[Senate Hearing 108-]
[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.]
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