    [Senate Hearing 108-155]
    [From the U.S. Government Publishing Office]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2004

                                  ----------

                             THURSDAY, MAY 8, 2003

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:58 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett, Cochran, Specter, Burns, Craig,
    Stevens, Kohl, Harkin, Dorgan, Durbin, Johnson, and Byrd.

                           DEPARTMENT OF AGRICULTURE

                            Office of the Secretary

    STATEMENT OF ANN M. VENEMAN, SECRETARY OF AGRICULTURE
    ACCOMPANIED BY:
            JAMES R. MOSELEY, DEPUTY SECRETARY
            KEITH COLLINS, CHIEF ECONOMIST
            STEPHEN DEWHURST, DIRECTOR, OFFICE OF BUDGET AND PROGRAM
                ANALYSIS
        Senator Bennett. The subcommittee will come to order.
        Let me apologize, Madam Secretary, to you and your team and
    to the others who are interested in the hearing for the fact
    that we are starting so late. We had a historic vote on the
    floor of the Senate. The leader reminded us that this is the
    58th anniversary of VE Day, which makes me feel a little old
    because I remember VE Day.
        But for those who do not understand, that stood for Victory
    in Europe, and was the day when the Nazi war machine
    surrendered and ended the war in Europe, and of course, a day
    of great rejoicing and excitement.
        And symbolically on this day we have just ratified the
    treaty that expands NATO and brings into NATO those former
    Soviet Republic, nations that were under the Soviet yoke, that
    have now become part of NATO. The leader asked us all to be on
    the floor and vote in the traditional fashion, standing at our
    desks. I think that was worthy delaying the hearing for.
        So we again thank you for your indulgence and your patience
    while we went through that.
        This is my first hearing as chairman of this subcommittee
    and I very much appreciate the support and openness which we
    have received from the Department of Agriculture. I have been
    down to the Department and met with Secretary Veneman and her
    staff, and am impressed with the depths of her bench as they
    deal with the very significant problems that we have here.
        I am looking forward to working with Senator Kohl, who
    chaired this subcommittee in the previous Congress and with
    whom I have had very productive conversations in anticipation
    of this new assignment.
        The Department of Agriculture, I discover, has a very
    diverse jurisdiction. It is not just about corn. There are all
    kinds of things going on in the Department which require our
    attention and funding. So we are looking forward to hearing the
    Secretary discuss this.
        The situation in which we meet is somewhat unusual in that
    the request for fiscal year 2004 was written before the
    legislation adopting appropriations for fiscal year 2003 was
    completed. I do not remember any previous situation where that
    was true. That leads to some confusion. That leads to some
    uncertainty as to where we are and what we will be doing.
        To further add to that, we have still not nailed down the
    allocation that we will receive from the full committee for
    this subcommittee. We have had some preliminary numbers but the
    chairman of the full committee has been unable to reach
    complete agreement with the chairman of the House. We do not
    know what number the House is going to come up with. We do not
    necessarily have to have the same number but that, I think, is
    a byproduct of the confusion that arose because the fiscal year
    2003 bill had not been enacted when the 2004 request was being
    put together.
        So we are going forward with our hearing. We want to get
    the information that the Department has to offer to us
    available and in front of us. But we are going forward with a
    little more uncertainty than would normally be the case. So
    that is why we are looking forward to this year with much
    anticipation, because it will be tremendously informative.
        I look forward to learning more, both at this hearing and
    in a continuing dialogue with the Secretary and the members of
    the Department that are here.
        Senator Burns, we are grateful that you are here with us.
    Senator Burns presides over the Interior Subcommittee which
    presides over a good chunk of the Department of Agriculture's
    budget, so maybe he is here to ask those kinds of questions as
    well. But Senator we appreciate your being here and we are
    happy to hear whatever you have to say.

                              PREPARED STATEMENTS

        Senator Burns. Thank you very much, Mr. Chairman, and thank
    you, Madame Secretary, for being here this morning. Thank you
    for a lot of good work along the way, drought assistance being
    one of those. I know that was a painful thing that went on
    downtown and we appreciate your good work on that.
        I have come this morning to take all the Ag money and put
    it over in Interior, so you guys who have all those books, can
    go on back to work now.
        When we take a look and see what the President proposed,
    and I am going to put my statement in the record, Mr. Chairman.
        Senator Bennett. Without objection, it shall be included.
        [The statements follow:]

                   Prepared Statement of Senator Conrad Burns

        Good Morning: Thank you, Mr. Chairman for holding this hearing on
    Ag Appropriations and welcome committee members and new member Mr.
    Bennett.
        Secretary Veneman--welcome--thanks for coming and I would like to
    thank you for your continued hard work and efforts in helping America's
    producers provide a food supply that is safe, reliable, abundant and
    affordable.
        Thanks for drought assistance. It was a long hard battle, but you,
    worked well with myself and farmers and ranchers from Montana.
        However, there is still work to do. The Farm Bill greatly increased
    the number of farmers and ranchers eligible for price support payments,
    conservation funding and farm program payments. Wood, mohair, honey and
    pulse crops became eligible for price support payments through loans
    and LDP's. Milk producers are receiving direct payments based upon milk
    production and price for each month. I welcome the increased
    participation which means that farm programs are helping more farmers
    and ranchers, especially those small and mid sized producers in rural
    areas.
        USDA's Farm Service Agency (FSA) has had the largest proportional
    reductions in permanent staffing at USDA during the past 9 years. FSA's
    personnel cuts have resulted in the loss of 5,694 permanent positions
    or a 38 percent reduction of staff since 1994. Temporary staff years
    have been reduced since 1996 by 1,424 staff years or a 41 percent
    reduction. President Bush's new budget proposal for 2004 further
    reduced 2 temporary staff years or an additional 15 percent while
    keeping permanent employee levels current.
        The shortage of staff is also resulting in delayed implementation
    of the Direct and County Cyclical Program, a major component of the
    Farm Bill. As of February of 2003, 39.3 percent of the nation's farms
    have been enrolled in the Direct and Counter-Cyclical Program with 79
    percent of the enrollment period completed. The shortage of employees
    and increased demands create the likelihood of errors by overworked
    staff resulting in increased inefficiencies in the FSA County Offices.
        Clearly, we have many challenges to face in the critical time of
    agriculture. Thanks again for being here today and thanks for all you
    support and hard work in helping the American farmer and rancher. Thank
    you, Mr. Chairman.
                                     ______

                 Prepared Statement of Senator Byron L. Dorgan

        Ms. Secretary, I welcome you and your staff to our subcommittee and
    I thank you for your appearance before us today. I recognize the
    challenges of putting together any Departmental budget during these
    tough budgetary times. As you point out, this budget is ``highly
    constrained.'' I would call this budget more than ``constrained'' and
    argue that it fails to meet the commitments that we made to the
    American people in the 2002 farm bill.
        This budget proposes to take many programs, recommended for
    mandatory funding in the farm bill, and make them discretionary
    programs. These include the rural broadband loan program, which I think
    is critically important to deploy technology to rural America, and many
    of the renewable energy programs. Given the tough times facing rural
    America, funding for rural development programs are really critical.
    Some of these areas have taken a pretty big hit in your budget
    recommendation, and I would urge the Subcommittee to take another look
    at your recommendations. Tight limits on discretionary spending will
    force the subcommittee to make some difficult decisions, and I hope
    that we will be able to work together to carry through on the promises
    made in the Farm Bill.
        This budget also contains some artificial offsets that will
    complicate our jobs. Proposals for new user fees, loan sales and caps
    on delivery expense reimbursements for crop insurance companies have
    been proposed before and rejected by Congress. These prospects for
    using these offsets to provide us some relief on limited discretionary
    spending are not good.
        One of my top priorities on this Subcommittee remains robust
    funding for agriculture funding. Unfortunately, the fiscal year 2004
    budget moves us in the wrong direction. Funding for ARS's research
    programs ($987.3 million requested) is down from an estimated $1
    billion in fiscal year 2003, and there is also a slight decrease in
    formula funds for agriculture research and extension at the land grant
    Colleges of Agriculture. I hope that we will be able to continue moving
    this research in the right direction.
        Finally, I hope that USDA becomes more aggressive in pursuing trade
    violations and I am hopeful that the slight increase of $6.6 million
    that this budget requests to deal with trade issues will result in more
    action. I have a question about wheat trade with China that I will pose
    to the Secretary, but I hope that any increase we provide will yield
    results in the area of trade enforcement.
        Ms. Secretary, I look forward to your testimony.
                                     ______

                Prepared Statement of Senator Richard J. Durbin

        Chairman Bennett, thank you for holding this important hearing
    today. I look forward to working with you, Senator Kohl, and my
    Subcommittee colleagues on the fiscal year 2004 Agriculture budget. Mr.
    Chairman, I'd like to welcome USDA Secretary Ann Veneman to this
    morning's hearing. Madam Secretary, I look forward to working with you
    and the rest of the USDA team. I'm certainly familiar with the three
    gentlemen you've brought with you today, Deputy Secretary, James
    Moseley, Chief Economist Keith Collins and Budget Officer Steve
    Dewhurst--who all testified last March before this Subcommittee, along
    with the Secretary. I always enjoy their budget insights.
        I'd like to take a few minutes this morning to talk about some very
    important issues that affect the Department, and my home state of
    Illinois. When I go back to Illinois, one of the things I hear from
    farmers is: How can we get the rural economy back on track? As you
    stated in your testimony, there are over 60 million people that call
    rural America home. Illinois has a significant rural community so I am
    pleased to see USDA is committed to creating new economic opportunities
    and improving the quality of life for a diversified rural population.
        One way in which we can improve the rural economy is through
    providing farmers with incentives for things such as biodiesel and
    ethanol.
        The expanded role for ethanol and biodiesel means more than a boost
    to industry; it means jobs to rural America, and increased energy
    security. In my home state of Illinois, roughly one in every six rows
    of corn, approximately 280 million bushels is the source for ethanol.
    Illinois ranks second in the nation in corn production, with more than
    1.5 billion bushels produced annually, and is the nation's leading
    source of clean-burning ethanol. Corn grown in Illinois is used to make
    40 percent of the ethanol consumed in the United States.
        Illinois farmers are the foot soldiers in our battle for energy
    independence. Farmers throughout the country have come together to
    build ethanol production facilities that, in many instances, have
    become the backbone of a regional rural economy. In fact, farmer-owned
    ethanol plants, taken together, are the single largest segment of the
    U.S. ethanol industry. As we look for solutions to rural economic
    stability, we must remember that renewable fuels are part of the
    solution. Replacing Mideast oil with Midwest ethanol is winner for
    everyone but the oil sheiks. When we can use our Illinois agricultural
    expertise to reduce our dependence on foreign suppliers, the whole
    nation benefits.
        In short, we must also work to become less dependent on foreign oil
    by opening and broadening markets for American agricultural products
    and find appropriate alternative uses. We need to create incentives for
    our farmers to produce and develop more efficient ways to make
    biodiesel and ethanol. I will continue working with my colleagues in
    Congress, and in the Bush Administration, to make every effort to
    expand the role of biodiesel and ethanol. Expanding biodiesel and
    ethanol's role is a win for our farmers, a win for the environment a
    win for the rural economy.
        Madame Secretary, I would like touch on an issue of great
    importance, food safety. Each year in the United States, food borne
    illness sickens 76 million Americans and causes more than 5,000 deaths.
    Tragically, 40 percent of the victims are children. Parents have had to
    watch their children die terrible deaths from E. coli 0157:H7
    contamination, and countless others have seen their children suffer
    after eating food contaminated with pathogens such as Listeria or
    Salmonella.
        Madame Secretary, I know you have heard these statistics before,
    and I know you share my belief that 5,000 deaths each year from
    illnesses we can prevent is simply unacceptable. All of us have been
    frustrated by court decisions that have stripped the Department of
    important enforcement powers, needless delays in cleaning up dirty food
    processing plants and industry resistance to increased food safety
    inspections. The time has come for us to provide the necessary
    resources and adequate regulatory framework to ensure the safety of the
    food eaten in our homes, the safety of food sold in our stores and the
    safety of food served to our schoolchildren.
        While I applaud the proposed $42 million increase for the Food
    Safety and Inspection Service to hire more plant inspectors and expand
    the pathogen testing program, the Administration makes these
    improvements contingent on Congress approving $122 million in new fees
    on the industry. As you know, similar user fees have been rejected in
    the past primarily because requiring industry to pay for its own
    regulation, particularly critical food safety regulation, brings into
    question the independence of such vital safety programs. Food
    inspections have historically been considered an essential government
    function and they should remain so. And, of course, industry simply
    passes the cost of user fees on to the consumer.
        If these fees are rejected as they have been in the past, we would
    be forced under the administration's program to either wring $80
    million out of other vital programs to pay for these critical inspector
    positions and testing program, or let them go unfunded. I would ask
    your commitment to fully fund the expansion of FSIS programs without
    relying on industry fees, and I support your efforts to expand pathogen
    inspection, testing and training programs to ensure the safety of our
    food supply.
        I also seek your support of legislation that will significantly
    bolster the safety of our food supply. One important measure, the Safe
    School Food Act which I introduced earlier this year, would improve the
    inspection, purchasing and preparation of food served in our nation's
    schools. Since 1990, there have been more than 100 reported outbreaks
    of food borne illness in schools that have sickened more than 6,000
    children nationwide. The Centers for Disease Control and Prevention
    tells us that 10,000 more children were sickened in school-related food
    outbreaks during that time, although those children never learned what
    food or pathogen made them sick. And those numbers are likely a
    fraction of the true amount since food borne illness in schools is
    seriously under-reported in this country.
        In fact, the Chicago Tribune recently reported that countless
    Illinois schoolchildren were served ammonia-contaminated chicken,
    hamburgers and potatoes over the course of several months last year
    contaminated food that apparently both Federal and State officials knew
    about but allowed to be served. In one Illinois elementary school, 42
    kids and teachers became so ill after eating chicken with ammonia
    levels 133 times the acceptable amount, that several were rushed to the
    hospital. I understand, Madame Secretary, that your agency has worked
    to improve the safety of food in our schools, but when our
    schoolchildren are being sent to the hospital after eating the food we
    provide, inspect and regulate, then obviously much more needs to be
    done.
        The Safe School Food Act fills the numerous gaps in our school
    lunch food safety program through increased inspection of foods donated
    to schools by the USDA, increased cafeteria inspections, improved food
    safety planning at the local level, helping schools incorporate food
    safety requirements in their purchasing contracts, sharing information
    on food suppliers' safety records and perhaps most important, giving
    your agency the authority to ensure that tainted food is removed from
    schools through mandatory recalls. Some say that the number of food
    borne illness outbreaks in our schools is relatively insignificant
    compared to the number of meals served each year. But I believe, as do
    many others, that when our schoolchildren are being hospitalized
    because of the food we serve them, we are breaking our promise that we
    will provide them with a safe and secure learning environment.
        Chairman Bennett and Senator Kohl, thank you again for the
    opportunity to talk about these issues and the fiscal year 2004 Budget.

                               FSA PERSONNEL CUTS

        Senator Burns. I want to bring up a point that really
    caught my attention and I think it is something that is
    indicative of the Department and it is something that I have
    been saying all along about the Department of Agriculture. It
    is the reduction in FSA, in staff, and their ability to get
    their work done. That concerns me.
        FSA's personnel cuts have resulted in a loss of 5,694 jobs
    or a 38 percent reduction since 1994.
        I do not know whether any other department in the
    Department of Agriculture has taken cuts like that or not. You
    can fill me in on that if you would. But temporary staff years
    have been reduced since 1996 by 1,428 staff years or a 41
    percent reduction.
        The President's new budget, proposed for 2004, further cut
    temporary staff years an additional 15 percent while keeping
    permanent employees' level current. When you look at those
    numbers, the shortage of staff is also resulting in delayed
    implementation of the Direct and Countercyclical Program, a
    major component of the Farm Bill. As of February of 2003, 39.3
    percent of the Nation's farmers had been enrolled in the Direct
    or Countercyclical Program with 79 percent of the enrollment
    period completed. The shortage of employees and increased
    demands, I think, is creating a likelihood of errors, number
    one, by overworked staff resulting in increased inefficiencies
    in our FSA county offices.
        I think it points to an attitude towards producer. We are
    here for the producers and we are just not doing things in that
    respect that would assist them or to do originally what the
    Department of Agriculture was created for in the first place.
        So I think we are in a time where we have critical
    challenges. I really believe this wholeheartedly. If somebody
    can clear me up on this, I would sure stand corrected and I
    will feel better about the whole thing. But that is the only
    gun I am going to fire this morning.
        Thank you, Mr. Chairman, for allowing me to get on with
    that sermon. I will pass the plate later.
        Senator Bennett. You took careful aim. Thank you.
        Madame Secretary, we appreciate very much your being here
    and we look forward to hearing what you have to tell us.

                          STATEMENT OF ANN M. VENEMAN

        Secretary Veneman. Thank you very much, Mr. Chairman. I
    appreciate the opportunity to be here with you and the members
    of the committee and it is an honor to appear before you today.
        We have with us today our Deputy Secretary Jim Moseley, our
    Chief Economist Keith Collins, and our Budget Officer Steve
    Dewhurst, as well as a number of our staff who are here in the
    audience as well.
        I want to thank this committee again for your support of
    USDA this year and for the long history of effective
    cooperation between this committee and the Department in
    support of American agriculture. I look forward to working with
    you and continuing to work with you, Mr. Chairman, in your new
    role as chairman of this subcommittee, as well as the other
    members, to make progress on issues during the 2004 budget
    process and to ensure strong programs for our Nation's farm
    sector and the many other USDA mission areas that we have as
    well.
        I submitted a formal statement that discusses in detail the
    Administration's 2004 budget and particularly, that of
    Department of Agriculture. I would be grateful if this would be
    included in the record.
        Senator Bennett. It will be.

                        FISCAL YEAR 2004 BUDGET OVERVIEW

        Secretary Veneman. In the next few minutes I want to
    provide a quick overview of our budget proposals.
        First, the fiscal year 2004 budget focuses on key
    priorities for USDA, enhancing protection and safety of the
    Nation's agriculture and food supply, continuing rapid
    implementation and diligent administration of the 2002 Farm
    Bill including providing record amounts of conservation funding
    and protecting natural resources, providing unprecedented
    funding for our food and nutrition safety net, expanding
    agricultural trade, expanding housing for rural citizens,
    investing in America's rural sector, and improving USDA's
    programs delivering customer service.
        The 2004 budget calls for $74 billion in spending, an
    increase of $1.4 billion or about 2 percent above the level
    that was requested in 2003. This is approximately $5.4 billion
    higher than the actual level in 2001 and represents a growth of
    8 percent since this Administration took office.
        Discretionary outlays are estimated at $20.2 billion, about
    a 1 percent change or $300 million below the 2003 requested
    level.
        The request before this committee for fiscal year 2004
    amounts to $15.5 billion. The budget seeks record level support
    for USDA's Food Safety and Inspection Service, or FSIS as we
    refer to it, our meat and poultry food safety programs, as well
    as increases to strengthen our agriculture protection programs.
    These areas of our budget have been top priorities for this
    Administration since we came into office and particularly since
    the tragic events of September 11th.
        FSIS funding will increase to a program level of $899
    million, an increase of nearly $42 million over the 2003
    requested level. This represents $117 million or a 15 percent
    increase in these food safety programs since 2001 when the Bush
    Administration came into office.
        The $899 million for FSIS is comprised of $797 million in
    appropriated funds and new fees for inspection services
    provided beyond an approved primary inspection shift. Existing
    user fees are expected to generate approximately $102 million.
    This will fund 7,680 food safety inspectors, an increase of 80
    inspectors, and provide specialized training for the inspector
    workforce, increase microbiological testing and sampling,
    strengthen foreign surveillance programs, and increase public
    education efforts.
        Regarding homeland security and agricultural protection
    programs, the budget includes nearly $47 million in new funding
    to strengthen laboratory security measures, conduct research on
    emerging animal diseases, improve biosecurity, develop new
    vaccines, create new biosecurity database systems, and continue
    development of the unified Federal/State Diagnostic Network for
    identifying and responding to high-risk pathogens.
        For the Animal and Plant Health Inspection Service, or
    APHIS, we are requesting increases of about $30 million above
    our 2003 request for inspection services. This is to expand the
    availability of foot and mouth disease vaccines, provide
    additional protections against chronic wasting disease and
    poultry diseases, and expand diagnostic and other scientific
    technical services.
        In addition, $200 million is requested for the National
    Research Initiative, including funding for genomics.
        The President's 2004 budget supports the continued
    implementation of the 2002 Farm Bill, which provides a
    consistent economic safety net for the next several years for
    our Nation's farmers and ranchers. We have continued to make
    good progress in implementing the Farm Bill. All of the Title I
    commodity programs have been implemented and producers have
    received payments of over $7.7 billion since the bill was
    enacted. Signup for base and yield adjustments formally ended
    on April 1st and our county offices are now working very hard
    to ensure producers have Direct and Countercyclical Program
    contracts in place by June 2nd.
        On April 22nd, we announced the Conservation Reserve
    Program general signup which began May 5th and runs through May
    30th. We also announced for fiscal year 2003 the allocation to
    States of $1 billion in CCC funding for Farm Bill conservation
    programs and another $800 million in discretionary funds to
    provide conservation assistance on working farmlands.
        In February, the Department issued the proposed rule for
    the EQIP program for public comment. The comment period has
    closed and we are about ready to issue the final rule. Also in
    February, we issued an Advanced Notice of Proposed Rulemaking,
    or what is referred to as an ANPR, to receive public comment on
    how to proceed with the Conservation Security Program. That
    comment period closed on April 3rd.
        We have an extremely heavy workload at USDA but we are
    making good progress. It should be remembered that we could not
    have done this without the tremendous efforts and hard work of
    our staff in Washington, in the field offices, and our county
    service centers all throughout the country.
        In 2004, the primary focus will be on Farm Bill
    conservation programs. Total program level funding for Farm
    Bill conservation programs increases from about $2.2 billion in
    2001, when this administration took office, to almost $3.9
    billion in 2004. This includes $3.5 billion for financial
    assistance and $432 million for conservation technical
    assistance in 2004 in support of Farm Bill implementation, an
    overall increase of $582 million over 2003. In total, this
    represents an unprecedented investment in conservation that
    will have significant and lasting environmental benefits.
        The fiscal year 2004 budget reflects the Bush
    Administration's continued commitment to the nutrition safety
    net by including a record of $44.2 billion for domestic food
    assistance programs, a $2.4 billion increase over the requested
    level for fiscal year 2003. The President has often said this
    is a compassionate administration and our continued support for
    these programs demonstrates that continued commitment.
        The budget supports an estimated 21.6 million food stamp
    participants. It supports a record level of 7.8 million low-
    income, nutritionally at-risk WIC participants. It supports an
    average of 29 million schoolchildren each day in the National
    School Lunch Program. With food stamps, WIC, and school lunch
    programs, we are reaching more Americans and helping educate
    more people about healthy eating and stressing the importance
    of balanced diets. This is part of the President's HealthierUS
    Initiative.
        The budget also includes $2 billion contingency reserve for
    food stamps and $150 million contingency reserve for the WIC
    program to be available to cover unanticipated increases in
    participation in these programs.
        A high priority of the Administration is reauthorization of
    the Child Nutrition Programs and WIC this year to ensure stable
    and adequate funding for the programs and to improve nutrient
    intakes of participants. In February, we unveiled some of the
    Administration's principals regarding reauthorization to
    include ensuring that all of those eligible have access to
    these important programs, working to provide more incentives to
    schools to provide healthy choices and examining innovative
    approaches to do so, and ensuring continued program integrity.
        The fiscal year 2004 budget continues a strong commitment
    to export promotion and foreign market development efforts by
    proposing $6.2 billion in spending. Included in our trade
    budget is funding for USDA's market development programs
    including the Market Access and Cooperator Programs, which are
    increased by $15 million. Since this Administration took
    office, funding for market development programs has experienced
    significant growth, a 37 percent increase since fiscal year
    2001.
        The budget requests a new centralized fund of $6.6 million
    to support agencies' work in addressing important cross-cutting
    trade issues, compliance monitoring, dispute resolution, and
    biotechnology activities within the Department.
        A program level of $4.2 billion is provided for the
    Commodity Credit Corporation export credit guarantee
    activities. Nearly $1.6 billion is requested for U.S. foreign
    food assistance activities, including $50 million for the
    McGovern-Dole International Food for Education and Child
    Nutrition Program which builds upon the pilot Global Food for
    Education Program.
        We have worked hard in this budget to provide funding to
    increase rural home ownership and to enhance the economic
    opportunities and the quality of life in rural America. The
    Administration proposes spending of $11.9 billion for rural
    development programs. The budget supports the President's home
    ownership initiative with particular emphasis on minority
    family home ownership. The initiative provides for more than 40
    percent increase for single-family housing. Nearly $4.1 billion
    is requested for direct and guaranteed Section 502 single-
    family housing loans compared to an estimate of $2.8 billion
    for fiscal year 2003.
        The President's budget will provide 49,000 new home
    ownership opportunities for low--and moderate-income families
    in rural areas. In addition, the water and waste disposal
    program is being maintained at the requested 2003 level of $1.5
    billion.
        The budget supports the Department's strategic plan and
    supports several management initiatives to better integrate
    computer systems and technology to provide the Department's
    constituents with enhanced ability to access records, to sign
    up for program benefits, to access USDA studies and economic
    information and to respond to USDA surveys.
        These initiatives will also provide USDA employees with the
    necessary tools to officially operate and deliver services.
        Our attention to financial management paid off with the
    first-ever clean opinion on the Department's fiscal year 2002
    financial statements and a significant reduction in delinquent
    debt, something that we are very proud of.
        We are providing greater focus on efforts to eliminate
    discrimination. Our budget requests $800,000 to fund the new
    Office of the Assistant Secretary for Civil Rights. We
    appreciate the funding that was provided by the Congress in
    2003 for this new office, and we appreciate the Senate
    confirming our new Assistant Secretary for Civil Rights, Mr.
    Vernon Parker. We are very excited to have him as part of the
    team and I can tell you that he is already doing a very good
    job.
        Finally, I want to give you a brief update on the $3.1
    billion disaster assistance that was included in the 2003
    Omnibus Budget package that was signed by the President on
    February 20th. The same day that the President signed the
    legislation, I established a Disaster Assistance Working Group
    within USDA to begin work on the disaster assistance programs.
    Their charge is very clear, to make implementation of disaster
    assistance a farmer-friendly process and to make sure the
    program benefits reach producers as quickly as possible.
        I am pleased to announce that the signup for the tobacco
    crop losses began on March 17th. Signup for the additional
    benefits associated with the Livestock Compensation Program
    began on April 1st. The Cottonseed Payment Program signup began
    on May 2nd. Signup for the Crop Disaster Program will begin on
    June 6th.
        USDA has launched a disaster assistance implementation web
    site that contains basic program information, the announcements
    on program signup, questions and answers, as well as a comments
    and suggestions section to encourage interested parties to
    provide input to USDA on how best to move implementation
    forward in a timely and expeditious manner.

                               PREPARED STATEMENT

        Mr. Chairman and members of the committee, that completes
    my overview of some of the key points in this budget, as well
    as an update on some important issues in the Department of
    Agriculture.
        Again, I want to thank you for the opportunity to be here
    this morning. We look forward to working with the committee as
    we move forward on the fiscal year 2004 budget proposals, and
    our team at USDA is available in the coming months to provide
    details and information on all of these important issues.
        Again, thank you Mr. Chairman and members of the committee
    and I will be happy to answer your questions.
        [The statement follows:]

                      Prepared Statement of Ann M. Veneman

        Mr. Chairman, Members of the Committee, it is an honor for me to
    appear before you to discuss the fiscal year 2004 budget for the
    Department of Agriculture (USDA). I have with me today Deputy Secretary
    Jim Moseley, our Chief Economist, Keith Collins, and our Budget
    Officer, Steve Dewhurst.
        I want to thank the Committee again this year for its support of
    USDA programs and for the long history of effective cooperation between
    this Committee and the Department in support of American agriculture. I
    look forward to working with you, Mr. Chairman, and all the Members of
    the Committee during the 2004 budget process.
        As you know, the President's Budget was released on February 3rd.
    Total USDA outlays for 2004 are estimated to be $74.1 billion. This is
    an increase of $1.4 billion above the level requested in 2003.
    Departmentwide discretionary outlays are estimated at $20.2 billion,
    about $300 million below the 2003 requested level. The Department's
    request for discretionary budget authority before this committee is
    $15.4 billion.
        This year's budget is consistent with this Administration's policy
    book: Food and Agricultural Policy for the 21st Century and supports
    the Department's 5-year strategic plan. This plan outlines long-term
    goals and strategies for providing leadership in food, agriculture,
    resource and related issues, and the 2004 budget is designed to help
    accomplish USDA's strategic goals of: enhancing economic opportunities
    for agricultural producers; supporting increased economic opportunities
    and improving quality of life in rural America; enhancing protection
    and safety of the Nation's agriculture and food supply; improving the
    Nation's nutrition and health; and protecting and enhancing the
    Nation's natural resource base and environment.
        Because of fiscal realities, this budget is highly constrained.
    However, it maintains and enhances critical programs that supports the
    Department's strategic goals by:
        For 2004, this budget supports the following key initiatives:
      --Providing necessary funding for the continued implementation and
            administration of new and expanded programs enacted as part of
            the Farm Security and Rural Investment Act of 2002 (Farm Bill).
      --Implementing the largest and most wide-reaching Farm Bill
            conservation title ever which represents an unprecedented
            investment in conservation that will have significant
            environmental benefits.
      --Providing record funding to support record levels of participants
            in the Special Supplemental Nutrition Program for Women,
            Infants and Children (WIC) and covers the anticipated increases
            in participation in the Food Stamp Program, including legal
            immigrants and others newly eligible for benefits under the
            2002 Farm Bill.
      --Providing record level funding to strengthen protection against
            harmful bacteria in meat and poultry products. The request
            funds additional food safety inspectors and supports continued
            implementation of a science-based food safety inspection system
            by providing specialized food safety training to inspectors and
            other food safety professionals, increasing microbiological
            testing, and enhancing the information available to inspectors
            for evaluating food safety hazards that threaten the food
            supply.
      --Supporting the Department's strategic goal of expanding
            international marketing opportunities by providing over $6.0
            billion for the Department's international programs and
            activities.
      --Protecting American agriculture from threats to plants and animals
            and transfers necessary inspection and research functions to
            support the new Department of Homeland Security (DHS).
      --Providing continued support for fundamental and applied sciences in
            agriculture, including advancing research on agricultural
            genomics and on animal and plant pests and diseases.
      --Providing over $11 billion in loans, grants, and technical
            assistance for rural development needs, including electric and
            telecommunications systems, water and waste disposal systems,
            rural housing, and business and industry.
      --Improving the management and delivery of the Department's programs.
        With this as an overview, I would now like to discuss the details
    of our budget proposals for 2004.

                               HOMELAND SECURITY

        The Department is transferring the border inspection functions of
    the Animal and Plant Health Inspection Service's (APHIS) Agricultural
    Quarantine Inspection (AQI) program and the Plum Island Animal Disease
    Center to the new DHS. The transfer involves $247 million and nearly
    2,700 staff years. A Memorandum of Understanding will ensure that USDA
    has access to AQI employees in the event of future outbreaks of plant
    and animal pests and diseases.
        The budget requests an increase of nearly $42 million over that for
    fiscal year 2003. It will support 7,680 food safety inspectors, an
    increase of 80 inspectors, and provide specialized training for the
    inspection workforce, increase microbiological testing and sampling,
    strengthen foreign surveillance programs and increase public education
    efforts. In addition, $30 million will fund efforts by APHIS to expand
    inspection services, increase the availability of foot-and-mouth
    disease vaccines, provide protection against chronic wasting disease
    and poultry diseases, and expand diagnostic and other scientific/
    technical services. An increase of $47 million will strengthen
    laboratory security measures, fund research on emerging animal
    diseases, develop new vaccines, create new bio-security database
    systems, and continue development of the unified Federal-State
    Diagnostic Network for identifying and responding to high risk
    pathogens.
        The fiscal year 2002 Emergency Supplemental provided the Department
    with $328 million for 2002 and 2003 to protect American agriculture and
    its food supplies from terrorism. The supplemental provided $15 million
    to APHIS for moving laboratory operations from a strip mall in Ames,
    Iowa, to the main National Veterinary Services complex. It is under
    construction. The supplemental of $50 million to ARS at Ames, Iowa, is
    being used as part of the $124 million appropriated by Congress in
    recent years for modernization of the research facility. It is awaiting
    construction. Another $23 million was allocated to Plum Island, New
    York. It is being transferred to DHS for laboratory improvements.
    Funding of $115 million was allocated to improve physical and
    operational security at USDA labs and facilities, undertake security
    related research, and improve cyber security. The planning for this
    effort is largely completed. The remaining $125 million was allocated
    to improve security for food and agriculture by expanding pest
    detection and animal health monitoring, emergency preparedness training
    and exercises and strengthening the regional laboratory network. As of
    March 2003, $143.7 million has been obligated with the remainder to be
    spent during 2003.

                     FARM AND FOREIGN AGRICULTURAL SERVICES

        The farm sector in recent years has experienced lower market
    returns for several major commodities and recurring losses from various
    diseases, pests and other natural disaster-related causes. While the
    situation is showing signs of improvement, market returns in some areas
    of the farm economy are still low. The new Farm Bill enacted in 2002
    provides additional financial support for the farm economy if market
    conditions weaken. The President's budget for 2004 reflects the new
    Farm Bill which added new countercyclical programs to the farm safety
    net, reformed other farm programs and substantially expanded the
    Department's conservation programs. In addition, the budget supports a
    strong crop insurance program and an aggressive international trade
    program that will be critical to improving the farm economy in the next
    few years.

    Farm Program Delivery
        Farm Service Agency (FSA) salaries and expenses are funded at $1.3
    billion in 2004. This would support staffing levels of about 5,900
    Federal staff years and 10,800 county non-Federal staff years,
    including about 1,500 temporary staff years. Temporary staff will be
    reduced from the high level required in 2003 because of the heavy
    workload associated with the initial implementation of the new farm
    programs. However, we expect the workload for FSA to remain at
    significant levels in 2004, particularly because of Farm Bill
    requirements in the conservation area. Therefore, permanent county non-
    Federal staff levels are protected at current levels.
        In order to help FSA meet its workload challenges, improve service
    to farmers, and enhance operating efficiency, the budget provides
    increased funding of $41.9 million for FSA's information technology
    efforts related to the Service Center Modernization Initiative. This
    includes continued installation of geographic information systems (GIS)
    and other Common Computing Environment (CCE) initiatives to help move
    the delivery system into the e-Government era. The budget presents
    these funds as well as funds for the other Service Center agencies
    under the CCE appropriation to ensure that these activities are well
    coordinated.
        Management initiatives to modernize farm credit program servicing
    activities and to streamline information technology and related
    administrative support for the Service Center activities of FSA, the
    Natural Resources Conservation Service (NRCS), and Rural Development
    (RD) will also be undertaken in an effort to improve our ability to
    provide services at less cost.

    International Trade
        One of the key objectives set forth in the Department's new
    strategic plan is the expansion of international marketing
    opportunities. As the strategic plan and our earlier review of the U.S.
    food and agricultural system in the 21st century make clear, expanding
    markets is critical to the long-term health and prosperity of American
    agriculture. With 96 percent of the world's population living outside
    the United States, future growth in demand for food and agricultural
    products will occur primarily in overseas markets.
        The Department is moving ahead aggressively to achieve our trade
    expansion objectives. At the center of these efforts is negotiation of
    trade agreements that will reduce trade barriers and increase market
    access overseas. At the World Trade Organization, the United States has
    presented an ambitious proposal for reform of global agricultural trade
    that will eliminate export subsidies and reduce market access barriers
    and trade distorting domestic support. At the same time, the Department
    is actively engaged in efforts to establish regional free trade
    agreements with countries in Central America and southern Africa, as
    well as the Free Trade Area of the Americas. Work also has begun to
    reach comprehensive trade agreements with Australia and Morocco.
        Our trade policy activities are not limited to negotiating new
    agreements, however. As these agreements are implemented, it is
    essential that we bolster our efforts to monitor compliance and ensure
    that U.S. rights are protected. These efforts are critical to
    preserving markets as evidenced by the Department's work over the past
    year to resolve trade disputes, such as China's restrictions on soybean
    imports and Russia's ban on U.S. poultry imports.
        The Foreign Agricultural Service (FAS) is the lead agency in the
    Department's international activities and plays a critical role in our
    efforts to expand and preserve overseas markets. To support its
    activities, the 2004 budget provides a program level of $145 million
    for FAS. This is an increase of nearly $10 million above the 2003
    request level and supports a number of important trade-related
    activities. Among these is a trade capacity building initiative that
    will allow FAS to work with other countries in their implementation of
    the Cartagena Protocol on Biosafety. The Protocol is intended to
    provide uniform standards for ensuring the safe transport and use of
    products derived from biotechnology. Through a series of regional
    seminars, training sessions, scientific exchanges, and related
    activities, FAS will work to ensure that the Protocol's provisions are
    properly interpreted and applied. This is intended to facilitate the
    adoption of science-based, transparent, and non-discriminatory
    standards and, thereby, help to avoid potential disruptions in
    agricultural trade.
        The FAS budget also includes funding for a USDA contribution to the
    Montreal Protocol Multilateral Fund. Established in 1991, the Fund
    assists developing countries switch from ozone-depleting substances to
    safer alternatives. Agricultural issues are expected to become
    increasingly important in the Montreal Protocol process, particularly
    as the scheduled phase-out date for the use of methyl bromide
    approaches. The USDA contribution will help to further U.S.
    agricultural interests in the Protocol implementation process.
        Additional funding in support of FAS trade agreement negotiation,
    enforcement, and standards-setting activities will be made available
    from funds requested for the Office of the Secretary to conduct USDA
    cross-cutting trade negotiation and biotechnology activities. These
    funds also will be available to bolster efforts by FAS, APHIS, and
    other USDA agencies to address market access constraints related to
    biotechnology.
        The Department's export promotion and market development programs
    are another key component in our efforts to expand international
    marketing opportunities. The 2002 Farm Bill increased funding for many
    of these programs in order to bolster our trade expansion efforts, and
    the President's budget fully reflects those increases.
        For the Commodity Credit Corporation (CCC) export credit guarantee
    programs, the budget includes a program level of $4.2 billion which
    continues the programs near their current level. For the Department's
    market development programs, including the Market Access Program and
    Cooperator Program, the budget increases funding to $163 million in
    2004. This includes $2 million to continue the Technical Assistance for
    Specialty Crops Program authorized by the Farm Bill and implemented by
    FAS last year. The budget also includes $57 million for the Dairy
    Export Incentive Program and $28 million for the Export Enhancement
    Program.
        The budget supports a total program level for U.S. foreign food
    assistance activities of nearly $1.6 billion. Of that amount, just over
    $1.3 billion is provided for the Public Law 480 Title I credit and
    Title II donation programs. It also includes a projected $151 million
    for the CCC-funded Food for Progress programs which, based on current
    price projections, should support 400,000 metric tons of assistance as
    required by the Farm Bill. The budget also requests $50 million in
    appropriated funding for the new McGovern-Dole International Food for
    Education and Child Nutrition Program. As the Committee is aware, the
    program is funded through CCC in 2003, but beginning in 2004 is to be
    funded through appropriations. This funding level will provide
    continuity to new program activities that will begin to be implemented
    in late 2003.

    Farm Credit
        The budget also supports a program level of about $3.7 billion in
    farm credit programs to enhance opportunities for producers to obtain,
    when necessary, Federally-supported operating, ownership, and emergency
    credit. The program level is down slightly from last year due to higher
    subsidy costs for the direct loan programs. In addition, funding has
    been reallocated from guaranteed operating loans to the direct loan
    programs to better accommodate the actual demand in these programs. No
    additional funding is being requested for the emergency loan program.
    Based on current estimates, the budget assumes that carry-over funding
    in the emergency loan program will be sufficient to meet demand.

    Crop Insurance
        The budget also includes full funding for the crop insurance
    program. The budget includes ``such sums as necessary'' for the
    mandatory costs associated with program delivery and the payment of
    indemnities. The program is delivered by private insurance companies,
    and the Federal Government reimburses the companies for their delivery
    costs. The companies may also receive underwriting gains on policies
    for which they retain the risk of loss.
        In 2000, Congress substantially reformed the crop insurance
    program, in part, by providing for substantial increases in the premium
    subsidy available to producers, especially at higher levels of
    coverage. Producers have responded by purchasing higher levels of
    coverage. As a result, the premium earned per policy has increased from
    about $1,500 to over $2,300. However, the number of policies sold has
    remained virtually steady at about 1.3 million policies, indicating
    that most policies are renewal business which requires less sales
    effort than does the solicitation of new customers. In addition,
    technological advances mandated, in part, by the 2000 reforms have
    provided producers the opportunity to access information and to apply
    for crop insurance electronically.
        The Administration recently announced that the 2004 book of
    business would be delivered under the Standard Reinsurance Agreement
    that has been in place for a number of years. However, the budget
    includes a proposal to cap the amount of delivery expense reimbursement
    the companies may receive at 20 percent of the premium. The existing
    cap of 24.5 percent has been in place since 1998. This proposal is
    expected to save about $68 million in 2004. These savings are
    achievable because of improvements in the cost-effectiveness of the
    delivery system through the establishment of e-commerce procedures,
    higher premium dollar policies for insuring the same number of acres,
    and more business being done on a renewal basis.

                       MARKETING AND REGULATORY PROGRAMS

        Marketing and Regulatory Program agencies provide the basic
    infrastructure to protect and improve agricultural market
    competitiveness for the benefit of both consumers and U.S. producers.
    Pests and Diseases
        Helping protect the health of animal and plant resources from
    inadvertent as well as intentional pest and disease threats has been a
    primary responsibility of APHIS. The Department is entering into a
    Memorandum of Understanding with the DHS regarding the transfer of the
    AQI border inspections program. In this regard, APHIS will retain
    responsibility for promulgating regulations to protect against
    agricultural pests and diseases. DHS will provide access to the AQI
    inspectors in the event of future outbreaks. USDA will retain the role
    of inspecting passengers and cargoes traveling from Hawaii and Puerto
    Rico to the mainland for compliance with specified regulations to
    protect the health of the agricultural sector on the mainland.
        The 2004 budget proposes a program level of slightly more than $800
    million for salaries and expenses, an increase of about $10 million
    from the current comparable 2003 estimate. Notable programmatic
    increases would double efforts against chronic wasting disease,
    increase the availability of foot-and-mouth disease vaccines to protect
    against a potential outbreak, fund a low-pathogenic avian influenza
    program, enhance the ability to track animals and animal products
    entering and leaving the country, and expand regulatory enforcement.
    Further, bio-security and physical and operational security efforts
    would be bolstered, as would veterinary biologic and diagnostic support
    for the livestock sector. About $32 million is reduced from specific
    pest and disease management programs assuming an increase in cost-
    sharing for emergency pest and disease outbreaks by some cooperators. A
    proposed rule will be published for comment which will provide the
    criteria for cost-sharing for all cooperators.
    Marketing
        Another important proposal in the marketing and regulatory programs
    area involves the Grain Inspection, Packers and Stockyards
    Administration (GIPSA). The 2004 budget requests $13 million to help
    ensure efficient market functioning. An increase of almost $1 million
    would fund a new pilot program to audit the top four steer and heifer
    meatpackers. The audits are anticipated to result in substantially
    better financial protection to the regulated industries through
    heightened financial scrutiny. An additional $500,000 would enhance
    compliance with the Packers and Stockyards Act and fund a review of the
    Act. GIPSA will implement a General Accounting Office recommendation to
    provide industry participants with clear information on agency views of
    competitive activities. The GIPSA budget also proposes user fees to
    recover the costs of establishing and amending U.S. Grain Standards, as
    well as license fees to recover costs of the Packers and Stockyards
    program.
        For the Agricultural Marketing Service the budget proposes a
    program level of $297 million of which over 65 percent will be funded
    through user fees with the remainder funded through appropriations. An
    increase of $1 million in appropriated funds for increased pay costs is
    included in order to maintain existing program operations in Marketing
    Services and Payments to States.

                                  FOOD SAFETY

        USDA plays a critical role in safeguarding the food supply and its
    policies have contributed to the recent decline in pathogenic
    contamination of meat and poultry products and the level of foodborne
    illness as reported by the Centers for Disease Control and Prevention.
    This Administration believes that continued investment in the food
    safety infrastructure is necessary to ensure that the appropriate
    personnel, tools, and information are available to address the emerging
    food safety hazards that threaten public health and the viability of
    our agricultural system.
        For 2004, the budget for the Food Safety and Inspection Service
    (FSIS) provides a program level of $899 million, an increase of nearly
    $42 million over 2003. The budget includes increases for pay and
    inflation, the resources necessary to support approximately 7,680 meat
    and poultry inspectors, an increase of 80 inspectors from 2003. These
    inspectors are necessary to provide uninterrupted inspection services
    to the growing poultry industry. Increased funding for domestic
    inspection programs is also requested to take into account Virginia's
    decision to terminate its State inspection program and Maine's decision
    to implement a State inspection program.
        The budget includes an increase of approximately $16 million to
    support programmatic improvements aimed at achieving USDA's strategic
    objective to reduce the prevalence of foodborne hazards from farm-to-
    table. These program improvements will permit FSIS to continually
    assess and update food safety systems in order to ensure the highest
    level of safety possible. The following programmatic improvements will
    be supported by the budget.
        The budget includes an increase of $2 million to intensify the
    oversight of foreign inspection systems and inspection of the meat and
    poultry products which are exported to the United States. As more
    countries seek permission to export meat and poultry products to the
    United States, greater efforts will have to be made by inspection
    personnel to determine that their inspection systems ensure the level
    of safety that we expect here at home. With this funding, the number of
    countries being evaluated will increase from 33 to 40.
        The budget also includes a programmatic increase of $6 million to
    strengthen FSIS's microbiological testing program. First, consistent
    with recent directives issued by FSIS concerning the control of E. coli
    O157:H7 and Listeria monocytogenes, FSIS will significantly increase
    the level of testing of meat and poultry products for the presence of
    these pathogens. With this funding, the number of tests of ready-to-eat
    meat and poultry products samples for Listeria and Salmonella will
    increase by 50 percent; environmental sampling for Listeria
    monocytogenes in firms processing ready-to-eat meat and poultry
    products will be initiated; and samples of raw ground beef and ground
    beef products will more than double. This level of sampling will give
    consumers greater assurance that establishments are effectively
    controlling or eliminating the presence of pathogens in meat and
    poultry products.
        In order to handle the increased level of testing and to develop
    the emergency surge capacity in the event of a bioterrorist incident,
    the budget includes funding to improve the agency's laboratory
    infrastructure and to increase the number of highly trained chemists
    and microbiologists. These improvements are necessary to provide FSIS
    the capability it needs to ensure the safety of the products on a daily
    basis and to respond effectively to national emergencies involving the
    products it regulates.
        FSIS will also conduct nationwide microbiological baseline studies
    to provide the long-term data necessary to assess the ongoing risks
    presented by the products FSIS regulates. Improved risk assessments
    will make inspection decisions more science-based. Consistent with the
    Administration's policy on outsourcing, this laboratory testing would
    be conducted by outside laboratories.
        The budget also provides a programmatic increase of $6 million to
    improve the scientific and surveillance skills of FSIS workforce. This
    represents approximately a 33 percent increase in FSIS' training budget
    and a commitment to raising the base level of skill of the FSIS
    workforce. Training will be provided to in-plant inspectors to enhance
    the consistency and effectiveness of inspection. Inspectors highly
    trained in the latest food safety science and technology, including
    skills in assessing establishment Hazard Analysis and Critical Control
    Point systems and Sanitation Standard Operating Procedures, must be the
    backbone of our food safety infrastructure. In addition, training needs
    to be provided to food safety professionals, such as microbiologists,
    toxicologists, and risk assessors, in order to improve the development
    and enforcement of more science-based regulations.
        An increase of approximately $2 million is requested to evaluate
    and design a mass media campaign aimed at improving the safe food
    handling practices of consumers. A well educated public is better
    prepared to understand and address the food safety hazards they face
    and, therefore, will be more confident in the food they buy and eat.
        The 2004 budget also proposes legislation to collect an additional
    $122 million in user fees annually by recovering 100 percent of the
    cost of providing inspection services beyond an approved primary shift.
    Recovering a greater portion of these funds through user fees would
    result in savings to the taxpayer. These fees will have a minimal
    impact on prices received by producers or prices paid at retail by
    consumers.

                     FOOD, NUTRITION, AND CONSUMER SERVICES

        The budget includes $44.2 billion for USDA's domestic nutrition
    assistance programs, the highest level ever requested. The budget will
    ensure access to food assistance for all eligible recipients, it will
    help improve nutritional intakes and reduce obesity, and it will
    provide support for those recipients working toward economic self-
    sufficiency.
        The Special Supplemental Nutrition Program for Women, Infants and
    Children is budgeted at $4.8 billion. This is a record high funding
    request, which funds record levels of at-risk, low-income participants.
    This request also includes additional funding for program initiatives,
    including State information systems, breastfeeding peer counselors, and
    childhood obesity prevention projects. WIC reauthorization is a
    priority and is assumed in the budget. Ensuring an appropriately funded
    WIC program with the best possible outcomes is a top Administration
    priority. Further, the budget includes $20 million for the WIC Farmer's
    Market Nutrition Program and another $15 million in CCC funds for the
    Senior Farmers' Market Nutrition Program.
        The Food Stamp Program, which is the cornerstone of America's
    effort to ensure low-income people have access to an adequate diet, is
    funded at $27.5 billion. This covers anticipated food cost inflation
    and participation growth of about 1 million participants, including
    legal immigrants and others newly eligible based on legislative changes
    in the 2002 Farm Bill. Included is a $2 billion contingency reserve,
    $1.4 billion for Nutrition Assistance for Puerto Rico, and funds to
    improve integrity and Electronic Benefit Transfer. Significant progress
    has been made in reducing over and under payment error in the program
    such that average State payment accuracy is now 91.34 percent, and
    overpayment error averages 6.37 percent of benefits. The budget
    maintains the emphasis on program integrity and seeks to reduce error
    further.
        The Child Nutrition Programs would be funded at $11.4 billion, also
    a record for these programs. Increases are provided for food cost
    inflation, growth in the number of meals served and program integrity.
    Reauthorization of the Child Nutrition Programs is a priority for this
    coming year, and the Administration believes the focus should be on:
      --Ensuring stable and adequate funding for program benefits,
            especially for eligible meals served to low-income children who
            are eligible for free or reduced price meals;
      --Ensuring access to meals for all children;
      --Providing financial incentives to schools that serve meals
            consistent with the Dietary Guidelines; and
      --Streamlining program administration, minimizing administrative
            burden, ensuring adequate resources for program oversight,
            reducing error and improving program outcomes, while
            reinvesting any savings in strengthening the programs.
        The budget also includes a proposal specifically to explore policy
    changes to help ensure that all free and reduced price meal eligibles
    are correctly certified. USDA studies and national survey data suggest
    that a significant number of children approved for free and reduced
    price meals are from ineligible households. Correct certifications are
    a priority not only because they affect about $7 billion in school meal
    funds, but also because a wide array of Federal, State, and local
    education resources, totaling considerably more than meal
    reimbursements, are targeted to low-income children and schools using
    the same data. More accurate certifications will help ensure that these
    resources are all targeted correctly. The Administration would fully
    reinvest any savings that result from improved payment accuracy to
    strengthen the programs.

                       NATURAL RESOURCES AND ENVIRONMENT

        The 2002 Farm Bill contains many new conservation programs designed
    to protect and enhance the environment. The Department is now faced
    with the demanding task of implementing this Farm Bill which provides
    nearly $17.1 billion in new conservation funding over the next 10
    years. The 2004 budget request in the conservation area recognizes the
    importance of this task, as well as the need to continue to support
    underlying programs to address the full range of conservation issues at
    the national, State, local and farm level.
        The 2004 budget request for NRCS includes $1.2 billion in
    appropriated funding, and $1.4 billion in mandatory CCC financial
    assistance funding for the Farm Bill conservation programs, including
    $850 million for the Environmental Quality Incentive Program. The
    appropriated request includes $577 million for conservation technical
    assistance for the base programs that support the Department's
    conservation partnership with State and local entities. One new element
    in the NRCS appropriated account structure, proposed initially in a
    2003 budget amendment, is a new Farm Bill Technical Assistance Account
    that will provide all technical assistance associated with the
    implementation of all the Farm Bill conservation programs. In 2004,
    this new appropriated account is funded at $432 million.
        The 2004 budget for NRCS will also enable the agency to maintain
    support for important ongoing activities such as addressing the
    problems associated with polluted runoff from animal feeding operations
    and providing specialized technical assistance to land users on grazing
    lands. In addition, limited increases will be directed to other high
    priority activities such as addressing air quality problems in
    noncompliance areas, more fully implementing the Customer Service
    Toolkit, and establishing a more effective and meaningful monitoring
    and evaluation regimen to oversee the implementation of Farm Bill
    programs.
        The budget also proposes certain other changes for the watershed
    programs. With emergency spending being so difficult to predict, the
    budget proposes to not seek appropriated funding for emergency work
    while partially restoring the ongoing watershed planning and Public Law
    566 programs. This will help address the backlog of unmet community
    needs that these programs are designed to meet. Disaster funding will
    be addressed as emergencies arise.
        The Department's 2004 budget request maintains funding for the 368
    Resource Conservation and Development areas now authorized. The ongoing
    program will continue to improve State and local leadership
    capabilities in planning, developing and carrying out resource
    conservation programs.

                               RURAL DEVELOPMENT

        Over 60 million people call rural America home and relatively few
    of them are farmers and ranchers. USDA must embrace this reality and
    commit to creating new economic opportunities and improving the quality
    of life for a diversified rural population. Rural America needs to
    share in the Nation's economic prosperity, in terms of good jobs and
    earning potential, homeownership and infrastructure for community
    services, including telecommunications to participate in a highly
    technological, global society.
        The Administration is committed to bringing new ideas, new
    solutions and new approaches to rural America. The 2004 budget reflects
    this commitment. It includes new programs that are being implemented
    using the mandatory funding provided by the 2002 Farm Bill, and
    maintains the traditional loan, grant and technical assistance programs
    for rural development purposes at realistic levels of funding while
    offering new ways to operate these programs. For example, on January
    29, 2003, USDA announced the availability of over $1.4 billion in loans
    for broadband telecommunication. This initiative started as a pilot
    program in 2001 and is on the verge of becoming one of USDA's most
    important programs. It could make the same difference to rural America
    as the railroads did in the 19th century and the highway program did in
    the 20th century.
        The 2004 budget proposes $11.9 billion for USDA's rural development
    programs, including $680 million for administrative expenses. This
    program level is estimated to cost the Government $2.3 billion in
    budget authority, which compares to about $2.6 billion in the
    President's 2003 budget. Because interest rates have declined, the
    subsidy costs for most direct loan programs are lower than those
    reflected in the 2003 budget. The 2004 budget maintains these programs
    at their 2003 levels, which results in a savings in budget authority.
        The 2004 budget maintains the water and waste disposal program at
    an overall program level of $1.5 billion. However, it proposes that the
    amount of grants included in this level be reduced from $587 million to
    $346 million. Because the subsidy rate is only about 3.33 percent for
    direct loans, compared to 100 percent for grants, the shift toward more
    loans would maintain the same program level as the 2003 President's
    budget while achieving a substantial savings in budget authority. The
    lowest interest rates in a decade should allow more communities to
    repay loans rather than rely on grants. In addition, mandatory funding
    provided by the 2002 Farm Bill was used to fund a backlog of projects
    that needed a substantial portion of their funding through grants in
    order to be viable. Recent applications indicate that more projects can
    be funded through loans alone or with only a moderate grant.
        Electric loans are maintained at a $2.6 billion level. However, the
    amount available for direct loans at the 5 percent interest rate would
    be increased from $121 million to $240 million. This increase is
    intended to serve areas with low density and high consumer costs as
    well as other hardships. Further, USDA intends to ask electric
    borrowers, most of which qualified for eligibility based on service
    areas defined decades ago, to recertify that they are still serving
    rural areas, rather than urban or suburban areas.
        Loans for broadband access were initiated as a pilot program in
    2001. The 2002 Farm Bill provided the statutory authority and mandatory
    funding for this initiative. The 2004 budget provides for an increase
    in discretionary funding for broadband loans from $80 million in the
    2003 budget to $196 million for 2004. This increase reflects the
    Administration's support for bringing internet and broadband services
    to rural areas, and its belief that this activity should compete for
    funding under the annual budget process. Therefore, the 2004 budget
    proposes rescinding the mandatory funding for broadband loans that the
    2002 Farm Bill makes available for 2004. The mandatory funding relating
    to the January 29, 2003, announcement is reflected in the budget as
    being used in 2003. However, this funding remains available until
    expended.
        The 2004 budget also includes $2 million for broadband grants. As
    has been the policy since 2001 when the program was established, these
    grants will be used to assist a few small communities that lack the
    repayment capacity for loans.
        With regard to the rest of the telecommunications programs, the
    budget includes $495 million for telecommunication direct loans, and
    $50 million in direct loans and $25 million in grants for the distance
    learning and telemedicine program. These levels are the same as those
    requested for 2003. Further, the 2004 budget contains the
    Administration's prior proposal to stop funding the loan-making
    activities of the Rural Telephone Bank (RTB). The RTB is fully capable
    of obtaining funds to make loans through commercial channels as soon as
    it is privatized through the redemption of its Class A stock, which the
    Government holds.
        The business and industry guaranteed loan program is funded at a
    program level of $602 million, down from $733 million in 2003. The
    decrease reflects an increase in subsidy costs due to both increased
    losses on guarantees made in prior years and technical adjustments.
        Section 502 direct loans for single family housing would be
    increased from $957 million in 2003 to almost $1.4 billion in 2004.
    This increase would contribute to meeting the President's goal of
    increasing minority homeownership. In addition, the 2004 budget
    includes $2.725 billion for Section 502 guaranteed loans, including
    $225 million for refinancing. While there have been shortfalls in
    demand for these guarantees in prior years, the Administration recently
    lowered the fees to bring them more in line with what other Federal
    agencies charge. This change is expected to ensure a strong demand for
    the program through 2004. Section 502 direct and guaranteed loans are
    expected to provide about 49,000 homeownership opportunities in 2004.
        Consistent with last year's budget proposal, the 2004 budget does
    not include funding for new construction of Section 515 rural rental
    housing projects. This proposal reflects concern about the long-term
    cost of the Government for maintaining the existing portfolio of 17,800
    projects, and the need to find more cost-effective ways to provide
    housing support for rural residents with very low income. Many of these
    projects are over 20 years old and in need of repair or rehabilitation.
    They also require substantial amounts of rental assistance payments to
    remain viable. USDA has already initiated a review of alternatives for
    servicing the portfolio and developing options for making loans for new
    projects at less cost to the Government. Direct loans for repair,
    rehabilitation and preservation would continue to be made. The 2004
    budget would support $71 million for these purposes. Further, the 2004
    budget provides $740 million for rural rental assistance payments,
    which is sufficient to renew all expiring contracts and to support new
    construction of $59 million of farm labor housing projects.
        In addition, the 2004 budget includes an estimated savings of $5
    million for sales of loan assets. USDA's RD mission area, along with
    FSA, will be evaluating the potential for conducting such sales on a
    regular basis.

                       RESEARCH, EDUCATION, AND ECONOMICS

        Publicly supported agricultural research has provided the
    foundation for modern agriculture and is an important component of
    virtually all of our strategic objectives. Research will lead to
    commercially feasible renewable energy and biobased products with
    benefits to the environment, national security, and farm income.
    Genetic and molecular biology hold promise to reduce plant and animal
    diseases that threaten U.S. agriculture as the movement of plants and
    animals increases and as bioterrorism becomes a matter of increasing
    concern. There are technology-based opportunities to make our food
    supply safer and more wholesome that need to be exploited to address
    serious human health-related problems.
        The 2004 budget for the four Research, Education and Economics
    agencies is approximately $2.3 billion, nearly the same as 2003 budget
    level. The 2004 budget follows the general pattern of the 2003 budget
    with reductions in earmarked programs and program increases in areas
    where needs and returns are the greatest. The budget also includes
    increases for pay costs, homeland security related activities,
    information technology and other infrastructure requirements.
        The centerpiece of the 2003 budget was the proposal to move
    aggressively towards the full authorization level for the National
    Research Initiative (NRI). The proposal in the 2004 budget is based on
    the same underlying policy objective, but in a way that is consistent
    with the greater overall constraints of the 2004 budget. The proposal
    for $200 million for the NRI will finance work that will have an
    immediate impact on such issues as emerging diseases of plants and
    animals, biosecurity, air quality, and food and nutrition. The NRI
    provides critical support for mapping and sequencing the genomes of
    organisms of importance to agriculture. These projects are carried out
    in the major Federal genome sequencing centers in cooperation with
    other agencies including the National Institutes of Health, the
    Department of Energy, and the National Science Foundation, where USDA
    funds are highly leveraged.
        The 2004 budget for the Agricultural Research Service (ARS) calls
    for increases to support participation in genome mapping and sequencing
    projects and enhance the agency's bioinformatics capacity to transfer
    this information into research programs. There are increases for work
    on animal diseases and biosecurity to develop new vaccines, rapid
    diagnostic tests, and genome data on biosecurity threat agents. The
    research will lead to improved vaccines and therapeutics against foot
    and mouth disease and the newly emerging and most threatening swine
    disease, known as porcine reproductive respiratory syndrome or PRRS.
        The budget includes funds to install security countermeasures in
    ARS laboratories. Security assessments and initial investments in
    countermeasures were funded through the 2002 emergency supplemental
    funding. Assessments of all ARS facilities are being completed and
    funds in the 2004 budget will be used for the highest priority
    projects. At this time, such security measures represent the highest
    priority for the Buildings and Facilities account. Congress has
    appropriated a total of $124 million in recent years for implementation
    of the animal health facilities in Ames, Iowa. No funding is proposed
    in the 2004 budget as security of existing facilities is the higher
    priority for this year. The Administration will reconsider the full
    range of options for future modernization of these facilities and
    present recommendations in the fiscal year 2005 budget.
        The 2004 budget for the Cooperative State Research, Education, and
    Extension Service (CSREES) includes funds to continue the formula
    programs for the 1862 institutions at current levels and increase
    formula payments to the 1890 institutions as a step towards funding
    these programs at the higher authorization levels established in the
    2002 Farm Bill. There are also proposed increases in funds for the 1994
    Tribal Land Grant schools and an increase in the CSREES graduate
    fellowship program that will allow more funding for fellowships at the
    masters degree level which is especially important for recruiting
    minority graduate students. Finally, there is an increase in the
    Outreach and Technical Assistance Program authorized under Section 2501
    of the 1990 Farm Bill which is now being administered by CSREES. Our
    goals for the 2501 program are to encourage and assist socially
    disadvantaged farmers and ranchers own and operate farms and ranches
    and participate in USDA programs. With increased funding to $4 million
    we will be making more awards, for longer periods of time, to a wide
    range of community-based entities.
        The budget for the Economic Research Service (ERS) includes an
    increase for two initiatives. An increase of $1 million for a Security
    Analysis System for U.S. agriculture (SAS-USA) to provide information
    critical for the mitigation of security threats and attacks to the
    Nation's agriculture and food supply. The system will integrate spatial
    and economic data with analysis functions to deliver security
    assessments and recommendations to key decision makers within a short
    timeframe. An increase of $1.1 million will allow ERS to investigate
    consumer behavior, particularly in U.S. export markets, towards foods
    modified by genomic and other agricultural biotechnology innovations.
        The budget for the National Agricultural Statistics Service (NASS)
    includes an increase for three initiatives and a decrease of $16.5
    million for the Census of Agriculture, reflecting the decrease in
    staffing and activity levels to be realized in 2004 due to the cyclical
    nature of the 5-year census program.
        An increase of $4.8 million is requested to help restore and
    modernize NASS core survey and estimation program for U.S. agricultural
    commodities and other economic, environmental and rural data. These
    data are used by a variety of customers for business decisions, policy
    making, research, and other issues. They are also necessary for the
    calculation of national countercyclical payments rates provided under
    the 2002 Farm Bill.
        An increase of $1.6 million for NASS Locality-Based Agricultural
    County estimates program continues the improvements included in the
    2003 budget request. These local estimates are one of the most
    requested data sets, and are especially important to the Risk
    Management Agency (RMA) for their risk rating process, (affecting
    premium levels paid by producers), and to FSA for calculating national
    loan deficiency payments.
        Finally, an increase of $3.25 million is requested to support NASS
    efforts as the lead agency for two of USDA's enterprise-wide e-
    Government initiatives, Survey Capability and Data Management. This
    funding will allow NASS to develop the infrastructure necessary for
    electronic data reporting for its surveys, thereby reducing the
    reporting burden on farmers and ranchers.

                            DEPARTMENTAL MANAGEMENT

        The Departmental staff offices provide leadership, coordination and
    support for all administrative and policy functions of the Department.
    These offices' are vital to USDA's success in providing effective
    customer service and efficient program delivery. Salaries and benefits
    often comprise 90 percent or more of these offices' budgets, leaving
    them little flexibility to reduce other expenditures needed to continue
    their operations. The 2004 budget proposes funding required to ensure
    that these offices maintain the staffing levels needed to provide
    management leadership, oversight and coordination.
        These offices also have key responsibilities related to the
    President's Management Agenda and other departmentwide and agency-
    specific management reforms, which are crucial to making the Department
    an efficient, effective and discrimination-free organization that
    delivers the best return on taxpayers-investments. The Department has
    made significant progress in improving management. Examples are:
      --The Department has a new strategic plan which is being used to
            communicate and drive our programmatic, budget and management
            priorities.
      -- The Department received its first-ever unqualified or ``clean''
            opinion on the fiscal year 2002 financial statements,
            significantly reduced delinquent debt and all of the
            Department's agencies now use a single financial information
            system that meets Federal standards.
      --The Department's National Finance Center was one of four winners of
            a governmentwide competition to streamline payroll service
            providers. It also helps nearly 3 million Thrift Savings Plan
            participants manage and track their investments.
      --USDA's customers can increasingly conduct business with the
            Department online, saving them and the Department time and
            money over the long term.
        The fiscal year 2004 budget builds upon that progress by continuing
    funding levels for these offices and providing key funding increases in
    order to:
      --Provide $6.6 million to appropriate agencies, such as APHIS, FAS,
            and GIPSA, through the Office of the Secretary to address
            cross-cutting trade related challenges. Additional resources
            are needed for trade negotiations and enforcement actions, as
            well as in solving biotechnology issues related to market
            access and regulatory standards. This request will allow
            Secretarial level coordination, flexibility and resource
            sharing to target current trade issues.
      --Meet demands for Departmental coordination of homeland security
            efforts, including emergency planning and strengthened physical
            and cyber security in light of the September 11, 2001, attacks.
      --Continue efforts to modernize the Service Center agencies (FSA,
            NRCS, and RD) to improve efficiency and customer service. A key
            element in these plans is the maintenance of a CCE for the
            Service Center agencies and RMA acceleration of our efforts to
            acquire and use Geospatial Information Systems (GIS). The CCE
            and GIS are critical to providing electronic services to USDA
            customers.
      --Continue renovations of the South Building to ensure that employees
            and customers have a safe and modern working environment.
      --Enable the new Assistant Secretary for Civil Rights to guide civil
            rights activities. The President nominated Vernon Parker as the
            Department's first Assistant Secretary for Civil Rights and he
            was confirmed by Senate on March 27.
      --Enhance outreach efforts to provide all of our customers with
            information about our programs.
      --Enable the Offices of the General Counsel and the Inspector General
            to provide needed services to the Department.
        That concludes my statement. I look forward to working with the
    Committee on the 2004 budget so that we can better serve those who rely
    on USDA programs and services.

        Senator Bennett. Thank you very much, Madame Secretary.
        As you have seen, as the vote has concluded, a number of
    members of the subcommittee have joined us. I want to
    particularly welcome Senator Kohl, who was chairman of the
    subcommittee and set a high standard of excellence for us all
    to try to follow.
        Senator, if you have an opening statement, we will be happy
    to hear that and then I will begin the questioning in the
    normal round.
        Senator Kohl. Go ahead.

                     BIOTECHNOLOGY TRADE-RELATED ACTIVITIES

        Senator Bennett. Thank you very much.
        Madame Secretary, I noted that you requested an additional
    $6.6 million in your own budget to fund cross-cutting trade
    relating and biotechnology programs throughout the Department.
    As we have talked to members of your staff, you plan to use
    this money for the Foreign Agricultural Service, the Animal
    Plant Health Inspection Service, and the Grain Inspection,
    Packers and Stockyards Administration.
        Could you tell us how you arrived at this figure of $6.6
    million? And how much of this amount do you plan to give to
    each of these agencies? Why didn't the Department request that
    the increases be provided directly to these accounts instead of
    coming through your office? Do you have an established criteria
    for distribution of the funds?
        We are just trying to get a better understanding of all of
    this. And if you do not have those specific members right at
    your fingertips, you can supply them for the record. But I
    would appreciate any comment that you would have on this
    general approach.
        Secretary Veneman. Mr. Chairman, I appreciate that
    question. This is a new proposal, something that has not
    appeared in our budget before. As you know, there are a number
    of new developments with regard to biotechnology. We are
    encountering trade issues, as we have worked to open up markets
    in the European Union. That continues to be a very big issue,
    not only with the EU but with other countries as well.
        As we worked through the budget, one of the things that was
    apparent was that a number of these agencies were requesting
    additional funds to work on issues related to biotechnology on
    the trade side and on the regulatory side as well. We have had
    issues come up over the course of the last year where we have
    had to deal with the cleanup of an issue relating to Prodigy,
    for example. We also had to deal with the Starlink situation,
    in 2001.
        So these are cross-cutting issues with regard to
    biotechnology. They are trade related. They are regulatory
    related. The concept is to have a fund under which we can
    really utilize the resources that we have in a coordinated
    manner, in a cross-cutting manner, and have some flexibility as
    these issues arise.
        At this point, is not possible for me to give you the exact
    break down by agency. Some of that will continue to remain
    undetermined because we will need some flexibility in this
    account to address issues that we may not anticipate. But we
    will be happy to give you what detail we can on this particular
    proposal.
        [The information follows:]

        Funding for these activities will be allocated in a coordinated
    manner to address issues related to trade and biotechnology that are
    very fluid. It would be premature to make allocations at this time,
    though we would expect funding to be used to respond to World Trade
    Organization and regional and bilateral trade negotiation demands, as
    well as trade and regulatory issues associated with biotechnology.
    Examples of the types of activities to be funded include:
      --work to minimize market constraints related to biotechnology;
      --expand efforts to exchange information relating to the implications
            of implementing laws and regulations related to biotechnology;
      --deal with issues that may disrupt trade;
      --address increased trade negotiation workload associated with the
            World Trade Organization's multilateral negotiations to reform
            world agricultural trade practices, as well as the negotiation
            of regional trade agreements, including the Free Trade Area of
            the Americas, and numerous bilateral free trade agreements; and
      --ensure that introduced genetically-modified organisms, including
            those in field testing, do not pose a risk to American
            agriculture.

                          CRP/WRP TECHNICAL ASSISTANCE

        Senator Bennett. We would appreciate that.
        In the 2003 supplemental, this subcommittee provided
    direction your Department regarding funding of technical
    assistance and clarifying the intent of Congress and an area. I
    understand there has been some confusion about that or at least
    some dispute about it.
        Can you tell us how the Department interprets the language
    that this subcommittee included in the 2003 supplemental on
    that issue? And how much money will be required to fund
    technical assistance for the Conservation Reserve Program and
    Wetland Reserve Program in fiscal year 2004?
        Secretary Veneman. Mr. Chairman, as you indicate, there was
    some dispute about how the technical assistance would be
    funded. Ultimately, there was a decision by the Justice
    Department as to how the law should be interpreted and we are
    bound by that decision.
        There was $333 million in the 2003 budget and we are asking
    for $432 million in the 2004 budget for technical assistance
    for the conservation programs.
        Senator Bennett. Mr. Dewhurst.
        Mr. Dewhurst. Senator, let me just add to the Secretary's
    answer. As you said, in the Omnibus Bill that the Congress
    enacted, the Congress clarified the law with respect to
    technical assistance, and specified that funding from certain
    of those mandatory programs, provided for in the Farm Bill,
    should be used to provide technical assistance for the
    conservation programs, not withstanding what we know as the
    Section 11 cap, which had been a problem in the past.
        The approach that the Congress adopted in the Omnibus Bill
    is different from the approach that the Administration had
    recommended in its budget in the sense that the Administration
    had recommended the creation of a discretionary account to
    provide this money and the action of the Congress specifies the
    use of mandatory money for this purpose.
        Senator Bennett. That is why we asked the question.
        Mr. Dewhurst. One of the things that happens here under the
    operation of that law is that four of the programs that are in
    the Farm Bill, the EQIP Program, the Farmland Protection
    Program, the Grasslands Program, and the Wildlife Habitat
    Incentives Program essentially are asked to provide the
    technical assistance money to support all of those programs. So
    you have some of these programs being used as a source of
    technical assistance money for other conservation programs, and
    that has become controversial.
        The $333 million that the Secretary talked about remains
    the amount of money that the Department thinks is needed in
    total to support these programs in the current fiscal year.
    That money, under the law, will come out of the mandatory
    programs, out of those four programs I mentioned. It will be
    used to provide the technical assistance to support all of the
    Farm Bill programs, including programs such as the Conservation
    Reserve Program.
        So the Administration is continuing to recommend, in its
    2004 budget, the creation of a discretionary account for this
    purpose and the issue resides in where you get the money from
    and whether or not you want the money from one program to, in
    effect, subsidize another program. It is quite a complicated
    and controversial issue.
        Senator Bennett. Thank you. That is a clear explanation of
    where we are and obviously the determination will have to be
    made by this subcommittee as to where we go.
        Let me ask what might be a parochial question but I think
    it affects everyone, and then I will go to my colleagues and
    come back on a second round for my additional questions.

                     EMERGENCY WATERSHED PROTECTION PROGRAM

        I say parochial because the situation occurred in
    Santaquin, Utah. A wildfire burned the hills in that rural area
    and Utahans were able to work with NRCS and receive funding
    through the Emergency Watershed Protection Program. The
    community was threatened with mud slides and funding helped to
    avert that potential disaster, and we are naturally very
    grateful.
        The USDA budget now does not include any funding for the
    Emergency Watershed Protection Program. We may not be having
    mud slides this year because we are in the 5 year of the worst
    drought in history, and maybe we would like enough water to
    perhaps threaten us with a mud slide. But there is no funding
    for that particular program.
        You state that ``emergency assistance will be evaluated and
    addressed as disasters arise.'' The age-old question how do you
    address disasters if you have no prior funding, especially in
    the light of potential devastating fire season that we may
    have. The flip side of being free from mud slides is that we
    are threatened with serious fires.
        Unfortunately in the West right now we have the worst of
    all possible scenarios. We have had, as I say, the worst
    drought since they started keeping records. And then this
    spring it rained just enough to create a very significant
    sprout of grass. When the rain goes away and the grass is
    there, it is tinder, and then the rest of the landscape is
    tremendously dry.
        So I am concerned, not just for my own state but for all
    states in the West where this situation exists. With your
    statement that emergency assistance will be evaluated and
    addressed as disasters arise, should we not consider putting
    some money in that fund in advance of the disaster to give you
    a faster response time to this particular kind of challenge?
        Secretary Veneman. Mr. Chairman, let me first address the
    issues that you raise with regard to the West and the drought
    and fire danger. This has been something we have been following
    very closely, both because of the impacts of the drought on
    agriculture but also because of the impacts of the drought on
    firefighting, and our fire season.
        Obviously, last year was one of the worst fire seasons we
    have ever had. We are continually, through our drought task
    force, not only implementing the drought assistance provisions
    but really following this issue of the drought. We are very
    concerned about what the fire year is going to look like. We
    are very thankful for the rain we have had but obviously this
    is a high priority, and also a very strong reason why the
    President has put forward his Healthy Forests Initiative. We
    will continue to work through the budget process to try to get
    that implemented.
        Senator Bennett. Senator Burns will address that in his
    subcommittee.
        Secretary Veneman. I know, but I just wanted to remind
    everyone that that is a very high priority for us.
        As far as this program, let me have Mr. Dewhurst address
    how we have typically used this in the past, in terms of the
    funding for the disasters.
        Mr. Dewhurst. Senator, your question, of course, highlights
    one of the most difficult dilemmas we have when we put a budget
    together for the Department in areas such as firefighting and
    the emergency watershed conservation program that you
    mentioned. We also have an emergency conservation program in
    the Farm Service Agency.
        In most years that we have emergencies, we are not very
    good at anticipating the true magnitude of those emergencies.
    Funding that we provide in advance counts against the
    discretionary budget targets for the Department.
        So in most years that I have been here, most
    administrations have chosen, although we do provide money in
    advance for firefighting to some extent, not to budget the
    Emergency Watershed Program or the Emergency Conservation
    Program in advance.
        What happens is that after we have emergencies, evaluations
    are done at the local level, and estimates of damages are
    provided to the Administration and to the Congress. These
    programs are almost always dealt with through supplemental
    funding after those evaluations are available.
        It may or may not be the best way to do it, but it is in
    fact what has happened over many years.
        Senator Bennett. We may think about changing that. Thank
    you very much.
        Senator Kohl, you have been very patient. We appreciate
    your support.
        Senator Kohl. Thank you very much, Senator Bennett.
        I would like to offer a very warm welcome to Senator
    Bennett as he assumes his responsibilities as chairman of this
    subcommittee. He is someone that I and other members of this
    committee have come to know, respect and admire for his
    fairness.
        Senator Bennett, we will all be looking to you for
    leadership, advice, and counsel as the subcommittee proceeds.

                         DAIRY PRICE SUPPORT ACTIVITIES

        Secretary Veneman, America's dairy farmers and those in my
    state of Wisconsin, which has more dairy farmers than any other
    state by far, are suffering hugely from low prices and a dairy
    pricing system that often works against the farmers best
    interests. In fact, if it were not for the new dairy program in
    the Farm Bill, then dairy farmers would be going out of
    business all across this country at a historical and therefore
    devastating rate.
        We know that there is no single solution to the problems
    faced by dairy farmers, but as Secretary of Agriculture, you
    have a number of authorities which you can use to help these
    hard working men and women stay in business. Expanded dairy
    research, innovative marketing alternatives, enhanced risk
    management options, sound conservation practices, rural
    development strategies, and a strong voice in international
    trade policy are all necessary to support the dairy industry.
        I have listed just a few of the tools that you can use to
    assist dairy farmers. Please share with us, if you would, how
    you can use these and other authorities to strengthen the dairy
    sector and help our struggling dairy farmers survive.
        Secretary Veneman. Senator Kohl, I appreciate the difficult
    situation the dairy farmers are faced with regard to prices in
    recent times. It is something we have heard continuously about
    and I do appreciate your bringing up some of the various kinds
    of programs that we have that assist farmers across the board
    from research to marketing programs and international trade.
        Obviously, all of these kinds of programs can be used to
    help a variety of farmers and rural communities throughout
    America and we continue to use them. We are working through our
    international trade negotiations to open up more markets for
    our farmers and ranchers. We have used some of our tremendous
    stocks of non-fat dry milk that we have in storage for
    humanitarian purposes.
        You also mentioned the conservation programs, which are
    increased by about 80 percent in this Farm Bill. Much of that
    will be available for animal agriculture to help ranchers
    comply with some of the environmental regulations such as
    Consolidated Animal Feeding Operations (CAFOS). So we are using
    a number of these programs to assist dairy farmers and
    ranchers.
        I will call upon our Chief Economist, Mr. Collins, to just
    give a quick overview of the situation with regard to the
    economics of the dairy industry, as well.
        Mr. Collins. Thank you, Madame Secretary.
        Senator Kohl, I agree with your comment about the economic
    distress dairy producers are in. April milk prices were the
    lowest since 1978, and that has caused the greatest concern in
    25 years.
        You outlined the key areas, I believe, where things can be
    done to help dairy producers. And, we have tools in all of
    those areas and we are doing some things that people may not
    know about and may even be surprised about.
        If I were looking at how to help dairy producers, I would
    focus on trying to help them manage the risks they face,
    starting with the input they buy.
        If you take the State of Wisconsin, for example, we have
    over 700,000 acres of corn that is used for silage for dairy
    producers. Unfortunately, only about 18,000 acres of that is
    insured. So we could do a lot better job on developing
    insurance tools for forage and pasture and silage-type of
    crops.
        On the output side, we have the milk program, the Milk
    Income Loss Contract Program. We have paid about $1.3 billion
    to dairy producers since that program began under the 2002 Farm
    Bill.
        In addition to that, we have a couple of interesting
    programs that are now in operation that are helping small dairy
    producers. We have Whole Farm Insurance Programs and the
    Adjusted Gross Revenue Pilot Program which is available in a
    number of states. Unfortunately, it has a limit as to how much
    milk can be covered by that program. However, the State of
    Pennsylvania has a program called Adjusted Gross Revenue Lite,
    in which 100 percent of the income can come from milk on a farm
    and be covered. You have to have at least two commodities
    because it is a whole farm product. But most of it could be
    milk and could be covered under a Whole Farm Insurance product.
        These are new things. These are new tools that are
    evolving. The Risk Management Agency at USDA is working on
    those programs, and they hold some potential for providing new
    crop insurance and risk management tools for dairy producers.
        We also have a new product that has been submitted to the
    Federal Crop Insurance Corporation by a private insurance
    provider for a price insurance product for milk. So there are
    things going on that can help producers. But they do not happen
    overnight. They are taking time. But in the meantime, we have a
    price support program. We continue to support milk marketing
    orders. We also have DEIP, the Dairy Export Incentive Program,
    and we have the Milk Income Loss Contract Program, all
    providing a range of support to dairy producers.

                       STRENGTHENING DAIRY PRICE SUPPORT

        Senator Kohl. I would like to ask one additional question,
    Madame Secretary.
        The Dairy Price Support system requires that USDA purchase
    certain dairy products when the Class III price falls below
    $9.90 per hundredweight. As has been said, since January 2003,
    the Class III price has remained at record lows and below that
    support level. In fact, we reached a low of $9.11 per
    hundredweight in March.
        What can you do to strengthen the price support program to
    prevent the market price from falling below the support level?
        Mr. Collins. Senator Kohl, this is an interesting case. We
    have seen this happen before. This is not new this year. It has
    happened a number of times over the years, that the price has
    temporarily fallen below $9.90 per hundredweight.
        The law requires us to support the price of manufacturing
    grade milk at $9.90. It can happen that for a particular class
    like Class III or Class IV, or for a particular region of the
    country, the milk price can fall below $9.90.
        As a whole, the manufacturing grade milk price in the
    United States has been running close to $9.90. The April
    average price was, in fact, exactly $9.90.
        But the question you raise does point toward the price
    support program. There may be some things we can do there.
    There is concern when you see prices on exchanges fall well
    below $9.90, or the product prices fall way below our purchase
    prices, for example, like the cheese price or the butter price.
        One of the things that we are looking at is the extent to
    which there are unique costs borne by those who sell their
    products to us. For example, cheese. If you are talking about
    the Class III price, that is the price of the milk that goes
    into producing cheese. When we buy cheese, we impose certain
    requirements on those that supply cheese to us.
        We are reviewing right now what cost those requirements are
    imposing on the suppliers. And to see whether we have properly
    accounted for those costs in establishing our purchase price
    for cheese.
        To the extent that we have not properly accounted for those
    costs, then suppliers would in fact be selling cheese to us at
    a milk price less than $9.90.
        So we are reviewing that right now, trying to look at that
    dimension of the dairy price support issue you raised.
        Senator Kohl. I thank you and I have additional questions,
    Mr. Chairman, but we will get back to that on the second round.
        Senator Bennett. We will go through a second round. Senator
    Burns.

                          CONSERVATION RESERVE PROGRAM

        Senator Burns. Thank you, Mr. Chairman. I have a couple
    questions regarding CRP. You just closed the applications for
    CRP; is that correct?
        Secretary Veneman. No, sir. We just opened them on May 5th
    through the end of May.
        Senator Burns. Do you have any expectations whether or not
    you will hit the 39 million acre cap? Is it not capped at 39.3
    million acres?
        Secretary Veneman. It is capped at 39.2 million acres.
        Senator Burns. Do you think you will hit that cap?
        Secretary Veneman. No, sir, not yet.
        Mr. Collins. Senator Burns, we are a long way from that
    cap. Under the 1996 Farm Bill, the statutory cap was 36.4
    million acres. We are still a couple of million acres away from
    that cap.
        In addition to that, this fall we will have about 1.5
    million acres that will expire. The contracts will expire and
    come out of the CRP or have to rebid to come in. So we will
    have a tremendous amount, something on the order of 7 million
    acres, of potential room under the 39.2 million acre cap.
        For the purposes of our budget that has been presented, we
    estimated about 2.8 million acres would be enrolled in this
    signup. Now that is not a target. That is just a placeholder
    that we used to be able to project the budget costs for the
    CRP. We can go above that, we can go below that, depending on
    the quality of the bids.

                             CROP DISASTER PAYMENTS

        Senator Burns. The next question is, of course we went
    through the drought thing. And I know that you have had to do a
    lot of work in software and do a lot of things in your county
    offices in order to get that money out the door.
        Give me an idea right now, if you have an idea, when
    producers can expect some sort of relief or receipt of some of
    those checks?
        Mr. Collins. If you are referring to the crop disaster
    payments, the signup begins June 6th and payments can be
    expected within a couple of weeks after producers come in the
    door, provided they come in that first week.
        Senator Burns. It is going to be that quick?
        Mr. Collins. Yes, sir.
        Senator Burns. Those are the questions I had. I have got
    some questions here that I would like to just relate to you if
    that is all right, in some areas. There is a couple of areas
    that I do not know what I am talking about. There are more than
    that, really, but two that I have identified this morning.
        But they are programs that are ongoing. I will convey my
    questions to the people here and we will try and get that
    ironed out and get some answers because they are parochial and
    I know there are other folks here that are going to talk about
    overall budgets and programs. So I think we should move on to
    that.
        I thank the chairman.
        Senator Bennett. Thank you very much.

                     HEALTHY FORESTS AND FOREST STEWARDSHIP

        Senator Burns. The fire situation, I will tell you, right
    now we are looking at a pretty normal year. We are getting rain
    in Montana. You guys have got to hold your mouth right. But you
    have to hold it right for 5 years. It is tough to do.
        Right now, we are getting moisture in Montana and it is
    pretty good moisture. The old prairie is trying to green up a
    little bit.
        We would hope, in all your planning, but that does not mean
    that there are not other areas out there that is a high risk.
        As far as your USDA, the Forest Service is concerned, we
    sure need that money budgeted for Healthy Forest and forest
    stewardship, because what we are finding is you can have more
    moisture that we normally had in our forest, but they need
    thinning. The growth that is in these areas are just taking
    that moisture and they are just sucking it out. So it takes
    more snow and more rainfall to sustain us through the season.
        So I am particularly interested in that money as it goes to
    forest health and to our forest stewardship programs.
        They are working, by the way. Those programs are really
    working, and I think will have an impact on our fire season and
    how we manage our forest.
        Senator Bennett. Thank you very much.
        We appreciate the ranking member of the full committee,
    Senator Byrd, being with us. And I will go out of the early
    bird order to recognize Senator Byrd and thank him for his
    participation.
        Senator Byrd. How is the PA system working?
        I often comment, Mr. Chairman, that our country has been
    able to put a man on the moon and bring him back to Earth
    safely, but it has never been able to perfect a public address
    system.
        But you know, Mr. Chairman, I think there is a postscript
    to that, if I might add. I am having great difficulty in
    opening milk cartons. I follow the instructions to open on one
    side, and I turn it around, and it says to press on both sides.
    And I cannot get the darn thing to open.
        So I think our country needs to work hard on producing a
    milk carton that works.
        Senator Burns. Senator, I suggest you get a bigger hammer.
        Senator Byrd. Mr. Chairman, you are very kind to call on
    me. I am an ex officio member, as you pointed out, but I want
    to wait my turn and let the regular members have their turn. I
    do appreciate your kindness. Thank you.
        Senator Bennett. Thank you, sir, for your courtesy. Senator
    Johnson.
        Senator Johnson. Thank you, and I thank Senator Byrd, as
    well, for his leadership and guidance and his courtesy here.
        Congratulations to Chairman Bennett, and also thank you to
    Senator Kohl for your leadership on this subcommittee. It has
    been extraordinary and something that I have valued a great
    deal.
        Welcome, of course, to Secretary Veneman. The Secretary and
    I played some telephone tag here this past week and I apologize
    that somehow or another I was not able to quite get things
    squared away that way. But the Secretary has been very
    accessible and willing to sit down and work through issues, and
    I am very appreciative of that.
        Let me just, at the outset, make more of a comment than a
    question. And that is as we review the President's fiscal 2004
    budget proposal, I have to say that there are a number of areas
    where I feel some concern.

               PROPOSED ELIMINATION OF CERTAIN FARM BILL PROGRAMS

        One is that the USDA budget would zero out a great many of
    our rural development initiatives that Congress included in the
    Farm Bill. This is a point of great concern to me.
        Frankly, this zeroing out, I think, has largely to do with
    making room for the President's massive tax cut which largely
    will be borrowed in order to compensate for the cost. but also
    will come out of the hide of other domestic programs.
        Among those I am concerned about is the elimination of $200
    million from the water and sewer grants to small communities at
    a time when frankly, the backlog of communities at our doorstep
    looking for help on these water and sewer issues is just
    immense. These communities have virtually nowhere else to go.

                               PREPARED STATEMENT

        Also the Value-added Development Grant Program, the
    Bioenergy Program, and the Renewal Energy Program all wind up
    zeroed out. And this is a source of great concern to me.
        In my limited time, let me ask the chairman for consent to
    submit a full opening statement, that is more comprehensive and
    I want to expedite things by doing that.
        Senator Bennett. Your statement will be included in the
    record.
        [The statement follows:]

                   Prepared Statement of Senator Tim Johnson

        Thank you Chairman Bennett and Senator Kohl, I join you in
    welcoming Secretary Veneman to discuss the President's Budget request
    for agriculture in fiscal year 2004. Senator Bennett, congratulations
    on your appointment as Chair of the Agriculture Appropriations
    Subcommittee, I look forward to working with you. I want to briefly
    outline some concerns about the U.S. Department of Agriculture's (USDA)
    budget proposal for fiscal year 2004, then, discuss issues such as
    implementation of the farm bill and disaster aid.
        I am concerned that in order to accommodate the President's
    proposed $726 billion tax cut, the Administration has made significant
    cuts to critical programs that benefit farmers, ranchers, and all
    American citizens.
        Of greatest concern, the proposed USDA budget would zero-out many
    rural development initiatives that Congress included in the farm bill.
    Overall, the Administration is seeking $1.4 billion less for rural
    development programs than 1 year ago. The cuts would result in the
    following problems:
      --$200 million would be eliminated from water and sewer grants to
            small communities. These towns have nowhere else to go, and the
            cuts will leave them with inadequate or no water and sewer
            service;
      --The Value-Added Development Grants program would be totally
            eliminated;
      --$50 million would be cut from the very successful Bio-Energy
            Program which pays new and existing renewable fuel refineries
            for purchasing corn, soybeans, and other biomass for renewable
            fuel production;
      --Funding would be prohibited under the new Renewable Energy program
            in the farm bill.
        Combining the cuts to the value-added program and the new energy
    title in the farm bill, the Administration is suggesting that renewable
    fuel production and other value-added agriculture development just
    aren't very important when the exact opposite is true. Finally, I am
    concerned that conservation programs would be reduced and a Rural
    Firefighters grant program would be eliminated.
        Once again, I am disappointed by these cuts and by the
    Administration's priority for a $726 billion tax cut that would not
    serve the interests of South Dakota and rural America, and I desire to
    help restore some of the severe cuts made by this budget proposal.
        I want to congratulate Secretary Veneman and her fine staff,
    however, for a job well-done in implementing the new farm bill. I am
    particularly proud the Farm Service Agency staff in South Dakota
    virtually led the nation in farm bill sign-ups relative to updating
    producer information for bases and yields. As the June 2nd deadline for
    participation in the 2002 and 2003 direct and counter-cyclical program
    nears, and a new CRP sign-up begins, I anticipate producer concerns
    will arise and I encourage you to keep a watchful eye for these
    implementation issues.
        I am disappointed with the lack of seriousness the Administration
    has taken with respect to the ongoing drought and its effect on
    producers across the country. Suggesting the President will veto a $6
    billion disaster package while at the same time pushing for billions of
    dollars in tax cuts for the very wealthy is irresponsible policy and
    sends the wrong message to hard working farmers and ranchers.
        The $3.1 billion of disaster relief included in the fiscal year
    2003 omnibus appropriations bill, shortchanged nearly every producer
    who has suffered substantial losses from the drought. Livestock
    producers in South Dakota, who received a minimal assistance in 2002,
    can expect little if any further assistance as they enter into the
    third year of severe drought. It is simply unrealistic to expect
    producers to recover from the losses they have endured without any
    real, comprehensive assistance.
        On February 20, 2003, the President signed the Agricultural
    Assistance Act of 2003 into law. Yet, producers have received no
    indication from USDA when the $250 million for the Livestock Assistance
    Program (LAP) will be made available to them. It is my hope that at the
    conclusion of today's hearing, I will have a commitment from you to
    release the $250 million for LAP in the very immediate future.
        Further, I'm troubled by the new feed assistance program you
    announced on April 8th, 2003 that excludes over three-fourths of the
    counties in South Dakota at the same time the drought continues and
    feed supplies have been nearly depleted. While it is true many parts of
    South Dakota have received timely rains in the last 2 months, it
    doesn't make up for a serious lack of meaningful precipitation in the
    last 2 years. These producers may need additional help to cope with the
    drought.
        Finally, I want to comment on USDA's role to implement the
    mandatory country-of-origin labeling (COL) provision for meat, produce,
    fish, and peanuts contained in the farm bill. Madam Secretary, the
    livestock producers I represent believe passage of COL may be the most
    important law enacted since the adoption of the Packers and Stockyards
    Act of 1921 they want it to work.
        Nevertheless, the Bush Administration and USDA have made it clear
    that you oppose the mandatory COL law that I and others successfully
    attached to the farm bill. I am very disappointed about the signals
    that USDA and others have been sending regarding COL. Recent testimony
    from USDA Undersecretary Hawks says, ``the new labeling requirements
    will not have a positive effect overall and the potential impact on
    trade and the unintended consequences on producers could be
    significant.'' USDA issued cost estimates that were excessively high
    and have since been refuted. Documents from USDA indicate that you only
    consulted with three persons outside USDA to make the overblown cost
    estimates, and those persons were lobbyists for organizations that
    oppose labeling. Recently, you sent me a letter indicating it was not
    just three, but rather twenty-nine organizations that USDA consulted
    concerning COL costs I would like to know the twenty-nine groups to
    identify how many of them were consumer and/or producer groups
    supporting COL.
        The negative statements about COL from the Administration cause me
    great concern with regard to the credibility and the agenda of USDA in
    the implementation process. I had a substantial part in writing the COL
    provision of the farm bill. We intend for consumers to be informed
    about where food comes from and for USDA to use existing programs to
    implement the program (i.e. USDA quality grading system, school lunch
    program, Certified Angus Beef program, current voluntary program for
    the California producer using a ``Born and Raised in the USA'' label,
    and HACCP among others).
        None of those programs requires third party verification. Yet, in
    your voluntary guidelines for voluntary COL, USDA suggests that self
    verification is not sufficient, implying that an expensive third party
    verification system is required. I did not intend that result, there is
    no language in the law to support that interpretation, and none of the
    existing programs set forth as examples for your agency require it. I
    encourage USDA to re-examine the logic behind negating self-
    certification, I also hope USDA will analyze how to reduce costs of COL
    by tracking only imports of livestock.
        Further, USDA has never recognized or studied the benefits of COL.
    However, a study by five university law professors and economists was
    released yesterday by the University of Florida saying that the
    benefits for selling beef alone were almost $6 billion because
    consumers are willing to pay for labeling because they desire it so
    strongly. $6 billion for beef alone! That does not include the consumer
    willingness to pay for labeling of pork, lamb, fruits, nuts, fish or
    vegetables.
        The report also indicates USDA's suggestion that COL will cost $2
    billion is overblown and based upon errors in legal and economic
    assumptions. The University of Florida report estimates the cost of COL
    is more likely in a range between $70 million and $200 million,
    depending upon the implementation system employed. The economists
    writing the report believe USDA can implement COL at a cost of less
    than one cent per pound of food covered by the law. That is very
    inexpensive. Importantly, the report indicates consumers are willing to
    pay a premium for beef with a COL. That does not mean I believe COL
    will increase the cost of beef I am not sure it will.
        The food industry currently keeps voluminous records on each and
    every unit of product in their supply chains. COL should not require an
    expensive new record keeping system for those involved in the process.
    The law professors and economists in the Florida study also said that
    the most inexpensive means of implementing the labeling law was to
    recognize the on-the-ground fact that the vast majority of U.S. product
    is produced and processed in the United States and that the USDA should
    presume that all product comes from the United States while tracking
    existing marks of origin that are already on virtually all relevant
    food products coming in to the country.
        I want to believe you will carry out the law as intended by
    Congress and that it is done so as to minimize cost, record keeping
    requirements, and other regulatory burdens. I have directed my office
    to work in good-faith with your staff and USDA to ensure the COL law is
    implemented in a common sense fashion. I have confidence in the staff
    at the Agricultural Marketing Service that they will write a reasonable
    final rule upon which to base COL implementation.
        Thank you for holding the twelve COL listening sessions across the
    country and I appreciate the time that USDA will need to put into this
    law to make it work. I encourage USDA to review this thorough cost-
    benefit analysis from the University of Florida and use it as you
    develop the final rule to implement COL. I hope that USDA will be able
    to focus on the benefits of labeling, the fact that nearly thirty major
    trading partners already have COL, the fact that the United States has
    not issued a WTO challenge against another country's COL law, and that
    every major consumer and agriculture group in the United States
    supports COL.
        Madam Secretary, I appreciate you taking the time to appear before
    this subcommittee. You have been quoted describing USDA's budget for
    fiscal year 2004 as ``constrained,'' and I look forward to working
    together to reconstruct some of the important initiatives reduced or
    cut by the budget.
        Mr. Chairman, thank you, I conclude my remarks and look forward to
    asking Secretary Veneman questions.

                           COUNTRY OF ORIGIN LABELING

        Senator Johnson. Let me focus on one issue that is, I guess
    tangentially involved with the budget, at least, but a matter
    of great concern to me. And that, Madame Secretary, as you know
    there is a widely held and growing view across much of America
    that the Department of Agriculture is teaming up with the
    packers to sandbag country of origin labeling for meat. There
    is a sense among many of my producers that USDA is consciously
    seeking out ways to complicate such a program and to cause it
    to be far more expensive than need be.
        Now whether those views are legitimate or not, they are
    widely held. I appreciate the listening sessions that USDA has
    been having, and I know that people with greatly diverse views
    have shared their views with you. And I think those listening
    sessions no doubt will be of some value.
        But it seems to me that a workable efficient country of
    origin labeling program for meat, and obviously the law applies
    to fruits and vegetables as well, is not rocket science. Many
    other countries already do this. It has been pointed out to me
    that under Article 9 of GATT, live cattle entering the United
    States can be marked as to the country of origin so long as the
    mark does not discriminate against, materially reduce the value
    of, or unreasonably increase the cost of the imported item.
        Indeed, last year the United States imported 800,000 calves
    from Mexico and most of these calves were branded with an M to
    differentiate them from domestic cattle. The practice is in
    compliance with Article 9.
        Several organizations have made a very compelling case to
    me that one way to reduce the implementation and tracking costs
    associated with country of origin is to have USDA require
    markings similar to what already is done with imports of
    Mexican cattle on all imported livestock. The rationale is that
    tracking these markings on imports will reduce overall cost for
    implementation.
        I believe the costs associated with tracking only imported
    animals for country of origin implementation is a common sense
    approach to pursue, which is permissible under the law, and
    which would reduce implementation costs because imported
    livestock are already marked as such.
        The law that we passed forbids third party verification.
    And as you know, there are mailings going out as we speak from
    some of the packers raising questions and fears among livestock
    producers that what USDA is going to do is to require expensive
    recordkeeping and alternative methods which would, in effect,
    destroy the credibility of the entire program.
        And so my question to you is to what extent has USDA
    analyzed Article 9 to determine how to implement country of
    origin labeling? Does it have a position on using this as a
    rational to track only imported animals? And do you agree that
    virtually all imported covered commodities are currently marked
    as to country of origin, and that such marks are specifically
    allowed under GATT and WTO?
        In general terms, the United States only imports around 2
    million head of live cattle but slaughters 28 million head.
    Obviously, obviously of most of the cattle we slaughter are of
    U.S. origin. It does it not make sense to the USDA that
    tracking the 2 million imported cattle would be less costly
    than keeping track of 28 million that are born and raised in
    the United States?
        Secretary Veneman. Mr. Johnson, I appreciate your question
    because, as you indicate, this has been a very controversial
    provision in the Farm Bill, one that was controversial as it
    was discussed in the context of the Farm Bill, and one that the
    Administration did not support. But as it was passed in the
    Farm Bill, we have worked to implement what the law has
    required.
        We announced the voluntary program last fall, as was
    provided in the law. That voluntary program then became the
    framework from which we have begun to discuss a proposed rule
    for the mandatory program that the law requires us to implement
    by 2004.
        There is a lot of controversy surrounding this provision,
    particularly as you point out with regard to livestock, because
    the law does require that livestock be born and raised in the
    United States, and the retailers and the packers, to some
    extent, are concerned about how do they ensure that. So, we
    decided, as you mentioned, to have these listening sessions
    around the country. And I think, by all accounts, they have
    been very helpful in helping to identify some of the issues
    that have come up with trying to implement a Country of Origin
    Labeling program that will be workable for the long-term.
        As we pointed out, this is not an easy program to
    implement. We pointed that out in our Statement of
    Administrative Action. We certainly want to get all of the
    information from these listening sessions and from the comments
    that we received on the voluntary rule, before we put forward
    the proposed rule.
        But as we move forward, this program is something that has
    been difficult to implement and is of increasing concern to
    many of the producer groups. As I go around the country, I am
    hearing more and more from the meat producers themselves. They
    indicate that they would like to see this remain as a voluntary
    program. But, we cannot do that without a Congressional change.
        Senator Johnson. The reason you are hearing that is because
    they are scared to death of extraordinarily bureaucratic, red-
    tape filled, expensive recordkeeping requirements that the
    packers are telling them USDA is going to require. And so that
    is, I think, the resistance you are finding from the producers.
    I think they support the concept of country of origin labeling,
    that our consumers deserve to know the origins of the products
    they feed their families. But what they are worried about is
    this threat that USDA and the packers are going to team up on
    them and create a monumental red tape problem and recordkeeping
    problem.
        What we need from you is assurances that you are not only
    going to implement this program, but that you are going to seek
    out ways which will minimize the cost and minimize the
    recordkeeping. One of the suggestions is to follow the model
    that we already do on imported livestock. But there may be some
    other things that you can do, as well. I think that is the
    thrust of what I hear from livestock producers around the
    country.
        Secretary Veneman. We are doing everything we can within
    the law. The problem is that the law is very specific on
    country of origin labeling, in terms of what USDA can and
    cannot do. I have discussed this extensively with our legal
    counsel and I am told that the way we are looking at this and
    implementing it is in accordance with what the law requires.
        Senator Johnson. And I would only conclude that among the
    things the law requires is that there not be third party
    verification requirements for every animal in the country.
        Secretary Veneman. I understand that.
        Senator Johnson. And that self-verification is indeed what
    we do in many other labeling circumstances, whether it is
    school lunch programs and all kinds of other things, Black
    Angus, you name it. There is nothing new about this. And that
    self-verification or some variation on that is indeed one of
    the opportunities that USDA has, would be within the law, in
    fact is required by the law.
        So I thank you for sharing your thoughts with me on this
    and I know that there are other members here who want to go on.
        If I may, I have a number of other questions on this and
    some other issues. And if you would be so kind, I would submit
    those to the Department in writing for your response.
        Secretary Veneman. We would be happy to work with you on
    that.
        Senator Johnson. Thank you very much, Madame Secretary.
        Senator Bennett. Senator Cochran, who is responsible for my
    being here. Happy to hear from you, sir.
        Senator Cochran. Mr. Chairman, thank you very much.
        Madame Secretary, welcome to the committee. We appreciate
    your presence but more especially your good assistance in the
    efforts to implement the Farm Bill and to assist us as we work
    to reauthorize the child nutrition programs.

                               FSA STAFFING LEVEL

        One specific responsibility that we have is getting the
    Farm Service agencies staffed and carrying out their
    responsibilities to conduct the signups. I wonder if you could
    give us a report on the status of that and whether or not this
    budget contains sufficient funding to staff these offices and
    give them the equipment and the other things they need to carry
    out the intent of the Congress as reflected in the Farm Bill?
        Secretary Veneman. Senator, I appreciate the question and I
    appreciate your compliments on the Farm Bill implementation. I
    must say that our team has worked extraordinarily hard on
    implementing the Farm Bill with Keith Collins and Scott Steele
    and Hunt Shipman, before you stole him away. And we appreciate
    the working relationship that we have with your Committee on
    the work that we are doing on the reauthorization of the Child
    Nutrition Programs.
        When the Farm Bill was passed, the Department asked for, I
    believe, $110 million in implementation money. We received just
    over $50 million. Additional money was provided in the 2003
    appropriation, which gives us the ability to hire some
    additional staff.
        But I have to say, we have done extraordinarily well under
    the circumstances with the staff we have. We have got over 90
    percent of the signup completed. It is nearly complete. We are
    in the middle of the CRP signup in addition to the disaster
    assistance program and so forth.
        The other things that we are trying to do is to incorporate
    more and more new technologies that will allow us to better
    serve our farmers and ranchers with online forms that are
    understandable and usable, and access to all of the maps. We
    are trying to get all of the maps, both for the Farm Service
    Agency and NRCS digitized and onto the computer, which, we
    believe, will make it much easier for both the delivery of
    programs as well as the utilization of them by farmers.
        So as we move forward, I think it is important to recognize
    what an extraordinary job our Farm Service Agency people and,
    our NRCS people have done, as we have implemented this Farm
    Bill. And we will continue to work to make sure that we have
    the tools necessary to carry out these programs.
        But we do believe that we have budgeted for an appropriate
    number of additional staff as we go forward because once we get
    beyond the initial signups, obviously the workload will change.

                        FOOD SAFETY TRAINING INITIATIVE

        Senator Cochran. One of your other high priorities is food
    safety. You have taken steps to improve the food safety system.
    In your statement you suggest that inspectors are the backbone
    of our food safety system. Could you tell us about your
    training initiative and how this will improve the food
    inspection system?
        Secretary Veneman. We feel very strongly that we need to
    continually find ways to enhance our training for our food
    safety inspectors. In the mid-1990s, the Department implemented
    HACCP. We want to make sure that we have the best possible
    training under this relatively new methodology. We are
    conducting food safety inspections to make sure that training
    is up to date and appropriate for our inspectors and that they
    fully understand how to inspect for and implement HACCP. So we
    have asked for additional money in our budget for food safety
    training.
        I might add that this has been something that has been
    strongly supported by the industry groups, the processors
    themselves, consumer groups, as well as our Department. We want
    to work together to enhance the training programs that are
    available to our inspectors and we are working hard in FSIS to
    do that.
        Senator Cochran. We noticed that a recent report from the
    National Academy of Sciences entitled Scientific Criteria to
    Ensure Safe Food concluded that the HACCP inspection system's
    progress in reducing food-borne illness is, and I quote,
    ``decidedly favorable.''
        Do you agree with the findings in this report?
        Secretary Veneman. We agree with much of what was in that
    report and there are things that we do not agree with. We are
    going to have a more formal response to the report. But there
    are findings that we certainly do agree with.
        There were some questions in that report about whether or
    not we had legislative authority to enforce performance
    standards. We continue to use performance standards in our
    plants, and in our HACCP reviews. We are also using them to
    evaluate issues in plants to determine whether or not we need
    to do further inspections.
        So that report does have a lot of very good information but
    we have not had a formal response to it as yet.
        Senator Cochran. Mr. Chairman, thank you very much for your
    recognition.
        Senator Bennett. Thank you, and thank you for giving me
    this opportunity when you moved from this committee to the
    Homeland Security Committee.
        We should take note, as the first hearing without Senator
    Cochran, of his service as both chairman and ranking member of
    this subcommittee for a number of years.
        Senator Harkin.
        Senator Harkin. Thank you very much, Mr. Chairman. Madame
    Secretary, welcome again.

                         CONSERVATION SECURITY PROGRAM

        I would like to, if I might in my limited time, I have two
    or three items. I hope to get through them in this round, if
    not maybe another round. But the most important thing I would
    like to discuss with you is the Conservation Security Program
    that was included in the 2002 Farm Bill.
        As I have said before, this program is consistent with the
    goals that were spelled out in your farm policy book. When the
    President signed the Farm Bill into law, he specifically
    pointed to conservation as one of the major provisions of the
    Farm Bill.
        There is strong nationwide interest in making sure that CSP
    is implemented soon and correctly. Congress set funding for CSP
    at $3.773 billion in the Omnibus Bill, not at the $2 billion
    level included in the President's budget. So there is no basis
    anywhere for the $2 billion in any law ever passed by Congress.
        So I am asking if you can commit that the Department will
    move ahead and issue regulations based on delivering the full
    $3.773 billion to producers that was in the Omnibus Bill? Will
    that form the basis of your regulations? That figure, rather
    than $2 billion?
        Secretary Veneman. Currently, we are looking at the 4,500
    comments that we received in response to the Advanced Noticed
    of Proposed Rulemaking in the formulation of this program. This
    has been an extraordinarily complicated program to implement
    with a number of questions that need to be answered.
        One of the things you said is that we want to make sure
    that we do it correctly. We are absolutely in agreement that we
    want to do this program right because there was a lot of
    questions that we needed to have answered, so we went out with
    this request for comments. It is an extraordinary number of
    comments that we have gotten in.
        The $3.773 billion that was included in the fiscal year
    2003 budget, I believe, is a number that authorizes up to that
    amount in terms of expenditures for this program. The
    President's budget does include a $2 billion figure for 2004
    and that number, of course, was proposed before the 2003 budget
    was enacted. We had an unusual situation this year, in that we
    developed the fiscal year 2004 budget without a 2003
    appropriation.
        I cannot commit to a number today, but I do recognize that
    the 2003 Omnibus does allow the program to spend up to $3.773
    billion. It does not mandate, as I understand it, the spending
    $3.773 billion.
        Senator Harkin. Let me try it again.
        I understand what you are saying about the budget came up
    before the Omnibus. I understand that. I am just saying that
    the law that we passed, signed by the President, allows funding
    for CSP at the $3.773 billion level.
        All I am asking, and I am going to get into the rules here
    in a little bit and the Advance Notice of Proposed Regulations.
    I am just asking that in your implementation, as we move ahead
    this year, because I hope we are going to be signing up people
    this year, will it be based upon the full $3.773 billion? Or
    will it be based on $2 billion or something else? What will it
    be based on?
        Secretary Veneman. We are still working on the regulations
    and what they will ultimately be. But what we want these
    regulations to do is to be based on principle, not a level of
    funding. We want to get the principle and the program right.
        It is going to be very difficult to develop a regulation
    that promises to spend an exact amount of money. We want to get
    the principles right so that they comply with the level of
    funding authorized for the program.
        Senator Harkin. Principles. Do you agree, Madame Secretary,
    that the principle that we are operating under for the
    Conservation Security Program, the principle is written in
    statute? That statute is the Farm Bill. And, as written, as a
    statute, it is a mandatory open-ended program. Do you agree
    with that? As written in statute.
        Secretary Veneman. It is a complicated budget issue because
    there are certain budget scores that have been attached to it.
    So it has certainly been limited by what the Congress has
    specifically passed.
        Senator Harkin. I agree that there is a cap of $3.773
    billion. But the statute provides it as a mandatory open-ended
    program. It is just that the Omnibus Bill put a cap on it. I am
    talking about principles now. The principle that we are
    operating under is an open-ended mandatory program. Is that
    right or not? That should be very straightforward.
        Secretary Veneman. As far as I understand it, that is
    correct.
        Senator Harkin. Thank you.
        So that, again, if farmers do the work, the conservation
    work, to earn up to the $3.773 billion, then they should not be
    denied access to that money. That is how the law is written. At
    least that is how the law is written with the cap that we put
    on it. Now I am working to get the cap removed, as you know.
    But I am just talking about what you have to deal with right
    now.
        Secretary Veneman. I would agree that the fiscal year 2003
    law allows us to implement the program and use up to $3.773
    billion.
        Senator Harkin. Thank you.
        I understand that you have got 700 letters that had up to
    4,500 comments, but a lot of these comments were involved in
    the letters. And I understand that you did get a big response.
        And again, I do want to say that in February I met with
    Secretary Moseley and Mr. Collins, Ms. Waters, and Mr. Knight.
    We had a very good meeting on this in the Capitol. I understand
    full well the problems of moving ahead with this. It is a new
    program. I was more than willing to overlook the fact that the
    Farm Bill stipulated 270 days for final rules. I understand
    that. Fine, we move on beyond that.
        But what I want to ask now is you had 700 letters that came
    in. A lot of those came in early, so you have had at least a
    month or so to look at them. I am not certain that there is 700
    different points of view. There are just 700 letters came in.
        I think perhaps a lot of them have the same points of view
    on it. This does not mean you have to look at all the different
    ones.
        I know that you have been working on this, but I want to
    know when can we expect that we are going to have the final
    rules promulgated? And will USDA meet its goal of having sign
    up this year, this fiscal year?
        Secretary Veneman. We are doing everything we can to get
    these comments reviewed in order to put in place a proposed
    rule. We believe it is important to issue a proposed rule
    because of the complexity of this. As you know, there are a
    number of review processes that occur with these rules and we,
    in the Department, have worked very hard to get our Farm Bill
    rules out as quickly as possible. It also depends on external
    forces like how quickly things get through OMB, as well.
        I believe that when the USDA representatives met with you,
    they did present you with a time line. We are still working
    under the time line that was presented to you.
        Senator Harkin. Correct me if I am wrong, Jim, but I think
    the time line was to try to get the final rule sometime towards
    the end of the summer so that we can have sign up before the
    end of the fiscal year.
        Mr. Moseley. Yes, that is correct. When we met that was the
    discussion we had. And that would still be a reasonable time
    frame.
        As the Secretary pointed out, though, when you get involved
    in these things, you find out there are more hoops to jump
    through than you anticipated. If we could control everything,
    that would be reasonable. But, we cannot control everything. So
    we are moving along and trying to process this is quickly as we
    can.
        As I stated to you that day, there is no, absolutely no
    intent on the part of USDA to slow down the adoption of CSP. We
    think, in principle, it has some things that farmers want. And
    so we are moving forward as quickly as we can.
        At the same time, as the Secretary has pointed out, and you
    and I have discussed, this is a very complicated piece of
    legislation. There are a lot of views and opinions out there
    and I hear them all the time from farmers when I travel.
        Trying to bring all of that information together and to say
    that this is the best way to proceed is not a simple process.
        As I pointed out to you that day, the most important thing
    is to get it right. We would like to get it right soon and
    quick. But those two things, quick and right, may not
    necessarily be compatible.
        I think the important thing and the message that I would
    share is that there is no intent on the part of USDA to slow
    this down at all. We are trying to keep this on track and get
    this out.
        Senator Harkin. As I said once before, I think, to the
    Secretary, I am not aiming at you. I am talking to you but I
    think the aim may be at something called OMB. I have detected
    that the Department is interested in this. You are moving
    ahead, but my senses pick up that there is some hanky-panky
    going on at OMB that are really, Mr. Chairman, trying to
    misinterpret the law as we wrote the statute. I do not think it
    is at the department level but I think it is at OMB.
        So I might be pointing the questions at you but really I
    think my remarks are probably more applicable to OMB.
        Thank you very much. Again, I appreciate your working with
    us. Senator Smith and I wrote you a letter, and I hope you will
    look at that because we took a lot of care and time in looking
    at how we had envisioned this program and how we brought it
    through the Farm Bill. So I hope you will take look at those.
        Mr. Moseley. We will do that.
        Senator Harkin. Thank you. Thank you, Mr. Chairman.
        Senator Bennett. We have been joined by the chairman of the
    full committee. Senator Stevens, we appreciate your
    participation.

                         CONSERVATION SECURITY PROGRAM

        Senator Stevens. Thank you very much.
        I am glad I came in during that discussion because, Madame
    Secretary, I do want to have a discussion with the Senator from
    Iowa and you about what the Senator from Iowa just said.
        I do not envision the program he mentioned to be an
    entitlement that is unlimited. We did put a cap on it. As a
    matter of fact, I think we ought to have a review of that
    program. I know of no other program in the country where a
    landowner can make what he or she considers to be conservation
    improvements and automatically get totally repaid for the cost
    of those improvements without any limitation, without any kind
    of restriction at all.
        I am opposed to entitlements in appropriations bills. I am
    opposed to the concept that we can have, named through the
    appropriations process, a type of program that we do not have
    the right to control or limit.
        I want to put some limits on that and I want to know who is
    getting that money. Are people that have 10,000 acres getting
    it? Or is it a 160 acre limitation? What is it?
        I think it needs some better definition. And it certainly
    does not amount to what the Senator from Iowa said, to a
    program where everybody is entitled to money without regard to
    the amount of money we put up. You have a limit, and I want to
    see that limited.
        We are facing considerable opposition to a lot of the
    moneys which we should be appropriating for conservation
    programs in other areas. And to have an agricultural
    entitlement in an appropriations bill, I think, is wrong.
        I would just make that statement. I am not here to have a
    debate. But I do want to go it in the future.
        I am sure Senator Byrd is doing what I am doing. We have
    got several appropriation subcommittees meeting this morning
    and I would ask that the questions I do not have time to ask be
    submitted to the Secretary for a response.
        Senator Bennett. Without objection.

                                 SALMON PRICES

        Senator Stevens. But I have two specific issues. One is
    very close to the heart of all of the people in the North
    Pacific. We have a problem with regard to salmon prices,
    primarily because of the enormous amount of imports now that
    are coming in from Chile and from other countries.
        The questions I am filing are about the programs we have
    instituted, organic seafood and country of origin labeling. I
    would be happy to have your response to those.
        But right now there is a half million cases of canned
    salmon in warehouses in Seattle. They are not owned by my
    constituents. They are owned by the people in Seattle. But the
    fact that they are there is an overhang on the market so that
    the prices for salmon this year are really endangered.
        We specifically included language, at the request of the
    Senators from Washington and myself, to give the Department the
    authority to purchase surplus salmon products.
        I was recently informed that your Department people have
    told us that there were not funds for those purchases. We
    thought there was money for purchase of surplus foods. This is
    the first time salmon has been included in that category. But
    you have enormous amounts of money to purchase surplus foods.
    Why can't you use that for the purchase of this salmon and make
    it available under the food program?
        Secretary Veneman. Senator, we do have money for purchases
    of surplus foods. We have been purchasing surplus foods just in
    the last few weeks. And we do have salmon under active
    consideration, as I understand it.
        Senator Stevens. This is about the best buy in the country.
    Canned salmon is probably the most beneficial food that a woman
    can eat because when salmon is canned, the bones are calcified
    and it is the highest level of natural calcium in the world, in
    any food.
        But as a practical matter, until that salmon is taken off
    the shelf, they are not going to buy any salmon this year. And
    it is a result of the recession and the economic conditions.
    But I would urge you to use your authority to remove that
    impediment to the purchase of salmon this year. If those cases
    stay there, there will not be any salmon canned this year. I
    would just make that request.

                            DISTANCE LEARNING GRANTS

        Secondly, our committee included $15 million for a distant
    learning account to help rural public television stations meet
    the Federally mandated deadline, which is this month, to
    convert from analog to digital broadcasting. The exact language
    is $15 million in grants for public broadcasting systems to
    meet that goal of digital conversion.
        Now, the House specifically agreed to that in conference.
    But I am now told that your staff has advised us that the
    Congressional intent is not clear. I do not know how much
    clearer we can have it. It is a very short statement.
        It was the Senate committee who vote that provision and
    those grants are to public broadcasting stations to allow them
    to install the digital translators that are necessary to send
    digital broadcast signals to rural America. They have a
    deadline of this month. There are over 100 translators in
    Alaska alone. The money is not solely for Alaska, but it is for
    the country.
        We hope we will get additional money in 2004. What this
    means is that some of the broadcasting systems will no longer
    get public funds if they do not meet the requirement of being
    able to specifically deliver the digital signal along with the
    analog.
        We hope that they will all become digital soon but those
    that remain that have some analog capability must show that
    they have digital capability to continue to get assistance from
    the public broadcasting system. This money was to your
    department to help rural public television stations.
        Could you tell me why you cannot proceed?
        Secretary Veneman. Mr. Chairman, I will look into this
    issue for you. As I understand it, there may be some argument
    with the lawyers here. And I will commit to you to look into
    this and get back to you as quickly as possible.
        Let me say this, though. We have been strong proponents of
    using our rural development programs and expanding them for
    technology advances for rural America. We think that is
    important. If rural America is going to compete in the 21st
    century, they cannot be left behind with regard to the
    technology infrastructure.
        So I agree with you that these kinds of issues are very
    important as we move forward.
        I will commit to you that we will get back to you as
    quickly as possible on what the potential issues may be with
    regard to this $15 million. But I do understand your sense of
    urgency and we will work on this immediately.
        Senator Stevens. Just to make sure what happened, we
    started out with the $15 million. The House did not have that.
    But in the conference we had $42.813 million for distance
    learning and telemedicine grants and grants to broadcast
    digital signal for conversion.
        So the $15 million does not stand there all alone but is
    part of the larger sum. And we specifically, in the law, said
    it was for the digital signal conversion.
        I hope that you will look at it and I hope you will
    recognize the deadline these people are under, which is the end
    of this month.
        Secretary Veneman. I understand your concern and we will
    look at it immediately.
        Senator Stevens. I am sorry to come in so quickly and get
    out, but thank you very much. Mr. Chairman, I thank the
    committee for its courtesy.
        Senator Bennett. Thank you. Senator Byrd.
        Senator Byrd. Thank you, Mr. Chairman.
        I also want to thank my colleague, Senator Stevens, the
    chairman of the full committee, for his contribution today.
        By the way, his charming daughter Lilly is going to receive
    a bachelor's degree in history from the University of Stanford
    within a short time. I know how proud Senator Stevens is of
    this fine young woman, and he has every reason to be. She is,
    likewise, so proud of him. He is the idol of her eye.

                          HUMANE SLAUGHTER INSPECTORS

        Two years ago The Washington Post detailed the inhumane
    treatment of livestock in our Nation's slaughterhouses. The
    Humane Methods Slaughter Act of 1978 stipulates that cattle and
    hogs are to be stunned prior to their slaughter, rendering them
    senseless to the pain.
        However, as the article revealed, many slaughterhouses do
    not abide by the humane practices outlined in the Federal law.
    Thus, unimaginable pain is forced upon these defenseless
    animals. They cannot speak. They cannot tell us to be merciful.
        In the fiscal year 2003 Omnibus Appropriations Bill, $5
    million was secured for the hiring of at least 50 new humane
    slaughter inspectors within the Food Safety Inspection Service
    at the USDA. The report language in that bill instructed these
    new inspectors to work solely on the enforcement of the Humane
    Slaughter Act.
        Prior to the $1.25 million that I added to the fiscal year
    2001 Supplemental Appropriations Bill for the hiring of 17
    District Veterinary Medical Specialists at the Food Safety
    Inspection Service, there was not a single USDA inspector
    employed exclusively for the purpose of enforcing the Humane
    Slaughter Act. Not one.
        In the book of Proverbs, it is written that a righteous man
    regardeth the life of his beast. We are stewards of God's
    creatures and, as stewards, we are called to treat all animals
    with kindness, empathy, and a merciful spirit. At least, our
    domesticated animals.
        Despite the laws on the books, chronically weak enforcement
    and intense pressure to speed up slaughterhouse assembly lines
    reportedly have resulted in animals being skinned, dismembered,
    and boiled while they are still alive and conscious.
        Due to the late date on which the fiscal year 2003 Omnibus
    Appropriations Bill was signed into law, language in the bill
    permitted the funding for inspectors to be used into fiscal
    year 2004. What is the intention, Madam Secretary, of the USDA
    with reference to the hiring of at least 50 new humane
    slaughter inspectors with the funds that were provided?
        Secretary Veneman. Senator, I certainly appreciate your
    strong interest in this issue and share your concern for the
    humane slaughter of animals. As you indicated, we have, in the
    last couple of years, hired 17 new district veterinarians to
    work on these issues. I have recently talked with my staff in
    the Food Safety and Inspection Service about their
    implementation progress with regard to this $5 million and the
    50 humane slaughter inspectors.
        We are in the process now of defining exactly how the
    position descriptions would be put together and how we would
    proceed with hiring additional people.
        I had a question from Senator Cochran earlier, about our
    training initiative. We have in this 2004 budget, a training
    initiative for our food safety inspectors. As part of that
    training initiative, there will be additional training on
    humane slaughter for the personnel that are in the plants
    because it is important that they are cognizant of the humane
    slaughter practices in the plants. So we are working on this
    from a number of different perspectives.
        I noted also that there was an L.A. Times article on this
    issue just about a week or two ago talking about the progress
    that has been made in humane slaughter. An independent
    consultant said that in 1996 just 36 percent, according to her
    studies of the beef plants, had effectively knocked out the
    cattle before slaughter. Last year her statistics showed that
    94 percent of the plants were doing it properly.
        This is an outside study that was reported in the press,
    but it is something I think shows some progress in this area on
    an issue that I know is of great concern to you, sir.
        Senator Byrd. Madam Secretary, I am astonished. You did not
    answer my question. Let me repeat the question.
        What is the intention of the USDA with regard to hiring at
    least 50 new humane slaughter inspectors with the funding it
    has been provided? That is a straightforward question, and I
    would hope that we would get a straightforward answer.
        Secretary Veneman. Sir, I thought I did answer your
    question.
        Senator Byrd. No, you did not. With all respect, I do not
    want to appear to be discourteous but I listened carefully. Why
    don't you answer that question?
        Secretary Veneman. As I think I said, we are in the process
    of working on the position descriptions to comply with
    implementation of this particular provision in the 2003 bill. I
    will be glad to get you a more complete description of how we
    intend to carry this out. But this was a provision that was
    just recently passed. Our folks are working on the details of
    how we intend to implement this initiative and carry forward
    with the hiring. We will work to brief you or your staff on the
    specifics or get you written information on that.
        Senator Byrd. We have talked about this before. And with
    all due respect, I heard you say that you recently met with
    your staff and discussed this.
        We talked about this a year ago. I think we talked about it
    2 years ago. Here is what the language says in the omnibus
    appropriations conference report, dated February 13, 2003.
        The conference agreement includes $5 million to remain
    available through fiscal year 2004 to hire no fewer than 50
    FTEs for enforcement of the Humane Methods of Slaughter Act
    through full-time antemortem inspection, particular unloading,
    handling, stunning and killing of animals at slaughter plants.
        Now how many do you have on board? How many of these
    inspectors do you have on board at this time?
        Secretary Veneman. My understanding is none, sir. We are
    still in the process of developing these positions. Again, this
    has been a relatively short amount of time since this provision
    was implemented or signed into law but we are working to
    implement this provision of the 2003 Omnibus bill.
        Senator Byrd. This is not something new, and the very
    distinguished Secretary knows that, because I added $1.25
    million to the fiscal year 2001 Supplemental Appropriations
    Bill. At that time, there was not a single USDA inspector
    employed exclusively for the purpose of enforcing the Humane
    Slaughter Act.
        I am really surprised that we have to talk about this a
    second time. I was very, I thought, serious in my discussion of
    this last year with the Secretary. How many are on board at
    this time?
        Secretary Veneman. We have the 17 on board that were hired
    previously. As I mentioned earlier, we do have 17 district
    veterinarians who are overseeing the issue of humane slaughter.
    The issue of the 50 new additional inspectors is still, as I
    indicated, being reviewed in our Department to determine the
    position descriptions. My understanding is that these are 50
    FTEs for enforcement activities but are not necessarily
    veterinary personnel.
        Senator Byrd. That is right.
        Secretary Veneman. And so it is a different position
    description than the 17 that we have previously hired. We are
    in the process of developing this program to effectively carry
    it out as specified in the conference report.
        Senator Byrd. How long does it take? The suffering of these
    animals is going on.
        Let me read this conference report just a bit further. It
    mentions the 17 District Veterinary Medical Specialists. It
    says the conferees also support the ongoing activities of the
    17 District Veterinary Medical Specialists and expect that
    their mission be limited to HMSA enforcement.
        So aside from those, the conference report includes $5
    million to remain available through fiscal year 2004 to hire,
    no fewer than 50 FTEs for enforcement of the Humane Methods of
    Slaughter Act.
        Do you not think that there is a responsibility to pursue
    the course set out by the Congress, through the workings of its
    two Appropriations committees in the Senate and the House,
    respectively, according to their instructions in the conference
    report that was issued in February? Do you not think that the
    Department has a responsibility to follow-up on this, and to do
    it quickly?
        There is a manifest need, a great need, for these
    inspectors. I called attention to it last year and I have done
    it again today, most respectfully. I have called attention to
    The Washington Post articles.
        Mr. Chairman, I ask unanimous consent to include in the
    record two articles here, one entitled, ``An Outbreak Waiting
    to Happen,'' and the other entitled, ``Big Mac's Big Voice in
    Meat Plants.''
        Senator Bennett. Without objection, they will be included.
        [The information follows:]

                   [From the Washington Post, April 10, 2001]

                         Big Mac's Voice in Meat Plants

        Never mind the bad old days, when slaughterhouses were dark places
    filled with blood and terror. As far as the world's No. 1 hamburger
    vendor is concerned, Happy Meals start with happy cows.
        That was the message delivered in February by a coterie of
    McDonald's consultants to a group of 140 managers who oversee the
    slaughter of most of the cattle and pigs Americans will consume this
    year. From now on, McDonald's says, its suppliers will be judged not
    only on how cleanly they slaughter animals, but also on how well they
    manage the small details in the final minutes.
        Starting with cheerful indoor lighting.
        ``Cows like indirect lighting,'' explained Temple Grandin, an
    animal science assistant professor at Colorado State University and
    McDonald's lead consultant on animal welfare. ``Bright lights are a
    distraction.''
        And only indoor voices, please.
        ``We've got to get rid of the yelling and screaming coming out of
    people's mouths,'' Grandin scolded.
        So much attention on atmosphere may seem misplaced, given that the
    beneficiaries are seconds away from death. But McDonald's, like much of
    the meat industry, is serious when it comes to convincing the public of
    its compassion for the cows, chickens and pigs that account for the
    bulk of its menu.
        Bloodied in past scrapes with animal rights groups, McDonald's has
    been positioning itself in recent years as an ardent defender of farm
    animals. It announced last year it would no longer buy eggs from
    companies that permit the controversial practice of withholding food
    and water from hens to speed up egg production.
        Now the company's headfirst plunge into slaughter policing is
    revolutionizing the way slaughterhouses do business, according to a
    wide range of industry experts and observers.
        ``In this business, you have a pre-McDonald's era and a post-
    McDonald's era,'' said Grandin, who has studied animal-handling
    practices for more than 20 years. ``The difference is measured in
    light-years.''
        Others also have contributed to the improvement, including the
    American Meat Institute, which is drawing ever-larger crowds to its
    annual ``humane-handling'' seminars, such as the one in Kansas City.
    The AMI, working with Grandin, issued industry-wide guidelines in 1997
    that spell out proper treatment of cows and pigs, from a calm and
    orderly delivery to the stockyards to a quick and painless end on the
    killing floor.
        But the driving force for change is McDonald's, which decided in
    1998 to conduct annual inspections at every plant that puts the beef
    into Big Macs. The chain's auditors observe how animals are treated at
    each stage of the process, keeping track of even minor problems such as
    excessive squealing or the overuse of cattle prods.
        The members of McDonald's audit team say their job is made easier
    by scientific evidence that shows tangible economic benefits when
    animals are treated well. Meat from abused or frightened animals is
    often discolored and soft, and it spoils more quickly due to hormonal
    secretions in the final moments of life, industry experts say.
        ``Humane handling results in better finished products,'' AMI
    President J. Patrick Boyle said. ``It also creates a safer workplace,
    because there's a potential for worker injuries when animals are
    mishandled.''
        Not everyone is convinced that slaughter practices have improved as
    much as McDonald's surveys suggest. Gail Eisnitz, investigator for the
    Humane Farming Association, notes that until the past few months, all
    McDonald's inspections were announced in advance.
        ``The industry's self-inspections are meaningless,'' Eisnitz said.
    ``They're designed to lull Americans into a false sense of security
    about what goes on inside slaughterhouses.''
        But Jeff Rau, an animal scientist who attended the Kansas City
    seminar on behalf of the Humane Society of the United States, saw the
    increased attention to animal welfare as a hopeful step.
        ``The industry has recognized it has some work to do,'' Rau said.
    ``The next step is to convince consumers to be aware of what is
    happening to their food before it gets to the table. People should
    understand that their food dollars can carry some weight in persuading
    companies to improve.''
                                     ______

                   [From the Washington Post, April 9, 2001]

                         An Outbreak Waiting to Happen

         ``Did your daughter eat meat that was pink or red?''
        The nurse's question puzzled Connie Kriefall. In an intensive care
    ward a few steps from where the young mother stood, doctors were
    struggling to save her only daughter, a 3-year-old with sapphire eyes
    and a mysterious disease.
        In 6 days, tiny Brianna Kriefall had gone from a healthy
    preschooler with a tummy ache to a deathly sick child with advanced
    organ failure. Her kidneys had quit. Her heart was faltering. And now a
    nurse was asking: Could this be E. coli?
        Kriefall's mind raced back to dinner at a Sizzler restaurant the
    previous week. Brianna had chosen the children's buffet, she
    remembered. Watermelon, cantaloupe, cheese. Nothing likely to carry E.
    coli. ``That just couldn't be possible,'' she said.
        But the outbreak that killed Brianna and sickened more than 500
    others here in July was not only possible, it was foreseeable. A series
    of systemic failures by government and industry all but guaranteed that
    potentially deadly microbes would make their way into a kitchen
    somewhere in America. It was simply a question of when.
        For decades, the familiar purple ``USDA-inspected'' stamp has given
    Americans confidence that their meat supply is safe. But for the
    Kriefalls, like thousands of other families stricken by meat-borne
    pathogens each year, this veneer of safety proved dangerously
    deceptive.
        Wisconsin health investigators later concluded Brianna Kriefall
    died from eating watermelon that Sizzler workers had inadvertently
    splattered with juices from tainted sirloin tips. The meat came from a
    Colorado slaughterhouse where beef repeatedly had been contaminated
    with feces, E. coli's favorite breeding ground. Federal inspectors had
    known of the problems at the plant and had documented them dozens of
    times. But ultimately they were unable to fix them.
        Nearly a century after Upton Sinclair exposed the scandal of
    America's slaughterhouses in his novel ``The Jungle,'' some of the
    nation's largest meatpacking plants still fail to meet Federal
    inspection guidelines to produce meat free of disease-carrying filth,
    an investigation by The Washington Post and Dateline NBC has found.
        U.S. Department of Agriculture inspectors who patrol the nation's
    6,000 meatpacking plants today are armed with more modern tools and
    tougher standards than ever. But the government's watchdog agency often
    has lacked the legal muscle and political will to address serious
    safety threats. It cannot impose civil fines or recall meat even when
    its inspectors see problems that could lead to outbreaks.
        In the Milwaukee case, one of the nation's largest, most modern
    meatpacking plants--Excel Corp.'s Fort Morgan, Colo., facility--was
    cited 26 times over a 10-month period before Brianna Kriefall's death
    for letting feces contaminate meat, documents show. Despite new
    government controls on bacteria launched 3 years ago, the plant shipped
    out beef tainted with E. coli on at least four occasions. The last
    shipment delivered the pathogens that ended up in the children's buffet
    at the suburban Milwaukee Sizzler.
        ``It was like making Fords without brakes,'' said Michael
    Schwochert, a veterinarian and retired Federal inspector who worked at
    the Excel plant. ``We used to sit around the office and say, `They're
    going to have to kill someone before anything gets done.''
        Excel officials said they were unable to talk about the Milwaukee
    outbreak, citing litigation. In a statement, Excel said it uses
    cutting-edge technology to prevent contamination, but food must be
    properly cooked and handled to ensure safety. ``Excel is committed to
    providing safe food for people,'' the company said.
        A lawyer for the Sizzler franchise in suburban Milwaukee said the
    restaurant owners still did not know how the outbreak occurred, but had
    reached settlements with numerous sickened customers. ``The owners have
    been devastated by this outbreak,'' attorney Ron Pezze Jr. said.
        Criticism of the USDA's enforcement record comes as domestic E.
    coli outbreaks and epidemics of mad-cow and foot-and-mouth disease in
    Europe heighten concerns about America's meat supply. Contamination
    similar to that found at Excel was documented at several other plants
    around the country in an internal agency report a month before the
    Milwaukee outbreak.
        The USDA's inspector general, in a sharply critical review of the
    agency's inspection system, said the government's safety net for
    consumers was being compromised by confusing policies, blurred lines of
    authority and a lack of options for enforcement. At some plants,
    regulators frequently were finding tainted beef but doing nothing
    because they simply ``were unaware of any actions to take,'' the report
    said.
        ``How long does it take for a `bad' plant to be listed as bad? We
    can't tell you,'' USDA Inspector General Roger Viadero said in an
    interview, ``because [the USDA] has not told the inspector what's
    bad.''
        USDA officials at the Excel plant were still searching for that
    line last June 14 when they sent the last in a series of warnings to
    the plant's management. Nine days later, records show, a package of
    contaminated meat left the factory and ended up at the Sizzler in
    Milwaukee.
        ``It was like a ticking time bomb by the time it got to the Sizzler
    restaurant,'' said William Cannon, attorney for the Kriefall family.
    ``And unfortunately, this ticking time bomb killed Brianna Kriefall.''
    A Safer System
        The internal struggle over beef quality at the Excel plant would
    likely have never attracted public attention were it not for two
    headline-generating events.
        The first came in August 1999 with the chance discovery--in a USDA
    random survey--of E. coli in Excel beef at an Indiana grocery store.
        The second was the Milwaukee E. coli outbreak last summer. In one
    of the worst such incidents in state history, more than 500 people got
    sick, 62 with confirmed E. coli infections.
        What happened between the two incidents starkly illustrates how
    problems at modern meat plants test the limits of the USDA's new
    inspection and meat safety system.
        Located on a dry plain 80 miles northeast of Denver, the Excel
    factory is an imposing agglomeration of smokestacks and aircraft
    hangar-sized buildings covering 2 million square feet. The only outward
    sign that the plant produces beef is the line of trucks delivering
    cattle to the stockyard. That, and the ubiquitous smell--cow manure
    with a hint of decaying meat.
        Inside, much of the butchering is done the old-fashioned way, by
    workers using various sorts of knives. At the front of the line is the
    ``knocker,'' who uses a pistol-like device to drive a metal bolt into
    the steer's head--the law requires that animals be rendered insensible
    to pain before slaughtering. Another worker slits the animal's throat
    to drain the blood. Others in turn remove limbs, hide and organs.
        At line speeds of more than 300 cattle per hour, things frequently
    go wrong. Organs tear and spill their contents. Fecal matter is smeared
    and splattered.
        The presence of fecal matter greatly increases the risk of
    pathogens, which is why USDA inspectors enforce a ``zero-tolerance''
    policy for fecal contamination on meat carcasses. Meat smeared with
    fecal matter is supposed to be pulled off the line and cleaned by
    trimming. But there is no law that requires raw meat to be free of
    pathogens; the exception is for ground beef. Thus, raw meat must carry
    a label that specifies it must be properly cooked.
        In 1993, the Jack in the Box food poisonings on the West Coast
    killed four children and awakened Americans to E. coli 0157, a mutant
    bacterial strain that lurked in undercooked ground beef. Three years
    later, the Clinton administration officially scrapped a century-old
    system that relied on the eyes and noses of Federal inspectors--called
    ``poke and sniff''--in favor of a preventative system of controls
    developed by the industry with federal supervision.
        That system, supported by food safety experts and many consumer
    groups, was called the Hazard Analysis and Critical Control Point
    system, or HACCP (pronounced hass-ip). Under HACCP, companies create
    their own plans for addressing safety threats--a ``hazard analysis''--
    and their own methods of dealing with threats--``control points.'' The
    theory is that hazards arise at many points in the production process,
    and steps can be taken to minimize risks from pathogens. The measures
    can range from lowering room temperatures to dousing meat with a
    chlorine rinse to kill germs.
        In a nod to consumer groups, HACCP introduced mandatory testing for
    microbes for the first time. Plants would be subjected to testing for
    salmonella and a benign form of E. coli, but not the deadly E. coli
    0157:H7.
        Three years into HACCP implementation, the reviews are decidedly
    mixed. The rate for deadly E. coli illness remains steady, with 73,000
    people stricken and 61 killed a year, according to the U.S. Centers for
    Disease Control and Prevention.
        But a steady decline in disease rates for salmonella and several
    other pathogens since 1996 has prompted UDSA officials and many
    consumer groups to declare HACCP a major success.
        ``The nation's food supply is safer than ever,'' Thomas J. Billy,
    administrator of the Food Safety Inspection Service, said in a
    statement in response to questions about HACCP's performance. ``Our
    data shows the level of harmful bacteria has been markedly reduced.''
        But pathogens remain a major concern. The USDA estimates that
    salmonella is present in 35 percent of turkeys, 11 percent of chickens
    and 6 percent of ground beef. Each year, food-borne pathogens cause 76
    million illnesses and 5,000 deaths, according to the CDC.
        According to critics, gaps in HACCP still allow too many pathogens
    to slip through.
        The report by the USDA's inspector general last summer said meat
    companies were manipulating the new system to limit interference from
    inspectors. For example, by their placement of control points, plants
    can effectively dictate which parts of the process inspectors can fully
    monitor.
        Viadero said the agency was ``uncertain of its authorities'' and
    had ``reduced its oversight short of what is prudent and necessary for
    the protection of the consumer.''
        ``After what I've seen,'' Viadero said in an interview, ``if my
    hamburgers don't look like hockey pucks, I don't eat them.''
        Meat inspectors and consumer groups like HACCP's microbe-testing
    requirements, but some argue the new system is an ``industry-honor
    system'' that puts consumers at greater risk. Under the old system,
    meat with fecal matter on it was trimmed to remove pathogens. Now,
    inspectors say, chemical rinses can wash off visible traces of fecal
    matter without removing all the pathogens.
        ``It's the biggest disaster I've seen,'' said Delmer Jones,
    president of the National Joint Council of Food Inspection Locals,
    which represents most of the government's 7,600 meat inspectors.
    ``We're vulnerable to more deaths and no one seems to care.''
        Last fall, two Washington watchdog groups, the Government
    Accountability Project and Public Citizen, released results of an
    unscientific poll of 451 inspectors. While a majority approved of HACCP
    in concept, more than three-fourths said their ability to enforce the
    law had declined.
        One inspector scribbled these words:
        ``HACCP ties our hands and limits what we can do. If this is the
    best the government has to offer, I will instruct my family and friends
    to turn vegetarian.''
        Schwochert, formerly the night shift inspector-in-charge at Excel's
    Fort Morgan Plant, worked 15 years in private business before joining
    the USDA. He prided himself on his ability to work with industry, but
    he felt that HACCP made his job even tougher.
        ``I've never seen anything so slow to respond,'' he said.
        ``Nothing in my professional training or life gave me the tools for
    dealing with what was going on. It was a calamity of errors. If it
    weren't so serious, it would be funny.''
    Showdown at Excel
        By the late summer and fall of 1999, Schwochert was accustomed to
    tussling with Excel's managers over problems ranging from filthy,
    urine-soaked employee washrooms to occasional findings of fecal matter
    on carcasses. But the skirmishes intensified dramatically on Sept. 13,
    after the USDA found E. coli 0157 in a package of Excel beef at the
    Indiana grocery store.
        The discovery, part of a routine survey of grocery stores and
    meatpacking plants, triggered a series of reviews of the Excel plant's
    food-safety practices.
        The measures began with 2 weeks of E. coli testing. Inspectors
    found E. coli--not once but twice, in the first 3 days of testing. The
    USDA ordered the contaminated meat seized, but it was too late. Some of
    the meat had been loaded onto a delivery truck.
        ``Not only were those samples positive, but that meat had left the
    plant,'' Schwo-chert said. Excel tracked down the truck and returned
    the meat to the plant.
        USDA documents show the combination of E. coli positives and the
    improper shipment of the contaminated beef prompted the government to
    impose its harshest sanction: A district supervisor ``withheld
    inspection'' from the plant, forcing Excel to shut down for 3 days. On
    Sept. 28, the plant reopened under the threat of another suspension if
    new violations occurred.
        They did, but no suspension followed. By Sept. 29, inspectors were
    finding so much fecal contamination on carcasses that Schwochert said
    he tried to close the plant again, even though he felt he lacked the
    authority to do so. At the last minute, the plant's top supervisor
    agreed to shutter the factory voluntarily for the rest of the day,
    Schwochert said.
        Excel promised to retrain its workers and fine-tune its carcass-
    dressing system, although details of its plan are considered
    proprietary information. But more contaminated carcasses turned up 2
    days later, and regularly after that, agency records show:
        Oct. 1: ``Fecal contamination observed . . . sample failed to meet
    zero-tolerance requirements.''
        Oct. 2: ``Identifiable fecal deficiencies on two carcasses (out of
    11).''
        Oct. 4: ``Fecal contamination splotched in an area 1 inch by 4
    inches . . . carcasses retained.''
        Oct. 9: ``Deficiencies were observed on six carcasses (out of
    11).''
        In company memos, Excel responded that the inspectors were focusing
    on ``unrelated'' and ``isolated'' incidents. But USDA district
    supervisors took a different view. One USDA letter called the company's
    explanations ``incredible, frivolous and capricious.'' Another
    specifically suggested Excel was putting its customers at risk.
        ``In the light of recent E. coli positives, I would think that food
    safety and preventive dressing procedures would be of utmost importance
    on your corporate agenda,'' Dale Hansen, the FSIS's circuit supervisor
    in Greeley, Colo., wrote on Nov. 29 to Marsha Kreegar, Excel's
    regulatory affairs superintendent.
        USDA's enforcement records contain no response to that letter.
    Excel has declined to make officials at the Fort Morgan plant available
    for interviews.
        For 5 months, the USDA chose not to impose new sanctions, despite
    14 additional citations for fecal contamination and a host of other
    problems. Government records also describe mice infestation, grease and
    rainwater leaking onto meat; unsanitary knives; equipment sullied with
    day-old meat and fat scraps; and carcasses being dragged across floors.
        USDA inspectors asked their supervisors for guidance. How many
    violations before the plant is suspended again? Three? Five?
        ``The question was asked by myself or in my presence at least 10
    times,'' Schwochert said, ``and we never got a clear answer.''
        On May 23, the USDA threatened another suspension. ``Recent
    repetitive fecal findings on product produced by your firm demonstrates
    that the HACCP plan at your facility is not being effectively
    implemented to control food safety hazards,'' USDA District Manager
    Ronald Jones wrote to Excel General Manager Mike Chabot.
        Excel was given 3 days to make changes--then a 3-day extension,
    after Excel's initial proposals proved less than convincing.
        Finally, on June 14, based on Excel's promise to improve its
    process, USDA withdrew its threat with an additional warning. ``Your
    firm will be required to consistently demonstrate that your slaughter
    process is under control, meeting food-safety standards,'' the agency
    wrote.
        On June 23, a sealed package of sirloin tips contaminated with E.
    coli was loaded into an Excel truck bound for Milwaukee.
    A Family's Ordeal
        The Sizzler restaurant on South Milwaukee's Layton Avenue was one
    of Brianna's favorite places, even if she could never quite remember
    its name. To her 3-year-old mind it was just the restaurant ``up the
    hill.''
        ``We used to pass it all the time, and she'd have a fit if we
    didn't go there,'' her father, Doug Kriefall, recalled.
        On the night of July 17, her parents were happy to oblige. It was
    the end of a harried workday for a young family juggling two careers
    and two kids, and the lure of a quick and inexpensive night out was
    irresistible. As a bonus, Sizzler offered an adult menu as well as a
    special salad bar stocked with kids' favorites: macaroni and cheese,
    fresh fruit, dinosaur-shaped chicken nuggets.
        Emotionally, the family was still in shock from the loss of a baby
    girl just 7 weeks earlier. The girl the family calls Haley was
    stillborn. The loss reopened old wounds: Connie Kriefall had lost six
    fetuses in 8 years before finally giving birth to Brianna in May 1997.
        ``She was my miracle baby,'' the mother said. ``It was the best
    Mother's Day present any mom could ever get.''
        The couple's difficulty in having children made Connie Kriefall an
    exceptionally careful mother. She knew improperly cooked meat can carry
    E. coli, a microbe sometimes fatal to young children. So at Sizzler,
    the Kriefalls' buffet choices reflected caution: watermelon,
    cantaloupe, cheese, ham cubes, a meatball or two.
        But on that night, the bacteria was hidden not in meat but in
    watermelon, an investigation concluded. A state health task force would
    determine that E. coli entered the restaurant in sealed packages of
    sirloin tips.
        The USDA inspection stamp on the package read ``XL Est. 86R''--the
    code assigned to the Fort Morgan plant. Unopened packages of Excel beef
    in the restaurant's cooler would test positive for the same genetic
    strain of E. coli 0157 found in the bodies of Brianna Kriefall and
    other restaurant patrons.
        Once loose in the restaurant's cramped kitchen, the task force
    found, the bacteria easily made the jump from raw meat to raw fruit.
    Health officials discovered that kitchen workers had violated the
    restaurant's rules by preparing watermelon and meat on the same counter
    top. A meat grinder used to convert steak trimmings into hamburger was
    located inches from the same counter, close enough to splatter juices
    on other foods.
        The recycling of salad bar items over several days eventually
    exposed hundreds of people to the bacteria. The first symptoms surfaced
    on July 14, three days before the Kriefalls' dinner. By July 24,
    Milwaukee health officials were tracking an epidemic. Twenty-three
    victims were hospitalized. The intensive care unit at Milwaukee's
    Children's Hospital was already jammed with sufferers before medical
    investigators confirmed the cause of the illness and its source.
        ``I knew it was bad. I just didn't know how bad,'' recalled Judy
    Fortier, a Milwaukee mother whose oldest daughter, Carly, was among the
    most seriously ill. For days, Carly, 8, suffered painful bouts of
    bloody diarrhea so severe her intravenous line was moved to the
    bathroom so she could nap during the brief lulls between attacks. ``She
    would lean against me,'' Fortier said, ``and that's how she slept.''
        Like many other parents, Connie Kriefall assumed her children had
    picked up a summer virus when both came down with stomachaches on a
    Wednesday evening, 2 days after their meal at Sizzler.
        By Friday, Chad had recovered, but Brianna's condition had taken a
    frightful turn. Severely dehydrated from diarrhea, she was admitted to
    the hospital the next morning.
        For her parents, the next 7 days unfolded with deepening horror. On
    Sunday, the family learned Brianna had developed a life-threatening
    complication. By Tuesday, doctors had begun dialysis to prop up the
    girl's failing kidneys. The normally bright, playful child had become
    nearly unresponsive, uttering only a single, mournful phrase for hours
    at a time.
        ``It was just `Ow-wee, Mama, Ow-wee, Mama,' '' Connie Kriefall
    recalled. ``And those eyes. I'll never forget how she looked at me.''
        The crying would end abruptly. On Wednesday morning, Brianna was
    placed on a respirator after her heart briefly stopped beating.
    Finally, on Thursday, she suffered a catastrophic stroke and lapsed
    into a coma.
        With all medical options exhausted, the Kriefalls decided to allow
    the doctors to disconnect Brianna's life support.
        ``Thursday night we both stayed up with her, and took turns
    crawling in bed with her, telling her how much we loved her and reading
    her stories,'' her mother said. ``I couldn't hold her, and I wanted to
    hold her so bad. And her heart was racing all night--her heart rate was
    so high.''
        On Friday, just before 7 a.m., Brianna's heart stopped.
    Forward
        The months since the Sizzler outbreak inevitably brought
    investigations and lawsuits, as both victims and governments tried to
    parcel out blame. An early casualty was the Sizzler restaurant on
    Layton Avenue, which was permanently closed.
        Excel lawyers have maintained in court documents that the
    corporation was not at fault, since it had no control over Sizzler's
    food-handling practices.
        ``Excel is continuously seeking ways to eliminate or reduce food
    hazards,'' the statement said. ``For the benefits of those efforts to
    reach the consumer, it is essential for food preparers to follow safe
    handling practices.''
        Pezze, the lawyer for the Sizzler franchise, said he had seen the
    USDA documents from the Excel plant and found the reports of fecal
    contamination surprising. ``Obviously, if suppliers and producers could
    nip this problem in the bud, we wouldn't need to rely purely on
    preparers.''
        Industry trade groups and the USDA also argue that it is impossible
    to make meat germ-free, so consumers bear responsibility for using
    proper preparation techniques and fully cooking their food.
        It's an argument that William Cannon, the Kriefalls' attorney,
    finds especially galling. The Kriefalls have joined other victims in a
    lawsuit that names Sizzler and Excel.
        ``They have blamed other people for not catching their mistakes,
    but the blame starts with them,'' Cannon said of Excel. ``They knew or
    should have known they were sending out meat that contained this
    bacteria. And that there was a substantial risk that somebody,
    somewhere, in America would end up eating this meat.''
        But others find more disturbing the government's ineffectiveness in
    responding to chronic lapses at plants such as Excel's. It's a problem
    nearly as old as meat inspection itself, said Carol Tucker Foreman, the
    assistant secretary for food and consumer services in the Carter
    administration.
        ``There is almost no notion of shutting down a plant for failing to
    meet standards,'' said Foreman, now a distinguished senior fellow at
    the Washington-based Food Policy Institute. ``The regulations help
    ensure that plants stay just above the level that requires sanctions.''
        USDA officials are promising change. After devoting 3 years to
    implementing HACCP, the agency is beginning an extensive review to
    determine how the system can be improved.
        Congressional supporters of stronger food safety protections say
    they will press again this year for a law giving meat inspectors more
    effective enforcement tools, including the power to impose civil fines
    and order mandatory meat recalls. But after similar legislation failed
    in the last three sessions, backers acknowledge their prospects are far
    from certain.
        ``The American people would be shocked,'' said Sen. Tom Harkin, an
    Iowa Democrat and sponsor of several previous bills, ``to learn that
    the USDA does not have the fundamental authority to protect public
    health.''
    Anger and Grief
        The memorial card for Brianna Kriefall is a collage of things the
    little girl liked best: Barney and Barbies, dancing and Dr. Seuss, the
    little watering can that was Brianna's delight on summer days when the
    flowers were in bloom. The card's verse is written in a child's words.
        ``Mom and Dad, don't cry that I didn't stay,'' it begins. ``I know
    you'll be lonesome for me for a while, but time heals all wounds and
    again you will smile.''
        For now, though, the promise of healing seems a hollow one. At the
    Kriefalls' neatly kept home in middle-class South Milwaukee, every day
    brings searing reminders. Pictures of Brianna adorn almost every wall.
    The little girl's room and toys remain just as she left them. Their son
    Chad, now 2\1/2\, asks about his sister and sometimes loses patience
    with his parents' explanations. `` `Nana come home--now!' '' he wails.
        For Connie Kriefall, just knowing that Brianna's ordeal might have
    been prevented fires emotions too intense for words. Like her son's,
    the mother's grief is tinged with an anger she suspects is beyond
    healing.
        ``They need to be aware that this has completely destroyed our
    lives,'' she says in a whisper. ``Our daughter was a miracle child we
    waited 8 years for. And now she's gone, and we'll never get her back.''

        Senator Byrd. These 17 veterinary inspectors do not count
    toward the 50. Now, I take it from your answers to my questions
    that you do not have any of the 50, aside from the 17
    veterinary inspectors?
        Secretary Veneman. That is correct, sir. We have not begun
    the hiring process on the 50 new inspectors. But I respectfully
    disagree with your statement that we do not intend to carry out
    this provision.
        Senator Byrd. I do not think that I said you did not intend
    it. I asked you what the intention was of your department.
        Secretary Veneman. We are in the process of implementing
    this provision by putting together the specifications for the
    50 FTEs. It has been a relatively short amount of time since
    the passage of the 2003 Omnibus Appropriation. It was not
    passed last September, as normally we would see these.
        And so I will commit to you that I will work with our Food
    Safety and Inspection Service to get this implemented as
    quickly as we possibly can.
        Senator Byrd. I appreciate what you said.
        Mr. Chairman, I think we ought to write it into the bill.
    The language has been in the report. It is there for all to
    see. And reports are important. If the courts carry out the
    legislative intent of this bill, or that bill, or some other
    bill, and there is a suit, the courts resort many times to the
    committee reports, as well as, to the legislative history on
    the Senate floor and House floor, to determine, or to construe
    the intent of the Legislative Branch. It is right here in plain
    language.
        Secretary Veneman. I do not think, sir, that we have a
    dispute on the intent.
        Senator Byrd. Very well.
        Let us carry out that commitment, and I think that we may
    as well put it into the bill. If the report does not speak
    loudly enough, we can put it into the bill. And the Department
    can pursue the carrying out of the purposes of the bill. We
    should not have to meet a third time on this matter, and I am
    sorry we have had to talk about it today.
        Mr. Chairman, I do not want to impose on the committee. I
    have one more question, if I may.
        This question has to do with outsourcing.
        Senator Bennett. Senator, Senator Dorgan has not gone a
    first round. Could we hear from Senator Dorgan and then to your
    question?
        Senator Byrd. Absolutely. I would like to hear from Senator
    Dorgan, also.
        Senator Dorgan. Mr. Chairman, thank you.
        I was interested in the questions Senator Byrd has been
    asking. Let me just ask a couple of brief questions.

                              FAS TRADE WITH CHINA

        I would like to ask a couple of questions about trade, FAS
    trade with China. First of all, is the Foreign Agricultural
    Service at USDA a part of the Trade Policy Review Group? I
    believe it is. Does anybody know that?
        Secretary Veneman. USDA is part of the Trade Policy Review
    Group. It is not necessarily just the Foreign Agricultural
    Service, but the Undersecretary's office as well.
        Basically, the way that the trade interagency process works
    is that, at the principles level, you have the USTR and the
    cabinet secretaries that are involved in trade, which would
    include USDA. Then you have the Trade Policy Review Group and
    then the Trade Policy Subcommittees. Through FAS, we are
    thoroughly involved in that process.
        Senator Dorgan. Let me tell you why I asked the question.
    On March 17th, a USTR official in charge of agricultural trade
    with China, this was the week this person left the employ of
    the United States. He had been in charge of agricultural trade
    at USTR.
        He stated that the United States would be well justified in
    filing a WTO case in China for failing to live up to its
    commitments on wheat trade. The official said that the evidence
    of unfair trade by the Chinese was ``undeniable'' and that the
    Chinese themselves privately acknowledge that they are cheating
    on agricultural trade.
        He then said that the Interagency Trade Policy Review Group
    has given USTR the green light to march forward with a WTO case
    against China. But this official said the administration was
    reluctant to do that because the Chinese might be offended. The
    administration was worried that a WTO case would be seen as an
    ``in your face'' thing to do to China so soon after China
    joined the WTO.
        Let me tell you why I believe he says that it is undeniable
    that the Chinese are cheating with respect to wheat trade. When
    we did the bilateral trade agreement with China, China agreed
    that it would set tariff rate quotas for imported wheat at 8.5
    million metric tons. That means 8.5 million metric tons a week
    could enter China at very low tariffs.
        According to the CRS, China's imports were less than 8
    percent of that from the United States. The Chinese decided
    that they would issue licenses for imports, but most all of the
    licenses, over 90 percent, were retained by the Chinese
    government. Less than 10 percent were given to private
    interests. And for that reason we have sold very little wheat
    to China.
        So if the Chinese government decides it does not want
    American wheat, then it retains these licenses in the
    government and does not import the wheat.
        So we have a USTR official, and the USTR of course is part
    of the Trade Policy Review Group, saying that there ought to
    have been a WTO case. And what he said is there was a green
    light given by the Trade Policy Review Group to take action
    against China.
        Would that have been the position of USDA, as well, as a
    part of the Trade Policy Review Group? Who serves on that group
    for USDA?
        Secretary Veneman. It depends on the issue. That is why I
    say that the USDA is part of the Trade Policy Review Group, and
    it would depend on the issue as to who attended the meeting on
    behalf of USDA because we have various specialties.
        I have to say, I am not familiar with those remarks of the
    USTR official, but we will be happy to get back to you on it.
        As you know, China entered the WTO as a result of the Doha
    meeting in November 2001, which provides tremendous market
    potential for the United States, as you point out. We have had
    a continuing number of issues with China as they seek to
    implement their agreements with regard to agriculture and the
    WTO.
        I was in China just the summer. We discussed a whole range
    of these issues, including the licensing arrangements, with
    Chinese officials and we talked about the importance of making
    sure that they had transparent trading systems if they are
    going to be credible members of the WTO.
        We are continuing to press the Chinese officials very hard
    on a wide range of issues, including wheat. Obviously, options
    will be considered if we do not make progress.

                     INTERAGENCY TRADE POLICY REVIEW GROUP

        Senator Dorgan. Madam Secretary, we have been pushing on
    the Chinese for years. They now have a $103 billion trade
    surplus with us. We agreed to a bilateral trade agreement with
    them. We agreed to a bilateral trade agreement with the Chinese
    a couple of years ago. On that basis they were able to enter
    the WTO.
        The fact is an official in USTR, the week before he left,
    said publicly it is undeniable they are cheating. And he also
    said that the Trade Policy Review Group, a group that is made
    up of USDA as one member, had given the green light to take a
    WTO case against China.
        I had intended to try to get to you about this so that I
    could give you some warning. Can we find out whether that is
    the case? This is an administration official speaking on the
    record, so he is saying it is the case.
        When did that happen, the Interagency Trade Policy Review
    Group? And if it did happen, if that group signaled somehow
    that they believe that a WTO case was brought against China on
    the issue of wheat, it seems to me there are plenty of other
    areas that we can use to bring actions against China. Because
    China--you make the point that this is a great opportunity for
    us. But there is no opportunity in China if China will not buy
    our products. There is no opportunity.
        Secretary Veneman. That is correct, although I must say
    that they have become about a billion dollar soybean market for
    us, and that is a relatively recent development in our trade
    with China. They have been a very good purchaser of soybeans,
    although we have had some difficulties with some regulations.
        Senator Dorgan. How big is that market?
        Secretary Veneman. It is about $1 billion.
        Senator Dorgan. You look at trade with China, and I will
    not talk about Mexico and Canada and Europe and Japan. But just
    look at China today. $103 billion and in virtually every single
    area, when you look at the promise of the bilateral 2 years
    ago, you find out that the promises were never kept.
        The agriculture minister of China went to South China to
    Guang Zhou, and in the South Asian Post was quoted as saying
    yes, we have this 8.5 million metric tons but that does not
    mean we are going to buy that from the United States.
        And now what we have discovered 2 years later is they are
    not buying wheat from us because the Chinese government does
    not want to, despite the fact they have this huge surplus. And
    if someone inside the administration, officially a Trade Policy
    Review Group, has decided that we should take action,
    officially take action and pursue a WTO case, should we not do
    that? And should we not do that immediately?
        Secretary Veneman. Again, I am unfamiliar with the remarks
    that you are referencing. We will look into that and get back
    to you. I just had not seen that particular report.
        Just to correct the record, we did not enter into a
    bilateral agreement, per se. We entered into various agreements
    with China as part of their accession to the WTO, as opposed to
    a bilateral free trade agreement.
        Senator Dorgan. But we got those agreements bilaterally
    from China?
        Secretary Veneman. Right. They were bilateral discussions
    with regard to the accession to the WTO.
        However, we continue to have a number of issues, wheat
    being one of them, with China that we are having trade
    difficulties with. USTR officials were scheduled, along with
    USDA officials, to go to China and discuss some of these issues
    but unfortunately, a lot of the recent travel to China has been
    postponed because of the SARS issue.
        But we do take these and other trade issues very seriously
    and we are having a number of discussions regarding trade
    issues, as you point out, around the world, whether it is
    Mexico or Canada or other countries.
        China, again, has been an area that we are watching very
    closely because they did commit, in their WTO accession
    negotiations, to certain things. We want to make sure those are
    implemented properly. And obviously, we will work with you on
    this wheat issue.
        Senator Dorgan. But Madam Secretary, we already know they
    are not implemented properly. We already know that the Chinese
    are cheating.
        And with respect to these trade negotiators, I must say,
    for Democratic administrations and Republican administrations,
    I have seen them get on airplanes for 20 years and move off.
    And frankly, you can put them all in a barrel and roll it down
    a hill, you are always going to have a lower on top.
        The fact is they cannot, within 1 week, fail to lose a
    trade association. They come to us with these negotiations, in
    this case the Chinese bilateral, and they say look what this is
    going to do for our country. And then 2 years later we discover
    we are moving backwards.
        This is not your fault, but I am asking the question about
    the policy review group. If, in fact, we have a group now that
    says we ought to be taking action against China on trade from
    wheat purposes only, then let us do that. Let us decide to have
    a backbone, a spine, some stiffness of spirit here, and stand
    up for the wheat producers in this country.
        It is more for USTR and Commerce than it is for you, Madame
    Secretary, but I am just asking having a vote or a membership
    on the Trade Policy Review Group, I hope that you go in there
    and start swinging, to say on behalf of American farmers, by
    God, we have the right to demand fair trade, whether it is with
    China, Japan, Europe, Canada. We have a right to demand it.
        Secretary Veneman. I agree with you and, as I said, I will
    definitely look into the comments that you have attributed to
    this USTR official and determine, if there was some kind of
    decision made, what that decision was and where it has gone
    since then.
        Senator Dorgan. Would you get back with me?
        Secretary Veneman. I will get back to you.
        [The information follows:]

        USDA is part of the interagency Trade Policy Review Group (TPRG),
    which also includes the USTR, State, Commerce, Treasury, NSC, and
    several other agencies. USDA's representative's at these meetings can
    vary depending on the topic, but generally includes high-level
    representation from either the Office of the Secretary, the Office of
    the Under Secretary for Farm and Foreign Agricultural Services, or the
    Foreign Agricultural Service.
        At the TPRG meeting that preceded the February high-level dialog
    talks, USDA expressed support, absent a timely resolution of
    outstanding concerns, for pursuing a WTO case against China over its
    overall administration of its tariff-rate quota (TRQ) system. The TPRG
    deferred a decision to initiate a WTO case, pending the outcome of
    further discussions with the Chinese to resolve the issues. Ambassador
    Zoellick and Ambassador Johnson raised our concerns at the highest
    levels during their subsequent visit to Beijing in February. A follow-
    up meeting, which was delayed by the SARS situation, is expected to
    occur in the very near future. Absent a satisfactory outcome, it is
    expected that the TPRG would reconvene to revisit the issue of
    initiating a WTO case. Wheat is one of the nine agricultural
    commodities covered by China's TRQ system and USDA believes that
    improvements in China's TRQ system would lead to greater market access
    for U.S. wheat and other commodities.

        Senator Dorgan. Thank you, Madam Secretary.
        Senator Bennett. We have been joined by two other members
    of the Subcommittee. We will go to Senator Specter, then
    Senator Durbin, and Senator Byrd will follow up.
        Senator Specter. Thank you, Mr. Chairman. I regret being
    here so late but we had a meeting of the Judiciary Committee. I
    was about to compliment all my colleagues for not being members
    of the Judiciary Committee until I saw Senator Durbin walk in.
    He is a member of the Judiciary Committee. We have just been
    wrangling for a long time and we are going to do so for a lot
    longer. Senator Byrd used to be member of the Judiciary
    Committee.
        Madam Secretary, just a couple of questions. A letter was
    written to you on April 8th by about a dozen Senators inquiring
    about the requirements of the Agriculture Marketing Agreement
    Act which specifies taking into consideration regional costs of
    feed, feed availability, and other specific economic factors.
    The price of Class I fluid milk has dropped precipitously. I
    would very much appreciate--I am not going to take the time
    now--if you would review that letter and respond to it.

                                 DAIRY COMPACTS

        Also when you--you were nice enough to call me in advance
    of the hearing and I raised the issue of dairy compacts. I
    would like a response for the record on the proposals to have a
    dairy compact. I am on the verge of introducing legislation on
    it. We had one for the Northeast and we tried to expand it to a
    number of other States including Pennsylvania. It has been
    represented that it would provide stability, not be a cost to
    the taxpayer. I would like to have your position on that in
    writing.
        [The information follows:]

        There are a number of concerns with attempting to implement a dairy
    compact at this time. A first concern with starting a new program is
    that considerable Federal support is already being provided to the
    dairy industry. We are now beginning to see milk production slow down
    and expect to see farm milk prices increase as we move through the rest
    of this year. The Dairy Price Support Program (DPSP) is supporting
    prices through the purchase of manufactured dairy products. In
    addition, the Dairy Export Incentive Program (DEIP) has supported
    substantial exports of manufactured dairy products. This fiscal year,
    the DPSP and DEIP will remove from the market an estimated 35 million
    pounds of butter, 50 million pounds of cheese and 730 million pounds of
    nonfat dry milk. Federal Milk Marketing Orders continue to help assure
    orderly marketing and equity in returns among producers. And, the Milk
    Income Loss Contract program will provide an estimated $2.5 billion to
    dairy producers in income support payments this fiscal year. We are
    also making substantial efforts to distribute surplus nonfat dry milk
    through humanitarian assistance and domestic drought assistance
    programs.
        A second concern relates to the effects of a compact as revealed
    through the experience of the Northeast Compact and analysis of
    proposed regional compacts. The 1996 Farm Bill gave the Secretary
    authority to approve the Northeast Compact, a regional pricing plan
    intended to increase milk returns for Northeast dairy farmers, maintain
    local milk supplies, and reduce the decline in the number of dairy
    producers. Six New England states, accounting for 3 percent of U.S.
    milk production and 3 percent of dairy farms, implemented the Northeast
    Compact on July 1, 1997. Authority for the Northeast Compact expired on
    September 30, 2001. Compacts, such as the Northeast Compact, establish
    minimum prices fluid handlers must pay for milk. Our review of the
    economic effects of compacts shows that farm milk prices and dairy farm
    income increased in compact states, when the Federal order minimum
    price is below the compact-established price. There appears to be no
    evidence that the Northeast Compact reduced the decline in the number
    of small and medium-sized dairies in New England. Milk production
    increases above what it would otherwise be in compact states as dairy
    farmers react to higher prices by expanding their dairy herds and
    increasing feeding rates both of which lead to higher milk production.
        The Northeast Compact experience provides strong evidence that
    handlers of fluid milk pass along the higher prices imposed by a
    compact to consumers. Immediately following implementation of the
    Northeast Compact, the retail price of fluid milk increased by about
    $0.20 per gallon in New England, while retail prices fell nationally.
    Higher retail prices for fluid milk cause consumers to reduce fluid
    milk consumption in a compact region. Farm milk prices and income
    decline outside of compact states because higher milk production and
    lower fluid milk consumption in the compact states results in more milk
    available for processing into manufactured dairy products, leading to
    lower prices for milk and manufactured dairy products in non-compact
    states. This is the reason producers in the Upper Midwest opposed the
    Northeast Compact. The Northeast Compact regulations required
    reimbursement of WIC state agencies for increased program costs, and
    the Northeast Compact adopted provisions to reimburse schools for
    increases in the cost of fluid milk caused by regulation. Other low-
    income households, however, were not compensated for higher fluid milk
    prices resulting from the Northeast Compact.
        The administration does not have a position on any future
    legislative efforts to establish dairy compacts at this time. However,
    there are numerous programs already in operation to support dairy
    farmers and the Administration is concerned that compacts stimulate
    milk production, adversely affect consumer milk prices and retail
    demand for fluid milk, have disparate regional effects on farm income
    and reduce the effectiveness of the Federal dairy programs already
    directed by Congress. Legislation authorizing compacts should address
    such concerns.

        Senator Specter. Thank you, Mr. Chairman.
        Senator Bennett. Thank you very much.
        Senator Durbin.
        Senator Durbin. Mr. Chairman, it is a pleasure to be here
    with you again in your new capacity. I hope you will enjoy this
    committee. It is an assignment I had in the House and in the
    Senate and I think it is an excellent opportunity.
        Madam Secretary, Mr. Dewhurst, Mr. Collins, Mr. Moseley,
    thank you for being here today. I am going to just ask one area
    of questioning very briefly. I have my statement that I would
    like to submit for the record and my questions.

                    FOOD SAFETY IN THE SCHOOL LUNCH PROGRAM

        But I would like to speak to you for a moment and ask your
    thoughts on the question of the safety of the food in the
    school lunch programs of America. Since 1990 there have been
    more than 100 reported outbreaks of foodborne illness in
    schools that have sickened more than 6,000 children across our
    Nation. The Centers for Disease Control and Prevention tell us
    that 10,000 more kids were sickened in school-related food
    outbreaks during that time, although these kids never learned
    what food or pathogen made them sick. Those numbers are, I am
    afraid, just a fraction of the true amount, since foodborne
    illness in schools is seriously underreported across America.
        Recently the Chicago Tribune reported that countless
    Illinois schoolchildren were served ammonia-contaminated
    chicken, hamburgers, and potatoes over the course of several
    months; contaminated food that apparently both Federal and
    State officials knew about but allowed to be served. In one
    Illinois elementary school, 42 kids and teachers became so ill
    after eating chicken with ammonia levels 133 times the
    acceptable amount that they were rushed to the hospital.
        I understand that your agency has worked to improve the
    safety of food in schools, but when our schoolchildren are
    being sent to the hospital after eating the food that we
    provide, inspect, and regulate then obviously more needs to be
    done.

                        MANDATORY RECALL OF UNSAFE FOOD

        I would like to ask you a few specific questions.
    Currently, recalls of unsafe food in the school lunch program
    are performed on a voluntary basis. Let me repeat that. Recalls
    of unsafe food in the school lunch program are performed on a
    voluntary basis. Complicating the recalls is the fact that
    schools do not know the identity of the producers who supply
    the food due to the complicated chain leading up to the school
    door. In the Illinois case, it appears some of the food was
    pulled from cafeterias. Several schools were not even notified
    they were serving potentially dangerous food until it was too
    late. In any event, the process in place now failed to protect
    our kids.
        First question. Are there any reasons recalls of
    contaminated food served in the school lunch program should not
    be made mandatory if a voluntary recall effort fails?
        Secretary Veneman. Senator, I appreciate your concerns
    about the school lunch food safety. It has been something that
    we have been concerned about as well. In fact, let me just give
    you a little bit of background on some of the things that we
    are doing in the Department.
        We basically have three agencies involved in the school
    lunch program. We have the Food and Nutrition Service, the
    Agricultural Marketing Service, who purchases a lot of the
    products, and we have the Food Safety and Inspection Service
    when it comes to the safety of meat and poultry. We have
    started, within the Department, an interagency dialogue on all
    of these food safety issues so that the minute we have any
    issue that involves food safety, we know whether or not there
    were products that went into the school lunch program. That is
    part of our notice now.
        That is something that was not done before. I just bring
    this up to tell you that I share your concern.
        With regard to the case you cited that happened recently in
    Illinois, my understanding is that there were specific disposal
    orders that went out that were not followed by the school
    district. In fact, there are school district officials who have
    been indicted in this case.
        Senator Durbin. That is true.
        Secretary Veneman. So while we need to be looking at that
    case as an example of where we can do better, I do not think
    the fault lies with the Federal agencies since they issued the
    disposal orders and they were not followed through on by the
    school district.
        Now what does that mean for us in the future? It means that
    we are going to go back the next time and make sure that
    officials do what they say they are going to do.
        Senator Durbin. I would just say, you know that my passion
    is food safety.
        Secretary Veneman. It is one of mine as well.
        Senator Durbin. I know that there are a dozen Federal
    agencies in charge of food safety, and 35 different laws, and
    25 different committees on Capitol Hill. It is madness. The
    only people that I can get to support a single food safety
    agency to try to consolidate this are people who have not been
    appointed Secretary of Agriculture or those who were former
    Secretaries of Agriculture. I cannot get any incumbent
    Secretary of Agriculture to agree with it until they leave
    office and then they think it is a great idea. Secretary
    Glickman fought me all the way, and now he is with me all the
    way.
        I do not know what it takes, but there is something about
    going into that building that leaves you in a state of mind
    that you cannot think in terms of consolidating food safety.
    But what I just heard you say was, you are starting to realize
    you have to. You are bringing together within your own agency
    groups that were not talking to one another.
        But what about the basic question? Should we have mandatory
    recall of contaminated food in the school lunch program rather
    than voluntary?
        Secretary Veneman. We have not, to my knowledge, had
    difficulty getting firms to recall any product when necessary
    because, as you know, the U.S. Department of Agriculture,
    through the Food Safety and Inspection Service, has the ability
    to shut down a plant if they do not put forward a recall order
    as we recommend.
        In addition, I would also note that the Department of
    Agriculture itself, through our Food and Nutrition Service, has
    used recall authority when necessary. We are able to do that as
    the customer.
        So the issue of whether or not we need additional
    legislative authority I think is one that is, in our view, not
    necessary. We believe we have the legal authorities necessary
    to carry out recalls, if needed, and we have never had an
    instance where we were unable to get a recall carried out.
        Senator Durbin. I ask you, please do not rule out the
    possibility until we can talk about it a little more, because I
    think it may give you some authority that will protect some
    children.

                              SUPPLIER DISCLOSURE

        I would also like to suggest to you, and this will be my
    last question, Mr. Chairman, we have had recommendations from
    the General Accounting Office that we need to give school
    districts and school authorities who are purchasing food, more
    information about food suppliers.
        In other words, if you have gathered information, USDA FDA,
    that suggest that some suppliers to the school lunch program
    have had a questionable history of providing safe food, I would
    think it obvious that school authorities should have that
    information so that when they contract with these same people
    they have the benefit of this Federal information, and that
    they can purchase the safest foods for the school lunch
    program.
        I have some legislation along this line and I would like to
    bring it to you in the same context if I can.
        Secretary Veneman. If I might also make one comment, just
    last week we released our new Agricultural Marketing Service
    standards for the purchase of ground beef. Those are much
    stricter standards. They are standards which are consistent
    with those that the fast food restaurants use. So we now have a
    much stricter standard that we just released last week with
    regard to purchases of ground beef for the school lunch
    program.
        Senator Durbin. Good. Thank you. Thanks, Mr. Chairman.
        Senator Bennett. Thank you very much, Senator.
        Senator Byrd, you have been very patient. Appreciate your
    participation. Glad to give you a second round.
        Senator Byrd. Mr. Chairman, you have been very patient. My
    experience over my 45 years on this committee is that the
    Chairman is usually left to the last. He is constrained to give
    other members of the committee an opportunity, and he usually
    waits until everybody else has a chance. So, I respect your
    situation, and I will be perfectly happy to wait until you have
    an opportunity to ask some questions.
        Senator Bennett. Go ahead.

                          HUMANE SLAUGHTER INSPECTORS

        Senator Byrd. Thank you, Mr. Chairman.
        A brief follow-up on the subject that I was pursuing
    earlier. In order to ensure that adequate funding is available
    to maintain no less than 50 humane slaughter inspectors
    throughout fiscal year 2004, the future funding needs must be
    determined. Given that the $5 million provided in the fiscal
    year 2003 omnibus appropriations bill for no less than 50 new
    humane slaughter inspectors has been made available through
    fiscal year 2004, Madam Secretary, will any additional funding
    be needed to fulfill and maintain this requirement in fiscal
    year 2004?
        Secretary Veneman. We do not anticipate that we will need
    additional funding for the period of time through fiscal year
    2004. That should be adequate funds according to our budget
    analysis that has been done.
        Senator Byrd. Very well. I thank you. I will be pursuing
    this with interest, and I hope that the Department will proceed
    expeditiously to get the 50 new humane slaughter inspectors on
    board. I will be back later if you need additional funds.
        In the meantime, I would appreciate it if you let me know
    if you are having any problems.
        Secretary Veneman. We will do that, sir. We will keep in
    touch with you.

                            COMPETITIVE OUTSOURCING

        Senator Byrd. Now as to outsourcing, the OMB scores
    agencies on how well they comply with the President's
    management agenda. Agencies are encouraged to submit management
    plans to the OMB which incorporates the competitive sourcing
    quotas outlined in the President's budget. I understand that
    agencies within the Department of Agriculture are currently
    studying their workforces to find places where it would be
    appropriate for private contractors to take over agency
    functions. One example relates to potential outsourcing of
    technical specialists, such as soil scientists and other
    conservation specialists of the Natural Resources Conservation
    Service. These are the people who are responsible for
    transferring public conservation policy to private landholders
    through what has been one of the most successful public/private
    partnerships in history.
        Another example, which many of my constituents are
    concerned about, is the privatization effort within the U.S.
    Forest Service. I believe that this is an important issue for
    every agency in your Department. Regardless of the agency or
    the activity, the uncertainty at the employee level as to how
    agency outsourcing will evolve is having a horrific effect on
    morale. Given the loss of experienced agency personnel that
    will occur as a large number of employees reach retirement, we
    should be thinking of ways to retain experienced workers, not
    engage in practices that will erode their trust in personnel
    management.
        It is my understanding from OMB that these competitive
    sourcing plans, once they are submitted to the OMB for approval
    can be released to the public at the discretion of the agency
    heads. If the Congress is to appropriate substantial funding
    for private sector employment opportunities, will you first
    provide Congress, and in particular this committee, with a copy
    of any management plan or a competitive sourcing proposal that
    the Department of Agriculture submits to the OMB?
        Secretary Veneman. Senator, first let me just say that I
    have served in Government a long time and I have a great
    respect for career civil servants and the job that they do. It
    is certainly not a philosophical position on my part to reduce
    the career workforce.
        I think, though, that you do bring up a very good example
    of where competitive sourcing is appropriate, and that is in
    the technical assistance area through the NRCS for some of the
    conservation issues in the Farm Bill that was specifically
    authorized by the Congress. We recognize the fact that we are
    going to need substantial new resources in technical
    assistance. It is not going to take away current jobs, we do
    not believe, in the NRCS, but recognize that we should have the
    opportunity for the private sector or the non-profit sector to
    compete with regard to technical assistance.
        This has been something that has been very well received
    both on the side of the provider community as well as by the
    farmers themselves having the opportunity to work with a
    variety of sources in terms of this kind of technical
    assistance. We are working with OMB on where the appropriate
    areas are to potentially look at outsourcing, and we will
    consult with this Committee as we move forward.
        But I do think that the technical assistance issue with
    regard to the NRCS is a very important one because it was
    specifically authorized by the Congress. And, it has been very
    well accepted in the agricultural community. It is one that we
    have done in conjunction with a lot of public input and public
    meetings to best see how to do this.
        Another area where we do a lot of outsourcing, and it has
    been very effective, is in the whole area of technology and
    technology development. It is very difficult to get the kind of
    technology expertise in-house in the Government. We need the
    expertise of various providers, whether it is in GIS mapping or
    in some of our computer systems. But these are the kinds of
    things that I think are appropriate as we move forward and
    looking at the kinds of things that would be appropriate
    outsourcing in our Department.
        Senator Byrd. You did not exactly answer my question. Let
    me ask a different question.
        When do you expect to submit a management plan to the OMB?
    And, how soon can you make that plan available to this
    committee, if it requests such?
        Secretary Veneman. We are working with OMB. I do not know
    that we have a specific timetable for submission of a
    management plan but we will certainly work with this Committee
    as we move forward on any specific plans with regard to the
    outsourcing provisions.
        Senator Byrd. Do I understand you to say that you will
    provide this committee, if it requests such, a copy of any
    management plan or competitive outsourcing proposal that the
    Department of Agriculture submits to the OMB?
        Secretary Veneman. Yes, we would provide this Committee
    with any plans to restructure the kinds of activities that we
    were proposing.
        Senator Byrd. Very well.
        Mr. Chairman, I thank you for your courtesy and your
    patience. And I thank you, Madam Secretary, and Mr. Dewhurst,
    and Secretary Moseley, and Mr. Collins. Thank you very much.
        Secretary Veneman. Thank you, sir.
        Senator Bennett. Thank you, Senator.
        Senator Harkin, do you want a second round?
        Senator Harkin. If you had some----
        Senator Bennett. I am going to submit some of mine in
    writing. I will say, the Secretary has a lunch appointment with
    the President of Spain as I understand it. So I am going to
    submit mine in writing so that she can meet her appointment.
    She and I talk perhaps more often than some of the others of
    you, so go ahead, sir.
        Senator Harkin. I will keep mine real short. I just want to
    know, is he buying or selling?
        If he is buying, I will be real short.

                      AMES, IOWA ANIMAL RESEARCH FACILITY

        You are very nice, Madam Secretary. You have been very
    patient. Mr. Chairman, you have been very patient and I
    appreciate that. I just have three very short ones. One has to
    do with the Ames Animal Research Facility. In 2001, USDA came
    to the conclusion that modernizing the Ames facilities was
    essential. You have visited the facilities. Three Secretaries
    of Agriculture have come to the same conclusion. As I read your
    testimony I am concerned that there may be some going back and
    reevaluating USDA's carefully developed plans to rehabilitate
    and renovate these facilities. Delay means increased costs and
    leaves our Nation without the facilities it needs to respond to
    future natural or terrorist threats to our meat supply.
        I understand that construction will start this fall on the
    large animal holding facility and I just want to know, should
    we be concerned about any delay in moving forward with this
    project? Should we be concerned about any delay?
        Secretary Veneman. We are absolutely committed to moving
    forward with the Ames modernization program. The question is
    funds. As you point out, if we delay and do this in increments,
    it could substantially increase the cost of the program.
        Senator Harkin. Could increase it.
        Secretary Veneman. So, at this point, we intend to stay on
    the accelerated program. We received some additional monies in
    the 2003 omnibus bill, and that is certainly helpful. We are,
    as you say, going to begin construction on the one portion of
    it this fall.
        Senator Bennett. Senator Harkin is responsible for your
    giving additional monies.
        Secretary Veneman. Thank you, sir.
        Senator Harkin. I do not know about that. We all worked
    together on that, I think, to get that done.
        Mr. Chairman, as you know, you have been in business. They
    are building--everyone is committed to getting this thing
    rebuilt. There is a large animal facility. Then there is
    another biocontainment facility, then a small animal facility.
    The contractors and constructors will be there this fall
    starting on the large animal facility. If they can then
    continue to build the others, they have got all the equipment
    there, they have got the people there. But if they have to
    close that down, go away, then come back, the costs just
    escalate. That is what we are trying to get to in terms of
    getting the funds out there. Once the contractor is there,
    finish the job and get it done. That is what my comments went
    to.

                          FARM BILL ENERGY PROVISIONS

        On energy, Madam Secretary, you along with your staff and
    the President have stated your support for farm-based renewable
    energy including the landmark energy provisions in 2002 farm
    bill. Yet the Administration in the budget has proposed to cut
    or eliminate funding for some of these very popular
    initiatives. The 2004 budget of the President effectively zeros
    out funding for the renewable energy and energy efficiency
    program. That is Section 9006, which provides cost-share
    assistance to farmers and rural small businesses for renewable
    energy systems like wind turbines, methane digesters, and to
    make valuable energy efficiency improvements to their own
    operations to save money. Your budget also reduces funding for
    the critically important bioenergy program under the Commodity
    Credit Corporation which assists our ethanol and biodiesel
    producers. Again, these programs were funded in the Farm Bill.
        So can you--again, if you cannot now, if you want to
    respond in writing, that is fine. I know you have got to get to
    your lunch, but I am just interested in where you are headed
    with this and whether or not we are going to get the funds
    necessary for the cost-share programs and for the bioenergy
    programs.
        Secretary Veneman. Senator, you and I have talked a lot
    about programs for rural America and for renewable sources of
    energy. Obviously, we are very supportive of moving ahead with
    new markets for our agricultural producers.
        One of the issues that came up with regard to the Farm Bill
    is that there were funds that were provided for some of these
    programs, and we will get some of the specifics to you in
    writing as you indicate, but some of these programs were funded
    for the first year of the Farm Bill with mandatory funds and
    then it was left to discretionary funds in the outyears. We are
    limited in terms of the amount of discretionary funds we have
    to put toward new programs, which made it difficult to make
    some of these choices. I understand that the Farm Bill
    authorized these programs but they were funded initially with
    mandatory funds and we have had difficulty coming up with
    discretionary funds to continue some of the funding.
        The other thing I would like to point out is that some of
    these programs were funded with mandatory funds in fiscal year
    2002 with program funds that would go into fiscal year 2003. So
    some of the funds that were provided as mandatory funds are
    continuing funds that can be used for these programs to allow
    them to proceed into the outyears.
        Senator Harkin. Please check with your staff. I think the
    two programs I mentioned, 9006 and the bioenergy program are
    both mandatory. Those do not rely upon discretionary funds.
        Mr. Collins. Senator Harkin, that is correct, they are both
    mandatory. What happened with the CCC bioenergy program, the
    Administration did propose capping that at $100 million. The
    authorization is for $150 million a year. However, it is funded
    at 77 percent of $150 million, or $115.5 million by the
    appropriations bill. We just announced the final rule on that
    program this week. We are operating that program with $115.5
    million for fiscal year 2003 and at $150 million in future
    years. That is the operating regime we are under.
        With respect to the other program you mentioned, the
    renewable energy systems and energy efficiency program, that
    program was funded at $23 million in mandatory funds.
        Senator Harkin. That is that cost-share program.
        Mr. Collins. Correct, that is a cost-share program. It was
    funded at $23 million a year in mandatory spending for each
    year of the life of the Farm Bill. The Administration is
    implementing that program at the $23 million level for fiscal
    year 2003. It was proposed at $18 million in fiscal year 2003
    but it is being implemented at $23 million.
        Senator Harkin. I thought it was zeroed out.
        Mr. Collins. In the future, in fiscal year 2004 it is
    proposed to be shifted to discretionary funding. If I am not
    mistaken, I think the discretionary funding level is $3 million
    a year. That was simply a function of the tight budget
    environment and very tough trade-offs in trying to make a
    difficult decision about where to focus the money.
        Senator Harkin. So it goes from 23 down to three.
        Mr. Collins. Correct.
        Senator Harkin. And shifted from a mandatory program to a
    discretionary.
        Mr. Collins. Correct.
        Senator Harkin. Can you do that?
        Mr. Collins. No, you have to do that.
        Senator Harkin. That is what I thought.
        Mr. Collins. We can only propose that.
        Senator Harkin. That is what I thought. You cannot do that.
    So you are proposing to do that.
        Mr. Collins. Yes, sir.
        Senator Harkin. Mr. Chairman, I would say, I hope we do not
    do that. That is why it was written into the bill that way, was
    to keep it on that level and keep it moving as a mandatory
    program. If I remember right in the farm bill, that had pretty
    broad support.
        Senator Bennett. Do we do that or does the authorizing
    committee do that?
        Senator Harkin. I do not know.
        Senator Bennett. If you do not know, I certainly do not
    know.
        Senator Harkin. It would have to be that the authorizing
    committee. The appropriations can only do on the funding, but
    to change it, to shift the nature of it would have to be done
    by the authorizing committee.
        Senator Bennett. That would be my thought.
        Senator Harkin. The authorizing committee would have to
    approve of that. So again, I hope Appropriations Committee
    will--but how can they do that? You have requested us to do it,
    but I do not think we can do that. I am told by my staff they
    can do it through limitations and obligations. And we would
    oppose that, obviously.
        Senator Bennett. That was redundant.
        Senator Harkin. That statement did not have to be made.
    That was all I really had, and I do not want to delay you. I
    know you have got to go to lunch.
        Technical assistance, I will write you a letter on that
    because I think some things were said here. We specifically
    undid the Section 11 cap, specifically in the omnibus bill,
    specifically. I have got it here. I can read it to you. So I do
    not know why we are having so many problems with that because
    we specifically we wrote it out in the omnibus bill. So I do
    not know why we are having problems on the technical
    assistance.
        Lastly, Mr. Chairman, it seems I do have some work to do
    and I will have to talk with Senator Stevens about the CSP to
    clear up some misperceptions. As we all know, it is not an
    uncapped entitlement. There are rigid caps in there.
        Secondly, it is not rely an entitlement. There are things
    you have to do in order to qualify for it. It is just that it
    is open to all. But you still have to meet certain things and
    it is very strongly capped. So I will have to talk with him
    about that.

                         ADDITIONAL COMMITTEE QUESTIONS

        Thank you all very much. Thank you, Mr. Chairman, for your
    kind patience.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                Questions Submitted by Senator Robert F. Bennett

                                 BIOTECHNOLOGY

        Question. Madam Secretary, I noted that you have requested an
    additional $6.604 million in your own budget to fund cross-cutting
    trade-related and biotechnology programs throughout the Department.
    According to your staff, these funds will eventually be distributed to
    the Foreign Agriculture Service, the Animal and Plant Health Inspection
    Service, and the Grain Inspection, Packers and Stockyards
    Administration.
        How did you arrive at this figure? How much of this amount do you
    expect will be made available to each of these agencies? Why didn't the
    Department request that the increases be provided directly to those
    accounts?
        Answer. This figure was arrived at by considering the priority
    needs for these activities and overall budget constraints. We request
    appropriations for the Office of the Secretary so funding may be
    allocated in a coordinated manner to address issues related to trade
    and biotechnology that are very fluid. It would be premature to make
    allocations at this time, though we would expect funding to be used to
    respond to World Trade Organization and regional and bilateral trade
    negotiation demands, as well as trade and regulatory issues associated
    with biotechnology.
        Question. What are the established criteria for distribution of
    these funds? What are the established procedures to seek Congressional
    approval for these transfers?
        Answer. Funds would be used for high-priority Departmental needs
    related to trade and biotechnology, such as World Trade Organization
    and regional trade negotiation demands and trade and regulatory issues
    associated with biotechnology. Authority to transfer the funds is
    included in proposed appropriation language that was submitted with the
    President's budget.

                      REVIEW OF RURAL DEVELOPMENT OFFICES

        Question. I understand Rural Development is performing a review of
    all of its offices nationwide. Could you please share your expectations
    of this review with us, the reasons behind it, and the status?
        Answer. Rural Development went through several reorganizations
    during the 1990's that resulted in a variety of different
    organizational structures, positions and titles in the States. While
    there is great diversity in geography and needs among the States, the
    variety of field structures has resulted in confusion to our customers,
    especially those who work with more one State office, and to the
    national office staff as it works to implement national programs. An
    advisory committee composed of 10 Rural Development State Directors
    reviewed the various organizations and recommended two organizational
    models, one of which could be adopted in all States. The committee also
    made several recommendations related to responsibilities, titles, and
    the minimum size of staff at an office location to ensure quality
    customer service is provided. Each Rural Development State Director has
    developed a plan for achieving the recommendations of the advisory
    committee's report and those state plans are currently being reviewed.
    Implementation of those plans will result in greater consistency in the
    delivery of our programs and improved efficiency and effectiveness in
    the delivery of our programs.

         IMPLEMENTATION OF AGRICULTURE EMERGENCY ASSISTANCE ACT OF 2003

        Question. What is the status of the implementation of the
    Agriculture Emergency Assistance Act of 2003? When do you expect the
    Livestock Assistance Program signup to begin? When do you expect
    payments to begin?
        Answer. The implementation status is as follows:
      --2001/2002 Crop Disaster Program.--Signup begins June 6, with
            payments to begin by the end of the month.
      --Livestock Compensation Program (LCP).--2,149 counties in 42 States
            were already eligible for LCP under the original program
            announced September 19, 2002 (LCP-I). An additional 779
            counties in 30 States have become eligible under the
            Agricultural Assistance Act of 2003 (LCP-II). Signup began
            April 1 and will continue through early June. Payments began in
            early May.
      --Hurricane Loss Assistance for Sugarcane Growers and Cooperatives
            and Sugar Beet Disaster Program.--Signup will begin for both
            programs once the program provisions have been finalized.
      --Tobacco Payment Program.--Signup is under way March 17 through May
            16, with payments to be completed by the end of May.
      --Cottonseed Payment Program.--Signup began May 2 and will continue
            through May 23. Payments will be issued in early June.
        Signup is expected to begin in August and continue through the end
    of October.
        Because the program is limited to $250 million, signup must end and
    a payment factor be determined before payments can be issued. Once the
    factor is determined, payments should begin within 2 weeks.

                      FOOD STAMP PAYMENT ACCURACY ACTIVITY

        Question. In your testimony, you mention funds to improve the
    integrity and accuracy of nutrition programs. According to your
    testimony, the current average State payment accuracy is now 91.34
    percent. How does the Department expect to improve on that number and
    improve the integrity of nutrition programs?
        Answer. The Food and Nutrition Service (FNS) implemented a priority
    project plan beginning in fiscal year 2001 to reduce eligibility errors
    and assure program integrity in the Food Stamp Program. The intended
    outcome was to initially achieve, for fiscal year 2001, a payment
    accuracy rate of at least 90.8 percent. As noted above, the agency
    exceeded its payment accuracy goal, by achieving an accuracy rate of
    91.34 percent in fiscal year 2001. Preliminary quality control data for
    fiscal year 2002 suggest there has been even further improvement in
    this fiscal year. These rates will be released in June 2003.
        FNS continues to employ a variety of strategies and activities to
    improve payment accuracy and assure program integrity. For the past
    several years, the agency has received $1.9 million in funding per year
    to augment its staffing and efforts to increase payment accuracy
    nationwide. FNS also allocates nearly $400,000 annually to support
    State travel to conferences, workshops, and other meetings between
    States, to facilitate the sharing of best practices of effective and
    efficient program management techniques.
        Fiscal year 2003-2004 current and planned activities include:
      --Creating and maintaining a national team of experts to monitor and
            evaluate payment accuracy progress, analyze error rate data,
            and exchange information on payment accuracy best practices and
            program improvement strategies.
      --Targeting high issuance/high error rate states for enhanced Federal
            intervention and technical support. This is accomplished by
            establishing a tier methodology for states (based on error rate
            performance) to support effective and consistent deployment of
            limited FNS resources for intervention and technical
            assistance.
      --Continuing the exchange of best practices information through the
            State Exchange Program, and the publication of a Best Practice
            Guide.
      --Further facilitating the commitment, involvement and collaboration
            among State partners and leadership at all levels through the
            utilization of a web-based environment dedicated to the
            exchange of information and discussion forums on error
            reduction issues and strategies.
      --Continuing to work with States to optimize analysis based on
            quality control data in an effort to develop and monitor
            corrective action.

                      WIC PARTICIPATION ESTIMATION PROCESS

        Question. The Administration's budget supports a record level of
    funding for the Women, Infants and Children Program (WIC) to cover
    anticipated increases in participation. What process is used by the
    Department of Agriculture to determine the additional participation?
    Also, will the Department make another participation estimate prior to
    Committee action on the fiscal year 2004 Agriculture Appropriations
    bill?
        Answer. USDA tracks WIC participation throughout the fiscal year
    and makes projections for the following fiscal year based on
    anticipated demand for services. Based on current and projected fiscal
    year 2003 participation levels, we consider it unlikely that we will
    revise our participation estimate prior to Committee action on the
    fiscal year 2004 Agriculture Appropriations bill.

                             FOOD SAFETY EDUCATION

        Question. The Department recently launched a campaign to educate
    and reinforce to consumers the importance of food safety. A food safety
    mobile actually travels the country to educate the public. According to
    your testimony, an increase of approximately $2 million is requested
    for a mass media campaign aimed at improving the safe food handling
    practices of consumers. What other resources are available through USDA
    to educate the public when it comes to food safety?
        Answer. One of the key public health missions for FSIS is to
    educate the public about the hazards of foodborne illness, as well as
    to teach safe food handling techniques to ensure the safety of meat,
    poultry, and egg products. The $1.5 million requested in the budget
    will be used to evaluate and develop effective strategies for a
    comprehensive and sustainable mass media food safety education
    campaign.
        FSIS has already started to develop this campaign with the new USDA
    Food Safety Mobile. The Food Safety Mobile is traveling the country to
    educate the public about the importance of food safety, but at the same
    time, we are learning important lessons about the best way to get our
    message across in order to reach the most people through events and the
    media. We will use the information that we learn from this new campaign
    to determine how to best utilize our resources, meet our food safety
    education goals and communicate our food safety message with all
    segments of the population.
        Other USDA agencies such as the Food and Nutrition Service (FNS)
    and the Cooperative State Research Education and Extension Service
    (CSREES), also offer programs to promote food safety and make
    educational materials available. Trying to share food safety messages
    with all segments of the population, such as consumers, food preparers,
    educators, children, physicians, public health officials, and industry,
    is a formidable task. However, partnerships between USDA agencies,
    other State and Federal entities, as well as private and public
    organizations facilitates a wider dissemination of life-saving public
    health information about food safety.

                REIMBURSEMENT RATE FOR CROP INSURANCE COMPANIES

        Question. In the Risk Management Agency portion of the
    Administration's budget, the reimbursement rate for crop insurance
    companies is reduced from the current level of 24.5 percent to 20
    percent. Recently, one crop insurance company failed and others have
    commented on the thin profit margins due to 2 years of drought
    conditions. If this proposal is enacted, do you expect participation in
    the crop insurance program to lower due to this change?
        Answer. The number of companies participating in the Crop Insurance
    program has been on a steady decline due to a variety of reasons. As
    recently as 1993 there were 24 companies in the program compared to 18
    today. It is likely that market dynamics will further reduce that
    number. To protect the integrity of the delivery system, each new
    company will need to satisfy a higher minimum standard of operating and
    financial condition to be admitted into, and remain in, the program.
        A reduction in the reimbursement rate will increase the financial
    pressure upon the companies to adjust their operating approach. Each
    company will strive for increased efficiencies without sacrificing
    service. This of course is a healthy exercise. However, if the company
    is not successful in driving down cost and generating sufficient
    returns to satisfy shareholders, consolidation or departures will be
    the result.

                         CROP INSURANCE FRAUD AND ABUSE

        Question. It is my understanding that crop insurance fraud and
    abuse is a concern for both the Department of Agriculture and crop
    insurance companies. A number of individuals are experimenting with
    various methods that could be used to combat fraud and abuse. Does the
    Risk Management Agency have additional ideas on how to increase the
    awareness or combat program fraud and abuse?
        Answer. The Risk Management Agency (RMA) continues to regard
    technology, visibility and preemptive actions as a major element of our
    program to improve the way we address fraud and abuse. This approach
    takes advantage of the advanced tools that are becoming available
    through various USDA initiatives such as data mining, remote imagery,
    and geographical information systems (GIS) technology. We have only
    started to explore and use the possibilities of leveraging the use of
    GIS technology and data mining to identify potential program abuse and
    increase the cost/benefit for the funds currently dedicated to
    compliance activities. In particular, GIS capabilities will be expanded
    in concert with the Farm Service Agency to benefit program compliance
    with other farm programs in addition to crop insurance. RMA also
    benefits from FSA field office spot checks in priority areas and from
    continual review and revision of product structures and program design
    to preempt and prevent abuse. Regarding program awareness, RMA
    continues to publicize high profile cases to make farmers aware of the
    penalties associated with program abuse. Future RMA reviews will also
    include more field visits with producers to promote compliance program
    objectives.
                                     ______

                   Questions Submitted by Senator Ted Stevens

                       ORGANIC STANDARDS FOR WILD SEAFOOD

        Question. In the fiscal year 2003 Supplemental Congress just
    approved, a provision was included directing you to permit wild seafood
    to be labeled ``organic''. Under prior law, seafood could not be
    labeled organic because it was not grown on a farm. What are the plans
    for implementing this new law, and when can we expect new regulations
    to be in place?
        Answer. Our plans at the present are to begin a public dialogue on
    standards for seafood later this fiscal year. We will publish
    information on the National Organic Program web site seeking comments
    and input from interested parties to determine the scope of work
    involving the development of organic standards for seafood.

                           COUNTRY OF ORIGIN LABELING

        Question. In the 2002 Farm Bill, Congress passed a provision
    directing the USDA to develop a country of origin labeling program for
    several commodities, including salmon. You recently announced that your
    department would hold listening sessions in several communities. My
    colleague Lisa Murkowski and I wrote you a letter requesting that you
    schedule a session in Alaska. What are your plans for listening
    sessions in our State?
        Answer. We are pleased to inform you that we have been in contact
    with representatives of the Alaska seafood industry and will join them
    in Kodiak, Alaska, on June 12, 2003, to hear their views and concerns
    on country of origin labeling.
        Question. Because of the importance of this program in Alaska and
    in the lower 38, I would like to know what the timeline is for
    implementation of this program?
        Answer. The law required USDA to issue guidelines for voluntary
    country of origin labeling by September 30, 2002, which USDA published
    on October 11, 2002. To meet the law's deadline for implementation no
    later than September 30, 2004, we expect to promulgate the rules for
    the mandatory country of origin labeling program in early 2004.
                                     ______

               Questions Submitted by Senator Christopher S. Bond

                              COMPETITIVE SOURCING

        Question. With respect to the A-76 process, please outline in
    detail a comprehensive description of the status of all affected USDA
    employees in Missouri, including but not limited to the following
    information: how many employees are on the inventory; a description of
    their duties; how they were determined and by whom to not be considered
    ``inherently governmental''; how many employees on the job are already
    privatized/contracted out and what they do and what they cost; any
    available analysis suggesting that service is not compromised and that
    the cost to the Federal Government is reduced; what the plans are for
    the future; and how functions placed on the inventory before enactment
    of fiscal year 2003 appropriations are in compliance with language
    included in Senate Report 107-41 noted below.
        ``The Committee expects that none of the funds provided for Rural
    Development, Salaries and Expenses should be used to enter into or
    renew a contract for any activity that is best suited as an inherent
    function of Government, without prior approval from the Committees on
    Appropriations of the House and Senate. Such activities may include,
    but are not limited to, any function that affects eligibility
    determination, disbursement, collection or accounting for Government
    subsidies provided under any of the direct or guaranteed loan programs
    of the Rural Development mission area or the Farm Service Agency.
    Further, the Secretary shall provide a report to the Committees on
    Appropriations of the House and Senate by March 1, 2002, on all plans
    by the Department to enter into contracts to carry out any of the
    previously stated activities.''
         How many total FTEs at Rural Development currently exist relative
    to levels 10 years ago?
        Answer. The Rural Development Mission Area FTE ceiling is 7,024 for
    fiscal year 2003. In 1993, our records show that the precursor agencies
    that now constitute Rural Development had the following staff year
    ceilings.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                1993 STAFF
                             AGENCY                                YEARS
    ------------------------------------------------------------------------
    Rural Utilities Service, formerly Rural Electrification              890
     Administration.........................................
    Rural Housing Service, formerly Rural Housing and                  8,144
     Community Service......................................
    Rural Business-Cooperative Service, formerly Rural                   435
     Business and Cooperative Development Service...........
                                                             ---------------
          TOTAL.............................................           9,469
    ------------------------------------------------------------------------

        This represents a reduction of 2,435 staff years from the staff
    year ceiling over the 10-year period.
        Question. How many contract employees at Rural Development
    currently exist relative to levels 10 years ago?
        Answer. Due to the temporary nature of contracts and contract
    employees, Rural Development does not track this information.
        Question. Federal Programs at USDA to provide loans to the rural
    poor were authorized by Congress because private lending institutions
    were not willing to expose themselves to the significant financial
    risk. It is my understanding that those bidding under A-76 to take over
    the public loan program functions carried out by the USDA are large
    multi-national banks. Do you think it is appropriate to turn over
    lending programs to those who have already elected not to serve these
    poor citizens?
        Answer. The Rural Development mission area has not identified any
    public loan program functions in its competitive sourcing plan approved
    by the Department in May 2002.
        Question. Do you believe it is a good Federal policy to have big
    private banks conducting activities such as determining eligibility,
    disbursement, collection or accounting for Government subsidies
    provided under any of the direct or guaranteed loan programs of the
    Rural Development area or the Farm Service agency?
        Answer. The Rural Development mission area has not identified for
    competitive sourcing, any function related to the determining of
    eligibility, disbursement, collection or accounting for Government
    subsidies functions under any of its direct or guaranteed loan
    programs.

                FOOD SAFETY ASSESSMENT PROCESS FOR BIOTECHNOLOGY

        Question. Under current law, it is clear that there is latitude to
    administratively establish an early food safety assessment process for
    biotechnology derived food and feed products, which is often referred
    to as the Adventitious Presence issue. It is also clear that USDA would
    have a lead role to play in coordinating this process with EPA and FDA.
    Could you elaborate upon the progress that the three agencies have made
    to move forward on the OSTP notice, which was issued in the summer of
    2002?
         Answer. The expansion of biotechnology-derived crops is expected
    to result in net benefits to producers, consumers, and the environment.
    The Federal regulatory agencies--the USDA Animal and Plant Health
    Inspection Service (APHIS), the Food and Drug Administration (FDA), and
    the Environmental Protection Agency (EPA)--must maintain appropriate
    regulatory oversight, adjusting its requirements based on scientific
    developments and industry trends.
        The Office of Science and Technology Policy has requested public
    comment on proposed Federal actions. In anticipation of the expansion
    of the development and commercialization of agricultural biotechnology,
    these proposed Federal actions would establish a coordinated regulatory
    approach to update field testing requirements of biotechnology-derived
    plants and to establish early food assessments for new proteins
    produced by plants intended for food and feed use. The comments
    received in response to the proposal are still under review and the
    agencies continue close coordination.

                         EARLY FOOD SAFETY ASSESSMENTS

        Question. Expanding agricultural exports is critical to the
    viability of the American farmer and to a robust economy. It appears to
    me that it is critical to establish an early food safety assessment
    process in a timely manner to leverage greater access for U.S.
    agricultural products in international markets while simultaneously
    protecting our credibility with trading partners. I would appreciate
    your view on this and what plans the Agencies have to address this
    issue in international markets.
        Answer. Regarding the value of an early food safety assessment for
    products of modern agricultural biotechnology, USDA coordinates closely
    with the Food and Drug Administration and the Environmental Protection
    Agency under the U.S. Government's Coordinated Framework for
    Biotechnology to address these types of important issues. In addition,
    USDA operates a host of activities and participates in many others to
    promote the development, responsible regulation and use of agricultural
    biotechnology around the world in order to preserve market access for
    U.S. agricultural products.

                               BIO-BASED PRODUCTS

        Question. Secretary Veneman, I appreciate the enormous task you and
    your staff at USDA have had last year in implementing the 2002 Farm
    Bill. I commend you for your diligence and hard work in getting these
    critical programs up and running for our nation's farmers and rural
    citizens. However, there is one area that has lagged behind in
    implementation and that is Section 9002 of the Farm Bill. This section
    gives USDA the central role in leading the Federal Government's use of
    bio-based products. I would like to know the status of the proposed
    regulations.
        Answer. Currently, the draft proposed regulation is in final
    clearance. We expect to have the proposed regulation published by
    autumn. A 60-day public comment period will follow, to give
    stakeholders and the public an opportunity for comment. The draft
    regulations have taken longer than anticipated for several reasons:
        The program is complex, with many issues to be resolved, ranging
    from the types of renewable materials that can be used in bio-based
    products that qualify for procurement, to how a labeling program would
    work, to how bio-based content is measured. As bio-based products are
    such a new field, there is no obvious blueprint to follow.
        Addressing the range of responsibilities the statute gives the
    Secretary is especially challenging. Before qualifying items for
    procurement, the Secretary must consider the availability of the items
    and the economic and technological feasibility of using the items,
    including the life-cycle costs. Moreover, the statutes also require
    that the Secretary provide information as to the availability, relative
    price, performance, environmental and public health benefits, and--
    where appropriate--a recommended level of bio-based material contained
    in the items to be procured. To meet these criteria, we have been
    working to identify the appropriate testing and evaluation procedures
    to be used and how to ensure the integrity of test results.
        Another necessary complication is that the statute requires
    consultation with a number of Federal agencies, and that takes time
    because of differing views.
        Question. I would also like to encourage USDA's own internal use of
    bio-based products. I feel USDA can and should be leading this
    government-wide effort. Bio-based products help develop new markets for
    our agriculture products and should be fully utilized by USDA. Please
    let me know the status of USDA's activities in this area.
        Answer. USDA has been an enthusiastic user of bio-based products,
    as well as a leader in spearheading new bio-based research and
    applications.
        Our Beltsville Agricultural Research Center (BARC) has been at the
    forefront of this effort. In fact, BARC won the prestigious White House
    Closing the Circle (CTC) Award for environmental achievement in 2001,
    in recognition of the Center's innovative utilization of bio-based
    products. The 2001 CTC Award specifically lauded the BARC Biodiesel
    Demonstration, the permanent fuel program of the Center in which all
    150 diesel-powered vehicles at BARC use a blend of 20 percent biodiesel
    and 80 percent diesel fuel referred to as B20. The Center has worked
    closely with the Defense Energy Supply Center, to purchase large
    quantities of pre-blended B20, which reduced costs and made it easier
    for Defense and civilian agencies to purchase the fuel. BARC is now
    demonstrating the use of B20 in back-up generators at the facility, and
    is using another, B5, blend in its boiler plants in an effort to reduce
    use of #2 home heating oil.
        In addition to biodiesel, the Center utilizes a variety of bio-
    based products on a regular basis. In fact, the use of these products
    as part of an innovative Environmental Management System helped BARC
    win the CTC award for 2002 as well. Specific examples of bio-based
    products utilized include: soy-backed carpet; bio-based 2-cycle oil;
    gear lubricant; hydraulic fluids; lithium grease; anti-wear hydraulic
    oil; chainsaw bar and chain lubricant; oil cutter; penetrating fluid;
    power steering fluid; and engine oil. All shops utilize bio-based hand
    cleaners, parts cleaners, and metal cleaners. A recently-implemented
    BARC janitorial contract requires the use of bio-based and/or
    environmentally preferable cleaning materials, restroom hand soaps, and
    other products on a daily use basis in all the Center's facilities.
        Across the Department, other activities are ongoing to expand our
    internal usage of bio-based products. USDA is committed to using
    alternative domestic biofuels in our fleet vehicles, and has an
    internal Departmental education and promotion strategy in place to
    annually increase the level of usage of these fuels, especially
    biodiesel and ethanol. In fiscal year 2000, USDA fleets used 66,550
    gallons of alternative fuels and by fiscal year 2002 the fleets were
    using over 133,000 annually. For fiscal year 2003, we expect an
    estimated 8 percent increase over fiscal year 2002 usage levels. Also,
    we expect to soon initiate a biodiesel fuel educational outreach grant
    program, as directed by the 2002 Farm Bill's Section 9004. In another
    product area, this past spring, USDA purchased carpet for various
    Departmental offices that utilizes soy-based carpet backing.
        Finally, we are involved in government-wide projects to create
    markets for bio-based products. In addition to the aforementioned
    Federal bio-based preferred procurement program of the Farm Bill's
    Section 9002 that we are leading, we are actively participating in the
    ``Buy Bio'' inter-governmental working group, developing additional
    strategies for government-wide procurement and promotion of bio-based
    products.

                     VALUE-ADDED DEVELOPMENT GRANT PROGRAM

        Question. On another note, the Administration's proposed budget
    eliminated funding for the value-added development grant program, which
    was authorized in the last farm bill. Many Missouri farmer groups are
    utilizing this program to jump start value-added ventures, which are
    desperately needed to rejuvenate rural economies and create jobs. While
    Missouri producers were successful last year in securing some funding
    to assist their projects, many projects are still seeking assistance.
    With the proposed elimination of funding, how does USDA intend to
    assist producer groups who are seeking to help themselves and their
    communities through value-added agriculture?
        Answer. USDA provides support to producer groups for value-added
    activities through a number of its programs. One means is through
    technical assistance. Rural Development's Cooperative Services program
    has many years of experience in working with producers to organize
    cooperatives, many of which involve value-added activities. There are
    cooperative development specialists assigned to the National Office, as
    well as to many of the State Rural Development offices. Rural
    Development also offers other funding programs to assist producers who
    wish to enter value-added activities. These include the Business and
    Industry Loan Guarantee Program, the Cooperative Stock Purchase
    Program, and the Rural Business Enterprise Grant Program.
                                     ______

                  Questions Submitted by Senator Conrad Burns

                        UPDATE ON LIVESTOCK FEED PROGRAM

        Question. Much of the State is still in extreme drought conditions.
    Your announcement on it was last month--can you provide an update on
    how the program is running, and whom it affects?
        Answer. The Secretary will add seven counties in southeastern Idaho
    and an additional four counties in northwestern Utah, under the 2003
    Livestock Assistance Nonfat Dry Milk Program to those experiencing
    continuing drought. This makes livestock producers in a total of 130
    counties in 11 States eligible to apply for surplus stocks of nonfat
    dry (NDM) milk. These surplus stocks cannot be used for human
    consumption.
        This program was designed to be dynamic and adjust as conditions
    change to help meet the needs of America's foundation livestock owners
    experiencing the worst conditions.
        Other States already included in NDMFP are Arizona, Colorado,
    Kansas, Montana, Nebraska, New Mexico, South Dakota, Utah and Wyoming.
    These stocks are provided at a minimal cost to the States and Tribal
    Governments who are responsible for providing distribution points for
    the eligible producers. The Commodity Credit Corporation will bear the
    expense of and be responsible for transporting the NDM to distribution
    points.
        The program uses USDA's surplus NDM stocks that are out of
    condition. The allocation of NDM for a county is based on a renewable,
    30-day supply equivalent to 2 pounds of NDM per day for beef cattle and
    buffalo, and \1/2\ pound of NDM per day for sheep and goats. Eligible
    livestock include foundation herds of beef cattle, buffalo, sheep and
    goats. National Agricultural Statistics Service (NASS) data is used to
    determine the number of eligible livestock in each county. Eligibility
    is determined based on the U.S. Drought Monitor found on the Web at
    http://www.drought.unl.edu/dm/monitor.html.
        The addition of 11 counties required an obligation of 12 million
    pounds of NDM. A total of 232 million pounds of NDM is now obligated to
    producers in the States that have been hardest hit by the ongoing
    drought.
        Question. When will checks for Crop Disaster (CDP) be going out?
        Answer. Signup started on June 6 and the issuance of payments began
    on June 30.
        Question. What are the views on the Ewe replacement program?
        Answer. The Lamb Meat Adjustment Assistance Program including the
    ewe lamb expansion payment program is scheduled to expire July 31,
    2003. The overall program has provided some much needed assistance and
    sheep producer returns have improved since the initiation of the
    program in 1999. In general, the program seems to have fulfilled its
    objective. Ewe lamb payments have been made on over 1.3 million ewe
    lambs to increase the quality and size of U.S. flocks. However, serious
    drought conditions have discouraged expansion in many areas. We will
    reevaluate the overall condition of the sheep industry as we consider
    proposals to extend the program.

                           HARD WHITE WHEAT INCENTIVE

        Question. How will USDA handle this program?
        Answer. The final rule for the Hard White Wheat Incentive Program
    (HWWIP) is published in the Federal Register. Key components of the
    HWWIP include:
      --Signup for 2003 HWWIP began March 3, 2003, and will continue
            through the marketing year.
      --Both hard white winter wheat and hard white spring wheat are
            eligible for payment.
      --A production incentive in the amount of $0.20 per bushel is
            provided for a minimum of #2 or better hard white wheat, as
            established by the Federal Grain Inspection Service.
      --Payment can be earned on a maximum of 60 bushels for each planted
            acre.
      --An additional incentive in the amount of $2.00 per acre is provided
            for each acre planted to certified seed.
      --Producers are eligible to earn both the production incentive and
            the certified seed incentive in the same year.
      --Total Commodity Credit Corporation outlay for the 3 years is to be
            based on not more than 2 million acres or equivalent volume of
            production.
      --Settlement sheets must be provided to FSA upon disposal of the
            production certified on the application, to be eligible to earn
            the production incentive.
      --The end use of the hard white wheat may not be for feed.
        Question. When can producers expect to get paid for their certified
    seed tags?
        Answer. The certified seed incentive payment and the production
    incentive payments will be issued, as applicable, as soon as payments
    software development and testing is complete.
        As you are aware, the HWWIP provisions were included in the 2002
    Farm Bill. Due to the massive resources required to implement the
    Direct and Counter-Cyclical Program, livestock assistance programs,
    other programs included in the 2002 Farm Bill, and the programs
    included in the Agricultural Assistance Act of 2003, program delivery
    and implementation was prioritized according to the potential numbers
    of affected producers, as well as other determining factors.
        All available resources are currently being utilized and a certain
    portion allotted to final development of the HWWIP, so that payments
    may be timely issued. We are anticipating that we will be able to begin
    issuing payments as soon as possible during the summer of 2003.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                            FARM BILL IMPLEMENTATION

        Question. The new farm bill expanded program crops to include
    soybeans as an eligible commodity to receive direct and counter-
    cyclical payments. I have heard from constituents that this has had the
    unintended effect of restricting the ability of growers to produce
    anything other than program crops once their acreage becomes
    ``program'' acreage and they are thereby prohibited from producing
    commodities such as fruits and vegetables. I do recognize that the
    Department has attempted to address this problem administratively.
        Are there additional authorities at your disposal to address this
    problem, or does a remedy require legislation?
        Answer. The 1996 Act established bases acres for wheat, feed
    grains, cotton, and rice. Nationally, base acres equal 212 million
    acres. Because producers of these crops can update their bases and
    bases may be established for oilseeds for the first time under the 2002
    Farm Bill, total base acres could increase by 50 to 75 million acres.
    These additional base acres potentially reduce the ``pool'' of acres
    available for fruit and vegetable plantings.
        The provisions that allow owners to update base acres and establish
    base acres for oilseeds is statutory; the Administration has no
    discretion when it comes to implementing these provisions.
        However, the 2002 Farm Bill allows producers to opt out of the
    program for any year and be allowed to plant unlimited acres of fruits
    and vegetables on that farm. The producer will not receive any direct
    and counter-cyclical payments for that farm; however, the farm may be
    enrolled in the in succeeding years and receive full program benefits.
        We have heard compelling arguments from those who think the fruit
    and vegetable restrictions and penalties are too severe and from those
    who think the opposite. The Secretary has used any discretionary tools
    available to her to strike a balance between opposing viewpoints. We
    believe in the principle of planting flexibility; however, we are
    concerned about how small increases in fruit and vegetable acreage can
    be devastating to the traditional growers of these crops, especially if
    the increase is a result of government programs.
        After listening carefully to all sides of the arguments, we have a
    rule that implements the statutory provisions of the 2002 Farm Bill and
    minimizes the government's role in influencing a producer's decision to
    plant fruits and vegetables. The rule gives the industry the ability to
    attract new acres if market conditions warrant, without giving the
    program participant an unfair advantage in being able to receive both
    government payments and fruit and vegetable income on the same acres.

                 HOMELAND SECURITY/OFFICE OF HOMELAND SECURITY

        Question. What are the responsibilities of the Department's Office
    of Homeland Security?
        Answer. The Department does not have an Office of Homeland
    Security. The Department established a Homeland Security Council and a
    Homeland Security Support Staff. The Council is chaired by the Deputy
    Secretary and includes all of the Under and Assistant Secretaries, the
    Inspector General, select staff office directors, and the
    communications director. This Council is responsible for protecting the
    food supply and agricultural production, protecting USDA facilities and
    other infrastructure, and protecting USDA staff and managing emergency
    preparedness.
        USDA's Homeland Security Staff is delegated authority for the
    following primary functions of:
      --coordination with mission areas for policy formulation, response
            plans, reporting and action assignments to meet acute and major
            threats to the food and agricultural system, and key USDA
            assets;
      --activating the USDA incident management system and the Federal
            Response Plan responsibilities in the event of a major
            incident;
      --oversight of USDA nationwide policies and procedures related to
            homeland security;
      --coordination with the White House Homeland Security Council,
            Department of Homeland Security, other Federal agencies, and
            public and private organizations, as necessary;
      --collaboration with the National Security Council, the Homeland
            Security Council, the Office of Management and Budget, USDA
            mission areas, the Office of Budget and Program Analysis, and
            the USDA Homeland Security Council on the development and
            submission of a coordinated budget request for homeland
            security; and
      --staff support to the USDA Homeland Security Council.

                            TRANSFERS TO PLUM ISLAND

        Question. The President's budget proposes to transfer $7.8 million
    in fiscal year 2004 to the Department of Homeland Security (DHS) for
    research and diagnostic activities currently funded through ARS and
    APHIS respectively at the Plum Island Animal Disease Center at
    Greenport, NY.
        What assurances do you have that once this funding is transferred
    to DHS, research and diagnostic priorities will continue to support the
    animal health issues as they have in the past and as anticipated by the
    livestock sector?
        Answer. The fiscal year 2004 Budget provided funding for Plum
    Island activities to both USDA and DHS. We are working with our
    partners at DHS to create a research and diagnostic program that
    reflects the priorities of both departments. Communications between
    USDA and DHS, in relation to the DHS fiscal year 2004 budget, reveal
    that they share a strong interest in rapid detection of pathogens and
    vaccine development. These two areas of ongoing research by USDA are
    designed to meet the need of the livestock industry and the American
    public.
        Question. Please summarize any communications you have had with the
    livestock sector in regard to concerns they may have that
    responsibilities for these activities may fall out of the jurisdiction
    of USDA.
        Answer. USDA personnel have visited with various stakeholder and
    consumer groups representing the livestock sector during which the
    transition at Plum Island has been discussed. Within these groups there
    is a broad array of opinions as to how the changeover is perceived.
    Some groups express apprehension that their priorities will not be
    reflected in research programs conducted by DHS and are further
    concerned about how the changes in funding will impact current USDA
    research. Others, however, see it as an opportunity to bring new
    resources into agriculture to meet high priority needs.

                     HOMELAND SECURITY UNOBLIGATED BALANCES

        Question. You state in your written testimony that of the $328
    million provided to USDA for Homeland Security purposes, $184.3 million
    remains to be obligated. Documents from the Administration indicate
    that USDA is one of the Departments to have obligated the smallest
    percentage of Homeland Security-related appropriations since the
    terrorist attacks of September 11, 2001.
        Please explain why USDA has taken longer than most Departments to
    obligate these funds and provide specific information on how and when
    the $184.3 million which remains will be obligated.
        Answer. I wanted to make sure the Department took the time
    necessary to intensively review our needs and direct the funds where
    critical security gaps were identified.
        Many of the activities being funded through the Homeland Security
    supplemental require significant levels of planning prior to the
    obligation of funds. In the case of laboratory enhancements, which
    represent 27 percent of the funds provided, significant planning and
    design work must precede construction. Additionally, we have allocated
    funds to cover salary and benefit costs for new employees. Although we
    have made good progress in recruiting and filling these positions,
    obligations will appear incrementally as salary payments are made.
        The Department plans on obligating the majority of the remaining
    funds by the end of fiscal year 2003. However, certain funds, including
    those for construction and those awaiting the results of security
    assessments are expected to be obligated in 2004. Additionally,
    approximately $30.8 million of the $328 million is being transferred to
    the Department of Homeland Security for the laboratory at Plum Island.

                      EXTENSION DISASTER EDUCATION NETWORK

        Question. It has been noted that the USDA Extension Service, with
    its state and county network, can provide substantial contributions to
    Homeland Security in the nature of a first-responder in rural areas. In
    fact, the Extension Disaster Education Network (EDEN) is in place to
    serve in this capacity.
        Does USDA intend to utilize the EDEN system as a Homeland Security
    tool, and if so, in what manner?
        Answer. USDA is currently utilizing the EDEN system as a Homeland
    Security tool and intends to support efforts to increase that
    utilization in the future. The EDEN system is an internet based tool
    for providing relevant information on disaster preparedness, mitigation
    and recovery to Extension educators throughout the Nation. USDA is
    using the system to provide relevant information on homeland security
    to Extension educators who can use it for training and educating
    farmers, ranchers and others who are likely to be first responders in
    rural areas.
        Question. What level of funding is in the President's fiscal year
    2004 budget for the EDEN system?
        Answer. Approximately $500,000 of the $16,000,000 in the Homeland
    Security Program line of Integrated Activities in the CSREES fiscal
    year 2004 President's Budget will be used to support EDEN homeland
    security efforts.
        Question. Has the EDEN system, or any other USDA program, been used
    to improve Homeland Security preparations at the farm level? What
    evidence is there that individual farmers are taking steps to improve
    homeland security? Please describe funds in the President's fiscal year
    2004 budget to help individual farmers be better prepared in the area
    of Homeland Security.
        Answer. EDEN system based information has been used to educate
    farmers and farm advisors on the identification and appropriate
    responses to suspected introductions of plant and animal diseases. This
    is being done through linking EDEN with the Plant and Animal Disease
    Diagnostic Networks and with APHIS information systems. EDEN is being
    used to survey Extension educators on their use of EDEN based
    information in their farmer and rancher education programs. In addition
    to the direct funding for EDEN, education programs will be developed
    through funding of integrated activities in the National Research
    Initiative (NRI). $500,000 in fiscal year 2003 NRI funds are being used
    for a National Training Program for Agricultural Homeland Security.
    More funds could be allocated for this purpose in fiscal year 2004
    depending on the fiscal year 2004 appropriation language, and if the
    number and quality of proposals indicate it would be a good investment.

                                  FOOD SAFETY

        Question. The President's budget request includes an increase of
    nearly $5 million, in part, to develop the laboratory capability to
    respond to chemical terrorism. This increase will include the
    construction and equipping of a Biosafety Level 3 (BL-3) facility
    within FSIS's Microbiological Outbreaks and Special Projects Unit in
    Athens, GA.
        Has construction on this lab already started? When will it be
    completed?
        Answer. In order to protect laboratory staff and to minimize the
    probability that the laboratory complex will become contaminated, FSIS
    will renovate existing laboratory space at the Russell Research Center
    in Athens, Georgia. Renovation of this facility began in March of 2003,
    and is expected to be completed in February of 2004.
        Question. What will the total cost for lab construction and
    equipment be? Will additional increases be requested in the future?
    Please provide the planned timeline and budget for completion and
    equipment of this laboratory.
        Answer. The total cost for renovating existing space to construct
    the Biosafety Level-3 facility is $2.1 million. The President's 2004
    Budget does not request additional funding for this laboratory. The
    planned timeline and budget for completion and equipment of laboratory
    are as follows:

    ------------------------------------------------------------------------
                                             Performance
                   Dates                     milestones           Budget
    ------------------------------------------------------------------------
    Mar 2002..........................  Purchase lab                $117,000
                                         equipment.
    Jun 2002..........................  Purchase lab                  66,000
                                         equipment.
    Aug 2002..........................  Purchase lab                  68,000
                                         equipment.
    Sep 2002..........................  Construction               1,660,000
                                         Contract to bring
                                         to BL-3 level.
                                        Other Costs.........         140,000
    Feb 2004..........................  Construction
                                         Completed.
                                                             ---------------
          Total Costs.................  ....................       2,051,000
    ------------------------------------------------------------------------

        Question. What, specifically, will the laboratory be used for?
        Answer. In the event that there is a major threat condition, the
    BL-3 laboratory will be a critical resource that will allow FSIS to
    handle and screen large numbers of food samples for the presence of
    biological, chemical, and radiological agents. It will also give FSIS
    the capability to handle samples potentially contaminated with unknown
    and mixed agents. This facility will also protect staff and minimize
    the probability that the entire laboratory complex will become
    contaminated during the analysis of agents that would mostly be used to
    contaminate the food supply.

                              FSIS REORGANIZATION

        Question. The January, 2003 FSIS report on the Food Security
    Initiatives currently being undertaken by FSIS mentions the Food
    Biosecurity Action Team, and states that ``a planned reorganization of
    FSIS is underway that includes a new homeland security office that will
    serve as a center for this team's functions.'' However, I see no
    specific mention of this Team or any planned reorganization in the
    President's budget request.
        Is a reorganization being planned for FSIS? If so, please provide
    information on when will it take effect and what is being planned.
        Answer. FSIS has developed a reorganization plan, which is
    currently under review.
        Question. Will Congress receive prior notification of any
    reorganization?
        Answer. Congress will be notified as required by the 2003
    Appropriations Act.
        Question. Will this reorganization result in the need to reprogram
    any of the funds requested in the President's budget?
        Answer. The reorganization plan is under review. Therefore, we have
    not determined if there will be a need to reprogram any of the funds
    requested in the President's budget.

                             FOOT AND MOUTH DISEASE

        Question. Please contrast the level and type of preparations the
    United States now has to contain an outbreak of Foot and Mouth Disease
    from those which the British had available at the time of the outbreak
    in the United Kingdom in 2001. How have the British modified their
    level of preparation since then? What actions have the United States
    taken since then?
        Answer. Since the British experience with foot-and-mouth disease
    (FMD) and the terrorist attacks of September 11, 2001, USDA has
    strengthened its guard against FMD and other animal health threats.
    USDA has bolstered the Emergency Management System (EMS), a joint
    Federal-State-industry effort to improve the ability of the United
    States to deal successfully with animal health emergencies ranging from
    natural disasters to introductions of foreign animal diseases. In March
    2001, APHIS announced the availability of fiscal year 2001 funds for a
    grant program for the National Animal Health Emergency Management
    System to increase the level of animal health emergency preparedness
    for the entire United States. Of the 67 grant applications received,
    APHIS was able to award 38 of them, totaling $1.8 million.
        During the FMD outbreak in the United Kingdom, the United States
    responded to the United Kingdom's request for assistance on disease
    diagnosis and carcass removal. More than 200 veterinarians from State
    agencies, private practice, universities, and other organizations from
    the United States took part in the control efforts. Another 125 Federal
    veterinarians from several agencies also participated, and the U.S.
    Environmental Protection Agency provided support for carcass disposal
    and burial. ARS scientists visited the main UK reference laboratory at
    Pirbright and assessed sampling protocols and diagnostic tools utilized
    throughout the outbreak. This experience, as well as the practice USDA
    gained in coordinating such a diverse group, will be beneficial in the
    event of future emergencies.
        In fiscal year 2002, APHIS distributed approximately $18.5 million
    in cooperative agreements to the States and Tribal Lands to help
    bolster foreign animal disease (FAD) surveillance and preparedness.
    Currently, APHIS is working on distributing additional funds to the
    States and Tribal Lands to be used to help further bolster their FAD
    surveillance programs.
        Additionally, APHIS developed and participated in many State level
    test exercises to increase the confidence and capability of the first
    responders to an animal health emergency in the United States. APHIS
    also participated in the development and implementation of an
    international animal health test exercise in Australia. In fiscal year
    2002, APHIS offered FAD awareness and incident command system training
    to State veterinarians.
        APHIS and the Cooperative State Research Education and Extension
    Service initiated a cohesive and coordinated national animal health
    laboratory network (NAHLN) in fiscal year 2002 with Homeland Security
    Supplemental funds. The network emulates a national strategy to meld
    the Nation's Federal, State, and local resources in order to respond to
    any type of animal health emergency, including bioterrorist events,
    newly emerging diseases, and FAD agents that threaten the Nation's food
    supply and public health. During fiscal year 2002, APHIS provided a
    total of $15.25 million in Homeland Security funding to 12 State
    diagnostic laboratories for activities such as improving biosecurity of
    facilities, communication of results, equipment, standardization of
    methods, and quality assurance.
        Question. Please provide the USDA position on the need to make
    available a rapid test to detect the presence of Foot and Mouth Disease
    and the need to stockpile vaccines.
        Answer. The availability of a rapid test to detect the presence of
    foot-and-mouth disease (FMD) would greatly help contain an outbreak
    should one ever occur here. ARS Scientists at Plum Island have
    developed and bench validated a rapid detection assay. The assay will
    be further validated by APHIS. In addition, two other rapid detection
    assays for FMD (one developed by the California Animal Health
    Diagnostic Laboratory System in conjunction with the Lawrence Livermore
    National Laboratory and one commercial assay developed by Dupont) will
    also be validated by APHIS.
        Stockpiling is already occurring through the North American FMD
    Vaccine Bank, which stores FMD antigens that keep indefinitely and may
    be formulated into vaccine rapidly should an FMD outbreak occur. Given
    the many subtypes of the FMD virus, APHIS continues to add antigens to
    the Bank for needed subtypes.
        Question. Does such a rapid test exist, and if so, why is it not
    deployed? If it does not exist, what is USDA doing to develop one?
        Answer. ARS Scientists at Plum Island have developed and bench
    validated a rapid detection assay for foot-and-mouth Disease (FMD).
    This assay has been taken to the field and tested on samples from
    clinical cases of the disease, but more data and testing is required
    before these tests can be accepted as fully validated. The assay will
    be further validated by APHIS, via testing on samples of positive and
    negative controls. In addition, two other rapid detection assays for
    FMD (one developed by the California Animal Health Diagnostic
    Laboratory System in conjunction with the Lawrence Livermore National
    Laboratory and one commercial assay developed by Dupont) will also be
    validated by APHIS.
        Question. To what extent are vaccines available? If there was a
    reported outbreak, how quickly could vaccines reach the effected herds?
        Answer. Presently, our contributions, along with contributions from
    Mexico and Canada, assure the availability of 14.5 million doses of
    four strains of FMD vaccine. During fiscal year 2003, APHIS expects to
    add additional strains and bring the total number of available doses to
    19.5 million. In the fiscal year 2004 President's budget, APHIS
    proposes to increase the availability of doses to 20.75 million at a
    cost of $560,000.
        Once the North American FMD Vaccine Bank is supplied with the
    serotype of the outbreak, and the vaccine is available, the North
    American FMD Vaccine Bank will be able to supply approximately 300,000
    vaccines to the affected areas within 3 days. If however, the North
    American FMD Vaccine Bank does not have a stockpile of the needed
    vaccine, it could take as long as a month to produce the needed
    vaccines.

                            EXOTIC NEWCASTLE DISEASE

        Question. It is my understanding that USDA developed a rapid test
    for Exotic Newcastle Disease more than 2 years ago, but has failed to
    speed the validation or deployment of this test in spite of
    admonishments from Congress. The recent outbreak of this disease
    indicates that USDA efforts at containment are badly inadequate.
        Is not Exotic Newcastle Disease a virus that has been identified as
    a potential biological weapon agent?
        Answer. I disagree that the USDA efforts at containment are badly
    inadequate. While the exotic Newcastle disease virus has been
    identified as a potential biological weapon agent, there is no evidence
    that this incident is the result of an intentional introduction.
        Question. Why has USDA not validated and made available this test?
        Answer. The United States Department of Agriculture, along with the
    California diagnostic laboratory system, has validated the rapid test
    for exotic Newcastle disease. Samples were used from the recent
    outbreak in California to validate the test. Presently, both the State
    of California and USDA's National Veterinary Services Laboratories are
    using the rapid test to sample commercial and backyard flocks. USDA
    officials have also offered the test to neighboring State diagnostic
    laboratories and to laboratories participating in the National Animal
    Health Laboratory Network. Training has been completed and once the
    laboratories pass a proficiency test, they will begin using the rapid
    test in national surveillance.
        Question. To what extent does USDA believe the outbreak of Exotic
    Newcastle Disease is intentional or does USDA believe, as has been
    reported, that it was introduced by the illegal transportation of
    fighting birds? If the latter is the case, what is USDA doing to step
    up enforcement of bird fighting laws to prevent similar introductions
    in the future?
        Answer. While USDA's investigation into the exotic Newcastle
    disease outbreak in Southern California has not provided a source of
    infection, the virus strain is genetically similar to a strain
    confirmed in Mexico in 2000. USDA does not believe the virus was
    introduced intentionally. There is no conclusive evidence to support
    the claims in the press that the disease was introduced by the illegal
    transportation of fighting birds. However, the movement of poultry
    species such as fighting birds does contribute to the spread of
    disease. USDA commonly intercepts illegally transported pet birds from
    Mexico and previous exotic Newcastle disease outbreaks have been
    attributed to birds from Mexico. In February 2003, USDA conducted a 30-
    day operation on the Mexican Border in Southern California to intercept
    birds and other prohibited items. During the operation, program
    officials intercepted three shipments of smuggled birds and two
    shipments of fighting cock spurs, resulting in the confiscation of six
    birds. All seized birds tested negative for END. Regulations in the new
    Farm Bill and legislation pending in California should help support
    improved enforcement of laws prohibiting the movement of fighting
    birds.

           SECURITY ANALYSIS SYSTEM/UNITED STATES AGRICULTURE SYSTEM

        Question. You are requesting additional funding for the SAS/USA
    system. The Agency received $1.7 million from Homeland Security Funds
    last fiscal year. With the large balance left in that fund, why is a
    separate line-item request needed?
        Answer. ERS plans to obligate all of this $1.7 million before the
    end of fiscal year 2003. Currently, ERS is focusing on integrating many
    new databases to strengthen the fundamentals of the SAS/USA system to
    have information readily available for analysis for a variety of
    agriculture-related emergency situations. ERS has made substantial
    progress in gathering and incorporating data in the areas of
    transportation, agriculture production, and the locations of food
    processing facilities. Within the next 6 months, ERS will also be
    developing a very complex food contamination scenario that uses data to
    describe the flow of food material from production through processing
    and distribution channels to consumers. This scenario will concentrate
    on ground meat, ready-to-eat food, poultry, milk, and eggs.
        For fiscal year 2004, ERS will use the $1 million in additional
    requested funding to finalize the food contamination scenario and
    construct a foot-and-mouth scenario, as well as to incorporate a more
    finely-defined spatial dimension (at the county level instead of the
    current State level) and economic dimension (about 500 business sectors
    instead of the current 132) into the system. ERS also plans to develop
    a more sophisticated economic model that includes feedback to project
    consumer reactions.
        The Homeland Security funds have all been allocated to high
    priority efforts, and all such funds are expected to be obligated the
    end of fiscal year 2003.

                              COMPETITIVE SOURCING

        Question. I am concerned that Administration directives on the
    subject of USDA Competitive Sourcing will result in substantial harm to
    employee morale and serious erosion of long-held public/private
    partnerships in the area of conservation and other mission areas
    important to Rural America.
        Please provide a listing of all USDA activities that are being
    considered for competitive sourcing and the timetables for actions on
    this subject with a brief description of their current workload,
    responsibility, grade, ethnicity, gender and include persons with
    disabilities.
        Answer. Currently USDA is considering approximately 6,600 positions
    for study under Competitive Sourcing guidelines during fiscal year
    2003. These positions include functions such as Human Resources,
    Internet Technology, Debt Collection, Loan Operations, Program
    Reporting, Maintenance, Clerical, Geological analysis, Cartography,
    Soil conservation, Civil Engineering and Laboratory Technicians. About
    two thirds of the individuals filling these positions have been
    identified as male and about a third female, with an ethnicity of 8
    percent African-American, 2.6 percent Hispanic, 1 percent Asian, 1
    percent American Indian and less than 1 percent identified as disabled.
    The grades of these individuals range from GS-3 to GS-14. I will
    provide the listing you requested for the record.
        [The information follows.]

    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Expected
                   Agency Responsible                         Type of Work Load          Study Start    Completion
                                                                                             Date          Date
    ----------------------------------------------------------------------------------------------------------------
    FSA............................................  Human Resources...................     6/1/2002       9/30/2003
                                                     Information Technology............     6/1/2002       9/30/2003
                                                     Debt Collections..................     6/1/2002       9/30/2003
                                                     Loan Operations...................     6/1/2002       9/30/2003
                                                     Program Reporting.................     6/1/2002       9/30/2003
    FAS............................................  Data Collection...................    10/1/2002       9/30/2003
    RMA............................................  Administrative Support............     8/1/2003       9/30/2003
    FS.............................................  Information Technology                 2/3/2003       2/15/2004
                                                      Infrastructure.
                                                     Maintenance.......................         2003       9/30/2003
                                                                                            (various
                                                                                               start
                                                                                              dates)
                                                     Job Corp Center...................     4/3/2003       9/30/2003
                                                     Information Technology Help Desk..   10/15/2002       12/2/2003
                                                     Content Analysis..................          TBD             TBD
    NRCS...........................................  Administrative Support............    12/1/2002       9/30/2003
                                                     Geological Analysis...............     1/1/2003       9/30/2003
                                                     Supply Warehouse and Distribution.    12/1/2002       9/30/2003
                                                     Cartography.......................     1/1/2003        9/1/2004
                                                     Soil Conservation Operations......    12/1/2002       9/30/2003
                                                     Soil Conservation Evaluation......    12/1/2002       9/30/2003
                                                     Civil Engineering and Analysis....   12/18/2002        4/1/2004
    RD.............................................  Centralized Service Center........    10/8/2002       9/18/2003
                                                     Operations and Service                10/8/2002       9/18/2003
                                                      (Accounting).
                                                     Human Resources (Training Support)    10/8/2002       9/18/2003
                                                     Program Support...................    10/8/2002       9/18/2003
    FNS............................................  Administrative Support............    9/30/2002       9/30/2003
    AMS............................................  Cotton Grading....................     8/1/2003       8/30/2003
    APHIS..........................................  Laboratory Technicians............     2/1/2003       9/30/2003
                                                     Administrative Support............     1/1/2002        6/1/2002
                                                     Aircraft Pilot....................     2/1/2003       9/30/2003
                                                     Tree Climbers.....................     2/1/2003       9/30/2003
                                                     Clerical Support..................     2/1/2002       9/30/2002
                                                     Information Technology............     9/1/2002       9/30/2003
                                                     Laboratory Technicians............     2/1/2003       9/30/2003
                                                     Maintenance.......................     2/1/2003       9/30/2003
                                                     Medfly Production Workers.........     2/1/2003       9/30/2003
                                                     Training..........................     9/1/2002             TBD
    REE............................................  Facilities Operations &                5/1/2003       12/1/2004
                                                      Maintenance Farm Services.
                                                     Facilities Operations &                5/1/2003       12/1/2004
                                                      Maintenance Research Farming
                                                      Service.
    NFC............................................  E-Payroll operations..............    10/1/2002        1/1/2003
                                                     Information Graphics..............     7/1/2003       9/30/2003
                                                     Printing and Reproduction.........     7/1/2003       9/30/2003
                                                     Records Management................     7/1/2003       9/30/2003
                                                     Microfilming......................     7/1/2003       9/30/2003
                                                     Nursing...........................     7/1/2003       9/30/2003
                                                     Internal Audit....................     7/1/2004       9/30/2003
                                                     Claims Processing.................     7/1/2003       9/30/2003
                                                     Telephone Management..............     7/1/2003       9/30/2003
                                                     Cyber Security....................     7/1/2003       9/30/2003
    ----------------------------------------------------------------------------------------------------------------

        Question. Please explain how you intend to consider the
    ``competitive'' value of the historical experience and cooperation with
    the private sector that Federal agencies currently posses?
        Answer. USDA contracts extensively with the private sector. As
    contracts expire, USDA will continue to compete the work according to
    the Federal Acquisition Regulation to ensure full and open competition
    through the use of competitive procedures.
        Question. Please explain how the Administration intends to ensure
    that any private entity that succeeds in a competitive bid over a
    current USDA agency will maintain, at least, current services over a
    prolonged period of time?
        Answer. The Federal Acquisition Regulations that the Department and
    other Federal agencies follow provide a number of mechanisms to ensure
    that private entities provide services under contract to the
    government. During the evaluation of the contract bid proposals, the
    past performance of the vendor is considered when judging the ability
    of a private entity to perform at the required level. In addition, the
    contracting officer makes a determination to ensure that a private
    entity is making a responsible offer; this assessment includes
    possessing such items as: adequate resources, necessary organization
    and experience, accounting and operational controls, and a satisfactory
    performance record. Once a contract is awarded, the Department provides
    technical direction and guidance to the contractor to ensure
    satisfactory performance and timely delivery.
        Question. For what period of time will private entities be expected
    to maintain a current level of services in order to be ``competitive''
    in this process?
        Answer. Typically, a contract will include a base year and four
    option years. Options will be exercised based on contract performance.
        Question. Will there be liquidated damages assessed against any
    private entity that defaults in their contractual responsibilities over
    a period of time? If not, what means will be used to ensure long-term
    viability of Federal programs once they are no longer under the control
    of Federal employees?
        Answer. The Federal Acquisition Regulation (FAR) provides for
    several remedies, depending upon the circumstances, should a contractor
    default in their contractual responsibilities. One such remedy is to
    terminate the contract. There are also various steps the government
    takes to notify contractors of unsatisfactory performance and to permit
    them to correct the situation, prior to engaging in the termination
    process. Should the contactor be terminated for default, the government
    may hold it liable for any additional costs resulting from
    reprocurement. Generally, sound contract administration practices
    should result in satisfactory performance by most contractors. Use of
    positive and negative financial incentives, in conjunction with the use
    of a performance-based work statement, will also assist in ensuring
    quality contractor performance.
        Question. The Centralized Servicing Center's bankruptcy division is
    an example of potential out-sourcing. If the government wins this
    competition, as I understand, a contract will have to estimate the
    number of bankruptcies that would be completed for a year. As the year
    proceeds, if the number is less, the Agency will have to modify the
    contract down. If the numbers come in higher as the year proceeds, the
    Agency will have to modify once again and provide additional resources
    including FTEs. In addition, if by chance there is a surge in
    foreclosures, the Agency would be prevented from transferring some of
    this work from the bankruptcy division to the foreclosure division to
    temporarily handle the backlog. With the uncertainties in the economy
    and an ever changing housing market, does this make sense to reach
    efficiencies and provide good service to the customers? Why was the CSC
    even considered?
        Answer. Estimated workload requirements are included as part of the
    Performance Work Statement (PWS) in the solicitation. These estimates
    take into account workload variations. Additionally, the solicitation
    states, ``The actual specific workload that the Provider will
    experience during the performance period is subject to annual review
    and may vary from the estimated workloads shown in the PWS by a much as
    10 percent.'' Both government and potential industry offerors are aware
    that their staffing approach must be flexible enough to accommodate the
    fluctuations in workload.
        Upon completion of the study, the Centralized Service Center (CSC)
    will continue to be flexible in meeting the needs of their customers.
    Further, we believe that the organization will actually have improved
    control and management capability through its performance measures and
    quality assurance procedures.
        Since the CSC performs mortgage loan servicing functions that are
    similar to loan servicing functions performed in the private mortgage
    industry, this similarity makes the Center a good candidate.
        Question. I also understand the correspondence unit in the national
    office for Rural Development will be contracted out, even though the
    overall competitive sourcing evaluations are not complete. A large
    percentage of these letters are from Congress. The Federal managers of
    the contract will have to ensure the complex policy, program and
    political issues are dealt with appropriately. How will an outside
    source with no historical knowledge of the internal workings of the
    Department, relationships with the programs and Congress provide
    savings and not simply add another layer of oversight?
        Answer. The Rural Development Correspondence Unit does its work by
    obtaining input on policy, program and political matters from Rural
    Development policy officials and staff. The unit itself does not have
    the expertise to address such matters. Its functions are primarily
    administrative, such as keeping track of correspondence, using
    previously approved responses for handling routine correspondence and
    drafting appropriate responses based on the input it receives from
    other sources including National, State and local office staff. Such
    functions do not require a great deal of historical knowledge. Rather,
    they require only basic skills in communications and organization,
    which are readily available in the private sector work force.
        Question. It is my understanding that the direct conversion
    provisions of the A-76 are directed to functions with 10 or fewer
    employees. These groups are not afforded the ability to compete. What
    is the percentage of minorities and persons with disabilities that
    could be impacted by this allowance?
        Answer. For Rural Development, the number of FTEs impacted is 18,
    12 of these individuals have been placed in other positions in the
    agency. Fifty percent (9) were minorities, and three of them were
    placed within the agency. Five have disabilities and three of them were
    placed within the agency.
        Question. Since Thursday, January 23, 2003, 13 employees in the
    Rural Development Washington, D.C. office were given ``Certificates of
    Expected Separation'' under the Direct Conversion of the A-76. What is
    the Civil Rights Impact analysis of those employees, and have any Civil
    Rights Impact Analysis been conducted on any other potential A-76 RIF
    candidate?
        Answer. I understand that Rural Development has performed a Civil
    Rights Impact Analysis on all potential impacted employees in the
    mission area. This analysis indicated that competitive sourcing in the
    Washington DC area will impact less than 2 percent of Rural
    Development's employees.
        Question. I understand the same contractor, operating out of the
    same Headquarters Office in Virginia, is performing both the
    Performance Work Statement (PWS) and the Most Efficient Organization
    (MEO) on this A-76 study. Do you have concerns that this could result
    in a conflict of interest, and if so, can it be defended?
        Answer. In accordance with OMB Circular A-76 and applicable Federal
    Acquisition Regulations, firewalls are required within the competitive
    sourcing process to ensure the government maintains the integrity of
    the process by preventing the occurrence of actual or perceived
    conflicts of interest. Rural Development has established written
    firewall procedures based on the most current OMB guidance, and
    requires compliance with that guidance by its contractors.
        The Agriculture Appropriations Report, S. Rept. 107-41, stated as
    follows: ``The Committee expects that none of the funds provided for
    Rural Development, Salaries and Expenses should be used to enter into
    or renew a contract for any activity that is best suited as an inherent
    function of government, without prior approval from the Committees on
    Appropriations of the House and Senate. Such activities many include,
    but are not limited to, any functions that affects eligibility
    determination, disbursement, collection or accounting for Government
    Subsidies provided under any of the direct or guaranteed loan programs
    of the Rural Development mission area or the Farm Service Agency.
    Further, the Secretary shall provide a report to the Committees on
    Appropriations of the House and Senate by March 1, 2002, and all plans
    by the Department to enter into contracts to carry out any of the
    previously stated activities.''
        Clearly it is the intent of Congress that any function that affects
    eligibility determination, disbursement, collection or accounting for
    government subsidies provided under any of the direct or guaranteed
    loan programs of the Rural Development mission area is inherently
    governmental and should not be subjected to either competition or
    direct diversion to the private sector.
        Pursuant to the above, was a report provided to the Committees of
    the House and Senate on plans to enter into contracts to carry out any
    of these activities. The answer on March 6, 2002, from Deputy Under
    Secretary Neruda stated: ``Rural Development contracting officers have
    not entered into any contract for inherently governmental services and
    do not plan to do so.''
        Question. Don't some, if not all, of the services, contained in the
    aforementioned fiscal year 2003 Competitive Sourcing plan for Rural
    Development affect eligibility determination, disbursement, collection
    of accounting for Government subsidies provided under any of the direct
    or guaranteed loan programs of the Rural Development mission area?
        Answer. Rural Development's competitive sourcing plan does not
    include any of the aforementioned functions.
        Question. It is my understanding that in its fiscal year 2000 Fair
    Act Inventory, Rural Development listed some 929 FTEs as commercial,
    with the remaining approximate 6,000 FTEs in Rural Development
    considered being inherently governmental. Of the 929 FTEs listed as
    commercial in fiscal year 2000, approximated 139 were coded ``Reason A
    specifically exempted by the agency from OMB Circular A-76 cost
    comparisons as core functions,'' and 788 were coded ``Reason B subject
    to cost comparison or direct conversion requirements.'' Then in its
    fiscal year 2001 FAIR Act Inventory Rural Development listed a total of
    only 183 FTEs as commercial activities on its FAIR Act inventory of its
    approximately 7,000 employees which seems more in line with the intent
    of Congress as expressed in the fiscal year 2002 Agriculture
    Appropriations report language. Of these approximately 58 were listed
    with Reason Code A, and 125 with Reason Code B. The fiscal year 2002
    FAIR Act Inventory was posted on the OCFO website on or about February
    11, 2003. It now lists ALL of Rural Development activities and
    employees as commercial. Can you explain the fluctuations in what is
    being considered as inherently governmental vs. what is being
    considered as commercial activities?
        Answer. The FAIR Act inventory requirements have changed over time.
    The fiscal year 2000 FAIR Act inventory required only ``Commercial''
    functions. Rural Development identified only Headquarters functions in
    that inventory; Field Offices were not reported and no inherently
    governmental functions were identified. OMB did not approve Rural
    Development's fiscal year 2001 FAIR Act Inventory. Rural Development's
    fiscal year 2002 FAIR Act inventory reflects 20 percent of its total
    FTEs (7,020) as commercial.
        Question. Have you considered the cost of Federal oversight as a
    factor in the cost of outsourcing?
        Answer. Yes, the cost of oversight is routinely included in the
    study process.

                             UNAUTHORIZED USER FEES

        Question. The President's fiscal year 2004 budget request includes
    assumed revenues of $159 million from unauthorized user fees among the
    following programs: $8 million in connection with the Animal and Plant
    Health Inspection Service, $29 million in connection with the Grain
    Inspection Packers and Stockyards Administration, and $122 million in
    connection with the Food Safety Inspection Service. The jurisdiction
    for authorizing such fees does not lie with this Committee.
        Notwithstanding the fact that the Budget Appendix for the
    President's fiscal year 2003 Budget submission indicates appropriation
    levels based on current law, Table S-8 on page 318 of the President's
    Budget indicates the total discretionary spending amount for this
    subcommittee is $16.9 billion, which does include assumptions that the
    total $159 million in assumed revenues from these fees will be
    available. It is from this table that the subcommittee's allocation
    will be based.
        Section 723 of Division A of Public Law 108-7 requires information
    in regard to reductions in the President's budget that must occur in
    the event such user fees are not timely authorized. Please provide that
    information.
        Answer. If the user fee proposals were not enacted, appropriations
    would need to be provided to adequately support FSIS programs. We
    respectfully defer to the appropriations and authorizing committees to
    determine the outcome of these proposals.
        Question. Have the Congressional authorizing committees received
    your proposed legislation in regard to these fees, and if not, when
    will they receive it?
        Answer. The Department has not submitted the proposed legislation
    to Congress. We expect to forward a package by the end of June.
        Question. Since the President assumes the $159 million in revenues
    from these fees will be available, would you similarly have no
    objections if we also assume that the authorizing committees will
    provide you the authority to collect these fees? Therefore, do you have
    no objection if we, consistent with the President's S-8 Table,
    appropriate what the President wants us to appropriate as suggested by
    Table S-8, and provide you with the ability, subject to authorization,
    to collect these fees? Do you have any objection to working with the
    authorizing committees in this fashion?
        Answer. We will be glad to work with both the appropriations and
    authorizing committees to give the Department the ability to collect
    and retain the user fees.

                                  EEOC REVIEW

        Question. The March 10th article in the Washington Post on USDA
    Civil Rights refers to an EEOC review that was very critical of the
    Department's entire civil rights process.
        When will this division come into compliance with time frames,
    tracking, proper oversight, etc.?
        Answer. Vernon Parker, USDA's first Assistant Secretary for Civil
    Rights, was sworn in on April 1, 2003, and is exploring aggressive
    actions to improve civil rights at USDA.
        Parker is developing a plan with a number of initiatives that will
    dovetail with the United States Equal Employment Opportunity
    Commission's (EEOC's) recommendations. The initiatives will address
    timeliness, data tracking and oversight responsibilities. USDA plans to
    fully comply with all the recommendations in EEOC's report and has
    begun implementing and tracking the actions required to comply with the
    recommendations.

                                  FAIR HOUSING

        Question. In 2001 and 2002, the Rural Housing Service conducted
    Fair Housing testing on management companies, banks, and USDA
    employees. I understand that some results have indicated violation in
    the tested areas.
        When will the results of this data be made available to Congress
    and have you taken any steps against violators including USDA
    employees?
        Answer. All of the Rural Development testing projects are scheduled
    for completion, with the Contractor's final reports issued, by
    September 2003. Once the final reports are issued, corrective action
    plans are developed and our summaries analysis completed I will be in a
    position to provide you with a final report. We anticipate this being
    completed by November 2003.
        Question. In light of the President's initiative on increasing
    minority housing, do you think this activity should continue, and if
    so, will you provide funding within the Rural Development S&E budget?
        Answer. Yes, testing should continue as part of the President's
    initiative. We feel this is a tool to evaluate Rural Development's
    program administration and better direct appropriate funding to various
    programs. Funding for this activity is included within Rural
    Development's S&E account for 2003 and the 2004 Budget.
        Question. What are your plans for complying with the President's
    Housing Initiative including Fair Housing?
        Answer. Based upon the 2000 Census, Rural America is comprised of
    13 percent minorities; however, over 20 percent of USDA's homeownership
    programs benefit rural minority families. While USDA has an excellent
    track record at assisting minority families, we feel we can do more. At
    the White House Conference on Increasing Minority Homeownership on
    October 15, 2002, both USDA Secretary Ann Veneman and Housing and Urban
    Development (HUD) Secretary Mel Martinez announced their individual
    plans to increase minority homeownership. USDA's Five Star Commitment
    includes (1) lowering fees to reduce barriers to minority
    homeownership; (2) doubling the number of self-help housing
    participants by 2010; (3) increasing participation by minority lenders
    through outreach; (4) promoting credit counseling and homeownership
    education; and (5) monitoring lending activities to ensure a 10 percent
    increase.
        Benchmarks and performance goals have been issued to each State,
    and each State has developed their own plans to meet the Department's
    Minority Homeownership goals by the decade. In addition, USDA agreed to
    submit reports to the White House on the progress made by HUD, VA and
    USDA in meeting the President's initiative.
        Question. I understand that the Department of Justice's Office of
    Legal Counsel has indicated the HUD Fair Housing Division can't
    prosecute USDA employees that violate the Fair Housing Act. What steps
    are you taking to ensure USDA employees comply with the Fair Housing
    Act and what steps will you take or have taken against violators?
        Answer. Rural Development has in place appropriate regulations that
    can be used when Rural Development employees violate civil rights laws
    especially the Fair Housing Act. Rural Development Instruction 1901-E,
    the Table of Disciplinary Penalties and employee evaluations are the
    tools Rural Development will use to ensure accountability to violations
    of civil rights laws.
        The Rural Development Civil Rights Staff (CRS), in conjunction with
    Program Area Divisions, conduct annual field reviews, Management
    Control Reviews, State Internal Reviews, as well as Civil Rights
    Compliance Reviews. These different types of reviews are all part of
    regulations and the CRS is working toward providing training to all
    Rural Development employees in the area of civil rights and program
    reviews. Rural Development's Civil Rights Instruction require that one
    third of its portfolio is to be reviewed by trained civil rights
    compliance persons each year. Additionally, Rural Development has
    collateral and full time State Civil Right Coordinator/Managers in each
    State office.
        Question. In the last administration, HUD and USDA entered into a
    memorandum of understanding on Fair Housing. Is this still in place and
    has it been altered?
        Answer. Yes, the Memorandum of Understanding is still in place and
    it has not been altered.

                              WORKING CAPTIAL FUND

        Question. The fiscal year 2003 enacted bill provided $12,000,000
    for acquisition of remote mirroring backup technology and requires a
    feasibility study to be submitted to both the House and Senate
    Appropriation Committees.
        Can you give us an estimate of when you would complete this study?
        Answer. The study should be completed by August 2003.
        Question. Will it include various locations, including existing
    USDA Federal facilities sites?
        Answer. The National Finance Center is in the process of gathering
    information required for a feasibility study. The study will look at
    appropriate locations. However, until the study is completed, we will
    not know whether a solution will involve one or more locations, or the
    use of existing Federal facilities sites.
        Question. Do you anticipate competition for one finance center for
    the entire Federal Government in the future?
        Answer. The Office of Management and Budget (OMB) and the Office of
    Personnel Management (OPM) may look at this issue in the future.
    Earlier this year, OPM conducted an internal competition to consolidate
    22 Federal payroll providers and recommended that two payroll
    partnerships be formed. USDA's National Finance Center and the
    Department of Interior will form one partnership and the Department of
    Defense will partner with the General Services Administration. OMB and
    OPM expect this consolidation to save the Federal Government an
    estimated $1.2 billion over the next decade.

                   OUTREACH TO SOCIALLY DISADVANTAGED FARMERS

        Question. What is the status of the funding for the 2501 program
    with funds made available in 2002 and 2003 combined?
        Answer. A request for applications was released November 6, 2002 to
    begin the solicitation process. The deadline for proposals to be
    submitted was January 31, 2003. We received 85 proposals with the
    following types of organizations represented in the applications: 25
    percent from 1890 institutions; 35 percent from community based
    organizations; 15 percent from 1994 institutions and tribal
    organizations; 25 percent from other higher education institutions.
    Applications came from the following regions: Western region 35
    percent; Southern 38 percent; Northeast 9 percent; North Central 18
    percent and 4 percent were multi-state applications. The peer review
    panel has been convened and awards have been recommended. We anticipate
    that the grants will be announced in early summer once the award
    process is completed.
        Question. Will you establish performance measures in this program?
        Answer. Yes. The following two performance measures are under
    development:
      --Level of Participation.--There will be an increase in participation
            in USDA farm assistance programs among socially disadvantaged
            farmers and ranchers.
      --Minority Participation.--There will be an increase in the number of
            minorities involved in CSREES-funded education programs
            (African Americans, Native Americans, Alaskan Natives,
            Hispanics, Asians, and Pacific Islanders).

                CHRONIC WASTING DISEASE/ASSISTANCE TO WISCONSIN

        Question. Last year, the sudden presence of chronic wasting disease
    in Wisconsin deer populations caused serious concern among the state's
    livestock and natural resource sectors. I want to thank you for the
    assistance you provided to Wisconsin. As is the case with many State
    governments, budget shortfalls in Wisconsin have made it very difficult
    for the State to direct the resources needed to contain and eradicate
    this disease. Last year, we appropriated $14.9 million to combat
    chronic wasting disease of which Wisconsin received only $800,000--far
    below the State's needs. I understand other States have similar
    shortfalls.
        Can you explain how the $14.9 million was allocated and what
    additional resources you plan to make available to Wisconsin in fiscal
    year 2003?
        Answer. Slightly more than half (about $7.6 million) of the
    available fiscal year 2003 appropriations was directed to deal with CWD
    in wild herds, of which $4 million was for cooperative agreements with
    States. To deal with the disease in wild herds, APHIS worked with the
    International Association of Fish and Wildlife Agencies in determining
    the formulas for distributing these funds. Level-1 States, including
    Wisconsin, are eligible to receive $93,750 for surveillance activities
    and $125,000 for management activities. Final funding amounts are based
    on the State's risk level and the needs outlined in the surveillance
    and management plan accompanying each State's application for funding.
        In addition to the $4 million reserved for State management and
    surveillance assistance, APHIS also provides support for the diagnostic
    testing of samples collected during the 2002-2003 hunting season.
    Funding for diagnostic testing was based on the initial number of
    samples projected in a given State's approved surveillance plan. APHIS
    estimates that the allocation for the testing of Wisconsin samples will
    be $232,000 given greater-than-expected testing efficiencies; this
    amount will cover the 41,000 samples collected in the State during the
    2002-2003 hunting season. Payments will be directed to the certified
    laboratories that are conducting the tests. APHIS has already provided
    the State laboratory of Wisconsin with $100,000 for the reagents used
    to conduct the diagnostic testing.
        We estimate that APHIS' total funding to Wisconsin in fiscal year
    2003 to address CWD in free-ranging cervids will reach approximately
    $550,750. We will make a final allocation of funds after all
    surveillance and management plans submitted by State wildlife agencies
    have been reviewed. Should funds remain after we meet all approved
    requests, we will consider additional allocations. Such allocations
    would focus on level-1 States like Wisconsin. Also we will consider
    emergency developments such as CWD detection in wild cervids that
    occurred in Wisconsin last year.
        A sizable portion of the resources devoted to the captive cervid
    program will support the program in Wisconsin. APHIS will be covering
    testing, indemnity, and disposal costs associated with the depopulation
    of CWD-positive and CWD-exposed captive cervid herds. In addition,
    APHIS hired a veterinary medical officer (VMO) in September 2002 who is
    stationed in Madison, Wisconsin. The Wisconsin VMO is responsible for
    coordinating indemnity and disposal activities in the region.
        Question. I and other members of the Wisconsin Congressional
    delegation recently sent you a letter on ways you can release more
    funds to Wisconsin. Please respond on that issue.
        Answer. APHIS appreciates the support we have received from the
    Wisconsin Congressional delegation in our efforts to monitor and
    control the spread of CWD in captive and wild cervid herds. Before
    finalizing the fiscal year 2003 CWD allocation, we are waiting to
    receive about 20 more State applications for wildlife surveillance and
    management funds, for which we have set aside $4 million. After we have
    received and reviewed all applications and have allocated funds based
    on these submissions, we will work with the International Association
    of Fish and Wildlife Agencies to redistribute any remaining funds to
    high-risk States. We recognize the need for funding in Wisconsin, and
    we will take these needs into account when redistributing any
    unallocated funds.
        Question. The State of Wisconsin has requested $5.5 million in
    Federal funds for CWD activities in fiscal year 2004. Will the
    President's budget request provide Wisconsin with the necessary
    resources to meet this need?
        Answer. During fiscal year 2004, we anticipate distributing CWD
    funds to States based on their level of risk, as we are doing in fiscal
    year 2003. Wisconsin is among those States that rank in the highest
    risk category.
        During fiscal year 2003, we project that we will provide
    approximately $550,750 to Wisconsin for CWD management, surveillance,
    and testing of wild cervids. We may also be providing additional
    resources to the State if unallocated funds remain from the $4 million
    we set aside for wildlife surveillance and management. In addition,
    APHIS will be covering testing, indemnity, and disposal costs
    associated with the depopulation of CWD-positive and CWD-exposed
    captive cervid herds in the State. We have also stationed a permanent
    CWD VMO in Madison, Wisconsin, to carry out program activities.
        Given that Congress provided a level of funding in fiscal year 2003
    that was nearly equal to the amount asked for in the President's fiscal
    year 2004 budget request, a significant increase in any one State's
    level of funding in fiscal year 2004 would require other States to
    accept significant decreases. Barring any unforeseen emergencies, we
    anticipate CWD funding levels in fiscal year 2004 will correspond
    closely to the amounts we are providing to the States during fiscal
    year 2003.

                                  ANIMAL CARE

        Question. Please provide information regarding the number of
    investigation and enforcement actions undertaken in fiscal year 2002,
    and estimated for fiscal years 2003 and 2004, in regard to the Animal
    Welfare Act.
        Answer. APHIS conducted 12,174 AWA inspections and 143 formal
    investigations of potential AWA violations in fiscal year 2002. The
    investigations resulted in 137 official warnings, 97 stipulated
    agreements, 85 formal decisions by administrative law judges, $586,577
    in civil penalties, and 22 license suspensions and revocations. As of
    May 2003, the number of inspections for fiscal year 2003 has increased
    by 16 percent over the fiscal year 2002 inspection level. Based on this
    increase, we estimate that we will conduct 14,121 inspections in fiscal
    year 2003. With level funding, the number would remain roughly the same
    in fiscal year 2004.
        Question. Please describe how USDA has used the increases for
    Animal Welfare Act-related activities in fiscal year 2002, and
    estimated for fiscal year 2003, above the President's requested levels.
        Answer. In fiscal year 2002, APHIS hired 17 new inspectors,
    increasing the AWA inspection force to 99, and increased the number of
    inspections by 2 percent over fiscal year 2001. We also increased
    outreach efforts by conducting canine care workshops for licensed dog
    dealers in seven locations. In fiscal year 2003, we are increasing the
    inspection force to 100. With the newly-trained inspectors that were
    hired in fiscal year 2002, we are increasing inspections by 16 percent
    this fiscal year. To increase the effectiveness of the inspection and
    enforcement process, we have upgraded our database and the equipment
    used by inspectors. We are also continuing to conduct canine care
    seminars for dog dealers and have created a seminar on caring for
    large, exotic and wild cats. Additionally, program officials have
    participated in training sessions for Institutional Animal Care and Use
    Committees at registered research facilities and conducted a seminar in
    conjunction with the Animal Welfare Information Center on searching for
    alternatives to animal testing for researchers. We are working to
    formalize these types of outreach efforts.
        Question. To what extent have the additional funds for Animal
    Welfare investigations increased the demand for additional resources
    for enforcement activities?
        Answer. The inspectors hired in fiscal year 2002 are now fully
    trained and inspections are up 16 percent for fiscal year 2003. We
    estimate that the number of formal investigations and enforcement
    actions required will increase as well. As of May 2003, we have already
    conducted 132 formal investigations into potential Animal Welfare
    violations compared to the 143 conducted during all of fiscal year
    2002.
        Question. Please explain actions taken by USDA to enforce
    violations of bird and animal fighting statutes. Do you support
    directing enforcement of these statutes through the Office of Inspector
    General or through the enforcement programs of APHIS?
        Answer. We believe that animal fighting statutes must be enforced
    primarily through the Office of Inspector General (OIG), USDA's law
    enforcement arm, with the assistance of APHIS investigators. Most
    animal fighting ventures are accompanied by other illegal activity,
    such as sales of illegal drugs and firearms. Investigations into these
    types of violations are inherently dangerous and require the expertise
    of trained and equipped law enforcement personnel and the participation
    of State and local law enforcement agencies. OIG frequently cooperates
    with these agencies and can more effectively and safely lead such
    investigations.
        Since January 2003, OIG has assisted in three Federal prosecutions
    for the smuggling of fighting cocks and two investigations of domestic
    fighting cock operations. Because the three prosecutions involved
    smuggling, the U.S. attorney was able to charge the defendants with
    felonies. In the two domestic fighting cock investigations, over 1,500
    fighting cocks were seized. Additionally, APHIS is reviewing
    epidemiological evidence to determine whether the exotic Newcastle
    disease outbreak in California and other nearby States resulted from
    the movement of fighting birds.

                                MOLTING RESEARCH

        Question. It has been reported that the egg production industry has
    invested in research to maintain levels of production without the
    practice of ``molting'' their flocks. Do you have any information
    regarding research in this area, is USDA engaged in any such research,
    and is there any reason there should not be a prohibition to this
    practice?
        Answer. The egg production industry is funding research directed at
    assessing non-feed versus feed withdrawal methods to induce molting,
    which contrasts greatly from maintaining production without the
    practice of molting. The United Egg Producers is funding research at
    three different universities: the University of Illinois, the
    University of Nebraska, and North Carolina State University. The U.S.
    Poultry and Egg Association's website (www.poultryegg.org) reveals
    funding for three proposals for this year, two at North Carolina State
    University and one at Virginia Polytechnic Institute and State
    University. Additionally, ARS is conducting both physiological and
    behavioral research in the area of alternatives to induce molting
    through feed withdrawal. The Department is currently in the process of
    responding to a Congressional directive, Senate Report 107-41, which
    discusses current practices and molting alternatives as well as the use
    and consequences of molting as a management tool.
        Question. While there has been significant publicity to problems
    regarding humane handling of livestock during slaughter operations,
    there is a growing concern among the American people in regard to the
    treatment of livestock during the production phase. Since the Animal
    Welfare Act does not apply to poultry or livestock, would you support a
    study to provide recommendations on humane treatment of farm animals?
        Answer. Since USDA has no authority to regulate humane handling of
    poultry or livestock, such a report would have to address authorities
    to implement any recommendations.

                               WILDLIFE SERVICES

        Question. Please describe progress in adapting additional non-
    lethal methods of animal control through the Wildlife Services
    programs.
        Answer. APHIS Wildlife Services has made progress in the following
    areas:
        Having developed an effective non-lethal Radio-Activated Guard
    (RAG), APHIS is working on reducing the relatively high costs of the
    device.
        Substantial efforts have been made towards the development and
    evaluation of an effective non-lethal Movement-Activated Guard (MAG)
    system to protect livestock from various large predators, including
    wolves, black bears, and eagles. MAG systems are more flexible in their
    application than RAG systems although they have a smaller, effective
    range. The cost of these systems is likely to be less than the cost of
    RAG units, making them more practical for routine livestock protection.
        NWRC scientists are now in the process of testing a new breakaway
    snare design with great promise as an effective remote collaring system
    for both coyotes and wolves.
        Substantial efforts continue to develop new and effective capture
    technologies, including establishment of a temporary duty assignment
    for APHIS wildlife specialists to work with National Wildlife Research
    Center (NWRC) scientists to test and to improve cable restraint devices
    that could serve as practical alternatives to foothold traps under some
    circumstances. Additionally, in cooperation with APHIS operational
    personnel in Arizona and New Mexico, the U.S. Fish and Wildlife
    Service, Defenders of Wildlife, and the Arizona and New Mexico wildlife
    agencies, NWRC is planning to investigate sustainable livestock grazing
    regimes that could minimize predation opportunities by Mexican wolves.
    As part of these studies and investigations elsewhere, NWRC scientists
    are developing alert systems to warn ranchers when predators are in the
    vicinity of livestock.
        APHIS has established cooperative agreements with two universities
    and a private research firm to foster collaborative research on
    reproductive inhibitions, economics of non-lethal management
    strategies, and the development of baiting systems to deliver wildlife
    pharmaceuticals.
        APHIS has applied commercially available repellents and fencing to
    protect forest resources from beaver damage.
        APHIS has documented the effectiveness of vulture effigies and low-
    powered lasers as dispersal methods at vulture roosting sites.
        Question. Please provide information in regard to losses to
    production agriculture and other costs (such as costs related to
    traffic accidents, costs to communities, etc.) from wildlife whose
    control is under the jurisdiction of Wildlife Services.
        Answer. According to Resolving Human-Wildlife Conflicts by Michael
    Conover, 2001, wildlife causes an estimated $23.3 billion in damages to
    the United States annually. Damage to agricultural producers is
    approximately $4.5 billion annually; more than half of all farmers and
    ranchers experience some kind of wildlife damage each year. APHIS'
    efforts to protect agricultural resources include managing wildlife
    predation to livestock and wildlife damage to a variety of crops (e.g.,
    rice, sunflowers). In addition, APHIS conducts beaver management
    activities to reduce loss to the timber industry, which is
    approximately $3.4 billion annually.
        APHIS works to reduce deer populations in heavily populated areas
    in order to increase public safety. Damage from deer-automobile
    collisions is approximately $1.6 billion annually and results in
    approximately 29,000 human injuries each year. Damage from bird-
    aircraft collisions is about $300 million annually, while also posing a
    serious safety hazard to flight crews and passengers.
        Other wildlife damage includes damage to metropolitan households
    (approximately $8.3 billion annually) and damage to rural households
    (approximately $4.2 billion). APHIS provides technical assistance and
    frequently loans equipment to resolve wildlife damage to residential
    property.
        The power interruptions caused by Brown Tree Snakes (BTS) on Guam
    cause a multitude of problems that have been valued at over $1 million,
    ranging from food spoilage to computer failures. BTS frequently invade
    poultry houses, homes, and yards to consume domestic poultry, eggs, pet
    birds, and small mammals associated with residential areas. APHIS has a
    BTS control program in Guam and conducts activities to prevent the
    introduction of BTS into Hawaii through aircraft and cargo transport.
        Question. Please provide information in regard to control of wolves
    in the Upper Midwest.
        Answer. As the Eastern timber wolf population continues to increase
    in Minnesota, Michigan, and Wisconsin, so have the requests for
    assistance with wolf predation. The U.S. Fish and Wildlife Service
    (FWS) estimates the number of wolves to be over 2,600 in Minnesota, 325
    in Michigan, and 360 in Wisconsin. In Minnesota alone, APHIS responded
    to 218 requests for assistance with wolf predation on livestock and
    other domestic animals during fiscal year 2002. APHIS also hired a wolf
    damage management specialist to assist with management activities
    related to the increasing wolf population within the State of Michigan.
    There has been an increase in the wolf population in Wisconsin at a
    rate of approximately 20 percent per year, and the public is
    increasingly intolerant of wolf conflicts.
        In fiscal year 2002, we continued to coordinate wolf depredation
    control activities with the Wisconsin Department of Natural Resources
    (WDNR) and the FWS. APHIS received 80 wolf depredation complaints in
    fiscal year 2002 and verified 20 of these conflicts as either probable
    or confirmed wolf depredation. The WDNR requested APHIS conduct control
    operations, which resulted in APHIS capturing and relocating 18 wolves
    to resolve livestock depredations. With the additional funding Congress
    provided in fiscal year 2003, we are in the process of hiring wildlife
    specialists and procuring necessary equipment and supplies to enhance
    response to wolf depredation in the Upper Midwest.

                     COMPREHENSIVE FARMERS' MARKET PROGRAM

        Question. In the fiscal year 2003 conference report, language was
    included that encouraged research on creating a broad Farmers' Market
    Program, that would take into account all of the activities currently
    provided in the Senior and WIC Farmers' Market Nutrition Programs, as
    well as the recently authorized Farmers' Market Promotion Program. A
    report was requested by March 1, 2003. What is the status of this
    report? Please summarize its contents.
        Answer. On May 15, 2003, a letter reporting on this subject was
    sent to the House and Senate Appropriations Committees. The letter
    recommends that responsibilities for administration of the affected
    programs remain unchanged at this time. This recommendation is based on
    the relationship of the farmers' market programs in terms of target
    populations served, administration of the programs at the State level,
    current infrastructure at the Food and Nutrition Service and
    Agriculture Marketing Service in terms of Federal oversight and
    monitoring, and the lack of appropriated funding available for the
    Farmers' Market Promotion Program. A copy of the letter is attached for
    the record.
        [The information follows:]

                         U.S Department of Agriculture,
                                       Office of the Secretary,
                                          Washington, DC, May 15, 2003.

    Hon. Ted Stevens,
    Chairman, Committee on Appropriations, U.S. Senate, Washington, DC.
        Dear Mr. Chairman: Public Law 108-7, enacted February 20, 2003,
    directs the Under Secretary for Marketing and Regulatory Programs to
    work with the Under Secretary for Food, Nutrition, and Consumer
    Services to study the potential for a broad Farmers' Market Program
    within the Agricultural Marketing Service (AMS). Such a program would
    provide funding for the WIC Farmers' Market Nutrition Program (FMNP),
    the Senior Farmers' Market Nutrition Program (SFMNP), and the recently
    authorized Farmers' Market Promotion Program (FMPP). Public Law 108-7
    requires that a report on this subject be provided to the House and
    Senate Committees on Appropriations by March 1, 2003.
        As a result of our consultation, we are pleased to report our
    recommendations. As you are aware, both the FMNP and SFMNP are intended
    to enhance the health of their target populations by providing coupons
    directly to recipients that can be exchanged at farmers' markets,
    roadsides stands, and in the SFMNP community supported agriculture
    programs for the purchase of fresh fruits and vegetables. In many
    cases, the same office that operates the Special Supplemental Nutrition
    Program for Women, Infants and Children (WIC) administers the FMNP and
    SFMNP. Only State-level governmental agencies and Federally recognized
    Indian tribal organizations can receive grant funds to administer the
    FMNP or SFMNP.
        The Food and Nutrition Service (FNS) has successfully administered
    the FMNP and SFMNP since their inception. FNS' infrastructure includes
    seven regional offices that effectively provide oversight, technical
    assistance and monitoring of the programs. The FNS cost estimate
    associated with the administration of the FMNP and the SFMNP is
    $554,600 per fiscal year.
        AMS facilitates cooperation and collaboration among agencies and
    organizations that promotes direct marketing and help agricultural
    producers benefit from the growing consumer interest in direct
    marketing, including promoting the development and operation of
    farmer's markets. As such, staff from AMS works closely with FNS staff
    to provide technical guidance and expertise on market developments
    aspects of the FMNP and SFMNP. Over the years, AMS has significantly
    increased its farmers direct marketing activities. Evidence of our
    success is the phenomenal growth in the number of farmer's markets
    nationwide.
        The Farmers' Market Promotion Program is intended to support the
    development of farmers' markets and direct marketing opportunities for
    agricultural producers by providing funds directly to agricultural
    cooperatives; local governments; nonprofit corporations; public benefit
    corporations; economic development corporations; regional farmers'
    market authorities; or other entities as the Secretary may designate.
    Currently, no funding has been appropriated for this program.
        Given the relationship of the farmer's market programs in terms of
    target populations served, administration at the State level, current
    infrastructure at FNS and AMS in terms of Federal oversight and
    monitoring, and no appropriated funding for the FMPP, we recommend that
    responsibilities for administration of the affected programs remain
    unchanged at this time.
                Sincerely,
                                       William Hawks,
                    Under Secretary, Marketing and Regulatory Programs.
                                       Eric M. Bost,
                Under Secretary, Food, Nutrition and Consumer Services.

                          FOODS DONATED TO FOOD BANKS

        Question. Please describe any authorities USDA has to assist public
    or private organizations with activities to collect donated crops or
    food from farms, restaurants and other entities and deliver this food
    to local food banks.
        Answer. Under the Emergency Food Assistance Act, State and local
    agencies can use Emergency Food Assistance Program (TEFAP)
    administrative funds to pay costs associated with the transportation,
    processing, and packaging of foods obtained through gleaning and food
    recovery initiatives. Such activities complement our efforts to engage
    community-based organizations, including faith-based organizations, in
    providing nutrition assistance to those in need. In corresponding with
    State and local agencies, we continue to emphasize the excellent
    opportunity to increase the volume of fresh produce available to TEFAP
    recipients by using TEFAP administrative funds to support gleaning
    initiatives. The recovery and distribution of foods from restaurants
    and other congregate meal service sites are governed by State and local
    Health Department regulations, and require an intensively organized
    local effort. While USDA does not play a significant role in these
    initiatives, we continue to remind State and local agencies that TEFAP
    administrative funds can be used to support them.

                         AGRICULTURAL MARKETING SERVICE

        Question. There have been several recent reports of children
    becoming ill after eating school lunches. As the agency who purchases
    commodities for the school lunch program, please explain how you ensure
    that all commodities you purchase are safe for consumption, and what
    authorities you have to notify school districts if a problem is
    discovered. What information is AMS required to provide school
    districts regarding the commodities they are receiving? Is AMS
    considering any additional means to ensure that contaminated foods are
    not delivered to school districts, and if so, what is being considered?
    Further, what are the responsibilities of the individual school
    districts in relation to AMS? If a problem is discovered at the local
    level, are school districts required to notify AMS or another USDA
    agency?
        Answer. The Agricultural Marketing Service (AMS) purchases
    commodities based on strict specifications that assure high standards
    of quality as well as safety. AMS purchase specifications rely on FSIS
    and FDA food safety safeguards, explicitly require monitoring beyond
    FSIS or FDA requirements of those safeguards, and require additional
    testing to meet food safety standards as deemed appropriate.
        Because USDA donated products are produced under contract and
    certified by AMS employees as meeting these product specifications, AMS
    attempts to ensure that only products that meet the required processing
    sanitation or safety requirements are delivered to schools.
        Further, when a plant that sells products to AMS becomes associated
    with a food safety issue, such as a recall of products in commercial
    trade, FSIS communicates such information about these problems to both
    AMS and FNS. If the products produced under contract to AMS are
    suspected to also be associated with the food safety problem, AMS
    provides the product destinations to FNS for them to notify the State
    Distributing Agencies so that suspected products are removed from the
    system.
        However, as noted in a number of independent reports, many of the
    food safety issues that occur in the school lunch program associated
    with USDA donated products are ultimately found to have resulted from
    improper food handling within the school itself through cross-
    contamination or improper preparation and are not due to
    unwholesomeness of the USDA donated product as it was delivered to the
    school.
        AMS provides item descriptions to FNS, which in turn provides the
    information to recipients. AMS also puts all of the specifications for
    the commodities it purchases on its website.
        All of the involved agencies within USDA--AMS, FNS, FSIS, and FSA--
    are working to improve information systems used to assure that
    recipients as well as State Distributing Agencies are always
    immediately notified of suspected food safety issues involving foods
    purchased for the school lunch program.
        AMS is an integral part of the Department's Commodity Hold and
    Recall Process which requires schools to report potential problems to
    FNS. By being a part of this process, AMS learns of problems associated
    with the products it procures so that corrective action can be taken in
    a timely manner.
        If schools suspect a food safety issue, they are to immediately
    contact their local or State health department and FNS through its
    commodity hotline.

                              AMS IT CONSOLIDATION

        Question. What is the total funding ``saved'' through IT
    consolidation? How was this number formulated?
        Answer. The Department's total funding ``saved'' through IT
    consolidation is $16 million. These savings will be realized across the
    Department, through consolidated hardware and software procurements, as
    well as the reengineering of paper-based processes, such as data
    collection.

                        NON-FAT DRY MILK DONATION PILOT

        Question. Please provide an update on the pilot project between
    USDA and the Milwaukee Hunger Task Force regarding the donation of non-
    fat dry milk.
        Answer. We have worked with the Wisconsin Department of Health and
    Family Services, the Hunger Task Force of Milwaukee, and Alto Dairy to
    develop agreements under which non-fat dry milk will be made available
    for processing into mozzarella cheese for distribution through the
    Emergency Food Assistance Program. For purposes of this pilot, the
    agreements reflect a substantial reduction in reporting and
    recordkeeping requirements traditionally imposed under processing
    agreements. We anticipate receiving information necessary for USDA to
    approve the agreement between the Hunger Task Force of Milwaukee and
    Alto Dairy in the very near future. Once the agreement is approved,
    USDA will arrange to have the non-fat dry milk shipped directly to Alto
    Dairy.

                         AGRICULTURAL MARKETING SERVICE

        Question. What is the most updated estimate on the level of funds
    AMS plans on spending in fiscal year 2004 on surplus commodities that
    will be donated to food pantries, including the type and amount of
    commodities?
        Answer. Consistent with statutory requirements, fiscal year 2004
    surplus removal levels will depend on a number of factors for each
    possible commodity, including market demand, inventory levels, and
    production yields. The Food and Nutrition Service will consider program
    needs across the various Federal food and nutrition programs in
    determining the appropriate outlets for each commodity purchased.
    Beyond the commodities otherwise purchased through appropriations
    specific to food pantries and other programs, recent history would
    suggest a significant level of commodity donations for food pantries in
    fiscal year 2004.

                COUNTRY OF ORIGIN LABELING--RECORDKEEPING COSTS

        Question. Please provide an updated cost estimate on record-keeping
    costs associated with implementation of the voluntary Country of Origin
    Labeling measures.
        Answer. Thus far, no retailer has chosen to implement the voluntary
    country of origin labeling guidelines, so there is no basis for
    updating the cost estimate for recordkeeping costs.

                                   SECTION 32

        Question. During fiscal year 2003, Section 32 funds were released
    for a livestock compensation program in a manner not suggested in the
    submission of the President's 2003 budget request or accompanying
    budget materials. This Committee was not provided prior notice of this
    action and, in fact, learned of it as it was announced publicly through
    a USDA broadcast.
        Can you assure this Committee prior notification of any such future
    actions in regard to Section 32 funds or other program authorities?
        Answer. We will keep the Committee informed of future major uses of
    Section 32 funds not included in the annual budget submission or that
    otherwise fall outside the normal use of these funds.
        Question. Please provide information for estimates of fiscal year
    2003 and 2004 Section 32 purchases of specialty crops as a means to
    comply with Farm Bill requirements.
        Answer. For fiscal year 2003 through May 22, 2003, $135.9 million
    has been authorized for Section 32 purchases of fruits and vegetables.
    Actual, total Section 32 purchases for fruits and vegetables through
    May 22, 2003 are $69.2 million. We do not anticipate a problem in
    meeting the Farm Bill requirement for fruit and vegetable purchases in
    either fiscal year 2003 or 2004.
        Question. Please provide current estimates for all Section 32
    activities for fiscal years 2003 and 2004.
        Answer. The Department expects to spend a total of $1,432.4 million
    of Section 32 funds in fiscal year 2003. This includes $897.0 million
    provided for drought relief through the Livestock Compensation Program
    and $25.6 million for AMS administrative expenses. The balance will
    primarily be available for commodity purchases. For fiscal year 2004,
    AMS anticipates expenditures of $821.6 million for commodity purchases.

            GRAIN INSPECTION, PACKERS AND STOCKYARDS PROGRAM STUDIES

        Question. Can you estimate the time frame for the $4.5 million
    packer concentration study?
        Answer. GIPSA is committed to completing the study as quickly as
    possible consistent with the need to produce technically sound
    findings. This is a complex, data-intensive project. It is difficult to
    anticipate time requirements accurately before plans for the scope of
    the study have been finalized and without knowing what specific
    methodology and data needs will be proposed by potential contractors.
        Major milestones include receiving public comments on plans for the
    study; finalizing the plans; establishing a 5- to 7-member academic
    peer review team; soliciting offers and awarding contracts;
    consolidating data needs of the contractors and developing data
    collection plans; obtaining Office of Management and Budget clearances
    for data collection; collecting and analyzing data and preparing
    contractors' draft reports; reviewing contractors draft reports;
    finalizing contractors' reports; and preparing GIPSA's summary reports.
        Question. Is a $500,000 study needed to review the Packers and
    Stockyards Act? Couldn't this be accomplished by the Department's staff
    without the additional cost?
        Answer. The Packers and Stockyards Act of 1921 has not undergone
    any significant review since its enactment, despite the substantial and
    controversial structural changes experienced by the regulated
    industries. The request for an additional $500,000 to review the
    Packers and Stockyards Act primarily addresses the need for additional
    staff with expertise not currently residing within the Agency for a
    comprehensive review of the P&S Act. Use of existing staff to handle
    issues associated with the review of the P&S Act and regulations would
    also divert resources away from ongoing monitoring and compliance
    programs.

                              WAREHOUSE LICENSING

        Question. Section 770 of Division A of Public Law 108-7 (the
    Agriculture, Rural Development, Food and Drug Administration, and
    Related Agencies Appropriations Act, 2003) established certain
    limitations in regard to the licensing of grain warehouses. Please
    provide information in regard to this section and the current status
    protections for farmers in regard to licensed warehouses.
        Answer. On August 5, 2002, the Department of Agriculture (USDA)
    published its final rule implementing the U.S. Warehouse Act of 2000
    which clarified, for the first time, that Federal warehouse operators
    cannot be required by State government to be dually licensed or comply
    with State warehousing, grain dealer laws or regulations. The final
    rule asserted, publicly, USDA's long-held view that it has exclusive
    jurisdiction to regulate the merchandising and other activities of
    Federally licensed warehouses. The final rule reflected existing case
    law dating back more than 60 years and made transparent what USDA has
    conveyed when asked.
        State Departments of Agriculture with grain merchandising licensing
    programs disagreed with USDA's position. Several States issued strongly
    worded statements in response to USDA's position, noting the impact it
    could have on the continued willingness of Federally licensed
    warehouses to comply with State grain dealer laws or to submit elevator
    proceeds to State grain indemnity funds.
        The issue has caused both USDA and State governments to examine
    levels of protection currently provided to producers under warehouse
    programs. USDA cooperated with the National Association of State
    Departments of Agriculture, as well as farm and industry
    representatives, to explore ways to improve warehouse regulations in
    order to protect producers and depositors.
        As a result of its meetings with stakeholder groups, USDA announced
    changes on February 5, 2003, to the Federal license requirements for
    grain warehouse operators. These changes would improve depositor
    protection requirements already in place for storage obligations and
    expand coverage to producer contractual obligations.
        USDA is changing the requirements for Federally licensed warehouse
    operators to improve producer protection already in place for producers
    who own and store grain with such warehouse operators and will extend
    protection to producers who only sell grain to such an operator. USDA
    is making the following changes to existing requirements for Federal
    licenses:
      --Increase the basic net worth requirements a warehouse operator must
            have to qualify for a license;
      --Increase the level of auditing required of the warehouse operator's
            financial statements by a third-party auditing firm; and
      --Provide additional coverage for producers who only sell grain to a
            Federally licensed warehouse.
        The increased producer protection will be funded through
    liquidation proceeds, a $5 million assessment on the Federal licensee
    community, and a $10 million umbrella insurance policy.
        USDA planned to have its grain warehousing plan in place for the
    start of the 2003 marketing year that begins May 1, 2003. The plan
    included an opportunity for Federally licensed warehouse operators to
    review the new program requirements before executing the new grain
    licensing agreements. The new grain licensing agreements were scheduled
    to be available by March 1, 2003.
        This implementation plan changed based on the language in Section
    770 of Division A of Public Law 108-7. This section requires a 180 day
    moratorium during which no funds could be used to: (1) amend licensing
    agreements for grain (excluding rice) under the United States Warehouse
    Act; or (2) to issue Federal licenses to grain warehouse operators
    (excluding rice) that are not currently Federally licensed; or (3) to
    implement any changes that were not in effect on January 1, 2003.
        All actions with respect to implementation of these changes
    initially ceased during this 180-day period. On March 27, 2003, at the
    urging of the stakeholders, USDA re-initiated its efforts to develop
    and implement the grain licensing changes. USDA is working to implement
    the announced changes at the end of the moratorium.
        A stakeholder group composed of representatives from producer and
    industry groups, and State Departments of Agriculture have met twice to
    develop their own plan for improving producer protection in Federally
    licensed grain warehouses. Joe Pearson from the Indiana Department of
    Agriculture and Randy Gordon with the National Grain and Feed
    Association serve as co-chairs for the warehouse task force.
        USDA has provided requested background information and made
    available staff to answer questions at both meetings. The warehouse
    task force has requested information on the costs associated with
    USDA's program. USDA has provided all information that has been
    developed; however, some cost information has not been provided either
    because it is unknown at this time or will require resources to
    develop. The cost of the insurance policy is still unknown though USDA
    is working quickly to obtain a contract for the insurance policy.

                              FSIS SYSTEMS REVIEW

        Question. The Secretary was directed in the 2002 Farm Bill to
    review State meat and poultry inspection systems and report the
    findings to Congress in FSIS's annual report to Congress, including
    guidance on possible changes if the statutory prohibition on interstate
    shipment of State-inspected product is removed.
        Please provide an update on the status of this report, including
    when it, and FSIS's annual report, will be available.
        Answer. At the 2002 National Advisory Committee on Meat and Poultry
    Inspection (NACMPI) meeting, discussions were held in response to the
    Farm Bill report language concerning interstate shipment. Committee
    members recommended that FSIS assess all completed State comprehensive
    reviews back to 2000, and complete reviews of the remaining States by
    March 2003, before starting the more comprehensive reviews called for
    in the Farm Bill report language. FSIS has completed all the audits
    through March 2003, as recommended by NACMPI and is now beginning the
    more comprehensive review of State MPI programs. Preliminary results of
    the intensified comprehensive reviews should be available in late fall
    2003.
        Question. Further, no specific funding for this report is requested
    in the fiscal year 2003 President's budget. How is this survey being
    funded, and how much will it cost?
        Answer. Existing resources within FSIS have been utilized to
    prepare for the more comprehensive reviews of State inspection
    programs. Under the current FSIS plan for these reviews, the more
    intensive portion of the reviews will not occur until next year.
    Available FSIS resources would in large part dictate the number of
    States that could be reviewed next year.

                                 FSIS USER FEES

        Question. The President's budget request for FSIS for fiscal year
    2004 is $797,140,000 in total. However, this number includes $122
    million that is to be collected in proposed user fees paid for by
    industry for the cost of mandatory, Federal inspections services beyond
    8 hours per day. Therefore, the true President's budget request for
    appropriated funds is $675,149,000. This is a decrease of $79,672,000
    from last year's appropriated level, unless the proposed user fees are
    authorized and collected.
        Do you agree with this summary?
        Answer. Yes, however, under current law, the budget requests
    $797,149,000 million, which is the level of funding necessary to ensure
    that America has the safest food supply in the world.
        Question. If the appropriations committee provides FSIS with the
    President's request for appropriated funds, $675 million, and the user
    fees are not authorized, please describe in detail the effect this will
    have on the FSIS budget and activities. Specifically, how will this cut
    in funding be absorbed by FSIS, and how will it affect the number of
    inspectors and inspections performed?
        Answer. FSIS will not be able to conduct inspection operations
    throughout the year, which would result in a disruption to industry
    operations.
        Question. Did USDA consult with industry or food-safety consumer
    groups when preparing this user-fee proposal?
        Answer. USDA did not consult with industry or food safety consumer
    groups when preparing the user fee proposal.
        Question. Did USDA consult with Congress before preparing this
    user-fee proposal to ensure that there would be adequate support to get
    it enacted?
        Answer. USDA did not consult with Congress before preparing the
    user fee proposal.

                   STATE MEAT AND POULTRY INSPECTION PROGRAMS

        Question. In fiscal year 2003, both Maine and Virginia terminated
    their State food inspection programs. Therefore, FSIS has assumed these
    costs in its fiscal year 2004 budget request. In the current fiscal
    environment, it is not unlikely that in the future, more States may
    consider terminating their State food inspection programs and leaving
    the responsibility with FSIS.
        Does USDA believe this is a viable possibility, and has this
    possibility been budgeted for in the Administration's fiscal year 2004
    request?
        Answer. FSIS is in constant contact with States to determine what
    actions they will take with respect to their inspection programs. If
    FSIS is aware of any plans by a State to either terminate or initiate
    its program, FSIS will take it into account when preparing its budget.
        Question. If this has not been budgeted for, how has FSIS planned
    for these potential situations?
        Answer. It is difficult to plan because many States are on a
    different legislative and budget calendar than the Federal Government.
    FSIS will address any potential funding problems related to the change
    in status of State inspection programs as they arise.

                            TECHNOLOGY AND TRAINING

        Question. The overall FSIS budget includes a total decrease of $1.5
    million for ``savings associated with centralization and improvement of
    information technology.'' How specifically was this number, and amount
    of savings, determined?
        Answer. The estimate of Department-wide savings resulting from
    consolidating enterprise architecture and infrastructure procurement is
    $16 million. FSIS' share of this is $1,356,000. The savings to the
    agency will be realized through consolidated hardware and software
    procurements, as well as the reengineering of paper-based processes,
    such as data collection.
        Question. I was pleased to see an increase of more than $5 million
    to improve the scientific and surveillance skills of the workforce,
    which appears to be essentially for increased training. While FSIS has
    long declared that their employees need additional training, will this
    training eventually qualify these employees for higher grade levels and
    promotions? What type of payroll and benefit increases does FSIS
    anticipate as a result of this training?
        Answer. FSIS has recently created a Consumer Safety Officer (CSO)
    position that requires greater scientific training and experience, as
    well as a higher grade level. Employees qualifying for these positions
    would receive increased compensation. Other employees that receive
    training to conduct their duties as assigned will not automatically be
    qualified for a higher grade level or promotion. Employees that move
    into higher graded positions would receive increased compensation.

                        EXPANDED FOOD SAFETY AUTHORITIES

        Question. I am pleased to hear that USDA is now reconsidering its
    position on the need for additional food safety authorities. When the
    Secretary spoke to the Food Safety Summit and Expo on March 19th, she
    stated that USDA was considering asking Congress for additional
    authorities, including, and I quote ``mandatory notification to USDA
    when a Federally inspected establishment has reason to believe that
    meat or poultry has been adulterated or misbranded; authority to impose
    civil penalties after notice in writing and continued lack of
    compliance; and cease and desist orders and potential suspensions at
    earlier phases and on an expedited basis arising from HACCP
    violations.''
        What were the reasons that USDA decided to seek additional
    regulatory authorities, and what is the status of these requests?
        Answer. We are always assessing our authorities to determine if
    they need to be strengthened. I have asked for a complete review of our
    authorities to determine if they allow us to do our job and I am
    awaiting assessments on what options USDA should consider pursuing in
    the future.
        Question. If additional authority is requested and granted, will
    you have additional costs that were not included in the fiscal year
    2004 budget? If so, how much do you anticipate additional authorities
    will cost?
        Answer. We are still evaluating our legislative authorities. Until
    that evaluation is completed, we will not know what the potential
    budget impact of those authorities will be.
        Question. Are there any other additional authorities that the
    Department is considering, such as mandatory recall authority?
        Answer. At this time, we have not determined if we require any
    additional authorities.
        Question. If, in fact, you believe that your enforcement
    authorities are relatively sufficient, then why are you continuing to
    be sued by meat companies when your agencies try to enforce regulations
    that the courts do not necessarily hold to have a legal basis, as
    reported just yesterday in the Omaha World Herald? I realize you can't
    discuss pending litigation, but this incident does seem to be more
    evidence that sufficient authorities are lacking.
        Answer. The Federal Meat Inspection Act and the Poultry Products
    Inspection Act provide the authority needed to close plants that fail
    to comply with FSIS regulatory requirements. Under these existing laws,
    FSIS maintains the authority to initiate a withholding, suspension, or
    withdrawal action based on sanitation or HACCP violations, including:
    failure to collect and analyze samples for the presence of generic E.
    coli; failure to develop or implement sanitation standard operating
    procedures; or failure to develop or implement a required HACCP plan.
    FSIS may also initiate a withholding, suspension, or withdrawal action
    for other violations, such as inhumane slaughter or unsanitary
    conditions. Even though FSIS cannot act solely on an establishment's
    failure of the Salmonella performance standard, an establishment's
    failure to meet Salmonella performance standards will trigger an
    immediate review of the establishment's entire food safety system.
    Establishments that do not meet food safety requirements are subject to
    enforcement actions.
        Question. I have received a request to include language that would
    make bison an amenable species for purposes of the Meat Inspection Act.
    Please provide a cost estimate for FSIS if this language is included in
    the fiscal year 2004 bill.
        Answer. It would cost approximately $1 million to start up a
    mandatory bison inspection program.

                        HUMANE METHODS OF SLAUGHTER ACT

        Question. The Committee, in fiscal year 2003, provided FSIS with $5
    million to be used to hire no fewer than 50 FTEs for enforcement of the
    Humane Methods of Slaughter Act. The Secretary stated at her May 8th
    hearing before the Committee that none of the FTEs had been hired, but
    that FSIS was working on the position descriptions.
        How many total people does FSIS plan to hire during fiscal year
    2003 and fiscal year 2004 with these funds? How many people will be
    hired in fiscal year 2003, and how many will be hired (not carried over
    from fiscal year 2003) in fiscal year 2004?
        Answer. FSIS continues to increase agency efforts to ensure that
    all field personnel understand their authorities and rigorously enforce
    the Humane Methods of Slaughter Act. FSIS has recently hired 215 new
    line inspectors trained in humane handling methods and at this time,
    the systemwide FSIS effort devoted to humane handling and slaughter
    inspection is equal to 63 FTEs. In fiscal year 2002, the comparable
    level of effort equaled 25 FTEs carrying out humane handling and
    slaughter inspection, so the agency has added 38 FTEs in fiscal year
    2003. The agency expects that this number will continue to rise through
    fiscal year 2004 to meet and even exceed the requirement outlined in
    the fiscal year 2003 Omnibus Appropriations bill.
        Question. Has FSIS been working with the GAO on the HMSA report
    required in the fiscal year 2003 Conference report? If so, how?
        Answer. FSIS has met with General Accounting Office (GAO) auditors
    regarding the GAO report. FSIS has provided GAO a variety of humane
    handling related materials. Several FSIS representatives have met with
    GAO auditors to discuss humane handling issues. Additional meetings are
    being planned.

                                 IMPORTED FOOD

        Question. In the fiscal year 2003 bill, the Committee included
    report language emphasizing the importance of USDA enhancing its
    inspections of overseas plants, making sure any plant that fails to
    meet U.S. standards is audited frequently, and not allowed to ship its
    product into this country until it meets our standards. So, I am
    pleased to see an increase of $1.7 million to increase the number of
    trips overseas by FSIS inspectors in order to ensure that foreign
    plants shipping product to the United States meet the U.S. standard for
    safety. The budget states that this funding will increase the number of
    countries being evaluated from 33 to 40.
        What, exactly, will this $1.7 million increase buy, and how will it
    improve our food safety system? Will additional inspectors be provided
    to countries that have historically struggled to meet our safety
    standards?
        Answer. Funds are included in this request to hire seven additional
    auditors to conduct reviews of foreign country inspection systems.
    These new auditors will enhance FSIS' review of foreign meat and
    poultry inspection systems and exporting plants to assure they operate
    at standards equivalent to the U.S. system. The additional auditors
    will ensure that each country approved to export meat and poultry
    products to the United States will be audited at least annually, and
    more frequently, if needed.
        FSIS currently allocates more resources to those countries that
    have historically struggled to meet our safety standards and will
    continue to do so.
        Question. How many countries import meat into the United States?
    Are there any countries that USDA inspectors do not physically visit
    and evaluate, and if not, why?
        Answer. At this time 33 countries have been approved to export meat
    and poultry products to the United States.
        All countries exporting meat and poultry products to the United
    States are audited through a physical visit at least once a year.
        Question. The language in the Senate report last year was due to a
    concern about the safety of meat imported into this country. Although I
    received several assurances from FSIS officials that this was not a
    safety issue, and the USDA system was not flawed, there was a USDA
    internal inspector general report released in February which stated
    that from 1999 to 2001, USDA allowed more than 800,000 pounds of meat
    from foreign plants that might have been prohibited, and 66,000 of that
    was from processors that were not approved to ship product to the
    United States. Generally, the report concluded that USDA has not been
    sufficiently guarding the food supply from potentially unsafe imported
    meat. This report was released after the President's budget request was
    formulated. Please explain the discrepancy between the assurance I
    received about the safety of imported meat, and the information
    included in the USDA Inspector General's report. Further, what steps is
    USDA taking to address the findings in this report? Will the increase
    requested in the budget take care of the safety issues outlined, or is
    further funding necessary?
        Answer. The Office of the Inspector General (OIG) questioned the
    entry of about 800,000 pounds of meat from foreign plants, including
    66,000 pounds of meat from plants not eligible to export to the United
    States. The discrepancy resulted from a disagreement between FSIS and
    the OIG over how countries provided annual certifications of eligible
    establishments to FSIS. FSIS is confident that establishments are
    properly certified, and has made procedural changes to address the
    concerns of the OIG. FSIS pointed out that, at the time this product
    was presented for reinspection by FSIS, each shipment was accompanied
    by a certificate issued by the inspection service of the foreign
    country attesting that it was produced according to U.S. standards and
    in a plant eligible to export to the United States.
        The Automated Import Information System (AIIS) has been re-
    programmed and updated to address all concerns raised by the OIG
    regarding the entry of shipments. The changes will be made with
    existing and requested resources.

                            FARM ASSISTANCE PROGRAMS

        Question. The salaries and expense request eliminates 2,807 non-
    Federal staff years, 2,657 temporary positions, and 150 permanent
    positions. At the same time, the Agency received $70 million in
    supplemental funding in the fiscal year 2003 appropriations bill,
    Division N of Public Law 108-7.
        How will the supplemental funds be allocated?
        Answer. The $70 million will support approximately an additional
    1,200 temporary staff years for county field offices during fiscal year
    2003 and fiscal year 2004. In addition, funding will be used for IT/ADP
    software development and support, and increased operating costs such as
    postage, supplies, and materials. Even though the fiscal year 2004
    Budget reflects a precipitous drop of 2,692 non-Federal temporary and
    other staff years from the fiscal year 2003 level, FSA is working to
    even out fiscal year 2003 to fiscal year 2004 temporary staffing
    levels. We are able to do this by spreading the use of the $70 million
    additional funding over a 2-year period.
        Question. Will any be used for IT purposes and how much?
        Answer. Yes, approximately $14 million of the funds provided for
    Farm Bill implementation will be used for IT/ADP software development
    and support.
        Question. With the continued demand from new Farm Bill programs,
    many still to be implemented, is there a need for additional permanent
    Federal full-time staff?
        Answer. No, at the present time, FSA does not feel there is a
    critical need for additional permanent Federal full-time staff. The
    initial impacts of Farm-Bill-related implementation workload increases
    are similar to those of a disaster in that they are temporary and do
    not easily lend themselves to support of permanent staff. Through the
    dedication of our employees we have been able to sign up over 90
    percent of the landowners that have made base and yield selections.
    Some offices were stretched more than others, and we did our best to
    provide additional temporary staffing resources to fill the gaps.
    Temporary staffing is being used to assist with administrative
    activities, allowing time for permanent staff with the needed technical
    knowledge to conduct signup activities.
        FSA does not yet know the full impact of permanent, ongoing
    maintenance of new Farm Bill programs. However, every effort will be
    made to continue the high standard of service provided to our customers
    while analyzing these impacts.
        Question. In the inventory property area, what is the racial and
    ethnic breakdown, including women, of purchasers who have acquired
    property through FSA lending programs in the latest data available?
    Please include the average loan and size of farm.
        Answer. FSA does not track the gender of purchasers when an
    inventory property is sold. FSA lending programs do not finance
    acquisition of inventory property except for beginning farmers. Rather,
    the property is sold at auction to the highest bidder.
        The following table displays fiscal year 2002 inventory property
    purchasers by race, average size of farm and total acreage:

                                     INVENTORY PROPERTY PURCHASERS, FISCAL YEAR 2002
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Average Size
                             Race/Ethnicity                              Number of        of Farm      Total Acreage
                                                                        Purchasers        (Acres)
    ----------------------------------------------------------------------------------------------------------------
    Asian/Pacific Islander..........................................               1              10              10
    Black...........................................................               6              84             505
    Hispanic........................................................               4              31             123
    Native American.................................................               2             281             561
    White...........................................................             174             148          25,679
    Tax-Exempt \1\..................................................               4             267           1,066
                                                                     -----------------------------------------------
          Total.....................................................             191             146          27,944
    ----------------------------------------------------------------------------------------------------------------
    \1\ This category reflects corporations that have status as a race or ethnic group. Purchases made by these
      entities are not tracked by any other group designation.

        Question. In the Beginning Farmer Program, what is the racial and
    ethnic breakdown, including women, of purchasers who have acquired a
    farm or ranch? Please include the average loan and size of farm. The
    2002 Farm Bill enacted a similar provision on data analysis but which
    applied to Farm Loans rather than housing loans. Will this report be
    submitted to the Committee?
        Answer. There were 402 Beginning Farmer Farm Ownership Loans made
    to females during fiscal year 2002. Because women are also counted in
    the racial and ethnic categories, the number of women per racial
    category was not separately identified during 2002. FSA does not track
    the average size of farm by racial category for beginning farmers. This
    information is only captured for inventory property.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                         Direct FO     Average Loan    Guaranteed FO   Average Loan
    ----------------------------------------------------------------------------------------------------------------
    White...........................................           1,000        $118,947             731        $252,300
    Black...........................................              15         106,060               4         253,850
    Asian...........................................              10         140,450              61         457,374
    American Indian.................................              53         122,623              32         271,047
    Hispanic........................................              19         102,726              11         214,313
    Other--Not coded................................               0               0               1         200,000
                                                     ---------------------------------------------------------------
          Total Participants........................           1,097         118,864             840         267,354
    ----------------------------------------------------------------------------------------------------------------

        We assume the 2002 Farm Bill provision you are referring to is
    Section 10708, ``Transparency and Accountability for Socially
    Disadvantaged Farmers and Ranchers; Public Disclosure Requirements for
    County Committee Elections.'' That provision is much broader than just
    the farm loan programs. That provision requires an annual report on the
    participation rate of ``socially disadvantaged farmers and ranchers
    according to race, ethnicity, and gender'' for ``each program of the
    Department of Agriculture established for farmers and ranchers,'' and;
    the composition of county, area or local committees established under
    the Soil Conservation and Domestic Allotment Act. In addition, Section
    10708 requires a report to Congress after the completion of each Census
    of Agriculture on the rate of change in participation by socially
    disadvantaged groups since the previous census. We would be happy to
    provide both the annual reports and the post-census report to Congress
    when they become available.

                                RISK MANAGEMENT

        Question. The President's budget proposes reducing the
    administrative expense reimbursement rate from 24.5 to 20 percent,
    which is expected to produce a savings of $67.8 million. Given the
    drought and other natural disasters that have occurred in the farming
    sector over the past several years, in developing this proposal, have
    you worked with the individual crop insurance companies to ensure that
    this limitation will in no way impair those companies' abilities to
    continue providing coverage to our Nation's farmers? If so, what were
    their comments? If not, please explain why.
        Answer. On an ongoing basis, RMA works closely with the companies
    to address a wide range of issues. It is clear that a reduction of the
    A&O reimbursement rate is a cause of significant concern to them. It
    should be noted that the general rate of 24 percent is not the actual
    rate paid to companies. Because the rate is based upon the type of
    policy purchased, the companies receive an average closer to 21
    percent.
        A reduction in the reimbursement rate will increase the financial
    pressure upon the companies to adjust their operating approach. Each
    company will strive for increased efficiencies without sacrificing
    service. This of course is a healthy exercise. However, if the company
    is not successful in driving down cost and generating sufficient
    returns to satisfy shareholders, consolidations or departures will be
    the result.

                       INFORMATION TECHNOLOGY INVESTMENTS

        Question. The President's budget proposes a $5.5 million increase
    for a new, updated information technology system. What are the specific
    spending plans for this funding? Will all of the $5.5 million be spent
    in fiscal year 2004? If not, how and when will each portion of the
    funding be spent?
        Answer. The spending plan for the funding is as follows:

    ------------------------------------------------------------------------
                                                                Dollars in
               Information Technology Investments                thousands
    ------------------------------------------------------------------------
    Financial Management System.............................            $512
    Corporate Insurance Information System..................           2,713
    Compliance Support & Pattern Recognition System.........             725
    Standard Reinsurance Agreement Analysis.................           1,550
                                                             ---------------
          Total.............................................           5,500
    ------------------------------------------------------------------------

        These funds are scheduled to be used within the fiscal year. The
    funds will be scheduled within the 5-year plan, which is currently
    being developed, and will be completed and implemented prior to the
    beginning of fiscal year 2004.

                          CROP AND LIVESTOCK INSURANCE

        Question. Recently, I have heard from farmers in Wisconsin
    regarding crop and livestock insurance. Specifically, they are in favor
    of both, but believe that crop insurance while beneficial, can be
    complicated and difficult for small farmers to understand and feel
    comfortable participating in, and are concerned that any livestock
    insurance program may have the same problems. How does RMA attempt to
    reach out to small or part-time farmers to educate them on crop
    insurance? Are there any products currently produced by RMA to educate
    farmers about crop insurance that are easily accessible and easy to
    understand? If not, how much additional funding would RMA need in order
    to produce and distribute this information?
        Answer. RMA operates two major education programs, as mandated and
    funded under the Federal Crop Insurance Act (FCIA sections 522(d)(3)(F)
    and 524(a)(2)). These two programs are (1) partnerships for risk
    management education, with priority for producers of certain crops; and
    (2) crop insurance education and information in States that have been
    historically underserved by crop insurance. In addition, the
    Cooperative State Research, Education, and Extension Service operates a
    national program of grants for risk management education through four
    regional centers based at Land Grant universities in accordance with
    FCIA, section 524(a)(3).
        RMA operates its educational programs to reach small farmers and
    ranchers through local education partners. Funding to conduct these
    local programs is awarded competitively through cooperative agreements
    to educational partners that have substantial influence with local
    farmers and farm groups. RMA's educational partners include State
    departments of agriculture, universities, grower groups, and other
    public and private organizations.
        RMA recognizes the ongoing need for clear, understandable, and
    timely information about crop insurance so that farmers can make an
    informed decision. To accomplish this, RMA's regional offices work
    closely with local education partners to tailor educational curricula
    and training materials to the commodities and growing practices unique
    to each area. Informational materials are also available on RMA's web
    site (www.rma.usda.gov) and on the RMA-sponsored Ag Risk Education
    Library web site (www.agrisk.umn.edu). RMA works with its educational
    partners to ensure that, as far as possible, farmers are informed about
    local educational opportunities.
        Much is being done to reach the legislatively-mandated underserved
    groups and regions with crop insurance education. Given the
    acceleration in crop insurance development and expansion, however,
    RMA's educational resources are continuously challenged to keep pace.
    The increased use of information technology holds out the best promise
    of meeting this challenge. Additional funding of $3 million per year
    would allow RMA to substantially enhance its set of internet
    information and distance learning tools, especially those dealing with
    newer products such as livestock. With such tools, RMA could reach a
    much larger number of small farmers than it can with current resources.

                              USDA DROUGHT OUTLOOK

        Question. What does USDA forecast for drought outlook this coming
    year, and if natural disaster-related crop and livestock losses reach
    or exceed the levels of the last 2 years, will you recommend to the
    President to work with the Congress to enact disaster assistance?
        Answer. We are monitoring drought conditions carefully, however, it
    is too early to make any reliable predictions on the outlook for the
    coming year. According to the U.S. Drought Monitor, conditions have
    generally been improving throughout the U.S. since early March.
    However, severe drought persists in the West particularly from the 4-
    Corners Region north to Southern Idaho. Current projections are that
    this area will remain under drought conditions for at least the near
    future. While we do not anticipate drought related losses to reach the
    levels seen in 2002, we would expect to work with Congress should the
    need arise.

                          DAIRY PRICE SUPPORT PROGRAM

        Question. The Dairy Price Support system requires that USDA
    purchase certain dairy products when the class III price falls below
    $9.90 per hundredweight. Since January 2003 the class III price has
    remained below that support level--in fact we reached a low of $9.11
    per hundredweight for March. It has been suggested that USDA
    specifications for the purchase of these products created additional
    costs, and results in prices to producers falling below the safety-net
    established by Congress.
        Since January of 2000, the weekly average block cheddar cheese
    price on the Chicago Mercantile Exchange has been below the $1.1314 per
    pound CCC purchase price about one-fourth of the time. At one point,
    during the week ending February 28, 2002, the price averaged as low as
    12.3 cents below the CCC purchase price. In other words, sellers on the
    CME are choosing to sell product at levels far below the standing offer
    of the CCC. The effect of this is to undermine the integrity of the
    price support program, causing prices to producers to fall far below
    the $9.90 per hundredweight support price established by Congress. In
    fact, during the period of January 2000 through April of 2003, the
    Class III price; was below support for 14 of 39 months.
        In order to make the price support program function more
    effectively, and to more closely meet the intent of Congress with
    regard to a price support level of $9.90 per hundredweight, some in the
    industry have suggested that the CCC should be an active trader of
    dairy products on the Chicago Mercantile Exchange. Instead of acting as
    a passive purchaser of surplus products whenever manufacturers choose
    to sell, it is argued that CCC should step in and purchase product,
    particularly cheese, whenever it is offered on the CME at prices that
    match or fall below the established CCC purchase price.
        How do you plan to strengthen the price support program to prevent
    the market price from falling below the support level?
        Answer. The Farm Security and Rural Investment Act of 2002 states
    that the Milk Price Support Program (MPSP) purchase prices shall be
    sufficient to enable plants of average efficiency to pay producers, on
    average, a price not less than $9.90 per hundredweight (cwt) for milk
    containing 3.67-percent butterfat. The Class III price calculated by
    the Agricultural Marketing Service (AMS) is a minimum price for milk
    containing 3.5-percent butterfat. Actual prices producers received are
    typically greater than the minimum, and prices for 3.67-percent milk
    are about $0.20 per cwt higher when butter is near its support price of
    $1.05.
        CCC has historically interpreted ``on average'' to mean an annual
    average over all cheese and butter/nonfat dry milk (NDM) plants (Class
    III and Class IV milk). Weighted average prices, based on utilization,
    of milk used for cheese making (Class III) and milk used for butter/NDM
    making (Class IV) have exceeded $10.00 per cwt for the past 3 years.
    Annual average manufacturing milk prices in the National Agricultural
    Statistics Service (NASS) reports and the manufactured milk value
    calculated for the Dairy Interagency Commodity Estimates Committee have
    also exceeded $10.00 per cwt.
        AMS began publishing a minimum monthly price for Class III milk and
    a separate minimum monthly price for Class IV milk in January 2000 with
    implementation of Federal Milk Market Order reform. CCC is considering
    whether in light of these published prices it should revise its
    interpretation of ``on average.''
        Payment of an allowance to cover additional costs incurred to sell
    cheese to CCC is being considered. This payment would be designed to
    lessen the difference between Class III and Class IV prices when dairy
    product prices are near CCC purchase prices for cheese, butter and NDM.
        Question. Are you aware of the effect USDA specifications have on
    the final level of support received by dairy farmers, and will you
    consider either changing the specifications or being a more active
    purchaser of products, such as on the Chicago Mercantile Exchange, in
    order to make certain dairy farmers receive a price support level as
    directed in the Farm Bill?
        Answer. We are aware of USDA specification impacts on support
    received by dairy farmers. Revisions to USDA specifications are in
    draft form and are currently being reviewed. However, CCC storage of
    product requires more expensive packaging. Also, resale or donation of
    product from CCC inventory requires grading that is not typically
    required for cheese going for immediate processing uses in the
    commercial market.
        Question. Does the CCC have the authority to be an active trader of
    dairy products on the CME, or would separate legislation from Congress
    be required to enable such action?
        Answer. CCC has been an active trader on futures exchanges (Chicago
    Board of Trade) and CCC has the authority to be an active dairy
    products trader on the CME spot cash market.
        Question. If the CCC does have this authority, please comment on
    why it has not been used, in light of how often cheese prices have
    fallen below support over the last several years?
        Answer. In discussions with CME officials it was found that even
    though CME product specifications match USDA's specifications, they are
    not enforced for CME commercial trades. If CCC offered to buy product
    on CME, CCC would not necessarily receive product meeting CCC
    specifications. CME is uncomfortable with CCC's proposal to actively
    sell inventory on the CME when market prices are above purchase prices
    because this would tend to narrow the CME trading range and allow CCC
    to break market rallies. CCC could purchase cheese on the CME at its
    purchase price provided CCC specifications were fulfilled, but total
    acquisition costs would be higher. CME brokerage fees, immediate
    payment and $25 per trade transaction fees would add expenses to CCC
    purchases. Also, CCC requires grading paid for by the seller while CME
    does not require grading unless requested by the buyer, and if
    requested, grading costs must be paid by the buyer.
        Question. Will you provide me an analysis of the relationship
    between an increase in the purchase CCC price of dairy products and
    dairy income received by farmers?
        Answer. A one cent increase in the CCC purchase price for cheese
    should raise Class III milk price about 10 cents per cwt when purchases
    are being made and cause a slight decrease in Class IV price. Class III
    (milk used for cheese making) used 44 percent of total milk marketings
    in 2002 so the price impact would affect at least 44 percent of milk
    production. If Class III is the price mover, Class I price would also
    increase, affecting another 37 percent of milk production. Impact on
    the all milk price will vary from 4 cents to 8 cents per cwt depending
    on the month. When purchases are taking place throughout the year and
    Class III is seldom the Class I price mover, a 5 cent per cwt average
    milk price increase for the year would yield an $85 million (half of 1
    percent) dairy farm income increase (an average of about $925 per
    farm). In years with few cheese purchases and Class III prices never
    being the mover, the impact would be less than 1 cent per cwt average
    increase, yielding a $12 million total income increase ($130 per farm).
        Question. To what extent will use surplus stocks of non-fat dry
    milk for food aid, drought relief, or other purposes?
        Answer. Disposition of CCC NDM inventory for fiscal year 2003 has
    been about 400 million pounds through April 30. Export donations have
    been about 100 million pounds and drought relief about 250 million
    pounds. Domestic donations and sales have each been about 25 million
    pounds. Additional export donations of 100 to 200 million pounds are
    expected. Additional drought aid is beginning to be distributed and use
    may reach 200 to 400 million pounds by the end of the fiscal year.

                                  CONSERVATION

        Question. What input did USDA have in the Justice Department
    determination that conservation technical assistance for Farm Bill
    conservation programs would be subject to the section 11 cap, making
    necessary the President's request to provide such assistance through
    discretionary spending?
        Answer. The Justice Department determination that conservation
    technical assistance for Farm Bill conservation programs would be
    subject to the section 11 cap reflects its own independent evaluation
    of the law, legislative history, and relevant precedents. USDA supplied
    the Justice Department with relevant legal materials, as requested.

                         CONSERVATION SECURITY PROGRAM

        Question. Do you intend to implement the Conservation Security
    Program in a manner similar to an entitlement until enrollments reach
    the current statutory spending cap? If not, how would such alteration
    be consistent with the Farm Bill?
        Answer. USDA estimates that there is a potential applicant pool of
    over two million farms and ranches covering some 900 million
    potentially eligible acres. A primary implementation concern that was
    raised in our published Advanced Notice of Proposed Rulemaking (ANPR)
    is the scope of the CSP program. In order for this program to
    accomplish the Administration's goal of maximizing the conservation and
    improvement of natural resources, it will be necessary to focus CSP
    assistance on farms and ranches that maintain the highest level of
    natural resource protection.

                        STATUS OF CONSERVATION PROJECTS

        Question. Please provide the status of conservation projects listed
    in the Conservation Operations and Watershed Flood Prevention
    Operations accounts of the Senate, House, and Conference Report
    Statement of Managers to accompany the fiscal year 2003 appropriations
    bill.
        Answer. All of the fiscal year 2003 conservation projects listed in
    the Conservation Operations account of the Senate, House, and
    Conference Report Statement of Managers have been funded and
    allocations made to the States within the last few months. State
    Conservationists are in the process of implementing the projects and
    accomplishments will be available at the end of the fiscal year.
        Appropriated funds for Watershed Flood Prevention Operations were
    not sufficient to cover the estimated installation cost of all projects
    listed in the appropriation language. As a result, each 2003 project
    allocation was reduced by approximately 20 percent. The following table
    summarizes the fund allocations that were made during mid April:

                    WATERSHED PROTECTION AND FLOOD PREVENTION
    ------------------------------------------------------------------------
                  State                     Project         Status of Funds
    ------------------------------------------------------------------------
    Alabama.........................  Upper Cahaba......  No funds
                                                           allocated, not an
                                                           authorized
                                                           Watershed
                                                           Protection and
                                                           Flood Prevention
                                                           project
    Alabama.........................  Pine Barren WS      $1,184,000
                                       Ext..               allocated to
                                                           project
    Arkansas........................  Little Red River..  $545,000 allocated
                                                           to project
    Arkansas........................  Poinsett..........  $744,000 allocated
                                                           to project
    Arkansas........................  Big Slough........  $125,000 allocated
                                                           to project
    California......................  Beardsley.........  $5,646,000
                                                           allocated to
                                                           project
    Florida.........................  WF-Four Pilot       $1,452,000
                                       Projects in North   allocated to
                                       FL.                 project
    Florida.........................  Big Cypress.......  $186,000 allocated
                                                           for FL project
                                                           planning,
                                                           including Big
                                                           Cyprus
    Illinois........................  DuPage County.....  $25,000 allocated
                                                           to project
    Kansas..........................  Whitewater East...  $1,429,000
                                                           allocated to
                                                           project
    Kansas..........................  Whitewater West...  $971,000 allocated
                                                           to project
    Louisiana.......................  Bayou Bourbeux....  $7,815,000
                                                           allocated to
                                                           project
    Missouri........................  Big Creek &         $1,341,000
                                       Hurricane Creek.    allocated to
                                                           project
    Missouri........................  E. Fork of Grand..  $477,000 allocated
                                                           to project
    Missouri........................  E. Locust Cr......  $477,000 allocated
                                                           to project
    New York........................  Cayuga Lake.......  Not an authorized
                                                           Watershed
                                                           Protection and
                                                           Flood Prevention
                                                           Project. Other
                                                           programs are
                                                           being utilized.
    North Carolina..................  Swan Quarter......  $2,851,000
                                                           allocated to
                                                           project
    North Dakota....................  Devil's Lake Basin  Not an authorized
                                                           Watershed
                                                           Protection and
                                                           Flood Prevention
                                                           Project
    Oklahoma........................  Sugar Creek.......  $3,512,000
                                                           allocated to
                                                           project
    Pennsylvania....................  Mill Creek........  $507,000 allocated
                                                           to project
    Pennsylvania....................  Little Toby.......  $347,000 allocated
                                                           to project
    South Carolina..................  Flood mitigation    Not an authorized
                                       Projects.           Watershed
                                                           Protection and
                                                           Flood Prevention
                                                           Project
    South Dakota....................  Little Minnesota    $67,000 allocated
                                       River/Big Stone     to project
                                       Lake.
    Texas...........................  Elm Cr. Site #34..  $1,615,000
                                                           allocated to
                                                           project
    Texas...........................  Big Sandy Cr......  $1,277,000
                                                           allocated to
                                                           project
    Texas...........................  Lake Waco           $437,000 allocated
                                       Watershed.          to project
    Virginia........................  Southwest VA        Not an authorized
                                       Waterways in        Watershed
                                       Clinch Powell.      Protection and
                                                           Flood Prevention
                                                           Project. $105,400
                                                           allocated through
                                                           the Emergency
                                                           Watershed
                                                           Program.
    Virginia........................  Holston, Pound, &   Not an authorized
                                       Bluestone R..       Watershed
                                                           Protection and
                                                           Flood Prevention
                                                           Project. $105,000
                                                           allocated through
                                                           the Emergency
                                                           Watershed
                                                           Program.
    Virginia........................  Marrowbone Cr.....  $18,000 Watershed
                                                           Rehabilitation
                                                           Planning
                                                           provided, in
                                                           addition to
                                                           fiscal year 2002
                                                           fund carryover.
    West Virginia...................  Upper Tygart        $12,131,000
                                       Valley WTSH.        allocated to the
                                                           project
    West Virginia...................  Little Whitestick   $3,570,000
                                       Cranberry.          allocated to the
                                                           project
    West Virginia...................  Potomac Headwaters  $460,000 allocated
                                       Land Treatment.     to the project
    ------------------------------------------------------------------------

                        WATERSHED REHABILITATION PROGRAM

        Question. Please provide information in regard to expenditures in
    fiscal years 2003 and 2004 under the Watershed Rehabilitation Program.
    What criteria is USDA using to determine which rehabilitation projects
    to fund? At the rate of funding for this program as requested by the
    President, how many years will it take before those structures in
    danger of failure will be rehabilitated? Is it likely that some
    structures will fail before such time, and to what degree is this
    likely?
        Answer. The following is a summary of the allocations made for
    fiscal year 2003. (To date, the fiscal year 2004 appropriations and
    subsequent allocations have not been made):

    ------------------------------------------------------------------------
                              STATE                                TOTAL
    ------------------------------------------------------------------------
    Alabama.................................................         $30,000
    Alaska..................................................               0
    Arizona.................................................         320,000
    Arkansas................................................       1,055,000
    California..............................................          10,000
    Colorado................................................               0
    Connecticut.............................................               0
    Delaware................................................               0
    Florida.................................................               0
    Georgia.................................................       5,125,000
    Hawaii..................................................               0
    Idaho...................................................               0
    Illinois................................................          40,000
    Indiana.................................................         125,000
    Iowa....................................................       1,126,000
    Kansas..................................................         845,000
    Kentucky................................................         165,000
    Louisiana...............................................          44,000
    Maine...................................................               0
    Maryland................................................               0
    Massachusetts...........................................         125,000
    Michigan................................................          19,000
    Minnesota...............................................               0
    Mississippi.............................................         530,000
    Missouri................................................         660,000
    Montana.................................................         160,000
    Nebraska................................................       1,466,000
    Nevada..................................................               0
    New Hampshire...........................................               0
    New Jersey..............................................          50,000
    New Mexico..............................................         740,000
    New York................................................         275,000
    North Carolina..........................................          54,000
    North Dakota............................................         470,000
    Ohio....................................................         300,000
    Oklahoma................................................       6,451,000
    Oregon..................................................               0
    Pennsylvania............................................         230,000
    Rhode Island............................................               0
    South Carolina..........................................          40,000
    South Dakota............................................          15,000
    Tennessee...............................................         975,000
    Texas...................................................       5,304,000
    Utah....................................................         150,000
    Vermont.................................................          73,000
    Virginia................................................         328,000
    Washington..............................................               0
    West Virginia...........................................         220,000
    Wisconsin...............................................         150,000
    Wyoming.................................................          36,000
    Puerto Rico.............................................          25,000
                                                             ---------------
          Total.............................................      27,731,000
    ------------------------------------------------------------------------

        The Watershed Rehabilitation amendment to Public Law 566 requires
    that a priority ranking system be prepared. A standardized priority
    ranking procedure was developed and is contained in NRCS policy. The
    priority ranking process computes a ``risk index'' for each dam which
    includes the following components:
      --Potential for failure of the dam--based on existing conditions and
            design features of the dam.
      --Consequences of failure of the dam--based on number of lives and
            property at risk if the dam should fail.
      --Input from the State Dam Safety Agency.
        Priority was placed on dams with:
      --The highest risk to loss of life and where the dams were in the
            poorest condition.
      --Legal obligations through Federal contracts or projects agreements
            where local contracts will encumber funds.
      --Commitments for planning and application were made (i.e. completion
            of plans, designs, and construction contracts).
        At $10 million per year, an estimated 10 projects annually will be
    rehabilitated. We do not have estimates of the number of dams that are
    currently in danger of failure to respond to your request for
    information on the possibility of future failures under current and
    proposed program funding levels. We expect to have 250 risk assessments
    completed by September 30, 2003 which will shed some light on this
    question.

                      RD FIELD STRUCTURE CONSISTENCY PLAN

        Question. I understand that the Under Secretary (Rural Development)
    will issue a Consistency Plan for the field structure of RD. I also
    understand that in the previous reorganization, States were allowed
    flexibility to set up the structures to meet specific State needs. This
    new plan, as I understand, will close most two-person offices and allow
    States to develop a 2 or 3 tier system. States would also be limited to
    the number of program chiefs. I assume this will require a shifting of
    employees, functions and grade level changes.
        How will these changes impact delivery and costs to the Agency?
        Answer. The purpose of the Consistency Planning effort is to
    improve the field structure across the country to better serve the
    public, ensure that a basic level of service is available in all
    offices, and to improve the delivery of services to customers. It
    provides two possible field structures, which are very compatible to
    each other on a national level, but allow for differences among the
    States in geography, population density, program demand, and staffing
    levels. Having a basic requirement nationally that there be at least 3
    people in each office improves the chances that someone will always be
    there to help customers in need of assistance rather than having to
    close an office when employees are sick, on leave, or working away from
    the office in order to make or service loans or provide technical
    assistance. There will be some initial costs of relocating a few
    employees and renting new space. There may be some savings in the long-
    term of reduced rent due to the consolidation of a few offices.
        Question. How will the savings or increase in cost be reflected in
    your 2005 or 2006 budget?
        Answer. These costs will be paid from, and any savings as a result
    of improved efficiency, will accrue to the Salaries and Expenses
    account.

                        RD COUNTY FIELD OFFICE CLOSURES

        Question. What is the status of the 2003 requests by OMB to close
    200 county base field offices?
        Answer. The Secretary's Task Force, in the very near future, will
    be transmitting to the State Leadership of the Farm Service Agency, the
    Natural Resources Conservation Service, and Rural Development
    instructions for evaluating offices for consolidation. The Task Force
    anticipates the evaluation will be completed this summer.
        Question. Is the criteria used for the Secretary's office closing,
    to comply with the OMB request, and RD's plan similar, please explain?
        Answer. The criteria are similar in that both efforts seek to
    ensure customers are served effectively and efficiently. Rural
    Development's consistency planning effort focuses on how the agency can
    most effectively deliver its services with the resources available.
    While the consistency plans are being reviewed, Rural Development is
    also working closely with the Secretary's staff identifying inefficient
    offices. The Rural Development State Directors will receive and utilize
    the same evaluation criteria and instructions as the NRCS State
    Conservationist, and the FSA State Executive Director and any
    inconsistency between the Rural Development consistency plan and the
    Secretary's evaluations will be reconciled following the completion of
    the evaluations. Any Rural Development offices identified as
    inefficient will be addressed in the implementation phase of each
    State's consistency plan.
        Question. Is there different criteria used in the two plans?
        Answer. The criteria for the two initiatives are tailored to meet
    the specific purposes of each initiative. However, the two effects are
    being closely coordinated. Rural Development offices meeting the
    evaluation criteria being used by the Secretary's Task Force will be
    reviewed by the Rural Development State Director during their
    consistency evaluation and appropriate action taken, based on the
    overall needs and resources of the State.
        Question. Are both groups using underserved minority populations,
    substandard housing, rent overburden, and unemployment as factors for
    office locations?
        Answer. Rural Development did not provide specific criteria for the
    States to use in determining the location of its offices during the
    consistency planning process and each Rural Development State Director
    is determining, with the assistance of their staff, where the offices
    should be located utilizing such factors as geography, roads, location
    of trade centers, existing office locations, and impact on employees.
    The Secretary's Task Force has included diversity of the customer base
    as a criterion that is being used in the evaluation of offices,
    including those of Rural Development.
        Question. Is the National Office reviewing factors of historic need
    prior to final approval of State plans, including the factors used to
    allocate resources to the States in the 1940-L regulation?
        Answer. The National Office review of each State's implementation
    plan does not include an assessment of the proposed office locations.
    Each State Director established a working group of employees to assist
    them in the development of their plan. The location of proposed offices
    is part of that effort. The employees in the State are far more
    knowledgeable of the State and its needs than is the staff of the
    National Office and it would be presumptuous, in most cases, of the
    National Office staff to question the recommendations of the State
    employees as to the location of their worksites.

                      THE OFFICE OF COMMUNITY DEVELOPMENT

        Question. The Office of Community Development will be redirected
    from assisting EZ/EC and other communities to create and monitor
    performance measures, training field staff and strategic planning (18
    people). Do you need this entire staff devoted for these purposes?
        Answer. The Office of Community Development (OCD) will continue to
    provide national-level oversight of the Empowerment Zone/Enterprise
    Community (EZ/EC) program, along with the Champion Communities and the
    Rural Economic Area Partnership (REAP) Zones. These programs were
    designed so that direct assistance to the supported communities would
    be conducted by the Rural Development State and area office staff. As
    part of a comprehensive plan to strengthen the field structure and give
    State offices more responsibility for the outcome of programs in their
    jurisdictions, OCD will provide State offices and staff additional
    training on the implementation of the EZ/EC programs. In addition to
    these responsibilities, OCD will be coordinating the effort within
    Rural Development to formulate sound strategic plans, develop
    appropriate goals to implement them, and devise sound performance
    measurements to determine the effectiveness of Rural Development's
    programs. It will also continue to develop and provide Rural
    Development National and State office staff with web-based measurement,
    mapping and reporting tools, along with other database management
    systems, to achieve Rural Development's mission. Given this workload,
    the staff of 18 FTEs is fully employed meeting these responsibilities.

                        ROUND 2 AND 3 EZ/EC COMMUNITIES

        Question. Proper oversight and technical assistance were issues
    when Round I of the EZ/EC communities were funded and there are still
    many outstanding issues for these communities. What will happen to the
    Round 2 and in the future round 3 EZ/EC communities with the proper
    oversight and assistance to ensure these funds are adequately
    administered?
        Answer. Clearly, the Round I program constituted a learning
    experience for both the urban and rural EZ/EC programs. There are still
    outstanding issues with the oversight and assistance for the EZ/EC
    program and they are constantly being addressed. Our Benchmark
    Management System actively shows communities in all three Rounds are
    making progress in the implementation of their strategic plans, for
    example achieving an average leveraging ratio of over 16:1 with the
    Federal funds provided them.

                   RURAL HOUSING SERVICE/MULTI-FAMILY HOUSING

        Question. In recent years, RHS has offered little in the way of
    incentives for section 515 owners to maintain long-term use. This lack
    of action and funding has prompted both the courts and--the Congress to
    consider the provisions of the law that regulates section 515 and
    provides incentives. All section 515 tenants are low-income--with
    average incomes of approximately $8,000 and two-thirds are elderly or
    disabled households.
        What is RHS doing to resolve this issue, so that owners are
    compensated consistent with the law and tenants are not displaced?
        Answer. The 2004 Budget includes funding for equity loans to
    encourage owners to remain in the program. Additionally, RHS will
    implement administrative changes to include: (1) encouraging and
    expanding the use of third-party funds by establishing industry
    relationships and continuing to subordinate our debt to secure
    preservation funding; (2) re-directing existing Section 515 funds and
    Section 521 rental assistance to resolve preservation cases; (3)
    expanding the eligibility of non-profits and streamlining the transfer
    of ownership process; (4) exploring contracting for processing; and (5)
    concentrating MFH program and borrower training on preservation issues.
        Question. If Congress, or the courts, lifted the restrictions in
    the 87 Housing Act, what is the Agency's estimate of the number of
    units that would be lost and the number of households that are likely
    to be displaced?
        Answer. Our estimates are consistent with those reflected in last
    May's GAO report that stated 3,872 projects representing approximately
    100,000 units/households could be eligible to prepay in the next
    several years if restrictions on prepayment are lifted.

                MULTI-FAMILY HOUSING PORTFOLIO NEEDS ASSESSMENT

        Question. What is the status of the Committee's recommendation to
    provide the Department $1,000,000 to conduct a capital needs assessment
    as outlined in the GAO report, GAO-02-397?
        Answer. The Committee's recommendation was included in the Senate
    Appropriation Report, however, it did not reach the Conference Report;
    and it was not funded by a separate line item in the USDA fiscal year
    2003 budget. The Agency, however, has accepted the Committee's
    recommendation to conduct a capital needs assessment of the Multi-
    Family Housing Portfolio as outlined in the GAO report, GAO-02-397 and
    has begun the study. To date, the structure of the Request for Proposal
    (RFP) has been decided. A Multi-Family Advisory Board has been formed,
    which consists of National Office staff, State Directors, and Program
    Directors who will execute and closely monitor the progress of the
    study. Portions of the study will be contracted out. Affordable housing
    industry stakeholders have been identified to consult with the Multi-
    Family Advisory Board during the study. Our target date for completion
    of the study is early in 2004.

                       COMPREHENSIVE PROPERTY ASSESSMENT

        Question. I see that the 515 program has no new construction funds
    for 2004. What are the specific rehabilitation and preservation needs
    for the entire portfolio and will you contract out for this purpose?
        Answer. The Rural Housing Service has initiated an effort to
    determine the condition of the portfolio from several perspectives. The
    Comprehensive Property Assessment (CPA) has several objectives, all of
    which are designed to provide an all-encompassing evaluation of the
    State of the portfolio. These objectives include: (1) assessment of
    property's physical condition; (2) assessment of property's financial
    condition; (3) assessment of property's position in the real estate
    rental market; (4) determination of continuing need for this rental
    housing; (5) assessment of needed capital improvements and cost; (6)
    assessment of future capital reserves needs; (7) analysis of prepayment
    potential; and (8) analysis of prepayment incentive costs to retain
    properties/use restrictions.
        These objectives will be met using a combination of in-house
    expertise and private contracts.

                            HUD OMHAR STRATEGIC PLAN

        Question. The HUD OMHAR Strategic Plan indicates HUD will provide
    assistance to the Department of Agriculture with restructuring the
    Section 515 Program. What assistance are they providing and are there
    any plans to allow HUD to perform preservation or other activities for
    RHS? Is this delaying your Rural Housing Study?
        Answer. The HUD OMHAR Strategic Plan referenced is a draft plan
    that indicates that OMHAR would have the capacity to assist RHS as
    OMHAR's activities sunset in 2004. At this point, there have been no
    discussions with HUD as to how OMHAR could assist. However, we plan to
    meet with HUD to see if OMHAR's underwriting capabilities can be used
    to assist in meeting the preservation needs of RHS.

                          SECTION 515 HOUSING PROGRAM

        Question. The Committee provided additional funding above the
    President's request for new construction and rental assistance for the
    515 programs. How much funding will be allocated to new construction
    and please include the associated rental assistance cost and units?
        Answer. Of the amount Congress appropriated for fiscal year 2003
    for Section 515, the agency allocated a total of $29,252,541 for new
    construction. As of June 6, 2003, we have funded 41 new construction
    properties containing 984 units for a total funding of $23,616,151.
    Rental Assistance was provided to 545 of those units totaling
    $5,990,998 or 55 percent.

                           MULTI-FAMILY HOUSING STUDY

        Question. The RFP for the $2,000,000 study on multi-family housing
    has never been issued. This is the second year you have not requested
    new construction funds while awaiting for this study to be completed.
    What have you learned and when will you be in a position to request new
    construction funds or legislation to change or replace the 515
    programs?
        Answer. The study is underway and the RFP is to be issued for
    portions of the study that will be contracted out in fiscal year 2003.
    We expect the study to be concluded in the first quarter of fiscal year
    2004.
        In recent years, RHS has offered little in the way of incentives
    for Section 515 owners to maintain long-term use. This lack of action
    and funding has prompted both the courts and--the Congress to consider
    the provisions of the law that regulates section 515 and provides
    incentives. All section 515 tenants are low-income--with average
    incomes of approximately $8,000 and two-thirds are elderly or disabled
    households.
        Question. What is RHS doing to resolve this issue, so that owners
    are compensated consistent with the law and tenants are not displaced?
        Answer. The 2004 Budget includes funding for equity loans to
    encourage owners to remain in the program. Additionally, RHS will
    implement administrative changes to include: (1) encouraging and
    expanding the use of third-party funds by establishing industry
    relationships and continuing to subordinate our debt to secure
    preservation funding; (2) re-directing existing Section 515 funds and
    Section 521 rental assistance to resolve preservation cases; (3)
    expanding the eligibility of non-profits and streamlining the transfer
    of ownership process; (4) exploring contracting for processing; and (5)
    concentrating MFH program and borrower training on preservation issues.
        Question. If Congress, or the courts, lifted the restrictions in
    the 87 Housing Act, what is the Agency's estimate of the number of
    units that would be lost and the number of households that are likely
    to be displaced?
        Answer. Our estimates are consistent with those reflected in last
    May's GAO report that stated 3,872 projects representing approximately
    100,000 units/households could be eligible to prepay in the next
    several years if restrictions on prepayment are lifted.

                    RURAL HOUSING SERVICE/RENTAL ASSISTANCE

        Question. The Section 521 Rental Assistance Program is the largest
    line item in the entire Rural Development request. On December 18,
    2002, I requested the GAO to look into processes of the 521 Rental
    Assistance Program including the administration of this program and
    models used to anticipate recurring and future needs to formulate your
    appropriation request. It is my understanding that the Agency is moving
    to automate this process for the first time. Preliminary discussions
    with GAO indicate this program appears to have large levels of
    unliquidated balances for many reasons. The previous model was flawed
    in estimating recurring and future costs as reflected in the
    Department's appropriation requests.
        The Secretary's testimony before this Committee on May 8, 2003,
    insisted that outsourcing is needed specifically for advanced
    technological needs.
        Wouldn't it be prudent to contract with an outside source to help
    the Agency construct an accurate and efficient program to track and
    estimate the needs for this program?
        Answer. The Agency has developed a working group consisting of
    staff from the Department's IT Systems Services Division, the Financial
    Management Division, national office and field staff, and private
    contractors from Unisys, IBM and Rose International. This team is
    developing a model based on relevant information elements using several
    software applications that will provide a mechanism for providing
    improved information for making budgetary decisions.
        Question. This has obviously been a problem for many years. Are you
    using outside expertise to create or test a new model?
        Answer. Early in the rental assistance program, which started in
    1978, there was a tendency to overestimate rental assistance needs,
    mostly due to newness of the program and a lack of history on
    assistance usage. Our recent analysis of the accuracy of rental
    assistance projections in the last 6 to 7 years has revealed that the
    current estimating methods used have been more accurate than in the
    past. We have acquired a team of professionals from inside and outside
    of government to create the Rental Assistance Forecasting tool.
        Question. Are you using the same staff to provide input that
    created the previous model?
        Answer. Predicting the use of rental assistance has taken many
    forms over the last 25 years and various methods and staff persons were
    used to determine obligation amounts. We believe the recent methods of
    projecting rental assistance usage contain valid parameters for
    determining future needs, and it is critical to the development of the
    forecasting tool to include persons most familiar with that process.
    These staff members provide valuable input, historical knowledge and a
    keen understanding of the variables associated with designing such an
    estimating tool. A combination of experience and skill to assist in
    this effort is required.
        Question. Have you considered modifying existing systems, such as
    DLOS, which USDA has spent millions of dollars to modify for RHS needs.
        Answer. The Dedicated Loan Origination and Servicing System (DLOS)
    is underpinned by a commercial-off-the-shelf package that currently
    does not support the business processes applicable to the making and
    servicing of Multi-Family Housing loans and the management of projects
    and rental assistance. It was determined more cost effective and
    efficient to pursue those systems already in place that support the
    Multi-Family Housing loan program. These already contain much of the
    data and have automated processes already in place that would support
    the development and the integration of the new Rental Assistance
    Forecasting software. This will reduce the cost of design, development,
    and deployment as well as more effectively support existing business
    processes supported by these systems.

                RURAL HOUSING SERVICE/HOME OWNERSHIP COUNSELING

        Question. The Section 525 technical assistance program for
    homeownership counseling with a historical level of approximately $1
    million has been eliminated with a justification that other sources,
    including HUD, will provide this service. The President's Budget also
    eliminates the Office of Rural Housing at HUD to provide technical
    assistance and build capacity. HUD has been inadequate with the FHA
    programs in penetrating rural America. In addition, the President and
    the Secretaries of USDA and HUD have announced changes to increase
    minority participation in Homeownership. One change required this
    Committee to transfer $11,000,000 in the 502 guaranteed program to make
    up for a shortfall during conference.
        Do you have a commitment from HUD or others that would ensure our
    rural areas are not left behind?
        Answer. We work with many agencies, including HUD, State housing
    finance agencies, local housing authorities and local non-profit
    housing groups to ensure that rural areas receive a fair share of
    housing assistance, including homeownership counseling. Homeownership
    counseling is also provided by our Section 523 Grantees to those
    families who participate in the Mutual Self-Help Housing Program. A
    Memorandum of Understanding is being developed between the Rural
    Housing Service (RHS) and the Federal Deposit Insurance Corporation
    (FDIC) to make available training for potential rural homeowners using
    the Money Smart financial literacy program. Our field staffs have
    received training and are already using this program as another tool in
    providing homeownership counseling.
        Question. Does this Administration believe homeownership counseling
    is an intricate part of the success of homeownership and wouldn't this
    small investment add value; especially when you are reaching out to
    historically undeserved minority communities and individuals?
        Answer. We believe homeownership counseling is a critical factor in
    becoming a successful homeowner. However, funding for homebuyer
    education programs is available through numerous other Federal, State,
    and local government and non-governmental sources. For example, in
    2002, HUD awarded more than $18 million for its Housing Counseling
    Programs in urban and rural areas across the country.

                    RURAL HOUSING SERVICE/SELF-HELP HOUSING

        Question. In fiscal year 2003, the Rural Housing Service had a
    large percentage of carryover-appropriated funds for the Self Help
    Housing Grant fund.
        What is the actual need to meet obligations in 2004?
        Answer. We anticipate the actual need in fiscal year 2004 to be
    $34,000,000. About $24,000,000 of this amount would be used to refund
    75 existing grantees. The rest would be awarded to new grantees brought
    to meet contract needs.

                    RURAL HOUSING SERVICE/FARM LABOR HOUSING

        Question. In the Secretary's testimony for the May 8, 2003
    Appropriation hearing, she indicated that the rental assistance request
    is enough for all renewals including supporting new construction of $59
    million for farm labor housing projects. In a recent briefing with the
    Committee staff, the Department indicated that only 170 units of rental
    assistance would be used for farm labor. Additionally, these projects
    require a large percentage (around 80 percent) of rental assistance for
    each facility, which averages around 40 units.
        How will you utilize $59 million to construct farm labor housing
    with only enough rental assistance for 4 or 5 projects?
        Answer. We have projected to fund 984 farm labor housing (FLH) new
    construction units from the $59,167,000 appropriations. Of that number
    we will provide Rental Assistance for 859 units or 87.3 percent of FLH
    new construction units, which will allow us to continue to operate a
    viable FLH program. The percentage in prior years was 85 percent in
    2002 and 79.5 percent in 2003.
        Question. This is a program has low-rehab needs. What will you do
    with the balance for the loan and grant programs in farm labor?
        Answer. For fiscal year 2004, we anticipate to use all of the $59
    million in loan and grant funds in FLH. The funds will be made
    available for new construction of off-farm housing and rehabilitation
    of properties in the portfolio. The balance of the funds will be used
    for on-farm new construction and Technical Assistance grants.
        Question. Will you make adjustments to this request?
        Answer. We do not plan to make adjustments to this request.

                              BENEFICIARIES REPORT

        Question. In 2001 the Department sent to the Congress a report,
    Rural Housing Service Program Beneficiaries, which analyzed
    demographically who was getting Rural Housing Service funds.
        When will the Department provide another such report; a report that
    is required annually by the Fair Housing Act?
        Answer. This report will be completed within this fiscal year and
    will cover the period from the last report.
        Question. How many units of housing will the Rural Housing Service
    finance with the budget authority requested in the fiscal year 2004
    budget? How does this relate to the need?
        Answer. For the Single Family Housing Direct loan and grant
    programs, RHS will finance the construction or purchase of
    approximately 17,900 homes with Section 502 Direct Loan funds, 17,000
    with Section 502 Guaranteed funds and make more affordable over 2,500
    units of refinanced housing, and the repair/rehabilitation of
    approximately 12,000 homes with the Section 504 Loan and Grant funds.
    The demand for these programs remains very strong.
        For the Multi-Family Housing programs, the fiscal year 2004
    President's Budget column reflects what will be financed with the
    budget authority provided.
        [The information follows:]

    ------------------------------------------------------------------------
                                                            Fiscal year 2004
                PROGRAM (MULTI-FAMILY HOUSING)             Presidents Budget
    ------------------------------------------------------------------------
    Total Number of units funded for new construction                  3,143
     (fiscal year).......................................
    Sec. 515.............................................                  0
    Sec. 514/516.........................................                741
    Sec. 514/516 Natural Disaster........................                  0
    Sec. 538.............................................              2,402
    Total Number of units funded for rehabilitation                    9,243
     (fiscal year).......................................
    Sec. 515.............................................              5,888
    Sec. 514/516.........................................                978
    Sec. 533.............................................              2,377
                                                          ------------------
          Total..........................................             24,772
    ------------------------------------------------------------------------

        These figures, which are consistent with prior years, indicate that
    the Rural Housing Service is making a significant contribution toward
    meeting the housing needs of Rural America.
        I believe these analyses, judging from the one submitted for the
    Rural Housing Service in 2001, Rural Housing Service Program
    Beneficiaries, are tools for the Congress, the Department, and the
    agencies in Rural Development and the Farm Services Agency to monitor
    civil rights, as well as, programmatic performance. This type of report
    can tell you who received the funds, what county they are in, what
    their racial and ethnic background is, and who was successful in
    obtaining USDA funds. The report also compares the beneficiaries to
    those eligible for the program, so you can see if you are reaching all
    eligible populations around the country.
        Question. I know we have had a difficult time getting data and
    analysis from the Department on these programs, wouldn't you agree that
    this type of analysis would help you respond to us in the Congress as
    well as to self-monitor your own programs?
        Answer. Yes, this type of analysis would help respond to Congress
    and Rural Development is working to improve data collection.
        Rural Development has evaluated all of its program data and
    reformatted the data to better address the requirement of FHA and other
    Civil Rights Laws. Additional racial and ethnic data collection has
    been adopted to the new categories as required by the Office of
    Management and Budget.
        Question. Does the Department have the personnel to perform such
    analysis?
        Answer. Rural Development's report was prepared by a private
    contractor. Similar reports for other USDA program areas would likely
    also have to be done by contractor.
        I know the Assistant Secretary for Civil Rights' was just
    established and may have difficulty providing studies such as the one
    submitted in 2001, so I don't believe we can look there for action. I
    know the report, Rural Housing Service Program Beneficiaries, was
    produced by a private group under contract from Rural Development.
        Question. Are you prepared, as Rural Development did, to seek non-
    Federal entities to perform the analysis and write these reports
    required by law?
        Answer. We believe such reports can be effectively done in-house or
    by private contractors. It is important that they meet the specific
    needs for ethnic data for specific program areas.

                                  ASSET SALES

        Question. What programs do you consider for the asset sale and how
    will you assure that agencies don't repeat 1987 loan asset sales
    conducted by the former Farmers Home Administration when they sold only
    seasoned loans for approximately 55 cents on the dollar?
        Answer. All farm loan programs, both performing and non-performing
    loans, will potentially be considered for the loan asset sale. However,
    FSA will participate with RD in a study to determine whether or not
    there is any market for the loans and whether or not there would be any
    net savings to the Government after factoring in the cost of the sale.
    If it is determined that there will be no net savings, it is not likely
    that the farm loans will be considered for an asset sale.
        As noted above, FSA will conduct a study to determine whether or
    not there will be a net savings to the government before farm loans are
    considered for an asset sale.
        Question. Will these assets also be heavily discounted and if so
    isn't this the same as reducing a portion of the debt to the borrowers
    and allowing them to refinance with the private sector?
        Answer. If it is determined that the farm loans will not yield any
    net savings to the Government, it is not likely that they will be
    considered for an asset sale.

                             RURAL BUSINESS SERVICE

        Question. The Rural Business Investment Program (RBIP, Sec. 6029)
    is currently required to use another Federal agency to carryout the
    program. Is this arrangement adequate, or should the Department have
    the authority to contract with non-Federal groups or deliver this
    program in-house?
        Answer. Rural Development and SBA have jointly identified certain
    impediments with the current legislation. While we are continuing to
    work toward resolving these impediments, we may find it necessary to
    propose some legislative changes.
        Question. How does the agency protect a property acquired by a
    Rural Enterprise grant from allowing the recipient to take an equity
    loan on a facility or selling the equipment? Is any instrument filed by
    the Government at the courthouse to protect the Government's interest?
        Answer. Rural Business Enterprise Grants are governed by Section
    3019.37 of 7 C.F.R., which provides that Federal agencies may require
    recipients of grants to record liens or other appropriate notices of
    record to indicate that personal or real property has been acquired or
    improved with Federal funds, and that use and disposition conditions
    apply to the property. These requirements are spelled out in the Grant
    Agreement and/or Letter of Conditions that is signed by the Agency and
    Grantee.
        Question. A recent news report referred to a Business and Industry
    loan provided to a company that was found to have violated other
    Federal requirements and was forced to pay penalties to the Federal
    Government. The report indicated that proceeds from the B&I loan went
    to pay these fines. Is this allowed under the current regulations and,
    if so, is this good policy? Can you please explain in detail how this
    loan was approved?
        Answer. We are not familiar with the news report to which you
    refer. Not knowing the specifics of the project, it is hard to provide
    more than a general answer. Program regulations do not specifically
    prohibit the payment of fines, but prudent lending decisions would
    dictate the proper action. Most guaranteed loans are approved at the
    State Office level. It would be up to the approval official to evaluate
    each individual application on its own merits, assess the causes of any
    fines or penalties, and evaluate any adverse affect on repayment
    ability. We do not know the amount or purpose of the fines. It is
    possible that a business owner purchased property with existing
    environmental problems of which he was unaware. It is possible that the
    lender and borrower did not make the Agency aware of the fines, nor
    that B&I funds were used to pay the fines.

               RURAL ECONOMIC DEVELOPMENT LOAN AND GRANT PROGRAM

        Question. The Farm Security and Rural Investment Act of 2002 (Farm
    Bill), which was signed into law by President Bush last May, included a
    new provision providing for private sector funding for the Rural
    Economic Development Loan and Grant (REDLEG) program. The REDLEG
    program provides zero-interest loans and grants for projects such as
    business expansion and start-up, community facilities, schools and
    hospitals, emergency vehicles, and other essential community
    infrastructure projects in rural America. In Wisconsin alone, this
    program has provided 59 grants/loans totaling nearly $13 million while
    leveraging an additional $59 million and creating over 1,800 jobs. This
    new source of private funding for REDLEG is provided through fees
    assessed on qualified private lenders receiving a guarantee under
    Section 313 A of the Farm Bill. The authorizing language is very
    straightforward on this matter and incorporates specific and strong
    protections to the government to ensure the safety and soundness of the
    program. In fact, the Farm Bill Conference Report notes that this new
    provision ``effectively places the lender between the RUS and the
    borrower minimizing the risks to the government.'' It is clearly stated
    in the Farm Bill that the Secretary has 180 days from the date of
    enactment to issue regulations and 240 days to implement the program.
    Both deadlines has come and gone and not even draft regulations have
    been issued. I am concerned that by the time regulations are issued
    with the appropriate following public comment period and then final
    program implementation, USDA may well be into the next fiscal year and
    lose the $1 billion guarantee program level Congress appropriated for
    this fiscal year.
        What steps are you taking to expedite this process and will you
    have something published this fiscal year?
        Answer. The Rural Utilities Service is in the process of addressing
    the issues that came about through the normal review process within the
    Administration. The regulation should be published in the near future.
        Question. Does this Committee need to do anything else to assist
    the Department in this effort?
        Answer. No, the Committee does not need to do anything else.

                              COMMUNITY FACILITIES

        Question. The Rural Community Development Initiative (RCDI) imposes
    a one-to-one match requirement. Is this a problem serving low-income
    communities that lack capacity compared to, for example, national
    organizations?
        Answer. The point system used for ranking RCDI applications gives
    priority to small, low-income rural communities. We have no way of
    determining if some organizations are discouraged from applying by the
    requirement for matching funds. However, there have been more loan
    applications than could be funded in recent years.
        Question. What lead to the change to allow the Federal match and
    are we funding other USDA entities like Extension Service and is this
    good policy?
        Answer. The matching funds requirement is mandated by Congress. The
    Extension Service and other USDA agencies are not eligible to receive
    RCDI funding.
        Community Facilities (CF) Direct Loan--The CF direct program has
    never had a negative subsidy. This program has had a generally flat
    program level of $250,000,000 for years. Additionally, the Agency
    adjusts the interest rates to the customers on a quarterly basis on the
    11th bond buyer's index. On the 3 week at the end of the quarter, the
    Agency averages the bond buyer's index for the previous three months
    and sets a new interest rate for the next quarter.
        Question. The current rates to the borrowers are as follow:
    Poverty, 4.5 percent; Intermediary, 4.78 percent; Market, 5 percent.
    Without any budget authority, is the Agency exposed as we move through
    the appropriation process with higher anticipated interest rates?
    Wouldn't a slight rise in the interest rates have a tremendous impact
    on this program and the end customers? What are the factors that lead
    to a negative subsidy rate for the first time?
        Answer. All direct loan programs are exposed to risk related to a
    rise in interest rates as we go through the appropriation process. That
    is a part of credit reform budgeting for direct loans. Subsidy costs
    tend to increase when interest rates go up and to decrease when
    interest rates go down. Other factors that determine the subsidy rate
    include disbursement rates, average loan terms, percentage of program
    level obligated at each interest rate, grace period for principal,
    repayment schedule, and recovery of payments that are behind schedule.
    The primary factor that has changed creating the negative subsidy
    factor is the overall cost of money to the Federal Government.

              RURAL UTILITIES SERVICE/WATER AND WASTEWATER PROGRAM

        Question. The 2002 Farm Bill provided mandatory funds to meet the
    requirements of a portion of the backlog for water and wastewater
    applications. The fiscal year 2002 request dramatically reduces the
    portion of grant funds available for this program. I understand that
    you have applications in a pre-application stage, applications that
    have been approved for funding and are expected to be funded with
    available dollars, and applications which have been approved for
    funding but for which resources are not available.
        What level of applications which had been approved for funding were
    still unfunded after the Farm Bill mandatory funds were made available?
        Answer. At the end of fiscal 2002 there were 762 complete loan
    applications on hand totaling $1,363,369,609 and 561 complete grant
    applications on hand totaling $706,527,731.
        Question. How many applications were funded with the Farm Bill
    mandatory funds and how many additional applications approved for
    funding were unfunded?
        Answer. A total of 393 projects were funded with the Farm Bill
    mandatory funds and a total of 786 additional applications were
    unfunded at the end of fiscal year 2002.
        Question. As of May 1, 2003, how may applications are approved and
    waiting for funding but are not expected to be funded in fiscal year
    2003, and what is the cost of funding these applications?
        Answer. It is estimated that approximately 500 complete
    applications will not be funded in fiscal year 2003. It is estimated
    that the cost of funding these applications is approximately $1.0
    billion.
        Question. As of May 1, 2003, how many applications have been
    submitted that are in the pre-application stage, and what is the
    expected cost of funding these applications if they are all approved.
        Answer. There are a total of 820 incomplete applications on hand.
    The total cost of funding these incomplete applications is estimated to
    be $1.5 billion.
        Question. Of the applications approved for funding, what is the
    total of grant necessary to fund these applications?
        Answer. The total amount of grant needed to fund the complete
    applications on hand is estimated to be $763,852,491.
        Question. How many applications will not be funded in fiscal year
    2004 due to the Administration's reduction in grant funds since those
    applications need a higher rate of grant funds to cash flow, and from
    what States are those applications generated?
        Answer. Nationally, the applications remaining in the backlog
    indicate an increasing demand for loan funds, which could mean that
    there would be no change in the number of applications funded and
    unfunded. It is anticipated that fiscal year 2004 will be no different
    than any other fiscal year in that a number of applications will be
    unfunded in each State.
        Question. Will the Administration's proposal to reduce grant levels
    mean that it is intended to pass on a higher portion of the project
    cost to lower income Americans or does it mean that it is intended that
    this program shall be more targeted to more affluent communities?
        Answer. It is believed that neither one of these is the case. The
    program remains committed to directing loan and grant funds to the
    smallest communities with the lowest incomes, while providing financial
    assistance that results in reasonable costs for rural residents, rural
    businesses, and other rural users. The substantial reduction in
    interest rates that has occurred over the past 10 years has made
    projects funded through loans more affordable.
        Question. Will the customer historic rates for water and sewer
    increase for the States as a result of debt serving a larger portion of
    the projects with loans funds instead of a higher grant infusion and
    have you conducted any analysis on the impact to low and very low-
    income communities?
        Answer. It is believed that the customer's historic rates for water
    and sewer will not increase at this time. Matching loan and grant funds
    to meet the needs of local communities is always challenging. A
    project's financial feasibility is determined based on its ability to
    repay a loan and at the same time maintain reasonable user rates. With
    the additional funding from the Farm Bill, we were able to fund a
    significant number of applications that needed grant funds to develop a
    feasible project. The loan-grant mix on the 393 Farm Bill projects was
    50/50. Fortunately, we were able to reach many projects that needed
    significant grant support. This resulted in a reduction in the backlog
    particularly in projects with a heavy grant demand. Nationally, the
    applications remaining in the backlog indicate an increasing demand for
    loan funds.
        A formal analysis has not been conducted on the impact to low and
    very low-income communities.

                               PUBLIC TELEVISION

        Question. Public television stations are facing a Federal mandate
    to convert all of their analog transmission equipment to digital. The
    deadline for public television stations to make this conversion
    recently passed on May 1, 2003. 195 stations have filed with the FCC
    for extensions of the deadline. Of the stations that cited financial
    hardship as reason for a waiver, 70 percent of them serve predominantly
    rural areas.
        Last year, members of this committee recognized that public
    stations serving rural areas would experience financial hardship as one
    of the obstacles to meeting the Federally mandated deadline. To assist
    these stations, the committee included $15 million in the Distance
    Learning and Telemedicine program specifically to address these needs.
        Committee staffs have recently met with both budget officers and
    attorneys in your department about funding for this purpose. Further, I
    understand that your agency has neglected to develop a plan for
    awarding these funds. It is my understanding that the reason for the
    delay in awarding these funds is because your department does not feel
    that there is significant congressional direction to implement this
    program for public television. I have read both the Senate report
    language as well as the Omnibus report language and I think that
    Congress was explicit in their intent to award these funds. I might add
    that we put those funds in there for this specific purpose--to provide
    funding for rural public televisions stations.
        Please explain why you are choosing to ignore a directive from this
    committee?
        Answer. Rural Development is aggressively seeking the
    implementation of a Notice of Funds Availability (NOFA) that would make
    this funding available this summer. The NOFA will outline funding
    parameters and set forth eligibility requirements to allow for the most
    equitable distribution of this grant funding.

                        WIC CONTINGENCY FUND USE IN 2003

        Question. Does USDA currently anticipate the need to use any of the
    contingency funds provided in fiscal year 2003 in order to maintain
    full WIC participation in fiscal year 2003.
        Answer. Based on our current assessment of State agency funding
    requirements, we do not anticipate using contingency funds in fiscal
    year 2003 in order to maintain WIC participation. Any projected
    shortfalls by individual States will be managed through conventional
    reallocations.

                        2003 WIC FARMERS' MARKET GRANTS

        Question. Please provide an update on funds provided in fiscal year
    2003 for the WIC Farmers' Market Program, including the amount of funds
    obligated to date, and information regarding the specific grants.
    Further, please include the total number and total amount of requests
    received for the WIC Farmers' Market Program.
        Answer. A total of 44 State agencies requested and received to
    date, $23,619,504 in funds as reflected in the attached chart. We have
    advised State agencies of the opportunity to request additional
    funding, given that $1,380,496 remains available from the $25 million
    appropriated for the program. Some State agencies have expressed an
    interest in receiving additional funds. Therefore, we are collecting
    this information and expect to allocate additional funds by July 2003.
    The grant allocations through May 22, 2003 are provided for the record.
        [The information follows:]

                      WIC FARMERS' MARKET NUTRITION PROGRAM
    ------------------------------------------------------------------------
                                                                Fiscal Year
                          State Agency                         2003 Program
                                                                 Grant \1\
    ------------------------------------------------------------------------
    ALABAMA.................................................        $239,850
    ALASKA..................................................         290,029
    ARIZONA.................................................         303,333
    ARKANSAS................................................         245,000
    CALIFORNIA..............................................       3,097,875
    CHICKASAW, OK...........................................          40,000
    CONNECTICUT.............................................         409,879
    D.C.....................................................         339,276
    5 SANDOVAL..............................................           6,337
    FLORIDA.................................................         366,543
    GEORGIA.................................................         309,243
    GUAM....................................................         123,457
    ILLINOIS................................................         322,166
    INDIANA.................................................         284,696
    IOWA....................................................         641,320
    KENTUCKY................................................         230,000
    MAINE...................................................          85,000
    MARYLAND................................................         624,843
    MASSACHUSETTS...........................................         607,229
    MICHIGAN................................................         515,490
    MINNESOTA...............................................         396,667
    MISSISSIPPI.............................................          86,766
    MISSOURI................................................         257,137
    MS. CHOCTAWS............................................          14,500
    MONTANA.................................................          70,000
    NEW HAMPSHIRE...........................................         129,047
    NEW JERSEY..............................................       1,118,411
    NEW MEXICO..............................................         392,891
    NEW YORK................................................       4,083,332
    NORTH CAROLINA..........................................         365,470
    OHIO....................................................         329,446
    OREGON..................................................         363,067
    OSAGE TRIBAL COUNCIL....................................          31,325
    PENNSYLVANIA............................................       2,312,386
    PUEBLO OF SAN FELIPE....................................           8,666
    PUERTO RICO.............................................       1,301,308
    RHODE ISLAND............................................         198,313
    SOUTH CAROLINA..........................................         132,530
    TENNESSEE...............................................          96,000
    TEXAS...................................................       1,650,000
    VERMONT.................................................          75,676
    WASHINGTON..............................................         308,000
    WEST VIRGINIA...........................................          70,000
    WISCONSIN...............................................         747,000
                                                             ---------------
          TOTAL.............................................      23,619,504
                                                             ===============
    Fiscal year 2003 Available Funds........................      25,000,000
                                                             ===============
    Total Funds Allocated...................................      23,619,504
                                                             ===============
    Remaining Available Funds...............................      1,380,496
    ------------------------------------------------------------------------
    \1\ Funds Allocated Thru May 22, 2003.

                        WIC VENDOR PRACTICES EVALUATION

        Question. Please provide an update on the evaluation of WIC vendor
    practices, for which $2 million was provided in fiscal year 2003. When
    will the evaluation be complete, and does USDA anticipate any changes
    in WIC guidelines as a result of this evaluation?
        Answer. We anticipate that an evaluation contractor will be
    selected and a contract awarded by September 30, 2003. Data collection
    will occur in 2004 with a final report expected in 2005. This will be
    the first study of WIC vendor management practices since the WIC Food
    Delivery Systems final rule, which was published on December 29, 2000.
    WIC State agencies were required to implement the rule by October 1,
    2002. We expect that an examination of the efficacy of existing State
    high-risk vendor identification systems will result in additional
    guidance to help States to target more effectively their limited
    investigative resources toward vendors that are most likely to
    overcharge on food instruments or commit other serious violations.

                          ROUNDING-UP FOR WIC FORMULA

        Question. The Senate included report language last year regarding
    the amount of infant formula issued to WIC participants each month and
    the variety of infant formula can sizes. Has FNS taken any action in
    regard to this report language? Please provide an update.
        Answer. The Department has a proposed rule in the initial stages of
    clearance that would, as drafted, allow WIC State agencies to round up
    to the next whole can size of WIC formula (infant formula, exempt
    infant formula, or WIC-eligible medical food) so that participants can
    receive the full amount of formula authorized in WIC regulations. We
    intend to publish the proposed rule by September 2003.

                             WIC MANDATORY FUNDING

        Question. Has USDA taken any position on any proposals to modify
    the WIC program from a discretionary program to a mandatory program
    during the reauthorization of the Child Nutrition Act, or at any other
    time? If so, what is the position of USDA?
        Answer. As stated in Food and Agriculture Policy: Taking Stock for
    the New Century of particular urgency is ensuring dependable funding
    for WIC. There may be advantages, programmatically as well as from a
    budget formulation perspective, in redefining WIC as a mandatory
    spending program. There has been no formal proposal and the
    Administration has taken no formal position on any proposals to modify
    the WIC program from a discretionary program to a mandatory program. In
    the current budget environment, the Administration is likely to be wary
    of putting more spending on the mandatory side of the budget.

                          WIC STUDIES AND EVALUATIONS

        Question. The President's budget requests an increase of $5 million
    for studies and evaluations. Please provide more detailed information
    on the type of studies planned with this increased funding, and the
    information that will be obtained through these studies.
        Answer. This increase will be used for a comprehensive study to
    evaluate the effectiveness of the WIC program.
        While studies by FNS and other entities have long shown that WIC is
    cost-effective in improving health and nutritional outcomes for
    specific populations, a comprehensive evaluation has not been recently
    completed. The program faces a range of emerging issues and challenges,
    including changes in the demographics of WIC recipients, the need for
    better coordination with other programs, staff development and
    retention, and the use of new technologies to improve customer service
    and maintain program integrity. Detailed research plans are under
    development within USDA. We will be happy to share this with the
    Committee once they are finalized.

                   WIC MANAGEMENT INFORMATION SYSTEM REQUEST

        Question. The President's budget requests an increase of $30
    million for State Management Information Systems, to replace old and
    antiquated WIC systems. What are the specific spending plans for this
    funding? Will all of the $30 million be spent in fiscal year 2004? If
    not, how and when will each portion of the funding be spent? Is this
    $30 million increase a one-time request for fiscal year 2004, or do you
    anticipate requesting another increase in fiscal year 2005 and beyond?
        Answer. We intend to fully obligate the funds in fiscal year 2004
    for planning activities and system design and development work. Funding
    decisions will be made in accordance with a Capital Planning and
    Investment Plan we are preparing in conjunction with OMB. Funds
    obligated in fiscal year 2004 will ultimately be contingent upon State
    agency progress in forming consortiums, determining State agency needs,
    and actual award of procurement contracts as specified in our Plan.
        The requested $30 million is part of a multi-year plan for WIC
    system development that should be completed no later than fiscal year
    2008.

                     BREASTFEEDING PEER COUNSELING REQUEST

        Question. How will the $20 million increase for breastfeeding peer
    counseling, in the President's budget, be distributed? Will there be
    any evaluation of this effort to increase the number of women who
    choose to breastfeed?
        Answer. These funds would be awarded on a competitive grant basis
    to the WIC State agencies. Restricting the use of these funds to
    breastfeeding peer counselor programs would ensure that peer counselors
    are available at a majority of the WIC agencies nationwide. The
    selection criteria for awarding grant funds to the WIC State agencies
    is still under consideration. However, we expect the components of a
    successful peer counselor program to provide education and support to
    WIC clients through: (1) repetitive contacts throughout the prenatal
    period in the WIC clinic; (2) postpartum hospital visits; (3) home
    visits, (4) follow-up phone calls; (5) addressing barriers and
    encouraging family support; and (6) culturally sensitive breastfeeding
    management and education within the context of limited financial and
    social resources.
        Prior to developing our budget request, we examined the research on
    use of breastfeeding peer counselors. The research indicated that use
    of breastfeeding peer counselors has proven to be an effective method
    of increasing breastfeeding duration rates among the WIC target
    population. To ensure that WIC breastfeeding peer counseling is
    effectively implemented, we plan to monitor and evaluate the
    effectiveness of breastfeeding peer counseling on WIC breastfeeding
    initiation and duration rates, but no formal evaluation is planned.

                        WIC FOOD PACKAGE REVISION STATUS

        Question. I recently received a letter from Secretary Veneman,
    dated March 11, stating that the updated WIC food package is expected
    to be published in early summer. Please provide a specific date by
    which this is expected to occur.
        Answer. The letter you refer to, dated March 11, 2002, outlined the
    Department's plans to publish a proposed rule to amend the WIC food
    packages by early summer 2002. Since that time, in light of emerging
    nutrition-related health issues and the new research-based Dietary
    Reference Intakes, the Department instead plans to publish an Advanced
    Notice of Proposed Rulemaking (ANPRM) on the WIC food packages in late
    summer 2003. Also, a Statement of Work has recently been submitted to
    the Institute of Medicine's (IOM) Food and Nutrition Board requesting
    that it undertake a review of the research on nutrients lacking in the
    WIC population's diet and the WIC food packages. We are asking the IOM
    to make recommendations for possible changes to the WIC food packages,
    based on the best available science. They will also consider
    recommendations from the National WIC Association and comments received
    in response to the ANPRM. IOM recommendations and the Department's
    proposed decisions on how to implement them will be submitted for
    public review and comment through a Notice of Proposed Rulemaking. We
    have developed an accelerated timeline to ensure publication of a final
    rule before the close of fiscal year 2005.

                         WIC OBESITY PREVENTION EFFORTS

        Question. The President's budget requests an increase of $5 million
    for obesity prevention projects to be carried out in WIC clinics,
    including evaluations of those projects. Does USDA intend to try and
    replicate successful projects throughout the country when reasonable?
    Further, does USDA anticipate additional funding needs for obesity
    prevention within the WIC program in the near future?
        Answer. FNS plans to use these funds to implement and rigorously
    evaluate a series of interventions in multiple WIC clinics to prevent
    childhood obesity. FNS will encourage States and local WIC agencies to
    implement any cost-effective approaches identified through the
    evaluation.
        FNS will use the results of the evaluation to determine the need
    for additional funding. If cost effective approaches to preventing
    childhood obesity are identified, FNS may request additional funding to
    assist State and local WIC agencies in implementing these approaches.

                   FREE AND REDUCED PRICE LUNCH CERTIFICATION

        Question. The President's budget includes an increase of $6 million
    for activities to explore policy changes to help ensure that all
    children receiving free and reduced price meals are eligible for them.
    According to the budget, some of the ways in which USDA seeks to
    improve the accuracy of eligibility decisions include mandating the use
    of Food Stamp and TANF records to directly certify eligibility of
    children already participating, or to use a ``combination of third-
    party wage data'' and other expanded requirements for up-front
    documentation for children not currently receiving free or reduced
    price school lunches.
        Does USDA believe that these increased certification requirements
    will not only identify ineligible children who are currently receiving
    benefits, but also children who are currently receiving reduced price
    lunches but are in fact eligible for free lunches?
        Answer. Yes. We expect that using Food Stamp records to directly
    certify children for free meals, and other program improvements, will
    help to identify more children who are eligible for free breakfast and
    lunch, but currently pay for school meals at reduced or full price, and
    certify them for free meals.
        We also intend to address this issue through our $6 million budget
    request to explore methods to enhance the targeting accuracy of the
    free and reduced price eligibility determination system.
        USDA has identified two fundamental problems in the current system.
    First, there is a substantial number of children approved for free and
    reduced price meal benefits on the basis of an application that are not
    income-eligible for the benefit level they are receiving. These
    children are over-certified. FNS believes that the vast majority of
    over-certified children are approved on the basis of an application
    provided to their school district, while there are very few over-
    certified children approved on the basis of direct certification.
        Second, there are a significant number of income-eligible children
    that are not approved for the level of benefits associated with their
    income-level. For example, some households eligible for free or reduced
    price meal benefits are not approved for either level of benefits. When
    these children receive an NSLP lunch, they must pay full price.
    Likewise, there are some households eligible for free meal benefits but
    who are approved for reduced price meal benefits. Funds requested are
    designed to consider methods to address both fundamental problems.

                      SCHOOL LUNCH CERTIFICATION ACCURACY

        Question. Please explain the proposals listed in the budget a
    little more fully, specifically the ``combination of third-party wage
    data and other expanded requirements.'' If USDA has updated their
    proposals, please explain the most current ones.
        Answer. Through the President's Budget request and the
    reauthorization of the Child Nutrition Programs, USDA will seek to
    improve the accuracy of program eligibility determinations, while
    ensuring access to program benefits for all eligible children, and
    reinvesting program savings to support program outcomes. Our current
    recommendations to improve integrity include:
      --Requiring direct certification for free meals through the Food
            Stamp Program, to increase access among low-income families,
            reduce the application burden for their families and schools,
            and improve certification accuracy.
      --Enhancing verification of paper-based applications by drawing
            verification samples early in the school year, expanding the
            verification sample; and including an error-prone and random
            sample.
      --Minimizing barriers for eligible children who wish to remain in the
            program by requiring a robust, consistent effort in every
            school to follow-up with those who do not respond to
            verification requests.
      --Initiating a series of comprehensive demonstration projects to test
            alternative mechanisms for certifying and verifying applicant
            information, including use of wage data matching that
            identifies eligible and ineligible households.
      --Planning for a nationally representative study of overcertification
            errors and the number of dollars lost to program error.

                        IMPROVING CERTIFICATION ACCURACY

        Question. How does USDA intend to make sure that increased
    certification requirements do not drive away any child who is eligible
    for a free or reduced-price school lunch, regardless of whether or not
    they are currently participating?
        Answer. The Administration is committed to maintaining and
    improving access to low-income children who rely on free or reduced-
    price school meals. We have had a continuing dialogue with the
    Congress, the school food service community, and program advocates, and
    have been working to develop and test policy changes that improve
    accuracy but do not deter eligible children from participation in the
    program and do not impose undue burdens on local program
    administrators. Recommendations we support include:
      --Requiring direct certification for free meals through the Food
            Stamp Program. As provided for in the Child Nutrition
            reauthorization, this would increase access among low-income
            children and reduce the application burden for their families.
            Current evidence suggests that while direct certification is
            much more accurate than the standard application process it is
            not yet widely used.
      --Requiring school districts to follow up and make contact with
            households that do not respond to verification requests, in
            writing and by telephone.
      --Streamlining the process for those who must still submit paper
            applications by requiring a single application for each
            household.
      --Providing for year-long certifications in both paper-based
            applications and direct certifications, eliminating the need to
            report income changes during the year.

                   USE OF SAVINGS FROM CERTIFICATION ACCURACY

        Question. Secretary Veneman's testimony stated that the
    Administration would fully reinvest any savings that result from
    improved payment accuracy to strengthen the programs. How specifically
    will those savings be reinvested?
        Answer. The Administration's decision to fully reinvest any savings
    back into the programs is an essential aspect of our commitment to
    improving program integrity and program access.
        A majority of the savings will be reinvested to promote access to
    the programs for all those eligible for them. Some specific proposals
    in this area include increasing the regular free and reduced-price
    school breakfast rates to the severe need rate, to encourage additional
    schools to deliver the School Breakfast Program, and to exclude
    military housing allowances from income, expanding eligibility and
    improving access for families serving in America's armed forces.
        Savings will also be used to encourage children to make positive
    choices about what they eat, how much they eat, and how active they
    are. This could include proposals such as providing expanded funding to
    support the delivery of nutrition education messages and materials in
    schools and conducting a large-scale demonstration project and
    evaluation to test the impact of a healthy school nutrition environment
    on student's nutrition and well-being in schools across the Nation.

                       IRRADIATED MEAT IN SCHOOL LUNCHES

        Question. Please provide an update on any plans by USDA to
    introduce irradiated meat into the school lunch program.
        Answer. Product specifications will be released May 29, 2003 and
    schools will have the option to order irradiated beef beginning January
    2004. This allows ample time for schools to educate parents and the
    community so that informed decisions can be made. Should schools decide
    to order product, this also allows schools ample time to notify
    parents. In addition, irradiated beef manufacturers will have the
    opportunity to study and implement the specifications prior to orders
    from schools in January. The decision to order and serve irradiated
    ground beef will be left to each school food authority.
        Farm Bill conference report language indicates that USDA should
    consider ``the acceptability by recipients of products purchased'' by
    USDA for commodity distribution. Therefore, before irradiated ground
    beef products are made available for order by schools, USDA will make
    every effort to encourage schools to educate food service personnel,
    parents, and the community concerning irradiated ground beef products.
    Shortly after the release of specifications, FNS will provide all
    school districts with an informational package to help them to decide
    whether to order irradiated beef products beginning January 2004. The
    package will be mailed in June 2003 and will include a letter from
    Under Secretary Bost strongly encouraging schools to notify parents,
    students, and the community if they are planning to order irradiated
    beef. In addition, the package will include a brochure with answers to
    commonly asked questions about irradiation. This letter will also
    include Web site addresses for the brochure as well as the site for the
    U.S. Food and Drug Administration (FDA) irradiation consumer
    information. The letter will give information regarding the community
    educational materials currently under development by the State of
    Minnesota that will be available to schools in the fall of 2003.

                           FRUIT AND VEGETABLE PILOT

        Question. The pilot programs that have provided free fruits and
    vegetables to students have been deemed extremely successful, and the
    USDA has stated that it would like to expand these pilot programs. Has
    USDA taken any specific steps to try and expand these programs in the
    most cost-effective manner?
        Answer. Public Law 108-30, enacted May 29, 2003, extends the
    ability of schools participating in the Fruit and Vegetable Pilot
    Program, which was authorized in the Farm Bill, to use any remaining
    funds to continue the pilot in the 2003-2004 school year. Schools were
    unable to expend the funds completely this past school year because the
    grants were not made until the middle of October and schools then
    needed time to implement the pilot. We will continue to work closely
    with participating schools, providing support and technical assistance,
    through next school year. We stand ready to provide technical
    assistance to Congress, upon request, on this issue. An evaluation of
    the pilots, submitted by USDA to Congress in May 2002, demonstrated
    great popularity among participating schools; however, empirical
    evidence was not available to allow us to evaluate the impact of the
    pilots on dietary or health outcomes.

                       SCHOOL MEALS AND CHILDHOOD OBESITY

        Question. There have been many reports of the drastic increase in
    childhood obesity, and questions have been raised about the role of
    school meals in this trend. What actions are USDA taking to ensure that
    meals provided to children during school hours are nutritious and do
    not contribute to childhood obesity?
        Answer. Currently, the Richard B. Russell National School Lunch Act
    requires schools to offer program meals that meet USDA's nutritional
    standards. In a recent report, the General Accounting Office (GAO),
    citing USDA studies, found that schools have made measurable progress
    nationwide, in meeting USDA nutrition requirements and other
    guidelines. GAO noted that additional improvement is needed not only in
    meeting the nutrition requirements, but also in encouraging students to
    eat more healthfully.
        FNS is currently working on updating guidance and providing
    training to assist States in providing schools with the technical
    assistance needed to bring all meals up to the nutrition requirements
    identified in program regulations. The more difficult problem is
    teaching children to eat more healthfully. Most schools secure
    additional revenues by offering children ``other foods'' a la carte
    during times of meal service, in school stores, in vending machines,
    and in other venues that compete with the school meals in the
    cafeteria. There are no nutritional standards for these ``other
    foods'', except that when sold in the cafeteria during meal service
    periods they cannot be ``foods of minimal nutritional value.''
        GAO noted that FNS has several major school nutrition initiatives--
    Team Nutrition, Changing the Scene, and Eat Smart.Play
    Hard.TM--that play an important role in encouraging schools
    to serve nutritious foods and encouraging children to eat well. FNS is
    also working with the Centers for Disease Control, the Department of
    Health and Human Services, and the Department of Education to support
    the Administration's HealthierUS initiative. However, not all schools
    participate in these initiatives.

                    FOOD PROGRAM PARTICIPATION IN WISCONSIN

        Question. There were recently two articles in the Milwaukee Journal
    Sentinel regarding Wisconsin's difficulty in getting Federal food aid
    to hungry people within the State. While some of these problems are due
    to complicated Federal regulations, other difficulties are due to the
    complex State applications people are required to fill out, and a lack
    of outreach to eligible participants. Do you currently have, or are you
    pursuing through Child Nutrition reauthorization, any programs that
    will provide outreach and assistance to States such as Wisconsin to
    help them increase the numbers of people they are serving?
        Answer. While we are aware of problems in certain areas of the
    State, it is important to note that Wisconsin's Food Stamp Program
    (FSP) participation has substantially increased in recent years. For
    instance, between February 2001 and 2003, Food Stamp participation
    increased by 39 percent in Wisconsin, compared to 22 percent
    nationally. Furthermore, the FSP has several outreach activities
    underway to help States like Wisconsin increase the number of eligible
    people that they are serving. One is a web-based pre-screening tool
    that will be launched this Summer to allow interested persons to learn
    quickly if they might be eligible for FSP benefits and the approximate
    benefit amount they might receive. Another is a bilingual toll-free
    number allowing callers to receive educational materials about the FSP
    and how to apply.
        Regarding the Child Nutrition Programs, the Administration believes
    that ensuring access to program benefits for all eligible children
    should be one of the guiding principles of the Child Nutrition
    reauthorization. To advance this principle, we would support using
    savings from an improved eligibility certification process for the
    National School Lunch Program for proposals such as:
      --Streamlining the school meal programs by fostering common program
            rules and policies, supporting program operators in improving
            access to the programs.
      --Increasing the regular free and reduced-price breakfast rates to
            the severe need rate for all schools participating in the
            School Breakfast Program, to encourage more schools to
            participate in the program.
      --Mandating direct certification for free meals through the FSP,
            which would add low-income children to the program while
            reducing the application burden on their families.
      --Expanding the 14 State Summer Food Service Program Pilots
            (``Lugar'' pilots) to all States, thus eliminating cost
            accounting for reimbursement in the Summer Food Service Program
            (SFSP).
      --Expanding permanent authority for proprietary child care centers
            with 25 percent of their enrollment at free and reduced-price
            to all States who participate in the Child and Adult Care Food
            Program. Currently, only 3 States have this authority.

                WISCONSIN SCHOOL BREAKFAST PROGRAM PARTICIPATION

        Question. Wisconsin ranks last in getting school breakfast to needy
    children. Morning meals were served in only 44 percent of Wisconsin
    schools that also serve lunch, compared with 78 percent nationally. It
    seems to me that we should be able to turn this situation around. As I
    understand, with the combination of start-up grants we have provided in
    the last three Appropriations bills--and that we hope to make a
    national program by next year--and State and Federal subsidies, a
    Wisconsin school district can run a breakfast program at minimal to no
    cost to the district. Given the great benefits to the students of a
    school breakfast program, I have to believe that many Wisconsin school
    districts aren't offering breakfast because they simply do not
    understand how easy it would be to set up and run the program.
        Can USDA commit to me that they will work with my office to develop
    a plan to ``sell'' the school breakfast program to Wisconsin school
    systems?
        Answer. We share your concern regarding the low participation rate
    of Wisconsin schools in the School Breakfast Program (SBP). In fiscal
    year 2003, the Food and Nutrition Service (FNS) has made promotion of
    this program a national priority. In reviewing the level of school
    participation in Wisconsin, we find the number of schools participating
    in the SBP has increased from 858 (fiscal year 2000) to 1,127 (fiscal
    year 2003), a 31 percent increase. Prior to the grant activity (fiscal
    year 2000), only 35 percent of the schools with the National School
    Lunch Program also participated in the breakfast program; this has
    grown to 45 percent in fiscal year 2003. This growth is encouraging and
    likely represents the Wisconsin Department of Public Instruction's
    (DPI) efforts to ``sell'' the program.
        In addition to schools not understanding how easy it would be to
    set up and run the SBP, a number of other factors that are not within
    the control of the State agency or school food service may affect a
    school's decision to participate in the SBP; e.g., logistics resulting
    from bussing or scheduling. As a result, it is not clear what level of
    participation we can hope to expect from Wisconsin schools.
        In addition to the School Breakfast Start-up grants which may be
    used for administrative costs related to program outreach and
    expansion, DPI receives State Administrative Expense Funds to
    administer the Child Nutrition Programs. These funds may also be used
    to promote the breakfast program to schools. USDA will continue to work
    closely with Wisconsin, as we do with all State agencies, to provide
    technical assistance. We will also continue to work with our partners
    in the advocacy community, the Food Research and Action Center and the
    American School Food Service Association, to generate interest in the
    program across the country.

                  WISCONSIN SCHOOL BREAKFAST PROGRAM EXPANSION

        Question. Will such a commitment include people and time dedicated
    to helping these districts understand and design new school breakfast
    programs?
        Answer. The Department of Public Instruction (DPI) is the State
    agency charged with administering the breakfast program in Wisconsin.
    In addition to the School Breakfast Start-up grants to be used for
    administrative costs related to program outreach and expansion, DPI
    receives State Administrative Expense Funds to administer and promote
    the Child Nutrition Programs, including the School Breakfast Program.
        USDA will continue to work closely with Wisconsin, as we do with
    all State agencies, to provide technical assistance, as needed. We will
    also continue to work with our partners in the advocacy community, the
    Food Research and Action Center and the American School Food Service
    Association, to generate interest in the program nationwide.

                            FOOD STAMP REINVESTMENT

        Question. Several States, including my State of Wisconsin, have
    paid several million dollars in penalties in recent years due to
    misadministration of the Food Stamp Program within the State. However,
    USDA does allow these States to ``reinvest'' those funds in order to
    try and improve their programs. How are these funds ``reinvested''? Are
    there specific guidelines? Does USDA provide any assistance to States
    as they are attempting to improve their program?
        Answer. USDA's Food and Nutrition Service (FNS) encourages States
    to settle liabilities incurred due to misadministration of the Food
    Stamp Program by reinvesting in mutually agreed-upon error reduction
    activities and management improvements to improve payment accuracy. In
    recognition that no single approach or set of initiatives work for all
    areas, reinvestment strategies vary from State to State and reflect
    each State's unique problems and circumstances. In the past States have
    reinvested funds in activities such as enhanced training of eligibility
    workers, computer cross matching to check client data, on-line policy
    manuals, client education on reporting responsibilities, intensive case
    reviews, and centralized change reporting functions.
        While there is a broad spectrum of potential strategies for
    reinvestment, there are specific criteria that must be met in
    determining whether or not a specific activity is allowable. These
    include a determination that the activity is directly related to error
    reduction in the State's ongoing Food Stamp Program and has specific
    objectives regarding the amount of error reduction and type of errors
    that will be reduced. The activity must also be in addition to the
    minimum program administration required by law for State agency
    administration and represent a new or increased expenditure that is
    entirely funded by State money, without any matching Federal funds
    until the entire reinvestment amount is expended.
        FNS works with States to develop allowable reinvestment strategies
    and routinely assists them as they attempt to improve their programs.
    As part of this effort, FNS allocates State Exchange funds to support
    travel to conferences, workshops, and other meetings between States to
    facilitate the sharing of effective and efficient program management
    techniques. FNS Regional Offices also work with States to analyze error
    data and provide technical assistance in support of corrective action
    and payment accuracy efforts. These efforts are supplemented by
    national efforts to monitor and evaluate payment accuracy progress,
    analyze error rate data and exchange information on payment accuracy
    best practices and program improvement strategies.

                              BISON MEAT PURCHASES

        Question. The Committee provided $3 million in fiscal year 2003 for
    the purchase of bison meat for the food stamp program. How much of that
    funding has been expended? Does the Department anticipate spending the
    full amount? If additional funding were provided, would USDA encounter
    any difficulty in expending the funds?
        Answer. To date, the Department has spent $789,689 of the $3
    million provided to purchase bison meat for the Food Distribution
    Program on Indian Reservations in fiscal year 2003. The Department
    anticipates fully expending the remaining funds. Should the same amount
    or a lesser amount be appropriated under the same terms for this
    purpose for fiscal year 2004, we believe that it could be fully
    utilized.

                        FOOD STAMP PRIVATIZATION WAIVERS

        Question. Are there currently any pending or requested waivers of
    section 11(e)(6)(B) of the Food Stamp Act? Please provide an update of
    the waiver granted in fiscal year 2002. Is it still in effect, and what
    have the results been.
        Answer. There are no pending waivers of the merit personnel
    provisions under section 11(e)(6)(B).
        In December 2002, the State of Florida requested a modification of
    its approved fiscal year 2002 food stamp privatization waiver. The
    expanded request would include all food stamp households in the six
    demonstration sites, increasing the number of food stamp households
    participating in the demonstration from approximately 3 percent to
    approximately 22 percent of the State's food stamp caseload. The Food
    and Nutrition Service (FNS) denied this expansion request. However,
    because the State indicated its intention to request the same waiver
    for the Medicaid caseload, FNS advised the State in April 2003 that we
    would reconsider the merits of the expanded waiver when the Center for
    Medicaid and Medicare Services (CMS) at the Department of Health and
    Human Services reviews the Medicaid waiver. We believe this will ensure
    the greatest program consistency among the Federal programs. As of this
    date, the State of Florida has not submitted its waiver request to CMS.
    In the meantime, we continue to work with the State in its development
    of a Request for Proposals for the independent evaluator of the
    demonstration as originally approved.

              COMMODITY SUPPLEMENTAL FOOD PROGRAM FUNDING REQUEST

        Question. The President's budget requests $94.991 million for the
    Commodity Supplemental Food Program. This is the same level as
    requested last year. However, the Congress provided $114.5 million for
    CSFP in fiscal year 2003, so the net result is a requested decrease of
    nearly $19 million for this important program for senior citizens and
    others.
        In Dane County, in my State of Wisconsin, food pantry participation
    has increased 14 percent in the previous year. At the same time,
    donations are down, so pantries are trying to feed more people with
    less food. Similar statistics are seen throughout the State, and with
    the current unemployment rate, relief doesn't seem to be coming any
    time soon.
        With all this information in mind, why wasn't an increase in
    funding requested for CSFP over the fiscal year 2003 President's
    request level?
        Answer. The President's Budget request for fiscal year 2004 was
    submitted before the fiscal year 2003 appropriation was enacted on
    February 20, 2003 and was identical to the fiscal year 2003 request.
    The fiscal year 2003 appropriation of approximately $114 million
    significantly exceeded the President's request for $94,991,000.

                         FUNDING AND CSFP PARTICIPANTS

        Question. How many participants does the Administration believe
    will have to be turned away from this program, if the President's
    budget request is agreed to by Congress?
        Answer. We do not believe that any participants will be turned away
    from the Commodity Supplemental Food Program (CSFP). Because fiscal
    year 2003 appropriations increased so significantly over the previous
    year, and because they were enacted so late in the fiscal year, we
    anticipate that States will not be able to fill a significant portion
    of their allocated caseload. Therefore, we anticipate carryover into
    fiscal year 2004 of about $12 million. Based on the fiscal year 2004
    budget request, the anticipated availability of bonus commodities for
    the CSFP, projected participation levels at the close of the current
    fiscal year, and unspent funds carried over from fiscal year 2003, we
    anticipate being able to support a caseload of 530,000. A monthly
    average participation of 482,000 is projected. It is important to point
    out that the Food Stamp Program is America's first line of defense
    against hunger and poor diet quality for people of all ages, and CSFP
    participants are typically eligible for food stamps.

                          COORDINATION OF CSFP FUNDING

        Question. Was the CSFP request taken into consideration when
    formulating the budget for other Federal feeding programs such as WIC
    and the Elderly Feeding Programs?
        Answer. The Commodity Supplemental Food Program (CSFP) funding
    request for fiscal year 2004 was developed independently from the
    requests for other nutrition assistance programs such as WIC or the
    Elderly Feeding Program. The other programs cited do not have a direct
    connection to the level of activity or resource needs of CSFP. The WIC
    component of CSFP is a small and declining portion of the program and
    is not significantly influenced by the activity in the WIC Program. The
    Elderly Feeding Program, now known as the Nutrition Services Incentive
    Program (NSIP), is no longer a part of the USDA budget request. The
    program was transferred to the Department of Health and Human Services
    in fiscal year 2003.
        Question. What suggestions and resources does USDA have for people
    who are turned away from CSFP?
        Answer. The Department does not anticipate that eligible applicants
    will be turned away in fiscal year 2004. It should be noted that the
    CSFP is not a nationwide program. Currently, it operates in 32 States,
    on 2 Indian reservations and the District of Columbia. Also, only in a
    few States is the program administered Statewide. Individuals in need
    of nutrition assistance that do not have access to CSFP can apply to
    participate in the Food Stamp Program, which is the Nation's primary
    nutrition assistance program. In addition, individuals may also be
    eligible for The Emergency Food Assistance Program, the Women, Infants
    and Children Program and /or the Nutrition Services Incentive Program
    which are all administered nationwide.

          THE EMERGENCY FOOD ASSISTANCE PROGRAM ADMINISTRATIVE FUNDING

        Question. Congress provided the Secretary with the authority to
    transfer up to $10 million from TEFAP commodity purchases to
    administration, if the Secretary deemed it necessary. Have any funds
    been transferred to date? If so, how much, and if not, does USDA
    anticipate transferring funding for this purpose?
        Answer. On March 27, 2003, State agencies administering the
    Emergency Food Assistance Program (TEFAP) were notified of their fair
    shares of the $10 million being made available from TEFAP commodity
    purchases for program administration. The funds were released to the
    States in early April.

                   TEFAP ADMINISTRATIVE FUNDING USE FOR FOOD

        Question. Currently, within the TEFAP Program, does USDA have the
    authority to allow a State to use any of its storage and distribution
    funds to purchase additional commodities, if feasible for that State?
    If not, what additional authorities, if any, are needed, and would USDA
    support such a proposal?
        Answer. No. The Emergency Food Assistance Act currently prohibits
    State and local agencies from using TEFAP administrative funds to make
    direct purchases of additional commodities. However, in recent years,
    excluding fiscal year 2003, States were granted authority under
    Appropriations Acts to convert any portion of their TEFAP
    administrative funds to food funds for use by the Department to
    purchase additional commodities on behalf of the States for
    distribution through TEFAP. To ensure that States are granted this
    authority on a permanent basis, an amendment to the Emergency Food
    Assistance Act would be necessary. Since States are in the best
    position to target available resources to ensure that the nutritional
    needs of households are met, the Department would support such an
    amendment.
        The Department would not, however, support an amendment to permit
    States to make direct purchases of additional commodities since, in
    most instances; States cannot purchase commodities as economically as
    the Department. Although State and local agencies cannot directly buy
    food with TEFAP administrative funds, they can use these funds to pay
    costs associated with the transportation, storage, packaging, and
    distribution of non-USDA commodities. The Department encourages using
    TEFAP funds to support gleaning and food recovery initiatives, and the
    distribution of commodities donated by other sources, because this
    practice can substantially increase the amount of commodities available
    for distribution through TEFAP.

                   SENIORS FARMERS' MARKET NUTRITION PROGRAM

        Question. What was the total number of requests received by USDA
    for the Seniors Farmers' Market Nutrition Program for fiscal year 2003?
        Answer. A total of 48 grant applications were received by USDA's
    Food and Nutrition Service to operate the Seniors Farmers' Market
    Nutrition Program (SFMNP) for fiscal year 2003. All 36 SFMNP grantees
    from fiscal year 2002 requested funding to continue their programs. In
    addition, 12 new State agencies submitted applications to operate the
    program.

                      FUNDING FOR SENIORS FARMERS' MARKET

        Question. What was the total funding level requested for fiscal
    year 2003 by the States, and how many and what level of grants were
    funded?
        Answer. The total funding level requested for the Seniors Farmers'
    Market Nutrition Program (SFMNP) grants for fiscal year 2003 was just
    under $30 million. The total amount of grants awarded was $16.8
    million. The attached chart reflects the individual grant amounts for
    the 40 State or tribal agencies that received SFMNP grant awards for
    the fiscal year 2003 market season. The SFMNP grant allocations for
    fiscal year 2003 are provided for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                GRANT AWARD
                      SFMNP STATE AGENCIES                      FISCAL YEAR
                                                                   2003
    ------------------------------------------------------------------------
    Alabama.................................................        $757,760
    Alaska..................................................          52,221
    Arkansas................................................          96,335
    California..............................................         791,800
    Chickasaw...............................................         144,845
    Connecticut.............................................          91,148
    District of Columbia....................................         143,080
    Florida.................................................          96,604
    Grand Traverse..........................................          96,440
    Hawaii..................................................         575,246
    Illinois................................................         814,352
    Indiana.................................................          42,297
    Iowa....................................................         467,997
    Kansas \1\..............................................         182,439
    Kentucky \1\............................................         750,000
    Louisiana...............................................         284,644
    Maine...................................................         893,220
    Maryland................................................         135,000
    Massachusetts...........................................          56,900
    Minnesota...............................................          77,280
    Missouri................................................         238,888
    Montana.................................................          43,313
    Nebraska................................................         205,885
    Nevada \1\..............................................         200,010
    New Hampshire...........................................          86,000
    New Jersey..............................................         560,734
    New York................................................       1,457,900
    North Carolina..........................................          54,000
    Ohio....................................................       1,309,052
    Oregon..................................................         882,249
    Osage Tribal............................................          22,720
    Pennsylvania............................................       1,500,000
    Puerto Rico \1\.........................................       1,000,000
    South Carolina..........................................         570,925
    Tennessee...............................................         472,980
    Vermont.................................................          64,660
    Virginia................................................         493,707
    Washington..............................................         123,720
    West Virginia...........................................         737,973
    Wisconsin...............................................         299,579
                                                             ---------------
          Total.............................................      16,783,903
    ------------------------------------------------------------------------
    \1\ Indicates New State Agencies for fiscal year 2003.

             NUTRITION SERVICES INCENTIVE PROGRAM TRANSFER TO DHHS

        Question. Please provide an update or summary on the transfer of
    the Nutrition Services Incentive Program from USDA to DHHS.
        Answer. Before the passage of the fiscal year 2003 Appropriations
    Act, USDA was still operating the Nutrition Services Incentive Program
    (NSIP). For the fiscal period prior to the passage of the fiscal year
    2003 Appropriations Act, the States obligated a total of $58,114,849.
    USDA is closing out all financial operations for the current fiscal
    year for funds provided to the program during the Continuing
    Resolutions. The Administration on Aging within the Department of
    Health and Human Services has taken the lead in developing two
    memoranda of agreement with input from the USDA's Food and Nutrition
    Service. The first memorandum established roles and procedures for
    program operations during this transitional year and the second
    addresses fiscal year 2004 and beyond.

                 NUTRITION SERVICES INCENTIVE PROGRAM TRANSFER

        Question. Was service to any participants interrupted at all during
    the NSIP transfer?
        Answer. Service to participants has not been interrupted during the
    NSIP transfer. States continue to order and receive commodities for the
    current program year. Cash has also been provided to States in a timely
    manner.

              NUTRITION SERVICES INCENTIVE PROGRAM FUND ALLOCATION

        Question. Were all aspects of NSIP maintained that were
    specifically mentioned by the Congress? These include ensuring that
    NSIP funds are allocated on the basis of the number of meals served in
    a State in the previous year, excluding NSIP from being subject to
    transfer of administrative or match requirements, and ensuring that
    States continue to have the option to receive benefits in the form of
    cash or commodities.
        Answer. While the program operated under Continuing Resolutions at
    USDA, all aspects of the program remained unchanged. All States were
    provided the opportunity to receive benefits in the form of cash and/or
    commodities, and all NSIP funds were allocated on the basis of the
    number of meals served in the previous year. The Department of Health
    and Human Services, Administration on Aging, has maintained program
    administration and operation as specified by Congress including the
    exclusion of NSIP from being subject to transfer of administrative or
    match requirements.

                   CHILD NUTRITION PROGRAMS INTEGRITY REQUEST

        Question. The President's budget requests a $6 million increase
    under the Child Nutrition Programs account for ``enhanced program
    integrity in the Child Nutrition Programs.'' An increase of $1 million
    is also requested for ``enhanced program integrity in the Child
    Nutrition Programs'' under the Nutrition Programs Administration
    account. What specific activities will be carried out with these two
    requests and will there be any overlap? Why were these funds requested
    in two different accounts to apparently carry out the same activities?
        Answer. The requests are in separate accounts to support different
    kinds of activities--analytical program assessment versus State agency
    oversight--each of which is intended to contribute to enhanced Child
    Nutrition Program integrity.
        The $6 million request under the Child Nutrition Programs account
    will allow FNS to expand its assessment of free and reduced price meal
    certification procedures in the National School Lunch and School
    Breakfast Programs. The agency has been testing a number of potential
    policy and program changes to improve certification accuracy. The
    requested funding will build on these efforts, and provide important
    data needed to inform policy decisions in this area. Specific projects
    will be selected based on the outcome of work already underway; high
    priorities include a study of the feasibility, cost, and operational
    implications of data matching as an additional source of eligibility
    information, and collecting information that will improve the accuracy
    of our estimates of the level of error in the program. This activity
    will help us to comply with the Improper Payments Information Act.
        The $1 million increase in the Nutrition Programs Administration
    account will fund 13 additional staff years to support increased
    oversight of State agencies and their efforts at improving local level
    eligibility determinations for the National School Lunch Program.

                          FNS STUDIES AND EVALUATIONS

        Question. Congress provided an increase of $3.195 million in fiscal
    year 2003 to the Food and Nutrition Service for studies and
    evaluations, and requested a comprehensive list of planned studies,
    including the intent and funding level of each study, and the time
    frame during which each study will be carried out. Please provide the
    most up-to-date information on all planned studies to be carried out
    with this increase.
        Answer. The Food and Nutrition Service provided the requested list
    of planned studies to the Committee on April 24. I will provide a copy
    for the record.
        [The information follows:]

       NUTRITION ASSISTANCE STUDY AND EVALUATION PLAN FOOD AND NUTRITION
                            SERVICE FISCAL YEAR 2003

        America's nutrition assistance programs form a nationwide nutrition
    safety net to help low-income families and individuals improve their
    nutritional levels. Together, these programs touch the lives of one in
    five Americans over the course of a year and, with an expected
    investment of nearly $42 billion in fiscal year 2003, account for
    almost 40 percent of USDA's annual budget. Operational assessments that
    respond directly to the needs of program policy makers and managers are
    essential to ensure that these programs achieve their mission
    effectively.
        As indicated in House Rpt. 108-010, the Consolidated Appropriations
    Resolution, 2003, provided the Food and Nutrition Service (FNS) a
    $3,195,000 increase (for a total of $6,195,000) in the Food Program
    Administration account for studies and evaluations of the nutrition
    assistance programs. The conferees directed the Department to report to
    the Committees on Appropriations on the studies and evaluations to be
    carried out, including a comprehensive list of planned studies, the
    intent and funding level of each study, and the time frame during which
    each study will be carried out. The study and evaluation agenda
    described here responds to this directive.
        The conference agreement also provided $2,000,000 in the account
    for the Special Supplemental Nutrition Program for Women, Infants, and
    Children (WIC) for an evaluation of WIC vendor practices. Finally, not
    less than $7,500,000 of the Food Program Administration account is
    available to improve integrity in the Food Stamp and Child Nutrition
    programs, a portion of which is used to provide support for related
    studies. This report consolidates the Agency's spending plans for funds
    provided from all of these sources.
        The study and evaluation agenda described here addresses four key
    program priorities:
      --Improve access to Federal nutrition assistance programs, to ensure
            that all those eligible for these programs are able to
            participate. USDA is targeting special efforts in three
            underutilized programs--Food Stamps, School Breakfast, and
            Summer Food Service.
      --Improve program integrity, to strengthen their operations and
            maximize their ability to serve eligible children and low-
            income people while safeguarding the taxpayer's investment in
            nutrition assistance.
      --Build a HealthierUS by better integrating nutrition education into
            the nutrition assistance programs and promoting healthier
            lifestyles among those eligible for nutrition assistance.
      --Address the emerging epidemic of obesity, especially among
            America's youth, by improving the programs' ability to promote
            healthy eating and physical activity.

    Improve Program Access
        Measuring Program Access, Trends, and Impacts.--This project
    supports several key analytic tools (including microsimulation) to
    address program participation trends and impacts. It provides annual
    estimates of the percentage of eligible individuals who receive food
    stamps, for the Nation as a whole and for individual States, providing
    a key measure of the program's effectiveness in reaching its target
    population. The project also generates annual reports on the
    characteristics of food stamp participants. In addition, the project
    provides the primary mechanism through which FNS estimates the caseload
    and budgetary impact of actual and proposed policy changes. The project
    is structured to support these activities through fiscal year 2008.
        Evaluation of Grants to Improve Food Stamp Participation.--FNS
    awarded 19 grants to State and local organizations in 2002 to explore
    innovative approaches to improve food stamp access and increase program
    participation. Grantees are responsible for evaluating the impact of
    their approach. This project will provide technical assistance to help
    ensure that their evaluations meet national technical standards and
    will synthesize findings across all grants to help inform policy makers
    about the effectiveness of different approaches. The final report is
    anticipated in 2005.
        National Work Support Center Demonstration.--The rate of receipt of
    the full package of financial work supports available to low-wage
    workers is quite low even though it can fundamentally change the return
    on low-wage work, raising a family well above the poverty level. This
    project will support a multi-year demonstration to put in place new
    systems and procedures that make it easier for low-wage workers to
    access the full range of financial work supports--including food
    stamps. Funds would be provided to the U.S. Department of Labor, which
    would serve as the lead Federal agency in a consortium of public and
    private funders. Initial funding will support the development and
    implementation of an integrated work support demonstration in selected
    sites in 2003 and 2004.
        Feeding Practices of Low-Income Households When School is Out.--
    Federal summer feeding programs reach only one in five of the 15
    million children who receive free or reduced price school lunches on a
    typical day during the regular school year. This qualitative study will
    examine the family dynamics and food security of low-income households
    with school-aged children during the summer months in an effort to gain
    a better understanding why low-income families are not participating in
    the Summer Food Service Program. The final report is expected in 2005.

    Improve Program Integrity
        NSLP Payment Error Rate Methodology Study.--There is growing
    recognition that inaccurate certification of eligibility for school
    meals is a significant problem. The precise size of the problem,
    however, remains difficult to quantify. This project would explore
    survey methods for accurate classification of households eligible for
    free and reduced price meals and examine the cost and burden
    implications of various methods to estimate the payment error rate in
    the National School Lunch Program. The final report is anticipated in
    2004.
        Evaluation of NSLP Application and Verification Pilot Projects.--
    This evaluation is examining the effect of new school meal application
    and verification processes on the accuracy of free and reduced price
    meal eligibility determinations, the difficulty that eligible
    households have in obtaining benefits for their children, and the
    additional workload imposed on school food service staff. Fiscal year
    2003 funds will be used to fund remaining tasks of a contract awarded
    in fiscal year 2002. The final report is expected in 2003.
        Case Study of Metropolitan Area Verification Outcomes.--The current
    pilot tests of alternative free and reduced price eligibility
    determination systems for school meals does not include any of the
    largest metropolitan school districts. This study will help fill this
    gap by collecting application verification results from a number of
    large metropolitan areas and conducting household interviews with a
    sample of those who fail to respond to a request for documentation to
    assess their eligibility for free and reduced price meals. The results
    will be used to inform discussions related to school meal certification
    and verification. The final report is expected in 2003.
        Feasibility of Data Matching.--This project would assess current
    State infrastructure and capability to conduct data matching as an
    additional source of eligibility information in the school meals
    certification process. An initial census of all States would be
    followed by feasibility testing in selected States. Fiscal year 2003
    funds would be used to fund the initial census and to design the
    feasibility test. The results will be used to improve the process for
    determination and verification of student eligibility for school meals.
    The final report is anticipated in 2005.
        WIC Vendor Practices.--This Congressionally-mandated study will
    examine the extent to which vendors comply with program rules and
    ensure that proper foods are purchased from retail stores. This would
    be the first study of WIC vendor management practices since the new
    vendor management regulations were issued. It will also build on State
    high-risk vendor identification systems to identify and evaluate the
    efficacy of high-risk indicators that would allow States to target
    their limited investigation resources toward vendors that are most
    likely to be overcharging on food instruments. The final report is
    anticipated in 2005.

    Build a Healthier US
        Assessment of Nutrition Education in the Food Stamp Program.--A key
    mission area initiative is to improve the nutrition status and behavior
    of those served by USDA's food assistance programs through integrated
    cross-program nutrition education. Nutrition education funded through
    the Food Stamp Program can be a powerful tool to promote healthy food
    choices among low-income families and individuals. This project will
    help realize this potential by collecting systematic information needed
    for effective policy oversight and planning. This information will
    include measures of the extent of integration of community efforts to
    promote healthy food choices and physical activity; the content,
    structure and funding of nutrition education and promotion activities;
    and consistency with FNS policy objectives. The project will also
    develop a model assessment tool that can be used to assess the quality
    of food stamp nutrition education in a community. Project results are
    anticipated to be available in 2005.
        Feasibility of Monitoring Impact of Competitive Food Policy.--
    Although there has been an increased emphasis on nutritional
    improvement in school meals, the increased prevalence of childhood
    obesity underscores the need to consider further efforts to promote
    healthy eating throughout the school environment. Schools typically
    sell foods and beverages that compete with the Federally supported
    school meals, both in cafeterias and through vending machines, school
    stores and other venues. This feasibility study will explore data
    availability and reliability, and analytic methods to monitor the
    impact of changes in competitive food policies on the nutritional
    profile of foods available in the school environment. The final report
    is anticipated in 2003.
        Integrated Study of School Meal Programs.--The school meals
    programs have changed considerably since the last national studies of
    student diets and meal costs were completed in the 1990's. As part of
    the Agency's periodic assessment of the nutritional effects of school
    meals, this integrated study would update information on five domains
    of great interest to policy makers: (1) characteristics of the school
    environment and school food service operations; (2) nutritional quality
    of meals offered and served in the school meal programs; (3) costs and
    revenues of providing school meals; (4) student participation,
    participant characteristics, satisfaction, and related attitudes toward
    the school lunch and breakfast program; and (5) student dietary intakes
    and the contribution of school meals to these dietary intakes. Fiscal
    year 2003 funds would be used to develop the sampling frame and recruit
    school districts to participate in this large national study. The final
    report is expected in 2006.
        Food and Nutrition Information Center.--These funds will support
    the Food and Nutrition Information Center (FNIC) within the National
    Agriculture Library to systematically store and disseminate information
    on USDA's food assistance programs, nutrition education, and related
    nutrition topics.

    Address Obesity
        Overweight and Obesity Initiative Pilot Project.--As part of
    mission area's Breaking the Barriers initiative, the Center for
    Nutrition Policy and Promotion has launched a pilot project to help
    consumers aim for and maintain a healthy weight. The pilot will develop
    and test appropriate messages and delivery mechanisms targeted to 20 to
    40 year old women, especially those with low income. These funds will
    support creative development and consumer research of material
    prototypes, a small-scale implementation in selected cities to evaluate
    effectiveness and measure consumer awareness, and development and
    testing of enhanced graphics and educational information for the
    Interactive Healthy Eating Index. The final report is expected in 2005.
        Poverty, Food Assistance, and Obesity.--Recent observers, noting
    the prevalence of obesity among low-income recipients of food
    assistance, have speculated that there is a relationship between
    program participation and obesity. The research evidence on this
    question is sparse, scattered, and inconsistent. This project will
    assemble an expert panel of leading researchers to conduct a critical
    review, evaluation, and synthesis of the scientific literature and
    suggest avenues for additional work to determine how food assistance
    programs can best address overweight and obesity among participants.
    The final report is expected in 2004.

                       FNS & ERS STUDIES AND EVALUATIONS

        Question. I understand that the fiscal year 2004 budget was
    formulated and sent to Congress prior to the passage of the fiscal year
    2003 appropriations bill. In light of this, is it USDA's opinion that
    the studies and evaluations funding, which was transferred from the
    Economic Research Service to the Food and Nutrition Service in fiscal
    year 2003, should remain in FNS in fiscal year 2004 or should be
    transferred back to ERS?
        Answer. Objective studies and evaluations are a critical need for
    effective program management of the Nation's nutrition assistance
    programs. To keep the budget request to a minimum required difficult
    decisions about funding levels for studies and evaluations, and which
    organization should have primary responsibility. Funding should be
    provided as requested, although it would seem appropriate to anticipate
    continuation of a certain level of flexibility, as plans solidify
    around program needs.

                 UPDATING THE DIETARY GUIDELINES FOR AMERICANS

        Question. The President's budget requested an increase of $150,000
    for development for the Year 2005 Dietary Guidelines for Americans, in
    conjunction with DHHS. Will there be additional increases requested for
    these efforts in the future? Please provide a breakout of the total
    cost, including funding provided by USDA and funding provided by DHHS.
        Answer. Although USDA and HHS jointly manage the effort to develop
    and publish the Dietary Guidelines for Americans, each is responsible
    for funding different aspects of the process. The responsibility to
    charter and fund the operation of the Dietary Guidelines Advisory
    Committee rotates between the two departments--HHS bears that
    responsibility for the 2005 Committee. The HHS costs for Committee
    operations have been estimated to be $116,300. The $150,000 requested
    by CNPP for fiscal year 2004 is for development and testing the sixth
    edition of the consumer bulletin Nutrition and Your Health: Dietary
    Guidelines for Americans.
        After release of the new Guidelines, development and dissemination
    of a variety of actionable materials for targeted consumer audiences
    will allow the messages to reach and influence consumer behaviors.

                        UPDATING THE FOOD GUIDE PYRAMID

        Question. There has been an increased focus on decreasing obesity
    and improving eating habits in America recently, and much publicity has
    been given to a Harvard study published in the American Journal of
    Clinical Nutrition in December 2003 that suggests the USDA Food Guide
    Pyramid is outdated and actually contributes to obesity. The
    President's budget request includes a $670,000 increase to promote the
    ``Reassessed and Updated Food Guide Pyramid''. What is the status of
    updating the Food Guide Pyramid? Will there be an update on the
    nutritional recommendations included in the Food Guide Pyramid, or will
    this be a newer packaging and presentation of the same material? Has or
    will the December 2003 study be taken into consideration? When does
    USDA plan on having the update complete, and do you anticipate another
    requested budget increase?
        Answer. The Food Guide Pyramid reassessment and updating process
    includes three phases. The first phase consists of gathering
    information through technical research, stakeholder input, and consumer
    research. The second phase involves updating of the Pyramid food
    patterns and the third involves developing new or revised graphic and
    educational materials for consumers.
        Phase two technical analysis is currently underway to revise
    Pyramid food patterns so that they meet current nutritional standards
    and reflect changes in food choices among Americans. Pyramid food
    patterns consist of the types and amounts of foods to eat and are
    specific to consumers' gender and life stage. Any changes in the food
    patterns will be examined in consultation with Department of Health and
    Human Service staff and potentially with other experts in the field.
    Proposed modifications will also be made available for stakeholder and
    public comment through the Federal Register before they are finalized.
        New or revised consumer materials will be developed and tested in
    the third phase of the revision process. The major goal of this phase
    is to create a graphical representation and materials that communicate
    the Pyramid's advice in ways that consumers can understand and act on
    it. All proposed changes to the Pyramid's graphic presentation will be
    tested with consumers and available for stakeholder and public comment
    through the Federal Register before they are finalized.
        As described above, there will be an update of the nutritional
    recommendations included in the Food Guide Pyramid as well as the
    packaging and presentation. The nutritional goals for the Pyramid are
    set according to current nutritional standards, including the Dietary
    Reference Intakes from the National Academy of Sciences, Institute of
    Medicine, and the Dietary Guidelines for Americans. The committees that
    establish these standards conduct extensive reviews and evaluations of
    all the current scientific literature. The determinations that they
    make are based on the preponderance of these research findings. Within
    the context of these standards, we are taking into consideration the
    findings from the Harvard study, along with the findings from numerous
    other studies

              TIMING OF DIETARY GUIDELINES AND FOOD GUIDE PYRAMID

        Question. Upon looking at the budget, it appears as though the
    updated Food Guide Pyramid will be completed and used in the
    development of the Year 2005 Dietary Guidelines for Americans. Please
    provide a timeline of how and when these two items will be developed
    and updated--how will the updated dietary guidelines be reflected in
    the Food Guide Pyramid if the Food Guide Pyramid is completed first, or
    will these two updates occur concurrently?
        Answer. The development processes for the Food Guide Pyramid and
    the Dietary Guidelines for Americans are concurrent and coordinated.
    USDA plans to present Pyramid-related technical and consumer research
    to the Dietary Guidelines Advisory Committee. Coordination of these two
    activities allows for significant changes in the Guidelines to be
    reflected in the Pyramid. HHS and USDA expect to release the new
    Dietary Guidelines in January 2005. Release of an updated Food Guide
    Pyramid with a core set of actionable, consumer-friendly materials will
    follow shortly after that in early 2005. The projected timelines for
    development of the sixth edition of the Dietary Guidelines for
    Americans and the updated Food Guide Pyramid follow.
        [The information follows:]

    ------------------------------------------------------------------------
                                      Dietary Guidelines
                                         for Americans    Food Guide Pyramid
    ------------------------------------------------------------------------
    Fall 2002.......................  USDA and DHHS       CNPP conducts
                                       Memorandum of       technical
                                       Understanding       research to
                                       provides the        develop proposed
                                       framework to        revisions to Food
                                       jointly prepare     Guide Pyramid
                                       and publish the     food patterns.
                                       2005 Dietary
                                       Guidelines for
                                       Americans.
    Spring 2003.....................  The Dietary
                                       Guidelines
                                       Advisory
                                       Committee (DGAC)
                                       is chartered.
                                       Federal Register
                                       notice solicits
                                       public
                                       nominations for
                                       the DGAC.
    Summer 2003.....................  USDA and DHHS       Proposed Food
                                       appoint a Dietary   Guide Pyramid
                                       Guidelines          food patterns are
                                       Advisory            published in the
                                       Committee (DGAC)    Federal Register
                                       composed of         for peer review
                                       nationally          and public
                                       recognized health   comment.
                                       and nutrition
                                       experts. Federal
                                       Register notice
                                       announces the
                                       DGAC members and
                                       their first
                                       meeting date. The
                                       notice also
                                       solicits written
                                       and oral comments
                                       from the public.
    Fall 2003.......................  DGAC holds its      Revised Food Guide
                                       first public        Pyramid food
                                       meeting in          patterns are
                                       Washington, DC.     finalized and
                                                           cleared.
                                                           Preliminary
                                                           graphic
                                                           presentation is
                                                           conceptualized
                                                           and designed.
    Winter 2003-Summer 2004.........  DGAC holds its      Preliminary
                                       second, third and   graphic
                                       fourth public       presentation is
                                       meetings, which     consumer tested.
                                       include oral        Proposed Food
                                       public testimony    Guide Pyramid
                                       and presentations   graphic
                                       from invited        presentation is
                                       experts on          published in the
                                       Dietary             Federal Register
                                       Guidelines          for public
                                       related topics,     comment.
                                       including
                                       presentations by
                                       CNPP on the Food
                                       Guide Pyramid
                                       revision.
    Fall 2004.......................  The DGAC report is  The Food Guide
                                       issued to the       Pyramid is
                                       USDA and HHS        finalized.
                                       Secretaries. The
                                       departments
                                       develop and
                                       produce the
                                       bulletin,
                                       Nutrition and
                                       Your Health:
                                       Dietary
                                       Guidelines for
                                       Americans.
    January 2005....................  The sixth edition   Revised Food Guide
                                       of Nutrition and    Pyramid is
                                       Your Health:        cleared.
                                       Dietary
                                       Guidelines for
                                       Americans is
                                       released.
    February 2005...................  ..................  Revised Food Guide
                                                           Pyramid is
                                                           released.
    ------------------------------------------------------------------------

                        INTERACTIVE HEALTHY EATING INDEX

        Question. An increase of $400,000 is requested to update the
    Interactive Healthy Eating Index. How long has this website been in
    existence, and approximately how many hits does it receive daily? Are
    further increases anticipated, as the update is scheduled for fiscal
    year 2004 and fiscal year 2005?
        Answer. In April 1998, the Interactive Healthy Eating Index (IHEI)
    was added to the Web site of the Center for Nutrition Policy and
    Promotion. In fiscal year 2002, on an average day, consumers hold more
    than 2,500 sessions of the IHEI, spending about 25 to 35 minutes on
    average assessing their dietary status and receiving targeted nutrition
    education messages. (The average number of hits per day is around
    200,000, but this is not as informative as the average number of
    sessions). Besides continual updates to the IHEI foods database, the
    Center will need to incorporate any revisions in targets for the new
    Dietary Guidelines and the Food Guide Pyramid. An interactive menu
    planning module will be an enhancement that will allow consumers to
    plan for healthful diets based on their food preferences and dietary
    guidance. The Center also intends to develop and promote IHEI-related
    applications--a single-user CD-ROM and a Personal Digital Assistant
    (PDA) IHEI application--that will provide greater access to the IHEI.

                   OBESITY PREVENTION AND NUTRITION PROMOTION

        Question. Please provide additional information regarding what the
    $600,000 increase to expand an obesity prevention program, and the $2.5
    million increase for nutrition education and promotion, will be spent
    on. Will all of this money be spent in fiscal year 2004?
        Answer. The $600,000 increase to expand an obesity prevention
    program will be spent in fiscal year 2004 on consumer research and
    message development to refine and reshape consumer messages for
    additional audiences. In fiscal year 2003, the Center for Nutrition
    Policy and Promotion (CNPP) began development of a campaign to build
    awareness of USDA's anti-obesity message and promote behavior change.
    In this first phase, credible consumer messages were developed and
    pilot tested with 20 to 40 year old women, especially low-income women,
    to help motivate them to aim for a healthy weight. The fiscal year 2004
    funds will be spent on research to test the applicability of these
    messages to men and women over 40, and to reshape the messages and
    modify the delivery channels as needed to better target these
    audiences. Widespread implementation of the consumer-tested campaign
    elements is planned for fiscal year 2005, using appropriate messages
    and delivery channels for each audience.
        The $2.5 million increase for nutrition education and promotion
    will be spent in fiscal year 2004 on:
        Enhanced Media Support for the Eat Smart.Play Hard.TM
    Campaign (40 percent). This includes expanding the Web site with
    interactive games and projects for children and information for
    teachers and caregivers, producing nutrition education materials for
    teachers, and producing messages and other products that can be shown
    on in-school educational networks and closed circuit channels in WIC
    clinics, community centers and Food Stamp offices.
        Revising, reprinting and distributing existing Eat Smart.Play
    Hard.TM Materials (25 percent). This includes providing
    materials to WIC and the household-based commodity programs and
    translating and making materials more culturally appropriate (for
    Native Americans and Hispanics).
        Establishing and evaluating cross-program nutrition education
    interventions (35 percent). This includes working with specific States
    to plan and implement targeted nutrition education interventions by
    providing materials, training and evaluation support to teams
    representing all the FNS programs. Subjects would include promoting the
    5-A-Day messages, breastfeeding, implementing comprehensive Team
    Nutrition, and overweight and obesity issues especially in children.

                            PUBLIC LAW 480 TITLE II

        Question. During fiscal year 2003, we appropriated more than $1.7
    billion for international food assistance through the Public Law 480
    Title II program. Those resources were in addition to other commodities
    released this year from the Bill Emerson Humanitarian Trust, and were
    vital to meet needs in places like Sub-Saharan Africa from which
    resources were being diverted to meet anticipated demand in connection
    with our military campaign in Iraq. However, the President's 2004
    budget for Public Law 480 Title II is less than $1.2 billion.
        Can you explain why the President has recommended a decrease by
    more than $500 million when the crisis in Africa remains at
    unprecedented levels?
        Answer. Title II has been provided an unprecedented funding level
    for fiscal year 2003 in response to the scale and magnitude of
    emergency requirements around the globe, and for increased program
    costs due to higher U.S. commodity prices and fuel costs for shipping
    in the run up to the war with Iraq. Our assumption is that fiscal year
    2003 is an unusual year, and fiscal year 2004 will see a return to a
    more traditional situation, including more typical commodity and fuel
    costs. Accordingly, the President's budget proposes to continue funding
    for Public Law 480 Title II in fiscal year 2004 at the same level
    requested for fiscal year 2003.
        Question. Have the President's or your views changed since the
    United Nation's World Food Program informed the Administration just the
    other week that their appeal for assistance in Iraq for $1.3 billion
    will be $868 million below what they actually need?
        Answer. Under the original appeal of $1.3 billion, the World Food
    Program planned on distribution of full rations for 3 months, assuming
    the public distribution system (PDS) would be fully functioning in
    July. As time has progressed, we have come to realize that the PDS
    system will take longer than expected to become fully functional and
    will require the support of WFP for a longer period of time. The WFP
    now plans to expand its Emergency Operations, which are still under
    revision, to include full rations until the end of October at an
    estimated total value of $1.85 billion.
        Question. What assumptions were used for commodity prices in the
    fiscal year 2004 budget request for Public Law 480 Title II? How do
    they compare to more recent estimates of commodity prices for fiscal
    year 2004?
        Answer. The commodity price projections used in the fiscal year
    2004 budget request were based on the USDA baseline estimates of
    November 2002. The baseline incorporates provisions of the Farm
    Security and Rural Investment Act of 2002 and assumes that current farm
    legislation remains in effect through the projections period. Projected
    prices for corn, wheat, and soybeans reflect, in part, movements in
    stocks-to-use ratios. The baseline assumes that prices decline over the
    next several years as production recovers from the reduced levels of
    the 2002 crops. Prices for corn, wheat, and soybeans rise during the
    later years of the baseline period as growth in demand outpaces gains
    in production.
        When the November forecasts were made, there was only limited
    information about Northern Hemisphere winter wheat plantings for 2003/
    2004 and, of course, no information about Southern Hemisphere crops for
    the next year. By the May revision, however, Northern Hemisphere winter
    and spring crop conditions and plantings were better known. In
    addition, by this time in the crop year, there are at least some
    indications of Southern Hemisphere winter grain plantings.
        For wheat, the November 2002 baseline price for Marketing Year
    2003/2004 was $3.25 per bushel and this was revised to $3.35 (midpoint
    of range) in the May 12, 2003, World Agricultural Supply and Demand
    Estimates (WASDE). For rice, the November 2002 baseline price for
    Marketing Year 2003/2004 was $3.77 per hundredweight and this was
    revised to $5.25 (midpoint of range) in the May 12 WASDE. For corn, the
    November 2002 baseline price for Marketing Year 2003/2004 was $2.20 per
    bushel and this was revised to $2.10 (midpoint of range) in the May 12
    WASDE. For soybeans, the November 2002 baseline price for Marketing
    Year 2003/2004 was $189 per metric ton and this was revised to $182
    (midpoint of range) in the May 12 WASDE. For soybean oil, the November
    2002 baseline price for Marketing Year 2003/2004 was $525 per metric
    ton and this was revised to $430 (midpoint of range) in the May 12
    WASDE.
        Question. What estimates were used for emergency needs (commodity
    and dollar levels for each country) in the 2004 request for Title II?
    Are these levels still relevant? Will funding be needed for food aid
    for Iraq?
        Answer. As outlined in USAID's Congressional Budget Justification,
    the estimated emergency allocation in the aggregate for fiscal year
    2004 for Title II is approximately $522 million, not including the
    unallocated reserve of $241 million. It is expected that over 1 million
    metric tons of commodities for emergency food needs can be procured
    with this funding level. Allocation decisions between emergency and
    non-emergency programs must take into account many factors, including
    congressional mandates related to Title II as well as global food aid
    needs. No decisions regarding specific dollar and tonnage allocations
    by country for fiscal year 2004 have been made at this time. As we draw
    nearer to the fiscal year, funds will be allocated to countries or
    regions based upon the latest information on hand. This is true for all
    countries, including Iraq, where the projected funding allocation for
    fiscal year 2004 is largely dependent on what food commodities are
    sourced through the Oil for Food program contracts. The U.S. Government
    will provide funding to fill shortfalls as needed.
        Question. Does the 2004 request for Title II assume that you will
    comply with the requirement in the 2002 Farm Bill that 1.875 MMT be
    made available for non-emergency purposes, and what steps have been
    taken to seek proposals for fiscal year 2004 developmental programs in
    order to reach the 1.875 MMT level?
        Answer. The fiscal year 2004 budget request assumes that the Title
    II program will comply with the minimum tonnage level established for
    non-emergency programs. We understand the Office of Food for Peace at
    USAID continues to work with the U.S. PVO community to increase the
    number of effective development activities, as well as to program
    commodities for other non-emergency activities.
        Question. Is OMB or USAID placing arbitrary limits on the use of
    monetization for Title II programs, rather than allowing PVOs to
    identify and justify in their proposals the appropriate levels to meet
    program objectives in particular countries?
        Answer. No arbitrary limits have been placed by OMB or USAID on the
    use of monetization of Title II commodities. However, as part of the
    President's Management Agenda and related review of Title II programs,
    a decision has been made jointly by OMB and USAID to reduce the level
    of monetization over the next several years. A Monetization
    Rationalization Plan has been developed by USAID to guide this process.
    The plan is now under discussion with private voluntary organizations.
        Question. How has the Administration met the requirement in the
    fiscal year 2003 Supplemental Appropriations Act that to the greatest
    extent possible USAID shall restore funding for the Title II non-
    emergency programs that were cut? What tonnage level do you estimate
    will be provided for non-emergency Title II programs in fiscal year
    2003?
        Answer. Except for India, funding has been restored to the maximum
    extent possible to all non-emergency programs that were cut to meet the
    food emergencies in Africa. In the case of India, the Government's
    position on commodities potentially containing genetically modified
    organisms prohibit us from shipping commodities to that country at this
    time. USAID anticipates that $106 million will be restored to the PVO
    development portfolio in fiscal year 2003, bringing the funding level
    to $416 million for PVO development activities.
        Including PVO development activities and other Title II non-
    emergency activities, it is estimated that approximately 1.3-1.9
    million metric tons grain equivalent of food will be programmed under
    Title II non-emergency programs in fiscal year 2003.
        Question. What level (tonnage and dollar amounts) of food
    assistance is being provided for the following emergencies: a) Southern
    Africa, b) Ethiopia, and c) Eritrea and from what funding sources? What
    were the estimated food needs (tonnage and dollar amounts) in each of
    these cases in fiscal year 2003?
        Answer. The information is submitted for the record.
        [The information follows:]

        Southern Africa.--The U.S. Government has provided 566,000 metric
    tons of food aid to Southern Africa over the past year, using both
    fiscal year 2002 and fiscal year 2003 funding availabilities. The
    estimated value of those contributions is $320 million. In addition,
    USAID will be shipping an additional estimated 150,000 metric tons of
    commodities in fiscal year 2003. Funding has come from three sources:
    Public Law 480 Title II, Section 416(b) programming, and the Bill
    Emerson Humanitarian Trust.
        The estimated humanitarian cereal needs for the six affected
    countries in southern Africa between July 1, 2002, and March 31, 2003,
    was 1.2 million metric tons. With the addition of the other required
    components of the food basket, such as beans and oil, the total reached
    approximately 1.5 million metric tons. On average, the provision of
    this amount of food aid would cost $825 million.
        Ethiopia.--In fiscal year 2003, 737,020 metric tons valued at $340
    million have been provided from both the Bill Emerson Humanitarian
    Trust ($77 million) and Public Law 480 Title II ($263 million). The
    estimated food needs for Ethiopia are 1.52 million metric tons for 12.6
    million beneficiaries. Based on U.S. pricing factors, this quantity on
    average would cost $836 million.
        Eritrea.--In fiscal year 2003, 118,900 metric tons valued at $52
    million have been provided from Public Law 480 Title II. The estimated
    food needs for Eritrea are 290,000 metric tons for 1.4 million
    beneficiaries. Based on U.S. pricing factors, this quantity on average
    would cost $160 million.

        Question. The Administration did not request food aid funding for
    Iraq, other than restoring $200 million to foreign aid accounts for
    funds that were provided to the U.N. World Food Program for the
    purchase of food aid from other countries. What level (tonnage and
    dollar amount) of food aid will be provided to Iraq from the United
    States, not foreign purchases, in fiscal year 2003 and from what
    funding sources?
        Answer. USAID will provide a total of 164,000 metric tons of Title
    II valued at $150 million and 81,500 metric tons from the Bill Emerson
    Humanitarian Trust valued at $46 million. The total planned U.S.
    contribution is 245,500 metric tons valued at $196 million. This does
    not include the $200 million in cash provided to WFP.
        Question. What is the estimated need for Iraq food assistance for
    the remainder of the fiscal year? If this is not being supplied
    directly through U.S. food aid programs, then how is it being supplied?
    Do you agree with the World Food Program estimates in regard to Iraq,
    and if not, please explain.
        Answer. Fortunately, the WFP has been able to re-negotiate over 1.2
    million metric tons of food contracts. According to the latest reports
    from WFP, 1.2 million metric tons of Oil for Food contracts coupled
    with additional donor contributions, including those from the U.S.
    Government, mean that the food pipeline is fully sourced.
        The total needs for the Iraqi population are being met in part
    through U.S. food contributions, other donor contributions, and a $200
    million cash contribution provided by the U.S. The cash allowed WFP to
    procure 330,000 metric tons of commodities in the Gulf region. This was
    done to provide commodities urgently needed in Iraq in May, when U.S.
    food aid could not have arrived in time.
        We agree with WFP estimates in regard to Iraq. The total food needs
    per month under the Public Distribution System are a little under
    500,000 metric tons. This level multiplied by 5 months is about 2.4
    million metric tons.

                        BILL EMERSON HUMANITARIAN TRUST

        Question. The fiscal year 2003 supplemental provides $69 million
    for the purchase of commodities to replenish the Emerson Trust.
    Language is also included that prohibits the monetization of any
    additional release of Emerson Trust commodities during the remainder of
    this fiscal year.
        Do you support having the authority to hold cash for replenishment
    of the Emerson Trust rather than being required to actually purchase
    commodities to be held in storage for future use?
        Answer. Yes, we support maximum flexibility in administering the
    Bill Emerson Humanitarian Trust.
        Question. What effect on U.S. commodity markets has the
    monetization of Emerson Trust commodities had during the past 2 years?
        Answer. About 19 million bushels of wheat were monetized during the
    2002/2003 marketing year. A review of wheat prices shows that wheat
    markets began an upswing in June and peaked in early September. Markets
    began a downward swing about mid-September and leveled off around mid-
    October. There was slight market increase in late October through early
    November. Markets then began a downward trend in mid-November that
    continued through the end of the marketing year.
        Although wheat prices varied, there is no evidence to link the sale
    of wheat by CCC as the reason for any price decline. Price decreases
    point more directly to declines in the U.S. market share of world wheat
    trade, which resulted from lower priced wheat being offered by other
    countries, including a number of non-traditional exporters. U.S. wheat
    exports during 2002/2003 were at the lowest level in many years.
        It is also important to note that during the June to December 2002
    period, CCC purchased more wheat in the marketplace--approximately 59
    million bushels--than it sold--approximately 26.7 million bushels. When
    all these factors are taken into account, the sale of wheat from the
    Emerson Trust appears to have had a negligible impact on the domestic
    U.S. wheat market.
        Question. How is the $69 million appropriated in the fiscal year
    2003 Supplemental Appropriations Bill being used?
        Answer. At the moment, the $69 million is being held by the
    Commodity Credit Corporation. No final decision has been made on how
    the $69 million will be used, but clearly its use will depend on future
    needs.
        Question. Why did USDA decide not to seek funds to replenish
    commodities for the Trust?
        Answer. Funds were not sought by the Administration to replenish
    the Trust at this time due to other more pressing budget needs.
        Question. Have Public Law 480 funds been used at any time to repay
    the Trust for commodities withdrawn for urgent needs under section
    302(c)(1) of the Bill Emerson Humanitarian Trust Act? If so, have any
    of these funds been retained for the purchase of commodities to
    replenish the Trust, as permitted under section 302(b)(2)(B)?
        Answer. CCC has been reimbursed three times for wheat released from
    the reserve in response to urgent humanitarian needs and programmed
    through Public Law 480 Title II. The reimbursements were based on the
    export market price of the wheat in accord with section 302(f)(2) of
    the authorizing statute. CCC was reimbursed $45 million in fiscal year
    1987, $6.9 million in fiscal year 1991, and $28 million in fiscal year
    1995. These funds were not used for the purchase of commodities to
    replenish the Trust. The reason for that is because the authority
    provided in section 302(b)(2)(B) was not added to the statute until
    enactment of the Bill Emerson Humanitarian Trust Act of 1998, which was
    after all three reimbursements had occurred.

                            MILK PROTEIN CONCENTRATE

        Question. Although USDA has no direct jurisdiction of the
    regulation of MPCs, the importation of these products has raised
    substantial concerns among dairy farmers.
        Will USDA work with the USTR to ensure that any future agricultural
    trade negotiations will include the issue of MPC imports as a priority?
        Answer. In trade negotiations we pay close attention to the needs
    of import-sensitive U.S. producers. Throughout the negotiations, USTR
    and USDA work together closely to assess a particular product's import
    sensitivity, based on advice from the ITC on probable economic effects.
    USTR and USDA also consult closely with private sector advisors and
    Congress throughout the negotiations. Negotiators use a variety of
    tools to protect U.S. import-sensitive sectors, including extended
    periods for tariff reductions and import safeguards.
        Question. In the meantime, does USDA have any recommendations on
    how the harm to domestic dairy markets from MPC imports can be
    overcome?
        Answer. MPC impacts on dairy markets would be to lower nonfat dry
    milk (NDM) prices. However, during MPC import growth domestic NDM
    prices have typically been near support and CCC has purchased
    significant quantities of NDM. The impact of MPC imports has been to
    support new product formulations and to some extent increase CCC NDM
    purchases. Direct impacts on farm prices are believed to be very small
    because of the milk price support program (MPSP).
        A subsidy program to encourage the production of MPC domestically
    is being considered. Diversion of milk protein to domestic MPC
    production and away from NDM production might decrease CCC purchases
    and save total government expenditures.
        A tariff rate quota would probably lead to a WTO challenge and
    possible demands from the EU for compensation of up to $600 million.

                        INTERNATIONAL DEVELOPMENT POLICY

        Question. There is evidence of growing sentiments around the world
    critical of the United States intentions and practices, on a global
    scale.
        Do you agree or disagree that international developmental programs,
    such as those associated with Public Law 480 non-emergency programs,
    have great potential to overcome growing world hostilities toward
    American interests, help prevent the growth of terrorist organizations
    in those parts of the world, and provide significant long-term benefits
    for those countries and the United States?
        Answer. We agree that Public Law 480 non-emergency programs, such
    as Public Law 480 Title I and Public Law 480 Title II development and
    food for work programs, have a significant role in supporting the
    economic development of low-income countries and in this way are
    beneficial in reducing the potential for terrorist activity. For the
    United States, reducing the number of chronically poor, undernourished
    and underweight people throughout the world is both a humanitarian
    concern and a strategic goal. Food aid resources are given to help
    those in need in an effort to deal with hunger and to eliminate the
    food insecurity that fuels political instability and the potential for
    terrorism. Global Food for Education programs and food for work
    activities also contribute to the prevention of conditions that foster
    terrorism and create new generations of better educated citizens.
    However, it is important to note that there is a mosaic of issues that
    stimulates terrorists that is much broader than food and economic
    development alone.
        Question. If you agree, what will you do to help promote these
    programs and seek greater levels of resources?
        Answer. Our first step in promoting the non-emergency programs will
    be to continue to work with the recipients of our programs to develop
    effective programs that are supported by the recipient governments. We
    also will continue to ensure that program oversight is effective so
    that program objectives are met. These measures will go a long way
    toward effective and efficient use of program resources.
        Question. Should these types of programs take on a greater role in
    the context of national security in view of current world conditions?
        Answer. The United States Government carries out a wide range of
    programs designed to assist in the growth and development of developing
    countries. These programs range from security, economic development,
    humanitarian food assistance, and health and safety programs.
    Maintaining a balance in the level of support for these programs is
    important, and that's what the Administration is attempting to do.
        Question. One of the areas of U.S. involvement in reconstruction
    efforts in Iraq is agriculture. Please describe U.S. activities in this
    effort, including the amount of funds and number of personnel assigned
    to this task.
        Answer. USDA has had one person on the ground in Baghdad since
    April 24th. He has been totally involved in getting the Ministry of
    Agriculture up and running and in selecting a management team which
    will begin to make decisions on the priorities of the agriculture
    sector. Once this team is in full play, USDA will be sending Daniel
    Amstutz, Senior Advisor for Agriculture, to Baghdad. He will be
    responsible for policy development in agriculture and as agriculture
    relates to the other sectors of the Iraqi economy.
        USAID has begun the lengthy process of obtaining a project
    agreement for the reconstruction of agriculture in Iraq. The proposed
    project will contain four components: (1) increased agriculture
    production, (2) enterprise development, (3) access to rural credit, and
    (4) resource management--water, irrigation, etc. The timetable for this
    project will include full and open competition (45 days), a bidders'
    conference, a period in which to receive proposals, evaluation,
    selection, negotiations, and awards. Funding for this project is to
    come from the funds already designated for Iraq reconstruction.
        Question. There has been significant criticism of U.S. farm
    policies (and those of other countries) that certain program
    characteristics, such as commodity price support programs, are very
    harmful to the developing economies of many poor nations. How does USDA
    respond to these criticisms?
        Answer. All domestic support programs are not alike. The United
    States has tabled an ambitious proposal to the WTO agriculture
    negotiations designed to substantially reduce trade-distorting domestic
    support and open world agricultural markets to fair competition.
    Governments can and will continue to support their agricultural
    producers; however, our focus remains on trade-distorting domestic
    support.
        The Uruguay Round only started the job of tackling trade-distorting
    domestic subsidies. As a result, the EU's current limit for amber box
    support is around $67 billion annually, Japan's limit is around $33
    billion, and the U.S. limit is $19.1 billion. In addition, the EU and
    Japan use blue box subsidies (trade-distorting support linked to
    production limiting policies). All other countries have much lower
    levels of amber and blue subsidies, if any.
        The U.S. agriculture proposal in the Doha negotiations seeks to
    build on the first step of the Uruguay Round by pressing for much more
    substantial reductions to achieve a more level playing field for all
    countries, including developing ones. In particular, the U.S. proposal
    calls for a cut of over $100 billion in trade-distorting support
    globally, undertaken in a manner that harmonizes levels across
    countries, with the eventual goal of eliminating such subsidies
    altogether. The United States proposes maintaining current rules on
    non-trade distorting support (green box)--spending in areas such as
    conservation, research, food stamps, and the environment--as long as
    such spending is de-linked from production incentives.

                                 BIOTECH TRADE

        Question. An Iowa State University study concluded that the U.S.
    wheat industry could lose 30-50 percent of its business with foreign
    markets for spring wheat if Monsanto releases a new genetically
    modified variety of that commodity.
        Do you agree with this assessment?
        Answer. Dr. Robert Wisner of the Iowa State University concluded in
    a recent study that U.S. exports of hard red spring (HRS) wheat could
    fall by 33-52 percent if Monsanto's herbicide-tolerant, genetically
    modified (GM) wheat were introduced in the United States. We believe
    that this finding can only be regarded as a worst-case scenario. Dr.
    Wisner makes a strong assumption about the ready availability of non-GM
    wheat in competing countries. Further, his analysis does not consider
    the probable diversion of U.S. exports to markets that will accept GM
    wheat.
        A preliminary ERS study suggests there is considerable scope for
    diversion of GM wheat away from sensitive export markets. In the U.S.
    domestic market, we estimate that the non-GM segment accounts for only
    5-10 percent of demand. Thus, our large domestic market would provide
    an important outlet for GM wheat production, even if most export
    customers refused to accept it. Of course, the feasibility of diversion
    (without loss of export sales) also depends on extent of adoption by
    spring wheat growers. The ERS analysis, assuming 50 percent adoption of
    the GM variety, shows relatively modest impacts on average farm-level
    prices. However, buyers of non-GM spring wheat (primarily foreign)
    would incur additional costs.
        Question. Do you think that the growing trend toward genetically
    modified agricultural products can continue without a further erosion
    of our foreign markets? If so, how?
        Answer. Up to now, trade impacts from the rapid adoption of biotech
    crops since 1996 have been limited. Demand for non-biotech corn and
    soybeans has reflected biotech food labeling regulations in some parts
    of the world, such as the EU and Japan, and changing consumer
    preferences toward non-biotech foods. Over the last few years, the EU's
    de facto moratorium on approving new biotech varieties did adversely
    impact the United States. However, a concerted effort is being made by
    the government, the U.S. grain industry, and biotech companies to
    address issues that led to these incidents, paving the way for the
    further adoption of biotech crops.
        Question. What plans does USDA have to counter the threats by
    foreign nations in regard to genetically modified products?
        Answer. The Administration announced on May 13, 2003, that the
    United States, Argentina, and Canada are requesting World Trade
    Organization (WTO) consultations with the EU over its moratorium on
    approving new biotech varieties. The complaint intends to ensure that
    crops grown by U.S. farmers will not be rejected simply because they
    were produced using biotechnology.
        In the United States, we have managed to keep biotech discussions
    within the realm of science; and, indeed, scientific assessments are
    the cornerstones of our regulatory system. USDA/APHIS, FDA, and EPA
    have managed to maintain consumers' faith in their abilities to discern
    which products are safe to consume, and which products are unsafe.
        We continue to believe that keeping the discussions on scientific
    ground offers the most promise to counter threats to biotech products,
    but we need to reinforce those efforts. For this reason, the 2004
    budget requests $6.6 million to establish a new fund within the Office
    of the Secretary to support cross-cutting trade-related and
    biotechnology issues. These funds will be available to support the work
    of FAS, APHIS, and other USDA agencies as they address the growing
    array of regulatory and market access issues related to biotechnology.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                       CONSERVATION TECHNICAL ASSISTANCE

        Question. The most recent allocations for conservation programs
    were for far less than was generally expected after passage of the farm
    bill because of the Administration's decision to prohibit technical
    assistance to be paid from each program's funds as provided in the farm
    bill. I believe we need to find a solution that does not continue to
    require a net reduction in overall conservation funding, because that
    is the effect under both the omnibus appropriations bill and the
    Administration's budget.
        Will you work with the Committee to find a way to fix the technical
    assistance funding problem that does not involve cutting funding for
    conservation from expected farm bill levels?
        Answer. We share your concern about providing adequate funding for
    the technical assistance necessary to support the conservation programs
    of the 2002 Farm Bill. We believe that the President's budget proposal
    for a dedicated technical assistance account for Farm Bill
    implementation would be the best approach to fixing this problem. This
    approach maximizes the amount of financial assistance dollars while
    providing the technical assistance funding needed to deliver the
    programs. Having one central account also increases accountability and
    improves transparency of the Department's costs of delivering these
    conservation programs.
        At the same time, both NRCS and the Farm Service Agency have been
    making concerted efforts to improve and streamline their operations in
    the field which has helped to significantly reduce NRCS technical
    assistance costs for the Environmental Quality Incentives Program.
    Recently proposed rule changes for the Conservation Reserve Program
    will help streamline and improve the sign-up process and will lead to
    additional savings. This summer, we will also be conducting a thorough
    sweep of all Farm Bill conservation program accounts and will convert
    any unused technical assistance funding back into program dollars.
        Finally, NRCS will be fully implementing the new Technical
    Assistance Provider (TAP) system authorized in the Farm Bill. This will
    ensure that there is a viable cadre of technically qualified non-
    Federal partners that are certified by NRCS to provide the technical
    assistance needed to plan and oversee the installation of conservation
    practices.
        While we believe that these steps will greatly help achieve the
    conservation envisioned by the Farm Bill, we also look forward to
    working with the Committee to look for ways to better address this
    issue and to make further improvements.

                        NATIONAL ORGANIC STANDARDS BOARD

        Question. I am concerned about ongoing threats to the integrity of
    the Organic Foods Protection Act of 1990 (OFPA). OFPA requires a very
    strong public-private partnership in setting, enforcing and maintaining
    strong standards for organically certified foods. Specifically, OFPA
    established the National Organic Standards Board (NOSB) as a body of
    private-sector experts to help USDA set and oversee the implementation
    of the national organic standards, and required the establishment of a
    peer review panel to ensure public oversight of USDA's accreditation
    program. As envisioned by OFPA, the NOSB's recommendations would have
    significant weight and authority. Yet, in recent years, many of its
    recommendations have been ignored or simply not implemented by USDA. In
    addition, the peer review panel has yet to be established, even though
    organic certifiers have been accredited.
        Please detail your plan for giving proper weight to recommendations
    of the NOSB and for constituting and supporting the required peer
    review panel.
        Answer. AMS is in the process of establishing a peer review panel,
    with the American National Standards Institute (ANSI), a well
    recognized accrediting body that represents the United States in
    international standards setting organizations. A technical expert from
    the organic community will assist ANSI in their review of AMS'
    accreditation program under the National Organic Program (NOP). This
    technical expert will be selected from nominations made by the organic
    industry. AMS also is developing ``Good Guidance Practices,'' a
    document that outlines in detail how the agency will process and handle
    recommendations from the NOSB. In addition, AMS has provided the NOSB
    with clear guidance on how to present their recommendations to the
    agency in a manner that will expedite action on those recommendations.
        Question. In addition, would you please provide for the record a
    list of the recommendations that the NOSB has made, since the
    publication of the final rule on organic standards, and the actions
    that USDA has taken in response to those recommendations. If no action
    has been taken in response, please explain why.
        Answer. Since the final rule was published in December, 2000, the
    NOSB has held six public meetings; all of their recommendations are
    posted on the NOP web site for viewing by the public. All
    recommendations concerning materials to be added or prohibited on the
    National List have been accepted by AMS and are being published in the
    Federal Register for notice and comment. All other recommendations made
    by the NOSB will be reprocessed through the guidance material that the
    agency has given to the NOSB, so that all Board recommendations are
    treated equally and to ensure that those recommendations that are
    feasible will withstand scrutiny from a legal and regulatory review.

                REIMBURSEMENT RATE FOR CROP INSURANCE COMPANIES

        Question. The crop insurance industry is in shaky financial shape
    in the wake of the drought and other disasters that affected the 2002/
    2003 crops, as illustrated by the failure of American Acceptance, the
    largest company at the time. The President's budget proposes to cap the
    amount of delivery expense reimbursement the crop insurance companies
    may receive at 20 percent of the premium. Such a cut from the current
    24.5 percent would cut companies' revenue for delivery expenses by 20
    percent.
        What analysis has been done to assess the effect such a reduction
    would have on the financial condition of remaining companies,
    particularly in high-loss years such as 2002? What are the results of
    this analysis?
        Answer. The 24.5 percent reimbursement rate is the statutory
    maximum rate. However, several crop insurance products currently have a
    maximum statutory reimbursement rate less than that. In fact, for the
    2002 crop year the average reimbursement rate across all product lines
    was about 21 percent. We are projecting a reduction in reimbursements
    of about 10 percent. To put this in perspective, reimbursements have
    risen about 53 percent in the past 5 years with no increase in the
    number of policies sold.
        RMA conducts an annual analysis of each company's plan of operation
    for the upcoming crop year, in addition, the Agency has recently
    instituted a comprehensive review of each company's financial
    condition. As part of this review, the Agency is evaluating financial
    data that has never been previously requested by RMA. While the results
    are preliminary, it is evident that the analysis will significantly
    improve the Agency's ability to identify companies who are in a
    particularly vulnerable financial position.
        A reduction in the reimbursement rate will increase the financial
    pressure on companies to adjust their operating approach. Each company
    will strive for increased efficiencies without sacrificing service.
    This of course is a healthy exercise. However, if the company is not
    successful in driving down cost and generating sufficient returns to
    satisfy shareholders, consolidation or departures will be the result.

                             PACKERS AND STOCKYARDS

        Question. In a letter to me from Under Secretary Hawks dated
    February 24, 2003, the Administration stated its opposition to the
    proposed ban on mandatory arbitration in livestock and poultry
    contracts, its opposition to efforts to reorganize USDA to improve
    enforcement of the Packers and Stockyards Act, and other competition
    and trade practice statutes. The letter argued that USDA already has
    the authority and enforcement regime to deal with matters like unfair
    contract terms. Yet a number of private suits, as well as numerous
    press accounts and studies, have highlighted the real problems that
    exist in USDA's enforcement of the Packers and Stockyards Act.
        Your testimony indicates that the USDA budget seeks an additional
    $500,000 to ``enhance compliance with the Packers and Stockyards Act
    and to fund a review of the Act'' (page 13). We have increased Grain
    Inspection Packers and Stockyards Administration (GIPSA) funding for
    years, with absolutely no improved results, and some would argue even
    more lax enforcement. Without substantial changes in the law and in
    USDA's enforcement organization, why should we think that simply
    increasing funding will address GIPSA's serious enforcement
    shortcomings?
        Answer. Industry has become more complex, vertically integrated,
    and is making increasing use of technology, which complicates
    enforcement activities. The P&S Act has not undergone any significant
    review in many years. A review of the P&S Act and regulations is
    warranted to determine the best way for GIPSA to remain effective in
    the 21st century. The request for an additional $500,000 to ``enhance
    compliance with the Packers and Stockyards Act and to fund a review of
    the Act'' would provide 6 additional staff years, expenses, and
    consultations necessary for a comprehensive review of the P&S Act.

                               FSIS MEAT RECALLS

        Question. USDA has been criticized during recalls for its policy of
    telling State public health officials where recalled meat was
    distributed in their States only if those States promise not to tell
    their citizens where recalled product is being sold. It seems to me
    that the purpose of a recall is to get tainted product out of
    consumers' homes.
        Can you explain the reasoning behind USDA's policy of essentially
    withholding from consumers information about where recalled product was
    sold? Is there any barrier, legal or otherwise, to the Department's
    release of this information to any State public-health department that
    may need it to respond to a recall?
        Answer. The goal of a recall is to protect public health by
    removing potentially contaminated product as quickly as possible. In a
    recall situation, FSIS needs to be able to act quickly to ensure public
    health by protecting consumers from potentially contaminated product.
    The cooperative arrangement with establishments ensures that FSIS can
    move as quickly as needed to remove potentially contaminated product
    from the marketplace. It also allows industry to move as rapidly as
    possible. The current cooperative arrangement allows FSIS to act
    quickly to protect public health and is preferable to a slow,
    cumbersome legal process.
        There are no barriers to the Department's release of distribution
    information to the States.

                               FOOD AID PROGRAMS

        Question. Has USDA considered adding Iraq to the list of countries
    receiving donations under the McGovern-Dole International Food for
    Education and Child Nutrition program?
        Answer. USDA will consider all proposals during the application
    period, which we expect to begin in June. Proposals for Iraq would be
    considered, although Iraq will soon return to the status of middle-
    income country. Due to the limited budget for the McGovern-Dole
    International Food for Education and Child Nutrition program, most
    programming resources are expected to go to low-income countries. A
    major consideration in programming will be the cooperating sponsors'
    ability to carry out effective programs immediately. It is not clear if
    this criterion could be met for Iraq because the economic and political
    systems are in transition.
        Question. If not, do you think it would help facilitate Iraqi
    reconstruction if we encourage such school nutrition programs there?
        Answer. The education system in Iraq is already restarting and
    rebuilding. Over the next few months, what is needed to restore and
    improve the education system will be assessed by the new Iraqi
    government as well as the international donor community. Use of
    programs like McGovern-Dole should not be ruled out but, as Iraq
    emerges as a middle-income country, it would not be a primary target
    for U.S. Government food aid programs.

                               VALUE-ADDED GRANTS

        Question. The Farm Bill provided $40 million a year in mandatory
    funding for Value-Added Product Market Development grants. These grants
    have been a critical element in assisting rural value-added business
    development. Without the help of these value-added grants, many
    projects such as farmer owned ethanol plants and meat processing plants
    simply would not materialize. The Administration's budget proposes
    changing this program to discretionary funding and reducing the funding
    to $2 million a year--only 5 percent of its fiscal year 2003 level--
    thus essentially eliminating this program.
        What is the Administration's commitment to producer owned business
    and cooperative development in light of this budget proposal?
        Answer. USDA spends approximately $10 million a year on the
    Cooperative Service programs. Rural Development has over 75 years of
    experience in working with producer owned cooperative businesses. This
    includes assisting producers in organizing cooperatives; providing
    technical assistance, such as strategic planning, to existing
    cooperatives; conducting research on problems and issues facing
    cooperatives; and providing education services to cooperative boards,
    management, and members. The Administration is committed to the
    continuation of helping producers, their farm and ranch businesses, and
    their cooperatives.

                       RURAL BUSINESS INVESTMENT PROGRAM

        Question. I am disappointed that the Department has moved slowly on
    implementing the Rural Business Investment Program, which was
    authorized and provided mandatory funding in the Farm Bill. As you
    know, venture capital is a crucial need in rural America. This program,
    carefully worked out in a bipartisan manner, should really help.
        It has very broad support, including from the major farm groups,
    cooperative groups, bankers of all sizes, and many of the entities of
    the Farm Credit System.
        I had hoped by now to see this program in full operation, creating
    jobs.
        Exactly what is the status of the Department's actions to get the
    Rural Business Investment Program up and running?
        Answer. Since the Farm Bill was signed, USDA has worked jointly and
    diligently with the Small Business Administration (SBA) to develop an
    RBIP implementation and management plan that is based on the Program
    model, as envisioned and expressed by Congress in the statute. USDA and
    SBA have identified some impediments to the development of the
    implementation plan, such as how administrative responsibilities for
    the program would be shared between USDA and SBA within the context of
    the statute. We are continuing to work with SBA to reach agreement on
    such issues.
        Question. When will the Department have this program in operation?
        Answer. The timeline will be developed once an agreement with SBA
    is reached and specific roles and responsibilities are developed.
        Question. Is there anything that we can be doing to help expedite
    the Department's implementation of the Rural Business Investment
    Program?
        Answer. At this time, we know of nothing that the Committee needs
    to do to implement this program.

                                RURAL UTILITIES

        Question. The farm bill provided $360 million to assist in funding
    some of the backlog of water and wastewater programs at the Rural
    Utilities Service. Your budget proposes increasing the loan program,
    but reduces the grants by almost 50 percent, or $250 million. Small
    communities will once again be placed on a long waiting list because
    grant funds will not be available. It is not the purpose of this
    program primarily to fund only communities that qualify for loan
    programs, but also to ensure that the poorest and smallest of
    communities needing clean drinking water or a wastewater system will
    not be left behind.
        What is the national backlog in applications needing grant
    assistance? What is your plan for addressing the needs of small
    communities with very limited incomes, which need safe, reliable
    drinking water if this proposed shift in the program is implemented?
        Answer. There are currently 443 incomplete applications and 662
    complete applications on hand for water and waste grants for a total of
    1,105. The total amount requested by these applications is $433,762,484
    for incomplete applications and $763,852,491 for complete applications
    for a total of $1,197,614,975.
        With the additional funding from the Farm Bill, we were able to
    fund a significant number of applicants that needed grant funds to
    develop a feasible project. The applications remaining in the backlog
    indicate an increasing demand for loan funds. The current very low
    interest rate environment reduces the need for higher grant amounts,
    which will allow us to adequately meet the need for assistance. A
    project's financial feasibility is determined based on its ability to
    repay a loan and at the same time maintain reasonable user rates. A
    proposed system's budget is based on income projections solely from
    sales of services the system is providing. Since the Rural Utilities
    Service has the authority to switch funds between loan and grant, the
    levels established at the beginning of the year can be adjusted as
    needed based on projects funded during the year.

                                     CREDIT

        Question. On the matter of farm credit, your written testimony
    (page 10) indicates that the amount of direct loans that FSA will make
    available to farmers will decrease because the subsidy costs have
    somehow increased. Yet in other parts of your testimony, you note that
    the subsidy rate for other loan programs has actually fallen because of
    decreased interest rates.
        Please explain why the subsidy rate for FSA direct loans has
    increased in this time of lower interest rates and relatively low
    default rates.
        Answer. The cost of subsidizing direct loans has increased due
    largely to projections of increased loan defaults. As the modeling of
    the projected costs of subsidizing loans is refined, default
    projections have increased. Defaults are a major component of the
    subsidy rate that determines the amount of budget authority that is
    required to support the requested loan levels. Direct loans are more
    expensive to operate than guaranteed loans due to the fact that
    borrowers of direct loans are generally not able to obtain credit from
    commercial lenders due to their credit risk.

                           AGRICULTURAL BIOTECHNOLOGY

        Question. As a supporter of agricultural biotechnology, I believe
    products derived from this new technology hold tremendous promise for
    consumers and our Nation's agricultural industries. For that very
    reason, any shortcomings in our regulatory regime must be addressed to
    ensure that the development of agricultural biotechnology continues in
    a thoughtful and secure manner that provides our Nation's consumers and
    our trading partners with assurance that these products are safe. The
    National Research Council has released two important reports on
    agricultural biotechnology over the last few years. In last year's farm
    bill, Congress required your Department to issue a report to the House
    and Senate Agriculture Committees by next week outlining how USDA plans
    to implement the recommendations made by the Council.
        Please provide an update on the status of this report.
        Answer. While we have drafted a response to most of the
    recommendations from the National Academies of Science, National
    Research Council, there are a number of issues that we are currently
    working on with our partners at FDA and EPA that will affect many of
    our responses. As a result, our report missed the deadline of May 12.
    We feel it is important to work through the issues with our partners so
    that we can offer a more concrete overall Answer. Our report, when
    complete, will give a better sense of the direction we are taking in
    USDA and across government to address the recommendations in the
    reports.

                               FSIS--INSPECTIONS

        Question. In May 2000, a Federal judge in Texas ruled that the Food
    Safety and Inspection Service (FSIS) could not use Salmonella test
    results to determine the sanitary conditions in a beef grinding plant.
    More recently a Federal court in Nebraska prevented FSIS from closing a
    meat plant repeatedly found to have sanitation violations. Rather than
    pursuing the Nebraska case, FSIS signed a consent agreement with the
    company which ceded the agency's authority.
        In light of these court decisions, can you specify USDA's exact
    legal authority to close meat plants that repeatedly fail to comply
    with USDA's food-safety standards?
        Answer. The Federal Meat Inspection Act and the Poultry Products
    Inspection Act provide the authority needed to close plants that fail
    to comply with regulatory requirements. USDA has the authority to
    initiate a withholding, suspension, or withdrawal action based on
    sanitation or HACCP violations, including: failure to collect and
    analyze samples for the presence of generic E. coli; failure to develop
    or implement sanitation standard operating procedures (SSOP); or
    failure to develop or implement a required HACCP plan. USDA may also
    initiate a withholding, suspension, or withdrawal action for other
    violations, such as inhumane slaughter or unsanitary conditions.
        Question. Your statements last month seemed to indicate that you
    thought USDA could benefit from enhanced enforcement powers. What is
    USDA's opinion concerning the need for additional authorities, or
    clarifications of existing authorities?
        Answer. We are always assessing our authorities to determine if
    they need to be strengthened. I have asked for a complete review of our
    authorities to determine if they allow us to do our job and am awaiting
    assessments on what options USDA should consider pursuing in the
    future.

                     RENEWABLE ENERGY AND ENERGY EFFICIENCY

        Question. Please provide for the record the explanation you
    promised regarding proposed funding for the energy and energy
    efficiency program (section 9006) and the CCC Bioenergy program. As
    clarified in the hearing, these programs already have mandatory funding
    for fiscal year 2004 as provided in the farm bill. The Administration's
    budget proposes to change the 9006 program to a discretionary program
    and reduce funding from $23 million to $3 million in fiscal year 2004.
    The proposed cut of $50 million to the bioenergy program is similarly
    troubling since this program has been a key Federal program to help
    increase ethanol and biodiesel production. How do you reconcile your
    stated support for the farm bill renewable energy and energy efficiency
    programs and the Administration's budget proposal?
        Answer. This is a very tight budget and embodies numerous difficult
    resource allocation decisions. The Administration's energy policy
    strongly supports development and expansion of renewable and bio-based
    energy sources. Rural Development is in the process of implementing
    Section 9006 of the Farm Bill to promote renewable energy and energy
    efficiency projects. The $23 million in mandatory funding will be made
    available as grants under this program. Rural Development has also
    supported renewable energy under its Business and Industry (B&I)
    guaranteed loan program, and the Value Added Producer Grant program.
    Through fiscal year 2003, projects totaling over $70 million will have
    been funded under these programs. For fiscal year 2004, the Department
    is continuing to seek funding for the Section 9006 program, but at the
    reduced level of $3 million, and as discretionary rather than mandatory
    money. During this tight budget environment, it is appropriate to pause
    and review the success and effectiveness of the significant funding
    that has already been provided. Furthermore, Rural Development will
    continue to support renewable and bio-based energy projects through the
    B&I program, and also the Value Added Producer Grant program.

                                ANIMAL FIGHTING

        Question. I and many of my colleagues in the Senate and House are
    concerned about reports of illegal animal fighting. As you know,
    Congress strengthened this animal fighting law last year, as a
    component of the farm bill. In addition, we called on you to report
    back to the Committee on March 1, 2003 regarding plans for effective
    enforcement of the animal fighting law.
        What can you tell us now about how the Department intends to carry
    out these responsibilities? When will we see the report?
        Answer. The report will be sent to Congress on May 9, 2003. APHIS
    and the USDA's Office of the Inspector General (OIG) work together with
    State and local authorities to investigate and enforce Federal and
    State laws regarding animal fighting. USDA has made some progress with
    both APHIS and OIG taking steps to improve the effectiveness of the
    USDA enforcement effort. APHIS refers information it receives on animal
    fighting activities to OIG. OIG initiates investigations based upon the
    potential for criminal prosecution and as resources permit. In those
    instances where OIG does not initiate an investigation, it refers those
    complaints to State or local enforcement agencies as appropriate.
        Despite these efforts, however, significant improvements cannot be
    achieved without increased involvement by other Federal and State law
    enforcement agencies specifically dedicated to investigating and
    prosecuting violators of the prohibition against animal fighting
    ventures. APHIS must rely on law enforcement agencies to conduct
    investigations into animal fighting ventures because they are often
    accompanied by other illegal activities and are inherently dangerous.
    APHIS and OIG will continue to work together to seek better ways of
    furthering the goal of reducing and eliminating illegal animal fighting
    ventures.

                              OUTSOURCING IN NRCS

        Question. The farm bill does not authorize or justify downsizing of
    NRCS staff or outsourcing of their work. Instead, it provides for the
    use of outside personnel to supplement existing NRCS staff. I am
    concerned that the Administration has undertaken a process to downsize
    the agency by outsourcing and reducing the number of field offices.
        Please provide for the record all analyses you have done of the
    expected workload involved in fully implementing the farm bill
    conservation programs and carrying out NRCS' responsibilities for
    assisting on-farm non-farm bill conservation. How will this workload be
    met by: NRCS staff; and outside personnel, and what are the planned
    numbers for each?
        Answer. I will provide this information for the record.
        [The information follows:]

        NRCS has developed a workload model to estimate the technical
    assistance costs to deliver each of the Farm Bill programs at the
    authorized level. The model uses information from the agency's
    Integrated Accountability System (IAS) including workload analysis,
    timekeeping, and financial systems data. The model is used to project
    future technical assistance requirements for Farm Bill programs based
    on actual data collected at the field level. This model assumes that
    the program will continue to be delivered in the way they are today.
    However, we anticipate finding opportunities to work smarter and more
    efficiently and effectively deliver technical assistance. Technical
    assistance is reflected as staff year needs, regardless of who does the
    work.
        Farm Bill programs included in these technical assistance
    projections include:
      --Agricultural Management Assistance Program (AMA)
      --Conservation Reserve Program (CRP)
      --Conservation Security Program (CSP)
      --Environmental Quality Incentive Program (EQIP)
      --Ground and Surface Water Conservation Program (GSWC)
      --Klamath Basin
      --Farm and Ranchland Protection Program (FRPP)
      --Grassland Reserve Program (GRP)
      --Wildlife Habitat Incentives Program (WHIP)
      --Wetland Reserve Program (WRP)
        Funding levels for Farm Bill Programs are based upon the
    Congressional Budget Office score of the Farm Bill. Funding levels can
    be adjusted to evaluate technical assistance requirements based upon
    different funding levels.
        Farm Bill Technical Assistance Requirements currently projected
    based upon the model are displayed in the following graph:

        The projections also include technical assistance requirements for
    USDA to continue to service ongoing Commodity Credit Corporation (CCC)
    contracts from prior years for the conservation programs authorized in
    the 1996 Farm Bill.
        A key component of the NRCS workload projection model for Farm Bill
    Programs is the National Conservation Partnership Field Workload
    Analysis (WLA 2001), which provides a descriptive baseline of the
    workload requirements by discipline for Federal, State and district
    employees at the field level. WLA 2001 describes the time required by
    discipline for what employees do at the field level as described in 28
    Core Work Products (CWPs). It captures the core field activities and
    the time to accomplish them for the NRCS field staff and the
    Conservation Partners field staff. WLA 2001 is used to estimate the
    staff years required to complete fiscal year projected workload and
    total resource conservation needs.
        Within each Core Work Product, several tasks are identified and
    time associated with each task to accomplish the activity. Similar CWPs
    have the same tasks. For example, the natural resource CWPs all have
    the same tasks. Two hundred and eighteen Time Teams, consisting of NRCS
    and partner specialists (subject matter experts), provided estimates of
    the time required from various disciplines to perform the tasks
    necessary to accomplish each Core Work Product. Time teams were
    determined based on the area having similar resource concerns,
    geophysical characteristics, production characteristics, and cultural
    differences, time requirements for conservation activities.

        Integrated with information from other components of the Integrated
    Accountability System, such as the Performance and Results Measurement
    System (PRMS) and the Total Costs and Accounting System (TCAS), the
    National Conservation Partnership Field Workload Analysis (WLA 2001)
    and the NRCS workload projection model for Farm Bill Programs are the
    analysis tools utilized to provide information necessary for management
    activities such as workforce planning, and performance planning.
        The workload on non-farm bill programs consists of conservation
    planning assistance including lands, which are ultimately enrolled in
    Farm Bill programs and conservation practice installation accomplished
    on a voluntary basis without USDA incentives or cost sharing. The
    workload also includes development and maintenance of conservation
    technology such as the Field Office Technical Guide, soil surveys,
    water supply forecasts, conservation plant materials, etc, utilized by
    local, State and Federal agencies as well as individual land owners and
    operators, to guide resource management decisions and programs. In
    2002, CTA resulted in 33 million tons of sediment reduction,
    conservation systems being applied on 8.8 million acres of grazing
    lands, and 2,172 Comprehensive Nutrient Management Plans being
    installed.
        NRCS has allocated $20 million in fiscal year 2003 or approximately
    209 staff years for Technical Service Providers (TSPs) to assist in
    implementing Farm Bill programs this fiscal year. We anticipate the
    portion of technical assistance provided by TSPs of the total workload
    will grow in future years.

                      MAINTAINING ASSISTANCE TO PRODUCERS

        Question. How will you ensure that reducing NRCS staff will not
    harm producers' access to this important assistance?
        Answer. USDA will continue to utilize the best available
    information to evaluate the conservation workload and determine the
    most cost-effective means of providing the highest quality technical
    assistance available for producers including the use of NRCS staff and
    technical service providers. Given the farm bill workload, no net staff
    reductions are anticipated.
        To ensure high quality technical assistance is provided by
    technical service providers as well as NRCS staff implementation of
    several initiatives were undertaken during the first year of the new
    Farm Bill. A technical service provider online self-certification
    process (TECHREG) was made available from the NRCS website for
    organizations and individuals who wish to provide technical assistance
    to USDA customers. Several hundred technical service providers have
    registered and self certified and the list is growing each day. TECHREG
    also provides access to USDA customers to identify sources of technical
    assistance available other than NRCS staff and their areas of
    expertise. NRCS quality assurance policies were revised and updated to
    provide a standard level of quality review for all technical assistance
    provided to USDA customers including technical service providers. On
    line access was developed and implemented to provide USDA customers and
    others electronic access to the latest in standards, specifications and
    other technical information available from their local Field Office
    Technical Guide.
        By automating and streamlining administrative processes NRCS has
    made available staff resources for providing technical assistance under
    all programs, also reducing the technical assistance costs for the farm
    bill programs allowing more dollars to be available for cost-share
    assistance.
                                     ______

                 Questions Submitted by Senator Byron L. Dorgan

                        LEGUME CROPS GENOMICS INITIATIVE

        Question. The U.S. Legume Crops Genomics Initiative brings together
    growers and scientists to guide the development of priority research
    areas that will provide economic benefits and enhance sustainable
    agronomic practices of American agriculture. The initiative is designed
    to develop tools and research to alter compositional traits to further
    legume crops competitiveness and growers' profitability; maximize
    tolerance to biotic and abiotic stresses; and minimize use of inputs.
    Each of the 48 contiguous States produces legumes, from major row crops
    to alfalfa for hay and grazing. Agronomic improvements to legumes using
    modern genomics tools will provide an economic boost to agriculture in
    all areas of the United States. In 2000, the U.S. total estimated
    farmgate value was $22 billion. An added value derives from the legume
    symbiosis with soil bacteria that fixes nearly 17 million metric tons
    of atmospheric nitrogen each year, worth about $8 billion.
        Given the need and benefits of the initiative, can you detail
    USDA's plans for including legume crops genomics funding in the
    Administration's budget?
        Answer. Expansion and strengthening of legume genomics and genetics
    programs will play a crucial role in ensuring food for future
    generations. The fiscal year 2004 USDA/ARS request for sequencing and
    bioinformatics related to plants is $5.1 million of which $1.2 million
    is proposed for legume genomics.
        USDA/CSREES supports plant/crop genomics (including legumes)
    through its competitive grants program, the National Research
    Initiative (NRI). The fiscal year 2004 request for the NRI is $200
    million with $9 million requested for plant genomics (including
    legumes).

                            WORLD TRADE ORGANIZATION

        Question. On March 17, the USTR official in charge of agricultural
    trade with China stated that the United States would be well justified
    in filing a WTO case against China, for failing to live up to its
    commitments on wheat trade. The official said that the evidence of
    unfair trade by the Chinese was undeniable, and that the Chinese
    themselves privately acknowledge that they are cheating on agricultural
    trade. He said that the interagency Trade Policy Review Group has given
    USTR the green light to move forward with a WTO case against China. But
    the official said that the Administration was reluctant to do so,
    because the Chinese might be offended. He said the Administration was
    worried that a WTO case would be seen as an ``in-your-face'' thing to
    do to China, so soon after China joined the WTO.
        Is the Foreign Agricultural Service of USDA a part of the Trade
    Policy Review Group?
        Answer. USDA is part of the interagency Trade Policy Review Group
    (TPRG), which also includes USTR, State, Commerce, Treasury, NSC, and
    several other agencies. USDA's representative at these meetings can
    vary depending on the topic, but generally includes high-level
    representation from either the Office of the Secretary, the Office of
    the Under Secretary for Farm and Foreign Agricultural Services, or the
    Foreign Agricultural Service.
        Question. Didn't FAS sign off on a WTO case against China on wheat
    trade?
        Answer. In the TPRG meeting that you refer to, USDA expressed
    support, absent a timely resolution of outstanding concerns, for
    pursuing a WTO case against China over its overall administration of
    its TRQ system. The TPRG deferred a decision to initiate a WTO case,
    pending the outcome of further discussions with the Chinese to resolve
    the issue. Ambassador Zoellick and Ambassador Johnson raised our
    concerns at the highest levels during their subsequent visit to Beijing
    in February. A follow-up meeting, which has been delayed by the SARS
    situation, is expected to occur in the very near future. Absent a
    satisfactory outcome, it is expected the TPRG would reconvene to
    revisit the issue of initiating a WTO case. Wheat is one of nine
    agricultural commodities covered by China's TRQ system, and USDA
    believes that improvements in China's TRQ system would lead to greater
    market access for U.S. wheat and other commodities.
        Question. Do you believe that filing a WTO case is an ``in-your-
    face'' thing to do, when there is undeniable evidence of a trade
    violation, as the USTR official stated?
        Answer. USDA views very seriously China's failure to fully meet its
    WTO commitments. Our preference would be to resolve the issue
    bilaterally, as the WTO option, while certainly a viable one, could
    prove time consuming and could ultimately produce mixed results. At the
    same time, we recognize the bilateral process should not be open ended
    and that China should take immediate steps to bring its practices into
    compliance with the WTO. Toward that end, we are actively engaged with
    other U.S. agencies in preparation for upcoming negotiations with the
    Chinese to resolve this issue.

                   RURAL DEVELOPMENT FARM BILL SPENDING CUTS

        Question. The Administration's proposal to prohibit all fiscal year
    2004 mandatory funding for all Rural Development programs authorized in
    the Farm Bill and instead fund a few at much lower levels than
    authorized (such as renewable energy programs and enhancement of access
    to broadband services) is going to put tremendous pressure on this
    Subcommittee to fund these items with a very limited discretionary
    allocation.
        Do you consider these issues when you claim that there are no cuts
    in the Farm Bill spending?
        Answer. USDA considered both the mandatory and discretionary
    funding in developing its 2004 budget. The proposals to not spend
    mandatory funding that was authorized in the Farm Bill provided offsets
    for a portion of the discretionary funding that is being requested in
    the budget. Without these offsets, it would be even more difficult to
    stay within the discretionary spending targets.

                         PUBLIC LAW 480 PROGRAM FUNDING

        Question. The Administration's request would provide $1.185 billion
    for Public Law 480, which provides grants to private voluntary
    organizations (PVOs), and the World Food Program (WFP), to alleviate
    hunger. Last year, Congress provided $1.44 billion in appropriations,
    $300 million in supplemental appropriations (for a total of $1.74
    billion).
        Why does the Administration believe that the appropriations needed
    will be $555 million less in fiscal year 2004 than in fiscal year 2003?
        Answer. Fiscal year 2003 is unusual in that unfavorable climatic
    conditions in the United States last summer resulted in dramatically
    higher commodity prices at the same time that we are experiencing
    several large scale emergencies overseas. The scale of the emergencies
    and the fact that they overlapped is almost unprecedented. Congress
    responded to the situation by increasing the level of appropriations
    for Public Law 480 Title II for fiscal year 2003.
        Although we do not see an end to emergencies in fiscal year 2004,
    the budget assumption in this regard is that fiscal year 2003 is an
    unusual year in terms of the magnitude of emergency requirements, e.g.,
    droughts in the Horn and Southern Africa and conflict in Iraq, and that
    the funding level required to respond to emergencies in fiscal year
    2004 will not be as high.

                              SALES OF LOAN ASSETS

        Question. I see that your budget includes a new provision that
    would provide an estimated savings of $5 million from the sales of loan
    assets. I have to admit that this provision makes me very nervous given
    the experience that North Dakotans have had with the Small Business
    Administration's asset sale program and the sale of their disaster
    loans to private companies.
        A GAO report released last January confirmed the complaints that I
    heard and found very serious problems in SBA's asset sales program.
    This report found that SBA lacks a comprehensive system to document and
    track all borrower inquiries and complaints after loans are sold, that
    SBA incorrectly calculated the losses on its loan sales and lacks
    reliable financial statements. It recommended that before OMB continues
    to encourage loan sales at USDA and other agencies, it make sure that
    agencies have the capability to properly carry out and account for
    these activities.
        Does USDA have these mechanisms in place? Is USDA familiar with the
    concerns raised by GAO, and if so, what does it plan to do to address
    borrower inquiries and complaints after FSA and Rural Development loans
    are sold?
        Answer. USDA does have mechanisms in place to correctly account for
    its loan programs and to handle constituent inquiries of any kind. USDA
    has reviewed the GAO report on the SBA loan sales program and is
    currently working with OMB to make certain that the problems
    experienced by SBA are not repeated at USDA. In the event of a sale of
    loan assets, all borrower rights would still be protected, as they were
    during previous sales.
                                     ______

                Questions Submitted by Senator Dianne Feinstein

                          MEXICAN FRUIT FLY ASSISTANCE

        Question. Secretary Veneman, I am concerned that the Mexican fruit
    fly outbreak this year is already worse--much worse than the previous
    Fallbrook outbreak. In 2000 I helped provide assistance to San Diego
    farmers hurt by the fruit fly outbreak, yet few growers who applied for
    payments received assistance from USDA.
        Secretary Veneman, if 1,470 growers suffered approximately $3.5
    million in total losses, why did your department only provide
    assistance to 60 growers for a total of $644,225?
        Answer. We provided assistance to all producers that applied for
    the program. Some producers may have elected not to participate because
    of issues relating to gross revenue eligibility requirements.

                           MEXICAN FRUIT FLY OUTBREAK

        Question. Fighting this infestation will be costly and I believe
    this widespread invasion of foreign species requires a strong Federal
    response from Congress. What more can USDA do to provide assistance to
    the avocado and citrus growers hurt by the current Mexican Fruit Fly
    outbreak?
        Answer. USDA is mounting an aggressive response to the outbreaks.
    Since the initial detection of Mexican Fruit Fly (MXFF) in November
    2002, APHIS and the California Department of Food and Agriculture have
    worked diligently to prevent and alleviate damage from this harmful
    pest as part of a cooperative eradication effort. We have increased
    trapping densities, continuously release millions of sterile MXFF's per
    square mile for at least two generations, and applied ground bait
    pesticide sprays and aerial treatments. We are also developing
    regulatory treatments especially for specialty fruits and organically
    grown commodities. Our program protocols specify pre-harvest and post-
    harvest treatments to allow the continued movement of commodities such
    as avocados and citrus in commerce.
        Question. Would you support direct financial assistance to help the
    growers in San Diego County?
        Answer. I would be happy to work with you to discuss the funding
    for the program.
        Question. To ensure high value specialty crop growers are able to
    receive the help they deserve, I believe compensation payment must be
    based on the value of the crop, not the acreage. Would you support
    adding specific language to an appropriations bill to specify this so
    that growers of high value crops like avocados and citrus receive
    adequate payments?
        Answer. I would be happy to work with you to discuss the funding
    for the program.

           REALLOCATING UNUSED SUGAR EXPORT QUOTAS TO OTHER COUNTRIES

        Question. Secretary Veneman, I was able to include an amendment to
    the Farm Bill to allow you the authority to ensure that the amount of
    sugar allowed to come into the United States actually makes it to the
    market.
        At the end of section 1403 of the Farm Bill, I included a provision
    that allows you, working with the United States Trade Representative,
    to reallocate any unfilled portion of a sugar exporting country's quota
    when that country does not fill its quota.
        On March 25th, I wrote you a letter urging you to make this
    reallocation because there are 50,000-60,000 tons of sugar that could
    be exported to the United States right now from other nations that have
    already met their cap. Will USDA and USTR be making this reallocation
    this year to help refineries like C&H Sugar--the only sugar refinery on
    the West Coast--obtain more raw sugar to be refined?
        Answer. According to current estimates, the shortfall of the raw
    cane sugar tariff rate quota for fiscal year 2003 is expected to be
    30,000 tons. The Harmonized Tariff Schedule of the United States and
    the Farm Bill authorize the United States Trade Representative to
    allocate the quota and reallocate it, if necessary. USDA's authority is
    limited to establishment of the quota and consulting with the U.S.
    Trade Representative. Concerning this year, the U.S. Trade
    Representative has not informed us of his intentions regarding a
    shortfall reallocation.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                        PATHOGEN TESTING AND ENFORCEMENT

        Question. Madame Secretary, in a speech you gave in March you said
    ``we are working under a Meat Inspection Act that pre-dates the Model
    T,'' and I couldn't agree with you more. It is obvious that changes are
    needed to ensure that dirty meat processing plants can be shut down
    based on the results of microbiological testing, and Senator Harkin,
    myself and others have sought to clarify the USDA's authority through
    the Pathogen Reduction and Enforcement Act, or Kevin's Law, as it also
    is known. I also want to ensure that you have enough resources to
    implement a vigorous microbiological testing program.
        You have asked for a $6 million increase to strengthen FSIS'
    microbiological testing program for Salmonella, E.Coli and Listeria.
    How frequently will the USDA be testing products for Salmonella, E.Coli
    and Listeria with the $6 million requested, and is that enough to make
    the new E.Coli and Listeria testing directives meaningful?
        Answer. The proposed increase of just over $6 million is to
    strengthen USDA's microbiological testing program. Of the approximately
    $6 million requested, $4.5 million would be used to provide additional
    microbiologists, chemists, laboratory technicians, and other personnel
    to increase the agency's ability to identify adulterants in meat,
    poultry, and egg products. This funding will help the agency develop
    analytical methods to test food products for chemical, biological, and
    radiological contamination. This initiative will also increase sampling
    of ready-to-eat (RTE) products for the presence of bacteria such as
    Listeria monocytogenes and Salmonella. FSIS will increase sampling of
    these products from 10,000 to 15,000 annually and will add the
    capability to conduct 5,000 Listeria monocytogenes environmental
    samples annually. The agency also plans to increase sampling of raw
    ground beef and raw ground beef ingredients for E. coli O157:H7 from
    7,000 to 15,000 samples annually.
        The budget request also includes a new $1.7 million initiative to
    establish nationwide microbiological baseline studies to provide the
    long-term data necessary to assess the ongoing risks presented by the
    products FSIS regulates. The use of nationwide microbiological baseline
    studies will improve data quality and help us further incorporate risk
    management into all regulatory and policy actions. Furthermore, these
    increases will significantly increase FSIS' ability to identify food
    safety risks associated with these pathogens.
        Question. How much more testing could USDA perform if it were given
    $10 million for the testing program?
        Answer. It costs the agency approximately $130 per test. However,
    the budget fully funds the laboratory needs for 2004.

                          MANDATORY NOTICE AND RECALL

        Question. Madame Secretary, you also suggested earlier this year
    that you would be willing to support mandatory notification to USDA
    when a Federally inspected establishment has reason to believe it has
    adulterated or misbranded meat or poultry. You also called for civil
    penalties for continual lack of compliance, and expedited cease-and-
    desist orders and suspensions for those companies that violate their
    Hazard Analysis and Critical Control Points plan.
        I support you in seeking these authorities, but I'm curious to know
    why you did not seek mandatory recall authority of an adulterated
    product, considering mandatory notice of adulteration, and recall
    authority, traditionally go hand in glove? Why would you want mandatory
    notice of a food safety problem, but not want the authority to act on
    it?
        Answer. FSIS has the means to quickly remove potentially
    adulterated product from commerce in order to protect the public
    health. Any new authority would need to be implemented with an eye
    towards enhancing public health. Providing FSIS with mandatory recall
    authority would not increase the safety of our food supply nor enhance
    our Nation's public health.
        Advance notice of food safety problems would enable FSIS to more
    quickly identify and act to initiate a recall or other action to
    protect public health from a potential food safety hazard. This would
    provide an additional tool to increase response time to a food safety
    hazard with a recall or other action. A company's decision to comply
    with a voluntary recall request from FSIS is compelled by FSIS
    enforcement powers such as detention and seizure authority. In addition
    to detention and seizure authority, the agency can also shut a plant
    down by withholding official inspection.

                               LISTERIA STANDARDS

        Question. Last summer a multi-state Listeriosis outbreak linked to
    deli products sickened at least 53 consumers, killing eight people and
    causing three miscarriages or stillbirths. More than 2 years have
    passed since the USDA published a proposal to require ready-to-eat meat
    and poultry processing plants to test for Listeria. A recent USDA risk
    assessment showed that requiring even more frequent Listeria testing
    than was proposed in 2001 would ``lead to a proportionally lower risk
    of listeriosis.'' Thus, the new risk assessment provides the scientific
    basis for the USDA to issue a stronger Listeria rule.
        When do you anticipate issuing the final regulations for Listeria
    testing and when would those regulations go into effect?
        Answer. We plan on issuing an interim final rule on June 4, 2003
    with an effective date of 120 days after publication in the Federal
    Register.
        Question. Wouldn't more testing save more lives by helping plants
    to more rapidly identify when they are not adequately controlling
    Listeria? Shouldn't USDA be seeking a testing scheme that is more
    protective of public health?
        Answer. Through use of the Listeria risk assessment, FSIS
    discovered that a combination of testing, sanitation and interventions
    yielded greater benefits than any one strategy alone. The risk
    assessment also demonstrated that the use of intervention steps, such
    as post-packaging pasteurization or the introduction of growth
    inhibitors, showed dramatic public health benefits.
        FSIS has worked diligently to gather the extensive scientific data
    necessary to develop a predictive risk assessment model. By allowing
    FSIS to evaluate factors that potentially contribute to the overall
    risk to public health, this risk assessment has given FSIS scientific
    confidence that new policies will be effective.

                      SAFETY OF FOODS PURCHASED BY SCHOOLS

        Question. About 17 percent of the food served in schools is donated
    by the Federal Government and undergoes stringent USDA food-safety
    standards, including increased inspections and tougher pathogen
    standards. The USDA also has extensive safety information available to
    it on the companies it purchases food from to help it make informed
    decisions. Yet, the remaining 83 percent of food consumed at schools is
    purchased locally and is not subjected to these tougher standards.
    Local school officials also do not have access to the safety
    information that their Federal counterparts have when making their
    purchasing decisions.
        In 2002, the General Accounting Office recommended USDA provide
    local school authorities with information and guidance on incorporating
    these more stringent safety provisions in their procurement contracts.
    The GAO also urged USDA to consider giving schools access to records
    from USDA's and FDA's inspections of prospective school food suppliers.
        Have you followed up on these GAO recommendations? If so, to what
    extent have these recommendations been implemented?
        Answer. As we understand it, the General Accounting Office (GAO)
    made these suggestions in testimony given in April 2002 on ``Continued
    Vigilance Needed to Ensure Safety of School Meals.'' Since that time,
    GAO has done extensive work in this subject area. They recently
    concluded an audit entitled, ``GAO Audit of School Meal Programs:
    Opportunities Exist to Improve Nationwide Data on Frequency and Causes
    of Foodborne Illness and to Enhance School Food Safety Efforts
    (Assignment No. 360246).'' GAO held exit conferences with the Food
    Safety and Inspection Service (FSIS), the Agricultural Marketing
    Service (AMS), and the Food and Nutrition Service (FNS) on March 7 and
    April 15, 2003. GAO released the audit on May 9, 2003, entitled
    ``School Meal Programs: Few Instances of Foodborne Outbreaks Reported,
    but Opportunities Exist to Enhance Outbreak Data and Food Safety
    Practices (GAO-03-530).''
        GAO's recommendation that USDA provide local school authorities
    with information and guidance on incorporating these more stringent
    safety provisions in their procurement contracts is currently being
    addressed. First Choice: A Purchasing System Manual for School Food
    Service has been revised and published by the National School Food
    Service Management Institute (NFSMI). NFSMI is currently working on a
    food safety supplement to First Choice that provides information on how
    to apply food safety to food purchasing including guidance on food
    safety procurement language that schools could use in developing their
    contracts. This supplement will be made available to every local school
    as a technical resource in the fall of 2003. Development and
    distribution of these NFSMI products are fully funded by USDA.
        The suggestion to share inspection records was not raised in either
    exit conference or in the statement of facts that GAO provided. We feel
    that sharing inspection records with schools would not be an effective
    or efficient means of helping them make purchases, as these records are
    complex and voluminous. AMS conducts lengthy and rigorous screening of
    potential vendors and considers many factors, including inspection
    records, before admitting a vendor to the Approved Vendor List. That
    list, which may be useful to schools, is available on the AMS website.

                   USDA COMMODITY STANDARDS FOR LOCAL SCHOOLS

        Question. What would be the health benefits of incorporating USDA's
    donated commodity standards into local schools' food-purchasing
    contracts?
        Answer. There would be little or no health benefits of
    incorporating USDA's donated commodity standards into local school food
    purchasing contracts, as the more stringent safety standards only apply
    to USDA commodities of ground meats, turkey, some egg products, frozen
    cooked diced chicken, and canned fruits and vegetables. Otherwise, all
    foods supplied through the USDA commodity donation program have the
    same safety standards as are required for commercially available foods.
    Schools, for the most part, choose to use their entitlement money to
    purchase those products that are more stringently regulated (ground
    meats, turkey, some egg products, and frozen cooked diced chicken), and
    purchase very little of those same foods from the commercial market.
    Schools make direct purchases of foods such as fresh dairy products,
    fresh bread and other baked goods, additional fresh, frozen, or canned
    fruits and vegetables, and staples, such as salt, sugar, seasonings,
    and spices, for which no more stringent specifications are available at
    the Federal level.

                         SCHOOLS ACCESS TO SAFETY DATA

        Question. Would school officials be able to make better purchasing
    decisions if they had access to companies' safety data? What barriers
    (legal or otherwise) are preventing USDA from implementing these
    recommendations?
        Answer. No, we believe giving schools access to companies' safety
    data would prove to be overwhelming and not informative. If the
    assumption is that these records would lead school officials directly
    to a decision to purchase or not to purchase, there is no single set of
    inspection records that could be used to arrive at that conclusion. As
    noted above, heavily regulated foods supplied through the commodity
    program are more stringently governed by food safety measures. Other
    food items supplied by USDA or purchased commercially by schools meet
    all of the current safety standards as are required for all
    commercially available foods.
        One barrier to providing inspection and safety records is that this
    data is voluminous, complex, and requires specialized knowledge of the
    subject in order to be properly interpreted. Another barrier is that
    this information would need to be screened and, in some cases
    ``sanitized,'' to protect confidential and proprietary commercial
    information, or other protected information, from release.

                             SAFE FOODS IN SCHOOLS

        Question. What other methods could be employed to ensure that
    schools are purchasing and preparing the safest foods possible for the
    school lunch program?
        Answer. We believe that training school food service staff is the
    key to ensuring that schools are purchasing and preparing safe foods.
    Administering State agencies provide training to school food service
    personnel on an on-going basis. To support training in the areas of
    safe food purchasing and food handling practices, FNS has worked
    closely with the National Food Service Management Institute (NFSMI) to
    provide guidance and seminars to complement State agency training
    endeavors.
        NFSMI is a key resource for food safety materials, education and
    training for food service personnel in our nutrition programs.
    Established by Congress in 1989, the Institute recently created a
    network of Hazard Analysis and Critical Control Points (HACCP)
    instructors to train school food service employees in HACCP principles,
    and developed a manual and teleconferences to train food service
    managers in responding to a food recall or emergency readiness crisis.
    In addition, NFSMI has been active in developing procurement materials
    including the manual, First Choice, A Purchasing Systems Manual for
    School Food Service which was originally published in 1995. Since its
    publication, over 2,000 school food service professionals have attended
    seminars using the manual as a reference. This training effort
    reinforces the concept that food procurement is integrally related to
    food safety. Emphasis is placed on bid specifications, laboratory
    testing of products, food recall procedures, and receiving and storage
    of foods.
        FNS's Team Nutrition developed a complementary manual, Serving It
    Safe: A Manager's Tool Kit to assist food service managers to implement
    a comprehensive sanitation and safety program in the cafeteria.
    Emphasis is placed on identifying key phases and critical control
    points in the food preparation process and identifying methods of
    preventing problems during each phase of the process. FNS continues to
    develop materials to educate food service personnel on food safety
    issues and to emphasize the importance of the safety of the food in
    school meals. We have distributed irradiation pamphlets; bio-security
    guidelines for school food service; ``Fight BAC'' food safety posters
    and pocket cards; ``Thermy'' pocket card, poster and magnet; and a
    manager's checklist.
        FNS is providing funding to the NFSMI for various food safety
    projects including: creation of a Hand Washing Video and Poster, adding
    hazard analysis and critical control points information to all USDA
    recipes, and updating Serving it Safe--A Manager's Toolkit.
        While we will continue to provide materials and guidance and to
    work with States to educate school food service personnel on food
    safety issues, we also believe that the reauthorization of the Child
    Nutrition Programs offers an opportunity to reaffirm the importance of
    food safety. We would support requiring all school food authorities to
    employ approved HACCP procedures in the preparation and service of
    meals, to ensure that every meal is prepared under the safest, most
    wholesome conditions possible.
                                     ______

                   Questions Submitted by Senator Tim Johnson

                 COUNTRY OF ORIGIN LABELING--CONSUMER BENEFITS

        Question. A study from the International Agricultural Trade and
    Policy Center at the University of Florida was released yesterday
    concerning the benefits and costs of mandatory COL. This is the only
    comprehensive, independent study on COOL that covers the benefits of
    labeling, and also provides a legal analysis to guide regulators at
    USDA in the implementation of the rule. No other report exists other
    than those paid for by lobbying groups and opponents of COL.
        The report contains very encouraging news about consumer
    willingness to pay for beef containing a U.S. label. It suggests the
    benefits of COL for beef may total between $3 and $6 billion if you
    extrapolate the consumer willingness to pay a 10 percent premium for
    steaks, 10 percent premium for roasts, and a 24 percent premium for
    hamburger. (We know from a recent Colorado State study consumers are
    willing to pay those premiums for beef with a U.S. label.) Finally, the
    University of Florida report suggests labeling won't cost $2 billion,
    but rather between $70 and $200 million.
        I encourage USDA to review this study and glean useful information
    from it.
        Has USDA ever studied the benefits of COL? If not, why?
        Answer. USDA has conducted studies that examined the benefits of
    Country of Origin Labeling (COOL). The Conference Report accompanying
    the Agriculture, Rural Development, Food and Drug Administration, and
    Related Agencies Appropriations Act, 1999 directed the Secretary of
    Agriculture to conduct a study on the potential effects of mandatory
    country of origin labeling of imported fresh muscle cuts of beef and
    lamb until such products reach the ultimate consumer. As directed,
    USDA's Food Safety and Inspection Service released a report entitled
    ``Mandatory Country of Origin Labeling of Imported Fresh Muscle Cuts of
    Beef and Lamb'' in January 2000. The findings of the report relate to
    benefits, costs, implications for international trade, and stakeholder
    views.
        To fulfill requirements of the Paperwork Reduction Act of 1995
    (PRA), USDA estimated the annual reporting and recordingkeeping burden
    associated with the voluntary COOL program published on October 11,
    2002. The PRA requires the estimation of the amount of time and related
    cost necessary for participants to comply with a program, but does not
    require the determination of any benefits that may be attributed to a
    program.
        In the process of promulgating the regulations to implement
    mandatory COOL, USDA will prepare a cost/benefit assessment. We have
    received many comments on the initial reporting and recordkeeping
    burden estimates, which combined with information gleaned from
    available studies, the voluntary COOL program, and other public and
    private data, will assist us in examining both the benefits and costs
    of mandatory country of origin labeling.
        Question. Do you agree that the consumer demand for knowing the
    country of origin of the food they feed their children is very
    substantial?
        Answer. Many groups, including consumers and industry associations,
    have expressed an intense interest in the value of country of origin
    labeling.
        Question. Do you agree that there may well be a significant
    willingness on the part of consumers to pay for information about the
    origin of the food they feed their families?
        Answer. This will be one of the issues that will be examined when
    the requisite cost/benefit analysis is conducted as part of the
    mandatory rulemaking.
        Question. Do you agree that more consumer information about their
    food is better than less information?
        Answer. In general, consumers benefit from having more information
    on which to base their purchasing decisions. However, the costs of
    providing the additional information must be considered as well as the
    benefits.
        A recent independent consumer survey conducted by economists at
    Colorado State University indicated that of those surveyed, 75 percent
    of consumers prefer mandatory COL for beef. Other findings included: 73
    percent of consumers were willing to pay an 11-percent premium for
    steak and a 24-percent premium for hamburger with a ``U.S.'' label and
    21 percent of the consumers surveyed preferred COL for beef because
    they want to support U.S. ranchers--they prefer to buy American meat
    from American producers.
        Question. Has USDA reviewed this consumer survey, will you consider
    these consumer benefits as you write the final rule, and do you agree
    with the results from the survey?
        Answer. As part of the rulemaking process, USDA will prepare a
    detailed cost/benefit analysis utilizing all of the pertinent
    information available, including the Colorado State University survey.
    However, the researchers who conducted this survey recently issued a
    fact sheet about the appropriate use of the survey data and stated that
    results of the study ``were not intended to and should not be used to
    establish COOL policy or cost benefit analysis.''

                   COUNTRY OF ORIGIN LABELING--PACKER THREATS

        Question. My constituents are very supportive of COL, but are very
    concerned about the abusive letters sent by meat packers saying that
    the packers intend to conduct random private audits of farmers and
    ranchers for compliance. The law was carefully written to prohibit on-
    farm, mandatory animal identification and it doesn't permit third-party
    audits mandated by packers.
        What provision of the COL law leads USDA or the packers to believe
    mandatory third-party audits are permissible?
        Answer. While Section 282(f)(1) of the law expressly prohibits USDA
    from using a mandatory identification system to verify country of
    origin, the law does not contain any language prohibiting the industry
    from using whatever method industry participants deem appropriate,
    including the use of third-party audits, to verify the country of
    origin information they receive from their suppliers (i.e. producers).
        Question. Why do you believe it is reasonable for a packer to
    require a third-party audit of a farm when existing USDA programs to
    track origin and other information (USDA grading system, Certified
    Angus Beef program, school lunch program) do not allow for a similar
    requirement?
        Answer. The COOL law requires suppliers to provide country of
    origin information to retailers. Retailers and their suppliers are
    subject to fines of up to $10,000 per violation under the law.
    Therefore, it is reasonable to expect that industry participants will
    take the steps necessary to ensure themselves that they are in
    compliance with the law. In order for retailers to make accurate origin
    claims, suppliers must have proper documentation to verify ``born,
    raised, slaughtered'' information. Such documentation can only be
    provided by producers that have first-hand knowledge of where an animal
    was born.
        The USDA grading system, Certified Angus Beef program, and school
    lunch program are command-and-control type systems that can only be
    utilized in conjunction with a mandatory identification system. Because
    USDA itself administers these systems, third-party audits by packers or
    other entities would be redundant.
        Question. Do you agree with me that the prohibition of a mandatory
    animal identification system in the COL law means that USDA cannot mark
    product to trace the farm of origin but can mark product, including
    animals, to show the country of origin?
        Answer. This provision states that USDA ``shall not use a mandatory
    identification system to verify the country of origin of a covered
    commodity.'' The provision is not limited to mandatory animal
    identification systems and prohibits USDA from mandating any type of
    identification system to verify the country of origin.

            COUNTRY OF ORIGIN LABLEING--RECORDKEEPING/IMPLEMENTATION

        Question. Livestock producers currently maintain birth, health,
    sales, breeding, feed, beef quality, veterinary, and inventory records
    on the cattle, sheep, and hogs they own. I intend for producers to be
    able to self-certify this information which can be utilized to help
    verify the origin of animals for COL.
        Does USDA believe this type of information that a majority of
    producers already maintain is sufficient to comply w/COL?
        Answer. USDA believes that in general, these types of records are
    useful in verifying the origin of animals for COOL. However,
    maintaining documents and records such as those listed will not
    necessarily ensure compliance. During a compliance audit conducted by
    USDA, auditors will review and assess any and all documents and
    information to the extent necessary to arrive at an accurate decision
    on compliance.
        Question. If not, what additional information do you believe you
    will require?
        Answer. Because of the diversity in industry operations, we cannot
    predetermine precisely what documents will be necessary to verify
    origin claims.
        The COL law gave USDA discretion to create an audit verification
    system (not a mandatory system!) to help verify the origin of
    livestock. We included many existing industry practices and USDA
    programs to model in order to achieve voluntary audits. Some of these
    models include: the USDA grade stamp system--i.e. Choice, Select, etc,
    Certified Angus Beef and other breed programs, Beef Quality Assurance,
    Hazard Analysis Critical Control Points--HACCP, the national school
    lunch program, the Market Access Program, and, the voluntary ``Born and
    Raised in the USA'' label used by Carolyn Carey of California).
        Question. To what extent is USDA using existing models to implement
    COL?
        Answer. While the law provides USDA with the authority to require
    and enforce retail labeling, it does not provide USDA with the
    authority to certify and control the movement of products from
    production through retail sales. A necessary component of the models
    referenced is a mandatory identification system, which USDA is
    prohibited from requiring, to verify country of origin claims. Thus,
    none of these models could be used to implement COOL.
        Recently, I discovered that for one beef carcass, packers track up
    to 2,500 different products--called stock keeping units. Packers
    segregate beef products by owner, type, breed, grade, and special
    company brands or labels they use to market the beef they sell. All of
    this information is computerized and records are kept by the company.
        Moreover, a sticker is placed on every beef carcass which includes
    an identification number for the carcass and the packing plant number.
    This data is read from each sticker/carcass and downloaded into the
    company's computer system. Boxed beef items are shipped to their final
    destination according to a complex computerized routing system. The
    boxes of beef contain labels denoting a wide array of data, including:
    cut of meat, breed of animal meat is derived from, final destination
    (whether for export, a grocery store, or wholesaler), special company
    labels, packing plant, quality grade of meat, and weight among other
    information.
        All of this data is stored on a bar code included on every label
    placed on the boxed beef. It is my belief that while tracking animals,
    carcasses, and meat for COL will include costs, it isn't impossible and
    it can be done knowing they track so many other bits of information for
    their business operations.
        Question. If packers are tracking enough information to keep track
    of 2,500 different products from one beef animal, how are we to believe
    it's virtually impossible and exorbitantly costly for them to also
    track the origin of the animals?
        Answer. The level of complexity in the packing industry will be a
    function of the variation of the number of different origins and the
    number of products they process. In addition to maintaining an accurate
    recordkeeping system, packers that handle products from more than one
    country of origin will be required to have a segregation plan to
    maintain the identity of the origin of the product. Facilities may need
    modifications to permit product segregation, and there may be
    additional costs associated with handling, employee training,
    marketing, invoicing, shipping, etc. Products that may be of mixed
    origin, such as ground beef, add additional complexity to process
    needed to ensure credible country of origin labeling claims.
        Question. Do you agree that the food industry currently tracks a
    large amount of data (at least 2,500 products just for one beef animal)
    about their product so that a whole new record keeping system is NOT
    required, but merely an adjustment to current records?
        Answer. USDA does not believe that records pertaining to the origin
    of covered commodities as defined by the COOL law are already
    maintained by affected entities. While it may be possible for these
    entities to make modifications to their existing recordkeeping systems
    in order to meet the requirements of COOL, it is an additional burden
    that USDA must account for in the recordkeeping costs.
      tracking imports only for verification of country of orgin labeling
        Question. It has been pointed out to me that under Article 9 (IX)
    of GATT 1994, live cattle entering the United States can be marked as
    to their country of origin so long as the mark doesn't discriminate
    against, materially reduce the value of, or unreasonably increase the
    cost of the imported item. Indeed, last year the U.S. imported about
    800,000 calves from Mexico, and most of these calves were branded with
    an ``M'' to differentiate them from domestic cattle. This practice is
    in compliance with Article 9 of GATT.
        Several organizations have made a very compelling case to me that
    one way to reduce the implementation and tracking costs associated with
    COL is to have USDA require markings similar to the ``M'' applied to
    imports of Mexican cattle on all imported livestock. The rationale is
    that tracking these markings on imports will reduce overall costs for
    implementation. I believe the costs associated with tracking only
    imported animals for COL implementation--in accordance w/Article 9 of
    GATT--is a common sense approach to pursue which is permissible under
    the law and would reduce implementation costs because imported
    livestock are already marked as such.
         To what extent has USDA analyzed Article 9 of GATT to determine
    how to implement COL?
        Answer. In promulgating the regulations for the mandatory Country
    of Origin Labeling program, USDA will analyze the pertinent statutes
    that govern the marking of imported goods and will work with the Office
    of the U.S. Trade Representative to ensure that the United States is in
    compliance with all of the applicable trade laws.
        Question. Does USDA have a position on using Article 9 of GATT as a
    rationale to track only imported animals for COL implementation?
        Answer. The COOL law applies to all covered commodities and
    specifically identifies the criteria that products of U.S. origin must
    meet. While Article 9 of GATT may permit the marking of imported
    animals, the COOL law does not provide authority to control the
    movement of domestic or imported products and prohibits the use of a
    mandatory identification system, which would be required to track
    imported product through the entire chain of commerce.
        Question. Do you agree that virtually all imported covered
    commodities are currently marked as to country of origin and that such
    marks are specifically allowed by GATT and WTO rules?
        Answer. While products imported in consumer-ready packages are
    required to be labeled for origin, many imports undergo some type of
    transformation that eliminates the current requirement for labeling of
    origin. In addition, certain products such as livestock are currently
    on the ``J-List'' and are exempt from marking requirements.
        Question. In general terms, the United States only imports around 2
    million head of live cattle but slaughters 28 million head. Obviously,
    most of the cattle we slaughter are of U.S. origin. Doesn't it make
    sense to USDA that tracking the 2 million imported cattle would be less
    costly than keeping track of 28 million?
        Answer. While tracking only imported cattle may be less costly than
    tracking 28 million head, the law applies to all covered commodities
    and specifically identifies the criteria that product of U.S. origin
    must meet. The law does not provide authority to control the movement
    of products and prohibits the use of a mandatory identification system,
    which would be required to track product through the entire chain of
    commerce. Because the law requires country of origin labeling by
    retailers, compliance enforcement will begin at retail and will track
    the country of origin claims back through the production and marketing
    chain. Not all imported animals and covered commodities will be sold at
    retail, so there is little justification for requiring marking and
    tracking of all imported products.

                       COUNTRY OF ORIGIN LABELING--TRADE

        Question. Nearly 30 major trading Nations in the world have
    mandatory COL programs for food.
        Has the United States ever filed a complaint in the WTO against any
    of these foreign labeling requirements?
        Answer. The U.S. filed a complaint against certain trade practices
    followed by Korea, which included an import labeling component.
        Question. Has USDA reviewed any of these foreign labeling
    requirements so as to learn what pitfalls and/or success stories may be
    available regarding COL implementation?
        Answer. USDA has reviewed many existing labeling requirements,
    including State labeling laws. However, all of these labeling programs
    have different definitions and requirements that provide limited value
    in terms of implementing the specificity of origin in the COOL law.

                        COUNTRY OF ORIGIN LABELING--COST

        Question. Earlier this year USDA released a public cost estimate of
    $2 billion for implementation of COL. I can think of no credible
    organization that agrees with this exorbitant estimate.
        Through a Freedom of Information Act request, it was discovered
    that USDA only consulted with 3 organizations regarding the possible
    cost of COL--and all 3 were among the most powerful opponents of COL.
        The documents released to the Consumer Federation of America reveal
    USDA consulted with the National Meat Association (packers), the
    National Food Processors Association, and the National Pork Producers
    Council before developing the $2 billion cost estimate.
        Shortly thereafter, I wrote you a letter asking that you explain
    the methods USDA used to determine the initial cost of COL and why you
    apparently met only with opponents.
        You recently responded to my letter, assured me USDA would
    implement COL in a fair and balanced matter, and said USDA officials
    met formally w/29 different organizations and State programs regarding
    the cost estimate of COL, as opposed to just 3.
         How many of the 29 groups supported COL and would you provide me
    with a list of the 29 different organizations USDA met with to discuss
    cost issues?
        Answer. USDA was approached by numerous groups representing a
    variety of industry segments and we tried to meet with as many groups
    as possible. As the law had already been enacted, our discussions were
    focused more on the overall implementation of Country of Origin
    Labeling rather than the individual group's position on COOL. A copy of
    all of the groups we have met with to date is attached.
        [The information follows:]

    ------------------------------------------------------------------------
                    Event name                           Event dates
    ------------------------------------------------------------------------
    Food Labeling Conference..................  January 15
    R-Calf National Conv......................  January 23-25
    NAMP Executive Cmte.......................  January 27
    NCBA/CBB Conv. & Trade Show...............  January 29-February 1
    Northern VA Angus Assn....................  February 1
    Lancaster County Cattle Feeders Day.......  February 4
    National Grocers Assn./GRLC...............  February 4
    American Sheep Industry Assn. Annual Conv.  February 6-8
    Congressional Research Service............  February 14
    California State Univ. @ Chico............  February 15
    American Farm Bureau Federation...........  February 16-20
    United Fresh Fruit & Vegetable Assn.......  February 21-24
    Agricultural Women's Leadership Network     February 24
     Forum.
    21st Century Pork Club....................  February 26-28
    National Meat Assn. MEATXPO 2003..........  March 2-5
    Kentucky Farm Bureau......................  March 3-6
    Joplin Regional Stockyards/Mo. Cattlemen's  March 11
     Assn.
    AMI/FMI/Topco Meat Conference.............  March 9-11
    South Dakota Briefing--Farm Bill/USDA       March 11
     Programs & Services.
    International Boston Seafood Show.........  March 11-13
    National Lamb Feeders Assn................  March 13-15
    House Ag Committee Briefing...............  March 17
    Virginia Farm Bureau......................  March 18
    AAEA/FAMPS Food Labeling Conf.............  March 20-21
    Oklahoma Ag Leadership....................  March 20
    Texas Southwest Cattle Raisers Assn.......  March 23-26
    Haverlah Ranch--Powderhorn Cowbelles......  March 25
    Missouri Cattlemen's Association..........  March 25
    International Meat Secretariat/OPIC         March 30-April 1
     Regional Meeting.
    Missouri Stockgrowers Assn................  April 10-12
    National Cattlemen's Beef Assn., Spring     April 11
     Conference.
    NFI Spring Conference.....................  April 11-16
    NAFTA Workshop............................  April 23-26
    Federal Food Regulatory Conf..............  April 28
    American Farm Bureau Federation...........  May 6
    ------------------------------------------------------------------------

                           2003 LIVESTOCK FEED PROGRAM

        Question. On August 12, 2002, you announced $150 million in feed
    assistance for producers in Colorado, Nebraska, South Dakota, and
    Wyoming. This assistance was provided in the form of $23 feed credits
    for producers to use at their local feed supply store. At the same
    time, USDA was sending participating feed mills surplus nonfat dry milk
    stocks to be used in manufacturing the feed. In a press release issued
    by your office, it was stated that the four States chosen to
    participate in the program was because they were the hardest hit by the
    drought, with at least 75 percent of the pasture and forage crops rated
    poor or very poor.
        The data made available by NASS indicates pasture in South Dakota
    was rated 59 percent poor or very poor the week of April 8, 2003, when
    the new Livestock Feed Program was announced. Additionally, feed
    supplies and stock water supplies jumped from an average of 4.5 percent
    very short in 2002 to an average of 23.5 percent very short in 2003.
    Yet it appears data of this sort was not taken into consideration in
    determining how producers would be eligible for the new feed assistance
    program.
         If the entire State of South Dakota was eligible for the 2002
    Cattle Feed Program and little if any precipitation has fallen since
    then, how can you justify excluding over three-fourths of the State
    from the 2003 feed assistance program?
        Answer. In mid-April, when criteria for the 2003 Nonfat Dry Milk
    Feed Program were established, the previous 6 months' moisture
    accumulation data was used, specifically the U.S. Drought Monitor. In
    order to best utilize the available surplus stocks of non-fat dry milk,
    only the areas suffering the most according to the monitor were
    determined eligible.
        Question. Why did the Department choose a different drought data
    source (Drought Monitor) for the 2003 program, which excludes over
    three-fourths of the producers that had been eligible for the 2002
    program?
        Answer. This program was established early in the spring before
    there was any new growth of pasture. The other program was established
    in late summer after pasture losses were known. Therefore, the criteria
    based on the U.S. Drought Monitor were utilized.
        Question. How does the Department plan on providing assistance to
    producers who have no feed source for 2003 but were excluded from this
    recently announced program?
        Answer. Under the Nonfat Dry Milk Feed Program, conditions are
    monitored on a monthly basis, and the program will be available in
    areas of persisting drought and inadequate grazing due to the drought.

                               PUBLIC TV QUESTION

        Question. Secretary Veneman, as you may know, public television
    stations are facing a Federal mandate to convert all of their analog
    transmission equipment to digital. The deadline for public television
    stations to make this conversion recently passed on May 1, 2003. 195
    stations have filed with the FCC for extensions of the deadline. Of the
    stations that cited financial hardship as reason for a waiver, 70
    percent of them serve predominately rural areas.
        Last year, members of this committee recognized that public
    stations serving rural areas would experience financial hardship as one
    of the obstacles to meeting the Federally mandated deadline. To assist
    the stations, the committee included $15 million in the Distance
    Learning and Telemedicine program specifically to address these needs.
        It is my understanding that the committee staff has recently met
    with both budget officers and attorneys in your department about fund
    for this purpose. Further, I understand that you agency has neglected
    to develop a plan for awarding these funds.
        Can you explain the delay?
        Madam Secretary, it is my understanding that the reason for the
    delay in awarding these funds is because your department does not feel
    that there is significant congressional direction to implement this
    program for public television.
        I have read both the Senate report language as well as the Omnibus
    report language and I think that Congress was explicit in their intent
    to award these funds.
        I might add that we put those funds in there for this specific
    purpose--to provide funding for rural public television stations.
        Question. Secretary Venemen, can you explain why you are choosing
    to ignore a directive from this committee?
        Answer. The 2003 Agriculture Appropriations Act provides
    $56,941,000 for the Distance Learning and Telemedicine Program. It
    specifically enumerates that $10 million of these funds are to be used
    for grants to support broadband transmission and local dial-up Internet
    services for rural areas. It is, however, silent concerning translators
    for digital conversions. There is language in the Senate Appropriations
    Committee Report and a reference in the Statement of Managers that
    accompanies the Conference Report that both sets out the $15 million
    and refers to conversion to digital translators.
        Rural Development is aggressively seeking the implementation of a
    Notice of Funds Availability (NOFA) that would make this funding
    available this summer. The NOFA will outline funding parameters and set
    forth eligibility requirements to allow for the most equitable
    distribution of this grant funding.
                                     ______

                 Questions Submitted by Senator Robert C. Byrd

                                 ANIMAL WELFARE

        Question. In the Fiscal Year 2003 Omnibus Appropriations bill, $5
    million was secured for the hiring of at least 50 new Humane Slaughter
    inspectors within the Food Safety Inspection Service (FSIS) at the
    United States Department of Agriculture (USDA). Report language in this
    bill instructed these new inspectors to work solely on the enforcement
    of the Humane Slaughter Act. Prior to the $1.25 million allocation in
    the fiscal year 2001 Supplemental Appropriation bill for the hiring of
    17 District Veterinary Medical Specialists at FSIS to work solely on
    the enforcement of the Humane Slaughter Act, there were no inspectors
    employed exclusively for this purpose.
        Due to the late date on which the Fiscal Year 2003 Omnibus
    Appropriations bill was signed into law, language in the bill permitted
    the funding for inspectors to be used into fiscal year 2004. However,
    it has recently come to light that it is not the intention of the USDA
    to hire at least 50 new Humane Slaughter Inspectors with the funding
    that has been provided. Instead, it is believed that the USDA plans on
    hiring only 15 inspectors in fiscal year 2003, then in fiscal year 2004
    the USDA will retain these 15 inspectors while hiring an additional 20
    inspectors. While the USDA may claim that this qualifies as the minimum
    of 50 inspectors they are required to hire, this does not coincide with
    the original intent of the law.
         At this time, how many new Humane Slaughter Inspectors have been
    hired to work solely on the enforcement of the Humane Slaughter Act,
    funded through the $5 million provided for this purpose in the fiscal
    year 2003 Omnibus Appropriations bill? How many new inspectors will be
    hired by the end of fiscal year 2003?
        Answer. FSIS continues to increase agency efforts to ensure that
    all field personnel understand their authorities and rigorously enforce
    the Humane Methods of Slaughter Act. FSIS has recently hired 215 new
    line inspectors trained in humane handling methods and at this time,
    the systemwide FSIS effort devoted to humane handling and slaughter
    inspection is equal to 63 FTEs. In fiscal year 2002, the comparable
    level of effort equaled 25 FTEs carrying out humane handling and
    slaughter inspection, so the agency has added 38 FTEs in fiscal year
    2003. The agency expects that this number will continue to rise through
    fiscal year 2004 to meet and even exceed the requirement outlined in
    the fiscal year 2003 Omnibus Appropriations bill.
        Question. When will the USDA complete securing no less than the 50
    new Humane Slaughter inspectors as required by the fiscal year 2003
    appropriations bill and what is the schedule for hiring these new
    inspectors?
        Answer. The agency expects to meet the requirement in fiscal year
    2004 and even exceed the requirement outlined in the fiscal year 2003
    Omnibus Appropriations bill.
        When determining the amount of funding necessary to employ 50 new
    Humane Slaughter Inspectors at the Food Safety Inspection Service,
    officials at the USDA requested the amount of $5 million, indicating
    that it would be preferable to employ veterinarians in these positions,
    thus affecting the amount of funding that was allocated for these
    inspectors.
        Question. Are all of the new Humane Slaughter Inspectors, and those
    that have yet to be hired, veterinarians? If not, how many inspectors,
    above the 50 required by the fiscal year 2003 Omnibus Appropriations
    bill, are being hired?
        Answer. In fiscal year 2003, FSIS has hired 215 new line inspectors
    trained in humane handling methods and the systemwide FSIS effort
    devoted to humane handling and slaughter inspection is equal to 63
    FTEs. In fiscal year 2002, the comparable level of effort equaled 25
    FTEs carrying out humane handling and slaughter inspection, so the
    agency will have 38 FTEs in fiscal year 2003. The agency expects that
    this number will continue to rise through fiscal year 2004 to meet and
    even exceed the requirement outlined in the fiscal year 2003 Omnibus
    Appropriations bill.
        In addition to the 63 FTEs, FSIS veterinarians also conduct humane
    handling verification activities. FSIS' Veterinary Medical Officers
    (VMO) are assigned to all livestock slaughter facilities that also
    provide inspection oversight for humane handling and slaughter. FSIS
    employs 1,100 veterinarians, approximately 600 of which conduct on-
    going humane oversight verification duties in livestock plants.
        In order to ensure that adequate funding is available to maintain
    no less than 50 Humane Slaughter Inspectors throughout fiscal year
    2004, the future funding needs must be determined.
        Question. Given that the $5 million provided in the fiscal year
    2003 Omnibus Appropriations bill for no less than 50 new Humane
    Slaughter Inspectors has been made available through fiscal year 2004,
    will any additional funding be need to fulfill and maintain this
    requirement in fiscal year 2004? If so, how much funding is needed?
        Answer. FSIS has adequate resources to continue increasing agency
    efforts to ensure that all field personnel understand their authorities
    and vigorously enforce the Humane Methods of Slaughter Act.

                              COMPETITIVE SOURCING

        Question. The Office of Management and Budget (OMB) scores agencies
    on how well they comply with the President's Management Agenda.
    Agencies are encouraged to submit management plans to the OMB which
    incorporate the competitive sourcing quotas outlined in the President's
    budget. I understand that agencies within the Department of Agriculture
    are currently studying their workforces to find places where it would
    be appropriate for private contractors to take over agency functions.
        One example relates to potential outsourcing of technical
    specialists (such as soil scientists and other conservation
    specialists) of the Natural Resources Conservation Service. These are
    the very people who are responsible for transferring public
    conservation policy to private landholders through what has been one of
    the most successful public-private partnerships in history.
        Another example which many of my constituents are concerned about
    is the privatization effort within the U.S. Forest Service, but I
    believe this is an important issue for every agency in your Department.
    Regardless of the agency or the activity, the uncertainty and the
    employee level as to how agency outsourcing will evolve is having a
    horrific effect on morale. Given the loss of experienced agency
    personnel that will occur as a large number of employees reach
    retirement, we should be thinking of ways to retain experienced
    workers, not engage in practices which will erode their trust in
    personnel management.
        It is my understanding (from OMB) that these competitive sourcing
    plans, once they are submitted to the OMB for approval, can be released
    to the public at the discretion of the agency heads. If the Congress is
    to appropriate substantial funding for private sector employment
    opportunities, I expect that you will first provide Congress, and in
    particular this Committee, with a copy of any management plan or
    competitive sourcing proposal that the Department of Agriculture
    submits to the OMB.
        When do you expect to submit a management plan to the OMB, and how
    soon can you make that plan available to this Committee?
        Answer. I submitted a competitive sourcing plan to OMB in May 2002.
    This plan represents USDA's initial starting point for competitive
    sourcing. The Department expects to update this plan over the next
    several months. I will submit a copy of our May 2002 plan for the
    record.
        [The information follows.]

                             Department of Agriculture,
                                       Office of the Secretary,
                                        Washington, D.C., May 14, 2002.
    Hon. Mitchell E. Daniels, Jr.,
    Director, Office of Management and Budget, Washington, D.C.
        Dear Director Daniels: On January 4, we provided you with a summary
    of the Department's plan to meet the Administration's competitive
    sourcing goal by September 2003. Enclosed is a detailed plan of the
    specific positions we intend to compete or convert as part of Phase I
    of our plan.
        In addition, we are also now focusing on USDA-wide functions,
    including the structure and initiatives for county-based agencies. As
    we finalize the tasks, we will incorporate additional changes, as
    necessary, to our competitive.sourcing plans.
        If you have any questions, please contact Edward R. McPherson,
    Chief Financial Officer, at (202) 720-5539.
                Sincerely,
                                                Ann M. Veneman,
                                                             Secretary.

        Question. Secretary Veneman, how do you intend to quantify the
    collective experience and expertise of the public employees in your
    Department when determining their ``competitiveness'' in this process?
        Answer. We use the guidance and process in OMB's Circular A-76 when
    quantifying the experience and expertise of government employees in the
    competitive process. Circular A-76 requires that the government develop
    a Most Efficient Organization (MEO) to compete against private sector
    bidders. As part of that organization, the government develops a
    staffing plan, to include position descriptions that specify the level
    of expertise required to perform the work. If the government wins the
    competition, the new organization will be staffed from the personnel
    currently assigned within the organization.
        Question. To the extent that the Administration intends to pursue a
    policy of outsourcing, why is that policy not limited to new hires, as
    current employees retire, so as to not erode the morale of current
    employees?
        Answer. The Administration is pursuing a policy of competitive
    sourcing, not outsourcing. Where practicable, USDA has used and will
    continue to use current vacancies to minimize the impact of competitive
    sourcing on employees. However, limiting competitive sourcing only to
    vacancies could severely impact efforts to build better organizations
    across the department.

                              SUBCOMMITTEE RECESS

        Senator Bennett. Thank you for your persistence.
        Madam Secretary, we appreciate your appearance here. We
    appreciate the work that you do, and that all of your team
    does. I know this process sometimes gets untidy, and you will
    get more questions in writing that will add to the untidiness.
    But we are grateful to you and your staff for your ability to
    straighten this all out, and in the end, give us a result and a
    product that we can understand where you are.
        The subcommittee is recessed.
        [Whereupon, at 12:28 p.m., Thursday, May 8, the
    subcommittee was recessed, to reconvene to subject to the call
    of the Chair.]