's already intensive counter-terrorism programs, 
expanding salary and staff resources, further emphasis in decreasing 
medical errors related to medical products, and continuing a strong 
defense against unsafe or ineffective consumer goods.
    The widespread public trust in FDA activities is well deserved, as 
the agency for decades has reviewed carefully both new and on-the-
market products, ranging from toothpaste to sophisticated medical 
lasers and tissue transplants. Most of the food consumed in the United 
States is under FDA surveillance as well, as are such health threats as 
microbial resistance to antibiotics and in-hospital medical errors. The 
ASM urges Congress to approve significant funding increases in 
supporting the FDA's focus areas of food safety, safe and effective 
medical products, and physical security of this country and its 
citizens.
Science for Safety and Security
    The role of the FDA is a complex blend of law and science B 
consumer protection laws are upheld through careful reviews or 
evaluations based on the latest in science and technology. With the 
rapid scientific changes expected in coming years, the ASM believes it 
is essential that the FDA remains at the forefront of these changes. 
Up-to-date science is considered the agency's foundation, whether its 
personnel are enforcing regulations, reviewing new-product 
applications, or assisting in policy development. Among those current 
FDA responsibilities dependent on solid science are the federal efforts 
against antimicrobial resistance among pathogenic microorganisms, 
attempts to understand and prevent transmission of bovine spongiform 
encephalopathy (BSE, or ``mad cow disease''), and responsibility for 
the safety of bioengineered foods and other products. Cutting-edge 
areas under FDA purview will include medical imaging, stem cell-derived 
products, biosensors, new drug delivery systems, robotics, organ 
replacements, products from transgenic organisms, and more.
    Only by staying ahead of the scientific curve can the FDA maintain 
its credibility as the nation's principal protector of product safety 
and efficacy. The short-staffed agency must be able to train additional 
researchers and inspectors, as well as strengthen its extramural 
research grant programs. Given the FDA's role in new-product approval, 
the failure to provide adequate scientific resources to an already 
overburdened organization could hinder both public health and public 
safety initiatives. In the past, the agency has worked efficiently to 
improve processes such as the review of new drugs, which has been 
shortened from an average of 30 months to a year, and the number of new 
drugs appeared annually has increased by almost 40 percent. Such 
efforts have persisted within the framework of solid scientific 
expertise.
    The ASM strongly supports efforts to increase and enhance FDA's 
science research base. FDA must be given the resources to keep pace 
with accelerating technology and to take advantage of scientific 
opportunities to best serve the American public. Basic research by the 
FDA contributes to the Agency's ability to adapt to constant changes in 
its consumer constituency and respond to future public health threats.
Counter-Terrorism at the FDA
    The FDA has a well-deserved reputation of being able to assess 
threats to public safety and managing those risks. Recent events of 
terrorism and bioterrorism have altered specific FDA goals for the 
coming year, but these goals fall firmly within the agency's long-
standing approach of risk identification and prevention. The FDA will 
focus on three areas identified as security issues: safe and effective 
medical products to treat victims of an attack, food safety, and 
physical security of FDA facilities and programs. The FDA has been 
entrusted with two functions within the national response to terrorism, 
that is, to facilitate the ready supply of medications to prevent or 
treat terrorism-related injuries, and to prevent the intentional 
contamination of consumer products such as food and pharmaceuticals. 
Included in the President's fiscal year 2003 counter-terrorism budget 
is $159 million for FDA.
    In recent months, the specter of bioterrorism shifted from theory 
to threat, and then to reality. In 2000, the FDA approved a drug for 
treatment of post-exposure inhalational anthrax, in anticipation of 
such dire events. The agency now is a partner B along with the NIH, the 
CDC, and others B in a new vaccine/drug development continuum devoted 
to the prevention and treatment of such diseases as smallpox and 
anthrax. The FDA will continue its regulatory functions, as all of its 
centers focus on new biologics (vaccines and antibiotics), rapid 
diagnostic devices, and additional trained personnel specializing in 
bioterrorism. Other FDA counter-terrorism goals for the coming year 
further reflect the agency's wide-ranging responsibilities, including a 
doubling of the number of physical exams of import goods and an 
intensified laboratory analysis of suspicious items, as well as the 
inspection of imported goods coming through 45 ports of entry not 
previously examined. In all of these efforts, the FDA adheres to its 
stated principles of using solid science as a basis for accurate 
decision-making; maintaining strong collaborations with industry, 
government, and other stakeholders; regulating products throughout 
their use by the public; and considering the global nature of product 
development and consumption.
Product/Consumer Safety
    The balance between benefits and risks of a proposed new product is 
the central question asked by FDA personnel each time they evaluate new 
drugs and biologics (vaccines, blood products, gene therapy, 
biotechnology products), medical devices, or food additives. Such risk 
assessment is absolutely vital to our national health and must be well-
funded from year to year. While the FDA does not itself develop new 
products, it thoroughly assesses laboratory data in both pre- and post-
market reviews of consumer goods, a costly responsibility. The FDA 
recently negotiated with product manufacturers to use industry funds 
for product/device review. This is the first time that resources will 
be allowed for risk management activities of products after they enter 
the marketplace. The ASM recommends that FDA-regulated areas such as 
blood product assessment be adequately funded. United States 
investments in biomedical research, promises advances such as animal 
organ transplants and cellular and gene replacement therapies. These 
new products must each be evaluated by one or more of the FDA's 
research centers before entering the public health arena.
    At the Center for Biologics Evaluation and Research (CBER), FDA 
investigators oversee biological products such as blood, vaccines, 
therapeutics and related devices. They will be responsible for 
implementing new regulations governing tissue and cell transplants, 
made more important with today's increases in reconstructive surgery 
and with the potential uses for animal tissues in treating human 
disorders. FDA monitoring of transplantation tissue like bone, skin, 
and corneas includes donor screening to prevent spread of communicable 
diseases and rigorous record-keeping by medical centers. The agency is 
in the process of revising its regulations, part of its on-going 
efforts to refine and strengthen disease prevention. CBER also 
regulates human gene therapy products, expected to be a major source of 
medical treatments in the future. Genomics, informatics, and transgenic 
animals are just some of the cutting-edge advances about which FDA 
scientists must be thoroughly trained, as entirely new types of 
products enter the regulatory system. In February, for instance, the 
FDA approved the first nucleic acid test system to screen whole blood 
donors for infections with both HIV and hepatitis C virus, providing 
earlier and more sensitive detection of contaminated blood.
    Other FDA institutes likewise deal with burgeoning products to be 
reviewed within the context of innovative science. Last year the Center 
for Drug Evaluation and Research (CDER) approved 66 new drugs, 24 of 
which contained ingredients never before marketed in this country. Ten 
drugs received priority status because of their clear benefit to public 
health, including a new oral treatment for chronic myeloid leukemia 
that the FDA approved in a record 2.5 months. The CDER also continues 
to watch more than 10,000 drugs currently on the market, as well as 
drug advertising to assure it is truthful. The Center for Devices and 
Radiological Health (CDRH) contends with more than 20,000 firms 
worldwide that produce more than 80,000 different medical devices for 
the U.S. market, from contact lenses to heart valves. Among the 
thousands of products approved last year was a skin substitute made of 
human fibroblast cells, used to help heal diabetic foot ulcers. Over 
the past five years, through streamlined efforts by the CDRH, approval 
times for novel, high-potential medical devices declined by about half, 
to 12 months.
    The use of many thousands of medical products too frequently 
results in adverse events, causing harm to patients. Recent studies 
suggest that drug- and device-related mistakes are the single greatest 
cause of preventable patient injury. Annual estimates of the damage in 
the United States include up to 100,000 deaths, more than 3 million 
hospital admissions, and an economic cost ranging from $20 million to 
$75 million. The FDA records more than 350,000 reports of adverse 
events annually, but believes that about half of the deaths and 
injuries could be avoided through strict adherence to its patient 
safety initiatives. These include clarifying instructions to physicians 
and patients and expanding requirements for reporting adverse events. 
The CBER and the CDC, for example, jointly manage the Vaccine Adverse 
Event Reporting System, a post-market surveillance system to collect 
information on vaccination side-effects. The FDA also has pioneered the 
international harmonization of drug standards; as a result, producers 
in the United States, the European Union, and Japan are coordinating 
event reporting and drug instructions.
Food Safety
    Nutritious food flows into American homes, restaurants, and markets 
from overseas and from domestic producers, in large part due to the 
diligence of FDA inspectors and scientists. Each year about $240 
billion of food is produced in the United States, while an additional 
$15 billion worth is imported from every part of the world. Roughly 80 
percent of this abundant food supply is the responsibility of the FDA, 
which regulates all but meat, poultry, and some egg products controlled 
by the U.S. Department of Agriculture. The FDA's Center for Food Safety 
and Applied Nutrition (CFSAN) and Center for Veterinary Medicine (CVM) 
have a tremendous responsibility in assuring that this food is safe, 
wholesome, and free from disease.
    In the United States foodborne diseases cause approximately 76 
million illnesses, 325,000 hospitalizations, and 5,000 deaths each 
year. Annual hospitalization costs exceed $3 billion, plus the cost 
from lost productivity may be an additional $8 billion. Food-related 
outbreaks of infections from such pathogenic bacteria as Escherichia 
coli and Listeria continue to plague Americans. Control of foodborne 
illness is increasingly complicated because of emerging pathogens like 
E. coli O157:H7 and the BSE agent; the fact that more food is prepared 
and consumed outside the home; and the dramatic movement worldwide of 
food imports and exports. Other factors likewise causes problems, such 
as the link between antibiotic use in animal feeds and rising 
incidences of human infections by antimicrobial resistant bacteria. 
Consequently, the FDA rightly argues for tighter controls and more 
education both among consumers and within the food production industry.
    Last year, the FDA took specific steps to strengthen procedures 
that prevent unsafe food from entering the United States, and to widen 
its domestic efforts against food-related health threats. Using funds 
from the fiscal year 2003 budget, the agency plans to double the number 
of physical exams of food imports performed last year. It is a partner 
in the multi-agency National Food Safety Initiative, with the goal of 
``effective detection, response, and control of foodborne and 
waterborne pathogens.'' It also is part of a coordinated effort, the 
Egg Safety Action Plan, intended to cut in half the number of 
salmonella-caused illness due to contaminated eggs by 2005. Drawing 
from its considerable experience in information gathering and 
dissemination, the FDA participates in several nationwide surveillance 
and emergency response systems; e.g., PulseNet, which collects DNA 
``fingerprints'' of bacteria that may be foodborne pathogens. CFSAN 
initiated widespread use of the Hazard Analysis and Critical Control 
Point (HACCP) system that inserts preventative controls at the most 
contamination-susceptible points within food production processes. Thus 
far, CVM inspectors have collaborated in nearly 10,000 inspections of 
animal feed facilities, searching for sources of the ``mad cow 
disease'' pathogen.
The FDA in an Era of Complexity
    Today's complicated social, scientific, and economic pressures are 
demanding more and more from FDA resources and personnel, creating a 
clear and present need for increased support. The ASM is concerned that 
growing shortages in trained staff and scientific capabilities will 
diminish the FDA's traditional role as protector of public health. The 
FDA has a labor-intensive, science-based mission that necessitates 
sufficient numbers of well-trained employees. Most (60 percent) of the 
agency's budget, in fact, goes towards payroll costs, and nearly half 
of its employees are ``in the field'' inspecting and educating. The 
number of import shipments of foreign-produced products under FDA 
review rose from about 1.5 million in 1992 to 6 million in 2000. FDA 
investigators are now able to sample less than 1 percent of all foods 
entering the United States, due to the large volumes imported.
    Challenges faced by the FDA are changing along with society and 
science in this era of increasing complexity. An aging population of 
Americans changes the types of new medical drugs and devices needed 
most urgently. Advances in human genetics and artificial intelligence 
create both unforeseen opportunities and unanticipated problems that 
must be reviewed carefully by the FDA. Radiation safety issues and the 
intentional release of chemicals or microbial pathogens have forced 
recognition of bioterrorism as an FDA priority. More than 100 million 
people consulted the internet last year for medical advice from FDA 
sources, raising the agency's public outreach efforts to new levels. 
International trade has formed an interlocking worldwide web of 
inspections, product review, and education campaigns. Adapting to these 
changes is critical, if the FDA is to continue to protect public health 
and national security.
                                 ______
                                 

      Prepared Statement of the American Society for Microbiology

    The American Society for Microbiology (ASM), the largest single 
life science organization in the world, comprised of more than 42,000 
members, appreciates the opportunity to provide written testimony on 
the fiscal year 2003 budget for the U.S. Department of Agriculture 
(USDA) research and education programs.
    The ASM represents scientists who work in academic, medical, 
governmental and industrial institutions worldwide and are involved in 
research to improve human health and the environment. Microbiological 
research is directly related to agriculture involving foodborne 
diseases, bioterrorism, new and emerging plant and animal diseases, 
soil erosion and soil biology, agricultural biotechnology, and the 
development of new agricultural products and processes. The ASM is a 
member of the Coalition on Funding Agricultural Research Missions 
(CoFARM), which represents scientific societies and organizations 
involved in formulating research directions and needs for agricultural 
research.
    The U.S. agricultural system is one of the most productive and 
efficient in the world, due in part to continued investments in 
science. Agricultural research has led to many advances, including 
biotechnology, which contributes to a more abundant and nutritious food 
supply and a more environmentally friendly food production process, 
while reducing agriculture's reliance on chemical fertilizers, 
pesticides, and fungicides. Unfortunately, public investment in 
agricultural research has been stagnant for several years impeding 
scientific advancement and progress, despite the recognized importance 
of the agriculture sector in the economy. According to the National 
Science Foundation's (NSF) Division of Science Resources Studies, 
agricultural research made up only 4 percent of all public funds 
devoted to basic research and only 2 percent of total R&D expenditures 
for fiscal year 2000.
    U.S. agriculture, however, faces an array of challenges, including 
the threats of new and reemerging diseases, agroterrorism, and public 
concern about food security and its impact on the environment. It is 
critical to increase the visibility and investment in research to 
respond to these challenges. The ASM encourages the Subcommittee to 
build upon the renewed focus on agricultural research supported in the 
Administration's fiscal year 2003 USDA budget. This will not only 
benefit U.S. agriculture but also the health and well-being of every 
American.
               infectious diseases in plants and animals
    It is important to recognize a growing threat to the U.S. 
agricultural system that requires immediate attention--the threat of 
new and emerging infectious diseases. Like the human population, U.S. 
agriculture is also experiencing severe problems caused by new and 
emerging infectious diseases in plants and animals. Changes in 
agricultural practices, agroterrorism, population growth, climate, 
microbial evolution, animal migration, and international trade and 
travel are all factors in introducing new plant and animal diseases 
into the U.S. agriculture system and natural resources, such as oak 
trees in California. The lack of knowledge to manage effectively and 
control new and reemerging infectious diseases often leads to very 
serious consequences from lost productivity from quarantines to 
embargoes, and the destruction of plants and animals to control the 
spread of diseases. For example, citrus canker has cost millions in 
tree destruction in Florida. Research, monitoring, surveillance, and 
new sources of resistant genetic material, including the use of 
biotechnology, may enable continued growth of citrus trees commercially 
and by homeowners. New technologies, e.g. the polymerase chain 
reaction, now enables us to detect minute quantities of etiological 
agents, including those previously ascribed to physiological problems 
in plants, such as the class of viruses known as luteoviruses.
      cooperative state research, education and extension service
    In 1989 the Board on Agriculture of the National Research Council 
(NRC) recommended that public investment through competitive research 
grants in agriculture, food, and the environment be made a national 
priority. To address this monumental task, Congress (1991) created the 
National Research Initiative Competitive Grants Program (NRI) in the 
hope of generating new knowledge and reinvigorating research in 
agriculture, food, and environmental science (National Research 
Initiative: a Vital Competitive Grants Program in Food, Fiber, and 
Natural-Resources Research, NRC, 2000). The ASM strongly supports 
competitive peer reviewed research that is open to all the nation's 
scientists.
    The ASM urges the Subcommittee to fund the NRI at the President's 
requested $240 million budget. This level of funding would strengthen 
the commitment of the USDA to the competitive merit review process, 
provide funds for fundamental research with long-term potential for new 
discoveries, and better sustain human resource opportunities in 
agricultural research. Despite previous funding levels, the NRI has 
yielded extensive scientific advancements that are comparable to some 
of those made at other agencies that fund peer-reviewed research. For 
instance:
  --Microbial pathogens represent the most serious contamination 
        problem facing the U.S. food supply. This threat has expanded 
        to include the intentional release of food/animal/plant 
        pathogens into the U.S. agricultural system. Research supported 
        by the NRI has led to the development of immunomicrobial 
        biosensors for the detection of Salmonella in foods. Research 
        will continue to expand this technology to include Toxoplasma 
        and Escherichia coli 0157:H7. This technology is the foundation 
        of future advances in on-site, on-demand analyses of 
        agricultural products.
  --Economic losses of animals and attendant pain and suffering can 
        occur due to diseases, such as Marek's disease virus (MDV), a 
        herpesvirus, in chickens and avian pneumovirus (APV) in 
        turkeys. These diseases are being examined at the genetic level 
        to understand pathogenic properties that would be candidate 
        disease intervention targets.
                     agricultural research service
    The ASM recommends that the Subcommittee build upon the 
Administrations proposed $1 billion budget for fiscal year 2003, which 
is a $223 million decrease from fiscal year 2002. The Agricultural 
Research Service (ARS) is the principal in-house research agency in 
USDA in the area of natural and biological sciences. The imminent 
threats of bovine spongiform encephalopathy (BSE) and foot-and-mouth 
disease in animals and plum pox in plants are examples requiring new 
and extensive research. Agroterrorism also presents a serious threat to 
the American agricultural system and requires a renewed focus on animal 
and plant pathogens. Therefore, the ASM recommends that increased 
funding in this area be distributed equally between plant (emerging and 
exotic diseases of plants ($5.4 million fiscal year 2003 increase)) and 
animal research (emerging, reemerging, and exotic diseases of animals 
($8 million fiscal year 2003 increase)) at $10 million each for fiscal 
year 2003. This increase will allow ARS to focus on improving rapid and 
accurate detection systems for animal and plant diseases and pathogens 
and effective treatment protocols. Research will also be directed to 
developing diagnostic and vaccine technologies that will ultimately 
improve the nation's ability to control disease outbreaks, and mitigate 
the threats of tomorrow to the nation's animal, plant, and grain 
products.
    The ASM also believes continued support of agricultural genomic 
research is a critical component of our nation's research enterprise. 
Increasingly, environmental factors are requiring new and novel 
solutions to plant production, protection (pest), nutritional content 
and food safety that are being addressed through genomic research. The 
ASM endorses the Administration's increase ($6.9 million) for genomic 
research, which includes funds for microbe sequencing and identifying 
genes that affect resistance, reproduction, nutrition, and other 
important traits.
    The ASM is pleased to see the Administration continues to recognize 
the pivotal role ARS will play in safeguarding U.S. agriculture. The 
Administration proposes $5 million for biosecurity needs within the 
ARS. This money will modestly fund research into new tools for 
identifying specific genetic attributes of a pathogen, which will 
improve global disease and pest surveillance, as well as enhancing U.S. 
food security and its appeal in the global marketplace. The ASM highly 
recommends increasing funding in this pivotal area in the fiscal year 
2003 budget.
               animal and plant health inspection service
    U.S. agriculture is uniquely vulnerable, due to its size and 
variety of products, to infectious diseases and pests. The Animal and 
Plant Health Inspection Service (APHIS) has the critical role of 
policing the U.S. infrastructure that is in place to prevent, diagnose 
and respond to these threats. The U.S. needs to continue to upgrade its 
biosafety systems to prevent foreign animal and plant diseases from 
entering the domestic agriculture system. This sentinel network 
requires new, accurate and cost effective diagnostic tools and updated 
information technology. The ASM is pleased that the Administration's 
budget reflects APHIS's daunting task of combating animal and plant 
diseases by allocating additional resources ($48 million) for 
monitoring and responding. The ASM is also encouraged by the 
Administration's total funding for APHIS at $1 billion, which is level 
with fiscal year 2002. While this amount is not an increase over fiscal 
year 2001 or 2002, it does reflect the rapidly changing needs of APHIS 
and its role in addressing animal and plant health monitoring and 
outbreak management.
                              food safety
    Foodborne illness continues to pose a major public health problem 
in the U.S. The ASM recommends that the Subcommittee provide additional 
funding to USDA to expand food safety research. In a recent report it 
was estimated foodborne diseases cost the U.S. billions in medical 
costs and lost productivity (salmonellosis, only 1 of many foodborne 
infections, have been estimated to cost $1 billion/year) and an 
estimated 76 million illnesses a year (CDC 2000). Further reducing 
foodborne illness requires not only preventing contamination through 
improved processing and inspection, but also educating consumers to 
avoid unsafe consumption choices and to prepare food safely to avoid 
cross-contamination. The 1997 Food Safety Initiative recognizes this 
with funding for a national media campaign to encourage safe food 
handling.
    Microorganisms continue to adapt to their changing environments and 
begin to ``out smart'' current techniques to control their presence. 
Many foodborne microbes have developed resistance to conventional food 
preservation and disinfection techniques and continue to proliferate. 
It is also important to note that the diversity of microorganisms 
affecting food safety changes with time, processing techniques, 
location and other factors. To illustrate the growing problem, one need 
only examine the number of USDA and FDA regulated food product recalls 
because of harmful bacteria. In 1995 the USDA and FDA recalled 265 
products due to microbial hazards; in 1999, the number of recalls rose 
to 337.
                           microbial genomics
    Microbes are involved in all aspects of agriculture, from 
beneficial uses of microbes in food (i.e., yogurt, cheese, and bread), 
to pest controls, to the spread of disease in plants and animals, and 
the contamination of the food supply. Studying the genomes of 
agricultural microbes is expected to enable development of new 
technologies to provide improved foods and better pathogen control to 
protect the nation's crops, to reduce the incidence of plant and animal 
disease, and to ensure a safer food supply. Thus, ASM is highly 
supportive of microbial genomics through the NRI program. Microbial 
sequencing is also expected to lead to speedier and more accurate 
identification of microbes, identify targets for intervention, as well 
as potential new antimicrobial agents. Coordination and cooperation 
with the National Science Foundation in this area is particularly 
promising. In conjunction with an interagency working group on microbes 
that focuses on sequencing and bioinformatics.
                           biobased products
    The ASM continues to support the promising research to accelerate 
the conversion of agricultural materials and byproducts into biofuels, 
such as soybean oil conversion into (bio)diesel fuel. Such scientific 
advancements in biobased product research have the added benefit of 
enhancing farm income, strengthening U.S. energy security, rural 
revitalization, and environmental stewardship. Current scientific 
estimates suggest that energy production from biofuels could generate 
up to 10 percent to 15 percent of the nation's energy needs. ASM 
believes agriculture can play a positive role in achieving U.S. energy 
security and encourages the Subcommittee to consider the benefit 
biofuels represent to the entire agricultural and consumer community.
                         global competitiveness
    Recent adoption of the Uruguay Round, which confines the use of 
import restrictions on agriculture products of the General Agreement on 
Tariffs and Trade (GATT) and the North American Free Trade Agreement 
(NAFTA) pose great challenges to American agriculture. While domestic 
advances in agricultural technology, including biotechnology, have 
achieved great strides in food production, safety, and nutrition, they 
will also provide similar advances to other nations. Agricultural 
competitiveness in the global economy depends upon the ability of 
producers and processors to make measurable production and quality 
gains while providing desirable products that are reliable and safe. 
Agricultural research in food safety, production systems, and 
biotechnology will be key instruments in maintaining America's 
agricultural competitiveness, while providing food security.
    The ASM encourages Congress give high priority to agricultural 
research for fiscal year 2003. Many of today's scientific achievements 
leading to the development of biotechnology, genetically modified 
foods, improved crops and plant-based products and an improved 
environment have their roots in the basic research conducted by the 
USDA. The future holds many challenges from the monitoring of the 
ecological impact of transgenic plants to research in plant and animal 
diseases that is requisite to combating agricultural bioterrorism. We 
urge the Administration and Congress to assist the USDA to address 
these issues.
    The ASM appreciates the opportunity to provide written testimony 
and would be pleased to assist the Subcommittee as the Department of 
Agriculture bill is considered throughout the congressional process.
                                 ______
                                 

  Prepared Statement of the American Society for Nutritional Sciences

    The American Society for Nutritional Sciences (ASNS) is the 
principal professional organization of nutrition research scientists in 
the United States representing 3,000 members whose purpose is to 
develop and extend the knowledge and application of nutrition science. 
Our members include scientists involved in human as well as animal 
nutrition research. ASNS members hold positions in virtually every land 
grant and private institution engaged in nutrition-related research in 
the United States as well as industrial enterprises conducting 
nutrition and food related research.
        the need for federally funded nutrition-related research
    The need for nutrition science and research is critical within the 
USDA. The USDA has a unique role in the area of nutrition research, 
particularly as it applies to human nutrition. For example, although 
there is a serious and obvious commitment to the funding of disease-
related research within the National Institutes of Health, issues 
important to the basic mechanisms of nutrient function and the safety 
of the food supply have traditionally been the purview of USDA funded 
research. An NIH analysis of funding for biomedical research and 
training calculates that less that 4 percent of total NIH funding is 
linked to nutrition. This is in spite of heightened consumer interest 
in nutrition and health, and in spite of potential cost-savings in 
disease-prevention. This funding percentage has remained constant for 
the past 10 years. Thus, the USDA is the preeminent Federal agency for 
nutrition research in regard to maintaining human health.
    A recent NRC report examining the National Research Initiative's 
Competitive Grants program, characterized USDA support of human 
nutrition research as having ``experienced considerably less funding 
support in the National Research Initiative Competitive Grants Program 
(NRI) than most other [divisions]''. However, competitive USDA funding 
of nutrition research has only increased 18 percent in the past 5 
years, which is a rate of increase far below the increase in total NIH 
funding (15 percent per year for the past 4 years).
    Most of the recent work on nutrient content and availability in 
various foods has come from USDA-NRI supported research. From a 
consumer perspective, it is this type of information that is often the 
most useful. It is clearly an important extension of the commodity-
oriented research carried out by our land grant universities.
    We need to continue to invest in research as greater challenges 
face us in the future. Increasing populations, international economic 
competitiveness, improving the environment and minimizing healthcare 
costs through disease prevention are all areas that will continue to 
demand solutions for the future. These solutions might include advances 
in the understanding of the genetic basis of disease and the genetic 
basis of nutrient requirements for optimal health, which will require 
greater understanding of how nutrition and dietary information can be 
used for disease prevention in at-risk populations. In recent years 
nutrition research has led to nutritionally improved school lunches, 
implemented changes in safety requirements, and increased awareness for 
pregnant women, children and the elderly.
    The economic impact on society in healthcare costs produced by 
advances in nutrition research is significant in the number of dollars 
saved by the American taxpayer. As health costs continue to rise, it is 
imperative that our medical practices take a preventive approach. This 
requires a thorough understanding of the role of nutrients in foods in 
preventing chronic illnesses such as heart disease, cancer and 
diabetes.
    Nutrition and agricultural research are areas that impact the 
constituents of every congressional district in the nation. New 
technologies are demanded to reduce the likelihood of pathogen 
transmission by food, to improve the quality of processed foods, and to 
deliver greater nutritional value in foods. Research in the areas of 
food safety and human nutrition has paid-off with considerable benefits 
to society.
         significant nutrition-related research accomplishments
    Fighting Cancer with the Right Foods.--Cows that eat fish oil as 
part of their feed produce milk with higher concentrations of 
conjugated linoleic acid, a compound shown to help prevent cancer. 
USDA-funded research shows that butter, yogurt, and ice cream produced 
from this milk also contain healthful compounds and that consumers like 
the taste. Efforts are under way to develop a corn hybrid that will 
synthesize genistein, an isoflavone in soybeans that protects against 
breast, prostate, and colon cancers.
    Nutritional Value of Corn Increased.--Cereals provide about 70 
percent of the protein in our diets. However, most of that protein 
lacks all of the essential amino acids. Researchers have characterized 
the mechanism by which genes mutation increases lysine in corn. Humans 
require 5 percent lysine in their diet, while most maize contains only 
about 3 percent. Scientists have discovered that a protein needed by 
cells to function normally is rich in lysine (10 percent), and its 
level doubled in the gene (opaque2) needed to increase lysine. Now, 
laboratories around the world are applying this discovery to improving 
protein quality in their locally grown corn varieties.
    New Insights into the Causes of Obesity.--Current estimates show 
that half the American population will be clinically obese by the year 
2030. This is up from 30 percent today. The direct costs of treating 
complications of obesity, plus the indirect costs from lost 
productivity, represent a $100 billion annual burden on the U.S. 
economy. Variation to dietary fat has been documented in mice. 
Researchers studying fat-resistant and fat-sensitive mouse strains have 
found that after being released from adipose tissue, leptin travels via 
the bloodstream to the brain, where it binds to specific receptors in 
the brain. These receptors produce a coordinated series of responses to 
match rates of energy being utilized with rates of food intake. The 
leptin resistant mice show a breakdown in the communication system 
between adipose tissue and the brain, which regulates stabilization of 
body weight. Scientists expect this research will show fundamental new 
insights into the causes of leptin resistance and will serve as the 
basis for developing treatments and strategies for this debilitating 
condition.
                 research funding mechanisms and issues
Competitive Grants
    The NRC report, ``National Research Initiative'', suggests that 
inadequate funding for competitive research has ``limited its potential 
and placed the NRI program at risk.'' A competitive system for 
allocating government research funds is the most effective and 
efficient mechanism for focusing efforts on cutting edge research aimed 
at improving the health of the American people. Competitive grants 
provide the most effective, efficient and economic return to the 
public. ASNS strongly supports the competitive grants process as 
reflected in the National Research Initiative and believes that an 
open, merit and peer review process, applied as extensively as possible 
throughout the research system, is the preferred way to distribute 
research funds among qualified scientists and to support the most 
meritorious new concepts. For these reasons, we strongly urge this 
subcommittee to support the Administration's request to double the NRI 
competitive grants program in fiscal year 2003 to $240 million.
Initiative for Future Agriculture and Food Systems
    The Initiative for Future Agriculture and Food Systems (IFAFS) has 
supported large, multi-disciplinary, multi-center research programs 
with an educational outreach component. IFAFS includes provisions for 
peer review and for public input. Research stemming for IFAFS 
complement the individual investigator basic and applied research of 
the NRI. Such broad-based efforts are necessary for complex problems 
such as agricultural genomics. ASNS urges the sub-committee to consider 
a stable mechanism of funding to continue this program.
Nutrition Monitoring
    Under an agreement between the Department of Health and Human 
Services Centers for Disease Control and Prevention (CDC), National 
Center for Health Statistics (NCHS), and the USDA Agricultural Research 
Service (ARS/USDA), the ARS and NCHS agreed to collaborate on a program 
of national nutritional monitoring. This agreement establishes a 
cooperative diet and nutrition monitoring program integrating the 
previously conducted Continuing Survey of Food Intakes by Individuals 
(CSFII) and the National Health and Nutrition Examination Survey 
(NHANES) in 2002.
    The USDA, through its Agricultural Research Service, has conducted 
the CSFII, which was designed to assess food consumption and related 
behavior in the U.S. population using personal interviews. The CSFII 
was conducted periodically with the most recent survey being conducted 
in 1998. The Department of Health and Human Services, through its 
National Center for Health Statistics (part of the Centers for Disease 
Control and Prevention), conducts the NHANES, which was designed to 
assess the health and nutritional status of the U.S. population using 
personal interviews and direct physical examination. NHANES, previously 
periodic, began continuous operation in 1999.
    The Senate has long supported USDA's role in food security, 
progress on foot and mouth disease, WIC, and prevention of diseases 
such as diabetes, cancer, and heart disease. And so, ASNS asks for your 
support of data collection essential to policy making in all of these 
areas. Health and dietary information gathered from the USDA/DHHS 
survey is critical to the Nation and plays a key role in shaping a 
variety of policies and programs including food safety, food labeling, 
child nutrition programs, food assistance, and dietary guidance. To 
ensure that the USDA/ARS nutrition monitoring activities for fiscal 
year 2003 continue and include 2 days of dietary recall on 5,000 
individuals, interviews for diet and health knowledge, food program 
information, continued updating of food composition data, and prompt 
coding and processing information, we urge you to appropriate $7 
million or an increase of $4 million above the fiscal year 2002 budget.
Animal Welfare
    Research using animals has been crucial to virtually every advance 
in medicine in the past century. Agents for control of high blood 
pressure and the management of diabetes, vaccines for the control of 
poliomyelitis and mumps, development of artificial joints and heart-
lung machines, and many more medical advances have depended on animal 
research. USDA's Animal and Plant Health Inspection Service (APHIS) is 
charged by Congress to enforce the Animal Welfare Act (AWA).
    The question of whether the USDA should extend the Animal Welfare 
Act to rats, mice, and birds is one of many issues before this 
committee. Although this sounds like a simple solution, it is not, and 
that is why the research community has opposed this extension of the 
USDA's responsibilities. Good animal care is important for both humane 
and scientific reasons, but other oversight programs are in place to 
cover the vast majority of rats, mice, and birds used in biomedical 
research. Adding the USDA's oversight to those programs would force 
research institutions to do more paperwork without improving the 
welfare of these animals. We are, therefore, pleased to report to you 
that in February the Senate by unanimous consent adopted a farm bill 
amendment by Senator Helms that would codify the existing 
administrative exclusion of rats, mice, and birds. It is ASNS's hope 
that this provision becomes law and that this issue will be resolved.
                               conclusion
    Agriculture has been and will continue to be important to human 
health in terms of food that provides proper nutrition for healthier 
people. As the future challenges us with more complicated diseases, 
research is forced to expand outside the traditional disciplines and 
approaches, such as the work that is being done is plant and animal 
genomics. Transgenic plants and animals offer potential for new 
developments never before thought possible. New approaches must be 
implemented to address new societal concerns. For example, research in 
areas of how our food is produced, biosecurity and terrorism, pesticide 
usage, animal care and food handling issues also present demands to our 
scientists. These demands and opportunities must be answered in a way 
that sustains or enhances our quality of life. Although greater 
challenges lie ahead, agricultural research funding continues to be 
stagnant.
    Thank you for considering our request for the NRI and other 
important research programs within the USDA. We hope that you will call 
upon the expertise of our members as the committee continues to 
deliberate these very important research areas.
                                 ______
                                 

     Prepared Statement of the American Society of Civil Engineers

    Chairman Kohl and Members of the Subcommittee: The American Society 
of Civil Engineers (ASCE) is pleased to offer this testimony on the 
President's proposed budget for the Natural Resources Conservation 
Service (NRCS) for fiscal year 2003.
    ASCE was founded in 1852 and is the country's oldest national civil 
engineering organization. It represents more than 125,000 civil 
engineers in private practice, government, industry and academia who 
are dedicated to the advancement of the science and profession of civil 
engineering. ASCE is a 501(c)(3) non-profit educational and 
professional society.
    ASCE is concerned that for the second consecutive year, no funds 
have been requested in the President's budget to fund the Small 
Watershed Dam Rehabilitation Program that was authorized on November 9, 
2000, in Public Law 106-472, Section 313. Congress corrected this error 
in fiscal year 2002 and appropriated $10 million--the full authorized 
amount. We urge the Committee to appropriate the fully authorized 
amount for fiscal year 2003--$15 million. We hope the outcome of the 
fiscal year 2003 appropriations process will enable this vital work to 
continue and expand as we seek to preserve, protect and better manage 
our nation's water and land resources. Every state in the United States 
has benefited from the Small Watershed Program.
    Of the 78,000 dams in the United States, 95 percent are regulated 
by the states. Approximately 10,400 of these dams are small watershed 
structures built under the United States Department of Agriculture 
programs authorized by Congress beginning in the 1940s (primarily the 
Flood Control Act of 1944, Public Law 534 and the Watershed Protection 
and Flood Control Act of 1953, Public Law 566). By the year 2020, more 
than 85 percent of all dams in the United States will be more than 50 
years old, the typical useful life span.
                   the urgent need for federal action
    The benefits from the 10,400 improved watershed dams are enormous. 
The dams provide downstream flood protection, water quality, 
irrigation, local water supplies and needed recreation. Yet these 
benefits to lives and property are threatened. The small watershed dams 
are approaching the end of their useful lives as critical components 
deteriorate. The reservoirs become completely filled with sediment, 
downstream development increases the potential hazards and 
significantly changes the design standards, and many dams do not meet 
state dam safety standards.
    Although these dams were constructed with technical and financial 
assistance from the Department of Agriculture, local sponsors were then 
responsible for operation and maintenance of the structures. Now these 
dams are approaching the end of their useful lives, yet the resource 
need is still great. The flood control benefits, the irrigation needs, 
the water supply, the recreation and the conservation demands do not 
end. In fact, they are more necessary than ever as downstream 
development has dramatically increased the number of people, properties 
and infrastructure that are protected by the flood control functions of 
these dams. The Federal Government has a critical leadership role in 
assuring that these dams continue to provide critical safety and 
resource needs.
    The NRCS in the Department of Agriculture has estimated the cost of 
rehabilitating the small watershed dams at $542 million. While the 
average rehabilitation cost per dam is approximately $242,000, the 
local sponsors typically do not have sufficient financial resources to 
complete these necessary repairs to assure the safety and critical 
functions of these dams. The Federal Government must recognize the 
urgent need to provide assistance to maintain these dams. Congress 
should reinforce its earlier commitment to the goals of the Flood 
Control Acts of 1944 and 1953.
                         extent of the problem
    ASCE views funding of dam safety repairs as a critical need. In 
ASCE's 2001 Report Card for America's Infrastructure dams received a 
grade of D. Nearly 2,000 unsafe dams have been identified in this 
country and many of the owners do not have sufficient funding sources. 
In 2000, Congress proposed funding of $600 million over 10 years to 
rehabilitate small watershed dams, but the legislation enacted only 
authorizes $90 million spread over 5 years. However, this is an 
important first step in recognizing and resolving the enormous problem 
with deteriorating and aging dams. Many of these urgent repairs and 
modifications are needed because of the following: downstream 
development within the dam failure flood zone, replacement of critical 
dam components, inadequate spillway capacity due to significant 
watershed development and increased design criteria due to downstream 
development.
    Many of the small watershed dams do not meet minimum state dam 
safety standards and many that are being counted on for flood 
protection can no longer provide flood protection due to excessive 
sedimentation and significant increases in runoff from development 
within the watershed. The dams suffer from cracked concrete spillways, 
failing spillways, inoperable lake drains and other problems that 
require major repairs that are beyond the capability of the local 
sponsors.
                         the cost of no action
    These small watershed dams have been a silent and beneficial part 
of the landscape. Failure to make the necessary upgrades, repairs and 
modifications will increase the likelihood of dam failures. Continued 
neglect of these structures may easily result in reduced flood control 
capacity causing increased downstream flooding. Failure of a dam 
providing water supply would result in a lack of drinking water or 
important irrigation water.
    The floods in Georgia in 1993 and in the Midwest in 1994 are recent 
reminders of natural events that can cause enormous disasters, 
including dam failures. The failure to act quickly will clearly result 
in continued deterioration and a greater number of unsafe dams until a 
dam failure disaster occurs. The failure of a 38-foot tall dam in New 
Hampshire in 1996, which caused $5.5 million in damage and one death, 
should be a constant reminder that dam failures happen and can have 
tragic consequences.
    Completion of the needed repairs will result in safer dams, as well 
as continued benefits. Failure to establish a mechanism to reinvest in 
these structures will greatly increase the chances of dam failures and 
loss of benefits, both having significant economic and human 
consequences. Costs resulting from flood damage and dam failure damage 
are high and unnecessarily tap the Federal Government through disaster 
relief funds or the National Flood Insurance Program.
                             recommendation
    ASCE urges the committee to approve full funding at the authorized 
level of $15 million, for the Small Watershed Dams Rehabilitation 
Program (Public Law 106-472, Section 313). Additionally, we would like 
to see these rehabilitation funds be a separate line item in the NRCS 
budget in an effort to better track the rehabilitation funding approved 
by Congress. While, this is well short of the demonstrated need of $60 
million a year for 10 years, it would be a step in the right direction.
    The condition of our nation's dams, and the need for watershed 
structure rehabilitation, should be a national priority before we have 
to clean up after dam failures that we know are likely to happen if 
nothing is done.
    ASCE also supports a research and development (R&D) program as we 
get the structural rehabilitation process underway. In the USDA, the 
Agricultural Research Service (ARS) undertakes that work. We 
respectfully request that $1.5 million be included in the ARS budget 
for small watershed research. These funds would be used for evaluation 
of upstream and downstream changes to the stream channel systems in 
cases of decommissioning, evaluation of the water quality impact of 
stored sediment releases, and the evaluation of impacts of the loss of 
flood protection, among other things.
                                 ______
                                 

             Prepared Statement of Aquatica Tropicals, Inc.

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to provide testimony in support of funding for the Regional 
Aquaculture Center program. My name is J.M. Marty Tanner. I own and 
operate Aquatica Tropicals, Inc., and Hi-Tech Fisheries of Florida, 
Inc. I have been in the ornamental aquaculture business for 20 years. 
For the last 6 years, I have had the privilege of serving on the 
Industry Advisory Council of the Southern Regional Aquaculture Center 
(SRAC). I also serve on the Board of Directors of the Florida 
Aquaculture Association and the Florida Tropical Fish Farmers 
Association.
    It is important that the Subcommittee understand the importance of 
aquaculture in the United States. Production of ornamental fish has 
increased drastically over the years. We are currently the number one 
valued aquaculture product out of Florida, and third in the United 
States. Tropical fish producers are currently experiencing rapid 
declines in market shares and have been assaulted by increased 
competition from Asian countries. Having suffered drastic declines in 
market after the September 11th attacks, the need for research and 
development of new technology has never been as important as it is 
today.
    I feel that the Regional Aquaculture Center program is essential to 
help meet the need for technology development. Through projects already 
completed from the Regional Aquaculture Center, results have 
significantly impacted the production of domestic aquaculture. Serving 
as a Steering Committee member of several SRAC projects, the process of 
scientists from the regional states working collaboratively to identify 
and solve problems inherent to the Southern Region has saved millions 
of dollars in lost production and labor.
    Historically, projects supported through the Regional Aquaculture 
Center programs have returned economic benefits many times the amount 
invested. Additional funding of new research will help insure future 
success and growth of U.S. aquaculture.
    In summary, I am convinced that the Regional Aquaculture Center 
programs are very productive and valuable. The need for continued and 
increased funding could not be more timely.
    Thank you for allowing me the opportunity to submit testimony on 
behalf of the Regional Aquaculture Centers, and on behalf of the U.S. 
aquaculture industry, I express my sincere appreciation for your 
continued support.
                                 ______
                                 

         Prepared Statement of Carolina Classics Catfish, Inc.

    Mr. Chairman and Members of the Subcommittee: It is a pleasure to 
have the opportunity to offer testimony in support of the Regional 
Aquaculture Center program. My name is Robert Mayo and I am President 
of Carolina Classics Catfish, Inc., a fully integrated company in the 
farm-raised catfish industry. Headquartered in North Carolina, our 
operations include feed milling, catfish production, and processing and 
marketing. We also process the catfish grown by sixty family farmers 
located in North Carolina, South Carolina and Georgia. We sell our farm 
raised catfish fillets and other products to the food industry in the 
eastern United States, Canada, as well as in Europe and Asia.
    I started the business in 1985 as the first commercial catfish 
operation on the U.S. East Coast, at a time when the U.S. farm-raised 
catfish industry was producing 192 million pounds of catfish, primarily 
in the deep south states. Our company has grown steadily along with the 
U.S. catfish industry. Last year, the U.S. produced 597 million pounds 
of farm-raised catfish on farms located from Virginia to California. 
Today catfish is one of the major fish species consumed by Americans, 
helping to offset the $3 billion trade imbalance in edible seafood. 
Even as catfish continues to grow and represents the largest segment of 
U.S. aquaculture, we find ourselves dwarfed by aquaculture industries 
abroad, who are, frankly, growing in size and sophistication at a 
faster rate than the U.S. In the coming years, catfish and all of U.S. 
aquaculture must rise to the challenge of competition or our nation's 
seafood imbalance will continue to widen.
    The Regional Aquaculture Center program is, in short, the research 
funding program that supports catfish and the other U.S. aquaculture 
industries with research on the issues and problems that we face. I can 
attest to the fact that the Southern Regional Aquaculture Center has 
served and is serving the needs of the catfish industry through its 
carefully-designed and funded programs of work. To give you an idea of 
the breadth of work that SRAC funds, I would like to offer two project 
examples:
    Through funding from the Southern Regional Aquaculture Center, 
research on the effluents from aquaculture ponds has produced extensive 
data on the components of those effluents, and is leading to the 
development of Best Management Practices for the operators of 
aquaculture facilities. Information from this project is likely to be 
used by regulators in the future, including the Environmental 
Protection Agency as it develops Effluent Limitation Guidelines. 
Through its funding of the project, the Southern Regional Aquaculture 
Center has provided producers of catfish, baitfish, striped bass and 
other species with the tools for adopting Best Management Practices 
with regard to effluents, as well as establishing extensive data that 
can be used in rulemaking efforts in the future.
    The Southern Regional Aquaculture Center also funds a broad, 
valuable pipeline of information that is transmitted to the aquaculture 
industry through its ongoing Publications, Videos and Computer Software 
project. This provides for widespread and quick access of information 
on production and marketing of aquaculture products sourced from 113 
authors. SRAC fact sheets, videos, and other publications are accessed 
and used by a broad clientele of aquaculturists. I can tell you that 
virtually all of the aquaculture producers that we work with have read 
or used SRAC publications at one time or another on subjects ranging 
from specific diseases to financial aspects of their operations. Our 
company regularly retrieves and uses SRAC publications from the 
internet for immediate, up-to-date information for issues on which we 
need assistance.
    Thank you for your time and support of the Regional Aquaculture 
Center program. I strongly request that the program be funded for the 
existing five Centers for fiscal year 2003. Full funding is needed to 
support our U.S. aquaculture industry in its effort to continue to grow 
and compete with the large industries developing abroad. U.S. 
aquaculture provides jobs and commerce in rural areas, and serves to 
help balance our nation's seafood trade.
                                 ______
                                 

          Prepared Statement of the Catfish Farmers of America

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to provide testimony in support of the USDA Regional 
Aquaculture Center program. My name is Hugh Warren, and I am Executive 
Vice President of the Catfish Farmers of America. Founded in 1968, and 
with current membership of over 1,700 from 40 states, the Catfish 
Farmers of America is the trade organization that represents the 
interests of the farm-raised catfish industry.
    Production of farm-raised catfish has increased over 80-fold since 
1970, a phenomenal rate of growth that is unmatched in other segments 
of domestic agriculture. Per capita consumption of farm-raised catfish 
now ranks fifth among all seafood products in the United States. 
Because farm-raised catfish has become a widely accepted food item 
throughout much of the United States, the demand for catfish should 
continue to increase turn toward fish as part of their overall diet.
    Production of safe, high-quality products is the foremost goal of 
fish farmers. A recently completed project developed and sponsored by 
the Southern Regional Aquaculture Center evaluated pesticide and metal 
residues in farm-raised fish. The project involved scientists from six 
states in the region--Alabama, Florida, Georgia, Louisiana, 
Mississippi, and Texas. The study was initiated because of highly 
publicized reports of contamination seafood products that did not 
discriminate between wild-caught fish and farm-raised fish. This study 
found that levels of harmful metals and pesticides in farm-raised fish 
were many times lower--often more than 100 times lower--than FDA-
recommended levels. The study also showed that levels of contamination 
in farm-raised fish are lower than fish caught from the wild because 
the water used to raise fish on farms is cleaner than most natural 
waters. This project has helped assure the quality and safety of 
aquaculture products, and lets consumers know that fish products from 
aquaculture are superior to most wild-caught fish.
    Producing food in an environmentally sound manner is another 
fundamental goal of American aquaculture. Research and extension 
scientists in Alabama, Arkansas, Florida, Georgia, Louisiana, 
Mississippi, North Carolina and South Carolina recently cooperated in a 
Southern Regional Aquaculture Center project to evaluate waste 
management practices that reduce the impact of aquaculture on the 
environment. Results of the project showed that aquaculture ponds can 
be operated with minimal impact on the environment by using simple 
management practices that can be implemented with little or no extra 
expense or labor. These practices have been widely adopted in the 
southeast because aquaculture producers are aware that the use of 
environmentally responsible farming practices can be part of the 
marketing appeal of farm-raised fish.
    The above two projects represent only a small part of the impact of 
the Regional Aquaculture Center program, yet funding for the program 
has not increased over the last 10 years, and the program has operated 
at half its authorized funding level. Meanwhile, domestic aquaculture 
has grown at a remarkable rate and the cost of conducting research has 
increased. These trends make it difficult for the Center program to 
address the needs of this important segment of American agriculture. I 
respectfully request your sincere consideration of the Regional 
Aquaculture Centers in the fiscal year 2003 budget, and I urge you to 
provide funding at the full authorized level of $7.5 million for the 
five Regional Centers.
                                 ______
                                 

            Prepared Statement of the CES Mangrove Tropicals

    Mr. Chairman and Members of the Subcommittee, I am writing this 
testimony in strong support of the USDA Regional Aquaculture Centers in 
particular the Center for Tropical and Subtropical Aquaculture (CTSA). 
Hawaii is at the forefront of marine aquaculture technology due in part 
to the benefits of having such strong support through CTSA. The 
development of marine ornamental aquaculture in particular has been 
greatly affected by the work done through CTSA. The marine ornamental 
aquaculture industry is a new and growing industry. The demands on the 
environment from wild collection and the growing trend toward 
conservation have catapulted marine ornamental aquaculture to the 
forefront of aquacultural sciences and presents tremendous business 
opportunities.
    Mangrove Tropicals, Inc. is a marine aquaculture facility in Hawaii 
where we produce marine ornamental fish and invertebrates as well as 
marine food fish fingerlings. With such diversified products, we have 
many times taken advantage of CTSA research. We are the only U.S. farm 
producing the Giant clams, Tridacnidae, which we learned from CTSA 
technical publications (Spawning and Early Larval Rearing of Giant 
Clams CTSA Pub. No. 130 and Nursery and Grow-out Techniques for Giant 
Clams CTSA Pub. No. 143.) We have also had the benefit of communicating 
with the author through CTSA to advance both his and our knowledge and 
experience.
    The Aquaculture of Marine Ornamentals project, is a research 
project that led to the first time production of a highly valued marine 
angelfish. This discovery is the most important first step in opening 
up the majority of marine aquarium species to eventual commercial 
production. The marine ornamental industry is a $250 million global 
business and the advances made through this project will have a 
definite effect on this market. The collection of wild caught species 
will decline, as their captive-bred counterparts become more available. 
My facility, as well as many others in this region, will have new 
products that are particular to this region, which give us a tremendous 
competitive advantage.
    Mangrove Tropicals' other products include marine food fish: Moi, 
Mullet, and Milkfish. Through CTSA projects, the eggs are made 
available to commercial producers for hatching and growout. We have 
been able to produce these species using techniques based upon CTSA 
research and technical manuals. More species are being proposed for 
study through CTSA projects and have the potential for a huge impact on 
the future of the industry. The growing food fish industry in Hawaii is 
in great need for food fish hatcheries and will depend on the eggs and 
manuals provided by CTSA.
    The impact of CTSA greatly extends past Hawaii and covers the 
largest geographical distribution of any of the regions. This also 
includes being involved with other countries and protected territories. 
The difficulties that occur due to this diversity are monumental. CTSA 
has to not only deal with the great distances to reach all the 
constituents of the region but also the cultural and governmental 
differences. Through all of these difficulties, CTSA has been able to 
provide for the region and has helped business and research that 
affects the global community. As a region, we have the potential to be 
a leader in aquaculture production but our growth has been slow. I feel 
that with increased funds, CTSA would be able to do much more and 
possibly accelerate the rate at which they are helping aquaculture grow 
in the Pacific.
    I strongly urge you to support full or increased funding for all 
the Regional Aquaculture Centers. These centers are extremely important 
to all regions and deserve full funding and complete support of the 
United States Senate Appropriations Subcommittee on Agriculture, Rural 
Development and Related Agencies. I appreciate your time and 
consideration.
                                 ______
                                 

          Prepared Statement of the Coalition of EPSCoR States

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to submit this testimony on behalf of the Coalition of 
EPSCoR States \1\ regarding the U.S. Department of Agriculture 
Experimental Program to Stimulate Competitive Research (USDA EPSCoR). 
USDA EPSCoR is extremely important to agricultural research in the 
state of Mississippi and in our nation. I appreciate the opportunity to 
submit this testimony.
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    \1\ Alabama, Alaska, Arkansas, Idaho, Kansas, Kentucky, Louisiana, 
Maine, Mississippi, Montana, Nebraska, Nevada, North Dakota, Oklahoma, 
Puerto Rico, South Carolina, South Dakota, Vermont, West Virginia, and 
Wyoming.
---------------------------------------------------------------------------
    I would also like to extend my appreciation to you, Mr. Chairman, 
for your strong support of USDA EPSCoR. This important program is 
having a significant impact in Mississippi and in the other USDA EPSCoR 
states. Your support and the support of this Subcommittee have been 
absolutely crucial in establishing and maintaining this important 
program. Mr. Chairman, those of us committed to improving Mississippi's 
research and development capability deeply appreciate your support and 
your effort. Thank you for your fine work representing Mississippi in 
the United States Senate.
    Seven Federal agencies have EPSCoR or EPSCoR-like programs, 
including USDA. EPSCoR works to improve our country's science and 
technology capability by funding activities of talented researchers in 
states that have historically not received significant Federal R&D 
funding. USDA EPSCoR was established in fiscal year 1992 with the goal 
of increasing the amount of agricultural research at academic 
institutions within states that have received limited competitive 
funding from USDA.
    The Mississippi EPSCoR program began in 1988 with the naming of the 
state EPSCoR Committee by the Governor. Mississippi EPSCoR obtained its 
first funding in 1989 from USDA EPSCoR's sister program in the National 
Science Foundation. Since that time, EPSCoR has had an enormously 
positive impact within the state and at the four research institutions 
and their affiliates.
    Because of the multi-institutional framework of EPSCoR and of the 
commitment of the state EPSCoR Committee to creating a critical mass of 
scientists and engineers around specific issues as well as a more fully 
developed statewide infrastructure, Mississippi EPSCoR has produced a 
stronger, more competitive research community and closer working 
relationships among the institutions that participate in the Federal 
EPSCoR programs: Jackson State University, Mississippi State 
University, The University of Mississippi and The University of 
Mississippi Medical Center, and The University of Southern Mississippi.
    Mr. Chairman, USDA EPSCoR is helping to improve the quality and 
competitiveness of agriculture research in Mississippi. Since the 
program was established in 1992, a number of Mississippi researchers 
have received USDA EPSCoR Strengthening Awards. These investigators 
have been located at Mississippi State University, The University of 
Mississippi Medical Center, and The University of Southern Mississippi.
    Important examples of Mississippi's research include studies in 
such areas as: kenaf processing, which is a potential economic 
opportunity for rural states; rapid detection of E coli, an important 
factor in food safety; and disease mechanisms in channel catfish, which 
impacts a significant cash crop across the southern part of the 
country. These projects and many, many others address issues important 
to rural states and to the rest of the nation. USDA EPSCoR allows 
researchers across our country to contribute to our economy and our 
agricultural research knowledge base.
    USDA EPSCoR states are those whose funding ranks no higher than the 
40th percentile of all states, based on a 3 year rolling average. The 
following states are eligible: Alaska, Arkansas, Connecticut, Delaware, 
Hawaii, Idaho, Kentucky, Maine, Mississippi, Montana, Nevada, New 
Hampshire, New Mexico, North Dakota, Rhode Island, South Carolina, 
South Dakota, Utah, Vermont, West Virginia, Wyoming, and the 
Commonwealth of Puerto Rico. Let me stress that EPSCoR relies on 
rigorous merit review in order to ensure that it funds only high-
quality research.
    USDA makes four types of competitive awards through USDA EPSCoR: 
Research Career Enhancement Awards, Equipment Grants, Seed Grants, and 
Strengthening Standard Research Project Awards. Proposals must be 
related to the program priorities of the National Research Initiative 
Competitive Grants Program, which address critical issues facing 
agriculture today.
  --Strengthening Standard Research Project Awards fund standard 
        research projects of investigators who have not received a 
        NRICGP grant within the past 5 years.
  --Research Career Enhancement Awards help faculty enhance their 
        research capabilities by funding sabbatical leaves. Applicants 
        may not have received a NRICGP competitive research grant 
        within the past 5 years.
  --Equipment Grants strengthen the research capacity of institutions 
        in USDA EPSCoR states. The maximum equipment cost is $250,000. 
        The USDA NRI contribution is limited to $50,000. Non-Federal 
        matching funds are required in all cases except for small and 
        mid-sized institutions requesting equipment costing $25,000 or 
        less and serving multiple uses within a research project or 
        which is can be used in multiple research projects.
  --Seed Grants enable researchers to collect preliminary data in 
        preparation for applying for a standard research grant. Seed 
        Grant awards are limited to a total cost of $75,000, including 
        indirect costs, for 2 years and are nonrenewable. Applicants 
        must indicate how the research will enhance future 
        competitiveness in applying for standard research grants.
    Through USDA EPSCoR, Mississippi and the other USDA EPSCoR States 
contribute more effectively to our nation's science and technology 
capability, and help provide our country with needed, high-quality, 
peer-reviewed research. This program allows all regions of our country 
to contribute to our nation's science and technology capability while 
allowing flexibility to meet regional research needs. USDA EPSCoR is a 
sound investment of taxpayer dollars.
    Mr. Chairman, the Subcommittee has for several years directed USDA 
to set aside 10 percent of USDA NRICGP funds for USDA EPSCoR. Those 
funds have provided significant opportunity and significant success in 
Mississippi and the other EPSCoR states. I request that the 
Subcommittee once again include report language directing USDA to set 
aside 10 percent of its NRI competitive grant funds in fiscal year 2003 
for an EPSCoR program. These funds will allow the EPSCoR states to 
continue providing for the agricultural research needs of rural America 
and of our nation.
    I thank the Subcommittee for the opportunity to submit this 
testimony.
                                 ______
                                 

   Prepared Statement of the Coalition to Promote U.S. Agricultural 
                                Exports

    As members of the Coalition to Promote U.S. Agricultural Exports, 
we commend the Chairman and members of the Subcommittee for their 
interest and support of U.S. agriculture and express our appreciation 
for this opportunity to share our views.
    The Coalition to Promote U.S. Agricultural Exports is an ad hoc 
coalition of over 80 organizations, representing farmers and ranchers, 
cooperatives, small businesses, regional trade organizations, and the 
State Departments of Agriculture (see attached). We believe the U.S. 
must continue to have in place policies and programs that help maintain 
the ability of American agriculture to compete effectively in a global 
marketplace still characterized by subsidized foreign competition.
    Farm income and agriculture's economic well-being depend heavily on 
exports, which account for one-third or more of domestic production, 
provide jobs for millions of Americans, and make a positive 
contribution to our nation's overall trade balance. In 2002, U.S. 
agriculture exports are projected to be around $54 billion, down $6 
billion from 1996. This is caused by a combination of factors, 
including continued subsidized foreign competition and related 
artificial trade barriers. U.S. agriculture's trade surplus is also 
expected to be about $14 billion, down approximately 50 percent from 
1996, with imports continuing at record levels.
    According to recent USDA information, the EU and other foreign 
competitors are outspending the U.S. by a factor of 20 to 1 with regard 
to the use of export subsidies and other expenditures for export 
promotion. In 1998 (the most recent year for which data is available), 
in addition to spending $6 billion in export subsidies, our leading 
foreign competitors spent a combined $1 billion on various activities 
to promote their exports of agricultural, forestry, and fishery 
products, including some $379 million by the EU.
    According to USDA, spending by these competitor countries on market 
promotion increased by 50 percent over the 1995-98 time period, while 
U.S. spending remained flat. We have no reason to believe that this 
trend has changed since then. Furthermore, almost all of this increase 
has been directed to the high-value and consumer-ready product trade.
    Information compiled by USDA also shows that such countries are 
spending over $100 million just to promote sales of their products in 
the United States. In other words, they are spending more to promote 
their agricultural exports to the United States, than the U.S. 
currently spends ($90 million) through MAP to promote American-grown 
and produced commodities worldwide! In fiscal year 1999, the U.S. 
recorded its first agricultural trade deficit with the EU of $1 
billion. In fiscal year 2001, USDA reported that the trade deficit with 
the EU had grown to $1.6 billion.
    Because market promotion is a permitted ``green box'' activity 
under World Trade Organization (WTO) rules, with no limit on public or 
producer funding, it is increasingly seen as a centerpiece of a winning 
strategy in the future trade battleground. Many competitor countries 
have announced ambitious trade goals and are shaping export programs to 
target promising growth markets and bring new companies into the export 
arena. European countries are expanding their promotional activities in 
Asia, Latin America, and Eastern Europe. Canada, Australia, New 
Zealand, and Brazil have also sharply bolstered their export promotion 
expenditures in recent years.
    As the EU and our other foreign competitors have made clear, they 
intend to continue to be aggressive in their export efforts. For this 
reason, we believe the Administration and Congress should immediately 
strengthen funding for MAP and other export programs, and ensure that 
such programs are fully and aggressively utilized. Since MAP was 
originally authorized, funding has been gradually reduced from a high 
of $200 million to its current level of $90 million a reduction of more 
than 50 percent. Again, given what our foreign trade competitors are 
doing, we believe it's time to restore funding for this vitally 
important program up to its original level. American agriculture is the 
most competitive industry in the world, but it can not and should not 
be expected to compete alone against the treasuries of foreign 
governments.
    In order to reverse the decline in funding for a number of our 
agricultural export programs, the Coalition strongly supports an 
increase in annual funding for MAP to $200 million, restoring the 
program to the level at which it was funded approximately a decade ago. 
The Coalition also supports separate funding of $43.25 million annually 
for the Foreign Market Development (FMD) Cooperator Program. Both MAP 
and FMD are administered on a cost-share basis with farmers and other 
participants required to contribute up to 50 percent of their own 
resources.
    These programs are among the few tools specifically allowed under 
the Uruguay Round Agreement to help American agriculture and American 
workers remain competitive in a global marketplace still characterized 
by subsidized foreign competition. The over 70 U.S. agricultural groups 
that share in the costs of the MAP and FMD programs fully recognize the 
export benefits of market development activities. In fact, they have 
sharply increased their own contributions to both programs over the 
past decade while USDA funds have actually dropped. Since 1992, MAP 
participants have increased their contributions from 30 percent (30 
cents for every dollar contributed from USDA) to almost 120 percent 
($1.20 in industry funds for every USDA dollar). For FMD, the 
contribution rate has risen from 76 percent to the current level of 120 
percent. By any measure, such programs have been tremendously 
successful and extremely cost-effective in helping maintain and expand 
U.S. agricultural exports, protect American jobs, and strengthen farm 
income.
    For all these reasons, we want to emphasize again the need to help 
strengthen the ability of U.S. agriculture to compete effectively in 
the global marketplace. As a nation, we can work to export our 
products, or we can export our jobs. USDA's export programs, such as 
MAP and FMD, are a key part of an overall trade strategy that is pro-
growth, pro-trade and pro-job.
    Again, as members of the Coalition to Promote U.S. Agricultural 
Exports, we appreciate very much this opportunity to share our views 
and we ask that this statement be included in the official hearing 
record.
                                 ______
                                 

 Prepared Statement of the Colorado River Basin Salinity Control Forum

    The Congress concluded that the Colorado River Basin Salinity 
Control Program should be implemented in the most cost-effective way 
and realizing that agricultural on-farm strategies were some of the 
most cost-effective strategies authorized a program for the Department 
of Agriculture. With the enactment of the Federal Agriculture 
Improvement and Reform Act of 1996 (FAIRA), the Congress concluded that 
the Salinity Control Program could be most effectively implemented as 
one of the components of the Environmental Quality Incentives Program. 
Since the enactment of FAIRA, the Salinity Control Program has not been 
funded at a level adequate to ensure that salinity damages from the use 
of Colorado River water in the United States will not increase. This 
testimony in support funding has been prepared in advance of 
Congressional action on a new farm bill. We are encouraged that both 
the House and the Senate have passed measures that significantly 
increase funding for EQIP.
    The Salinity Control Program has been subsumed into the EQIP 
program without the Secretary of Agriculture giving adequate 
recognition to the requirement in Section 202(c) in the Colorado River 
Basin Salinity Control Act to carry out salinity control measures. 
Water users hundreds of miles downstream are the beneficiaries of this 
water quality improvement program. Agriculturalists in the Upper Basin, 
however, see local benefits as well as downstream benefits and have 
submitted cost-effective proposals to the State Conservationists in 
Utah, Wyoming and Colorado. Priority Area proposals for EQIP funding 
are ranked in each State under the direction of the Natural Resources 
Conservation Service (NRCS) State Conservationist. Existing ranking 
criteria, however, does not consider downstream benefits (particularly 
out of State benefits) when proposals are being evaluated.
    After longstanding urgings from the States and directives from the 
Congress, the Department has concluded that this program is different 
than small watershed enhancement efforts common to the EQIP program. In 
this case, the watershed to be considered stretches more than 1200 
miles from the river's headwater in the Rocky Mountains to the river's 
terminus in the Gulf of California in Mexico. The Department has now 
determined that this effort should receive a special fund designation 
and has appointed a coordinator for this multi-state effort.
    The NRCS has earmarked funds to be used for the Colorado River 
Basin Salinity Control Program and has designated this an area of 
special interest. This was done at the urging of this Senate 
subcommittee. The Forum appreciates the efforts of the subcommittee in 
this regard. Since the designation, there has been earmarked about $4.5 
million annually. The States added about $1.5 million in up-front cost-
sharing and local farms, we estimate, contributed about another $2.0 
million. The plan for water quality control of the river prepared by 
the Forum, adopted by the States, and approved by the EPA requires that 
the USDA portion of the effort to be funded at $12 million. Hence, 
there is a shortfall from the Federal designated funds of about $7.5 
million. State and local cost-sharing is triggered by the Federal 
appropriation. The entire effort is only at about 40 percent of what is 
needed. The USDA indicates that more adequate funding for the EQIP 
program will result in more funds being allocated to the salinity 
control program. The Basin States have cost sharing dollars available 
to participate in on-farm salinity control efforts. The agricultural 
producers in the Upper Basin are waiting for their applications to be 
considered so that they might also cost share in the program.
    The President's Budget includes an additional $73.5 billion in 
funding over a 10-year period for Farm Bill programs. The Budget 
assumes that a portion of this will be allocated to conservation 
programs, including funds to support a $1 billion level for EQIP in 
2003. The Forum urges that this subcommittee support the funding at the 
$1 billion level from the CCC in fiscal year 2003 for EQIP. The Forum 
also requests that this subcommittee advise the Administration that $12 
million of these funds be designated for the Colorado River Basin 
Salinity Control Program.
                                overview
    The Colorado River Basin Salinity Control Program was authorized by 
Congress in 1974. The Title I portion of the Colorado River Basin 
Salinity Control Act responded to commitments that the United States 
made, through a minute of the International Boundary and Water 
Commission, to Mexico with respect to the quality of water being 
delivered to Mexico below Imperial Dam. Title II of the Act established 
a program to respond to salinity control needs of Colorado River water 
users in the United States and to comply with the mandates of the then 
newly legislated Clean Water Act. Initially, the Secretary of the 
Interior and the Bureau of Reclamation were given the lead Federal role 
by the Congress. This testimony is in support of funding for the Title 
II program.
    After a decade of investigative and implementation efforts, the 
Basin States concluded that the Salinity Control Act needed to be 
amended. Congress agreed and revised the Act in 1984. That revision, 
while keeping the Department of the Interior as lead coordinator for 
Colorado River Basin salinity control efforts, also gave new salinity 
control responsibilities to the Department of Agriculture. Congress has 
charged the Administration with implementing the most cost-effective 
program practicable (measured in dollars per ton of salt removed). It 
has been determined that the agricultural efforts are some of the most 
cost-effective opportunities.
    Since Congressional mandates of nearly three decades ago, much has 
been learned about the impact of salts in the Colorado River system. 
The Bureau of Reclamation has conducted studies on the economic impact 
of these salts. Reclamation recognizes that the damages to United 
States' water users alone are hundreds of millions of dollars per year.
    The Colorado River Basin Salinity Control Forum (Forum) is composed 
of Gubernatorial appointees from Arizona, California, Colorado, Nevada, 
New Mexico, Utah and Wyoming. The Forum has become the seven-state 
coordinating body for interfacing with Federal agencies and Congress to 
support the implementation of a program necessary to control the 
salinity of the river system. In close cooperation with the Federal 
agencies and under requirements of the Clean Water Act, every 3 years 
the Forum prepares a formal report analyzing the salinity of the 
Colorado River, anticipated future salinity, and the program necessary 
to keep the salinities at or below the levels measured in the river 
system in 1972 and to control damages to downstream users.
    In setting water quality standards for the Colorado River system, 
the salinity concentrations measured at Imperial, and below Parker, and 
Hoover Dams in 1972 have been identified as the numeric criteria. The 
plan necessary for controlling salinity has been captioned the ``plan 
of implementation.'' The 1999 Review, Water Quality Standards for 
Salinity, Colorado River System, includes an updated plan of 
implementation. In order to eliminate the shortfall in salinity control 
resulting from inadequate Federal funding for the last several years 
for USDA, the Forum has determined that implementation of the salinity 
control program needs to be accelerated. The level of appropriation 
requested in this testimony is in keeping with the agreed to plan. If 
adequate funds are not appropriated, State and Federal agencies 
involved are in agreement that damage from the high salt levels in the 
water will be widespread and very significant in the United States and 
Mexico.
State cost-sharing and technical assistance
    The authorized cost sharing by the Basin States, as provided by 
FAIRA, was at first difficult to implement as attorneys for USDA 
concluded that the Basin States were authorized by FAIRA to cost share 
in the effort, but the Congress had not given USDA authority to receive 
the Basin States' funds. After almost a year of exploring every 
possible solution as to how the cost sharing was to occur, the States, 
in agreement with the Bureau of Reclamation, with State officials in 
Utah, Colorado and Wyoming and with NRCS State Conservationists in 
Utah, Colorado and Wyoming, agreed upon a ``parallel'' program wherein 
the States' cost sharing funds will be used. We are now several years 
into that program and, at this moment in time, this solution to how 
cost sharing can be implemented appears to be satisfactory.
    With respect to the States' cost sharing funds, the Basin States 
felt that it was most essential that a portion of the program be 
associated with technical assistance and education activities in the 
field. Without this necessary support, there is no advanced planning, 
proposals are not well prepared, assertions in the proposals cannot be 
verified, implementation of contracts cannot be observed, and valuable 
partnering and education efforts cannot occur. Recognizing these 
values, the ``parallel'' State cost sharing program expends 40 percent 
of the funds available on these needed support activities. Initially, 
it was acknowledged that the Federal portion of the salinity control 
program funded through EQIP was starved with respect to needed 
technical assistance and education support. The Forum is encouraged 
with the Administration's determination that 19 percent of the EQIP 
funds will be used for technical assistance but observes that this is 
still not adequate funding for the technical assistance needed. The 
Forum urges this subcommittee to appropriate adequate funds for these 
support activities rather than to direct NRCS to borrow these needed 
funds from the CCC.
                                 ______
                                 

 Prepared Statement of the Industry and Government Central California 
                         Ozone Study Coalition

    Mr. Chairman and Members of the Subcommittee: On behalf of the 
California Industry and Government Central California Ozone Study 
Coalition, we are pleased to submit this statement for the record in 
support of our fiscal year 2003 funding request of $500,000 from CSREES 
for the Central California Ozone Study (CCOS).
    Most of central California does not attain Federal health-based 
standards for ozone and particulate matter. The San Joaquin Valley is 
developing new State Implementation Plans (SIPs) for the Federal ozone 
and particulate matter standards in the 2002 to 2004 timeframe. The San 
Francisco Bay Area has committed to update their ozone SIP in 2004 
based on new technical data, and the Sacramento area also plans to re-
evaluate their ozone SIP in that timeframe. In addition, none of these 
areas attain the new Federal 8-hour ozone standard. SIPs for the 8-hour 
standard will be due in the 2007 timeframe--and must include an 
evaluation of the impact of transported air pollution on downwind areas 
such as the Mountain Counties. Photochemical air quality modeling will 
be necessary to prepare SIPs that are approvable by the U.S. 
Environmental Protection Agency.
    The Central California Ozone Study (CCOS) is designed to enable 
central California to meet Clean Air Act requirements for ozone SIPs as 
well as advance fundamental science for use nationwide. The CCOS field 
measurement program was conducted during the summer of 2000 in 
conjunction with the California Regional PM10/PM2.5 Air Quality Study 
(CRPAQS), a major study of the origin, nature and extent of excessive 
levels of fine particles in central California. CCOS includes an ozone 
field study, a deposition study, data analysis, evaluations of model 
performance, and a retrospective look at previous SIP modeling. The 
CCOS study area extends over central and most of northern California. 
The goal of the CCOS is to better understand the nature of the ozone 
problem across the region, providing a strong scientific foundation for 
preparing the next round of State and Federal attainment plans. The 
study includes six main components, some of which have been completed:
  --Developed the design of the field study.
  --Conducted an intensive field monitoring study from June 1 to 
        September 30, 2000.
  --Developing an emission inventory to support modeling.
  --Developing and evaluating a photochemical model for the region.
  --Designing and conducting a deposition field study.
  --Evaluating emission control strategies for the next ozone 
        attainment plans.
    The CCOS is directed by Policy and Technical Committees consisting 
of representatives from Federal, State and local governments, as well 
as private industry. These committees, which managed the San Joaquin 
Valley Ozone Study and currently manage the California Regional PM10/
PM2.5 Air Quality Study, are landmark examples of collaborative 
environmental management. The proven methods and established teamwork 
provide a solid foundation for CCOS. The sponsors of CCOS, representing 
state, local government and industry, have contributed approximately 
$8.7 million for the field study. The Federal government contributed 
$2,150,000 for some data analysis and modeling. In addition, CCOS 
sponsors are providing $2 million of in-kind support. The Policy 
Committee is seeking Federal co-funding of an additional $6.75 million 
to complete the remaining data analysis and modeling portions of the 
study and for a future deposition study. California is an ideal natural 
laboratory for studies that address Federal, agriculture-related 
issues, given the scale and diversity of the various ground surfaces in 
the region (crops, woodlands, forests, urban and suburban areas).
    For fiscal year 2003, our Coalition is seeking funding of $500,000 
through the U.S. Department of Agriculture (USDA) Cooperative State 
Research, Education, and Extension Service (CSREES). Domestic 
agriculture is facing increasing international competition. Costs of 
production and processing are becoming increasingly more critical. The 
identification of cost-effective options for addressing environmental 
options affecting agricultural costs will contribute significantly to 
the long-term health and economic stability of local agriculture. A 
CSREES grant is needed to address the issue of biomass burning and 
alternatives to open burning. Biomass burning is managed in order to 
minimize smoke impacts and avoid violations of ambient air quality 
standards. The air quality impacts of using biomass as a fuel source 
and as an alternative to open burning need to be addressed. CCOS will 
improve the ability to assess the impacts of biomass power plants. A 
CSREES grant is also needed to improve livestock emission estimates in 
the air quality modeling inventory. Recent studies have shown that 
livestock emissions are poorly understood and can have significant 
impacts on ozone formation.
    There is a national need to address data gaps and California should 
not bear the entire cost of addressing these gaps. National data gaps 
include issues relating to the integration of particulate matter and 
ozone control strategies. The CCOS field study took place concurrently 
with the California Regional Particulate Matter Air Quality Study--
previously jointly funded through Federal, State, local and private 
sector funds. Thus, CCOS was timed to enable leveraging the efforts of 
the particulate matter study. Some equipment and personnel served dual 
functions to reduce the net cost. From a technical standpoint, carrying 
out both studies concurrently was a unique opportunity to address the 
integration of particulate matter and ozone control efforts. CCOS was 
also cost-effective since it builds on other successful efforts 
including the 1990 San Joaquin Valley Ozone Study. Federal assistance 
is needed to effectively address these issues and CCOS provides a 
mechanism by which California pays half the cost of work that the 
Federal Government should pursue.
    Scientists at the University of Nevada, Desert Research Institute 
(DRI) are involved with the CCOS. To expedite research studies related 
to biomass burning and smoke management for CCOS, it is requested that 
funds provided by CSREES be allocated directly to DRI.
    We appreciate the Subcommittee's consideration of our request. 
Thank you very much.
                                 ______
                                 

               Prepared Statement of Columbia University

    Mr. Chairman, thank you for this opportunity to submit a statement 
for the Outside Witness Hearing Record. This statement provides a 
recommendation to improve and refine one of USDA's primary missions and 
goals relating to U.S. agriculture, the development of world supply and 
demand estimates for agricultural production and products.
    The supply and demand analysis that USDA conducts requires the most 
accurate tools and mechanisms available. Columbia University's 
International Research Institute for Climate Prediction is recognized 
as the leader in climate modeling and interannual to seasonal 
forecasting. The IRI's partnership with USDA would result in improved 
supply and demand estimates, and therefore be of immense benefit to the 
U.S. agricultural economy. The details of this proposed linkage are 
discussed below.
                               objective
    Continue Report language contained in the fiscal year 2002 
Agriculture Appropriations Report in the Office of the Chief Economist 
that encourages USDA to utilize the expertise and tools provided by the 
International Research Institute for Climate Prediction in the 
assessment of foreign agricultural supply and demand estimates.
                               background
    USDA's World Supply and Demand estimates for agricultural products 
could utilize the most sophisticated and accurate analytical tools 
available. The importance of advanced planning in crop production and 
reserve stocks in times of fluctuating foreign demand can assist the 
agricultural economy in maintaining financial stabilization and provide 
warnings to mitigate foreign famine. Foreign draught and famine, in 
addition to the tolls of human life and suffering, cause social and 
political unrest in third world countries, contributing to instability 
and economic hardships on third world national economies. Improved 
supply and demand estimates assist domestic producers and the entire 
agricultural economy, as well as provide the advance planning necessary 
to avoid or minimize damage in third world economies.
    Columbia University's International Research Institute for Climate 
Prediction has developed the world's most accurate and long-range 
climate models and forecasting techniques in the areas of temperature 
and precipitation variability from average conditions. These two 
factors determine the surplus or deficit in foreign agricultural 
production. Improvement of the accuracy of USDA's long-range supply and 
demand estimates could be achieved with the involvement of IRI analysis 
and expertise in the an effort to obtain the necessary and available 
tools and mechanisms for foreign agricultural supply and demand 
estimates.
    Brazil represents one of the most uncertain climate and weather 
driven agricultural variables in world food production. Tools available 
to USDA, such as the IRI, can assist the development of more accurate 
USDA monitoring of agricultural production and growing conditions in 
Brazil. This, in turn, will provide more informed analysis and 
estimates for U.S. decision makers in the public and private sectors 
for the impact of Brazil's production on world markets.
    Africa represents the most vulnerable continent to temperature and 
precipitation variations caused by climate forcing agents such as El 
Nino and La Nina. The IRI is establishing a Health and Food Security 
Climate Project that will integrate global interannual to seasonal 
forecasts with regional climate modeling to provide the most accurate 
climate forecasting and predictive analysis for private and 
governmental decision makers. The agricultural component of this effort 
is crucial to the production of USDA's supply and demand estimates, and 
also to key planting decisions both within the U.S. and abroad. The 
IRI's Health and Food Security Climate Project will focus on Africa and 
function as an independent institution that will work cooperatively 
with the Federal Government in the accomplishment of USDA missions and 
goals.
    As a result of the Committee's Report language for fiscal year 
2002, a constructive dialogue has developed between the IRI and USDA 
officials on a number of potential projects. The IRI, at USDA's 
invitation, conducted a forum on climate and agriculture at the annual 
USDA Outlook Conference in February. as well as providing an IRI 
exhibit in the Conference Exhibit Hall. These are positive first steps 
in what we believe will be a constructive collaboration between the IRI 
and USDA.
    Thank you for this opportunity to submit this proposed linkage for 
the Subcommittee's consideration in deliberations on the fiscal year 
2003 Agriculture Appropriations Bill.
                                 ______
                                 

Prepared Statement of the Council for Agricultural Research, Extension, 
                              and Teaching

    Thank you, Mr. Chairman. I appreciate the opportunity to provide 
testimony again this year in support of the Land-Grant University 
System.
    My name is Joseph E. Motz and I am the president of The Motz Group, 
an integrated company involved in the construction and management of 
high profile sporting field facilities around the world. Our offices, 
as well as my home, are located in Cincinnati, Ohio. I also have the 
privilege of serving as the Chairman of the Council for Agricultural 
Research, Extension, and Teaching, or you may know it as CARET.
    CARET is a national group of volunteers representing farmers, 
ranchers, agribusiness leaders, consumers, and local elected officials 
who strongly believe in and work on behalf of the Land-Grant University 
System. The CARET group was formed a number of years ago for the 
expressed purpose of enhancing national support and understanding of 
the important role played by the land-grant colleges in the food and 
agriculture systems (both nationally and internationally), as well as 
the role of this system in enhancing the quality of life for all 
citizens of the nation.
    As you know, the Land-Grant University System has made innumerable 
contributions to America's food, fiber, and agricultural production 
system. You also recognize that the Land-Grant University System has 
been an essential ingredient to the success of American agriculture and 
the health of the American public--in essence, the foundation of this 
nation's way and quality of life.
    The Land-Grant University System is very unique and has been a 
critical component to the long-term success of the nation's 
agricultural community. It has provided technology and education 
enabling farmers, ranchers, and other stewards of natural resources in 
this country to manage their productive resources in a way that is 
efficient, yields the greatest and most nutritious quality and quantity 
of food in the world, and protects the natural environment. The 
contributions of the Land-Grant University System to American 
agriculture has had an enormous impact on the nation's economy, our 
balance of trade, the quality of our workforce, and the health and 
quality of life for every American citizen. Unfortunately, this 
research and education system that has given so much to the country 
continues to be taken for granted.
    One of the most acute issues facing us today and that is the 
security of country and its agriculture. This new subject demands new 
research to enable our country to prepare for and prevent a terrorist 
attack. The Land-Grant System has a proven track record in providing 
cutting-edge research on homeland and agricultural security. We greatly 
appreciate the support received from Congress in the past, without 
which we would not have been able to do this research and education.
    There are five necessary steps that the Land-Grant System could 
take to help prevent and prepare for a terrorist attack on the U.S. 
food supply. These steps are:
    The first step is to prepare to respond to emergency outbreaks.--At 
the onset, bio- logical attacks on our plant and animal species could 
appear to be a natural occurrence. However, a purposeful introduction 
will probably spread more quickly and from separate locations. 
Immediate recognition that there is an unnatural outbreak of a disease 
in multiple locations is critical if the spread of the disease is to be 
contained. Modeling and communication tools need to be developed that 
will facilitate early detection and recognition of unnatural outbreaks. 
The food and fiber production process opens up many opportunities where 
purposeful contamination could occur. Most existing safeguards were not 
designed to protect against intentional attacks. The private sector, 
the Federal Government and the universities will need to develop new 
standards and protocols to: improve detection and monitoring practices; 
develop a secure communication system that alerts appropriate agencies 
and points of entry that a problem may exist, with guidance on 
appropriate actions; improve the ability to trace contamination back to 
its source; and, enhance communication networks with public health 
agencies, law enforcement agencies and state and local officials.
    The second step is to prepare to counteract terrorism.--
Agricultural sciences overlap with the medical sciences, particularly 
in the areas of animal health, pathology and microbiology. For example, 
much of the current knowledge about anthrax resides within the 
agricultural sciences community. Stepping up pathology, microbiology 
and other basic science research will provide us with the tools to 
minimize biological threats to agricultural security. More information 
about disease vectors would help shape both prevention and containment 
strategies. Such research could include the development of vaccines, 
agents to neutralize and treat the effects of disease outbreaks, and 
other technologies that can reduce the potential for contamination. 
Other types of research, such as GIS and spatial analysis, could help 
determine the size and scope of a possible attack.
    The third step is to build secure communities.--Producers, 
processors, suppliers, retailers, and consumers may one day be the 
first responders to an agro-terrorist attack and thus play a pivotal 
role in quickly containing contamination. The Extension system can 
offer and provide educational programs to the private sector on how to 
secure their operations. Specialized training in agro-security for 
Extension agents is needed so that as ``first responders'' they have 
the ability to recognize possible threats and that they are trained in 
the appropriate protocols for working with local and Federal law 
enforcement and health agencies. Local communities will need assistance 
in creating and implementing plans to improve their ability to 
anticipate and respond to acts of agroterrorism. Just as the Department 
of Health and Human Services needs to help strengthen the ability of 
state and local health agencies to plan and prepare, so does the 
Department of Agriculture need to work with state departments of 
agriculture and rural community leaders to plan and prepare. USDA will 
need to collaborate with the Land-Grant Rural Development Centers and 
the Extension system to accomplish this mission.
    In addition to building agro-security, there are additional 
security issues facing our communities: economic security, health 
security, and the need to build leadership and service at the local 
level. The state and county Extension system is in place to facilitate 
the implementation of multiple Federal agency security programs at the 
local level in over 3,000 counties.
    The fourth step is to address immediate security needs.--
Universities conducting agricultural research need to establish 
protocols to secure sites where hazardous materials are used and 
stored, including toxic chemicals, radioactive elements and contagious 
microbiological agents. Appropriate protocols for securing these 
materials should be developed in collaboration with USDA's Agricultural 
Research Service (ARS), the Animal and Plant Health Inspection Service 
(APHIS), and the Food Safety Inspection Service (FSIS).
    University and Federal laboratory research often is openly 
communicated and stored electronically on computer networks. These 
networks could be used to locate and abuse hazardous materials. As 
well, research results and data that could be abused are often easily 
accessible via electronic posting and web sites. The universities and 
Federal research laboratories must develop protocols to safeguard this 
information while keeping necessary information and communication 
channels open.
    As we have sadly learned, equipment and materials used in farming 
and ranching can be abused horribly. Fertilizers can be used in bombs 
and crop dusting planes can be used to spread bioweapons. The Extension 
system needs to develop a variety of agriculture and forest security 
programs for agricultural producers, natural resource managers, 
processors, suppliers and retailers to help them prevent, detect and 
respond to agroterrorism. Extension needs to work in partnership with 
state and local agencies and private operations to help them understand 
and implement protocols to prevent the abuse of these tools and 
materials.
    In addition to better physical security for hazardous radioactive, 
toxic and biological materials, it will be important for state and 
Federal officials to be able to locate or track the location of these 
materials over time. Recent questions about the location of anthrax 
samples in Federal laboratories demonstrate why this new level of 
security will be needed. An inventory of materials with the potential 
for abuse needs to be aggregated across agricultural research 
facilities. A Federal determination of materials required for inventory 
should guide the process. As required for national security, 
information regarding the quantity and location of such materials 
should be provided to appropriate Federal, State and local emergency 
management agencies. This information must be securely maintained and 
updated regularly. There are, of course, databases for some of these 
materials already in place; however, university-based agricultural 
research materials may not be included in these systems. USDA needs to 
take the lead in insuring that hazardous materials located in 
university research facilities are included in the appropriate database 
systems.
    The fifth and final step is to educate scientists, teachers and 
specialists.--Who will provide the expertise for these efforts in the 
future? We will need people whose education concentrates on security in 
agriculture and natural resources. Courses or degrees in agricultural 
security will be necessary. This kind of expertise currently does not 
exist in institutions and initially will require outside expertise. 
Institutions will require help to design long-term educational programs 
that can provide the scientists and educators the ability to address 
the issues of agricultural security.
    The costs of prevention are small. Severe economic disruption could 
result to our production, distribution and trade system, if we do not 
take responsibility to act now.
    The purpose of my testimony today is to request support for the 
fiscal year 2003 budget recommendations of the National Association of 
State Universities and Land-Grant Colleges (NASULGC) Board on 
Agriculture Assembly (BAA). I, along with the membership of CARET, feel 
that the BAA budget recommendations adequately address the research and 
education needs of the Land-Grant System in helping this nation prepare 
for and prevent a terrorist attack upon any part of the agricultural 
sector of the nation.
    The President's fiscal year 2003 proposal provides over $6 billion 
to address biosecurity issues. We believe that the Land-Grant System 
can serve in a critical partnership with the United States Department 
of Agriculture to address agriculture security issues. Thus, CARET 
joins NASULGC in calling for a $212 million increase in the funding for 
the Cooperative State Research, Education, and Extension Service 
(CSREES), U.S. Department of Agriculture (USDA) in fiscal year 2003.
    CARET supports the President's budget recommendation along with a 
$212 million increase for CSREES/USDA for fiscal year 2003. There is an 
urgent need to support this new funding to address agro-security issues 
through our Land-Grant and State Colleges and Universities. The 
President's proposed budget includes more than $6 billion in new 
funding to address biosecurity concerns, including over $2 billion in 
new funding for biosecurity research and development. Unfortunately, 
the President's budget does not adequately address the biosecurity 
issues facing the agricultural production and food-processing sector, 
particularly in the areas of research, outreach, and education. It 
appears that no funding has been proposed for USDA/CSREES to address 
national agro-security issues at the state and local level. The 
recommendations described here are for new funding, in addition to the 
President's proposed budget for CSREES and above funding levels 
provided in fiscal year 2002.
    Additionally, CARET recognizes the President's proposed increase in 
the National Research Initiative (NRI) of $120 million and strongly 
supports this proposed increase in the NRI. However, those of us in 
CARET would not support this increase in the NRI at the cost of losing 
the Initiative for Future Agriculture and Food Systems (IFAFS)--an 
invaluable program strongly supported by CARET.
    The NRI supports critically needed basic, investigator-driven 
research. IFAFS supports critical multi-disciplinary team projects to 
address applied research and immediate problems facing farmers, 
ranchers and communities. Both funding mechanisms are needed. The BAA 
and CARET strongly urge the continuation of the IFAFS program. Of the 
proposed $120 million increase for the NRI in the President's budget, 
we recommend that at least $30 million be directed towards agro-
security, specifically in the areas of developing technologies to 
counteract terrorism in the future. This would include investments in 
microbiology and pathology, as well as the development of vaccines and 
treatments for pathological materials.
    In regard to facilities and security, CARET supports the BAA 
recommendation of $50 million to address immediate security needs. 
Security upgrades are badly needed at our research facilities. There is 
legislative language proposed in several bills that would provide 
guidance regarding the need to upgrade security at our university 
research facilities. However, it is our understanding that adequate 
authority currently exists for the Congress to provide funding to 
upgrade security at our university research laboratories and 
facilities.
    CARET also endorses and supports the Administration's 
recommendations to establish an International Science and Education 
Grants program at $1 million and increase funding for Higher Education 
Programs ($1.16 million for Challenge Grants and an increase of 
$507,000 for the National Needs Graduate Fellowship Grants).
    All of the technology and knowledge in the world are useless 
without the well-trained mind of someone to learn from it, apply it, 
and expand it. Undergraduate education in colleges of agriculture and 
life sciences is largely neglected in Federal funding. All of the 
nation's students need to be equipped to become leaders in our nation's 
workforce. Their future and the nation's future are one in the same, 
and the nation can ill afford to poorly invest in this critical area.
    The budget recommendations that are being advanced by CARET on 
behalf of the Land-Grant System are the result of a broad number of 
stakeholder meetings and receipt of substantial input from those that 
benefit from the research and education activities.
    It is the strong belief of the CARET membership that increasing the 
funding for the Cooperative State Research, Education, and Extension 
Service (CSREES), U.S. Department of Agriculture (USDA) by $212 million 
in fiscal year 2003 is the most cost effective and responsible way to 
provide for our agro-security needs while equipping American 
agriculture for the 21st Century. This amount of funding will secure 
America's food and agricultural system through research, extension, and 
education while facilitating the maintenance of America's competitive 
edge throughout the broad range of the production, processing, 
distribution, and retail system that moves commodities around the 
world. CARET also firmly believes that this funding level for 
agricultural science and education will enhance the health and welfare 
for our own citizenry as well as the people of the world. Certainly, we 
do not want the recent headlines about the food supply in the European 
community and other places in the world to be the future headlines in 
American newspapers.
    Thank you for this opportunity to provide this testimony in support 
of the appropriations for continuing the fine work being done and the 
work that must be done at America's Land-Grant University System--a 
true national treasure!
                                 ______
                                 

               Prepared Statement of Delta Western, Inc.

    Mr. Chairman and Members of the Subcommittee, I thank you for the 
opportunity to provide testimony in support of the USDA-CSREES Regional 
Aquaculture Centers. My name is Lester Myers. I own and operate a 
catfish farm near Inverness, Mississippi, and am President and General 
Manager of Delta Western, Inc., Indianola, Mississippi, the largest 
catfish feed mill in the United States.
    Over the last 20 years, aquaculture has become an important part of 
United States agriculture. Production of channel catfish, the largest 
sector of domestic aquaculture, has increased more than 30 percent in 
the last 10 years--a growth rate matched by very few industries. Farm-
raised channel catfish now makes up a remarkably large proportion of 
domestic seafood consumption and, on a value basis, catfish ranks 
fourth in the United States, behind only shrimp, salmon, and crabs. 
Further, a significant portion of the salmon consumed by Americans also 
derives from aquaculture.
    As the catch from wild fisheries continues to decline, with no end 
in sight, the shortfall in seafood production must be met by increased 
aquaculture production. However, continued expansion and profitability 
of the aquaculture industry will depend on development of new 
technology to reduce production costs and make production more 
competitive in the global market. For the past several years, I have 
been actively involved with the Southern Regional Aquaculture Center as 
Chairman of the Industry Advisory Council, and I feel that the Regional 
Aquaculture Center program is essential to help meet the need for 
technology development. Already, results from the Regional Center 
projects are having a significant impact on domestic aquaculture. I 
would like to illustrate that point with the results of one project 
that I am very familiar with through my role as General Manager of a 
catfish feed mill.
    Feeds represent about half the cost of raising fish in aquaculture, 
so advances in feed formulation and feeding practices can have a great 
impact on profitability. The recently completed project ``Improving 
Production Efficiency of Warmwater Aquaculture Species through 
Nutrition'' was one of the most successful projects developed through 
the Southern Regional Aquaculture Center. Scientists from nine states--
Alabama, Arkansas, Georgia, Kentucky, Louisiana. Mississippi, North 
Carolina, Tennessee, and Texas--cooperated on the project. These 
researchers, working collaboratively, to identified the most cost-
effective levels of vitamin and protein supplementation in feeds. Their 
work resulted in improved feed formulations and feeding practices that 
have saved the catfish, baitfish, and striped bass industries millions 
of dollars a year. For example, in the catfish industry alone, feed 
costs have been reduced $2-4 a ton as a direct result of work on this 
project. Assuming overall feed use of 600,000 tons per year in the 
catfish industry, cost savings average $1.8 million annually-over three 
times the amount spent on this project over its 3-year duration.
    The project mentioned above is just one of many projects supported 
through the Regional Aquaculture Center program that return economic 
benefits many times the amount invested. This funding efficiency is the 
result of the decentralized structure of the Regional Centers and the 
unique cooperative process used to develop research projects.
    In summary, representatives of the U.S. aquaculture industry are 
convinced that the Regional Aquaculture Center programs are highly 
valuable and productive. Additional new research findings will help 
insure future success for aquaculture production in the United States. 
The authorized level of funding for the five Regional Aquaculture 
Centers is $7.5 million annually. Despite an outstanding performance 
record and an organizational structure that has become a model for 
collaborative research in agriculture, funding for the Regional Center 
program has remained level at half the authorized level of funding, or 
$4.0 million per year ($800,000 for each of the five Regions). This has 
resulted in steady erosion of actual operating funds, at the very time 
when industry expansion calls for greater investment in research and 
development. I respectfully request that you recommend the full 
authorized level of $7.5 .million for the existing five Centers to 
support these extraordinarily important and effective programs.
    On behalf of the U.S. aquaculture industry, I thank you for the 
opportunity to present testimony in support of the Regional Aquaculture 
Centers, and express my sincere appreciation for the support you have 
provided in previous years. Again, I would like to emphasize that 
significant benefits have already been provided from work conducted by 
these Centers and additional funding is urgently needed by our 
industry.
                                 ______
                                 

             Prepared Statement of Florida State University

    Mr. Chairman, I would like to thank you and the Members of the 
Subcommittee for the opportunity to present testimony before this 
Committee. I would like to take a moment to briefly acquaint you with 
Florida State University (FSU).
    Located in Tallahassee, Florida's capitol, FSU is a comprehensive 
Research I university with a rapidly growing research base. The 
University serves as a center for advanced graduate and professional 
studies, exemplary research and top quality undergraduate programs. 
Faculty members at FSU maintain a strong commitment to quality in 
teaching, to performance of research and creative activities and have a 
strong commitment to public service. Among the faculty are numerous 
recipients of national and international honors, including Nobel 
laureates, Pulitzer Prize winners as well as several members of the 
National Academy of Sciences. Our scientists and engineers do excellent 
research, have strong interdisciplinary interests, and often work 
closely with industrial partners in the commercialization of the 
results of their research. Having been designated as a Carnegie 
Research I University several years ago, Florida State University will 
approach $150 million this year in research awards.
    FSU has initiated a new medical school, the first in the U.S. in 
over two decades. Our emphasis is on training students to become 
primary care physicians, with a particular focus on geriatric 
medicine--consistent with the demographics of our state.
    Florida State attracts students from every county in Florida, every 
state in the Nation, and more than 100 foreign countries. The 
University is committed to high admission standards that ensure quality 
in its student body, which currently includes some 345 National Merit 
and National Achievement Scholars, as well as students with superior 
creative talent. We consistently rank in the top 25 among U.S. colleges 
and universities in attracting National Merit Scholars to our campus. 
At Florida State University, we are very proud of our successes as well 
as our emerging reputation as one of the Nation's top public 
universities.
    Mr. Chairman, let me tell you about a project we are pursuing this 
year through the U.S. Department of Agriculture. To give you some 
background, in fiscal year 2001, Congress passed the Federal Crop 
Insurance Act, which included funding of partnerships for Risk 
Management Development and Implementation. This legislation authorized 
the USDA, working with NOAA, to enter into partnerships for the purpose 
of increasing the availability of tools for crop loss mitigation. The 
partnerships give priority for producers of agricultural commodities 
for specialty crops and under-served agricultural commodities. Congress 
authorized the program through fiscal year 2008.
    The Federal Government, which sets crop insurance rates, needs to 
utilize new cost-effective ways to reduce risk by using modern ideas 
such as El Nino-La Nina climate variability; this would allow more 
appropriate and fair pricing of premiums for crop insurance. The 
Florida Climate Research Consortium, which consists of Florida State 
University, the University of Florida, and the University of Miami, has 
been at the forefront of this climate prediction work. The Consortium 
has worked in Florida and throughout the Southeastern U.S., with 
support from NOAA, to develop new methods to predict the consequences 
of climate variability. More recently, in actual real-life tests, these 
methods and data have been applied to the problem farmers raising 
specialty crops face relative to rainfall; the efforts have also 
tremendous implication for officials in their fight against forest 
fires. In both instances and with the support of Florida's Commissioner 
of Agriculture, use of these methods and their application to these 
challenges has been seen as successful and well received.
    In this consortium, Florida State University will provide the 
climate forecasts and risk reduction methodology. The University of 
Florida will provide crop models for predicting the climate variability 
effects on selected crops. The University of Miami will provide the 
economic modeling of the agricultural system. Each university will 
provide appropriate expert advice on interactions with farmers. In 
particular, the expertise of the Florida Agricultural Extension Service 
will be utilized.
    FSU, on behalf of the FL Climate Consortium, is seeking $1.75M in 
fiscal year 2003 for this activity through the Partnerships for Risk 
Management Development account of the U.S. Department of Agriculture. 
Utilization of these tools and their application to agricultural 
problems in this project has the strong support of Florida Commissioner 
of Agriculture, Charles Bronson.
    Mr. Chairman this is an excellent project that will yield great 
rewards for our Nation and is just one of the many ways that Florida 
State University is making important contributions to solving some key 
problems and concerns our Nation faces today. Your support would be 
appreciated, and, again, thank you for an opportunity to present these 
views for your consideration.
                                 ______
                                 

                   Prepared Statement of Easter Seals

    Easter Seals appreciates the opportunity to report on the notable 
accomplishments of the USDA Cooperative State Research, Education, and 
Extension Service (CSREES) AgrAbility Program and request that funding 
for the AgrAbility Program be increased to $4.6 million in fiscal year 
2003.
    The AgrAbility Program is an essential, unduplicated, hands-on 
resource for farmers, ranchers, and farmworkers with disabilities and 
their families. AgrAbility is the only USDA program dedicated 
exclusively to helping agricultural producers with disabilities. It 
demonstrates the value of public-private partnership by securing 
donations of funds, talent, and materials to magnify the impact of a 
modest federal investment. The fiscal year 2002 appropriation of $4.05 
million will fund 22 state projects.
                        disability & agriculture
    Agricultural production is one of the nation's most hazardous 
occupations. According to the National Institute on Occupational Safety 
and Health, each year, approximately 182,500 agricultural workers 
sustain disabling injuries, about 5 percent of which permanently impair 
their ability to perform essential farm tasks. Tens of thousands more 
become disabled as a result of non-farm injuries, illnesses, other 
health conditions, and the aging process. Nationwide, approximately 
288,000 agricultural workers between the ages of 15 and 79 have a 
physical disability that affects their ability to perform one or more 
essential farm tasks.
    The presence of a disability jeopardizes rural and agricultural 
futures for many of these individuals. Rural isolation, a tradition of 
self-reliance, and gaps in rural service delivery systems frequently 
prevent agricultural workers with disabilities from taking advantage of 
growing expertise in modifying farm operations, adapting equipment, 
promoting farmstead accessibility, and using assistive technologies to 
safely accommodate disability in agricultural and rural settings. Yet, 
with some assistance, the majority of disabled agricultural workers can 
continue to earn their livelihoods in agriculture and participate fully 
in rural community life.
                 agrability's role and accomplishments
    The AgrAbility Program was established under the 1990 Farm Bill in 
response to the needs of farmers, ranchers, and farmworkers with 
disabilities. The Farm Bill authorizes the Secretary of Agriculture to 
make grants to Extension Services for conducting collaborative 
education and assistance programs for farmers with disabilities through 
state projects and related national training, technical assistance, and 
information dissemination. Easter Seals is proud to be a partner with 
the University of Wisconsin-Extension Cooperative Extension to provide 
the national training and technical assistance portion of the 
AgrAbility Program. Thousands of people in states with and without 
state AgrAbility projects are aided through this initiative.
    AgrAbility combines the expertise of the Extension Service and 
disability organization staffs to provide people with disabilities 
working in agriculture the specialized services that they need to 
safely accommodate their disabilities in everyday farm and ranch 
operations. AgrAbility received strong bipartisan support during the 
1998 reauthorization of the USDA research and education programs, and 
was extended through fiscal year 2004. The $6 million authorization 
level for AgrAbility was continued.
    Under the statute, state and multi-state AgrAbility projects engage 
Extension Service agents, disability experts, rural professionals, and 
volunteers to offer an array of services, including: identifying and 
referring farmers with disabilities; providing on-the-farm technical 
assistance for agricultural workers on adapting and using farm 
equipment, buildings, and tools; restructuring farm operations; 
providing agriculture-based education to prevent further injury and 
disability; and, upgrading the skills of Extension Service agents and 
other rural professionals to better promote success in agricultural 
production for people with disabilities.
    In 2002, USDA received an allocation from Congress of $4.05 
million. These funds will support 22 state projects, the national 
project, and USDA-CSREES administration of the Program. The competition 
for the state project grants is currently underway and an announcement 
of the new state projects is expected momentarily.
    AgrAbility provides customized assistance to farmers, ranchers, and 
farmworkers with disabilities and their families. The nature and degree 
of assistance depends on the individual's disability, needs, and 
agricultural operation. For example:
  --Ryan Odens of Sibley, IA took over his family's 1,300-acre corn and 
        soybean farm after his father passed away suddenly when Ryan 
        was 20. When he was 23, Ryan was involved in a pickup truck 
        rollover accident that left him with a spinal cord injury. He 
        was not expected to walk again. With the help of therapy and 
        the use of a crutch, however, he regained his ability to walk. 
        AgrAbility and the Iowa Division of Vocational Rehabilitation 
        worked with him to add an extra step on his tractor, purchase a 
        four-wheel drive motorized cart to help him navigate the farm, 
        put lifts on several pieces of farm machinery, add a cement 
        floor to the machine shed to increase safety while working on 
        machinery. He has also added mirrors in his tractor to increase 
        his range of vision because rods in his back make it difficult 
        for him to turn. Ryan believes that, ``without Easter Seals and 
        Vocational Rehabilitation, I probably wouldn't be farming.''
  --Grover Greer, of Anguilla, Mississippi, has farmed in the 
        Mississippi Delta for 26 years. Thanks to the work of 
        AgrAbility and other state agencies, his son is now doing the 
        same. Born with cerebral palsy, Jonathan, 17, operates a 25-
        acre turfgrass business. A hoist and hand controls allow 
        Jonathan to independently operate his tractor to irrigate and 
        maintain the grass. While they anticipate the business growing 
        and providing Jonathan with employment, Grover says, ``The more 
        important point is that he is happy and self-sufficient.'' 
        Jonathan is putting to good use his abilities and motivation to 
        be a successful turfgrass farmer.
  --Richard Mauer, of Newport, Pennsylvania, has operated his 450-acre 
        dairy farm since he purchased it from his father in 1966. 
        Thirty years later, a stroke that left Mr. Mauer partially 
        paralyzed threatened his ability to remain in farming. After 
        reading about AgrAbility in a magazine, Mr. Mauer contacted 
        AgrAbility for Pennsylvanians to seek assistance. AgrAbility 
        staff helped Mr. Mauer make modifications to his farm including 
        extra steps added to tractors, a new more automated milking 
        system with computerized monitors and automatic shut-off 
        mechanisms, and a automatic wagon hitch that minimizes the 
        number of times Mr. Mauer must climb on and off a tractor. 
        These modifications have helped Mr. Mauer keep his farm 
        operation running; an operation that currently produces 
        approximately 550 gallons of milk a day. He also serves as a 
        mentor and peer supporter for other farmers with disabilities 
        throughout Pennsylvania.
    Overall, AgrAbility Projects in 29 states along with the national 
project accomplished the following between 1991 and 2001:
  --provided assistance, including nearly 8,800 on-site visits, to over 
        10,000 farmers, ranchers and farmworkers or their families 
        affected by disability;
  --educated over 200,000 agricultural, rehabilitation, and health 
        professionals on safely accommodating disability in 
        agriculture;
  --recruited and trained more than 6,000 volunteers and peer 
        supporters to assist farmers, ranchers and farmworkers with 
        disabilities; and,
  --reached 9,500,000 people through more that 8,000 exhibits, 
        displays, and demonstrations to increase awareness of the 
        challenges affecting and resources available to farmers, 
        ranchers and farmworkers with disabilities.
    In 2000, the National AgrAbility technical assistance and education 
grant was awarded to Easter Seals national headquarters and the 
University of Wisconsin-Extension Cooperative Extension. This new 
partnership is generating innovative and effective activities at the 
national level that will have a significant impact on the effectiveness 
of the state AgrAbility projects and the lives of agricultural workers 
with disabilities. Some of the initiatives underway or planned at the 
national level include:
  --a Consensus Conference on Disability in Agriculture and Rural 
        America co-sponsored by the Farm Foundation and Easter Seals to 
        engage leading agricultural organizations and experts in 
        identifying and addressing challenges agricultural producers 
        with disabilities face;
  --an expanded and refined AgrAbility website that includes AgrAbility 
        technical information, new publications, and on-line training 
        modules;
  --a comprehensive training resource on rural case management; and,
  --a ``virtual farm tour'' resource on accommodating disability to 
        include footage of actual farmstead and machinery 
        modifications.
                    impact of current funding levels
    A funding floor of $150,000 per state was set in the 1990 Farm Bill 
to assure that the state programs were appropriately resourced to meet 
diverse, statewide agricultural accommodation needs. In the 1998 
reauthorization of the USDA research and education programs, the 
Committee reaffirmed a commitment to that funding floor of $150,000 per 
state. Because funding had not approached the $6 million authorized 
level prior to fiscal year 2002, however, state projects had only 
received on average slightly under $100,000 per state. The funding 
increase for AgrAbility in fiscal year 2002 provided USDA with the 
ability to fund projects at the $150,000 base level. Easter Seals 
strongly supports full funding of state projects to assure that they 
continue to be effective for farmers with disabilities.
    AgrAbility projects are underfunded relative to need and objective. 
At the current funding level, only a few staff can be hired to provide 
statewide education and assistance to farmers with disabilities, 
educate rural professionals, recruit volunteers, and work with rural 
businesses on disability-related issues. Rising demand for services and 
the great distances that must be traveled to reach farmers and ranchers 
severely strains even the most dedicated of AgrAbility's outstanding 
staff. Easter Seals fears that failure to invest adequately in this 
worthwhile program will ultimately cause it to falter.
    An additional consequence of limited funding is that in every grant 
cycle some states with existing AgrAbility programs and a demonstrated 
need for services are not renewed and are forced to discontinue 
services to farmers with disabilities in that state. These states often 
have difficulty obtaining the access to the limited public and private 
funding sources that the federal seed money granted them. More than a 
dozen states have sought AgrAbility funding without success. Other 
states, including Kentucky, Louisiana, Michigan, Montana/Idaho, New 
Jersey, New York, South Carolina, Ohio, and Vermont/New Hampshire had 
USDA-funded AgrAbility projects in the past. Each of these states can 
demonstrate significant unmet needs among farm and ranch families 
affected by disability that AgrAbility could potentially address. Any 
loss of programs will greatly affect farmers with disabilities in 
states where AgrAbility is the primary resource through which they seek 
information and assistance on farming with a disability.
    The fiscal year 2003 request of $4.6 million would allow USDA to 
(a) continue to fund states up to the $150,000 base level and add new 
projects in states currently unserved by AgrAbility or (b) increase the 
budgets of currently funded projects to allow much-needed expansion of 
existing services.
                            funding request
    The need for AgrAbility services has never been greater, and its 
accomplishments to date are remarkable by any standard. Easter Seals is 
proud to contribute to the ongoing success of the USDA-CSREES 
AgrAbility Program. Please support the allocation of at least $4.6 
million for AgrAbility in fiscal year 2003 to ensure that this valuable 
public-private partnership continues to serve rural Americans with 
disabilities and their families. Thank you for this opportunity to 
share the successes and needs of the USDA AgrAbility Program.
                                 ______
                                 

          Prepared Statement of the Florida Sugar Cane League

    importance of sugarcane to the economies of florida and the u.s.
    Sugarcane is Florida's most valuable row crop. It is surpassed in 
value to the state's economy only by tourism and the citrus crop. 
According to a recent study by LMC International, Ltd., Florida 
sugarcane growing and milling have an economic impact in Florida of two 
billion dollars annually and provide nearly 21,000 full time equivalent 
jobs for the economy.\1\
---------------------------------------------------------------------------
    \1\ LMC International, Ltd. 2001. The Importance of the Sugar and 
Corn Sweetener Industry to the U.S. Economy. Report prepared for the 
American Sugar Alliance.
---------------------------------------------------------------------------
    The United States is the world's largest sweetener market, using 
over 20 million tons of caloric sweeteners annually. About half of 
this, 10 million tons, is provided by sugar (sucrose) produced from 
sugarcane and sugar beets. The other half is mainly corn sweetener 
(fructose) produced from maize in the United States. We are not 
currently self-sufficient in sucrose, producing only about 8 million 
tons from sugarcane and sugar beet crops in the United States on an 
annual basis. The deficit in U.S. sugar needs is met through 
preferential trading arrangements with 41 separate countries from which 
we purchase sugar under a tariff-rate quota system administered by USDA 
and the U.S. State Department.
                   sugarcane in agricultural research
    Sugarcane is a large grass, and being mainly a tropical crop, is 
grown in only four U.S. states, Florida, Louisiana, Texas and Hawaii. 
There is a total of only 1 million acres of sugarcane in the United 
States. By comparison, there are over 75 million acres of corn (maize). 
This is why sugarcane is considered a minor crop in the United States, 
even though we are the sixth largest producer of cane sugar in the 
world.
    Sugarcane is unusual among crops in that it is vegetatively 
propagated, i.e., it is planted from stalk cuttings, not seeds. 
Sugarcane is also a perennial, ratooned crop, meaning that it regrows 
several annual crops from one planting. This is significant in that 
seed companies have never entered into the business of developing new 
varieties for growers since once a grower has a new variety, he need 
only reserve a small portion of his crop each year for replanting. 
There is no profit for seed companies in sugarcane past an initial 
sale, and they are therefore not interested in breeding new strains. 
This is a major reason why USDA has remained in sugarcane variety 
research and development on behalf of U.S. sugarcane farmers.
    Sugarcane is a difficult crop to perform genetic research and 
improvement on by virtue of its large size, long generational interval, 
and complicated genetics. Special facilities are needed for rearing the 
plants, forcing flowering, and making crosses. In addition, the true 
seed are extremely small and fragile. Special greenhouse facilities and 
rearing techniques are required for successfully growing them as 
seedlings that are the basis of new variety selection. It is necessary 
to set out over 100,000 seedlings annually to field plantings in a 
sugarcane breeding program, and over 10 years of selection, replanting, 
and testing are required to develop a successful variety from that 
original crop of seedlings.
    The expertise for breeding sugarcane in the United States lies 
largely with USDA-ARS through their facilities at Canal Point, Florida 
and Houma, Louisiana. This infrastructure and expertise has been 
developed by USDA with industry support beginning in the 1920s, and is 
world-renowned within international sugarcane research circles.
  history of the usda sugarcane field station at canal point, florida
    The USDA Sugarcane Field Station was established on Collins Key 
(now Miami Beach, Florida) in 1918 and relocated to its current site, 
Canal Point, Florida, a small town on the southeastern shores of Lake 
Okeechobee, in 1920. Canal Point was selected as an ideal site by the 
founding superintendent, Dr. E.W. Brandes, who chose it for its 
protection from cold by the nearby waters of Lake Okeechobee, its 
favorable climate, rich soils, and proximity to Florida's infant sugar 
industry.\2\
---------------------------------------------------------------------------
    \2\ Leo P. Hebert. 1971. U.S. Sugar Cane Field Station, Canal 
Point, Florida--First 50 Years 1920-1970. Sugary Azucar.
---------------------------------------------------------------------------
    The primary objective of the station has always been the production 
of improved sugarcane varieties. The impetus for this objective was 
originally provided by Louisiana, at the time, the leading producer of 
sugar on the mainland U.S., where a devastating complex of sugarcane 
diseases had decimated their production based on old world sugarcane 
varieties. The Sugarcane Field Station was established largely in 
response to industry requests to USDA to help with recovery of the 
industry in Louisiana through development of improved, adapted, hybrid 
varieties of sugarcane.
    The Florida and Louisiana sugarcane industries have always worked 
closely with the Sugarcane Field Station through cooperative agreements 
between their State Cooperative Extension agencies and industry 
organizations.\3\ The first formal arrangement of this type, dating to 
1924, was between USDA and the Louisiana State University Agricultural 
Experiment Station. It provided for annual contributions to the Canal 
Point station for propagating hybrid seedlings as the basis of 
development for new varieties of sugarcane for Louisiana. Florida's 
sugar industry saw a large expansionary period from 1960 to 1970 
following the Cuban embargo and the inability of Puerto Rico to meet 
its domestic production quota. During this period, the Florida industry 
promoted and signed a three-way agreement between the USDA Sugarcane 
Field Station, the University of Florida Experiment Station and the 
Florida Sugar Cane League (a Florida sugar industry trade association) 
to provide for the testing, increase and distribution of promising new 
varieties to Florida's sugar cane growers. This three-way agreement is 
still in effect, and is often cited as an exemplary case of successful 
cooperative experimentation between Federal, State and industry 
agencies in agricultural research. The three-way agreement has been an 
excellent vehicle for shared responsibility and costs of the program. 
The Federal and State agencies are responsible for maintaining test 
fields at experiment stations and on grower cooperator farms, while 
Florida Sugar Cane League representatives supervise the increase and 
distribution of new varieties. The three-way agreement is also the 
foundation for direct industry support in terms of manpower and funds 
to the program. Currently, Florida's sugar industry provides about 
$400,000 annually in direct support of the program at Canal Point 
through a dedicated research assessment on production paid by growers, 
and approximately $125,000 annually through in-kind contributions of 
cooperating grower farms in the testing program.
---------------------------------------------------------------------------
    \3\ Benjamin A. Bourne. 1972. Significant Developments in the Early 
Phases of the Florida Cane Sugar Industry. Sugar y Azucar.
---------------------------------------------------------------------------
          research mission of the usda sugarcane field station
    According to Dr. Jimmy D. Miller, Research Leader at the Sugarcane 
Field Station,\4\ the mission of the station has remained relatively 
constant over the years with the following emphasis:
---------------------------------------------------------------------------
    \4\ J.D. Miller. 2002. The Last 30 Years (1970-1999) at the U.S. 
Sugarcane Field Station, Canal Point, Florida. Unpublished manuscript.
---------------------------------------------------------------------------
  --Produce true seed of recommended crosses for the ARS breeding 
        programs at Houma, Louisiana and Canal Point, Florida. In 
        recent years, ARS has entered into a three-way memorandum of 
        understanding with Texas A&M University and the Rio Grande 
        Valley Sugar Growers Cooperative to supply them with true seed 
        also.
  --Conduct a cooperative (USDA-ARS, University of Florida, and Florida 
        Sugar Cane League) sugarcane cultivar development program for 
        Florida.
  --Conduct a sugarcane pathology program that is closely coordinated 
        with the breeding program to efficiently screen selections for 
        disease resistance and evaluate the status of diseases in the 
        Florida industry.
    Recently, three additional missions have been assigned:
  --Breed varieties of sugarcane that are tolerant of high water tables
  --Conduct agronomic and genetic research that will strengthen 
        sugarcane production in Florida and improve compatibility 
        between sugarcane production and the natural Everglades
  --Conduct research aimed at reducing the rate of soil subsidence 
        while maintaining sugarcane production
                        research accomplishments
    The USDA Sugarcane Field Station has released 44 varieties in 
Florida since 1970. In the 1999-2000 harvest season, there were 34 
USDA, Canal Point (CP) varieties being grown commercially. The Florida 
industry has had record yields the past 3 years, and at least some of 
this can be attributed to improved tonnages and increased sugar content 
of CP Varieties. CP varieties are grown on about 70 percent of the 
acreage in the Florida industry.
    Adequate seed has been produced by the crossing program to provide 
sufficient seed (mostly of recommended crosses) to supply the needs of 
the ARS sugarcane breeding programs at Houma, Louisiana and Canal 
Point, Florida and the breeding program conducted by Texas A&M 
University. Since 1970, the mainland sugarcane breeding programs have 
released four new varieties for Texas and introduced and made available 
to growers others previously released in Louisiana and Florida. 
Fourteen new varieties have been produced for Louisiana through the 
program.
    The breeding program has been effective in minimizing the effect of 
damaging disease outbreaks in Florida. Since 1970, new disease and 
outbreaks in Florida have included sugarcane smut, mosaic, sugarcane 
bacilliform virus, rust (several new races), a new race of leaf scald 
disease, yellow spot disease, purple spot disease, dry top rot, yellow 
leaf syndrome and continuing problems with Ratoon Stunting Disease. Due 
to the large diversity of varieties being grown, no industry wide 
losses of production can be attributed to a specific disease. Although 
individual diseases have caused serious economic losses in individual 
fields, growers were able to quickly shift to resistant varieties and 
thus avoid significant losses.
    Progress was made in development of techniques to screen for 
diseases in the sugarcane breeding program which has led to higher 
levels of disease resistance for some diseases, most notably Ratoon 
Stunting Disease.
    Significant progress has been made in breeding for higher cold 
weather tolerance of sugarcane varieties.
    Development of mapping populations for use by molecular biologists 
has resulted in identification of several individual genes for both 
sucrose accumulation and reduction. More crosses are planned to expand 
these studies.
    True seed were produced from most of the clones of wild ancestral 
canes of the species S. spontaneum and stored in the National Seed 
Storage Laboratory in Fort Collins, Colorado. That contribution should 
preserve the availability of this germplasm for use by sugarcane 
breeders for the next 50 years.
    Experiments with water tables at 15 and 30 cm levels in field 
ditches between 1 June and 1 November (during the rainy season in 
Florida) have identified differences among cultivars in their yield 
reactions at both water tables. This should permit growers to reduce 
pumping costs by holding higher water tables on tolerant sugarcane 
varieties.
                national and domestic research linkages
    The Sugarcane Field Station is the primary sugarcane breeding 
facility for mainland United States sugarcane growers. It enjoys 
national and international recognition in this role, and hosts 
scientists interested in sugarcane genetics and breeding from many 
countries in the world for training and information exchange. In the 
past 10 years, excess seed to program needs has been shared with 
sugarcane breeding programs in Argentina, China (PRC) Colombia, Congo, 
Costa Rico, Ecuador, Egypt, El Salvador, Guatemala, Mexico, Morocco, 
Nicaragua, Pakistan, South Africa, Sri Lanka, Sudan, Switzerland, 
Thailand and Viet Nam. CP sugarcane varieties are also an important 
component of production in many foreign countries and serve 
additionally as parental material in their crossing programs. Examples 
of foreign countries growing CP varieties include: Morocco, Australia, 
Mexico, Iran, Argentina, Dominican Republic, Colombia, Guatemala and 
Pakistan to name some.\5\
---------------------------------------------------------------------------
    \5\ Gilherme Rossi Machado, Jr. 2001. Sugarcane Variety Notes and 
International Directory, 7th Rev. Guiherme Rossi Machado, Jr., Pub. 
Piracicaba, Brazil.
---------------------------------------------------------------------------
    The Sugarcane Field Station plays an important coordinating role in 
managing the World Collection of Sugarcane Clones housed at the USDA 
Horticultural Research Station in Miami, Florida. Requests for 
propagative material from the collection by overseas cooperators are 
often coordinated through the Sugarcane Field Station. The World 
Collection of Sugarcane Clones is an important genetic repository of 
sugarcane varieties and ancestral sugarcanes collected by USDA and 
other researchers throughout the world over the last century.
    USDA researchers at Canal Point are active in worldwide sugarcane 
research, and represent USDA-ARS as a member of the International 
Consortium of Sugarcane Biotechnology, a multi-country research 
consortium dedicated to the furtherance of biotechnology for the 
improvement of sugarcane.
                   future research needs and funding
    The primary research priority for the Sugarcane Field Station is to 
retain its current mission of breeding superior sugarcane varieties for 
Florida, Louisiana and Texas growers. The following specific 
improvements to the Canal Point, Florida portion of the USDA-ARS 
Sugarcane Variety Development Program are recommended:
  --Continue and improve the production of true sugarcane seed in 
        numbers sufficient to provide the broadest possibility for 
        selection of sugarcane varieties that maintain acceptable 
        yields under reduced production inputs.
  --Implement molecular marker-assisted breeding strategies consistent 
        with USDA-ARS research in other crops such as corn, small 
        grains and vegetables.
  --Utilize molecular tools and techniques to screen for specific 
        traits to improve disease, weed and insect resistance toward 
        minimizing pesticide use.
  --Strengthen facilities, infrastructure and agency collaboration to 
        improve selection and screening for varieties under prevailing 
        conditions including management for improved soil and water 
        conservation.
    To maintain program viability, and to elevate the research effort 
to the level of excellence expected of ARS research centers, it is 
essential $1.5 million be added as a recurring appropriation to the 
current budget of the USDA-ARS sugarcane research effort at the Canal 
Point Sugarcane Field Station. These funds should be used toward 
strengthening the breeding, pathology and soil conservation projects 
currently underway, including improving staff, equipment and research 
facilities.
    Special thanks to Dr. Jimmy D. Miller, Research Leader, USDA-ARS 
Sugarcane Field Station, Canal Point, Florida, and Mr. James M. Shine, 
Jr., Agricultural Research Director, Sugarcane Growers Cooperative of 
Florida, for their contributions to this report.
                                 ______
                                 

Prepared Statement of the Friends of Agricultural Research--Beltsville, 
                                  Inc.

    Mr. Chairman, and Members of the Subcommittee, thank you for this 
opportunity to present our statement supporting funding for the 
Department of Agriculture's Agricultural Research Service (ARS), and 
especially for the Agency's flagship research facility, the Henry A. 
Wallace Beltsville Agricultural Research Center (BARC), in Maryland. 
Our organiztion--Friends of Agricultural Research--Beltsville--is 
dedicated to supporting and promoting the Center's agricultural 
research, outreach, and educational mission.
    Mr. Chairman, we know these are difficult times for the Federal 
budgetary process. The unspeakable acts of September 11 and their 
aftermath join with a slower economy to create complications for fiscal 
year 2003 appropriations. Yet the case for maintaining essential 
agricultural research must be made, and defended. This is our purpose: 
to add voice to the recommendations of our finest agricultural 
researchers and managers. Producers, processors, transporters, 
marketers, agribusinesses will be the beneficiaries. Ultimately, the 
big winner will be the American consumer With that, we turn to our 
specific recommendations. Though we don't propose to present our 
recommendations in any particular order of importance, we will begin 
our specific comments with a solid recommendation to keep Beltsville's 
Bee Research Laboratory in Beltsville.
Beltsville Bee Research Laboratory
    Just as the Beltsville Agricultural Research Center is the flagship 
agricultural research facility to the nation and the world, the 
Beltsville Bee Research Laboratory is the flagship bee research 
facility to the nation and the world. The Beltsville location is not 
only a boon to honey bee research, but to all of production 
agriculture. The nation's oldest Federal bee research facility, the 
Laboratory and its predecessors in the Washington area have existed for 
over 100 years. Generally considered the world's premier bee disease 
laboratory, the Beltsville laboratory provides bee disease, parasitic 
mite, and Africanized honey bee identification services for beekeepers 
worldwide. It also supports the mission of other Federal agencies, 
including the Animal and Plant Health Inspection Service, the 
Environmental Protection Agency, and the Food and Drug Administration. 
Moreover, the Bee Research Laboratory provides training for bee disease 
diagnosticians from other states and countries including Mexico, 
Canada, the United Kingdom, South Africa, New Zealand, Pakistan, Chile, 
and others.
    I. Barton Smith of the Maryland Department of Agriculture recently 
described the need for the Beltsville Laboratory this way: ``The 
beekeeping industry is in dire need of the work . . . due to problems 
with resistant mites and foulbrood. The Beltsville Bee Research Lab 
provides bee disease and pest diagnosis to state regulatory agencies 
and beekeepers. Last year, that lab diagnosed 96 bee disease samples 
for the Maryland Department of Agriculture (MDA). The MDA does not have 
the expertise to do this work.''
    A recent Cornell University study estimated the value of increased 
agricultural production attributable to honey bee pollination at $14.6 
billion annually. This value comes from increased crop yields and 
superior quality. Between 1993 and 1997, numbers of bee colonies and 
yield of honey per U.S. colony declined sharply. A 1998 report pointed 
out that a quarter of North America's wild and domesticated honey bees 
had disappeared over the previous 8 years at a cost to American farmers 
of $5.7 billion a year. Managed bee colonies and their pollination 
benefits will survive only if these trends can be reversed, according 
to the report.
    Full-scale honey bee research of this quality can't stand in 
isolation. The Beltsville location provides research cooperation that 
is unavailable anywhere else. Bee research requires the expertise not 
only of apiculturists, but of pathologists, geneticists, and chemists. 
Beltsville provides all these and more. For example, the Beltsville Bee 
Lab is the only laboratory committed to preserving honey bee germplasm. 
It is uniquely positioned to take advantage of the avian and porcine 
germplasm research being conducted at Beltsville. This type of 
cooperative research allows research groups to meet daily if needed and 
it provides the savings of shared instrumentation. Also, the lab 
spearheads the USDA effort seeking FDA approval for two antibiotics to 
control American foulbrood disease of honey bees. The causative 
bacterium is showing resistance to the only approved antibiotic, and is 
devastating bee colonies across the nation. The Beltsville Bee Lab has 
developed new controls for parasitic mites, including an ARS-patented 
gel formulation of formic acid. The commercially available, 
environmentally friendly product offers a 90-100 percent control. 
Nowhere in the country is a Federal bee laboratory located in the close 
proximity to such prestigious institutions as the National Institutes 
of Health, Johns Hopkins University, the University of Maryland, 
Georgetown University, and the Smithsonian Institution.
    The Beltsville Bee Laboratory is the only Federal honey bee 
research facility located in a climate representative of the majority 
of U.S. beekeeping areas. Honey bee experts from the Mid-Atlantic 
Region say that a sustained base of research support would be lost if 
the Beltsville Laboratory were to be re-located to Wesalco, Texas. 
Within a 400 miles radius of Beltsville, growers use honey bees to 
pollinate major acreages of crops such as apples, blueberries, and 
cranberries. Those crops are unavailable for pollination studies in the 
arid Southwest. Further, migratory beekeeping is a vital management 
practice near Beltsville, where honey bee colonies are moved up and 
down the eastern agricultural corridor.
    Federal Africanized honey bees dominate Weslaco's arid Southwestern 
location. By no means do we diminish the importance of Africanized 
honey bees to the six states where they have been reported. Still, 
scientists say that Weslaco's atypical honey bee situation is ill-
suited for traditional European honey bee research. They say 
traditional honey bee research at Weslaco would be both highly 
impractical and extremely costly. Also, we would note that several 
state universities are cutting back on honey bee research. The net 
effect overall is to cut honey bee research to the bone when more, not 
less, research is badly needed. Thus, for many reasons, we respectfully 
recommend keeping the Beltsville Bee Research Laboratory intact. This 
is not the time to cut bee research at Beltsville.
Animal Improvement Programs Laboratory
    This venerable Beltsville laboratory and its predecessors have 
contributed over a century of steady genetic progress to America's milk 
production industry. Its reach is worldwide, helping producers 
everywhere make better informed genetic decisions and promoting export 
of American germplasm and breeding stock.
    For many years America's dairy cows have steadily increased milk 
production at the rate of about 45 gallons per year. Approximately two-
thirds of those increases can be traced to genetic progress. Much of 
the credit for that success stems from the cooperative national and 
international genetic evaluation programs of BARC's award winning 
Animal Improvement Programs Laboratory. The future of dairy industry 
will be greatly influenced by the research of the Animal Improvement 
Programs Laboratory. In recent years, the Laboratory staff has 
decreased as inflation and salary increases have eaten away at 
operating funds. Without additional funding, the lab will be so 
strapped for funds it will be unable to function. With the requested 
funding, the lab can support the current program and expand it by 
hiring another Research Geneticist. We recommend continued funding 
support for the Laboratory.
Barley Health Foods Research
    Barley contains carbohydrates called beta-glucans that help control 
blood sugar and cholesterol. We recommend continued support for 
research to determine if barley-containing foods may affect the risks 
of such chronic conditions as cardiovascular disease, diabetes, and 
obesity. This research is needed to assess the bioavailability and 
efficacy of food components found in barley and to identify foods, 
health practices, and attitudes associated with successful maintenance 
of weight loss.
Biomineral Soil Amendments for Nematode Control.
    Losses to soil nematodes cost farmers billions every year. The 
soybean cyst nematode alone can cut soybean yields by 10 percent, often 
more. Citrus and vegetable crops also are vulnerable to intensive 
nematode damage. Growers are squeezed by expanding nematode 
infestations, nematicide resistance, and de-registration of traditional 
nematicides because of environmental concerns. BARC in cooperation with 
industry and others is pursuing new, more effective approaches to 
nematode control. Promising research lines include using such re-
cyclable soil amendment as animal wastes, composts, and mineral by-
products. We recommend continuing the increased funding for these 
promising approaches.
Foundry Sand By-Products Utilization
    Municipalities and industries generate vast quantities of by-
products. By-products, such as foundry sand from the metal castings 
industry, have potential uses in agricultural and horticultural 
production processes. The Animal Manure and By-Products Laboratory will 
use the funding to identify beneficial new uses and assess risks to 
human health, safety, or the environment from using foundry sand in 
agriculture. A new soil scientist will be hired to support this work. 
We recommend continuation of this funding.
Poultry Diseases
    The mission of the Parasite Biology, Epidemiology, and Systematics 
Laboratory is to reduce the economic costs of parasites in livestock 
and poultry. Coccidiosis causes the greatest economic loss to the meat 
chicken industry from disease. But traditional chemical controls are 
becoming ineffective; and new non-chemical control methods are needed. 
New funding will be used to conduct functional genomics and proteomics 
analysis of coccidia to identify potential proteins that can be used in 
diagnostic tests and as targets for potential vaccine development. We 
recommend continuation of this funding.
Biomedical Plant Materials
    There is a growing need for functionally active, protective 
molecules for human and animal pathogens. We need them at lower cost 
and without risk to humans, animals, or the environment. Such molecules 
include recombinant antibodies, vaccines, and enzymes. Also, we need 
non-contaminated, lower-cost, more reliable diagnostic reagents.
    In recent years, scientists have produced biomedical reagents from 
plants in the laboratory. The potential benefits are huge. For one 
example, replacing poultry vaccine injections with edible plant-
produced vaccines would substantially lower poultry production costs. 
Beltsville is uniquely equipped to develop necessary systems and to 
test their efficacy in cooperation with other ARS facilities working on 
livestock and poultry diseases. This is a cooperative project with the 
Biotechnology Foundation, Inc., in Philadelphia. We recommend 
continuation of this funding.
National Germplasm Resources System
    This laboratory supports the national database that provides data 
storage and retrieval systems for collecting and disseminating 
germplasm information. It provides accurate taxonomy, transport, 
geographic, evaluation, inventory, and cooperator information for plant 
and animal germplasm holdings nationwide. This is an ARS mission-
critical activity. We recommend continuation of funding.
Bovine Genetics
    Somatic cell nuclear transfer (cloning) technology has tremendous 
biomedical and agricultural potential. Yet the frequency of successful 
births from cloning has been relatively low. Many pregnancies fail 
before completing gestation. New funding will support collaborative 
research by the Gene Evaluation and Mapping Laboratory and the 
University of Illinois aimed at improving cloning efficiency. A new 
Molecular Biologist is being hired to support this effort. We recommend 
continuation of this funding.
IR-4: Registration of Minor Use Pesticides
    ``Minor crops'' have great economic value, but are not among the 
top ten crops like corn and soybeans that provide huge markets for 
pesticide manufacturers. Manufacturers often do not see a large enough 
market to justify the expense of doing the research needed to register 
a pesticide for a ``minor crop.'' Without the IR-4 program, growers 
would have fewer options for pest control. The Beltsville Environmental 
Quality Laboratory operates a minor crop pesticide residue laboratory. 
This lab vigorously enforces EPA-prescribed protocols for all 
experimental procedures, and prepares comprehensive final reports. New 
funds enhance the overall mission of the Agency's IR-4 program. We 
recommend that this funding be continued.
Invasive Species Initiative
    Globalization has lowered trade barriers over much of the world. It 
also has contributed to the ease with which exotic organisms--or 
invasive species--enter U.S. habitats and environments. Invading pest 
species not only create ecological and economical problems, they also 
threaten biodiversity and the financial stability of U.S. agriculture. 
Once invaders become successful competitors in natural or agricultural 
ecosystems, producers must spend millions every year to combat them. 
Collateral damage, such as loss of native diversity, may not be evident 
for years. Moreover, exotic species represent a biosecurity risk 
through deliberate introduction into the United States.
    Beltsville laboratories are at the vanguard of invasive species 
research, covering prevention, detection, identification, and control. 
Invasive species research includes: insects, plants, fungi, nematodes, 
and other arthropods. Certain labs provide stand-by, 24-hour 
identification services for possible alien intruders. Others provide 
basic taxonomic information targeting preventive and control measures 
for use before or after invasive species have become established. 
Beltsville can point to many past successes in the battle against 
invasive species. Overall, Beltsville has the strongest invasive 
species programs in the nation. The President's fiscal year 2003 Budget 
proposes an increase of $775,000 for Beltsville for Control of Invasive 
Species. We strongly support this recommendation.
Tornado Damage and Recovery Needs
    On September 24, 2001, BARC-West took a direct hit from a rare, 200 
mph, Force-3 tornado. Unprecedented in Beltsville, the powerful storm 
smashed windows and ripped roofing from buildings, damaged half of the 
Center's greenhouse space, destroyed 60 vehicles and damaged many 
others. It wreaked havoc on several laboratories, destroying equipment, 
reagents, and supplies--miraculously, no one was hurt. The work of 75-
100 scientists was set back by months, a few by years. Some 
irreplaceable environmental samples, plant clones, and the like were 
lost permanently. Damage to facilities and vehicles and to equipment 
and supplies has been conservatively estimated at $21.5 million.
    The BARC landscape took a big hit, too.--Acres of trees and shrubs 
were lost, including a majestic 100 year-old American elm. BARC 
Director Phyllis Johnson has appointed a committee of leading 
horticulturists from BARC and the National Arboretum to develop and 
implement a comprehensive landscape restoration. We are pleased to 
report, Mr. Chairman, that FAR-B is working closely with the landscape 
committee. Thus far, we have raised over $15,000 for clean-up, site 
preparation, and plant material purchases. Also, we have received or 
have commitments for thousands of dollars of donated or discounted 
plant materials. Despite the limited availability funds, repairs to the 
landscape are coming along well
    Repairs to buildings, greenhouses, labs and lab restocking--not to 
mention vehicle replacements--pose a more formidable challenge.--Still, 
by using thoughtful management, BARC is making excellent progress. For 
instance, using ARS Headquarters support, BARC has completed $1.3 
million of emergency roof repairs. Also, BARC has committed another 
$3.8 million of Headquarters funds and $407,000 from its R&M accounts 
to repairs.
    Moreover, BARC is making excellent progress toward replacing its 
all-important greenhouses. BARC plans to use $3 million of fiscal year 
2002 Building and Facility funds to replace three greenhouses. The 
President's fiscal year 2003 budget proposes $4.18 million for building 
and facilities, which BARC would use to replace four other greenhouses. 
Still other greenhouses will be replaced with hoop houses. Together, 
these measures and funding would generally complete tornado-related 
facility repairs, though they do not address vehicle and laboratory 
equipment and supplies replacement.
    Lastly, we would emphasize our support for other BARC needs, 
including a poultry research facility ($3 million) and phase III of the 
Human Nutrition Complex ($22 million).
    Mr. Chairman, that concludes our statement. We are grateful for 
your past support of the BARC mission. And, we again thank you for the 
opportunity to present our testimony.
                                 ______
                                 

       Prepared Statement of the Grocery Manufacturers of America

    On behalf of the member companies of the Grocery Manufacturers of 
America (GMA) and our partner association, the Association of Sales and 
Marketing Companies (ASMC), I appreciate the opportunity to submit 
testimony to the Senate Appropriations Subcommittee on Agriculture, 
Rural Development, and Related Agencies. We ask that you support the 
Administration's recognition, in its budget request, of the continuing 
need to increase resources for the Food and Drug Administration (FDA) 
as you consider their fiscal year 2003 funding request.
    GMA is the world's largest association of food, beverage and 
consumer product companies. With U.S. sales of more than $460 billion, 
GMA members employ more than 2.5 million workers in all 50 States. The 
organization applies legal, scientific and political expertise from its 
member companies to vital food, nutrition and public policy issues 
affecting the industry. Led by a board of 44 Chief Executive officers, 
GMA speaks for food and consumer product manufacturers at the State, 
Federal and international levels on legislative and regulatory issues. 
The association also leads efforts to increase productivity, efficiency 
and growth in the food, beverage and consumer products industry.
    GMA particularly supports increased funding for the Center for Food 
Safety and Applied Nutrition (CFSAN), whose role is invaluable in 
ensuring the public that the United States has today--as it always has 
had--the safest and most wholesome food supply in the world. The 
Center's role has been highlighted in the months since the tragic 
attack on our country threatened our inherent sense of safety and 
renewed our commitment to find ways to further enhance the safety of 
our food supply. The resources Congress appropriated for FDA and CFSAN 
in the bioterrorism supplemental appropriation went a long way toward 
assisting the agency's activities; it is crucial for the fiscal year 
2003 budget to continue this commitment. We note that FDA has moved 
quickly to hire the new consumer safety officers Congress provided for 
in last year's supplemental, and are expected to reach the 600 level 
this week.
    We believe it is essential for FDA to have the resources it needs 
for research into new and improved methods to detect contaminants in 
foods, particularly substances that when introduced deliberately, turn 
a safe and nutritious product into an agent for harm. Additionally, we 
strongly support FDA's proposal in the budget request to work 
cooperatively with other health and agriculture agencies in national 
surveillance and emergency response programs designed not only to 
detect problems accurately and scientifically but to communicate risk 
appropriately to the public and to take actions that are properly 
rooted in science. We continue to support FDA's activities, together 
with those of USDA, in ensuring that problems affecting food and 
agricultural products in other countries--such as BSE and foot and 
mouth disease--do not enter the U.S. Finally, we support FDA's 
consistent policy of rejecting non-scientific approaches to decisions 
regarding the incorporation in food technology of the new scientific 
approaches of biotechnology.
    In communication with this Committee last year, we urged you to 
ensure the inclusion in the FDA budget of funds to cover FDA's 
government cost-of-living increase; we reiterate that request for this 
appropriations cycle. This funding will both ensure that other programs 
are not placed in deficit to cover this mandatory cost and that FDA 
will have the resources it needs to add appropriately skilled and 
trained technical staff consistent with its expanding mission in this 
new climate.
    At USDA, we support the USDA/ARS nutrition monitoring program and 
ask the committee to appropriate the $7 million that is needed for this 
effort in fiscal year 2003. Such funding will allow for 2 days of 
dietary recall on 5,000 individuals, interviews for diet and health 
knowledge, food program information, continued updating of food 
composition data, and prompt coding and processing information. The 
information gathered in this survey is invaluable to both the public 
and private sectors, and we ask for the committee's continued support. 
We also support the Administration's request for $3 million in funding 
within FSIS to coordinate U.S. participation in the Codex Alimentarius 
Commission, a critical activity for our industry.
    We recognize that the confidence of the public in our food supply 
depends both on our industry's continuing commitment to safety and 
quality and on FDA's ability to work with us to achieve this. We 
support FDA's mission to protect the public health, and we urge you to 
provide the funds necessary to do this. If we may be of any assistance 
as you proceed with your work on this important appropriation, please 
do not hesitate to contact me.
    Thank you for your consideration of our views.
                                 ______
                                 

              Prepared Statement of the Harrison Fish Farm

    I would like to open by thanking you for the opportunity to speak 
on behalf of the Regional Aquaculture Centers. I come from a family 
farm that has been owned and operated as a row crop and livestock 
operation for the past 138 years. The year 2000 found our farm vacant 
of cows and hogs. In our known history, this was the first time that 
``traditional'' livestock did not play a vital role in our cashtlow.
    I graduated from college in 1987 with the intentions of becoming an 
engineer. In May of 1987, my father called with the devastating news 
that he was selling the farm as my two older brothers were moving to 
other employment opportunities. My oldest became a State Patrolman and 
my next oldest became a U.S. Postal carrier. It is very sad to say that 
this is a common occurrence in family farms today. With my return to 
our farm came the realization that I was not going to survive without 
additional income. It was a love of the outdoors and luck that turned 
my attention to Aquaculture. A hobby farmer retired and sold his 
equipment to me. One truck, two steel tanks, several cages and limited 
equipment and supplies was what I started out with. I have grown from 
one three acre lake in 1990 to over 180 acres of surface water in 2001. 
We are still growing and are excited about the Aquaculture industries 
outlook. With our imports far exceeding our exports it is no small 
surprise that this segment of Agriculture will not be able to keep up 
with the growing demand of farm raised aquatic products. Now more than 
ever, we need your financial support in funding our Regional 
Aquaculture Centers.
    The internet and computer software has transformed the information 
highway into a marketing tool. We need you to support our efforts to 
include more farmers and innovative leaders in Aquaculture. We have an 
opportunity to help our American Farmer by including him in an 
agricultural sector that shows great promise. Look around, it is quite 
easy to find success stories of fish fanning and their related 
endeavors. Regional Aquaculture Centers play an increasingly vital role 
in getting this information out to State extension agencies. We need to 
inform the farmer as well as the public on the benefits of producing 
American products for American people.
    Ever since their inception, our RAC's have not received full 
funding at their authorized level. We need your support now to change 
this dangerous and discouraging trend. We as American citizens realize 
this past year has brought about financial stress that we will feel for 
years to come but please do not let the pressure for spending cuts 
dictate against wise decision making. The value of one dollar is not 
what it was when our RAC's were created. We are getting the same dollar 
in 2001 as we did when we were originated. In essence, we are getting 
less, and to top this off, we must withstand an administrative cost 
now. Pay raises, rising costs, higher overhead, all these dictate that 
something must be done soon. Please demonstrate your support of 
Aquaculture by supporting our RAC's. Level funding is not the answer, 
we need your true support by funding us at our fully authorized level. 
Please do not let history repeat itself again, give us, YOUR AMERICAN 
FARMER, a true chance at survival. It made a difference here in 
Missouri, and I know it can make a difference in our Country. Thank 
You.
                                 ______
                                 

     Prepared Statement of the Humane Society of the United States

    As the largest animal protection organization in the country, we 
appreciate the opportunity to provide testimony to the Agriculture, 
Rural Development and Related Agencies Subcommittee on fiscal year 2003 
funding items of great importance to the Humane Society of the United 
States and its 7 million supporters nationwide.
Enforcement of Animal Welfare Laws
    We are grateful for the Committee's strong support last year of 
Animal Welfare Act enforcement funding, and we urge you to continue 
providing modest increases for improved enforcement by the U.S. 
Department of Agriculture of key animal welfare laws, as explained 
below. The increases above fiscal year 2002 funding that we seek for 
fiscal year 2003 will help protect the welfare of millions of animals 
at facilities across the country including commercial breeding 
facilities, puppy mills, laboratories, zoos, circuses, horse shows, 
airlines, and slaughterhouses. Sound enforcement will also benefit 
people by helping to prevent: (1) injuries to slaughterhouse workers 
from animals struggling in pain; (2) orchestrated dogfights and 
cockfights that often involve illegal gambling, drug traffic, and human 
violence; (3) the sale by puppy mills of unhealthy pets by commercial 
breeders commonly referred to as ``puppy mills''; (4) laboratory 
conditions that could jeopardize may impair the scientific integrity of 
animal based research; (5) risks of disease transmission from, and 
dangerous encounters with, wild animals in or during public exhibition 
public display;, and (6) injuries and death of pets on commercial 
airline flights due to mishandling and exposure to adverse 
environmental conditions improper environment and handling. The 
enforcement funding increases we request are as follows:
Food Safety Inspection Service: $2.5 million to hire inspectors to work 
        solely on enforcement of the Humane Slaughter Act
    The Humane Slaughter Act (HSA) requires that livestock be rendered 
unconscious before they are slaughtered. However, as reported in the 
Washington Post last spring, while this law has been on the books for 
decades, chronically weak enforcement and intense pressure to speed up 
the slaughterhouse assembly line have resulted in animals being 
skinned, dismembered, and boiled while they are still alive and 
conscious. USDA food safety inspectors are not routinely tasked with 
checking for or reporting violations of HSA, and some slaughter plants 
even have barriers that make it impossible for inspectors to see live 
animals. Inspection activity centers on the examination of body parts 
and carcasses, with inspectors stationed far down the production line, 
well past where the animals are killed. Although a USDA directive 
instructs inspectors to stop the production line when an HSA violation 
is observed, this rarely occurs. Inspectors and slaughter plant workers 
themselves support improved enforcement of this law, which would not 
only reduce animal suffering but also improve worker safety. Congress 
provided a $1 million increase to the Food Safety Inspection Service 
(FSIS) in the fiscal year 2001 Supplemental to begin addressing this 
problem, and the Senate and House have passed resolutions calling for 
tougher enforcement. For fiscal year 2003, we seek a $2.5 million 
increase along with language directing FSIS to use these funds to hire 
50 employees to work solely on HSA enforcement through full-time ante-
mortem inspection, particularly unloading, handling, stunning and 
killing of animals at slaughter plants.
APHIS/Investigative and Enforcement Services: $800,000 to establish a 
        special investigative unit focused on animal fighting cases
    Congress is poised to finalize legislation, contained in both the 
Senate and House farm bills and overwhelmingly supported in both 
chambers, to close loopholes in the Animal Welfare Act (AWA) regarding 
cockfighting and dogfighting, and to boost the penalties for Federal 
animal fighting violations. The AWA already prohibits most interstate 
commerce of animals for fighting but, in more than 30 years, USDA has 
pursued no cockfighting cases and only three dogfighting cases, despite 
rampant activity across the country. To improve enforcement of this 
part of the AWA, we seek $800,000 to hire, train, and equip a special 
unit within Investigative and Enforcement Services, comprised of 6-10 
agents, to focus exclusively on animal fighting cases, and bill 
language to permit this IES team to carry arms to protect themselves, 
given the dangerous nature of animal fighting enforcement work. This 
approach will permit a cadre of specially training investigators to 
develop the expertise needed to crack the underground animal fighting 
network, working closely with State and local law enforcement personnel 
to complement their efforts. USDA has apparently received innumerable 
tips from informants and requests to assist with State and local 
prosecutions, but has routinely ignored or declined such requests.
APHIS/Animal Welfare: current funding plus $800,000 to hire additional 
        inspectors
    Thanks to appropriations increases in the past three years, 
Congress has enabled USDA to begin to reverse a serious decline in the 
number of AWA compliance inspections. However, the President's fiscal 
year 2003 budget proposal--which suggests $1.7 million less for the 
Animal Care division than in fiscal year 2002--would fail to cover the 
salaries of recently-hired inspectors and substantially undo the gains 
Congress provided last fall. Moreover, the need for additional 
inspectors is still great. Many facilities continue to escape oversight 
for long periods of time, giving rise to situations that threaten both 
human and animal health and safety. Nearly half of the sites that do 
get inspected are found to have apparent violations of the minimum 
standards under the Act and, therefore, follow-up visits are badly 
needed. We seek an $800,000 increase above fiscal year 2002 funding to 
hire, train, and equip an additional 8 inspectors, bringing the total 
number of inspectors to 100 (responsible for approximately 10,000 
sites).
APHIS/Horse Protection: $78,000 for improved enforcement of the Horse 
        Protection Act
    Congress enacted the Horse Protection Act in 1970 to end the 
obvious cruelty of physically soring the feet and legs of show horses. 
In an effort to exaggerate the high-stepping gate of Tennessee Walking 
Horses, unscrupulous trainers use a variety of methods to inflict pain 
on sensitive areas of the feet and legs for the effect of the leg-jerk 
reaction that is popular among many in the show-horse industry. This 
cruel practice continues unabated by the well-intentioned but seriously 
underfunded and understaffed APHIS inspection program. As recommended 
in the President's fiscal year 2003 budget, we seek an increase of 
$78,000 to bring this program to its authorized annual funding ceiling 
of $500,000. We also urge the Committee to oppose any effort to 
restrict the USDA from enforcing this law to the maximum extent 
possible.
Agricultural Research Service/Animal Welfare Information Center: 
        current funding
    Thanks again to the Committee's support last year, Congress 
provided a $400,000 increase for the Animal Welfare Information Center 
(AWIC), which serves as a clearinghouse for those involved in the care 
and use of animals for experimentation. AWIC provides valuable 
information on training for laboratory employees, and legal 
requirements and appropriate care for animals in research, including 
minimizing pain and distress, preventing duplication of experiments, 
and reducing or replacing animals in research when possible. The 
President's fiscal year 2003 budget proposal would return AWIC to its 
previous inadequate funding level. We seek to maintain the increase 
provided in fiscal year 2002.
Hoop Barns/Leopold Center for Sustainable Agriculture: $325,000
    The hoop barn is an emerging alternative for livestock production 
that offers many advantages to the factory farm system of animal 
housing. A typical hoop barn is shaped like a Quonset hut (a half 
cylinder lying on its flat side) and contains a deep bedding of straw 
or corn stalks. No individual cages confine the animals, and open ends, 
which can be closed if weather requires, allow access to pasture. 
Animals in hoop barns enjoy greater freedom of movement and have the 
opportunity to interact socially.
    Because they are not tightly confined in an overcrowded, high-
stress environment, animals in hoop barns tend to be healthier than 
their counterparts in factory farms. That means farmers using hoop 
barns do not need to rely on antibiotics to prevent disease and promote 
growth, a common practice on factory farms that is contributing to the 
development of antibiotic-resistant strains of bacteria that threaten 
public health. Products from hoop producers are being sought out by 
meat suppliers and restaurants based on the enhanced flavor and texture 
characteristics of the meat. In addition, hoop barns are better for the 
environment, because they use solid manure composting rather than the 
liquid waste disposal systems used by factory farms, which jeopardize 
groundwater and produce noxious odors. Furthermore, they offer an 
affordable alternative for farmers. Hoop barns are approximately one-
third the cost of conventional factory farm structures. They are easy 
to install and versatile (they can be used for different species or for 
storage of hay or equipment). This flexibility helps family farmers 
withstand fluctuations in market demand and avoid corporate buyouts.
    We appreciate the Committee's support in fiscal year 2002 for this 
promising technology. As a result of the Committee's action, Iowa's 
Leopold Center for Sustainable Agriculture--which is in the forefront 
of research and development on hoop barns--received $187,072 to expand 
understanding and adoption of hooped structures as low-cost, humane, 
environmentally-friendly production housing systems for swine and other 
agricultural animals. The hoop research is promoting viable and timely 
production options for struggling small and medium sized farmers as 
well as helping to open new markets. Specifically, the fiscal year 2002 
funds will allow:
  --Completion of a comprehensive manual of hoop barn use for swine 
        production;
  --Collection and distribution of information on uses of hoop 
        structures for other livestock species;
  --Establishment of a hoop barn network of producers and demonstration 
        sites; and
  --A national workshop on Hoop Barn Swine Production.
    The fiscal year 2002 funds will also allow the Leopold Center to 
begin work on the remaining objectives set out in last year's $325,000 
proposal:
  --Evaluation of hoop barns as a total production system, including 
        labor and resource economics;
  --Development of protocols for using hoop barns to raise 
        disadvantaged and light-weight pigs for welfare, medical and 
        production reasons;
  --Systematic investigation of farmers' perceptions of benefits and 
        limitations of hoop structures;
  --Evaluation of meat quality characteristics of hoop pork; and
  --Determination of genetic and production interactions on pork 
        quality traits.
    We are again requesting your support for an appropriation of 
$325,000 in fiscal year 2003. Part of this request is to further the 
remaining objectives set out in the original proposal. The additional 
part of this request would allow expansion of the original objectives 
to broaden the farmer network of hoop users, to support on-going 
efforts to create a marketing infrastructure that facilitates consumer 
access to hoop products, and to tighten nutrient cycles on individual 
farms. This continuing work will enable the Leopold Center to make the 
benefits of hoop barns available on a wider scale.
National School Lunch and Breakfast Programs/Forced Molting of Egg-
        Laying Hens
    At the end of their production cycle, egg-laying hens in 75 percent 
of U.S. flocks are starved until they lose up to 35 percent of their 
body weight--typically for 5-14 days--in an effort to shock their 
systems into a new egg-laying cycle. Once placed back on feed, those 
hens who survive the starvation period will produce more and bigger 
eggs. Such ``forced molting'' is a threat to the health and safety of 
consumers, because eggs produced at facilities using this high-stress 
practice have a greatly increased incidence of Salmonella enteritidis 
(SE). Forced molting is a husbandry strategy that extends the 
productive life of those birds who survive, but it comes with severe 
consequences for the health of consumers and for animal welfare.
    Salmonella is the second most common food-borne illness in the 
United States (an estimated 500-1,000 people die from it annually). SE 
is the second most common Salmonella strain. Most SE infections are 
caused by the consumption of eggs. Starvation causes severe stress to 
hens and makes them highly susceptible to Salmonella infections. 
Research indicates that hens who have been force molted in this way 
shed significantly more SE bacteria than hens with access to food. Dr. 
Fred Angulo, the chief medical epidemiologist for food-borne diseases 
at the Centers for Disease Control and Prevention, has determined that 
outbreaks of SE in schools have been traced back to layer houses where 
hens were molted using starvation. In 1998, USDA's Food Safety and 
Inspection Service (FSIS) Director wrote that ``highly stressful forced 
molting practices. . . .[f]or example, extended starvation and water 
deprivation practices, lead to increased shedding of Salmonella 
enteritidis (SE) by laying hens,'' and recommended that ``egg producers 
eliminate forced molting practices and adopt alternatives that reduce 
public health risks.''
    Intentionally starving a hen so that she loses up to 35 percent of 
her body weight is cruel. Almost every State anti-cruelty statute 
specifically bars the deliberate starvation of animals, but this 
standard is not typically enforced for routine animal husbandry. 
Alternative methods to forced molting, which are more humane, safer, 
and economically comparable, are available to the U.S. egg production 
industry. Major fast food companies, including McDonald's, Burger King, 
and Wendy's, have stopped buying eggs from farms that use forced 
molting. It is time for Congress to ensure that meals provided at 
public schools are at least as safe as fast food.
    Under the National School Lunch and Breakfast Programs, schools 
spent more than $14.2 million on fresh and raw eggs for food service 
during the 1996-97 school year, according to a USDA study (the number 
may well be higher now, since the breakfast program has greatly 
expanded since that time). With three-quarters of all flocks in the 
U.S. currently force molted, there is a very high risk that school 
children are being exposed to SE bacteria. In 2000, the USDA announced 
that it would no longer allow the use of downed animals in the school 
lunch program because it could not count on the safety of the meat. 
School districts incorporate Federal requirements (e.g., to comply with 
nutritional guidelines, ``Buy American'' laws, and health department 
inspections) in their detailed specifications for each food item 
contained in their contracts.
    To reduce animal cruelty and protect schoolchildren, we urge the 
Committee to include bill language to end USDA's support under the 
National School Lunch and School Breakfast Programs for the purchase of 
eggs produced at facilities that force-molt hens through deprivation of 
food or water.
Birds, Rats and Mice in the Animal Welfare Act
    We commend the Committee for allowing USDA to proceed with its 
rulemaking to begin regulating birds, rats, and mice under the Animal 
Welfare Act, as required by a court settlement in 2000. These species 
account for approximately 95 percent of animals used in research, and 
they deserve basic minimum standards of care. Ensuring that they 
receive adequate care is imperative not only as a humane matter, but 
also as a matter of sound science, since animal suffering compromises 
the integrity of research results. We urge the Committee not to include 
any language in the fiscal year 2003 bill or committee report that 
would interfere with USDA's ability to carry out this important 
rulemaking on a timely basis.
    Again, we appreciate the opportunity to share our views and 
priorities for the Agriculture, Rural Development and Related Agencies 
Appropriation Act of fiscal year 2003. We hope the Committee will be 
able to accommodate these modest funding requests to address some very 
pressing problems affecting millions of animals in the United States. 
Thank you for your consideration.
                                 ______
                                 

         Prepared Statement of the Illinois Soybean Association

    We appreciate the opportunity to provide testimony on behalf of the 
Soybean Disease Biotechnology Center, an important initiative for 
soybean producers in Illinois and the United States.
Request
    The Soybean Disease Biotechnology Center was established with an 
$800,000 Federal appropriation in fiscal year 2002. This important 
action on the part of the Congress and the leadership of Illinois's 
legislative champions is very much appreciated. The initial request 
came from the Illinois Soybean Association, an organization of 
approximately 4000 leading soybean producers, and the University of 
Illinois, a major land-grant institution. They proposed to establish a 
Soybean Disease Biotechnology Center within the National Soybean 
Research Laboratory (NSRL) at the University of Illinois. The effort to 
bring the Center to its full potential is underway. To continue this 
important effort, we request a Federal appropriation of $3.5 million.
    The Illinois Soybean Checkoff Board will consider proposals from 
Center scientists for future program support, and the University of 
Illinois will contribute core staff, space, general support services, 
greenhouse facilities, and utilities. This will greatly leverage 
Federal support of soybean disease biotechnology research.
Rationale
    About 15 percent of total soybean production is lost to disease 
each year. That amounted to approximately 12 million bushels in 2001. 
While there were significant improvements in soybean yields during the 
last few decades, there was no reduction in the percentage of crop lost 
to disease. Soybean cyst nematode (SCN), sudden death syndrome (SDS) 
and other diseases continue to be major threats to the U.S. soybean 
industry.
    The Soybean Disease Biotechnology Center will be the first line of 
defense against major soybean diseases, especially the soybean cyst 
nematode (SCN), that threaten the industry. The Center is bringing the 
power of new scientific advances in structural, comparative, and 
functional genomics and genetic transformation to bear on SCN and other 
disease threats, including diseases not yet in the U.S., such as 
soybean rust.
    Center researchers will identify and create new and improved 
mechanisms of disease tolerance and resistance to protect the soybean 
crop and increase its profitability throughout the industry. Genetic 
stocks of the National Soybean Germplasm Collection, located at the 
University of Illinois, provide a unique, readily accessible resource 
for the Center, as will wild species that are related to soybean and 
have novel sources of disease resistance.
Objectives
    Reduce yield losses to the U.S. soybean crop from plant diseases.
    Identify resistance genes in Glycine soja and perennial Glycine to 
major soybean diseases, especially soybean cyst nematode (SCN) and 
sudden death syndrome (SDS).
    Move resistance genes from Glycine soja and perennial Glycine into 
elite soybean cultivars utilizing modern biotechnology techniques.
    Measure and optimize effects of newly introduced disease resistance 
genes on other economically important attributes such as yield, 
protein, and oil content.
    Disseminate results to the soybean industry through web-based 
programs such as the Varietal Information Program for Soybeans (VIPS), 
scientific publications, university extension publications, 
publications of the National Soybean Research Laboratory (NSRL), and 
through presentations at professional and industry conferences.
Location advantages
    The Soybean Disease Biotechnology Center is strongly supported by 
two unique campus resources, the Keck Center for Comparative and 
Functional Genomics and the National Center for Supercomputing 
Applications. They offer high throughput genetic sequencing, unequaled 
bioinformatics capabilities, and unique, one-of-a-kind genetic analysis 
tools, including micro-arrays. Center researchers also have ready 
access to the University of Illinois Biotechnology Center, which 
provides recombinant DNA and protein services, immunological resources, 
flow cytometry, high capacity transgenic plant production, and cell and 
tissue culture facilities.
    Outstanding USDA-ARS programs in soybean pathology interact 
directly with the Center, and there is direct access to superb 
conventional greenhouse and controlled environment facilities in 
adjacent, connected structures. As part of this project, a bio-
containment greenhouse will be constructed to provide the levels of 
isolation and protection required for sophisticated disease 
biotechnology research. An elaborate system of research farms is 
available for testing new developments in a wide range of soil and 
climatic conditions. Specialized, state-of-the-art laboratories to 
house the Center are under construction in the National Soybean 
Research Laboratory.
    The Soybean Disease Biotechnology Center works with the new St. 
Louis-headquartered Danforth Plant Science Center and participates in 
the Illinois-Missouri Biotechnology Alliance. Its association with the 
NSRL will ensure that research in the Soybean Disease Biotechnology 
Center will fully complement and benefit from other public and private 
soy research programs across the nation. This will ensure that the 
results of fundamental soybean disease biotechnology research are 
quickly translated into practical technology, useful information, and 
sustainable competitive advantage for the industry.
    This initiative is timely because the University of Illinois is 
expanding its nematology and post-genomics biotechnology programs. A 
multi-million dollar investment of State funds is providing new 
biotechnology faculty positions in functional genomics, bioinformatics, 
developmental biology, microanalytic systems, and cellular and 
molecular bioengineering and is creating elaborate new facilities for 
basic biotechnology and bioinformatics research. New positions in plant 
disease biotechnology have already been filled with outstanding 
scientist/educators who already have established impressive track 
records. The new State-funded Post Genomics Institute (to be 
constructed in 2003) will enable a much-expanded basic biotechnology 
research program that will support and complement activities of the 
Center. The Center will also benefit from Illinois's investment in an 
expanded University of Illinois business incubator and two new 
University research parks to ensure rapid commercialization of 
promising new technologies from the University's research program.
Progress to date
    The Soybean Disease Biotechnology Center is in very early stages of 
development, but important progress has already been made. The 
organizational structure is established, with the Director of the 
National Soybean Research Laboratory serving as Director of the Center. 
The Center faculty and staff have been recruited. State funds were used 
to create two new senior faculty positions in nematology. Proposals for 
specific research efforts to be funded through the Center have been 
solicited. A soybean cyst nematode task force is organizing the overall 
SCN effort and developing new strategies for controlling this major 
pest.
Summary
    We request that $3.5 million be appropriated to establish a Soybean 
Disease Biotechnology Center within the National Soybean Research 
Laboratory at the University of Illinois. These funds, complemented by 
State funds and industry contributions, will be used to continue to 
staff, equip, house, and operate the center, and launch and sustain its 
programs. We greatly appreciate the legislative initiatives that 
created the National Soybean Research Laboratory and the Soybean 
Disease Biotechnology Center and look forward to this opportunity to 
enhance the returns on those investments.
                                 ______
                                 

    Prepared Statement of the International Association of Fish and 
                           Wildlife Agencies

                     usda/aphis--wildlife services
    The President's fiscal year 2003 proposed budget for the APHIS 
Wildlife Services' Operations is $68,745,000, and reflects a 
$14,626,000 increase from the fiscal year 2002 level. For Methods 
Development, the proposed budget is $16,310,000, a $486,000 increase 
from the fiscal year 2002 level. For Aquaculture, the proposed budget 
is $764,228, a decrease of $174,000 from the fiscal year 2002 level. 
The increases for all three line items include proposals to fund GSA 
rent, employee pension, and the Federal Employee Compensation Act from 
the program's budget.
    Wildlife Services (WS), a unit of APHIS, is the Federal agency 
responsible for controlling wildlife damage to agriculture, 
aquaculture, forest, range and other natural resources; for protecting 
public health and safety through the control of wildlife-borne 
diseases; and for wildlife control at airports. Its control activities 
are based on the principles of wildlife management and integrated 
damage management, and are carried out cooperatively with State fish 
and wildlife agencies. Most APHIS WS operational work is cost-shared 
between the Federal WS program, State and county governments, 
agricultural producers, and other cooperators.
    The cooperation and support of the agricultural community are 
essential to maintaining wildlife populations, because much of the 
Nation's wildlife exists on private agricultural lands. A progressive 
wildlife damage management program which reduces the adverse impact of 
wildlife populations is necessary to maintain the support of the 
agrarian community and to counter increasing pressures for indemnity 
due to wildlife damage.
    Since Congress transferred the WS program to USDA in 1986, the 
Association has worked closely with this program on numerous issues 
critical to the State fish and wildlife agencies, including those 
related to migratory birds and endangered species. The Association 
commends the WS program for its professionalism and continuing effort 
to be attuned to the changing public values for the Nation's wildlife, 
while remaining responsive to emerging wildlife problems.
    The Association is concerned with the Administration's proposal for 
the near level funding for Methods Development. Although the fiscal 
year 2003 budget contains a $486,000 increase, the majority is for 
salary increase costs. Many of the current control tools such as traps, 
snares and other restraining devices are becoming less acceptable to 
the public as, similarly, are wildlife toxicants and are actually being 
prohibited in many States because of public referendums. The only 
source of identifying and perfecting new methods is through research. 
We commend Congress for recognizing the need to relocate the WS 
research facility from Denver to Fort Collins, Colorado, and for 
recognizing the need to fund maintenance and operations costs in the 
current budget. However, current operating and maintenance costs still 
exceed current funding by $500,000, and no funds are provided to 
address the development of new innovative methods for wildlife damage 
management. The Association requests an increase of at least $5.0 
million to the Methods Development line item to adequately continue 
non-lethal methods research and address the increased operating and 
maintenance costs, including the funds to maintain the current program 
for trap testing being done in cooperation with the Association and the 
State fish and wildlife agencies to help implement and carry out U.S. 
international understandings to improve animal welfare in State-
regulated wildlife trapping programs.
    The Association recognizes the importance of aircraft to WS for 
predator control activities to protect both livestock and wildlife, the 
distribution of oral vaccine baits for rabies control projects, and for 
the removal or capture of problem wolves. We commend Congress for 
providing $1 million in fiscal year 2002 ($1.2 million was provided in 
fiscal year 2000 and an additional $1 million in fiscal year 2001) to 
WS to continue implementing improved safety procedures for their aerial 
operations. The Association supports the proposed funding in the fiscal 
year 2003 budget of $1.6 million to fully implement the safety 
recommendations contained in the aerial safety report.
    The Association remains concerned with attempts by various 
organizations and individuals in the past several years to 
significantly reduce WS' funding for wildlife damage management 
activities in the United States. A recent report by the General 
Accounting office documented that wildlife damage throughout the United 
States is significant and increasing because of high wildlife 
populations. The Association therefore opposes the proposed $9.96 
million reduction to the WS operations budget, as this reduction will 
directly affect that agency's efforts to protect agricultural and 
natural resources, and property. The rationale for this reduction is 
that cooperators will pick up the cost. One of the principal 
cooperators with WS is the State fish and wildlife agencies which in 
fiscal year 2001 were already picking up over 50 percent of the cost. 
The Association strongly urges Congress to restore the $9.96 million 
reduction to WS operations. WS cannot continue to expand into new areas 
and provide effective service to current customers and cooperators 
unless its operations budget is appropriately funded.
    The Association is pleased with the accomplishments of the Berryman 
Institute located on the Utah State University campus in Logan, Utah. 
However, we would like to see the Institute enhance its capabilities to 
conduct social science research, expand continuing education programs, 
and start a new high quality scientific journal for wildlife damage 
management that would be patterned after other established journals. To 
reach these new goals, the Association supports an increase of the 
funding to the Berryman Institute by an additional $300,000.
    The Association commends Congress for increasing the funding in 
Montana, Idaho, and Wyoming by $1 million in fiscal year 2001 and by 
$1.3 million in fiscal year 2002, to deal with the increasing wolf-
related conflicts. However, wolf conflicts also continue to increase in 
Minnesota, Wisconsin, and Michigan. That three-state area has a 
population that exceeds 3,100 animals, as compared to approximately 500 
wolves in Montana, Idaho and Wyoming. In Minnesota, Wisconsin and 
Michigan, WS personnel responded to approximately 200 wolf complaints 
in fiscal year 2001, as compared to 120 complaints in the three western 
States. The Association requests that Congress appropriate an 
additional $750,000 in fiscal year 2003 to deal with wolf-related 
conflicts in Minnesota, Wisconsin and Michigan in addition to the $1.3 
million in funding for Montana, Idaho and Wyoming.
    The Association recommends that Congress make $1.8 million 
available in fiscal year 2003 to allow WS to continue to implement the 
new Management Information Reporting System. The implementation began 3 
years ago and will occur over a 5-year period, at a total cost of $6-8 
million. The new system will standardize WS reporting systems and allow 
WS to provide specific information on resources protected, damage 
levels, trend information, and data on measurements and outcomes now 
required by the Government Performance and Results Act, and to comply 
with requirements of the National Environmental Policy Act.
    The Association recognizes the increased emphasis being placed by 
USDA APHIS on the detection of foot and mouth and other foreign animal 
disease in this country. Such detection efforts include a greatly 
accelerated surveillance program, as evidenced by a request for $8.2 
million in the fiscal year 2003 WS budget. WS has a long and impressive 
record of coordination with State fish and wildlife agencies on all its 
ongoing activities. The Association supports this new role for WS, so 
long as WS and other USDA agencies remain mindful and respectful of 
State management authority over resident wildlife species. This will 
require constant coordination and cooperation with the State fish and 
wildlife agencies as this surveillance takes place.
    Security at Federal laboratory and research facilities has taken on 
new meaning and dimension in the aftermath of the events of September 
11, 2001, and the ongoing terrorism threat in this country. WS has had 
firsthand experience with security breaches and resulting damage at two 
facilities within the past 5 years. The Association supports the 
allocation of fiscal resources afforded under the Emergency 
Supplemental Appropriation Act to WS to address the homeland security 
needs of these facilities, thereby not diminishing the base budget for 
other important agency programs and services.
                    usda/aphis--veterinary services
Brucellosis
    The Association is concerned about the $738,000 reduction in the 
amount being requested for the Brucellosis Program in the fiscal year 
2003 budget. While we understand some of this may be offset by the 
$25,357,000 (36 percent) increase in the Animal Health Monitoring and 
Surveillance Program budget--in essence the core infrastructure of 
APHIS-Veterinary Services--it will be problematic if the entire 
requested amount is not acted on favorably by Congress. The Association 
supports the $96,288,000 being requested for the Animal Health 
Monitoring and Surveillance Program.
    The Association also supports the request from the States of 
Montana, Idaho and Wyoming for $600,000 in the fiscal year 2003 USDA/
APHIS/Veterinary Services, Program Diseases, Brucellosis Program 
budget, to enable those States to continue their participation in the 
Greater Yellowstone Interagency Brucellosis Committee (GYIBC). Like 
amounts ($600,000) have been included as Congressional add-ons in both 
fiscal year 2001 and fiscal year 2002. The GYIBC is working to 
coordinate Federal, State and private actions involved in eliminating 
brucellosis from wildlife in the Greater Yellowstone Area and 
preventing transmission of brucellosis from wildlife to cattle. Given 
the priority for eradicating this disease, it would seem prudent that 
Veterinary Services include this amount in its base Brucellosis Program 
budget, rather than the States having to rely on Congressional add-ons 
to obtain relief. The Association recommends this amount ($600,000) be 
identified in the base budget for the Brucellosis Program beginning in 
fiscal year 2004 and beyond, until such time as eradication of the 
disease has been achieved.
Chronic Wasting Disease
    The Association commends APHIS-Veterinary Services for taking 
actions to destroy and dispose of captive cervids exposed to chronic 
wasting disease (CWD) because these animals represent a tremendous risk 
to this country's wildlife resources. The Association supports the 
$7.233 million request for funding a new program to eliminate CWD from 
captive cervids and strongly encourages Veterinary Services to use a 
significant part of the funding to assist State wildlife management 
agencies with surveillance for CWD, and to provide funding for research 
directed toward better diagnostic testing and increased knowledge of 
the epidemiology and epizootiology of CWD. The Association supports 
this role for Veterinary Services in the context that Veterinary 
Services and other USDA agencies remain mindful and respectful of State 
management authority over resident wildlife species. This will require 
constant coordination and cooperation with the State fish and wildlife 
agencies as this certification and control program is launched.
Import/Export
    Exotic ticks may carry disease agents that could potentially 
devastate wildlife populations and therefore, prevention of their 
importation is essential. The Association supports the $2.74 million 
(33.6 percent) increase in fiscal year 2003 funding in the Import/
Export Program for inspection of imported reptiles and amphibians for 
exotic ticks, and further recommends that Veterinary Services work 
closely with the U.S. Fish and Wildlife Service in addressing this 
issue.
Tuberculosis
    The Association supports the $11.4 million (131 percent) increase 
in the fiscal year 2003 funding request in the Tuberculosis Program for 
the control of bovine tuberculosis, a continuation of an accelerated 
program begun in fiscal year 2001 to address inadequate national 
surveillance as it relates to international trade needs and enhanced 
tuberculosis testing, training and Mexican eradication efforts, with a 
goal of total eradication in domestic livestock by January, 2004. The 
Association recommends that APHIS-Veterinary Services work closely 
with, and provide financial support to, State fish and wildlife 
agencies involved in this activity. Funding should be provided to State 
fish and wildlife management agencies for TB surveillance, research, 
and control operations, and must be accompanied by close coordination 
and respect for State management authority over resident wildlife.
Veterinary Diagnostics
    The Association recognizes that wildlife disease investigations 
often are dependent upon the USDA's animal disease resources for test 
reagents, consultations, and sample referrals, and commends APHIS for 
assistance with testing of free-ranging wildlife for diseases such as 
brucellosis, chronic wasting disease and bovine tuberculosis. The 
Association supports the $6.73 million (37 percent) increase in fiscal 
year 2003 funding for increasing diagnostic capabilities at the Plum 
Island Animal Disease Diagnostics Laboratory in New York and at the 
National Veterinary Services Laboratories in Ames, Iowa.
Security
    As was the case with USDA/APHIS-Wildlife Services, security at 
Veterinary Services laboratories and research facilities is of great 
concern, particularly in the aftermath of September 11, 2001. The 
Association supports the allocation of fiscal resources afforded under 
the Emergency Supplemental Appropriation Act to Veterinary Services to 
address homeland security needs of these facilities, thereby not 
diminishing the base budget for other important agency programs and 
services.
 cooperative state research, education, and extension service (csrees) 
                     u.s. department of agriculture
    The Association recognizes that the research and educational 
programs of the CSREES and its Land Grant partners effect relevant, 
positive changes in attitudes and implementation of new technologies by 
private landowners, communities, decision-makers, and the public. This 
results in significant benefits to the Nation through development of a 
productive natural resource base in concert with agriculture. Since 
over two-thirds of our land is privately owned, it is appropriate that 
the CSREES-Land Grant System, with its grass roots credibility and 
delivery system, be adequately funded to transfer knowledge that helps 
all private landowners move towards sustainability. However, in the 
fiscal year 2003 budget proposal, we see little emphasis on natural 
resources research and education directed toward these clientele. In 
fact, the total number of farmers based on recent statistics is just 
slightly over one million--only one-tenth of all private landowners--
and, the majority of CSREES' budget is directed toward production 
agriculture on these lands. Conversely, only $4.093 million is budgeted 
(out of a total of $1.033 billion) for the Renewable Resources 
Extension Act (RREA) which assists the over ten million private 
landowners who own and manage most of the Nation's natural resources. 
The Association notes with gratitude that the appropriation for fiscal 
year 2002 is $.8 million larger than the Administration proposed and 
that the increase is carried into the fiscal year 2003 budget request. 
The Association is still seriously concerned that the amount ($4.093 
million) is so small as to be ineffective and we encourage 
Congressional reconsideration of this amount to better reflect the need 
to reach a higher percentage of all landowners.
    The Association strongly recommends that the Renewable Resources 
Extension Act be funded at a minimum of $15 million in fiscal year 
2003. The RREA funds, which are apportioned to State Extension 
Services, effectively leverage cooperative partnerships at an average 
of four to one, with a focus on development and dissemination of 
information needed by private landowners (in rural and urban settings). 
The increase to $15 million would enable the Extension System to 
accomplish the goals and objectives outlined in the 1991-1995 Report to 
Congress. The need for RREA educational programs is greater than ever 
today because of fragmentation of ownerships, urbanization, the 
diversity of landowners needing assistance, and increasing societal 
concerns about land use and its effect on soil, water, wildlife and 
other environmental factors. It is important to note that RREA has been 
reauthorized through 2002 and was originally authorized at $15 million 
annually; however, even though it has been proven to be effective in 
leveraging cooperative State and local funding, it has never been fully 
funded. An increase to $15 million would enable the Extension Service 
to expand capability to assist more private landowners to improve 
management of additional land while increasing farm revenue.
    The Association strongly encourages that McIntire-Stennis Forestry 
Research funds be increased from the $21.884 million in the fiscal year 
2002 budget to a level of $25 million. These funds are essential to the 
future of resource management on non-industrial private forestlands. 
The rapid reduction in timber harvests from public lands bring expanded 
opportunities for small private forest owners to play an increasingly 
important role in the Nation's timber supply. In some places, these 
added opportunities are creating pressures and situations where timber 
harvest on private ownerships exceeds timber growth.
    The Association is pleased to see $12.97 million in the budget for 
Water Quality Integrated Activities but believes that this amount is 
insufficient considering the growing public concern over water quality, 
particularly on agricultural landscapes and therefore the Association 
recommends the appropriation be increased to $20 million. And, we are 
concerned that there is no line item budget for water quality specific 
to educational programs under Smith-Lever in Extension activities. The 
Association recommends a minimum of $3.5 million in Extension programs 
to focus on water quality education targeted at agricultural producers 
and other private landowners and managers. We believe that such program 
efforts are urgently needed to help these landowners learn how to 
address water quality degradation, which seriously affects drinking 
water, human health and fish and wildlife habitat. The Clean Water Act, 
TMDL's, Gulf of Mexico hypoxia and expanded animal feeding operation 
(AFOs) are just a few of the water quality issues that need to be 
addressed through Cooperative Extension efforts.
    The value of National Research Initiative Competitive Grants is 
recognized by the Administration in a 100 percent increase in 
recommended funding to $240 Million. It is important to note the great 
needs for creative and competitive grant programs to provide valuable 
new information to broaden approaches to land management, especially 
with integrated timber and wildlife management on private lands. There 
are few truly competitive programs in wildlife science and USDA NRI has 
a great opportunity to make a unique contribution with this type of 
program. This program will fund creative and new ideas in ways that 
``formula'' funding cannot. The Association applauds and supports that 
funding level and requests Congressional approval.
                       farm service agency (fsa)
    An adequately funded budget for the FSA is essential to implement 
conservation related programs and provisions under FSA administration 
and/or in cooperation with the Natural Resources Conservation Service 
(NRCS) as a result of passage of the Federal Agricultural Improvement 
and Reform (FAIR) Act of 1996 and the new Farm Bill of 2002. The 
Association strongly advocates that the budget include sufficient 
personnel funding to service a very active program and strongly 
believes that the past erosion of staffing levels has been inconsistent 
with the demonstrated need of agricultural producers. The Association 
is deeply concerned that the fixed level of staffing (17,057 FTE) 
proposed by the Administration is far too low to adequately address the 
need.
    FSA programs have tremendous quantifiable impacts on natural 
resources, and yield substantial public as well as private benefits. 
Building on the provisions of the 1985 FSA, the 1990 FACT Act, and the 
1996 FAIR Act, the Association wants to ensure that each program 
accomplishes the broadest possible range of natural resource 
objectives, and encourages close cooperation between FSA, NRCS and the 
State Technical Committees in implementing the 2002 Farm Bill.
    Conservation Reserve Program (CRP)--The continued administration of 
CRP under the guidelines of the 1996 FAIR Act is a very significant and 
valuable commitment of USDA and the FSA. The Association applauds FSA 
efforts to fund and extend CRP contracts for the multiple benefits that 
accrue to the public as well as the landowner. The Association provides 
special thanks to FSA for the continuous CRP sign-up of high value 
environmental practices and applauds the addition of new incentives to 
increase landowner participation, as well as ensure that practices 
incorporate fish and wildlife needs, along with soil and water 
considerations.
    The commitment of FSA to provide high wildlife benefits in CRP 
contracts has been obvious since the advent of the Environmental 
Benefits Index (EBI) in the 15th sign-up. The Association applauds FSA 
in those efforts with their special emphasis on native grasses, 
endangered species and enlightened pine planting and management and 
urge that strong emphasis on the establishment and management of 
wildlife friendly cover be continued and where possible strengthened. 
Management/maintenance strategies are essential to ensure continuation 
of soil, water and wildlife benefits throughout the life of the CRP 
contract. The up-to-$5/acre' maintenance payment presently included in 
CRP contracts tends to be viewed by many landowners as additional 
rental payment, whether maintenance practices are performed or not. It 
makes sense to ensure and pay for maintenance when maintenance is 
needed and prudent to save public funds when maintenance is not needed. 
The Association encourages FSA to convert the annual maintenance fee in 
future contracts to cost-share on an as-needed basis to ensure soil, 
water and wildlife objectives reflected in the EBI are realized as well 
as to ensure wise use of public funding for CRP.
             natural resources conservation service (nrcs)
    The Natural Resources Conservation Service has immense 
responsibilities for implementing the conservation provisions of the 
1985 Food Security Act (FSA), the 1990 Food, Agriculture, Conservation 
and Trade (FACT) Act, the Federal Agricultural Improvement and Reform 
(FAIR) Act of 1996 and are expected to be carried through in the 2002 
Farm Bill. In addition, the 2002 Farm Bill presently in Congress 
contains a promising new Grassland Reserve Program (GRP) as well as a 
much-needed revised Forestry Title to address conservation on non-
industrial private forestland.
    WRP, WHIP, FPP, EQIP, proposed GRP and Forestry Title programs--The 
Wetlands Reserve Program (WRP), Wildlife Habitat Incentives Program 
(WHIP) and Farmland Protection Program (FPP) have reached their 
authorized acreage or appropriation caps and, in the absence of 
legislation that continues these programs, NRCS does not include 
funding in the fiscal year 2003 budget proposal. Neither does the NRCS 
budget propose funding for the proposed GRP or Forestry Title programs. 
Since passage of the 2002 Farm Bill is imminent, and inclusion of the 
existing and proposed conservation programs are expected to be part of 
the new Farm Bill, NRCS is encouraged to provide the appropriate cost 
projections for these programs.
    With approximately 50 percent of the land in the United States in 
agricultural production, conservation is inextricably linked with 
agriculture and, therefore, the importance of USDA conservation 
programs cannot be overemphasized.
    Wetland conversions continue and wetland resources cannot be 
sustained without a proactive program like WRP that compensates 
landowners for voluntary restoration of wetlands. WRP is currently 
over-subscribed by a factor of 5, with many eligible landowners already 
qualified but unable to enter the program due to lack of funding.
    Similarly, many wildlife species reside on agricultural landscapes 
with nowhere else to go--they must survive on those landscapes if they 
are to survive at all. WHIP has helped many landowners make significant 
contributions to conservation of imperiled species on lands where 
wildlife is a primary purpose. In complementary fashion, EQIP has 
tremendous potential to help interested agricultural producers 
incorporate fish and wildlife considerations, along with soil/water/
other resource considerations, on lands that are managed with 
agricultural production as the primary purpose. This approach 
simplifies paperwork and conservation for landowners in that EQIP can 
be used as a self-contained program to address all resource needs 
(including fish and wildlife) on production lands and WHIP can be the 
vehicle on lands where wildlife is a primary purpose.
    New programs, such as the GRP, present great opportunity to provide 
agricultural producers with an economic alternative to conversion of 
dwindling native prairie to other uses. GRP would enable producers to 
keep irreplaceable prairie in forage production, a use to which these 
lands have historically been so well suited. Programs proposed in the 
Forestry Title could provide a much needed boost to conservation of 
forest resources on agricultural ownerships across the Nation. This is 
important because these lands contribute to on-farm agricultural income 
just as do grasslands and cropland. And, forest lands are just as key 
to conservation of soil, water and wildlife resources as are grasslands 
and cropland.
    In a like manner, the FPP has been important in places where urban 
encroachment diminishes the long-term viability of the local farming 
economy and interest in the program far exceeds budget allocations.
    All of the existing conservation programs have been tremendously 
successful and significant interest has been expressed in the proposed 
GRP and additional Forestry Title conservation programs. Due to the 
overwhelming success, customer interest and public benefits of these 
programs, the Association strongly encourages Congress to provide 
annual funding for these programs in the amount of $286 million per 
year for WRP (reflecting an enrollment cap of 250,000 acres per year), 
$100 million for WHIP, funding for a 400,000 acre enrollment in GRP, 
$300 million for EQIP, $100 million for Forestry Title programs and $65 
million per year for FPP.
    Technical Assistance.--The NRCS Strategic Plan for 2000-2005 
establishes natural resource priorities in support of agriculture and 
identifies staffing levels needed to achieve success. The Strategic 
Plan projects a steadily increasing need for technical assistance 
through 2005. Adequate technical assistance will be essential to ensure 
private landowners can deliver the conservation of natural resources 
while also providing affordable food for our citizens. However, despite 
increased workloads and increased societal demands on land and natural 
resources, NRCS staffing levels have been on steady decline since the 
1980's, even in the face of increased landowner interest and Farm Bill 
emphasis on conservation. While the fiscal year 2003 budget proposal 
reflects a carryover of the NRCS staffing level of fiscal year 2002, it 
is far short of the 24,000 staff years identified in the NRCS Strategic 
Plan for fiscal year 2000-2005.
    Since NRCS provides essential and complementary (to FSA) support to 
agricultural producers, it is prudent for both agencies to be 
adequately staffed to adequately deliver services. In addition, the 
Conservation Reserve Program (CRP), WRP, WHIP and EQIP all reflect 
long-term contracts that necessitate continuous technical support to 
participants, whether or not there is new sign-up. NRCS can draw some 
program funding for technical assistance but only in the year in which 
sign-up occurs and, consequently, program funding does not fully 
address the long-term technical assistance support these programs 
demand. It is essential for NRCS to maintain adequate staffing to 
address all on-going needs for which landowners need technical 
assistance. The Association strongly encourages Congress to provide 
NRCS with funding to better address the need for the nearly 24,000 
staff years identified in the NRCS Strategic Plan for 2000-2005.
    In these times of compelling conservation need, many State fish and 
wildlife agencies are contributing staff time to help NRCS field 
offices service fish and wildlife aspects of USDA assistance to 
landowners. Such partnerships help NRCS deliver specialized technical 
expertise to private landowners at less cost than adding NRCS staff 
with such expertise. The 2002 Farm Bill, presently in Congress, 
contains third party vendor aspects that could allow USDA to contract 
with State fish and wildlife agencies to provide fish and wildlife 
expertise more inexpensively and effectively than could be provided by 
adding NRCS staff to fill the discipline need. And, importantly, State 
fish and wildlife agencies have State-level constitutional authority 
for fish and wildlife resources of the State and are, therefore, in an 
excellent position to help service related aspects of Farm Bill 
programs. The Association strongly encourages the Administration and 
Congress to emphasize partnering arrangements, between NRCS and State 
fish and wildlife agencies and others that result in cost-efficiencies. 
The Association also encourages the Administration to develop a third 
party vendor certification system that fully recognizes the technical 
expertise and constitutional authority of State fish and wildlife 
agencies.
    Wetland Determination.--We believe the need for wetland 
determination, certification, and mapping is significant and urge NRCS 
to proceed as soon as possible, under the guidance of the FAIR Act of 
1996. The Association urges expeditious completion of the wetland 
determinations required to implement the Swampbuster provisions of the 
1985 FSA, 1990 FACT Act, and the 1996 FAIR Act. The FAIR Act directed 
interagency cooperation, whereby NRCS assumed responsibility for 
wetland designation for Section 404 (Clean Water Act) purposes on 
farmland, including tree farms, rangelands, native pasture, and other 
private lands used to produce or support the production of livestock. 
The Association and individual State fish and wildlife agencies will 
continue to work with NRCS to help achieve these goals.
    Emergency Watershed Program (EWP).--This program provides an 
important alternative to agricultural producers faced with localized 
and/or national natural disaster. Of particular importance is the 
aspect of EWP that provides compensation to landowners for removing at-
risk land from production (via easement) and, therefore, a continual 
and expensive cycle of repair and income uncertainty. Utilization of 
the floodplain protection element of EWP saves the government money in 
the long-run, provides needed assistance to producers and benefits 
natural resources including water quality and fish and wildlife. The 
Association supports the level of funding for EWP as reflected in the 
fiscal year 2003 budget proposal.
    National Buffer Initiative.--NRCS has implemented this initiative 
in cooperation with industry and other partners. The National Academy 
of Sciences has found that buffer strips can reduce off-field pollution 
by 70 percent, thus also contributing to meeting non-point source 
remediation goals under the Clean Water Act. Unfortunately, the level 
of sign-up by producers remains relatively low in many places with 
conservation need. The reason for this needs to be identified and 
addressed based on actual field experience. In previous years, NRCS 
committed special emphasis and a major effort to use buffer practices 
in the continuous CRP and other programs like EQIP. However, there is 
no mention of the National Buffer Initiative in the fiscal year 2003 
budget narrative. The Association encourages Congress to mandate that 
NRCS continue the National Buffer Initiative as a high priority effort 
and provide the necessary funding.
    Forestry Incentives Program (FIP).--The Forestry Incentives 
Programs (FIP) has multiple resource values for fish, forests, 
wildlife, clean water and erosion control. Many farms contain forest 
resources that are as much in need of conservation treatment as are 
cropland and grassland. The Association opposes the NRCS proposed 
intention to zero out FIP funding and strongly recommends that the 
fiscal year 1999 level of $16.325 million be restored in the fiscal 
year 2003 budget.
                                 ______
                                 

            Prepared Statement of the Joslin Diabetes Center

                              introduction
    Mr. Chairman, thank you for this opportunity to submit a statement 
for the public witness hearing record. The subject of this short 
statement is the continued funding in fiscal year 2003 for the Diabetes 
Project in the Extension Service of CREES. We have developed a plan for 
fiscal year 2003 that will require continued funding at the current 
year's level of $906,000. This includes costs of Federal 
Administration, participation expenses of the states of Washington, New 
Mexico and Hawaii, and the personnel, equipment and associated costs of 
Joslin Diabetes Center within the total cost of the program.
                    fiscal year 2001-2002 background
    I would like to express Joslin Diabetes Center's sincere 
appreciation to Senator Domenici and the Subcommittee for actions in 
the fiscal year 2002 process in providing $906,000 for the third year 
of the Diabetes Project. We know you faced difficult decisions 
concerning funding priorities. We feel that the allocation of these 
funds indicates support for the growing community role and 
organizational flexibility of the Extension Service.
    In May, Joslin, Washington State, Hawaii, New Mexico and Federal 
Extension personnel will meet with representatives of more than 20 
sites within 12 different states to develop strategies for widespread 
use of the ``On the Road'' programs and materials.
    The Diabetes Project in Washington State is working in partnership 
with clinics in 6 counties, collaborating with 47 community health 
centers using ``On the Road'' programs and materials, and actively 
involving Native Americans from the Colville tribe.
    In New Mexico the Diabetes Project is working directly with Sangre 
de Cristo Community Health Partnership in Sante Fe, Las Clinicas Del 
Norte in El Rito, and the San Juan San Juan Pueblo; developing 
educational programs and materials with 12 clinics of the statewide 
Diabetes Collaborative; and implementing a partnership with the New 
Mexico Department of Health in District 3, the northwest part of the 
state.
    Working in partnership with the Hawaii State Diabetes Prevention 
and Control Program, the Diabetes Project is expanding outreach within 
the Big Island to rural neighborhoods and biweekly ``On the Road'' 
educational programs and on Oahu with the Hispanic population through 
the Hispanic Education Center. Through fiscal year 2002 funding retinal 
imaging equipment will be installed in all three states, with image 
acquisition and training, and image reading procedure in place. At a 
rate of 30 patients per day per site, the three units will have the 
capacity to screen 18000 patients annually. This actually involves the 
examination of 36,000 eyes, because a patient can develop diabetes 
retinopathy in only one eye.
    All participants remain committed to goals and objectives of the 
original project and are planning cooperatively for this and the coming 
fiscal year.
                         fiscal year 2003 plan
    For fiscal year 2003, the mission and objectives for the three 
state pilot programs will be implemented on two levels:
  --Continuation of distribution of educational materials for diabetes 
        awareness and dieting/health guidelines;
  --Retinal screening for diabetes mellitus in all three states.
  --Assessment of progress and revision of materials and internal 
        processes within each state will be conducted for refinement 
        for each state's target population.
    Joslin Diabetes Center will continue to welcome additional 
participation within the three states of the pilot project to better 
educate consumers about diabetes and the most effective methods to 
address diabetes and its complications.
    While continuing current programs and activities fiscal year 2003 
plans call for:
  --Washington state expansion to provide educational programs to 2 
        additional counties, to provide JVN retinal screening for 
        interested community clinics, and further outreach to Native 
        American and Hispanic minorities;
  --New Mexico expansion to reach out to the Navajo Nation and Zuni 
        tribes, to include outreach in the southwest part of the state, 
        and to enhance activity with the rural clinics of the New 
        Mexico Diabetes Collaborative;
  --Hawaii State expansion to extend diabetes education in Native 
        Hawaiian clinics through partnership with Native Hawaiian 
        Health, and to introduce diabetes education into school systems 
        starting with Kumaya Maya schools.
    Mr. Chairman, this concludes my brief statement. We are submitting 
a detailed budget for the fiscal year 2003 funds of $906,000 to the 
Committee for continuation of this project with the Extension Service. 
If you or the Committee staff have any questions we may answer 
concerning this project, we would be pleased to meet and discuss the 
details in more detail.
    The Extension Service and Joslin Diabetes Center appreciate your 
confidence in our capabilities and your focus on the improvement of 
quality of life in rural America. We respectfully request continued 
funding of $906,000 in fiscal year 2003 to fully demonstrate the 
benefits and potential national returns that can be derived from this 
pilot effort.
                                 ______
                                 

           Prepared Statement of the Kent SeaTech Corporation

    Mr. Chairman and Members of the Subcommittee: My name is James M. 
Carlberg. I am President of Kent SeaTech Corporation, the largest 
aquaculture company in California. I have been involved in aquaculture 
research and production for more than 32 years. I have served on the 
Board of Directors of the National Aquaculture Association, was a 
Founder and President of the U.S. Striped Bass Growers Association, and 
serve as a member of the Industry Advisory Council for the Western 
Regional Aquaculture Center.
    I am writing to inform you of the need for continued funding for 
high quality research in the growing field of aquaculture. Kent SeaTech 
Corporation is a perfect example of the value of nationally funded 
research in aquaculture. During 1970-79, we conducted aquaculture 
research funded by the Sea Grant Program at UCSD Scripps Institution of 
Oceanography. In 1980, based on the successful results of extensive 
laboratory research, we obtained private funding and developed the 
first and largest striped bass culture operation in the world. The 
facility has grown to be the largest aquaculture operation in 
California and produces nearly four million pounds of high quality 
seafood each year, valued at nearly $10 million. More importantly, the 
research has resulted in the development of an entirely new form of 
aquaculture for the U.S., the culture of striped bass and striped bass 
hybrids. This new industry, based entirely on preliminary research 
funded by the federal government, has quickly expanded to become the 
fifth largest form of fish culture in the U.S., trailing only catfish, 
trout, salmon and tilapia farming. Often, the annual production of 
striped bass from U.S. aquaculture facilities exceeds the entire wild 
fishery harvest. This important new source of supply relieves the 
fishing pressure on fragile ocean stocks and provides new employment at 
all levels of the seafood industry. This is truly a success story in 
which research supported by the federal government has grown into a 
multi-million dollar new industry that has provided significant 
benefits to the nation.
    On behalf of Kent SeaTech Corporation, I would like to express our 
strong support for the Regional Aquaculture Centers and urge you to 
provide full funding for the next fiscal year. The valuable research 
supported by the Centers has been very supportive of our industry and 
is addressing the most important problems encountered in aquaculture 
facilities throughout the nation.
    Aquaculture is an extremely large industry worldwide, where more 
than 20 million metric tons of fish and shellfish are produced each 
year. The U.S. lags far behind many other countries such as China, 
India, and Russia in aquaculture, producing only a small fraction 
(about 2 percent) of the world's total supplies. The majority of U.S. 
production involves freshwater fish, primarily catfish, trout, tilapia, 
and striped bass. Aquaculture has become a one billion dollar industry 
in the U.S., providing nearly 15 percent of our seafood supplies. 
Aquaculture production in the U.S. is rapidly approaching 450 million 
kg annually. Annual production of catfish in the U.S. is estimated to 
be about 200 million kg, with trout between 22 and 27 million kg, 
salmon over 9.0 million kg, domestic tilapia production at 70 million 
kg, and hybrid striped bass at nearly 4.5 million kg.
    Aquaculture is expanding at an annual rate of 20 percent and is the 
fastest growing sector of the agriculture industry. Predictions from 
independent surveys of the food industry indicate that aquaculture 
could become the most productive sector of food production in the U.S. 
within the next two decades. Furthermore, these studies suggest that 
most of the additional production will come from intensive culture, and 
that the culture will focus on the luxury species using innovative 
technologies. However, these advances can only occur if a coordinated 
effort is made to provide the technical and engineering breakthroughs 
needed to allow this new industry to develop.
    Unfortunately, foreign competition is having a major impact on some 
U.S. aquaculture operations. More than 60 percent of our seafood 
supplies are now imported, resulting in a large annual trade deficit of 
$7 billion. Many of the competing countries are located in tropical and 
sub-tropical climates, where large quantities of warm water are 
available for aquaculture. Also, land costs are low, there are few 
competing uses of water resources, semi-skilled labor is widely 
available for a fraction of U.S. costs, and often there are few 
controls on the quality of water discharges to the environment or the 
use of antibiotics and other disease treatments illegal in the U.S.
    Foreign competition also is beginning to have an impact on our 
segment of the industry, the culture of striped bass. In the last 3 
years, competition from Taiwan has increased significantly. Foreign 
farmers are now purchasing more than 200 million striped bass juveniles 
each year, which is about 20 percent of all of the fingerlings 
available from the U.S. hatcheries. The only means of protecting and 
fomenting the U.S. industry is to develop significant technological 
improvements in the culture process, so that U.S. producers will not be 
at a disadvantage.
    Although aquaculture offers extremely high potential, some 
observers liken the status of our technology to the status of land-
based agriculture in the 1950's. There is a real need for the 
development of high-tech solutions for many problems we face, such as 
the development of methods to treat and reuse wastewater, improved feed 
formulations, controlled reproduction and genetic improvements, and the 
testing of new medications to maintain healthy fish populations in 
culture systems. Well-planned aquaculture research programs could have 
extremely important commercial applications in the U.S. Almost every 
major review of aquaculture as described the critical need for improved 
culture technologies if this new industry is to continue to expand in 
the U.S. The National Aquaculture Act and the revised National 
Aquaculture Plan highlight the importance of aquaculture research and 
development. The Congressional Joint Subcommittee on Aquaculture and 
the National Research Council promote a ``national agenda to encourage 
the development of advanced aquaculture technologies and 
environmentally sound, renewable resources'', as part of the 
Presidential Initiative on Sustainable Development. Similar emphasis is 
placed on the topic by the Cooperative States Research, Education, and 
Extension Service (CSREES) Program, and the Sustainable Agriculture 
Research and Education Program (SARE). Aquaculture has been declared a 
National Need having top priority by the Agriculture in Concert with 
the Environment (ACE) program, a joint effort of the USDA and the EPA.
    As former recipients of Sea Grant funding from the U.S. Department 
of Commerce (1970-80), and Small Business Innovation Research funds 
from several agencies (1982-present), we are fully aware of the 
difficulty that Congress faces each year in deciding which national 
research programs are of real merit to the country and should be 
funded. Now, as scientists who have become successful members of the 
seafood industry in California, please accept our sincere 
recommendation that this proposal would be of significant benefit to 
the growing aquaculture industry in the nation. In our view the 
importance of continued funding for aquaculture research programs 
cannot be overstated. It is the only means of studying the complex life 
cycles of aquatic species and developing the basic scientific concepts 
that future industry start-ups will need if they are to successfully 
develop new seafood farming ventures. We hope that the committee will 
agree with us regarding the importance of the Regional Aquaculture 
Centers and continue to provide funding at the highest possible level.
    We would be glad to provide more information if required.
                                 ______
                                 

 Prepared Statement of the Leopold Center for Substainable Agriculture

    The Leopold Center for Sustainable Agriculture thanks you for your 
leadership and support last year in providing $187,072 of our $325,000 
request to expand understanding and adoption of hooped structures as 
low-cost, humane, environmentally friendly production housing systems 
for swine and other agricultural animals. The hoop research is 
promoting viable and timely production options for struggling small and 
medium sized farmers as well as helping to open new markets. 
Specifically, first year funds will allow:
  --Completion of a comprehensive manual of hoop barn use for swine 
        production.
  --Collection and distribution of information on uses of hoop 
        structures for other livestock species.
  --Establishment of a hoop house network of producers and 
        demonstration sites.
  --A national workshop on Hoop Barn Swine Production.
    The first year funds will also allow us to begin work on the 
remaining objectives set out in the original proposal:
  --Evaluation of hoop barns as a total production system, including 
        labor and resource economics;
  --Development of protocols for using hoop barns to raise 
        disadvantaged and light weight pigs for welfare, medical and 
        production reasons;
  --Systematic investigation of farmers' perceptions of benefits and 
        limitations of hoop structures;
  --Evaluation of meat quality characteristics of hoop pork; and
  --Determination of genetic and production interactions on pork 
        quality traits.
    We are again requesting your support of an appropriation of 
$325,000 in fiscal year 2003. Part of this request is to further the 
remaining objectives set out in the original proposal. The additional 
part of this request would allow expansion of our original objectives 
to broaden the farmer network of hoop users, to support on-going 
efforts to create a marketing infrastructure that facilitates consumer 
access to hoop products, and to tighten nutrient cycles on individual 
farms.
    We expect that the two year total request of $512,072 will allow us 
to make significant progress toward the goals of the project.
    It is critical to have unbiased research about the costs and 
benefits of production alternatives. Farmers need some less expensive, 
more ecologically-friendly production methods--as well as some 
encouragement and assistance before reentering or remaining in pork 
production. We will very much appreciate your leadership in obtaining 
continued funding for this important project. If you have any 
questions, please feel free to contact me. Thank you for your 
consideration.
                                 ______
                                 

    Prepared Statement of the Massachusetts Department of Food and 
                              Agriculture

    Mr. Chairman and Members of the Subcommittee: The Massachusetts 
Department of Food and Agriculture within the Executive Office Of 
Environmental Affairs is a State agency whose mission is to help insure 
a safe secure supply of locally grown food, and to support, promote and 
enhance the long-term viability of Massachusetts agriculture with the 
aim of helping the State's agricultural businesses become as 
economically and environmentally sound as possible. To that end we have 
recognized the importance of aquaculture and the opportunities that 
aquatic farming presents to our Commonwealth and have undertaken 
numerous efforts to promote aquaculture development in Massachusetts.
    Our efforts to promote aquaculture development in Massachusetts 
primarily came about as a result of a fisheries crisis that commenced 
in 1994 and has lingered to the present. Through the development of the 
Gubernatorial directed Massachusetts Aquaculture White Paper and 
Strategic Plan, it became clear that aquaculture; presented employment 
opportunities for individuals displaced from their traditional 
commercial fishing activities, provided a source of high quality, 
wholesome fisheries products and offered economic development 
opportunities that are a ``good fit'' for our coastal communities. 
However, as a new initiative the Aquaculture Development Program at the 
Massachusetts Department of Food and Agriculture it was imperative to 
network and develop organizational relationships that were capable of 
fostering program development without competing or dampening existing 
efforts that had similar goals. To our great fortune one the United 
States Department of Agriculture's (USDA) five (5) Regional Aquaculture 
Centers is located in Massachusetts (i.e. Northeastern Regional 
Aquaculture Center, NRAC) and it was without hesitation that the NRAC 
provided access to informational resources and opportunities for 
programmatic development benefiting from industry insight.
    True to its mission statement, NRAC has served as a principal 
public forum for the advancement and dissemination of science and 
technology needed by Northeastern, aquacultural producers and support 
industries. Further, we have had the pleasure of working with NRAC 
through a variety of projects and fora that have facilitated regional 
stakeholder communications-linking industry and government 
representatives to university scientists and educators. These events 
have lead to efforts that are appropriately targeted and responsive to 
the often-diverse needs of the northeastern aquaculture industry.
    Considering the farm gate value of the United State's aquaculture 
industry that represents less than 2.5 percent of the global $40 
billion industry, as a nation we currently lag many other countries 
that view aquaculture as a significant if not primary contributor to 
their nation's economy and food supply. As the health benefits of 
seafood consumption are realized surely U.S. per capita consumption 
will increase. With this in mind and in regard to the availability of 
fish and seafood, the United States has what can be boiled down to two 
options; 1. Increase fish and seafood imports or 2. Undertake and 
promote activities that increase availability of domestic fish and 
seafood products. Already fish and seafood imports represent the second 
largest contributor, behind petroleum products, to the U.S. natural 
resources trade deficit. And considering the status of global fisheries 
resources, it is not unlikely that the availability of foreign wild 
harvest fisheries products will also be reduced as populations grow and 
global demand for fish and seafood increases. Further, considering the 
increased importance and emphasis on food security and the safety of 
our food supplies, it is now, perhaps more than ever before, important 
to shift our current reliance on foreign food sources toward that 
produced domestically. We have already seen the impact of increasing 
domestic fish and seafood production when approached with sole reliance 
on the natural productivity of our aquatic environments. It resulted in 
an over capitalized industry and resources that may have been impacted 
beyond the point of recovery. Fortunately, aquaculture presents 
opportunities to enhance resources while at the same time providing 
employment and economic development opportunities that rely on 
sustainable practices.
    If we are to realize the fill benefit and potential of aquaculture 
in the United State's there are a number of activities and services 
that must be available including research, development and the transfer 
of appropriate information and technology. Not coincidentally, the USDA 
Regional Aquaculture Centers provide these services and have done so on 
limited budgets in a way that is guided by the public, industry, 
researchers and government agencies. The role of the Regional 
Aquaculture Centers as an intersection for the myriad of interests 
associated with aquaculture is essential for continued industry 
development. Further, the support that the Regional Aquaculture Centers 
provide promotes efforts and publications that are likewise critical 
for industry progress and product development. With this in mind we 
strongly support the work of the Regional Aquaculture Centers and 
encourage continued support and increased program funding to the 
authorized level of $7.5 million.
    With the above in mind and the promise that aquatic production 
holds for our country, we respectfully request that Congress consider 
the opportunity at hand and support funding of the Regional Aquaculture 
Centers at the full authorized level. We would also like to offer our 
deepest gratitude for this opportunity to express our concern and 
support for this important innitiative and look forward to your 
continued interest, encouragement and support.
                                 ______
                                 

   Prepared Statement of the Metropolitan Water District of Southern 
                               California

    The Metropolitan Water District of Southern California (MWD) 
appreciates the opportunity to submit testimony regarding the U.S. 
Department of Agriculture's (USDA) fiscal year 2003 budget, for the 
Hearing on Agriculture, Rural Development and Related Agencies 
Appropriations. MWD is a public agency that was created in 1928 to meet 
the supplemental water demands of people living in what is now portions 
of a six-county region of southern California. Today, the region served 
by MWD includes 17 million people living on the coastal plain between 
Ventura and the international boundary with Mexico. It is an area 
larger than the State of Connecticut and, if it were a separate nation, 
would rank in the top ten economies of the world.
    Included in our region are more than 225 cities and unincorporated 
areas in the counties of Los Angeles, Orange, San Diego, Riverside, San 
Bernardino, and Ventura. We provide nearly 60 percent of the water used 
in our 5,200-square-mile service area. MWD's water supplies come from 
the Colorado River via the district's Colorado River Aqueduct and from 
northern California via the State Water Project's California Aqueduct.
                              introduction
    MWD continues to favor USDA implementation of conservation 
programs. MWD firmly believes that interagency coordination along with 
cooperative conservation programs, that are incentive-based and 
facilitate the development of partnerships are critical to addressing 
natural resources concerns, such as water quality degradation, wetlands 
loss and wildlife habitat destruction. It is vital that Congress 
provides USDA with the funding necessary to successfully carry out its 
commitment to natural resources conservation.
    Our testimony focuses on USDA's conservation programs that are of 
major importance to MWD. In particular, MWD urges your full support for 
funding for USDA's Environmental Quality Incentives Program (EQIP). 
Funding for this program is essential for achieving Colorado River 
Basin salinity control objectives through the implementation of 
salinity control measures as part of EQIP. Sufficient Federal funding 
for USDA programs is necessary to achieve source water quality 
protection objectives in the Colorado River Basin.
                environmental quality incentives program
    EQIP provides cost-sharing and incentive payments, technical 
assistance and educational assistance to farmers and ranchers for the 
implementation of structural practices (e.g., animal waste management 
facilities, filterstrips) and land management practices (e.g., nutrient 
management, grazing management) that address the most serious threats 
to soil, water and related natural resources. EQIP is to be carried out 
in a manner that maximizes environmental benefits per dollar expended. 
This assistance has been focused in conservation priority areas 
identified by the Natural Resources Conservation Service's (NRCS) State 
Conservationists, in conjunction with state technical committees and 
Farm Service Agency personnel.
    In Public Law 104-127, Congress amended the Colorado River Basin 
Salinity Control Act to direct the Secretary of Agriculture to carry 
out salinity control measures in the Colorado River Basin as part of 
EQIP. Beginning with the first full year of EQIP funding in 1997, 
USDA's participation in the Colorado River Salinity Control Program 
(Salinity Control Program) has significantly diminished. The mechanism 
by which funding had been allocated by USDA inherently masked projects 
for which benefits are interstate and international in nature. After 
requests had been made by the Colorado River Basin Salinity Control 
Forum (Forum), the interstate organization responsible for coordinating 
the Basin states' salinity control efforts, and others, and directives 
from the Congress, USDA has concluded that the Salinity Control Program 
warranted a multi-state river basin approach. The Forum is composed of 
Gubernatorial appointees from Arizona, California, Colorado, Nevada, 
New Mexico, Utah, and Wyoming. Clearly, Colorado River salinity control 
has benefits that are not merely local or intrastate in nature, but 
continue downstream. The President's Budget includes an additional 
$73.5 billion in funding over a 10-year period for Farm Bill programs. 
The budget assumes that a portion of this will be allocated to 
conservation programs, including funds to support a $1 billion level 
for EQIP in 2003. This level of Federal funding through financing 
provided the Commodity Credit Corporation is critical for 
implementation of EQIP in order to achieve nationwide EQIP objectives. 
This level of funding would allow acceptance and funding of additional 
EQIP proposals nationwide compared to previous years. USDA staff have 
indicated that a more-adequately funded EQIP would result in the 
availability of more funding for the Salinity Control Program.
    The Colorado River is a large component of Southern California's 
regional water supply and its relatively high salinity causes 
significant economic impacts on water customers in MWD's service area, 
as well as throughout the Lower Colorado River Basin (Lower Basin). MWD 
and the Bureau of Reclamation (Reclamation) completed a Salinity 
Management Study for Southern California in June 1999. The first phase 
of the study (completed in February 1997) updated the findings of 
previous studies and concluded that the high salinity from the Colorado 
River continues to cause significant impacts to residential, industrial 
and agricultural water users. Furthermore, high salinity adversely 
affects the region's progressive water recycling programs, and is 
contributing to an adverse salt buildup through infiltration into 
Southern California's irreplaceable groundwater basins. In April 1999, 
MWD's Board of Directors authorized implementation of a comprehensive 
Action Plan to carry out MWD's policy for management of salinity. The 
Action Plan focuses on reducing salinity concentrations in Southern 
California's water supplies through collaborative actions with 
pertinent agencies, recognizing that an effective solution requires a 
regional commitment. MWD, the Association of Groundwater Agencies, the 
Southern California Association of Publicly Owned Treatment Works, and 
the WateReuse Association of California have formed a Salinity 
Management Coalition. During 2002, the Coalition is being expanded to 
include major water and wastewater agencies throughout Southern 
California. Initial activities of the group are focusing on education, 
coordination, and development of local and regional solutions to 
problems associated with high salinity. In addition, Metropolitan and 
representatives from Arizona and Nevada have been collaborating to 
explore opportunities to develop a program that would address salinity 
issues associated with brine disposal in the region.
    Reclamation estimates that water users in the Lower Basin are 
experiencing hundreds of millions of dollars in annual impacts from 
salinity levels in the river, and that impacts would progressively 
increase with continued agricultural and urban development upstream of 
California's points of diversion. Droughts will cause spikes in 
salinity levels that will be highly disruptive to Southern California 
water management and commerce. The Salinity Control Program has proven 
to be a very cost-effective approach to help mitigate the impacts of 
higher salinity. Adequate Federal funding of the Salinity Control 
Program is essential.
    The Forum issued its 1999 Review, Water Quality Standards for 
Salinity, Colorado River System (1999 Review) in June 1999. The 1999 
Review found that additional salinity control was necessary with normal 
water supply conditions beginning in 1994 to meet the numeric criteria 
in the water quality standards adopted by the seven Colorado River 
Basin states and approved by the U.S. Environmental Protection Agency 
(USEPA). For the last nine fiscal years (1994-2002), funding for USDA's 
salinity control program has not equaled the Forum-identified funding 
need for the portion of the program the Federal Government is 
responsible to implement. While NRCS has designated Colorado River 
Basin salinity control as an area of special interest, appointed a 
multi-state coordinator, and allocated about $5.5 million in fiscal 
year 2002, with states and local cost-sharing adding about $4.3 
million, it is essential that implementation of salinity control 
efforts through EQIP be accelerated to reduce economic impacts. The 
Basin states and farmers continue to stand ready to pay their share of 
the implementation costs of EQIP.
    The Forum has determined that allocation of $12 million in EQIP 
funds in fiscal year 2003 is needed for on-farm measures to control 
Colorado River salinity. This level of funding is necessary to meet the 
salinity control activities' schedule to maintain the state adopted and 
USEPA approved water quality standards. With this level of Federal 
funding, an additional $9.3 million in states and local cost-sharing 
could be committed.
                   conservation technical assistance
    MWD also supports adequate funding for Conservation Technical 
Assistance (CTA) within the NRCS Conservation Operations Program. 
Conservation technical assistance provides the foundation for 
implementation of EQIP and other conservation programs. While USDA has 
determined that 19 percent of the EQIP funds will be available for 
technical assistance, adequate funding for technical assistance and 
educational activities should be provided through the Conservation 
Operations Program, permitting these EQIP funds to be utilized for 
contracts with agricultural producers. USDA staff has indicated that 
the percentage of EQIP funds available for technical assistance is 
inadequate. Consequently, the Basin states have agreed that 40 percent 
of the states' cost sharing funds be utilized for technical assistance 
and educational activities. However, only through adequate Federal 
funding for technical assistance and educational activities can advance 
planning, proposal preparation assistance, comprehensive proposal 
review, and periodic verification of contract implementation occur.
                               conclusion
    MWD urges you and your Subcommittee to support funding of $1 
billion for EQIP and adequate funding for NRCS CTA, and advise USDA 
that $12 million in EQIP funds be designated for the Salinity Control 
Program. Thank you for your consideration of our testimony. USDA's 
conservation programs are critical for achieving Colorado River Basin 
salinity control objectives, as well as broader source water quality 
protection objectives in the Colorado River Basin.
                                 ______
                                 

        Prepared Statement of the Mountain Watershed Association

    The Mountain Watershed Association, Inc. (MWA) is a grassroots, 
community-based group working to restore the Indian Creek Watershed in 
Fayette and Westmoreland Counties. Most of the damage to this watershed 
is caused by mine discharges from abandoned mines. The area, 
particularly the degraded section in Fayette County, is one of the 
poorest in Pennsylvania with the second highest illiteracy rate in the 
state second only to inner city Philadelphia.
    Over one hundred and 50 years of coal mining in this community have 
left us with mine discharges dumping 5,853.31 pounds per day of acid, 
1,120.55 pounds per day of iron, and 363.45 pounds per day of aluminum 
into the streams and backup public water supply. This adds up to: 
2,136,458.15 pounds of acid per year; 409,000.75 pounds of iron per 
year; and 132,659.25 pounds of aluminum per year. This has resulted in 
dead streams, mine drainage in homes, and yards and fields consumed and 
rendered useless.
    Two years ago, MWA went through a lengthy process to qualify for 
Federal assistance through the Public Law 566 program. This assessment 
showed that mine drainage remediation in this watershed would glean a 
net average annual benefit of $523,000 for this impoverished community. 
It has come to our attention that President Bush's proposed 2003 budget 
provides no funding for the Public Law 566 program or the Watershed 
Protection and Flood Prevention Act, (Public Law 83-566). The USDA 
Natural Resources Conservation Service administers the program.
    This program adapts to local needs, creates economic growth, 
attracts other Federal, State and local dollars to projects, and solves 
major environmental problems and protects natural resources. For every 
Public Law 566 dollar spent, 6.3 dollars has been leveraged from local, 
state, and other Federal sources. The program has been a tremendous 
impetus to treatment and cleanup of agricultural and mine drainage 
problems.
    With all of the economic and environmental problems in Pennsylvania 
we desperately need this program. It will help revitalize the economy 
in our area while remediating serious environmental problems caused 
from mine discharges.
    With the help of local sponsors, NRCS has developed 6 watershed 
plans for the treatment of abandoned mine drainage and one for 
agricultural land treatment. The total estimated cost of Page two, 
Subcommittee on Agriculture, Rural Development and Related Agencies the 
95 projects identified in these plans is $19,544,000.00. As of February 
of 2002, 33 of these projects have been completed, or are under 
construction, for a total cost of $9,084,030. The Public Law 566 
program provided $1,229,206 of this total; the remaining $7,854,824 
came from other Federal, State and local sources. Again, this means 
that every single Public Law 566 dollar leveraged 6.3 dollars of other 
money. All of these projects have a positive benefit to cost ratio. 
This means that every dollar spent will create a local benefit greater 
than the cost of the project. It also means that 122 miles of streams 
in western Pennsylvania will have water quality improvements allowing 
the return of economic sport fisheries.
    The agricultural land treatment watershed is Yellow Creek in 
Bedford County. This project has an estimated cost of $2,903,517. NRCS 
has entered into contracts with 42 landowners for a Public Law 566 cost 
of $1,292,517 that will treat 4,528 acres to reduce soil erosion and 
animal waste pollution in Yellow Creek. Other funds in the amount of 
$789,871 have been leveraged for this project. This project has an 
average annual benefit of $332,600.
    The Raystown reservoir benefits from this project because Yellow 
Creek flows into the reservoir. The reduction in chemical fertilizers, 
and animal waste nutrients reaching the reservoir will reduce or 
prevent detrimental algae blooms in the reservoir.
    This program will help us restore 95 percent of the Indian Creek 
Watershed, ostensibly total restoration, and could be instrumental in 
bringing over $523,000 each year into the Indian Creek Watershed toward 
economic revitalization. This restoration could take as little as 7 
years if we keep this funding source. Or, it could never happen without 
funding.
    Given the facts above, we hope you will agree that the Public Law 
566 program needs to be fully funded so that Pennsylvania can continue 
to receive the economic and environmental benefits of this excellent 
program administered by the USDA Natural Resources Conservation 
Service. Please support a fully funded Public Law 566. The people of 
the Indian Creek Watershed need this funding. Pennsylvania needs this 
funding. All coal-producing states need this funding.
                                 ______
                                 

    Prepared Statement of the National Association of Conservation 
                               Districts

    The National Association of Conservation Districts is the 
nonprofit, nongovernment organization that represents the nation's 
3,000 conservation districts and more than 16,000 men and women who 
serve on their governing boards. Established under state law, 
conservation districts are local units of state government charged with 
carrying out programs for the protection and management of natural 
resources at the local level. They work with nearly two-and-half 
million cooperating landowners and operators--many of them farmers and 
ranchers--to provide technical and other assistance to help them manage 
and protect private land in the United States. In carrying out their 
mission to coordinate and carry out all levels of conservation 
programs, districts work closely with USDA's Natural Resources 
Conservation Service (NRCS) through its Conservation Technical 
Assistance Program (CTAP) to provide the technical and other help 
farmers and ranchers need to plan and apply complex conservation 
practices, measures and systems.
    The partnership of conservation districts, state conservation 
agencies and the NRCS provides farmers and ranchers with critical help 
in protecting and improving the quantity and quality of our soil and 
water resources while meeting both domestic and international food and 
fiber needs. America's agricultural producers provide many benefits to 
our citizens including clean water and air, fish and wildlife habitat 
and open space. Many of the conservation practices producers apply on 
their land also take carbon out of the atmosphere and store it in the 
soil, providing a hedge against global climate change. As stewards of 
the nation's working lands, farmers and ranchers manage the vast 
majority of America's private lands and provide tremendous 
environmental benefits to the country.
    On behalf of America's conservation districts, I am pleased to 
provide our recommendations on selected conservation programs carried 
out through the U.S. Department of Agriculture, especially those of the 
Natural Resources Conservation Service.
    Conservation districts' top funding priority for USDA conservation 
programs for fiscal year 2003 is to strengthen the Natural Resources 
Conservation Service's Conservation Technical Assistance Program (CTAP) 
to ensure that the nation's Federal, State and local conservation 
technical assistance infrastructure is able to provide private 
landowners and operators the technical assistance needed to support the 
application of sound conservation practices and systems on the nation's 
private working lands.
               conservation technical assistance program
    Our request for the NRCS Conservation Technical Assistance Program 
(CTAP) is for a total of $856.736 million. This request includes, among 
other increases, a $48.7 million increase to be used for base technical 
assistance staff. This amount represents a 7.2 percent increase 
relative to total CTAP spending in fiscal year 2002. I note that the 
President's budget includes a requested increase for the same amount. 
We believe it is critical that this basic and essential program be 
strengthened to help landowners and operators address the nation's 
natural resource needs on private working lands. In order to cover 
inflation and increased pay costs our request also includes the same 
amount requested by the President for this purpose, $22.5 million. We 
estimate that these increases will be needed in order for NRCS field 
staff to be able to make some headway on growing concerns such as soil 
erosion, water quality, animal waste management, wetlands conservation 
and other natural resource issues.
    In addition to the base Conservation Technical Assistance Program, 
conservation districts support full funding for the Grazing Lands 
Conservation Initiative authorized to be carried out through NRCS by 
the Federal Agricultural Improvement and Reform Act of 1996. Resource 
problems such as brush, weeds and accelerated water or wind erosion 
threaten the capacity of nearly 300 million acres--more than 50 
percent--of these lands to satisfy production needs and meet natural 
resource values. Working with partners such as the National Grazing 
Lands Conservation Initiative, conservation districts and their 
partners have determined that at least $60 million is needed to fund 
the CPGL program. This amount represents a $38.5 million, or 5.7 
percent, increase relative to total fiscal year 2002 CTAP spending and 
will allow us to begin reversing the negative trends that affect both 
production and environmental concerns on these lands.
    The President's budget request includes a proposal to cut almost 
$31 million from CTAP relative to fiscal year 2002 levels to account 
for increases in ``administrative efficiencies.'' NACD's request does 
not include this cut. NACD is fully supportive of the Administration's 
objectives of streamlining administrative functions so that more 
resources can be used in the field to support landowners and managers. 
But our experience with the practical details of what has been 
developed by the Administration to this point has been that these 
changes will result in administrative cost increases, not decreases. We 
do not see how such proposals can really help deliver more conservation 
assistance to the field, and accordingly, we encourage you to reject 
the Administration's proposal and the cut in funding that goes along 
with it.
    When considering discretionary funding for NRCS relative to the 
mandatory spending that will likely be made possible by the new Farm 
Bill, it is important to keep in mind the real limitations of the Farm 
Bill programs and the fact that CTAP will be needed to fill the major 
gaps that remain. We have been strong and forceful advocates for 
increased conservation spending in the Farm Bill, and we welcome the 
major gains that Congress is proposing in this bill. But even under the 
best scenarios, the new Farm Bill's working agricultural lands 
conservation programs will reach less than 25 percent of the nation's 
agricultural lands, and an even smaller percentage of the nation's 
farms and ranches.
    There are approximately 2.1 million farms and ranches in the U.S. 
today that cover much of the 1.5 billion acres of the nation's private 
land. These private working lands-cropland, grazingland and private 
forestland-comprise nearly 70 percent of the country's land mass. Two 
of the programs in the farm bill now being debated, EQIP and the 
Conservation Security Program (CSP), are directed towards conservation 
being applied to such lands if they are still in agricultural 
production. EQIP today has approximately 97,000 active contracts 
involving some 43 million acres, 11 million of which are crop acres. 
Even if the new Farm Bill results in a 6-fold increase in funds for 
these two programs, to apply conservation on lands still in production, 
NACD estimates they would reach approximately only 33 percent of the 
farms, and 20 percent of all working lands and cropland acres.
    That means that CTAP, and the states' own conservation cost-share 
programs that CTAP helps support, will be needed to provide quality 
technical assistance to the other 1.4 million farms and ranches and the 
approximately 1.2 billion working acres that will not be reached by 
Farm Bill programs. CTAP was intended as a program itself with the 
purpose of helping the nation's farmers and ranchers and other 
landowners address their resource conservation needs by providing 
technical support at the local level. It also helps to support the many 
state and local conservation programs and initiatives that complement 
NRCS goals and objectives and address the nation's natural resource 
priorities. Many states also depend on NRCS technical guidance and 
standards to ensure that complex conservation treatments are installed 
properly.
    NACD is committed to securing enough technical assistance funds to 
work with the producers managing these private lands to help ensure 
that good conservation is practiced wherever possible. NACD's fiscal 
year 2003 CTAP request makes only a very small start on the total 
increase necessary to reach this objective.
    Lastly, with regard to CTAP, NACD's request also includes the 
$67,758,000 proposed in the President's budget for health care, 
pension, rental and other costs. These costs have historically been 
carried in one single USDA account, not in CTAP. NACD has no policy 
objection if Congress chooses to carry these costs in this account if 
they are added to the funding level as requested by NACD.
    The following table shows how our request is broken out.

                        [In millions of dollars]

Fiscal year 2002 CTAP Funding.................................   679.139
Increase in Base CTAP.........................................    48.689
Increase in Grazing Lands Conservation Initiative.............    38.500
Inflation and Pay Costs.......................................    22.650
Transfer for Rent/Pension Costs from USDA Account.............    67.758
                    --------------------------------------------------------------
                    ____________________________________________________

    Total CTAP................................................   856.736
             watershed protection and flood control program
    Through its Watershed Protection and Flood Control Program, NRCS 
and local sponsors address numerous water-related and other natural 
resource issues, conduct studies, develop watershed plans and implement 
resource management systems. Projects are carried out primarily under 
the authority of Public Law 83-566 and Public Law 78-534. More than 500 
active watershed projects primarily target land treatment measures for 
water quality and water supply management and flood prevention.
    Although the President requested no funding for the Watershed 
Protection and Flood Prevention Program or Watershed Surveys and 
Planning, NRCS documents an immediate need and ability to effectively 
utilize $170 million and $20 million, respectively, for these programs 
that address important watershed-based public health and safety issues 
across the nation and we urge you to make these funds available.
    A related priority facing private lands conservation is the 
rehabilitation needs of the nation's aging watershed infrastructure--
many of them built under the authority of the above programs. NRCS 
estimates that approximately 2,200 watershed structures, including 
dams, are in immediate need of rehabilitation and that more than 650 of 
these dams pose potential threats to public health and safety. Unless 
these issues are addressed, the magnitude of the problems will only 
increase as the infrastructure continues to age. We recommend funding 
Watershed Structure Rehabilitation efforts at $25 million in fiscal 
year 2003 to begin the work needed.
    Conservation districts fully support the President's request for 
$111 million for the NRCS Emergency Watershed Program as an important 
step toward creating a separate, stand-alone account for helping 
landowners and operators respond to flooding and other emergencies.
          resource conservation and development (rc&d) program
    RC&D Councils play an important role in rural development and 
natural resource conservation. USDA has indicated that it takes 
$161,000 to fully support an RC&D council. There are 368 existing 
councils and 20 pending applications. Conservation districts recommend 
that Congress appropriate $64 million to fully support the existing 
councils and additional applicant areas.
    Additional recommendations for USDA's discretionary-funded private 
lands conservation programs are contained in the attached chart.
                           mandatory programs
    In 1985, Congress recognized the important role that farmers and 
ranchers play in environmental protection when it enacted the first 
Farm Bill conservation title that required producers to incorporate 
conservation into their operations if they wanted to continue receiving 
USDA farm program benefits. The title also included a land retirement 
program--the Conservation Reserve Program (CRP)--to give farmers 
financial incentives to take sensitive lands out of production. In 
subsequent Farm Bills and other statutes, lawmakers added more 
incentives programs--the Wetlands Reserve Program (WRP), Environmental 
Quality Incentives Program (EQIP), Farmland Protection Program (FPP), 
Wildlife Habitat Incentives Program (WHIP) and Agricultural Management 
Assistance (AMA) Program--to provide additional incentives to increase 
conservation.
    The authorizations for all of these programs expire at the end of 
fiscal year 2002. Conservation districts support extending these 
programs and, since all have tremendous backlogs of unfunded requests, 
expanding their funding levels to meet producer and environmental 
demands.
    Conservation districts also support fully funding the new 
initiatives proposed in both the House and Senate Farm Bills, including 
a stand-alone conservation incentives program and a grassland reserve 
program.
    Congress has not yet finalized the funding levels for the above-
referenced Farm Bill conservation programs that will be funded through 
the mandatory accounts of the Commodity Credit Corporation. 
Nonetheless, we urge you to allow for their full funding once the new 
Farm Bill is enacted and signed into law.
                               conclusion
    As you continue your work on providing funding for critical NRCS 
programs, we again urge you to keep in mind that NRCS is the only 
Federal agency whose primary role is to provide conservation assistance 
on the nation's private lands. There are a few other agencies with 
narrowly targeted purposes, but no other agency even comes as close to 
touching all of America's private working lands as do NRCS and 
conservation districts. It is critical, therefore, that we strengthen 
the nation's commitment to providing adequate resources to help these 
land managers conserve and protect natural resources on America's 
private working lands.
    On behalf of the nation's 3,000 conservation districts, we 
appreciate the opportunity to provide our views on fiscal year 2003 
funding recommendations for select USDA conservation programs. We look 
forward to working with you over the next few months in finalizing your 
proposals.

        FISCAL YEAR 2003 RECOMMENDED APPROPRIATIONS FOR NRCS AND CCC CONSERVATION PROGRAMS--FEBRUARY 2002
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                           Fiscal year
                                               -----------------------------------------------------------------
                                                                               2002
                                                 2002 admin    2002 NACD     enacted     2003 admin   2003 NACD
----------------------------------------------------------------------------------------------------------------
    U.S. Department of Agriculture Natural
        Resources Conservation Service
 
Discretionary Spending:
    Conservation Operations (CO):
        Technical Assistance..................      678.000       809.000      657.435      765.500      796.736
        Grazing Lands.........................      (18.000)       60.000       21.500       21.500       60.000
        Soil Surveys..........................       80.000         82.00       81.497       90.000       90.500
        Snow Surveys/Water Forecasting........        6.000         6.250        8.516        9.000        9.500
        Plant Materials Centers...............        9.000         9.300        9.849       11.000       11.000
                                               -----------------------------------------------------------------
          Total...............................      773.000       966.550      778.797      897.000      967.736
                                               =================================================================
    Emergency Watershed Program...............          N/A           N/A          N/A      111.000      111.000
    Watershed Protection & Flood Prevention...      100.000       250.000      106.590        0.000      170.000
    Watershed Structure Rehabilitation........        0.000        60.000       10.000        0.000       25.000
    Watershed Surveys & Planning..............       11.000        20.000       10.960        0.000       20.000
    RC&D......................................       43.000        60.000       48.048       52.000       66.000
    FIP.......................................        0.000        25.000        6.800        0.000       10.000
    Transfer of RAMP funds from Interior......        0.000        25.000        0.000        0.000       25.000
    Mandatory (CCC) Programs:\1\
        EQIP..................................      174.000       550.000      200.000      200.000
        AMA...................................        6.000         7.000        7.000        7.000
        WRP (acres)...........................        0.000       250,000        0.000        0.000
        WHIP..................................        0.000        50.000        0.000        0.000
        FPP...................................        0.000        65.000        0.000        0.000
        Conservation Incentives Program.......          N/A           N/A          N/A          N/A
        Grassland Reserve Program.............          N/A           N/A          N/A          N/A
                                               =================================================================
   US Department of Agriculture Farm Service
          Agency--Mandatory Programs
 
CRP (In millions of acres)....................  ............  ...........         36.4         36.4  ...........
----------------------------------------------------------------------------------------------------------------
\1\ America's conservation districts support full funding and enrollment at the authorized levels for the
  mandatory conservation programs of the Commodity Credit Corporation.

                                 ______
                                 

   Prepared Statement of the National Association of Farmers Market 
                           Nutrition Programs

    Dear Subcommittee: The National Association of Farmers' Market 
Nutrition Programs (NAFMNP) respectfully submits testimony on the 
fiscal year 2003 appropriations for the U.S. Department of Agriculture 
relating to funding for the Farmers' Market Nutrition Programs for both 
WIC participants and Seniors.
    In fiscal year 2001, on a mere $35 million in federal 
appropriations (supplemented by more than $10 million in state matching 
resources), the WIC and Senior FMNPs:
  --delivered benefits--in the way of fresh, locally grown, nutritious 
        fruits and vegetables--to nearly 2.7 million low-income women, 
        infants, children, and seniors to help improve their diet and 
        health and combat obesity and chronic diseases;
  --provided over $32.5 million in increased sales and income to more 
        than 14,600 independent fruit and vegetable farmers; and
  --supported the operation of more than 3,200 farmers' markets, farm 
        stands, and community supported agriculture programs, many of 
        them serving low-income neighborhoods with limited access to 
        fresh produce.
    Sufficient, unconditional funding is essential for the 
uninterrupted operation of these small but cost effective and valuable 
programs.
    NAFMNP strongly urges appropriators to provide fiscal year 2003 
funding that is not contingent on unused funds from other nutrition 
assistance programs.
    The WIC FMNP requires $25 million next year to maintain the current 
programs of states, Indian Tribal Organizations (ITOs), and 
territories, allow for modest expansions within those jurisdictions, 
and permit new entities to join the program. We urge Congress and the 
Appropriations Committee NOT to make any portion of these funds 
contingent on caseload needs in the WIC Program or any other program.
    In regard to funding for the Senior FMNP, the NAFMNP also endorses 
a $25 million funding level for this program in fiscal year 2003. Prior 
to the enactment of fiscal year 2003 appropriations for USDA, passage 
of the Farm Bill may secure mandatory funding for this program at a 
level of at least $15 million annually. We urge appropriators to 
augment mandatory funding by $10 million or fully fund the program at 
$25 million if there is no Farm Bill provision.
    Thank you for your consideration of these funding concerns.
                                 ______
                                 

Prepared Statement of the National Association of Professional Forestry 
                     Schools and Colleges (NAPFSC)

    The National Association of Professional Forestry Schools and 
Colleges (NAPFSC) is comprised of the 69 universities that conduct the 
Nation's research, teaching, and extension programs in forestry and 
related areas of environmental and natural resource management. NAPFSC 
strongly supports increased funding for federal forestry research 
programs, including those operated by the USDA's Cooperative State 
Research Education and Extension Service (CSREES).
    The management of nonfederal forestlands has become a critical 
economic, environmental, and security issue. Owners and managers of 
nonfederal forestlands are simply not equipped to deal with the 
tremendous changes in forest land use and management that have occurred 
in the last decade nor the pressures of the 21st century. The programs 
outlined below are key to addressing the stewardship of these lands. 
These programs are: the McIntire-Stennis Cooperative Forestry Research 
Program (McIntire-Stennis), the Renewable Resources Extension Act 
(RREA), the National Research Initiative (NRI), and the Initiative for 
Future Agriculture and Food Systems (IFAFS). The first three of these 
programs have stimulated the development of vital partnerships 
involving universities, federal agencies, non-governmental 
organizations and private industry, and the newest program--IFAFS--a 
competitive grants program, offers great potential for developing new 
uses for forest products, improving natural resource management, and 
building multi-state and multi-university partnerships for research and 
outreach activities.

                                             NAPFSC RECOMMENDATIONS
                                              [Amounts in dollars]
----------------------------------------------------------------------------------------------------------------
                                                                            Fiscal year
                                                 ---------------------------------------------------------------
                                                                                     2003 Bush      2003 NAPFSC
                                                   2001 enacted    2002 enacted       budget      recommendation
----------------------------------------------------------------------------------------------------------------
MCINTIRE-STENNIS................................      21,884,000      21,884,000      21,884,000      30,000,000
RREA............................................       3,192,000       4,093,000       4,093,000      15,000,000
NRI.............................................     105,767,000     120,110,000     240,000,000     150,000,000
IFAFS...........................................     120,000,000               0               0     120,000,000
----------------------------------------------------------------------------------------------------------------

    The Case for Enhanced Forestry Research Funding.--The past, 
present, and future success of forestry research and extension 
activities arising from the NAPFSC member institutions results from a 
unique partnership involving federal, state, and private cooperators. 
Federal agencies have concentrated on large-scale national issues while 
state funding has emphasized applied problems and state-specific 
opportunities. University research in contrast, with the assistance of 
federal, state and private support, has been able to address a broad 
array of applied problems related to technology development and 
fundamental biophysical and socioeconomic issues and problems that 
cross ownership, state, region, and national boundaries.
    The 1998 Farm Bill and various subsequent reports and conference 
proceedings have identified the need for greater attention on the 
emerging issues confronting non-federal forest landowners. NAPFSC is 
pleased to be one of the cofounders of the National Coalition for 
Sustaining America's Nonfederal Forests. The founding of the Coalition 
and its subsequent report emerged from a Forestry Summit held in 1999 
that brought together key forestry leaders and landowners from across 
the nation. The Coalition has documented a plan of action to conserve, 
protect, and sustain our nation's nonfederal forest lands. The nation's 
recent experience with international terrorism heightens the importance 
of this plan. The plan stresses the importance of cooperation among the 
public universities, state forestry agencies, federal agencies, and the 
many stakeholders in the natural resources arena. Key elements of this 
plan are research capacity and concerted action on stakeholder 
priorities.
    The forests and other renewable natural resources of this country 
are primary contributors to the economic health of the nation; are 
reservoirs of biodiversity important to the well-being of our citizens; 
are significant to the maintenance of environmental quality of our 
atmosphere, water, and soil resources and provide diverse recreational 
and spiritual renewal opportunities for a growing population. 
Tremendous strains are being placed upon the nation's private forest 
lands by the combination of increasing demands for forest products 
coupled with dramatic changes in timber policies concerning our 
National Forests. Because of the changes in federal forest policy, 
private forest lands in the United States are now being harvested at 
rates not seen since the beginning of the 20th century.
    To meet this challenge, research priorities must be adjusted to 
better address the needs of private landowners, and to specifically 
enhance the productivity of such lands through economically efficient 
and environmentally sound means. These challenges can be substantially 
addressed by the university community through the building of 
integrated research and extension programs assisted by McIntire-
Stennis, RREA, and NRI.
    There are currently approximately 10 million private forestland 
owners in the U.S. These landowners control nearly 60 percent of all 
forestland in the country. And it has been to the universities, with 
strong support from CSREES, that landowners traditionally look for new 
information about managing their lands. The overwhelming majority of 
the 10 million private landowners are not currently equipped to 
practice the sustained forest management that is critical to the health 
of our environment and economy. The combination of research conducted 
by the forestry schools, combined with the dissemination of that 
research through the cooperative extension network, has never been more 
essential.
    McIntire-Stennis Cooperative Forestry Research.--The Cooperative 
Forestry Research Program (McIntire-Stennis Act) is the lead forestry 
effort administered by the USDA Cooperative State Research, Education, 
and Extension Service (CSREES). This program is the foundation of 
forestry research and scientist training efforts at universities. 
Funding this program provides for cutting-edge research on 
productivity, technologies for monitoring and extending the resource 
base, and environmental quality. The program is critically important 
today since universities provide a large share of the nation's 
research. Additionally, universities train nearly all of the nation's 
scientists in forestry. The main categories of need are:
  --Significantly enhance sustainability and productivity of nonfederal 
        forests;
  --Increase the financial contributions of nonfederal forests to 
        benefit landowners, the rural community, state and national 
        economies, and environmental values; and
  --Conserve and sustain the nonfederal forests and other natural 
        resources for future generations.
    The Cooperative Forestry Research Program is currently funded at 
$21.884 million and matched more than three times by universities with 
state and nonfederal funds. The program is currently funded at little 
more than one-fifth its authorized level. We recommended funding 
McIntire-Stennis at a level of $30,000,000 for fiscal year 2003. The 
requested additional funding would be targeted at:
  --Sustainable and productive forest management on private lands to 
        address issues of competitiveness and economic growth ($2.8 
        million);
  --Forest inventory, monitoring, and assessment with emphasis on new 
        technologies ($1.9 million);
  --New products, improved processing technologies, and utilization of 
        small trees to extend the forest resource and improve 
        environmental quality ($1.0 million);
  --Forest health and risk to address issues of fire, pest species, and 
        other disturbances affecting domestic resource security and 
        downstream impacts ($1.0 million); and,
  --Assessing social values and tradeoffs to facilitate the 
        understanding of policy options, economic impacts, and informed 
        decisions at all levels of government ($1.4 million).
    The NAPFSC schools further recommend that CSREES provide this 
support to universities with direction to focus on new or existing 
approved projects for the explicit purpose of near term progress in 
addressing one or more of these research targets in each school's state 
or region. It is recognized that progress will be dependent on a 
critical mass of scientific effort, and collaboration among schools is 
thus encouraged. Additionally stakeholder advisory mechanisms should be 
a part of the funding allocation process. In the process of funding 
these projects, NAPFSC would also recommend that portions of this 
funding be used to build research capacity, including a provision 
calling for training of much needed new forestry scientists.
    Renewable Resources Extension Act.--The Renewable Resources 
Extension Act (RREA) is the lead forestry extension effort administered 
by the USDA Cooperative State Research, Education, and Extension 
Service (CSREES). This program is the foundation of outreach and 
extension efforts at universities.
    Funding for this program addresses critical forestry and related 
natural resources extension and stewardship needs in states, and would 
address the critical issues of forest management for productivity and 
environmental quality on non-federal lands brought about by diminished 
harvest levels on federal lands. NAPFSC is pleased that the House and 
the Senate, during their discussions of the 2002 Farm Bill, have both 
agreed to increase the authorization level of RREA to $30 million.
    Audiences for the products of outreach and extension are as diverse 
as are the stakeholders. Of highest priority are the owners of 
nonfederal forestlands and those involved in implementing forest 
management. Outreach programs that (1) solve immediate problems; (2) 
transfer research technologies and new knowledge; and (3) increase 
their awareness of the benefits of active management would best serve 
these groups.
    It is vital that Congress increase funding for this important 
program for distributing the knowledge gained through our research 
institutions to the private landowners. NAPFSC recommends funding RREA 
at a level of $15 million for fiscal year 2003. This increase would 
take RREA to its current full authorization level.
    With nearly ten million nonfederal forest landowners, the most 
compelling priority areas for extension and outreach are:
  --Develop databases and communication systems for landowner education 
        and the delivery of information tailored to address owner 
        values and objectives ($4.0 million);
  --Identify best management practices together with readily accessible 
        information on programs, services, and benefits of natural 
        resources management and planning to integrate water, wildlife, 
        timber, fish, recreation and other products and services ($3.5 
        million);
  --Identify opportunities such as landowner cooperatives and other 
        organizations linked to professional services, price reporting 
        systems, and cooperative marketing to address local issues 
        within the framework of landowner's objectives ($1.9 million); 
        and
  --Use these databases, communication systems, and opportunities to 
        communicate information on managing the risks from fire, pests, 
        and other disturbances to simultaneously address local and 
        larger scale issues of environmental and resource security 
        ($1.5 million).
    The NAPFSC schools further recommend that CSREES provide this 
support to universities with direction to focus on new or existing 
approved projects for the explicit purpose of near term progress in 
addressing one or more of these outreach/extension targets in each 
school's state, region, or nationally. It is recognized that progress 
will be dependent on a critical mass of extension educator effort, and 
cooperation among schools is thus encouraged. Additionally stakeholder 
advisory mechanisms should be a part of the funding allocation process. 
In the process of funding these projects, NAPFSC would also recommend 
that portions of this funding be used to build outreach/extension 
capacity, including a provision calling for training of much needed new 
extension educators and associated technical support staff.
    National Research Initiative Competitive Grants.--The National 
Research Initiative Competitive Grants program (NRICGP) is a 
significant source of funding for basic cutting-edge and applied 
research in categories important to sustainable forest management. 
Among these categories are (1) natural resources and the environment, 
(2) plants, (3) markets, trade and rural development, and (4) 
processing for value added/new products. This program is administered 
by the USDA Cooperative State Research, Education, and Extension 
Service (CSREES).
    This program is currently funded at $120 million of which 
approximately ten percent goes to successful forestry research 
proposals. NAPFSC supports the Administration's efforts to greatly 
increase the funding for this program for fiscal year 2003--with at 
least 20 percent of the increase directed to forest resources related 
research priorities in categories (1)-(4) above under existing and/or 
new research areas. However, we urge that part of the Administration's 
proposed increase be directed to base programs, particularly to move 
the Cooperative Forestry Research Program to the above noted $30 
million level. Addressing the base program needs will in turn build the 
capacity to compete effectively for competitive grants.
    Initiative for Future Agriculture and Food Systems.--The Initiative 
for Future Agriculture and Food Systems (IFAFS) is a new research, 
extension, and education competitive grants program designed to address 
a number of critical emerging issues in the broad area of agricultural. 
These issues encompass future food production, food safety, 
environmental quality, natural resource management, and farm income. 
Priority program areas include (1) the agriculture genome; (2) new and 
alternative uses and production of commodities and products; (3) 
biotechnology; and (4) and natural resource management, including 
precision agriculture. Priority for funding is for those proposals that 
were multi-state, multi-institutional, or multi-disciplinary, or that 
integrated research, extension, and/or education. This program, 
administered by CSREES, was funded at $113.4 million in fiscal year 
2001, but was suspended for fiscal year 2002. NAPFSC strongly supports 
this competitive grants program and urges your Subcommittee to provide 
the full $120 million for fiscal year 2003 with an expansion of the 
focus to allow greater consideration of forestry and related natural 
resources issues.
                               conclusion
    The needed investment is substantial, but the potential returns are 
considerable. Disciplined and rigorous implementation of research and 
education on forest resources issues will contribute greatly to 
attaining our vision for America's nonfederal forests for the future. 
NAPFSC urges cooperation at federal, state, and University levels to 
make this investment and the vision and security it will support a 
reality.
                                 ______
                                 

 Prepared Statement of the National Association of State Universities 
                        and Land-Grant Colleges

    Mr. Chairman, I am delighted to be able to submit testimony today 
in support of the International Science and Education grants program 
(ISEP) that has received an appropriation of $1,000,000 in the 
Administration's Department of Agriculture fiscal year 2003 budget 
under the Integrated Activities Account of CSREES. I respectfully 
request that you include this funding in your fiscal year 2003 
Agriculture Appropriations budget.
    Mr. Chairman, I am the current chair of the International 
Agriculture Section of the Board on Agriculture Assembly of the 
National Association of State Universities and Land Grant-College 
(NASULGC). As the Section chair, it is my privilege to submit this 
testimony to you in support of this critically important program.
    NASULGC's Board on Agriculture Assembly, Budget and Advocacy 
Committee has requested a $212 million increase for USDA/CSREES in 
fiscal year 2003 of which one small part is the International Science 
and Education grants program. This increase is necessary to address 
immediate security needs for U.S. agriculture. This is a small price to 
pay for a safe and secure food supply. The International Science and 
Education grants program enhances the agro-security research, 
extension, and education program by providing an international link. In 
addition, this program seeks to incorporate substantive international 
activities into programs related to food systems, agriculture and 
natural resources at U.S. land-grant colleges and universities.
    The Cooperative State Research Extension and Education Services 
(CSREES) of USDA intends to administer the International Science and 
Education grants program through a competitive grants system. We have 
worked closely with CSREES in the past to develop a solid program that 
meets real and demonstrated needs. In fact, we estimate that there is a 
demonstrated need of approximately $8 million to address agro-security 
needs, although we are thrilled to see the $1 million appropriation in 
this year's budget.
    After 5 years of activity, GASEPA (Globalizing Agricultural Science 
and Education Programs for America) has succeeded in receiving funding 
through ISEP in the Administration's fiscal year 2003 budget. GASEPA/
ISEP represents a global agenda for sustainable agriculture, food, 
natural resources, rural development and related science programs. It 
represents a broadening in focus from aid to trade and national 
security, including economic cooperation and the need to strengthen 
global competencies of U.S. citizens.
    These grants will address five primary goals:
  --Enhance global competitiveness of U.S. agriculture through human 
        resource development;
  --Develop and disseminate information about international market, 
        trade, and business opportunities for U.S. agriculture;
  --Establish mutually beneficial collaborative global partnerships;
  --Promote trade through global economic development; and
  --Promote global environmental quality and the stewardship of natural 
        resources management.
    This grants program is intended to help position U.S. agriculture 
to continue to be a major contributor to global food security in the 
post-Cold War and post 9/11 era. Its tenets of human resource 
development, global environmental conservation, global market creation, 
and increased participation in global markets have important 
implications for the US university community.
    Our institutions of higher education continue to serve the needs of 
the citizens of their respective campuses, communities and states. They 
will also have an important role to play in this new era of heightened 
security--particularly in the area of bio-security--and global 
cooperation.
    As we position U.S. agriculture for the 21st century, we are 
cognizant that education, research, and outreach programs at our land-
grant and similar universities will need to address global issues more 
than in the past. We urgently need to find ways to increase the level 
of engagement of our resident teaching faculty, research scientists, 
and extension agents in addressing global dimensions of food and fiber 
industries, and the natural resource base on which they rely. Only in 
this way will we adequately serve the needs of the citizens of our 
respective states.
    As I mentioned earlier, the International Science and Education 
Grants program is strongly supported by the National Association of 
State Universities and Land-Grant Colleges (NASULGC) and it's Budget 
Committee. As you know, the land-grant higher education community has a 
strong tradition of commitment to a global agenda for sustainable 
agriculture, food, natural resources, rural development and related 
science programs. It also enhances agro-security programs by providing 
a complimentary international link. We seek to help position U.S. 
agriculture as a major contributor to global food security in today's 
new era of heightened national security.
    This new funding line will directly contribute to addressing agro-
security concerns, but it will also deal with some of the more 
fundamental issues facing our students today. We must ensure that our 
students are being sufficiently trained in the reality of today's 
international markets and that they have an understanding of other 
parts of the world in order to prevent some of the issues that have now 
emerged in the arena of agro-security.
    I strongly believe that the International Science and Education 
grants program will play an important role in the domestic and 
international agriculture world of the 21st century. But it will depend 
on the appropriation of Federal funding. I look forward to working with 
you to meet this goal.
    Mr. Chairman, again, thank you for the opportunity to submit this 
testimony to your committee today. I sincerely appreciate your 
favorable consideration of this request.
                                 ______
                                 

 Prepared Statement of the National Association of State Universities 
                        and Land-Grant Colleges

    Mr. Chairman, Members of the Committee, it is my pleasure to submit 
to you testimony regarding the fiscal year 2003 budget. I am commenting 
on behalf of the National Association of State Universities and Land-
Grant Colleges, Board on Agriculture Assembly.
    There is one critical issue facing the United States today that 
brings us before you; the need to secure the United States from a 
biological attack and the attendant concerns related to the security of 
the U.S. food production system. In addition to jeopardizing public 
health and safety, biological attacks on the U.S. agricultural sector 
would cause our nation and the world's food supply substantial damage, 
and undermine the U.S. economy. United States agricultural exports 
alone reached $50.9 billion in fiscal year 2002. As noted in a study 
issued by the Department of Defense in January of 2001:

    The potential threats to U.S. agriculture and livestock can come 
from a variety of pathogens and causative agents. With one in eight 
jobs and 13 percent of the gross national product dependent on U.S. 
agricultural productivity, economic stability of the country depends on 
a bountiful and safe food supply system. Similar to the human 
population, the high health status of crop and livestock assets in the 
U.S. creates a great vulnerability to attack with biological agents.

    The President's fiscal year 2003 proposal provides more than $6 
billion across several Federal agencies to address biosecurity issues. 
Unfortunately, very little of this proposed investment is targeted to 
address the homeland security issues facing agriculture, our food 
production, natural resources, distribution system, or our rural and 
urban communities. We fully recognize that there is an immediate need 
to address public health, defense and law enforcement homeland security 
issues. However, it is just as important and just as urgent to protect 
our food production and distribution system. It is important not to 
alarm the public or our trading partners unnecessarily. It is even more 
important to take the immediate and straightforward steps that will 
ensure that there is no tampering with our food supply system.
    The Land-Grant University (LGU) system is unique in the world in 
that it was designed to work in partnership with the Federal, State and 
local agencies. We were designed to address national issues at the 
state and local level. This partnership is critical in providing the 
science base and education outreach programs that are uniquely 
important in food production and distribution. This same distributed 
network will be critical in addressing homeland security needs. Our 
universities provide much of the innovative research and have the 
science knowledge base regarding biological pathogens that. could 
impact the food production system and natural resources. Our 
Cooperative Extension System provides a network of personnel in every 
county of the country, with staff that are already trained to work with 
local community leaders to plan and respond to natural and civic 
disasters, as well as years of experience designing and implementing 
education programs for producers, processors, and consumers. The LGU 
system's premier teaching facilities can also educate the next 
generation of scientists about agro-security. It is imperative that the 
security issues facing our food production system be addressed. It is 
essential that the existing distributed information and outreach system 
that resides within the Land-grant universities be harnessed and 
integrated into the efforts of all Federal agencies seeking to 
collaborate with rural communities.
    I respectfully offer the following testimony to describe the bridge 
between land-grant research and extension activities and the health 
sciences, security, and emergency management conducted by other Federal 
agencies. I will. also offer ways in which the land-grant universities 
could be a valuable resource in the Federal, State, and local 
government solution to coordinating and conducting the prevention and 
response to biosecurity threats.
            capabilities of the land-grant university system
    The Federal Government created the LGU System in 1862 and is 
anchored in every state and U.S. territory. In partnership with the 
local, state, and Federal Governments, the LGU System addresses 
national issues at the local level. Central to the LGU System are the 
State Agricultural Experiment Stations (SAES) that conduct research and 
the Cooperative Extension Service (CES) that provides outreach from the 
university to our communities across the country.
    SAES, with over 10,000 highly specialized researchers, has for 
years engaged in research that is relevant to protecting the nations 
food production, processing and distribution system from acts of 
terrorism. CES has an established presence in communities across the 
country with 3,150 local offices that continuously manages and controls 
emergencies, particularly natural disasters. CES' unique capacity to 
self-evaluate its program effectiveness constantly improves agriculture 
and community safety. Moreover, multi-institutional/multi-state 
procedures for coordinating the research of SAES and integrated 
activities with CES are already in place, ready for immediate 
engagement.
what must agriculture experiment stations and the cooperative extension 
                  system do to enhance agro-security?
Address Immediate Security Needs
            Securing Experiment Station Research
    Research results and data are often openly communicated and stored 
electronically via electronic posting and web sites and could be easily 
used to locate and abuse hazardous materials. SAES and Federal research 
laboratories must develop protocols to safeguard this information while 
keeping necessary information and communication channels open.
    Furthermore, it will be important for state and Federal officials 
to be able to locate or track the location of these materials over 
time. Recent questions about the location of anthrax samples in Federal 
laboratories demonstrate why this new level of security will be needed. 
There should be a national list of potentially dangerous materials 
inventoried across agricultural research facilities that would be 
maintained and updated regularly and available to appropriate Federal, 
State and local emergency management agencies.
    While laboratories should be secured, there should also be respect 
for the information sharing between scientists. Legitimate 
communication mechanisms and efforts should not be thwarted as a result 
of the, added security. Therefore, security plans should be made in 
conjunction with SAES and Federal laboratories to ensure the 
continuation of secure and critical agricultural research and 
communication.
            Training Industry to Secure Their Operations
    In a natural partnership with SAES, CES provides educational 
programs to the private sector on how to secure their operations. As we 
have sadly learned, equipment and materials such as fertilizers and 
crop dusting planes can be used as bioweapons. Appropriate protocols 
for securing these materials should be developed in collaboration with 
USDA's Agricultural Research Service (ARS), the Animal and Plant Health 
Inspection Service (APHIS), the Food Safety Inspection Service (FSIS), 
and other appropriate Federal agencies.
Secure Communities
    Producers, processors, suppliers, retailers, and consumers may one 
day be the ``first responders'' to an agroterrorist attack and thus 
play a pivotal role in quickly containing contamination. CES agents 
need to be trained to recognize possible threats and employ the 
appropriate protocols for working with local and Federal law 
enforcement and health agencies. CES has a unique role to play in 
training community leaders to prepare and plan for potential terrorist 
activity. CES can help rural and urban communities, businesses and 
farms develop tools to determine points of exposure and risk, so that 
they can develop programs at the local level that best meet their 
needs. Because rural communities are sparsely populated, the 
infrastructure may not already exist to mitigate a disaster. Many of 
the mitigation strategies will deal with preparedness and training of 
community volunteers. With more research on disease vectors, these 
communities could better shape both prevention and containment 
strategies via vaccines and agents to neutralize and treat the effects 
of disease outbreaks. CES has already developed a way to communicate 
with and keep on the same page as partner agencies called the Extension 
Disaster Education Network (EDEN). EDEN is a clearinghouse for 
educational and related materials used for disaster mitigation. The 
recovery process for communities and their constituents may require 
sustained presence within the communities and the mobilization of 
significant research resources.
Respond to emergency outbreaks
    A purposeful biological attack on our plant and animal species 
would probably spread quickly and from separate locations. Immediate 
recognition that there is an unnatural outbreak of a disease in 
multiple locations is critical if the spread of the disease is to be 
contained. Although the food and fiber production process opens up many 
opportunities for purposeful contamination, most existing safeguards 
were not designed to protect against intentional attacks. Modeling and 
communication tools need to be developed that would facilitate early 
detection and recognition of unnatural outbreaks. The private sector, 
the Federal Government, and the LGU System will need to develop new 
standards and protocols to:
  --improve detection and monitoring practices such as enhanced border 
        screening practices;
  --develop a communication system that alerts appropriate agencies and 
        points of entry that a problem may exist, with guidance on 
        appropriate actions;
  --improve the ability to trace contamination back to its source; and
  --enhance communication networks with public health agencies, law 
        enforcement agencies and state and local officials.
    The timing of the recognition and response is also critical. If a 
purposeful introduction of a biological agent is recognized quickly, 
the impact can be greatly reduced. A difference of several days can 
mean the difference between curtailing a viral outbreak and losing 
control over the spread of a contagion. As mentioned, with a lower 
population base distributed across vast areas, rural America typically 
lacks the infrastructure to recognize and respond to terrorist attacks.
Educate scientists, teachers and specialists
    Who will provide the expertise for these efforts in the future? We 
will need people whose education concentrates on security in 
agriculture and natural resources. Courses or degrees in agricultural 
security will be necessary. This kind of expertise currently does not 
exist in institutions and initially will require outside expertise. 
Institutions will require help to design long-term educational programs 
that can provide the scientists and educators the ability to address 
the issues of agricultural security.
          linking the land-grant system with federal agencies
    The LGU System offers across the broad experience with agricultural 
security research and extension that lends itself to the purposes of 
other Federal agencies. The attached budget summary table links funding 
requests from different agencies with biosecurity activities.
United States Department of Agriculture
    The LGU System has a long historic relationship with USDA in 
protecting our food production system. We are recommending a $212 
million increase in new funding for USDA/CSREES to address agro-
security and food safety issues. The LGU have a historic working 
relationship with USDA and our recommendations for agro-security 
funding have been detailed in testimony submitted to the House and 
Senate Agriculture Appropriations Subcommittees. While the LGU have 
worked with each of the following Federal agencies, we have not done so 
in a systematic way, and so we provide more detailed description of 
what our expanded cooperative efforts should include.
Department Of Defense
            Science and Security: Linking SAES with National Agro-
                    Security Efforts
    The LGU System proposes to develop new ways in which to collaborate 
with the Department of Defense in order to engage the SAES and CES in 
providing Federal, State, and local governments with rapid access to 
the best information and services for eliminating, avoiding or 
mitigating domestic and foreign threats to national food systems and 
U.S. agricultural production. The SAES could help to provide the 
Department of Defense with support services in the following areas:
  --National advisory service for research site security;
  --Organization of research facilities (domestic and international);
  --Strategic planning facilitation;
  --Document services;
  --Research outcome reporting;
  --Resource mobilization and allocations;
  --Financial accountability;
  --Information security and confidentiality assurances; and
  --Rapid responses for requested information.
    Moreover, we recognize that certain data collection and monitoring 
activities, threat assessments; interventions, and related training 
activities are necessarily classified; and therefore, we propose 
forming with others a partnership that would draw upon selected 
(cleared) experts from the LGUs and from pools within intelligence and 
law enforcement certain expertise to provide decision makers specific 
support in the following areas:
  --Security firewall for engaging the LGU expert community at large;
  --Conduct, oversee and/or advise on classified data collection and 
        monitoring activities;
  --Conduct, oversee, advise and/or participate in classified research 
        and assessments; and,
  --Education and training programs for:
    --First responders;
    --Incident monitoring systems;
    --Diagnostic services providers; and,
    --Risk and threat assessment resources.
            Preparing Our Civil Defense
    Since World War II, CES has worked with the military in our rural 
communities to coordinate civil defense needs. The CES network could 
heed the call once more to increase our civil defense, and prepare it 
for biosecurity aspects through volunteer training programs conducted 
in collaboration with the military. Additionally, CES has ongoing 
family programming designed specifically for those families living on 
military bases. CES could adapt these programs to discuss and address 
potential biological threats to family security on military bases.
            Funding
    The costs of prevention are small relative to the cost of a 
terrorist attack. Severe economic disruption could result to our 
production, distribution and trade system, if we do not take 
responsibility to act now. We are recommending a beginning funding 
level of $171 million in fiscal year 2003 from the DOD for the 
following purposes:
  --$136 million to link land-great research with DOD agro-security 
        issues;
  --$76 million to collaborate in securing research facilities and 
        developing a system for appropriate security screening and 
        background checks for individuals with access to sensitive 
        materials; and
  --$35 million to initiate CES technology transfer and networking 
        activities related to improved diagnostic and testing 
        technologies.
Federal Emergency Management Agency
    FEMA is charged with working closely with state and local 
governments and agencies to ensure their planning, training, and 
equipment needs are addressed and to ensure that the response to 
weapons of mass destruction threats is well organized. Stepping up the 
partnership between CES and FEMA could improve the management of 
emergency agro-terrorism situations by employing programs for risk 
awareness, risk assessment, mitigation, and recovery.
            Coordinated Emergency Planning and Training
    CES has collaborated with FEMA for many years to manage and control 
emergencies, although to date, most disasters have been natural such as 
floods, storms, droughts and disease outbreaks. In addition, CES has 
almost 100 years of experience in the recruiting, training, utilization 
and management of volunteers. CES works with thousands of volunteers 
every day, is familiar with all aspects of volunteer training and 
management and has a reputation of being a ``volunteer organization'' 
in the community. Many of the volunteers seek more intensive training 
through one or more of the ``master volunteer'' programs which target 
specific community or program needs such as agro-terrorism mitigation. 
As part of its emergency management work, CES created the Extension 
Disaster Education Network (EDEN), a clearinghouse for educational and 
related materials used for disaster mitigation. Most recently, CES 
mounted a nationwide train-the-trainer program to prepare small and 
rural communities and public and private organizations for Y2K. CES 
trained hundreds of thousands of individuals, families, and private and 
public organizations to manage the Y2K threat in little more than 1 
year.
    Building on EDEN, CES could assist FEMA in ensuring that first 
responders at all points in the food production system are well trained 
in new technologies and techniques to improve emergency response 
efforts. Such a program could involve training first responders and 
citizen volunteers in biosecurity risk assessment and mitigation. The 
program could have four parts: (1) risk awareness to inform communities 
and leaders about the potential threats of terrorist activity; (2) 
self-directed risk assessment that allows for flexibility required in 
given community of producers, processors, retailers, and consumers; (3) 
mitigation; and (4) recovery.
    Awareness.--This training would inform communities and leaders of 
the potential threats of terrorist activity including: likely 
approaches of terrorists, materials that may be used and their 
indicators, the symptoms of affected plants and animals, how materials 
might spread, the contacts to identify or verify contamination, and the 
ways in which the effects of materials manifest themselves in the 
community. This training could occur based on specific information 
about the nature of the threat and rapidly mobilized and disseminated 
through pre-organized train-the-trainers networks, the CES 
communications system, and local offices. Various State and Federal 
agencies could also be resources for this training.
    Risk Assessment.--This would involve building self-directed risk 
assessment instruments. These instruments would make it possible for 
the communities, organizations and households that create them to 
rapidly determine and prioritize points of exposure. Risk assessment 
templates could be adapted to different types of threats and be used to 
monitor the progress of the communities, determine the elements of the 
communities involved, and determine where those who live in the 
communities feel the most susceptible. The latter information would be 
valuable in adding to the strategy for intervention and additional 
training.
    Mitigation.--With risk assessments made, the users of the 
instrument are ready to deal with mitigation. What are the major areas 
of risk? How do they vary within and among communities, what are the 
efficient strategies, given the ``distribution'' of perceived and 
actual risk? Many of the mitigation strategies would deal with 
preparedness and training of community volunteers. Training 
certifications could adapt to the changing nature of terrorist threats. 
Using its close link with existing State and Federal programs, CES 
could leverage the distribution of the mitigation materials and 
training. Volunteer and community leader trainings could be delivered 
cooperatively with various State and Federal agency staff.
    Recovery.--The recovery does for communities may require sustained 
presence within communities and the mobilization of significant 
research resources. The recovery process may itself be unknown and 
require close cooperation between the researchers and CES staff working 
``on the ground'' in impacted communities. The land grant model that 
links strong research capacity with a field presence is likely to be of 
value to all agencies involved.
    In addition to the risk assessment training program, CES could also 
develop education programs that would mitigate public health and 
economic disruptions to rural communities from terrorist attacks. A key 
example of a mitigation strategy is preparing individual families for 
an agro-terrorist attack. Families need to have survival kits on 
constant standby that would mitigate the effects of an attack. Should 
an attack occur, they may need to know how long their food will stay 
fresh in the refrigerator or how they can sustain their crops if 
contaminated. In partnership with appropriate Federal agencies, CES 
could develop proper survival kits and train the families to implement 
the survival tools in the case of a disaster.
            Linking Research to Extension and Asking New Research 
                    Questions
    The State Agricultural Experiment Stations (SAES) within land-grant 
colleges and universities have significant research capacity. The 
researchers within the land-grant system are used to working with CES 
and have established communication mechanisms about new technologies 
and techniques. Thus, CES and the land-grants can be supportive of the 
mitigation approaches and the identification of the materials that may 
have been introduced by the terrorists. SAES is engaged in a breadth of 
issues relating to technologies that would mitigate a disruption to 
nation's food safety and economic health from a terrorist attack.
    There are many key examples of how SAES could support mitigation 
the effects of an agro-terrorist attack on rural communities. One topic 
could delve into the extent of a community's social capital. Is there a 
network of interested non-profits to address its community's particular 
piece of counter-terrorism? Another topic would be determining the 
impact on security by population variables. Demographics such as 
ethnicity, religious beliefs, and income levels are critical pieces of 
information in developing a mitigation plan for health and economic 
disruptions. Finally, research would need to be done on how to retain 
consumer trust. If there is a biological attack on the crops, consumers 
might question the safety of their food. SAES could determine methods 
that would alleviate these real or perceived fears.
            Funding
    To address emergency planning and training needs, the LGU system 
recommends--
  --a beginning funding level of $237 million in fiscal year 2003 to 
        incorporate biosecurity concerns into the emergency and 
        disaster education network, design and implement risk 
        management training programs, and train community leaders and 
        citizen volunteers--
    --$87.5 million for risk management education packages and training
    --$50 million for research to improve identification and 
            intervention strategies and technologies
    --$25 million for monitoring and evaluation of training program 
            results
    --$75 million to enhance communication and education systems
Health and Human Services
    Agriculture production is inextricably linked to food safety and 
public health. There is necessary overlap between the health and 
agricultural sciences that should be reflected in the budget and in 
research efforts.
            Health Resources and Services Administration (HRSA)
    HRSA functions on the frontlines of public health protection in 
communities and will develop programs to address the emerging need for 
public health emergency response teams in the event of a biological 
attack. As part of HRSA, Health Centers provide public health education 
in under-served communities. The Centers' effectiveness is due in part 
to their ability to train and mobilize public health volunteers in 
these communities. Such training programs will need to be expanded to 
address new Homeland Security aspects such as biosecurity. With nearly 
100 years of experience in recruiting, training, utilizing and managing 
volunteers, CES can add to the Center's capacity to meet the Homeland 
Security challenge. For decades, CES has successfully partnered with 
FEMA to prepare communities and families to respond effectively during 
natural disasters and can draw on this experience to collaborate with 
the Centers in designing biosecurity-public health emergency response 
plans. Health Centers also use volunteers to help assess operational 
capability at the community level and then provide on-site support to 
affected communities. CES could offer additional resources to the 
Centers in this area as well. In many states, CES is the public gateway 
to science-based information developed in academic disciplines across 
the university. CES could engage its research and evaluation tools, 
community planning experience, and facilitating skills in support of 
community capacity building.
            National Institutes of Health (NIH)
    NIH is charged with promoting biomedical research, and other 
scientific inquiries that may lead to medical advances, and will be the 
lead research agency in the Federal Government's effort to fight 
bioterrorism. Within NIH, the National Institute of Allergy and 
Infectious Diseases (MAID) will lead research activities aimed at 
developing biomedical tools to detect, prevent, and treat infection by 
biological agents.
    The State Agricultural Experiment Stations (SAES) and veterinary 
diagnostic labs within land-grant universities have broad and deep 
research portfolios to improve public understanding of disease vectors, 
particularly for infectious diseases that can cross between animal and 
human populations. They also perform critical research in applied 
animal science designed to serve medical advances. With this knowledge 
base, the land-grant universities can provide a critical research 
foundation for the development of diagnostic technologies and treatment 
of infectious diseases suitable for responding to the circumstances 
surrounding purposeful exposure.
            Funding
    To initiate the activities described in this testimony, the LGU 
system recommends funding for fiscal year 2003 of $265 million, which 
would be used to support the following activities:
  --A total of $165 million in support of SAES research and research 
        facilities--
    --$100 million for basic and applied research through the NIH
    --$15 million for enhanced research facility security through the 
            NIH
    --$25 million for integrated food safety research through the FDA
    --$25 million for basic and applied research through the CVM
  --A total of $100 million in support of CES education and outreach 
        activities, with a budget estimate of $500,000 per state per 
        program--
    --$25 million for Extension education and outreach to general 
            public on food safety through FDA
    --$25 million for integrated Extension for training in new food 
        contamination detection and containment technologies through 
        FDA
    --$25 million for integrated Extension for farmer and rancher risk 
            management program through CVM
    --$25 million for Extension volunteer program development and 
            training through HRSA
                               conclusion
    I would like to thank the Senate Appropriations Committee for 
taking the leadership to look at how our country is addressing homeland 
security issues across the Federal Government. Only by taking this 
comprehensive view can we insure that our Federal, State and local 
agencies are working together in the most effective way. The land-grant 
university system stands ready to provide its distributed research and 
education network to work in partnership with each of the Federal 
agencies to help them successfully address their specific homeland 
security missions.

                     MULTI-AGENCY BIOSECURITY--AGRO-SECURITY BUDGET LAND-GRANT UNIVERSITIES
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                          USDA       DOD        HHS         FEMA        Total
----------------------------------------------------------------------------------------------------------------
By funding Mechanism:
    Research Formula; NRI............................         64         60        100        n/a          224
    Extension Formula................................         62         35         50        124.5        271.5
    Integrated Sec. 406, RREA........................         28        n/a        100         87.5        215.5
    Facilities.......................................         50     \1\ 76         15        n/a          141
    Education........................................          8        n/a        n/a         25           33
                                                      ----------------------------------------------------------
      Total..........................................        212        171        265        237          885
                                                      ==========================================================
By Agro-Security Issue--in millions:
    Respond to \2\ Outbreaks.........................         49     \3\ 55         75        137          316
    Counteract Terrorism.............................         30     \4\ 40        100        n/a          170
    Secure \5\ Communities...........................         45        n/a         75         75          195
    Address Immediate Security Needs.................         80     \6\ 76         15        n/a          141
    Education Scientists, Teachers, and Specialists..          8        n/a        n/a         25           33
                                                      ----------------------------------------------------------
        Total........................................        212        171        265        237          885
----------------------------------------------------------------------------------------------------------------
\1\ Includes funding for site security assessment, security upgrades, and background check system.
\2\ All Extension and Integrated funding split between Respond to Outbreaks and Secure Communities.
\3\ Includes $30 M for research, $25 M for extension.
\4\ Includes $30 M for research, $10 M for extension.
\5\ See reference 1.
\6\ National Association of State Colleges and Land-Grant Universitites.

                                 ______
                                 

Prepared Statement of the National Commodity Supplemental Food Program 
                              Association

    Mr. Chairman and subcommittee members, I am Andrew Fox, President 
of the National Commodity Supplemental Food Program (CSFP) Association. 
Our Association of state and local CSFP operators works diligently with 
the Department of Agriculture Food, Nutrition, and Consumer Service to 
ensure a quality supplemental nutrition assistance commodity food 
package program for low income persons aged sixty and older, and low 
income mothers, infants, and children. The program, which was 
authorized in 1969, serves approximately 450,000 individuals every 
month in 28 states, 2 Tribal Organizations and the District of 
Columbia.
    This 32 year old CSFP stands as testimony to the power of 
partnerships between community and faith-based organizations, private 
industry and government agencies. The CSFP offers a unique combination 
of advantages unparalleled by any other food assistance program:
  --The CSFP specifically targets our nation's most vulnerable 
        populations: the very young and the very old.
  --The CSFP provides a monthly selection of foods specifically 
        tailored to the nutritional needs of the population we serve. 
        Each eligible participant in the program is guaranteed [by law] 
        a certain level of nutritional assistance every month.
  --The CSFP purchases foods at wholesale prices, which amounts to one-
        third the cost it would be to provide the same supplemental 
        nutrients at retail voucher cost. The average food package cost 
        for fiscal year 2002 is $15.35, and the retail cost would be 
        approximately $45.00.
  --The CSFP involves the entire community in the problems of hunger 
        and poverty. Thousands of volunteers as well as many private 
        companies donate money, equipment, and most importantly time to 
        deliver food to homebound seniors. These volunteers not only 
        bring food but companionship and other assistance to seniors 
        who might have no other source of support.
  --For these historical reasons I would like to submit the National 
        CSFP Association legislative issues and a report of our 2001 
        survey of monthly volunteer labor hours to support our 
        requests.
    Chairman Kohl, the committee has consistently been helpful with 
funding support for our very prudent way of providing nutritional 
supplements to low income senior citizens and mothers and children. 
Please help us continue.
                       2002-2003 issues and goals
    2002 Farm Bill.--A top priority is to ensure that the Conference 
Committee's final bill retain the Senate version's language regarding 
the CSFP ``administrative funding fix:'' increasing the per-caseload-
slot administrative funding level each year by the State and Local 
Government Index of Inflation.
    Fiscal Year 2002 Funding.--Increasing Participation and Funding 
Shortfall Require a $5 Million Supplemental Appropriation.--Demand for 
CSFP services increased significantly during the last quarter of 2001, 
due to the national recession. A majority of CSFP States saw monthly 
participation increase between September, 2001 (normally the highest 
participation month of the year) and December, 2001, with some 
increases higher than 10 percent.
    However, CSFP States operating in fiscal year 2001 saw their total 
assigned caseload decline from 453,481 slots in fiscal year 2001 to 
438,121 slots in fiscal year 2002, a 3.4 percent decline. Twelve States 
experienced significant caseload reductions, the median decrease being 
-9.5 percent, with a range from -2 percent to -42 percent. Total 
funding for the program declined from $105 million to $103.7 million 
(the latter dollar figure being called upon to support five new State 
programs). Thus, program resources are declining at the same time that 
demand for services is reaching a new peak.
    A $5 million supplemental appropriation for fiscal year 2002 would 
restore States that lost caseload to their fiscal year 2001 levels and 
allow for additional participation generated by the weakened economy.
    Fiscal Year 2003 Caseload and Funding Request.--500,000 Caseload 
Slots, Including Four Additional States--$118,650,000 Requested

Caseload Requirements:
    Restoration of fiscal year 2001 Caseload for 
      Existing Prog- 
      rams..............................................   453,481 slots
    Continuation Caseload for Five States Added in 
      fiscal year 2002..................................    21,000 slots
    Four Additional States (4,000 slots apiece) (Alaska, 
      Indiana, Nevada, South Carolina)..................    16,000 slots
    Expansion for Existing States:......................     9,519 slots
                    --------------------------------------------------------
                    ____________________________________________________
        Totals..........................................   500,000 slots
Required Food Funding: $15.35 (average package cost) 
     12 months  500,000 slots.........   $92.1 million
Required Administrative Funding: $50.25 (fiscal year 
    2002 per caseload slot)  102.5 percent 
    (estimated State and Local Government Inflation 
    Index for 2002)  500,000 slots.............  $25.75 million
Estimated USDA Costs for Procuring Commodities..........     $.8 million

    (Restore Senior Income Guidelines to 185 percent of Poverty.--
Current income eligibility for senior clients is set at 130 percent of 
the poverty income guidelines, as opposed to 185 percent of poverty for 
CSFP women, infants, and children and clients of the WIC Program and 
the Seniors Farmers Market Nutrition Program. Many seniors are 
struggling with high housing, medical, and utility costs, and at the 
130 percent poverty guideline, even the slightest inflation increase in 
Social Security income renders many seniors ineligible for CSFP.

                                               NATIONAL CSFP ASSOCIATION CSFP ADMINISTRATIVE EXPENSE/VALUE SURVEY FOR FISCAL YEAR 2001 MARCH 2002
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Goods &                                                       Extra goods
                                                                       USDA       Not reimbursed       CSFP          Services        Volunteer     Annual total    Percent paid     donated to
                            Programs                                reimbursed     by USDA cash    expenditures     donated to      labor hours    program value      by USDA          CSFP
                                                                       cash                            cash        agency value        value                                       participants
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New Hampshire...................................................        $499,073         $41,109        $540,182          $6,250        $122,627        $669,059              75          $1,000
New York \1\....................................................       2,206,437  ..............       2,206,437  ..............          28,241       2,234,678              99  ..............
Vermont \1\.....................................................         516,502  ..............         516,502  ..............          47,360         563,862              92  ..............
Wash, DC........................................................         539,148         705,902       1,245,050         365,500         141,378       1,751,928              31  ..............
Kentucky........................................................         316,214          67,007         383,221  ..............         171,260         554,481              57  ..............
Mississippi.....................................................         160,386           3,761         164,147  ..............          56,327         220,474              73          17,500
North Carolina..................................................          66,628          27,750          94,378  ..............  ..............          94,378              71  ..............
Tennessee \1\...................................................         866,965          75,738         942,703  ..............  ..............         942,703              92  ..............
Illinois \1\....................................................         860,530  ..............         860,530  ..............  ..............         860,530             100  ..............
Michigan \1\....................................................       4,629,473       1,404,811       6,034,284          29,500       4,569,293      10,633,077              44          80,150
Ohio............................................................         117,364          90,767         208,131          43,803          51,079         303,013              39  ..............
Red Lake, MN \1\................................................          10,631  ..............          10,631  ..............  ..............          10,631             100  ..............
Minnesota.......................................................         631,290         221,709         852,999          24,325          81,444         958,768              66  ..............
Louisiana.......................................................       3,937,862  ..............       3,937,862         819,723         861,039       5,618,624              70  ..............
New Mexico......................................................       1,122,764         125,250       1,248,014          61,687         159,225       1,468,926              76         260,792
Texas...........................................................         259,262  ..............         259,262  ..............          57,251         316,513              82          10,882
Colorado........................................................       1,199,722         230,562       1,430,284          36,925         425,607       1,892,816              63         822,637
Iowa............................................................         241,625         423,315         664,940  ..............           5,387         670,327              36         229,654
Kansas..........................................................         326,117          83,989         410,106          40,500         143,066         593,672              55          18,000
Montana \1\.....................................................         250,200           4,091         254,291             250          13,974         268,515              93  ..............
Nebraska........................................................         728,021          38,029         766,050          21,315         507,885       1,295,250              56          32,730
South Dakota \1\................................................          33,043  ..............          33,043  ..............  ..............          33,043             100  ..............
Arizona.........................................................       1,002,056         436,681       1,438,737  ..............         521,590       1,960,327              51       3,826,785
California \1\..................................................       2,323,386         699,171       3,022,557          35,177       1,701,226       4,758,960              49         990,335
Oregon \1\......................................................          56,499  ..............          56,499  ..............  ..............          56,499             100  ..............
Washington \1\..................................................          27,321  ..............          27,321  ..............  ..............          27,321             100  ..............
                                                                 -------------------------------------------------------------------------------------------------------------------------------
      Total.....................................................      22,928,519       4,679,642      27,608,161       1,484,955       9,665,259      38,758,375              59       6,290,465
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Full Survey Data Not Received; USDA Reimbursed Cash=fiscal year 2001 Final state Administrative data; Goods and Services Donated to Agency=facilities, warehouse space, transportation
  services, etc needed to operate and distribute food packages; Volunteer Labor hours=$15.39/hour (determined by Points of Light Foundation Washington, D.C.); Extra Goods Donated to
  Participants=donations in addition to CSFP monthly food package, ie. food, clothing, books, immunizations, carseats; Percent Paid by USDA=USDA Reimbursed Cash/Annual Total Program Value
  (calculations do not include value of Extra Goods donated to participants.

                                 ______
                                 

    Prepared Statement of the National Congress of American Indians

    On behalf of the National Congress of American Indians (NCAI) and 
its more than 200 member tribal nations, we are pleased to have the 
opportunity to present written testimony on fiscal year 2003 
appropriations for the Department of Agriculture.
    The tragic events of September 11 brought forth the strength and 
the determination of our nation to survive in the face of adversity. It 
is this same spirit that has carried Indian Country through years of 
annihilation and termination. It is this same spirit that has propelled 
Indian Nations forward into an era of self-determination. And it is in 
this same sprit of resolve that Indian Nations come before Congress to 
talk about honoring the federal government's treaty obligations and 
trust responsibilities throughout the fiscal year 2003 budget process.
    On February 4, President Bush proposed a $74.4 billion budget for 
the Agriculture Department that freezes funding for most Indian-
specific programs within USDA, continuing the trend of consistent 
declines in federal per capita spending for Indians compared to per 
capita expenditures for the population at large. This trend 
demonstrates the abject failure of the federal government to commit the 
serious resources needed to fully honor its trust commitment to Indian 
tribes.
    The federal trust responsibility represents the legal obligation 
made by the U.S. government to Indian tribes when their lands were 
ceded to the United States. This obligation is codified in numerous 
treaties, statutes, Presidential directives, judicial opinions, and 
international doctrines. It can be divided into three general areas--
protection of Indian trust lands; protection of tribal self-governance; 
and provision of basic social, medical, and educational services for 
tribal members.
    NCAI realizes that Congress must make difficult budget choices this 
year. As elected officials, tribal leaders certainly understand the 
competing priorities that members of Congress must weigh over the 
coming months. However, the fact that the federal government has a 
solemn responsibility to address the serious needs facing Indian 
Country remains unchanged, whatever the economic or political climate 
may be. We at NCAI urge you to make a strong commitment to meeting the 
federal trust obligation by fully funding those programs that are vital 
to the creation of vibrant Indian Nations. Such a commitment, coupled 
with continued efforts to strengthen tribal governments and to uphold 
the government-to-government relationship, will truly make a difference 
in helping us to create stable, diversified, and healthy economies in 
Indian Country.
    NCAI's statement focuses on our key areas of concern surrounding 
the President's budget request. Of course, there are numerous other 
programs and initiatives within USDA that are important to American 
Indians and Alaska Natives. Attached to this testimony is a breakdown 
of key programs for which we urge your support at the highest possible 
funding level as the appropriations process moves forward.
                  rural economic development programs
    The Census Bureau's Poverty in the United States for 2000 showed 
that American Indians and Alaska Natives remain at the bottom of the 
economic ladder--with 25.9 percent of our population falling below the 
poverty line. This compares to an 11.9 percent poverty rate for all 
races combined.
    Congress has authorized USDA's rural development programs to assist 
in building economic growth in the rural areas of the nation with the 
highest percentage of low-income residents. The tribal program 
allocation within the budget request is only a very small percentage of 
the total funding available for Rural Community Advancement Programs, 
but it will go a long way toward helping to address the needs of some 
of America's poorest communities.
    The President has requested level funding of $24 million for the 
Rural Community Advancement Program Indian Set-Aside. Within both the 
fiscal year 2002 appropriation and the fiscal year 2003 request, $4 
million of this amount is earmarked for community facilities grants to 
tribal colleges and $250,000 is for a grant to provide technical 
assistance on rural transportation. The remainder of the funds may be 
used for water and waste disposal grants and loans to tribes, as well 
as for rural business opportunity grants and rural business enterprise 
grants to tribes.
    NCAI urges that the Subcommittee adopt language to specify further 
how this tribal funding should be allocated among the various rural 
development programs, as follows: $1 million for rural business 
opportunity grants; $5 million for community facilities grants for 
tribal colleges; $15 million for grants for drinking water and waste 
disposal systems; and, $3 million for rural business enterprise grants.
    Water and Wastewater Grants.--We urge Congress to authorize USDA to 
provide 100 percent of project costs for the most economically 
disadvantaged tribes that otherwise would not qualify for a loan.
    Tribal Colleges.--Many of the nation's tribally controlled 
community colleges (TCCCs) are housed in substandard facilities, where 
common hazards include leaking roofs, asbestos insulation, exposed and 
below-code wiring, and crumbling foundations. TCCC's are located on 
federal trust land, and the upkeep of their physical plants is a 
federal responsibility.
    Rural Business Enterprise and Opportunity Grants.--Today, 
unemployment rates in Indian Country are the highest in the nation, 
sometimes topping 50 percent. The development of new and diverse 
businesses in Indian Country is one cornerstone of self-sufficiency. 
NCAI supports a $3 million amendment in rural business enterprise 
grants to support the development of small and emerging tribal business 
enterprises. These funds can be used to develop land, construct 
buildings and factories, purchase equipment, provide road access and 
parking areas, extend basic utilities, or provide technical assistance, 
startup and operating costs, or working capital for new business. We 
also urge $1 million for tribal rural business opportunity grants to 
help tribes to analyze business ventures that will make use of existing 
economic and human resources. Funding can also be used to train tribal 
entrepreneurs and to establish business support centers.
                           extension services
    Since fiscal year 2001, funding for extension agents on Indian 
reservations has been frozen at $2 million. The Extension Indian 
Reservation Program, authorized under the Food, Agriculture, 
Conservation and Trade Act, has provided services to Indian Country 
since 1991 on issues ranging from crop and animal production practices 
to farm business management. It also has furnished extension agents, 
employees of the State Cooperative Extension System, who work with 
tribal advisory committees to develop educational programs in 
agriculture or agriculture-related youth programs that respond to 
tribal priorities. NCAI strongly supports an increase to $5 million for 
fiscal year 2003 so that the program can hire additional extension 
agents on large Indian reservations to help promote productive and 
efficient land use.
            food distribution program on indian reservations
    The Food Distribution Program on Indian Reservations (FDPIR) is 
administered at the federal level by the Food and Nutrition Service 
(FNS) in cooperation with 98 tribal organizations and six state 
agencies. Many Native Americans actually participate in the FDPIR 
rather than the Food Stamp Program because of rural isolation and the 
lack of easy access to food stores.
    The $26.25 billion request for the Food Stamp program would provide 
full funding to FDPIR, which is critical to providing nutrition 
assistance to low-income households on reservations and to Native 
American families residing in designated areas near reservations.
    In fiscal year 2001 and fiscal year 2002, up to $3 million in FDPIR 
funds were reserved to purchase bison from Native American producers 
and cooperatives. Bison meat is a healthy meat product, low in 
cholesterol, fat, and calories, and it is a culturally preferable food 
choice for many Native Americans. NCAI strongly supports the inclusion 
of a similar provision in the fiscal year 2003 Agriculture 
appropriations bill.
Tribally Controlled Community Colleges
    The fiscal year 2003 budget request once again freezes funding for 
tribally controlled community colleges. Although tribal colleges are 
relatively new to the Land Grant community, they are making impressive 
strides with limited resources. More support is needed, however, for 
them to achieve full participation in the Land Grant system and to 
realize their full potential.
    Executive Order No. 13021 on Tribal Colleges and Universities, 
issued on October 19, 1996, reaffirms the important role tribal 
colleges play in reservation development by directing all federal 
departments and agencies to increase their support to the colleges. 
According to recent testimony before the Senate Committee on Indian 
Affairs by Tom Corwin, the Deputy Assistant Secretary of the Office of 
Elementary and Secondary Education, President Bush intends to reaffirm 
the Executive Order in the near future.
    In the meantime, we urge Congress to show its support for TCCCs by 
increasing funding for 1994 Institutions Equity Grants (currently 
funded at $1.5 million) and the Agriculture Research Initiative 
(currently funded at $1.0 million).
                               conclusion
    Thank you for this opportunity to present written testimony 
regarding the fiscal year 2003 appropriations for the Department of 
Agriculture. The National Congress of American Indians calls upon 
Congress to fulfill the federal government's fiduciary duty to American 
Indians and Alaska Native people. This responsibility should never be 
compromised or diminished because of any political agenda or budget cut 
scenario. Tribes throughout the nation relinquished their lands and in 
return received a trust obligation, and we ask that Congress maintain 
this solemn obligation to Indian Country and continue to assist tribal 
governments as we build strong, diverse, and healthy nations for our 
people.
  Attachment A.--The Fiscal Year 2003 Budget Request for Agriculture 
                       Programs Benefiting Tribes
    The fiscal year 2003 USDA budget request is $74.4 billion, $2.2 
billion less than the current estimate of fiscal year 2002 
expenditures, including $146 million for food safety-related homeland 
security and an increase in nutrition program spending. Among the 
decreases is funding for telecommunications access grants. In most 
instances, funding for Indian-specific programs remains frozen at 
current levels.

                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year
                              USDA                               -----------------------------------------------
                                                                   2001 enacted    2002 enacted    2003 request
----------------------------------------------------------------------------------------------------------------
Rural and Economic Development:
    Rural Community Advancement Program Indian Set-Aside \1\....            24.0            24.0            24.0
    Water/Sewer Grants for Alaska Rural and Native Villages.....            20.0            24.0            20.0
    Enterprise Zone/Empowerment Community Grants................            15.0            11.7             7.1
    Circuit Rider Program.......................................             9.5            11.0             9.5
    Distance Learning and Telemedicine Grants and Loans \2\.....            26.9            49.4            31.1
    Rural Development Loan Fund Indian Set-Aside................             2.0             1.7             1.7
    Indian Tribal Land Acquisition Loans........................             2.0             2.0             2.0
Extension Services: Tribal Colleges Extension Services                       3.3             3.3             3.3
Indian Reservation Agents.......................................             2.0             2.0             2.0
Food Programs:
    Food Stamps (incl. Food Distribution Program on Indian              20,100.0        22,922.0        26,250.0
     Reservations) \3\..........................................
    WIC.........................................................         4,000.0         4,348.0         4,751.0
Tribal Colleges:
    Endowment Fund..............................................             7.1             7.1             7.1
    1994 Institutions Equity Grants.............................             1.5             1.5             1.5
    Agriculture Research Initiative.............................             1.0             1.0             1.0
    Alaska Native and Native Hawaiian-Serving Institutions......             3.0             3.0            3.0
----------------------------------------------------------------------------------------------------------------
\1\ Within the fiscal year 2002 set-aside and fiscal year 2003 request for the Rural Community Advancement
  Program, $4 million is provided for community facilities grants to tribal colleges. This funding may be used
  for water and waste disposal grants and loans to tribes, as well as for rural business opportunity grants and
  rural business enterprise grants to tribes.
\2\ In fiscal year 2002, $22 million was set aside for broadband transmission and local dial-up Internet service
  in rural areas, including $12.5 million in grants. The fiscal year 2003 request cuts this level to $6.1
  million. The remainder of the Distance Learning and Telemedicine funds in both fiscal year 2002 and the fiscal
  year 2003 request will finance an estimated loan program level of $80 million for broadband and Internet
  access and $300 million for distance learning and telemedicine.
\3\ In fiscal year 2002, up to $3 million is reserved to purchase bison for the Food Distribution Program on
  Indian Reservations from Native American producers and cooperatives.

                                 ______
                                 

   Prepared Statement of the National Council of Farmer Cooperatives

    The National Council of Farmer Cooperatives (NCFC) appreciates very 
much this opportunity to submit its views regarding the fiscal year 
2003 agriculture appropriations bill, and respectfully requests this 
statement be made part of the official hearing record.
                overview of ncfc and farmer cooperatives
    NCFC is a national trade association representing America's farmer-
owned cooperative businesses. Our members include nearly 60 national 
and regional marketing, supply and credit cooperatives which, in turn, 
are comprised of more than 3,000 local cooperatives whose member owners 
represent a majority of our nation's nearly 2 million farmers. In 
addition, NCFC's membership includes 31 separate state councils.
    Farmer cooperatives are farmer owned and controlled. They exist for 
the mutual benefit of their farmer members. As farmer-owned businesses, 
they handle, process and market virtually every type of commodity 
produced in the U.S.; manufacture and sell farm supplies; and provide 
credit and related financial services for and on behalf of their member 
owners. Earnings from such activities are returned to their farmer 
owners on a patronage basis, thereby helping improve their income and 
providing greater opportunities to capture more of the value of what 
they produce beyond the farm gate. With approximately 300,000 full-time 
and seasonal employees, farmer cooperatives also represent an important 
source of employment in many rural communities, and contribute 
significantly to the local, state and national economy.
                 public policy and farmer cooperatives
    For these reasons, public policies and programs that serve to 
encourage and enhance the ability of farmers to join together in 
cooperative self-help efforts should be strongly supported and fully 
funded to achieve their objectives.
    Such action is necessary if farmers are to be able to:
  --Improve their income from the marketplace;
  --Better manage their risk;
  --Capitalize on potential new market opportunities, especially value-
        added; and
  --Compete more effectively in a rapidly changing global economy.
                  recommendations for fiscal year 2003
    To help achieve these important objectives, we recommend the 
following for fiscal year 2003:
    USDA Farmer Cooperative Programs.--Programs to help foster and 
promote cooperative self-help efforts by farmers need to be revitalized 
and given a high priority. Funding for such programs should be 
specifically provided at not less than $6 million. Further, 
consideration should be given to re-establishing a separate agency 
within USDA to carry out such programs.
    In addition, funding for USDA research, education and technical 
assistance programs in support of cooperative self-help efforts by 
farmers should be strengthened. We recommend not less than $3 million 
for cooperative research agreements and not less than $3 million for 
cooperative education grants. We also recommend that USDA continue to 
work closely with the private sector to carry out programs to provide 
farmers with greater access to the information and technical assistance 
needed for organizing and operating a farmer owned cooperative 
business.
    B&I Loan Guarantee Program and Farmer Cooperatives.--One of the 
major challenges facing farmer-owned cooperatives in helping farmers 
capture more of the value of what they produce beyond the farm gate is 
access to capital. Farmer cooperatives, being farmer owned and farmer 
controlled, can not go to Wall Street for equity capital as easily as 
other types of businesses. Instead, they generally must look to their 
farmer owners as a source of capital, a particularly limited pool of 
capital--especially at a time of low commodity prices and continued 
economic stress, or rely on debt equity.
    To help address this challenge, both the House and Senate farm 
bills would expand eligibility for farmer cooperatives under USDA's 
business and industry (B&I) guaranteed loan program and make other 
needed improvements in the program for the benefit of farmers. With the 
hope that Congress will soon complete action on the farm bill, it is 
vital that this important program be fully funded to help meet the 
needs of farmers and their cooperatives, and to achieve its overall 
objectives. At a minimum, the program should be maintained at not less 
than the level for fiscal year 2002 with recognition that additional 
increases may be needed in future years.
    Value-Added Market Assistance Grants.--Both the House and Senate 
farm bills authorize increased funding for this important program, 
which provides technical assistance and other support to help farmers 
through cooperative efforts become more involved in value-added 
activities to improve their income. We strongly support such increased 
funding.
    Export Programs.--We also believe it important to maintain and 
strengthen funding for USDA's export programs, and we endorse the 
recommendations of the Coalition to Promote U.S. Agricultural Exports 
of which NCFC is a member, with regard to the Market Access Program 
(MAP) and Cooperator Program (FMD). We also urge continued funding for 
other related USDA export programs, including the Export Enhancement 
Program (EEP), Dairy Export Incentive Program (DEIP), GSM Export Credit 
Guarantee Program, and Public Law 480 Programs. These programs 
encourage U.S. agriculture exports, meet humanitarian needs, counter 
subsidized foreign competition, protect American jobs, and strengthen 
farm income.
    Agricultural Research.--Another important area of emphasis when it 
comes to enhancing the global competitiveness of farmer cooperatives 
and American agriculture is research. NCFC endorses the recommendations 
of the National Coalition for Food and Agricultural Research of which 
NCFC is a member, which has set an objective of doubling Federal 
funding over the next 5 years.
    Conservation Programs.--Water quality issues are presenting 
increasing expectations and regulatory requirements for farmers and 
ranchers, particularly those with animal feeding operations. USDA's 
Natural Resources Conservation Service (NRCS) is the lead technical 
agency within USDA offering ``on-farm'' technical and financial 
assistance, principally through EQIP and CTA programs. We strongly 
support full funding for both programs, which provide farmers and 
ranchers with needed assistance to meet important environmental goals 
through adoption of best management practices. We also support funding 
of incentive payments for technical assistance that can be carried out 
in partnership with the private sector, including farmer-owned 
cooperatives, as provided in the House-passed farm bill. Farmer 
cooperatives have invested heavily in developing the technical skills 
of their employees to help their farmer owners address environmental 
concerns. It is estimated that 90 percent of all members of the 
Certified Crop Advisor (CCA) program, for example, are employed by the 
private sector and majority of those are employed by farmer 
cooperatives.
    Meat Inspection/User Fees.--We continue to be opposed to user fees 
relating to Food Safety and Inspection Service (FSIS) for meat 
inspection. Such inspection programs provide important public benefits 
relating to food safety and quality and should continue to be publicly 
funded.
                               conclusion
    Mr. Chairman, on behalf of NCFC and its members, we want to again 
thank you for the opportunity to share our views with regard to the 
fiscal year 2003 agriculture appropriations bill. We look forward to 
working with you.
                                 ______
                                 

          Prepared Statement of the National Dry Bean Council

    Dry & Snap beans (Phaseolus vulgaris L.) are versatile short 
season, high value food crops that niche well into shorter production 
seasons of the northern and intermountain states, providing vital 
alternatives to growers where crop options are limited. Beans offer the 
consumer a healthy, tasty and inexpensive food choice as either low-
fat, low-calorie vitamin/mineral-rich green bean pods or as a protein-
rich source of complex carbohydrates and fiber in a variety of canned 
and dry bean products differing in color, size, shape, and flavor. 
Clinical studies have documented that the soluble fiber or pectin 
content of dry bean seed has potent effects in the prevention and 
treatment of chronic medical conditions such as cardiovascular disease, 
diabetes mellitus, obesity, hypertension, cancer and diseases of the 
digestive tract. Beans are currently endorsed by the American Heart 
Association, the American Cancer Society, and the American Diabetes 
Association.
    Processing.--The canning and freezing industry for both seed and 
pod types is diverse and located across the country offering employment 
outside the 20 major production states. Over 90 percent of the navy 
bean crop is processed as canned baked beans, while only 20 percent of 
the pinto bean market class is processed as a canned food. The same 
processing industry which cans over half the dry bean crop as beans in 
either clear brine, sauce with pork, or chili has seen an increase in 
production in the last 10 years of 10 million cases. This volume 
represents an increase of $160 million to a current value in excess of 
$900 million.
    Production.--Phaseolus dry edible beans are planted on 
approximately 1.9 million acres (1.1-2.6) in the U.S. Production 
fluctuates around 22 million hundred weight (cwt) annually, ranging 
from 15 million cwt in 1983 to over 32 million cwt in 1990, 1991 and 
1999. On-farm value of this crop ranges from $350 to $700 million, 
depending on the season and price. The major production states ranked 
in order of acreage are: ND, MI, NE, MN, CO, CA, ID, WY, WA, NY, KS, 
and MT. Ten dry bean commercial classes are produced in the U.S. and 
these classes are differentiated by color, size and shape of the bean. 
In addition to production of Phaseolus dry beans, green bean (snap 
bean) production occurs in several regions of the U.S. (approximately 
220,000 acres), with an estimated value of $110 M annually. States 
leading in snap bean production for processing are WI, OR, IL, MI, and 
NY. Snap beans for fresh market are grown primarily in FL, with smaller 
acreages in NJ, AR, and TN. Snap beans for fresh market are grown on 
approximately 80,000 acres nationwide with an additional value of $80 
million annually.
    Utilization and Exportation.--Approximately 60 percent of the total 
U.S. dry bean production is consumed nationally. Per capita dry bean 
consumption has increased from 5.7 to 7.8 pounds since 1984. This 
represents a 36 percent increase that is largely due to the recognition 
of the food and health value of beans. A large share of the U.S. dry 
bean production is now targeted at export markets. Exports peaked in 
the early 1980's at over 12 million cwt. Currently, 40 percent of the 
U.S. production is exported with certain commercial classes grown 
exclusively for export. Cultural preferences in certain export markets 
for specific commercial classes of dry bean allows for diversification 
of U.S. dry bean agricultural production. Bean exports have played an 
important role in reducing the balance of payment deficit the U.S. 
suffers in world trade. Bean exports are becoming increasingly 
important because they are an indispensable protein source in Latin 
America and many developing countries, particularly those in East 
Africa. Their value in famine relief in these countries is vital. The 
array of seed types currently grown in the U.S. makes beans an 
important choice to meet the energy and protein needs of the estimated 
21 million people at risk of death from starvation and disease in 
Central Africa.
    These four programs represent the only Federal effort on bean 
research and the only projects with a national scope for these crops. 
Currently four scientists carry out this effort. The national 
leadership extended by ARS scientists in areas of pathology, germplasm 
maintenance and enhancement and food quality genetics has strengthened 
the entire bean industry nationally. The National Dry Bean Council 
(NDBC) truly believes that a continued and strong investment by the 
Federal Government in research and subsequent development and 
distribution of new technologies provides a return to the consumer many 
times the cost of the research investment.
vegetable and forage crop production research unit, prosser, washington
    The ARS Bean Project at Prosser, Washington has been long standing 
with a reputation of excellence for research conducted on the 
pathogenic variability of bean common mosaic virus (BCMV), the 
production problems caused by the soil root-rot complex of pathogens, 
and the introgression of diverse resistance genes into snap and dry 
bean germplasm. The project has made significant contributions to bean 
development by the release of more than 10 snap bean lines and 18 dry 
bean lines in six distinct market classes. A number of the dry bean 
lines have become successful dry bean varieties in the West and 
Intermountain states (CO, ID, MT, OR, WA, and WY) and the upper-Midwest 
(ND). The dry bean varieties developed by ARS, Prosser, WA have 
generated about $500 million in income to farmers in the Pacific NW 
over the past 25 years. Over 90 percent of the foundation and certified 
bean seed (dry and garden) is produced in California, Washington and 
Idaho. The ARS bean project at Prosser, WA has saved the Western bean 
seed industry considerable sums of money that could have been lost to 
disease epidemics.
    The ARS Prosser, WA bean project is currently under the leadership 
of Dr. Phillip Miklas who, in addition to introgressing genes from 
diverse germplasm, is conducting basic genetic studies on the 
resistance to different strains of BCMV, common bacterial blight, root 
rot, and white mold. Worldwide, Dr. Miklas is considered an authority 
on the development and application of DNA marker-assisted selection 
technologies for the improvement of bean. Dr. Miklas has developed 
effective cooperative research efforts with ARS and SAES scientists at 
several locations in the U.S. and Puerto, Rico, and with commercial 
plant breeders in CA, ID, FL, and WI. Over the years the facilities at 
Prosser, Washington have evolved to a point where there is an excellent 
infrastructure in which dry and snap bean disease and germplasm 
enhancement research is conducted productively, efficiently, and has 
garnered a wide customer base. A rapport has been established with this 
customer base that is extremely supportive of ARS research efforts. In 
addition, nurseries have been established that facilitate long term 
research and breeding for resistance to white mold, curly top virus, 
and the pathogen complex of root rot.
    The NDBC calls on Congress and ARS to maintain bean research at 
Prosser, WA and increase funding by $220,000 to enable ARS-Prosser to 
better meet the needs of the bean seed industry located in the West, 
and to better address chronic disease and environmental stress problems 
that face bean production nationwide. For example, ARS Prosser is 
currently addressing the new virus disease complex of snap bean in the 
Great Lakes region (IL, IN, MI, OH, PA, NY, and WI) and has recently 
developed germplasm with resistance to an emerging fungal disease 
problem affecting dry bean production in North Dakota and Minnesota. 
The additional funds will also enable maintenance and enhancement of 
several important long-term nurseries that have been established at or 
near Prosser to conduct bean pathology research. The project is 
currently undergoing a downsizing of field research activities and 
losing technical help due to insufficient funds.
        sugar beet & bean research unit, east lansing, michigan
    Dr. G.L. Hosfield, the incumbent of the ARS Food Quality Position 
at East Lansing, Michigan, is the ARS lead scientist to improve the 
availability of nutrients and consumer acceptance of dry beans as a 
food source. Dr. Hosfield is expected to provide new and fundamental 
knowledge that increases our understanding of the current food-value 
limitations in dry bean relevant to indigestibility of seed proteins 
and starch and their interactions with seed coat flavonoids, darkening 
of seed coats in storage, hardening of seeds, prolonged cooking time 
(due to a hard-to-cook phenomenon that restricts cell wall breakdown 
during cooking), and flatulence caused by indigestible starch, protein, 
hemicellulose, raffinose family oligosaccharides. Knowledge of the 
factors that define food quality in bean will permit the inherent 
complexity of food quality to be dissected into a number of component 
characters that can individually be measured, selected, and altered via 
genetic technology. The resulting extension of new, and/or the 
alteration of existing fundamental concepts and techniques impacts 
significantly the food-quality breeding of other food-legume crops. The 
incumbent releases new germplasm with improved food quality, 
architecture, horticultural characteristics and multiple and durable 
disease resistance to breeders and industry along with methodologies 
that enable breeders to efficiently screen and transfer food-quality 
genes into commercial cultivars. The improvement of food quality in 
bean contributes positively and significantly to the highest national 
research priorities established by the National Research Council and 
the President's initiatives. Improved food quality of dry bean promotes 
and optimizes human health and well-being through better nutrition, 
increased productivity, maximized use of agricultural products for 
domestic and export markets, decreased vulnerability of beans to 
adverse weather and disease stresses, and the transfer of technology to 
users. The research contributes positively to the U.S. trade balance.
    This program is highly productive. Dr. Hosfield is internationally 
recognized for his research on the use of genetic technologies to 
improve the biological utilization and consumer quality of dry bean and 
the development of new knowledge and methodologies to select dry bean 
germplasm with improved food quality. Procedures developed by Dr. 
Hosfield for testing bean quality have been adopted in bean quality 
laboratories in other countries. The incumbent receives numerous calls 
for advice and is consulted regularly by industry, other researchers, 
and the general public on food quality issues. Frequently, those 
consultations impact across food legume crop species. Dr. Hosfield 
cooperates effectively with other USDA, ARS scientists, SAES 
researchers in at least seven states, commercial plant breeders, and 
industry personnel. He has invented and co-invented numerous bean 
germplasms and varieties in several market classes.
    The NDBC calls on Congress and ARS to increase funding by $125,000 
for this critical and productive food quality improvement research 
program at East Lansing, MI to allow the project leader to work more 
efficiently in the germplasm enhancement area. There is a critical need 
to screen germplasm from a wider base of national and international 
programs and expand research efforts into the study of the relationship 
between antioxidant potential and the health related benefits of these 
compounds in beans, the effect of bean diets on decreasing the 
incidence of some forms of cancer, and the hard seed problem that 
limits consumer acceptance and reduces the availability of nutrients to 
consumers.
               vegetable laboratory, beltsville, maryland
    The ARS Bean Project at Beltsville, Maryland has been long standing 
with a presence of excellence under the legacy of Dr. J.R. Stavely, who 
devoted 100 percent of his research effort to the study of fungal and 
viral pathogens attacking beans. Historically, Dr. Stavely studied the 
foliar fungal pathogen causing rust disease in dry and snap beans. He 
developed important technologies for introgressing rust resistant genes 
into adapted and useful germplasm. He is also studying the new viral 
disease, Bean Golden Mosaic Virus, introduced in 1993 in South Florida. 
This disease has the potential to ``wipe-out'' the snap bean industry 
in Florida and cause economic losses in other snap bean production 
areas in the Eastern seaboard. Under the leadership of Dr. Stavely, 
this highly productive ARS project released 43 processing and 24 fresh 
market snap beans and 41 dry bean germplasm lines in three market 
classes: 9 great northern, 20 pinto, and 12 navy. Research has focused 
on the introgression and pyramiding of rust resistance genes into both 
snap and dry beans as the most effective control of the variable rust 
pathogen.
    This long-term germplasm enhancement project involves 
identification of novel sources of resistance present in the USDA Plant 
Introduction collection, the genetic characterization of these new 
disease resistance genes, and the incorporation of these genes, both 
individually and as groups, into snap bean and several dry bean market 
classes. In addition, the incumbent monitors the pathogenic variability 
of the bean rust pathogen and uses this information to identify 
strategies that result in durable and sustainable bean production. The 
project also aims to conduct basic plant pathological studies on the 
epidemiology and genetics of the rust fungus.
    The current project leader Dr. M.A. Pastor-Corrales cooperates 
effectively with other USDA scientists, SAES researchers in at least 
nine states, and commercial plant breeders. This position serves the 
national needs for bean research in the area of fungal pathogens 
attacking beans and provides leadership to SAES and industry in both 
dry and snap bean breeding efforts.
    The NDBC calls on Congress and ARS to increase funding by $90,000 
to maintain the program in bean rust pathology germplasm enhancement 
research at Beltsville, MD and expand the program into anthracnose and 
bean golden yellow mosaic disease breeding and pathology. Increased 
funding would allow this project to perform at optimum efficiency to 
develop improved rust, anthracnose, and bean golden yellow mosaic-
resistant germplasm lines. An increased emphasis on the genetics of 
pathogen virulence will offer insights on the development of strategies 
needed to obtain stable rust and broad-based genetic resistance to 
variable fungal and viral pathogens.
     tropical agriculuture research station, mayaguez, puerto rico
    Currently, Dr. J. Smith is the Bean Germplasm scientist at the 
Tropical Agriculture Research Station (TARS), in Mayaguez, PR. Dr. 
Smith is working to increase the genetic diversity of U.S. bean 
germplasm, domesticate unadapted tropical germplasm, and develop 
multiple disease-resistant beans for tropical and temperate regions. 
Through the years, the ARS bean position in Puerto Rico has played a 
vital part in supplying many of the bean breeding programs in the U.S. 
with improved germplasm. Strategically, the location allows evaluation 
of tropically adapted lines that would not be possible in northern 
temperate climates where the bean lines would not flower. In a given 
year, three field seasons can be conducted at each of three locations 
on the island with distinct environmental stresses and disease problems 
which serves to expedite germplasm evaluation and development. Thus, 
the tropical location of Puerto Rico is ideal for germplasm enhancement 
work, and is very functional as a bridge between tropical and temperate 
regions.
    Tropical lines developed by TARS, with adaptation in Michigan, have 
been used directly by the breeding program at MSU. The variety 
Mayflower has a TARS line (2W-33-2) as a parent. Mayflower is a popular 
high yielding navy bean in Michigan that is credited with contributing 
to the 25 percent increase in commercial bean yields in the state over 
the last 5 years. Currently over 40 percent of the navy beans produced 
in the U.S. are marketed overseas, mainly in the UK. British Food 
Health Legislation now requires that information be made available on 
the pesticides used in bean production. Breeding for disease resistance 
using new sources of resistance is vital to help reduce the use of 
chemicals in our bean production. The health of the industry is 
dependent on maintaining and expanding these overseas markets. Black 
beans are becoming an increasingly important national and export 
commodity, so disease resistance and productivity is vital to maintain 
a competitive edge in world markets, where 95 percent of the crop is 
exported. In a white mold trial, a black seeded line from TARS topped 
the trial and outyielded the check variety by over 30 percent under 
disease pressure. This is the kind of bean germplasm that is 
desperately needed by our industry.
    Minor market classes like Cranberry beans are a vital part of the 
bean industry in the U.S. Work at TARS in recent years has been 
directed at the improvement of this market class since commercial 
companies cannot direct resources to these minor market classes. All 
the cranberry beans produced in the U.S. are exported. The devastation 
of the winter snap bean crop in Florida was caused by the presence of a 
recently imported viral disease, bean golden mosaic virus, from the 
Caribbean. Resistance germplasm at TARS was made available to local 
breeders to assist in breeding for resistance to this devastating 
disease in Florida.
    The NDBC calls on Congress and ARS to increase funding by $65,000 
to maintain the Mayaguez program for bean germplasm enhancement and to 
strengthen the program's capacity for molecular marker development and 
basic agronomy support. Increased funding would allow the project to 
refill an agronomist position, recently vacated due to insufficient 
funding, and to fill a technician position in molecular biology. This 
would enable the expansion of germplasm screening and evaluation, the 
``pyramiding'' of multiple resistance genes from diverse sources, and a 
more efficient integration of resistance genes to alleviate biotic and 
abiotic stresses.
                      funding needs for the future
    The National Dry Bean Council (NDBC) is urging Congress to approve 
appropriations in fiscal year 2003 for the USDA Agricultural Research 
Service (ARS) Plant Science Program that increases funding from fiscal 
year 2002 levels to ensure that each existing bean CRIS (Current 
Research Information System) is funded at $350,000. This appropriation 
will enable ARS to provide the necessary support to existing programs. 
Specifically, the NDBC is recommending that Congress address the 
following priority needs in bean research.
    For existing ARS bean programs \1\ at Prosser, WA (add $220,000 
\2\); East Lansing, MI (add $125,000); Beltsville, MD (add $90,000); 
and Mayaguez, PR (add $65,000), increase funding to approximately 
$350,000 each. This additional funding of $500,000 will allow the 
incumbents to maintain critical core programs and to discover new 
knowledge about the biology and genetics of abiotic and biotic stresses 
that limit bean yields; expand studies on antioxidants, folate, and 
other nutritional compounds in beans that improve human health; address 
emerging pathogen problems; and develop new export markets by adapting 
exotic bean germplasm for U.S. production. The new knowledge base and 
farming technologies made possible by the increased base funding will 
facilitate sustainable bean production to meet export and local 
consumption demands and help promote and optimize human health and 
well-being by solving problems impacting digestibility, nutrition, and 
processor and consumer acceptance of beans. The new cultivars developed 
with improved stress resistance will promote a cleaner environment and 
safer food through reduced use of agricultural chemicals and increased 
water use efficiency.
---------------------------------------------------------------------------
    \1\ Note: it has been more than 10 years since any ARS-Bean Project 
has attained an additional influx of funds for research and germplasm 
development.
    \2\ Also please note that the Prosser, WA bean research project is 
partnered with the equally important and financially strapped edible 
legume pathology project that addresses bean, chickpea, lentil and pea 
problems. To keep bean research viable at Prosser both projects of the 
single CRIS require funding of $110,000 each; thus, the reason for 
requesting $220,000 for this location.
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                                 ______
                                 

  Prepared Statement of the National Organization for Rare Disorders, 
                                  Inc.

    Mr. Chairman and members of the Senate Appropriations Subcommittee 
on Agriculture, Rural Development, Food and Drug Administration and 
Related Agencies, the National Organization for Rare Disorders (NORD) 
wishes to express its views regarding appropriations for the Orphan 
Products Research Grant Program administered by the Office of Orphan 
Product Development (OOPD) at the Food and Drug Administration (FDA).
    NORD is a federation of approximately 140 voluntary health 
organizations and over 70,000 individual patients, healthcare providers 
and clinical researchers dedicated to helping the 25 million people in 
the United States suffering with rare ``orphan'' diseases. An orphan 
disease is defined by statute as any disease or condition impacting 
fewer than 200,000 Americans (The Orphan Drug Act of 1983). It makes no 
difference whether you are male or female, rich or poor, young or old, 
white, African-American, Latino, Asian or American Indian. These 
diseases affect everyone.
    In 1989 the HHS National Commission on Orphan Diseases estimated 
that only 30 percent of the 25 million patients suffering with rare 
diseases receive a diagnosis in 3 to 5 years after the onset of 
symptoms. That works out to about 7.5 million patients who are shuffled 
from specialist to specialist, year after year. Fifteen percent, or 3.7 
million people, wait 7 years or more. And even after diagnosis, they 
can only hope that someone, somewhere, will conduct research to develop 
a treatment for their disease.
    Recognizing that the rare disease community has not received 
sufficient funding, Senators Edward Kennedy and Orrin Hatch introduced 
the Rare Diseases Act of 2001, S. 1379, on August 3, 2001. This 
important legislation would provide additional funding for the Orphan 
Product Research Grant Program at the FDA in the amount of $25 million.
    On March 20, 2002, Mr. Mark Foley, cosponsored by Representatives 
Henry Waxman, John Shimkus, Sherrod Brown, Marge Roukema, Bobby Rush, 
James Greenwood, John Dingell, Peter King, James McGovern, Steve Horn 
and Christopher Smith, introduced the Rare Diseases Orphan Product 
Development Act of 2002, H.R. 4014, which would increase funding to $25 
million for the Food and Drug Administration's Orphan Product Research 
Grants Program.
    Note: The Rare Diseases Act of 2002, H.R. 4013, was also introduced 
on March 20, 2002, by Mr. John Shimkus, and cosponsored by the same 
Representatives above, which would provide for the statutory 
authorization for the existing Office of Rare Diseases (ORD) at the 
National Institutes of Health (NIH) in order to enhance the national 
investment in the development of diagnostics and treatments for 
patients with rare disorders. Additional funding for the office will 
augment NIH Institutes' research for neglected rare diseases in order 
to take advantage of emerging research opportunities.
    On behalf of the 25 million Americans suffering with the over 6,000 
known rare ``orphan'' diseases and the 119 organizations currently 
advocating for increased funding for this worthy program, we 
respectfully request that this Subcommittee support H.R. 4014 and 
appropriate the necessary funding authorized by this legislation. Just 
one dollar for each and every person suffering with a rare disease 
appropriated for the FDA'S Orphan Products Research Grant Program 
represents a minimal investment by the Federal Government in the 
development of lifesaving treatments in which the private sector has no 
interest. But the return on investment could be phenomenal if only a 
few new orphan drugs or devices are developed to reduce the burden of 
disease and death for thousands of patients with rare disorders.
    Appropriating just one dollar for each rare disease patient in 
America, rather than the current funding level, is a win-win 
proposition. Patients win when their symptoms are alleviated or cured. 
Families win when their loved ones no longer suffer. Society, as a 
whole, wins when patients are able to return to school or work to 
become productive tax-paying citizens. Pharmaceutical and biotechnology 
companies win when they are able to market new therapeutic products 
when part of the development costs are subsidized. The scientific 
community wins when the knowledge it gains can be applied to more 
prevalent diseases. And, finally, the government wins when the drain on 
healthcare dollars is minimized.
               fda orphan products research grant program
    This Subcommittee created the research grant program in fiscal year 
1983 to provide funding for pivotal clinical trials on new orphan 
drugs, medical devices, and medical foods for rare diseases. The funds 
have been made available to academic scientists and small companies. By 
definition, ``orphan products'' are treatments for rare conditions that 
have small potential markets and thus are not attractive to the 
commercial sector. Such treatments were not being developed for 
``orphan'' diseases by the private sector until the Orphan Drug Act was 
enacted in 1983.
    Since then, the FDA has approved 227 orphan drugs for marketing, 
and more than 800 additional drugs are in the research pipeline. Of 
those products approved for marketing, 27 (23 drugs and 4 medical 
devices) were developed with funding from the orphan product grants. 
These 27 treatments would not be on the American market today saving 
the lives of thousands of Americans, enabling them to return to school 
or work, if this Subcommittee had not created this small but critically 
important pool of research funds.
    Most of FDA's Orphan Products Research Grants support small 
clinical trials at academic institutions throughout the nation to 
develop the preliminary evidence that is necessary to attract 
commercial sponsors. It is the quintessential model for a successful 
government/industry partnership. There is no more appropriate program 
deserving of Federal support because it fills a major gap between 
academic research and the private sector, and it creates lifesaving 
products that are needed throughout the world.
    For example, children with Severe Combined Immune Deficiency 
(``Bubble Boy Disease'') no longer have to live in a plastic bubble 
because now their immune systems can fight off germs, thanks to an 
orphan drug developed with these grant funds. Children with urea cycle 
disorders no longer slip into a coma and die because an orphan drug 
enables their bodies to eliminate toxic levels of ammonia. Babies born 
without ribs no longer suffocate in infancy because an artificial rib 
(orphan medical device) is being developed now with funds from the 
Orphan Products Research Grant Program that allows the children's lungs 
to expand and breathe. Cystic fibrosis, Crohn's disease, and multiple 
sclerosis drugs are on the market today only because these grants 
supported some of their research.
    Unfortunately, there are many diseases and conditions that are 
simply too rare to attract private investment because the commercial 
sector is not interested in developing treatments for small markets. 
The investment necessary for research and development of new drugs and 
devices is too large in comparison to the size of the potential market 
for a rare disease. Case in point, there are only about 125 patients in 
the United States suffering with an orphan disease called 
fibrodysplasia ossificans progressiva (FOP), only 15,000 with 
Huntington's disease, and only 30,000 with cystic fibrosis. Many of the 
genetic diseases each impact no more than 40,000 Americans, whereas 
drugs for cancer, arthritis and hypertension each affect many millions 
of Americans, representing several billion dollars in potential sales 
each year.
    Given the fact that the Orphan Products Research Grant Program is 
attracting greater attention, more researchers are eager to participate 
each year. Therefore, it is very unfortunate that the annual 
appropriation for this program cannot begin to cover all of the 
meritorious grant requests for promising research projects. About 100 
grant applications are received annually, but many scientifically 
important applications are never funded simply because the 
appropriation is too small to meet the needs of the program. In fact, 
the appropriation now is less than it was in fiscal year 1995, and has 
remained between $10 to $12 million for many years.
    Mr. Chairman, if the government does not fund this research, who 
will? The private sector is simply not interested in rare diseases. If 
this Subcommittee does not meet the need of this unique sector of 
scientific research, people with rare diseases will be further 
victimized by the injustice of the supply and demand marketplace. For 
these diseases, no company wants to supply a treatment when the market 
demand is small.
                               conclusion
    And so, on behalf of the medically disenfranchised Americans and 
their families, we respectfully request that the members of this 
Subcommittee appropriate no less than $25 million to the FDA Orphan 
Products Research Grant Program for fiscal year 2002. We are relying on 
the members of this Subcommittee to fill the void between government 
and the private sector, and propel these treatments forward from 
academic laboratories to our local pharmacies. Ultimately, your 
compassion and insight will put new orphan drugs and devices into the 
waiting hands of critically ill patients. If you don't provide adequate 
resources for the Orphan Products Research Grant Program, unfortunately 
no one else will.
    For additional information about the Rare Diseases Act of 2001, S. 
1379, please contact Diane E. Dorman, Vice President for Public Policy, 
(202) 496-1296 or via e-mail at [email protected]. Thank you.
                Attachment I.--Supporting Organizations
    Alph-1 Association, Minneapolis, MN
    Alpha-1 Foundation, Miami, FL
    Alpha1VOICE, Evansville, IN
    Alstrom Syndrome International, Mount Desert, ME
    American Brain Tumor Association, Des Plaines, IL
    American Hemochromatosis Society, Lake Mary, FL
    American Laryngeal Papilloma Foundation, Spring Hill, FL
    American Syringomyelia Alliance Project (ASAP), Longview, TX
    Angel Flight America, Virginia Beach, VA
    Angel Flight Samaritans, Fairfax, VA
    Angel Flight for Veterans, Fairfax, VA
    ARPKD/CHF Alliance (Autosomal Recessive Polycystic Kidney Disease & 
Congenital Hepatic Fibrosis), Kirkwood, PA
    Association of Glycogen Storage Disease (U.S.), Durant IA
    Barth Syndrome Foundation, Perry, FL
    Batten Disease Support and Research Association, Reynoldsburg, OH
    Biotechnology Industry Organization (BIO), Washington, DC
    Blepharophimosis, Ptosis, Epicanthus Inversus (BPEI) Family 
Network, Pullman, WA
    Cardio-Facio-Cutaneous Family Network, Vestal, NY
    CARES (Congenital Adrenal Hyperplasia Research, Education & 
Support) Foundation, Short Hills, NJ
    Carol Ann Foundation, The, Tucson, AZ
    Celgene Corporation, Chevy Chase, MD
    Children's Angel Flight, Virginia Beach, VA
    Children's Brittle Bone Foundation, Pleasant Prairie, WI
    CDG Family Network Foundation, The, Shannon, IL
    Chromosome 9p- Network, Las Vegas, NV
    Chronic Granulomatous Disease Family Network Foundation
    Coalition of Advocates for Research on the Eye (CARE), Sharon, MA
    Coalition of Heritable Disorders of Connective Tissue, Sharon, MA
    Cornelia de Lange Syndrome (CdLS) Foundation, Avon, CT
    Corticobasal Ganglionic Degeneration (CBDG) Support Group, Haslett, 
MI
    Cystinosis Foundation, Oakland, CA
    Cystinosis Research Network, Burlington, MA
    Dubowitz Syndrome Information & Parent Support, Visalia, CA
    Dystonia Medical Research Foundation, Chicago, IL
    Ehlers-Danlos National Foundation, Los Angeles, CA
    Fabry Support & Information Group, Concordia, MO
    Families of Spinal Muscular Atrophy (SMA), Libertyville, IL
    FFF Enterprises, Temecula, CA
    FOD (Fatty Oxidation Disorder) Family Support Group, Greensboro, NC
    FORCE: Facing Our Risk of Cancer Empowered, Coral Springs, FL
    Foundation for Ichthyosis & Related Skin Types, Lansdale, PA
    Genetic Alliance, Washington, DC
    Genetics Information and Patient Services, Phoenix, AZ
    Hallervorden-Spatz Syndrome Association, El Cajon, CA
    Hermansky-Pudlak Syndrome (HPS), Oyster Bay, NY
    Hydrocephalus Association, San Francisco, CA
    Immune Deficiency Foundation, Towson, MD NORD, April 2002
    Incontinentia Pigmenti International Foundation, New York, NY
    International Children's Anophthalmia Network (ICAN), Philadelphia, 
PA
    International Joseph Disease Foundation, Livermore, CA
    International Morquio Support Group, Tucson, AZ
    International Rett Syndome Association, Clinton, MD
    International Society for Mannosidosis & Related Diseases, 
Baltimore, MD
    Interstitial Cystitis Association, Rockville, MD
    Joubert Syndrome Foundation, Baltimore, MD
    Kennedy's Disease Association, Simi Valley, CA
    Kids With Heart National Association for Children's Heart 
Disorders, Green Bay, WI
    Klinefelter Syndrome and Associates, Roseville, CA
    LAM (Lymphangioleiomyomatosis) Foundation, Cincinnati, OH
    Les Turner ALS Foundation, Skokie, IL
    Lewy Body Disease Association, The, Brooklyn, NY
    Lowe Syndrome Association, West Lafayette, IN
    MAGIC Foundation, The, Oak Park, IL
    Mannosidosis and Related Diseases, The International Society for, 
Baltimore, MD
    Medical Journeys Network, Alexandria, VA
    Mercy Medical Airlift, Virginia Beach, VA
    Mastocytosis Society, Spanish Fork, UT
    National Coalition for PKU & Allied Disorders, Mansfield, MA
    National Foundation for Ectodermal Dysplasias, Mascoutah, IL
    National Hemophilia Foundation, New York, NY
    National Incontinentia Pigmenti Foundation, New York, NY
    National Marfan Foundation, Port Washington, NY
    National MPS (Mucopolysaccharidoses/Mucolipidoses) Society, 
Downington, PA
    National Multiple Sclerosis Society, Washington, DC
    National Organization for Rare Disorders, New Fairfield, CT
    National Patient Travel Center, Virginia Beach, VA
    National Society of Genetic Counselors, Wallingford, PA
    National Spasmodic Torticollis Association, Fountain Valley, CA
    National Tay-Sachs & Allied Diseases Association, Boston, MA
    National Urea Cycle Disorders Foundation, La Canada, CA
    Noonan Syndrome Support Group, Upperco, MD
    Organic Acidemia Association, Plymouth, MN
    Orphan Medical, Minnetonka, MN
    Osteogenesis Imperfecta Child Advocacy (OICA), Woodville, WI
    Osteogenesis Imperfecta Foundation, Gaithersburg, MD
    Osteogenesis Imperfecta Parents' Support Group, San Diego, CA
    Parents of Galactosemic Children, Sparks, NV
    Pediatric/Adolescent Gastroesophaegeal Reflux Association (PAGER), 
Germantown, MD
    Pediatric Neurotransmitter Disease (PND) Association, Plainview, NY
    Periodic Paralysis Association, Monrovia, CA
    Peutz-Jeghers Syndrome Online Support Group Pierre Robin Network, 
Fowler, IL
    Polyarteritis Nodosa Support Group (PNSG), Pittsburgh, PA
    Polychondritis Educational Society, Somerton, AZ
    PRISMS (Parents and Researchers Interested in Smith-Magenis 
Syndrome), Francestown, NH
    Project DOCC--Delivery of Chronic Care, Oyster Bay Cove, NY
    PXE (Pseudoxanthoma Elasticum) International, Sharon, MA
    Reflex Sympathetic Dystrophy Syndrome Association, Milford, CT
    Restless Legs Syndrome Foundation, Rochester, MN
    Rupertus Foundation to Cure ALS, Virginia
    Sarcoid Networking Association, Sumner, WA
    Scleroderma Foundation, Byfield, MA
    Sickle Cell Disease Association of America, Culver City, CA
    Sigma Tau Pharmaceuticals, Gaithersburg, MD
    Society for Progressive Supranuclear Palsy, Baltimore, MD
    Sotos Syndrome Support Association, Pueblo, CO
    Stickler Involved People, Augusta, KS
    Sturge-Weber Foundation, Mt. Freedom, NJ
    Tourette Syndrome Association, Bayside, NY
    Transkaryotic Therapies, Inc., Cambridge, MA
    Trigeminal Neuralgia Association, Barnegat Light, NJ
    Trimethylaminuria Support Group, New York, NY
    Tuberous Sclerosis Alliance, Silver Spring, MD
    Tyler for Life Foundation, Winston, GA
    Von Hipple-Lindau Family Alliance, Brookline, MA
    United Mitochondrial Disease Foundation, Monroeville, PA
    Wegener's Granulomatosis Association, Kansas City, MO
    Wilson's Disease Association, Brookfield, CT
    Zeroderma Pigmentosum Society, Poughkeepsie, NY
    XLH (X-linked Hypophosphatemic Rickets) Network, Bowie, MD
   Attachment II.--Department of Health and Human Services Office of 
                           Inspector General
    In a Department of Health and Human Services report entitled ``The 
Orphan Drug Act--Implementation and Impact (May, 2001, OEI-09-00-
00380), the Office of Inspector General concluded that:
    The Orphan Drug Act's incentives and the Office of Orphan Products 
Development's clinical superiority criteria motivate drug companies to 
develop orphan products. Since Congress passed the Orphan Drug Act of 
1983, the Food and Drug Administration has awarded more than 1,000 
designations and approved more than 200 products.
    Advocates report that orphan products are usually accessible to 
patients. Orphan products are usually accessible, although they can be 
costly and in limited supply. Insurance typically pays for the 
treatments, and companies offer patient assistance programs to help 
patients obtain their products.
    The Office of Orphan Products Development provides a valuable 
service to both companies and patients. Companies report an excellent 
relationship with this office, which awards orphan product designations 
and disseminates public information about orphan products.
    Orphan products meet the legal prevalence limit, and most fall well 
below the threshold of 200,000 patients. Average patient population has 
climbed since 1983 but remains well below the legal limit.''
   Attachment III.--Grant Supported Products with Marketing Approval
    Product: 4-methylpyrazole (trade name Antizole); Fomepizole
    Indication: Ethylene Glycol and Methanol Poisoning
    Approval Date: 12/04/1997
    Institution: Orphan Medical, Inc.
    Investigator: Dr. Dayton Reardan

    Product: Actimmune
    Indication: Osteopetrosis
    Approval Date: 02/11/2000
    Institution: Medical University of South Carolina
    Investigator: Dr. Lester Key

    Product: Auditory Brainstem Implant
    Indication: Bilateral deafness
    Approval Date: 10/24/00
    Institution: Cochlear Corp.
    Investigator: Dr. Steven J. Staller

    Product: Anti-TNF (cA2) (trade name Remicade)
    Indication: Severe Crohns Disease
    Approval Date: 08/24/1998
    Institution: Centocor, Inc.
    Investigator: Dr. Richard McCloskey

    Product: Baclofen Intrathecal (trade name Lioresal)
    Indication: Severe Spasticity
    Approval Date: 06/25/1992
    Institution: Rush-Presbyterian-St. Lukes' Medical Center
    Investigator: Dr. Richard Penn

    Product: Betaine (trade name Cystadane)
    Indication: Homocystinuria
    Approval Date: 10/20/1996
    Institution: University of Virginia
    Investigator: Dr. William Wilson

    Product: Busulfan IV
    Indication: Bone Marrow Ablation
    Approval Date: 02/04/1999
    Institution: UT MD Anderson Cancer Center
    Investigator: Dr. Borge Andersson

    Product: Cladribine (trade name Leustatin)
    Indication: Mycosis fungoides and hairy cell leukemia
    Approval Date: 03/01/1993
    Institution: Scripps Research Institute
    Investigator: Dr. Ernest Beutler

    Product: Clonidine (trade name Duraclon)
    Indication: Intractable pain in cancer patients
    Approval Date: 10/02/1996 Institution: Wake Forest University
    Investigator: Dr. James Eisenach

    Product: CroFab
    Indication: Crotalid snake bites
    Approval Date: 10/02/00
    Institution: Therapeutic Antibodies, Inc.
    Investigator: Dr. Richard C. Dart

    Product: Cysteamine (trade name Cystagon)
    Indication: Nephropathic Cystinosis
    Approval Date: 08/15/1994
    Institution: University of California, San Diego
    Investigator: Dr. Jerry Schneider

    Product: Ganciclovir Intravitreal (trade name Vitrasert)
    Indication: CMV Retinitis
    Approval Date: 03/04/1996
    Institution: University of Kentucky Research Foundation
    Investigator: Dr. Thomas Smith

    Product: Glatiramer acetate (trade name Copaxone)
    Indication: Relapsing remitting multiple sclerosis
    Approval Date: 12/20/1996
    Institution: Lemmon Company
    Investigator: Dr. Yafith Stark

    Product: Histrelin Acetate (trade name Supprelin)
    Indication: Central precocious puberty
    Approval Date: 12/24/1991
    Institution: Massachusetts General Hospital
    Investigator: Dr. Paul Boepple

    Product: In-Exsufflator (trade name Cofflator)
    Indication: Assist Ventilator dependent patients
    Approval Date: 02/01/1993
    Institution: University of Medicine and Dentistry of New Jersey
    Investigator: Dr. John Bach

    Product: Iobenguane sulfate I-131
    Indication: Localization of Pheochromocytoma
    Approval Date: 03/24/1994
    Institution: University of Michigan
    Investigator: Dr. Brahm Shapiro

    Product: Levocarnitine (trade name Carnitor)
    Indication: Primary and Secondary Carnitine Deficiency of Genetic 
Origin
    Approval Date: 12/16/1992
    Institution: Duke University
    Investigator: Dr. Charles Roe

    Product: Nafarelin Acetate Intranasal (trade name Synarel)
    Indication: Central Precocious Puberty
    Approval Date: 02/06/1992
    Institution: Baylor College of Medicine
    Investigator: Dr. John Kirkland

    Product: Neurostimulator implantable electrodes
    Indication: Quadra-paraplegia with loss of hand function
    Approval Date: 08/18/1997
    Institution: Case Western Reserve University
    Investigator: Dr. Paul Peckham

    Product: Pegademase (trade name Adagen)
    Indication: ADA replacement in Severe Combined Immunogenicity 
Disease
    Approval Date: 03/21/1990
    Institution: Enzon, Inc.
    Investigator: Dr. Abraham Abuchowski

    Product: Pulmonary angioscope
    Indication: Visualization of pulmonary emboli
    Approval Date: 01/31/1989
    Institution: Regents of the University of California
    Investigator: Dr. Deborah Shure

    Product: Sodium phenylbutyrate
    Indication: Urea cycle disorders
    Approval Date: 04/30/1996
    Institution: Johns Hopkins University
    Investigator: Dr. Saul Brusilow

    Product: Succimer (trade name Chemet)
    Indication: Lead Poisoning in Children
    Approval Date: 01/30/1991
    Institution: The Kennedy Institute
    Investigator: Dr. J. Julian Chisolm

    Product: Sucrase enzyme
    Indication: Sucrase-isomaltase deficiency
    Approval Date: 04/09/1998
    Institution: Hartford Hospital
    Investigator: Dr. Jeffrey Hyams

    Product: Tobramycin for inhalation (trade name Tobi)
    Indication: Management of CF patients with Pseudomonas Aeruginosa
    Approval Date: 12/22/1997
    Institution: Pathogenesis Corporation
    Investigator: Dr. Alan Montgomery

    Product: Tretinoin (trade name Vesanoid)
    Indication: Acute Promyelocytic Leukemia
    Approval Date: 11/22/1995
    Institution: Memorial Hospital for Cancer and Allied Diseases
    Investigator: Dr. Raymond Warrell, Jr.

    Product: Zinc Acetate (trade name Galzin)
    Indication: Wilson's Disease
    Approval Date: 01/28/1997
    Institution: University of Michigan
    Investigator: Dr. George Brewer
                             Attachment IV
    FDA Office of Orphan Products Development fiscal year 2001 
Accomplishments FDA's Office of Orphan Products Development (OPD) 
encourages the development of drugs, biologics, medical devices, and 
medical foods for rare diseases and conditions by offering the sponsors 
of these products financial incentives.
    Since the Orphan Drug Act was enacted in 1983, FDA's Office of 
Orphan Products Development (OPD) has designated 1,152 products to 
treat many rare conditions. Of these, 228 orphan products are now 
available to treat a potential patient population of more than 11 
million people in the U.S.
    During fiscal year 2001, OPD received 129 applications for orphan 
designation. The OPD medical and pharmaceutical review staff approved 
78 of those applications for orphan status and six orphan products 
received FDA market approval.
    A significant component of OPD is the Orphan Products Grants 
Program, which funds studies to develop treatments or diagnostic 
products for rare diseases. Since the Orphan Drug Act began, FDA has 
funded 150 million dollars in rare disease research.
    In 2001, Congress appropriated 12.5 million dollars for the 
program, which provided funds for both new studies, and for the 
continuation of previously funded studies.
    The grants program funded 24 new studies to test products to treat 
rare diseases in 2001 and currently, 84 OPD grant studies are underway.
    OPD staff made ten grant site visits to advise and support clinical 
investigators. Since 1983 the orphan products grant program has led to 
the development and approval of 29 new products to treat or diagnose 
rare diseases.
    OPD continues to facilitate the development of treatments for rare 
diseases worldwide. This year the OPD director consulted with 
interested European Community legislators, and spent considerable time 
briefing and mentoring members of the Committee on Orphan and Medicinal 
Products of the European Agency for the Evaluation of Medicinal 
Products. The OPD hosted visits from foreign legislative organizations 
currently investigating new strategies for orphan product development.
                                 ______
                                 

           Prepared Statement of the National Potato Council

    My name is Dave Warsh. I am a potato farmer from Colorado and 
current Vice President, Legislative/Government Affairs for the National 
Potato Council (NPC). On behalf of the NPC, we thank you for your 
attention to the needs of our potato growers.
    The NPC is the only trade association representing commercial 
growers in 50 states. Our growers produce both seed potatoes and 
potatoes for consumption in a variety of forms. Annual production in 
2001 was 444,766 cwt with a farm value of $2.9 billion. Total value is 
substantially increased through processing. The potato crop clearly has 
a positive impact on the U.S. economy.
    The potato is the most popular of all vegetables grown and consumed 
in the United States and one of the most popular in the world. Annual 
per capita consumption was 138.7 pounds in 2000 up from 104 pounds in 
1962 and is increasing due to the advent of new products and heightened 
public awareness of the potato's excellent nutritional value. Potatoes 
are considered a stable consumer commodity and an integral, delicious 
component of the American diet.
    The National Potato Council's fiscal year 2003 appropriations 
priorities are as follows:
Cooperative State Research Education and Extension Service (CSREES)
    Potato Special Grant Program.--The NPC urges that the $1.568 
million provided by the Congress in fiscal year 2002 be maintained and 
that $1.6 million be appropriated for fiscal year 2003. This has been a 
highly successful program and the number of funding requests from 
various potato-producing regions are increasing.
    The NPC also urges that the Congress, once again, include Committee 
report language as follows:
    ``Potato research.--The Committee expects the Department to ensure 
that funds provided to CSREES for potato research are utilized for 
varietal development testing. Further, these funds are to be awarded 
competitively after review by the Potato Industry Working Group.''
Agricultural Research Service (ARS)
    The NPC urges that the Congress once again add Committee report 
language urging the ARS to work with the NPC on how overall research 
funds can best be utilized for grower priorities.
    The NPC urges that the Congress maintain all increases for potato 
research provided in fiscal year 2001 and 2002 including funding for 
Orono, Maine, Aberdeen, Idaho and golden nematode research at Cornell 
University.
    Grand Forks and East Grand Forks.--Appropriate $350,000 for a new 
scientist to be located at the Potato Research worksite in East Grand 
Forks, Minnesota. The scientist would address the effects of 
postharvest storage and treatments on potato market quality and value 
added traits. Since over 70 percent of the U.S. fall potato crop is 
placed into storage for year around sale, this research will benefit 
potato growers throughout the country.
    Fort Collins, Colorado.--Appropriate $300,000 for the Soil, Plant, 
and Nutrient Research Program at Fort Collins to conduct research to 
enhance water and soil quality with precision conservation farming.
    Aberdeen, Idaho.--Appropriate $30,000 for additional work by the 
potato breeder at Aberdeen. In fiscal year 2002 the Congress provided 
$120,000 out the $150,000 needed for this researcher. Since an 
estimated 96 percent of the current budget is committed to salaries and 
fixed costs, this additional funding is needed to provide for the 
development of a strong molecular biology program component to speed 
the incorporation of disease resistance from wild potato species into 
the cultivated potato.
    Appropriate funds for the construction of an advanced molecular 
genetics laboratory at the National Small Grains Germplasm Research 
Facility. This facility at Aberdeen is needed to assure the 
continuation of advanced molecular genetics research for potatoes and 
small grains. It is estimated that total construction costs will be 
$4.6 million. In fiscal year 2002, the Congress provided $400,000 in 
design funds.
    Beltsville, Maryland.--Improving the nutritional value of potatoes 
is a high priority of the NPC. Research should also be initiated at the 
Beltsville Vegetable Laboratory that combines traditional breeding and 
plant biotechnology to increase the nutritional value of the potato and 
add value to the crop. The nutrition research currently underway in the 
Beltsville potato breeding program relates to the development of potato 
tubers with anti-cancer properties (high lutein/carotene) and a product 
to help alleviate osteoporosis (high available tuber calcium). 
Approximately $150,000 is currently devoted to this newly developing 
field. The NPC urges that $300,000 be appropriated in fiscal year 2003 
for this important research effort.
Plant Protection and Quarantine Service (APHIS-USDA)
    The NPC urges that the Congress appropriate at least $810,000 for 
the Golden Nematode Quarantine Program. The National Potato Council 
also supports the budget request of $72 million for the AQI 
appropriated fund account and $27 million for pest detection. As new 
trade agreements are negotiated, the agency must have the necessary 
staff and technology to deal with the threat of pests and diseases.
FQPA Funding
    The NPC also supports the appropriation of $2.6 million for the 
USDA Office of Pest Management Policy (OPMP). The NPC has devoted 
considerable time and resources to the evaluation of pesticides 
required by the FQPA. However, it is essential that the USDA have 
adequate resources to assist in this effort. Otherwise, given the tight 
time frame for these assessments, the EPA will rely on default 
assumptions in the absence of actual data.
                                 ______
                                 

       Prepared Statement of the National Rural Housing Coalition

    Mr. Chairman and members of the Senate Subcommittee on Agriculture, 
my name is Robert Rapoza and I wish to testify on behalf of the 
National Rural Housing Coalition.
    I wish thank you for the Subcommittee's support of the Rural 
Development programs of the United States Department of Agriculture and 
to urge you to support an increase in its budget for fiscal year 2003.
    As you may know, the National Rural Housing Coalition (the 
Coalition) has been a national voice for rural low-income housing and 
community development programs since 1969. Through direct advocacy and 
policy research, the Coalition has worked with Congress and the 
Department of Agriculture to design new programs and improve existing 
programs serving the rural poor. The Coalition also promotes a non-
profit delivery system for these programs, encouraging support for 
rural community assistance programs, farm labor housing grants, self-
help housing grants, and rural capacity building funding.
    The Coalition is comprised of approximately 300 members nationwide. 
We hope to work with you to assure that the voices of rural America are 
heard and its needs met. Our concerns are focused on rural housing and 
rural water and sewer systems.
                 the need for affordable rural housing
    A disproportionate amount of the nation's substandard housing is in 
rural areas. Rural households are poorer than urban households, pay 
more of their income for housing that their urban counterparts, and are 
less likely to receive government-assisted mortgages. They also have 
limited access to mortgage credit and the secondary mortgage market, 
making them prime targets for predatory lending. Rural America needs 
programs which focus on the issues facing it. The Rural Housing Service 
of Rural Development provides many of these needed programs.
    Renters in rural areas are the worst housed individuals and 
families in the country. Thirty-three percent of rural renters are 
cost-burdened, paying more than 30 percent of their income for housing 
costs. Almost one million rural renter households suffer from multiple 
housing problems, 60 percent of whom pay more than 70 percent of their 
income for housing. The Section 515 rural rental housing loan program 
at USDA serves low and very-low income families with safe affordable 
housing.
    Although issues around rental housing are of vital concern, 
homeownership is the principal form of housing in rural America. 
However, there are a number of obstacles to improving homeownership in 
rural areas including high rates of poverty and poor quality of 
housing. According to a 1999 Economic Research Service report, the 
poverty rate in rural America was 15.9 percent, compared to 13.2 
percent in urban areas. Minorities in rural areas have much higher 
rates of poverty with an average of 34.1 percent compared to urban 
minorities at 28.1 percent. More than 1.6 million low-income rural 
households live in moderately to severely inadequate housing. These are 
units without hot or cold piped water, and/or have leaking roofs, 
walls, rodent problems, inadequate heating systems, and peeling paint, 
often lead-based.
    Rural residents also have limited access to mortgage credit. The 
consolidation of the banking industry that accelerated throughout the 
1990s has had a significant impact on rural communities. Mergers among 
lending institutions have replaced local community lenders with large 
centralized institutions located in urban areas. Aside from shifting 
the locus of loan-making, this has resulted in the diminishment of a 
competitive environment which, in the past, encouraged rural lenders to 
offer terms and conditions that were attractive to borrowers.
    Because of the gap left by traditional lenders, rural households 
are often prime targets for predatory lenders. Predatory lending 
practices include excessive fees, prepayment penalties, and loan 
flipping into high cost subprime loans. Rural America depends upon the 
affordable loans through USDA's Section 502 single family direct loan 
program for homeownership.
                      usda's rural housing service
    I would like to begin with the rental housing program.
Section 515 rental housing program
    Although we often talk about the surge in homeownership and all of 
its benefits, not all us are or are prepared to be homeowners. USDA's 
Rural Housing Service Section 515 rural rental housing program is 
invaluable to low-income residents in rural areas. The portfolio 
contains 450,000 rented apartments in Section 515 developments. The 
delinquency rate is a low 1.6 percent. The average tenant income is 
$7,900, which is equal to only 30 percent of the nation's rural median 
household income. More than half of the tenants are elderly or disabled 
and one-quarter are minority.
    Federal policy faces two challenges regarding rural rental housing. 
The first is to increase the production of affordable rental housing 
units in rural communities. The second is to maintain the existing 
stock of Section 515 units.
    This year, the President's budget cut Section 515 almost in half to 
$60 million and limited it to repair, rehabilitation, and preservation. 
If the fiscal year 2003 budget request for Section 515 is approved, it 
will be the first time in more than 30 years that the Federal 
government provides no new rental units for rural America. All new 
construction is postponed pending a comprehensive program review, which 
will cost up to $2 million.
    As I mentioned earlier, almost one million households either cannot 
afford their rents, live in unsafe, unsanitary conditions, or both. The 
capital replacement needs alone for 2001 were $130 million, with only 
$50 million in funding available.
    Section 521 rental assistance is used in conjunction with Section 
515 to help families who cannot afford even their reduced rent. In 
recent years, mostly in response to an escalating number of expiring 
contracts, appropriations for rental assistance have gone up. Despite 
the fact that the current appropriations stand at $701 million (fiscal 
year 2002), the funds are insufficient. Although about 50 percent of 
the 450,000 Section 515 households receive rental assistance, almost 
90,000 Section 515 households who need assistance do not receive it. 
The need for rental assistance is projected to increase to $937 million 
by 2006.
    Prepayment of 515 properties is a real threat to two-thirds of the 
portfolio over the next 7 years. Prepayment often means the units are 
lost for low-income residents. In 1987, Congress enacted legislation 
restricting prepayment, and providing financial incentives to owners to 
stay in the program. However, Section 515 funding has fallen off 
dramatically, and stands at $114 million, its lowest level in 25 years. 
This allows little money to provide incentives and other resources for 
preservation.
    The demand for incentives is estimated at approximately $100 
million for equity loans alone. This includes $11 million in approved, 
but un-funded requests some of that date back three to 4 years. 
Spending for Section 515 rental subsidized housing has been cut by 73 
percent since 1994. And rural rental housing unit production by the 
Federal Government has been reduced by 88 percent since 1990.
    For fiscal year 2003, we recommend a total of $250 million for 
section 515. With these funds, we proposed that $100 million be used 
for basic maintenance and preservation and $150 million for loans for 
new construction. In addition we recommend an increase of $50 million 
for rural rental assistance that will be used in conjunction with 
section 515 and farm labor housing, described later.
Section 502 single family direct loan program
    To qualify for the direct loan program, borrowers must have very 
low or low incomes but be able to afford mortgage payments. Also, 
applicants must be unable to obtain credit elsewhere, yet have 
reasonable credit histories. The average income of households assisted 
under Section 502 is $18,500. About nine percent of households have 
annual incomes of less than $10,000. Since its inception, Section 502 
has provided loans to almost two million families.
    The cost to the government per house under the Section 502 direct 
loan program is only $10,000. However, this effective program has also 
received severe cuts in recent years. Fund was available for 132,000 
units in 1976, but because of funding, production has dropped by 89 
percent to fewer than 15,600 units.
    Currently funded at $1.1 billion, the President's budget cuts this 
program by 13 percent to $957 million in program level.
    Of particular interest in the budget is the unexplained increase in 
the subsidy rate for section 502 direct loans. At a time of 
historically low interest rates, in a budget that does not project an 
increase in long-term rates, the subsidy rate for section 502 direct 
loans increases from 13.16 percent to 19.37 percent. What has changed? 
Are there increases in subsidy costs or in default or delinquency rates 
that led to this adjustment? Is this change based on recent experience? 
Is this a change in the assumptions that underlie the subsidy? If so, 
what are those changes? Our understanding is that the cost of the 
program has not changed, only the model that is used to estimate the 
cost to the government.
    We urge the Committee to restore section 502 to at least the 
current rate of $1.08 billion. There is a $5 billion backlog in 
applications for 502 direct loans. No other program provides home 
ownership assistance to rural low-income families. The cost of 
continuing section 502 at the current rate will add $23 million to the 
cost of section 502 to the government. It will also add over 2,500 
units of additional housing for low-income families.
Work with Non-Profit Organizations
    With dramatic program reductions and continued strength in the 
nation's real estate market, the private sector delivery system is no 
longer dominant as it was when funding levels were higher, and in many 
rural communities does not even exist. In some rural areas, non-profits 
have picked up the slack and pursued a multiple funding strategy. 
Skilled local organizations meld Federal, State, local and private 
resources together to provide affordable financing packages to low-
income families. But there is not a dedicated source of Federal support 
to promote a non-profit delivery system for rural housing.
    As one way to improve its programs, USDA has expanded its 
cooperation with non-profit housing and community development 
organizations. Two successful programs are Mutual and Self-Help Housing 
and the Rural Community Development Initiative.
    Under Mutual and Self-Help Housing, with the assistance of local 
housing agencies, groups of families eligible for Section 502 loans 
perform approximately 65 percent of the construction labor on each 
other's homes under qualified supervision. This program, which has 
received growing support because of its proven model, has existed since 
1961. The average number of homes built each year over the past 3 years 
has been approximately 1,500. For fiscal year 2003, we recommend a 
total of $35 million for self-help housing. This is the same as fiscal 
year 2002.
    The Rural Community Development Initiative (RCDI) program enhances 
the capacity of rural organizations to develop and manage low-income 
housing, community facilities, and economic development projects. These 
funds are designated to provide technical support, enhance staffing 
capacity, and provide pre-development assistance--including site 
acquisition and development. RCDI provides rural community development 
organizations with some of the resources necessary to plan, develop, 
and manage community development projects. Using dollar-for-dollar 
matching funds and technical assistance from 19 intermediary 
organizations, some $12 million in capacity building funds were 
distributed to 240 communities. There is a tremendous demand for 
capacity building funding. In the fiscal year 2000 funding round, 
USDA's Rural Housing Service received some $80 million in applications 
for $6 million in appropriated funds. This valuable program is also at 
risk in the budget request this year--it has been eliminated. For 
fiscal year 2003, we recommend $6 million for the Rural Community 
Development Initiative to continue level funding for fiscal year 2002.
Section 514 loan and Section 516 grant farm labor housing programs
    Two additional rental housing programs specifically address the 
needs of farm laborers. Migrant and seasonal farmworkers are some of 
the nation's most poorly housed populations. The last documented 
national study indicated a shortage of some 800,000 units of affordable 
housing for farmworkers.
    Farmworker households are also some of the least assisted 
households in the nation. Some 52 percent of farmworker households' 
incomes are below the poverty threshold, four times the national 
household poverty rate, and 75 percent of migrant farmworkers have 
incomes below the poverty line. Yet little more than 20 percent of 
farmworker households receive public assistance; most commonly food 
stamps, rarely public or subsidized housing.
    There are only two Federal housing programs that specifically 
target farmworkers and their housing needs: Sections 514 and 516 of the 
Housing Act of 1949 (as amended). Borrowers and grantees under Rural 
Housing Service Sections 514 and 516 receive financing to develop 
housing for farmworkers. Section 514 authorizes the Rural Housing 
Service to make loans with terms of up to 33 years and interest rates 
as low as one percent. Section 516 authorizes RHS to provide grant 
funding when the applicant will provide at least 10 percent of the 
total development cost from its own resources or through a 514 loan.
    Non-profit housing organizations and public bodies use the loan and 
grant funds, along with RHS rural rental assistance, to provide units 
affordable to eligible farmworkers. These funds are used to plan and 
develop housing and related facilities for migrant and seasonal 
farmworkers. Current funding for Sections 514/516 totals $37 million in 
program authority. This amount provides about 700 units of housing. The 
estimated need is two to three times the appropriated level.
    We applaud the President for proposing an additional $8 million in 
loans for fiscal year, and hope that you will recognize the even 
greater need for funding. We recommend that funding for farmworker 
housing grants and loans be increased to $100 million in budget 
authority for fiscal year 2003. We ask that these funds be equally 
divided between loans and grants authorized under sections 514 and 516. 
This will result in approximately $150 million in financing for much 
needed farmworker housing.
               the need for rural water and sewer systems
    Hundreds of rural communities nationwide do not have access to 
clean drinking water and safe waste disposal systems. A 1995 USDA needs 
assessment of rural areas showed that more than one million households 
had no indoor plumbing, and 2.4 million households had critical 
drinking water needs. In its 1997 Drinking Water Infrastructure Needs 
Survey, the Environmental Protection Agency estimated that over the 
next 20 years, water systems serving communities of less than 10,000 
people will require $37.2 billion in funding for water systems 
improvements and upgrades. And regarding wastewater, a 1996 EPA Survey 
demonstrated that small communities with up to 10,000 residents will 
need 21,000 wastewater treatment facilities by 2016 at a cost of 
approximately $14 billion. According to EPA's numbers, approximately 
$51.2 billion will be needed to address the basic water and wastewater 
needs of small communities.
    Many projects that the Rural Utilities Service funds are under 
consent order from the State EPA office for immediate action. The 
problems that the agency deals with range from communities and systems 
that are out of compliance with health and pollution standards, to 
communities without sewer systems where raw sewage runs in ditches 
after a heavy rainfall. Because so much time and money are spent on 
critical needs, the State offices spend less time on prevention. The 
programs and communities do not have enough resources to address issues 
before they become larger problems.
    The issue of affordability moves to the forefront with waste 
disposal systems, which are generally more expensive than water 
systems. Waste systems naturally succeed water systems--with central 
water comes indoor plumbing, washing machines, dishwashers, etc., all 
of which eventually require an efficient wastewater disposal system. 
Low-income communities often already pay as much as they can afford for 
water service alone and are unable to manage the combined user fees for 
water and waste. According to EPA data, ratepayers of small rural 
systems are charged up to four times as much per household as 
ratepayers of larger systems. In some extreme situations, some 
households are being forced out of homeownership because they cannot 
afford rising user costs.
    As I mentioned earlier, rural communities have limited access to 
much-needed debt and equity capital, and small water and wastewater 
systems lack the economies of scale needed to reduce costs on their 
own. In order for communities to cut back on project costs and have 
affordable rates, operation and maintenance are typically 
underestimated in the budgets for many new systems. This often results 
in limited or no capital improvement accounts for future upgrades and 
expansions needed for community development including stabilization of 
local small business, affordable housing development, and other needed 
industrial development.
                     usda's rural utilities service
    USDA's Rural Utilities Service (RUS) is the primary Federal force 
in rural water and waste development, providing loans and grants to 
low-income communities in rural areas. The agency assists low-income 
rural communities that would not otherwise be able to afford such 
services. Approximately one-fifth of the communities served live below 
the national poverty line.
    In providing these important services, the program also protects 
public health and promotes community stabilization and development. 
Aging municipal sewage systems alone are responsible for 40,000 
overflows of raw sewage each year. The overflows cause health hazards 
including gastrointestinal problems and nausea, as well as long-term 
damage to the environment. Businesses and industries are unable or 
reluctant to locate in areas without functioning water and sewer 
systems. But with the assistance of RUS, communities are able to have 
the services they need so that their health and economies may benefit.
    Although the need for RUS services continues, the level of 
available funds has continued to remain low. In fiscal year 1995, $1.35 
billion was obligated by the Federal program to the States. Due to 
decreasing appropriations and increasing interest rates, the 
obligations decreased. By fiscal year 2000, funding was at $1.24 
billion--a decrease of over $100 million--and was approximately 90 
percent of its fiscal year 1995 level. Fortunately, these programs 
received a boost in fiscal year 2001 and fiscal year 2002, and are 
currently at $1.46 billion. However, the Administration's budget 
request again asks for a decrease down to $1.4 billion.
    Through Federal and State initiatives, RUS is working to confront 
the challenges faced by rural communities. With increasingly restricted 
time and money, State offices are using other resources such as 
leveraged funds and technical assistance from the Rural Community 
Assistance Program (RCAP). Funds are being leveraged through HUD's 
Community Development Block Grant program and the EPA's State Revolving 
Loan Funds, as well as some private lenders. Through the RCAP technical 
assistance program, more than 2,000 communities and over 1.6 million 
households in 49 States have received assistance to identify solutions 
to water problems, improve and protect water quality, and construct and 
operate facilities. The RCAP program has proven to be an effective and 
efficient way of ensuring that small rural communities receive the 
information, technical assistance, and training needed to provide for 
the water and waste disposal needs of their residents.
    Mr. Chairman and members of the Committee, we look to you for 
continued support of the efforts of Rural Development. These programs 
are vital to the survival of our small communities nationwide. They 
address the most basic needs of affordable housing and clean water that 
still exist all over the country. Because of the overwhelming need, we 
wish to submit the following proposals for increases to Rural 
Development funding:

                        [In millions of dollars]
------------------------------------------------------------------------
                                        Fiscal year 2002    Fiscal year
                Program                       final        2003 proposed
------------------------------------------------------------------------
USDA Programs:
    502 direct........................           1,100             1,700
    502 guarantee.....................           3,100             3,700
    504 grants........................              30                50
    504 loans.........................              32                50
    514 loans.........................              28               100
    516 grants........................              17.9              50
    515 loans.........................             114               250
    521 rental assistance.............             701               800
    523 self-help grants..............              35                35
    Water sewer loans.................             894             1,050
    Water sewer grants................             584               700
    Community facilities..............             210               250
    Community facilities grants.......              14                50
    RCDI..............................               6                25
------------------------------------------------------------------------

                                 ______
                                 

      Prepared Statement of the National Rural Telecom Association

                     summary of testimony requests
    Project involved: Telecommunications lending programs administered 
by the Rural Utilities Service of the U.S. Department of Agriculture
    Actions proposed:
  --Supporting loan levels for fiscal year 2003 in the same amounts as 
        those contained in the fiscal year 2002 Agriculture 
        Appropriations Act for hardship, cost-of-money, Rural Telephone 
        Bank and guaranteed loan programs and the associated subsidy to 
        fund those programs at the existing level. Opposing the budget 
        recommendation to not fund new Rural Telephone Bank loans in 
        fiscal year 2003.
  --Supporting continued funding, as requested in the President's 
        budget, in the amount of $31 million in loan and grant 
        authority designated for distance learning and telemedicine 
        purposes, $6.1 million of which to continue to be made 
        available through the pilot program to finance broadband 
        transmission and dial-up Internet service in rural areas.
  --Supporting an extension of the language removing the 7 percent 
        interest rate ceiling on cost-of-money loans.
  --Supporting continuation of the restriction on retirement of Rural 
        Telephone Bank class A stock at the level contained in the 
        fiscal year 2002 Agriculture Appropriations Act and an 
        extension of the prohibition against the transfer of Rural 
        Telephone Bank funds to the general fund. Opposing the proposal 
        contained in the budget to transfer funds from the unobligated 
        balances of the liquidating account of the Rural Telephone Bank 
        for the bank's administrative expenses.
    Mr. Chairman, Members of the Committee: My name is John F. O'Neal. 
I am General Counsel of the National Rural Telecom Association. NRTA is 
comprised primarily of commercial telephone companies which borrow 
their capital needs from the Rural Utilities Service of the U.S. 
Department of Agriculture (RUS) to furnish and improve telephone 
service in rural areas. Approximately 1000, or 71 percent of the 
nation's local telephone systems borrow from RUS. About three-fourths 
of these are commercial telephone companies. RUS borrowers serve almost 
6 million subscribers in 46 states and employ over 22,000 people. In 
accepting loan funds, borrowers assume an obligation under the act to 
serve the widest practical number of rural users within their service 
area.
                           program background
    Rural telephone systems have an ongoing need for long-term, fixed 
rate capital at afford able interest rates. Since 1949, that capital 
has been provided through telecommunications lending programs 
administered by the Rural Utilities Service and its predecessor, the 
Rural Electrification Agency (REA).
    RUS loans are made exclusively for capital improvements and loan 
funds are segregated from borrower operating revenues. Loans are not 
made to fund operating revenues or profits of the borrower system. 
There is a proscription in the Act against loans which would duplicate 
existing facilities providing adequate service and state authority to 
regulate telephone service is expressly preserved under the Rural 
Electrification Act.
    Rural telephone systems operate at a severe geographical handicap 
when compared with other telephone companies. While almost 6 million 
rural telephone subscribers receive telephone service from RUS borrower 
systems, they account for only four percent of total U.S. subscribers. 
On the other hand, borrower service territories total 37 percent of the 
land area--nearly 1\1/2\ million squares miles. RUS borrowers average 
about six subscribers per mile of telephone line and have an average of 
more than 1,000 route miles of lines in their systems.
    Because of low-density and the inherent high cost of serving these 
areas, Congress made long-term, fixed rate loans available at 
reasonable rates of interest to assure that rural telephone 
subscribers, the ultimate beneficiaries of these programs, have 
comparable telephone service with their urban counterparts at 
affordable subscriber rates. This principle is especially valid today 
as the United States endeavors to deploy telecommunications 
``information superhighway'' technology and as customers and regulators 
constantly demand improved and enhanced services.
    At the same time, the underlying statutory authority which governs 
the current program has undergone significant change. In 1993, 
telecommunications lending was refocused toward facilities 
modernization. Much of the subsidy cost has been eliminated from the 
program. The subsidy that remains has been targeted to the highest 
cost, lowest density systems. Other loans are made at Treasury's cost-
of-money or greater, and, in fact, involve negative subsidies.
    We are proud to state once again for the record that there has 
never been a default in the RUS/REA telephone program! All loans have 
been repaid in accordance with their terms--almost $10.5 billion in 
principal and interest at the end of the last fiscal year.
           need for rus telecommunications lending continues
    The need for rural telecommunications lending is great today, 
possibly even greater than in the past. Technological advances make it 
imperative that rural telephone companies upgrade their systems to keep 
pace with improvements and provide the latest available technology to 
their subscribers.
    These rapid technological changes and Federal policies of 
competition and deregulation in the telephone industry, as evidenced by 
passage of the ``Telecommunications Act of 1996'', underscore the 
continuing need for targeted assistance to rural areas. The inherently 
higher costs to serve these areas have not abated. Regulatory trends 
encouraging competition among telephone systems increase pressures to 
shift more costs onto rural ratepayers. Interstate subscriber line 
charges continue to shift substantial costs to local exchange 
customers. Pressures to recover more and more of the higher costs of 
rural service from rural customers to foster urban competitive 
responses will further burden rural consumers. The Telecommunications 
Act of 1996 responded to a number of rural needs and differences with a 
series of safeguards to ensure that rates, services and network 
development in rural America will be reasonably comparable to urban 
telecommunications opportunities.
    The ongoing process of implementing the new law continues to raise 
troubling uncertain ties and concerns about whether the FCC and the 
states will honor the balance Congress achieved in its policy, as 
regulators (a) radically revise the mechanisms for preserving and 
advancing ``universal service,'' (b) adjust the cost recovery 
responsibilities and allocations of authority between Federal and State 
regulation, (c) effectuate the Act's somewhat different urban and rural 
ground rules for how new companies and incumbent universal service 
providers connect their networks and compensate each other and (d) peel 
back layers of regulation developed over a century. The FCC continues 
to be overzealous in expanding the Act's market-opening provisions to 
give new entrants a regulatory head start and advantage at the expense 
of the Act's rural development and universal service provisions. The 
FCC is trying to usurp the role of competition by dictating a whole 
new--and wholly inadequate--way to measure the costs of modern, 
nationwide telecommunications access to information. The FCC needs to 
reorder the sequence of its proceedings to ensure that rural Americans 
are not denied the ongoing network development and new services the Act 
requires. Rural telephone systems with universal service obligations 
must not be thwarted in their efforts to upgrade and provide rates and 
services reasonably comparable to urban offerings.
      expanded congressional mandates for rural telecommunications
    Considerable loan demand is being generated because of additional 
mandates for enhanced rural telecommunications standards contained in 
the authorizing legislation. These mandates coupled with the need for 
stable financing sources to meet the infrastructure demands envisioned 
for rural areas by the 1996 telecommunications act amply demonstrate 
the continuing need for this important program at the following levels:

                              [In dollars]

                                                                        
5 percent Hardship Loans................................      75,000,000
Cost-of-Money Loans.....................................     300,000,000
Guaranteed Loans........................................     120,000,000
Rural Telephone Bank Loans..............................     175,000,000
                    --------------------------------------------------------
                    ____________________________________________________
    Total...............................................     670,000,000

    These are essentially the same levels established in the fiscal 
year 2002 appropriations act for the hardship, cost-of-money, Rural 
Telephone Bank and guaranteed loan programs. The authorized levels of 
loans in all programs were fully obligated in fiscal year 2001 and we 
expect these levels to be met in fiscal year 2002. We believe that the 
needs of this program balanced with the minimal cost to the taxpayer 
make the case for its continuation at the stated levels.
                       rural telephone bank loans
    The administration again proposes to not fund new Rural Telephone 
Bank (RTB) loans in fiscal year 2003.
    The Rural Telephone Bank was established by Congress in 1971 to 
provide supplemental financing for rural telephone systems with the 
objective that the bank ultimately would be owned and operated by its 
private shareholders. The bank's mission is not complete--far from it! 
If Rural Americans are to be full participants with their urban 
neighbors in the Information Age, that job is just beginning! 
Economists agree that modern telecom infrastructure is the key to rural 
economic development which generates jobs and tax revenues for the 
government.
    The administration proposal will not ``generate increased member 
and borrower support for statutorily authorized privatization'', as 
suggested in the President's budget documents. That already exists! 
Privatization of the RTB began in 1995 under the current law and is 
proceeding annually at the rate of approximately $25 million per year. 
The Bank has now retired over $139 million, or over 20 percent, of the 
government's $592 million investment. As we pointed out in our 
testimony last year, not funding new loans in could actually impede 
privatization of the Bank since the law requires that the Bank annually 
retire government stock at the rate of at least 5 percent of the amount 
of Class B stock sold in connection with new loans. If no new loans 
were made, there would be no minimum requirement for retirement of 
additional government stock.
    The current loan level of $175 million has remained the same for 
many years. As a matter of fact, after factoring in the eroding effect 
of inflation, loan levels over the years have actually been reduced 
systematically. Despite this fact, we believe that the $175 million 
level is adequate to meet current program needs and strikes a cost 
effective balance for the taxpayer. This amount was fully obligated in 
fiscal year 2001 and we expect it to be met again this year. If no bank 
loans were made in fiscal year 2003, the budgetary outlay savings would 
be minimal because RTB loans are funded over a multi-year period. 
Moreover, if administration interest rate predictions are accurate, RTB 
loans could actually generate a profit for the government because of 
the minimum statutory interest rate of 5 percent!
                      specific additional requests
Continue the Removal of the 7 percent Cap on Cost-of-Money Loans
    Again this year we are supporting removal of the 7 percent ceiling 
on cost-of-money loans even though long-term Treasury rates are 
currently below this level.
Continue the Restriction on Retirement of Class A Government Stock in 
        the Rural Telephone Bank (RTB) and also Continue the 
        Prohibition Against Transfer of RTB Funds to the General Fund 
        and Require the Payment of Interest
    The Committee should continue the restriction on retirement of the 
amount of class A stock by the Rural Telephone Bank in fiscal year 
2003. The Bank is currently in the process of retiring the government's 
stock as required under current law. We believe that this process which 
began in fiscal year 1996 should continue to be an orderly one as 
contemplated by the retirement schedule enacted 6 years ago and 
continued through last year's bill to retire no more than 5 percent of 
the total class A stock in 1 year. The Rural Telephone Bank board, 
earlier this year, commissioned a private firm to perform a 
privatization study. This study is expected to be completed later this 
year. In this year's budget documents, the administration has indicated 
a desire to fully privatize the bank by the end of 2003. After 
reviewing the results of the pending study, both Congress and the rural 
telephone industry will be in a better position to evaluate the 
feasibility of that timetable as well as the appropriate level of 
retirement of the government's Class A stock in the future. In the 
meantime, we urge the Committee to continue the prohibition against the 
transfer of any unobligated balance in the bank's liquidating account 
which is in excess of current requirements to the general fund of the 
Treasury along with the requirement that the bank receive interest on 
those funds. The private Class B and C stockholders of the Rural 
Telephone Bank have a vested ownership interest in the assets of the 
bank including its funds and their rights should be protected.
    Previous appropriations acts (fiscal year 1997 through 2002) have 
recognized the ownership rights of the private class B and C 
stockholders of the bank by prohibiting a similar transfer of the 
bank's excess unobligated balances which otherwise would have been 
required under the Federal credit reform act.
Reject Budget Proposal to Transfer Funds from RTB Liquidating Account 
        for Administrative Costs
    The President's budget proposes that the bank assume responsibility 
for its administrative costs by a transfer of funds from the 
unobligated balances of the bank's liquidating account rather than 
through an appropriation from the general fund of the Treasury. This 
recommendation is contrary to the specific language of Sec. 403(b) of 
the RTB enabling act and would require enactment of new authorizing 
legislation as a prerequisite to an appropriation. It would not result 
in budgetary savings and has been specifically rejected by this 
Committee in previous years. No new justification is contained in the 
budget.
Loans and Grants for Telemedicine, Distance Learning and Internet 
        Access
    We support the continuation in fiscal year 2003 of the $31 million 
in loan and grant authority provided in the President's budget for 
telemedicine and distance learning purposes. Loans are made at the 
government's cost-of-money. The purpose is to accelerate deployment of 
telemedicine and distance learning technologies in rural areas through 
the use of telecommunications, computer networks, and related advanced 
technologies by students, teachers, medical professionals, and rural 
residents. We also support making available $6.1 million of the above 
amount available for continuation of the pilot program to finance 
broadband transmission and local dial-up access to the Internet in 
rural areas, as recommended in this year's budget. This 2-year old loan 
and grant pilot program continues to be oversubscribed each year and is 
effectively accomplishing its program mission.
                               conclusion
    Thank you for the opportunity to present the association's views 
concerning this vital program. The telecommunications lending programs 
of RUS continue to work effectively and accomplish the objectives 
established by Congress at a minimal cost to the taxpayer.
                                 ______
                                 

   Prepared Statement of the National Telecommunications Cooperative 
                              Association

                                summary
    NTCA makes the following fiscal year 2003 funding recommendations 
with regard to the Rural Utilities Service Telecommunications Loan 
Program and related programs.
  --Support the provisions of the president's budget proposal calling 
        for the required subsidy to fully fund the RUS 
        Telecommunications Loan Program's Hardship Account at a $75 
        million level, Cost of Money Account at a $300 million level, 
        and the Guaranteed Account at a $120 million level.
  --Reject the provisions of the president's budget proposal calling 
        for zero funding for the Rural Telephone Bank (RTB). Instead, 
        provide the required subsidy to fully fund the bank at last 
        fiscal year's $175 million level.
  --Support an extension of language that temporarily sets aside the 7 
        percent interest rate cap on loans made through the RUS Cost of 
        Money fund.
  --Support an extension of the restriction against RTB Liquidating 
        Account funds from being transferred into the general Treasury.
  --Support an extension of language prohibiting the expenditure of RTB 
        Liquidating Account funds to provide for the subsidy or 
        operational expenses of the bank.
                               background
    NTCA is a national association representing more than 550 small, 
rural, cooperative and commercial, community-based local exchange 
carriers (LECS) located throughout the nation. These locally-owned and 
operated LECS provide local exchange service to more than 2.5 million 
rural Americans. Since the creation of the RUS Telecommunications Loan 
Program, more than 80 percent of NTCA's member systems have been able 
to utilize the Federal program to one degree or another.
    NTCA's members, like most of the country's independent LECS, 
evolved to serve high-cost rural areas of the nation that were 
overlooked by the industry's giants as unprofitable. On average, NTCA 
members have approximately 6 subscribers per mile of infrastructure 
line, compared with 130 for the larger urban-oriented LECs. This 
results in an average plant investment per subscriber that is 38 
percent higher for NTCA members compared to most other systems.
    Congress recognized the unique financing dilemma confronting 
America's small rural LECS as early as 1949, when Congress amended the 
Rural Electrification Act (REA) to create the Rural Electrification 
Administration Telephone Loan Program. Today, this program is known as 
the RUS Telecommunications Loan Program. Through the years Congress has 
periodically amended the REA to ensure that original mission--to 
furnish and improve rural telephone service--was met. In 1971, the 
Rural Telephone Bank (RTB) was created to as a supplemental source of 
direct loan financing. In 1973, the RUS was provided with the ability 
to guarantee Federal Financing Bank (FFB) and private lender notes. In 
1993, Congress established a fourth lending program--the Treasury Cost 
of Money account.
                 rus helps meet infrastructure demands
    While the RUS has helped the subscribers of NTCA's member systems 
receive service that is comparable or superior to that available 
anywhere in the nation, their work is far from complete. As the 
Telecommunications Act of 1996 and other Federal policies continue to 
evolve, and as policymakers and the public alike continue to clamor for 
the deployment of advanced telecommunications services, the high costs 
associated with providing modern telecommunications services in rural 
areas will not diminish.
    RUS telecommunications lending has stimulated billions of dollars 
in private capital investment in rural communications infrastructure. 
In recent years, on average, less than $13 million in Federal subsidy 
has effectively generated $670 million in Federal loans and guarantees. 
For every $1 Federal funds that were invested in rural communications 
infrastructure, $4.50 in private funds were invested. The RUS is also 
making a difference in rural schools, libraries, and hospitals. Since 
1993, the RUS Distance and Learning Telemedicine Grant program has 
funded hundreds of projects throughout the nation of interactive 
technology in rural schools, libraries, hospitals, and health clinics.
    In addition, two other RUS-related programs are making a difference 
in rural America. Formerly known as the Zero Interest Loan and Grant 
Program, the Rural Economic Development Grants Programs, and the Rural 
Economic Development Loans Programs are now managed by the Rural 
Business Cooperative Service. The two programs provide funds for the 
purpose of promoting rural economic development and job creation 
projects, including for feasibility studies, start-up costs, incubator 
projects and other expenses tied to rural development.
         ntca's fiscal year 2003 appropriations recommendations
Fully Fund The Entire RUS Telecommunications Loan Program
    It is imperative that the entire RUS Telecommunications Loan 
Program be funded at the following levels:

Hardship Account........................................     $75,000,000
Cost of Money/Treasury Account..........................     300,000,000
Guaranteed Account......................................     120,000,000
Rural Telephone Bank Account............................     175,000,000

    Additionally, to support the operations of the RUS, it is critical 
that Congress provide at least $36 million in administrative 
appropriations the president's budget proposal envisions.
Reject the President's Proposal To Provide Zero RTB Funding
    The President's budget contains a proposal that suggests the Rural 
Telephone Bank should not be funded in fiscal year 2003. In presenting 
last year's budget, the administration stated that the RTB had outgrown 
its need and usefulness. The demand for advanced telecommunications 
services continues to grow and NTCA members continue to meet this 
demand. To this end, we believe the president's decision to zero out 
funding for the RTB is without merit. When the Bush administration 
presented its first budget to Congress, it too included a proposal to 
zero out funding for the RTB, stating it was a result of the RTB moving 
towards privatization.
    Privatization of the RTB is moving at a Congressionally mandated 
pace, and while Congress must stay aware of changes to the RTB program 
as it proceeds toward privatization, NTCA remains concerned about 
unnecessary disruptions that would cause instability to shareholders, 
borrowers, and taxpayers. In light of this fact, as well Congress' 
decision to reject the president's previous proposal to zero out RTB 
funding, we urge Congress to again reject this ill-conceived proposal 
and instead fully fund the bank at its regular $175 million annual 
level.
Prohibit The Transfer Of Unobligated RTB Liquidating Account Balances
    NTCA also recommends that Congress continue the prohibition against 
the transfer of any unobligated balances of the Rural Telephone Bank 
liquidating account to the general fund of the Treasury. This language 
has routinely been included in annual appropriations measures since the 
enactment of the Federal Credit Reform Act (FCRA, Public Law 101-508) 
that allows such transfers to potentially occur. Restatement of this 
language will ensure that the RTB's private class B & class C 
stockholders are not stripped of the value of their statutorily 
mandated investment in the Bank.
Prohibit RTB From Self Funding Subsidy and Administrative Costs
    NTCA urges Congress to maintain its prohibition against unobligated 
RTB Liquidating Account Balances being used to cover the bank's 
administrative and operational expenses for the following reasons: (1) 
such action would require amending the REA, (2) the proposal appears to 
be in conflict with the intent of the FCRA, (3) the proposal will not 
result in Federal budgetary savings, (4) it is unnecessary to the 
determination of whether the bank could operate independently, and thus 
would amount to wasting the resources of the bank which could be put to 
better use upon its complete privatization.
Extend Removal Of the Interest Rate Cap On Treasury-Rate Loans
    NTCA is also requesting that Congress again include language 
removing the 7 percent interest rate cap on Treasury-rate loans. This 
provision has been included in recent appropriations measures to 
prevent the potential disruption of the program in the case where 
interest rates exceed 7 percent and insufficient subsidy cannot support 
authorized lending levels.
Continue Distance Learning and Telemedicine Loan and Grant Program
    The RUS Distance Learning and Telemedicine Loan and Grant program 
has proven to be an indispensable tool for rural development. In this 
regard NTCA urges Congress to provide adequate funding for this 
critical program. NTCA supports the recommendations for this program 
that are contained in the president's budget proposal.
Preserve RBCS Rural Development Grant and Loan Programs
    Likewise, NTCA has witnessed the good these programs have done for 
rural communities. NTCA urges Congress to ensure adequate funding is at 
levels that are adequate to meet current demand for the programs.
                               conclusion
    The RUS Telecommunications Loan Program bears a proud record of 
commitment, service and achievement to rural America. Never in its 
entire history has the program lost a dollar to abuse or default--
unparalleled feat for any government-sponsored lending program. Cleary 
such a successful program should remain in place to continue ensuring 
rural Americans have the opportunity to play a leading role in the 
information age in which we live. After all, an operational and 
advanced rural segment of the nation's telecommunications 
infrastructure is critical to truly ensuring that the national 
objective of universal telecommunications service is fulfilled. We look 
forward to working with you to accomplish this objective.
                                 ______
                                 

      Prepared Statement of the National Treasury Employees Union

    Chairman Dorgan, Ranking Member Campbell, and distinguished members 
of this Subcommittee, my name is Colleen Kelley and I am the National 
President of the National Treasury Employees Union. NTEU represents 
more than 155,000 Federal employees across the Federal government, 
including the employees who work at the Food and Drug Administration. I 
want to thank you for giving me the opportunity to present testimony on 
behalf of these dedicated men and women who work to ensure the safety 
of our food, drugs, cosmetics, and medical devices.
    The past 6 months have been a very trying time for the American 
public. In particular, the tragic events of September 11th and the 
anthrax outbreak in October and November brought to light how 
vulnerable our nation is to such a wide variety of attacks. Without 
question, these horrible events have focused the attention of the 
American public and our elected leaders on the need to invest in a 
highly wined, highly skilled, dedicated Federal workforce to respond to 
and prevent these attacks. Our nation depends on these patriots who 
work for the Federal Government.
    The men and women who work at the Food and Drug Administration have 
been on the front lines in our nation's war on terrorism. They have 
been protecting the public against contaminated foods coming in through 
our ports and borders. They have been working overtime to facilitate 
the availability of safe and effective vaccines to protect Americans 
from anthrax or other bioterrorist attacks, even during a period when 
FDA's own facilities were thought to be contaminated with anthrax. And 
they are working to protect the health of our troops abroad who are at 
great risk for exposure to biological and chemical weapons. This is 
only a sampling of the efforts FDA employees contribute to our nation's 
war on terrorism. But it was not September 11th or the spread of 
anthrax that created these roles for FDA. Rather, the FDA workforce has 
been a critical component of our homeland defense for decades.
    It has been the FDA employees day in and day out--during times of 
war and times of peace--who have responded to the call of the American 
people for ensuring our food supply is safe and more effective drugs 
and medical products are brought to consumers more quickly. In fact, 
the FDA regulates more than $1 trillion worth of products that account 
for about 25 cents out of every dollar of American consumer spending. 
The FDA is staffed with experts in an extraordinary range of fields. 
Microbiologists, chemists, consumer safety officers, and others are 
working around the clock testing, approving, and regulating new drugs, 
robotics, and other medical devices, that will not only improve the 
health conditions for millions of Americans, but in many cases actually 
save lives. They are working to ensure the food we eat is safe and free 
of disease-causing contaminants, and working to ensure new food 
products, food additives, and dietary supplements pose no threat to our 
health.
    And the FDA employees who work in the field offices and 
laboratories located throughout the country have developed valuable 
working relationships with top scientists, health officials, and local 
industries. These employees help protect consumers from mislabeled 
foods, food borne diseases, defective medical devices, or unsafe 
cosmetics or drugs. And they work very closely with Customs, USDA, and 
others at our borders and ports, to inspect and test imported foods and 
drugs.
    We would like to offer our feedback on a few critical areas of the 
FDA budget for fiscal year 2003. First, while the Administration has 
requested a $123 million budget increase for the FDA over last year's 
funding level, more than half of that increase is attributed to a 
budget gimmick suggested by the Administration, that would, for the 
first time, require the agency to pre-fiend future retiree health and 
retirement costs from current appropriations. On March 13, the House 
Budget Committee declined to include this proposal in its fiscal year 
2003 Budget Resolution unless, and until, the appropriate authorizing 
committee makes this change into law.
    Thus, the ``real'' increase in funding over last year's levels is 
merely $60 million. Congress should not be misled about the impact 
these new creative accounting procedures being used by the Office of 
Management and Budget will have on the FDA and other agencies.
    NTEU urges Congress to provide significantly more finding than the 
amount requested by the Administration so that FDA can better respond 
to the constantly changing and complex public health threats facing our 
nation. Denying FDA adequate staffing and resources to do its job will 
deny Americans the public health protections and benefits they expect 
and deserve. It is impossible to put a dollar figure on the lives saved 
by expediting the approval of a new medical device or detecting a food 
borne pathogen before that food product makes it to the supermarket 
shelf. But what is clear is that dollars spent in the FDA budget today 
will reap enormous benefits for the American public tomorrow.
    With regard to programs aimed at ensuring the safety of our food 
supply, NTEU believes the FDA budget falls short. Each year in the 
United States alone, there are 76 million food borne illnesses, which 
result in 325,000 hospitalizations and 5,200 deaths annually. NTEU 
applauds Congress for providing funds in the current fiscal year for 
FDA to hire and train additional staff to inspect, test, and 
investigate food imports and our domestic food supply. But without more 
funding for staffing to conduct additional inspections, our food supply 
will remain vulnerable.
    Next, regarding drug and medical device activities, the budget 
request for FDA does not come anywhere near the amount needed to match 
the dramatic increases in funding for research by the National 
Institutes of Health and the private sector. NIH, pharmaceutical 
companies, and academia have nearly tripled the amount of money spent 
on medical research over the past ten years, from a total of 
approximately $20 billion in 1992 to nearly $60 billion in 2002. Yet 
during this same period, the FDA budget, adjusted for inflation, has 
remained flat. If Americans are to benefit as quickly as possible from 
medical breakthroughs resulting from our research investments, then the 
Administration and Congress must ensure the FDA the agency charged with 
regulating these new drugs and medical technologies--receives, at a 
minimum, funding increases proportionate to the increases for the NIH. 
While the Administration did request a modest increase for drug and 
medical device programs, the increase does not provide enough funding 
to staff the increased workload in approving and ensuring the safety of 
drugs and medical devices before they reach the public.
    NTEU was also very disappointed the Administration requested only a 
$1 million increase for counter terrorism activities performed by FDA 
employees. Last year, in the emergency supplemental appropriations 
bill, Congress recognized the need for increased counter terrorism 
resources for the FDA by appropriating nearly fifty percent more 
funding than what the Administration had requested. Yet even with 
Congress' strong endorsement of FDA's role in the war on terrorism, the 
Administration requested an increase of less than one percent over last 
year's funding level for FDA counter terrorism activities. If provided 
with additional funding, the FDA could rapidly train and place in the 
field an additional 500 employees to bolster counter terrorism efforts.
    Next, I would like to express NTEU's concerns about the proposal to 
transfer the FDA Offices of Legislative and Public Affairs to the 
Office of the Secretary at the Department of Health and Human Services. 
This proposal would also require the consolidation within HHS of 
communications, legislative, and public affairs offices from other 
agencies such as NIH and the Centers for Disease Control and 
Prevention. While NTEU recognizes the importance of keeping the 
Secretary involved in FDA activities, we believe the decentralized 
public information and legislative affairs structure within HHS has 
given lawmakers and the American public the access to experts they need 
to get specialized information in science and medicine. Consolidation 
of these important functions will likely slow the flow of information 
from the agencies and could also lead to inaccurate and/or incomplete 
communications to the public and to Congress.
    Finally, we wish to express our concerns about a different 
consolidation proposal being floated by Governor Tom Ridge, the 
Director of the Office of Homeland Security. This proposal would 
consolidate the food inspection programs at the FDA with meat 
inspection functions at the Agriculture Department. While the FDA and 
Agriculture inspection activities are similar in many ways, they have 
many differences that should not be overlooked. Before moving forward 
with this consolidation, the Office of Homeland Security should work 
with the front-line employees actually doing the inspections now, to 
determine how best to improve our food inspection programs. Again, 
agencies should not consolidate merely for the sake of consolidating. 
There ought to be measurable operational efficiencies and benefits 
gained for the American public by doing so.
    Thank you for giving NTEU the opportunity to share our views on the 
FDA budget for fiscal year 2003. We thank this subcommittee for its 
support of FDA programs in the past, and we urge you to work with the 
Administration to provide FDA with the staffing and resources necessary 
to protect and improve the health of the American public.
                                 ______
                                 

    Prepared Statement of the National Turfgrass Evaluation Program

    Mr. Chairman and Members of the Subcommittee: On behalf of the 
National Turfgrass Evaluation Program (NTEP), I appreciate this 
opportunity to provide the Subcommittee with the turfgrass industry's 
perspective in support of continuation of the $55,000 appropriation for 
the National Turfgrass Evaluation Program (NTEP) included in the 
President's fiscal year 2003 budget request for the Agricultural 
Research Service (ARS). Also, I appreciate the opportunity to present 
to you the turfgrass industry's need and justification for continuation 
of the $490,000 appropriated in the Presidents's fiscal year 2002 
budget for the full-time turfgrass scientist position within ARS. In 
addition, I appreciate the consideration of an additional appropriation 
of $3,500,000 for the establishment of a national turfgrass research 
laboratory, as a part of the national turfgrass research initiative 
proposed by ARS, with ten new research scientist positions.
Justification of $55,000 Appropriation Request for Program Support.
    Once again, NTEP and the turfgrass industry come to the 
appropriations process to request continuation of the $55,000 basic 
program support in the ARS budget for NTEP's activities at Beltsville. 
We appreciate the Subcommittee's continuation of this amount as in 
previous fiscal years, and hope that you will agree with us that this 
request is justified for the ensuing fiscal year.
    The National Turfgrass Evaluation Program (NTEP) is unique in that 
it provides a working partnership that links the Federal Government, 
turfgrass industry and land grant universities together in their common 
interest of turfgrass cultivar development, improvement and evaluation. 
The National Turfgrass Evaluation Program is the primary means by which 
cultivated varieties of turfgrass are evaluated in this country. It 
provides unbiased information on turfgrass cultivar adaptations, 
disease and insect resistance and environmental stress tolerance. The 
public and private sectors of the turfgrass industry use this 
information to develop cultivar recommendations for home owners, sod 
producers, sports turf and parks managers, golf course superintendents 
and highway vegetation managers.
    Our nation's awareness of safety is at an all-time high. Turfgrass 
provides multiple benefits to society including child safety on 
athletic fields, environmental protection of groundwater, reduction of 
silt and other contaminants in runoff, green space in home lawns, 
parks, golf courses, etc. With the advancements being made to 
turfgrasses that require less pesticides, water and other inputs as 
well as other efforts to improve integrated pest management programs, 
recycling, etc., the USDA has a unique opportunity to take positive 
action in support of the turfgrass industry. With a minuscule 
investment of Department funds, in relative terms within USDA's budget, 
a tremendous return can be gained for society and the turfgrass 
industry.
    While the vast majority of the USDA's funds have been and will 
continue to be directed toward traditional ``food and fiber'' segments 
of U.S. agriculture, it is important to note that turfgrasses (e.g., 
sod production) are defined as agriculture in the Farm Bill and by many 
other departments and agencies. Further, it is estimated by the 
Economic Research Service that the turfgrass industry, in all its 
forms, is a $35-40 billion industry. It should also be noted that the 
turfgrass industry is the fastest growing segment of U.S. agriculture, 
while it receives essentially no Federal support. There are no subsidy 
programs for turfgrass, nor are any desired.
    For the past 70 years, the USDA's support for the turfgrass 
industry has been modest at best. The turfgrass industry's rapid 
growth, importance to our urban environments, and impact on our daily 
lives warrant more commitment and support from USDA. Failing to support 
the National Turfgrass Evaluation Program, would be a tremendous 
oversight of a major opportunity. USDA's basic support of NTEP at the 
$55,000 level does not cover all costs. In fact, NTEP represents an 
ideal partnership of the public and private sectors in terms of program 
cost sharing. The NTEP relies most heavily on turfgrass industry (i.e., 
public sectors, end-users) support. However, it is essential that the 
USDA maintain its modest financial support and work closely with NTEP. 
The turfgrass industry relies heavily on NTEP for unbiased information. 
Discounting this support will also eliminate a highly reliable and 
credible level of objectivity that is associated with the NTEP program.
Justification of $490,000 Appropriation Request for the ARS Scientist 
        Position as well as $3,500,000 Appropriation Request for the 
        Establishment of a National Turfgrass Research Laboratory
    NTEP and the turfgrass industry are requesting the Subcommittee's 
support for $490,000 continuing funding for the full-time scientist 
staff position at ARS, focusing on turfgrass research, that was 
appropriated in the fiscal year 2002 budget. We also request that the 
Subcommittee appropriate an additional $3,500,000 for establishment of 
the initial stage of a national turfgrass research laboratory within 
USDA, ARS, which ARS estimates will be a $20 million venture over 
several years of development. This laboratory would address the 
specific need of collecting, evaluating and enhancing turfgrass 
germplasm. For this undertaking, we ask that five new scientist 
positions be created and located at the Beltsville Agricultural 
Research Center in Beltsville, MD. In addition, we ask that five new 
scientist positions be created to conduct watershed-level modeling 
research on turfgrass and development of management systems to minimize 
surface runoff and groundwater impacts from turf inputs. These five 
positions may be located at existing ARS centers of watershed quality/
modeling expertise.
    Our society is becoming increasingly more urbanized. Currently, 
turfgrasses impact more than 90 percent of all people in the U.S. 
through exposure to home lawns, business landscapes, roadsides, parks, 
or recreational turf on a daily basis. As more and more cropland is 
converted to houses, office parks, shopping centers, etc., the acreage 
of turfgrass is increasing exponentially. However, with the increasing 
urbanization comes a greater demand on resources, such as potable 
water. Also, with the general public experiencing heightened awareness 
of the environment and its protection, use of inputs such as 
fertilizer, pesticides and water on turfgrass areas is coming under 
greater scrutiny. In some jurisdictions, use of these inputs will 
either be banned or severely restricted for turfgrass use. In addition, 
the urbanization of America is leading to an overuse of current 
recreational facilities such as parks, athletic fields and golf 
courses. New facilities are being considered or constructed, many on 
abandoned sites such as landfills, industrial wastelands, gravel pits 
or mine spoils. Turfgrasses in these areas will play an important role 
in reclamation vegetation, recreational turf or both.
    The USDA needs to initiate and maintain ongoing research on 
turfgrass development and improvement for the following reasons:
    The value of the turfgrass industry in the U.S. is $35-$40 billion 
annually. Turfgrass is the number one or two agricultural crop in value 
and acreage in many states (i.e. MD, PA, FL, NJ, NC).
    As our society becomes and more urbanized, the acreage of turfgrass 
will increase significantly. Consequently, state and local 
municipalities will require the utilization of other water sources 
(i.e. effluent, reclaimed, etc.), reduction of pesticide use and 
elimination of nutrient runoff from turfgrass. However, demand on 
recreational facilities will increase while these facilities, for 
safety reasons, will still be required to provide safe, attractive 
athletic fields, parks and grounds.
    Private and university research programs are working to develop 
improved turfgrasses, but they do not have the time nor resources to 
identify completely new sources of beneficial genes in commonly used 
species or the usefulness of potential new species. In addition, new 
plant materials collected by these institutions most often are not 
placed in the National Plant Germplasm System for use by all interested 
parties. Additionally, long-term research to identify and transfer 
desirable genes from other species (turfgrass or other crop species) is 
not being undertaken by public and private interests. ARS scientists 
working with turfgrass will enhance the ongoing research and 
development currently underway within the public and private sectors of 
the turfgrass industry.
    Water management is a key component of healthy turf and has direct 
impact on nutrient and pesticide losses into the environment. New and 
improved technologies are needed to monitor turf stresses and to 
schedule irrigation to achieve the desired turf quality. Increasing 
demands and competition for potable water make it necessary to use 
water more efficiently for turf irrigation. Technologies are needed to 
more efficiently and uniformly apply irrigations to achieve desired 
turf quality for the intended use. Also, there is greater competition 
for potable water. Therefore, to increase water availability for turf 
irrigation, waste water (treated and untreated) from both animal and 
municipal sources as well as from food processing plants must be 
utilized. Some of these waste waters contain contaminants such as 
pathogens, heavy metals, and organic compounds. consequently, movement 
and accumulation of these contaminants in the atmosphere, soil profile, 
and ground water must be determined.
    USDA conducted significant turfgrass research from 1920-1988. 
However, since 1988, no full-time scientist has been employed by USDA, 
Agricultural Research Service (ARS) to conduct turfgrass research 
specifically.
    Research on florist, nursery and ornamental crops is significant 
within USDA, industries with far less public and commercial value than 
turfgrass.
    A new turfgrass research scientist position within USDA, ARS was 
created by Congress in the fiscal year 2001 budget. Accordingly, in 
January 2001, the turfgrass industry met with USDA, ARS officials to 
discuss the position description, hiring process, facilities needed, 
etc. for the new position. ARS welcomed the new position but felt 
strongly that just one person working in turfgrass research would be 
ineffective in addressing the needs and concerns of the industry. 
Therefore, in January 2002, ARS held a customer workshop to gain 
valuable input from turfgrass researchers, golf course superintendents, 
sod producers, lawn care operators, athletic field managers and others 
on the research needs of the turfgrass industry. As a result of the 
workshop, ARS is developing and proposing a national strategy to 
address the specific needs and concerns within the turfgrass industry. 
The highlights of this strategy are below:
             a national strategy for ars turfgrass research
    Research Objectives.--Conduct long-term basic and applied research 
to provide knowledge, decision-support tools and plant materials to aid 
in designing, implementing, monitoring and managing economically and 
environmentally sustainable turfgrass systems including providing sound 
scientifically based information for use in the regulatory process.
    Research Focus.--To make a significant contribution in developing 
and evaluating sustainable turfgrass systems, ARS proposes developing 
research programs in six major areas:
Component I. Turf Germplasm, Genetics, and Genomics
    Rationale.--Grasses that better resist diseases, insects, drought, 
traffic, etc. are deparately needed. Also, a better understanding of 
the basic biology of turfgrass species is essential.
Component II. Soil Management for Turf
    Rationale.--Research is needed to characterize limitations to turf 
growth and development in less than optimum soils and to develop cost-
effective management practices to overcome these limitations.
Component III. Turf Water Supply and Use
    Rationale.--New and improved technologies are needed to monitor 
turf stresses and to schedule irrigation to achieve desired turf 
quality but with greater efficiency or using other water sources.
Component IV. Turf Pest Control and Management
    Rationale.--New tools and management practices are needed to 
adequately control weeds, diseases, insects and vertebrate pests while 
reducing input costs and pesticide use.
Component V. Environmental Aspects of Turf
    Rationale.--The need is great to quantify the contribution of turf 
systems to water quality and quantify of vital importance in addressing 
the potential role of turf systems in environmental issues.
Component VI. Integrated Turf Management
    Rationale.--To develop needed tools for turf managers to select the 
best management practices for economic sustainability as well as 
environmental protection.

    The turfgrass industry is very excited about this new proposal and 
wholeheartedly supports the efforts of ARS. Since the customers at the 
workshop identified turfgrass genetics/genomics and water quality/use 
as their top priority areas for ARS research, for fiscal year 2003, the 
turfgrass industry requests that the following units be established 
within USDA, ARS:
    A turfgrass genomics unit (five new positions) to conduct the 
following research:
  --Plant Germplasm Collection and Evaluation.--The new position 
        created in the fiscal year 2001 budget will fulfill these 
        duties.
  --Genomics/Genetics Studies.--A molecular geneticist or 
        cytogeneticist to betterunderstand the genomics of various 
        turfgrass species, collected wild germplasm and their 
        evolution.
  --Transfer of Desirable Genes.--A molecular geneticist to identify 
        desirable genes and how they may be transferred to current 
        turfgrass species.
  --Evaluation and Enhancement of Genetically Altered Grasses.--A 
        turfgrass breeder to evaluate and enhance the genetically 
        altered plants from the program.
  --Turfgrass Entomology.--An entomologist to identify insect resistant 
        germplasm and evaluate promising new species and potential 
        releases.
  --Turfgrass Pathology.--A pathologist to identify disease resistant 
        germplasm and evaluate promising new species and potential 
        releases.
    A turfgrass water quality/systems unit (five new positions) to 
conduct the following research:
  --Watershed Modeling.--To first conduct watershed modeling of 
        existing turf systems on a regional basis. This research is 
        essential to document the contribution of turf to the overall 
        quality of surface and groundwater in the U.S.
  --Management Systems.--This unit also needs to conduct research on 
        management systems designed to reduce/eliminating any runoff 
        and groundwater contamination from turf inputs.
    In conclusion, on behalf of the National Turfgrass Evaluation 
Program and the turfgrass industry across America, I respectfully 
request that the Subcommittee continue the vital $55,000 appropriation 
for the National Turfgrass Evaluation Program (NTEP) as well as the 
$490,000 appropriated in fiscal year 2002 for the new turfgrass 
scientist position within the Agricultural Research Service. I also 
request that the Subcommittee appropriate an additional $3,500,000 for 
the establishment of a turfgrass genetics/genomics unit and a turfgrass 
water quality/systems unit within USDA, ARS.
    Thank you very much for your assistance and support.
                                 ______
                                 

         Prepared Statement of the National Watershed Coalition

    Mr. Chairman and Members of the Subcommittee: Mr. Chairman and 
members of the Subcommittee, I am Larry Smith from Berkeley Springs, 
West Virginia, and I am pleased to represent the National Watershed 
Coalition (NWC) as its Chairman. The National Watershed Coalition is 
privileged to present this testimony in support of the most beneficial 
water resource conservation programs ever developed in the United 
States. The Coalition recognizes full well the need to use our tax 
dollars wisely. That makes the work of this Subcommittee very 
important. It also makes it imperative that the Federal programs we 
continue, are those that provide real benefit to society, and are not 
programs that would be nice to have if funds were unlimited. We believe 
the Watershed Program (Public Law 83-566) and the Flood Prevention 
Operations Program (Public Law 78-534) are examples of those rare 
programs that address our nation's vital natural resources which are 
critical to our very survival, do so in a way that provide benefits in 
excess of costs, and are programs that serve as models for the way all 
Federal programs should work. The President's proposed budget, which 
would eliminate these most beneficial programs, is illogical and 
completely unacceptable to watershed project sponsors throughout the 
United States.
                 general watershed program observations
    The watershed as the logical unit for dealing with natural resource 
problems has long been recognized. Public Law 566 offers a complete 
watershed management approach, and should have a prominent place in our 
current Federal policy emphasizing watersheds and total resource 
management based planning. Proper watershed management improves water 
quality. Why should the Federal Government be involved with these 
watershed programs?
  --They are programs whose objectives are the sustaining of our 
        nation's precious natural resources for generations to come.
  --They are not Federal, but Federally assisted, locally sponsored and 
        owned. They do not represent the continued growth of the 
        Federal Government.
  --They are locally initiated and driven. Decisions are made by people 
        affected, and respect private property rights.
  --They share costs between the Federal Government and local people. 
        Local sponsors pay between 30-40 percent of the total costs of 
        Public Law 566 projects.
  --They produce net benefits to society. The most recent program 
        evaluation demonstrated the actual ratio of benefits to costs 
        was approximately 2.2:1. The actual adjusted economic benefits 
        exceeded the planned benefits by 34 percent. How many other 
        Federal programs do so well?
  --They consider and enhance environmental values. Projects are 
        subject to the discipline of being planned following the 
        National Environmental Policy Act (NEPA), and the Federal 
        ``Principles and Guidelines'' for land and water projects. That 
        is public scrutiny!
  --They are flexible programs that can adapt to changing needs and 
        priorities. Objectives that can be addressed are flood damage 
        reduction, watershed protection (erosion and sediment control), 
        water quality improvement, rural water supply, water 
        conservation, fish and wildlife habitat improvement, 
        recreation, irrigation and water management, etc. That is 
        flexibility emphasizing multiple uses.
  --They are programs that encourage all citizens to participate.
  --They can address the needs of low income and minority communities.
  --They are targeted to address the most serious resource problems.
  --And best of all--they are programs the people like!
    The National Watershed Coalition is concerned with the 
Administration's lack of support for these watershed programs, and 
trusts your support will cause the outcome of the fiscal year 2003 
appropriations process will enable this vital work to continue and 
expand as we seek to preserve, protect and better manage our nation's 
water and land resources. Every State in the United States has 
benefited from the Small Watershed Program.
    national watershed coalition usda water resource program budget 
                            recommendations
Watershed and Flood Prevention Operations
    In order to continue this high priority work in partnership with 
states and local governments, the Coalition recommends a fiscal year 
2003 funding level of $170 million for Watersheds and Flood Prevention 
Operations, Public Law 83-566 and Public Law 78-534. The current 
unfunded Federal commitment for this program is currently over $1.4 
billion.
    We recommend that $30 million of this amount be for Public Law 78-
534 projects. For some years now, the Federal budget has eliminated the 
separate line items for the Public Law 534 and Public Law 566 watershed 
projects, and just lumped a total figure under Public Law 566 with a 
note that some amount ``may be available'' for Public Law 534 projects. 
This is an entirely unsatisfactory way of doing business. Public Law 
534 still exists in law; it has not been repealed. It should be funded 
as a separate program. This tactic is unfair to both Public Law 566 and 
Public Law 534. We ask that the Public Law 534 projects be funded at 
$30,000,000.00, and that it be separate from Public Law 566. These are 
two distinct authorities that should not be confused. The current 
situation really penalizes both Public Law 534 and 566, as 534 has no 
funds at the outset, and in order to provide a little something to the 
Public Law 534 watershed projects, NRCS has to take money from the 
Public Law 566 accounts which are already very underfunded. Please 
restore funding for Public Law 534 watershed projects to $30 million in 
fiscal year 2003.
    The $170 million request represents the actual amount watershed 
project sponsors across the country have indicated they can use now for 
projects ready for installation. It is a real, documented need.
Watershed Surveys and Planning
    We recommend that watershed surveys and planning be funded at $20 
million. Watershed sponsors throughout the country have indicated a 
need for $35 million for surveys and planning, however the National 
Watershed Coalition believes the $20 million amount is a more 
reasonable request when all national water resource priorities are 
considered.
Watershed Rehabilitation
    We also suggest that $25 million be used for structural 
rehabilitation and replacement, in accordance with Public Law 106-472, 
the Small watershed Rehabilitation Amendments of 2000, passed by the 
Congress and signed into law on November 9th, 2000, and that another $5 
million be available for a thorough assessment of rehabilitation needs. 
The condition of our nation's dams, and the need for watershed 
structure rehabilitation, is a national priority. We are very 
disappointed to see the Administration's proposed budget apparently 
doesn't believe it is a national priority to protect the lives of 
America's citizens. Congress has indicated it is with passage of Public 
Law 106-472.
    The issue of the current condition of those improvements 
constructed over the last 50 years with these watershed programs is a 
matter of great concern. Many of the nearly 11,000 dams that NRCS 
assisted sponsors build throughout the United States no longer meet 
current dam safety standards largely as a result of development, and 
need to be upgraded to current standards. A USDA study published in 
1991 estimated that in the next 10 years, $590 million would be needed 
to protect the installed works. Of that amount, $100 million would come 
from local sponsors as their operation and maintenance contributions. 
NRCS also conducted a more recent survey, and in just 22 states, about 
$540 million in rehabilitation needs were identified. We are 
recommending starting with $30 million ($25 million for rehabilitation 
work and $5 million to start a more precise assessment of needs) for 
the work necessary to protect these installed structures, and commend 
Congress for their leadership in passing Public Law 106-472. Watershed 
project sponsors throughout the U.S. appreciate your leadership on this 
vital issue. We now have the authorization, and need the 
appropriations. If we don't start to pay attention to our rural 
infrastructure needs, the ultimate cost to society will only increase, 
and project benefits will be lost. This is a serious national issue. 
Since most of these structures were constructed in the 1950's, 60's, 
and 70's, and were originally designed for a 50-year life, it is 
apparent we need to look at their current condition. If we do the 
rehabilitation work to bring these older structures up to current 
health and safety standards, they will continue to provide benefits far 
into the future. We are appalled that the Administration's budget would 
eliminate this work. Elimination is not acceptable to watershed project 
sponsors.
Emergency Watershed Protection (EWP)
    We also suggest $20 million be provided for the Emergency Watershed 
Protection (EWP) program. This would allow NRCS to start providing 
disaster planning and survey assistance in a timely manner while 
supplemental natural disaster appropriation bills are being considered. 
These funds should not be taken from watershed protection and flood 
prevention, or the watershed surveys and planning accounts.
Watershed Research and Development
    There is also a research and development (R&D) need as we get the 
structural rehabilitation process underway. In USDA, that work in 
undertaken by the Agricultural Research Service (ARS). That need is 
estimated at $2.0 million, and we ask that it be included in the ARS 
budget. It would be used for evaluation of upstream and downstream 
changes to the stream channel systems in cases of decommissioning, 
evaluation of the water quality impact of stored sediment releases, and 
the evaluation of impacts of the loss of flood protection, among other 
things.
    People should understand these funds are only a part of the total 
that is committed to this vital national, conservation purpose. The 
local project sponsors in these ``federally assisted'' endeavors have a 
tremendous investment also. Congress increasingly talks of wanting to 
fund those investments in our nation's infrastructure that will sustain 
us in the future. Yet past budgets have regularly cut funding for the 
best of these programs. This makes absolutely no sense! We can't seem 
to invest and re-invest in our vital watershed infrastructure. That is 
simply unconscionable. Isn't water quality and watershed management a 
national priority? We believe it is.
The President's Budget Proposals
    While we have mentioned it in this testimony, we would like to once 
again express our dismay with the Administration's budget proposals to 
eliminate all watershed program funding in fiscal year 2003. The 
President's budget was released February 4th, and since then sponsors 
from all across the U.S. have told us these proposals are unacceptable. 
Once again we are disappointed with what appears to us to be a lack of 
Administration commitment for these very beneficial conservation 
programs. The Administration needs to recognize watershed natural 
resources conservation as a high national priority, as you do. It's 
only common sense.
    The Coalition appreciates the opportunity to offer these comments 
regarding fiscal year 2003 funding for the water resource programs 
administered by USDA's Natural Resources Conservation Service (NRCS). 
With the ``downsizing'' the NRCS has experienced, we would be remiss if 
we did not again express some concern as to their ability to provide 
adequate technical support in these watershed program areas. NRCS 
technical staff has been significantly reduced and budget constraints 
have not allowed that expertise to be replaced. Traditional fields of 
engineering and economics are but two examples. We see many states 
where NRCS capability to support their responsibilities is seriously 
diminished. This is a disturbing trend that needs to be halted. This 
downsizing has a very serious effect on state and local conservation 
programs. Local Watershed and Conservation Districts and the NRCS 
combine to make a very effective delivery system for providing the 
technical assistance to local people--farmers, ranchers and rural 
communities--in applying needed conservation practices. But that 
delivery system is currently very strained! Many states and local units 
of government also have complementary programs that provide financial 
assistance to land owners and operators for installing measures that 
reduce erosion, improve water quality, and maintain environmental 
quality. The NRCS provides, through agreement with the USDA Secretary 
of Agriculture, ``on the land'' technical assistance for applying these 
measures. The delivery system currently is in place, and by downsizing 
NRCS, we are eroding the most effective and efficient coordinated means 
of working with local people to solve environmental problems that has 
ever been developed. Our system and its ability to produce food and 
fiber is the envy of the entire world. In our view, these programs are 
the most important in terms of national priorities.
    We continue to be disappointed that the subcommittee no longer has 
a practice of accepting oral testimony from organizations such as the 
National Watershed Coalition. When we were allowed to make an oral 
presentation in the House, we were able to talk to subcommittee members 
who could ask us questions. It was a chance for them to actually talk 
with people doing the work on the land. That personal contact in both 
houses is now missing, and it would be easy to think that our written 
testimony may not be seriously considered. We hope you will reconsider 
this practice in future years, and again allow oral testimony.
    The Coalition pledges its full support to you as you continue your 
most important work. Our Executive Director, Mr. John W. Peterson, who 
has over 40 years experience in natural resource watershed 
conservation, is located in the Washington, DC area, and would be 
pleased to serve as a resource as needed. John's address is 9304 Lundy 
Court, Burke, VA 22015-3431, phone 703-455-6886 or 4387, Fax; 703-455-
6888, email; [email protected].
    Thank you for allowing the National Watershed Coalition (NWC) this 
opportunity.
                                 ______
                                 

               Prepared Statement of the Nez Perce Tribe

    The Nez Perce Tribe requests the following funding amounts for 
fiscal year 2003, which are specific to the Nez Perce Tribe: $228,708 
through the United States Department of Agriculture, Animal and Plant 
Health Inspection Service for the biological control of noxious weeds 
for implementation, monitoring, and education.
    The Tribe urges support for the full and adequate funding of tribal 
programs through the Department of Agriculture fiscal year 2003 budget, 
with the specific request discussed below.
Nez Perce Tribe Biological Control Center Funding: USDA, $228,708
    The Nez Perce Tribe established the Bio-Control Center in 1999 
thanks to grant funds from the USDA-Business Cooperative Services 
program. Since its inception, the Center has developed partnerships and 
networks to coordinate the biological control of weeds through the 
State of Idaho and worked collaboratively with the USDA to develop and 
implement monitoring protocols. The Center has been instrumental in 
providing biological control agent releases and monitoring under 
contractual agreements with private landowners and state and Federal 
agencies throughout the region. In coordination with the University of 
Idaho, the USDA-APHIS Plant Protection and Quarantine staff in Idaho, 
Oregon, Montana, and Washington, and the ARS Western Regional Research 
Unit, the Center has established biocontrol organism nurseries, 
distributed biocontrol organisms, and has monitored the results to 
biocontrol on targeted weed infestations. The Center is also an active 
participant in several Cooperative Weed Management Areas within Idaho.
    The biological control of weeds uses the weeds' natural enemies to 
reduce the weeds' ability to compete with the desired vegetation. 
Biological control techniques have been used in the West since 1940 to 
reduce weed density on range and wildlands where cultural and chemical 
control methods are not economically feasible or practical. This 
allocation would enable the Tribe to continue to rear and provide 
biological control organisms to private and public entities at no cost, 
to monitor the impacts, develop technology transfer materials, and host 
seminars and other educational programs for all interested parties.
    For fiscal year 2003, the Nez Perce Tribe requests that Congress 
earmark $228,708 from the USDA Animal Plant Health Inspection Service 
to continue the Biocontrol Center's efforts to establish nurseries to 
increase biological control availability, distribute biological control 
organisms throughout weed infestation areas, monitor the impacts, and 
provide annual technology transfer seminars to Cooperative Weed 
Management Area partners. This program will be developed in 
coordination with USDA, local universities, and regional experts.
    Biological control offers long-term solutions to the management of 
invasive weeds through the West. As biological control organisms reduce 
the weeds' competitive edge over desirable and native vegetation, both 
tribal and non-tribal users of the region's wildland resources will 
benefit and become more aware of the advantages of a biological weed 
control approach.
                                 ______
                                 

      Prepared Statement of the New Jersey Aquaculture Association

    Mr. Chairman and members of the Subcommittee: The New Jersey 
Aquaculture Association membership represents about fifty individuals 
and companies that are engaged in a variety of aquaculture activities, 
ranging from shellfish, ornamentals and finfish production to research 
and technical assistance for the producer community. I have personally 
been involved in aquaculture initiatives for over forty years in 
applied research, technology development and as a small scale producer 
of shellfish. I have participated in the evolution of the Northeastern 
Regional Aquaculture Center since its inception, having served on its 
Board of Directors and Executive Committee as an industry advocate for 
server terms. My origin in the research community, a close liaison with 
governmental resource management agencies and a long and intimate 
association with commercial aquaculturists in America and in Europe 
have fostered a perspective in this field which is somewhat broader 
that that of most observes. The operational strategy of the RAC system 
incorporates formulating and executing research, development and 
extension projects. I am convinced that this is probably the most cost-
effective approach to increasing out aquaculture production capacity. I 
have seen this strategy applied successfully in implementing many of 
the projects supported by the NRAC.
    It is clear that yields from the wild fisheries have reached a 
plateau, and in many cases are in decline; however, the demand for 
fisheries products continues to expand and will soon greatly exceed the 
productivity of wild populations. Aquaculture is an obvious means to 
satisfy the impeding production deficit. Other countries, having long 
since recognized that reality of this vexing shortfall, have taken the 
initiative to develop a strong aquaculture industry. The majority of 
research that originates within the academic community, though 
scientifically valid, seldom addresses the immediate technical problems 
of the aquaculturist. The RAC approach, by virtue of the program's 
mission, is ideally suited to selecting and funding the types of 
research and development projects that are critical to successfully 
meeting the goal of increasing levels of aquaculture productivity.
    There is a considerable potential for benefits to accrue from a 
relatively small investment dedicated to increasing aquaculture 
production, as envisioned and fostered by the RAC program. These 
benefits will have substantial positive impact, not only for the 
industry, but for the consumer, for auxiliary businesses and for 
society in general. Therefore, we request that your committee give 
careful consideration to adequate support for this program and 
recommend to Congress that it provide funding at the level authorized 
in the Food Security Act of 1985.
                                 ______
                                 

    Prepared Statement of the Northwest Indian Fisheries Commission

    Mr. Chairman and Members of the Committee, I am Billy Frank, Jr., 
Chairman of the Northwest Indian Fisheries Commission (NWIFC), and on 
behalf of the twenty-Western Washington member Tribes, I submit this 
request for appropriations to support the research, sanitation and 
marketing of Tribal shellfish products. We request the following:
    $500,000 to support commercial harvests costs which will assist the 
tribes in fulfilling the demands for their shellfish products both 
domestically and abroad;
    $1,000,000 to support water and pollution sampling, sampling and 
research for paralytic shellfish poisoning and coordination of research 
projects with State agencies; and,
    $1,000,000 to support data gathering at the reservation level for 
the conduct of shellfish population surveys and estimates.
                        treaty shellfish rights
    As with salmon, the tribes' guarantees to harvest shellfish lie 
within a series of treaties signed with representatives of the Federal 
Government in the mid-1850s. In exchange for the peaceful settlement of 
what is today most of Western Washington, the tribes reserved the right 
to continue to harvest finfish and shellfish at their usual and 
accustomed grounds and stations. The tribes were specifically excluded 
from harvesting shellfish from areas ``staked or cultivated'' by non-
Indian citizens. Soon after they were signed, the treaties were 
forgotten or ignored.
    The declining salmon resource in the Pacific Northwest negates the 
legacy Indian people in Western Washington have lived by for thousands 
of years. We were taught to care for the land and take from it only 
what we needed and to use all that we took.
    We depended on the gifts of nature for food, trade, culture and 
survival. We knew when the tide was out, it was time to set the table 
because we live in the land of plenty; a paradise complete. Yet, 
because of the loss of salmon habitat which is attributable to 
overwhelming growth in the human population, a major pacific coastal 
salmon recovery effort ensues. Our shellfish resource is our major 
remaining fishery.
    At least ninety types of shellfish have been traditionally 
harvested by the Tribes in Western Washington and across the continent 
Indian people have called us the fishing Tribes because of our rich 
history of harvesting and caring for finfish and shellfish. Our 
shellfish was abundant and constituted a principal resource of export, 
as well as provided food to the Indians and the settlers which greatly 
reduced the living expenses.
    Clams, crab, oysters, shrimp, and many other species were readily 
available year round. The relative ease with which large amounts could 
be harvested, cured, and stored for later consumption made shellfish an 
important source of nutrition second only in importance to salmon. 
Shellfish remain important for subsistence, economic, and ceremonial 
purposes. With the rapid decline of many salmon stocks, due to habitat 
loss from western Washington's unrelenting populous growth, shellfish 
harvesting has become a major factor in tribal economies.
    The tribes have used shellfish in trade with the non-Indian 
population since the first white settlers came into the region a 
century and a half ago. Newspaper accounts from the earliest days of 
the Washington Territory tell of Indians selling or trading fresh 
shellfish with settlers. Shellfish harvested by members of western 
Washington's Indian tribes is highly sought after throughout the United 
States and the Far East. Tribal representatives have gone on trade 
missions to China and other Pacific Rim nations where Pacific Northwest 
shellfish particularly geoduck is in great demand. Trade with the Far 
East is growing in importance as the tribes struggle to achieve 
financial security through a natural resources-based economy.
    Treaty language pertaining to tribal shellfish harvesting included 
this section:

    ``The right of taking fish at usual and accustomed grounds and 
stations is further secured to said Indians, in common with all 
citizens of the United States; and of erecting temporary houses for the 
purposes of curing; together with the privilege of hunting and 
gathering roots and berries on open and unclaimed lands. Provided, 
however, that they not take shell-fish from any beds staked or 
cultivated by citizens.''
             (treaty with the s'klallam, january 26, 1855)
    In exchange for the peaceful settlement of what is today most of 
western Washington, the tribes reserved the right to continue to 
harvest finfish and shellfish at all of their usual and accustomed 
grounds and stations. The tribes were specifically excluded from 
harvesting shellfish from areas ``staked or cultivated'' by non-Indian 
citizens.
    Tribal efforts to have the Federal Government's treaty promises 
kept began in the first years of the 20th Century when the United 
States Supreme Court ruled in U.S. v. Winans, that where a treaty 
reserves the right to fish at all usual and accustomed places, a state 
may not preclude tribal access to those places.
    Sixty years later, the tribes were again preparing for battle in 
court. After many years of harassment, beatings and arrests for 
exercising their treaty-reserved rights, western Washington tribes took 
the State of Washington to Federal court to have their rights legally 
re-affirmed. In 1974, U.S. District Court Judge George Boldt ruled that 
the tribes had reserved the right to half of the harvestable salmon and 
steelhead in western Washington.
    The ``Boldt Decision,'' which was upheld by the U.S. Supreme Court, 
also re-established the tribes as co-managers of the salmon and 
steelhead resources in western Washington.
    As a result of this ruling, the tribes became responsible for 
establishing fishing seasons, setting harvest limits, and enforcing 
tribal fishing regulations. Professional biological staffs, enforcement 
officers, and managerial staff were assembled to ensure orderly, 
biologically-sound fisheries.
    Beginning in the late 1970s, tribal and state staff worked together 
to develop comprehensive fisheries that ensured harvest opportunities 
for Indian and non-Indian like, and also preserved the resource for 
generations to come.
    It was within this new atmosphere of cooperative management that 
the tribes sought to restore their treaty-reserved rights to manage and 
harvest shellfish from all usual and accustomed areas. Talks with their 
state counterparts began in the mid-1980s, but were unsuccessful. The 
tribes filed suit in Federal court in May 1989 to have their shellfish 
harvest rights restored.
    The filing of the lawsuit brought about years of additional 
negotiations between the tribes and the state. Despite many serious 
attempts at reaching a negotiated settlement, the issue went to trial 
in May 1994.
    In 1994, District Court Judge Edward Rafeedie upheld the right of 
the treaty tribes to harvest 50 percent of all shellfish species in 
their Usual and Accustomed fishing areas. Judge Rafeedie also ordered a 
shellfish Management Implementation Plan that governs tribal/state co-
management activities.
    After a number of appeals, the U.S. 9th Circuit Court of Appeals 
let stand Rafeedie's ruling in 1998. Finally, in June 1999, the U.S. 
Supreme Court denied review of the District court ruling, effectively 
confirming the treaty shellfish harvest right.
Assist the tribes in fulfilling the demands fortheir shellfish 
        products, $500,000
    Shellfish harvested by members of Western Washington's Indian 
tribes is highly sought after throughout the United States and the Far 
East. We request $500,000 which will assist Tribes in promoting our 
shellfish products, in both domestic and international markets. We are 
now at a point in time when telecommunicating is both cost effective 
and timely when marketing products. Tribal fishers are not capable of 
supporting such an effort individually, but, could collectively benefit 
if such a network could be developed through the Northwest Indian 
Fisheries Commission and the Northwest Indian College in Bellingham, 
Washington. This institution is capable of providing the technology 
needed to implement such a marketing program for Tribal shellfish 
products.
Water and pollution sampling, sampling and research for paralytic 
        shellfish poisoning and coordination of research projects 
        withState agencies, $1,000,000
    Shellfish growing areas are routinely surveyed for current or 
potential pollution impacts and are classified based on the results of 
frequent survey information. No shellfish harvest is conducted on 
beaches that have not been certified by the tribes and the Washington 
Department of Health. Growing areas are regularly monitored for water 
quality status and naturally-occurring biotoxins to protect the public 
health.
    However, both Tribal and non-Indian fisheries have been threatened 
due to the lack of understanding about the nature of biotoxins, 
especially in subtidal geoduck clams. Research targeted to better 
understand the nature of biotoxins could prevent unnecessary illness 
and death that may result from consuming toxic shellfish, and could 
prevent unnecessary closure of tribal and non-Indian fisheries.
Data gathering at the reservation level for the conduct of shellfish 
        population surveys and estimates, $1,000,000
    Very little current data and technical information exists for many 
of the shellfish fisheries now being jointly managed by state and 
Tribal managers. This is particularly true for many free-swimming and 
deep-water species. This lack of information can not only impact 
fisheries and the resource as a whole, but makes it difficult to assess 
50/50 treaty sharing arrangements. Additionally, intertidal assessment 
methodologies differ between state and tribal programs, and can lead to 
conflicts in management planning.
    Existing data systems must be enhanced for catch reporting, 
population assessment and to assist enhancement efforts. Research on 
methodology for population assessment and techniques also is critical 
to effective management.
    Onsite beach surveys are required to identify harvestable 
populations of shellfish. Regular monitoring of beaches also is 
necessary to ensure the beaches remain safe for harvest. Additional and 
more accurate population survey and health certification data is needed 
to maintain these fisheries and open new harvest areas. This 
information will help protect current and future resources and provide 
additional harvest opportunities.
                               conclusion
    We ask that you give serious consideration to our needs. We are 
available to discuss these requests with committee members or staff at 
your convenience.
                                 ______
                                 

     Prepared Statement of the Organization for the Promotion and 
           Advancement of Small Telecommunications Companies

Summary of request
    The Organization for the Promotion and Advancement of Small 
Telecommunications Companies (OPASTCO) seeks the Subcommittee's support 
for fiscal year 2003 loan levels for the telecommunications loans 
program and Rural Telephone Bank (RTB) program administered by the 
Rural Utilities Service (RUS) in the following amounts:

                        [In millions of dollars]

5 percent hardship loans..........................................    75
Treasury rate loans...............................................   300
Guaranteed loans..................................................   120
RTB loans.........................................................   175

    In addition, OPASTCO requests the following action by the 
Subcommittee: (1) removal of the statutory 7 percent cap on Treasury 
rate loans for fiscal year 2003; (2) removal of previous appropriations 
act language limiting the retirement of Class A stock of the RTB to 5 
percent; (3) a prohibition on the transfer of unobligated RTB funds to 
the general fund of the Treasury; and (4) funding of the distance 
learning/telemedicine and broadband grant and loan programs at 
sufficient levels.
General
    OPASTCO is a national trade association of more than 500 small 
telecommunications carriers serving rural areas of the United States. 
Its members, which include both commercial companies and cooperatives, 
together serve over 2.5 million customers in 42 states. Approximately 
half of OPASTCO's members are RUS or RTB borrowers.
    Perhaps at no time since the inception of the RUS (formerly the 
REA) has the telecommunications loans and RTB programs been so vital to 
the future of rural America. The telecommunications industry is at a 
crossroads, both in terms of technology and public policy. Rapid 
advances in telecommunications technology in recent years have already 
begun to deliver on the promise of a new ``information age.'' The 
Federal Communications Commission's (FCC) ongoing implementation of the 
landmark Telecommunications Act of 1996, as well as modernization 
resulting from prior statutory changes to RUS's lending program, will 
expedite this transformation. In addition, both Federal and State 
policymakers have made deployment of advanced telecommunications 
services a top priority. However, without continued support of the 
telecommunications loans and RTB programs, rural telephone companies 
will be hard pressed to build the infrastructure necessary to bring 
their communities into this new age, creating a bifurcated society of 
information ``haves'' and ``have-nots.''
    Contrary to the belief of some critics, RUS's job is not finished. 
Actually, in a sense, it has just begun. We have entered a time when 
advanced services and technology--such as broadband fiber optics, high-
speed packet and digital switching equipment, and digital subscriber 
line technology--are expected by customers in all areas of the country, 
both urban and rural. Unfortunately, the inherently higher costs of 
upgrading rural wireline networks, both for voice and data 
communications, has not abated.
    Rural telecommunications continues to be more capital intensive and 
involves fewer paying customers than its urban counterpart. Nationally, 
the population density in areas served by rural carriers is only about 
13 persons per square mile. This compares to a national average 
population density of 105 persons per square mile in areas served by 
non-rural carriers. The FCC's most recent report on the deployment of 
advanced telecommunications capability noted that a positive 
correlation persists between population density and the presence of 
subscribers to high-speed services. Indeed, the report stated that 
high-speed subscribers were reported in 97 percent of the most densely 
populated zip codes but in only 49 percent of the zip codes with the 
lowest population densities. In order for rural telephone companies to 
modernize their networks and provide their customers with advanced 
services at reasonable rates, they must have access to reliable low-
cost financing.
    The relative isolation of rural areas increases the value of 
telecommunications services for these citizens. Telecommunications 
enables applications such as high-speed Internet connectivity, distance 
learning, and telemedicine that can alleviate or eliminate some rural 
disadvantages. A modern telecommunications infrastructure can also make 
rural areas attractive for some businesses and result in revitalization 
of the rural economy. For example, businesses such as telemarketing and 
tourism can thrive in rural areas, and telecommuting can become a 
realistic employment option.
    While it has been said many times before, it bears repeating that 
RUS's telecommunications loans and RTB programs are not grant programs. 
The funds loaned by RUS are used to leverage substantial private 
capital, creating public/private partnerships. For a very small cost, 
the government is encouraging tremendous amounts of private investment 
in rural telecommunications infrastructure.
    Most importantly, the programs are tremendously successful. 
Borrowers actually build the infrastructure and the government gets 
paid back with interest. There has never been a default in the history 
of the telecommunications lending programs.
The Telecommunications Act of 1996 has heightened the need for the 
        telecommunications loans and RTB programs
    The FCC's implementation of the Telecommunications Act of 1996 will 
only increase rural telecommunications carriers' need for RUS 
assistance in the future. The forward-looking Act defines universal 
service as an evolving level of telecommunications services that the 
FCC must establish periodically, taking into account advances in 
telecommunications and information technologies and services. As 
anticipated, in August 2001, the Federal-State Joint Board on Universal 
Service sought comment on its review of the services supported by the 
universal service mechanism. RUS has an essential role to play in the 
implementation of the law, as it will compliment support mechanisms 
established by the FCC and enable rural America to move closer to 
achieving the federally mandated goal of rural/urban service and rate 
comparability.
A $75 million loan level should be maintained for the 5 percent 
        hardship loan program
    One of the most vital components of RUS's telecommunications loans 
program is the 5 percent hardship loan program. These loans are 
referred to as hardship loans for good reason: They provide below-
Treasury rate financing to telephone companies serving some of the most 
sparsely populated, highest cost areas in the country. The commitment 
these companies have to providing modern telecommunications service to 
everyone in their communities has made our nation's policy of universal 
service a reality and, in many cases, would not have been possible 
without RUS's hardship loan program. Companies applying for hardship 
loans must meet a stringent set of eligibility requirements and the 
projects to be financed are rated on a point system to ensure that the 
loans are targeted to the most needy and deserving. In fiscal year 
2002, the government subsidy needed to support a $75 million loan level 
was only $1.74 million. Given the necessity of this indispensable 
program, it is critical that the loan level be maintained at $75 
million for fiscal year 2003.
Removal of the 7 percent cap on Treasury rate loans should be continued
    With regard to RUS's Treasury rate loan program, OPASTCO supports 
the removal of the 7 percent ceiling on these loans for fiscal year 
2003. This Subcommittee appropriately supported language in the fiscal 
year 1996 Agriculture Appropriations Act to permit Treasury rate loans 
to exceed the 7 percent per year ceiling contained in the authorizing 
act. The language has been continued in each subsequent year. Were 
long-term interest rates to exceed 7 percent, adequate subsidy would 
not be available to support the Treasury rate loan program at the 
authorized levels. Accordingly, OPASTCO supports the continuation of 
this language in the fiscal year 2003 appropriations bill in order to 
prevent potential disruption to this important program.
A $175 million loan level should be maintained for the rtb program
    As previously discussed, the RTB's mission has not been completed 
as rural carriers continue to rely on this important source of 
supplemental financing in order to provide their communities with 
access to the next generation of telecommunications services. In fiscal 
year 2002, the government subsidy necessary to fund a $175 million loan 
level was only $3.74 million, or 2.14 percent of the capital that the 
program generates. The ongoing need for the RTB program makes it 
essential that a $175 million loan level be maintained for fiscal year 
2003.
The 5 percent limitation on the amount of class a stock of the RTB that 
        can be retired should be removed
    OPASTCO believes it would be appropriate to remove or change the 
language contained in previous agriculture appropriations acts 
restricting the retirement of Class A stock of the RTB to 5 percent. 
This restriction is an impediment to the timely privatization of the 
RTB, as envisioned by the Rural Electrification Act of 1936. OPASTCO 
further suggests that Congress, the Administration, and the RTB Board 
of Directors develop a schedule and plan for privatizing the bank in a 
timely manner. OPASTCO believes that the timely privatization of the 
RTB is of great importance to rural telecommunications carriers as they 
seek to upgrade their networks for the provision of advanced services 
to their customers.
The prohibition on the transfer of any unobligated balance of the RTB 
        liquidating account to the Treasury and requiring the payment 
        of interest on these funds should be continued
    OPASTCO urges the Subcommittee to reinstate the language introduced 
in the fiscal year 1997 Agriculture Appropriations Act, and continued 
in the years following, prohibiting the transfer of any unobligated 
balance of the RTB liquidating account to the Treasury or the Federal 
Financing Bank which is in excess of current requirements and requiring 
the payment of interest on these funds. As a condition of borrowing, 
the statutory language establishing the RTB requires telephone 
companies to purchase Class B stock in the bank. Once all loans are 
completely repaid, a borrower may then convert its Class B stock into 
Class C stock. Thus, all current and former borrowers maintain an 
ownership interest in the RTB. As with stockholders of any concern, 
these owners have rights which may not be abrogated. The Subcommittee's 
inclusion of the aforementioned language into the fiscal year 2003 
appropriations bill will ensure that RTB borrowers are not stripped of 
the value of this required investment.
The distance learning/telemedicine and broadband programs should 
        continue to be funded at adequate levels
    In addition to RUS's telecommunications loans and RTB programs, 
OPASTCO supports adequate funding of the distance learning /
telemedicine and broadband grant and loan programs. Through distance 
learning, rural students gain access to advanced classes which will 
help them prepare for college and jobs of the future. Telemedicine 
provides rural residents with access to quality health care services 
without traveling great distances to urban hospitals. In addition, by 
continuing the pilot broadband program, more rural communities will 
gain access to the Internet and other enhanced services. Loans are made 
at the government's cost-of-money, which should help to meet demand for 
the programs in the most cost effective way. In light of the 
Telecommunications Act's purpose of encouraging deployment of advanced 
technologies and services to all Americans--including schools and 
health care providers--sufficient targeted funding for these purposes 
is essential in fiscal year 2003.
                               conclusion
    The development of the nationwide telecommunications network into 
an information superhighway, as envisioned by policymakers, will help 
rural America survive and prosper in any market--whether local, 
regional, national, or global. However, without the availability of 
low-cost RUS funds, building the information superhighway in 
communities that are isolated and thinly populated will be untenable. 
By supporting the RUS telecommunications programs at the requested 
levels, the Subcommittee will be making a significant contribution to 
the future of rural America.
                                 ______
                                 

    Prepared Statement of Public Citizen's Critical Mass Energy and 
                          Environment Program

    Chairman Kohl, Ranking Member Cochran and members of the 
Subcommittee. My name is Wenonah Hauter and I am Director of Public 
Citizen's Critical Mass Energy and Environment Program. Public Citizen 
is a consumer organization that was founded by Ralph Nader. We 
currently have some 150,000 members.
    As you know, Title VI of H. Rept. 107-225, the Conference Committee 
Report that accompanied the fiscal year 2002 Agriculture, Rural 
Development, Food and Drug Administration and Related Agencies 
Appropriations Bill, directed the Food and Drug Administration (FDA) to 
report to the House and Senate Appropriations Committees the ``outcome 
of recent focus groups regarding the labeling of irradiated food 
products and to report on how the results will be integrated into 
future rulemaking decisions.''
    For the past 5 years, there have been efforts by irradiation 
proponents to weaken the labeling requirements for foods that have been 
irradiated. At the present time, FDA regulations require that most 
foods that are irradiated display the radura--the international symbol 
for irradiation--and the disclosure ``treated by irradiation'' or 
``treated with radiation.'' There have been some in the food 
irradiation industry who have tried to convince the FDA that it should 
be permissible to call irradiation either ``cold pasteurization'' or 
``electronic pasteurization.''
    In 1999, the FDA issued an advanced notice for rule-making that 
called for public comments on proposed changes to the labeling 
regulations for irradiated foods. The proposed changes would have 
permitted the phrases ``cold pasteurization'' and ``electronic 
pasteurization'' to be used in place of the term ``irradiation.''
    The agency received over 20,000 comments, 98.2 percent of which 
opposed changing the current labeling requirements for irradiated 
foods.
    At the request of Congress in the fiscal year 2001 Agriculture-FDA 
Appropriations Bill, the FDA was directed to revisit the issue. In 
response to that congressional directive, the FDA impaneled six focus 
groups of consumers in Calverton, Maryland; Minneapolis, Minnesota; and 
Sacramento, California during the summer of 2001. Public Citizen and 
the Center for Food Safety were permitted to send observers to watch 
the focus group deliberations at all three locations, as was the food 
irradiation industry. What was remarkable about all of the focus groups 
was the fact that the consumers who participated in them were unanimous 
in their opinion--the word ``pasteurization'' has no business being 
included in the labeling used to describe irradiated food. This feeling 
on the part of consumers did not change even after the FDA altered its 
script to make the association between pasteurization and irradiation 
stronger.
    Since Public Citizen and the Center for Food Safety were able to 
secure copies of most of the transcripts from these proceedings, we 
distributed a summary to each member of the Subcommittee back in 
January of this year.
    I would like to convey to you some of the comments that focus group 
participants made about using ``pasteurization'' to label irradiated 
foods:
  --``That's deceitful.''
  --``Pasteurization is not going to translate in anybody's mind to 
        irradiation.''
  --``I think it's nasty trying to mask this.''
  --``The choice between `treated by cold pasteurization' and `treated 
        by cold pasteurization (radiation)' is a difference between a 
        lie and bad lie.''
  --``I think it's totally unbelievable. It's, it has the potential to 
        make people worry about pasteurization, rather that making them 
        feel good about irradiation''
  --``It's an oxymoron. You can't heat something up and it be cold.''
  --``Because they're trying to fool you. Pasteurization has nothing to 
        do with irradiation.''
  --``They're pulling the wool over your eyes.''
    Associate FDA Commissioner Lester Crawford, when testifying before 
the House Subcommittee on Agriculture, Rural Development, Food and Drug 
Administration and Related Agencies Appropriations on March 21, 2002, 
stated that consumers viewed any attempt to supplant the term 
``irradiation'' with ``pasteurization'' as a ``. . . ruse to conceal 
the fact.''
    Public Citizen has also conducted public opinion research on this 
issue. In January 2002, we polled 1000 consumers in a national public 
opinion survey conducted by Lake, Snell, Perry and Associates. We asked 
consumers two questions on food irradiation labeling.\1\
---------------------------------------------------------------------------
    \1\ Question 1. Do you favor or oppose requiring food be labeled to 
indicate whether it has been irradiated? (If favor/oppose) Is that 
strongly (favor/oppose) or not so strongly (favor/oppose)?
---------------------------------------------------------------------------
    Overwhelmingly, consumers favored irradiated foods to be labeled. 
Nearly three-quarters of the respondents (73.4 percent) favored such 
labeling. This seemed to be especially important to working women (80 
percent), homemakers (81 percent), and women with children living at 
home (82 percent).
    On the issue of what to call irradiated foods, consumers 
overwhelming rejected those terms that used ``pasteurization'' in the 
description: 16.4 percent of the respondents favored ``electronic 
pasteurization''; 12.5 percent favored ``cold pasteurization''; 47.1 
percent preferred ``irradiation''; 5.7 percent did not like any of the 
choices presented them; 18.3 percent were not sure. Again, working 
women (54 percent), homemakers (50 percent) and women with children (57 
percent) were more likely to favor clear and unambiguous labeling that 
called the process ``irradiation''.
    These poll results corroborate those from a public opinion survey 
conducted by the Center for Science in the Public Interest (CSPI) in 
1999 when only about a quarter of the respondents favored describing 
irradiation as either ``cold pasteurization'' or ``electronic 
pasteurization.''
    In a related matter, Public Citizen requested a clarification from 
the Food Safety and Inspection Service (FSIS) of the United States 
Department of Agriculture (USDA) about a claim made by an irradiation 
firm--the SureBeam Corporation of San Diego, California--that it had 
secured permission from the USDA to describe its process as a form of 
pasteurization. We received correspondence from Philip Derfler, Deputy 
Administrator for the Office of Policy, Program Development and 
Evaluation at FSIS who stated:

    ``The Food Safety and Inspection Service (FSIS) has no information 
as to whether the SureBeam Corporation irradiation equipment is capable 
of pasteurizing meat and poultry products. . . (N)either SureBeam nor 
any other firm has yet presented FSIS with data proving that their 
irradiated meat and poultry products are, in fact, `pasteurized.' 
Additionally, neither Surebeam (sic) nor any other firms has yet 
presented FSIS with labeling bearing the term `pasteurized' that was 
not viewed as misleading.'' \2\
---------------------------------------------------------------------------
    \2\ Question 2. Irradiation is a process of exposing food to 
radiation to kill bacteria. The government and the food industry have 
proposed various terms for use in the labeling of irradiated foods. 
Which do you think should be used:--treated with electronic 
pasteurization,--treated with cold pasteurization, or--treated by 
irradiation? (choices were rotated).
    Letter from Philip Derfler to Tony Corbo, Public Citizen, dated 
September 29, 2001.

    We believe that the FDA has received enough guidance on this issue 
and it should leave the current labeling regulations for irradiated 
food in place. All of the recent consumer data collected on this issue 
in addition to the professional opinion rendered by those responsible 
for administering our food safety laws clearly indicate that weakening 
the current labeling requirements for irradiated foods is not good 
public policy.
    I thank the Subcommittee for this opportunity to share our views on 
this very important consumer issue.
                                 ______
                                 

         Prepared Statement of the Red River Valley Association

    Mr. Chairman and members of the Committee, I am Wayne Dowd, and I 
am pleased to represent the Red River Valley Association as its 
President. Our organization was founded in 1925 with the express 
purpose of uniting the citizens of Arkansas, Louisiana, Oklahoma and 
Texas to develop the land and water resources of the Red River Basin.
    As an organization that knows the value of our precious water 
resources we support the most beneficial water and land conservation 
programs administered through the Natural Resources Conservation 
Service (NRCS). We understand that since the 11 September terrorist 
attack we have had to re-evaluate our national priorities; however, we 
cannot sacrifice what has been accomplished. NRCS programs are a model 
of how conservation programs should be administered and our testimony 
will address the needs of the nation as well as our region. We strongly 
believe that this national program must be preserved.
    The President's fiscal year 2003 budget for NRCS indicates an 
increase of $75.4 million from fiscal year 2002. In reality NRCS 
actually took a major decrease in program funding and staff years. 
Fiscal year 2003 is the first year additional administrative overhead 
burdens, totaling $145 million, were directed to be absorbed by the 
agency. This increase in overhead, from within the agency's 
Conservation Operation Account, provides for less funding for technical 
assistance to land owners. Even worse, the Administration took $111 
million used to assist landowners in ``Watershed and Flood Prevention'' 
and placed it in ``Emergency Watershed Protection'', which has 
traditionally been Congressional Supplemental Appropriations, in 
addition to the NRCS appropriated budget. This amounts to $256 million 
of the fiscal year 2003 budget that in the past has been used for 
landowner assistance that will not be available for assistance in 
fiscal year 2003. This is also reflected in the fact that NRCS manpower 
for fiscal year 2003 will decrease by 254 staff years.
    This means that NRCS programs will not be adequately funded, to the 
detriment of the agency and our natural resources. We would like to 
address several of the programs administered by the NRCS. Failure to 
adequately fund these initiatives would reduce assistance to those who 
want it and the resources that need protection.
    Conservation Operations.--This has been in steady decline, in real 
dollars, over the past several years. It has occurred partly as a 
result of funds being reduced from Conservation Operations to balance 
increases in technical assistance for mandatory conservation financial 
assistance programs. The President's budget included $897 million, 
which even though reflects an increase of $118 million from fiscal year 
2002, is not the case. This account, for the first time, is required to 
absorb additional burdens totaling $145 million. These include 
mandatory pay raises, pensions and health benefits previously funded by 
OMB; GSA rent and decreased funding due to anticipated administrative 
efficiencies. In fact, a reduction of over $27 millions is realized 
from fiscal year 2002 for assistance to landowners. This is far short 
of what is required to serve the needs of our nation's private lands. 
We request a total of $796 million be appropriated For Conservation 
Technical Assistance, increasing Conservation Operations to 
$927,190,000.
    Conservation Technical Assistance is the foundation of technical 
support and a sound, scientific delivery system for voluntary 
conservation to the private users and owners of lands in the United 
States. It is imperative that we provide assistance to all working 
lands' not just those fortunate few who are able to get enrolled in 
programs. Working lands are not just crops and pasture (commodity 
staples) but includes forests, wildlife habitat and coastal marshes. 
The problem is that personnel funded from programs' can only provide 
technical assistance to those enrolled in cost share programs, leaving 
the majority of the agricultural community without technical 
assistance. We recommend that this funding for technical assistance be 
placed in ``Conservation Technical Assistance'', and allow NRCS to 
provide assistance to everyone.
    We do not support the use of third party vendors for technical 
assistance. We would then have to address the question of quality 
assurance and administration for these programs. Why establish a new 
process that will ultimately cost more then using the in-house 
expertise that now exists and has proven to be successful.
    Watershed and Flood Prevention Operations (Public Law 566 & 534).--
We are greatly disappointed that the President's Budget provided 
absolutely NO funding for watershed operations. There is no doubt that 
this is a Federal responsibility, as well as for the local sponsor. We 
ask our legislators to support the local sponsors in this national 
issue.
    We DO NOT agree with the Administration's proposal to eliminate the 
``Watershed and Flood Prevention Program'' line item and putting it 
under ``Emergency Watershed Protection''. It appears they are trying to 
hide these programs and must not be allowed to do so. We request that 
Congress maintain the ``Watershed and Flood Prevention Program'' as a 
separate line item.
    There are many new projects, which are awaiting funds for 
construction under this program. We strongly recommend that a funding 
level of $170 million be appropriated for Watershed Operations, Public 
Law 534 ($35 million) and Public Law 566 ($135 million) programs. This 
is realistic and comparable to appropriation levels in the years prior 
to 1994.
    More than 10,400 individual watershed structures have been 
installed nationally. They have contributed greatly to conservation, 
environmental protection and enhancement, economic development and the 
social well being of our communities. More than half of these 
structures are over 30 years old and several hundred are approaching 
their 50-year life expectancy. Today you hear a lot about the watershed 
approach to resource management. These programs offer a complete 
watershed management approach and should continue for the following 
reasons:
  --They protect people and communities from flooding.
  --Their objectives and functions sustain our nation's natural 
        resources for future operations.
  --They are required to have local partners and be cost shared.
  --The communities and NRCS share initiatives and decisions.
  --They follow NEPA guidelines and enhance the environment.
  --They often address the need of low income and minority communities.
  --The benefit to cost ratio for this program has been evaluated to be 
        2.2:1.
    What other Federal programs can claim such success?
    There is no questioning the value of this program. The cost of 
losing this infrastructure exceeds the cost to reinvest in our existing 
watersheds. Without repairing and upgrading the safety of existing 
structures, we miss the opportunity to keep our communities alive and 
prosperous. It would be irresponsible to dismantle a program that has 
demonstrated such great return and is supported by our citizens. We 
cannot wait for a catastrophe to occur where life is lost to decide to 
take on this important work.
    Watershed Rehabilitation Program.--It was a great step forward to 
have the ``Lucas Bill'' passed; now adequate appropriations must be 
provided. A 1999 survey, conducted in 22 states, showed that 2,200 
structures are in need of immediate rehabilitation at an estimated cost 
of $543 million. With no funding authorized in the President's budget 
we neglect our community needs. We request that $5 million be 
appropriated for NRCS to conduct assessments of the rehabilitation 
needs nationwide. We request that $20 million be appropriated to 
provide financial and technical assistance to those watershed projects 
where sponsors are prepared to commence rehabilitation measures.
    Watershed Survey and Planning.--In fiscal year 2002 $11 million was 
appropriated to support this extremely important community program. 
NRCS has become a facilitator for the different community interest 
groups, State and Federal agencies. In our states such studies are 
helping identify resource needs and solutions where populations are 
encroaching into rural areas. The Administration decided to zero out' 
this program and provided NO funding. We strongly disagree with this 
action and ask Congress to fund this important program.
    As our municipalities expand, the water resource issue tends to be 
neglected until a serious problem occurs. Proper planning and 
cooperative efforts can prevent problems and insure that water resource 
issues are addressed. We request this program be funded at a level of 
$20 million.
    Emergency Watershed Protection Program.--This program has come 
under Watershed and Flood Prevention Operations, but is a separate line 
item. It has traditionally been a zero budget line item; however, there 
will always be emergency needs, which were funded through Supplemental 
Appropriations.
    As our land use expands to include sensitive environmental 
ecosystems, major weather events will have an adverse impact requiring 
NRCS assistance. It is important that NRCS is prepared for a rapid 
response, not waiting for legislative action. With some funds 
available, they would be able respond immediately to an emergency when 
it occurs.
    We appreciate that $111.4 million was in the President's Budget for 
fiscal year 2003; however, it is obvious that this funding was taken 
from ``Watershed and Flood Prevention Operations''. NRCS cannot pay 
staff years from this account unless it is in reaction to an emergency. 
We request that $20 million be appropriated as seed funding to allow 
NRCS to react to an emergency while the full need is determined and 
added through a supplemental appropriation. We also request that $110 
million be placed in ``Watershed and Flood Prevention Operations'' as a 
separate line item.
    This is another example of a major budget cut to NRCS. This funding 
must be used for emergencies and not for technical assistance to 
landowners; therefore, it is a realized $111.4 million reduction to the 
NRCS budget from fiscal year 2002.
    Forestry Incentives Program.--Congress transferred this program to 
NRCS from the Farm Service Agency as a restructuring in the Federal 
Agricultural Improvement and Reform Act of 1996. Forestry on small, 
privately owned lands is recognized as a farming activity. NRCS is the 
best agency to administer this program, which assists farmers in 
production agriculture. It is more than just a timber production 
program. Forests are the most effective use of land as they relate to 
water quality, non-point source pollution, air quality, greenhouse gas 
reduction and wildlife habitat.
    Again, the Administration provided NO funding for this program and 
we request Congress fund the Forestry Incentives Program at a level of 
$7 million for fiscal year 2003.
    Environmental Quality Incentives Program (EQIP).--Request for 
assistance through the EQIP program has been overwhelming. Requests far 
exceed the available funds and place an additional workload on NRCS's 
delivery system. Additionally, adequate funding for technical 
assistance must be provided to administer the program at a minimum of 
19 percent of total program cost.
    The EQIP Financial Assistance program for fiscal year 2003 should 
be appropriated at the $200 million authorized and the technical 
assistance budgeted at $38 million to meet the 19 percent TA level.
    Irrigation Project ``Earmarks''.--Findings in the Natural Resources 
Inventory (NRI) have concluded that irrigated agriculture is moving 
from western states to the east. A prime example of this is the 
interest to irrigate along the Red River in Arkansas and Louisiana.
    The recent drought conditions have accelerated the efforts of 
different regions to form irrigation districts and start the process to 
install irrigation systems. The farmers along Red Bayou, Caddo Parish, 
Louisiana, and Walnut Bayou, Little River County, Arkansas have been 
very aggressive in their attempts to become operational.
    Red Bayou Irrigation Demonstration Project, LA.--The impacted 
region has formed an Irrigation District and established a process to 
collect funding for operating and maintaining the system. The total 
project would cost approximately $5.5 million; $2.7 million off-farm 
components and $2.8 million on-farm components; with cost sharing 
involved with the Irrigation District. To initiate this project 
$200,000 would be required in fiscal year 2003 to complete the plans 
and environmental assessment. This will provide a more detailed cost 
analysis for the project.
    We request an `earmark' in the fiscal year 2003 appropriations 
under the watershed operations program.
    Language: Not withstanding any other provision of law, Secretary of 
Agriculture, acting through the Natural Resource Conservation Service, 
shall provide $200,000 for planning and design associated with the Red 
Bayou Irrigation Demonstration Project, LA. These funds will be from 
watershed surveys and planning and be accompanied with an equivalent 
increase in funding over current fiscal year 2003 appropriations.
    Walnut Bayou Irrigation Project, AR.--We appreciate the $250,000 
allocated in fiscal year 2002 for the planning and design of this 
project. It is important to continue with the next phase of 
construction. We request that the funding for this project be 
earmarked' in the fiscal year 2003 appropriations.
    Language: Not withstanding any other provisions of law, Secretary 
or Agriculture, acting through the Natural Resource Conservation 
Service, shall provide $4,000,000 for construction associated with the 
Walnut Bayou Irrigation Project, AR. These funds will be from watershed 
surveys and planning' and be accompanied with an equivalent increase in 
funding over current fiscal year 2003 appropriations.
    Over 70 percent of our land is privately owned. This is important 
in order to understand the need for NRCS programs and technical 
assistance. Their presence is vital to ensuring sound technical 
standards are met in conservation. These programs not only address 
agricultural production, but sound natural resource management. Without 
these programs and NRCS properly staffed to implement them, many 
private landowners will not apply conservation measures needed to 
sustain our natural resources for future generations.
    There have been new clean water initiatives, but why do we ignore 
the agency that has a proven record for implementing watershed 
conservation programs? Congress must decide; will NRCS continue to 
provide the leadership within our communities to build upon the 
partnerships already established? It is up to Congress to insure NRCS 
is properly funded and staffed to provide the needed assistance to our 
taxpayers for conservation programs.
    All these programs apply to the citizens in the Red River Valley 
and their future is our concern. The RRVA is dedicated to work toward 
the programs that will benefit our citizens and provide for high 
quality of life standards. We therefore request that you appropriate 
the requested funding within these individual programs, to insure our 
nation's conservation needs are met.
    I thank you for the opportunity to present this testimony on behalf 
of the members of the Red River Valley Association and we pledge our 
support to assist you in the appropriation process.
                                 ______
                                 

          Prepared Statement of the Seminole Tribe of Florida

    The Seminole Tribe of Florida is pleased to submit this statement 
regarding the fiscal year 2003 budget for the Natural Resources 
Conservation Service (NRCS) in the Department of Agriculture.
    The Seminole Tribe of Florida asks that Congress earmark a total of 
$200,000 in the Natural Resources Conservation Service's (NRCS) 
Watershed Operations 06, Watershed Planning account that funds the 
Small Watershed Program, as authorized by Public Law 83-566, for 
planning of a portion of the Tribe's Water Conservation Plan on the Big 
Cypress Reservation. The Tribe has worked with the NRCS in Florida for 
six years to develop this small watershed project as a part of the 
Tribe's overall Everglades Restoration Initiative. The results of this 
small watershed project will complement the joint effort of the Tribe 
and the Corps of Engineers to complete the Initiative.
                     the seminole tribe of florida
    The Seminole Tribe lives in the Florida Everglades. The Big Cypress 
Reservation is located in the western basins, directly north of the Big 
Cypress National Preserve. The Everglades provide many Seminole Tribal 
members with their livelihood. Our traditional Seminole cultural, 
religious, and recreational activities, as well as commercial 
endeavors, are dependent on a healthy Everglades ecosystem. In fact, 
the Tribe's identity is so closely linked to the land that Tribal 
members believe that if the land dies, so will the Tribe.
    During the Seminole Wars of the 19th Century, our Tribe found 
protection in the hostile Everglades. But for this harsh environment 
filled with sawgrass and alligators, the Seminole Tribe of Florida 
would not exist today. Once in the Everglades, we learned how to use 
the natural system for support without harm to the environment that 
sustained us. For example, our native dwelling, the chickee, is made of 
cypress logs and palmetto fronds and protects its inhabitants from the 
sun and rain, while allowing maximum circulation for cooling. When a 
chickee has outlived its useful life, the cypress and palmetto return 
to the earth to nourish the soil.
    In response to social challenges within the Tribe, we looked to our 
Tribal elders for guidance. Our elders taught us to look to the land, 
for when the land was ill, the Tribe would soon be ill as well. When we 
looked at the land, we saw the Everglades in decline and recognized 
that we had to help mitigate the impacts of man on this natural system. 
At the same time, we acknowledged that this land must sustain our 
people, and thereby our culture. The clear message we heard from our 
elders and the land was that we must design a way of life to preserve 
the land and the Tribe. Tribal members must be able to work and sustain 
themselves. We need to protect the land and the animals, but we must 
also protect our Tribal farmers and ranchers.
    Recognizing the needs of our land and our people, the Tribe, along 
with our consultants, designed a plan to mitigate the harm to the land 
and water systems within the Reservation while ensuring a sustainable 
future for the Seminole Tribe of Florida. The restoration plan will 
allow Tribal members to continue their farming and ranching activities 
while improving water quality and restoring natural hydroperiod to 
large portions of the native lands on the Reservation and ultimately, 
positively effecting the Big Cypress National Preserve and Everglades 
National Park.
    The Seminole Tribe's Big Cypress Initiative addresses the 
environmental degradation wrought by decades of federal flood control 
construction and polluted urban and other agricultural runoff. The 
interrupted sheet flow and hydroperiod have stressed native species and 
encouraged the spread of exotic species. Nutrient-laden runoff has 
supported the rapid spread of cattails, which choke out the periphyton 
algae mat and sawgrass necessary for the success of the wet/dry cycle 
that supports the wildlife of the Everglades.
    The Seminole Tribe designed an Everglades Restoration Initiative to 
allow the Tribe to sustain ourselves while reducing or eliminating 
impacts on the ecosystem. The Seminole Tribe is committed to improving 
the water quality and flows on the Big Cypress Reservation. We have 
already committed significant resources to the design of the projects 
and to our water quality data collection and monitoring system. Within 
the next few months, the Tribe will begin construction on the 
conveyance system that will serve as the backbone to Big Cypress water 
control system. We are willing to continue our efforts and commitment 
of resources, for our cultural survival is at stake.
                 small watershed project on big cypress
    As a part of the Tribe's Everglades Restoration Initiative, the 
Tribe completed a water conservation plan for the design and 
construction of surface water management systems to remove phosphorus, 
convey and store irrigation water, improve flood control, and rehydrate 
the Big Cypress National Preserve. This water conservation plan has 
been permitted for construction under the Clean Water Act Section 404 
program.
    Through the Corps of Engineers (COE) critical project program 
authorized by the Water Resources Development Act of 1996, the Tribe is 
building part of that water conservation plan. The first phase of the 
critical project, for which construction is about to begin, is to 
construct a conveyance canal system that will supplement and improve 
the existing system. The balance of the critical project will construct 
water storage and treatment areas on the east-side of the Reservation.
    Over the last six years, the Tribe has enjoyed the support of the 
Florida State Conservationist and the Florida staff of the NRCS in the 
development of a small watershed project to address some needs 
identified in the water conservation plan. While some preliminary 
planning has been completed, an existing funding commitment prevented 
commencement of the small watershed project until fiscal year 2004. In 
fiscal year 2003, both the Tribe and the NRCS in Florida are prepared 
to begin planning of water storage and treatment areas on the west-side 
of the Reservation. To do so, Congress must appropriate the initial 
funding.
    While all the project component options have not been fully vetted, 
the cost estimates range from downward from $34.6 million. This project 
is approved to operate with a 75 percent federal and 25 percent Tribal 
cost share. The timing of the design and construction are dependent on 
the funding stream.
                               conclusion
    Everglades restoration is a well-recognized national priority. The 
Tribe's goal of sustainable agriculture is consistent with the goals of 
the NRCS and the restoration activities in South Florida. The NRCS's 
support of the Tribe's conservation measures in the past, along with 
the implementation of future programs, will make a significant impact 
on the Big Cypress Reservation and the South Florida Ecosystem.
    Through its assistance to the Tribe, NRCS has provided valuable 
technical assistance to date. Beginning in fiscal year 1999, NRCS has 
provided programmatic support through EQIP and WRP, which is 
anticipated to continue. Additional programmatic assistance through the 
small watershed program will provide the needed design and construction 
to complete the water conservation plan. None of the joint objectives 
of the Tribe and the NRCS can be accomplished, however, without 
sufficient funding.
    The Tribe has demonstrated its economic commitment to the 
Everglades Restoration effort; the Tribe is asking the federal 
government to also participate in that effort. This effort benefits not 
just the Seminole Tribe, but all Floridians who depend on a reliable 
supply of clean, fresh water flowing out of the Everglades, and all 
Americans whose lives are enriched by this unique national treasure.
    Thank you for the opportunity to present the request of the 
Seminole Tribe of Florida. The Tribe will provide additional 
information upon request.
                                 ______
                                 

  Prepared Statement of the Society for Animal Protective Legislation

    The Society for Animal Protective Legislation appreciates the 
support that this Subcommittee has provided consistently to the above-
referenced programs of the United States Department of Agriculture 
(USDA) and respectfully requests modest increases in the annual 
appropriation for their operation in fiscal year 2003. These additional 
funds are essential to ensure the adequate enforcement of and 
compliance with Federal laws enacted to ensure the welfare of animals 
and prevent unnecessary animal suffering.
$17.7 Million is needed for the Animal and Plant Health Inspection 
        Service Animal Care Program
    A coalition of organizations including the American Veterinary 
Medical Association, the American Zoo and Aquarium Association, the 
Humane Society of the United States, and the Society for Animal 
Protective Legislation has worked together to secure additional funds 
to ensure adequate enforcement of the Animal Welfare Act by APHIS 
Animal Care staff. The Animal Welfare Act is the chief Federal law for 
the protection of animals. The USDA seeks compliance with its minimum 
standards for the care and treatment of animals during transportation 
and at the approximately 10,000 sites of dealers, research, testing and 
teaching facilities, zoos, circuses, carriers and handlers. In fiscal 
year 2000, Animal Care inspectors conducted over 11,000 compliance 
inspections.
    Approximately forty percent of the facilities that are inspected by 
USDA are found to be noncompliant. Facilities with serious deficiencies 
require reinspections to ensure that corrective action is taken but 
lack of funds has prevented USDA from conducting this much-needed 
follow-up.
    In 1966, the Laboratory Animal Welfare Act (later renamed the 
Animal Welfare Act) was adopted to prevent the sale of lost or stolen 
pets into research. Pet theft and fraudulent pet acquisition for sale 
into research continues to be a serious problem. In an attempt to 
remedy this situation in the 1990s, Animal Care instituted a policy of 
conducting quarterly inspections of random source dealers. Since 
stepping up enforcement in this area in 1993 (which has come at the 
expense of inspections conducted elsewhere), six Class B dealer 
licenses have been suspended, twelve have been revoked, six cases were 
under investigation (at the end of fiscal year 2000) and nearly 
$525,000 in fines were levied. The number of random source, Class B 
dealers, who supply dogs and cats to research, has dropped from over 
100 to 23.
    This approach, with respect to regulating and inspecting Class B 
dealers, illustrates the value of frequent, unannounced inspections of 
licensees and registrants. Increasing the ability to conduct these 
inspections more frequently will ensure effective compliance with the 
law. Facilities found to be consistently out of compliance with the 
minimum standards of the Animal Welfare Act should not be in business.
    The 1985 amendment to the AWA mandates at least one inspection per 
year of all registered research facilities. A vigorous inspection 
program is critical to maintaining public confidence in the quality of 
research and ensuring the humane treatment of animals used in 
experimentation. With the need to evaluate performance, as well as 
engineering standards, each inspection is time-consuming and 
necessitates skilled veterinary inspectors.
    An appropriation of $17.7 million would enable APHIS Animal Care to 
hire much needed inspectors, upgrade computer software, establish an 
emergency reserve for confiscated animals, and enhance the enforcement 
program to reduce the number of problem facilities, among other 
laudable goals.
$1,150,000 is needed for the Animal Welfare Information Center at the 
        National Agricultural Library
    The Animal Welfare Information Center (AWIC) was established by the 
1985 amendments to the Animal Welfare Act, the ``Improved Standards for 
Laboratory Animals Act,'' to serve as a clearinghouse and educational 
resource of information on alleviating or reducing pain and distress in 
experimental animals (including anesthetic and analgesic procedures), 
reducing the number of animals who are used for research and 
identifying alternatives to the use of animals for specific research 
projects.
    AWIC is the single most important resource for educating research 
facility personnel on their responsibilities under the Animal Welfare 
Act. There are more than 1,200 registered research facilities 
nationwide, and the services of the AWIC are available to all 
individuals at these institutions including the members of the 
Institutional Animal Care and Use Committees.
    AWIC staff responds to requests for information on topics related 
to the Animal Welfare Act. The staff conducts training sessions in 
workshops for Federal regulatory agencies, research facilities, 
military facilities, and universities. The staff also attends 
conferences where they maintain informational exhibits. The number of 
requests to AWIC has increased substantially. According to the latest 
information available in APHIS's 2000 Animal Welfare Report, AWIC staff 
responded to roughly 18,000 information requests in the year and 
distributed more than 40,000 published documents. The valuable AWIC 
website (www.nal.usda.gov/awic) received an average of 58,000 hits per 
month in 2000, almost doubling the previous year's monthly average.
    Additional funding is vital to maintain the level of excellence 
exhibited by AWIC and to advance the Center appropriately. $1,150,000 
specifically designated for AWIC would allow AWIC to increase the 
number of full-time staff, improve the search capabilities on the AWIC 
website and enable documents to be converted into different programs, 
thus improving user-friendliness, continue providing useful AWIC 
workshops, update information on animals in laboratories such as 
alternatives to animal models and appropriate animal housing 
documentation, develop an audiovisual library on animal welfare to 
improve the training of APHIS inspectors, among other important 
advancements.
    Again, it is imperative that this money be earmarked specifically 
for the AWIC program.
$10,049,000 is needed for Investigative and Enforcement Services
    Investigative and Enforcement Services (IES), the enforcement arm 
within APHIS, is responsible for conducting investigations, tracking 
unresolved cases, coordinating investigations within APHIS and between 
APHIS and other Federal and/or State agencies and training APHIS 
inspectors in the collection of evidence and documentation of 
violations. IES provides support to Animal Care and to three other 
APHIS programs.
    A $10,049,000 appropriation would enable IES to investigate 
competently alleged violations of the Animal Welfare Act. In 2000, IES 
inspectors already began implementing technological advancements to 
improve their work, including the use of digital and video cameras to 
document situations that reflect noncompliance with the law. Additional 
money in fiscal year 2003 would help IES keep pace with the 
inflationary costs of recently-filled field positions while 
concomitantly improving IES's ability to engage in its important work.
    Additional money would assist in the continued filling of animal 
care investigator positions in significant border/port areas. Four or 
five additional inspectors in fiscal year 2003 would complement the 
already improved staff level. Similarly, intelligence gathering is a 
substantial part of the work of IES. Analysts, funded by this 
additional appropriation, would ensure that data is collected and 
analyzed properly regarding, for instance, animal dealer activities, 
the operations of traveling animal acts or exhibitors, or animal 
fighting ventures. To this end, on animal fighting, an additional 
appropriation would assist in the enforcement of existing animal 
fighting prohibitions and the possible addition of legislation 
currently moving through Congress to prohibit the interstate shipment 
of birds for fighting purposes. A specific unit could be developed of 
between six to ten people to coordinate these activities against 
illegal animal fighting ventures.
$500,000 for the Horse Protection Act
    Congress adopted the Horse Protection Act (HPA) more than 30 years 
ago yet soring of Tennessee Walking Horses continues to be a widespread 
problem. Soring is defined by APHIS as ``the application of any 
chemical or mechanical agent used on any limb of a horse or any 
practice inflicted upon the horse that can be expected to cause it 
physical pain or distress when moving.'' Horses are sored to produce an 
exaggerated gait.
    The most effective method of reducing the showing of horses who 
have been sored is to have Animal Care (AC) inspectors present at the 
shows. AC has been restricted to attending about 10 percent of horse 
shows because of insufficient funds. Unless funding is provided to 
enable AC to attend more events, the industry will continue to defy the 
law with impunity. Certain members of the Walking Horse industry with a 
careless disregard for the HPA have utilized a variety of strategies to 
prevent fair and proper enforcement of this law. The current effort to 
undermine the law is to deny inspectors the ability to use digital 
palpitation of the pastern to determine soreness in horses. Use of 
digital palpitation, an accepted veterinary diagnostic technique, is 
vital to AC's ability to enforce the law.
    Lack of financial support has made it necessary for AC to rely 
heavily on the industry to assume responsibility for enforcement of the 
law. This is the same industry that has turned a blind eye to 
compliance with the law sine 1970! ``Designated Qualified Persons'' 
(DQPs) are the ``inspectors'' from industry who are supposed to assist 
AC identifying sore horses and pursuing action against the individuals 
who are responsible. The history of DQPs reveals their failure to 
achieve the level of enforcement of the unbiased, well-trained, 
professional AC inspectors. The gap is widening between the enforcement 
when AC inspectors are present versus the level of enforcement by 
unsupervised DQPs, clearly demonstrating the abysmal failure of the 
industry to regulate itself. For example, in fiscal year 1999 the rate 
at which DQPs turned down horses for soring was .44 percent. The 
turndown rate more that tripled to 1.49 percent when government AC 
inspectors were present to oversee the activities of the DQPs. The 
record was still worse for certain Horse Industry Organizations like 
the Kentucky Walking Horse Association; there was a nearly 12-fold 
increase in horses who were turned down for soring when AC inspectors 
were present as compared to when DQPs were unsupervised!
    We respectfully request that the Subcommittee resist all efforts by 
the industry to restrict AC's ability to enforce the Horse Protection 
Act. An increase in appropriations to $500,000 would allow Animal Care 
to attend a greater percentage of horse shows, thereby ensuring 
significantly stronger compliance with the HPA.
$2.5 Million is needed for additional line inspectors to enforce the 
        Humane Slaughter Act
    The USDA budget includes specific budget increases related to the 
Food Safety and Inspection Service (FSIS) activities, including 
maintaining 7,600 meat and poultry inspectors. However, these 
inspectors are primarily tasked with slaughter epidemiological surveys 
and risk prevention activities regarding disease and microbiological 
contaminants on animal carcasses. Specific additional funds are 
necessary to hire inspectors dedicated to enforcement of the Humane 
Slaughter Act to ensure that animals are stunned properly as they move 
through the slaughter process. An additional appropriation of $2.5 
million would enable the hiring of approximately 50 new employees to 
work exclusively on enforcement of the Humane Slaughter Act through 
full-time inspection of unloading, handling, stunning, and killing of 
animals at slaughter plants.
    The Washington Post expose, ``Modern Meat: A Brutal Harvest,'' from 
April 10, 2001, reveals that the Humane Slaughter Act is frequently 
ignored at ``overtaxed'' slaughterhouses ``with cruel consequences for 
animals as well as workers. Enforcement records, interviews, videos and 
worker affidavits describe repeated violations of the Humane Slaughter 
Act at dozens of slaughterhouses, ranging from the smallest, custom 
butcheries to modern, automated establishments such as the sprawling 
IBP, Inc. plant. The attached article from the Animal Welfare Institute 
magazine, the AWI Quarterly, ``Gutting the Gordian Knot,'' describes in 
great detail the historical increases in slaughterhouse line speeds and 
the needs for more diligent enforcement of the Humane Slaughter Act.
    To this extent, Resolutions were introduced in both the Senate and 
House of Representatives to call for greater enforcement of the Humane 
Slaughter Act. Both Senator Fitzgerald's and Congresswoman Morella's 
resolutions were attached to the 2002 Farm Bill and a compromise 
version of the Resolution presumably will be approved during the 
deliberations of the Farm Bill Conference Committee.
Birds, Rats and Mice in the Animal Welfare Act
    In 1970 and again in 1985 the United States Congress passed and 
improved on laws ensuring the protection and coverage of all ``warm 
blooded animals'' under the Animal Welfare Act (AWA). Last year The 
Honorable Robert Dole, distinguished former U.S. Senator and author of 
1985 AWA amendments wrote a letter on the protections of birds, rats, 
and mice and recent misrepresentations regarding the intent of their 
coverage. In his letter he stated:

    ``I would hope that the Bush Administration and Members of the 
present Congress, some of whom stood with me in 1985 in advancing my 
amendments, will recognize that all animals used in experimentation 
deserve the benefit of the modest requirements of the Animal Welfare 
Act. I would urge them to allow USDA to achieve this end by pursuing a 
full and fair rulemaking as provided in the settlement agreement.''

    We commend the Committee for allowing USDA to proceed during fiscal 
year 2002 with its rulemaking regulating birds, rats, and mice under 
the Animal Welfare Act, as required by a court settlement in 2000. 
These species account for approximately 95 percent of animals used in 
research, and they deserve basic minimum standards of care. Ensuring 
that they receive adequate care is imperative not only as a humane 
matter, but also as a matter of sound science, since animal suffering 
compromises the integrity of research results. We urge the Committee 
not to include any language in the fiscal year 2003 bill or committee 
report that would interfere with USDA's ability to carry out this 
important rulemaking on a timely basis.
                                 ______
                                 

               Prepared Statement of the State of Arizona

    As a member of the Colorado River Basin Salinity Control Forum 
representing the State of Arizona, I wish to indicate strong support 
for the designation of funds for the Colorado River Basin Salinity 
control effort within the Environmental Quality Incentives Program 
(EQIP).
    The Colorado River Basin Salinity Control Program is funded within 
EQIP and has been designated as an area of special interest. Under this 
designation, about $4.5 million have been earmarked for the Colorado 
River Basin Salinity Control Program. These funds, together with cost-
sharing from local farms and the Colorado River Basin states, have 
produced projects which demonstrate an effective methodology for 
controlling salinity in the Colorado River. However, the water quality 
control plan, which is prepared by the Forum, adopted by the Colorado 
River Basin states, and approved by the EPA, recommends that the USDA 
portion of these efforts be funded at $12 million. An appropriation of 
this amount would allow the implementation of the approved water 
quality control plan and help control the economic damages in the Lower 
Basin states due to salinity from the Colorado River.
    Arizona's cities, industries, farms, and Indian Tribes depend on 
the Colorado River. As we import the water to support our growing 
economy, we also import the salt that has accumulated in the river. 
Approximately 1.5 million tons per year of salt are now being imported 
into Arizona via the Colorado River. If the accumulation of salt in the 
river can be reduced, the economic costs of salt disposal and salt 
damages will be reduced. Currently, the damages due to salt are 
estimated to be over half a billion dollars annually in Arizona, 
Nevada, and Southern California. These damages would be significantly 
higher if the Colorado River Basin Salinity program had not been in 
place during the last three decades.
    Over the last few years the salinity control efforts under the EQIP 
program have been under-funded, resulting in control efforts lagging 
behind goals agreed upon by the Colorado River Basin states to meet the 
EPA criteria adopted pursuant to the Clean Water Act. The $12 million 
in earmarked funds for Colorado River salinity control would provide 
the appropriations necessary to more aggressively meet these goals and 
reduce the significant economic costs to the Lower Basin States.
    In addition to controlling water quality for water users in the 
United States, the Salinity Control program helps the United States to 
comply with Minute 242 of the Mexican Water Treaty of 1944. The United 
States has always met the commitments agreed to in Minute 242, but 
water quality at the International Boundary continues to be a subject 
of discussion between the United States and Mexico sections of the 
International Boundary and Water Commission.
    Thank you for your subcommittee's consideration of additional 
funding for the Colorado River Salinity Control Program and we hope to 
have your continued support of this vital program.
                                 ______
                                 

               Prepared Statement of the State of Wyoming

    Dear Chairman Kohl and Ranking Minority Member Cochran: This 
statement is sent in support of the designation of $12,000,000 of 
fiscal year 2003 Environmental Quality Incentive Program (EQIP) funding 
for the Department of Agriculture's Colorado River Salinity Control 
(CRSC) Program. Pursuant to Public Law 104-127, the USDA's CRSC Program 
is a component program within EQIP. The USDA's Natural Resources 
Conservation Service designated the Colorado River Salinity Control 
Program as a national conservation priority area in fiscal year 2000. 
Wyoming views the inclusion of the CRSC Program in EQIP as a direct 
recognition on the part of Congress of the Federal commitment to 
maintenance of the water quality standards for salinity in the Colorado 
River--and that the Secretary of Agriculture has a vital role in 
meeting that commitment.
    The State of Wyoming is a member state of the seven-state Colorado 
River Basin Salinity Control Forum. Established in 1973 to coordinate 
with the Federal Government on the maintenance of the basin-wide Water 
Quality Standards for Salinity in the Colorado River System, the Forum 
is composed of gubernatorial representatives and serves as a liaison 
between the seven States and the Secretaries of the Interior and 
Agriculture and the Administrator of the Environmental Protection 
Agency (EPA). The Forum advises the Federal agencies on the progress of 
efforts to control the salinity of the Colorado River and annually 
makes funding recommendations, including the amount believed necessary 
to be expended by the USDA for its on-farm CRSC Program. Overall, the 
combined efforts of the Basin States, the Bureau of Reclamation and the 
Department of Agriculture have resulted in one of the nation's most 
successful non-point source control programs.
    For the past 18 years, the seven State Colorado River Basin 
Salinity Control Forum has actively assisted the U.S. Department of 
Agriculture in implementing its unique, collaborative and important 
program. At its recent October 2001 meeting, the Forum recommended that 
the USDA CRSC Program should expend $12,000,000 in fiscal year 2003. In 
the Forum's judgment, the approximately $4,500,000 being designated 
annually for the CRSC Program by the NRCS is inadequate to implement 
the needed program and to gain any ground on the ``shortfall'' in 
program funding. ``Catch-up'' funding in the future will require 
expending greater sums of money, increase the likelihood that the 
numeric salinity criteria are exceeded, and create undue burdens and 
difficulties for one of the most successful Federal/State cooperative 
non-point source pollution control programs in the United States.
    The State of Wyoming greatly appreciates the Subcommittee's support 
of the Colorado River Salinity Control Program in past years. We 
continue to believe this important basin-wide water quality improvement 
program merits support by your Subcommittee. We request that your 
Subcommittee direct the expenditure of $12,000,000 for the USDA's CRSC 
Program during fiscal year 2003. Thank you in advance for your 
consideration of this statement and its inclusion in the formal record 
for fiscal year 2003 appropriations.
                                 ______
                                 

            Prepared Statement of the Taylor Shellfish Farms

    Mr. Chairman and Members of the Subcommittee: My name is William 
Dewey. I am the Project Development Division Manager for Taylor 
Shellfish Farms. Our company employs approximately 250 people farming 
clams, oysters, and mussels on approximately 8,500 acres of tidelands 
across Washington State. I am president of the Pacific Shellfish 
Institute and past president of the Pacific Coast Oyster Growers 
Association. I am the Governor appointed representative for the 
shellfish industry on the Puget Sound Council, and serve on the 
Interstate Shellfish Sanitation Conference Executive Board. I am also 
chair of the Industry Advisory Council for USDA's Western Regional 
Aquaculture Center which is housed at the University of Washington in 
Seattle.
    I have been professionally involved in shellfish aquaculture for 
over 20 years and I am familiar with all aspects of growing, 
harvesting, processing, and marketing shellfish. Recent technological 
advances, particularly in hatchery technology and seed production have 
positioned our industry to play a major role in meeting the nation's 
seafood demand and in offsetting the immense seafood trade deficit. We 
are further encouraged by recent national support for aquaculture 
development through the Joint Subcommittee on Aquaculture's efforts to 
develop a National Aquaculture Development Plan as well as Department 
of Commerce and NOAA Fisheries aquaculture policies.
    The continued growth and success of the shellfish industry hinges 
on our ability to do crucial research in areas such as disease, 
genetics, integrated pest management, harmful algae blooms, human 
health issues, marketing and the ecological impacts associated with out 
culture systems. The USDA Regional Aquaculture Centers support this 
critical research as well as extension of the results to the industry. 
Most importantly, unlike a number of other competitive grants programs, 
the mechanism by which the Regional aquaculture Centers fund research 
assures they are addressing priorities specifically identified by the 
aquaculture industry.
    Funds supporting aquaculture research and development have 
historically been limited. To achieve anything close to the five-fold 
increase in 25 years projected by the department of Commerce's new 
aquaculture policy, this is going to have to change. The diversity of 
species and culture systems involved in marine farming versus 
traditional land based agriculture and today's increased environmental 
scrutiny require a greater investment in R&D to achieve successful 
outcomes.
    Funds supporting aquaculture research and development have 
historically been limited. To achieve anything close to the five-fold 
increase in 25 years projected by the Department of Commerce's new 
aquaculture policy, this is going to have to change. The diversity of 
species and culture systems involved in marine farming versus 
traditional land based agriculture and today's increase environmental 
scrutiny require a greater investment in R&D to achieve successful 
outcomes.
    Aquaculture is the fastest growing segment of U.S. agriculture. 
Successful aquaculture directly offsets the seafood trade deficit and 
in the northwest brings economic relief to regions severely depressed 
from the decline in timber and fishing jobs. Clearly there is much to 
be gained by continued growth in the aquaculture industry. We therefore 
urge your support for funding the five Regional aquaculture Centers at 
the fully authorized level of $7.5 million.
    Thank you for the opportunity to provide testimony in support of 
this very important appropriation.
                                 ______
                                 

  Prepared Statement of the University of Illinois, the University of 
             Missouri, and the Southern Illinois University

    Our testimony is on behalf of the federally funded project entitled 
the Illinois-Missouri Alliance for Biotechnology (IMBA). We much 
appreciate the strong, continuing support of the committee for this 
effort. The project continues to produce valuable results and open new 
options for the corn and soybean industries in the Midwest and for the 
nation as a whole.
    Request.--In order to enhance this productive and strategically 
focused program, we request that $3.0 million be appropriated for IMBA 
for fiscal year 2003. It is particularly important to push this 
initiative forward at this time because of the race among nations to 
capitalize on dramatic findings in the field of genomics. Powerful 
tools are now available to determine the function of genes in 
microorganisms, plants, animals, and humans. Knowledge of gene function 
will allow much better targeting of projects on genes of major 
economic, health, and social promise. The increased appropriation will 
allow us to fund a larger proportion of worthy proposals, expand use of 
the powerful tools of genomics, and include more socioeconomic research 
that addresses stakeholder concerns about product quality and safety as 
well as economic and social impacts of biotechnology. Additional 
federal support will provide significant economies of scale and scope, 
increasing the funds directly allocated to research and the leveraged 
contributions to about $9 million.
    Needs and opportunities.--IMBA is focused on the world's most 
important agricultural challenge, meeting the nutritional needs of a 
growing population. Rapidly growing population, urbanization, and 
affluence, especially in Asia, are resulting in dramatic increase in 
the consumption of animal protein. These changes are leading to 
unprecedented growth in animal production and global markets for animal 
products. Corn and soybeans are economically and nutritionally superior 
to other grain crops for feeding swine, beef, dairy, poultry, and 
confined fish. These classes of livestock are increasingly being 
produced in large scale facilities around the world. With superior 
technology, Illinois, Missouri, and surrounding Midwestern states can 
be principal global suppliers, not only of corn and soybeans, but also 
of value-added food products produced from these crops. To capture 
these emerging markets, however, the U.S. will have to compete 
vigorously against sophisticated foreign producers and we will have to 
address consumer concerns about quality, safety, and efficacy of 
products containing genetically modified corn and soybeans.
    Mission, objectives, and strategy.--IMBA seeks to maximize the 
benefits of biotechnology for the American agriculture and food sector 
and the American consumer by improving the quality, safety, 
affordability, and acceptance of agricultural and food products. It 
accomplishes this mission by supporting competitively funded, cutting-
edge biotechnology research conducted as part of research programs 
organized around clearly defined, practical objectives. IMBA scientists 
are strongly encouraged to work closely with the private sector to 
assure that promising new discoveries move rapidly to practical 
application in Midwest agriculture.
    To avoid spreading the IMBA research investment too thinly, the 
scope of the program is limited to the corn and soybean industries; 
geographical scope to Illinois, Missouri, and other Midwestern states; 
and disciplinary scope to biotechnology, including technical, economic, 
and social dimensions of that subject.
    IMBA-funded biotechnology research grants are awarded 
competitively, based on relevance to IMBA objectives, soundness of 
proposed research strategy, and scientific merit. Proposals are 
evaluated by scientific peers to assure that the best strategies are 
brought to bear on agricultural problems and opportunities that are 
important to the region. A Program Manager located at the University of 
Missouri, www.imba.missouri.edu, works with an Executive Management 
Committee to design and develop a biotechnology research investment 
portfolio that addresses the following objectives: (1) Develop new and 
improved uses for corn and soybeans and increase the value of these 
crops as raw material for manufacturing various products, (2) lower the 
cost of producing, processing, and utilizing these products, (3) 
maximize positive and minimize negative impacts of the corn and soybean 
industries on the environment and conserve nonrenewable resources that 
are consumed by the corn and soybean industries, (4) anticipate and 
understand the economic and social impacts of agricultural 
biotechnology and capture as many benefits as possible for the American 
agriculture and food sector, (5) define the roles of experts and 
knowledge systems in resolving social conflicts over agricultural 
biotechnology so as to understand and manage agricultural biotechnology 
risks as perceived by consumers, and (6) understand and improve 
economic, organizational, and institutional approaches to value-
enhancement and identity preservation.
    Recent achievements of IMBA research.--IMBA continues to support 
AgBioForum, a unique, web-based, peer-reviewed journal designed to 
reach and educate a broad audience on issues of central importance. 
AgBioForum articles are widely reproduced in the classroom, by the 
media, and as references in academic journals. Total readership has 
surpassed 175,000 and includes scientists and interested lay persons 
from universities, industry, government, international organizations, 
and commercial sites. In 2001, AgBioForum produced and distributed a 
major special issue on the influence of governmental policy on the 
development of agricultural biotechnology in Europe.
    Proprietary protocols for soybean transformation have been 
developed to incorporate peptide carrier protein genes into soybean as 
a way to protect against the fungal pathogen, Phytophthora. The 
intellectual property from this project is being prepared for patent 
application.
    IMBA-funded scientists are studying the process of apomixis, which 
allows seed to be produced in the absence of sexual reproduction. If 
hybrid corn plants could be produced that produce seed through 
apomixis, that seed would produce plants genetically identical to the 
hybrid parents, unlike seed produced on current hybrid plants. This 
would enable farmers to save seed from hybrid parents for use as seed 
the next year. Eastern gamma grass, Tripsicum dactyloides, the closest 
apomictically reproducing relative to corn, has already been used to 
visually characterize the chromosomes of selected offspring plants 
obtained from crosses. DNA sequences to distinguish the two parents 
also have been identified.
    With funding from IMBA, scientists produced genetically transformed 
soybeans with significantly higher levels of oil than conventional 
lines--and better fatty acid composition. Linkage maps and fast oil 
analysis procedures developed by this group are simplifying selection 
of soybean lines for oil and protein content. Analysis of nucleotide 
sequence information is revealing the specific genes involved in 
protein and oil synthesis in soybeans and how these genes differ among 
lines with different oil quantity and quality.
    In a joint project with leading French scientists, a group of IMBA 
investigators has found that time of maturity has a major effect on 
levels of isoflavones in soybean seeds. These compounds have important 
functional food properties and could be used to enhance the value of 
soybean as an American crop. There is a two-fold range in total 
isoflavones among commercial U.S. cultivars with similar maturity and a 
four-fold range in exotic accessions.
    Phytic acid contains much of a plant's phosphorus. It is relatively 
indigestible to non-ruminant animals, including humans, and so it is 
excreted. In this way, phosphorus is passed into ground and surface 
waters, creating pollution. IMBA scientists are working to produce 
soybeans with low levels of phytic acid. Using an E. coli phytase gene, 
an embryo-specific promoter, and a series of other signal sequences, 
they have successfully introduced this gene into the model plant, 
Arabidopsis. The gene is active, and transgenic plants produce phytase 
and store lower levels of phytic acid than controls. This research 
group is now working to introduce phytase into soybeans.
    Several IMBA scientists are cooperating to develop high oil, high 
oleic acid oil, corn hybrids. Grain produced with these hybrids will 
command a premium based on higher digestible energy level, added value 
in manufacturing certain kinds of food products, and potential human 
health benefits. These scientists have identified molecular markers 
that will make it much easier to select for oil concentration and for 
specific fatty acid profiles. They also have developed new genetic 
constructs that, when introduced into elite germplasm, should enhance 
oil concentration and oleic acid concentration.
    Cooperators.--Current cooperators in IMBA projects include the 
Universities of Illinois and Missouri, Southern Illinois University, 
University of Nebraska, Iowa State University, the USDA-Agricultural 
Research Service group at Woodward, Oklahoma, and ESA-Purpan in 
Toulouse, France. Private, non-profit cooperators include Sapient's 
Institute and Northwestern University. Commercial firms cooperating or 
involved in negotiations include Monsanto Company, ICI Garst, Inc., 
DuPont/Pioneer, ADM-Growmark, Clarkson Grain, Cargill, Biosys, Zeneca 
Agrochemicals, Novartis, DowElanco, Genentech, Healthtech, 
Electropharmacology, and others. Each project is generating potential 
new and improved products, and private firms are evaluating the 
commercial potential of each product of IMBA research.
    Summary.--We believe IMBA projects constitute an outstanding 
portfolio of promising research investments focused on the major 
problems and opportunities associated with the U.S. corn and soybean 
industries. Because of the economically important subject matter being 
addressed by IMBA, unique opportunities afforded by advances in 
genomics, outstanding capabilities of participating institutions, and 
the innovative research management approach being employed, we believe 
that IMBA will continue to be highly productive and will generate an 
unusually high return on the federal investment. An appropriation of 
$3.0 million is requested to continue the project in fiscal year.
                                 ______
                                 

            Prepared Statement of the University of Illinois

    We propose to establish a Future Foods Initiative based at the 
University of Illinois in Urbana-Champaign. This will be a unique 
program for discovery, development and evaluation of new foods, food 
ingredients, and food functionality, including health-related, 
genetically enhanced foods, building on the seminal research work now 
being done at the University of Illinois. A competitive process is 
envisioned for research teams to address the most significant issues 
related to the functionality and benefits of new foods and food 
components and to create the necessary procedures and protocols that 
can lead to practical acceptance and effective use of such foods. We 
request $3 million to fund the initial research and development 
program.
    Background.--The global food industry is in the midst of a new 
health and business trend termed ``functional foods,'' fueled in part 
by rapid development of new technologies applied in food production and 
processing. For improved human health and greater value for food and 
agricultural products, functional foods offer tremendous potential. 
Functional foods are defined by the National Academy of Sciences as . . 
. any food or food ingredient that may provide a health benefit beyond 
the traditional nutrients it contains.'' During the past decade, 
considerable scientific evidence has indicated that foods we consume 
and their bioactive components can promote optimal health and 
contribute to reduced risk factors for chronic diseases, such as heart 
disease and cancer. Consumers readily accept the notion that food is an 
important part of healthy and high quality lifestyles. Leadership is 
needed in academia, government and industry to ensure that consumers 
obtain safe and effective products based on sound, scientific data. The 
Centre for Food and Health Studies in London depicts the world's food 
industry as ``looking to leverage their nutritional and scientific 
expertise in pursuit of the health benefits of food'' making food and 
health ``just about the biggest food industry business and product 
development issue for the new century.'' The functional foods market is 
presently valued at $18 billion in the United States and is projected 
to reach $50 billion worldwide by 2004.
    Vision.--The long-term goal of the University of Illinois is to 
establish a center of excellence that will stimulate unique, 
multidisciplinary research collaborations on the most critical 
questions for discovery, development and evaluation of new and improved 
foods and will contribute essential scientific information and testing 
procedures to help bring beneficial products to the public. Researchers 
in the food, agricultural and biomedical fields will focus particularly 
on bioactive food components and health, generating and providing 
consumers with accurate food and health information, leading to 
development of effective and safe food products. This initiative is 
critically important and timely as the world's consumers are faced with 
an increasingly wide and diverse array of new food products and 
ingredients, many being generated through new applications of 
biotechnology.
    Benefits.--Products developed and evaluated in the Future Foods 
Initiative will address major issues of human health and welfare. Some 
will have enhanced protein, carbohydrate, lipid, and fiber quality, 
contributing to overall nutritional value and addressing malnutrition. 
Some will contain enhanced levels of vitamins, minerals, and other 
functional components that are essential to human health. Many products 
will be generated from research in the Illinois Post-Genomics 
Institute, a large functional genomics research facility to be 
constructed at the University of Illinois in Urbana-Champaign, and in 
other research programs and facilities across the nation. A healthier 
population and business opportunities for producers, processors and 
others in the food value chain will provide a needed stimulus to the 
American economy.
    Function.--Research projects conducted under the Future Foods 
Initiative will be overseen by University of Illinois scientists and 
other specialists. The program will leverage major strengths across 
research disciplines to study the implications for nutrition and 
health, aspects of food safety, and processes in the agricultural and 
food industries that are essential to bring the potential benefits of 
nutritionally enhanced foods to consumers. Because of close association 
with basic biotechnology research, scientists involved will be able to 
conduct unique tests, designed to detect subtle effects, both positive 
and negative, and create new understanding of the biochemical and 
genetic interactions between people and the foods they consume.
    Setting.--The University of Illinois provides an ideal setting for 
the Future Foods Initiative, since it is already the home for the 
nation's first full-scale scientific program dedicated to studying the 
roles of naturally-occurring food components in preventing disease and 
promoting health and optimizing their concentrations in food products. 
The Functional Foods for Health program, conceived in 1992, involves 
more than ninety scientists from multiple disciplines located at the 
University's campuses in Urbana and Chicago and receives support from 
twenty-five industry affiliates. Scientists from highly ranked 
Colleges, for example ACES, Medicine, Pharmacy, and Engineering, and 
the Department of Food Science and Human Nutrition provide the world-
class scientific leadership. The University of Illinois is unique among 
public institutions in having led a successful effort to obtain F.D.A. 
approval for a health claim for a food ingredient, namely soy. 
Previously, thirty studies had demonstrated the cholesterol-lowering 
effect of soy protein in the diet. However, the data was inadequate to 
support a health claim, because some of the research was not conducted 
under the strict protocols required by F.D.A., and certain cohorts of 
human subjects had not been studied. The University worked closely with 
F.D.A., soybean commodity groups, and soy processing firms to correct 
these deficiencies and achieve the claim.
    The University of Illinois has a proven track record for managing 
research programs that address specific problems in food and 
agricultural systems with crucial societal outcomes. Successful 
examples include the C-FAR Sentinel programs and Strategic Research 
Initiatives, the National Soybean Research Laboratory, the Dudley-Smith 
Initiative for sustainable agriculture, and the Illinois-Missouri 
Biotechnology Alliance, to name a few. Thanks in part to significant 
Federal investments, the University of Illinois mounts one of the 
largest and best equipped public sector biotechnology research programs 
in the world with major strengths in both agricultural and biomedical 
applications of biotechnology. Major state commitments totaling over 
$130 million in the Post-Genomics Institute and Illinois Food and 
Nutrition Institute will improve an already superb infrastructure for 
basic and developmental research on foods and food ingredients.
    Estimated cost.--We request $3 million to initially fund the Future 
Foods Initiative. To maintain America's competitive leadership for the 
emerging opportunities in new food functionality and to ensure that 
consumers derive the potential benefits of new and improved foods and 
food ingredients, especially those resulting from biotechnology 
research, this request is of utmost importance. We thank the committee 
for its strong support of food and agriculture research and ask your 
consideration of this very important initiative.
                                 ______
                                 

            Prepared Statement of the University of Illinois

    Our testimony is on behalf of the Livestock Genome Sequencing 
Initiative (LGSI), an extremely important scientific initiative with 
profound implications for the future of U.S. agriculture and for the 
biological security of our nation's animal resources. We appreciate the 
strong support of the Committee for this effort that began in fiscal 
year 2002. To continue the effort in fiscal year 2003, we request that 
funding of $1.6 million be appropriated through USDA, to complete the 
funding of Stage I for the cattle genome and Stage I of the pig genome 
mapping effort.
    Concept.--International participants in the Livestock Genome 
Sequencing Initiative will create maps of the entire genomes of cattle 
and pigs and will sequence all the DNA in those genomes, so that every 
gene in each of the two species is identified by its unique sequence 
and location on specific chromosomes. The resulting map and sequence 
information will be placed in databases that can be accessed by 
scientists using bioinformatics to help establish the function of each 
of tens of thousands of genes, thus leading to valuable practical 
applications. Similarities to the human and mouse genomes will be 
extremely useful in the mapping and sequencing effort and subsequent 
research.
    Funding provided to the University of Illinois, as a member of 
international consortia, will lead to the completion of the whole-
genome physical maps for cattle and for the pig. Specifically, the 
funding is being used to sequence the ends of approximately 120,000 
bacterial artificial chromosomes (BACs) that contain large inserts of 
cattle and pig DNA. This enables scientists to build and enhance the 
quality of a whole-genome, high-quality physical map for each species, 
the critical first step in sequencing these livestock genomes.
    Progress.--During the first year of the Livestock Genome Sequencing 
Project (fiscal year 2002), 60,000 new sequences from the cattle genome 
(cattle genomic inserts in bacterial artificial chromosomes, or BACs) 
were generated at the University of Illinois. These 60,000 new 
``sequence tagged sites'' are being integrated with maps that are being 
created collaboratively with the USDA-ARS and the British Columbia 
Cancer Research Centre. The sequences generated provide the necessary 
``anchoring'' of the cattle map to the map of the human genome. The 
second year's work will allow the sequencing of 60,000 additional 
cattle BAC-ends for the whole-genome cattle map and 60,000 BAC-ends for 
the swine gene map. When completed, the resulting maps will permit 
rapid isolation and characterization of genes affecting health, well-
being and productivity of cattle and pigs and will provide an 
indispensable template for the DNA sequencing of both genomes. 
Preliminary discussions are already underway with other institutions 
and federal agencies to create the funding base for complete sequencing 
of the cattle and pig genomes.
    Justification.--For the long-term protection and security of our 
nation's food supply, the ability to rapidly diagnose and respond to 
threats from exposure to infectious and chemical agents rests 
increasingly on our knowledge of the genomes of critical plant and 
animal species. Mapping and sequencing genes are the essential first 
steps to learning the function of each gene. Knowledge of gene location 
and sequence, as is amply demonstrated by the human genome-sequencing 
project, opens a whole new vista of approaches to health, welfare, and 
quality of life issues and serves as the basis for future biological 
research. Diagnostics and cures for some of the major scourges of 
mankind, including cardiovascular disease, cancer, diabetes, and 
obesity are among the potentials of this initiative. In livestock, the 
initiative will enable powerful, environmentally safe approaches to 
disease prevention, resistance, and treatment; stress alleviation; 
increased productivity and profitability; improved food quality, 
safety, functionality, and diversity; improved odor and waste 
management; improved environmental quality; and enhanced quality of 
life for food animals. Above all, the initiative will address the 
growing aspirations of the world's population for nutritious, healthy, 
safe, and affordable livestock products and will provide new technology 
to secure those products against bioterrorist threats.
    Even though it is an international undertaking, there is a very 
important global competitiveness dimension to this initiative, as well. 
To illustrate, China, the world's largest pork producer, and Denmark, 
the largest pork producer per capita and a major world exporter of pork 
and pork products, have launched an aggressive swine genome sequencing 
initiative. Independent efforts to sequence the cattle genome are 
underway in New Zealand. If the U.S. is to remain technologically 
competitive in global food markets, it is absolutely essential for the 
U.S. to be among the first to map and sequence food animal genomes. 
This fundamental biological information is the foundation for 
sustainable competitive advantage.
    Economic development impact.--Focusing on the agricultural and food 
implications alone, rapid population growth, urbanization, and growing 
affluence in the most populous parts of the world are resulting in 
rapidly expanding world markets for livestock products. Enormous future 
growth is very likely, as developing countries improve both political 
and economic systems. To compete effectively for those markets, 
Illinois and the nation must be among the first to implement new 
livestock technology derived from genomics. Livestock production is the 
leading source of added value for the feed grains and oilseeds produced 
in Illinois and the Midwest, and technological leadership will allow 
that value to be captured in the areas where the new technology is 
implemented. This increased value would accrue to Illinois and the 
nation as increased profits throughout the swine and cattle industries, 
greater demand for feed grains and oilseeds, reduced costs of 
government farm programs, increased employment and economic 
development, and improved consumer products. Substantial economic 
returns can also be expected from applications of this technology to 
various aspects of human health. New technology emerging from the 
interface of animal genomics with nanotechnology will yield new 
opportunities to produce biosensors that will protect the nation's 
cattle and swine from biological threats.
    University capabilities.--The University of Illinois is uniquely 
positioned to lead in mapping the pig and cattle genomes. The 
Biotechnology Center, which includes the W. M. Keck Center for 
Comparative and Functional Genomics, provides one of the highest-
throughput public gene mapping and sequencing capabilities in the 
nation, as well as a number of state-of-the-art genetic analysis 
capabilities, such as microarray analysis. Cutting edge bioinformatics 
capabilities are provided by the National Center for Supercomputing 
Applications.
    These superb research support capabilities enabled University of 
Illinois scientists to become leaders in research concerning cattle, 
swine, and soybean genomes. The infrastructure is further enhanced by 
sizeable public investments in facilities, including the Edward R. 
Madigan Laboratory and the Post-Genomics Institute. The University of 
Illinois was also selected by USDA to establish the ``Agricultural 
Genome Sciences and Public Policy Training Program.''
    Additional state appropriations are enabling many distinguished 
scientists of demonstrated excellence to join a faculty that is already 
internationally preeminent in the genomics area. Also, the University 
has a long history of productive alliances and cooperation with other 
public and private institutions, both here and abroad, in biotechnology 
research. For example, the University was the first in the Western 
Hemisphere to import Chinese swine and exploit their advantages in 
prolificacy, disease resistance, and superiority for genetic research.
    Sponsor and funding status.--Under the leadership of USDA-ARS and 
University of Illinois scientists, international consortia for cattle 
and pig genome mapping and sequencing are being formed. The consortium 
that has initially undertaken the mapping of the cattle genome is 
presently comprised of the USDA-ARS, the University of Illinois, 
Shirakowa Institute of Animal Genetics (Japan), and the Alberta 
Livestock Genomics Initiative (Canada). The international consortium 
for sequencing the pig genome is being established with USDA-ARS and 
the University of Illinois to also include the Sanger Center--Cambridge 
(UK) and INRA (France).
    The long-term objective of the multinational, multi-institutional 
Livestock Genome Sequencing Initiative (LGSI) is to obtain the complete 
sequences of the cattle and pig genomes with a total expected 
investment of approximately $100 million per species. The first stage, 
anchored by the initial federal appropriation ($800,000) in the fiscal 
year 2002 LGSI initiative, is creating the physical maps of the cattle 
and pig genomes from the sequence-ready bacterial artificial 
chromosomes (BACs). Continuing appropriation of $1.6 million in fiscal 
year 2003 will allow for completion of this stage. The second stage, to 
be accomplished in the third through the 5 years, will result in 
targeted sequencing of chromosomal regions containing genes of economic 
importance to the livestock industry or approximately eight million DNA 
bases annually for each species. This will lead to the eventual 
complete genome sequences, three billion DNA bases for each species, 
with funding recruited from public and private sources by the 
international consortia.
    Request and summary.--For fiscal year 2003, $1.6 million is 
requested to be appropriated through the USDA to complete the funding 
of Stage I for cattle and of Stage I of the pig. If appropriated, these 
funds will be provided to the University of Illinois, as a member of 
the international consortia, to lead the completion of the whole-genome 
physical map for cattle and for the pig. Specifically, the funding will 
be used to sequence the ends of approximately 120,000 bacterial 
artificial chromosomes (BACs) that contain large inserts of cattle and 
pig DNA. This will greatly speed and facilitate building a whole-
genome, high-quality, physical map of each species, the critical first 
step in sequencing the genomes.
                                 ______
                                 

      Prepared Statement of the University of Southern Mississippi

    Mr. Chairman, distinguished Members of the Subcommittee, I would 
like to thank you for this opportunity to provide testimony describing 
ongoing research and commercializing efforts of The University of 
Southern Mississippi (USM) and the Mississippi Polymer Institute. I am 
very grateful to the Subcommittee for its leadership and the continued 
support of the Institute and its work. This testimony will include an 
update on the progress of the Institute since my testimony of 
approximately one year ago. During the past year, our efforts have 
focused principally on two commercialization thrusts. One effort 
involves our novel, agricultural-based inventions in emulsion 
polymerizations, and the other is to produce a commercial, 
formaldehyde-free, soybean derived adhesive for a variety of composite 
board materials, i.e., particle-board or oriented strand board (OSB). 
During the past year, we have continued to refine the adhesive and have 
prepared particle boards from our novel adhesive that meet commercial 
specifications. We are optimistic that these materials can be 
commercialized. We are currently working to reduce the cost of the 
adhesive in order to improve its commercial viability. With respect to 
the agricultural derived emulsions, I am happy to say that they have 
found commercial viability at this time. However, much more needs to be 
done in order to exploit the many uses of this novel technology. It is 
my belief that many applications exist, and our efforts to date have 
uncovered but a few applications. I will discuss the progress made with 
the two inventions separately in order to offer more clarity.
    In the case of castor and soy oil, we have designed and synthesized 
almost one hundred novel vegetable oil macro-monomers (VOMM) or polymer 
building blocks that offer state-of-the-art technology. For instance, 
the attributes of this technology include the ability to produce odor 
free, solvent free, non-polluting latex coatings. This represents the 
best-available technology for the production of solvent free latex 
coatings. The success of the technology depends on the use of 
agricultural materials as a building block of emulsion derived polymers 
offering a new opportunity for ag derived materials as a raw material 
in the polymer industry. By contrast, contemporary latex coatings 
contain 250 grams/liter or more of air pollutants or volatile organic 
content (VOC) per gallon. Moreover, this novel technology, if 
practiced, would allow governmental regulatory agencies to tighten the 
restrictions on VOC emissions of applied coatings without financial 
harm to the coatings industry. The fundamental scientific principles 
regarding its mode of action have been confirmed, yet additional data 
must be collected as even more novel monomers, or polymer building 
blocks, are designed and synthesized. We have identified emulsion 
polymerization as a synthetic technique particularly suited for use of 
these materials. We have also found that it holds much promise in 
ultraviolet cured polymers in that hard, scratch resistant coatings are 
produced in seconds from this novel technology. We have utilized this 
technology in the design and fabrication of industrial coatings that 
offer high performance, flexible, and non-blocking products. We have 
secured a pilot scale manufacturing facility for this material, and as 
a result, can produce 20 gallons of VOMM per run. Financial assistance 
was obtained via the USDA SBIR division competitive grant applications. 
We have met our SBIR objectives for Phase I and are currently 
implementing the Phase II award protocol. As a result of this work, we 
are now able to provide sufficient quantities of product to prospective 
users of this technology. We have sampled many interested parties and 
are continuing negotiations with several firms regarding 
commercialization. Finally, we have manufactured and shipped VOC free 
and low odor paints to the Pentagon for use in renovation and 
maintenance of this facility.
    Over the past year, new patent applicants have been filed and 
others have been issued. Foreign patent filings have also been 
affected. New patent applications will certainly be submitted during 
the coming year.
    In summary, commercialization efforts have continued over the past 
year with sales of paint to the Pentagon and polymer for textile 
treatments. Patents have been approved, new patent applications have 
been submitted, several toll manufacturing runs have been made, a USDA 
SBIR grant is in force to assist in the development of this technology, 
new industrial coatings have been designed, manufactured, formulated, 
and tested, and formulation efforts have been directed toward the 
generation of high performance, low odor, and low VOC coatings. We are 
optimistic that sales of these ag derived products will expand 
dramatically during 2002!
    In yet another of our novel ag based technologies, we have 
developed formaldehyde-free adhesives for use in the composites 
industry, specifically for particle board and oriented strand board. 
The new adhesives are composed of more than 98 percent agricultural 
products and are comparable in properties with traditional formaldehyde 
adhesives. Formaldehyde emissions are regulated as formaldehyde is 
considered a potential cancer producing agent. Consequently, there is a 
move afoot to remove formaldehyde from articles of commerce. This work 
to reduce water absorption values has been successfully completed. 
Moreover, while water absorption values are within limits so are values 
for internal bond strength, modulus of elasticity, and modulus of 
rupture. These developments represent major technical advancements 
during the past year. The cost of the soy adhesive is higher than 
formaldehyde derived adhesives, and our current goal is therefore to 
reduce adhesive costs while maintaining adhesive properties.
    In 1983, the Mississippi Legislature authorized the Polymer 
Institute at USM to work closely with emerging industries and other 
existing polymer-related industries to assist with research, problem 
solving, and commercializing efforts. The institute has maintained that 
thrust during the past year with much success. In fact, while 
manufacturing jobs alone in Mississippi have declined over the past 10 
years, manufacturing jobs in the plastics sector have risen and 
continue to rise.
    The Institute provides industry and government with applied or 
focused research, development support, and other commercializing 
assistance. This effort complements existing strong ties with industry 
and government involving exchange of information and improved 
employment opportunities for USM graduates. Most importantly, through 
basic and applied research coupled with developmental and 
commercializing efforts of the Institute, the School of Polymers and 
High Performance Materials continues to address national needs of high 
priority.
    The focus of my work is commercialization of alternative 
agricultural crops in the polymer industry. We are having success! This 
approach offers new opportunities for agriculture since the polymer 
industry is the largest segment of the chemical products industry in 
the world, and heretofore has been highly dependent upon petroleum 
utilization. However, the theme of our work is simple; high 
performance, and environmentally friendly technology utilizing 
agricultural (sustainable) crops when possible. In this way, we as a 
Nation can improve our environment, reduce our dependence on imported 
petroleum, and keep America's farmlands in production. As farm products 
meet the industrial needs of the American society, rural America is the 
benefactor. Heretofore, this movement to utilize alternative 
agricultural products as industrial raw materials has received some 
attention but much less than opportunities warrant. Your decisions are 
crucial to the accomplishment of these goals as funding from this 
Subcommittee has enabled us to implement and maintain an active group 
of university-based polymer scientists whose energies are devoted to 
commercializing alternative crops. We are most grateful to you for this 
support, and ask for your continued commitment.
    The faculty, the University, and the State of Mississippi are 
strongly supportive of the Mississippi Polymer Institute and its close 
ties with industry. Most faculty maintain at least one industrial 
contract as an important part of extramural research efforts.
    Polymers, which include fibers, plastics, composites, coatings, 
adhesives, inks, and elastomers, play a key role in the materials 
industry. They are used in a wide range of industries including 
textiles, aerospace, automotive, packaging, construction, medical 
prosthesis, and health care. In the aerospace and automotive 
applications, reduced weight and high strength make them increasingly 
important as fuel savers. Their non-metallic character and design 
potentials support their use for many national defense purposes. 
Moreover, select polymers are possible substitutes for so-called 
strategic materials, some of which come from potentially unreliable 
sources.
    As a polymer scientist, I am intrigued by the vast opportunities 
offered by American agriculture. As a professor, however, I continue to 
be disappointed that few of our science and business students receive 
training in the polymer-agricultural discipline as it offers enormous 
potential. The University of Southern Mississippi, the School of 
Polymers and High Performance Materials, and the Mississippi Polymer 
Institute are attempting to make a difference by showing others what 
can be accomplished if appropriate time, energy, and resources are 
devoted to the understanding of ag based products.
    I became involved in the polymer field 38 years ago and since that 
time, have watched its evolution where almost each new product 
utilization offered the opportunity for many more. Although polymer 
science as a discipline has experienced expansion and a degree of 
public acceptance, alternative agricultural materials continue to be an 
under-utilized national treasure for the polymer industry. There is 
less acceptance of petroleum derived materials today than ever before, 
and consequently the timing is ideal for agricultural materials to make 
significant inroads as environmentally friendly, biodegradable, and 
renewable raw materials. These agricultural materials have always been 
available for our use, yet society for many reasons, has not recognized 
their potential. The following examples are included and represent 
opportunities other than those already described which supports this 
tenet:
  --A waterborne, waterproofer has been designed and formulated with 
        the help of several natural products. It is being evaluated by 
        select chemical companies as a possible product in their 
        product mix. The material functions as a waterproofer yet is 
        carried in water. However, after application to the intended 
        substrate, typically wood or cementous products, the material 
        becomes hydrophobic and highly water resistant. We have 
        collected two and one-half years of exposure data on this 
        product with excellent success. We have made additional 
        contacts with industrial firms during the year in hopes for 
        commercialization but industry is complacent and no driving 
        force for change exists. For instance, unless VOC emission laws 
        are tightened, little movement will be toward new, 
        environmentally friendly, products. However, we will continue 
        our efforts to promote the use of ag based products offering 
        improved environmental attributes, i.e., high performance 
        accompanied by low odor and low VOCs.
  --We have exploited the potential of lesquerella, a crop that 
        produces a triglyceride similar to castor oil. Several high 
        performance products have been prepared and include polyesters, 
        stains, foams, pressure sensitive adhesives, and 100 percent 
        solid ultraviolet (UV) coatings. This technology was 
        highlighted at the AARC/NASDA meeting in Washington, DC. We 
        have developed a cooperative relationship with Alcorn State 
        University, Lorman, MS to grow and thus evaluate the agronomics 
        of lesquerella as a new crop for the Southeastern U.S. region. 
        Consequently, we have fabricated ag based foams for use as weed 
        retardant mulches. The new foams are under test as this report 
        is being written.
    U.S. agriculture has made the transition from the farm fields to 
the kitchen tables, but America's industrial community continues to be 
frightfully slow in adopting ag based industrial materials. The prior 
sentence was included in my last two testimonies but continues to ring 
true, even as I write this report. However, we are making progress and 
we must persist. We must aggressively pursue this opportunity and in 
doing so:
  --Intensify U.S. efforts to commercialize alternative crops and 
        dramatically reduce atmospheric VOC emissions and odor. The 
        result will be much cleaner and less noxious air for all 
        Americans.
  --Reduce U.S. reliance on imported petroleum.
  --Maintain a healthy and prosperous farm economy.
  --Foster new cooperative opportunities between American farmers and 
        American industry.
    Mr. Chairman, your leadership and support are deeply appreciated by 
the entire University of Southern Mississippi community. While I can 
greatly appreciate the financial restraints facing your Subcommittee, I 
feel confident that further support of the Mississippi Polymer 
Institute will continue dividends of increasing commercialization 
opportunities of agricultural materials in American industry. Advances 
in polymer research are crucial to food, transportation, housing, and 
defense industries. Our work has clearly established the value of ag 
products as industrial raw materials and we must move it from the 
laboratories to the industrial manufacturing sector. Only then can the 
U.S. enjoy a cleaner and safer environment which these technologies 
offer, as well as new jobs, and expanded opportunities for the U.S. 
farmer. We are most grateful for the support you have provided in the 
past. The funding you have provided has allowed laboratory work to be 
conducted, pilot commercial manufacturing to be completed, and limited 
sales of products derived from this technology. However, additional 
funds are needed to make these technologies cost effective while 
maintaining the high performance standards of which we are accustomed. 
Pilot scale processes are necessary to move this technology into the 
market place and this will be the principal focus of our upcoming work. 
Of course, while working to achieve commercialization, continued 
technology advancement will be in effect, as will basic research on 
those topic areas where knowledge is required.
    Since our testimony last year we have reached new levels of 
commercializing efforts in that we have manufactured final and finished 
products for sale. Indeed, the technology has matured and marketing and 
sales must move parallel with continued commercial development of new 
products. Thus, we are in need of additional resources to take these 
technologies to the market place and to continue our developments of 
other exciting technologies. We therefore respectfully request $1.5 
million in federal funding to more fully exploit the potentials of 
commercializing the technologies described herein. We have shown that 
we can be successful, yet we need additional resources in order to 
optimize the potential of this technology. Our efforts will be 
recognized as instrumental in developing a ``process'' for 
commercialization of new ag based products. That is, we will have taken 
a technology from the ``idea'' stage to commercialization in several 
market areas. The development of this process, and to show it 
successful, is extremely important to all entrepreneurs who believe in 
ag based products. Thank you Mr. Chairman and Members of the 
Subcommittee for your support and consideration.
                                 -_____
                                 

  Prepared Statement of the Upper Mississippi River Basin Association

    The Upper Mississippi River Basin Association (UMRBA) is the 
organization created in 1981 by the Governors of Illinois, Iowa, 
Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating 
the five states' river-related programs and policies and for 
collaborating with Federal agencies on regional water resource issues. 
As such, the UMRBA has an interest in the budget for the U.S. 
Department of Agriculture's conservation programs and technical 
assistance.
    Funding for conservation programs on private lands has eroded over 
time and is now less in constant dollars than during the depths of the 
Great Depression. The USDA's conservation programs and technical 
assistance are crucial alternatives to a totally regulatory approach to 
improving water quality. These important programs are inadequately 
funded, and many require reauthorization in the pending Farm Bill, 
making coordination of the authorizing and the appropriations processes 
absolutely critical this year. The UMRBA supports continuation and 
expansion of these programs, and urges Congressional appropriators to 
make adequate provisions for programs pending in the Farm Bill.
    Of particular importance to the UMRBA is funding for the 
Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP), and 
Environmental Quality Incentives Program (EQIP). Taken together, these 
three Commodity Credit Corporation-funded programs provide an 
invaluable means for the USDA to work with landowners, local 
conservation districts, and the states to ensure that agricultural 
productivity is maintained while protecting the nation's soil and water 
resources. Moreover, they do this in a voluntary, non-regulatory 
fashion. CRP, WRP, and EQIP will be key non-regulatory elements in the 
states' efforts to address agricultural sources of water quality 
impairment through the Total Maximum Daily Load program. In addition, 
these conservation programs will be absolutely essential to addressing 
the growing national concern with hypoxia in the Gulf of Mexico through 
the reduction of nutrient loads from agriculture. As stewards of some 
of the nation's most productive agricultural lands and important water 
resources, the five states of the Upper Mississippi River Basin (UMRB) 
believe these programs are vital. Strong farmer interest and state 
support demonstrate the region's commitment to the objectives of these 
programs. In 1998, state, local, and private entities matched every 
dollar of NRCS investment in the five states with an additional $0.80.
                      conservation reserve program
    Under President Bush's fiscal year 2003 budget request, funding for 
the CRP would increase modestly to $1.856 billion. While this increase 
is certainly welcome, it is not adequate to fund the expanded CRP 
provided for in both the House- and Senate-passed Farm Bills. Since its 
inception, enhancements to the CRP have increased its effectiveness in 
improving water quality, soil conservation, and habitat. These same 
enhancements, which include noncompetitive enrollment for filter 
strips, riparian buffers, and similar measures, as well as 
establishment of the Conservation Reserve Enhancement Program (CREP), 
have made the program more flexible and thus more attractive to 
farmers. In Illinois, Iowa, Minnesota, Missouri, and Wisconsin, CRP 
enrollment currently totals 6.6 million acres, or almost 20 percent of 
the national total. All five states also have active CREP programs 
tailored to meet their priority conservation needs. Current CREP 
enrollment in the UMRB states is almost 146,000 acres, or 50 percent of 
the national total. These rates of participation clearly demonstrate 
the importance of the CRP and CREP in the nation's agricultural 
heartland and reflect the compatibility of these programs with 
agricultural productivity.
    However, while demand for the program is up, the CRP has been 
unable to capitalize fully on its increased attractiveness and 
effectiveness because of its 36.4 million acre cap, which USDA projects 
will be reached this calendar year. Currently, new enrollments are 
limited to priority areas through noncompetitive enrollment, the CREP, 
and a farmable wetlands pilot. Thus, it is essential that Congress act 
this year to increase the CRP enrollment cap and then provide 
sufficient funding to support the program, thereby ensuring that the 
CRP will continue its vital role in helping states, local communities, 
and landowners meet their water quality and conservation goals.
                        wetlands reserve program
    Equally pressing is the need to fund and expand the enrollment cap 
for the WRP, which has already reached its 1.075 million acre cap. 
Citing the cap, President Bush has not requested any fiscal year 2003 
funding for the WRP. Since the WRP's establishment in 1996, its 
easements have proven to be important tools for restoring and 
protecting wetlands in agricultural areas. This is clearly evident from 
the overwhelming landowner response and the resulting improvements to 
water quality and habitat. WRP enrollment in Illinois, Iowa, Minnesota, 
Missouri, and Wisconsin totals almost 178,000 acres, or more than 15 
percent of the national total. But, as of 2001, the backlog of land in 
these five states offered for WRP enrollment totaled almost another 
122,000 acres. As with the CRP and CREP, the WRP is a vital tool in the 
agricultural conservation toolbox. Clearly the time is right for 
Congress to secure the WRP's future this year by significantly 
expanding the acreage cap and providing continued funding for this 
valuable program.
                environmental quality incentives program
    The CRP and WRP have been extremely effective in helping Midwest 
farmers to protect land and water resources by curtailing production on 
some of their most sensitive land. And there are certainly many more 
opportunities to make good use of the CRP and WRP in the region. 
However, it is also essential to support sound conservation practices 
on the far greater amount of land that remains in production. EQIP is 
the USDA's largest and most effective means of assisting farmers and 
ranchers to implement conservation practices on land currently in 
production. EQIP assistance can, for example, help operators balance 
the new dynamics of livestock production with the need to protect soil 
and water resources.
    Like many other conservation programs, EQIP funding has not kept 
pace with demand. In 2001, unmet requests for EQIP assistance in 
Illinois, Iowa, Minnesota, Missouri, and Wisconsin alone were estimated 
at $147.9 million. The President has requested the current authorized 
funding level of $200 million for EQIP in fiscal year 2003. Moreover, 
should EQIP be reauthorized this year, the President's budget has 
recommended up to $1 billion for the program in fiscal year 2003. The 
states are gratified by the Administration's support for EQIP and 
concur that the program offers the best opportunity to support 
conservation measures on working lands.
                   conservation technical assistance
    The UMRBA remains concerned with the adequacy of funding and 
staffing levels in the NRCS's conservation operations account. The 
technical assistance funded through conservation operations provides 
the foundation for the USDA's voluntary conservation planning. The 
Administration has proposed an increase of $46 million in conservation 
technical assistance funding for fiscal year 2003. However, this 
overall increase would be more than entirely consumed by a $48 million 
increase directed toward technical assistance for animal feeding 
operations. While the states agree that the water pollution problems 
associated with such operations must be addressed, they are concerned 
that other critical technical assistance functions would actually 
experience a net decrease under the President's budget. As a result, 
NRCS field staff will continue to have difficulty providing the timely, 
comprehensive technical assistance that farmers need if they are to 
participate effectively in the USDA's conservation programs and related 
state programs. A 2001 National Workload Analysis found that the NRCS 
needs approximately 1,900 employees at the field level in Illinois, 
Iowa, Minnesota, Missouri, and Wisconsin. At the time, actual field 
staff in the five states numbered about 1,250, or one-third below the 
estimated needs. Under the Administration's fiscal year 2003 budget, 
overall NRCS staffing would continue its multi-year decline, further 
reducing the effectiveness of technical assistance. The House- and 
Senate-passed Farm Bills would both authorize NRCS to work with third 
party vendors to deliver conservation technical assistance. This 
approach has the potential to alleviate problems associated with 
insufficient NRCS field staff. However, regardless of who delivers the 
technical assistance, it will remain imperative for Congress to ensure 
that the NRCS has resources necessary to effectively meet landowners' 
needs for such assistance.
                           watershed programs
    The UMRBA is extraordinarily disappointed by the President's 
failure to fund three critical watershed programs--i.e., Watershed and 
Flood Prevention Operations, Watershed Surveys and Planning, and the 
Watershed Rehabilitation Program. These programs all provide 
significant local, regional, and national benefits in the areas of 
erosion, sediment, and flood damage reduction; conservation; water 
supply; and development. They are soundly within USDA's tradition of 
working with states and local communities to enhance rural America. By 
shifting the Watershed and Flood Prevention Operations account entirely 
to emergency response work, the Administration would transform a 
proactive program to an entirely reactive one. Together with 
terminating funding for Watershed Surveys and Planning, this would 
virtually eliminate the NRCS's ability to address vital rural water 
resource needs. Similarly, the states oppose the President's proposal 
to eliminate funding for the Watershed Rehabilitation Program. This 
program was established under the Small Watershed Rehabilitation 
Amendments of 2000 and authorizes the NRCS to assist local sponsors in 
rehabilitating aging Public Law 534 and Public Law 566 flood control 
structures. A 1999 estimate put national rehabilitation needs at $543 
million, with needs in Illinois, Iowa, Minnesota, Missouri, and 
Wisconsin accounting for more than 10 percent of the total. These are 
very real needs, with very real potential public health and safety 
implications. As Congress rightly concluded when it authorized the 
program in 2000, the Federal Government has an appropriate role in 
addressing those needs. The states urge Congress to restore funding for 
these three important watershed programs.
                                 ______
                                 

            Prepared Statement of the U.S. Apple Association

    The U.S. Apple Association (U.S. Apple) appreciates the opportunity 
to provide this testimony on behalf of our nation's apple industry.
    Our testimony will focus on the following three areas: the Market 
Access Program (MAP); Food Quality Protection Act (FQPA) 
implementation; and Agricultural Research Service (ARS) funding.
    U.S. Apple is the national trade association representing all 
segments of the apple industry. Members include 40 state and regional 
apple associations representing the 9,000 apple growers throughout the 
country as well as more than 500 individual firms involved in the apple 
business. Our mission is to provide the means for all segments of the 
U.S. apple industry to join in appropriate collective efforts to 
profitably produce and market apples and apple products.
    Market Access Program (MAP).--U.S. Apple strongly supports 
increasing the annual appropriation for MAP from $90 million to $200 
million.
    The apple industry receives roughly $3 million annually in export 
development funds from the U.S. Department of Agriculture's Market 
Access Program (MAP). These funds are matched by grower dollars to 
promote apples in more than 20 countries throughout the world. Since 
this program's inception in 1986, the U.S apple industry has expanded 
fresh apple exports by 277 percent, thanks in large part to the foreign 
promotions made possible by this program. One-quarter of U.S. fresh 
apple production is exported, with an annual value of roughly $400 
million.
    The U.S. apple industry faces keen competition around the globe 
from competitors who receive significant government funds for generic 
promotions. The governments of our foreign competitors spend 
approximately $500 million on export promotion and market development. 
It has become increasingly difficult for U.S. exporters to compete with 
European and Chinese producers who receive massive government 
assistance. Increased funding for this critical program will assist 
U.S. apple producers to better compete and revive export demand in 
countries recently hit by adverse economic conditions.
    Food Quality Protection Act (FQPA) Implementation.--U.S. Apple 
strongly supports full funding for the following programs intended to 
facilitate fair FQPA implementation and to offset its anticipated 
negative impact on apple growers.
    Specifically, U.S. Apple supports the U.S. Department of 
Agriculture's following budget requests.
  --$14.8 million for the Pesticide Data Program, administered by the 
        Agricultural Marketing Service (AMS);
  --$8.0 million for the National Agricultural Statistics Service 
        (NASS) pesticide-usage surveys;
  --$2.6 million for the Office of Pest Management Policy administered 
        by the Agricultural Research Service (ARS);
  --$3.6 million for minor-use registration of crop protection tools 
        (IR-4) administered by ARS;
  --$7.2 million for area-wide Integrated Pest Management research 
        administered by ARS;
  --$13.5 million for the Integrated Pest Management Research Grant 
        Program administered by the Cooperative State Research, 
        Extension and Education Service (CSREES);
  --$10.5 million for minor-use registration of crop protection tools 
        (IR-4) administered by CSREES; and
  --$12.5 million for the Pest Management Alternatives Program, 
        Regional Pest Management Centers, Crops at Risk and Risk 
        Avoidance and Mitigation Program also administered by CSREES.
    Temperate Fruit Fly Research Position--Yakima, Wash.--U.S. Apple 
requests continued funding of $300,000 to conduct critical research at 
the USDA-ARS laboratory in Yakima, Wash. on temperate fruit flies, a 
major pest of apples.
    The Yakima, Wash., USDA Agricultural Research Service (ARS) 
facility is conducting research critical to the crop protection needs 
of the apple industry. FQPA implementation has reduced the number of 
pesticides currently available to growers for the control of pests, 
such as cherry fruit fly and apple maggot. Left unchecked, these 
temperate fruit flies can be devastating. Thus, research is needed to 
develop alternative crop protection methods as growers struggle to cope 
with the loss of existing tools. While Congress appropriated $300,000 
last fiscal year for this critical research, the administration's 
proposed budget for fiscal 2003 rescinds this funding.
    Post Harvest Quality Research Position--East Lansing, Mich.--U.S. 
Apple requests that the committee provide continued funding of $309,600 
for postharvest-quality research at the ARS laboratory in East Lansing, 
Michigan.
    The East Lansing, Mich., USDA Agricultural Research Service (ARS) 
facility is conducting research critical to the future economic 
recovery of the apple industry. Using a series of new sensing 
technologies, researchers at this facility are developing techniques 
that would allow apple packers to measure the sugar content and 
firmness of each apple before it is offered to consumers. Research 
indicates consumer purchases will increase when products consistently 
meet their expectations, suggesting consumers will eat more apples once 
this technology is fully developed and employed by our industry. While 
Congress appropriated $309,600 last fiscal year for this critical 
research, the administration's proposed budget for fiscal 2003 rescinds 
this funding.
    Technology Roadmap.--U.S. Apple urges the Committee to support the 
apple industry's efforts to improve its competitiveness by providing 
increased Federal funding for the development and application of new 
technologies.
    Worldwide apple production increased by 126 percent between 1990 
and 2000, while U.S. apple production grew by 10 percent during this 
same period. This dramatic increase in global apple production 
continues to threaten the profitability of America's apple growers. 
Global oversupply, subsidized foreign competition and unfairly priced 
imports have caused apple prices to plummet, while regulatory, 
production and distribution costs are steadily increasing. The U.S. 
apple industry's future survival may depend on its ability to develop 
and utilize new technology to decrease costs, while improving apple 
quality. Thus, the industry is seeking Federal support of a research 
initiative to develop new technology to automate orchard and fruit 
handling operations, optimize fruit quality, nutritional value, and 
safety, and integrate digital technologies and communication.
    The U.S. Apple Association thanks the committee for this 
opportunity to present testimony in support of the U.S. apple 
industry's Federal agricultural funding requests.
                                 ______
                                 

        Prepared Statement of the U.S. Marine Shrimp Consortium

    Mr. Chairman, we greatly appreciate the opportunity to provide 
testimony to you and the Subcommittee, to thank you for your past 
support and to discuss the achievements and opportunities of the U.S. 
Marine Shrimp Farming Program.
    We would like to bring to your attention the success of the U.S. 
Marine Shrimp Farming Consortium and its value to the nation. The 
Consortium consists of institutions from six states: The University of 
Southern Mississippi/Gulf Coast Research Laboratory, Mississippi; The 
Oceanic Institute, Hawaii; Tufts University, Massachusetts; Texas A & M 
University, Texas; The Waddell Mariculture Center, South Carolina; and 
the University of Arizona, Arizona. These institutions have made major 
advances in technology to support the U.S. shrimp farming industry, and 
the program's excellent performance through multi-state collaboration 
has been recognized by the USDA in its recent program reviews. The 
Consortium is at a point of making significant contributions to 
building the U.S. industry, reducing the trade deficit, and satisfying 
increasing consumer demand for shrimp. Seafood imports constitute the 
second largest trade deficit item for the U.S. at $7.1 billion and 
shrimp represents approximately half of this deficit.
                            accomplishments
    The Consortium, in cooperation with private industry, industry 
associations, and government agencies has generated new technologies 
for producing premium quality marine shrimp at competitive prices. To 
date the program has: (1) established the world's first and currently 
most advanced breeding and genetic selection program for marine shrimp; 
(2) completed pioneering research and development of advanced 
diagnostic tools for disease screening and control; (3) described the 
etiology of shrimp diseases associated with viral pathogens; (4) 
fostered shrimp production at near-shore, inland/rural farm and even 
desert sites; (5) served a lead role in the Joint Sub-committee on 
Aquaculture's efforts to assess the threat of globally transported 
shrimp pathogens; (6) supplied the U.S. industry with selectively bred 
and disease resistant shrimp stocks; (7) developed advanced technology 
biosecure shrimp production systems to protect both cultured and native 
wild stocks from disease; and (8) developed new feed formulations to 
minimize waste generation. These substantial accomplishments advance 
the continued growth of our industry, place an important emphasis on 
environmental sustainability, and increase market competitiveness. 
Judging from the state of our industry today, USMSFP programs continue 
to have measurable positive effects. The coastal industry continues to 
lead in the production of farmed raised shrimp in the U.S. Recent 
improvements in farm management practices have resulted in bumper crops 
for the industry. The year 2001 resulted in the largest harvest ever 
for U.S. farmers at over 10 million pounds. This represents a 50 
percent increase in U.S. production over the last 8 years.


                         industry vulnerability
    While exceptional progress has been made, this emerging and 
important industry is continually confronted with new challenges. It 
depends on the U.S. Marine Shrimp Farming Program (USMSFP) for high-
health and improved stocks, disease diagnosis and production 
technologies. As a result of the consortium's support, the U.S. 
industry has maintained relative stability while other countries have 
had major losses in their production due to diseases and environmental 
problems. Disease losses due to exotic viruses in Asia and Latin 
America during the past 5 years have approached $6 billion U.S. There 
have been no outbreaks of notifiable disease in the U.S. during the 
last 3 years and a commensurate increase in shrimp production during 
the same period. With reliable protection in place, we have also seen a 
commensurate geographic expansion of the industry within the U.S. A 
broader industry base, while increasing production through the addition 
of new farms, also provides additional protection to the industry by 
geographically isolating different regional sectors of the industry in 
the event of disease outbreaks or natural disaster. Significant amounts 
of shrimp production now comes from a wide part of the South with farms 
now operational in South Carolina, Florida, Alabama and Texas. Arizona 
and Hawaii have also greatly expanded production during the same 
period.

               THE STATE OF THE U.S SHRIMP INDUSTRY, 2001
------------------------------------------------------------------------
                                    Production
              States                  in lbs       Farms      Hatcheries
------------------------------------------------------------------------
AL...............................      400,000            4            0
SC...............................      435,000           10            2
FL...............................      500,000            4            3
AZ...............................      500,000            4            1
HI...............................    1,000,000            7            5
TX...............................    7,500,000           18            1
                                  --------------------------------------
      Total......................   10,335,000           47           12
------------------------------------------------------------------------

    But, while significant progress has been made in risk assessment 
and risk management with visible success, to further improve the 
competitiveness of the U.S. industry, the industry and the USMSFP must 
remain constantly vigilant. In addition to providing significant input 
on the development of national and international regulatory standards 
for shrimp farmers, important service work for government agencies and 
NGOs keeps us continuously apprized of new developments pertaining to 
emerging regulations so that USMSFP research plans can be kept 
proactively responsive to dynamic shifts in industry needs.
                         industry independence
    As a result of the work of the Consortium, investor confidence is 
increasing. In addition to supporting today's industry, advanced 
biosecure shrimp production systems will allow the expansion of shrimp 
farming into near-shore, inland/rural, and desert sites away from the 
environmentally sensitive coastal zone. Importantly, these new 
production technologies produce the highest quality shrimp at world 
competitive prices, consume U.S. grains as feed, and do not pose any 
threat to the environment. Shrimp farming is the newest agricultural 
industry for the U.S. and USDA/CSREES has suggested that our program 
represents a model program for resolving important problems and 
capturing opportunities in both agriculture and aquaculture. Clearly 
the U.S. shrimp farming industry has emerged from the early 90's with a 
larger and more diverse industry for the new millennium.
    To begin completion of our remaining tasks, an increase in the 
current funding level from $4.277 million to $5 million is being 
requested. Allocation of $5 million per year for the next few years to 
work in cooperation with the private sector, to support existing 
efforts, and to build this new industry with its associated jobs and 
economic benefits is in the best interests of the nation.
    Mr. Chairman, the U.S. shrimp farming industry and our Consortium 
deeply appreciate the support of the Committee and respectfully ask for 
a favorable consideration of this request.
                                 ______
                                 

      Prepared Statement of the United States Telecom Association

                           summary of request
    Project Involved.--Telecommunications Loan Programs Administered by 
the Rural Utilities Service (RUS) of the U.S. Department of 
Agriculture.
    Actions Proposed.--Supporting RUS loan levels and the associated 
funding subsidy for the hardship, cost of money, Rural Telephone Bank 
and loan guarantee programs in fiscal year 2003 in the same amount as 
loan levels specified in the fiscal year 2002 Agriculture 
Appropriations Act. Opposing the Administration's proposal to not fund 
Rural Telephone Bank loans in fiscal year 2003. Also supporting an 
extension of the language removing the 7 percent interest rate cap on 
cost of money loans. Also supporting an extension of the prohibition 
against the transfer of Rural Telephone Bank funds to the general fund. 
Opposing the proposal contained in the budget to transfer funds from 
the unobligated balances of the liquidating account of the Rural 
Telephone Bank for the Bank's administrative expenses. Supporting 
funding in the amount of $6.1 million of the distance learning and 
telemedicine loan and grant authority to extend the pilot program to 
finance broadband transmission and local dial-up Internet service in 
rural areas.
    The United States Telecom Association (USTA) represents over 1,400 
telecom companies that provide telecom services. USTA members range 
from large publicly-held corporations to small family-owned companies, 
as well as cooperatives owned by their customers. I am Walter B. 
McCormick, Jr., President and CEO of USTA. I submit this testimony in 
the interests of the members of USTA and their subscribers.
    USTA members firmly believe that the targeted assistance offered by 
a strong RUS telecommunications loan program remains essential in order 
to maintain a healthy and growing rural telecommunications industry 
that contributes to the provision of universal telephone service. We 
appreciate the strong support this committee has provided for the 
telecommunications program since its inception in 1949 and look forward 
to a vigorous program for the future.
                          a changing industry
    As Congress recognized through passage of the Telecommunications 
Act of 1996, telecommunications in the United States is in the midst of 
the most significant changes any industry has ever undergone. Both the 
technological underpinnings and the regulatory atmosphere are changing 
at an extraordinarily rapid pace. Without system upgrades, rural 
customers will be left out of the emerging information revolution.
    The need for modernization of rural telecommunications technology 
employed by RUS borrowers. Primarily, rural telecommunications 
companies, has never been greater. In addition to upgrading switching 
capability to allow new services to be extended to rural subscribers, 
it is critical that rural areas be included in the nationwide drive for 
greater bandwidth capacity. In order to provide higher speed data 
services, such as Digital Subscriber Line (DSL) connections to the 
Internet, outside plants must be modernized and new electronics must be 
placed in switching offices. With current technology, DSL services 
cannot be provided to customers located on lines more than three miles 
from the switching office. Rural areas have a significant percentage of 
relatively long loops and are therefore particularly difficult to serve 
with these higher speed connections. Rural telecommunications companies 
are doing their best to restructure their networks to shorten loops so 
that DSL may be provided, but this is an expensive proposition that may 
not be totally justified by market conditions. However, these services 
are important for rural economic development, distance learning and 
telemedicine. RUS-provided financial incentives for additional 
investment encourage rural telecommunications companies to build 
facilities which allow advanced services to be provided. The 
externalities measured in terms of economic and human development more 
than justify this investment in the future by the federal government.
    Greater bandwidth and switching capabilities are crucial 
infrastructure elements that will allow rural businesses, schools and 
health care facilities to take advantage of other programs available to 
them as end users. The money spent on having the most modern and 
sophisticated equipment available at businesses, schools or clinics is 
wasted if the local telecommunications company cannot afford to build 
facilities that quickly transport and switch the large amounts of data 
that these entities generate. RUS funding enhances the synergies among 
the FCC and RUS programs targeted at improving rural education and 
health care through telecommunications.
    The RUS program provides needed incentives, in the form of a 
reliable source of fairly priced, fixed rate long term capital, to help 
offset regulatory uncertainties related to universal service support, 
interstate access revenues and interconnection rules. RUS is a 
voluntary incentive program that encourages local telecommunications 
companies to build the facilities essential to economic growth.
    RUS endures because it is a brilliantly conceived public-private 
partnership in which the borrowers are the conduits for the federal 
government benefits that flow to rural telephone customers, the true 
beneficiaries of the RUS program. The government's contribution is 
leveraged by the equity, technical expertise and dedication of local 
telecommunications companies. The small amount of government capital 
involved is more than paid back through a historically perfect 
repayment record by telecommunications borrowers, as well as the 
additional tax revenues generated by the jobs and economic development 
resulting from the provisioning and upgrading of telecommunications 
infrastructure. RUS is the ideal government program it generates more 
revenues than it costs; it provides incentives where the market does 
not for private companies to invest in infrastructure promoting needed 
rural economic development; it allows citizens to have access to 
services, which can mean the difference between life and death; and, it 
has never lost a nickel of taxpayer money.
          impact of credit reform on the rural telephone bank
    Contrary to the intent of Congress, the interpretation of credit 
reform by the Office of Management and Budget (OMB) has significantly 
affected the operation of the Rural Telephone Bank (RTB). One of the 
most damaging impacts of OMB's interpretation of the credit reform law 
is to essentially split the RTB into two banks--a liquidating account 
bank, which is responsible for pre-credit reform loans, and a financing 
account bank, which is responsible for post credit reform loans. USTA 
has protested this arrangement since it began, since it prevents the 
relending of borrower repayments to fund new loans in direct 
contravention of Sec. 409 of the bank's enabling act. This, in turn, 
forces the RTB to borrow unnecessarily from the Treasury to fund new 
loans. It also permits funds to build up in the liquidating account 
that were generated by GAO-documented interest rate overcharges, 
instead of those funds being returned through relending to the same 
universe of borrowers that initially generated them. OMB should adhere 
to Sec. 409 of the Rural Electrification Act and allow those repayments 
to be used to fund new RTB loans.
                            recommendations
    Continuation in fiscal year 2003 of the loan levels and necessary 
associated subsidy amounts for the RUS telephone loan programs that 
were recommended by this Committee and signed into law for fiscal year 
2002 would maintain our members' ability to serve the nation's 
telecommunications needs, maintain universal service and bring advanced 
telecommunications services to rural America.
    USTA strenuously objects to the proposal in the budget 
recommendation to not fund RTB loans in fiscal year 2003. The proposal 
is fundamentally flawed. The RTB's mission is far from complete. Loans 
made today are to provide state of the art telecommunications 
technology in rural areas. If no bank loans were made in fiscal year 
2003, the budgetary outlay savings would be minimal because RTB loans 
are funded over a multiyear period. Moreover, because of the minimum 
statutory interest rate of 5 percent, the RTB has an excellent 
opportunity to actually generate a profit for the government!
    Not funding RTB loans will not ``generate increased member and 
borrower support for statutorily authorized privatization''. This 
ignores the fact that privatization of the RTB began in 1995 under the 
current law and is proceeding annually. Over $139 million, or more than 
20 percent, of the government's equity investment in the bank has 
already been retired. In fact, not funding new loans in fiscal year 
2003 actually could impede privatization since the law requires that 
the bank annually retire government stock at the rate of at least five-
percent of the amount of new loans. With no new loans, there is no 
minimum requirement for retirement of government stock.
    The Administration's budget proposes that funds be transferred from 
the unobligated balances of the bank's liquidating account to fund the 
bank's administrative expenses, instead of those expenses being funded 
through an appropriation from the general fund of the Treasury. This 
proposal would not result in budgetary savings and has been 
specifically rejected by this Committee in previous years.
    For a number of years, Congress has eliminated the seven percent 
``cap'' placed on the insured cost-of-money loan program through the 
appropriations process. The elimination of the cap should continue. If 
long term Treasury interest rates exceeded this seven percent ceiling 
contained in the authorizing act, adequate support for the program 
would not be available at the authorized level. This would be extremely 
disruptive and would hinder the program from accomplishing its 
statutory goals. Accordingly, USTA supports continuation of the 
elimination of the seven percent cap on cost-of-money insured loans in 
the fiscal year 2003 appropriations legislation. The Committee should 
also continue to protect the legitimate ownership interests of the 
Class B and C stockholders in the bank's assets by continuing to 
prohibit a ``sweep'' of any unobligated balance in the bank's 
liquidating account in excess of current requirements funds into the 
general fund.
Recommended Loan Levels
    USTA recommends telephone loan program loan levels for fiscal year 
2002 as follows:

                        [In millions of dollars]

RUS Insured Hardship Loans (5 percent)............................    75
RUS Insured Cost-of-Money Loans...................................   300
Rural Telephone Bank (RTB) Loans..................................   175
Loan Guarantees...................................................   120
                                                                  ______
      Total.......................................................   670

Broadband Pilot Program
    USTA supports continued allocation of $6.1 million of the distance 
learning and telemedicine appropriation for the pilot program of loans 
and grants to finance broadband transmission and local dial up access 
to the Internet in rural areas. RUS was founded on the premise that 
rural Americans should have comparable services, facilities and prices 
for telephone service as those who live in more densely populated, 
lower cost areas. As we move into the Information Age, in which 
increases in productivity, economic development, education and medicine 
can greatly benefit from the tremendous potential of the Internet, it 
is a continuation of the historic mission of RUS to support the 
extension of vital new services to rural America.
                               conclusion
    Our members take pleasure and pride in reminding the Subcommittee 
that the RUS telecommunications program continues its perfect record of 
no defaults in over a half century of existence. RUS telecommunications 
borrowers take seriously their obligations to their government, their 
nation and their subscribers. They will continue to invest in our rural 
communities, use government loan funds carefully and judiciously and do 
their best to assure the continued affordability of telecommunications 
services in rural America. Our members urge the Subcommittee to 
continue to recognize the importance of assuring a strong and effective 
RUS Telecommunications Program through appropriation of adequate loan 
levels.
                                 ______
                                 

 Prepared Statement of the Working Group to Preseve the Animal Welfare 
                                  Act

    My name is Nancy Blaney and I am the coordinator of the Working 
Group to Preserve the Animal Welfare Act, which includes the following 
organizations: American Humane Association, the American Society for 
the Prevention of Cruelty to Animals, Alternatives Research and 
Development Foundation, Doris Day Animal League, Humane Society of the 
U.S., Massachusetts Society for the Prevention of Cruelty to Animals, 
and the Society for Animal Protective Legislation. This statement 
supports allowing USDA to proceed with a rulemaking process to extend 
the AWA to the 95 percent of research animals covered by the law but 
not the regulations
    In 1970, the U.S. Congress amended the Animal Welfare Act to extend 
its protections to all ``warm-blooded species'' used in research. It 
amended it again in 1985 to strengthen those humane handling and care 
standards. However, for 30 years, USDA has ignored the law by excluding 
birds, rats, and mice used in labs from its regulations implementing 
the AWA.
    We commend the Subcommittee and the full Committee for allowing 
USDA to proceed during fiscal year 2002 with its rulemaking finally to 
bring birds, rats, and mice under the Act, as required by a court 
settlement in 2000. Twenty million of these animals 95 percent of the 
total number of experimental animals are used each year in research, 
and they deserve coverage under these basic minimum standards of care. 
We urge you to allow this process to continue.
    Ensuring that these research animals receive adequate care is 
imperative not only as a humane matter, but also as a matter of sound 
science, since animal suffering compromises the integrity of research 
results. A ``survey of Institutional Animal Care and Use Committee 
members reveals that most researchers actually favor AWA regulation of 
these species A clear majority of animal researchers and other IACUC 
members favored AWA coverage for mice, rats, and birds. Even animal 
researchers in psychology, psychopharmacology, and behavioral 
neuroscience support AWA coverage of these animals, despite the fact 
that these disciplines would be among the most affected by AWA 
regulation of mice, rats, and birds.'' [Survey conducted by Scott Plous 
(Dept. of Psychology, Wesleyan University) and Harold Herzog (Dept. of 
Psychology, West Carolina University), Science, v.290, 10/27/2000.] 
Support also comes from, among others, the American College of 
Laboratory Animal Medicine, The American Association for Laboratory 
Animal Science, Procter & Gamble, Scientists Center for Animal Welfare, 
Johns Hopkins University Center for Alternatives to Animal Testing, and 
DuPont Pharmaceutical Co.
    The fact of the matter is, however, that without the oversight and 
enforcement that only USDA can provide, good animal care cannot be 
assured. Just in the past couple of weeks, very serious cases of abuse 
of birds, rats, and mice in laboratories have come to light:
  --At the University of North Carolina-Chapel Hill, an undercover 
        investigator documented animal mistreatment that violates NIH 
        guidelines and accreditation standards, including:
    --Extremely sick and injured mice and rats being left to die with 
            no veterinary care
    --Paralyzed animals who had had their necks broken but were still 
            alive being placed in the dead animal cooler
    --The use of death as an ``endpoint'' in experiments when such an 
            endpoint is prohibited by policy
    --Severely overcrowded cages
    --A nonresponsive and ineffectual Institutional Animal Care and Use 
            Committee
  --A former researcher at the National Jewish Medical and Research 
        Center in Denver told of a colleague who, among other acts, 
        failed to adequately anesthetize mice before piercing the 
        eardrums of mice to hold their heads in place in a frame and 
        then drilling into their skulls. In this case, no effort was 
        made to stop this scientist, even though a member of the 
        Institutional Care and Use Committee observed these behaviors.
  --At the University of California San Francisco, the minutes from a 
        meeting of the Committee on Animal Research reveal that ``for 
        the third time in just over one month, live mice were found in 
        the dead animal freezer, indicating improper euthanasia 
        technique.''
    Unfortunately, NIH conducts no inspections; grantees must provide 
written ``assurances'' of their compliance with the guidelines. The 
Association for the Assessment and Accreditation of Laboratory Animal 
Care conducts announced site visits once every three years. Once in 
awhile, AAALAC catches something:
  --Last week it was reported that Johns Hopkins University is under 
        scrutiny by USDA for violations of the AWA related to protected 
        species. According to the Baltimore Sun of April 18, 2002, 
        ``[in] about a dozen cases, (USDA) inspectors found that 
        animals were given inadequate pain medication after 
        experimental procedures and may have suffered unnecessarily `` 
        Alerted by the USDA investigation, AAALAC came in and, among 
        other things, raised questions about JHU's housing and handling 
        of its rats and mice. Had USDA also been required to inspect 
        these species, a red flag would have been raised and corrective 
        steps taken that much sooner.
    These cases, and others, underscore the indisputable need for and 
value in having birds, rats, and mice covered by the AWA and subject to 
the oversight of USDA veterinary inspectors. As the distinguished 
former Senator Robert Dole author of the 1985 AWA amendments wrote in a 
letter last year:

    ``I would hope that the Bush Administration and Members of the 
present Congress, some of whom stood with me in 1985 in advancing my 
amendments, will recognize that all animals used in experimentation 
deserve the benefit of the modest requirements of the Animal Welfare 
Act. I would urge them to allow USDA to achieve this end by pursuing a 
full and fair rulemaking as provided in the settlement agreement.''

    We urge the Committee not to include any language in the fiscal 
year 2003 agriculture appropriations bill or committee report that 
would interfere with USDA's ability to carry out this important 
rulemaking on a timely basis.










       LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                              ----------                              
                                                                   Page
Acord, Bobby R., Administrator, Animal and Plant Health 
  Inspection Service, Department of Agriculture..................   415
    Prepared statement...........................................   425
Ad Hoc Coalition, prepared statement.............................   605
Alachua County Board of County Commissioners, prepared statement.   607
Alliance for Continuing Nutrition Monitoring, prepared statement.   610
Alsop, James C., Acting Administrator, Rural Housing Service, 
  Department of Agriculture:
    Biographical sketch..........................................   258
    Prepared statement...........................................   253
American:
     Beekeeping Federation, prepared statement...................   622
    Farm Bureau Federation, prepared statement...................   613
    Federation of:
        Government Employees, Local 3354, prepared statement.....   618
         State, County, and Municipal Employees, Local 3870, 
          prepared statement.....................................   618
    Honey Producers Association, Inc., prepared statement........   622
    Indian Higher Education Consortium, prepared statement.......   625
    Rivers, prepared statement...................................   628
    Sheep Industry Association, prepared statement...............   630
    Society:
        For Microbiology, prepared statements..................633, 636
        For Nutritional Sciences, prepared statement.............   639
        Of Civil Engineers, prepared statement...................   642
Aquatica Tropicals, Inc., prepared statement.....................   644

Biermann, Suzanne M., Deputy Under Secretary for Food, Nutrition, 
  and Consumer Services, Department of Agriculture...............   451
Bosecker, R. Ronald, Administrator, National Agricultural 
  Statistics Service, Department of Agriculture:
    Biographical sketch..........................................   285
    Prepared statement...........................................   281
Bost, Eric M., Under Secretary for Food, Nutrition and Consumer 
  Services, Department of Agriculture:
    Prepared statement...........................................   453
    Statement of.................................................   451
Braley, George A., Acting Administrator, Food and Nutrition 
  Service, Department of Agriculture.............................   451
    Prepared statement...........................................   457
Byrd, Senator Robert C., U.S. Senator from West Virginia, 
  questions submitted by.........................................   335

Carolina Classics Catfish, Inc., prepared statement..............   644
Catfish Farmers of America, prepared statement...................   645
CES Mangrove Tropicals, prepared statement.......................   646
Coalition:
    Of EPSCoR States, prepared statement.........................   647
    To Promote U.S. Agricultural Exports, prepared statement.....   648
Cochran, Senator Thad, U.S. Senator from Mississippi:
    Questions submitted by......................190, 339, 386, 502, 585
    Statements of................................................2, 356
Collins, Keith, Chief Economist, Office of the Secretary, 
  Department of Agriculture......................................1, 197
    Prepared statement...........................................   200
    Statement of.................................................   198
Colorado River Basin Salinity Control Forum, prepared statement..   649
Columbia University, prepared statement..........................   653
Council for Agricultural Research, Extension, and Teaching, 
  prepared statement.............................................   654
Craig, Senator Larry, U.S. Senator from Idaho, statement of......     3
Crawford, Lester, Deputy Commissioner, Food and Drug 
  Administration, Department of Health and Human Services........   511
    Prepared statement...........................................   513

Davidson, Ross J., Jr., Administrator, Risk Management Agency, 
  Department of Agriculture:
    Biographical sketch..........................................   229
    Prepared statement...........................................   226
Delta Western, Inc., prepared statement..........................   657
Dewhurst, Steve, Budget Officer, Office of the Secretary, 
  Department of Agriculture......................................     1
Dorgan, Senator Byron L., U.S. Senator from North Dakota:
    Prepared statement...........................................     4
    Questions submitted by................................174, 179, 567
    Statement of.................................................     3

Easter Seals, prepared statement.................................   659

Fleischman, Joyce N., Acting Inspector General, Office of 
  Inspector General, Department of Agriculture, prepared 
  statement......................................................    52
Florida:
    State University, prepared statement.........................   658
    Sugar Cane League, prepared statement........................   662
Friends of Agricultural Research--Beltsville, Inc., prepared 
  statement......................................................   665

Gallegos, Lou, Assistant Secretary for Administration, 
  Departmental Administration, Department of Agriculture, 
  prepared statement.............................................    43
Glavin, Margaret O'K., Acting Administrator, Food Safety, 
  Department of Agriculture......................................   389
    Biographical sketch..........................................   413
    Prepared statement...........................................   402
Grocery Manufacturers of America, prepared statement.............   668

Harkin, Senator Tom, U.S. Senator from Iowa, questions submitted 
  by...........................................................497, 565
Harrison Fish Farm, prepared statement...........................   669
Hawks, William T., Under Secretary for Marketing and Regulatory 
  Programs, Department of Agriculture............................   415
    Prepared statement...........................................   416
Hefferan, Dr. Colien, Administrator, Cooperative State Research, 
  Education, and Extension Service, Department of Agriculture:
    Biographical sketch..........................................   275
    Prepared statement...........................................   273
Herglotz, Kevin, Deputy Chief of Staff and Director of 
  Communications, Office of Communications, Department of 
  Agriculture, prepared statement................................    47
Hobbs, Ira L., Acting Chief Information Officer, Office of the 
  Chief Information Officer, Department of Agriculture, prepared 
  statement......................................................    21
Humane Society of the United States, prepared statement..........   670

Illinois Soybean Association, prepared statement.................   674
Industry and Government Central California Ozone Study Coalition, 
  prepared statement.............................................   651
International Association of Fish and Wildlife Agencies, prepared 
  statement......................................................   675

Jen, Joseph J., Under Secretary for Research, Education and 
  Economics, Department of Agriculture...........................   197
    Biographical sketch..........................................   268
    Prepared statement...........................................   264
    Questions submitted by.......................................   583
    Statement of.................................................   262
Johnson, Senator Tim, U.S. Senator from South Dakota:
    Prepared statements..........................................5, 212
    Questions submitted by................................187, 337, 498
    Statement of.................................................     5
Joslin Diabetes Center, prepared statement.......................   682

Kaplan, Dennis, Deputy Director, Office of Budget and Program 
  Analysis, Department of Agriculture.....................389, 415, 451
Kelly, James Michael, Acting General Counsel, Office of the 
  General Counsel, Department of Agriculture, prepared statement.    29
Kent SeaTech Corporation, prepared statement.....................   683
Knipling, Dr. Edward B., Acting Administrator, Agricultural 
  Research Service, Department of Agriculture:
    Biographical sketch..........................................   273
    Prepared statement...........................................   269
Kohl, Senator Herb, U.S. Senator from Wisconsin:
    Opening statements......................................1, 197, 355
    Questions submitted by.......................92, 305, 385, 474, 536

Legg, Hilda Gay, Administrator, Rural Utilities Service, 
  Department of Agriculture:
    Biographical sketch..........................................   252
    Prepared statement...........................................   249
Leopold Center for Substainable Agriculture, prepared statement..   685
Little, James R., Administrator, Farm Service Agency, Department 
  of Agriculture:
    Biographical sketch..........................................   225
    Prepared statement...........................................   221
Lumpkin, Dr. Murray, Principal Senior Associate Commissioner, 
  Food and Drug Administration, Department of Health and Human 
  Services.......................................................   511

Massachusetts Department of Food and Agriculture, prepared 
  statement......................................................   685
McPherson, Edward, Chief Financial Officer, Office of the Chief 
  Financial Officer, Department of Agriculture, prepared 
  statement......................................................    48
Metropolitan Water District of Southern California, prepared 
  statement......................................................   686
Moseley, James, Deputy Secretary, Office of the Secretary, 
  Department of Agriculture......................................     1
    Biographical sketch..........................................    21
Mountain Watershed Association, prepared statement...............   689
Murano, Elsa, Under Secretary for Food Safety, Department of 
  Agriculture....................................................   389
    Biographical sketch..........................................   401
    Prepared statement...........................................   391
Murano, Peter S., Ph.D., Deputy Administrator for Special 
  Nutrition Programs, Food and Nutrition Service, Department of 
  Agriculture, biographical sketch...............................   457

National:
    Commodity Supplemental Food Program Association, prepared 
      statement..................................................   705
    Congress of American Indians, prepared statement.............   708
    Council of Farmer Cooperatives, prepared statement...........   710
    Dry Bean Council, prepared statement.........................   712
    Organization for Rare Disorders, Inc., prepared statement....   716
    Potato Council, prepared statement...........................   723
    Rural Housing Coalition, prepared statement..................   724
    Rural Telecom Association, prepared statement................   729
    Telecommunications Cooperative Association, prepared 
      statement..................................................   732
    Treasury Employees Union, prepared statement.................   735
    Turfgrass Evaluation Program, prepared statement.............   736
    Watershed Coalition, prepared statement......................   740
National Association of:
    Conservation Districts, prepared statement...................   690
    Farmers Market Nutrition Programs, prepared statement........   693
    Professional Forestry Schools and Colleges (NAPFSC), prepared 
      statement..................................................   694
    State Universities and Land-Grant Colleges, prepared 
      statements...............................................697, 698
Neruda, Michael E., Deputy Under Secretary for Rural Development, 
  Department of Agriculture......................................   197
    Biographical sketch..........................................   248
    Prepared statement...........................................   245
    Statement of.................................................   243
New Jersey Aquaculture Association, prepared statement...........   743
Newsome, James E., Chairman, Commodity Futures Trading 
  Commission:
    Prepared statement...........................................   358
    Statement of.................................................   356
Nez Perce Tribe, prepared statement..............................   743
Northwest Indian Fisheries Commission, prepared statement........   744

Offutt, Susan E., Administrator, Economic Research Service, 
  Department of Agriculture:
    Biographical sketch..........................................   281
    Prepared statement...........................................   276
Organization for the Promotion and Advancement of Small 
  Telecommunications Companies, prepared statement...............   746

Penn, J.B., Under Secretary for Farm and Foreign Agriculture 
  Services, Department of Agriculture............................   197
    Biographical sketch..........................................   220
    Prepared statement...........................................   215
    Statement of.................................................   213
Pierson, Merle D., Deputy Under Secretary for Food Safety, 
  Department of Agriculture......................................   389
    Biographical sketch..........................................   401
Public Citizen's Critical Mass Energy and Environment Program, 
  prepared statement.............................................   749

Red River Valley Association, prepared statement.................   751
Reed, Pearlie S., Chief, Natural Resources Conservation Service, 
  Department of Agriculture, prepared statement..................   240
Rey, Mark E., Under Secretary for Natural Resources and 
  Environment, Department of Agriculture:
    Biographical sketch..........................................   239
    Prepared statement...........................................   238
    Statement of.................................................   236
Rosso, John, Administrator, Rural Business Cooperative Service, 
  Department of Agriculture:
    Biographical sketch..........................................   262
    Prepared statement...........................................   258

Seminole Tribe of Florida, prepared statement....................   754
Shipman, David R., Acting Adminstrator, Grain Inspection, Packers 
  and Stockyards Administration, Department of Agriculture.......   415
    Prepared statement...........................................   441
Smith, Nancy L., Acting Director, National Appeals Division, 
  Department of Agriculture, prepared statement..................    52
Society for Animal Protective Legislation, prepared statement....   755
Southern Illinois University, prepared statement.................   761
Specter, Senator Arlen, U.S. Senator from Pennsylvania:
    Question submitted by......................................195, 604
    Statement of.................................................    81
State of:
    Arizona, prepared statement..................................   759
    Wyoming, prepared statement..................................   759
Stevens, Senator Ted, U.S. Senator from Alaska, statement of.....   356

Taylor Shellfish Farms, prepared statement.......................   760
Terpstra, Ellen, Administrator, Foreign Agricultural Service, 
  Department of Agriculture:
    Biographical sketch..........................................   236
    Prepared statement...........................................   229

U.S. Apple Association, prepared statement.......................   771
U.S. Marine Shrimp Consortium, prepared statement................   773
United States Telecom Association, prepared statement............   775
University of:
    Illinois, prepared statements.........................761, 763, 764
    Missouri, prepared statement.................................   761
    Southern Mississippi, prepared statement.....................   766
Upper Mississippi River Basin Association, prepared statement....   769

Veneman, Hon. Ann, Secretary of Agriculture, Office of the 
  Secretary, Department of Agriculture...........................     1
    Letters from.................................................70, 77
    Prepared statement...........................................    12

Weber, Jeff, Senior Associate Commissioner for Management and 
  Systems, Food and Drug Administration, Department of Health and 
  Human Services.................................................   511
Weems, Kerry, Acting Deputy Assistant Secretary for Budget, Food 
  and Drug Administration, Department of Health and Human 
  Services.......................................................   511
Working Group to Preseve the Animal Welfare Act, prepared 
  statement......................................................   778

Yates, A.J., Administrator, Agricultural Marketing Service, 
  Department of Agriculture......................................   415
    Prepared statement...........................................   436









                             SUBJECT INDEX

                              ----------                              

                       DEPARTMENT OF AGRICULTURE

                                                                   Page
Additional committee questions..................................91, 305
Administrative:
    And operating (A&O) expenses.................................   228
    Expenses.....................................................   248
    Support......................................................   225
Agricultural:
    Marketing....................................................   296
    Research Service (ARS).......................................   341
    Resource management survey............................277, 345, 346
Appropriate technology transfer for rural areas..................   261
Barriers to U.S. agricultural exports............................   309
Base funding reduction...........................................   342
Broadband loans and grants.......................................   251
Budget...........................................................   276
    Request....................................................223, 233
    That leads...................................................   249
Bush Administration Food Aid Review Summary of Conclusions.......   306
Business and industry guaranteed loan program....................   259
Census of agriculture............................................   347
Centralized Service Center.......................................   332
Cochran Fellowship Program.......................................   351
Commodity Credit Corporation...................................216, 223
    Commodity inventories........................................   289
    Funded conservation programs.................................   242
Congressional spending priorities................................   314
Conservation:
    Operations program...........................................   238
    Programs.....................................................   217
    Programs/Natural Resources Conservation Service (NRCS).......   341
    Reserve enhancement program..................................   295
Cooperative programs.............................................   261
Cooperative State Research, Education, and Extension Service 
  (CSREES).......................................................   349
Costs of carrying out the new farm bill..........................   312
Crop insurance underwriting gain.................................   313
Customers, partners, and stakeholders............................   281
Dairy options pilot program......................................   304
Discretionary funding............................................   240
Distance learning and telemedicine loans and grants..............   252
E-Government.....................................................   348
Economic Research Service......................................334, 345
    Contributions to mission area goals..........................   276
    National Agricultural Statistics Service Agricultural 
      Resources Management Survey................................   333
Electric program.................................................   249
Emergency conservation program...................................   217
Empowerment zones and enterprise communities earmark.............   330
Ensuring we have the proper tools................................   232
Ewe lamb expansion program and LMAAP.............................   338
Export:
    Programs.....................................................   235
    Promotion and market development programs....................   219
Farm:
    Bill payment limitations.....................................   339
    Labor housing................................................   324
    Loan programs.........................................217, 224, 290
    Program delivery.............................................   216
    Service Agency...............................................   216
    Service Agency (FSA), Rural Development (RD), Natural 
      Resources Conservation Service (NRCS) field offices........   351
    Service Agency staffing levels...............................   294
FAS:
    Program activities...........................................   230
    Salaries and expenses........................................   219
FCIC fund........................................................   228
Fiscal year 2003 plans...........................................   284
Focusing our marketing strategy..................................   233
Food:
    Aid..........................................................   352
    Assistance and nutrition research program....................   334
Foreign:
    Agricultural Service.........................................   218
    Food assistance............................................220, 235
FSA farm credit..................................................   332
Guarantee 538 multi family housing...............................   325
Guaranteed housing...............................................   322
Homeland security................................................   344
Honey bee research.............................................339, 342
Initiative for future agriculture and food systems...............   315
Integrated activities............................................   349
Intermediary relending program...................................   259
International:
    Food assistance..............................................   299
    Humanitarian food assistance.................................   305
Invasive:
    Pests and diseases...........................................   280
    Species initiative...........................................   346
Investing where resources are most limited.......................   250
Liberalization of trade in agriculture, continuing the...........   231
Loan rates.......................................................   338
Locality based agricultural estimates............................   348
Lower Mississippi delta research.................................   342
Mission..........................................................   276
Modern telecommunications in rural America.......................   251
NAP payments.....................................................   294
National:
    Agricultural Statistics Service..............................   346
    Rural development partnership................................   330
Native Americans benefit from RHS assistance.....................   256
Obstacles/solutions..............................................   227
Other appropriated programs......................................   224
Outlook for:
    Farm finance.................................................   201
    Farm income..................................................   201
    Major crop and livestock commodities.........................   202
    U.S. and world economies.....................................   200
    U.S. agricultural exports....................................   200
Prime............................................................   337
Priorities for 2002 and 2003.....................................   231
Proposal to CAP underwriting gains...............................   339
Proposed:
    Increases for buildings and facilities.......................   272
    Pay costs....................................................   272
    Program:
        Decreases................................................   271
        Increases................................................   269
    Transfers....................................................   272
RBS-guaranteed business and industry loans.......................   329
Recent accomplishments...........................................   226
Research program implementation..................................   341
Resource conservation and development............................   239
Risk Management Agency.........................................218, 335
Rural business:
    Enterprise grant program.....................................   260
    Opportunity grant program....................................   260
    Cooperative services.........................................   246
Rural:
    Community advancement program................................   330
    Cooperative development grant program........................   261
    Development..................................................   350
        Budget request...........................................   246
    Eeconomic development loan program...........................   260
    Housing and farm credit shift from direct to guaranteed 
      lending....................................................   310
    Utilities Service..........................................246, 326
Rural Housing Service (RHS)......................................   247
    Demonstration program........................................   334
    502 housing..................................................   319
    Homeownership programs reach the underserved.................   253
    Partners with private and nonprofit organizations to increase 
      homeownership opportunities................................   254
    Programs serve America's farmworkers.........................   256
    Provides:
        Essential facilities to distressed rural communities.....   255
        Rural America's elderly with safe, affordable housing and 
          essential community facilities.........................   256
    Rental programs serve the most vulnerable rural Americans....   254
    Supports rural America and local community needs.............   257
Section 515 multi-family housing.................................   315
Tax-exempt financing, Rural Housing Service/Rural Utilities 
  Service........................................................   314
Terrorism response funding.......................................   292
Three program areas, working together............................   252
Timing of new farm bill..........................................   289
Treasury rate, guaranteed, and hardship loans....................   251
U.S. contribution to world food assistance.......................   286
Updated yields...................................................   338
USDA response to drought conditions..............................    23
    AG production................................................   335
    Rural communities............................................   337
Water and enviromental programs..................................   250
Watershed and flood prevention:
    Activities, elimination of...................................   336
    Operations...................................................   239

                  Commodity Futures Trading Commission

Additional committee questions...................................   385
Commodity Futures Trading Commission on the futures industry 
  response to September 11.......................................   364
Employee attrition and pay parity................................   363
Hiring and retaining high-level professionals....................   386
Initial review of preparedness efforts...........................   377
Overview of funding levels and operational effects...............   362
President's budget...............................................   385
Proposed transaction fee.........................................   386
Regulatory authority over derivatives............................   387
Reopening the futures markets....................................   366
Restoring commission operations..................................   374
Role of the:
    CFTC.........................................................   364
    Futures markets..............................................   364

                 Food, Nutrition, and Consumer Services

Additional committee questions...................................   474
Agricultural Marketing Service (AMS).............................   505
    Cranberries..................................................   480
Aquaculture......................................................   484
Biological control...............................................   484
Brucellosis......................................................   495
Cattle ticks.....................................................   483
Certification....................................................   453
Child:
    And adult care food program..................................   479
    Nutrition....................................................   452
        Programs.................................................   456
Chronic wasting disease..........................................   460
Codex alimentarius...............................................   481
Commodity supplemental food program administrative funding.......   508
Country of origin labeling.......................................   498
Emergency management system program..............................   495
Farmer's market nutrition program................................   454
Farmers market...................................................   452
Food Program Administration....................................480, 509
Food:
    Safety and Inspection Service (FSIS).........................   502
        Automated corporate technology suite.....................   483
    Stamps.......................................................   452
Fruit fly exclusion and detection................................   483
Golden nematode..................................................   486
HACCP system.....................................................   472
Highest-ever funding for WIC.....................................   454
Imported:
    Fire ant.....................................................   487
    Meat.........................................................   460
    Products.....................................................   463
Increases in obesity rates.......................................   500
Inspection services..............................................   497
Invasive species.................................................   493
Johne's disease..................................................   496
Legal immigrants in the food stamp program.......................   508
Listeria monocytogenes in ready-to-eat products..................   498
Mandatory recall authority.......................................   464
Nonlethal predator control methods development...................   494
Noxious weeds....................................................   487
Pest threats.....................................................   484
Pink bollworm....................................................   487
Program integrity................................................   453
Reimbursement rates in child nutrition programs..................   507
School:
    Breakfast start-up grants....................................   475
    Meal reimbursements..........................................   499
Screwworm........................................................   483
Senior farmers' market nutrition program.........................   477
Special supplemental nutrition program for women, infants and 
  children (WIC).................................................   456
Studies and evaluations..........................................   478
Supplemental appropriations for:
    APHIS........................................................   467
    FSIS.........................................................   466
Supreme beef and pathogen standards..............................   497
Targeted slaughter epidemiological surveys.......................   474
Trade issue resolution and management............................   483
Tuberculosis.....................................................   496
Universal animal identification and database retrieval system....   495
USDA veterinarian overtime pay...................................   502
Veterinary biologics.............................................   497
Voluntary recall.................................................   469
WIC..............................................................   452
    Childhood immunization.......................................   476
    Electronic benefits transfer.................................   475
    Farmers market nutrition program.............................   476
    Food package.................................................   476
    Immunization action plan.....................................   506
    Infrastructure grants........................................   506
    Program participation........................................   505
    Vendor management study......................................   505
Wildlife services operations.....................................   488
Wolf control.....................................................   491

                              Food Safety

Budget request, fiscal year 2003...............................399, 411
Budget requests..................................................   391
Enhancing effectiveness..........................................   404
Food safety education and outreach efforts.......................   409
Goals of FSIS....................................................   390
Infrastructure...................................................   402
International activities.........................................   411
My vision........................................................   392
President's management agenda....................................   398
Risk-based, science-based programs...............................   405
Workforce of the future..........................................   408

                   Marketing and Regulatory Programs

Agricultural Marketing Service...................................   417
Animal and Plant Health Inspection Service.......................   419
Budget:
    Proposal.....................................................   439
    Request:
        AMS' 2003................................................   419
        APHIS' 2003..............................................   422
        Fiscal year 2003.........................................   447
        Our fiscal year 2003.....................................   434
        Summary..................................................   441
Commodity Purchase Services......................................   440
Electronic Goverment initiatives.................................   439
Federal seed.....................................................   440
Funding sources..................................................   417
Global:
    Agricultural marketing.......................................   437
    Market expansion.............................................   439
Grain Inspection, Packers and Stockyards Administration..........   423
    Federal Grain Inspection Service.............................   444
    Packers and stockyards programs..............................   442
Making our mark..................................................   417
Mandatory price reporting system.................................   438
Marketing agreements and orders..................................   441
Mission..........................................................   436
National organic program.........................................   438
Organization.....................................................   441
Pesticide data program.........................................437, 440
Protection of Agriculture and the food supply....................   439

                        Office of the Secretary

Agricultural research............................................    91
Agriculture:
    Appropriations projects, fiscal year 2002....................   185
    Buildings and facilities.....................................    46
        And rental payments......................................   144
Allocation of homeland security funds............................   141
Animal:
    Sciences research............................................   138
    Welfare......................................................   169
Annual crop forecasts............................................    60
APHIS Commodity Credit Corporation transfers.....................   163
Assistance for socially disadvantaged farmers....................   144
Bee research program.............................................   190
Biofuels, use of.................................................    45
Biological control...............................................   166
Biosecurity......................................................   163
Biotechnology...................................................65, 169
Boll weevil eradication program..................................   172
Broadband grants.................................................   176
BSE/mad cow disease..............................................   181
Budget request, fiscal year 2003.............................42, 48, 50
Buildings and facilities.........................................   139
Business process reengineering...................................    59
Changing environment, preparing for a............................    21
China, trade with................................................    65
Chronic wasting disease..........................................   173
Civil rights.....................................................40, 43
Commodity conversion and delivery research.......................   138
Common computing environment.....................................   143
Computer security................................................    56
Conflict prevention and resolution OHRM's........................    46
Crisis planning and management...................................    44
Current activities and issues....................................    30
Dairy compact....................................................    82
Departmental management..........................................    20
Direct appropriation.............................................    47
Electronic Government............................................    27
Enterprise architecture..........................................    24
Erroneous loan deficiency payments...............................    84
EZ/EC program....................................................   177
Farm:
    And foreign agricultural services............................    13
    Bill.........................................................   179
        Funding..............................................67, 82, 84
        Implementation...........................................    68
        Payment limitations......................................   190
        Proposal--extending food stamp benefits to legal 
          immigrants.............................................    77
Farm Service Agency--farm loans..................................   177
Federal excess personal property program.........................    45
Financial integrity..............................................    58
Fiscal year 2002 NRCS conservation operations earmark status 
  report as of 3/31/2002.........................................    99
FNS elderly feeding program (nutrition services incentive 
  program).......................................................   157
Food:
    Aid..........................................................    80
    And Nutrition Division.......................................    31
    And Nutrition Service........................................   149
    Safety.......................................................    15
        And farm programs........................................    56
        And Inspection Service...................................   157
        In the national school lunch program.....................    79
        Recall authority.........................................    79
Food Stamp Program.........................................58, 152, 186
Food, Nutrition, and Consumer Services...........................    16
Foreign:
    Agricultural assistance......................................   168
    Food assistance............................................175, 185
Fuels, renewable.................................................   179
General Law Division.............................................    39
Global food for education initiative.............................   185
Government:
    Ethics program...............................................    46
    Functions--contracting out...................................   162
Harvard study shows very low risk of BSE in the United States--
  Government continues to bolster prevention programs in effort 
  to continue providing important safeguards to protect consumers 
  and agriculture................................................   181
Hazardous materials management...................................    47
Homeland security...............................................53, 191
    Supplemental.................................................    66
Human:
    Nutrition research...........................................   139
    Resources management.........................................    46
Humane slaughter................................................69, 159
Illinois River...................................................   169
Imported meat and poultry products, inspection of................    61
Information:
    Officer, Office of the Chief Information Officer.............    21
    Security, strengthening......................................    22
    Technology budget summary, USDA'S fiscal year 2003...........    22
Inspection of foreign meat-packing plants........................   160
Inspector General................................................   162
International affairs and commodity programs.....................    30
Introduction and overview........................................    52
Leaking agricultural market forecast.............................   187
Legislation Division.............................................    40
Litigation Division..............................................    40
Loan deficiency payments.........................................    83
Local television loans...........................................   178
Marketing and regulatory programs................................    15
Mission..........................................................29, 52
National school lunch program....................................   184
Natural resources................................................    36
    And environment..............................................    17
News release.....................................................   181
NRCS:
    Conservation reserve program technical assistance............    92
    Forestry incentives program..................................   134
    Watershed:
        And flood prevention operations..........................   123
        Earmark status report, fiscal year 2002..................   126
        Rehabilitation program...................................   133
OCIO working capital fund activities.............................    29
Office of:
    Assistant Secretary for Congressional Relations..............   149
    The Chief Financial Officer/Working Capital Fund.............   190
Olympics.........................................................    56
Organization.....................................................    29
Outreach.........................................................    43
Physical security................................................    44
Plant science research.........................................135, 174
Prime question...................................................   187
Procurement policy...............................................    45
Protecting U.S. Agriculture......................................   195
Public corruption................................................    58
Regulatory and marketing programs................................    32
Research, education, and economics...............................    19
Results:
    Achieved recently............................................    49
    On which we are currently focused............................    49
RHS--rural community development initiative grants...............   148
Rural development............................................18, 35, 74
    Coordination.................................................    75
Rural:
    Housing Service..............................................    91
    Telephone bank...............................................   178
    Water and waste loan program.................................    75
RUS--Broadband...................................................   162
Section 515 multi-family housing.................................   179
Security over hazardous material.................................    55
Seniors' farmers' market nutrition program.......................   157
Service center modernization initiative--information technology..    25
Single Food Safety Agency........................................   183
Small and disadvantaged business utilization.....................    43
Soil, water and air sciences research............................   134
Streamlining/CSRS and rental payments............................   143
Tracing financial transactions...................................    55
West nile virus..................................................   173
WIC:
    Farmers' market nutrition program............................   156
    Program......................................................   154
    Shortfalls on funding........................................   186
Workforce:
    And organizational streamlining..............................   192
    Planning, IT.................................................    28
Working capital fund.............................................    51

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

                      Food and Drug Administration

Additional committee questions...................................   536
Accomplishments--counter terrorism...............................   514
Adding tolerance to the trigger governing spending from 
  appropriations.................................................   561
Adverse event databases..........................................   589
Animal cloning...................................................   540
Antibiotic resistance.....................................517, 535, 600
Antimicrobial resistance/NARMS...................................   536
Application review performance...................................   586
Arkansas regional laboratory...................................564, 603
Backlog of product review........................................   533
Bar coding initiative............................................   564
Biotechnology--medical products..................................   518
Blood safety.....................................................   543
Botanical dietary supplements....................................   602
Bovine spongiform encephalopathy (BSE).........................517, 553
    Funding......................................................   534
    Inspections..................................................   534
CAERS............................................................   602
Cancer patients..................................................   521
Challenges.......................................................   523
Change in due date for annual fees to October 1..................   560
Changes to improve efficiency of billing for product fees........   562
Counter terrorism................................................   524
Decisions on pediatric rule......................................   529
Diabetes.........................................................   522
Dietary supplements.......................................535, 541, 580
Direct-to-consumer advertising...................................   584
FDA:
    Commissioner.................................................   542
    Dietary supplement adverse event reporting system............   541
    Orange book..................................................   547
    Review times for medical devices.............................   585
Final year adjustment............................................   561
Financial provisions for PDUFA III, changes in...................   559
Fiscal year 2003 request.........................................   590
Food:
    Labeling.....................................................   604
    Safety................................................516, 575, 591
Gene therapy.....................................................   520
    Tracking system..............................................   567
Generic drugs........................................518, 526, 543, 600
Global trade and global production--international standards and 
  harmonization..................................................   522
Heart patients...................................................   521
Highlights of the draft risk assessment and action plan..........   566
Hiring activities................................................   549
Homeland security................................................   549
Import inspections...............................................   585
Infectious diseases..............................................   521
Instances where companies refuse to recall a product or do not 
  provide distribution information...............................   577
Internet sale of drugs...........................................   531
Latex allergies..................................................   573
Listeria.........................................................   566
Los Angeles laboratory.........................................564, 603
Mad cow disease..................................................   585
Management/efficiency savings....................................   601
Medical:
    Device and animal drug user fees.............................   533
    Devices......................................................   587
    Gas..........................................................   556
Methylmecury.....................................................   565
Minor changes in the definition of prescription drug products....   562
MQSA.............................................................   558
NARMS activities.................................................   529
New products approved............................................   520
Office of Generic Drugs..........................................   583
Our most valuable resource.......................................   524
Patient safety/medical errors.............................519, 526, 589
Pediatric:
    Exclusivity..................................................   544
    Rule.........................................................   528
Personal importation and internet drug sales.....................   548
Physical security enhancements...................................   532
Prescription Drug User Fee Act (PDUFA).........................558, 588
    PDUFA II revenue model and workload adjuster.................   559
    PDUFA III..................................................527, 560
        Proposed revenue model for...............................   560
President's management agenda..................................526, 555
Progress on counterterrorism supplemental........................   530
Reuse of medical devices.........................................   568
Safe blood.......................................................   520
Seafood HACCP....................................................   574
Staffing.........................................................   557
Stockpiles of products...........................................   532
Surveillance and counterterrorism................................   530
Tissue and blood safety..........................................   570
Workload adjuster................................................   560

                              

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