[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]


                                                                                                                                            


 
                  AGRICULTURE, RURAL DEVELOPMENT, FOOD

                  AND DRUG ADMINISTRATION, AND RELATED

                    AGENCIES APPROPRIATIONS FOR 2004

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED EIGHTH CONGRESS
                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                     HENRY BONILLA, Texas, Chairman

 JAMES T. WALSH, New York                MARCY KAPTUR, Ohio
 JACK KINGSTON, Georgia                  ROSA L. DeLAURO, Connecticut
 GEORGE R. NETHERCUTT, Jr.,              MAURICE D. HINCHEY, New York
Washington                               SAM FARR, California
 TOM LATHAM, Iowa                        ALLEN BOYD, Florida          
 JO ANN EMERSON, Missouri
 VIRGIL H. GOODE, Jr., Virginia
 RAY LaHOOD, Illinois               
                                                                        
                                                                        
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Henry E. Moore, Martin P. Delgado, Maureen Holohan, and Joanne L. 
                        Perdue, Staff Assistants
                                ________

                                 PART 8
                       FOOD AND NUTRITION PROGRAMS
                     AND RURAL DEVELOPMENT PROGRAMS

                                                                   Page
 Food, Nutrition, and Consumer Services...........................    1
     Food and Nutrition Service...................................    5
 Rural Development................................................  733
     Rural Utilities Service......................................  961
     Rural Housing Service........................................ 1033
     Rural Business Cooperative Service........................... 1119
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 87-542                     WASHINGTON : 2003


                 COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                        DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California                   JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky                   NORMAN D. DICKS, Washington
 FRANK R. WOLF, Virginia                   MARTIN OLAV SABO, Minnesota
 JIM KOLBE, Arizona                        STENY H. HOYER, Maryland
 JAMES T. WALSH, New York                  ALAN B. MOLLOHAN, West Virginia
 CHARLES H. TAYLOR, North Carolina         MARCY KAPTUR, Ohio
 DAVID L. HOBSON, Ohio                     PETER J. VISCLOSKY, Indiana
 ERNEST J. ISTOOK, Jr., Oklahoma           NITA M. LOWEY, New York
 HENRY BONILLA, Texas                      JOSE E. SERRANO, New York
 JOE KNOLLENBERG, Michigan                 ROSA L. DeLAURO, Connecticut
 JACK KINGSTON, Georgia                    JAMES P. MORAN, Virginia
 RODNEY P. FRELINGHUYSEN, New Jersey       JOHN W. OLVER, Massachusetts
 ROGER F. WICKER, Mississippi              ED PASTOR, Arizona
 GEORGE R. NETHERCUTT, Jr.,                DAVID E. PRICE, North Carolina
Washington                                 CHET EDWARDS, Texas
 RANDY ``DUKE'' CUNNINGHAM,                ROBERT E. ``BUD'' CRAMER, Jr., 
California                                 Alabama
 TODD TIAHRT, Kansas                       PATRICK J. KENNEDY, Rhode Island
 ZACH WAMP, Tennessee                      JAMES E. CLYBURN, South Carolina
 TOM LATHAM, Iowa                          MAURICE D. HINCHEY, New York
 ANNE M. NORTHUP, Kentucky                 LUCILLE ROYBAL-ALLARD, California
 ROBERT B. ADERHOLT, Alabama               SAM FARR, California
 JO ANN EMERSON, Missouri                  JESSE L. JACKSON, Jr., Illinois
 KAY GRANGER, Texas                        CAROLYN C. KILPATRICK, Michigan
 JOHN E. PETERSON, Pennsylvania            ALLEN BOYD, Florida
 VIRGIL H. GOODE, Jr., Virginia            CHAKA FATTAH, Pennsylvania
 JOHN T. DOOLITTLE, California             STEVEN R. ROTHMAN, New Jersey
 RAY LaHOOD, Illinois                      SANFORD D. BISHOP, Jr., Georgia
 JOHN E. SWEENEY, New York                 MARION BERRY, Arkansas            
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
 DAVE WELDON, Florida
 MICHAEL K. SIMPSON, Idaho
 JOHN ABNEY CULBERSON, Texas
 MARK STEVEN KIRK, Illinois
 ANDER CRENSHAW, Florida
                                                                                                          
                                                                                                    
                                                                        

                 James W. Dyer, Clerk and Staff Director

                                  (ii)


   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2004

                              ----------                              

                                          Thursday, March 20, 2003.

                 FOOD, NUTRITION AND CONSUMER SERVICES

                               WITNESSES

ERIC M. BOST, UNDER SECRETARY
SUZANNE M. BIERMANN, DEPUTY UNDER SECRETARY FOR FOOD
ROBERTO SALAZAR, ADMINISTRATOR, FOOD AND NUTRITION SERVICE
ERIC HENTGES, PH.D., EXECUTIVE DIRECTOR, CENTER FOR NUTRITION POLICY 
    AND PROMOTION
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
    Mr. Bonilla. The subcommittee will come to order. 
Considering the situation that we have going on now in Iraq, we 
have chosen to continue business as usual for most cases here 
on the Hill. In fact, a few minutes ago I was visiting with a 
Desert Storm veteran, who assured me that when the folks are 
doing their job overseas in situations like this, that as they 
talk amongst themselves in the field, they are hoping that back 
home that life is proceeding as usual and that, in fact, they 
are more energized to know that we are just doing what we need 
to do and continuing with our procedures as normal. So that is 
our intent today.
    We also expect to be interrupted by some procedural votes 
and a couple of other matters on the House floor in about a 
little over half an hour, at which time we will take about a 
half-hour break and then return and continue our hearing. So 
those are just some logistical items that I wanted to go over 
before we began.
    But I am delighted to have Eric Bost with us today, the 
Under Secretary for Food, Nutrition and Consumer Services, and 
his colleagues joining us for this hearing this morning.
    This hearing marks our tenth, and final, oversight hearing 
on the fiscal year 2004 budget. Within that request, FNS 
funding totals over $44 billion, which is nearly 60 percent of 
the total funding for this bill. So we are wrapping up hearings 
with a grand finale, when talking about all of the programs 
that fall under this dollar figure.
    The programs we will be discussing today serve millions of 
people--29 million kids eating lunch at school, 26 million 
people served by the Food Stamp Program, almost half the 
infants in this country served through the WIC Program. Local 
food pantries are using bonus commodities to serve people who 
come to their doors. Both the influence of the programs, and 
the responsibility to run them, are immense.
    We heard about some fraud cases and feeding programs from 
the Inspector General at her hearing last month, and that 
certainly concerns us all. Waste has the same effect as fraud 
does, and that means it takes food out of the hands of some 
people that truly need it.
    I know Mr. Bost has expended a lot of effort in this area, 
and he has our support in this area. This committee has funded 
program integrity studies for FNS in 2002 and 2003, and we 
would like to hear about those results. I see that program 
integrity also continues to be highlighted in your budget 
request for 2004.
    We should also note that two of your major programs--the 
Child Nutrition Program and WIC--are being reauthorized this 
year. Although this committee will not be writing that 
legislation, we are certainly interested in its progress, and 
we will be watching it very closely. It is my understanding 
that this budget request assumes current services for the base 
Child Nutrition WIC Programs pending the reauthorization.
    We are just delighted, again, that you are here this 
morning. Before we hear your opening remarks, Eric, I am going 
to yield to Ms. Kaptur for any opening remarks that she may 
have.
    Ms. Kaptur. Thanks, Mr. Chairman. We want to welcome back 
Secretary Bost and all of your colleagues, and thank you for 
the important work that each of you does.
    I also wanted to just say that, in some ways, your 
testimony today is a bit anticipatory, in that we really don't 
have a final budget resolution, and we are looking at the 
budget submission along with the request that you are making.
    I must say that, as we begin today, in recognizing the 
extraordinary importance of what you do at a time especially of 
recession and growing need at our food banks across the 
country, and even our WIC sites, and I note the increases you 
have proposed in the WIC budget. Nonetheless, if we are going 
to be required to cut support for various programs, including 
in the Education and Workforce Committee, if only half of those 
came out of Child Nutrition, what we would see would be 
elimination of the School Breakfast Program for over two 
million children, elimination of school lunches for over a 
million children or we could see the elimination of the after-
school snacks for a half-million children in tutoring and 
recreation programs, the elimination of the Summer Food Service 
Program or the elimination of lunches for over half a million 
pre-school children in Head Start and children in child care.
    So I guess we are going to be very interested this morning 
in hearing from you how you view the future in terms of what 
may happen after a budget resolution is passed and the various 
committees up here are forced to make very difficult decisions. 
I, personally, do not support any of the cuts that I have just 
outlined, but I would expect that they might be possibilities, 
in view of what we are facing. So I look truly toward your 
testimony, Secretary Bost, and hope that you can present a 
rainbow future to me this morning and to the members of our 
committee.
    Thank you so very much for being here.
    Mr. Bost. Thank you.
    Mr. Bonilla. Go right ahead, Eric.

                            Opening Remarks

    Mr. Bost. Good morning, Mr. Chairman and members of the 
subcommittee. Thank you for this opportunity to present the 
Food, Nutrition and Consumer Services' budget request for 
fiscal year 2004.
    With your permission, I would like to take this opportunity 
to introduce three important members of my team who are here 
with me today. Suzanne Biermann, who is the Deputy Under 
Secretary; Robert Salazar, who is the Administrator for the 
Food and Nutrition Service; and the newest member of our team, 
Dr. Eric Hentges, who is the Executive Director of the Center 
for Nutrition Policy and Promotion, and who has been with us 
for a little over a month.
    You have my written testimony, and so I just want to speak 
briefly about some high-level aspects of my request, and then 
reserve the remainder of my time for questions.
    The President's budget for fiscal year 2004 requests $44.2 
billion in new budget authority for the Department's nutrition 
assistance programs. The budget is a clear reflection of the 
administration's commitment to the nutrition safety net and the 
associated activities President Bush expects all of us to 
achieve. The budget is constructed for results, and the 
expectations are very clear.
    In short, these expectations include access for eligible 
persons in the critical programs that we have responsibility 
for providing; improved program integrity; and addressing 
nutritional issues related to the problem of overweight and 
obesity in this country. With that in mind, I would like to 
highlight a couple of other issues:
    Ensuring access in the Food Stamp Program. Food stamps, at 
$27.7 billion, will serve an average of 21.6 million persons 
each month, including restoration of eligibility to many legal 
immigrants as provided for in the 2002 Farm Bill. The 
administration's budget continues the $2 billion reserve 
appropriated last year.
    The Child Nutrition Programs' request of $11.4 billion, 
supports an increase in school lunch participation from 28 
million children to over 29 million and also supports an 
increase in school breakfast participation of over 1 million 
children, from 8 million to 9 million children.
    For WIC, which is a program that is very important to all 
of us, and especially the President and Mrs. Bush, the 
President's budget proposes $4.8 billion to provide food, 
nutrition education and a link to health care to a monthly 
average of 7.8 million needy women and their children. I think 
that is a very clear sign of the President's commitment, as he 
asked for increased funding last year for this critical 
program.
    It also provides, which is unprecedented, for a $150-
million contingency fund.
    In our Commodity Supplemental Food Program the budget 
request of $95 million, added to our anticipated carryover from 
fiscal year 2003 and the current inventory of surplus donations 
and commodities, maintains the program at the fiscal year 2003 
level.
    The Emergency Food Assistance Program (TEFAP) request 
includes a $140 million budget request for food and $50 million 
budget request for storage and distribution costs. This 
administration has committed itself to ensuring the continuous 
flow of surplus commodities to those in need. Mr. Chairman, you 
also spoke of this. I would also like to reiterate that the 
Secretary and I are committed to a very sound stewardship of 
the resources that we are responsible for, as they are the 
investment in the future of our country.
    In the Food Stamp Program, funding to maintain our level of 
effort to reduce errors in the Food Stamp Program is included 
in the President's budget proposal. I would also like to note, 
that the payment accuracy for fiscal year 2001, which was 
91.38, was the highest accuracy rate achieved in the history of 
the Food Stamp Program. We will continue to work with the 
States and our State partners to ensure that that trend 
continues.
    In the WIC Program, the President's request provides for 
$30 million to support the enhancement and modernization of the 
WIC State Information Systems that will improve the management 
of the program, and we believe, that this will also help toward 
supporting our integrity efforts.
    The President's request provides for improving the 
eligibility determination system in our School Lunch Program.
    One of the most significant issues that we are facing in 
this country now relates to obesity. I will not go into the 
numbers today because they have been reported in the press 
almost every day. As a part of the President's HealthierUS 
initiative, our Nutrition Assistance Programs play a critical 
role in promoting good health and preventing diet-related 
diseases.
    As a part of the President's budget, there is support for 
breast feeding promotion efforts and other activities in WIC; 
$25 million for peer counseling and demonstration projects to 
evaluate how the program can be used to combat obesity among 
our children; expansion of our very successful ``Eat Smart, 
Play Hard campaign'', which goes across many of our program 
lines; the development of an integrated, family-oriented 
approach to nutrition education that allows the Department to 
partner with multiple Federal agencies; the promotion of good 
nutrition to all Americans, including resources to update and 
promote the Food Guide Pyramid, along with other obesity 
prevention efforts for the general public; and also funding for 
both the WIC and Senior Farmers' Market Nutrition Programs.
    In conclusion, the President's direction has been very 
clear. The administration request sets priorities to ensure 
access, maintain and improve integrity, and continue our 
support to address the public health threat of people in our 
country that are overweight and obese.
    I would like to thank you for your time and attention, and 
I look forward to any questions that you may have this morning.
    [The prepared statements of Eric M. Bost and Roberto 
Salazar follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Mr. Bonilla. Eric, I want to start out with an overall 
issue that a lot of us are dealing with as we speak this week, 
and that is the 2004 budget resolution. There has been a lot of 
discussion in recent days about having across-the-board cuts to 
deal with fiscal responsibility, and discussions have included 
both mandatory and discretionary cuts in programs all across 
the Federal agencies. In many cases, they suggest, well, why 
can you not just eliminate waste, fraud and abuse if you have 
to cut, let us say, 1 percent of your budget.

                         FRAUD, WASTE AND ABUSE

    I know that you have done a lot of work in that area in 
your particular agency, and I know, in some cases, that the 
funds that you save from looking into waste, fraud and abuse 
are put back into programs, but in general, maybe you can just 
give a general answer for now, but I do want to ask you to 
provide, for the record, an inventory of efforts to reduce or 
eliminate waste, fraud and abuse over the last five years by 
program area and what effect those efforts have had, but 
perhaps you would like to address your overall efforts.

            FOOD STAMP AND CHILD NUTRITION PROGRAM INTEGRITY

    Mr. Bost. Mr. Chairman, we can do that, and we will provide 
that information for the record. However, I am pleased to 
report that we have seen our integrity efforts yield some 
results in the administration of the Food Stamp Program. As I 
said before, we have the lowest error rate in the Food Stamp 
Program that has ever occurred in the history of the Program.
    In the WIC Program, we have worked with our State partners 
to ensure that there is a high level of integrity in our 
programs, which essentially means this for all of the programs 
that; if you are eligible to participate in our programs, we 
want you to participate, but if you are not, we do not. It 
tends to be very simple.
    In addition, we are also looking at ways to improve the 
integrity in our National School Lunch Program. It has come 
under a great deal of scrutiny, and people have voiced a 
significant number of concerns about what the administration 
may or may not do. We are looking at improving the integrity of 
that program with two stipulations that I want to note for the 
record:
    First, are not going to do anything that is going to either 
prevent or deter eligible children from participating in the 
program, and second, we do not want to put in place any 
initiatives that are going to result in any additional 
administrative barriers on the education side for whatever we 
may come up with in terms of implementing it.
    So those are two very clear guiding principles that I laid 
out and that the President laid out over nine months ago as we 
looked at reauthorization of the Child Nutrition Programs. We 
are looking at what we can do to improve the integrity of our 
three main programs that serve as a foundation for all of our 
nutrition assistance programs. We will put together that list 
for you of our three main programs and get it to you.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
        
    Mr. Bonilla. I appreciate that.

                     FREE AND REDUCED-PRICED MEALS

    The Department is requesting $6 million for expanded 
assessment of the Free and Reduced-Price Meal Certification 
procedures. In regard to this assessment, the Department notes 
that in addition to $7 billion in school meal funds, a wide 
array of Federal, State and local resources, representing much 
more than $7 billion, are targeted using this data.
    I have three questions related to this: Are any of the 
affected Federal agencies requesting funding for assessment of 
this data, since they would presumably benefit from this 
information; are any of the affected State or local agencies 
planning to contribute funding to this assessment; and how much 
is being spent by the Department on school meal certification 
this year?
    Mr. Bost. We do not break it down. It is part of the total 
expenditures in terms of management of the National School 
Lunch Program. The President's budget request, it goes back to 
what I said previously, in terms of looking at improving the 
overall integrity of the National School Lunch Program, and 
that is what we are going to look at.
    Mr. Bonilla. If you would also provide for the record 
answers to the first two parts of this question, I would 
appreciate that.
    Mr. Bost. Yes.
    [The information follows:]

    No State and local agencies or other Federal agencies are 
contributing funds to support the assessment of school meals 
certification procedures.
    A September 2002 report by the General Accounting Office 
examining the cost of three administrative procedures of the 
school meal programs found that in fiscal year 2001 the 
certification and verification processes represented 
approximately 1.1% of the $8 billion in reimbursements for 
school meals. Applying this proportion to projected fiscal year 
2003 reimbursements for the school meal programs, the estimated 
total costs of these procedures will be approximately $95 
million.
    The Department of Agriculture provides support to States 
and school food authorities to administer the school meals 
programs, including the process of eligibility determination.

                  FUNDING FOR UNDER SECRETARY'S OFFICE

    Mr. Bonilla. The last question I have on this round is some 
of the under secretaries are asking for more money to run their 
offices. I believe the increase you are asking for is 30 
percent. I want to know why you need that percentage increase 
and what you would use that for.
    Mr. Bost. Mr. Chairman, our programs serve 1 out of every 6 
Americans in this country. In our efforts to ensure that we do 
that effectively, and with the highest level of efficiency, we 
need the staff to be able to do that, and the additional staff 
that we are requesting in our office would afford us that 
opportunity. I think that we have done a Herculean job in terms 
of being able to manage our budget and the programs, given the 
number of people that we serve in this country.
    Mr. Bonilla. Very good. Thank you very much.
    Mr. Bost. Thank you.
    Mr. Bonilla. Ms. Kaptur?
    Ms. Kaptur. Yes, thanks, Mr. Chairman.

                 THE EMERGENCY FOOD ASSISTANCE PROGRAM

    Mr. Under Secretary, when you appeared before us, we talked 
about the long lines that were already present at food banks, 
and at the time you responded that there had been a call to 
action, and you were working with advocacy organizations at 
that time.
    The lines at food banks have gotten longer, and I am going 
to be placing in the record, just in the State that I am from, 
the really heavy volume increases at our food banks, and also I 
am going to be placing in the record information from the U.S. 
Conference of Mayors and a study that they have done, and I 
just want to quote from that for a second.
    The study was completed in December of 2002, and it found 
that, on average, 16 percent of the demand for emergency food 
assistance was unmet in our country in 2002. The mayors' report 
indicated that 46 percent of those requesting emergency food 
aid were families. There was a 92-percent increase in the 
number of elderly requesting food, and that emergency 
facilities had to provide both temporary and long-term 
assistance. Half of the cities in the survey reported they were 
not able to provide adequate food. In fact, 64 percent of the 
city said they had to limit the quantities provided, and 32 
percent of the cities, a third of the cities in our country, 
had to turn away people for lack of resources.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    The cities themselves, and many of them are in deficit, as 
you know, contributed $72 million to support emergency food 
activities, and looking ahead, they reported that they expect 
all food assistance requests to rise this year, including a 96-
percent increase from families with children. So the pressure 
on the programs that you administer are greater than they ever 
have been. The Farm Bill provided an authorization level of $60 
million just for TEFAP, but the budget the administration has 
requested only includes $50 million and makes no mention that 
that is short of the authorization level.
    So my question is what is the Department doing in order to 
assist these areas of the country that obviously are short on 
food for our own people?
    Mr. Bost. Two points, Ms. Kaptur, that I want to mention.
    Let us talk about The Emergency Food Assistance Program 
(TEFAP). Over the course of the last several years, we have 
continued to increase the amount of money that we have put in 
support of this program: Fiscal year 2001, $348.5 million; 
2002, $436.5; and 2003, almost $450.3 million. But in addition 
to that, and I think this is a very important point, we have 
actively been involved in working with the States to ensure 
that persons that are eligible for our programs are able to 
participate.

                    FOOD STAMP PROGRAM PARTICIPATION

    What we have found is that a number of persons in our 
respective communities that are eligible to receive and 
participate in the Food Stamp Program are not doing that. They 
are accessing the food banks and the soup kitchens. In many 
instances, they are eligible to receive and participate in the 
Food Stamp Program. There have been a number of activities and 
a number of initiatives to ensure that we work with our State 
partners in increasing the number of eligibles so that they are 
able to participate in our Food Stamp Program, which will help 
address some of your concerns.
    In addition, there has been some work in FNS with the 
faith-based community to ensure that they know and are aware of 
the resources that are available to people that are in need and 
that are hungry and that they know where to direct people so 
they can participate in our programs.
    Let me go back to the Food Stamp Program. The most recent 
figures would indicate that only about 59 percent of all 
eligible persons participated in that program in fiscal year 
2002, which essentially means there is a significant number of 
people that are eligible to participate and are not and many of 
those are, indeed, seeking the resources that you noted, for a 
variety of reasons:
    One, they find it easier to do so; two, they found that 
they may or may not be eligible to participate in the Food 
Stamp Program; and the third reason is that some just do not 
want to take the time to go and fill out an application.
    We are hoping to address all of those issues.
    Ms. Kaptur. Mr. Under Secretary, might I ask you to yield 
just for a second because I was looking at the numbers you 
gave----
    Mr. Bost. In terms of TEFAP?
    Ms. Kaptur. We have a serious disagreement in terms of the 
numbers. You mentioned for the year 2002 an appropriated level 
of $436 million. The number I have in your own budget 
submission is $361 million, which is a reduction of $113 
million from the prior fiscal year.
    And with the levels of unemployment rising and what you are 
saying about people having trouble filling applications and so 
forth, I guess I am just asking for some greater traction at 
the local level to help people who need the food get it, and if 
we do not even agree on the numbers----
    Mr. Bost. In terms of that traction Ms. Kaptur, I think it 
is really important to note that the level of outreach that I 
believe that this administration has done is unprecedented to 
ensure that every eligible person participates in our program.
    We have done a lot of work on the local level in terms of 
outreach grants, in terms of working to streamline applications 
with States, in addition to addressing some of the language 
barriers that some legal immigrants have brought to the table. 
The restoration of benefits to legal immigrants that was 
included in the Farm Bill will capture a significant number of 
persons, also.
    In terms of getting that traction, I think that we have 
been very assertive and very aggressive to ensure that eligible 
persons participate in our program so that we are able to meet 
their needs.
    Ms. Kaptur. I know that my time has expired, Mr. Chairman. 
I just want to say I think what is unprecedented are the 
numbers of people who need food assistance and that the Food 
Stamp eligibility has been seriously underadministered by the 
Department and people are scurrying around out there under 
enormous financial and human pressure right now.
    And it seems to me that we should be trying harder to get 
food to those who really need it, and I do not think that the 
Department's record to date shows that kind of aggressive 
posture that gets the traction at the local level, and we will 
wait to see.
    Mr. Bonilla. Thank you, Ms. Kaptur.
    Ms. Emerson?
    Mrs. Emerson. Thanks, Mr. Chairman.
    Welcome.
    Mr. Bost. Thank you.

                        CHILD NUTRITION PROGRAMS

    Mrs. Emerson. Mr. Chairman, I have some questions that 
relate to your question that I would like to submit to the 
record because I have got to get to another hearing.
    Mr. Bost, as I have discussed with you before, many of my 
constituents would like to see an elimination of the Reduced-
Price School Meal Program, and many of our working families 
find that the 40-cent fee is a significant barrier to 
participation, particularly at the end of the month, and 
particularly when there are numerous children in the family.
    I think it would make sense to offer free lunch to folks 
who have the same income guidelines as the WIC Program--185-
percent of the poverty line. While you have expressed your 
concern about the cost of such a program, if sufficient funds 
were available, would you be supportive of this proposal?
    Mr. Bost. That is a big ``if.'' Ms. Emerson, it is a 
question of priorities. If money was available, not at the 
expense of other programs or if the money was available to look 
at doing some other things, I would have to give a great deal 
of thought to. The cost of eliminating the reduced price lunch 
could be almost $900 million a year--if that is a decision you 
are willing to make.
    Mrs. Emerson. Okay, I appreciate that.

                              WIC PROGRAM

    Let me ask you a question with regard to the WIC Program. 
You know I am concerned, and particularly in my area of the 
country, this is a big problem, but I am concerned about the 
low rate of breast-feeding, if that was something you 
mentioned, but I would like to go into that a little bit more.
    In Pediatrics magazine, back in December, it talked about a 
20-percent lower rate of breast-feeding in the WIC population 
compared to the non-WIC population. I think it was like 58 
percent versus 78. How do you think we can increase breast-
feeding in the WIC Program?
    Mr. Bost. There is $20 million in the President's budget 
request for breastfeeding peer counselors that would afford us 
the opportunity to increase breastfeeding in the WIC Program.
    Through the utilization of peer counselors, we have seen an 
increase in WIC breast-feeding persons that is greater than in 
the public population. Essentially the way it works is the fact 
that counselors come to the WIC clinic, they work with the 
mothers, they go to the hospitals, they talk with them and they 
answer any questions that they may have.
    In addition to that, we also have an initiative to 
encourage males and fathers to provide a level of support, too. 
So I think in concert, using both of those models, we can 
realize a significant increase in the number of WIC moms that 
breastfeed.
    Mrs. Emerson. How many peer counselors do we have, do you 
know? I am just curious.
    Mr. Bost. We do not know now, but we can get back to you. 
We will answer your question.
    [The information follows:]

    Seven WIC State agencies have statewide breastfeeding peer 
counselor programs that include formal training for staff. In 
addition, 17 State agencies have some local WIC agency 
breastfeeding peer counselor programs that include both 
volunteer and paid staff as peer counselors.

    Mrs. Emerson. I am just curious because if it is a $20-
million program----
    Mr. Bost. That is one of the things that we have found to 
be the most successful, in terms of increasing the rate of 
breastfeeding among WIC moms.
    Mrs. Emerson. Well, I appreciate that. I know it is 
important to try to get----
    Mr. Bost. Another reason that breastfeeding is also very 
important to us is that it goes a long way toward addressing 
one of the other initiatives that we have to address is the 
issue of obesity. The research also indicates that children 
that are breastfed tend not to be as heavy late in life as 
nonbreastfed children. So it is something that is important to 
us because it allows us to address many issues.
    Mrs. Emerson. Thank you very much.

                        CHILD NUTRITION PROGRAMS

    Just back on the School Lunch Program and the 40-cent fee, 
I think another colleague might follow-up that line of 
questioning, but I also would like you all to consider the use 
of commodities to be more widespread in the School Breakfast 
Program.
    Mr. Bost. Absolutely, as we get into the reauthorization of 
the Child Nutrition Programs, it is one of the things that we 
hope to discuss.
    Mrs. Emerson. I appreciate that.
    Mr. Bost. You are welcome.
    Mrs. Emerson. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Ms. Emerson.
    Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman, and I am 
delighted to follow up on Mrs. Emerson because I have some of 
the same concerns.
    You were talking about the Child Nutrition Program. I have 
been on this committee, I do not know, four or five years now, 
and whenever this panel comes up, I kind of get involved in all 
of the food issues, and I have been really interested in trying 
to get fresh and special crops into all of our feeding 
programs.
    But what really struck because this town, you know, is 
famous for saying all politics is local is to try to follow the 
food and nutrition programs at the local level. I am convinced 
that when Congress enacted the Paperwork Reduction Act, they 
never had in mind the--or the Child Nutrition Program has never 
heard of it. I do not think you feed people as well as you just 
collect paper. I cannot understand how you can run these 
programs. Now, I blame Congress for inventing them, but, you 
know, if something is broken, we ought to fix it.
    And the farm bill sort of said, you know, just threw in, on 
top of everything else, that, oh, well, just to make free fresh 
and dried fruits and vegetables available to students in 25 
schools in each of the four States, to students in schools with 
one Indian reservation during the 2002-2003 school year.
    Here, you have a National School Lunch Program, which is 
administered separately from a National School Breakfast 
Program, which is administered separately from a Child and 
Adult Care Food Program, which is administered different from a 
Food Service Program. I am just wondering, on the Food Service 
Program, since the Food Service Program is free to children in 
low-income neighborhoods during summer months, on a per-meal 
basis, by Federal cash subsidies to State agencies and on and 
on, and now we have schools that are year-round, so the 
school's summer is not really a summer. It is just another 
period of a school year, and then you have a special Milk 
Program, and then you have State administrative expenses.
    But let me just point out that it seems to me that all of 
these, because there is common language in all of them, that 
essentially you are trying to target poor kids or kids from 
economically underemployed families. And with the way the 
economy is going in this country, which is such a total 
disaster, I mean, we now have a loss of 1.7 million jobs. 
Obviously, if the parents are not working, these kids are going 
to start being eligible for these programs.
    So what I would love to do, and to see you really get 
involved with the reauthorization here, is why can we not just 
combine all of these programs--figure out some common 
denominators that the Federal Government wants, and we have a 
lot of that common denominator language in our Census data. We 
have the history of these programs through the years, and 
essentially you are not really given a lot more money or the 
money is not being shifted around because I do not think that 
the paperwork or the prerequisites for getting into these 
programs are so onerous that the program is sort of set up 
history.
    So why can we not get a better bang for the buck? Because 
you are going to have to come up feeding hundreds of thousands 
of more children in this country by just sort of block-granting 
these to the schools with the requirements that you give these 
schools to the kids in need.
    Because what Jo Ann Emerson and I are talking about is that 
if you try to administer these programs as the kids come 
through the line, you do not know whether the parent has earned 
enough money. I mean, I told the Secretary we do not means test 
these kids when they get on the school bus, we do not means 
test these kids when they get into the library to check out a 
book. But when you are going through the line to get food, you 
have got to be means tested, and how can you do that?
    I just want to read to you here. Listen, how do you 
administer this program: ``Nonprofit child care centers and 
family day care group programs receive subsidies for meals 
served in pre-school and other young children as well. Now, the 
profit-making child care centers receiving compensation under 
Title XX of the Social Security Act may participate in the 
program if 25 percent of the children enrolled or 25 percent of 
the center's licensed capacity, whichever is less, are Title XX 
participants, and from December 21st, 2000, through September 
30th of 2002, such centers may participate if 25 percent or 
more of the children they serve are eligible for free or 
reduced price,'' and then it goes on.
    ``Adult day care, they must be nonprofit, unless they 
receive compensation under Title XIX or Title XX of the Social 
Security Act for at least 25 percent of their enrollees. PL Law 
105 through 336 made child care centers that had previously 
participated in the Kentucky-Iowa For-Profit Child Care 
Demonstration a permanent part of the CACFP under the 
eligibility criteria used in the demonstration.''
    I do not know how you can administer this kind of stuff. 
And the point is that we are putting more emphasis on paperwork 
than we are on feeding, and you are in charge of this now. I 
know you want to go out with having done something great. What 
I would love to have you do is, and I am very involved in all 
of the schools and trying to figure out how can we get the food 
out there and have it fresher and better, and have more kids 
participating, and less paperwork, and less denial of people 
that are hungry for access to food.
    Mr. Bost. Mr. Farr, with the reauthorization of the Child 
Nutrition Programs, one of the recommendations that we are 
going to put forward, that is a major priority for us, is the 
streamlining of these programs. That is at the top of our list, 
along with ensuring that every child that is eligible to 
participate does, along with ensuring that we do not add any 
additional paperwork to the schools or the entities that have 
the responsibility for managing our programs.
    With that said, however, it is also very important to 
ensure that when we do that, that there are safeguards in place 
to ensure the people who have the responsibility for managing 
these programs do realize that we are still asking them to be 
accountable and that there is a high level of integrity in 
these programs.
    We agree with you that we need to do that, and with the 
reauthorization of our Child Nutrition Programs, we will be 
putting forth our recommendations to address many of your 
concerns.
    Mr. Bonilla. The gentleman's time has expired.
    Mr. Farr. Maybe on the second round I can get it.
    Mr. Bonilla. Thank you, Mr. Farr.
    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Bost, I read in your summary here that you want to 
motivate Americans to improve their diets and physical 
activities. Good job. [Laughter.]

              IMMIGRANT ELIGIBILITY FOR FOOD STAMP PROGRAM

    Mr. Goode. Let me ask you this: In the Farm Bill, more 
immigrants are put back on the Food Stamp Program, and you know 
in a number of immigration situations, persons have sponsors, 
and those sponsors agree to take care of any of the needs of 
the persons if they need to come in to get Government 
assistance from some angle.
    How many of those sponsors have you contacted in the case 
of recent immigrants when they have applied for Food Stamps?
    Mr. Bost. Well, Mr. Goode, I think it is important to note 
that we just started this process, and the largest percentage 
of persons that will meet the eligibility requirements will 
happen April 1, 2003.
    In addition to that, the other issue is that they are not 
eligible to participate in the Food Stamp Program until they 
have been in the country for five years. Usually, many of them 
do not have sponsors when they have been in the country that 
long.
    Mr. Goode. All right, but let me ask you this. That is the 
law now. Then, the law two years ago, I believe, was no Food 
Stamps in those type of situations. Then, prior to that, 
though, the law did not have a five-year time wait.
    Mr. Bost. That is correct.
    Mr. Goode. During that time frame--and that would have been 
under the Clinton administration, and you were not here then--
--
    Mr. Bost. No. [Laughter.]
    Mr. Goode. Do you have, maybe Mr. Dewhurst has been here a 
while----
    [Laughter.]
    Mr. Dewhurst. Yes, I have been here for a while.
    Mr. Goode. How many sponsors were contacted in those 
situations when there were requests from----
    Mr. Bost. Interestingly enough, I had the responsibility 
for managing the Food Stamp Program in Texas, and I can answer 
it from a State perspective.
    Mr. Goode. All right.
    Mr. Bost. It was essentially our responsibility to do that 
and not these guys that were behind me when I was in Texas.
    Mr. Goode. Right. I figured he might have some numbers on 
it.
    Mr. Bost. The other thing is that I doubt very seriously if 
they have any numbers because I do not ever recall the Federal 
Government asking me to supply those numbers to FNS when I was 
commissioner in Texas. Is that correct?
    Ms. Biermann. That is correct.
    Mr. Bost. No, they would not have them because there was no 
requirement that I supply that information to the Federal 
Government when I was commissioner in Texas. So I am sure that 
they do not have any numbers.
    Mr. Goode. Do you remember them checking on, say, 5 
percent?
    Mr. Bost. No--less.
    Mr. Goode. They did not check 5 percent?
    Mr. Bost. It was less.
    Mr. Goode. Do you think they checked 1 percent maybe?
    Mr. Bost. When a person would come into an office in Texas, 
we would determine if they were eligible to participate in the 
Food Stamp Program. That would come into play if we looked at 
the household and the household income. If they were living 
with a sponsor or if the sponsor was providing some sort of 
financial support, then that would come into play.
    Mr. Goode. Right. Right.
    Mr. Bost. In most instances, the sponsors were not an 
issue.
    Mr. Goode. With the five-year time frame now, on the form 
that they fill out with INS or whatever the new initials are, 
did it limit the sponsorship period?
    Mr. Bost. Mr. Goode, I do not understand your question.
    Mr. Goode. The sponsorship period; in other words, you are 
responsible for a certain length of time for the needs of the 
person that has recently immigrated into the country, that 
sponsorship period ends after what length of time or does it 
end?
    Mr. Bost. The sponsorship period ends in ten years.
    Mr. Goode. So you could check on those with the five-year 
gap now, but you are not doing that yet, right?
    Mr. Bost. I think that it would be possible for the States 
to do it, but I do not think they would be jumping up and down 
to check on somebody else and report to us.
    Mr. Goode. Yes, I do not think, unless they get 
encouragement, they are not going to do it.
    Mr. Bost. I think we would have to offer them a little bit 
more than just encouragement. [Laughter.]
    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Goode.
    Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.

                              FOOD SAFETY

    I thank you all for being here today. I want to talk about 
the School Lunch Program, if I can. Recalls of unsafe food in 
the School Lunch Program are performed on a voluntary basis, 
complicating the recall is the fact that schools often do not 
know the identity of the producers and processors who supply 
food to them due to the, complicated chain of manufacturers, 
distributors, brokers that deal with schools. How important is 
it for schools to immediately identify and isolate contaminated 
food that is subject to recall?
    Should schools have access to the identity and contact 
information of all food manufacturers and producers who supply 
them with food?
    Should recalls of contaminated food served in the School 
Lunch Program be made mandatory if a voluntary recall effort 
fails?
    What policy does FNS or the Department have regarding the 
purchase of products from companies involved in recalls? Does 
it currently buy from Wampler or the ConAgra plant in Greeley, 
Colorado, that is now owned by Swift?
    Mr. Bost. You have asked several questions.
    Let me start off by saying that we are ultimately 
responsible and we care a great deal about the safety of school 
meals that are served to children in this country.
    The second point that I would like to make is the fact that 
we work very closely with the Food Safety Under Secretary, Dr. 
Murano, and FSIS to ensure that there is coordination between 
our efforts and their efforts whenever there is a problem and 
food needs to be recalled.
    To my knowledge, since I have been here, I cannot think of 
a single instance where we have asked for food to be recalled 
from schools or to be held. In terms of mandatory, I do not 
think that it is needed or warranted because that has not been 
the case. I think that when the schools receive a call from us, 
they take it very, very seriously.
    In terms of the labeling and the quality of food, that is 
something that is done, through our sister agency, the 
Agricultural Marketing Service (AMS), and also done by the 
schools themselves. With that said, we have been very clear in 
terms of the requirements of the foods served in schools, and 
the specifications that we require that, one, that they are 
safe and also that the nutritional value and content thereof 
that they meet those.
    And so, hopefully, I have answered at least three of your 
four questions.
    Ms. DeLauro. Let me ask for a quick answer because I want 
to get to another issue. Should schools, in your opinion, have 
access to the identity and contact information of all food 
manufacturers and producers who supply them with food?
    Ms. Biermann. When we do a recall, we actually provide them 
with the delivery orders and all of the information.
    Ms. DeLauro. Do you provide them with the names of the 
distributors, et cetera, so that they could know where that 
food is produced, processed, and where it came from?
    Ms. Biermann. Where it comes through the State distributing 
warehouse, the State warehouses, yes, we do identify the 
warehouses. We also identify the produce by the delivery orders 
and the shipping orders so that they can go back and track 
where that product is.
    Ms. DeLauro. All of the manufacturers and producers?
    Can you do a favor for me? Can you just get back to me with 
letting me know what the process is, what the notifications 
are?
    Mr. Bost. Certainly, we can do that.
    The information follows:

    Our contracts include language stating that donated 
commodities must be produced in plants operating under Federal 
inspection regulated by the Food Safety and Inspection Service 
(FSIS). So, if a company involved in a recall has their Federal 
inspection withdrawn by FSIS, they cannot participate in 
Federal purchase programs until their grant of inspection is 
reinstated.
    In addition, USDA maintains a recall committee to ensure 
that all recalls are quickly reviewed to determine if donated 
commodities are involved and to ensure that they are not served 
in USDA food assistance programs. Purchase contracts also state 
that in the event of a commodity recall, the contractor is 
responsible for removal and replacement of recalled commodities 
or products, and reimbursement of State and local costs 
incurred as a result of the recall.

    Ms. DeLauro. Let me ask you this because GAO testified that 
between 1990 and 1999 there have been almost 300 reported 
outbreaks of food-borne illnesses in our schools. That is 
thousands of kids being affected, with long-term health 
consequences.
    My understanding is that about 17 percent of the food 
served in schools is donated by USDA, undergoes stringent food 
safety standards, increased inspections, tougher pathogen 
testing, yet the remainder 83 percent of the food that is 
consumed at schools is not subjected to these tougher 
standards.
    Do you think that there are health benefits of 
incorporating USDA's donated commodity standards into local 
school schools' food purchasing contracts?
    Should we incorporate your standards for the 17 percent of 
the food that goes to the schools now into that other 83 
percent?
    Mr. Bost. It is my understanding that they are able to buy 
commercially at this point, and that for the most part, the 
food meets the same standard that we have established because 
the schools are interested in ensuring that the food that they 
serve to children is safe.
    Ms. DeLauro. I would like to know if the standards that are 
within the commercial efforts are the standards that you have. 
Are they the same? Are they different?
    Mr. Bost. I think the inference is that the schools would 
be interested in serving unsafe food to children, and I do not 
think that is the case.
    Ms. DeLauro. No, no. Schools are not interested in serving 
unsafe food. What I am trying to establish here is whether or 
not we are uniform in our standards for the product that goes 
into our School Lunch Program. Seventeen percent is USDA, the 
balance of it is not.
    Ms. Biermann. For the commercial products that are 
purchased, they do have the same standards except FNS has more 
stringent standards when it comes to the meat and the poultry 
aspect.
    Ms. DeLauro. Can I find out what the standards are and what 
we ask the commercial people to do in those standards?
    Mr. Bost. Yes.
    [The information follows:]

    Imposing USDA commodity food safety requirements on 
commercial products purchased by schools would not be 
necessary. There are only a few commodity products that USDA 
purchases for schools using food safety specifications that 
exceed those on the commercial market. They are ground meats 
and turkey, some egg products, and frozen diced cooked chicken. 
Schools, for the most part, choose to use their entitlement 
money to receive all of their ground meat and frozen diced-
chicken from the commodity program and, therefore, purchase 
very little from the commercial distribution system. 
Furthermore, imposing such standards on the commercial sector 
may ultimately lead to a significant increase in commercial 
prices paid by schools, or result in fewer commercial food 
manufacturers willing to market to the school food service 
community.
    For those schools that may, in fact, be interested in 
USDA's specifications for their own procurement purposes, we 
have alerted schools that these specifications are available on 
the AMS website.

    Ms. DeLauro. Do you think that schools would benefit from 
preparing monthly plans addressing the risks and general safety 
guidelines in preparing food for the School Lunch Program?
    Mr. Bost. Yes.
    Ms. DeLauro. What other methods could be employed to ensure 
that schools are purchasing and preparing the safest foods 
possible for the School Lunch Program? What are your views?
    Mr. Bost. We do training in concert with the schools. The 
States do in-service training, and the HACCP plans ensure that 
foods meet safety standards, and so we believe that those 
things are in place to ensure that food is, indeed, served 
safely to children in schools.
    Ms. DeLauro. Are we currently buying from Wampler or 
ConAgra in Greeley or now Swift?
    Mr. Bost. Much of the responsibility for food purchasing is 
local. We will have to check with AMS to determine that.
    Ms. DeLauro. I am talking about USDA, not the local 
schools.
    Mr. Bost. We need to talk to AMS because FNS does not buy 
food.
    Ms. DeLauro. If you can let me know what we have done with 
regard to ConAgra, Wampler, those who have been in violation of 
our laws. Are we still purchasing from those places?
    Mr. Bost. We can do that.
    [The information follows:]

    USDA has purchased products from Wampler Foods, Inc., in 
Franconia, PA; Hinton, VA; New Oxford, PA; and Moorefield, WV. 
However, after the Listeria recall at their facility, USDA 
worked very closely with Wampler Foods to determine if the food 
safety interventions they put in place after the event were 
adequate to ensure the safety of donated commodities before 
they were permitted to begin the production of replacement 
product and bid on new contracts.
    USDA has not purchased products from the Swift Greeley, 
Colorado, plant for the past three years. The facility has not 
chosen to participate as an approved supplier for Federal 
purchase programs.

    Ms. DeLauro. Thank you.
    Mr. Bonilla. Thank you, Ms. DeLauro.
    Ms. DeLauro. Thank you for your time, Mr. Chairman.
    Mr. Bonilla. Mr. Hinchey.
    Mr. Hinchey. Thank you very much.

                    FISCAL YEAR 2004 BUDGET REQUEST

    You are here on a rather propitious day. I do not mean 
because of what is happening in the Middle East, but because of 
the budget consideration on the floor today. That budget will 
impact the way that we do business here as a country and how we 
finance many of the needs that we have.
    The House's fiscal 2004 budget resolution, in order to make 
room for the President's $750-million tax-cut proposal, would 
require deep cuts in discretionary and mandatory programs alike 
throughout the Government. It would cut domestic programs 3 
percent below the President's request. Entitlement programs are 
not spared.
    The Education and Workforce Committee, for example, will be 
required to cut almost $10 billion from its entitlement 
programs, including the Child Nutrition Programs, over the 
course of the next 10 years. That includes a reduction of $269 
million this year.
    Can you give us some idea of what these cuts, the 3-percent 
reduction in your discretionary programs, as well as up to $269 
million from your mandatory programs will have, what effect 
they will have on child-feeding programs across the country?
    Mr. Bost. Mr. Hinchey, we have not done that, and the 
reason we have not, is the fact that I am here to present the 
President's budget. Given what is noted in the President's 
budget, it more than addresses the nutritional needs of 
children and poor families in this country.
    This is an outstanding budget the President has put forward 
to address the needs of hungry people in this country.
    Mr. Hinchey. Well, I know that----
    Mr. Bost. I would like to make one more point.
    Mr. Hinchey. There is a sense of unreality in the White 
House these days, but it is important for you to understand 
what budget you are going to have to deal with and what level 
of funding you will have to carry out the programs that you run 
that are mandated by law.
    The leadership here in the Congress has not heard what you 
are saying. Their intention is to give you a budget which is 
different, which is substantially lower than what the President 
has submitted. I am asking you to tell us how you will deal 
with the reality, not the imaginary situation, but the reality.
    Mr. Bost. If that were to occur, we would look at what we 
had been given to manage our programs, and we would make some 
decisions about those issues and prioritize so that it would 
not adversely affect the people who we have a responsibility of 
serving.
    Mr. Hinchey. But you are not facing up to the reality of 
the situation yet. You are not prepared to deal with it as yet.
    Mr. Bost. When it occurs, I will address it.
    Mr. Hinchey. Well, it is occurring.
    Mr. Bost. Well----
    Mr. Hinchey. The budget resolution is on the floor today. 
This is not something that is going to happen six months from 
now. The budget resolution is on the floor today.
    Mr. Bost. Mr. Hinchey, I understand that, but the issue for 
me is two real points, and I will try to make this as clear as 
I possibly can. The President has been very visionary and very 
supportive of meeting the needs of hungry people in this 
country, as I presented in the budget request. That is the 
first thing.
    The second thing is that you are asking me to respond to 
something that has not occurred; one, if it occurs, and 
whatever budget the Congress approves for us, we will look at 
it, and we will make some decisions that we believe are 
prudent, and that are responsible, in terms of meeting the 
nutritional needs of hungry people in this country.
    Mr. Hinchey. Okay, well, let me help you a little bit.
    The budget resolution on the floor today could force nearly 
one-half-million poor children from the Child Nutrition Program 
in the first year. It would zero-fund the Summer Food Service 
Program and still require an additional $2 billion in cuts from 
other programs on top of that.
    It would force the Child and Adult Care Food Program to 
reduce nutrition and health education services to children and 
family and center-based child care settings by almost 25 
percent in five years, and it would slash billions of dollars 
in funds for farmers who provide commodities like fruits and 
vegetables to the schools.
    So what I am asking you to help us with is to tell us, 
beyond what I have just said, if you can, how you are going to 
deal with this situation and still promote these educational 
programs and carry out your obligations under the law.
    Mr. Bost. Well, with the amount of resources that I have 
available to address the----
    Mr. Hinchey. The amount of resources that you are going to 
get from the budget resolution that is on the floor today.
    Mr. Bost. To address the needs of the eligible persons so 
that they are able to participate in these programs. I do not 
know how much further I can go, based on what you are asking me 
to do.
    Mr. Hinchey. Well, I could tell you how much further you 
could go, but I am out of time in this round of questioning, 
and you could tell me, also, how much further you could go if 
you wanted to, but you choose not to at the moment, and I 
understand that.
    Mr. Bonilla. Thank you, Mr. Hinchey.
    Mr. Bost, and to our distinguished panel here, we are now 
being summoned for three votes on the House floor. We expect 
that we can be back here within 25 minutes to 30 minutes, at 
the most. After the third bell goes off for the third vote, I 
have asked Ms. Kaptur to return as quickly as possible. She has 
remaining questions, as I understand other members do as well.
    There will probably not be many members on the Republican 
side returning because of a meeting that has been called by the 
leadership that they are asking everyone to attend. There are 
also simultaneous appropriations hearings going on at this 
time, but we will allow ample time for all members to ask 
questions.
    So, at this time, we will just take a break, and we will 
return in about 25 minutes to 30 minutes.
    Mr. Bost. Thank you, Mr. Chairman. We will be here.
    Mr. Bonilla. Very good.
    [Recess.]
    Mr. Farr. Thank you, Mr. Chairman.
    Thank you for being patient.
    Mr. Bonilla. Thank you, Mr. Farr.
    Thank you all for your patients. We will now proceed, Mr. 
Farr, and we will go as many questions that remain here with 
our members.
    Thank you.
    Mr. Farr. Yes, I want to reiterate Mr. Hinchey's concern. I 
mean, we are asked to vote on the Republican budget resolution 
today, and in that resolution it is going to cut essentially 
$269 million. What it does is it cuts the money targeted for 
education and labor force, and the only two big budget items in 
there are nutrition and student loans.
    So you are sort of competing. You know, you have got those 
competing concerns, political concerns, and if the program is 
going to be cut, you are going to have to be in a position to 
figure out how to do it. My thinking is that if you look 
through all of these paperwork costs that we could do away with 
paper by combining all of these programs and essentially 
creating some kind of block grant that would just allow us to 
feed as many people as we can.
    I also see this problem, I mean, I want to know do you have 
any people in your office that can do damage control-- damage 
control for a message that I think is going to be a real 
problem in the United States. As I have indicated, 1.7 million 
people have lost their jobs. If you consider that those may be 
family people, and there is an average of 2.2 in a family, that 
is about 3.7 million more children that will end up in poverty 
programs, and we certainly do not have the money there.
    So the lines are going to be long, a need the vision on 
television is that we are going to be reconstructing Iraq, and 
I do not think that the food programs in Iraq we means test 
anybody. So we are going to be feeding the adults and children 
in Iraq because they need to be fed, and yet in our own 
country, we are going to be telling people, ``I am sorry, the 
bureaucracy requires that you apply the right way, and you meet 
all of these stringent qualifications.''
    Have you thought about how we are going to get out a 
message with the cuts that we are supposed to vote on today and 
the fact that the food programs that we are feeding abroad, 
which come out of the same base as the food programs here, can 
be handled?
    Mr. Bonilla. If you would yield for just 10 seconds before 
you answer, Mr. Bost. Let us just all remember that this is 
highly speculative, and the budget that is being proposed today 
is still fluid, and there is no way to predict exactly what is 
going to happen in Iraq. So, just for the record, I am happy 
for Mr. Bost to respond, but that is the truth.
    Mr. Bost. Mr. Chairman, you took the words right out of my 
mouth. That is what I was going to say, but I would like to add 
that since I have been Under Secretary, it has been a major 
priority for the President, for the Secretary, for me and for 
this administration to ensure that every single person who is 
eligible for these programs is enrolled and we meet their 
nutritional needs.
    I sit here today, with the passion that hopefully you can 
hear in my voice that says that I believe that we have done an 
outstanding job in trying to ensure that that occurs. We are in 
the business of meeting the nutritional needs of children.
    Can we do a better job? Absolutely. Does the President's 
budget continue to lead us in that direction so that we can 
achieve those ends? Absolutely. I believe that that is the 
case.
    To your point about damage control and things that may 
happen, that is not my place. That is not my role.
    Mr. Farr. But my point is that we are not meeting the 
nutritional needs of children because the report comes back 
that we are giving meals to children who may be hungry, but 
their parents earn too much income. So, therefore, we are not, 
I mean, that is exactly what I hope we can get at. I hope we 
can get at feeding hungry kids, regardless of what their income 
is.
    Mr. Bost. Well, I think that a part of me would agree with 
you up to a point, but I also believe that people in this 
country have some responsibility for helping themselves, that I 
have a responsibility and an obligation to feed them if they 
meet a certain criteria. I also believe that we have a 
responsibility and an obligation, that people and parents also 
have a responsibility and an obligation to try to help 
themselves.
    I am always willing to ensure that we provide people with a 
hand-up, but not continuing just to provide a hand-out. That is 
why there is a real distinct difference between what happened 
with the reauthorization of the Food Stamp Program last year, 
in terms of restoration of benefits to legal immigrants, and 
what's happening with discussions that are going on in the 
Temporary Assistance for Needy Families (TANF). We are 
interested in encouraging work. However, we are still 
interested in ensuring that we meet the nutritional needs of 
hungry people in this country.
    Mr. Farr. Would you recommend a veto of a bill that would 
cut the Child Nutrition Program by $9.7 billion?
    Mr. Bost. Mr. Farr, do you think I am going to answer that 
question?
    Mr. Farr. I would think so, yes. From what you have just 
said, you would be absolutely wanting to veto a bill like that.
    Mr. Bost. The issue is the amount of money that is 
available to me. I am here to present the President's budget. 
It continues to go a long way in terms of meeting the needs of 
hungry people in this country. I support the President's 
budget. It is an outstanding budget.
    Mr. Farr. And if Congress does not give the President back 
what he asks for, you would recommend a veto?
    Mr. Bost. Mr. Farr, that is something that Congress would 
have to decide, will they not?
    Mr. Farr. No, you decide.
    Mr. Bost. No.
    Mr. Farr. The President has the ultimate signature to 
those----
    Mr. Bost. If the President asked me my opinion about what 
he should do, I will give it to him.
    Mr. Bonilla. Thank you, Mr. Farr.
    Ms. DeLauro.
    Ms. DeLauro. Thank you very much.

                              WIC PROGRAM

    Mr. Bost, I want to move to the WIC Program. If you can, 
explain the sudden and alarming change in the administration's 
view of the effectiveness of the WIC Program.
    Last year, the administration said several times that the 
effectiveness of the WIC Program was clearly established, and 
this year we have out of the blue OMB saying that a 
comprehensive evaluation of the program was long overdue. There 
was a radio address on January 12th, 2002, where the President 
said, ``My budget seeks to help them,'' that is Americans ``by 
adding resources to vital programs that have proven their 
value. One of our Government's most effective services is the 
Women, Infants and Children Program that counsels mothers on 
nutrition and health care for their children.''
    A fiscal year 2003 White House budget document said, 
``Numerous Government and private studies show that WIC is one 
of the Nation's most successful, cost-effective early 
intervention programs. Research documents the success of WIC. 
The studies show WIC improves diet and diet-related outcomes, 
infant feeding practices, immunization rates, access to health 
care, cognitive development. It reflects demonstrated success 
by increasing the program's funding. In addition, there was a 
report on the effectiveness of several programs in the USDA. In 
fiscal year 2003, the document rated the WIC Program as 
effective. WIC is successful, cost-effective, it saves lives, 
it improves the health of nutritionally at-risk women, infants 
and children.''
    In response to a question for the record last year, you 
said, ``The administration's request for WIC reflects the 
effectiveness of the program that has been demonstrated through 
rigorous evaluation.''
    So lots of praise of demonstrated success. And although the 
program is highlighted as one of the most effective Federal 
programs, it does not seem to support a conclusion here that a 
comprehensive evaluation of the program's effectiveness is long 
overdue.
    And if you can, tell me how the program has gone from one, 
on January 12th, 2002, that has proven its value to one for 
which a comprehensive evaluation is long overdue a year later.
    Mr. Bost. Ms. DeLauro, I am a proponent of continuous 
process improvement, and this is a fine example. Even if a 
program is doing exceptionally well, and we believe that WIC 
is, we would not be prudent if we did not continue to evaluate 
it to make some determinations of how we could make it even 
more effective or better. I think this is an opportunity to 
continue this process.
    In addition to that, I do not know of any programs, and I 
have only been Under Secretary for a year-and-a-half, that we 
would not want to evaluate so that we could have some basis for 
determining what we could do differently, so that we can 
improve on them, so we can make them more efficient, and more 
effective. I think this is an instance to look at that so that 
we can have that information enriched.
    Ms. DeLauro. No, I understand the issue of accountability 
and evaluation, except that just a year ago, through lots of 
studies, lots of research, and lots of documentation of a 
program which has reached the highest accolades from a variety 
of sources, it would seem to me that, quite frankly, given the 
variety of issues that we may not be looking at that need some 
evaluation, that we would take a highly successful program and 
then try to run it through a comprehensive evaluation.
    If you can show me where we think the WIC Program is 
falling down between January of last year and now, and why we 
would like to try to evaluate it. As I say, we have lots of 
things, limited resources, why would you want to go after a 
program that is top of the mark?
    Mr. Bost. I do not think that it is falling down, but as I 
said before, we are always interested in evaluating our 
programs so that we are able to receive information so that we 
can even make it better and more effective. We will provide 
additional information to your for all our programs.
    [The information follows:]

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                             FARM-TO-SCHOOL

    Ms. DeLauro. That would be great. I would like to see what 
is also in programs that have not been evaluated for the last 
several years. And really the timeline on evaluating the 
programs that you have, which maybe have not had an evaluation 
in the last 10 years, and then maybe we ought to take a look at 
how we do our priorities and evaluation.
    I have a final question. A variety of school districts in 
my State, including WestHaven, Connecticut, Wallingford, 
Connecticut, are either buying now or want to buy from local 
farmers. What they want to try to do is by encouraging children 
to eat healthy foods, they will have a much better chance of 
avoiding serious illness later in life, heart disease, obesity, 
diabetes.
    I think it is a wonderful program for local farmers, and 
contrary to what some of my colleagues believe on this 
committee, I do have farmers in the State of Connecticut. 
[Laughter.]
    Ms. DeLauro. So are you doing anything----
    Mr. Bost. How many acres? No, nothing. [Laughter.]
    Ms. DeLauro. A lot of dairy farms and lots of specialty 
crops as well.
    Are you doing anything now to encourage school districts to 
work with local farmers? I think this is a very good effort, 
and what else do you think we can be doing to encourage and 
strengthen these efforts?
    Mr. Bost. Yes, we are. I am pleased to announce that on May 
16, 2002, we sent a letter to states encouraging school food 
authorities to purchase locally produced food to the extent 
practicable. I am also happy and pleased to note, that this is 
one of the things that we are going to talk about during 
reauthorization of the Child Nutrition Programs because I agree 
with you, and we want to encourage activity.
    Actually, it is referred to as the Farm-to-School and 
Garden-to-School Programs.
    Ms. DeLauro. Right.
    Mr. Bost. We do support those. They have a tremendous 
benefit, and during the course of the Child Nutrition 
Reauthorization, there are some things that we want to do to 
encourage that. We also are aware of successful farm-to-school 
programs in two States--Florida and North Carolina--where those 
are ongoing. So it is a question of our ability to expand those 
to include other parts of the country.
    Ms. DeLauro. If you would, I would love to talk with you 
about expanding that. If programs are working, let us make them 
work nationally, and I appreciate your involvement in this 
effort.
    Thank you.
    Mr. Bost. Thank you.
    [The information follows:]

    FNS has worked with States to bring interested partners 
together and facilitated open discussions of policy issues in 
the Small Farms/School Meals Initiative, popularly known as the 
``farm to school'' project. Regional workshops were held and 
guidance was provided to local farmers, local schools and other 
officials, and other interested parties; several major 
universities are involved in the effort. A Memorandum of 
Understanding was developed between FNS and the Department of 
Defense (DoD) to link farmers to schools. DoD's role was 
assisting farmers in marketing and delivery of their produce to 
schools.
    In May of 2002, FNS issued a memorandum to States 
encouraging local school food authorities to purchase locally 
produced foods to the maximum extent practicable, along with 
other foods. During 2000, FNS released a publication, ``Small 
Farms/School Meals Initiative Town Meetings, A Step by Step 
Guide on How to Bring Small Farms and Local Schools Together''. 
Successful farm-to-farm projects have been established in 
Kentucky, Iowa, North Carolina, Georgia, and New York.

    Mr. Bonilla. Thank you, Ms. DeLauro.
    Ms. Kaptur.
    Ms. Kaptur. Thanks, Mr. Chairman.

                         TEFAP AND WIC PROGRAM

    I wanted to go back to the TEFAP Program, Mr. Secretary, 
and I can tell you I have been through many food banks in Ohio. 
I cannot speak for Texas, I cannot speak for Connecticut or 
California, but I can tell you the need has been progressively 
growing. And you referenced faith-based groups in your original 
comments. They are strung out just trying to meet the need in 
their own churches, plus trying to help the local food banks. 
They really need the commodities, and they also need the 
administrative support.
    The authorized level for administrative support is $60 
million. Your budget provides $50 million. I can take you to 
every food bank in Ohio. There is no fancy carpeting, there is 
no fancy phone systems, no fancy curtains, no fancy paneling. 
They are operating right at the edge. And it just seems to me 
that with the authority that you have and the resources of this 
great country that we could find a way to help the groups that 
are already currently on the ground.
    That little bit of administrative support goes such an 
incredible way on the ground, and we even have trouble. I have 
had to be involved myself, for the first time in 18 years, in 
helping our community ask for donated commodities to fill up 
the local food banks because they did not have enough food.
    So I can guarantee you that in places like Ohio, I will 
tell you what I would use. I would look at the unemployment 
statistics, and I would focus the staff at the areas of the 
country that have had the greatest washout. It is there where 
the need is the greatest.
    TEFAP is one resource that we have. Another resource we 
have, obviously, is WIC, and I just want to read you a few 
sentences from a local story here this year from my main home 
county, Lucas County. ``The line of mothers waiting for help 
feeding their children keeps getting longer in the hallway 
outside the WIC office in Toledo. The director of the county's 
WIC Program said, `In January, it was just insane.' He said, 
`At the start of the 2003 fiscal year last October, Lucas 
County's WIC Program reported the highest number of 
participants in history.' ''
    Since 1997, WIC's caseload has increased 17 percent to more 
than 14,000 participants in my home county.
    Now, I am just trying to say, with the authority you have, 
if you could target it to the areas where the unemployment is 
highest and where this need is growing both for food, for the 
administrative costs to help collect and deliver it, that would 
be a very worthy expenditure of time and analysis by your 
staff.
    We asked the FSA when they were up here, for where the 
farmers were not going to meet the deadline, to reassign staff, 
to look at staffing, to handle the administrative side of this. 
I do not want to get in a big budget debate here. I know that 
in terms of TEFAP, the amount being spent is less. I mean, the 
numbers are there. They are black and white, but the point is 
the need is growing at the local level.
    That TEFAP Program, the WIC Program, the Food Stamp 
Program, those are life lines, and if you could target it, 
maybe certain areas from where we have troops deployed, some of 
the wives are going to qualify for WIC. I mean, you might want 
to check. Members of Congress can give a good read on the needs 
in their areas, but I do not think that the budget is adequate, 
in view of the unemployment rising, and the severe need at 
these food banks and delivery sites.
    So I am just asking your special attention to this. Maybe 
you can find a way to fix it.
    Mr. Bost. Well, Ms. Kaptur, I think it is important to note 
that, as far as WIC is concerned, we do look at making specific 
adjustments based on caseload growths in States.
    That is one of the reasons that I am really pleased about 
the President's budget request. We have been averaging about 
7.6 million participants. The amount requested will serve up to 
7.8 million participants, along with a contingency fund of $150 
million that would serve an additional 200,000 persons. And so, 
in terms of the WIC Program, we are already doing some of the 
things that you asked for.
    In terms of the administrative authority for TEFAP, we are 
already in discussions with OMB because we believe that we do 
have the authority to move an additional $10 million into that 
account to address some of the administrative costs that the 
state agencies are having to deal with, and so we are already 
addressing that issue, too.
    My staff gave me this note, and I am happy to report to 
you, that TEFAP goes to States based on unemployment and 
poverty levels already. I think that we can continue to look at 
those given circumstances that are currently occurring right 
now, but we already do that.
    I am also very pleased to report, too, that on ``60 
Minutes'' this past Sunday, they were doing a report on a 
person who is in the Reserves, and their family's income had 
decreased, and the woman did make note that she was accessing 
WIC.
    WIC is there to meet the needs of people that require our 
services. I was really pleased to hear that as a part of the 
story.
    Ms. Kaptur. Thank you, Mr. Chairman.
    And, first of all, I appreciate the Secretary's sensitivity 
to what I am asking, and we will fight the OMB battle with you.
    Mr. Chairman, I ask unanimous consent to put the article 
from the Cleveland newspaper, ``Plain Dealer,'' and ``The 
Toledo Blade'' in the record, please.
    Mr. Bonilla. Without objection, they will be entered into 
the record.
    [The information follows:]

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                              WIC PROGRAM

    Mr. Bonilla. Mr. Bost, just to follow-up briefly on the 
line of questioning that Ms. Kaptur brought up. It is a very 
good subject to bring up regarding WIC. Very simply put, does 
the budget request fully fund anticipated needs at WIC?
    Mr. Bost. We believe that it does.
    Mr. Bonilla. Thank you.
    Mr. Hinchey.
    Mr. Hinchey. Well, that is a controversial issue. The 
history over the last budget year indicates that there was a 
series of problems with the funding levels; is that not true? 
Did we not have to----
    Mr. Bost. Not to my knowledge.
    Mr. Hinchey. Not to your knowledge?
    Mr. Bost. Maybe prior to me becoming Under Secretary, but 
not since I have been here, if it has.
    Mr. Bonilla. Mr. Hinchey, also just to point out that, with 
the contingency fund that they had, they never even had to use 
any of that money.
    Mr. Bost. There was no contingency fund in fiscal year 
2002.
    Mr. Hinchey. 2002.
    Mr. Bonilla. I would just point that out.
    Mr. Hinchey. I am talking about 2002. The budget of 2002 is 
what I was referring to.
    According to the information I have, the WIC Program had a 
rough time in 2002. Funding had to be increased in the regular 
bill, and then in the December supplemental, and once again the 
July supplemental.
    Mr. Bost. There was a supplemental that included the WIC 
Program, but I think my point is that we addressed the need of 
people who required the service.
    With this budget, as I have said, we have been averaging 
about 7.6 million participants, and there is money appropriated 
to serve up to 7.8 million persons. It is unprecedented that 
the President has requested persons a contingency fund so if we 
go above that, there is money to address anybody that may need 
the services if we go beyond 7.8 million participants. I think 
that is unprecedented.
    Mr. Bonilla. Now, if you would yield, Mr. Hinchey, that 
spike in need after September 11th was what this was 
addressing. It was not a routine shortfall that occurred. So 
that is what the supplemental was designed to do--simply 
address the----
    Mr. Hinchey. But there were two supplemental 
appropriations.
    Mr. Bonilla [continuing]. The increase after September 
11th.
    Mr. Hinchey. And that increase after September 11th, which 
was occasioned by September 11th, had to be increased twice?
    Mr. Bonilla. The answer is, yes, Mr. Hinchey, because there 
was an economic decline as well that we had to deal with at 
that time.
    Mr. Hinchey. Sure. Yes. So the two supplementals were in 
response to that situation because of the economic 
circumstances.
    Mr. Bonilla. Yes.
    Mr. Hinchey. And you agree?
    Mr. Bost. Yes. But it is also important to note, Mr. 
Hinchey, that we have not turned anybody away. That if they 
required WIC services, we have met their needs.
    Mr. Bonilla. That is right.
    Mr. Hinchey. I am not suggesting that. That is very 
critical. That is critically important. I do not know of any 
case where anyone has been turned away, and you have met the 
needs as they have materialized, even though it is sometimes 
difficult to anticipate those needs accurately because of 
changing economic circumstances, and that is very 
understandable, of course.
    This year's budget, you are requesting a slightly lower 
amount for WIC; is that correct?
    Mr. Dewhurst. No, we have requested a budget increase.
    Mr. Hinchey. A budget increase requested for WIC?
    Mr. Bost. Forty-three million.
    Mr. Dewhurst. Yes, in order to provide for a participation 
level of up to 7.8 million participants and provide for a 
contingency fund to cover any unanticipated increases in 
participation the fiscal year 2004 budget includes an increase 
of $43 million.
    Mr. Bost. Over last year.

                           FOOD STAMP PROGRAM

    Mr. Hinchey. Okay, good. And there is also a budget 
increase requested, a significant one, I think, for the Food 
Stamp Program.
    Mr. Bost. That is correct, and a contingency of $2 billion 
for the Food Stamp Program.
    Mr. Hinchey. A contingency of $2 billion?
    Mr. Bost. Two billion dollars, yes. So in case we exceed 
what we anticipate, there is a contingency fund of $2 billion 
that would be used to make sure that we address the needs if 
participation increases beyond the 21.6-million monthly average 
that we think we are going to need to cover.
    Mr. Hinchey. What are you basing that on, the anticipated 
increase in both WIC and Food Stamps?
    Mr. Bost. We look at trends in unemployment, at economic 
indicators and the information we get from the States.
    Mr. Hinchey. So you think that, basically, in terms of the 
economic indicators that you are looking at, there will be a 
higher demand for those programs over the course of the next 
year.
    Mr. Bost. Yes, and we have seen an increase over the course 
of the last past year. We are thinking with what is going on in 
terms of the country's economy, along with our outreach 
efforts, and along with the number of people that are currently 
eligible to participate in the programs, we are anticipating an 
increase. We have enough money to meet that need, and there is 
a contingency fund if participation increases beyond our 
estimate.
    Mr. Hinchey. Good. Thank you very much.
    Mr. Bost. Thank you.
    Mr. Hinchey. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Hinchey.
    Mr. Farr?
    Mr. Farr. Thank you very much.

           NUTRITION SERVICE PROGRAMS BENEFITS FOR IMMIGRANTS

    Let me tell you about a situation that I learned of when I 
was home last weekend. It is typical in our area. We have the 
worst housing crisis in America.
    One of my staff was telling me about a case where this 
woman has a green card. She has three children. One of them is 
one month old, one of them is about three years old, and the 
other is about seven years old. She is living in her car. The 
social worker who she has been dealing with meets with her in a 
parking lot of a fast-food service or Safeway store.
    What could I tell her about the ability to get access--what 
does she have to do to get WIC, to get the school--the child 
care center? I think her three-year-old is in the United Farm 
Workers Center, and her seven-year-old goes to the Caesar 
Chavez Elementary School. It is a public school, which 
qualifies for these programs. I do not know if it has a School 
Breakfast Program.
    But what does she have to do to get her kids into those 
respective programs--into WIC, into the child care center 
feeding program and into the elementary school's Breakfast and 
Lunch Program?
    Mr. Bost. Roberto?
    Mr. Farr. And she has limited English, too.
    Mr. Salazar. Mr. Chairman and Congressman Farr, she clearly 
needs to visit her local WIC clinic as soon as possible so that 
she can engage in the services of that program for the youngest 
of her children.
    Mr. Farr. She is eligible for that?
    Mr. Salazar. Given the limited information you have 
provided me I believe so.
    Mr. Farr. Even though she is not a citizen? She has a green 
card.
    Mr. Bost. She is still eligible.
    Mr. Salazar. She is still eligible, Mr. Farr.
    Mr. Farr. Her children were all born in the United States. 
They are all American citizens.
    Mr. Salazar. They are definitely eligible for those 
services, inclusive of the School Lunch Program.
    Mr. Farr. Would she be if her children were born in the 
United States, and she was undocumented, she still is eligible 
for WIC?
    Mr. Bost. Yes.
    Mr. Salazar. Yes.
    Mr. Farr. Okay, how about the other two kids?
    Mr. Salazar. Those children are eligible for the School 
Lunch Program that is provided by the school.
    Mr. Farr. Only if that school has the program.
    Mr. Salazar. That is correct, sir.
    Mr. Farr. So we only feed kids in schools that are 
eligible, not kids that are eligible.
    Mr. Salazar. We feed kids in schools that participate in 
the National School Lunch Program. All schools are eligible.
    Mr. Farr. So our ability to feed hungry people depends on 
going to the right school.
    Mr. Salazar. There are 91,500 schools in the country that 
currently participate in the National School Lunch Program.
    Mr. Farr. Yes, but not all hungry kids are in schools that 
have the program.
    Mr. Salazar. We believe, Mr. Farr, that virtually all kids 
are in schools that participate in the School Lunch Program.
    Mr. Farr. So that both the child care center, which is a 
nonprofit, they have to qualify?
    Mr. Salazar. That would be through our CACFP program, Mr. 
Farr.

                CHILD NUTRITION PROGRAMS REAUTHORIZATION

    Mr. Farr. What I am trying to point out in all of this is 
why do we not--this is in the same town, Salinas, California, 
county seat. Why can we not just, we have the data. I mean, the 
data was that the WIC center has to qualify, the child care 
center has to qualify, and the school has to qualify. And I am 
sure that the data that makes those entities, institutions, 
qualify is historical data.
    So why do we not begin a way of making this more money on 
the ground to feed more kids, rather than a bureaucracy that 
administers three separate programs? And even in that, the 
Elementary School Lunch Program is different than the 
Elementary School Breakfast Program.
    Mr. Bost. Mr. Farr, as a part of the Child Nutrition 
Programs reauthorization, we are looking at that. Given the 
three very specific programs that you described, I do not know 
if I can tie all of those together, but I think that I can tie 
at least two of them together in terms of some ideas that I 
have as we get into reauthorization of these programs.
    Mr. Farr. I think you have the passion. I would appreciate 
an answer. When OMB writes your department and asks what you 
think on these budgets, if it is not sufficient, that you would 
say, ``Damn right, veto the bill.''
    See, the sociology, we go and do this case work, and it is 
really difficult to tell people that are sort of at risk and do 
not have the sense about how to do all or have to go all over 
town to qualify for those programs. It would make it a lot 
easier.
    The Government is creating the problems, and then we talk 
about how we are meeting the needs, and I do not think we are 
meeting the needs. Because if that kid was not in the right 
school district or that child care center did not happen to 
qualify under these complicated things that I read earlier, 
these kids would not get served.
    I am going to work with you because I would like to even 
see if we could do some demonstration programs, maybe some 
pilot programs, where we combine all of these in a community 
like that and say, ``All right, we will give you a lump sum of 
money. You make the biggest bang for the buck for it,'' and we 
want to be totally accountable on all of the reasons you want 
to be accountable. I am all for that, but we have got to make 
it a lot easier.
    We do that with all of the other programs that we put out 
there. It is just that we make the nutritional programs, I 
think, ungodly complicated to qualify for. I will put my other 
questions in the record.
    Mr. Bost. Mr. Farr, I want you to know that I am very 
sensitive to your concerns. One of the priorities that I 
established, as we go into reauthorization, is to look at what 
we can do to streamline our programs, and especially to 
streamline access to these programs, but I do not want to 
mislead you. There are some challenges there, but we are going 
to take I think a pretty good stab at it.
    Mr. Bonilla. Thank you, Mr. Farr.
    Just as a general observation, there is some responsibility 
still, Mr. Farr, and I am sensitive to what you are saying. My 
background, there are a lot of farm workers in my family, and I 
come from a situation where we even had to live in a trailer in 
my grandmother's back yard for a while growing up, five kids in 
the family. If we are feeding three out of four kids in a 
particular family via the Federal Government, I think that is a 
pretty incredible accomplishment, and we are feeding a record 
number of children via WIC, via the School Lunch Program.
    So I, instead, would look at what we do in this country and 
say, man, we set the standard for feeding and taking care of 
people who are eligible, and we are not turning a single person 
away.
    And when we also look at the immigration policies of 
Mexico, which is a great friend of ours, and I have an area 
along the border that is almost 800 miles, and we work very 
closely with Mexico, but their policies in their country are to 
shut the door on immigrants coming in from the South and to not 
provide one iota of service for any child that comes from a 
country that tries to enter their country.
    And, quite frankly, in comparison to that, we provide an 
incredible amount of services to folks that, in some cases, are 
not even American citizens, which we should take care of these 
innocent kids that are out there, but I think it is certainly a 
different way we should look at this glass as being more than 
half full and not partially empty.
    Mr. Farr. The only difference I have with that is, 
remember, it is the institutions that qualify. It is not the 
children. They have to be in the right catchment area. They 
have to be in that elementary school district.
    Mr. Bonilla. I understand. I did not mean to get on my soap 
box, but I just wanted to make that observation.
    Mr. Hinchey.
    Mr. Hinchey. Thank you very much.
    Mr. Bonilla. I am sorry, did I go out of order?
    Okay, Mr. Hinchey. Sorry about that.
    Mr. Hinchey. Thank you, Mr. Chairman.

                  ELECTRONIC BENEFIT TRANSFER PROGRAM

    Mr. Bost, there is an Electronic Benefit Transfer Program 
for the WIC and Food Stamp Program. There is a pilot program in 
New York to bring this technology to open air farmers' markets. 
I am not sure if it is operating in other States as well, but 
the purpose of the pilot is to allow the purchase of food 
products with WIC and food stamps EBT cards at farmers markets 
where there are no electricity hook-ups, and they cannot use 
those machines.
    Mr. Bost. That is correct.
    Mr. Hinchey. The markets are testing is a device that 
allows that economic transfer to take place. Can you give me 
some idea where that is?
    Mr. Bost. Well, New York received a grant.
    Mr. Hinchey. Pardon?
    Mr. Bost. I went to New York City and delivered a grant to 
look at refining and perfecting this technology so that we 
could look at spreading it out across the country. So right now 
the project will start in New York City. There are a couple of 
other locations around the country, but they are still using 
scripts, and so hopefully our shining star is going to be New 
York City, in terms of working out the kinks of this program.
    Essentially, a number of cities and States are interested 
in using it, but they want us to pay for all of it, and we do 
not have the resources available to do that.
    What we have said is that we will work with them in 
partnership to help them. But I actually went up, delivered the 
grant, actually saw how it was demonstrated, and talked to some 
customers. They loved it. I actually talked to some providers 
and vendors, and they love it. So right now it is in New York 
City at a farmers market there.
    Mr. Hinchey. Can you give me some idea about the extent of 
its operation in New York City and if you plan on bringing it 
somewhere out of the city, Up State or----
    Mr. Bost. We are hopeful to bring it to other locations, 
but that is going to depend, more than anything else, on the 
actual cost and actually how much it is going to cost for us to 
do that, but I think we are into essentially the second 
generation of doing it. There were some glitches, in terms of 
the actual operation of it, and that is why New York got a 
grant to try to work on it. We are going to evaluate it, and 
then we will make some determinations of where we need to 
expand it. But, essentially, New York is our test case for 
doing this.
    As Suzanne has whispered to me, it is going to be a 
question of cost, because it is not the cost of the telephone 
lines themselves, but the little hand-held device and getting 
people enrolled.
    When I was there, we loaned those hand-held devices to the 
farmers. It is a question of whether there would be enough 
money to actually buy them for everybody because we would not 
want to exclude anybody who would be interested in 
participating in the program. If we were to do that, then it 
would increase our costs significantly.
    We are looking at all of those factors, but I do want to 
close by essentially saying this: It is a wonderful initiative, 
and it works exceptionally well. And the clients who are 
accessing it, they actually love it, and the farmers like it.
    Mr. Hinchey. And the principal cost associated with it is 
for the purchase of the machines.
    Mr. Bost. Well, it is the purchase of the machines and the 
infrastructure technology it takes to operate it.
    Mr. Hinchey. Through the purchase of the machines.
    Mr. Bost. Right. It works on the same basic system as 
returning a rental car and the person comes out and does it.
    Mr. Hinchey. Right.
    Mr. Bost. Same basic principle.
    Mr. Hinchey. Yes.
    Mr. Bost. But it is a question of cost. Everybody loves it, 
but no one wants to pay for it.
    Mr. Hinchey. That is odd. I have never heard that before. 
[Laughter.]
    Can you give me some idea about what the cost actually is.
    Mr. Bost. We will have to get that information for you.
    Mr. Hinchey. Not right now, you probably do not have----
    Mr. Bost. No, we will have to get back to you, but we can 
do that.
    Mr. Hinchey. Okay. Good. I appreciate that. Thanks very 
much.
    Mr. Bost. But I think the grant that New York received was 
$100,000.
    Mr. Hinchey. And if you could get me some information on 
what that grant has actually purchased and how it is working, I 
would appreciate it.
    Mr. Bost. We can do that, not a problem.
    [The information follows:]

    At this time, there is no EBT capability for the WIC 
Farmers Market Nutrition Program (FMNP).
    New York State and the Farmers' Market Federation have 
received a $100,000 grant from FNS for the Food Stamp Program 
wireless EBT demonstration projects in New York City and 
western New York State. The Federation will spend $86,000 for 
the purchase of 60 wireless point-of-sale (POS) terminals and 
payment of associated operating costs for these terminals. In 
addition, the grant will also be used for operating costs 
associated with the 40 POS terminals procured under an older 
USDA AMS grant for farmers' markets within New York City.
    The Federation will also spend $13,400 for promotion, 
outreach, and education about the project, targeted at food 
stamp recipients living near markets attended by farmers and 
vendors participating in the project, and for assistance to 
participating farmers' markets.
    The following is the Federation's proposed breakout of the 
$100,000 FNS grant for the wireless EBT demonstrations at New 
York farmers' markets:

60 Points-of-Sale (POS) terminals @ $995 (western NY).........   $59,700
60 POS terminal activation fees @ $35 (western NY)............     2,100
100 wireless access charges @ $12/mo for 8 months (western NY)     9,600
Transaction fees @ $100/8 months  100 farmers/vendors    10,000
Statement fees @ $5/mo  8 months  100 
    farmers/vendors...........................................     4,000
Shipping fees @ $20/terminal  60 POS terminals.......     1,200
Project promotion, outreach, and education programs...........    13,400
                    --------------------------------------------------------------
                    ____________________________________________________

      Total...................................................   100,000

    Mr. Hinchey. Thank you.
    Mr. Bonilla. Mr. Hinchey, did you have any additional 
questions?
    Mr. Hinchey. No, Mr. Chairman, that is it.
    Mr. Bonilla. Thank you very much.
    I think we have Ms. Kaptur and Mr. Farr have one more round 
that they would like.
    So, Ms. Kaptur?
    Ms. Kaptur. Thank you, Mr. Chairman.

           WIC AND SENIOR FARMERS' MARKET NUTRITION PROGRAMS

    I wanted to turn, Mr. Secretary, to the Senior Farmers 
Market Nutrition Program. And I appreciate the Department's 
attention to this in past years. I understand that the farm 
bill did provide you with $15 million in mandatory funds for 
this program and that total applications received thus far have 
totaled at least $30 million in the Agency.
    At least this member believes that the Department has 
discretionary authority to ask for the remaining funds to meet 
the need that has been requested, and I am interested in 
whether you plan to submit a supplemental for that, and also 
whether you have reviewed your Section 32 authority and the 
availability of the CCC as ways to provide the additional 
support for this program that is quite effective.
    I have seen it operate in Ohio now in supporting our 
seniors to get fresh fruits, vegetables and herbs directly from 
producers. So it is income in the pocket to our farmers. For a 
long time, Mr. Secretary, I have been complaining that the 
production side of agriculture did not relate to the consumer 
side, and this is definitely a program that is a win-win for 
hungry people, for people who are ``undervegetabled'' and 
``underfruited,'' and also direct income to producers, 
particularly around our major urban areas, where we have some 
of our small family farmers still remaining, our truck farmers 
who do not get any Government subsidy through our regular crop 
subsidy programs.
    So I am very interested in what you might be able to report 
on this program.
    Mr. Bost. Ms. Kaptur, it is an exceptionally popular 
program. It is popular from the vantage point of customers and 
consumers who utilize it and also from the farmers and the 
farmers markets who participate in it. The Farm Bill explicitly 
funded it through CCC.
    I do not know, and I will have to sit down and talk with 
Mr. Dewhurst and also OMB about the additional authorization 
that we may have regarding Section 32.
    Ms. Kaptur. All right.
    Mr. Bost. But that is something that I can talk with them 
about.
    [The information follows:]

    The Food and Nutrition Service has consulted with the 
Office of Budget and Program Analysis and the Agricultural 
Marketing Service regarding the availability of Section 32 
funds to provide supplementary resources for the Senior 
Farmers' Market Nutrition Program (SFMNP). Our review of the 
statute, as well as related Office of General Counsel 
decisions, clearly indicates that the Secretary does not have 
the authority to use Section 32 funds in the SFMNP. The SFMNP 
operates on the basis of grants to States. USDA is not 
authorized to use Section 32 funds for the purpose of grants to 
States.

    Ms. Kaptur. I do not know if you, in your responsibilities, 
have ever had a chance to go to one of these markets----
    Mr. Bost. Yes.
    Ms. Kaptur [continuing]. Where the seniors are redeeming 
these coupons.
    Mr. Bost. Absolutely. Ms. Kaptur, I have been to regular 
farmers markets, WIC Farmers' Markets, and Senior Farmers' 
Markets. I travel the country to look at our programs so that I 
can talk about them firsthand, in terms of how they are working 
and the types of things that we can do to improve them, and the 
feedback we are getting from people that participate in them.
    Ms. Kaptur. Right. So you know their impact, personally. 
You have seen it firsthand.
    Mr. Bost. I know how popular they are. But I also realize 
the challenges that we have in terms of establishing priorities 
to manage all of our programs.
    Ms. Kaptur. Why do you think that there is a 90-percent 
redemption rate on the Senior Farmers' Market Nutrition 
Program, and the redemption rate on WIC is much less? Do you 
have any observations on why that might be true and how we can 
up the WIC coupon purchases at our farmers' markets across the 
United States?
    Mr. Bost. We will answer your question further, but I think 
the anecdotal information that we have that competing 
responsibilities that parents have, in terms of transportation, 
in terms of having to address issues with raising children, and 
families, and infants, and seniors tend to not have to deal 
with those types of competing problems. And that is just only 
anecdotal information that we have about it. If there is 
additional information, we will pull it together and send it to 
you.
    [The information follows:]

    There are many factors that explain the disparity in 
redemption rates between the FMNP that serves WIC participants 
and the Senior Farmers' Market Nutrition Program (SFMNP) that 
serves low-income seniors. Some of these factors are as 
follows:
    Employment status--many WIC moms are employed during the 
times that markets are in operation; whereas many seniors are 
retired.
    Child care--WIC moms either have to bring their children to 
markets or arrange for child care; whereas most seniors are not 
primary caregivers for young children.
    Transportation and supporting services--seniors, through 
the effective efforts of local Agencies on Aging, have access 
to a greater array of services, including transportation, that 
allow them greater access to markets than their WIC 
counterparts.
    Experience and food preparation skills--seniors have 
greater experience in shopping for and preparing fresh fruits 
and vegetables than young WIC moms.
    Steps that could be taken to improve the redemption rates 
of FMNP participants might include the following:
    Encouraging markets to set up operations in urban 
neighborhoods close to WIC clinics.
    Encouraging markets to expand hours of operation or to 
adopt a weekend schedule.
    Working with volunteer organizations to provide 
transportation and child care services on specified days to 
allow moms to go to markets.
    Developing nutrition education programs that focus on 
shopping for fresh fruits and vegetables and how to prepare 
them for family meals and snacks.
    Steps to increase FMNP redemption rates would, of course, 
require resources that are not available to all programs in all 
communities. It should also be noted that while the FMNP has an 
average redemption rate of around 60 percent, most States 
expend 80 percent or more of their program funds by taking 
redemption patterns into account when issuing coupons to 
eligible recipients.

    Ms. Kaptur. I would really encourage you, Mr. Secretary, 
and somebody there on the staff or some brilliant intern that 
you might be able to attract, to really look at the programs 
under your jurisdiction that could directly benefit income to 
farmers. These obviously are two. When they purchase right 
there, the farmer is able to transact business.

                    MEETING THE PRODUCTION PROGRAMS

    And, also, I think Congresswoman DeLauro made mention of 
the Small Farm School Meals Initiative, where we have been 
trying so hard to help local farmers who are diversified 
farmers, family farmers, provide product right into the School 
Breakfast and Lunch Programs, which has been a real challenge, 
but nonetheless here is another area where the nutrition side 
of ag can relate to the production side.
    And I think it might be very interesting, I have never seen 
a real comprehensive review--I do not want a 400-page document, 
but a paper--of where the programs under your jurisdiction 
could more effectively meet the production side of agriculture, 
particularly our small farmers who are diversified, minority 
farmers around the country.
    It has been amazing to me to go through communities, and I 
mean nobody ever thanks us for the payment programs. It has 
almost become a way of life. These programs farmers say, 
``Something from Washington finally helped our family earned 
from the market.'' It has been amazing.
    And so I know their power, and I think part of the problem 
has been, in the past, that the nutrition side of agriculture 
just never really asks the question how do we relate to the 
people producing the food, even though you are part of the 
Department of Agriculture.
    Mr. Bost. Ms. Kaptur, I want to assure you that not only 
have we started to ask the question, but we have also started 
to do something about it. As I said earlier, when I was 
responding to Ms. DeLauro's question, the pilots in North 
Carolina and Florida, have had success with the Farm-to-School 
Programs. The Seniors Farmers' Market Nutrition Program and the 
WIC Farmers' Market' Nutrition Program are also good examples 
of the agency trying to ensure that we address the link that 
you are speaking to.
    We have one more idea that we are going to talk about 
during reauthorization of the Child Nutrition Programs that we 
are going to put on the table, that we believe will continue to 
support our activities. And so we have not only just asked the 
question, but we have taken some steps to address it.
    [The information follows:]

    The Nutrition Assistance Programs are working to increase 
the connection to production agriculture in a variety of ways. 
For example, the farm-to-school and the garden-to-school 
programs are helping to encourage schools to work with local 
producers to supply fresh fruits and vegetables to everyone's 
benefit. We also promote farmers' markets through the WIC 
Farmers' Market Nutrition Program and the Seniors Farmers' 
Market Nutrition Program, not to mention that farmers' markets, 
roadside stands, eggmen, and other direct to consumer retailers 
can become eligible to redeem food stamps. Farmers' markets are 
also supported in the nutrition program area as well as by 
Agricultural Marketing Service initiatives. We are working on 
wireless communications to make it possible for producers to 
economically continue to redeem food stamp benefits via the 
electronic benefit system. Also, the Department has increased 
its efforts to purchase fruits and vegetables with funds 
available to the commodity portions of the programs. And 
further, Child Nutrition Program providers have been encouraged 
to purchase more fruits and vegetables, consistent with the 
recommendations of the Dietary Guidelines for Americans. 
Finally, through commodity purchases that are made under farm 
support programs, the Department works closely to link the 
nutrition assistance and producer assistance missions through 
such programs as the National School Lunch Program, The 
Emergency Food Assistance Program, and the Commodity 
Supplemental Food Program.

    Ms. Kaptur. Very well. Thank you.
    Thanks, Mr. Chairman. I just wanted to also say I know this 
is our last hearing, and I want to thank the chairman for being 
very gracious to our side of the aisle and being very 
consultative through the whole process.
    I also want to thank the staff for the good job that they 
have done on preparing us to help make our country a better 
place in which to live. And we really look forward to your 
answers, Mr. Secretary, on some of the questions that we have 
discussed this morning.
    I will turn it over to my colleagues if they have any 
additional questions.
    Mr. Bonilla. Ms. Kaptur, I could not agree with you more. 
The staff for this subcommittee, they are real pros.
    Ms. Kaptur. Yes.
    Mr. Bonilla. And they are a real joy to work with, and I am 
glad you brought that up.
    Mr. Farr.

               ADMINISTRATION OF FOOD NUTRITION PROGRAMS

    Mr. Farr. Thank you, Mr. Chairman. I want to also thank you 
very much. This is what I think we got elected to come here to 
do, is part of the oversight and approving these budgets, and I 
find it a very stimulating opportunity. I wish we actually had 
more time to do it all.
    I am going to submit some questions about the Buy American. 
We have a requirement to buy American and now a requirement of 
origin labeling, and those two might come together. And I also 
have some questions about the DOD request for fresh produce 
requirements.
    I sort of gave you the last case issue about the problem of 
the family on the ground. I know that in the budget the 
administration has come in and asked to tighten the eligibility 
requirements and essentially to give more proof of income and 
more proof of living arrangements and so on.
    I mean, the difficulty in a lot of the poor communities is 
that the living arrangements are much--there are a lot of 
people living in one house, illegally. But if you go and tell 
where you live, we had this same thing when we had FEMA try to 
come in, they are not supposed to be living in there because 
the landlord denies that they are living there because the 
landlord does not want to get in trouble. Some of these people 
are undocumented, so they do not want everybody to know where 
they are. And some of those living arrangements are very 
difficult to define in rural areas, particularly in 
agricultural areas.
    So the other side of the coin is, as these regulations are 
going to be written, and you are going to be involved, is how 
do you administer the regulations? Because reading some 
comments by school employees in large school districts, there 
is one that I read that has 44,000 lunches a day.
    I was thinking, you know, in California we have schools are 
going to cut back because of our crisis out there, and I will 
bet the first people they cut are going to be the people that 
are supposed to monitor the School Lunch Program. So you are 
going to have less enforcement if we keep the regulations as 
they are.
    But how do you manage 44,000 lunches a day, and those 
people have changing income. They might be Welfare to Work and 
they get the job or they might be employed well and now they 
are unemployed. How do you manage all of that? I mean, it seems 
to me that we have put too much emphasis on accountability on 
each kid, rather than, as you said, because your testimony has 
all been about we want to feed hungry kids. We want to provide 
the nutrition that is necessary in America.
    Yet our regulations, and even the administration's 
requirement, is that we ought to tighten this up, that we have 
to make it tougher. I do not see how we are going to get there 
from here. So how are your regulations going to be able to 
manage like that 44,000 lunches a day?
    Mr. Bost. Mr. Farr, we are always interested in ensuring 
that we maintain or work toward maintaining the highest level 
of integrity in our programs.
    But specifically for the National School Lunch Program, and 
the President talked about it in his budget request, is the 
fact that we believe that there are some things that we were 
able to do that are going to accomplish two goals: One, improve 
integrity in our programs and not inhibit or prevent access to 
eligible children being able to participate during the course 
of----
    Mr. Farr. Is there going to be an appeal process? I mean, 
if I hear in my district that that, indeed, is not happening, 
what do I do, come to you?
    Mr. Bost. It will be dealt with on the local level.
    But, Mr. Farr, I truly believe that I am going to be able 
to put something forward that is going to address both of those 
guiding principles that I laid out earlier in terms of ensuring 
that we maintain integrity, but also ensuring that we make 
access to eligible persons easier.
    Mr. Farr. In ensuring integrity----
    Mr. Bost. Yes, sir?
    Mr. Farr [continuing]. We have a lot of other ways that we 
do that. We have Enterprise Zones, and I am sure there are 
wealthy people that live inside Enterprise Zones, but we do not 
ding the Enterprise Zone for that. We have Welfare to Work 
Programs, and we have other areas.
    What I find is our need to be accountable for each of our 
programs ends up making us into accountants and cops, rather 
than into social workers, and teachers, and child 
nutritionists. I think that is what this committee and the 
Congress would really want us to do.
    And I know we write some tough laws sometimes, but as the 
administrator of the law, I would hope that you come in and 
help us rethink what has been these sort of layers of 
categorical programs into trying to reinvent the whole program 
and come back with a better way in which we are doing it. I 
think that would be something that this year in Congress, and 
certainly under your administration, we would be very proud of, 
and I look forward to working with you on it.
    Mr. Bost. We look forward to working with you, also.
    Mr. Bonilla. Thank you, Mr. Farr.
    Mr. Bost, thank you for your excellent testimony today and 
to all of the good folks that you brought with you this 
morning. It has been a good hearing, and I am delighted that 
the members felt that they had a good exchange.
    We look forward to working with you as we put our bill 
together this year. We still have to get a budget number. We 
still have to get 302(b). We are working on that as we speak, 
but I anticipate, as we have in the past on this subcommittee, 
working together to try to get a good bill that the entire 
subcommittee can support as we move forward.
    So work with us, and we look forward to doing so as we move 
ahead in this process.
    Mr. Bost. Mr. Chairman, thank you, and all of the members 
of the committee. I really look forward to working with you, 
also, and I am happy that it is over.
    Thank you. [Laughter.]
    Mr. Bonilla. The subcommittee stands adjourned.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
        
                                         Wednesday, March 19, 2003.

                           RURAL DEVELOPMENT

                               WITNESSES

THOMAS C. DORR, UNDER SECRETARY FOR RURAL DEVELOPMENT
ARTHUR A. GARCIA, ADMINISTRATOR, RURAL HOUSING SERVICE
LUIS LUNA, DEPUTY ADMINISTRATOR, OFFICE OF COMMUNITY DEVELOPMENT
HILDA LEGG, ADMINISTRATOR, RURAL UTILITIES SERVICE
JOHN ROSSO, ADMINISTRATOR, RURAL BUSINESS-COOPERATIVE SERVICE
STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

                       Introduction of Witnesses

    Mr. Bonilla. The subcommittee will come to order. We are 
delighted this morning to have before us Mr. Tom Dorr, the 
Under Secretary for Rural Development, making his first 
appearance before this subcommittee. We welcome you, Tom.
    Also appearing before the subcommittee for the first time 
today are Mr. Art Garcia, Administrator of the Rural Housing 
Service, and Mr. Luis Luna, also for the first time, Deputy 
Administrator for the Office of Community Development. But back 
with us for a second time is Ms. Hilda Legg, Administrator of 
the Rural Utilities Service, and Mr. John Rosso, the 
Administrator of Rural Business Cooperative Service, and of 
course Steve Dewhurst is joining us also this morning.
    Mr. Dorr, we welcome your testimony today as well as those 
of your associates, who administer so many of these projects 
that are in some cases more important than any other projects 
in members' districts that have these economic issues and 
problems to deal with, and we are looking forward to your 
testimony.
    When Ms. Kaptur arrives, I will yield to her for opening 
remarks. I am told she is on her way and will be here shortly. 
We have upwards of half a dozen simultaneous subcommittee 
hearings on appropriations going on this morning, and a 
briefing by Homeland Security Director Ridge that is going to 
happen later this morning as well. So members will be coming in 
and out as you present your testimony.
    Ms. Kaptur has just entered, so Ms. Kaptur, would you like 
to make some opening remarks, or would you like to have the 
testimony and then do your remarks?
    Ms. Kaptur. I will just make a brief statement.
    Mr. Bonilla. All right.
    Ms. Kaptur. I wanted to welcome the Under Secretary and all 
of your associates, and to say that we certainly view the Rural 
Development programs as vital to the sustenance of the 
agricultural communities across this country. I suppose it is 
not unusual that we had a John Deere Tractor in the reflecting 
pool this week. [Laughter.]
    And I sort of like the Under Secretary's idea that some of 
the investments in rural America are indeed--you can look upon 
them as venture capital.
    The shortfalls that we have had in so many accounts over 
the years, particularly water and sewer, continue to be a 
problem, a backlog, and we will talk about that more during the 
question period, but if ever your intelligence and commitment 
was needed to sustain rural America and help her earn from the 
market, rather than from the Government, it was never more 
needed than now. So we welcome you and look forward to your 
testimony.
    And thank, Mr. Chairman. I apologize for being late. 
Because of the situation outside, could not find a way into the 
Capitol today. [Laughter.]
    Mr. Bonilla. Well, these are difficult times for all of us, 
not only with everything going on, but logistically, trying to 
get around this place is harder than ever.
    Mr. Dorr, your statement and the statements of your 
administrators have all been entered into the record, so if you 
would like to make some opening remarks and highlight your 
statement, that would be great, and at this time I turn it over 
to you.

                           Opening Statement

    Mr. Dorr. Thank you, Mr. Chairman, Ranking Member Kaptur. I 
appreciate the opportunity to be here. It is obviously a 
difficult time in the course of our Nation, so the fact that we 
have the opportunity to get together and discuss these issues, 
I think we are all appreciative.
    Again, thank you, Mr. Chairman.
    Mr. Chairman and members of the committee, I appreciate the 
opportunity to come before this committee to present to you the 
President's fiscal year 2004 budget request for USDA's Rural 
Development.
    This is my first opportunity to appear before you as Under 
Secretary for Rural Development, and I am honored by the 
opportunity President Bush has given me to serve my country and 
to assist him in directing Federal resources to help rural 
America grow and prosper in an ever-changing environment.
    My own roots in rural America run deep. For all but 9 years 
of my life, I have lived, worked and enjoyed life on a farm in 
Northwest Iowa, and I am appreciative for the values these 
experiences have instilled in me.
    I come to work each day determined to apply those 
fundamental values and life experiences to renew the energy and 
belief in all of rural America. This sensitivity and belief in 
ourselves, not just as an agency or department, but our belief 
in the good people of rural America will drive all our efforts 
in Rural Development.
    The President's 2004 budget proposal is key to economic 
revitalization in rural America. It strongly supports our 
vision of Rural Development as rural America's venture 
capitalist. Rural Development provides equity, liquidity and 
technical assistance to finance and foster growth in existing 
and new opportunities for home ownership, business development 
and critical community and technology infrastructure. The 
return on this equity is the economic growth realized through 
direct assistance and incentivizing private market forces. It 
is with this vision in mind that Rural Development's mission 
has been designed to deliver programs in a way that will 
support increasing economic opportunity and improving the 
quality of life of all rural residents throughout rural 
America.

                          OVERVIEW OF PROGRAMS

    Historically, Rural Development has been associated with 
the old Farmers Home Administration, the lender of last resort. 
However, in order to properly address these mission goals, it 
was important to recognize the changes that have occurred 
throughout rural America. With a renewed sense of understanding 
and purpose, Rural Development must, as rural America's venture 
capitalist, utilize the tools and resources at hand to support 
new economic growth opportunity in rural America.
    Through Rural Development's Rural Housing Service, Rural 
Business-Cooperative Service, and Rural Utility Service, we 
offer a multitude of programs with a common vision to support 
economic development. While they may be traditional in name, 
they must be used in new and innovative ways, and work as one 
to support the Rural Development mission.

                         RURAL HOUSING SERVICE

    Let me share with you a brief overview of the wide range of 
programs we administer. Our Rural Housing Service forms the 
bedrock of this Administration's commitment to rural America. 
The President feels a safe, secure home is the foundation for 
the family unit, and this is why the President has proposed a 
32 percent increase for single-family housing direct loans in 
his 2004 budget. Owning a home is the oldest and best form to 
build equity, and we must encourage more families to invest in 
their future. This investment will help families build wealth, 
lead to job growth, and create a generation of new economic 
activity in rural communities. In general we provide loans and 
grants for single family, multi-family and farm labor housing. 
We also provide rural community facility loans and grants for 
municipal, health care, child and adult care facilities, as 
well as public safety equipment.
    The President has set a goal of assisting 5\1/2\ million 
more minority families in attaining their dream of home 
ownership by the year of 2010. In order to meet this goal we 
must be aggressive in ensuring that America's minority families 
can gain access to the necessary financial resources, and I 
particularly want to thank this committee for its efforts in 
fiscal year 2003 that allowed Rural Development to convert $11 
million in unused self-help carryover funds to support $900 
million in guaranteed single family loan funding. Through the 
good work of this committee, 12,000 rural families will have 
the opportunity to realize their dream of home ownership, and 
for that I thank you all.

                   RURAL BUSINESS-COOPERATIVE SERVICE

    Through our Rural Business programs we provide business and 
industry guaranteed loans. We fund the intermediary relending 
program which provides capital for local revolving loan funds, 
and we have aggressively implemented the Value-Added 
Agricultural Product Market Development grant program. An added 
focus this year is the implementation of the Farm Bill's Rural 
Business Investment Program. The $44 million in grants and $280 
million in loan guarantees, will promote business and job 
opportunities through local investments. We will need, however, 
a legislative adjustment to shore up the limited support SBA is 
able to provide due to other responsibilities. This $324 
million is important to rural America, and we will continue our 
aggressive efforts to expeditiously implement this program.
    And we must look to other potential opportunities for 
economic growth, such as the development and production of 
renewable energy here in the United States, which by the end of 
the current fiscal year we will have invested over $120 million 
to support local energy development efforts.
    As we implement these business programs we should be 
mindful of the need to improve business knowledge, skills and 
give serious attention to business strategies, finance, 
marketing and decision making that will enable farmers, 
business and community leaders to lead dynamic, creative 
businesses that can succeed.

                        RURAL UTILITIES SERVICE

    In our Rural Utilities programs we support technology 
infrastructure through rural broadband, telemedicine and 
distance learning, rural community water and wastewater loan 
and grant programs, and electric and telecommunications direct 
and guaranteed loan programs. Our utility programs must focus 
on supporting the development of data and telecommunications 
infrastructure that will allow rural America to remain 
economically viable in a global economy.
    I can assure you that regardless of whether we seek 
discretionary or mandatory funding, the President's commitment 
to rural America is rock solid. We believe the $1.6 billion 
already provided in mandatory spending for renewable energy and 
broadband development, along with over $4 billion to support 
rural home ownership, will promote significant economic 
opportunities.
    It is important to remember that our effectiveness in 
delivering all of our rural development programs will 
ultimately be measured by a rigorous standard of 
accountability. We believe it is essential to be accountable to 
our Congress, President, and most importantly the rural 
residents which our programs are intended to benefit.

                           RURAL COOPERATIVES

    In that vein that we have several major initiatives under 
way. One of our top initiatives is to look at the effectiveness 
of the current cooperative model for assisting farmers and 
ranchers. The traditional model was developed with good 
intentions. However, cooperatives are now struggling to convert 
the equity and dreams of many rural Americans into the kind of 
economic opportunity they need and desire. And Rural 
Development's Business-Cooperative Service group should be at 
the focal point of this discussion, and we intend to be.
    We are also focused on addressing and shoring up our multi-
family housing portfolio. There are many converging dynamics 
relative to the current portfolio, which includes several aging 
building complexes over 20-years-old. Another focus is to work 
harder to ensure that the people of rural America are aware of 
what is available to assist them with their local efforts to 
increase economic opportunities and improve their quality of 
life. Simply put, I believe that local communities are cradles 
of innovation, and if properly encouraged and assisted, they 
will provide models and vehicles to help all of rural America 
better address its changing landscape.
    Rural communities, much like agriculture, have been 
undergoing critical changes that are important to their long-
term sustainability and growth. The goal of the President and 
Rural Development is to support these communities and place at 
their disposal the tools they need to succeed. I know you share 
this common value and desire to support rural America.

                    RURAL DEVELOPMENT BUDGET REQUEST

    Mr. Chairman, the President's commitment to rural America 
is reflected in the budget request for fiscal year 2004. The 
Rural Development request totals $2.3 billion in budget 
authority to support 12 billion in direct loans, loan 
guarantees, grants and technical assistance, as well as to 
cover associated costs with administering these programs.
    In summary, Rural Development and this Administration are 
committed to supporting efforts to bring economic opportunities 
and an improved quality of life to rural families and their 
communities. We appreciate the support this committee has 
provided to this mission and to rural America. So, at this time 
the administration and I would be happy to answer any questions 
that you may have. Thank you very much.
    [The prepared statements of Thomas Dorr, Hilda Gay Legg, 
Arthur Garcia, and John Rosso follow:]

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                       CONSISTENCY PLANS PROJECT

    Mr. Bonilla. Thank you, Mr. Dorr, for your excellent 
testimony. Before we start with questions, I want to commend 
you on an initiative that you have undertaken to make each 
Rural Development Office function in a consistent way. I 
believe you call it the Consistency Plans Project. We have 
heard some positive reports from a lot of states, and they 
report that although that this is going to take some work to 
implement, that feedback is already positive and they are 
complimenting your leadership and you are already providing a 
framework and diagrams for how each office ought to work to let 
them do their jobs again in a consistent way. So we have taken 
note of that, and I just want to say that before we begin our 
questions.

             OFFICE OF THE UNDER SECRETARY BUDGET REQUESTS

    The first question is have is: for the appropriation for 
the Office of the Under Secretary for Rural Development of 
fiscal year 2003 was $640,000. The budget request for fiscal 
2004 is $913,000, which is about a 43 percent increase. Could 
you tell us why you need this money?
    Mr. Dorr. Excuse me. Would you restate that question?
    Mr. Bonilla. Sure. At 2003 the Office of the Under 
Secretary for Rural Development was $640,000. The budget 
request for the coming year is $913,000. So we calculate that 
to be a 43 percent increase, and we want to know why, what that 
is for.
    Mr. Dorr. If I may, I would like to follow up, and provide 
a response for the record.
    Mr. Bonilla. If you would provide us an answer in writing, 
we would be happy with that.
    Mr. Dorr. We would be delighted to do that.

              Office of the Under Secretary Budget Request

    The Budget proposes $913,000 for the Office of the Under 
Secretary for Rural Development in the FY 2004 budget, which is 
an increase of $277,000 over the 2003 appropriations level of 
$636,000. This amount represents the required increase to reach 
an optimal staffing level and provide the necessary support 
costs for the work of the Rural Development mission area. The 
request is representative of those for other mission areas 
across the Department.

       VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT GRANTS

    Mr. Bonilla. Let me move now to the Value-Added 
Agricultural Product Market Development grants. I did mention 
to Mr. Latham--he will be here shortly--that this is not in any 
way--this question is not designed to showcase Iowa in any way 
whatsoever, but as you see what I am about to say, you are 
going to see what I am talking about here.
    The Farm Bill authorized CCC spending for Value-Added 
Agricultural Product Market Development grants, and USDA was 
able to award $33 million in 2002, but I am concerned about the 
lopsidedness, the geographic lopsidedness of these grants, and 
I will tell you why as I outline some numbers here in a second, 
because if you look at the State-by-State allocation of these 
grants, they appear to be skewed toward the Midwest, and we are 
not again trying to disparage anything that is going on in that 
part of the country, but for example, six states received $14.9 
million or 45 percent of the $33 million that was awarded. 
Example, Iowa $5.6 million; Missouri $2.8; Kansas $2.1 million; 
Minnesota $2.0; Michigan $1.2; Illinois $1.2; and now if you 
look at how that contrasts to some of the grants awards from 
the South and one from the Northeast, listen to this, Texas, 
$626,000; Mississippi, $329,000; Georgia $315,000; Virginia 
$308,000; Georgia--I mentioned that one already--Florida 
$147,000; Connecticut $12,500. Six states received $1.6 million 
or 5.3 percent of the awards.
    Now, again, we are not trying to take anything away from 
anyone. We just are very concerned about the bulk of these 
awards going to just one geographic area in this country. What 
can we do in the South, Southwest, other parts of the country, 
to see that these things are distributed in a more equitable 
way, where the 2002 award decisions made at the state level or 
at the headquarters level? And the final aspect of my question 
on this subject is, please provide for the record a State by 
State breakout of the total value of applications received, 
versus the amount awarded for 2002. So if you would address 
this big problem that we have pointed out, I would appreciate 
that.
    Mr. Dorr. Of course. First of all, we will provide for the 
record the information that you just requested. As you know, 
the program originated in fiscal year 2001 in which we were 
able to award $20 million in two $10 million tranches. That 
program was a demonstration program. I think people were a 
little bit unsure exactly how it was going to unfold, and the 
funds were made available through a Notice of Funds 
Availability (NOFA) process that was administered at the 
national level. At the completion of that first year's worth of 
awards, it was my understanding that there was some concern 
that we were not addressing all the necessary issues in an 
adequate manner. As a result, the Rural Business-Cooperative 
Service began to aggressively reevaluate the process in 
conjunction with that program, again, not certain whether there 
would be a program again, which obviously there is.
    One of the things they did for 2002 was to undertake a 
process by which all of the applications from any State would 
be first funneled through the State director's office to make 
certain that those applications were solid applications with 
regard to the requirements laid out in the NOFA. Once that was 
done, we hired a contractor to evaluate these applications in 
an extensive impartial way, their viability, and rank them 
before they were sent to the national office. The final 
rankings and decisions were made at the national office, but 
generally based on the guidance provided by the outside 
contractor.
    This is a new program and clearly there were some 
differences in how this thing was rolled out. I would simply 
point out that the first thing we are now doing is developing 
rules for this program. There is clearly discussion on whether 
or not this should be a block grant program where each State 
receives a certain amount of money, or whether we award funds 
at the national level. My view is that if our intention is to 
give those entrepreneurial and new opportunities the most 
effective chance at being successful, we do need national 
program rules.
    Secondly, I think, whether you agree with this or not, 
there had been an ongoing emphasis on value-added new product 
development that had been occurring as a result of the original 
ethanol and biomass fuels initiatives that evolved out of the 
Midwest. Consequently, I think there were a core number of 
folks who probably were more in tune with this sort of value-
added discussion and initiative at the outset of these 
programs. I think that as the rules are developed and as the 
program is carried out, we will probably see a much more 
balanced array of awards. There are many good ideas all across 
the country. I have had an opportunity to visit with people in 
the West who clearly have given this extensive thought, and my 
sense is that people around the country are now much better 
prepared to pursue these grants. The competition will be more 
intense, and as a result I think the dispersion of these grants 
will probably be far greater than it was last year.
    I will be happy to provide information on selection 
criteria and a State by State breakout of the total value of 
applications received, as compared to the amount awarded for 
2002.
    [The information follows:]

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    Mr. Bonilla. We will be keeping an eye on that as well, and 
we appreciate that you will as well.
    Just as a final comment, because I am trying to set an 
example here and keep to the five-minute limit, although I know 
I am over my time as well, Texas did receive in 2002, 14 
applications totaling $2.7 million, and of those, they were 
approved for five applications totaling $625,000. So we are 
going to be watching that very closely and we appreciate your 
attention to this as well.
    Mr. Dorr. I appreciate your concern.
    Mr. Bonilla. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    I also want to begin with an apology. I have to go across 
the hall to our other subcommittee, the other subcommittee on 
which I am number two in seniority on our side of the aisle, 
and I want to thank the Chairman if he had anything to do with 
locating the meeting over there so I do not have to run over to 
the Capitol. It is a big help.
    And so I am going to ask my colleague, Mr. Hinchey, if he 
would take the chair upon my leaving, and then I will come back 
when I am finished there.

                               BIOENERGY

    Mr. Secretary, I am so glad you are from Iowa, and that is 
really ground zero for the biofuels development that our 
country is experiencing. And I visited many. In fact I have a 
huge picture in my district office in front of an ethanol pump 
in your State because people in my State think I am at Disney 
World. They do not think that that really exists in America. So 
I think you are in a special position to really help us move 
this industry forward. Lots of other States cannot conceive of 
what you have already done out there, and I truly do look to 
your leadership on that, and I will have many questions in my 
second round in the area of biofuels and bioenergy. My goal, 
our country's goal should be to displace the $60 billion worth 
of imported petroleum, whether it is in Iraq, whether it is in 
Saudi Arabia, in Kuwait, United Arab Emirates, Nigeria, it does 
not matter to me. We ought to be energy self sufficient here at 
home, and I will tell you it has been really hard to get the 
Department of Agriculture to be a player. She has been 
shrinking from that responsibility, and if you look at what the 
administration did with the budget over at Department of 
Energy, the modest increase in the hydrogen fuel cell research 
comes out of biomass, and a $70 million reduction in the 
biomass accounts over there, and USDA just simply has to change 
its bureaucratic thinking about this industry. So more to come 
on that.

                            BUDGET DECREASE

    But in terms of the overall budget, as I read your 
submission, overall for Rural Development, which is so vital to 
the future of rural America, it actually is a half a billion 
dollar decrease cumulatively in the way that we have looked 
across accounts. Example, in the RCAP program, there is 
actually a reduction below the 2003 level of $429 million. The 
2003 bill that we passed provided $907 million. Your request is 
$478 million. So it is nearly a half a billion dollar decrease. 
In Rural Housing, when I know I have, just in my own region, 
such unmet need, a $78 million decrease in rural housing. Our 
2003 bill provided $1.57 billion. Your request is for $1.5 
billion in loans.
    In Rural Business-Cooperative Service Development another 
$12 million decrease.
    In Rural Utilities, which is just an incredible area I 
would ask you to give particular attention to, another $33 
million increase, and changing from grants to almost all loans, 
if not all loans, which is a real problem in communities that 
really do not have the economic wherewithal yet to provide for 
all the services that are necessary. I would encourage you to 
look at the backlog around the country and to really do a 
little econometric study of the backlog and the capability of 
these communities to pay.
    And in terms of the overall loan levels, from your entire 
budget, you are actually about $4.2 billion less in loan levels 
in the entire bill over what we were able to enact last year. 
And so that is about a third cut. And I am wondering if you or 
any of your colleagues want to comment on that? How are we 
going to help jump start rural America with these kinds of 
proposed cuts?

                        WATER AND WASTE FUNDING

    Mr. Dorr. Well, thank you for the question. First of all, 
let me simply say that we do believe our requests are adequate 
relative to the issues we are addressing and need to address at 
this point. I think I would first be remiss if I did not 
congratulate and point out how effective our Rural Utilities 
Service team was in terms of their ability to get out the Farm 
Bill water and waste funding. Nearly three-quarters of a 
billion dollars was provided in the 2002 Farm Bill, which we 
obligated to rural communities by August of last year. Quite 
frankly, that additional funding did help us take care of a 
large amount of the water and waste backlog that we were 
experiencing at that time. So, that addressed a number of 
needs.
    In the area of the Rural Business-Coop Service----
    Ms. Kaptur. Mr. Secretary, if I could just interject there, 
my understanding is--and you clarify me if I am wrong--that the 
Rural Utilities Service in the 2003 bill we provided $112 
million of effectively $6.1 billion in loans, and your request 
this year is for half that much, $79 million in loans which 
could only support $3.4 billion in loans. Am I correct in my 
understanding? So Rural Utilities 2003, $112 million to support 
$6.1 billion in loans, 2004 request, half that much $79 
million, supporting $3.4 billion in loans. Are you telling me 
there is no backlog that you have accommodated to that and that 
is why the cut is proposed?
    Mr. Dorr. I defer that to Ms. Legg.
    Ms. Legg. We do have a reduction. I do not have the 79 
million in front of me, but I will address the position. It is 
a $200 million increase in the direct loan program is what we 
are proposing, and yes, ma'am, that does correspond with a 
decrease in the grant program. The program lending level 
remains the same as last year, but the ratio of the mix of loan 
and grants has changed relative to, we think for one reason. 
Obviously, the interest rate is lower now, which helps loans be 
more viable, but as Under Secretary Dorr mentioned, the excess 
of $700 million that you all gave to us during the farm bill 
allowed us to address the most needy in the backlog. In that 
particular program that he mentioned we got out in three 
months, we did primarily the 50/50, 50 percent grant, 50 
percent loan. So we were able to focus that money on the 
greatest need area. So that coupled with obviously competing 
interest in the program, I mean in the budget nationwide, and 
along with the interest rate reduction, we believe the 75/25 
percent, maintain the program level, but to put it in that 
ratio mix will address the needs, given all the competition for 
the money.
    Quite frankly, that also reflects our backlog application 
numbers more closely as well in terms of the mix of the ratio, 
75/25. That is about 68 such, 70.
    Ms. Kaptur. Thank you very much, Ms. Legg.
    I know my time has expired, Mr. Secretary, but I do say 
that I would just encourage you to look at the huge backlog, 
particularly in the electric area, and in view of what is 
happening with the economy with unemployment and so forth, 
perhaps the grant program should not be diminished quite as 
much as has been done. There will be many, many communities 
that will be cut out of eligibility. They just simply cannot 
afford it.
    Mr. Dorr. Congresswoman Kaptur, if I could give you one 
other quick observation. Obviously we built our budget based on 
the President's 2003 budget proposal, and at the time that was 
submitted, clearly, we were not aware of what ultimately, the 
FY 2003 appropriation would be. So some of these disparities 
result from comparisons to the President's FY 2003 budget, as 
opposed to comparison to the actual appropriation.
    Mr. Bonilla. Thank you, Ms. Kaptur.
    Thank you, Mr. Dorr.
    Ms. Emerson.
    Ms. Emerson. Thank you, Mr. Chairman.

                   MISSOURI RURAL DEVELOPMENT OFFICE

    Welcome. I just want to say, before I ask my questions, 
what a great job your Missouri Rural Development Office is 
doing. I want that on the record, please. [Laughter.]
    Ms. Emerson. I am very proud that they have gotten their 
administrative costs down to under 3 percent. That is very 
important.
    And, Mr. Chairman, I also have some questions for the 
record, but I am going to have to go to another meeting, so I 
will not be able to stay.

                          PREDEVELOPMENT FUNDS

    Mr. Dorr, in the past this is something we have talked 
about, Rural Development has not been able to help those in 
greatest need because of their inability to either pay for 
services required in the application process or perform those 
services themselves. Because of that, poor applicants are not 
able to participate in the Rural Development programs to 
benefit their area. We addressed this problem in the omnibus 
bill by providing funds that could be used toward 
predevelopment cost to these applicants. Given the fact that 
there is not a lot of time left in fiscal 2003 I am curious 
about the time required to implement the language. Can you give 
me an update about where you all are in the process?
    Mr. Dorr. Yes. The process that will govern the 
Predevelopment program those and how those funds are 
administered is in the process of being developed, and funds 
will be made available when the water and waste allocations are 
made to the States. Because it is only a million dollars, most 
of the states will identify projects that clearly need 
predevelopment costs, and pass those up to the national office; 
we will ascertain how they fit in the overall mix so that we 
make sure that in the various poverty level communities the 
most serious needs will be addressed. We believe this will be 
administered and rolled out in the very near future.
    Ms. Emerson. Are there any plans afoot to continue offering 
funding for predevelopment costs beyond this fiscal year?
    Mr. Dorr. Ms. Legg.
    Ms. Legg. There is no request at this point. However, 
predevelopment costs have always been a part of the program 
that could ultimately be addressed with grant and loan funds. 
We just were not able to fund the grants at the beginning of 
the process. They have been a part of the projected total cost, 
but at this point there is no explicit request for FY 2004.
    Ms. Emerson. Well, I do want to urge you all to really take 
a close look at that situation because too many of the 
communities in my district, and certainly I know others around 
the country simply cannot even go ahead and apply for any kind 
of program because they do not have the wherewithal to do it, 
and so, obviously, it makes real good sense to, if you can do 
something on the back end, just flip it and do it on the front 
end.

                        CONSOLIDATION OF OFFICES

    My next question, Mr. Dorr, concerns consolidation of 
offices. When Secretary Veneman was here, she confirmed that 
you all were in the process of consolidating some of the 
offices within USDA including Rural Development. Now, for the 
record, I am not thrilled with this plan, and I want you to 
know that, and I can only imagine the problems that that would 
create for the farmers in my very, very rural district who 
would have to travel forever to get somewhere, to one of your 
offices, and as well as around the country. I believe that we 
need to take a much closer look at this before any action is 
taken.
    Can you give me any assurance that there will be no closure 
of offices until we have had an opportunity to study this 
issue, possibly no closures during this calendar year?
    Mr. Dorr. I am not in a position to give you any commitment 
with regard to office closures, whether they will or will not 
occur. We are obviously working in conjunction with the 
Secretary, as she develops her plan. We have, as the Chairman 
has indicated, developed a plan within Rural Development, and I 
think it is fair to make a couple of observations. After the 
reorganization that took place in the mid 1990s, the 
traditional Farmers Home Administration farm operating and farm 
ownership loans were transferred to Farm Service Administration 
(FSA). Rural Development essentially became a much more focused 
banking and economic development operation. Our direct 
involvement with producers or farmers and agriculture producers 
was much reduced. Quite frankly, our programs revolve around 
technical assistance, banking operations, home ownership issues 
and the like.
    What we found was that there was not a consistency of job 
descriptions, definitions, and an understanding of who was 
responsible for what in Rural Development. So our consistency 
plan, as mentioned by the Chairman early on, was designed to 
bring a level of consistency so that everyone understood the 
plans, everyone understood what the jobs were and were about 
and how we were structured. It is our hope that through this 
existing plan we are better positioned to deliver our programs 
in a more effective way than we have been in the past. Whether 
or not the consistency plan ultimately allows certain State 
Directors to recommend reorganizations of their offices, which 
may include moving some or closing some others, remains to be 
seen. This process will go through the Secretary's plan that is 
already under way to look at this whole issue, and it will be 
out of that process that determinations will be made.
    Rural Development will not get ahead of the game or the 
issue, but we will provide our efforts to make sure that our 
programs are delivered effectively and easily accessed by our 
constituents.
    Ms. Emerson. I appreciate that answer. I will reiterate my 
concern about consolidation.
    I have other questions, Mr. Chairman, but since my time is 
up, I will have to submit them for the record. Thank you.
    Mr. Bonilla. Thank you, Ms. Emerson.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    Thank you, Mr. Dorr, for being here.

                     FARM LABOR HOUSING--CALIFORNIA

    I am the only one on this committee that represents 
California, a large agriculture State and I am very interested 
in your programs. I mean as I counted up the responsibilities 
of your department, you have 43 categorical programs to 
administer, and all of them I think really important. 
Unfortunately, with each of them having different requirements, 
and the caps, the requirements, the size, the size of 
communities oftentimes just does not fit the problem. What I 
really want to encourage you to do is to see how we can work 
with HUD and other agencies to address the problem. Let me 
explain the problem were I live.
    The county of Monterey, which is a central part of 
California on the coast, produces about $2\1/2\ billion worth 
of just specialty crops, about 85 different kinds of crops, 
essentially everything that is in a salad, and it is the salad 
bowl of the world. It has, according to the National Builders 
Exchange, the most expensive housing in America, and yet it has 
the largest agricultural workforce because specialty crops are 
not mechanically harvested. Therefore we have no place for farm 
workers, and we have busted one rancher who was actually having 
the farm workers sleep in caves in his property.
    What we do have, fortunately, is in the town of Soledad, 
right in the middle of the valley, two beautifully large pieces 
of property that are owned by your department, one of them with 
just really awful housing on it. I mean it ought to be torn 
down, but it is housing people, and the other a vacant lot 
right now. What I want to do is sort of challenge the 
department, in working with all of the different programs, to 
see if we can build a model mixed income housing with your 
department on these properties, and really use high density but 
very attractive housing, and I would like suggestions of how we 
might be able to do that and do it really quickly. I think you 
have the discretion to kind of put these packages together. The 
property is under your jurisdiction. The city has a housing 
authority just for those two properties. The interest there 
among the growers, if you have noticed in the press some of the 
growers in California, particularly in the wine industry, have 
taxed themselves to build housing for rural America. I might 
want to express here that there are some business people in 
this country who do not follow the President's tax cut 
permanent squeeze approach and have actually realized that you 
have to have revenues to solve problems, and in California 
there are very progressive business people who are essentially 
out there raising taxes right now when the rest of the country 
is running the other way. So these taxes are going to help 
workers, and I would like to see if we could use the Rural 
Development Department to actually solve some problems in an 
area where they definitely are due to agriculture.
    Mr. Dorr. I appreciate that question, Congressman Farr, as 
well as the observations. Clearly this administration is very, 
very sensitive to the issue of housing. It is a major 
initiative of the President's. Quite frankly, we feel very 
strongly about it at Rural Development. I will tell you that I 
had the opportunity to spend a bit of time at a recent 
announcement by the Chase Finance Corporation, who announced a 
renewed commitment of an additional $500 billion to minority 
home ownership, and one of the observations they made was that 
our rural housing program was one of their better opportunities 
for two reasons. Number one----
    Mr. Farr. Can I interrupt there? If the President is 
committed to rural housing why is the program being cut by $1.4 
billion in housing loans?

                  HOUSING LOANS AND RENTAL ASSISTANCE

    Mr. Dorr. Well, in fact, I am not sure that we are. Our 
direct single family housing loans will be up over 30 percent, 
and those are loans that enable rural Americans to get into 
housing for interest rates of about 1 percent. And rental 
assistance that we have requested for multi-family tenants, I 
believe is the greatest in the history of the program in the 
2004 budget. For the poorest and least served sector of the 
housing community, which you are just now talking about in farm 
labor housing, we are actually asking for an increase in that 
program in the 2004 budget. Again, as I pointed out to 
Congresswoman Kaptur, our budget proposals came out clearly 
before the appropriation was passed, and so that is what we 
were benchmarking our request upon.
    We know that there are a number of needs out there. The 
multi-family section 515 program, which is part and parcel of 
this, is a program that has had a number of issues. I have been 
here for about 7 months, and we are working aggressively to try 
to get our hands around those issues to get a better 
determination of what that multi-family housing portfolio is, 
where the demands are and where they are not, and what we need 
to do to maintain an adequate inventory to accommodate the 
elderly, the single-parent families, as well as those farm 
laborers who have needs for housing that are currently not 
being met.
    Mr. Farr. My time is up, but I hope we can work the 
department to address these problems in Salinas Valley on your 
beautiful real estate.
    [The information follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Bonilla. Thank you, Mr. Farr.
    Mr. Goode.
    Mr. Goode. Thank you, Mr. Chairman.

                     COMMUNITY FACILITIES--VIRGINIA

    I want to tell Mr. Dorr and Ms. Legg, I appreciate the work 
that Rural Development and RUS does in Virginia. Your persons 
have been very cooperative and good to work with.
    I do want to ask you about a situation that arose 
yesterday. Mecklenburg County is a rural county, has lost a lot 
of jobs. It is a tobacco growing area. And the commute to the 
health center there is seeking a loan from Rural Development to 
renovate several buildings that it has its facility, plus help 
the little two of Boydton. They were working on getting a loan 
with Rural Development, and they thought, since tax credits 
were involved, that the cash they would get for tax credits 
could be paid at the end of the loan. Now they find they have 
got to get the money up front from some source, and it is tough 
to sell a tax credit before the building is built. They would 
have no problem once the building is renovated and 
reconstructed.
    But I was told that if they were going through a HUD 
process they would not have to front the money, and I am just 
wondering if that is true, that those that live in urban areas 
have an advantage over those that live in rural areas? The 
consulting person that was with the director of the clinic 
there, stated that was the case. I am wondering if that is the 
case. Does HUD have advantage over--they said if they were in 
the city of Richmond or the city of Washington, D.C., they 
could structure the loan easily, but they cannot do it with 
Rural Development.
    Mr. Dorr. Congressman Goode, that is clearly a detail that 
I am not familiar with or in a position to answer. I would 
defer to Mr. Garcia. I do not know if he has that answer at his 
fingertips. If not, we will get back to you.
    Mr. Garcia. Congressman Goode, I was not aware of that 
situation, but I have Mr. Alsop with me, who is head of our 
community facilities. What we will do is as soon as we get 
back, look at this situation, research it for you and provide 
your office with a full response as to the difference between 
our program and the HUD program. We are very concerned about 
what is happening in Virginia with our community facilities. 
Last year we did the training center for police in the 
Shenandoah Valley. We have a very active staff in community 
facilities in Virginia.
    We will get a full report back to you on this situation.
    Mr. Goode. And it is Mecklenburg County.
    Mr. Garcia. Got it. [Laughter.]
    [The information follows:]

                Boydton Community Health Facility, Inc.

    The financing package for the Boydton Community Health 
Facility, Inc., for the restoration and remodeling of three 
buildings in Boydton's historic district includes a $4,303,700 
Rural Development Community Facilities loan, a $460,400 
Community Development Block Grant from the Department of 
Housing and Urban Development, and a $100,000 grant from the 
Virginia Health Foundation.
    Virginia tax credit law does not allow tax credits to go to 
nonprofit corporations. The statutes authorizing the Community 
Facilities program require that an eligible applicant be a 
nonprofit corporation, for-profit corporation operated as a 
nonprofit corporation, a unit of local government, or an Indian 
tribe. Therefore, tax credits cannot benefit any of our 
borrowers in Virginia, or any of HUD's borrowers in Virginia 
that are nonprofit corporations. In this instance, the laws 
governing tax credits are applied equally in rural and urban 
areas.
    Several types of entities were originally involved in the 
Boydton project, including a for-profit corporation which is 
eligible for tax credits. Once the facility is substantially 
complete, we understand that approximately $532,500 will be 
made available to the for-profit entity from Virginia 
Rehabilitation Tax Credits to purchase equipment.

    Mr. Goode. All right. Thank you, Mr. Chair.
    Mr. Bonilla. Thank you, Mr. Goode, and if I could ask that 
this report, this response, can it come back directly to the 
subcommittee as well as directly to Mr. Goode? That would be 
appreciated.
    Mr. Garcia. Yes, Mr. Chairman.
    Mr. Bonilla. Thank you.
    Mr. Hinchey.

                             RURAL HOUSING

    Mr. Hinchey. [Off microphone.] Mr. Secretary, I wanted to 
ask you a question about housing programs in rural American. I 
think the work that you do is very important.
    We know that most of the substandard housing in America is 
in rural areas, not in urban areas. And the work that your 
agency does in rural development is very important. In some 
cases it is critically important to the people who live in 
those communities. We know that a disproportionate amount of 
the Nation's substandard housing would be a lot worse if it 
were not for the programs that you administer.

                           RENTAL ASSISTANCE

    Renters, for example, in rural areas, are the worst housed 
in the country. We know that one third of rural renters pay 
more than a third of their incomes for housing. The Section 515 
Rural Rental Housing Loan Program serves those low and very low 
income families and provides them, to the extent that it does, 
with safe, affordable housing.
    This year the President's budget cut Section 515 funding 
almost in half to $71 million, and it limits it to repair, 
rehabilitation and preservation. When USDA made this proposal 
last year, the Congress overruled it and put money back in the 
budget for new construction. If the fiscal year 2004 budget 
request for Section 515 is approved, it will be the first time 
in more than 30 years that the Federal Government builds no new 
rental units in rural America. Instead, the department proposes 
to postpone all new construction pending completion of an 
ongoing comprehensive program review.
    What are we going to do with our housing needs if we insist 
on cutting this program?

                         SECTION 515 PORTFOLIO

    Mr. Dorr. Well, we understand your concerns, Congressman 
Hinchey. There is no new construction for section 515 multi-
family housing in this budget. We feel very strongly that given 
the circumstances and the history of the 515 program, and 
particularly the age of the portfolio, that the most important 
thing we can do now is maintain the inventory. Through our 
efforts at repair and rehabilitation, and through equity loans, 
we must preserve the units. In the short term, the most 
important thing that we can do is make sure that we sustain the 
inventory that we have.
    This study that you talked about is one that I feel very 
strongly about getting done. Mr. Garcia will tell you that he 
has heard nothing more from me than that on this particular 
issue, simply because until we get our arms around the age and 
the status and the relationship of the contracts of this 
portfolio, it is going to be very difficult to sustain the 
housing inventory that we presently have. I think it is 
critically important that we do that, because, as you clearly 
pointed out, this is the only housing in many cases available 
for elderly and for single-parent families. Our budget proposal 
for FY 2004 is actually above what we requested a year ago, and 
clearly that was not what was in the bill that was provided for 
2003. We are requesting an increase over the FY 2003's request, 
in an effort to get a better handle on this issue.
    Mr. Hinchey. I thank you very much, but as you know, the 
Congress recognized the inadequacy of the request last year, 
and the fact that the request this year is slightly above what 
you requested last year, which was seen as grossly inadequate, 
does not really ameliorate the problem or the concern. And I 
understand your very lllegitimate interest in trying to get a 
better handle on the program and the need for a comprehensive 
study and review. But we do not need a comprehensive program 
review to understand that we have a very serious problem here, 
that there are an awful lot of people across this country who 
depend upon this program and who are living in substandard 
housing. That substandard housing includes situations which I 
will talk about later, that also have to do with poor water 
supplies and inadequate sewage facilities. There are the kinds 
of living standards that you would find in third world 
countries and be shocked by them, yet they prevail in this 
country. We know they are there.
    So studying the 515 program is a great idea to understand 
it more effectively, but reducing the funding does not make any 
sense. So I do not think it can be justified, and I certainly 
hope that you could reconsider your decision and ask the 
Congress for the kind of money, something close to it at least, 
that is needed here. Congress will respond.
    I would think that my time would be up, Mr. Chairman, but 
if I am allowed to proceed, I will be happy to do so.
    Mr. Bonilla. We will come back to you.
    Mr. Boyd. [Laughter.]

                       RURAL DEVELOPMENT SERVICES

    Mr. Boyd. Thank you very much, Mr. Chairman.
    And, Mr. Dorr, I want to echo the remarks of Mr. Goode. The 
people that I represent, the area that I represent, we deal 
with all of your folks on a regular basis, the utilities folks 
or the housing, RHS, RBS, community development folks. And they 
are very important. They provided very important services in an 
efficient manner over the years to help improve our 
communities, and so I want you to know that I, along with other 
members of this committee, recognize the importance of the work 
that you do.
    One of the things that I think that we have done very well 
in this country over the last 70, 75 years, improving the lives 
of folks in rural areas, are obviously in the utility, 
electricity utility area, and in telephone service, and those 
things which back then were considered maybe niceties to have, 
now are necessities for life. And you guys have played a 
tremendous role in that.

                            BROADBAND ACCESS

    Times change, and that changing need now is high-speed 
Internet. One of the things that is impeding the progress of 
our communities economically is the lack of high-speed 
Internet. Can you tell me if you see a shift in some efforts in 
your organization and tell me what you are doing to try to 
improve the high-speed Internet access in the rural areas?
    Mr. Dorr. Well, Congressman Boyd, I think you clearly have 
identified the single most significant issue relative to the 
infrastructure needs that will enable rural America to become 
competitive on a global basis, on a continuing basis, and allow 
them to increase the economic opportunities and quality of life 
in their communities. High speed access to the Internet will be 
as important today as electrification of rural America was back 
in the '30s and '40s, and developing telephoning across the 
rural areas as well.
    This Administration has committed approximately $1.45 
billion in guaranteed and direct loans and grants for the 
rollout of broadband capacity throughout rural America. As a 
result of the Farm Bill funds in 2002, the rules for this 
program were published and finalized in the Federal Register in 
the latter part of January, I believe January 30th. We are in 
the process now of receiving grant applications from all across 
the country. The assumption is that we should be able to fund 
most, if not all, of those applications that come in.
    In that vein, I think we have a very deliberate and a very 
strong program designed to address a number of these issues 
that you are talking about, and hopefully a year from now we 
will have a better idea of our ability to get these funds out 
and see how the program is going.

                             SUBSIDY RATES

    Mr. Boyd. In trying to read and understand the details of 
your budget request, I noticed a lot of shifting around of 
money in that particular category. Does not seem to be any 
significant increase or maybe no increase at all. But you 
shifted a lot of money from one account to the other, increased 
some, decreased the others. Would you like to address that in 
terms of how that helps implement this broad plan you have?
    Mr. Dorr. Well, I think what actually happened was there 
were some demonstration plans and there were some funds that 
were made available that were no-year funds that were not 
entirely used up. I will let Ms. Legg address that 
specifically, but I think the important point to note here is 
that with the decrease in subsidy rates, the ability to 
leverage a much larger program has been enhanced, and so we 
feel quite comfortable with the level of program support that 
we will have in these areas.
    If Ms. Legg has any other comments, I defer to her.
    Ms. Legg. Actually, I would just reinforce that. If you 
look at the FY 2002-2003 broadband program that is funded 
through the Farm Bill, and look at the FY 2004 request, it 
shows a subsidy rate reduction. Therefore, we can get a bigger 
bang for the buck.
    If you were looking at the projections based on the subsidy 
rate used for the Farm Bill, you would have looked at a three-
year program of about $1.2 billion. Now with the present FY 
2004 subsidy rate, we will be looking for in excess of $1.7 
billion in that broadband program. That is a very strong 
program, and we are really excited about the applications that 
are presently coming in.

                           DISTANCE LEARNING

    The distance learning and telemedicine grant program 
continues at the same level as the FY 2003 request. It is also 
a very strong program. But, you will see a reduction in the 
request compared to this year's appropriation. We are funded at 
$300 million for DLT loans. Quite frankly, Congressman, those 
loans, because they are to be delivered by the provider of 
either medical services or education, have simply not been in 
demand. Last year we funded approximately $16.6 million in 
loans. We are making, under Mr. Dorr's direction, a much more 
aggressive effort in outreach and marketing that loan program. 
As you know in the Rural Utilities Service we generally have 
not had to market; we have always had a backlog in our 
programs. This is one at which we are taking a very serious 
look, and trying to perform outreach, but that would be one of 
the shifts that you have noticed.
    Mr. Boyd. Thank you very much. I see my time is up.
    But before we leave this issue, Secretary Dorr, at some 
point in time the subsidy will have to go back up as interest 
rates go back up. Will the administration have a commitment to 
maintain the same level of program that we have now? I mean, 
that would be very important to us in the rural areas. I do not 
need a long answer.
    Mr. Dorr. The Administration has a strong commitment to 
rural America and I am sure that as those occasions evolve, we 
will evaluate them closely.
    Mr. Boyd. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Boyd.
    And I will now yield to the Vice Chairman of the 
subcommittee, Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman.
    And welcome everyone here. Mr. Dorr, everyone should know, 
originated from what was my old congressional district. I lost 
that part of the State in the reapportionment this time. I want 
to echo what Mr. Boyd was talking about, namely, the importance 
of telecommunications, particularly broadband in rural America. 
I think what you folks can do in that arena is most important, 
even more so than some of the farm policy efforts. It is 
important for the quality of life, for the potential for the 
future in rural America.
    Coming from a town of 168 people myself and living on a 
farm, I can tell you that we do not quite have access to the 
type of services oftentimes we find here in town or in more 
metropolitan areas. And with the quality of life and the 
quality of people that we have, I think our potential is great 
if in fact we have the means to grow and to prosper out there. 
The potential is there certainly, so what you are doing is 
extraordinarily important I think for the quality of life, for 
the future of rural America, more so again than some of the 
farm programs themselves.

                         RADIUM IN GROUNDWATER

    One of the major concerns we have, in a lot of the small 
communities, is the water quality and some of the EPA 
requirements like radium. Can you give me kind of an idea as to 
how the rural community advancement loans and emergency 
community water system grant programs are going, and what 
qualifications a community needs to qualify? We certainly have 
at least two communities that have real problems right now and 
it is very difficult to get assistance.
    Mr. Dorr. Well, first of all, Congressman Latham, I am 
delighted to be here with you, and it is good to see you again. 
We are sorry you are not our congressman, but we do have a----
    Mr. Latham. I know. That is where all the Republicans are--
--
    [Laughter.]
    Mr. Latham. Last year we got in a more competitive area.
    Mr. Dorr. I am not sure I want to go there, Congressman. 
[Laughter.]
    But you are right, these concerns for radium in local water 
systems in rural Iowa have been an ongoing issue, and one that 
I know the Rural Utilities Service has a direct involvement in 
addressing in terms of their programs as they work with the 
rural communities.
    What I would suggest we do on that specific issue is get 
back to you with a direct response on treatment and mitigation. 
If that would be satisfactory, we will get that to the Chairman 
and the committee and your office as well.
    [The information follows:]

                         Radium in Groundwater

    Radium is a radioactive metal that occurs naturally in 
trace amounts in rocks, soils, and groundwater. Radium readily 
dissolves in groundwater where acid conditions are found.
    The U.S. Environmental Protection Agency has established 
maximum contaminant levels for combined radium 226 and 228 and 
for gross alpha radiation in drinking water. Specific drinking 
water standards have not been established for radium 224 or 
other alpha emitters. The health risk is considered minimal. If 
a person consumed water containing five peco curies per liter, 
the EPA minimal standard, for one year, it would compare to one 
chest X-ray over the same period of time.
    Drinking water can be treated to remove radium and Rural 
Development can provide funding in the form of loan and/or 
grant assistance to eligible applicants. The USDA Rural 
Development office in Iowa has staff who are knowledgeable in 
the treatment of drinking water. They have dealt with the issue 
of radium for a number of years and should be the first point 
of contact for any Iowa community or rural water district.

          RURAL BUSINESS AND COOPERATIVE DEVELOPMENT PROGRAMS

    Mr. Latham. I would appreciate that very much. On Rural 
Business-Cooperative Service, I am curious about the funds you 
provide for the business opportunity grants and rural business 
enterprise grants. Is there any one part of that program, such 
as those distance learning projects, job training, land 
planning and technical assistance, start-up capital, etc., is 
that really absorbs most all of the funds, and are we able to 
properly target those dollars in the right direction? Is it 
working as anticipated do you think, and where do we get the 
most bang for the buck in all that?
    Mr. Dorr. Much of the funds go into the rural business 
enterprise grant program. We are requesting $44 million in that 
area, and $3 million for the rural business opportunity grant 
program.
    The rural business enterprise grant program is designed 
largely to finance and facilitate development of small and 
emerging private business enterprises, and the rural business 
opportunity grants provide technical assistance for business 
development planning in rural areas that would work more with 
nonprofits or Government agencies.

                 VALUE-ADDED DEVELOPMENT GRANT PROGRAM

    Mr. Latham. Does that apply to ethanol plants? I mean is 
this a source that we could----
    Mr. Dorr. Generally speaking, our Value-Added Development 
Grants have been more directly utilized by the ethanol plant 
programs, but rural business enterprise grants could be used in 
that vein if they applied accordingly; is that not correct, 
John?
    Mr. Rosso. Yes, sir, we can. We have a multitude of 
overlapping programs, if you might consider it such. Under the 
Value-Added Development Grant a great preponderance of our 
programs last year were for ethanol and alternative energy. Of 
course this year we have the Section 9006 under the energy 
title of the Farm Bill, which will further increase that. I 
think this year will probably be the year of the anaerobic 
digester as opposed to the ethanol plants, but they do come in 
cycles, and some of the funding is available under these 
programs. So, we have the capacity.
    These particular programs that you are addressing now are 
heavily utilized. We have a great demand for them, and they do 
a lot of good.
    Mr. Latham. Just as a follow up, where do we get the most 
bang for the buck? And where do most of the funds go today?
    Mr. Rosso. A lot of it goes to the development and the 
support of ongoing developing businesses, but we do put a lot 
of money into feasibility studies, the assistance with 
technological information and so on, because it is better to 
put that money up front and find out whether or not the project 
is going to work, than to fund it and find out after the fact 
it did not work. So, if you are asking me how many dollars do 
we spend on one or the other, or where do we get the most bang 
for the least amount of bucks, I would say it is in the 
advanced planning so we do not waste funds on the back end.
    Mr. Latham. Very good.
    Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Latham.
    Mr. Kingston.
    Mr. Kingston. Thank you, Mr. Chairman.

              RURAL ECONOMIC DEVELOPMENT FUND REGULATIONS

    Mr. Dorr, in the 2002 farm bill we had a provision under 
Section 6101 to increase the funding for the Rural Economic 
Development Loan and Grant program. And in the 2003 budget we 
increased the authority or brought it to a $1 billion level.
    In the farm bill, we had asked that the regulations be 
promulgated by November of 2002 and that the program be 
implemented in January of 2003. And I understand that your 
folks have done the regulations, that you all have done your 
part of it, and that you sent those regulations to OMB, but 
when our office inquires what the status is from OMB, we cannot 
find who has received those regulations. So I was wondering who 
has it at the moment.
    Mr. Dorr. My understanding is that those comments are back 
from OMB and at our shop now, and we are in the process of 
responding to those comments. And so as soon as those responses 
are completed, reviewed by our Office of General Counsel and 
Mr. Dewhurst's shop, they will go back to OMB.
    Mr. Kingston. Let me ask this because I do not--this is not 
a smart aleck question, but since it was supposed to have been 
done in November, why was it not done, and since we are past 
your January deadline, it would appear to me that somebody 
needs to be working overtime and weekends to get it nailed 
down.
    Mr. Dorr. No, no, no. I understand, and Congressman, I 
appreciate the fact that you make the laws and we are expected 
to implement them as quickly and as timely as possible. I think 
it is fair to say that this was a very significant issue, and 
so when OMB and our staff started working through the 
requirements, and realized that it was essentially a long-term 
$3 billion potential guarantee, that OMB had a number of 
questions to get resolved to make sure that a number of issues 
were addressed. And I respect that. That is a lot of money. I 
appreciate the fact that this issue was supposed to have been 
out, as you indicated, in January, but we are doing the best we 
can, and we will follow up with you and the Chairman's office 
to let you know what the status of this is.
    Mr. Kingston. If you could tell us when your deadline is, 
but I guess also, so we do not have to worry about OMB; the 
ball is back in your court at this point.
    Mr. Dorr. We hope to have our comments completed and ready 
to go shortly, and we will respond back to OMB with our 
responses.
    Mr. Kingston. Okay, great. Thank you.

                          WATER AND WASTEWATER

    Ms. Legg, on the water and wastewater program, I understand 
that the administration is planning to decrease the grant to 
loan ratio from 40/60 to 25/75. That program of course is very 
popular in Georgia as it is in other areas. Is that likely to 
happen? Are you all pushing forward or is this one of the 
stick-your-toe-in-the-water and see how it feels and maybe pull 
it back out?
    Ms. Legg. Well, this is the President's proposal, to shift 
the loan/grant mix to 75 percent loans and 25 percent grants. 
We were able to use the Farm Bill money to focus on the greater 
need areas that got closer to a 50/50 split. We were able to 
attack the backlog with those funds, and this current ratio 
actually reflects more closely the backlog of applications that 
are in house today. Coupled with a declining interest rate, we 
believe this will be feasible given the overall competition for 
dollars.
    Mr. Kingston. We will probably talk to you a little bit 
more about that, but I am glad you brought up the interest 
rates being down.

                  SINGLE FAMILY HOUSING AND MINORITIES

    Mr. Garcia, I have a question for you. I only have 30 
seconds, so you may have to answer it later.
    Mr. Garcia. Okay.
    Mr. Kingston. The administration is talking about 
increasing the direct loan rate for single-family housing. That 
has been very helpful in terms of minority home ownership, and 
in Georgia 47 percent of the money does go to minorities. Is 
this going to hurt the availability for people to get these 
loans? Is it just going to cost them more, or what can you tell 
me about that?
    Mr. Garcia. Okay, I will try to give you the short version 
since I know the time is short. Having gone to Georgia and 
seeing how our loans impact the beautiful State of Georgia. 
[Laughter.]
    And I really mean that, Congressman. [Laughter.]
    Mr. Garcia. What we are doing is reaching out to under 
served populations, and of course minorities, as we know, are a 
large part of these who are under served. We are not taking 
funds away from any group, or any program. We are trying to 
reach out and find the most needy, and as we know, a minority 
is three times as likely to have substandard housing in rural 
America as a nonminority. So, what we are doing is we are going 
out there, making our programs more accessible, getting the 
word out for all Americans, for all under served Americans in 
rural America. But a big part of that is we want to make sure 
that Americans are not left behind because they are a minority.
    Mr. Kingston. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Kingston.
    Mr. Garcia, Mr. Latham wanted me to point out that Iowa is 
beautiful too. [Laughter.]
    Thank you, Mr. Chairman, and may I say Texas is great also? 
[Laughter.]
    Mr. Bonilla. Thank you, Mr. Garcia.

                    RURAL BUSINESS INCENTIVE PROGRAM

    We are now going to start our second round of questions. 
Mr. Dorr, you had mentioned earlier that if you are going to 
implement the rural business incentives program, that you are 
going to require some legislative changes or some kind of 
authorization. If you would just please for the record provide 
legislative drafting service for the changes that are needed 
and provide that for the record, we would appreciate that.
    Mr. Dorr. We intend to do that.
    [The information follows:]

                   Rural Business Investment Program

    As Rural Development and the Small Business Administration 
continue to work toward implementing the Rural Business 
Investment Program (RBIP) authorized in the Farm Bill, we have 
become more optimistic that a legislative change may not be 
necessary. We plan to carry on along this current track, and as 
long as we continue to make progress, we will not seek a 
legislative change. If we determine that a legislative change 
is needed, we will provide the legislative drafting service 
requested.

                            COLONIAS FUNDING

    Mr. Bonilla. And for Ms. Legg I have one more point. I know 
a lot of members have touched on the water and wastewater issue 
and the funding levels. I just want to let you know that we are 
going to be watching the colonias budget request as well. The 
request is for $11.8 million for colonias along the border, 
which is down about $13.2 million from the enacted level. So 
perhaps you can comment on how we can work toward getting that 
number back up to the fiscal 2003 level, because that is 
something that I am going to be working with you very closely 
on, and I know some other members will be doing so as well.
    Ms. Legg. Yes, Mr. Chairman. The colonias are a challenge 
along the border between the United States and Mexico. You 
accurately reflect the decrease in the water program, but we 
believe that the increase for our sister agency, the Rural 
Housing Service, is the way to best tackle the needs, and that 
is to try to get a much more substantial home to hook that 
water up to, if you will. Some of those homes are just 
shanties, quite frankly. So we would rather see a stronger 
home, a stronger residence, with the water going into that 
improved residence. So we will be working with them, and 
continue to focus on colonias as well.
    Mr. Bonilla. We would like to see both continue, so we will 
be working with you on that.

                            STATE DIRECTORS

    And my only final comment I have, Mr. Dorr, yesterday I 
mentioned the great work your man in Texas is doing, Brian 
Daniel, and I want to compliment him for the record, and just 
hope that he can continue doing the great work down there for 
all of us, for so many projects that he has already worked on 
and those that he will be working on in the future.
    Mr. Dorr. Great. I would like to state for the record, 
quite frankly, that about two weeks ago we had our State 
Directors meeting here in Washington. We have an outstanding 
team of 47 state directors who are a very vibrant, aggressive 
and enthusiastic group of rural Americans. I do not want to 
understate the significance of these people, because they are a 
fine set of appointees, and they are very enthusiastic and very 
focused on what they are doing in rural America. In addition to 
Mr. Daniels and others, we have a lot of folks just like that 
across the country, and we are very appreciative of the fact.
    Mr. Bonilla. Well, I think it is reflected in some of the 
comments you are hearing from the individual states this 
morning as well. Thank you very much.
    Mr. Hinchey.

               WATER AND WASTEWATER TREATMENT FACILITIES

    Mr. Hinchey. Thank you very much, Mr. Chairman. I want to 
second that. I think that those folks are doing a terrific job, 
and I think that we need to help them more. I wanted to focus a 
little bit of attention on the Rural Utilities Service, 
particularly with regard to water and wastewater treatment 
facilities. We know that there are hundreds of communities 
across the country that have substandard water facilities and 
wastewater treatment facilities.
    In 1995, the USDA needs assessment of rural areas show that 
more than 1 million households have no indoor plumbing, and 
2\1/4\ million households have critical drinking water needs.
    The EPA conducted a 1997 drinking water infrastructure 
needs survey, which estimated that over the next 20 years, 
water systems serving communities of less than 10,000 people 
will require more than $37 billion in funding for water systems 
improvements and upgrades. For 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.
    This is something that I think concerns you, as it concerns 
all of us. I know that the funding for these programs has been 
relatively static now for a number of years. The President's 
request this year I believe is for $1.5 billion, but the vast 
majority of that goes for loans. Only $350 million of that $1.5 
billion goes for grants. That problem is exacerbated by the 
fact that many of the States have been trying to make up for 
the deficiency in Federal funding by leveraging Federal block 
grants to try to get the money to improve their 
infrastructures. But almost every State in this country is 
having budget problems this year, and in many cases they are 
very severe budget problems. They do not have the money to 
leverage any more.
    What can we do, Mr. Secretary, to deal with this problem 
more effectively? And I understood your answer to Mr. Kingston, 
I believe it was, a few moments ago with regard to the cut in 
the grant and the increase in the loan, you are trying to take 
advantage of the low interest rates. It makes sense to take 
advantage of low interest rates by providing more money for 
loans, but it does not make sense in my view to cut money for 
the grant program.
    Mr. Dorr. Well, the historical relationship prior to the 
late '80s, early '90s on these loan and grant programs was 
somewhere in the neighborhood of the 70/30, 75/25 relationship. 
We realize that that relationship changed from the late '80s to 
the early '90s. It was in our view pretty clear that the three 
hundred sixty million dollars of Farm Bill money last year did 
address many of these most severe needs. One of the things that 
we are faced with in this time of difficulty is that we do have 
limited resources, and we have to focus on how best to marshal 
those resources across the spectrum of demands that the country 
has as a whole. In hindsight, we will obviously be able to 
judge this pretty closely, but our feeling at this point is 
that this particular relationship will maintain a level of 
grants and loans that will give us the ability, within the 
framework of our capacity to deliver these programs, to do a 
good job in addressing much of these needs.
    Mr. Hinchey. Mr. Secretary, let me just say in the few 
seconds I have left that your historical perspective on this is 
accurate, but if you go back a little bit further, you find 
that the grant element was much higher. Those changes came 
about in the late '70s and early '80s, where you saw more loans 
and less grants. But originally these were essentially grant 
programs, or for the most part they were grant programs. This 
is where they originated, and it would be wise in my view if we 
went back there. In any case, we have got some serious problems 
on our hands in rural America, and I think that we need to work 
together to try to deal with them.
    If we can manage $1\1/2\ trillion in tax cuts for the most 
affluent people in the country--and I know that this is not 
your area, that we really need to be more sensitive to the 
critical needs of water and wastewater, the basic elements of 
life that are causing very serious problems in rural areas 
across the country.
    Mr. Dorr. I can assure you, Congressman, that we will 
attempt to be very good stewards of the resources that we have.
    Mr. Hinchey. I am sure of that, sir.
    Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Hinchey.
    Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman.

                          MULTI-FAMILY HOUSING

    Secretary Dorr, I refer you to page 11 of your testimony, 
starting at the top of the page, and I want to read it. ``Over 
the past year and a half we have passed the possibility of 
losing affordable housing due to borrower repayment. In 1979, 
1988 and 1992 Congress passed legislative changes to the MFH 
programs to restrict a borrower's ability to prepay their loan, 
thereby protecting residents from displacement. Recent legal 
actions brought by bars have challenged the statute that 
governs the MFH prepayment process. The future of the MFH 
program will require continued strategic and tactical planning 
and execution to keep affordable housing available to our 
residents. Our methods will include a combination of changes to 
the program, program incentives to owners and establishment of 
new partnerships with State and local housing agencies, 
nonprofits and faith-based organizations, whose commitments to 
rural communities is long term.''
    My question, Secretary Dorr, is this: I know this is a 
problem in the district that I represent, and I am sure it is 
in many other areas around the country. I have met with some of 
those folks. Can you update us on exactly where we are and 
explain to me exactly what the paragraph means in your 
testimony, if you would?

                            PREPAYING LOANS

    Mr. Dorr. I believe that is out of Mr. Garcia's testimony, 
but part of the record. I will give you what I have determined 
to be the issue. Quite frankly, having come in from rural 
America and not previously having dealt with multi-family 
housing programs and plans within Rural Development, it appears 
to me that over the years this program has evolved due to a 
variety of constituent demands and congressional demands. In 
that context, it also appears to me that perhaps we did not at 
Rural Housing, keep up with, relative to the rules, the things 
that were needed to make that program accommodate the changes 
that Congress had dictated, along with the contracts that were 
entered into with a number of providers of multi-family 
complexes.
    As a result we now have a situation where a number of 
owners are currently interested in prepaying. We have entered 
into a number of negotiations with some of them. A number of 
these cases have resulted in lawsuits in which they have 
determined that these property owners are in fact in a position 
to get out of the program.
    Consequently, we are now attempting to get our arms around 
this in an aggressive manner to determine what inventory is in 
what situation, and what is required to sustain an adequate 
inventory within the framework of the resources that we have. 
This is a complex issue that has evolved over time. It is not 
one that, quite frankly, I was familiar with before I got 
there. It is one that our rural housing staff is attempting to 
get their arms around. I am pushing them very aggressively. I 
am not sure that we are getting on top of it as quickly as we 
should, but we intend to, and it is not a simple problem to 
deal with. That is the best response I can give you at this 
point.
    Mr. Boyd. Well, actually, I think that your understanding 
of the issues is very similar to what I perceive the problem to 
be. I can tell you right now that the owners of these complexes 
are very confused and very worried. They had a contract. 
Obviously, they had to go to court to enforce that contract, 
because it is my understanding, and I think you alluded to this 
in your statement just then, that the legislative changes, 
since the contracts were written were basically written to 
excuse the government from some of its financial commitments 
under the contract. Is that a fair statement?
    Mr. Dorr. I think the fundamental issue was that the 
contract allowed these folks, after a period of time, to get 
out of their contract. They could pay it off.
    Mr. Boyd. Well, there were also incentives in the contract 
that the Government could make to keep them in the contract.
    Mr. Dorr. That is correct.
    Mr. Boyd. And now we are not willing to step up with those 
incentives. I guess that is where the problem starts. What is 
your shop's willingness to help with that?
    Mr. Dorr. We are attempting to step up to the plate with 
additional incentives in this year's budget, as well as to 
analyze what we have to do to resolve the issues in the 
aggregate or in the bigger picture.
    Mr. Boyd. Well, again, I want you to know that there are 
some very confused complex owners, but even more, the tenants 
are extremely confused. And at sometime in the near future I 
may invite you to come down and meet with some of them, and 
maybe that would give your folks some understanding of----
    Mr. Dorr. We may have confused tenants, but I am more 
concerned about making sure that we have a place for those 
tenants to live.
    Mr. Boyd. Exactly. Mr. Chairman, maybe if there are other 
questions on this, I could follow up on the next round.
    Mr. Bonilla. Okay. Very good, Mr. Boyd.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman. Sorry that my phone went 
off.
    Mr. Bonilla. That is okay, Mr. Farr.
    Mr. Farr. I did not even know I had it. That is a no-no in 
this committee. [Laughter.]

                 FAITH-BASED AND COMMUNITY INITIATIVES

    Mr. Farr. I notice that the department has created faith-
based community initiatives in the Rural Development 
Department. What is the authorization for that?
    Mr. Dorr. Luis, would you care to respond to that? Mr. Luna 
is the Deputy Administrator for the Office of Community 
Development.
    Mr. Luna. My understanding, sir, is that when the President 
initially issued his Executive Order to create the faith-based 
initiative, he designated several departments to carry that 
out, and the initial Executive Order did not include the 
Department of Agriculture. A couple of months ago the President 
issued a new Executive Order in which he added the Department 
of Agriculture and directed the Department to create a faith-
based and community office.
    Mr. Farr. And what is the budget for that office?
    Mr. Luna. That, sir, I do not know.
    Mr. Farr. What is the budget? How much is in the budget?
    Mr. Dorr. That budget does not come through Rural 
Development.
    Mr. Farr. Mr. Dewhurst, do you have it?
    Mr. Dewhurst. Well, at present, what we call the center is 
one person, a special assistant who works for the Secretary. I 
do not know her salary level, but it is not a box on the chart. 
It is an individual who is coordinating this effort. I can get 
you the number for that.
    [The information follows:]

         USDA Center for Faith-Based and Community Initiatives

    The salary and related operating expenses for the 
individual coordinating this effort and clerical support is 
estimated at $201,775 for FY 2003.

    Mr. Farr. How does that person, what do they do in your 
department?
    Mr. Dewhurst. The job is to take a look at the Department's 
programs in terms of cooperation with faith-based institutions. 
It is a coordination function. That person is gathering some 
information about how our programs work and how that kind of 
coordination might be improved, but that person is not running 
any programs and that person at this point has not got a staff 
or an operating budget.
    Mr. Farr. I am trying to figure out what the purpose of 
this and how effective it is going to be. And you do not have 
any new programs. You just have the regular programs. We have 
already talked about how some of those are under funded. And so 
you have created what, a new outreach person? What is the 
function? I mean you put out the press release, faith-based and 
community initiatives in the Rural Development Department, 
potential funding for nonprofits, programs for individuals. But 
it does not tell what this office or person does.
    Mr. Luna. Congressman, again, if I can clarify a little 
bit. The individual is trying to identify any obstacles that 
would exist to prevent either faith-based or community 
organizations from accessing the Department of Agriculture's 
programs and resources. It is not specifically aimed at helping 
faith-based organizations. It is to identify obstacles that any 
organization would have, be they faith-based or community-
based, to have access to these programs.
    Mr. Farr. The obstacles are going to be--already the lines 
are longer than the programs, so you are going to have greater 
demand and the same services.
    Mr. Luna. Apparently there are some programs that over the 
years have developed an understanding that certain 
organizations are not eligible to even apply for these programs 
because of the character of the organization, because they are 
faith-based or have some other characteristics.
    This individual, and it is only one person, is charged with 
working with all of the organizations, all of the agencies 
within the Department of Agriculture, to identify what 
obstacles there may be. It is not an effort to create a new 
entity. It is an effort to try to identify what obstacles there 
are.
    Mr. Farr. Could you provide for this committee, as you find 
the names of those organizations, the list of them, so that we 
can see who they are?
    Mr. Dorr. Yes. I do not think there would be any problem 
with that.
    [The information follows:]

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    Mr. Farr. Thank you very much. No further questions.
    Mr. Bonilla. Thank you, Mr. Farr.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. Again, I apologize for 
having to leave and I appreciate the opportunity on this round.

                            RENEWABLE ENERGY

    Mr. Secretary, do you believe that the U.S. Department of 
Agriculture has a role to play--let me amend that--a major role 
to play in restoring America's energy and independence?
    Mr. Dorr. Within the framework of the constitutional 
mandates that we have, and within the President's budget, 
clearly we do. In my view renewable energy is a great new 
opportunity for rural America, not just from the standpoint of 
the biomass and biobased energy opportunities, but those that 
relate to geothermal, wind, anaerobic digesters and a number of 
things.
    I personally believe that with a lot of the scientific 
research and development work, we are over that hump. We are 
now at the cusp of the commercialization of a lot of these 
initiatives. I think that much like the ethanol industry, it 
has taken 2\1/2\ decades, nearly 30 years, to move from the 
drawing boards. I might say that I was on the board of 
directors of the Iowa Corn Growers Association, when we passed 
the first statewide referendum for a corn check off. Our first 
major project was the development of the ethanol industry 
during the height of the energy crisis back then.
    Ms. Kaptur. Mr. Secretary, could I just interject there if 
I might. I know my time is extraordinarily limited. In view of 
that commitment that you personally appear to have, I can tell 
you that we had to fight up here in Congress to get an energy 
title in the farm bill. For the first time in American history, 
we now have a title in the farm bill that places the Department 
of Agriculture at parity with other cabinet departments, and 
that energy title gave you mandatory authority, spending 
authority for both value-added grants and renewable energy. You 
in the budget proposal the administration has submitted to us, 
are proposing that we literally defund these programs in the 
following way.
    According to a budget cross cut that I will submit to the 
record, Rural Development is literally asking for a cut from 
available authority of $63,852,000.
    [The information follows:]

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    Ms. Kaptur. You are only asking for $5,878,000. And 
essentially a 90 percent cut in your authority. What type of 
venture capital is it that would not implement the law that 
attempts to move the Department of Agriculture into the 21st 
century in creating this new industry for our country? What is 
going on inside this department?
    Mr. Dorr. Well, I have pointed it out earlier--when you get 
into periods of time in the country's history when there are 
extraordinary events, there is a need to make very difficult 
choices. Clearly, choices have to be made with regard to 
limited resources.
    Secondly, I would point out that we have, since this 
administration took office, expended over $120 million in loans 
and grants to support the ethanol industry through our B&I 
program, the Value-Added Development Grants, et cetera.
    The 9006 Energy Title along with the Value-Added 
Development Grant program will fund on a grant basis in excess 
of $120 million in this year and last year. I do not think that 
it is inappropriate to step back, take a breath, take a look at 
these programs, and analyze how they are doing. We are in fact 
including $5 million of discretionary funding, both for Value-
Added Development, and the 9006 Energy Title.
    As we set about implementing the 9006 Title, we are working 
with EPA, DOE, NRCS, FSA and ERS to make sure that we are 
positioned to address the kinds of issues that small farmers, 
small business people and farmers and ranchers will face. To 
the extent that our resources allow, we are very committed to 
these programs.
    Ms. Kaptur. Thank you. And I would like to say to you, Mr. 
Under Secretary, just by a point of comparison, the oil and gas 
industry spends just on advertising that we can account for, 
$211 million a year, $211 million a year, and I can tell you 
that our Government, not counting the cost of the war in Iraq, 
spent over $100 billion to support the petroleum industry 
internationally, including requests from the administration to 
do such things as guard with paramilitary forces the Occidental 
Pipeline in Columbia, a company that made $2 billion over the 
last couple years. So if one looks at relationships, and you 
have the ability, based on your background, to understand these 
relationships, I do not think you should shortchange the 
farmers of America that can really bring up this new industry.

                    BIOFUELS ENERGY INDEPENDENCE ACT

    And I would encourage you to look at a bill I sponsored 
with many others, H.R. 130, to create a Biofuels Energy 
Independence Act for our country, centered at the Department of 
Agriculture, modeled on the Rural Utilities experience in 
electric and telephone, so that farmers can own this new 
industry. Now is the time. And the competition is very clear. 
And coming from where you do, I know that you can have policy 
influence beyond where any of your predecessors have been able 
to be successful. You now have the legislative authority, and 
my God, if we cannot see what is going on here, then shame on 
all of us and our time and generation.
    And I know that my time has expired on this round, and I 
thank you for your sympathetic ear.
    Mr. Dorr. Thank you.
    Mr. Bonilla. Thank you, Ms. Kaptur.
    Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman.
    Mr. Under Secretary, let me say first of all that I know 
that you have been very proactive in reaching out to Congress 
and staff on this committee, and I want to thank you for that, 
much more than some of the other Under Secretaries do, and I 
think that should be acknowledged, and we appreciate it.
    Mr. Dorr. Thank you.
    Mr. Boyd. On the housing issue that we talked about 
earlier, I do want to tell you that your Florida folks tell me 
that there is a 5- to 6-year backlog at the Office of Rental 
Housing Preservation, which is responsible for providing the 
incentives that are in law, and obviously, that is the basis of 
the problem here, in that the obligations of the contract, the 
obligation of the U.S. Government is not behind upheld. I know 
that contract may have been written 30 years ago, but the fact 
is that we have an obligation to uphold our part of it, and the 
courts have said that.
    So I guess my question is: how are we going to solve this 
problem? Also I want you to know that I want to be part of the 
solution, and I will be glad to bring you to some of those 
frustrated renters and frustrated owners.

                    GUARANTEED MULTI-FAMILY HOUSING

    Mr. Dorr. Well, one of the ways in which we are attempting 
to alleviate the shortfall of units, if there are any, in 
conjunction with the demands that we have for prepayment and 
equity requests, is through our 538 guarantee program. Last 
year there were a hundred million dollars in loan levels 
committed to that program. It appears that it will all be 
obligated. There is $100 million for that in this year's budget 
again.
    That program was new and seems to be working fairly well. 
We think that is one way in which we can begin to alleviate 
some of this concern.
    Mr. Boyd. And that is the 538?
    Mr. Dorr. It is called the 538 program. It is a multi-
family guaranteed housing program. It is one in which we 
provide guarantees to commercial or third-party lenders for 
portions of these projects, that they then provide affordable 
housing or multiple housing capacity to tenants who are looking 
for that sort of housing.
    Mr. Boyd. Mr. Under Secretary, will you make a commitment 
to me that none of our constituents will be thrown out of their 
housing because of Government action, and that we will make 
sure that we do what we have to do to solve this problem?
    Mr. Dorr. We will do everything we can possibly do to make 
sure that something like this does not happen.
    Mr. Boyd. Thank you, Mr. Chairman.
    Mr. Bonilla. Thank you, Mr. Boyd. Did you have any 
additional questions?
    Mr. Boyd. No.
    Mr. Bonilla. Thank you very much. At this time I will yield 
to Ms. Kaptur to conclude her round of questions.
    Ms. Kaptur. Thank you, Mr. Chairman.

                      POWER PRODUCTION FACILITIES

    I want to turn to the energy issue again. I have been 
studying Ohio and looking at the Rural Utilities Service and 
the power production of many of our farmer-owned facilities. 
And under the laws of our State, for example, if a city wanted 
to procure power from rural production, Ohio law prohibits 
that. They literally divide up the territory. And one of the 
questions I have of you is as you look across your programs, to 
what extent is rural America building new power production 
facilities, particularly when they are owned by farmers? And to 
what extent under existing law that you are aware of can rural 
power suppliers sell into urban areas and still remain eligible 
for Rural Utilities Service financing?
    Mr. Dorr. Let me take a crack at that, because that is a 
very intriguing question. We set about developing the rules for 
section 9006 of the Farm Bill Energy Title, in conjunction with 
correlating the expectation that we would work with other USDA 
agencies and across Government agencies involving EPA, DOE, 
NRCS and others. We needed to make sure that we could leverage 
our funds with other funds similarly designed in terms of 
developing renewable and green energy sources throughout rural 
America.
    I gave them two additional specific charges. I said, number 
one, please take a look at doing something that we typically 
have not done in production agriculture and in agricultural 
programs in this area, and that is, look at ways in which we 
can stimulate the kind of tax incentives necessary to enable 
these programs to grow.
    Historically, we look at farm and other program payments. 
Outside of the ethanol tax credits and exemption, and outside 
of investment tax credits, we typically in agriculture do not 
look toward tax incentive programs that may in fact enable us 
to enhance these programs.
    And secondly, I said, these alternative energy sources that 
we produce through this program will essentially result in 
being electrical in nature, and that is where the demand growth 
is. Base generation transmission programs historically have 
State regulations that sometimes make it difficult for the 
short distributive source of electric generation capacity to 
get incorporated into the grid.
    Then I urged them to look at any way to create hooks so 
that these programs, when they were implemented in a variety of 
states, had enhancements to make it more likely or more 
feasible that they could be used economically and cost 
effectively in the short grid distributive system. This is 
particularly important from the standpoint of dumping into a 
municipal utility or into a storage facility, where this would 
mitigate some of the peak demand issues.
    So it is clearly our intent to look within the framework of 
what this administration can and wishes to do, as well as what 
resources are provided by Congress, at every avenue that can be 
proactive and stimulate the development of these new 
opportunities in cost effective ways. That is something that we 
are taking very seriously.
    Ms. Kaptur. Mr. Secretary, I would offer my region of 
America as a prime example of where to test this theory. We 
have among the 10 highest cost regions of the United States. It 
is our chief disincentive to job growth, and whether you are 
trying to power your greenhouse, where 60 percent of your cost 
is fuel, or whether you are running an automotive plant, or 
where you are trying to pay your heating bill, we pay 12 or 
more a kilowatt hour. I defy you to find any rural electric 
around our country that pays 12 cents a kilowatt hour. And so 
we are trying to find a way to get competitive power into our 
region, and to the extent that you have any work going on in 
that arena, believe me, we are more than interested. And we do 
have rural power that backs up up against us. We just cannot 
get it.
    Thank you very much, and thanks, Mr. Chairman.
    Mr. Dorr. Thank you.
    Mr. Bonilla. Thank you, Ms. Kaptur.
    Mr. Latham, nothing further?
    Mr. Latham. Nothing.
    Mr. Bonilla. I want to thank you all for appearing here 
today and helping us with our process of putting our bill 
together.
    Ms. Kaptur. Mr. Chairman?
    Mr. Bonilla. Ms. Kaptur?

                                 HAYNET

    Ms. Kaptur. I am so sorry. I just wanted to compliment the 
department. This is a bit off the subject. I do not know who 
did this. It is called HayNet, and frankly, I do not even know 
if it is in the FSA arena, and so it is not exactly your bag, 
but I have to tell you, this is exactly the kind of information 
that is user friendly to the farm community and those beyond 
it. It literally lists--this is my own State for example--
people needing hay, and then who has hay available. And it is 
just such a user friendly method, I am sure you can apply the 
same concept to people who want to sell vegetables into our 
school lunch programs. I am sure you can use it on power 
providers that can serve areas beyond their immediate. And I 
just say, this is an example of USDA trying to be user 
friendly. I would like to submit it to the record as an example 
of the agency doing something really right.
    And I thank you, Mr. Chairman, for allowing me to insert 
this in the record.
    Mr. Bonilla. Thank you for bringing that up, Ms. Kaptur, 
and without objection, that will be entered into the record.
    [The information follows:]

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        Mr. Bonilla. And to all of you, thank you for the good work 
you do. Keep it up and we will be working with you as we put 
our bill together.
    The subcommittee will stand adjourned until tomorrow at 
9:30.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Biermann, S. M...................................................     1
Bost, E. M.......................................................     1
Dewhurst, S. B...................................................1, 733
Dorr, T. C.......................................................   733
Garcia, A. A.....................................................   733
Hentges, Eric....................................................     1
Legg, Hilda......................................................   733
Luna, Luis.......................................................   733
Rosso, John......................................................   733
Salazar, Roberto.................................................     1


                               I N D E X

                              ----------                              

                 Food, Nutrition, and Consumer Services

                                                                   Page
Biographies:
    Administrator, Food and Nutrition Service, Roberto Salazar...    27
    Deputy Under Secretary, Food, Nutrition, and Consumer 
      Services, 
      Suzanne M. Biermann........................................    26
    Director, Center for Nutrition Policy and Promotion, Eric 
      Hentges, Ph.D..............................................    28
    Under Secretary, Food, Nutrition, and Consumer Services, Eric 
      M. Bost....................................................    25
Budget Request:
    Food and Nutrition Service...............................52-56, 313
    Under Secretary's Office....................................35, 450
Child Nutrition Programs:
    Bonus Commodities...........................................493-494
    Certification Procedures, Free and Reduced-Price Meals.35, 442, 448
    DoD Fresh Produce Program....................................   527
    Farm-to-School Programs...................112-113, 128-130, 491-492
    Food Safety.....................................50-52, 447, 508-509
    Fruit and Vegetable Pilot Program, Fresh...............445, 482-483
    National School Lunch Program (NSLP):
        Certification Errors....................................474-475
        Certification Eligibility................................   481
    Competitive Foods......................................479-480, 483
        Funding, Mandatory.......................................   519
        Monetary Award Program..................................348-349
        Nutrition Education................................464, 478-479
    Outreach Efforts............................................497-502
    Participation, School Lunch Program..........................   135
    Program Integrity...........................29-34, 136-137, 441-442
    Reauthorization........................46-48, 123-124, 479-480, 483
    Reduced-Price School Meal Program, Elimination of....44-45, 479-480
    Reimbursement Rates:
        CACFP....................................................   142
        School Breakfast Program.................................   142
        School Lunch Program.....................................   479
    School Breakfast Pilot Program.....................133-134, 449-450
    Snack Program, in the NSLP and CACFP..................136, 142, 476
    Special Milk Program.........................................   141
    State Administrative Expenses................................   140
    Studies and Evaluations.............................96-111, 365-438
    Summer Food Service Program..................................   446
Colonias.........................................................   285
Commodity Assistance Program....................................225-227
    Commodity Supplemental Food Program (CSFP):
        Bonus Commodities........................................   494
        Caseload.......................................355-356, 503-504
        Funding...................................228-229, 353-354, 356
        State Expansion..........................................   503
    Elderly Feeding Program, Meals Served........................   284
    Seniors Farmers' Market Nutrition Program126-128, 351-352, 477, 489
    The Emergency Food Assistance Program (TEFAP)...............506-507
        Administrative Funding.............................113-117, 231
        Bonus Commodities..............................230-231, 493-494
        Entitlement Commodities..................................   230
        Study by, The United States Conference of Mayors......... 36-43
Explanatory Notes...............................................521-731
Food and Nutrition Service:
    Food Insecurity..............................................   505
    Funding, States Matching Requirements........................   444
    Immigrant Eligibility.......................................122-123
    Nutrition Education.......................314-315, 464-465, 484-486
    Outreach Efforts............................................497-502
    Program Administration.................................130-132, 490
    Proposed Legislation.........................................   286
    Staff Year Distribution......................................   313
    State Budgets................................................   443
    Studies and Evaluations.............................56-111, 288-312
Food Program Administration (FPA):
    Dietary Guidelines for Americans...........................357, 465
    Economic Research Service....................................   286
    Food Guide Pyramid.....................................357-358, 465
    Funding Levels...............................................   287
    Nutrition Education and Promotion Initiative................359-361
    Studies and Evaluations:
        Funding................................................361, 441
        Program Integrity..............................317-438, 441-442
        Research, Evaluation and Assessment.....................439-440
Food Stamp Program:
    American Samoa...............................................   276
    Benefits.....................................................   282
    Contingency Reserve...................................121, 242, 451
    Electronic Benefit Transfer (EBT)........124-126, 249-274, 316, 451
    Eligibility.................................................495-497
    Employment and Training Funds...............................276-281
    Error Rates........................................240-249, 469-470
    Food Distribution Program on Indian Reservations:
        Fresh Fruit and Vegetable Project.......................238-239
        Participation............................................   283
    Fraud, Waste and Abuse.........................29, 317-318, 472-474
    Funding, Mandatory...........................................   519
    Immigrant Eligibility....................................48-49, 518
    Nutrition Education.........................................233-234
    Outreach Efforts............................................497-502
    Overissuance Claims..........................................   235
    Participation............................................43-44, 282
    Program Integrity....................................29-34, 441-442
    Puerto Rico, Nutrition Assistance for........................   276
    Retailer Integrity...........................................   236
    Special Wage Incentive Program...............................   275
    State Administration.........................................   471
    Studies and Evaluations...................................... 70-95
    Trafficking..................................................   319
    Unemployment Rates...........................................   282
Opening Statement, Under Secretary, Food, Nutrition, and Consumer 
  Services, Eric M. Bost.........................................     3
Questions Submitted for the Record:
    Chairman Bonilla.............................................   133
    Mr. Boyd.....................................................   518
    Ms. DeLauro..................................................   508
    Mr. Farr.....................................................   516
    Mr. Hinchey..................................................   510
    Ms. Kaptur...................................................   477
    Mr. Kingston.................................................   466
    Mr. Latham...................................................   469
WIC:
    Benefits....................................................199-201
    Breastfeeding, Impact on the Program.........................   454
    Breastfeeding Peer Counselors.................45, 341-342, 487, 516
    Budget Request...........................113-114, 118-121, 466, 516
    California Fresh Produce Pilot...............................   517
    Childhood Obesity Demonstration Projects..............348, 468, 516
    Cost-Benefit Analysis........................................   463
    Electronic Benefit Transfer (EBT)............................   490
    Eligibility, Income...........................145, 206-208, 460-467
    Farmers' Market Nu126-128, 146-147, 205, 349-350, 476, 488-489, 518
    Food Package.................................................   319
    Funding:
        Carryout, Projected......................................   144
        Obligations, Prior Year..................................   144
        Recoveries................................144, 210-212, 219-222
        Spendforward.......................................145, 210-218
    Infant Formula Rebates...................201-203, 205, 454, 461-462
    Infant Formula Regulations..................................510-514
    Infrastructure Grants........................................   232
    Nutrition Education..........................................   209
    Nutritional Risk Criteria...................................455-459
    Obligations, Actual........................................143, 219
    Outreach Efforts............................................497-502
    Participation....................................143, 204, 223-224,
    Program Integrity............................................ 29-34
    Program Violations..........................................148-149
    Projections............................................452-453, 488
    Rules and Regulations, Final, Reauthorization Act of 1998...149-198
    State Management Information Systems........................320-340
    Studies and Evaluations..............................56-69, 342-346
    Research from Other Institutions.............................   347
    Vendor Fraud.................................................   199
    Vendor Study...............................................443, 515
Written Statements:
    Administrator, Food and Nutrition Service, Roberto Salazar...    15
    Under Secretary, Food, Nutrition, and Consumer Services, Eric 
      M. Bost....................................................     5

                           Rural Development

Automated System...............................................867, 869
Biography of Thomas C. Dorr......................................   794
Biofuels Energy Independence Act.................................   844
Budget Decrease..................................................   815
Budget Request, Office of the Under Secretary....................   800
Carryover for Rural Development Programs.........................   857
Centralized Servicing Center.....................................   866
Consolidation of Offices.........................................   818
    Goodfellow Facility..........................................   874
Comprehensive Communication Plan.................................   881
Explanatory Notes................................................   899
    Revised Explanatory Notes....................................   882
EZ/EC and Colonias...............................................   853
Faith-Based and Community Initiatives............................   837
HayNet...........................................................   847
Notice of Funds Availability.....................................   876
Predevelopment Funds.............................................   817
Questions Submitted for the Record:
    Chairman Bonilla.............................................   853
    Mr. Hinchey..................................................   881
    Ms. Kaptur...................................................   878
Rural Community Development Initiative.........................868, 871
Rural Development:
    Councils.....................................................   859
    Financial Statements.........................................   871
    Loan Portfolio...............................................   874
    Salaries and Expenses........................................   868
    Services.....................................................   826
    State Directors..............................................   833
    State Officers...............................................   870
Service Contracts................................................   864
Statement by Thomas C. Dorr......................................   733
Write-offs and Losses............................................   859

                        Rural Utilities Service

Biofuels.........................................................   878
Biography of Hilda Gay Legg......................................   798
Broadband Access.................................................   827
Colonias Funding.................................................   833
Contract Support.................................................   870
Distance Learning................................................   828
Energy, High Cost................................................   869
Explanatory Notes................................................  1000
    Revised Explanatory Notes..................................895, 993
Power Production Facilities......................................   846
Questions Submitted for the Record:
    Chairman Bonilla.............................................   960
    Ms. Kaptur...................................................   984
    Mr. Latham...................................................   981
Statement by Hilda Gay Legg......................................   755
Subsidy Rates....................................................   827
Water and Waste Water:
    Funding......................................................   816
    Radium in Groundwater........................................   829
    Rural Water Systems..........................................   880
    Treatment Facilities.......................................831, 833

                         Rural Housing Service

Administrator, Statement by Arthur A. Garcia.....................   766
Biography of Arthur A. Garcia....................................   795
Business and Cooperative Development Programs....................   829
Community Facilities--Virginia...................................   824
Explanatory Notes................................................  1080
    Revised Explanatory Notes....................................  1066
Farm Labor Housing--California...................................   819
Housing Loans and Rental Assistance..............................   820
Multi-Family Housing.............................................   835
    Guaranteed Loans.............................................   845
Prepaying Loans..................................................   835
Questions Submitted for the Record:
    Chairman Bonilla.............................................  1032
    Ms. Kaptur...................................................  1056
    Mr. Latham...................................................  1053
Rural Housing....................................................   825
Single Family Housing and Minorities.............................   832

                   Rural Business-Cooperative Service

Biographies:
    Luis A. Luna.................................................   796
    John Rosso...................................................   797
Cooperatives.....................................................   872
Energy, Renewable................................................   840
Equity Capital...................................................   881
Explanatory Notes................................................  1150
    Revised Explanatory Notes....................................  1138
Micro Enterprises................................................   879
Questions Submitted for the Record:
    Chairman Bonilla.............................................  1118
    Ms. Kaptur................................................878, 1056
    Mr. Latham...................................................  1134
Rural Business Investment Program................................   832
Rural Economic Development Fund Regulations......................   830
Statement by Luis A. Luna........................................   784
Value-Added Agricultural Product Material Development Grants.....   800
Value-Added Development Grant Program............................   830

                                  
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