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



 
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2005

                              ----------                              


                        THURSDAY, MARCH 25, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 1:36 p.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Robert F. Bennett (chairman) 
presiding.
    Present: Senators Bennett, Bond, Craig, Kohl, Harkin, 
Dorgan, and Durbin.

                       DEPARTMENT OF AGRICULTURE

                        Office of the Secretary

STATEMENT OF ANN M. VENEMAN, SECRETARY
ACCOMPANIED BY:
        KEITH COLLINS, CHIEF ECONOMIST
        STEPHEN DEWHURST, BUDGET OFFICER

    Senator Bennett. The Subcommittee will come to order, and 
we welcome you all here to the first hearing of the Agriculture 
Subcommittee of the Senate Appropriations Committee.
    Last year was a very challenging year, because our 
allocation was almost $1 billion less than the previous year in 
fiscal 2003, but with some heavy lifting and a lot of help by 
Senator Kohl, we managed to write a balanced bill that seemed 
to solve the problems, and we congratulated ourselves and 
thought that we had set the level that we might be asked to 
hold this year.
    However, the budget request for this year is over a half a 
billion dollars less than last year. So maybe there is no 
virtue, Senator Kohl, in having given at the office. They come 
back to us again. But we do not have our formal allocation, but 
at least from the budget request, it looks as if it is going to 
be even more challenging this year than it was last, and I very 
much appreciate the cooperation and continuing support that 
Senator Kohl has given.
    Before we begin, I would like to acknowledge the efforts of 
Secretary Veneman with respect to recently announced 110 metric 
tons of wheat destined for export to Iraq. This is a 
significant contribution toward moving Iraq in the direction 
which we want it to move, and we are grateful to the Secretary 
for her efforts in bringing that to pass.
    We have a host of issues that we are facing and expect to 
talk about many of them this afternoon, and so, with a lot of 
ground to cover, I would ask the witnesses if they would 
summarize their statements. And we will be using the 5 minute 
timer, both for opening statements and for questioning. We can 
do additional rounds if Senators wish to do that, but given the 
number of things we need to talk about, I would like to have 
the discipline of the 5 minute timer.
    And to try to set the example, I will now cease here and 
recognize Senator Kohl.
    Senator Kohl. I thank you, Mr. Chairman, Senator Bennett. I 
want to congratulate you for the superb job you and your staff 
have done in guiding this Subcommittee last year and for 
crafting the fiscal year 2004 bill under trying circumstances.
    Secretary Veneman, we want to welcome you and your 
colleagues to appear before us once again this year. We just 
passed through a most challenging year for USDA and all of us 
involved in U.S. agriculture. The year ahead shows no signs of 
relief. We will continue to focus on the needs of farmers and 
ranchers, invasive pests and disease, demands for food 
assistance, threats to public health and consumer confidence, 
notably the December discovery of mad cow disease, and many 
other challenges.
    However, the President has submitted a budget proposal for 
us for the second year in a row with major reductions, 
reductions which are among the very largest of any Federal 
department. Madam Secretary, we hope that you will be able to 
explain to us today why the budget for the Department of 
Agriculture continues on a severe downward slope. You are the 
primary spokesperson in this country for rural America, and 
your voice needs to be heard and heard loudly within the 
highest levels of the administration.
    As challenging as your tasks continue to be, Madam 
Secretary, our job this coming year will be no less difficult. 
Downward budget pressures on this Subcommittee will continue to 
make our choices difficult and leave our opportunities 
diminished.
    So, Mr. Chairman, I look forward to continuing our strong 
working relationship in order to meet the problems ahead of us.
    Thank you very much.
    Senator Bennett. Thank you, Senator. I appreciate that very 
much.
    Senator Craig.
    Senator Craig. Mr. Chairman, thank you. I will be brief.
    We are anxious to hear your testimony. As I have done 
privately, let me publicly again congratulate you, Madam 
Secretary, for your leadership in several areas, but most 
important to my state and I expect to the State of Utah and to 
Senator Kohl's state was I think the masterful way that USDA 
and you handled the issue of mad cow.
    I say so because it was a volatile issue. You stayed on top 
of it. You were quick to demonstrate to the American consumer 
the safety of the American meat supply while at the same time 
moving judiciously and responsibly to get it under control. So 
my congratulations to you on that.
    I am, as most of us are, extremely frustrated by some 
things going on in farm country today against production 
agriculture; that is, outside their control. While we look at 
the increase of $4 billion in mandatory spending in your budget 
and about a $720 million decrease in discretionary outlays, 
that is no small sum and a very real frustration as we try to 
solve a couple of issues or work with Agriculture to do so.
    Let me point out a couple of them. In the 2002 Farm Bill, 
we worked hard to improve the energy title. We were not able to 
do that. We will work again to be able to do that this year, to 
extend larger loans, guarantees and grants to farmers and 
ranchers and rural businesses purchasing renewable energy 
systems, because energy has become a huge factor in production 
agriculture at this moment, and it will be in the near future.
    Yesterday, Madam Secretary, I was visiting with a banker 
from Idaho who extends a lot of lines of credit to Idaho 
agricultural producers. He said he had just called all of his 
managers of the branches together on a conference call and 
asked them to examine all of the lines of credit of his farmers 
this year, and if those lines would handle at least a 20 
percent increase based on one sole input factor: energy and the 
cost of energy.
    Energy as an input part of production agriculture this year 
will go up between 25 and 30 percent at the farm gate. Nothing 
will offset that. There is not a commodity out there that is 
going to increase enough this year in any way to offset that. 
And that is a direct response to the inability of this Congress 
to produce a national energy policy and get us back into the 
business of production.
    Let me give you one other figure that has just come out. In 
the 46 months since 2000 until today, increased natural gas 
prices have taken $130 billion out of this economy: in 
industrial consumers, $66 billion; residential consumers, $39 
billion; commercial consumers, $25 billion. Shame on Congress. 
Shame on those who stand in the way of energy production in 
this country today.
    And what does that do to the farmer? You and I both know. 
The input cost of fertilizer this year, 100 percent up from a 
year ago; 100 percent. Now, that will do one of two things. 
First of all, the farmers I talk to are saying we are not 
buying forward; we are buying it as delivered. We will use much 
less fertilizer this year than we did last. Maybe in some 
areas, that is okay. But it runs the risk of the overall 
production in agriculture dropping this year as it relates to 
the ability to produce at certain levels, and those margins of 
production, in some instances, were the margin of 
profitability, and now, you drive that cost of production up, 
and so, you ultimately drive production down because of its 
cost factors.
    You have no control of the price of energy, nor does this 
administration. But the Congress has fumbled and fumbled and 
fumbled once again, and for 10 years, we have debated national 
energy policy. We have done nothing since 1992 in any positive 
way as it would relate to the increased production of energy.
    How do we, then, for the American farmer, offset those 
dramatic increases in production costs? That is a phenomenal 
challenge for you and for this Congress in difficult budget 
times. So shame on Congress for standing in the way of this 
country beginning to produce once again for its consumer and 
especially for American agriculture.
    Thank you, Mr. Chairman.


                          prepared statements


    Senator Bennett. Thank you very much, Senator Craig.
    The Subcommittee has received statements from Senators Byrd 
and Johnson which will be placed in the record.
    [The statements follow:]

              Prepared Statement of Senator Robert C. Byrd

    Secretary Veneman, thank you for coming before this committee 
today.
    Over the past 3 years, I have made funding for the proper 
enforcement of the Humane Methods of Slaughter Act one of my top 
priorities. In the fiscal year 2001 supplemental appropriations bill, I 
secured $1.25 million for the hiring of 17 District Veterinary Medical 
Specialists at the Food Safety Inspection Service. Report language 
accompanying that bill instructed these new inspectors to work solely 
on the enforcement of the Humane Methods of Slaughter Act. Prior to my 
securing this funding for DVMS personnel, there were no inspectors 
employed by the USDA exclusively for this purpose.
    During the consideration of the fiscal year 2003 omnibus 
appropriations bill, the Senate included, at my request, $5 million for 
the hiring of at least 50 full-time equivalent humane slaughter 
inspectors also for the sole purpose of humane slaughter enforcement. 
The fiscal year 2004 omnibus appropriations bill includes continued 
funding for the 50 full-time equivalent humane slaughter inspectors and 
the 17 District Veterinary Medical Specialists.
    Last year, Secretary Veneman, when you testified before this 
committee, I expressed my deep concern about the proper use of the $5 
million for at least 50 full-time equivalent humane slaughter 
inspectors by the U.S. Department of Agriculture. The purpose of this 
funding is to ensure that the industry works to minimize pain and 
suffering of defenseless animals. By adding 50 full-time equivalent 
inspectors devoted exclusively to enforcing humane slaughter methods, 
along with 17 District Veterinary Medical Specialists, the USDA will 
finally have the resources to enforce a law that was enacted nearly 25 
years ago.
    Earlier this year I was pleased to learn that the 50 FTE inspectors 
are now in place at the USDA. The Department is now heading down the 
right path with regard to humane slaughter enforcement. But there is 
still more that can and needs to be done to eliminate operations that 
raise and slaughter livestock in unspeakable conditions--conditions 
where the animals do not even have room to lie down and where animals 
are not properly stunned before beginning the process of dismemberment. 
Such facilities are operating illegally and it is the responsibility of 
the USDA to identify these violations and stop the production line when 
violations are observed. Today it is my hope that we will hear from 
you, Madame Secretary, about the progress that has been made by the 
USDA over the last year regarding humane slaughter enforcement with the 
funding this committee provided, and how the USDA plans to continue to 
improve its enforcement of the Humane Methods of Slaughter Act with 
future funding.
                                 ______
                                 

               Prepared Statement of Senator Tim Johnson

    Mr. Chairman and Members of the Agriculture Appropriations 
Subcommittee, I appreciate the opportunity to submit a statement at 
today's hearing, and address important issues for our Nation's farmers 
and ranchers. As the Senate considers the fiscal year 2005 Agriculture 
Appropriations bill, I find several issues at the forefront for the 
producers in my home state of South Dakota and across the Nation. I 
would like to take this opportunity to address these important issues, 
and question United States Department of Agriculture Secretary Ann 
Veneman on the Department's action, or in some unfortunate 
circumstances, inaction, on these concerns.
    Country of origin labeling (COOL) remains an overwhelmingly popular 
concept with American consumers and producers. Not only would this 
provision facilitate consumer choice and confidence, it would also be 
greatly beneficial for our Nation's producers and the agricultural 
economy in general. The General Accounting Office (GAO) study that I 
requested during the summer of 2002, along with my colleague Senator 
Tom Daschle, confirms that COOL would be feasible to implement not only 
from a budget perspective, but also by incorporating existing regional 
and state programs for record-keeping and tracking purposes. GAO found 
that ``USDA used higher estimates of the hourly cost of complying with 
the recordkeeping requirements of the COOL law than it used in 
developing similar estimates for other programs and it has no 
documented evidence to justify these differences.''
    The Administration's handling of the country of origin labeling 
delay, in addition to their position on the country of origin labeling 
debate, has consistently been problematic and difficult. While 
opponents of COOL were successful in securing a 2-year delay on 
implementation of labeling for meat and produce, many unanswered 
questions still exist regarding what type of delay was enacted. While 
the mandatory date of implementation was postponed for 2 years, I 
believe the rulemaking process has remained unhindered by the delay 
language included in the 2004 Omnibus Appropriations measure. I wrote 
USDA on December 11, 2003, requesting clarification of the department's 
interpretation of the language delaying the implementation of COOL. I 
was greatly disappointed by the vague and ambiguous response in the 
letter I received dated February 10, 2004.
    To deny country of origin labeling to America's consumers and 
producers is unacceptable; for USDA to remain evasive and unresponsive 
in attending to this issue is inexcusable. I intend to seek 
clarification of the rule pertaining to the delay. My first meat 
labeling bill was introduced in the House of Representatives 12 years 
ago, in 1992, and I will persist in working to speed up implementation 
of this invaluable and effective law with my colleagues. A majority of 
producer groups support implementation of COOL and consumers are 
expecting swift implementation. Country of origin labeling should be 
implemented for all products in a timely fashion, not only for the fish 
producers whose special interests were represented during closed-door 
consideration of the fiscal year 2004 Omnibus Appropriations bill.
    Furthermore, I am very concerned that an adequate amount of funds 
be available for small and medium-sized producers. Our family farmers 
and ranchers in South Dakota and across the Nation deserve adequate 
representation in the fiscal year 2005 Agriculture Appropriations bill. 
I was pleased to see that Senator Charles Grassley's (R-Iowa) 
amendment, which would alter payment limitations and cap excessive 
compensation to large farms, was adopted on this year's budget 
resolution. I support this amendment. This funding would instead be 
channeled toward worthwhile and essential conservation and development 
programs, which are beneficial to producers in South Dakota and across 
the Nation.
    With respect to the President Bush's budget recommendation, the 
President has cut spending to seven of the fifteen Cabinet level 
agencies, including an unacceptable 8.1 percent cut to agriculture and 
an astounding 10 percent cut to rural development programs. 
Conservation programs have experienced a 12 percent cut, and research 
has been cut by 3 percent. Our rural communities are irreplaceable, and 
regardless of budgetary constraints, we must place a high priority on 
rural America. It is an essential component for a stable and productive 
Nation.
    Furthermore, we must ensure that a marketplace exists for the 
quality products our Nation's farmers produce, and we must ensure that 
consumer confidence in our food supply remains high. I sent a letter to 
President Bush requesting that he make funding for meat and livestock 
testing a priority in his fiscal year 2005 budget request. USDA's 
budget includes $60 million in new spending for Bovine Spongiform 
Encephalopathy (BSE) related programs, while allotting $17 million for 
an additional 40,000 BSE tests a year. While I am pleased to see an 
increase in funding for animal disease measures, there are several 
problematic aspects of testing which must be resolved. Animals can only 
be tested after slaughter, and it can take up to two weeks to receive 
test results. USDA should be committed to the development of a rapid, 
live test, which is an endeavor that we cannot afford to compromise. 
Producers in my home state of South Dakota continue to suffer from 
closed export markets, and USDA must do everything they can to ensure 
the viability of our agriculture economy.
    Additionally, the President's budget includes $33 million for the 
development of a national animal identification program. I am concerned 
that we have no information as to how this money will be spent, nor do 
we have any knowledge of how this system will work. It is my 
understanding that at the March 4, 2004, Senate Marketing, Inspection, 
and Product Promotion Subcommittee oversight hearing on a national 
animal identification plan, USDA's testimony left a lot to be desired. 
The broad statement that was given provided little substantive 
information on issues of cost and transparency. Cost estimates are all 
over the board, and are often twice the amount allotted by the 
President's budget. This lack of consistency is disturbing.
    Implementing a national animal identification program is a 
substantial endeavor with direct impacts on our Nation's farmers and 
ranchers, and we must ensure that the process by which this system is 
established is open and transparent. It is imperative that an animal 
identification system is effective and feasible for all parties 
involved. Questions regarding confidentiality and cost to the producer 
are still answered. It is my hope that USDA will work jointly with the 
affected parties to arrive at a sound system.
    In conclusion, I am hopeful that USDA will respond appropriately to 
the looming concerns for our Nations' farmers and ranchers. I will do 
everything possible to ensure they get a fair deal and are well-
represented as Congress considers such important issues, which will 
affect their bottom line and productivity.
    Senator Bennett. Secretary Veneman, when I talked about 
opening statements to 5 minutes, I did not mean you.
    Secretary Veneman. Oh, good. I was panicking.
    Senator Bennett. You were panicking; all right.
    We will give you 6\1/2\ minutes.
    No, we appreciate your being here, and we recognize that 
while you will, I am sure, submit your written statement for 
the record, we want to give you ample time for your verbal 
statement, and we now turn to you and very much appreciate your 
appearing here.

                      STATEMENT OF ANN M. VENEMAN

    Secretary Veneman. Thank you very much, Mr. Chairman and 
members of the Committee. It is a pleasure to be with you 
today. I appreciate the opportunity to appear before you today.
    Senator Bennett. I do not think your microphone is on. 
There is a button to press.
    Secretary Veneman. Okay.
    Senator Bennett. That helps, yes.
    Secretary Veneman. I want to thank the Subcommittee and 
each of you for the support of the Department and for the 
support of American agriculture, and we look forward to 
continuing to work with all of you as we craft the 2005 budget.
    As you indicated, we have a longer statement for the 
record, and we would ask that it be included in the record. But 
I wanted to provide a quick overview of what our budget does 
provide. First, it is consistent with the policy book that we 
put out at the beginning of this Administration, Food and 
Agriculture Policy: Taking Stock for the 21st Century, and it 
supports USDA's strategic plan, both of which are designed to 
enhance economic opportunities for agricultural producers, 
support increased economic opportunities and improve the 
quality of life in rural America, protect America's food supply 
and our agriculture system, improve nutrition and health; and 
conserve and enhance our natural resources and environment.
    As you know, we are in a time of fiscal constraint. The 
President has proposed a responsible budget across the Federal 
Government, which holds non-defense and non-homeland security 
discretionary spending increases to no less than 1 percent. At 
the same time, his budget funds key priorities such as 
continuing the war on terror, protecting homeland security, 
strengthening the economy and jobs and health care 
affordability.
    His budget puts our Nation on track to reduce the deficit 
by one-half within 5 years. The budget for USDA faces those 
same fiscal realities. Our proposals focus and maintain 
resources to meet our strategic goals. The numbers and data we 
present today build upon the Omnibus Appropriations Bill for 
2004, and of course this means we do not have the confusion we 
had last year when we were working on the 2004 budget without a 
2003 budget, which made comparison very difficult.
    The 2005 budget focuses on our key priorities, as I 
indicated, including strengthening food safety and pest and 
disease prevention and eradication, continuing the 
administration of the 2002 Farm Bill, and that includes many 
increases in conservation funding, providing an unprecedented 
funding for a food and nutrition safety net, expanding 
agricultural trade, investing in our rural sector, supporting 
basic and applied sciences, and improving USDA's program 
delivery and customer service.
    The 2005 USDA budget calls for $82 billion in spending. 
This is an increase of $4 billion or about 5 percent above the 
2004 level. The Department's request for discretionary 
appropriations for ongoing programs within the jurisdiction of 
the Subcommittee is $16.2 billion. Due to some user fee 
proposals and other adjustments reflected in the budget, the 
net amount requested is $14.9 billion.
    And now, I would like to review some of the details: first, 
looking at the safeguarding of America's homeland and 
protecting the food supply, the President's 2005 budget funds 
an interagency initiative to improve the Federal Government's 
capability to rapidly identify and characterize a bioterrorist 
attack. This initiative will improve national surveillance 
capabilities in human health, food, agriculture and 
environmental monitoring.
    In keeping with the President's commitment to homeland 
security, the USDA budget for 2005 includes $381 million, to 
support the Food and Agriculture Defense Initiative. These 
funds would enhance monitoring and surveillance of pests and 
diseases in plants and animals, support research on emerging 
animal diseases, increase the availability of vaccines, 
establish a system to track select disease agents of plants; 
expand the Regional Diagnostic Network to all 50 States; and 
the bulk of the funding goes to completing the National Centers 
for Animal Health in Ames, Iowa, which is the single largest 
item under this initiative at $178 million.
    The research and diagnostic activities at the Ames complex 
are a critical part of our Bovine Spongiform Encephalopathy 
(BSE) response as well as our work on other animal diseases. In 
light of the discovery of a BSE-positive cow, first in Canada 
last May 20 and another on December 23 in Washington State, I 
announced on December 30 a series of actions to strengthen 
protection of the food supply, public health and animal health.
    USDA's actions are based on our BSE response plan, which 
has been in place since 1990, and it has continuously evolved, 
based on current knowledge of the disease. We are committed to 
ensuring that there is a strong BSE surveillance program in 
place in this country, and in that regard, on March 15, I 
announced the details of an expanded surveillance program which 
reflects the recommendations of the international scientific 
panel.
    Our goal is to greatly expand the testing of high-risk 
cattle as well as testing a sampling of the normal, older 
cattle population. The budget also requests increases in 
funding for other BSE-related activities in the amount of $60 
million, which includes increases for advanced animal testing, 
acceleration of the National Animal Identification System and 
some funds for the Grain Inspection, Packers and Stockyards 
Administration to enable rapid response teams to deal with BSE-
related complaints regarding contracts or lack of prompt 
payment.
    It would also include some funds for our Food Safety and 
Inspection Service to conduct monitoring and surveillance of 
compliance with regulations for specified risk materials and 
advanced meat recovery.
    As we have responded to the BSE situation, we have been 
constantly guided by what has been in the best interests of 
public health. We received a report from an international panel 
of experts about how the BSE incident in Washington was handled 
which indicated that the Department had done a comprehensive 
and thorough epidemiological investigation, and the 
investigation was concluded on February 9.
    Protecting the food supply and public health is one of the 
primary missions of USDA, and this focus is reflected in the 
budgets of this Administration. The budget for 2005 seeks a 
record level of support for USDA's Food Safety and Inspection 
Service, or what we call FSIS, meat and poultry food safety 
programs as well as increases to strengthen food and 
agriculture protection systems. These areas of our budget have 
been top priorities for the Administration since we came into 
office.
    This additional funding continues to build upon a solid 
record of achievement to further strengthen our agricultural 
protection systems to ensure the integrity of our food supply. 
The FSIS funding request would increase to a program level of 
$952 million, which would be an increase of $61 million over 
the 2004 level. This represents an increase of $170 million or 
22 percent in food safety programs since the Administration 
took office in 2001.
    The $952 million for FSIS comprises $828 million in 
appropriated funds and the continuation of existing user fees 
as well as $124 million in new user fees for inspection 
services that are provided beyond one approved inspection 
shift. The FSIS funding would support 7,690 meat and poultry 
inspectors, and it would provide specialized training for the 
inspection work force, increase microbiological testing and 
sampling, strengthen foreign surveillance programs and increase 
public education efforts.
    USDA is working on the Nation's fastest growing public 
health problem--obesity. As part of the President's Healthier 
US Initiative, USDA is working with the Department of Health 
and Human Services to promote good nutrition and physical 
activity. The Department's 2005 budget includes just over $700 
million for nutrition research, education and promotion 
programs, including an increase of $33 million, most of which 
is focused on obesity-related initiatives.
    I also would like to point out that for the first time, the 
subject of a healthier food supply and the topic of obesity 
were major issues at this year's Agricultural Outlook Forum. As 
I said in my Outlook speech, we need to make people more aware 
of the dangers of being overweight and figure out ways to 
reverse what is becoming an increasingly dangerous trend in 
America's eating habits.
    Next, the President's budget supports the continued 
implementation of the 2002 Farm Bill. Our employees at USDA 
have worked very, very hard to implement this Farm Bill, and 
they have done so quickly and efficiently. We appreciate their 
outstanding efforts, both from our staff here in Washington, 
DC, as well as the staff all over the country in our county and 
state offices.
    Funds are provided in the budget to support continued 
implementation of the Farm Bill, and we are in the process of 
implementing the largest and most far-reaching Farm Bill 
conservation title ever. It represents an unprecedented 
investment in conservation that will have significant and long-
lasting environmental benefits. Total program-level funding for 
Farm Bill conservation programs increases from about $2.2 
billion in 2001 when this Administration took office to $3.9 
billion in the 2005 budget proposal. This is an increase of 
$385 million or almost 11 percent over the amount of 2004.
    The expanded programs include $2 billion for the 
Conservation Reserve Program, an increase of $76 million over 
2004; $1 billion for the Environmental Quality Incentives 
(EQIP) Program, which is an increase of $25 million over 2004; 
$295 million for the Wetlands Reserve Program, to enroll an 
additional 200,000 acres, which is an increase of $15 million; 
$209 million for the new Conservation Security Program, which 
is an increase of $168 million; and $125 million for the Farm 
and Ranch Lands Protection Program, an increase of $13 million.
    The 2005 budget also reflects the Bush Administration's 
continued commitment to nutrition and fighting hunger by 
including a record $50.1 billion for domestic food assistance 
programs, which is a $2.9 billion increase over 2004. Our 
continued support for these programs follows the course of 
compassion that has been set by President Bush. The Food and 
Nutrition Service's budget supports an estimated 24.9 million 
Food Stamp participants, and that compares to 23.7 million in 
2004; a record level of 7.86 million low-income nutritionally 
at-risk Women, Infants and Children Program (WIC) participants, 
which compares to 7.8 million in fiscal year 2004; and an 
average of 29.2 million school lunch children each day in the 
school lunch program, and that compares to 28.7 million in 
fiscal year 2004.
    Particularly with the WIC and School Lunch Programs, we are 
reaching more Americans and helping to educate them about 
healthy eating and the importance of balanced diets. These 
efforts help support the President's Healthier US Initiative, 
and many of these services are delivered in cooperation with 
our partners under the President's Faith-Based and Community 
Initiatives. The budget includes a $3 billion contingency 
reserve for the Food Stamp Program and $125 million contingency 
reserve for the WIC program to be available to cover 
unanticipated increases in participation in these programs.
    One of the most important ways to expand opportunities for 
American agriculture is through trade, by maintaining and 
opening markets for our products. We have seen this close tie 
between agriculture and markets with the BSE situation. The 
2005 budget continues a strong commitment to export promotion 
and foreign market development efforts by proposing $6.6 
billion for our international programs and activities.
    Since this Administration took office, these programs have 
experienced significant growth by increasing by more than $1.4 
billion or 27 percent since 2001. Funding for USDA's market 
development programs, including the Market Access Program and 
Cooperator Program are maintained at the current year level of 
$173 million. Funding is provided for a new initiative to 
modernize FAS's IT systems and applications and improve 
telecommunications systems in order to provide more effective 
and efficient services to cooperators and the public and to 
help bolster our trade policy and trade expansion efforts.
    A program level of $4.5 billion is provided for the 
Commodity Credit Corporation export credit guarantees 
activities. Concerning global food aid, the efficiency and 
productivity of American farmers has allowed the United States 
to lead the world in this important area. More than $1.5 
billion is requested for U.S. foreign food assistance 
activities, including $75 million for the McGovern-Dole 
International Food for Education and Child Nutrition Program, a 
50 percent increase over 2004. So clearly, this budget 
continues to provide strong support for development of markets 
and assistance to those most in need around the world.
    We have also worked hard in this budget to provide funding 
for infrastructure and to enhance economic opportunities and 
the quality of life in rural America. The Administration 
proposes $11.6 billion for rural development programs, down 
from the 2004 level, due in large part from lower projections 
of the demand for loans, particularly electric and distance 
learning loans.
    Of the total amount, $3.8 billion is for direct and 
guaranteed Section 502 single-family housing loans. These 
programs are a crucial part of USDA's effort to support the 
President's Minority Homeownership Initiative, which has the 
goal of homeownership for an additional 5.5 million minority 
families by the end of the decade. In addition, $1.4 billion is 
requested for the Water and Waste Disposal Loan Program, which 
will provide about 650,000 rural families with new or improved 
water and waste disposal facilities.
    The budget proposes $331 million for broadband loans and 
loan guarantees in 2005, building upon the $2.2 billion in 
funding that has been provided over the last several years. 
Finally, the budget supports the Department's strategic plan 
and our continued efforts to implement the President's 
management agenda, which focuses on improving performance and 
results in government. USDA is one of only eight out of a total 
of 26 Federal agencies to be scored at green, or the highest 
level, for our progress toward all five of the major areas in 
the President's management agenda, and for the second year in a 
row and only the second time ever, USDA again received a clean 
audit of our financial statements.
    As part of our implementation of the President's management 
agenda, USDA is working on several initiatives to better 
integrate computer systems and technology support functions. In 
so doing, we are providing employees with the tools necessary 
to quickly and efficiently deliver services and to benefit our 
customers. The 2005 budget will allow us to build on our 
program delivery progress and our management priorities by 
providing resources needed to improve customer service through 
continued modernization of technology.
    This includes $137 million in 2005, an increase of $18 
million, to upgrade technology in the county office service 
centers in order to continue to improve administration of farm 
programs and customer service. Electronic government is a major 
focus for USDA in 2004. By increasing our customers' ability to 
interact with us over the Internet, we can save them and USDA 
time and money. As part of these efforts, we are nearing 
completion of a new basic computing infrastructure for all of 
our field agencies so that employees and customers will be able 
to share data electronically.
    The budget also proposes to strengthen the security of the 
Department's facilities and information technology. The budget 
increases funds to focus on strengthening civil rights and 
equal treatment under our programs. We need to ensure there are 
adequate resources to implement our civil rights initiatives. 
The budget proposes $22 million for USDA's Office of Civil 
Rights, an increase of $4 million over 2004. This includes an 
increase of $2 million to process complaints in a more timely 
manner and an increase of $1 million to improve our tracking 
and analyses of civil rights complaints.
    That completes my overview of some of the key points in 
this budget. Again to summarize: the 2005 budget is a 
responsible budget, and it funds key priorities and programs at 
USDA by focusing on the Food and Agriculture Defense 
Initiative, BSE-related activities, record level support for 
farm conservation programs, food safety and nutrition programs.

                           PREPARED STATEMENT

    With that, Mr. Chairman and members of the Committee, I 
want to again thank you for the opportunity to be here today. 
We look forward to working with the Committee, and we would be 
pleased, along with our team, to answer the questions posed by 
the Committee.
    Thank you very much.
    [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 today to discuss the 2005 budget for the Department 
of Agriculture (USDA). I have with me today Chief Economist, Keith 
Collins; and our Budget Officer, Steve Dewhurst.
    I want to thank the Committee again this year for its support of 
USDA 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, as well as the other Members 
to make progress on these issues during the 2005 budget process and 
ensure strong programs for our Nation's farm sector--but as well--the 
many other USDA mission areas.
    The 2005 budget calls for $82 billion in spending, an increase of 
$4 billion, or about 5 percent, above the level for 2004. Discretionary 
outlays are estimated at $20.8 billion, a decrease of $720 million, 
over 3 percent below the 2004 level. The Department's request for 
discretionary appropriations for 2005 before this Committee is $16.2 
billion. Due to some user fee proposals and other adjustments reflected 
in the budget the net amount requested is $14.9 billion.
    The Department's budget for 2005 is consistent with this 
Administration's policy book ``Food and Agricultural Policy for the 
21st Century'' and it supports the USDA's Strategic Plan. Both are 
designed to enhance economic opportunities for agricultural producers; 
support increased economic opportunities and improved quality of life 
in rural America; protect America's food supply and agriculture system; 
improve nutrition and health; and conserve and enhance our natural 
resources and environment.
    As you know, we are in a time of fiscal constraint. The President 
has proposed a responsible budget across the Federal Government which 
holds non-defense and non-homeland security discretionary spending 
increases to less than 1 percent. At the same time, the budget funds 
key priorities, such as the continuing War on Terror, protecting 
Homeland Security, strengthening the economy and jobs as well as health 
care affordability. It puts the Nation on track to reduce the deficit 
by one-half within 5 years.
    The budget for USDA faces those same fiscal realities. Because the 
budget is constrained, the Department's request is focused on key 
priorities which include:
  --Ensuring a safe and wholesome food supply and safeguarding 
        America's homeland.
  --Continuing administration of the 2002 Farm Bill--the major 
        provisions of which we have implemented in the past year--and 
        includes providing historic increases for conservation funding.
  --Providing record funding for a food and nutrition safety net.
  --Expanding agricultural trade.
  --Providing housing for rural citizens and investing in America's 
        rural sector.
  --Providing continued support for basic and applied sciences in 
        agriculture.
  --Improving USDA's program delivery and customer service.
    With this as an overview, I would now like to focus on the specific 
budget proposals for 2005.

                      FOOD AND AGRICULTURE DEFENSE

    The infrastructure developed in response to September 11, 2001, has 
enabled the Department to become a strong partner in the 
Administration's biodefense initiative. The Department has worked 
closely with other Government agencies participating in the Homeland 
Security Council to prepare for any potential bioterrorist acts. The 
2005 budget funds an interagency initiative to improve the Federal 
Government's capability to rapidly identify and deal with such threats. 
This initiative will improve national surveillance capabilities in 
human health, food, agriculture, and environmental monitoring. It will 
promote data sharing and joint analysis among these sectors at the 
Federal, State, and local levels and also will establish a 
comprehensive Federal-level multi-agency integration capability led by 
the Department of Homeland Security (DHS) to rapidly compile these 
streams of data and preliminary analyses and integrate and analyze 
them.
    The highlights of the $381 million USDA request to support the Food 
and Agriculture Defense Initiative include:
    Strengthening food defense by requesting increases totaling $38 
million to:
  --Establish a Food Emergency Response Network (FERN) with 
        participating laboratories, including implementation of the 
        Electronic Laboratory Exchange Network (eLEXNET) and an 
        electronic methods repository;
  --Develop diagnostic methods to quickly identify pathogens and 
        contaminated foods;
  --Improve surveillance and monitoring of pathogens and other hazards 
        in meat, poultry and eggs and establishing connectivity with 
        the integration and analysis function at DHS; and
  --Upgrades laboratories, improve physical security; and enhance 
        biosecurity training and education.
    Strengthening agriculture defense by requesting increases of:
  --$178 million to complete the consolidated state-of-the-art 
        biosafety level-3 (BSL-3) animal research and diagnostic 
        laboratory at Ames, Iowa;
  --$50 million for the Animal and Plant Health Inspection Service 
        (APHIS) to substantially enhance the monitoring and 
        surveillance of pests and diseases of plants and animals, 
        increase the availability of vaccines through the national 
        veterinary vaccine bank, increase State Cooperative Agreements 
        to better identify plant and animal health threats, provide 
        biosurveillance connectivity with the integration and analysis 
        function at DHS, and establish a system to track select disease 
        agents of plants.
  --$27 million for the Cooperative State Research, Education, and 
        Extension Service (CSREES) to expand the Regional Diagnostic 
        Network, and to establish a Higher Education Agrosecurity 
        Program that will provide capacity building grants to 
        universities for interdisciplinary degree programs to prepare 
        food defense professionals.
  --$9 million for the Agricultural Research Service (ARS) to establish 
        a National Plant Disease Recovery System that will quickly 
        coordinate with the seed industry to provide producers with 
        resistant stock before the next planting season, and to conduct 
        research on identifying, preventing and controlling exotic 
        plant diseases.

                         BSE RELATED ACTIVITIES

    The Department has taken aggressive actions to deal with the recent 
detection of a cow that tested positive for bovine spongiform 
encephalopathy (BSE) in the State of Washington. The actions taken were 
based on a BSE response plan which has been in place since 1990 and has 
been continuously updated to reflect the latest available knowledge 
about this disease. As late as August 2003, Harvard University 
reaffirmed the findings of an initial 2001 study that the risk of BSE 
spreading extensively within the United States is low because of the 
firewalls already in place. In general, we have effectively responded 
to this incident.
  --Our tracing efforts were remarkably successful. After an 
        international panel of experts indicated that the Department 
        had done a comprehensive and thorough epidemiological 
        investigation, our investigation was concluded on February 9. 
        The panel also indicated that actions the Department announced 
        on December 30 and subsequent the Food and Drug Administration 
        announcements have further enhanced the protections for human 
        and animal health.
  --We also traced the products from the slaughter of these animals and 
        determined that high-risk products such as brain and spinal 
        cord did not enter the food system. Nevertheless, all of the 
        beef that came out of that plant on the day in question was 
        recalled.
  --Throughout the investigation, we regularly held briefings to inform 
        the public about the incident. In one week's time we announced 
        a series of actions to further enhance the Department's already 
        strong safeguards. These included, among other actions, an 
        immediate ban on nonambulatory or so-called downer animals from 
        the food system and further restrictions on specified risk 
        materials such as brain and spinal cord from entering the food 
        supply. Retailers and food service outlets are reporting 
        virtually no adverse effects on consumer demand as a result of 
        the BSE finding.
  --The Department's Chief Information Officer is overseeing the design 
        of a National Animal Identification Program. Every effort is 
        being taken in the design of this system to ensure it is 
        technology neutral, cost effective, and does not place an undue 
        cost burden on the producer.
  --We are also in the process of approving the use of BSE rapid test 
        kits to enhance our national surveillance efforts.
  --We have continued to work with trading partners. Regaining export 
        markets is a top priority for the Administration, and the 
        international response must reflect what science tells us. 
        Unfortunately, most export markets for U.S. beef, including key 
        buyers--Japan, Mexico, Korea and others--immediately closed 
        their markets to U.S. beef, accounting for 10 percent of U.S. 
        beef production that now must be absorbed in the domestic 
        market. The loss of exports had an immediate impact on the 
        cattle market, resulting in an initial drop of 15 to 20 percent 
        in cattle prices on cash and futures markets while remaining 
        above year-ago levels. Despite this decline, USDA's current fed 
        cattle price forecast of $74 to $79 per hundredweight remains 
        above the previous 5-year average and would be the second 
        highest average price in the past 11 years.
  --We are committed to ensuring that a robust BSE surveillance program 
        continues in this country. On March 15, we announced the 
        details of our expanded surveillance program which is based on 
        recommendations of an international scientific review panel. 
        The enhanced program has a goal to test as many cattle as 
        possible in the high-risk population, as well as to test a 
        sampling of the normal, aged cattle population. USDA has begun 
        to prepare for the increased testing, with the anticipation 
        that the program will be ready to be fully implemented on June 
        1, 2004. In the meantime, BSE testing will continue at the 
        current rate, which is based on a plan to test 40,000 animals 
        in 2004. Testing will be conducted through USDA's National 
        Veterinary Services Laboratory in Ames, Iowa, and a network of 
        laboratories around the country.
    As part of the President's Budget for 2005, we are requesting $60 
million, an increase of $47 million which will permit us to:
  --Further accelerate the implementation of a verifiable National 
        Animal ID System;
  --Increase the current BSE surveillance program;
  --Conduct advanced research and development of BSE testing 
        technologies;
  --Strengthen the monitoring and surveillance of compliance with the 
        regulations for specified risk materials and advanced meat 
        recovery; and
  --Dispatch rapid response teams to markets experiencing BSE related 
        complaints regarding contracts or lack of prompt payment.

                   BETTER NUTRITION FOR A HEALTHY US

    USDA is also working on the Nation's fastest growing public health 
problem--obesity. The Department has a special responsibility to ensure 
that participation in nutrition assistance programs such as the School 
Lunch and Breakfast programs, the Special Supplemental Nutrition 
Program for Women, Infants and Children (WIC) and Food Stamps, 
contributes as much as it can to healthier diets and improved health 
outcomes. USDA research is essential in understanding the role of the 
diet in obesity and healthy weight management. USDA along with its 
Federal partners at the Department of Health and Human Services (DHHS) 
is responsible for developing the revised Dietary Guidelines for 
Americans to be issued jointly by USDA and DHHS in January 2005. On a 
parallel track, the Department is undertaking a complete reassessment 
and update of the Food Guide Pyramid. These documents are the 
cornerstone of Federal nutrition promotion efforts directed at all 
Americans. With these efforts, USDA plays a key role in the President's 
Healthier US initiative. And as part of this, USDA is working closely 
with DHHS to promote good nutrition and adequate physical activity.
    The Department's 2005 budget includes about $700 million for 
nutrition research, education, and promotion programs, including an 
increase of $33 million which is focused mainly on obesity-related 
initiatives. Spending for nutrition education and promotion programs 
accounts for the largest share of this spending, over $540 million or 
almost 80 percent in 2005. These Federal funds are augmented by 
significant spending by State and local partners who conduct a wide 
range of nutrition education and promotion activities designed by local 
officials to meet local needs.
    Spending for basic research on nutritional requirements, monitoring 
food consumption patterns, analyzing social and behavioral factors 
affecting diets, and conducting demonstration projects accounts for the 
rest of our spending. We are a partner with the National Center for 
Health Statistics for the food consumption data that supports research 
on diets conducted by the growing number of Federal and non-Federal 
scientists looking at the causes and possible ways to curb the obesity 
epidemic.

                 FARM AND FOREIGN AGRICULTURAL SERVICES

    Currently, major sectors of the diverse farm economy are 
experiencing favorable market conditions. Net cash farm income was at a 
record level in 2003. The President's budget for 2005 supports 
continued administration of the Farm Bill which has now been largely 
implemented, although work is proceeding on the substantial expansion 
of the conservation programs provided by the bill. In addition, the 
budget supports a strong crop insurance program and an aggressive 
international trade program that will be critical to the continued 
improvement on farm economy in the next few years.

Farm Program Delivery
    The Farm Service Agency (FSA) salaries and expenses are funded at 
$1.3 billion in 2005, an increase of $50.9 million over 2004. This 
would support staffing levels of about 6,000 Federal staff years and 
nearly 10,300 county non-Federal staff years, including about 1,000 
temporary staff years. Temporary staff will be reduced from the high 
levels required in 2003 and 2004 because the heavy workload associated 
with the initial implementation of the new farm programs has been 
completed. However, we expect the ongoing workload for FSA to remain at 
significant levels in 2005. Therefore, permanent county non-Federal 
staff levels are maintained at current levels. In addition, the budget 
provides for an additional 100 Federal staff years to improve service 
provided to farm credit borrowers. The budget also requests continued 
funding for FSA's information technology (IT) efforts related to the 
Service Center Modernization Initiative.

International Trade
    Trade is vitally important for American agriculture. The United 
States is the world's largest agricultural exporter. The value of our 
agricultural exports equals nearly one-fourth of farm cash receipts, 
making the agricultural sector twice as dependent on trade as the 
overall U.S. economy. With gains in productive capacity continuing to 
outpace growth in demand here at home, the economic growth and future 
prosperity of America's farmers and ranchers depend heavily upon our 
continued success in reducing trade barriers and expanding overseas 
markets. Accordingly, the expansion of international market 
opportunities is one of the key objectives set forth in the 
Department's strategic plan.
    The 2005 budget proposals fully support the Administration's 
commitment to export expansion and overseas market development by 
providing a program level of over $6.6 billion for the Department's 
international programs and activities. These programs have increased 
significantly since this Administration took office and have increased 
by more than $1.4 billion, or 27 percent, since 2001.
    The Foreign Agricultural Service (FAS) is the lead agency for the 
Department's international activities. Through its network of 80 
overseas offices and its headquarters staff here in Washington, FAS 
carries out a wide variety of activities that contribute to expanding 
and preserving overseas markets. Our budget requests $148 million for 
FAS activities in 2005. This is an increase above the 2004 level of 
nearly $12 million and is designed to ensure the agency's continued 
ability to conduct its activities effectively and provide important 
services to U.S. agriculture. This funding would enable FAS to meet 
higher overseas operating costs, improve telecommunications systems, 
and implement a high priority initiative to modernize the agency's IT 
systems and applications.
    The Department's export promotion and market development programs, 
which FAS administers, play a key role in our efforts to expand 
international market opportunities. Commodity Credit Corporation (CCC) 
export credit guarantees are the largest of these programs. As overseas 
markets for U.S. agricultural products continue to improve, that 
improvement will be reflected in export sales facilitated under the 
guarantee programs. For 2005, the budget projects a program level of 
$4.5 billion for the guarantee programs, an increase of just over $250 
million above the current estimate for 2004.
    The budget continues funding for the Department's market 
development programs, including the Market Access Program and 
Cooperator Program, at the current level of $173 million. It also 
includes $53 million for the Dairy Export Incentive Program and $28 
million for the Export Enhancement Program.
    The efficiency and productivity of our producers allows the United 
States to be a leader in global food aid efforts. For 2005, the budget 
supports a program level of over $1.5 billion for U.S. foreign food 
assistance activities. This includes $1.3 billion for the Public Law 
480 Title I credit and Title II donation programs. For the McGovern-
Dole International Food for Education and Child Nutrition Program, 
funding is increased to $75 million, a 50 percent increase over 2004. 
The budget also includes an estimated program level of $149 million for 
the CCC-funded Food for Progress program, which is expected to support 
400,000 metric tons of assistance as required by the authorizing 
statute.

Farm Credit
    The budget supports a program level of about $3.8 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 about $300 million higher than last year. 
Due to lower subsidy costs for the direct loan programs, the amount of 
subsidy requested is less than for 2004. In addition, funding has been 
realigned to better accommodate the actual demand in these programs. 
The budget also includes a request of $25 million for the emergency 
loan program. Also, any unused funding from prior year appropriations 
will carry over for use in 2005.

Crop Insurance
    The budget provides full funding for the crop insurance program. 
The budget includes ``such sums as may be necessary'' for the mandatory 
costs associated with program delivery and the payment of indemnities. 
The current estimate of the mandatory costs is about $3.7 billion.
    The budget includes a request of $92 million for the discretionary 
costs of the Rural Management Agency (RMA), an increase of $21 million 
above the level provided in 2004. The increased funding is urgently 
needed for the modernization of the RMA IT infrastructure as well as to 
provide for 30 additional staff years. The additional staffing will be 
used, in part, to monitor companies and producers participating in the 
crop insurance program, to detect and prevent fraud, waste, and abuse.

                   MARKETING AND REGULATORY PROGRAMS

    Marketing and Regulatory Program agencies provide basic 
infrastructure to protect and improve agricultural market 
competitiveness for the benefit of both consumers and U.S. producers.

Pests and Diseases
    Helping protect the health of animal and plant resources from 
inadvertent as well as intentional pest and disease threats is a 
primary responsibility of APHIS. The 2005 budget requests an 
appropriation of $828 million for salaries and expenses, an increase of 
about $112 million (16 percent) above the 2004 estimate. The majority 
of this increase is for the Food and Agriculture Defense Initiative and 
for BSE related activities.
    Increases are also requested for efforts to deal with low-
pathogenic avian influenza, emerging plant pests (especially citrus 
canker and Emerald Ash Borer), Mediterranean fruit fly, tuberculosis, 
scrapie and a $6.6 million increase is requested to enhance the 
Department's ability to strengthen its regulatory system for the 
testing of biotechnology based crops.

Marketing
    For 2005, the Agricultural Marketing Service (AMS) budget proposes 
a program level of $732 million, of which $87 million or 12 percent, is 
funded by appropriations and the remainder through user fees and 
Section 32. AMS, in cooperation with the Food and Nutrition Service and 
FSA, purchases commodities to meet the needs of domestic feeding 
programs and to help stabilize market conditions. The 2005 budget 
includes an increase of $10 million in appropriated funds to begin the 
critically needed replacement of our outdated IT systems used by three 
USDA agencies to manage and coordinate commodity orders, purchases, and 
delivery.
    Another important proposal in the marketing and regulatory programs 
area involves the Grain Inspection, Packers and Stockyards 
Administration (GIPSA). For 2005, the budget proposes a program level 
for salaries and expenses of about $44 million. Of this amount, $20 
million is devoted to grain inspection activities for standardization, 
compliance, and methods development and $24 million is for Packers and 
Stockyards Programs. The 2005 budget includes $7.7 million in increases 
to:
  --Conduct market surveillance and ensure that marketing and 
        procurement contracts are honored in the aftermath of the BSE 
        finding.
  --Significantly upgrade the agency's IT functions, including the 
        ability to securely accept, analyze, and disseminate 
        information relevant to the livestock and grain trades.
  --Monitor the various technologies that livestock and meatpacking 
        industries use to evaluate carcasses to ensure fair and 
        consistent use of those technologies. Producer compensation is 
        increasingly dependent not simply on the weight of the animals 
        they bring to slaughter, but the characteristics of the 
        carcasses as well (e.g., fat content).
  --Enable GIPSA to better address and resolve international grain 
        trade issues, thus precluding disruption of U.S. exports.
    The GIPSA budget includes two user fee proposals which have been 
submitted to the authorizing committees. New user fees would be charged 
to recover the costs of developing, reviewing, and maintaining official 
U.S. grain standards used by the grain industry. Those who receive, 
ship, store, or process grain would be charged fees estimated to total 
about $6 million to cover these costs. Also, the Packers and Stockyards 
Programs would be funded by new license fees of about $23 million that 
would be required of packers, live poultry dealers, poultry processors, 
stockyard owners, market agencies, and dealers as defined under the 
Packers and Stockyards Act.

                              FOOD SAFETY

    USDA plays a critical role in safeguarding the food supply and 
plays a pivotal role in protecting the Nation's food supply from 
bioterrorist attack. This Administration believes that continued 
investment in the food safety infrastructure is necessary to achieve 
USDA's goal of enhancing the protection and safety of the Nation's 
agriculture and food supply.
    For 2005, the budget for the Food Safety and Inspection Service 
(FSIS) provides a program level of $952 million, an increase of $61 
million over 2004. The budget includes an increase for pay to support 
7,690 meat and poultry inspectors, which are necessary to provide 
uninterrupted inspection services to the industry.
    The budget for FSIS requests $5.0 million to continue the work 
funded in 2003 and 2004 to fully enforce the Humane Methods of 
Slaughter Act. With this funding, the agency has allocated 63 staff-
years to ensuring the humane treatment of livestock in 900 federally 
inspected establishments. With the increased emphasis on humane 
handling verification, the agency was able to increase humane handling 
inspection procedures from 86,810 performed in 2002 to 111,117 
performed in 2003, a 28 percent increase. Although difficult to 
estimate, FSIS reports that a resultant increase in the number of 
enforcement actions and violations was the result of training and 
correlation efforts of FSIS District personnel, Front Line Supervisors 
and veterinarians to better understand the application of the Agency's 
rules and enforcement process to inhumane handling situations. As 
recommended by the General Accounting Office, FSIS will continue to 
make improvements in the inspection process to ensure proper 
enforcement of the law and accurate tracking of both verification 
activities and enforcement actions.
    The budget includes an increase of approximately $33.6 million to 
support programmatic improvements aimed at achieving FSIS' strategic 
objective to reduce the prevalence of foodborne hazards from farm to 
table. The majority of this increase is for the Food and Agriculture 
Defense Initiative and BSE related activities.
    The budget provides an increase of $7.1 million for a broad-based 
training initiative for meat and poultry inspection personnel. This is 
more than a 50 percent increase in the FSIS training budget from 2004. 
Under this initiative, all entry level inspectors will receive formal 
classroom training for performing basic inspection duties within one 
year of employment. Currently, only 20 percent of new employees receive 
this type of training. In addition, current inspectors will receive 
supplemental training to improve the enforcement of the Pathogen 
Reduction/Hazard Analysis and Critical Control Point Systems regulation 
and food safety sampling. The increased level of training will improve 
the consistency and effectiveness of inspectors in the performance of 
their duties and ensure a safer food supply.
    The 2004 budget also reproposes legislation submitted to Congress 
in August 2003 to collect an additional $124 million in user fees 
annually by recovering 100 percent of the cost of providing inspection 
services beyond an approved primary shift. Assessing user fees in this 
manner promotes equity among producers that have enough production for 
a full second shift paid for by the Government and other establishments 
that may only have enough production for a partial shift which they 
must currently pay for themselves. 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 $50.1 billion for USDA's domestic nutrition 
assistance programs, an increase of $2.9 billion, and the highest level 
ever requested. The budget will ensure access to nutrition assistance 
for low-income families and individuals as they work toward economic 
self-sufficiency. USDA is working hard to provide information to help 
improve nutritional intakes, increase breastfeeding rates, and reduce 
obesity and overweight among Americans. In addition to its work with 
the President's Healthier US Initiative, USDA will work with nutrition 
assistance program stakeholders to identify strategies to improve 
health outcomes for eligibles.
    The WIC program is expected to be reauthorized this year and is 
budgeted at $4.8 billion. This is a record high funding request, which 
will help record numbers of low-income, at-risk participants. The 
request continues special increments to fast track State information 
systems development, increase breastfeeding rates through the use of 
peer counselors, and increase support of childhood obesity prevention 
projects. Ensuring a WIC Program that yields healthy birth outcomes and 
nutritional habits with the best possible outcomes is a top 
Administration priority.
    The Food Stamp Program, the cornerstone of America's effort to 
ensure access to an adequate diet for low-income people, is funded at 
$33.6 billion. The budget anticipates modest food cost inflation and 
participation growth of about 1.2 million participants or a 5 percent 
increase above 2004 estimates. The budget includes a $3 billion 
contingency reserve, $1.4 billion for Nutrition Assistance for Puerto 
Rico, $2.4 billion for the Federal share of State administrative 
expenses, and about $300 million to support employment and training. 
Significant progress has been made in reducing payment errors in the 
program. In 2002, 91.74 percent of payments were made accurately, with 
overpayment error at 6.16 percent of benefits. Changes in financial 
incentives to States for good management as authorized by the 2002 Farm 
Bill are on track for implementation in 2005. This is the time line 
anticipated by the Farm Bill, and this will help improve program access 
as well as program integrity.
    Child Nutrition Programs are funded at $11.4 billion with increases 
provided for food cost inflation, growth in the number of meals served 
and program integrity. Also, the budget includes funding for several 
key provisions that are expiring such as the exclusion of military 
housing allowances for eligibility determination. The Administration 
will continue work with Congress on a reauthorization bill this Spring 
to ensure that all aspects of the program continue without 
interruption, including those key provisions expiring at the end of 
March.
    The Administration is committed to ensuring that funds for school 
meals are well targeted to those in need and that any savings achieved 
in reauthorization will be reinvested in the program.

                   NATURAL RESOURCES AND ENVIRONMENT

    The 2002 Farm Bill represents an unprecedented commitment to 
conservation and its continued implementation is an ongoing challenge 
as well as a high priority for the Department. To do this successfully, 
the budget proposes not only to increase funding for Farm Bill programs 
but also to continue support for the underlying conservation programs 
that form the basis for the Department's ability to address the full 
range of conservation issues at the national, State, local and farm 
levels.
    The 2005 budget request for the Natural Resources Conservation 
Service (NRCS) includes $1.9 billion in mandatory CCC financial 
assistance funding for Farm Bill conservation programs in addition to 
$2.0 billion for the Conservation Reserve Program administered by FSA. 
This represents an increase of more than $200 million over the 2004 
level and includes $1 billion for the Environmental Quality Incentives 
Program that will allow nearly 40,000 producers to participate in this 
vital program. It also includes $295 million for the Wetlands Reserve 
Program to enable the Department to enroll an additional 200,000 acres. 
Another $209 million will support expansion of the new Conservation 
Security Program that supports ongoing conservation stewardship and 
rewards those producers who maintain and enhance the condition of their 
natural resources. The remaining $351 million in CCC funding will 
support the other Farm Bill programs including the Grassland Reserve 
Program, the Wildlife Habitat Incentives Program and the Farm and Ranch 
Lands Protection Program.
    On the appropriated side, the 2005 budget proposes a total funding 
level of $908 million which includes $604 million for conservation 
technical assistance (CTA) that forms the base program that supports 
the Department's conservation partnership with State and local 
entities. The budget also proposes a separate account totaling $92 
million to fund technical assistance activities in support of the 
Wetlands Reserve and Conservation Reserve Programs. This would limit 
the amount of funding that would have to be redirected from other Farm 
Bill programs and maximize the financial assistance made available to 
producers. Overall CTA funding will also enable the Department to 
continue to address natural resource issues such as maintaining 
agricultural productivity and improving water quality and grazing 
lands.
    In the watershed programs area, the budget proposes reductions in 
funding for watershed implementation, planning and rehabilitation. This 
will enable NRCS to redirect some resources to address the more 
pressing Farm Bill implementation issues while still funding the most 
critical watershed work. With emergency spending being so difficult to 
predict, the budget proposes to not seek appropriated funding for 
emergency work and instead to address disaster funding as emergencies 
arise.
    Finally, the Department's 2005 budget will maintain its support for 
all 375 Resource Conservation and Development areas that are now 
authorized. This important activity will continue to improve State and 
local leadership capabilities in planning, developing and carrying out 
resource conservation programs.

                           RURAL DEVELOPMENT

    Rural America is home to over 60 million people, most of whom are 
not farmers. It is a place of employment for workers in numerous 
industries that contribute to the Nation's wealth. It is also very 
diverse, including areas that are facing declining population and 
employment opportunities as well as areas that are growing at a rapid 
pace and becoming urbanized. Thus, the challenges differ from area to 
area, and require planning and coordination, to ensure that State and 
local priorities are served along with national goals. USDA embraces 
this reality and is committed to supporting increased economic 
opportunities and improved quality of life in rural America.
    The Department's rural development programs are both traditional 
and forward looking. Many of these programs were created to bring 
electricity, telephone service and other amenities to the Nation's 
farms and rural towns. These programs have made enormous contributions 
to economic productivity and quality of life of rural America. In 
addition, USDA has played a significant role in providing homeownership 
opportunities and rental housing for rural residents, and support for 
rural business and industry.
    Modern technology has brought new challenges. Perhaps the most 
striking example is in the area of telecommunications. Basic telephone 
service is no longer adequate. High speed broadband communications, 
including data as well as voice transmission, are needed to stay 
abreast of the ever changing world of information for both business and 
personal use. In addition, new approaches are needed to diversify rural 
economies, for example, through value-added processing of agricultural 
products.
    The 2005 budget supports $11.6 billion in loans, grants and 
technical assistance for rural development. This is a realistic level 
of support in light of the need to balance budgetary constraint against 
the demands for program assistance. While it is significantly below the 
level available for 2004, more than half of the reduction is due to 
lower projections of the demand for selected loans.
    In particular, the 2005 budget reflects a reduction in electric 
loans from almost $5 billion in 2004 to $2.6 billion in 2005. In recent 
years, Congress appropriated much higher levels for such loans than the 
Administration requested. The additional funding, including the amount 
available for 2004, has helped meet the needs of rural electric 
cooperatives for upgrading their systems. Although more remains to be 
done, it is anticipated that the high levels of lending in recent years 
will provide a cushion that will result in fewer applications for 2005.
    Also in the electric area, the 2005 budget does not include a $1 
billion add-on by Congress to the 2004 Appropriations Act for 
guaranteeing electric and telephone notes of certain private lenders. 
This program was authorized in the 2002 Farm Bill. USDA published a 
proposed rule for implementing the program on December 30, 2003, with a 
60-day comment period. Until the public comments are reviewed and a 
final rule published, it is difficult to know the extent of demand for 
the program and for that reason the program was not included in the 
2005 budget.
    The 2005 budget also does not include funding for distance learning 
and telemedicine loans, which accounts for a $300 million reduction 
from 2004, because there has been little demand in the past few years 
for these loans. Further, there is a reduction in discretionary funding 
for broadband loans from $598 million in 2004 to about $331 million in 
2005 because there remains a substantial amount of unused mandatory 
carry-over funding that was provided by the 2002 Farm Bill. Currently, 
there is about $1.6 billion available for such loans and about $1.0 
billion in applications, many of which will require additional work 
before they are complete and can be considered for funding.
    For single family housing loans, the 2005 budget includes $1.1 
billion for direct loans and $2.5 billion in guaranteed loans for 
purchases and $225 million in guaranteed loans for refinancing. While 
there is a proposed reduction in direct loans, guaranteed loans are 
maintained at the 2004 levels. Further, legislation is being proposed 
to allow guaranteed loans to exceed 100 percent of appraised value by 
the amount of the fee on such loans. This proposal will make the 
program more accessible to families with limited resources for paying 
closing costs and will contribute to the President's Initiative to 
Increase Minority Homeownership. The combined level of almost $3.8 
billion in direct and guaranteed loans is expected to provide up to 
40,000 homeownership opportunities for rural residents. Continuation of 
recent increases in housing costs will reduce the number of 
homeownership opportunities that can be provided in 2005 compared to 
prior years.
    The total water and waste disposal loan and grant program for 2005 
is $1.42 billion compared to $1.67 billion for 2004. Within this total, 
loans are maintained at about $1.1 billion. It should be noted that the 
subsidy rate for these loans has increased such that we are asking you 
to increase the budget authority for loans from $34 million in 2004 to 
$90 million in 2005 just to reach the $1.1 billion level. This increase 
is due to a rise in the Government's cost of financing the loans. 
Grants would be reduced from $563 million in 2004 to $346 million in 
2005. With interest rates remaining low, more projects are viable at a 
higher loan to grant ratio.
    In addition, the 2005 budget for rural rental housing continues the 
Administration's policy to focus on servicing the existing portfolio 
which includes about 17,000 projects that provide housing for about 
450,000 rural households. Many of these projects require repair and 
rehabilitation, for which the 2005 budget includes $60 million in 
direct loans. It also includes $100 million in guaranteed loans for new 
rental projects. In addition, the 2005 budget includes $592 million for 
rental assistance payments, up from $581 million available in 2004. 
Most of this funding is for the renewal of expiring contracts, 
consistent with the policy established by Congress in the 2004 
Appropriations Act to renew contracts on a 4-year cycle. About a 
quarter of a million rural households receive this assistance. We are 
nearing completion of a comprehensive study of the existing portfolio 
to help identify opportunities for revitalizing the management of these 
projects.
    The budget includes $300 million in direct loans and $210 million 
in guaranteed loans for essential community facilities that meet a wide 
range of public safety, health and other purposes. This reflects a 
reduction in direct loans, from $500 million in 2004, but exceeds the 
2003 level of $261 million. This pattern mirrors a change in subsidy 
costs which went from 6 percent in 2003 to zero in 2004 and up to 4 
percent for 2005, due largely to very small differences in interest 
rates. For business and industry programs, the 2005 budget supports 
$600 million in guaranteed loans, up from $552 million in 2004 and $34 
million for the intermediary re-lending program, compared to $40 
million for 2004. Together, these programs are expected to account for 
most of an estimated 66,000 jobs that will be created or saved by a 
combination of rural development programs that assist business and 
industry. This estimate reflects direct employment. Many rural 
development programs also impact on employment indirectly by creating a 
demand for products and services.

                   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.
    The 2005 budget for the four Research, Education and Economics 
(REE) agencies is approximately $2.4 billion. The budget proposes 
reductions in unrequested earmarks of about $335 million, and program 
increases in high priority areas, such as food and agriculture 
security, genomics, human nutrition and climate change, where national 
needs and returns are the greatest.
    One increase directly related to the Food and Agriculture Defense 
Initiative is to fund the remaining $178 million required to complete 
the modernization of the National Centers for Animal Health in Ames, 
Iowa. These funds will allow the completion of the $460 million project 
that will provide a world-class research and testing facility 
commensurate with the magnitude and economic importance of the $100 
billion U.S. livestock industry. Upon completion in October 2007, there 
will be nearly one million gross square feet of new and renovated 
laboratory and support space. Extensive site and infrastructure 
upgrades and miscellaneous office, animal care, and support facilities 
will also be integrated into the design.
    The 2005 budget for 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 research on invasive species 
and animal diseases, such as bovine spongiform encephalopathy and foot 
and mouth disease; as well as research which will lead to improved 
vaccines and therapeutics, rapid diagnostic tests, and genome data on 
biosecurity threat agents. The budget includes an increase of $5 
million for research in support of the President's Healthier US 
Initiative. And, as part of this, USDA will work closely with the 
Department of Health and Human Services to promote good nutrition. In 
support of the Administration's Food and Agriculture Defense 
Initiative, food safety research will see an increase of $14 million to 
support the development of rapid diagnostic tests that will accurately 
detect and identify pathogenic bacteria, viruses and chemicals of food 
safety concern. Finally, the ARS budget will provide $5 million to 
support the President's Climate Change Research Initiative. These funds 
will be used to conduct interagency research that will build the 
scientific foundation for forecasting responses of ecosystems to 
environmental changes and for developing resources that can be used to 
support decision making.
    The 2005 budget for CSREES includes funds to continue the formula 
programs at current levels. There are 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 the recruitment of minority graduate students. Additional increases 
are proposed for the Expanded Food and Nutrition Education Program 
which assists low income youth and low-income families with children in 
acquiring the skills, attitudes, and changed behavior necessary to 
formulate nutritionally sound diets.
    The proposal for the National Research Initiative (NRI) in the 2005 
budget is consistent with the greater overall constraints of the 2005 
budget. The proposal includes $180 million as compared to $164 million 
in 2004, for the NRI to finance work that will have a far reaching 
impact on such issues as genomics, nutrition, and obesity.
    The budget for the Economic Research Service (ERS) includes an 
increase of $8.7 million to develop a consumer data information system, 
to provide information to support decision making in the food, health, 
and consumer arenas. There are three components: a food market 
surveillance system that will provide information to identify and 
explain consumer food consumption patterns; a rapid consumer response 
module that will provide real-time information on consumer reactions to 
unforeseen events such as the recent discovery of BSE; and a flexible 
consumer behavior survey module that will assess the relationship 
between individuals' knowledge and attitudes about dietary guidance and 
food safety and their food choices, complementing the Centers for 
Disease Control and Prevention and ARS data on health outcomes and food 
consumption.
    The budget for the National Agricultural Statistics Service (NASS) 
includes an increase for two initiatives to improve its statistical 
programs, and a decrease of $2.6 million for the Census of Agriculture, 
reflecting the decrease in staffing and activity levels to be realized 
in 2005 due to the cyclical nature of the 5-year census program.
    To improve NASS' statistical accuracy, an increase of $7.4 million 
is requested to continue the restoration and modernization of its 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 payment rates provided under the 2002 Farm 
Bill.
    The second initiative requires an increase of $2.5 million for 
NASS' Locality-Based Agricultural County estimates program to continue 
the improvements begun in 2003. These local estimates are one of the 
most requested data sets, and are especially important to RMA for their 
risk rating process, (affecting premium levels paid by producers), and 
to FSA for calculating national loan deficiency payments.

                              CIVIL RIGHTS

    This budget will allow the Assistant Secretary for Civil Rights to 
continue making progress in addressing Equal Employment Opportunity 
(EEO) and Program-related civil rights issues. The Assistant Secretary 
for Civil Rights also has responsibility for outreach and conflict 
prevention and resolution. The challenging task of implementing changes 
within USDA's civil rights organization is now underway. A 
comprehensive action plan has been developed to address structural, 
operational, procedural accountability and systems challenges.
    This budget is critical in ensuring adequate resources to implement 
Civil Rights initiatives. Specifically, the budget will support a 
reduction in the time it takes to process both EEO and Program-related 
complaints. The Department continues to make progress toward meeting 
regulatory timeframes for complaint processing. Tracking and analysis 
of complaints will be improved and analytical information will be used 
to identify further improvements and allocate resources. Additional 
funds will be devoted to technical assistance, training, and outreach 
activities.
    This budget clearly reflects the high priority that the Department 
places on providing equal opportunity, equal access and fair treatment 
for all USDA customers and employees. .

                        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.
    Due to the efforts of these offices, the Department has made 
significant progress in improving management. For example, the 
Department received its first-ever unqualified or ``clean'' opinion on 
the 2002 financial statements and received a clean opinion again in 
2003. To meet the mandate of the Government Paperwork Elimination Act, 
USDA agencies are deploying new departmentwide electronic signature 
technologies that allow customers to conduct business transactions over 
the Internet, saving both customers and the Department time and money.
    The 2005 budget builds upon that progress by continuing funding 
levels for these offices and providing key funding increases in order 
to:
  --Continue efforts to modernize the Service Center agencies (FSA, 
        NRCS, and the Rural Development) IT activities to improve 
        efficiency and customer service. As part of this initiative, 
        efforts to expand the use of the Geographic Information Systems 
        continue and will lead to improved soil and land-use analyses. 
        A scheduled integration of the IT support functions of the 
        Service Center agencies into a single organization under the 
        Chief Information Officer will further improve these 
        activities.
  --Strengthen the security of the Department's facilities and IT 
        systems through certifying and accrediting USDA systems, 
        improving a Departmentwide Information Survivability program, 
        implementing an automated risk management system, and 
        establishing a Cyber-Security Operations Center.
  --Support the creation of remote backup capabilities to protect the 
        National Finance Center accounting, payroll and related 
        services data for USDA and other agencies from malicious 
        intrusions and natural catastrophes.
  --Implement an electronic commodity market information system that 
        will consolidate all of the Department's commodity data, 
        analyses and forecasts into a single public website.
  --Support the Administration's goal to increase procurement of 
        biobased products, with the purpose of creating new economic 
        opportunities in rural areas while reducing our dependence on 
        fossil energy-based products derived from foreign oil and 
        natural gas. The Office of the Chief Economist (OCE) will 
        implement and administer a government-wide biobased product 
        procurement program, mandated by the 2002 Farm Bill. OCE will 
        work with Departmental Administration to develop a model 
        biobased product procurement plan that can be adopted by 
        Federal agencies, and will support interagency biobased product 
        procurement efforts.
  --Continue renovations of the South Building to ensure that employees 
        and customers have a safe and modern working environment.
    That concludes my statement. I look forward to working with the 
Committee on the 2005 budget so that we can better serve those who rely 
on USDA programs and services.

                 NATIONAL ANIMAL IDENTIFICATION PROGRAM

    Senator Bennett. Thank you very much, Madam Secretary. We 
appreciate your statement, and we appreciate your being here.
    I understand you are working to design a National Animal 
Identification Program. Can you tell us how you envision such a 
program being implemented? Any timing that you might have on 
this? And do you expect it to be mandatory or voluntary? And do 
you have statutory authority to implement this, or when you 
have got the work done, are you going to come back to the 
Congress and ask for additional authority? Could you explore 
that whole area with us?
    Secretary Veneman. I will, Mr. Chairman, and thank you for 
that question.
    As you know, on December 30, I announced aggressive actions 
that we were taking in response to the BSE find on December 23. 
One of the things I said we would do is accelerate a national 
verifiable system of animal identification. A tremendous amount 
of work had been done over the past 18 months involving an 
effort by a number of agriculture producing groups, and 
government employees to look at the kinds of standards that 
should be applied in an animal identification system.
    So we were fortunate that the work had already been done. I 
then asked our Chief Information Officer to begin to look at 
how do we put together the architecture for such a system. As 
we continued into this process, we expanded our CIO's group to 
include Keith Collins, our Chief Economist; and Nancy Bryson, 
our General Counsel, because of the legal issues involved, and 
they are now in the process of putting together an overall plan 
with recommendations. I will have Keith comment on that.
    With regard to the authorities, we have also been looking 
at that issue, and as I have testified at other hearings, the 
one issue that is of concern to many of the producers is making 
sure that they can maintain confidentiality of the information 
that will be put into this system. We have been working with a 
number of the Committees to determine the kind of statutory 
language we may need to ensure that information provided into 
this system can be maintained as confidential information.
    I would like Keith Collins to comment briefly on what the 
USDA committee has been doing on this system.
    Mr. Collins. I would be happy to do that, Madam Secretary.
    A lot of work has been done, as the Secretary said, 
particularly by a group called the USAIP, United States Animal 
Identification Plan team, which represents some 100 people and 
70 organizations. They have developed a tremendous amount of 
infrastructure recommendations such as data standards for 
identifying premises, for identifying animals, and for tracking 
movements.
    What we have envisioned is to be able to implement a 
national plan, first on a voluntary basis because we have such 
a complicated animal agricultural sector in the United States 
with very little experience with individual animal 
identification. A survey taken in 1997 indicated that about 
half of all operations had no experience whatsoever with 
individual animal identification.
    When you consider that we have over 1 million cattle 
operations alone, and we have some 3,000 meat packing and feed 
lot operations in excess of that, we felt it was important to 
start this program on a voluntary basis. We believe that for it 
to work over time, all animals will have to be in the system, 
so at some point, this could very well become a mandatory 
program.
    The first thing we want to do is to look at the USDA-funded 
programs that have operated over the last couple of years and 
select one of those systems to serve as the national animal 
allocator for premise numbers and a national animal allocator 
for individual animal numbers. Once we scale up one of the 
existing systems to be able to operate in that capacity, then, 
we plan to work with states, with tribes, and eventually with 
third parties to, through cooperative agreements, and some 
funding by USDA, enable them to interface with the national 
premise allocator and with the animal number allocator.
    Our first priority would be to issue premise numbers, 
identify places where animals are located, develop a uniform 
definition of a premise, sign up states, tribes and third 
parties and issue premise numbers. As you know, in this budget, 
there is a request for $33 million for 2005 to continue the 
development of that process that I just described. That 
initiative would grow in 2005.
    Senator Bennett. Fine, thank you very much.
    Senator Kohl.

                    HUNGER TASK FORCE PILOT PROGRAM

    Senator Kohl. Madam Secretary, in March 2003, I was able to 
assist a nonprofit in Milwaukee, the Hunger Task Force, in 
receiving approval from the USDA to carry out an innovative 
pilot program. They received nonfat dry milk from USDA and 
worked with a local Wisconsin dairy to turn this into about 
20,000 pounds of mozzarella cheese.
    The cheese was distributed to needy families at food 
pantries throughout the region, and it was very popular. 
Ninety-three percent of the recipients surveyed said that they 
would much rather receive cheese than nonfat dry milk. Because 
it was such a popular program, the Hunger Task Force has asked 
USDA to let them continue their program. They would propose to 
use 516,000 pounds of nonfat dry milk every year, less than 
one-half of 1 percent of the 960 million pounds USDA has in 
storage.
    As you know, we have been working on this together for a 
year now, and we have talked about it, you and I and your 
Department a great deal. It would be nice if we could reach a 
conclusion. Is it possible that you have anything to say to us 
on this issue?
    Secretary Veneman. Well, Senator, as you and I discussed, I 
indicated to you that after a review of this pilot program, 
there are significant concerns that have been raised regarding 
the operation of the program from the perspective of how it 
interrelates with the dairy price support program, particularly 
if the pilot goes beyond the limited application it now has.
    Given the conversations that you and I had yesterday, we 
will be agreeing to extend the pilot program for a year, under 
the limited basis, to further evaluate the pilot. But again, 
there are some significant concerns over the long term that are 
being looked at both in terms of the price support program and 
the overall impact on the dairy program.
    Senator Kohl. Well, I consider that to be a very positive 
development, and I want to thank you for your willingness to be 
so cooperative and supportive. I know that the Hunger Task 
Force, and more importantly, the people they serve, will be 
very gratified by your response and will feel indebted to you 
for this. Thank you so much.

                         WIC CONTINGENCY FUNDS

    Madam Secretary, it is my understanding that states are 
already starting to take action to conserve WIC dollars because 
they are afraid they do not have enough money to finish out 
this year. As you know, we have a $125 million contingency fund 
to prevent things like this from happening, and states need to 
be given as much advance notice as possible if additional money 
will be made available. Do you anticipate using any of the 
contingency fund this year, and if so, will an announcement be 
made with regard to this?
    Secretary Veneman. We are reviewing the possibility, for 
the very reasons that you state, of tapping into that 
contingency fund primarily because of increased prices for 
formula. That has been the primary driver in the increased cost 
of the WIC program. So we are looking very carefully at the 
possibility of tapping into that contingency reserve. Of 
course, that would have implications for the budget you are now 
considering, because it is anticipated in the 2005 budget 
proposal that the reserve would not have been tapped into and 
would roll forward.
    So all of that has to be considered, but given the 
difficulty that many of the states are having, I think we will 
be looking very carefully at tapping into some of that reserve 
for 2004.

                     ANIMAL WELFARE ACT VIOLATIONS

    Senator Kohl. All right. As you know, included in the 
fiscal year 2004 bill is $800,000 to help address violations of 
the Animal Welfare Act, including illegal animal fighting. 
Along with other problems, bird fighting played a key role in 
spreading Exotic Newcastle Disease in 2002 and 2003, which 
ultimately cost taxpayers about $200 million to contain. I know 
your department has tried to develop some cases against people 
who have participated in this activity but has had a tough time 
because the Federal law provides only misdemeanor penalties, 
and the U.S. attorneys are reluctant to prosecute misdemeanor 
cases.
    Does the administration support legislation, S. 736, to 
upgrade the penalties for Federal animal fighting violations 
from a misdemeanor to a felony, and if not, do you have 
suggestions on how to deal with this problem?
    Secretary Veneman. Senator Kohl, I absolutely agree with 
you that this is a serious issue. We encountered the outbreak 
of Exotic Newcastle Disease, that was focused in the area of 
Southern California. Not only did we begin to better understand 
the problem of birds that were being transported for bird 
fighting purposes but also I think all of our regulatory 
agencies and the state agencies, including the state regulatory 
agencies, were surprised to find out just how many--what we 
call backyard birds--were in homes around Southern California, 
in the L.A. area, which made the task of controlling Exotic 
Newcastle Disease and looking for the problems much more 
difficult.
    We worked with our Inspector General and with our Animal 
and Plant Health Inspection Service and with local law 
enforcement to see how we could better control some of the 
movement of these animals and birds. Of course, another problem 
with the birds is the live bird markets. There has been a lot 
of concern expressed about that, particularly with the 
outbreaks of avian influenza here on the East Coast.
    I am not familiar with the penalties legislation that you 
have indicated. We would be happy to review it to determine 
whether or not, with our authorities, it would provide the 
kinds of assistance that would help us better control some of 
this movement of birds that can cause these animal diseases. As 
you know, these outbreaks have a tremendous impact on our 
international trade when we get these diseases of poultry and 
other animals. We have had several disruptions over the past 2 
or 3 years, and we have been doing everything we can to address 
these issues as completely and effectively as we can.

                     CENTRAL FILING SYSTEM PROGRAMS

    Senator Kohl. All right. Mr. Chairman, I had just one other 
question regarding current central filing system programs and 
the need to eliminate any potential for identity theft, which 
was brought to my attention by the Wisconsin Department of 
Financial Institutions.
    However, in the interest of preserving time, I will submit 
that for the record and look for a response. Thank you, Mr. 
Chairman.
    Senator Bennett. Thank you. We can get to it in the next 
round if you are so inclined.
    Senator Craig.
    Senator Craig. Thank you, Mr. Chairman.

                 NATIONAL ANIMAL IDENTIFICATION SYSTEM

    Madam Secretary, the Chairman asked the first question that 
I had planned to, and I appreciate your response to a national 
ID system. Senator Hagel, myself, and a good number of others 
are looking at different approaches. But we do appreciate your 
sensitivity to it, the Department's. A lot of work--you are 
right--has already been done. The vet sciences and all of that 
type of thing; I am glad you are approaching it with caution in 
the sense of timing and testing things.
    We here in the Congress sometimes think we are pretty 
smart, but we are not as smart as the cattlemen when it comes 
to knowing how something will work on the ground that can 
effectively develop a chain of identification, and I 
appreciate, and I have had the concern of confidentiality 
expressed to me by a variety of our cattlemen. At the same 
time, they know, and they are ready to respond to a national ID 
system as long as it is the right system and it works, and it 
is something that is manageable and cost-effective.
    We dare not, in a marginal industry at times, drive up the 
costs simply because we are going to command and control a 
system. It has to function.

                 NATIONAL RURAL DEVELOPMENT PARTNERSHIP

    Through the decade of the nineties, Idaho was not unlike 
other States. Many of our urban areas prospered, and many of 
our rural areas floundered. And as a result of that executive 
order by President Bush in 2002 to look at rural economic 
development was the right thing to do. And we here on the Hill 
responded; I responded with legislation to develop a National 
Rural Development Partnership. It happened. And we have it 
implemented, now, across America and beginning to work.
    Unfortunately, although I have tried hard to secure stable 
funding for this what I believe is a common sense vision of 
bringing together varieties of resources and focusing them 
effectively in a teaming approach as the kind that the 
executive order and our President proposed, we are still 
struggling to be able to effectively do that with natural 
resources or with resources. I have discussed the issue with 
former Rural Development Secretary Tom Dorr, and frankly, we 
have not seen much change.
    With resources as scarce as they are, what are your 
thoughts in regard to the NRDP with its role in helping rural 
communities and states better coordinate and understand the 
resources that are available to them?
    Secretary Veneman. As you indicate, our Rural Development 
programs are an important part of the USDA portfolio, one that 
many people often forget, and I think that one of the things 
that former Under Secretary Dorr was able to do was to help 
people to understand that we need to look at these programs as 
the venture capital for rural America. And I think that concept 
is very appropriate as we look at these kinds of programs.
    One of the things that our Rural Development team has done 
is they have begun to put together a new partnership of all of 
the Rural Development agencies and programs, so that they are 
working in much more of a coordinated effort with rural 
communities. I think this partnership will be very positive as 
we implement it and go forward with it because rural 
communities are often going to one of our housing programs, for 
one thing, and somewhere else for an economic development 
grant.
    If we can begin to integrate our efforts more with specific 
communities, I think it will help to bring together a number of 
the kinds of issues that you are talking about with the Rural 
Development Partnerships where we are also trying to work with 
the States and the local communities.
    We have tried to be very forward looking in terms of our 
Rural Development programs. Our housing initiatives, 
especially, have been ones where we have really tried to target 
towards homeownership. We have our business development loans 
and our business loans and grants for rural businesses that can 
help stimulate economic activity. We also have a range of 
utility loans and water and sewer loans, which are very 
popular, and all of these programs help rural America have the 
kind of infrastructure they need to attract capital and attract 
jobs that they need to thrive for the future.
    So we certainly will continue to work with you on the 
issues of rural development as we move forward.
    Senator Craig. Well, thank you, Mr. Chairman.
    Teaming in this issue is phenomenally important. The 
coordination of bringing them all together, instead of 
communities rushing one place and another to try to find 
resources is clearly the right approach, and I do believe the 
partnership is moving in that direction to do a comprehensive, 
coordinated effort, and so, I encourage you to pursue that. We 
will try to find the bucks to help you pursue it a little more 
aggressively than your budget reflects, because many of our 
rural communities are really struggling to come alive in a new 
context that agriculture will just not provide them anymore.
    Thank you.
    Senator Bennett. Thank you.
    Senator Durbin.
    Senator Durbin. Thanks, Mr. Chairman.
    Secretary Veneman, welcome, and I welcome all those who are 
with you, especially your chief economist, Dr. Keith Collins, 
and your budget officer, Stephen Dewhurst. They are gifted, 
patient, long-suffering stalwarts of the U.S. Department of 
Agriculture who have in their careers seen more of Congressmen 
and Senators than any living American----
    With the possible exception of the attending physician in 
the Capitol.
    And I am glad that they are with you today.

                       SINGLE FOOD SAFETY AGENCY

    We spend a lot of time talking about food safety, and we 
certainly have since we found that one sick cow. And I have 
been pushing for a single food safety agency to combine the 12 
different agencies of the Federal Government that have some 
mandate when it comes to food safety and the 35 different laws 
and the scores of committees. I have really been able to 
convince every aspiring Secretary of Agriculture and every 
retiring Secretary of Agriculture. I just had my problem with 
current Secretaries of Agriculture who do not want to support 
it.
    So this is your chance to step out and to say it is time 
for us to get together on a single, science-driven food safety 
agency; that it is mindless to have the Food and Drug 
Administration responsible for the feed given to cattle and the 
USDA responsible for the cattle once fed, and it is time to put 
it all under one roof. I give you that chance at this moment.
    Secretary Veneman. Well, Senator, you and I have talked 
about this issue on other occasions, and as you know, I think 
it is very important for us to coordinate very carefully on 
food safety issues. We have made a concerted effort in this 
Administration to do just that, and in fact, we have been 
working very, very closely with the Food and Drug 
Administration throughout the issue of the BSE find.
    The FDA has been involved in our briefings with the press 
and they have been involved in our meetings in determining 
where we go from here. Again, we have worked very, very closely 
with them. There has been a lot of discussion about forming a 
separate agency, taking, for example, the Food Safety and 
Inspection Service out of USDA, and along with FDA, putting it 
into a brand new agency.
    There are pros and cons to that strategy, but I would say 
to you that I think that the BSE situation has illustrated one 
reason why it has been so important to have the Food Safety and 
Inspection Service in the U.S. Department of Agriculture, and 
that is the intersection with BSE between animal health and 
human health and the safety of the food supply given an animal 
health issue. As you know, these two agencies were under the 
same Undersecretary or Assistant Secretary for a number of 
years in USDA. They were split apart about 10 years ago but are 
still under the same department in USDA.
    We have found that these agencies have had to work 
seamlessly throughout this BSE incident. I think that as hard 
as we are working with FDA, it would not have been as easy to 
begin the traceback, which we were doing through the Animal and 
Plant Health Inspection Service, when we found the BSE cow and 
then the trace forward to the product, which we were doing 
through the Food Safety and Inspection Service.
    All of these things have been very, very well coordinated 
as a result of the fact that we have had the agencies together 
in USDA.
    Senator Durbin. Well, I will not dwell on the question, 
because as I said, no current Secretary of Agriculture every 
supports it.
    Once you have retired, you will be in my corner.
    But that will be many years from now.

                              BSE TESTING

    Let me say, though, that the logic behind the creation of 
the Department of Homeland Security is the same logic behind 
bringing together food safety. I want to ask you specifically 
about the announcement of the USDA about testing for BSE: 
200,000 cattle from high risk, 20,000 from normally old cattle. 
I have written to you three different letters, three different 
subjects, I should say, on BSE, soybean rust and childhood 
obesity, and I am hoping that your Department can get me a 
response soon to all of those letters.
    In the meantime, though, as I understand it, we do not know 
the ambulatory status of the Washington State holstein cow that 
tested positive. I understand an investigation by the OIG has 
been opened. If it turns out that the only animal that has been 
tested for BSE in the United States was clinically normal and 
was found only through chance, then we must question the USDA's 
BSE surveillance program that focuses only on suspect, 
nonambulatory and dead cattle.
    So I would like to ask you, how do you happen to believe 
that it makes sense for us, since we have millions of cattle, 
mostly aged dairy cows in the United States, that are older 
than the FDA ruminant feed restrictions of August 1997 not to 
be universally testing those older animals; instead, taking a 
very small sample which may not even tell the story of what 
happened in Washington State?
    Secretary Veneman. Senator, as you know, we recently 
announced our expanded surveillance plan on March 15. One of 
the reasons that we wanted to wait to make an announcement and 
to decide on our surveillance plan is that we wanted to wait 
for the international review committee to return with their 
analysis of how we conducted the BSE investigation and what 
steps we should undertake in addition to what we have already 
done to move forward.
    We had already said we were going to increase our 
surveillance, but we asked them for specific recommendations on 
surveillance. What they recommended was an expanded 
surveillance plan for a period of about a year to get a 
baseline of what the extent of the BSE problem is in the United 
States. As a result of that, we worked with our Animal and 
Plant Health Inspection Service as well as our Chief 
Economist's Office to get a statistically valid sampling 
process established. Now, that is still targeting, as the 
international organizations recommend, the highest-risk 
animals: those with central nervous system disorder signs, 
those that are dead, dying, or downers.
    We know from the countries that have had a much greater 
incidence of BSE than we obviously have had in North America, 
that these are the cows that are most likely to have BSE. But 
as you indicate, we included in our surveillance plan a random 
sampling of older, healthy animals, and the importance of that 
is to target the animals you are talking about, that is, those 
animals that are older than the feed ban primarily. Not just to 
say that if animals are over 30 months, we are going to 
randomly sample them but to really target those animals that 
are over the age of the feed ban. We think it is important to 
get a random sampling of that group of animals.
    I think you have probably seen a lot of the debate about 
this particular instance in Moses Lake in Washington State. 
There has been a great amount of debate about whether or not 
this cow was indeed a downer. I have to say that as our OIG is 
investigating it, the Government Reform Committee has been very 
involved in looking into this.
    Our veterinarian from FSIS clearly deemed this cow to be 
nonambulatory, a downer, thereby putting it in the higher risk 
category. But apparently, according to this process, this 
company was bringing in animals that they called, ``back door 
animals'' and many of those animals were tested under the BSE 
testing protocol, but the company was not calling them downers 
because they were saying that we do not kill any downers in our 
plant, because they had customers who did not want downer cows.
    Senator Durbin. It has been 4 months, and we still cannot 
answer that basic question: what was the ambulatory status of 
this diseased cow?
    Secretary Veneman. Our veterinarian deemed it to be a 
downer.
    Senator Durbin. Nonambulatory.
    Secretary Veneman. Right.
    Senator Durbin. Mr. Chairman, I know my time has expired. I 
have a series of questions on BSE, soybean rust, which was not 
mentioned in the Secretary's remarks, but I have spoken to her 
personally, and on the whole question of school lunch programs 
dealing with childhood obesity, which I would like to submit to 
her for response.
    Thank you, Mr. Chairman.
    Senator Bennett. Be happy to do that, and we do intend to 
have another round if you----
    Senator Durbin. Thank you.
    Senator Bennett. If you have got an opportunity.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    Madam Secretary, thank you for being here and thanks to 
your staff.

                       BSE AND CATTLE FROM CANADA

    I want to just make a couple of comments and then follow 
with a question, and the comments will not surprise you. One is 
the issue of BSE or mad cow disease. You know I have written to 
you, and I hope very much that we will not move quickly to open 
the border to live cattle with Canada. We know there is 
discussion going on, there is a process, but I feel very 
strongly about that issue. I regret very much that a case of 
mad cow disease was found in Canada; a case of BSE was found in 
the United States, apparently with a cow that was imported from 
Canada.
    But first and foremost, our objective must be to protect 
our beef industry, and I really hope you will move cautiously. 
I do not think this is the time to open the market to the 
import of live cattle from Canada. Second, I want to again say, 
many of us, as you know, feel very strongly about country of 
origin labeling. And we have had a long, tortured debate about 
this legislation, and, you know, this has kicked around a long 
while. We need to move on that and get that done.

                      AGRICULTURAL TRADE AND CAFTA

    And third, I want to discuss something that you are not 
directly involved in in terms of responsibility, but I know you 
have an acquaintance of, and that is the agricultural trade 
issue. I would just say for the interest of the administration, 
the negotiation of CAFTA, the negotiation of US-Australia falls 
far short, from my standpoint. I regrettably would oppose CAFTA 
if it is brought to the floor, and with respect to Australia, 
the promise by the trade ambassador to deal with the 
elimination of state trading enterprises was not done with 
Australia, and I regret that.

                     STANDARD REINSURANCE AGREEMENT

    So those are just a couple of things, and I know that it is 
not your primary responsibility to deal with ag trade. That is 
a message, really, for the Trade Ambassador.
    I would like to mention to you, the Risk Management Agency 
of USDA is engaged in negotiations with the crop insurance 
providers for a new product called SRA or Standard Reinsurance 
Agreement, and I have been visited by farm organizations and 
others about it. One major farm organization that came in to 
talk to me about the first draft of the SRA, were very 
concerned about it.
    They said that draft was so onerous that a number of 
private companies and reinsurers could abandon their 
participation in the program, leaving farmers and ranchers with 
less competitiveness than they have today. I do not admit to 
being an expert in this area, but I will just ask you to take a 
look at what is happening there, because having crop insurance 
that works, that is good for producers, is very important to 
us, and we do not want to leave farmers and ranchers without 
the choices that they need and deserve.

                 IMPORTATION OF LIVE CATTLE FROM CANADA

    We, I believe, are going to be meeting on another subject 
dealing with the issue of broadband loans, which is a program, 
I know, that you are beginning to initiate, and I am anxious to 
get that done. We will talk about that at a later time. But I 
did want to just mention those issues, and if you would give me 
just an answer on the issue of the importation of live cattle 
from Canada, given the BSE situation. Would you respond to 
that?
    Secretary Veneman. I would be happy to, Senator.
    As you know, when Canada announced that it had a single 
find of BSE on May 20, our standard protocol was to close the 
border, which we did. We then looked from a risk-based 
perspective, a scientific perspective, at reopening the border 
for the lowest-risk product, which was deemed to be boneless 
boxed beef from animals under 30 months, and we did that. The 
effective time of that was about the end of August, the 
beginning of September.
    We then also published a proposed rule that would allow 
live cattle to reenter the U.S. market that were under 30 
months of age and that were going directly to slaughter. I know 
that you said in your remarks that we need to protect our beef 
industry. This would have not put these cattle into the general 
population, but they would have had to be destined directly for 
slaughter.
    The comment period on that rule was to close on January 5. 
This, as you know, was just after we discovered BSE in this 
country. So on January 2, I announced that we would allow the 
comment period to close, but that we would not take action on 
the proposed rule until we had time to finish our 
investigation, which we did in February. In March, we 
reproposed the same, or a very similar rule, I should say, and 
opened the comment period again for 30 days. The comment period 
will close, I think, on April 7, and we will then evaluate the 
comments that we have received.
    But again, this border opening would be limited, and as I 
have been around the country lately, I realize there is a lot 
of confusion about what this importation rule would do. This 
rule, as it is proposed, would limit importation to those 
animals under 30 months destined for slaughter. My Canadian 
counterpart indicates that we should move quickly to allow all 
cattle to come into the United States, but the way we set this 
up is in a two-stage process based upon the risk.
    So I think that it is very important that we take actions 
with regard to trade on sound science. We have also been 
working with other countries. Obviously, we have lost most of 
our beef trade because of the BSE find here. We have had some 
success in partially reopening the Mexican market. We are 
working hard with our markets in Asia and other places. But it 
is very important that we set a good example in terms of basing 
our decisions that pertain to border opening and other issues 
on sound science, and that is what we have attempted to do 
throughout this BSE situation.
    Senator Dorgan. If I might just make a final comment, Mr. 
Chairman, I understand that. I also believe that in Japan, they 
have discovered animals with BSE, mad cow disease, under 30 
months of age. I wish no ill for the Canadian producers. Our 
heart breaks for them as well. But our first and foremost job 
is to protect our country's industry. And with the release a 
week or so ago of information about two Canadian feed plants, 
you know, the question is what were British cows, cows that 
were banned for importation into the United States since 1988, 
doing in Canadian cattle feed in 1997, 9 years later?
    All of those things just raise a lot of questions, and I 
would just ask that we not rush to open that border to the 
import of live cattle from Canada. I think it is very 
important.
    Madam Secretary, thanks for all of the work that you do. We 
from time to time agree on things and disagree on things, but 
your office is always responsive, and I appreciate that.
    Secretary Veneman. Thank you.
    Senator Bennett. Senator Bond.
    Senator Bond. Thank you very much, Mr. Chairman.

                 EXPORTS TRANSPORTATION INFRASTRUCTURE

    Madam Secretary, I do not know if you remember or if you 
saw the December 1 last year Wall Street Journal. The headline 
on the front page said railroad log jams threaten boom in the 
farm belt, delays in grain shipments reduce potential profits, 
may affect overall economy. Log jams worst since 1997. Corn and 
soybean on the ground; rail prices doubled over the past 6 
months, close quotes.
    In general, in your view, how critical is it that we have 
efficient shipment transportation options for our exporters, 
and is an efficient waterways system essential if we are going 
to export in an increasingly competitive international 
marketplace?
    Secretary Veneman. Well, Senator, I believe it is. As you 
know, we are very dependent in our agriculture sector on the 
export market. We produce much more than we consume, and so, 
the global market is very important. We are projecting that our 
agricultural exports for this year, 2004, will be at $59 
billion. This is even with the difficulties we have had because 
of our beef exports and our poultry exports with BSE and avian 
influenza. That exports projection is nearing our record high 
level of exports of $60 billion in 1996.
    But one of the reasons we are able to be such an abundant 
producer and be such an important exporter in the world market 
is because we do have an infrastructure that allows us to move 
that product. Whether it is on the railroads, and I would like 
to point out that I did send a letter to all of the railroad 
executives asking them to make sure that they were addressing 
the issue of agricultural commodities when the transportation 
infrastructure issue was going on, but we also depend, to a 
great extent, on the waterways as well for the movement of 
agricultural commodities.
    Senator Bond. Thank you. And I think the best way to 
assure--we need all forms of transportation, and the more 
competition we have the more efficient and more economical 
every one of them is going to be. You are probably aware the 
Mississippi River has locks and dams built 70 years ago that 
were designed to last 50 years. I have seen them leak and the 
water flow through. They are a source of congestion. It is a 
straitjacket on our shipping growth in a region where two-
thirds of our corn and almost half our beans for export must 
travel.
    I am working with Senators Harkin, Durbin, Grassley and 
others, because it takes 870 trucks to carry the same amount of 
corn as one single medium-size tow on the Mississippi. The 
Corps of Engineers is now in the 12th year of their 6 year, $70 
million study and in great need of some adult supervision and 
guidance from USDA. AMS and Deputy Hawks have been working on 
this to ensure that farmers are not left to the mercy of a 
dilapidated water transport system and a railroad monopoly. I 
appreciate your keeping an eye on this to ensure that we 
maintain an efficient means of getting our farm products to 
market.

                       TRANSPORTATION EFFICIENCY

    Let me turn to Dr. Collins. How do you see the relationship 
between transportation efficiency and the ability of farmers to 
win markets at higher prices?
    Mr. Collins. I think they are fundamentally related, 
Senator Bond. A great example of that is simply what has 
happened in the world soybean market over the last 10 years or 
so. Everyone knows that Brazil has a very low cost of 
production of soybeans. However, we have an advantage in 
transportation infrastructure. And that has enabled us, despite 
the large growth in soybean production in Latin America, to 
continue to increase our exports and be competitive around the 
world. So I think they are closely related.

                             CORN SHIPMENTS

    Senator Bond. I just hope we maintain that edge.
    Over the next 10 years, Dr. Collins, what would you 
estimate the increase in corn shipped through the Gulf to be?
    Mr. Collins. Senator, we have recently completed a 10-year 
analysis that forecasts through the 2013 crop year. We do not 
project specific exports through the Gulf. I know you have 
asked me this question. Our exports of corn in total over the 
next 10 years are projected to rise about 45 percent, and about 
70 percent of all corn export increases would be expected to go 
out through the Gulf. So we would say something in the range of 
about 435 to 550 million bushels of corn, over and above where 
we are now, would be going out through Gulf ports by the year 
2013.
    Senator Bond. I was interested that you do your baseline 
projections for 10 years. The Corps has tried to figure out 
what is going to happen 50 years from now. Why do you do it for 
10, not 20, 30 or 50?
    Mr. Collins. Doing it for 10 is heroic enough.
    Senator Bond. You are joined in that by the National 
Academy of Sciences, which said nobody can predict anything 50 
years from now, and I very much appreciate your projections and 
your interest.
    Mr. Collins. I think that is right. There are just too many 
risk factors for us to go much beyond a decade.
    Senator Bond. Thank you.
    Senator Bennett. Senator Harkin.

                     CONSERVATION SECURITY PROGRAM

    Senator Harkin. Thank you very much, Mr. Chairman.
    I apologize for being late, but I thank you for this 
opportunity.
    I welcome you again, Madam Secretary, and I want to cover a 
couple of programs with you, the Conservation Security Program 
and the bio-based proram which includes, the Federal 
requirement to purchase bio-based products, both of which were 
in the Farm Bill.
    Secretary Veneman, as you know, the Conservation Security 
Program is an important new program included in the 2002 Farm 
Bill. It embodies all the important features included in your 
own Food and Agricultural Policy report. The payments fall 
under the WTO green box for trade purposes. It encourages not 
only maintenance of conservation practices, but additional new 
conservation, and it is a voluntary national program to 
diminish the need for environmental regulations for farmers and 
ranchers.
    Despite the promise of CSP, despite the clear wording in 
the law that we passed and the President signed, USDA has drug 
its feet and has issued a proposed rule that provides such 
limited payments and very difficult eligibility requirements 
with multiple obstacles that almost no producers can get in, 
and the few that can may find it financially impossible to 
participate.
    The program in your proposed rule bears little resemblance 
to what was passed in the Farm Bill. Quite frankly, Madam 
Secretary, you have made up the rules out of thin air. Now, not 
only have members of Congress told you that; I have here a 
recent letter that 56 members of the Senate signed. Last 
summer, we sent you another bipartisan letter. This later one 
was bipartisan, too with 56 members. I could have gotten more, 
but I ran out of time.
    But every Senator I have talked to has heard from their 
farm groups, the major groups, the Farm Bureau, the Farmers 
Union and also the other crops: the corn growers, soybean 
producers, cotton, rice, everybody. And as I understand it, you 
have gotten over 12,000 comments, sent to you expressing 
similar sentiments and disappointment.
    Now, after you published the proposed CSP rule, Congress 
passed and the President signed into law the fiscal 2004 
Consolidated Appropriation Act that restored the CSP funding to 
what it was in the Farm Bill. Now, in your proposed rule, you 
have said here, that Congress is currently considering 
legislation that amends funding for the CSP. Pending the 
enactment of the legislation, NRCS intends to publish a 
supplement to this proposed rule. Well, we changed the law, but 
there is no supplement to the proposed rule.
    So now, USDA's rulemaking, simply, it seems to me, is going 
on in some kind of a black box. We do not know what is going 
on. For example, I was shocked to find out that despite the 
fact that the comment period closed on March 2, the public and 
the press still does not have access to the comments. My staff 
that I deputized to do this have repeatedly requested and asked 
for access to the comments, and we have been denied. The press 
has been denied.
    Madam Secretary, with all due respect, I have never in all 
my 20 some years here encountered an agency denying access to 
public comments in this way, never. And so, you know my 
frustration. I am saying it this way because the farmers I have 
talked to are extremely frustrated by this, so I am asking you 
for the record whether you will commit to America's farmers and 
ranchers, to our Nation's citizens, to your own words in your 
farm policy report that you will revise the CSP rules and carry 
out the program as written in the Farm Bill and which the 
President signed.
    Will you commit yourself to that?
    Secretary Veneman. Senator, let me just say that this CSP 
is part of the larger Farm Bill, as we have talked about. We 
have had a tremendous amount of work to do with regard to this 
Farm Bill, and as we have discussed on many occasions, the CSP 
was not described in detail in the Farm Bill, and there were 
many decisions left to be made. We have gone out and had a 
number of public hearings, a number of processes to get public 
input, and as you say, our proposed rule was then published.
    The comment period has now closed, and as you have 
rightfully indicated, there were over 12,000 comments. We are 
now in the process of evaluating those comments to determine 
what the final rule should look like. I certainly can commit to 
you that we are going to review all of the comments that we 
received. I frankly had been unaware of the fact that you had 
not had access to the comments, and I commit to you that I will 
look at that issue to determine whether or not we can get you 
the comments that you are requesting. I was not aware that the 
comments were not available.
    Senator Harkin. I would also hope that you would let the 
press have access--these are public comments.
    Secretary Veneman. I understand.
    Senator Harkin. There should be no secrecy. There are no 
state secrets.
    Secretary Veneman. I understand, Senator. I just was 
unaware that there was a problem.
    Senator Harkin. Well, it is a big problem.
    Secretary Veneman. I will go back and try to determine what 
is the issue there.
    Senator Harkin. All right; I appreciate it.
    Secretary Veneman. But I think as you indicate, this has 
been a long process primarily because it is a new program, and 
we want to do it right. I have not seen the comments. I do not 
know what the various issues are, but I can tell you that 
because the funding has been limited, we have had to make some 
decisions about how we structure this CSP program. Are they the 
right ones? I do not know. But this is what you have: a notice 
of proposed rulemaking and we have comments for the proposal 
and so, as we go forward, I cannot tell you what the final rule 
is going to look like, but certainly, we will review the 
comments and take into account as much as we possibly can in 
developing a final rule.
    Now, Dr. Collins has been part of our overall group that 
has been responsible for implementing the Farm Bill, and he may 
want to make a couple of other comments about how we have tried 
to work to get to where we are on the CSP rule.
    Senator Bennett. Let me warn you, Dr. Collins, the vote is 
on, so that we need to be as brief as we can. We will not have 
another round, after I have been promising it all afternoon, 
because we have to go vote.
    Mr. Collins. I did not know that.
    Senator Bennett. But go ahead.
    Mr. Collins. Mr. Chairman, I would only say very quickly 
that there has been a different balance that the agency has had 
to cast here. We have a statute with a legislative history of 
it being capped. It is capped for fiscal year 2004. It also has 
a limitation on technical assistance funds.
    Senator Harkin. Is it capped beyond fiscal year 2004?
    Mr. Collins. It is not capped beyond 2004.
    Senator Harkin. Thank you. I want that for the record to be 
clear. Fiscal year 2005 and beyond is not capped.
    Mr. Collins. It is not. But we have had a legislative 
history of caps in the out years, and the Administration has 
proposed a cap in the out years, although statutorily, it is 
not capped in the out years.
    Senator Harkin. Thank you, the law we are following in the 
law in effect now.
    Mr. Collins. Correct. There is also a 15 percent limitation 
on technical assistance, which also does serve as a constraint 
in the Natural Resources Conservation Service's ability to deal 
with the potential 1.8 million farms that would be eligible for 
a wide-open environmental stewardship program. So I think there 
were those kinds of constraints that the agency felt they 
needed to deal with in developing this regulation.
    Senator Harkin. Well, I know we have to go, Mr. Chairman, 
but when were the rules supposed to come out under law? What 
date? February of 2003. We are now more than a year past that. 
I think we, all of us here and on the authorizing committee, 
have been more than understanding of saying, okay, fine, things 
take time.
    But we are getting to the point now where farmers are just 
saying you are scoffing at the law. The Department of 
Agriculture is just scoffing at the law that we wrote and not 
doing anything to implement this. The proposed rules bear no 
resemblance to what is in the law. That is why you have got 
over 12,000 comments. I have not read them. I take you at your 
word you are going to try to let us have access to those. As I 
have said, I have never had an agency ever say that we could 
not look at public comments.
    But all I know is that the agricultural producers and 
groups have contacted me who have sent in comments. To a 
person, I am sure that close to 100 percent were opposed to the 
rules that you proposed, so I just am hoping that you do have a 
revision of these rules. I would forego the supplement at this 
point to the proposed rule. You do not need a supplement. That 
will just delay the final rule some more. But if you get these 
rules out and carefully follow the comments, then, perhaps we 
can start signing people up soon.
    And I am glad, Mr. Collins, you have pointed out that it 
was capped this year; the law got changed. We got it put back 
the way it was in the Farm Bill, and it will not, I can assure 
you, change again until this Farm Bill is up again. And so you 
should prepare for a program that reflects the law beyond this 
year.
    Thank you, Mr. Chairman.
    Senator Bennett. Thank you.
    Senator Harkin. I did not get to the bio-based products 
program.
    Senator Bennett. Well, you can submit those for the record.
    Senator Harkin. I appreciate it. Thank you.
    Senator Bennett. And she will be happy to respond in 
writing.

                     SECTION 521 RENTAL ASSISTANCE

    Madam Secretary, I have two quick items; also, you can 
respond in writing for the record. GAO recently reviewed the 
Rural Housing Service's Section 521 Rental Assistance Program, 
and the information that I am seeking is very specific, so I 
will provide a written request and would ask that you respond 
in writing both to myself and to Senator Kohl by the 6th of 
April if you possibly can.

                             CYBER SECURITY

    And then, the second quick item, this is a hobby horse of 
mine, but I cannot resist it: cyber security, IT weakness. GAO 
did a study on the cyber security of the department and found, 
quote, significant and pervasive, close quote, information 
security weaknesses. And we will give you again some 
information in writing, and the only comment I want to make 
about this based on my experience with Y2K, when we had that 
challenge governmentwide, the mantra I repeated over and over 
again, to which the Clinton administration responded, was this 
is not a CIO problem; this is a CEO problem.
    When the Secretary or the administrator or whoever the CEO 
of the agency was made it clear that this was her priority or 
his priority, then it got done. If it got turned over to the 
CIO and say, well, this is a technical thing, you fix it, then, 
it did not get done, because nobody recognized how important it 
was, and the GAO report indicates the many problems they found 
are fixable, and I am sure that it can be fixable.
    I simply wanted to call it to your attention as the CEO, to 
ask you to give it the kind of leadership of which you are more 
than capable and which I think the problem demands.
    Secretary Veneman. Mr. Chairman, if I might make one 
comment on that. I do take cyber security very seriously, as 
does our CIO. We had money in the 2004 budget for cyber 
security, and it was denied by the Congress. We have money 
again in the 2005 budget request for cyber security, and we 
hope that, given your strong interest in this, that we will be 
able to maintain that money in the budget so that we can do the 
things that we know we need to do.
    Senator Bennett. Properly noted, and I will be a bulldog on 
it this year.
    Senator Harkin. Just 60 seconds, please.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Bennett. All right. I will time you.
    Senator Harkin. Secretary Veneman, the learing I did not 
want to leave on that note. I told you I was going to be hard 
on you on the CSP, and I am going to continue to be hard on 
you. But I wanted to end it on a positive note. I want to thank 
you, Madam Secretary, for what you have done for the Ames Lab 
and for coming out for the dedication of it. You have been 
great. You have put money into this critical project.
    It is needed, Mr. Chairman, to make sure that we have the 
best laboratory facilities in the world in answering animal 
disease problems and especially with the issues about BSE. We 
are moving ahead at Ames, and I just wanted to thank you, Mr. 
Chairman, Senator Kohl and your staff, along with Secretary 
Veneman, very much for all of your support and help with the 
Ames lab.
    Secretary Veneman. Thank you for being there with us.
    [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

                            RD STATE OFFICES

    Question. We understand that RD state offices have been told that 
there will not be sufficient money to fund all rental assistance needs 
this year--in particular, that some rehabilitation and repair loans may 
be funded without rental assistance. We also understand that the state 
offices have been told to reexamine their unused rental assistance and 
to consider using unused rental assistance funds for rehabilitation and 
repair loans. Your calculations for rental assistance needs seem 
inconsistent.
    Please explain your fiscal year 2004 calculations and provide us 
with documented information that explains the discrepancy between your 
original and current calculations. Also, please document what new 
information, if any, has resulted in the change regarding your ability 
to fund rehabilitation and repair loans.
    Answer. The fiscal year 2004 calculation of $740,000,000 was 
reduced by Congress to $730,000,000. Then 20 percent was taken off to 
account for 4-year contracts instead of 5 years. There was a rescission 
to bring the number to $580,550,000. Of the total, $10,000,000 was 
allocated to new construction, farm labor and preservation, which left 
$570,550,000 for renewals. At $14,000 per unit for 4 years, we 
estimated 40,754 contracts could be renewed. This resulted in no rental 
assistance for rehabilitation. We expect to use $55.8 million of the 
$116 million available for the Sec. 515 loan program for repair 
rehabilitation process.

                  RHS/GAO REPORT ON RENTAL ASSISTANCE

    Question. The Rural Housing Service (RHS) has reported that in 
implementing its new automated budget estimation process, 3 to 4 staff 
will work together on generating the budget estimates and allocating 
the resulting funds to rental assistance contracts.
    In light of the concerns reported in the GAO report, 
``Standardization for Budget Estimation Processes Needed for Rental 
Assistance Program'' (GAO-04-424), over the lack of segregation of 
duties at RHS, how will you document that these key duties have been 
divided among 3 to 4 different people to reduce the risk of error or 
fraud? Furthermore, will these 3 or 4 staff come from different offices 
within Rural Development, e.g., budget, finance, and program offices, 
or will they all be from the program office? If from the same office, 
please comment on how you plan to maintain the segregation of duties.
    Answer. The agency has not made a decision on how to address this 
issue. Several options are being considered. One of the options would 
include a national office staff person responsible for the day-to-day 
administration of rental assistance and a supervisory-level person to 
handle the policy issues. The allocation process would be developed in 
the national office and then presented to a ``Rental Assistance 
Advisory Committee'' made up of the national office staff who 
administer the rental assistance program and a person from RD Budget 
Staff, a person from the Finance Office, and the Deputy Administrator 
for Multi-Family Housing. This committee would concur with the proposed 
allocation method presented by the national office staff. The concurred 
allocation method would be presented to the Administrator for approval.
    Question. To what extent is the RHS national office monitoring the 
activity of rental assistance transfers at the state and local levels? 
For example, how many units and how much rental assistance funding was 
transferred in fiscal year 2003? How does RHS ensure that units are 
transferred according to the regulations, and that transferred units 
are used in a timely manner?
    Answer. The national office provides procedures and advice to the 
field staff for the proper administration of rental assistance. We also 
perform Management Control Reviews (MCR) of the program, which consist 
of visits to four representative states to see if the program is being 
correctly administered. The MCR results and recommendations are 
provided to all states for educational and consistency purposes.
    In fiscal year 2003 5,166 rental assistance units and $48,436,455 
were transferred.
    To address the issue of unused rental assistance, we are reviewing 
and providing monthly reports to the field staff and the management 
team to ensure this valuable resource is properly and promptly used.
    Question. Last year this subcommittee was told that USDA had 
acquired a team of professionals from inside and outside of government 
to create a new rental assistance forecasting tool. Who were the 
outside professionals that helped create the tool and what did they do?
    Answer. The Agency 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 
developed a model based on relevant informational elements using 
several software applications. The Rental Assistance Forecasting Tool 
was completed in November 2003, was reviewed by GAO in December 2003, 
and has undergone several months of testing to ensure accuracy and 
debugging. The Department expects to use the Forecasting Tool to 
develop the fiscal year 2006 Rental Assistance Renewal budget estimate.

                             RURAL PROGRAMS

    Question. There are currently different definitions of rural among 
various rural development programs throughout USDA and the Federal 
Government. A town needs to have a population under 2,500 to be 
eligible for some USDA rural development programs and rural towns with 
populations of 20,000 or 50,000 are eligible for other USDA rural 
programs. Rural health programs in HHS use non-metropolitan criteria. 
Also, some programs use county data, others use census tract 
information, and still others use commuting area designations.
    Should there be a more consistent definition with common criteria 
for rural programs throughout USDA and the Federal Government?
    Answer. Due to the diversity of rural communities across the 
country and the wide variety of programs funded by the Federal 
Government for rural residents, businesses, and communities, it is 
difficult to develop one definition for ``rural'' that is appropriate 
for all purposes. Past efforts have been found to be harmful to some 
segment of the population or overly generous to another segment. 
Nevertheless, we support simplification of the myriad of definitions 
and criteria used to define and allocate resources to rural areas.
    Question. I understand that RHS has started a capital needs 
assessment and, as outlined in the GAO report (GAO-02-397), is 
developing a protocol for evaluating the physical, financial, and 
market needs of the section 515 multifamily portfolio. I also 
understand that a private contractor is evaluating a 3 percent sample 
of the portfolio to develop the protocol. Who selected the 3 percent 
sample, and what methodology was used for the selection? In particular, 
(1) did all properties have an equal chance of being selected, or (2) 
were other factors, such as the age of or the percentage of rental 
assistance in each property considered in the sampling process?
    Answer. The Agency consulted with Department economists who, after 
reviewing the data, provided us with the sample size that would result 
in a 90 percent confidence level. The 333 Section 515 properties 
selected were a mix of family and elderly complexes in operation for 
more than 5 years, and categorized by property size (less than 12 
units, 12-24 units, 25-50, 51-100 and 101 units or more). All of these 
factors were used to sort the total database to develop a 
representative sample. The percentage of rental assistance was not a 
factor in selecting the sample.

                       RD INFORMATION TECHNOLOGY

    Question. In July 1993 testimony, GAO stated ``USDA has 
substantially increased its use of information technology. But most of 
the information system expenditures to date have been for automating 
the systems associated with providing program benefits. However, these 
systems are not providing managers with the data they need to manage 
and make decisions, nor is the information produced in a form that can 
easily be shared with other agencies.''
    How much have we progressed in the past 11 years? For example, how 
many different information systems are used to manage the various 
housing and community development programs in USDA's Rural Development 
Mission Area?
    Answer. Over the past 11 years, Rural Development has progressed 
significantly beyond the automation capabilities supporting the mission 
area at that time. Several new, modern state-of-the-art systems have 
been constructed and deployed in support of Agency business needs. Some 
key major accomplishments in this area include:
  --The Agency purchased and deployed a new commercial-off-the-shelf 
        mortgage servicing system in support of the Single Family 
        Housing Direct Loan Program and in support of the Centralized 
        Servicing Center in St. Louis. Deployed in support of this 
        commercial system were several new technologies including 
        document management technologies including scanning and 
        imaging, workflow management, and content management; automated 
        mail handling; and automated call center technologies including 
        voice response and predictive dialing. These capabilities have 
        not only been extended to other business processes within Rural 
        Development but to other USDA agencies and the Department.
  --A new guaranteed loan system supporting all Rural Development loan 
        programs (and Farm Services Agency guaranteed loans) has been 
        fully deployed and major new enhancements have already been 
        completed. This system now includes a funds reservation 
        application, an electronic data interchange capability with 
        participating lenders, and a web-enabled user interface. 
        Application and project tracking capabilities for Business & 
        Industry and Community Facility loans and grants have been 
        added to this system.
  --A new system is in the process of being designed, developed, and 
        deployed to replace obsolete legacy systems dating back to the 
        Rural Electrification Agency. The initial capabilities of this 
        new system have been deployed and key financial and program 
        management capabilities are in development.
  --In a joint effort with the Farm Services Agency, Rural Development 
        has purchased and deployed a new program funds control system 
        that is compliant with the Joint Financial Manager's Integrity 
        Act.
  --A new Multi-Family Housing project management system has been 
        deployed and new enhancements are being added to meet emerging 
        needs identified to improve the overall management and 
        oversight of this program. This new web-enabled system 
        permitted the retirement of three, stove-pipe legacy systems.
    While much progress has been made in RD's information technology 
(IT) capabilities, the 2005 Budget requests an additional $14.1 million 
to upgrade IT systems. Upgrades are needed to improve RD program 
accountability and customer service, and to correct a material 
deficiency in RD direct loan systems.
    Question. How compatible are the systems?
    Answer. Each system is designed to meet the unique needs of the 
loan and grant programs they support. However, all new systems and 
applications are built using ``re-useable components'' and technologies 
that are relatively easy to extend to other systems and applications. 
Integration of data is achieved through the construction of a data 
warehouse that will eventually become the single source of all Rural 
Development management data. Although much Agency data has been 
extracted and moved into the data warehouse and made available to 
Agency managers and staff, there is much more to accomplish. Also 
included in the data warehouse is census data which allows program 
managers to better monitor the effectiveness of their programs. Tabular 
data has been geo-coded to permit the graphical display of data by 
creating maps; maps showing eligibility areas for specific programs 
have already been developed. Rural Development systems are being built 
through a vision of a fully-open technology architecture and data 
integration is being achieved by moving all data required to support 
Agency loan and grant programs into a single data warehouse.

                  COORDINATION OF USDA RURAL PROGRAMS

    Question. What efforts have you implemented to facilitate the 
coordination of programs across USDA for the benefit of rural 
communities?
    Answer. Within USDA, we have developed guidelines regarding the 
delivery of all Rural Development programs and required the state 
offices to reorganize themselves to meet those guidelines in order to 
bring consistency to how programs are delivered nationwide.
    Question. What is the Department's rural policy?
    Answer. The Department's rural policy recognizes the diversity of 
rural America and that there is no single recipe for prosperity that 
will be applicable nationwide. It further recognizes that agriculture 
is no longer the anchor for most rural communities and the availability 
of non-farm jobs and income are the drivers of rural economic activity. 
The creation of an economic environment to save or create jobs in rural 
areas is the challenge and doing so will require attracting private 
investment; creating a rural population with the education and skills 
needed by businesses; and the development of the technology, 
infrastructure and community facilities needed to make rural 
communities attractive to new businesses is critical if the communities 
are to prosper. Finally, there is the recognition that we need to 
enhance the market base for agricultural producers to find new markets 
for their products, including the development of alternative fuels. A 
more thorough discussion of the Department's rural policy is outlined 
in the USDA publication ``Food and Agricultural Policy--Taking Stock 
for the New Century'' which was published in September 2001.
    Question. USDA Rural Development is mandated under the Farm Bill to 
create the National Rural Development Coordinating Committee. What is 
the status of that effort?
    Answer. Rural Development is developing a course of action 
regarding creating the National Rural Development Coordinating 
Committee. The Farm Bill mandates certain representation on the 
Coordinating Committee, but implementation of that mandate could be 
pursued in a variety of ways. Rural Development may publish a notice in 
the Federal Register requesting public comment and input on how to 
accomplish that mandate.
    Question. The Farm Bill also mandates that USDA present a report to 
Congress on the National Rural Development Partnership. What is the 
status of that report?
    Answer. Section 6021(b)(3)(B) of the Farm Security and Rural 
Investment Act states that the Governing Panel in conjunction with the 
National Rural Development Coordinating Committee and state rural 
development councils shall prepare and submit to Congress an annual 
report on the activities of the Partnership. This annual report cannot 
be submitted this year because neither the Governing Panel nor the 
National Rural Development Coordinating Committee yet exists.

                             PILOT PROGRAM

    Question. In September 2000, GAO noted that in some rural areas, 
new agribusiness jobs are available in off-farm processing plants, such 
as aquaculture and poultry processing operations. In response to the 
GAO report, USDA noted that it had undertaken a pilot program in 
California and was considering a potential demonstration program in the 
future. What resulted from the pilot program and has USDA undertaken 
any similar pilots?
    Answer. In the fiscal year 2001 Agriculture Appropriations Bill, 
Congress authorized the Rural Housing Service (RHS) to provide almost 
$5 million in housing assistance (grants) for agriculture, aquaculture, 
and seafood processing workers in the states of Mississippi and Alaska. 
On February 12, 2001, RHS published a Request for Proposals in the 
Federal Register and on September 14, 2001, six proposals were selected 
for funding. The six selected proposals are in different stages of 
development. Some have completed construction and are now providing 
housing to processing workers. Other proposals have not completed 
construction.
    In the fiscal year 2004 Agriculture Appropriations Bill, Congress 
authorized RHS to provide almost $5 million in housing assistance 
(grants) for processing and/or fishery workers in the states of Alaska, 
Mississippi, Utah and Wisconsin. On April 6, 2004, RHS published a 
Request for Proposals in the Federal Register. The deadline to submit a 
proposal is July 6, 2004.

                    NATIONAL BOARD ON RURAL AMERICA

    Question. What is the status of the National Board on Rural America 
created under the Farm Security and Rural Investment Act of 2002? Is 
such a board needed to promote business and community development in 
rural America?
    Answer. The Board was to implement the Rural Strategic Investment 
Program. Funding for the program was rescinded by Congress. Without 
funding to cover their administrative expenses, the Board cannot 
function and has, therefore, not been named.
    The promotion of business and community development in rural areas 
occurs in a variety of ways through outreach from government, non-
profit and profit organizations. The establishment of the National 
Board on Rural America is not critical to this function.

                          MULTI FAMILY HOUSING

    Question. How effective has the agency been in encouraging more 
lenders to get involved with the Section 538 guaranteed multifamily 
housing program? Is anything being contemplated through regulation, or 
through a statutory change to allow the program to provide more 
multifamily affordable housing for moderate-income families?
    Answer. Lender participation in the program has been increasing 
because the industry has created a secondary market for the program. 
The Section 538 lender pool currently consists of 15 Approved Lenders, 
which are lenders with closed Section 538 loans, and 16 Eligible 
Lenders, which are lenders that are processing a Section 538 loan. The 
eligible lenders will become approved once they close the 538 loan. In 
addition, the publication of the program's final rule this summer will 
allow Ginnie Mae lenders to participate in the program.
    The purpose of the Section 538 Proposed Rule, which was published 
for comment on June 10, 2003, was to make the program more industry 
friendly to the secondary market. We expect the final rule to be 
published this summer.
    In addition to moderate-income families, the program also serves 
very-low-income (with section 8 vouchers) and low-income families. 
Eighty-five percent of the Section 538 housing portfolio has been 
financed with Low-Income Housing Tax Credits (LIHTC) equities and, 
therefore, must follow the LIHTC low-income occupancy restrictions.

                 RURAL BUSINESS AND COOPERATIVE SERVICE

    Question. The Inspector General has reported that the Rural 
Business Cooperative Service's business and industry loan program 
continues to have problems in applying its own policies and procedures 
for underwriting and managing the loans and performing adequate lender 
oversight. What can be done to ensure that the loan approval process 
and monitoring of the loans will reduce the number of defaults and 
better protect the government's financial interests?
     Answer. The Agency revamped its internal control review of the 
State Offices. The review is called a Business Program Assessment 
Review. We contracted with another Agency (experienced in completing 
Safety and Soundness reviews) to improve upon the National Office 
review. National Office reviewers have been trained and we are working 
with the contractor agency in conducting these reviews.
    As a result of these reviews, we are evaluating:
  --the need for reducing/removing loan approval authorities delegated 
        to individual State Offices,
  --the need for implementing changes to protect the portfolio,
  --the need for training/closer monitoring of loan approval(s),
  --changes to the regulations to improve portfolio development, and
  --the need for lender training.

                     BUSINESS AND INDUSTRY PROGRAM

    Question. Considering the problems with the business and industry 
program and the complex nature of the deals, does your field staff have 
the training and capacity to effectively negotiate with lenders and the 
borrowers?
    Answer. The level of expertise varies between states. Several 
initiatives are underway to provide staff with tools and training that 
will ensure more timely and consistent analysis in the processing of 
applications/servicing actions.
    The Agency has purchased and distributed Moody's financial analysis 
software to field staff to improve and provide consistent credit 
analysis of loans that are considered for funding.
    We have had national meetings with the National Office and selected 
State Office Program Directors/Loan Specialists and we have contracted 
with other institutions, i.e. Farm Credit Association, to provide 
specific training. With budget constraint, we have explored ways to 
provide telephonic training, regional teleconferences, web cast, 
Intranet and etc., to provide guidance to our field personnel.
    The Agency has identified the need for a core curriculum of 
training that will provide staff the training necessary for them to 
perform their assigned duties. An accreditation plan that will identify 
this core curriculum is under development. Current field staffs are 
being surveyed to determine the basic core training needs.
    Each delegation of authority to State Offices for loan processing 
and servicing actions is based on experience as well as the performance 
record of the personnel in the state. We will continue to make every 
effort to ensure authorities are issued to employees with the necessary 
skill set to protect the taxpayer's investment.

                   FARM CREDIT ADMINISTRATION REVIEW

    Question. How effective has the Farm Credit Administration been in 
identifying problems with nontraditional lenders using the B&I program? 
What is the annual cost of this contract? Has the cost of the contract 
been justified based on Farm Credit Administration reviews?
    Answer. The Farm Credit Administration (FCA) has been quite 
effective in its review of nontraditional lenders. The particular arm 
of FCA with which the agency has contracted conducts safety and 
soundness examinations not only of the banks within FCA but has also 
contracted with the Small Business Administration (SBA) to perform the 
same function for specific SBA lenders. FCA is a recognized expert in 
lender examinations, internal controls, and program oversight. These 
examinations provide the agency and the nontraditional lenders with 
recommendations. We monitor the lenders to assure that recommendations 
are implemented.
    The cost for lender examinations by FCA in fiscal year 2004 is 
$104,501.
    We believe the involvement of FCA in the examination of lenders 
participating in the B&I Guaranteed Loan Program has been cost 
effective. Improvements in lender loan underwriting, risk 
identification, and servicing as well as a better understanding of the 
Agency's regulations are examples of the benefit of FCA's lender 
reviews. FCA reviews have supported the Agency's actions to debar an 
individual from participation in Government programs. The results of 
FCA reviews have been instrumental in identifying weaknesses in lender 
practices and have assisted the Agency in determining lender fraud, 
misrepresentation or negligent servicing. This assistance helps save 
millions of dollars for taxpayers.

                      CENTRALIZED SERVICING CENTER

    Question. The Centralized Servicing Center in St. Louis reported a 
32.5 percent reduction in the number of loans serviced from the year 
the center opened in 1997 to 2003. Have any staff reductions occurred 
as a result? Has the Centralized Servicing Center in St. Louis 
attracted any additional work from other Federal agencies? If not, what 
efforts are underway to attract any new business? Without new business, 
at what point will the loan volume become too small to keep the 
operation viable?
    Answer. Thank you for recognizing the success of our Single Family 
Housing program and Centralized Servicing Center. As you are aware, 
customers are required to ``graduate'' to other credit when they no 
longer require Federal assistance. We are pleased that over 30 percent 
of our direct homeownership customers were able to graduate to the 
private sector. In response to your specific questions, we offer the 
following explanation:
    In 1997, the Centralized Servicing Center (CSC) supplemented its 
permanent workforce with 100 private-sector temporary staff and the 
equivalent of 50 staff with overtime. The CSC no longer uses private-
sector temporaries and has reduced overtime usage by 50 percent. This 
is equivalent to a reduction of 125 staff years or 20 percent, without 
negatively impacting service to our customers.
    The CSC has acquired additional work. It recently began the 
centralization process for approving loss mitigation plans and 
processing loss claims for National Lenders participating in our 
guaranteed homeownership program. The guaranteed homeownership program 
has the second largest dollar portfolio within Rural Development. By 
providing a single point of contact at CSC, loan servicers are provided 
greater consistency and efficiency in obtaining approval for loss 
mitigation plans and processing of claims. The Agency also benefits 
through better internal controls and improved monitoring of losses. 
More than 40 percent of all loss mitigation activity for guaranteed 
lenders will be handled at CSC by the end of May and more than 60 
percent by year-end. This is an ongoing and growing initiative.
    In addition, the graduation process for direct loan customers has 
been centralized at CSC. This is the process used to identify, notify 
and support customers who are eligible for private financing. An 
average of 10 percent of our customers graduate annually. Naturally 
this supports self-sufficiency, while reducing ongoing costs for the 
government.
    CSC is also working with Rural Development's Business and Industry 
(B&I) program to service a portion of its receivables. CSC's Real 
Estate Owned (REO) website has also been expanded to include B&I, as 
well as Multi-Family Housing and guaranteed program properties. CSC is 
also working with the Veterans Administration and the Department of 
Housing and Urban Development to establish a common government website 
for all government-owned housing.
    CSC is currently using its imaging technology to archive historical 
executive correspondence files on behalf of the USDA Office of the 
Executive Secretariat. CSC is also participating in the project to 
establish a web-based correspondence tracking system for Department-
wide use.
    CSC is devoting approximately 75 staff years to these and other new 
initiatives.
    Since CSC's inception, the rate of delinquent loans has declined to 
a new record of 12.93 percent as of March 30, 2004. This is a 37.5 
percent reduction in delinquency since 1998. The delinquency rate net 
of foreclosures is 9.24 percent which compares favorably to the latest 
reported Federal Housing Administration (FHA) delinquency rate net of 
foreclosures of 12.23 percent.
    In summary, CSC staff years have declined by 20 percent, important 
new work has been and continues to be assumed, while dramatic 
improvements in program results are being attained. The combination of 
reduction in FTE and new work acquired is equivalent to savings of 200 
staff years or 32 percent.
    With the existing portfolio, new loans being added every day, and 
new business, CSC will continue to be an efficient and effective 
operation and asset to USDA. CSC continues to look for other services 
that can be provided to other USDA Agencies and throughout the 
government.
 merging of urban and rural housing and community development programs
    Question. When the Congress decided to separate rural development 
from urban development programs in the 1930s, the world was different. 
Today we have superhighways, information highways, and the boundaries 
of rural and urban areas are often unclear. Access to credit, a major 
factor behind the creation of rural specific programs, is no longer a 
major issue in rural areas. Today, affordability is the key problem in 
rural as in urban areas.
    Given the changes in rural demographics, the current budget 
constraints, and your need to focus on food security and safety issues, 
is it time to merge both urban and rural housing and community 
development programs into one housing and community development agency?
    Answer. Rural areas, like urban areas, are constantly changing, but 
for many parts of the country, the rural areas continue to be far 
different places than urban communities. We do not believe one housing 
and community development agency for both rural and urban areas would 
be helpful to rural families and communities. Most rural communities, 
especially the smallest and the poorest, do not have the staff to 
develop the loan and grant requests needed to effectively compete for 
limited funding against larger, more urban communities. These requests 
are often developed by the elected officials of small communities who 
are totally inexperienced in such an effort. Providing this type of 
assistance is a key function of USDA Rural Development field staff. 
Access to credit, especially private credit, continues to be very 
limited in the poorest communities. We have found there are pockets 
throughout the country where private lenders are not interested in 
making single family housing loans in rural areas. In some areas, 
private lenders are not even available. Rural Development has several 
pilots underway in rural areas that have no local banking facilities to 
involve the state housing authorities. Rural Development staff works 
with the family to prepare their application and then submits it to the 
state housing authority for consideration as a guaranteed loan.

                     RENTAL ASSISTANCE PRESERVATION

    Question. We understand you are committed to preserving rural 
rental housing. We also understand that you cut half of the $5.9 
million that this subcommittee set aside for rental assistance 
preservation funding. How do you plan to address the waiting list for 
rental assistance preservation?
    Answer. We have successfully reduced this waiting list over the 
last 12 months to the point where few borrowers are currently on the 
list.
    Question. We understand that as a result of legal action, 2 
properties in Oregon have prepaid their Section 515 loans resulting in 
44 households at risk of being displaced. I understand that RHS has the 
authority to issue vouchers under section 542 of the Housing Act of 
1949 to tenants in such a situation. Why has no funding ever been 
requested for this voucher authority that could be used in this type of 
emergency situation?
    Answer. Until recently, the need for RHS rental assistance vouchers 
was not recognized for the preservation program. Currently, the Agency 
is conducting a comprehensive property assessment of its multi-family 
housing portfolio. Upon completion of that study, the Agency expects to 
consider many policy options, which may include the use of vouchers for 
the situation you have described above.

                USDA KEY INFORMATION SECURITY WEAKNESSES

    Question. GAO reported that a key reason for USDA's weaknesses in 
information security system controls was that it had not yet fully 
developed and implemented a comprehensive security management program.
    What steps are you taking to ensure that an effective information 
security management program is implemented?
    Answer. Beginning in 2000, using initial funds provided by the 
Congress as well as existing resources, USDA embarked on a new approach 
to securing its critical information assets. Since its formation, the 
Department's Cyber Security Program has engaged in a number of 
activities and projects designed to address USDA's most serious cyber 
security deficiencies. I will provide some additional details for the 
record.
    [The information follows:]
    Examples of progress made during the past year include:
  --Initiation of a USDA Certification and Accreditation Program that 
        will position USDA mission critical systems to comply with 
        Federal system certification requirements. In fiscal year 2004, 
        USDA compiled a Departmental inventory of over 500 systems that 
        we are now using to track the certification and accreditation 
        (C&A) of these systems. OCIO has challenged USDA agencies to 
        schedule accreditation of each of these systems by the end of 
        the fiscal year 2004. To assist agencies with the certification 
        and accreditation process, OCIO has established a contract 
        vehicle through which agencies can acquire contract support.
  --Development and establishment of a Risk Management Program that 
        incorporates the widespread use of security self-assessment 
        tools that address both overall security management and 
        specific technical platforms. OCIO has developed a 
        comprehensive USDA Risk Assessment Methodology that addresses 
        the full spectrum of risk management, including sensitivity, 
        assessment, remediation, and business case.
  --With a contract vehicle established for conducting independent risk 
        assessments according to OCIO methodology, dozens of risk 
        assessments have been conducted on the Department's more 
        important systems. This activity has positioned agencies to 
        move forward with full certification and accreditation, a major 
        priority for fiscal year 2004.
  --Release of guidance and tools to USDA agencies that provide the 
        ability to analyze existing information security controls and 
        technical environments.
  --Establishment and management of an enterprise-wide Intrusion 
        Detection System and procedures for detecting and reporting 
        intrusion incidents. OCIO is requesting funds in fiscal year 
        2005 to further strengthen this system by establishing a 
        Departmental security operation center to continuously evaluate 
        and manage gathered security information.
  --Development and issuance of new or revised policies and interim 
        guidance on specific security areas and provide precise 
        requirements. These include policies addressing: (1) mainframe 
        security, (2) incident reporting, (3) security plan guidance, 
        (4) security requirements for the use of private Internet 
        access providers, (5) user ID and password requirements, (6) 
        server and firewall security, use of network protocol 
        analyzers, and (7) physical security standards and use of 
        configuration management.
      Guidance issued during fiscal year 2003 and 2004 includes 
        policies addressing: (1) Privacy Impact Assessments, (2) 
        Encryption of Sensitive But Unclassified (SBU) Information, (3) 
        Revised Capital Planning and Investment Control Requirements, 
        (4) Security Awareness and Training, (5) Contingency Planning, 
        ( 6) Telework and Remote Access Security, (7) Trusted 
        Facilities Manual Requirements, (8) Security Features Users 
        Guide Requirements, (9) Portable Electronic Devices (PED) and 
        Wireless Technology Security, and (10) Life Cycle Approach to 
        Security Controls.
  --For the broader USDA security community, and to meet the Federal 
        requirement for on-going training for security specialists, 
        OCIO is providing instruction in the areas of security 
        controls, forensics, intrusion detection, risk management, 
        vulnerability assessments, contingency planning and other 
        security-related issues.
      More recent security training has been provided in the areas of 
        systems security scanning, patch management, Certification and 
        Accreditation, and Federal Information Security Management Act 
        (FISMA) requirements.
  --Development of an enhanced security awareness program that includes 
        partnership with the Government-wide eLearning initiative. This 
        program provides Department-wide web-based training on security 
        issues to all USDA staff. As of September 30, 2003, over 39,000 
        employees (of 60,000 total), including the Secretary, have 
        logged on and completed this course. Other objectives of the 
        Department's Security Awareness and Training Program include: 
        defining a security and awareness scope, identifying executive 
        briefing package materials, surveying and assessing security 
        and awareness products, and identifying security and awareness 
        assessment methodologies.
      In 2003, the Secretary declared September as USDA Cyber Security 
        Awareness Month. The Secretary recorded a video focusing on the 
        need for every employee to be aware of and comply with 
        Departmental security requirements.
  --Oversight has been increased for both Capital Investment Planning 
        and technology deployment to ensure that security is considered 
        throughout the entire life-cycle of system development. Annual 
        reporting instructions are issued and requests for approval to 
        invest in technology are carefully scrutinized to ensure 
        security is adequately addressed.
  --A rigorous reporting and monitoring process has been established to 
        oversee USDA's activities related to the Federal Information 
        Security Management Act (FISMA). In particular, OCIO manages 
        the Department's annual self-assessment process and oversight 
        of the action plans and schedules designed to address weakness 
        discovered.
  --OCIO has negotiated and executed USDA-wide contracts for security 
        services and products. These contracts, managed by OCIO, 
        provide USDA agencies with access to quality security controls 
        and expertise in the areas of scanning devices, virus detection 
        and protection, software security patch management, 
        vulnerability assessments, and security planning.
  --The Department has initiated an Information Survivability Program 
        through which Disaster Recovery and Business Resumption Plans 
        will be developed and tested. Software that supports the 
        development of these plans has been purchased for use by all 
        USDA agencies and offices. Contract support has been engaged to 
        support agency personnel in this endeavor.
      While much remains to be done to improve USDA's information 
        security program, these steps and strategies provide evidence 
        that the Department is committed to eliminating its long-
        standing security deficiencies.

     HOLDING SENIOR MANAGMENT ACCOUNTABLE FOR INFORMATION SECURITY

    Question. How does USDA hold senior management of the department 
and its component agencies accountable for ensuring adequate 
information security? For example, does it affect their performance 
evaluations?
    Answer. We have taken a number of steps, both directly and through 
delegated authority to the CIO, to ensure program and IT executives and 
managers understand and perform their information security 
responsibilities. These include:
  --Establishing an information security performance measure within the 
        performance plan of each under and assistant secretary, agency 
        head, and staff office director. Performance in this measure is 
        rated and considered in each executive's annual performance 
        review.
  --Focusing senior management attention on certifying and accrediting 
        all USDA IT systems. The USDA CIO briefed the Subcabinet on 
        this critical effort, and agency management have been advised 
        that funding will not be approved for any new systems 
        development efforts until agencies identify the resources and 
        milestones to certify and accredit their systems.
  --Evaluating and approving each investment in the USDA IT Portfolio 
        to ensure cyber security is addressed, staffed, budgeted, and 
        assessed for compliance with USDA Cyber Security Policies. 
        After approval by the Department's Executive Information 
        Technology Investment Review Board, the Deputy Secretary 
        recommends approval of the Major IT Investment Portfolio to the 
        Secretary.
  --Ensuring decisions on all USDA IT acquisitions, above a $25,000 
        threshold, are approved by the Department CIO. OCIO reviews 
        each acquisition to ensure cyber security is addressed, 
        staffed, budgeted, and assessed for compliance with USDA Cyber 
        Security Policies.
  --Establishing security responsibilities and authorities for Program 
        Officials, CIO's, security officers, IT technical specialists 
        and IT users through departmental guidance and policy.

             ENSURING EFFECTIVENESS OF SECURITY MANAGEMENT

    Question. How will the Department ensure that security management 
positions have the authority and cooperation of agency management to 
effective implement and manage security programs?
    Answer. The Department has established controls and performance 
measures to ensure the cooperation of agency management.
    In addition, USDA's Office of the Chief Information Officer makes 
great effort to ensure security managers are engaged in IT investment 
decisions throughout the system life cycle. The Department's Capital 
Planning and Investment Control process is designed to ensure security 
issues are considered at every phase of investment. OCIO reviews each 
acquisition to ensure cyber security is addressed, staffed, budgeted, 
and assessed for compliance with USDA Cyber Security Policies.
    OCIO reaches beyond USDA's security community to the Department's 
most senior mangers to keep them abreast of topical and important 
security issues. Our current effort to certify and accredit (C&A) all 
USDA IT systems is a good example of this process. Discussions 
regarding C&A are held regularly with the Department's most senior 
management. Executive training and materials for the C&A process have 
been developed and presented to agency heads and program 
administrators.
    Weekly status reports that score progress toward attaining 
accreditation are prepared and shared with senior management to ensure 
objectives are attained. In addition, OCIO's senior management counsels 
individual agency managers on specific C&A strategy, procedures and 
progress.

                     FILLING ACIO FOR CYBERSECURITY

    Question. What actions are planned to fill the role of Associate 
CIO for Cyber Security, given that the person that held this position 
is recently retired?
    Answer. The advertisement to recruit a new USDA Associate CIO for 
Cyber Security will close in early May 2004. The Department will 
carefully review all applications in its search to fill this critical 
position.

           BUDGET IMPACT OF INFORMATION SECURITY REQUIREMENTS

    Question. Is there a budget impact to ensure that information 
security requirement are met?
    Answer. The Department's Capital Planning and Investment Control 
process is designed to ensure security issues are considered at every 
phase of investment. OCIO reviews each acquisition to ensure cyber 
security is addressed, staffed, budgeted, and assessed for compliance 
with USDA Cyber Security Policies.
    USDA is currently operating under a moratorium that requires a 
waiver for all IT acquisitions above $25,000. OCIO reviews each 
acquisition waiver request to ensure cyber security is addressed, 
staffed, budgeted, and assessed for compliance with USDA Cyber Security 
Policies. Failure to adequately address security throughout the system 
life cycle will result in delay or denial of funding approval.
    Additionally, OCIO has advised agency management that funding for 
any new system development efforts will not be approved until agency 
management identifies the resources and milestones to certify and 
accredit their systems.

                      COMPLETING RISK ASSESSMENTS

    Question. Addressing risk is necessary to implementing appropriate 
security controls. According to the USDA OIG, 8 of 10 agencies that it 
reviewed during fiscal year 2003 had not completed risk assessments for 
mission essential information technology resources. What actions is the 
Department taking to ensure that risk assessments are completed?
    Answer. USDA is addressing the issue of risk management on a number 
of separate fronts. First, with agency and contractor assistance, USDA 
has developed a comprehensive Risk Assessment Methodology to assist 
USDA agencies in determining information sensitivity, identifying 
threats and vulnerabilities, designing mitigation strategies, and 
developing business cases for necessary security costs. Additionally, 
risk assessment training and counseling has been provided to agency 
security managers by both Cyber Security Program Staff and contracted 
risk management specialists.
    Second, to meet the requirements of the Federal Information 
Security Management Act, agencies are charged with performing self-
assessments of their respective IT systems and security programs. To 
address these requirements, USDA uses the National Institute of 
Standards and Technology (NIST) Self-Assessment Guide. Weaknesses 
discovered during these assessments form the basis for mitigation plans 
that guide agency security activities throughout the year.
    Third, an initiative that addresses risk management is OCIO's 
aggressive strategy to certify and accredit all of its IT systems in 
fiscal year 2004. A fundamental component of system certification is a 
thorough risk assessment. Agencies will be using USDA and Federal risk 
assessment guidance to ensure security controls are adequate prior to 
submitting systems for accreditation.
    Fourth, OCIO has established vehicles through which USDA agencies 
and offices can obtain contract expertise to perform risk assessments. 
Over the past 2 years, dozens of USDA IT systems have been 
independently assessed for risks and vulnerabilities by highly 
qualified and experienced security contractors, a reflection of the 
high priority USDA management places on thorough security analysis.

           PLANS TO FINALIZE SECURITY POLICIES AND PROCEDURES

    Question. Although the department's Office of Cyber Security has 
developed numerous policies and procedures that address information 
security over the last couple of years, many remain in draft, or 
interim guidance, some for over a year. What plans does the department 
have for finalizing these policies and procedures?
    Answer. Individual information security policies, particularly 
those that prescribe technical controls must be vetted thoroughly to 
resolve issues of incompatibility and unnecessary expense. Often this 
vetting process requires additional analysis and compromise to achieve 
maximum effectiveness and economy. Nevertheless, OCIO has been 
successful in issuing a wide array of security guidance. New guidance 
issued during fiscal year 2003 and 2004 include policies addressing: 
(1) Privacy Impact Assessments, (2) Encryption of Sensitive But 
Unclassified (SBU) Information, (3) Capital Planning and Investment 
Control Requirements, (4) Security Awareness and Training, (5) 
Contingency Planning, (6) Telework and Remote Access Security, (7) 
Trusted Facilities Manual Requirements, (8) Security Features Users 
Guide Requirements, (9) Portable Electronic Devices (PED) and Wireless 
Technology Security, and (10) Life Cycle Approach to Security Controls.
    It should be noted that even guidance issued as ``Interim'' 
provides the standard by which USDA agencies must operate. Interim 
guidance is used as criteria for IT investment reviews, risk 
assessments, FISMA self-assessments, and other compliance exercises.

                  EMPLOYEE SECURITY AWARENESS TRAINING

    Question. How does the Department plan to ensure that all employees 
receive security awareness training?
    Answer. During the past year, OCIO has developed a more rigorous 
security awareness program that includes partnership with the 
Government-wide eLearning initiative. During fiscal year 2004, OCIO 
purchased on on-line security awareness course through which all 
Department end-users could meet their awareness training requirements. 
By using this course, USDA was able to report over 60,000 USDA 
employees had been trained. While this was only 53 percent of all 
employees, we anticipate the percentage will increase for this year. 
Performance related to this issue will be a consideration in each 
executive's annual performance review.
    Other objectives of the Department's Security Awareness and 
Training Program include: defining a security and awareness scope, 
identifying executive briefing package materials, surveying and 
assessing security and awareness products, and identifying security and 
awareness assessment methodologies--all designed to assist agencies in 
their attempt to meet Federal security awareness requirements. For the 
technical security community, on-going training is provided in the 
areas of security controls, forensics, intrusion detection, risk 
management, vulnerability assessments, contingency planning and other 
security-related issues.

                     SYSTEMS TESTING AND EVALUATION

    Question. The department has reported that just over a third of its 
systems have undergone test and evaluation within the past year, and 
only 16 percent of its systems had been certified and accredited. What 
action has the department taken to ensure that testing and evaluating 
controls becomes an ongoing element of agencies' overall information 
security management programs?
    Answer. The testing and evaluation of the security controls is a 
critical component of the Department's current certification and 
accreditation (C&A) initiative. The C&A process requires testing and 
evaluation of all system controls to ensure they function as planned. 
To ensure the independence of system testing, agencies must enlist the 
services of a third party to undertake the testing who was not involved 
in the design or development of the security controls.
    In addition, in order to reduce or eliminate these risks, OCIO has 
established guidance for conducting Security Vulnerability Scans (SVS) 
of all USDA networks, systems and servers. These SVS scans are a vital 
component of the overall security protection plan being deployed within 
the department. OCIO guidance requires USDA organizations to accomplish 
these SVSs on a monthly basis. In addition, to the vulnerability scans, 
each agency/staff office is required to conduct and maintain 
information technology (IT) inventories of networks, systems, servers, 
software and Internet Protocol Addresses for all areas within their 
responsibility.
    To assist agencies with their scanning responsibilities, OCIO 
provides scanning tools, training, and on-going support. OCIO also 
conducts oversight reviews of agencies and staff offices to review 
vulnerability reports and corrective actions taken to ensure that 
networks, systems, and servers are protected in accordance with this 
policy.

             ENSURING SYSTEMS ARE CERTIFIED AND ACCREDITED

    Question. What action has the department taken to ensure that 
systems are certified and accredited?
    Answer. OCIO has initiated an aggressive program to certify and 
accredit (C&A) all of USDA's IT systems and position the Department to 
comply with Federal system certification requirements. To prepare 
agencies for C&A, OCIO developed a USDA Certification and Accreditation 
Guide, document templates, and procedures for managing the broad set of 
activities involved. Training sessions have been conducted to educate 
all levels of managers and technicians involved in the C&A process.
    In fiscal year 2004, USDA compiled a Departmental inventory of over 
500 systems that we are now using to track the certification and 
accreditation of these systems. In fiscal year 2004, USDA will spend in 
excess of $25 million on systems certification and accreditation.
    A fundamental step in accreditation is a thorough risk assessment, 
conducted through self-assessments for low impact systems and through 
independent assessments for all others. To achieve this independent 
review, OCIO has developed contract vehicles by which agencies can 
engage external expertise to assist them. USDA management and agency 
technical staffs have become fully involved in the Certification and 
Accreditation Program, scheduling activities and executing contracts 
that will lead to accreditation of the systems for which they are 
responsible.
    OCIO's fiscal year 2005 budget request of $687,000 relative to 
certification and accreditation does not reflect the cost of individual 
agency C&A activities. Funding for these activities is expected to be 
borne by agencies from funds provided for IT investments, and from 
unobligated balances allocated for this purpose. OCIO's funding request 
is directed toward corporate-level activities such as common toolsets, 
oversight and counsel, and Independent Verifications and Validation 
exercises.
    OCIO recognizes this aggressive schedule places an enormous burden 
on the Department's technical staffs, both from a personnel and budget 
perspective. Nevertheless, OCIO is committed to moving the Department 
to a more secure baseline from which new technologies and methodologies 
can be employed safely and effectively, while at the same time meeting 
Federal security mandates.

              HOW USDA BUDGET CORRECTS SECURITY WEAKNESSES

    Question. Given the pervasive extent of the Department's 
information security weaknesses, how will the Department's request for 
budgetary resources address the issues involved in correcting the 
problems?
    Answer. OCIO is working with the agencies to ensure funding for 
security requirements are included in all budget requests for system 
development and operation. In addition, OCIO's budget request for 
fiscal year 2005 includes increases for the following security 
initiatives:
  --An increase of $687,000 is needed to manage the USDA Information 
        System Certification and Accreditation Program.--OCIO's highest 
        priority is to certify and accredit all USDA systems to ensure 
        they are properly secured from theft and destruction, in 
        compliance with Federal security laws and guidelines. Funding 
        provided to-date from the Department's fiscal year 2003 
        unobligated balances, as well as from the OCIO base is being 
        used to pay for the certification and accreditation (C&A) of 
        specific high-priority systems that are owned and operated by 
        USDA agencies and staff offices. These additional requested 
        funds will enable OCIO to manage this program in fiscal year 
        2005 at the needed level of detail and help ensure that USDA IT 
        systems are properly secured and in compliance with Federal 
        security guidelines.
      The result of the OCIO C&A Program will be a large collection of 
        security documentation and artifacts (security plans, risk 
        assessments, contingency plans, etc), most of which will be 
        essential to future C&A activities. In addition to compliance 
        activities, training, evaluation, and Independent Verification 
        and Validation, OCIO will investigate the value of acquiring 
        enterprise C&A management tools that will allow USDA to re-use 
        C&A artifacts, thereby reducing future C&A costs. Because 
        Federal guidance requires certification of systems at least 
        every 3 years, savings obtained through re-use could be 
        substantial.
  --An increase of $2,373,000 is needed to maintain an Information 
        Survivability program to minimize disruptions caused by 
        attempted intrusions and catastrophic interruptions.--OCIO's 
        Information Survivability Program addresses both prevention of 
        attack on USDA IT systems and recovery in the event of 
        disruption.
      OCIO currently manages USDA's corporate Intrusion Detection 
        System (IDS). This system monitors traffic over the 
        Department's backbone network to detect incidents of possible 
        unauthorized access and policy/legal violations. The system is 
        instrumental in detecting viruses, worms, and other mechanisms 
        intended to disrupt IT systems. OCIO's IDS operates 24 hours 
        per day, 365 days per year.
      OCIO's request for increased funding for Information 
        Survivability includes $1,000,000 for the expansion of the IDS 
        to lower level networks operating within the Department that 
        support mission-critical applications and communications. In 
        addition, the increased funding will allow USDA to improve and 
        expand its detection tools to expand the range of monitoring 
        and reduce detection time.
      Recognizing that no prevention measures are perfect, OCIO's 
        Information Survivability Program also addressed the 
        disciplines of disaster recovery and business resumption. 
        Procedures and policies have been established to ensure that 
        USDA's business processes will continue to function and serve 
        its customers, regardless of the degree of damage sustained 
        from an attack. Features of the Information Survivability 
        program include: tools, policies and procedures designed to 
        understand the extent and source of an intrusion; protection, 
        and if needed, restoration, of sensitive data contained on 
        systems; protection of the systems, the networks, and their 
        ability to continue operating as intended; recover systems; 
        information collection to better understand what happened; and, 
        if necessary, legal investigations support.
      OCIO has entered into a Department-wide contract that provides 
        software tools and training for agencies as they begin 
        developing contingency plans. However, the funding for this 
        effort was provided through the Department's Homeland Security 
        budget, which provides for no long-term support. As agencies 
        begin development of their recovery plans, counseling, support, 
        testing and training will become an on-going effort. In 
        addition, contractor support to perform Independent 
        Verification and Validation of contingency plans will be 
        needed.
      OCIO currently devotes one FTE to manage its contingency planning 
        effort. Over the past year, two contract FTE's have also 
        provided support with funding provided through the Department's 
        Homeland Security budget. However, since Homeland Security 
        funds are no longer available for this contract support, OCIO 
        is requesting $1.373 Million to continue this critically 
        important effort.
  --An increase of $937,000 is needed to obtain, implement, and manage 
        an automated Risk Management toolset.--Risk determination and 
        risk management are the foundation for all successful security 
        programs. The Department currently relies heavily on manual 
        tools and forms to conduct risk assessments that identify 
        security deficiencies in our system controls. This increase is 
        requested to fund the acquisition of automated software tools, 
        training, oversight, maintenance and support that provide 
        continuous updates to existing threats and provide users with 
        methods to determine information value, vulnerability 
        predictions, and mitigation strategies. USDA agency employees 
        will be the predominant users of the tools.
  --An increase of $1,561,000 is needed to establish a Security 
        Operational Center.--While USDA's Intrusion Detection System 
        captures and handles an ever-growing stream of information on 
        cyber security related events, no single USDA organization is 
        trained and equipped to fully utilize the information captured 
        to determine the true nature and extent of risk to critical 
        USDA information systems. By providing the requested funding in 
        fiscal year 2005, Congress will enable OCIO to reduce the time 
        delay in detecting and responding to security events, improving 
        the efficiency and effectiveness of USDA's security controls.

            ENSURING ADEQUATE FUNDING FOR FISMA REMEDIATION

    Question. In preparing remediation plans as required by the Federal 
Information Security Management Act--FISMA, what is your process to 
ensure that adequate funds are identified to correct the Department's 
information security weaknesses?
    Answer. By ensuring responsible agency officials identify the funds 
to certify and accredit USDA's systems, we are focusing agency 
management on addressing a majority of the remediation actions 
identified in their FISMA plan of actions and milestones or POA&Ms. In 
a review of USDA Agency POA&Ms, approximately seventy percent of the 
identified security vulnerabilities are being addressed by agency 
system certification and accreditation efforts, which is being funded 
through a combination of agency IT funding, the Department's fiscal 
year 2003 unobligated balances, and from the OCIO base.
    Additionally, OCIO is working with USDA agencies on all non C&A 
related activities, such as providing security awareness training to 
all employees and improving intrusion detection and response, on a 
project-by-project basis. In the case of security awareness training, 
OCIO has acquired an online training course, which will be available to 
all agencies to use in security awareness training requirements.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    Question. On March 15, 2004, the Department of Agriculture 
announced details for an expanded surveillance effort for BSE. The 
release also stated that $70 million is being transferred from the 
Commodity Credit Corporation (CCC) to test cattle in the high risk 
population.
    Can you take a moment to provide Committee Members with a detailed 
explanation of how the Department intends to conduct this increased 
surveillance program?
    Answer. For more than a decade, USDA has taken aggressive measures 
to prevent the introduction and potential spread of BSE. On March 15, 
USDA announced a plan to significantly augment those efforts by 
strengthening BSE surveillance in the high-risk cattle population and 
establishing a small proportion of random surveillance in the aged 
cattle population. We are taking these proactive steps to further 
assure consumers, trading partners, and industry that the risk of BSE 
in the United States is low. By expanding surveillance, we will have 
even greater confidence in the health of the U.S. cattle population.
    USDA's primary focus and the goal for this new program is to obtain 
samples from as many of the targeted high-risk adult cattle population 
as possible, plus obtain a small random sample of apparently normal, 
aged animals. Under this surveillance plan, USDA will test as many of 
the targeted high-risk cattle as possible for a 12- to 18-month period. 
This effort will help better define whether BSE is present in the 
United States and, if so, at what level. After that time period, USDA 
will evaluate the results of the program and determine what future 
actions may be appropriate.
    We have already begun ramping up our surveillance system and expect 
to be at full capacity by June 1. Whereas all BSE testing in the United 
States has historically been performed at USDA's National Veterinary 
Services Laboratories (NVSL), the new program incorporates a network of 
State and university laboratories into the testing program. Their 
geographic distribution will help ensure adequate turn-around time for 
sample testing and reporting of results.
    USDA will continue to build on previous cooperative efforts with 
renderers and others to obtain samples from the targeted high-risk 
populations. Samples will be collected by authorized State or Federal 
animal or public health personnel, accredited veterinarians, or trained 
State or USDA contractors. The random sampling of apparently normal, 
aged animals will come from the 40 U.S. slaughter plants that currently 
handle more than 86 percent of the aged cattle processed for human 
consumption each year in the United States. The carcasses of these 
animals will be held and not allowed to enter the human food chain 
until negative results are received.
    USDA anticipates using rapid test technology during the enhanced 
surveillance program. However, any rapid test that identifies a non-
negative result will be subject to additional confirmatory testing by 
NVSL. A BSE implementation team has been established and is working to 
ensure the program meets its goals. The team is currently drafting more 
specific guidelines that will be used during the course of the enhanced 
surveillance program. These guidelines will address questions regarding 
cost recovery and participation in the program.
    USDA anticipates pursuing a variety of approaches with regard to 
cost recovery, including contracts, cooperative agreements, direct 
payments, and fee-basis agreements.
    A more detailed version of the plan is available through the APHIS 
Web site at http://www.aphis.usda.gov/lpa/issues/bse/BSE_Surveil-
Plan03-15-04.pdf.

                   TESTING OF ANIMALS PRIOR TO EXPORT

    Question. The livestock industry and Department of Agriculture are 
working toward reopening export markets in Japan, Mexico, and other 
exporting countries. Establishing animal testing guidelines for export 
markets continues to be a point of controversy that is preventing any 
agreement to open markets. The controversy arises over testing each 
animal and whether or not animals under the age of 30 months should be 
tested.
    Do you believe each animal, including those under 30 months of age 
should be tested prior to export? Also, if an agreement requires 
testing each animal, what is the expected cost of such a program?
    Answer. We do not believe each animal, including those under 30 
months of age, should be tested prior to export. Science does not 
support the testing of every animal, regardless of age, for BSE. 
Further testing apparently healthy animals is the most inefficient 
method of finding disease if it were present.
    The cost for each rapid test kit is about $25 per test. If we were 
to test every animal that goes to slaughter each year (in excess of 35 
million), the approximate cost for the test kits alone would be $875 
million. However, there are other costs involved in testing the 
animals. These costs include sample collection, shipping, handling, 
processing, lab support, equipment, disposal, etc. Because of these 
other costs, we have estimated that the total cost of testing would be 
$175-$200 for each animal. Thus our total cost of testing every animal 
would be between $6 billion and $7 billion.

                     LOW PATHOGENIC AVIAN INFLUENZA

    Question. The Administration's fiscal year 2005 Budget request 
includes an increase in funding of nearly $12 million to address Low 
Pathogenic Avian Influenza (LPAI).
    Can you update the Committee in regard to ongoing action related to 
avian influenza and explain how the Department would utilize the 
additional funding?
    Answer. APHIS has been working to establish a national LPAI program 
by incorporating this program into the National Poultry Improvement 
Plan (NPIP); scheduled to be discussed and adopted at the NPIP meeting 
in July 2004. The Uniform Methods and Rules (UM&R) for the live bird 
marketing portion of the program has been drafted and is currently 
being reviewed by a subcommittee of the U.S. Animal Health Association 
in order to obtain their recommendations for program improvement.
    APHIS would utilize the additional funding for cooperative 
agreements with states that will support the LPAI prevention and 
control program; indemnities; for additional field personnel, 
equipment, and other resources necessary to assist states with long-
term prevention and control; educational materials and training for 
recognition of avian influenza and for biosecurity practices to protect 
against the disease; development and administration of vaccine to 
support industry when infected with LPAI; and provide reagents and 
other laboratory support to incorporate the commercial program through 
the National Poultry Improvement Program (NPIP). This program is 
currently testing poultry breeder flocks and will continue to expand 
its activities until all segments of the commercial industry are 
monitored and certified as avian influenza clean.

                            AVIAN INFLUENZA

    Question. With the discovery of avian influenza (AI), a number of 
countries have banned poultry imports from the United States.
    Can you provide the Committee with an update on poultry export 
markets and exactly what actions USDA is taking to reopen these 
markets?
    Answer. USDA responded quickly and effectively to control the 
spread of AI in the AI-affected states. Throughout this process, USDA 
officials were in constant contact with their foreign counterparts to 
provide timely information about the outbreaks and quarantine control 
measures. As a result of these efforts, USDA was able to free pipeline 
shipments in Japan and Hong Kong valued at over $40 million, and head 
off the actions of many trading partners to impose nationwide bans on 
U.S. poultry meat. The good news is that countries representing 47 
percent, or $941 million of our export markets, have banned products 
only from affected areas and another 18 percent, or $337 million, did 
not impose any ban. Therefore, taken together 65 percent of U.S. 
poultry exports to the world have been unaffected by the AI situation.
    On April 2, the USDA Chief Veterinary Officer (CVO) announced the 
completion of the required surveillance and testing protocols per the 
World Animal Health Organization (OIE) guidelines. An official request 
from the CVO has been sent to major U.S. poultry export markets 
requesting the removal of all import bans on U.S. poultry and poultry 
product imports. The Department at all levels is diligently pursuing 
with its trading partners the lifting of all AI trade restrictions on 
products from the United States. By the summer of 2004 or earlier, the 
remaining countries imposing nationwide bans on U.S. poultry meat are 
expected to at least regionalize their import bans to those states 
affected by Low Pathogenic Avian Influenza (LPAI) now that the United 
States is free of High Pathogenic Avian Influenza (HPAI).

                          BEEF EXPORT MARKETS

    Question. Livestock producers continue to be concerned with the 
loss of export markets following the outbreak of BSE.
    Will you take a moment to update the Committee in regard to the 
efforts being made by the Department of Agriculture to open export 
markets?
    Answer. USDA continues to work closely with its foreign trading 
partners to re-establish U.S. ruminant and ruminant product exports as 
quickly as possible. We work with foreign officials at all levels to 
reassure them of the safety of U.S. beef and beef products. USDA 
officials encourage foreign governments to follow World Animal Health 
Organization guidelines regarding BSE. The Animal and Plant Health 
Inspection Service (APHIS) has been in constant contact with its 
counterparts providing them with updates on the BSE investigation, as 
well as new USDA regulatory policies imposed on BSE testing and 
specified risk material (SRM) removal.
    As a result of USDA's efforts, a number of countries have opened 
their markets to selected U.S. beef, beef products, and ruminant by-
products exports. Mexico and Canada have agreed to accept U.S. boneless 
beef from cattle less than 30 months of age. Although export 
certification issues continue to impede U.S. beef exports to Canada, 
USDA and Canadian officials are expected to resolve the problem very 
soon. We expect Mexico to lift its ban on selected U.S. beef variety 
meats and veal. Mexico had already lifted its ban on U.S. boneless beef 
imports earlier and exempted low-risk ruminant product imports based on 
OIE guidelines. Mexico and Canada are the second and fourth largest 
U.S. beef export markets, respectively, valued at over $1.2 billion in 
2003.
    Japan and South Korea, the first and third largest U.S. beef export 
markets, continue to ban U.S. beef imports. Senior USDA officials 
communicate with their respective government officials and have 
traveled there to discuss their concerns with USDA BSE controls and 
testing procedures. USDA has extended an invitation to Korean officials 
to visit Washington for further discussions. USDA is also planning 
another high-level visit to Japan in late April to continue discussions 
and resolve issues regarding BSE testing and SRM removal.
    In addition, USDA continues to work with governments in secondary 
markets to lift their bans to U.S. bovine products as a result of the 
finding of a BSE case in Washington State. USDA has sent a letter to 
selected secondary countries requesting they open their markets to no 
risk and low-risk products. These export markets, while smaller in 
total export value, provide significant opportunities to resume U.S. 
exports in rendered products, animal genetics, dairy products and other 
ruminant by-products.
    Question. According to the livestock industry, economic losses to 
export markets following the discovery of BSE are estimated to be over 
$10 billion.
    Has the Department conducted a thorough investigation of the 
economic impact of the lost export markets?
    Answer. The Office of the Chief Economist and the Foreign 
Agricultural Service independently evaluated the situation and 
concluded that there will be minimal effects on U.S. meat production 
and domestic consumption. U.S. consumers continue strong demand for 
beef and beef products, and coupled with tight U.S. beef supplies, beef 
and cattle prices remain relatively high. The trade impact will be 
significant. In 2003, the United States exported approximately $7.5 
billion worth of ruminant and ruminant by-products. U.S. export value 
of these products for January-February 2004 alone was down 53 percent, 
or over $582 million compared to the 3-year average January-February 
period for 2001-2003. The severity of the overall trade impact will 
depend upon the number of countries that continue to impose import 
bans, their importance to U.S. trade, and the length of time the bans 
remain in place.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    Question. The Administration's Budget request for the Department of 
Agriculture includes a total of $60 million for BSE related activities.
    Can you provide the Committee with the most up to date information 
in regard to ongoing activities related to BSE and then take a moment 
to explain the increase that has been requested for fiscal year 2005?
    Answer. On December 25, 2003, USDA received verification from the 
Veterinary Laboratories Agency in Weybridge, England, of the finding of 
BSE in an adult Holstein cow slaughtered in the State of Washington. 
The epidemiological investigation and DNA test results confirm that the 
infected cow was not indigenous to the United States, but rather born 
and became infected in Alberta, Canada. Above and beyond OIE standards, 
animals with known or potential risk for having been infected with the 
BSE agent in Canada have been depopulated, as have all progeny from the 
index cow in the United States. All carcasses were properly disposed of 
in accordance with Federal, State, and local regulations. Between 
January 1, 2004 and March 31, 2004, USDA tested approximately 5,500 
cattle for BSE, and all results were negative.
    The United States concluded active investigation and culling 
activities on February 9, 2004, and has redirected resources toward 
planning, implementing, and enforcing national policy measures to 
promote BSE surveillance and protect human and animal health.
    An international panel of scientific experts appointed by the 
Secretary was complimentary of the scope, thoroughness, and 
appropriateness of the epidemiological investigation and concluded that 
the investigation conformed to international standards. The review team 
members concurred that the investigation should be terminated and made 
several key policy recommendations. USDA and the Department of Health 
and Human Services have already taken significant actions to address 
these recommendations, many of which build on mitigation measures that 
were previously in place.
    The response actions have focused on (1) preventing inclusion of 
specified risk materials in human food and ruminant feed, (2) enhancing 
targeted and passive BSE surveillance systems, (3) improving 
traceability through a comprehensive national animal identification 
system, and (4) reinforcing educational and outreach efforts.
    On March 26, 2004, USDA's Animal and Plant Health Inspection 
Service provided the results of its BSE investigation to foreign chief 
veterinary officers. The information included in the letter 
demonstrates that any remaining trade restrictions against U.S. beef 
and beef products can be lifted without compromising safety.
    On March 15, 2004, USDA announced an enhanced surveillance plan 
with a goal of testing as many cattle in the targeted, high-risk 
population as possible during a 12- to 18-month period. We plan to 
evaluate future actions based on the result of this effort. USDA will 
continue to focus on the cattle populations considered to be at highest 
risk for the disease--adult cattle that exhibit some type of clinical 
sign that could be considered consistent with BSE. This includes non-
ambulatory cattle, those exhibiting signs of central nervous system 
disorders, and those that die on farms. We also plan on testing at 
least 20,000 BSE slaughter samples from apparently healthy aged 
animals.
    More intensive surveillance will allow USDA to refine estimates of 
the level of disease present in the U.S. cattle population and provide 
consumers, trading partners, and industry better assurances about our 
BSE status.
    As an example, if a total of at least 268,444 samples is collected 
from the targeted population, we believe this level of sampling would 
allow USDA to detect BSE at a rate of 1 positive in 10 million adult 
cattle (or 5 positives in the entire country) with a 99 percent 
confidence level.
    Historically, all BSE testing in the United States has been 
performed exclusively at USDA's National Veterinary Services 
Laboratories (NVSL) in Ames, Iowa. The new program incorporates a 
network of State and Federal veterinary diagnostic laboratories into 
the testing program. Their geographic distribution will help ensure 
adequate turn-around time for sample testing and reporting of results.
    Appropriate rapid screening tests will be used to test time-
critical samples. USDA recognizes the possibility of false positives; 
any non-negative results on the rapid screening tests will be forwarded 
to NVSL for additional confirmatory testing.
    A BSE implementation team has been established and is working to 
ensure the program meets its goals. The team is currently drafting more 
specific guidelines that will be used during the course of the enhanced 
surveillance program. These guidelines will address questions regarding 
cost recovery and participation in the program.
    The President's fiscal year 2005 Budget request includes $60 
million for BSE related activities, an increase of $47 million over 
fiscal year 2004. The increase will allow USDA to further its research 
efforts, improve animal traceability, enhance surveillance, ensure 
compliance with food safety regulations, and answer BSE-related 
complaints at markets regarding contracts or prompt payment. The total 
requested includes:
  --$33 million to further accelerate the development of a national 
        animal identification system;
  --$17 million for the Animal and Plant Health Inspection Service 
        (APHIS) to enhance BSE surveillance at rendering plants and on 
        farms;
  --$5 million for the Agricultural Research Service (ARS) to conduct 
        advanced research and development of BSE testing technologies;
  --$4 million for the Food Safety and Inspection Service (FSIS) to 
        conduct monitoring and surveillance of compliance with the 
        regulations for specified risk materials and advance meat 
        recovery; and
  --$1 million for the Grain Inspection, Packers and Stockyards 
        Administration (GIPSA) to dispatch rapid response teams to 
        markets experiencing BSE related complaints regarding contracts 
        or lack of prompt payment.
    Question. What actions have you taken to better coordinate the 
Department of Agriculture's response to BSE?
    Also, if this $60 million is provided, will one person coordinate 
the various components?
    Answer. USDA's response to the BSE detection has been overarching 
and has included contributions from all affected agencies, particularly 
the Animal and Plant Health Inspection Service (APHIS), the Food Safety 
and Inspection Service (FSIS), and the Foreign Agricultural Service 
(FAS). APHIS, FAS, and FSIS communicate regularly, and an FSIS liaison 
has been assigned to APHIS. USDA also communicates and coordinates with 
the Food and Drug Administration (FDA), and we requested FDA's input 
when developing the enhanced BSE surveillance plan.
    APHIS' Transmissible Spongiform Encephalopathy (TSE) Working Group 
monitors and assesses all ongoing events and research findings 
regarding TSEs, including BSE. Members are in regular contact with the 
Agricultural Research Service, the research arm of USDA, to ensure 
regulatory actions are in line with the most current science.
    To ensure a consistent trade message between the United States and 
our North American trading partners, USDA has been working with Mexico 
and Canada to enhance ongoing efforts to increase harmonization and 
equivalence of BSE regulations. In January 2004, each government agreed 
to establish a sub-cabinet group to coordinate ongoing interagency 
efforts toward resumption of exports based on a harmonized framework. 
Currently, Dr. J.B. Penn, Under Secretary for Farm and Foreign 
Agricultural Services, is leading USDA's efforts in this area. He is in 
regular contact with other members of USDA's leadership council, 
including the Under Secretary for Food Safety, the Under Secretary for 
Marketing and Regulatory Programs, and the Under Secretary for 
Research, Education, and Economics.
    The sub-cabinet group is serving as a coordinating body for the 
three countries, giving guidance to existing work groups, many of which 
are already working on harmonization and other activities. A meeting 
among the sub-cabinet members was held in mid-February, and a meeting 
among the chief veterinary officers from all three countries took place 
in mid-March 2004. The three parties are committed to working towards 
the normalization of trade and the harmonization of regulations on a 
North American basis. We plan to use the harmonized regulations to 
present a unified front to the international community.

                     STANDARD REINSURANCE AGREEMENT

    Question. The Risk Management Agency (RMA) is currently working to 
renegotiate the Standard Reinsurance Agreement (SRA). This agreement 
establishes the terms and conditions under which the Federal government 
will provide subsidies and reinsurance on eligible crop insurance 
contracts.
    Can you provide the Committee with an update on the negotiation 
process and have you set a deadline for completion?
    Answer. The Department announced on December 31, 2003 that the 
current standard reinsurance agreement would be renegotiated effective 
for the 2005 crop year. The first proposed reinsurance agreement was 
made publicly available at that time. Based on the advice of the 
Department of Justice, RMA established a process by which we meet with 
each company individually and renegotiate the agreement in detailed 
negotiating sessions. Interested parties had until February 11, 2004 to 
provide written comments about the proposed agreement. RMA reviewed 
comments from insurance companies and interested parties to revise the 
first draft. On Tuesday, March 30, RMA announced the release of the 
second SRA proposal. RMA believes that the second draft demonstrates 
responsiveness to concerns raised by companies and interested parties. 
The proposed SRA will enhance the Federal crop insurance program by: 
encouraging greater availability and access to crop insurance for our 
nation's farmers; providing a safe and reliable delivery system; and 
reducing fraud, waste, and abuse, while achieving a better balance of 
risk sharing and cost efficiencies for taxpayers.
    As part of the process, RMA will meet with the insurance providers 
in individual negotiating sessions the last 2 weeks of April and will 
receive public comments until April 29. At that point RMA will evaluate 
the comments and negotiating session materials and develop another 
draft for discussion with the companies. There are several remaining 
issues of substance to resolve before a final draft may be completed. 
While it is the agency's desire to resolve them and complete the 
process before July 2004, given that this is a negotiation, RMA is not 
able to determine how long it will take to resolve issues to all 
parties' satisfaction. Prior SRA negotiations have taken well past July 
to conclude, but have not affected the continuing delivery of the 
program.

                            FRAUD AND ABUSE

    Question. The Administration's Budget request for the Risk 
Management Agency includes an increase of over $20 million to improve 
information technology. Within the increase, the Budget requests 
funding to monitor companies and improve current procedures to detect 
fraud and abuse.
    Can you explain how the department will monitor companies and 
improve detection of fraud and abuse?
    Answer. The current systems are based on technology that is more 
than 20 years old. The information that is collected from the Insurance 
Companies is distributed to a collection of 100+ databases. Any 
subsequent updates or changes to this information received from the 
Insurance Companies overlays the original information. This 
architecture does not allow RMA to track changes in the submissions 
from the external entities.
    As the data requirements of the current data structures change from 
year to year, new databases are created for each crop year. The prior 
years' databases are problematic due to the intense effort needed to 
convert the historical information to formats that are consistent with 
the more recent years. This creates problems in data analyses when 
trying to use data from multiple crop years.
    The requested increase in funds is directed at the establishment of 
a consistent enterprise architecture and enterprise data model. This 
would replace the 100+ databases with a single enterprise data model 
that would be consistent across the organization. This enterprise data 
model would allow data mining operations to be conducted without first 
converting the data to a consistent useable format.
    By moving the data to a modern relational database system, RMA will 
be able to track detailed changes that are made to the data that is 
received from the Insurance Companies. This will allow RMA to monitor 
the timing of the changes as they occur and identify those changes that 
could potentially be related to fraud and abuse.

                       ASSISTANCE ON PUBLIC LANDS

    Question. Currently, the Natural Resources Conservation Service is 
prohibited from performing conservation work on public lands. This 
limits participation to farms and ranches with private lands and puts 
Utah, other public land states, and ranchers who graze on the public 
lands at a disadvantage.
    As a matter of policy, does the Department believe that the Natural 
Resources Conservation Service should be able to provide technical and 
financial assistance to ranchers to make improvements to their BLM and 
Forest Service grazing allotments?
    Answer. The Department believes that legislative intent limits the 
conservation programs that the Natural Resources Conservation Service 
(NRCS) administers to primarily providing financial and technical 
assistance on private lands. However, NRCS does work with other 
agencies, individuals, and groups using the Coordinated Resource 
Management (CRM) approach to provide technical assistance on Bureau of 
Land Management (BLM) and Forest Service lands. CRM is a voluntary, 
locally-led planning process to address the natural resource issues 
which involves all the stakeholders. The Federal and State agencies 
work through a Memorandum of Understanding to support the use of the 
CRM approach.
    Financial assistance, for applicable NRCS programs, is available 
for use on BLM and Forest Service grazing allotments when the land is 
under private control for the contract period, included in the 
participant's operating unit, and when the conservation practices will 
benefit nearby or adjacent agricultural land owned by the participant.
    Question. Public lands dominate many of Utah's counties and many 
states in the West. In addition to their impact on agriculture, public 
lands severely reduce the tax base in many communities, restrict and in 
some cases discourage development, and affect the way-of-life in rural 
public land counties.
    Do you think farm programs, rural development programs, and 
conservation programs offered by USDA, take into account regional 
differences generally, and the impact of public lands specifically?
    Answer. The Natural Resources Conservation Service (NRCS) 
administers conservation programs. The agency allocates conservation 
program funds to states based on National program priorities and the 
scope of natural resource needs in the individual states. The process 
used to allocate conservation program funds to states includes factors 
that account for the fact that natural resource conditions are often 
similar within the same physiographic region, but may have natural 
resource differences with other regions. The Department believes that 
legislative intent limits the conservation programs that NRCS 
administers to primarily providing financial and technical assistance 
on private lands. Resource concerns on Federal acreage would not 
typically contribute to the scope of resource factors used to allocate 
funds to states for a particular conservation program.
    FSA Conservation Programs are adapted to local and regional 
conditions. Seeding and planting requirements are tailored to the local 
climatic and ecosystem for that region. FSA utilizes State Technical 
Committees and County Committees in the development and implementation 
of conservation policies.
    Conservation programs, such as the Conservation Reserve Program 
(CRP), help address the most critical resources on private land. Sound 
resource planning on private land assists producers to better manage 
their other resources including range resources on public land. In 
addition, programs such CRP can have a significant positive impact on 
hydrology and water resources in the West. Water yields off of CRP can 
be of greater quantity and longer duration than water yields on 
cropland.
    USDA Rural Development allocation formulas generally take into 
account: (1) rural population in comparison to national rural 
population; and (2) rural population in poverty in comparison to 
national rural population in poverty. While that does not make an 
adjustment for a regional area that is impacted by a large amount of 
public lands, it also does not punish an area. The lack of population 
concentration could give a state like Utah and other western states an 
advantage because of the rural nature of the areas. Grant programs like 
the Distance Learning and Telemedicine, Community Connect and the Water 
and Waste Disposal loan and grant program give those areas additional 
points in the scoring process.

            NATIONAL FINANCE CENTER/TSP COMPETITIVE BIDDING

    Question. Madam Secretary, the National Finance Center did an 
admirable job in late 1986 to get ready to assume responsibility for 
the record keeping functions associated with the new Thrift Savings 
Plan which started receiving participants investment selections in 
April 1987. Many people didn't think it could be done but the NFC did 
it.
    It has recently been brought to my attention that the Federal 
Retirement Thrift Investment Board has begun to explore the competitive 
outsourcing of the services related to the TSP. Earlier this year, the 
Board decided to solicit a Request for Proposals for both software 
maintenance and mainframe installation and housing. I am told that 
these actions were taken because the NFC was ``slow to assume control 
for software maintenance and to install the TSP's new mainframe 
computer.'' The Board has also stated that while they intend to leave 
the remaining TSP record keeping functions at the NFC, they will 
periodically conduct a cost/benefit analysis to make sure that TSP 
participants get the best value for their money.
    What percentage of the NFC operations has been associated with 
management and operations of the Thrift Savings Plan?
    Answer. Approximately 425 employees, 35 percent of the National 
Finance Center's (NFC) total staff, supported the Thrift Savings Plan 
(TSP) in fiscal year 2003.
    Question. What is the impact of the decisions to outsource software 
maintenance and the location of the mainframe?
    Answer. Outsourcing software maintenance resulted in a reduction of 
31 programmers and analysts. Moving the mainframe will reduce the data 
center mainframe support staff by 7.
    Other cutbacks in service recently directed by the Federal 
Retirement Thrift Investment Board (FRTIB) will eliminate 20 additional 
positions in NFC's Thrift Savings Plan Division in fiscal year 2004 and 
120 additional call center employees by 2006. The administrative and 
other general support staff for these employees will also be reduced. 
NFC anticipates 65 administrative and general support staff positions 
to also be reduced by 2006. Another 15 contract positions will also be 
lost. In total, between 2004 and 2006, decisions by FRTIB to outsource 
work historically performed at NFC will result in a loss of 243 Federal 
and 15 contract positions in New Orleans.
    Question. Will the NFC compete to retain these functions?
    Answer. NFC was not given an opportunity to compete for the 
software maintenance and mainframe operations work.
    Question. What steps is the NFC taking now to make sure that they 
are the best facility to continue the remaining vital record keeping 
functions for this program?
    Answer. NFC is attempting to redefine the FRTIB/NFC relationship 
and develop principles of operation for TSP that help clarify roles, 
responsibilities, and service level expectations for the future.
    NFC has multiple initiatives underway to ensure that its facilities 
are secure and that they meet or exceed customer expectations. The 
United States Department of Agriculture (USDA) performed an extensive 
security assessment in 2002 on the current facility. As a result of 
that assessment, NFC has undertaken 31 multi-year facility improvement 
initiatives, most of which are now completed. The facility improvements 
include such things as increasing the number of guards; adding x-ray 
machines, fencing, and bollards; and building guard stations.
    NFC also received an appropriation to develop data mirroring 
capability at NFC, which will address known network vulnerabilities, 
high availability and immediate recovery time objectives, and the 
enterprise-wide vulnerabilities to weather and other threats that 
jeopardize NFC's service to its customers.

                 USDA'S CENTER FOR VETERINARY BIOLOGICS

    Question. Madam Secretary, on February 10 of this year, UPI 
published a story which stated that many Federal meat inspectors had 
lost confidence in the testing conducted by the National Veterinary 
Services Laboratories in Ames, Iowa. There were allegations of secrecy 
and collusion with the beef industry, as well as inaccurate test 
results. We are aware that the USDA Inspector General has been looking 
into these allegations as part of their larger investigation into 
issues surrounding the December discovery of a BSE-contaminated cow in 
Washington State.
    The fiscal year 2005 budget requests $178 million to expand this 
facility. Obviously, with resources as tight as they are, it would be 
imprudent for us to provide this level of funding to upgrade and expand 
a facility if it provides unreliable testing.
    What is the USDA reaction to this article?
    Answer. USDA's Center for Veterinary Biologics, National Animal 
Disease Center, and National Veterinary Services Laboratories (NVSL) 
are all located in Ames, Iowa. The laboratories included in the Ames 
complex, now identified as the National Centers for Animal Health, are 
recognized nationally and internationally for their scientific 
expertise and professional ability. They continue to receive 
recognition from various science-based organizations, including the 
United States Animal Health Association (USAHA) and the American 
Association of Veterinary Laboratory Diagnosticians (AAVLD).
    The President's fiscal year 2005 Budget request includes $178 
million to modernize the Ames complex, a request that has received the 
full support of organizations such as USAHA and AAVLD, as well as the 
Animal Agriculture Coalition and the American Farm Bureau Federation.
    With regard to the February 10, 2004, UPI article, USDA believes 
the allegations made are inaccurate and that the article itself does 
not represent a balanced profile of the work carried out by scientists 
at NVSL. USDA is confident in the quality and competence of all 
laboratory staffs in Ames, and we regret that the reporter did not 
include the viewpoints of any staff members currently employed at NVSL, 
which has been responsible for BSE testing at the national level.
    NVSL has quality assurance standards in place, as well as standard 
operating procedures to track samples that are sent in for testing. The 
facility is recognized as the United States' national and international 
reference diagnostic laboratory for animal diseases, as designated by 
the World Organization for Animal Health (OIE) and the Food and 
Agriculture Organization of the United Nations. NVSL staff members have 
participated with full transparency in a review by the USDA Office of 
the Inspector General, just as they operate with full transparency in 
carrying out program operations.
    USDA continues to stand behind the work of its laboratory staffs in 
Ames, and we plan to move forward with an enhanced BSE surveillance 
program that incorporates a network of approved State and Federal 
veterinary diagnostic laboratories throughout the United States. NVSL 
will provide leadership, confirmation testing, proficiency testing, 
quality assurance inspections, and training throughout this program.
    Question. When do you expect the IG to complete the investigation?
    Answer. The Office of Inspector General's (OIG) investigators and 
auditors are working collaboratively to determine the facts involving 
BSE-related allegations that have been circulating in the public 
domain, including those in the article you mention. OIG's investigative 
work involves the condition of the BSE-infected cow before slaughter. 
OIG auditors are separately conducting a broader review involving USDA 
BSE Surveillance Programs. The audit is looking at the surveillance 
program in use when the BSE-infected cow in the State of Washington was 
identified. It is also looking into changes made to the surveillance 
plan (New Surveillance Plan) after the BSE-infected cow was discovered. 
This also includes looking at the role and responsibilities of the 
National Veterinary Services Laboratory in Ames, Iowa. Within the next 
few weeks, OIG will be in a better position to estimate a completion 
date for reporting its findings from those reviews.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                              RISK FACTORS

    Question. Dr. Collins, in our questions regarding forecasting, you 
mentioned that, ``There are just too many risk factors going on for us 
to go much beyond a decade.''
    Can you please identify some of the risk factors or uncertainties?
    Answer. Long-term forecasting models are generally based on long-
term relationships among explanatory variables, such as income and 
population, and variables to be projected or forecast, such as corn 
demand and trade. These relationships are also based on a number of 
other factors, ranging from infrastructure to government policy, which 
are not usually explicit in models. Therefore, long-run projections can 
go wrong when projections of explanatory variables are wrong or there 
are changes in the underlying structures that invalidate the 
relationships between explanatory variables and variables to be 
projected. As examples, the longer the projection period, the larger 
the error is likely to be in projecting income, population, exchange 
rates, yield per acre and other such explanatory variables. These are 
all risk factors. Similarly, changes in governments, government 
policies, infrastructure such as available transportation routes and 
modes, weather and climate, war and peace, availability and prices of 
substitute or competing products, and availability and prices of 
production inputs are all risk factors as well. The longer the forecast 
period, the more likely these underlying factors will change and reduce 
the accuracy of the projections. Statistical projection models estimate 
the range (confidence interval) within which the projection is expected 
to be. The further the projection is into the future, the larger is the 
confidence interval.
    Question. Dr. Collins, given all the risk factors that you identify 
and changes that have transpired in the world in recent years, is it 
necessarily so that to embrace a forecasting model looking ahead, that 
same model would need to accurately predict recent experience when 
applied to the same time period looking backward?
    Answer. A long-term projection model is normally validated against 
historical data. If the model cannot explain past trends, then there is 
little reason to embrace it. However, a model may be useful for 
projecting trends, or central tendencies, and still miss some year-to-
year variation due to transitory factors. If the model errors are for 
the most recent years, the challenge is to know whether these misses 
are due to transitory factors that will correct over time or whether 
the underlying assumptions on which the model is based have changed.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                              BUDGET CUTS

    Question. Thank you Secretary Veneman for appearing before this 
committee today. I understand that your department is operating under 
challenging funding constraints, and you had to make some difficult 
decisions in preparing your budget. However, I am extremely concerned 
with the level of funding you chose to allocate to certain programs, 
and how those choices will affect constituents in my state.
    The Rural Utilities Program was established to provide rural 
communities with assistance to support basic needs of its residents. 
This includes many of the things that we take for granted such as 
running water, electricity, and waste disposal. These basic amenities 
are vital to the health of these rural communities and yet the USDA has 
slashed the funding of this program.
    In Alaska alone, funding was reduced for water and waste disposal 
systems from $28 million in fiscal year 2004 to $11.8 million in fiscal 
year 2005, a reduction of $16.2 million.
    Funding was also eliminated to develop a regional system for 
centralized billing, operation and management of water and sewer 
utilities, which will streamline operations, reduce overhead, and 
ensure efficient management.
    And funding was eliminated for high cost energy grants--a reduction 
of $28 million. Alaska's rural communities experience some of the 
highest energy costs in the nation--paying up to 9 times higher than 
the national average. Rural areas rely on expensive diesel fuel which 
must either be barged or flown in.
    These cuts will have devastating consequences on rural communities, 
particularly in my state. Why are these cuts proposed?
    Answer. The Department is aware that high energy costs in Alaska 
and other states can be a barrier to the economies and quality of life 
in rural communities. It also recognizes that there are a host of other 
barriers that can have similar consequences. In a tight budget 
situation, it is very difficult to make the necessary choices that will 
provide effective results for the most people. Grants for rural 
development purposes are particularly difficult to budget because they 
have a dollar for dollar impact on the limited amount of budget 
authority that we have available. Loans, on the other hand, require 
budget authority for only the amount of subsidy costs. In most cases, 
these costs are relatively low. A small amount of budget authority used 
for loans can leverage a substantial amount of financing for the types 
of projects that will be the most help for rural communities. This was 
a significant factor in the decisions that were made in developing the 
2005 budget.

             DISTANCE LEARNING, TELEMEDICINE AND BROADBAND

    Question. Additionally, USDA reduced funding for the Distance 
Learning, Telemedicine and Broadband program by $14 million.
    With respect to the telemedicine program, most of Alaska's rural 
communities are not on a road system and so do not have access to 
healthcare facilities. These communities rely on the telemedicine 
program, which provides them access to doctors and healthcare 
professionals.
    The distance learning program is also important to Alaska's rural 
communities because it provides residents with tools necessary for 
education. These residents don't have access to the more populated 
urban centers and rely on distance learning programs to meet their 
educational needs.
    Similarly, the broadband program connects schools, libraries, 
homes, and health clinics to the information highway. Without funding 
for this program, the residents have limited access to the outside 
world. Why was funding cut for these programs?
    Answer. The $14 million reduction was not a cut. Congress, in 
fiscal year 2004 appropriations, added $14 million in funding under the 
DLT program specifically for the purpose of providing grants to Public 
Broadcast Stations serving rural areas with funding to meet the Federal 
Communications Commission mandate to convert their analog broadcast 
signals to digital. None of that funding was for DLT or broadband 
grants. The $25 million request for DLT grant funding is within 
historical funding level requests. With regard to broadband grants, the 
deployment of broadband facilities in rural areas is very capital 
intensive. Typically, limited grant authority provides a very small 
number of communities nation-wide with the ability to deploy broadband 
service on a limited scale within the community. There isn't enough 
grant funding available to make a significant dent in achieving 
universal broadband service deployment in rural areas. The best model 
is one built on a company that has a strong business plan and that 
seeks to take advantage of economies of scale in its business model. 
The Broadband Loan program is designed to specifically meet this 
challenge. With reasonably low subsidy rates and low loan interest 
rates, the loan program will be the vehicle by which broadband 
infrastructure is deployed on a wide scale basis in all of rural 
America.

           TRANSSHIPMENT OF BEEF FROM THE LOWER 48 TO ALASKA

    Question. I am pleased that USDA has increased funding for APHIS 
for animal diseases. I understand that you are currently negotiating 
with the Canadian government regarding the reopening of our borders. 
This is particularly important to my state, which relies on the Alaska-
Canada highway, or ALCAN to transport live cattle and beef products to 
Alaska.
    In the February BSE hearing which Senator Specter held, I raised 
the issue of transshipment. The inability of transporting cattle and 
beef products from the Lower 48 to Alaska is having a devastating 
impact on ranchers, dairy farmers and truckers in Alaska.
    At that time, I requested that the USDA take steps to address this 
issue and to negotiate an agreement to permit the safe passage of 
cattle and beef products through Canada.
    Has the USDA taken any steps to address this situation? If so, what 
is the status of your negotiations and how soon can we expect a 
resolution on this issue?
    Answer. We appreciate the position of Alaskan ranchers, dairy 
farmers, and others who wish to transport U.S. cattle, beef, and beef 
products through Canada to Alaska. USDA continues to work with Canadian 
colleagues to reach an agreement on a regulatory protocol that would 
allow the safe transiting of U.S. cattle and beef products through 
Canada to and from Alaska. United States and Canadian officials have 
had a series of discussions regarding this issue--the latest in early 
March 2004--and we hope to resolve the matter in a timely fashion.
    In a broader context, USDA continues to push for a more reasoned 
international dialogue on the need for countries to devise more 
flexible, commercially viable solutions to allow safe trade in low risk 
products. We are working with the World Animal Health Organization to 
both clarify the international guidelines for trade and ensure a 
consistent application of these guidelines. In addition, USDA continues 
to work with both of our tripartite partners, Canada and Mexico, to 
harmonize North America's approach to handling trade in certain 
commodities that present minimal BSE risk.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                     HEALTH CARE COOPERATIVE PILOT

    Question. Recent studies by the University of Wisconsin-Madison and 
others demonstrate that farmers pay an average of three times as much 
for their health care coverage as salaried employees and pay twice as 
much as other self-employed individuals. These plans carry high 
premiums and high deductibles and do not contain preventive health 
care. Furthermore, 41 percent of our farm families cannot afford to 
insure every member of their family and nearly half of those families 
have no insurance at all.
    One or more family members must often work off of the farm to 
obtain less expensive group health insurance. This acts as a 
significant labor barrier when the farm operation is determining 
whether or not to modernize. The net result is a loss of farm 
operations. We know this because farmers say that the lack of 
affordable quality health care is a primary reason why they will no 
longer farm.
    Because of the lack of affordable health insurance, farm supply 
cooperatives and other small businesses in rural areas are working to 
help their farmer-members stay on the farm by creating a cooperative 
healthcare purchasing alliance. This purchasing alliance is designed to 
provide a group coverage alternative to individual coverage. The 
healthcare co-op could serve as a model for other rural and urban 
cooperatives to provide access to group coverage for individuals that 
otherwise would not be able to access affordable health care.
    Secretary Veneman, are you supportive of the creation of a pilot 
health care cooperative purchasing alliance for farmers and small 
businesses in rural communities?
    Answer. We would certainly support every appropriate and realistic 
effort to fill the serious gaps in health insurance coverage available 
to farmers and other rural residents. Purchasing alliances, 
cooperatives, and mutuals have a demonstrated track record of lowering 
costs and responding to the special needs of their members. A properly 
structured pilot healthcare cooperative purchasing alliance could be a 
very useful tool for shaping effective and efficient solutions.
    Question. A ``stop-loss'' fund will be needed to attract potential 
insurers and healthcare providers and ``buy down'' the risk for farmers 
and other individuals who are currently considered to be ``high risk'' 
because they have not been insured during the last 12 months or longer 
or have only carried a catastrophe healthcare plan. Cooperative 
councils in Wisconsin and Minnesota are working to create these 
healthcare cooperatives. They report to me that insurers and 
reinsurance carriers do not want to offer healthcare insurance to the 
cooperative if they include ``high risk'' members without the assurance 
of a stop-loss fund.
    Overall, this demonstration project would potentially help 
thousands of agricultural producers. This demonstration project would 
provide affordable, quality group healthcare coverage as an alternative 
to individual coverage for farmer members of rural, agriculturally-
based cooperatives. By doing so, this removes a primary barrier for 
growing agriculture across the nation.
    Will you support appropriations to help create a stop-loss fund to 
move these healthcare cooperatives forward?
    Answer. Our support would depend upon certain conditions. First, 
our support would be limited to funding that is used in the start-up 
process. We do not believe this should become a perpetual support 
program that takes on the nature of an entitlement. Second, extensive 
input and oversight in the use of the funds would be appropriate. This 
is a new and untested effort whose success or failure may well be 
determined by the quality of the decisions made by its management. If 
we provide funding, we have an obligation to do what we can to make 
sure the overall effort is well conceived, well organized, and well 
managed. Third, we need the authority and resources to properly analyze 
the effectiveness of the program. We need to make sure, for example, 
that Government funding does not distort the real economic costs of the 
system or give false impressions about the likely success of future, 
self supporting systems. Any such appropriation should include funding 
for adequate USDA staffing to assist and monitor this initiative.

               COOPERATIVE SERVICES TECHNICAL ASSISTANCE

    Question. The Committee is concerned that over the last several 
years State Directors have not been held accountable to meet the 
Department's Cooperative Services technical assistance goals as 
outlined in the Rural Development Strategic Plan. This plan states that 
in order to achieve rural development's goals, the Department 
emphasizes the use of cooperatives to develop the institutional 
framework to leverage rural America's assets.
    Madam Secretary, will you hold your State Directors accountable to 
meet the Department's goals as stated in the strategic plan to provide 
technical assistance for cooperatives?
    Answer. We will make ourselves accountable for the directions we 
are laying out for ourselves in our strategic planning process. 
Building accountability into the Rural Development system, at all 
levels, is critical if our planning process is to be of any value. We 
have developed and distributed an administrative notice directing our 
State Rural Development Directors to provide regular and prescribed 
reports on the cooperative development assistance activities being 
undertaken by their staffs. This regular reporting system will provide 
the basis for holding our State Directors accountable for cooperative 
development work.
    Question. Will you commit to requiring State Directors to dedicate 
at least one full time employee per State for cooperative services 
technical assistance?
    Answer. We are taking steps to determine the appropriate resources 
and staffing mix in providing Cooperative Services technical assistance 
within each State. We are engaged in a set of reviews and analyses of 
our Cooperative Services program that will enable us to develop sound 
guidance and directions on how we can best deploy cooperative technical 
assistance assets, particularly in light of our strategic goals and 
objectives. A high level external program review team is initiating a 
formal review of the Cooperative Services technical assistance 
programs, resource mix and requirements, priority area of focus, and 
fit within the Rural Development program portfolio. We have also 
established a cooperative advisory committee composed of Rural 
Development field and National Office staff to provide an internal 
review and suggestions for strengthening the effectiveness of Rural 
Development's field level delivery systems for Cooperative Services 
programs and activities. We will use the products of these review 
activities in conjunction with the Rural Development strategic plan to 
better position ourselves to make specific commitments to alternative 
resource deployment for providing Cooperative Services technical 
assistance.
    Question. Beyond ensuring a minimum of one FTE per state, staffing 
resources should be reflective of the number of cooperatives in the 
state and the number of small farm producers.
    Are you supportive of working to ensure that state offices are held 
accountable to have staffing that reflects the level of need for 
cooperative services technical assistance in each State, based on the 
number of coops in each state?
    Answer. There are several factors we believe are necessary to 
consider in deciding how to deploy resources to cooperative services 
technical assistance programs. While the existing number of 
cooperatives in a given State or region is certainly one criterion, we 
would also want to take a broader needs and opportunities based 
approach to designing program delivery. We want to make sure small and 
underserved farmers have appropriate access to technical assistance; 
and we want to make sure that new markets and industries growing out of 
value added and energy products receive due attention.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin

                         CONSERVATION PROGRAMS

    Question. Madame Secretary, I noticed that you state in your 
testimony that the Administration is increasing funding for 
conservation for fiscal 2005. However, if you compare the President's 
budget proposal to what Congressional Budget Office estimates should be 
spent on 2002 farm bill conservation programs, the President's budget 
represents a cut of over $400 million for fiscal 2005. This includes 
the $92 million for technical assistance for the Conservation Reserve 
Program and the Wetlands Reserve Program because the President's budget 
does not propose new funding to fix the technical assistance problem 
created by this Administration.
    Would the President support providing new funding for conservation 
technical assistance without an offset so the other conservation 
programs, like the Environmental Quality Incentives Program, will no 
longer need to lose funding to support other programs?
    Answer. The President's fiscal year 2005 Budget proposes a brand 
new Farm Bill Technical Assistance account to provide separate and 
distinct technical assistance funding to support the Conservation 
Reserve Program and the Wetlands Reserve Program. The President's 
fiscal year 2005 Budget reflects the change in law that was initiated 
by the Subcommittee to ensure programs that historically could fund 
their own technical assistance, could continue to do so. We feel that 
the Administration's approach is the best way to ensure that adequate 
funding resources are available to implement all conservation programs.
    Question. What are the underlying assumptions for the $249 million 
estimate for the Conservation Security Program (CSP)? Does this $249 
million estimate reflect the law as it is in effect following the 
enactment of the 2004 Consolidated Appropriations Act?
    Answer. We have been able to design the Conservation Security 
Program (CSP) in a way that provides funding obligations similar to the 
way that the Conservation Reserve Program obligations are structured. 
We estimate that there is a potential applicant pool of 700,000 
producers nationwide to sign-up for CSP. Given the $41 million 
available for this fiscal year and undetermined amounts for fiscal year 
2005 and beyond, USDA has had to design a program that is flexible 
enough to be able to function at any funding level. To accomplish this 
we have proposed making the program available in selected watersheds 
and emphasizing enrollment categories.
    The NRCS approach also deals with the constraint placed in statute 
on technical assistance at 15 percent of expended CSP funding. If USDA 
was to conduct a nationwide sign-up for CSP, technical assistance costs 
would far exceed the $41 million made available in fiscal year 2004 for 
the program just for the signup. The Administration's budget assumes 
that all watersheds would be offered a CSP sign-up within an 8 year 
rotation; about one-eighth of the total watersheds would be offered 
sign-ups annually.
    The 10 year spending cap is no longer in effect.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    Question. You suggested that the revised BSE surveillance plan will 
require $70 million (that will be obtained from CCC) to test at least 
201,000 cattle. The President's fiscal year 2005 budget proposed to 
test 40,000 cattle at a cost of $17 million. APHIS now plans to 
increase the number of animals tested by more than five-fold and that 
the new surveillance plan will include incentives paid to farmers and 
veterinarians to collect and submit samples to APHIS.
    Is a four-fold increase in funding adequate to cover the costs of 
this increased surveillance, testing and incentives?
    Answer. In fiscal year 2003, APHIS tested approximately 20,000 
samples for BSE, the majority of which were collected from animals at 
slaughter facilities. When the fiscal year 2005 budget request was 
submitted, the Secretary had announced that certain new regulations 
were going into effect--such as the banning of non-ambulatory cattle 
from slaughter facilities--but USDA had not yet received the 
international review panel's recommendations with regard to an enhanced 
surveillance program.
    The fiscal year 2005 President's Budget request, therefore, 
included enough funding for APHIS to double the number of samples 
collected from 20,000 to 40,000 samples and to provide for certain 
cost-recovery options. However, since the fiscal year 2005 budget was 
submitted, USDA has revised its BSE surveillance program for fiscal 
year 2004 and fiscal year 2005 to allow for more than 200,000 samples 
to be collected and tested over a 12 to 18 month period. We will now be 
utilizing a network of approved laboratories and will achieve certain 
economies of scale with regard to other costs, such as shipping and 
test kit costs. We anticipate that funding will be adequate to cover 
the costs of the enhanced surveillance and testing program.
    Question. The downed cattle population represents a large portion 
of USDA's BSE proposed test population.
    Since downed cattle have been removed from the human food supply, 
and it will be more difficult to obtain access to these cattle for 
testing, will the $70 million be adequate to pay for the additional 
expected costs of incentives for downed animals that do not come to 
slaughter plants?
    Answer. A BSE implementation team has been established and is 
working to ensure the enhanced surveillance program meets its goals. 
The team is currently drafting more specific guidelines that will be 
used during the course of the program. These guidelines will address 
questions regarding cost recovery and participation in the program.
    USDA anticipates pursuing a variety of approaches with regard to 
cost recovery, including contracts, cooperative agreements, direct 
payments, and fee-basis agreements. For example, costs for transporting 
an animal or carcass to the collection site from a farm or slaughter 
establishment may be reimbursed, or disposal expenses for ``suspect'' 
cattle that test non-negative or that cannot be rendered may also be 
covered. Other expenses may also be addressed in the program.
    We anticipate that the $70 million provided to APHIS through an 
emergency transfer will be adequate to cover the cost of the enhanced 
surveillance program during the course of the 12-18 month effort.

                        MEAT AND POULTRY SAFETY

    Question. As you know, USDA still does not have a nationally 
representative, statistically robust, baseline surveillance program for 
pathogens on meat and poultry products. We still do not know the 
prevalence of common foodborne pathogens, such as E. coli O157:H7 and 
others that kill thousands of people in the United States each year. 
While it is critical to implement a national surveillance program for 
BSE, it is equally critical to know the prevalence of pathogens on meat 
and poultry products.
    Can you provide me with your plans for developing a national 
baseline surveillance program for pathogens on meat and poultry 
products?
    Answer. FSIS is committed to developing baseline studies that will 
help the agency and the industry to better understand what 
interventions are working or how they could be improved. Currently, 
FSIS is developing protocols to enable us to conduct continuous 
baseline studies to determine the nationwide prevalence and levels of 
various pathogenic microorganisms in raw meat and poultry.
    To achieve the agency's goal of applying science to all policy 
decisions, the fiscal year 2004 appropriations bill provided $1.65 
million for an initiative to establish a continuous baseline program. 
After the fiscal year 2004 appropriations bill was enacted, the agency 
quickly developed a Request for Proposals. On February 12, 2004, the 
agency posted the pre-solicitation notice, and then on February 29, and 
March 2, 2004, the solicitation and accompanying materials were posted 
on the web site, FedBizOpps.gov, which is the point-of-entry for 
Federal government procurement over $25,000. The official solicitation 
issue date was March 1, 2004, and all offers were due on April 1, 2004. 
FSIS is currently evaluating offers and expects to award a contract in 
June 2004.
    Baseline studies will provide information on national trends and 
are a tool to assess performance of initiatives designed to reduce the 
prevalence of pathogens in meat and poultry products. These baseline 
studies will also yield important information for conducting risk 
assessments that can outline steps we can take to reduce foodborne 
illness. These surveys will also be important in establishing the link 
between foodborne disease and ecological niches, as well as levels and 
incidence of pathogens in meat and poultry. The net result will be more 
targeted interventions and the effective elimination of sources of 
foodborne microorganisms.
    Question. What would be the estimate of the cost of such a program?
    Answer. FSIS estimates that each year, it can complete one baseline 
and begin a second one using the $1.65 million appropriated in fiscal 
year 2004. Since there are at least 15 different products for which 
baselines could be considered (e.g. beef trimmings, beef carcasses, 
ground beef, chicken carcasses, and ground chicken), FSIS could 
complete a full cycle of baselines in about 10 years at a cost of 
approximately $16.5 million. If baselines were repeated every 3 to 5 
years, the yearly costs would be higher.

                 NATIONAL ANIMAL IDENTIFICATION SYSTEM

    Question. The USDA budget proposes $33 million for the development 
of a National Animal Identification system, even though most estimates 
for implementation of the system are well above $100 million. I have 
repeatedly stressed the need for this system to ensure animal health, 
consumer confidence, export markets and public health. The proposed 
budget amount falls far short of the full implementation costs and will 
impede USDA's ability to implement a system that will meet these goals.
    Given the limited funding, which parts of the system do you plan to 
fund, and which parts of the system will you leave to states and the 
private sector?
    Answer. The President's Budget for fiscal year 2005 requests $33 
million for animal identification. This funding would support the 
national repositories for identification of premises, animals and non-
producer participants; cooperative agreements with states, tribes, and 
third parties; communication and outreach efforts, and some staff to 
support the effort. The cooperative agreements would be one-time 
allocations for initial implementation and integration with the 
national repositories. USDA would look to state or state consortiums 
for additional contributions, depending on the integration needs. It is 
also expected that producers and other market participants would share 
in the system's cost.
    There is an important role for private industry in the National 
Animal Identification System. One of the key elements of the National 
Animal ID program is to be technology neutral in the requirements of a 
national system. This objective was to provide flexibility to producers 
and to prevent the stagnation of innovation in technology. Private 
industry will be critical in providing technology and service to 
producers and markets. Grass-roots interface with producers, states and 
other parties will be needed to support the successful implementation 
of a national animal identification system.
    Question. How did you arrive at this decision?
    Answer. The recommendations reflect the complex structure of the 
livestock industry and previous efforts to design and implement a NAIS. 
The decision process was chaired by the Chief Information Officer with 
assistance from USDA's BSE response coordinator, the Deputy Under 
Secretary for Farm and Foreign Agricultural Services; USDA General 
Counsel; and USDA Chief Economist. The group relied heavily on the 
excellent information developed as part of the U.S. Animal 
Identification Plan (USAIP) and on the expertise of the USAIP Steering 
Committee; the Under Secretary for Marketing and Regulatory Programs; 
and the Administrator and the staff of the Animal and Plant Health 
Inspection Service. The group also met with a broad spectrum of 
organizations and companies representing the meat supply system, from 
production through retailing.

         MCGOVERN-DOLE INTERNATIONAL FOOD FOR EDUCATION PROGRAM

    Question. I want to ask you about the McGovern-Dole International 
Food for Education Program that we permanently established in the 2002 
Farm Bill. We provided $100 million for fiscal 2003 for the program in 
mandatory funds, but we were only able to provide $49.7 million for 
fiscal 2004.
    Please describe to me how the program has to be scaled back to fit 
within the lower funding level for fiscal 2004, and how many fewer 
children will be served compared to fiscal 2003?
    Answer. The fiscal year 2003 program, which totaled $100 million, 
supported a total of 130,000 tons of commodity donations for 21 
programs with the total beneficiaries estimated at 2.2 million. It is 
estimated that the fiscal year 2004 funding level of $49.7 million will 
provide approximately 60,000 tons of commodities for 10-15 programs 
with approximately 1.1 million beneficiaries.
    Question. Also, please describe to what extent USDA has been able 
to recruit participation in the program by other donor countries.
    Answer. Under the pilot Global Food for Education Initiative and 
the McGovern-Dole International Food for Education and Child Nutrition 
program over $1 billion has been donated to school feeding programs 
from other donors. These contributions have been primarily via the 
World Food Program but also in coordination with private voluntary 
organizations. In addition, the in-kind contributions in recipient 
countries have been significant.
    Question. In the last few months, we have seen significant 
increases in key commodity prices in the United States. On a season-
average basis, 2003/04 prices for corn, wheat, rice, and soybeans have 
increased between 2 and 10 percent just since December 2003, with cash 
soybean prices now spiking near $10/bushel. While that is certainly a 
beneficial development for American farmers who still have crops from 
last fall in their storage bins, it will also increase the cost of 
acquiring commodities for USDA and USAID food aid programs.
    Given that the President's budget does not include an increase to 
compensate for these higher prices, will it be necessary to curtail the 
scope of these food aid programs? And, if so, to what extent?
    Answer. Yes, it will be necessary to curtail the scope of these 
food aid programs. USDA calculated the potential impact of price 
increases of both commodities and freight on USDA food aid programs for 
fiscal year 2004. I will provide a table which shows the expected 
decrease in tonnages and people fed under the programs, based on four 
different price scenarios.
    [The information follows:]


                                   POTENTIAL IMPACT OF PRICE INCREASES ON USDA FOOD AID PROGRAMS FOR FISCAL YEAR 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Tonnage Assuming   Tonnage Assuming
                                                                                 Tonnage with                          a 10 percent       a 20 percent
                                         Commodity Value     Freight Cap ($      prices from     Tonnage with Dec/    price increase     price increase
                Program                    ($ Million)          Million)         President's       Feb prices \1\    from 12/2003/02/   from 12/2003/02/
                                                                               Budget Estimates       (000 MT)       2004 prices (000   2004 prices (000
                                                                                   (000 MT)                                MT)                MT)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Title I \2\...........................            $117.70  .................              740.0              616.4              560.6              512.8
Food for Education \3\................              21.47  .................               66.1               60.6               55.1               50.5
Food for Progress \4\.................  .................             $40.00              257.6              225.1              204.6              187.5
                                       -----------------------------------------------------------------------------------------------------------------
      Total...........................             139.17              40.00            1,063.7              902.1              820.3              750.8
                                       =================================================================================================================
Millions of People Fed................  .................  .................                5.9                5.0                4.6                4.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Title I uses price estimates based on Feb. 2004 crop report. Food for Education uses average of actual purchase prices for Dec. 2003--Feb. 2004.
\2\ Includes Title I funded Food for Progress. Tonnages and values do not include the $21.9 million reserve.
\3\ McGovern Dole Food for Education and Child Nutrition Program.
\4\ CCC funded Food for Progress.

                      DESIGNATE BIOBASED PRODUCTS

    Question. What are your plans to designate biobased products for 
Federal agencies to purchase?
    Answer. Under the Federal Biobased Products Preferred Procurement 
Program, we currently are gathering test data on individual biobased 
products in a number of separate items (generic groupings of products). 
This data will be used to support the designation of one or more items 
for preferred procurement in a draft rule we expect to begin preparing 
soon. We will first publish a draft rule with a thirty day public 
comment period, to be followed by a final rule. Once a final rule is 
published designating this first group of items, we will begin a draft 
designation rule for a second grouping of items. The process of 
designating items by rule for preferred procurement will then continue 
as quickly as manufacturers can be identified and test data developed. 
We expect that the bulk of the items thus far identified by the CTC 
study will be designated by rule over the next 3 or 4 years. We also 
recognize that new items or generic groupings of biobased products will 
emerge in the market place from time to time, as the industry grows. As 
that occurs, we will gather the necessary information to designate 
those new items as well.
    Question. Can you provide me with a schedule of what products you 
are planning to designate and when?
    Answer. We expect to include one or more items-generic groupings of 
products-in the first regulation to designate items. Among the items on 
which we are currently gathering product and test data for individual 
products are:
  --hydraulic fluids for stationery equipment
  --hydraulic fluids for mobile equipment
  --formulated industrial cleaners
  --all other formulated cleaners
  --formulated solvents
    We expect to be able to include one or more of these items in our 
first draft rule to designate items for preferred procurement. We 
expect to publish a draft rule, with a 30 day public comment period 
this summer. We hope to have a final rule in place this fall.
    Question. Also, can you update me briefly on the labeling program? 
My understanding is that you have created a draft label. What else are 
you doing to move this component of Section 9002 of the farm bill 
forward?
    Answer. We do have a draft label in review in USDA's Office of the 
General Counsel. We currently are working through Federal contracting 
procedures to obtain a contractor to provide support in writing draft 
and final rules for the labeling program. We hope to have that draft 
rule cleared for publishing in the Federal Register by the end of the 
current calendar year. We expect to have a 30 or 60 day public comment 
period on the draft rule, and will follow as quickly as possible with a 
final rule before the middle of 2005.

                        RENEWABLE ENERGY SYSTEMS

    Question. What does the Department plan to do to vigorously promote 
and implement Section 9006 of the farm bill this spring and summer? The 
Department used a Notice of Funds Availability to implement section 
9006 of the farm bill in fiscal year 2003 and fiscal year 2004. I 
understand that the Department intends to issue a rule for the fiscal 
year 2005 program. Can the Department commit to issuing the final rule 
by January 2005, in order to give potential applicants sufficient time 
to review and apply for the program?
    Answer. The Under Secretary for Rural Development designated Rural 
Energy Coordinators from each USDA Rural Development State Office to 
coordinate outreach, implementation and delivery of the program. An 
Interagency Agreement between DOE's Office of Energy Efficiency and 
National Renewable Energy Laboratory (NREL) and USDA Rural Development 
has been executed. This agreement provides a vehicle for funding NREL 
activities to assist USDA in writing the technical requirements of the 
program, to develop tools to assist applicants and Rural Development 
State offices in addressing the technical requirements, and to assist 
in public outreach activities. Through this interagency agreement, a 
strong partnership has been established with the National Renewable 
Energy Laboratory (NREL) to establish a technical team of 
internationally recognized experts in the fields of solar, wind, 
biomass, geothermal, hydrogen, and energy efficiency technologies to 
provide training, technical review of applications and comments on the 
program. These experts are from the following Department of Energy 
(DOE) Laboratories: National Renewable Energy Laboratory, Sandia 
National Laboratory, and Oak Ridge National Laboratories. We have also 
developed a close partnership with EPA's AgStar Program.
    With the help of NREL, the State and Local Initiative Staff, we 
have developed the following resources: Outreach materials for Rural 
Development State Offices and technology interest groups to conduct 
outreach workshops, informational meetings and agricultural conferences 
were developed and a comprehensive one-stop web-site addressing the 
opportunities for renewable energy development provided by Section 
9006. The website consists of a series of web pages designed to 
increase program awareness and aid prospective applicants in 
determining basic eligibility requirements. This website will be 
continually updated as new information and opportunities and case 
studies come available. The website also provides useful guidance to 
farmers and ranchers on how to go about developing these projects by 
technology and scale.
    Most recently, a national training web-cast for our USDA Rural 
Development Rural Energy Coordinators for the fiscal year 2004 Program 
delivery was held. The training conference was broadcasts from the NREL 
headquarters in Golden, Colorado, on April 7, 2004. Training included 
presentations from DOE, EPA, NREL, the Sandia National Laboratories, 
Rural Utilities Service, and Rural Business-Cooperative Service.
    USDA Rural Development has drafted a proposed rule that is in 
clearance within the Department. We anticipate publishing the proposed 
rule in the Federal Register within the next few months. A 60-day 
public comment period is included in the proposed rule.
    We hope to publish this final rule early in calendar year 2005.

                            RENEWABLE ENERGY

    Question. Will the Department lower the minimum grant or loan size 
to allow more farmers and rural small businesses to participate in the 
section 9006 program, especially for energy efficiency projects? This 
is something that I, and others, would support. What else is the 
Department considering to encourage more applications for energy 
efficiency projects?
    Answer. In the fiscal year 2004 notice of funding availability, we 
have lowered the minimum grant request threshold from $10,000 to 
$2,500. We will consider similar changes to the minimum threshold in 
the rule.
     We are considering ways to streamline and reduce application 
requirements for energy efficiency improvements for smaller project 
requests. We are developing guidance to assist smaller project 
applicants in preparation of applications.
    Question. Will the Department streamline the application 
requirements, especially for small farmers? Section 9006 funds should 
go only to deserving applicants, but I strongly encourage you to open 
up the program to a broader audience. One way of doing this would be to 
ensure that the detail necessary for the feasibility study commensurate 
with the size of the project. In other words, a smaller project ought 
not to have to provide the same level of information and analysis as a 
larger one.
    Answer. The Department is proposing ways to streamline application 
requirements in the proposed rule.
    Question. Will the Department allow in-kind contributions to count 
towards the funds leveraging requirement? If not, why not? This seems 
like a potential change that could help spur additional participation 
in the program and put it within the reach of many smaller producers, 
who are clearly among the intended beneficiaries of the program.
    Answer. The Department will address this issue in the proposed 
rule.
    Question. What is the Department planning to do to coordinate the 
section 9006 program with state energy offices and the U.S. Department 
of Energy?
    Answer. USDA has entered into an Interagency Agreement with DOE and 
the National Renewable Energy Laboratory (NREL). This agreement 
provides a vehicle for funding NREL activities to assist USDA in 
writing the technical requirements of the program, to develop tools to 
assist applicants and Rural Development State offices in addressing the 
technical requirements, and to assist in public outreach activities. 
Through this interagency agreement, a strong partnership has been 
established with the National Renewable Energy Laboratory (NREL) to 
establish a technical team of internationally recognized experts in the 
fields of solar, wind, biomass, geothermal, hydrogen, and energy 
efficiency technologies to provide training, technical review of 
applications and comments on the program. These experts are from the 
following Department of Energy (DOE) Laboratories: National Renewable 
Energy Laboratory, Sandia National Laboratory, and Oak Ridge National 
Laboratories. We have also developed a close partnership with EPA's 
AgStar Program.
    With the help of NREL, the State and Local Initiative Staff, we 
have developed the following resources: Outreach materials for Rural 
Development State Offices and technology interest groups to conduct 
outreach workshops, informational meetings and agricultural conferences 
were developed and a comprehensive one-stop web-site addressing the 
opportunities for renewable energy development provided by Section 
9006. The website consists of a series of web pages designed to 
increase program awareness and aid prospective applicants in 
determining basic eligibility requirements. This website will be 
continually updated as new information and opportunities and case 
studies come available. The website also provides useful guidance to 
farmers and ranchers on how to go about developing these projects by 
technology and scale.
    Most recently, a national training web-cast was held for our USDA 
Rural Development Rural Energy Coordinators for the fiscal year 2004 
Program delivery. The training conference was broadcast from the NREL 
headquarters in Golden, Colorado, on April 7, 2004. Training included 
presentations from DOE, EPA, NREL, the Sandia National Laboratories, 
Rural Utilities Service, and Rural Business-Cooperative Service.
    Our Rural Development State Offices are working with the State 
Energy Offices and others in conducting outreach activities, workshops, 
using materials we have discussed previously. The DOE, through NREL, 
has assisted in developing the regulation and conducting technical 
reviews of applications and in preparing outreach materials. Also, 
these materials have been used by DOE to conduct workshops such as 
those conducted by the wind working groups.

                   NATIONAL CENTER FOR ANIMAL HEALTH

    Question. I am concerned about possible shrinkage in the 
capabilities of the National Center for Animal Health that might be 
necessary to avoid exceeding OMB's present budget limit of $459 million 
on which the $178 million in the Administration request is premised. 
What reductions in the capabilities of the facility have either been 
decided on or are likely, and what are the costs of restoring those 
capabilities over the past year and the past 2 years?
    Answer. There is no shrinkage in the capabilities of the Centers 
for Animal Health. The primary difference between the initial plan and 
the current plan is how animal and laboratory support space will be 
acquired--either by renovating existing space or constructing new 
space. By consolidating ARS and APHIS functions into a single complex 
the USDA will achieve efficiencies in both staffing and space needs 
over the existing campus. New animal and laboratory space is configured 
to accommodate both agencies and be shared by a number of programs to 
improve usage efficiencies. The $461 million program provides for the 
needs of the 280 NADC program staff and the 286 APHIS program staff 
located in Ames.
    The Department will meet the animal health program needs within the 
$461 million estimated for this project. Because construction costs for 
the Ag large animal facility and the initial laboratory segment were 
higher than originally estimated in 1999 during the preliminary program 
efforts, the size of the new low containment large animal facility has 
been reduced; however, these programs will be accommodated within 
existing low containment facilities. A number of the existing field 
barns and miscellaneous support structures (feed storage, hay storage, 
vehicle maintenance) will also remain in operation.

       SOUND SCIENTIFIC INFORMATION FOR REGULATORY DECISIONMAKING

    Question. There has recently been much discussion about ``sound 
science.'' I am concerned that proposed changes to the review process 
of scientific information used by agencies, including the USDA, would 
create the perception that the acceptance of scientific findings are 
subject to review by political and special interests. I am also 
concerned that the proposed review process would also unnecessarily 
slow down the implementation of regulations to protect human health.
    Of particular concern are changes that would (1) move the 
coordination of scientific review out of the agencies and into the 
Office of Management and Budget, where the administration would have 
greater political influence, and (2) specifically restrict the 
participation of scientists receiving funding from agencies such as the 
USDA in the review of scientific findings, but not similarly restrict 
participation of scientists receiving funding from regulated 
industries.
    Can you please explain what steps you have taken to make certain 
politics and special interests will not affect the quality of 
scientific information used to make important regulatory decisions?
    Answer. Following recommendations from a Report by the National 
Research Council entitled ``Improving Research Through Peer Review,'' 
and language in The Agricultural Research Extension, and Education 
Reform Act of 1998, USDA/ARS overhauled its prospective peer review 
process. The Office of Scientific Quality Review (OSQR), which was 
established in 1999, coordinates independent external peer panel 
reviews of each of the research projects that make up the Agency's 22 
National Programs at the beginning of their 5-year cycle. This 
prospective review of the proposed project plans has contributed to a 
strengthening of the ARS research program.
    We are currently developing new procedures for a retrospective 
evaluation of each of ARS' 22 National Programs at the end their 5-year 
program cycle. While we are piloting several different approaches to 
achieve this objective, all of our pilots involve an independent 
external peer panel made up of scientists, customers, stakeholders, and 
partners who will determine if the research is relevant, of high 
quality, and that it produced research products that benefited American 
agriculture. Additionally, results of ARS' research are peer reviewed 
when they are submitted to scientific journals for publication.
    The information provided to regulatory agencies to serve as the 
basis for regulation is also submitted to scientific journals in the 
form of scientific manuscripts. The editorial boards of the journals 
subject these manuscripts to peer review, which usually occurs 
anonymously. Researchers do not get their papers published unless the 
papers pass the scientific scrutiny of the peer review process.
    The Cooperative State Research, Education, and Extension Service 
(CSREES) funds research relevant to the mission of USDA at 
universities, Federal laboratories, private research institutions, and 
other organizations. All research projects, including those funded by 
base programs, undergo scientific peer review prior to initiation, as 
required by law. Proposals are reviewed by peer panels that are 
composed of expert scientists from universities, industry, government 
and stakeholders as appropriate. Conflict of interest criteria are 
applied to ensure that proposals from an institution are not reviewed 
by a panel member from that institution and that there are no real or 
perceived financial conflicts. The review criteria include scientific 
merit and relevance to U.S. agriculture. Research results are peer 
reviewed again when published in the scientific literature, as 
described above. This peer review process ensures that the highest 
quality scientific information is continually supplied to those who 
would make regulatory decisions. However, CSREES does not control or 
limit in any way publications or other communication of research 
results from projects it funds. Finally, the relevance, quality, and 
performance of research portfolios will be subjected to rigorous 
assessment by experts on a 5-year basis.
    Every regulation published by USDA must comply with applicable 
Executive Orders, the Administrative Procedures Act, and other 
applicable statutes. The procedures in place establish an open and 
transparent process that requires regulatory agencies to clearly and 
concisely outline the basis for regulatory decisions, including the 
scientific information used to make those decisions. USDA follows 
procedures common to all Federal regulatory agencies to ensure all 
interested parties as well as the general public have an opportunity to 
participate in the rulemaking process and comment on regulatory 
decisions made by the agency.
                                 ______
                                 

             Questions Submitted by Senator Byron L. Dorgan

                           EMPOWERMENT ZONES

    Question. For the third year in a row, the Administration proposes 
no funding to follow through on the commitment that USDA made to rural 
empowerment zones even though this Subcommittee has thankfully rejected 
this recommendation for 2 years in a row. I have one of those zones in 
my state, the Griggs-Steele Empowerment Zone, focused on out 
migration--a very serious problem in North Dakota.
    Why has the Administration continued to oppose this funding even 
after Congress restored it in the fiscal year 2003 and fiscal year 2004 
bills?
     Answer. The Administration has provided substantial earmarks and 
technical assistance in support of the EZ/EC communities in the past. A 
larger amount of resources can be made available by utilizing the 
Budget Authority for loans rather than funding specialized grants.
    Question. Can you please give me a substantive reason why this 
funding has been eliminated again this year?
     Answer. The President's fiscal year 2005 budget proposes $103.8 
million of earmarked loan and grant funds for the EZ/EC communities. 
Considering the tight nature of the fiscal year 2005 overall budget, 
this amount of funding, plus technical assistance, is a substantial 
investment on the part of the Federal Government in rural communities.

              OBESITY PREVENTION INITIAIVE GRAND FORKS ARS

    Question. I see that this year, you have announced Food-Based 
Obesity Prevention as a top departmental priority. It is my 
understanding that you also included an additional $5 million in ARS to 
implement this priority.
    Can you tell me where that ARS research will be conducted?
    Answer. The new funds will be used to support research on obesity 
prevention at the following proposed locations: Baton Rouge, LA; 
Beltsville, MD; Boston, MA; Davis, CA; and Houston, TX.
    Question. I would have expected that some of that research would 
happen at the Grand Forks Human Nutrition Center, which is one of our 
nation's most outstanding human nutrition research facilities. But when 
I look at the budget for the Grand Forks ARS, I only see a reduction of 
$515,317 which is the funding I've been able to add for the last 
several years through this Subcommittee for the Center's Healthy Food 
Initiative.
    Why isn't ARS better utilizing this facility, particularly given 
your emphasis on human nutrition and obesity?
    Answer. The Grand Forks Human Nutrition Research Center has 
developed a much deserved reputation as an outstanding Center for the 
study of trace elements, which is the mission of the Center. That work 
will continue to be supported. ARS is developing its strategic plan to 
attack the problem of obesity using a focus on foods. The Grand Forks 
Human Nutrition Research Center has been part of that process, and ARS 
will develop a role for its research capacity to address obesity 
issues.
    Question. I am concerned about reports that the Grand Forks ARS has 
lost 40 percent of its staff since 1985 and flat budgets will probably 
force 8-10 layoffs a year.
    Why hasn't ARS been supporting this top notch facility?
    Answer. Funding at the Grand Forks Human Nutrition Research Center 
has increased since 1985. The impact on the center is similar to the 
impacts on all of the other human nutrition research centers, as well 
as on all ARS units. The funding for the center, or any unit in ARS, 
can be used as best determined by the Center Director, who can use 
discretion in deciding to expand a program, purchase new equipment, 
develop new facilities, or change the number of personnel. At each of 
the human nutrition research centers, there has been significant 
leveraging of resources with funding from industry and other Federal 
agencies, and this has resulted in much stronger research programs.
    In recent years there have been a number of outstanding scientists 
hired at the center and, with the existing budget, ARS has been able to 
maintain the high visibility and impact of the research that is 
conducted at the center. There has not been a reduction in force in ARS 
since 1985, and any reductions in the number of personnel that have 
occurred throughout the agency are based on decisions to not fill 
positions in favor of using the money for new programs, new equipment, 
etc.

                        BSE SURVEILLANCE PROGRAM

    Question. Madam Secretary, I noted in your testimony that USDA is 
requesting $60 million, an increase of $47 million, which will permit 
it to further accelerate the implementation of a verifiable National 
Animal ID system, increase BSE surveillance, conduct technology of BSE 
testing technologies and strengthen the monitoring and surveillance of 
advanced meat recovery. I wanted to bring to your attention some 
technology that has been developed at North Dakota State University 
that I understand APHIS may be interested in pursuing.
    NDSU and its private sector partners have the unique capability to 
participate in this, and I'm curious what to know about the technology 
that USDA plans on using?
    Answer. USDA is interested in technologies that may meet the needs 
of the BSE surveillance program and the implementation of a national 
animal identification system.
    On January 9, 2004, USDA announced that the Center for Veterinary 
Biologics would begin accepting license applications for BSE tests. The 
decision to formally accept license applications for BSE test kits and 
rapid tests has better positioned USDA to quickly implement 
modifications to our current BSE surveillance program.
    Several test kits have been issued licenses or permits by APHIS, 
and more may be approved in the future. Distribution and use of BSE 
test kits in the United States shall be under the supervision or 
control of the USDA's Animal and Plant Health Inspection Service. 
Distribution in each state shall be limited to authorized recipients 
designated by proper state officials, under such additional conditions 
as the APHIS administrator may require. Regarding the national animal 
identification system, USDA's goal is to create an effective, uniform, 
consistent, and efficient system by:
  --Allowing producers, to the extent possible, the flexibility to use 
        current systems or adopt new ones, but not burden them with 
        multiple identification numbers, systems, or requirements;
  --Building on the data standards developed in the United States 
        Animal Identification Plan; and
  --Remaining technology neutral in order to utilize all existing forms 
        of effective technologies and new forms of technology that may 
        be developed.
    The specific technologies used to link a unique animal number to an 
animal, record the movement in commerce, and report the movement to a 
national database will be determined by industry. We welcome North 
Dakota State University's participation in this developing program.

                           BROADBAND FUNDING

    Question. It has been almost 2 years since the new broadband title 
to the Rural Electrification Act (REA) was enacted. More than $2 
billion in loan authority has been provided under this new program and 
the Senate reinforced its bipartisan support for this initiative in a 
series of amendments to the Agriculture Appropriations bill. 
Unfortunately, less than $200 million in loans have been allocated so 
far while more than a $1 billion in demand has been made known to the 
agency.
    Specifically, I would like to know: how many broadband loan 
applications are pending; how many loans have been approved; how many 
loan applications have been rejected; what states have projects 
pending, rejected or approved; how long loan processing takes; how many 
staff are allocated to the broadband program and how many staff are 
allocated to the Telecommunications and Distance Learning and 
Telemedicine programs; and how many rural broadband connections you 
expect to make under the new program?
    Answer. There are 40 loan applications pending totaling $438.8 
million; 14 loans have been approved totaling $201.8 million; 20 loan 
applications totaling $300.3 million have been returned as ineligible 
and 17 loan applications totaling $195.3 million have been returned as 
incomplete. It takes RUS approximately 60 days to process a loan 
application provided the application is reasonably complete when it is 
submitted. Initially, a team of 14 headquarters individuals have been 
assigned to the broadband program. Under a recently approved 
reorganization plan, approximately 25 individuals will be assigned to 
it, pending filling vacancies which currently exist. The number of 
headquarters employees assigned to the Telecommunications and DLT 
program is approximately 40. Over 1 million potential connections to 
broadband service have been made possible with the approval of the 
first 14 loans. Future connections will vary depending on loan size, 
service territory, and project costs. Our goal is the full utilization 
of the funding available to hook up as many rural customers as 
possible.

                        RURAL TELECOMMUNICATIONS

    Question. I am also profoundly concerned about reports that suggest 
that the agency avoid rather than manage risk. The risk I hope you 
avoid is the risk of leaving rural Americans behind in the digital 
economy. In creating and funding a new broadband title to the REA, 
Congress sought to re-ignite the ``can-do'' spirit of the early days of 
rural electrification and the rural telephone program. Historically, 
the agency worked with applicants in a cooperative, not adversarial way 
to find solutions.
    Can I get assurances from you that you see our mission as using the 
tools of this new loan program to spur rapid and meaningful deployment 
of broadband services?
     Answer. Yes. In concert with the President's recently announced 
goal of universal broadband by 2007, USDA's Rural Development is ready 
to meet this goal in rural America. The ``meaningful deployment of 
broadband services'' can only be met by making quality loans. As stated 
before, universal broadband deployment has been recognized as a 
national policy goal. In light of this, we still face challenging 
domestic spending decisions. In order to balance fiduciary 
responsibility with mission delivery, USDA is focusing on ``quality 
loans'' that produce exponential benefits through reduced subsidy rates 
and greater lending levels and that strengthen not only rural 
economies, but our national economy and its role in the global economic 
system. A failed business plan translates not only into loss of 
taxpayer investment, but deprives millions of citizens living in rural 
communities of the technology needed to attract new businesses, create 
jobs, and deliver quality education and health care services. I can 
assure you that every effort is being made to expedite the deployment 
of broadband service to rural America in a ``meaningful'' way.

                NORTHERN GREAT PLAINS REGIONAL AUTHORITY

    Question. Can you tell me how the Department is proceeding with the 
establishment of the Northern Great Plains Regional Authority and which 
agency within USDA will be charged with administering the Authority? 
Also, when can we expect the fiscal year 2004 funding to be released? 
The legislation also calls for the appointment of a Federal and a 
tribal co-chair. Can you tell me what the process will be to make these 
appointments and what the status of this process is?
    Answer. Rural Development has been tasked with providing the report 
requested in the fiscal year 2004 Appropriations Act and working with 
the Governors of the five states to establish the Northern Great Plains 
Regional Authority. A taskforce of State Directors has been established 
to develop the report and coordinate the numerous activities required 
to establish the Authority.
    Funds will be available once the Authority is fully established. 
The Authority cannot be established until the Federal and Tribal co-
chairs have been named and confirmed.
    The statute requires those appointments to be made by the President 
and confirmed by the Senate. It is our understanding that the White 
House will follow the normal procedure for filling such positions.

                     STANDARD REINSURANCE AGREEMENT

    Question. When can we expect a new SRA?
    Answer. RMA anticipates establishing an agreement for the 2005 
reinsurance year by the July 1, 2004 deadline.
    Question. Why did RMA eliminate the developmental fund within the 
crop insurance program?
    Answer. The first draft of the SRA was designed to raise many ideas 
and concepts to address long-standing program delivery issues. RMA has 
listened carefully to all the responses from insurance providers, 
interested parties via submitted written comments, and discussions with 
trade associations. RMA believes the second draft addresses most of the 
concerns raised in the first round of negotiations. There were strong 
concerns about the suggested elimination of the developmental fund. 
Therefore, in the second draft RMA restored the developmental fund and 
reverted back to seven reinsurance funds.

                         UNDERWRITING GAINS TAX

    Question. Why did RMA propose a 25 percent tax of underwriting 
gains for the reinsurance companies involved in crop insurance?
    Answer. The proposed SRA encourages companies to provide broader 
service to farmers by RMA assuming a larger share of the non-profitable 
business in high-risk areas. It also allows greater flexibility for 
companies to share risk with FCIC in the pilot phase of new products, 
encouraging companies to make new products available to producers.
    The 25 percent global quota share arrangement permitted RMA to take 
a greater share of the losses as well as gains to stabilize the program 
and secure a better balance of risk sharing between the government and 
the companies. This provision was intended to add capital support and 
stability to the program to supplement private sector reinsurance that 
often is less available for drought stricken, and therefore less 
profitable areas of the country. The second draft retains this 
provision but at a much reduced, 5 percent level.

                       MULTI-PERIL CROP INSURANCE

    Question. RMA is proposing to penalize companies who deliver Multi-
Peril Crop Insurance above the cost of Federal reimbursement of 
Administration and Operations. This proposal would have a 
disproportionate affect on smaller companies and may force them out of 
the program. Why would RMA want fewer companies in the crop insurance 
program? What evidence do you have that the current rate of A&O 
reimbursement is adequate?
    Answer. RMA does not want to have fewer companies in the program, 
but is also concerned about companies over spending and harming the 
livelihood of the customers, agents and loss adjusters. In the second 
draft, we have removed the penalty for companies that exceed their A&O 
reimbursement allowance, but will continue to exert careful and active 
oversight over company financial condition and operational 
effectiveness. RMA will take appropriate regulatory action to safeguard 
farmers and the delivery system against another company failure due to 
financial excesses. The failure of American Growers cost taxpayers 
approximately $40 million to date above and beyond indemnities paid for 
farmer losses. The proposed SRA establishes additional reporting to RMA 
of critical business information needed to anticipate company financial 
weaknesses such as those that caused the failure of American Growers.
    Expense reimbursement payments have grown over time in total and on 
a per policy basis. For example, the number of policies serviced by 
companies in 1998 and 2003 remained at 1.2 million, but RMA paid the 
companies a total of $444 million in expense reimbursement in 1998 and 
$734 million in 2003. On a per policy basis, expense reimbursements 
increased from $358 per policy in 1998 to $592 per policy in 2003. This 
is a 65 percent increase over 5 years--an average compound increase of 
over 10 percent per year. For 2004, it is estimated that premium income 
will be substantially higher reflecting generally higher commodity 
prices and that the related total and per policy expense reimbursement 
will rise dramatically without a significant increase in the cost of 
selling or servicing the policies.

                     STANDARD REINSURANCE AGREEMENT

    Question. Does RMA intend on providing the industry with a complete 
proposal, including all necessary supporting manuals to review when the 
second draft is released?
    Answer. On Tuesday, March 30, RMA announced the release of the 
second SRA proposal along with subsequent appendices (Appendix I: 
Program Integrity Statement, Appendix II: Plan of Operations, and 
Appendix IV: Quality Standards and Control). This additional 
information will allow the companies to evaluate the agreement in a 
more comprehensive way. A document detailing the required data 
processing formats and instruction, Appendix 3 (formerly Manual 13), 
will be published at the end of the process to reflect the new 
agreement.
    Question. Will the SRA contain terms to make it financially viable 
for companies to operate in every state?
    Answer. RMA has proposed changes allowing for future growth of the 
delivery system, such as permitting greater flexibility for companies 
to shift more risks to RMA on policies that are in high-risk areas as 
well as the risk of new products in their pilot phase. Traditionally, 
the Federal Government takes on the bulk of non-profitable business in 
all areas and allows insurance companies to retain more of the 
profitable business. In addition, the SRA proposes raising state 
session limits in many states allowing for the viability of more 
service in those areas.
    Question. What happens if RMA doesn't have the SRA wrapped up by 
May 1?
    Answer. RMA fully anticipates having a signed agreement by the July 
1, 2004 deadline. As with prior negotiations, if the new agreement is 
not signed by that time, RMA will continue to provide the necessary 
reinsurance support until the new agreement is signed. Once the new 
agreement is signed, all policies issued for the 2005 reinsurance year 
will be covered by the new agreement.
    Question. Do you believe RMA will pursue the establishment of a 
guarantee fund in the second draft of the SRA?
    Answer. Yes, in the second draft, the purpose of the guarantee fund 
was clarified and the fund was also renamed the Contingency Fund. 
During the company discussions and with others, it became clear that 
many misunderstood the purpose of the fund and even questioned the 
authority to have such a fund.
    The purpose of the fund is simply to use existing penalty and fee 
provisions, due to company performance issues, to help pay for any 
future company failures, such as the American Grower situation. The 
estimated funds that would be put in this fund on an annual basis is 
between $1-2 million. The Office of General Counsel firmly believes RMA 
has the authority to make what is essentially a bookkeeping change for 
this purpose. It should also be noted that this fund cannot be used by 
the RMA as a resource to fund agency expenses.
    Question. It is my understanding there were numerous provisions in 
the first SRA proposal in which RMA was exerting more regulatory 
authority. I believe RMA currently has very extensive regulatory 
authority and I would urge the agency to use such authority in a 
responsible manner. Additionally, I am concerned the crop insurance 
program is currently a very complex highly regulated program. Has the 
agency done any analysis regarding the costs these regulations place on 
the delivery system and the savings, which could be generated by 
removing some of these burdensome procedures?
    Answer. Although RMA has not performed a formal analysis regarding 
regulatory costs, RMA is striving to put into place regulatory 
provisions that do not put an undue burden on the agency or the 
companies. In addition, RMA has revised its Appendix IV (Quality 
Control and Standards) to incorporate more efficient processes for 
oversight activities, and to better utilize the existing resources of 
the companies in such efforts. However, it is imperative that RMA apply 
its learning gained from the demise of American Growers. RMA will 
continue to work closely with the companies to responsibly fulfill its 
vital role as a steward of the program.
    In the proposed SRA, RMA is fairly and equitably exercising its 
given authority and responsibility to oversee the financial and 
operational safety, soundness and effectiveness of the Federal crop 
insurance program to ensure program integrity and a reliable, effective 
delivery system. This is good for farmers, companies, agents and all 
others concerned and will not impose ``massive'' new burdens or costs.
    The proposed SRA establishes additional reporting to RMA of 
critical business information needed to anticipate company financial 
weaknesses such as those that caused the failure of American Growers. 
The companies are already preparing much of the requested information 
for other purposes. This information includes financial statements, 
statement of earnings and cash flow, commission and other expense 
details, reinsurance agreements and management evaluations of major 
financial and operating risks facing a company. Any well-run, fiscally 
responsible company will already be developing and using this kind of 
information and should be willing to provide it to its regulator.
    In farmer listening sessions throughout the country, RMA has 
received an overwhelming number of requests to ensure that agents and 
loss adjusters are knowledgeable and well trained. The proposed SRA 
requires insurance companies to verify that agents and loss adjusters 
are trained in accordance with RMA standards and are delivering the 
best and most complete and accurate information possible to farmers. 
The proposed SRA also strengthens the companies' focus on training 
agents and loss adjusters to better serve limited resource, minority 
and women farmers.
    Any concern over the cost associated with agent and loss adjuster 
oversight and training fails to recognize the benefits and efficiencies 
of well-trained agents and loss adjusters. Farmers benefit from making 
informed sound risk management decisions, while agents, loss adjusters 
and insurance companies benefit from increased customer satisfaction 
and customer retention, and reduced exposure to fraud, waste and abuse, 
and litigation risks and costs.
    The proposed SRA provides for disclosure of information to allow 
RMA to assess the financial strength and performance of insurers and 
their service providers. RMA is asking that companies disclose more 
leading indicators of their insurer and service provider operational 
and financial soundness and risks. Many of these disclosures were 
requested informally last year in the wake of the failure of American 
Growers. Current insurance companies serving farmers should have this 
information and be willing to share it with their regulators. Companies 
conducting good business practices and assessing their risks should 
incur no additional cost. Companies that are not already using this 
information should begin to develop it to ensure their soundness and 
safety.

                           AGRICULTURAL TRADE

    Question. The United States Trade Representative (USTR) has 
recently completed free trade agreements with Central America (CAFTA) 
and Australia, with the benefits to American agriculture being 
miniscule.
    Can you identify any specific benefits to American agriculture that 
these and future free trade agreements provide?
    Answer. On March 22, 39 leading agriculture-related associations, 
federations, councils, and institutes representing a broad spectrum of 
American agriculture, sent a letter to President Bush expressing their 
support for the CAFTA and Dominican Republic agreements. The signators 
of the letter expressed the view that the agreements would lead to 
``significant'' increases in exports of a wide range of agricultural 
products.
    American agriculture will benefit from the Australia FTA because 
Australia will immediately eliminate all agricultural tariffs. In 
particular this will benefit U.S. exports of: processed foods; oilseeds 
and oilseed products; fresh and processed fruits and fruit juices; 
vegetables and nuts; and distilled spirits. Also the FTA establishes an 
SPS Committee that will enhance our efforts to resolve SPS barriers to 
agricultural trade, in particular for pork, citrus, apples and stone 
fruit.
    Under the Caribbean Basin Initiative and the Andean Trade 
Preferences Act, agricultural imports from nearly all of our FTA 
partners already receive duty free treatment from the United States. By 
negotiating Free Trade Agreements with these countries we will level 
the playing field, affording our exporters similar duty free access to 
those markets for their products.
    Question. The USTR has recently announced intentions to negotiate 
free trade agreements with Colombia and Thailand.
    Will sugar be included in the negotiations and do you support the 
inclusion of sugar in regional and bilateral free trade agreements?
    Answer. To maximize the benefits for U.S. agriculture from these 
negotiations, we seek increased market access for all of our export 
commodities, including those that our negotiating partners want to 
protect. We can only pursue this strategy effectively if we are willing 
to negotiate increased foreign access to our own sensitive markets. We 
will continue to take steps to ensure that the interests of U.S. sugar 
producers are taken into account. For example, in the CAFTA, we 
insisted that the out-of-quota duty for sugar not be eliminated or even 
reduced. This provision for sugar was unique, but it was deemed 
necessary to defend our domestic sugar program.

                           ASIAN SOYBEAN RUST

    Question. I am very concerned about the risk of importing Asian 
soybean rust into the United States. The movement into the United 
States could devastate our soybean crop and impose a heavy economic 
burden on American farmers and consumers. We cannot afford to take 
unreasonable risks given the adverse impact soybean rust would have on 
soybean production and growers in the United States. If a temporary ban 
on the importation of beans from infected nations is the only answer 
that government can come up with in the short term, I believe that it 
is better than jeopardizing our entire soybean industry.
    Will you halt soy imports until the Department can find a sway to 
ensure that this devastating fungus doesn't infiltrate our domestic 
soybean crops as a result of lax import standards?
    Answer. We do not plan to halt soy imports. APHIS officials are 
looking closely at our country's importation of soybean seed, meal, and 
grain. Our analysis to date has shown that clean soybean seed and 
soybean meal--which is a heat-treated, processed product--pose a 
minimal, if any, risk of introducing this disease. Historically, there 
has never been a documented instance of soybean rust spread through 
trade. Rather, it is spread naturally through airborne spore dispersal. 
We are currently conducting a risk assessment to study the viability of 
the pathogen and verify that it does not survive in commercial grade 
soybean products. The preliminary results of the assessment indicate a 
very low risk, if any, of introducing this disease through imports.

                       INTEREST ASSISTANCE LOANS

    Question. Money for interest assistance loans to farmers has been 
used up for 2004. Many producers depend on interest assistance to 
obtain the financing necessary to plant their crops. It is my 
understanding that interest assistance was cut by 35 percent from 2003 
to 2004.
    What steps are being taken by USDA to meet the demands of the 
program? Will USDA provide alternative funding for the program in 2004?
    Answer. The fiscal year 2004 allocation of guaranteed operating 
with interest assistance loan funds was $271.2 million. As of March 31, 
2004 guaranteed operating with interest assistance loan obligations 
totaled $244 million. In accordance with statutory requirements, 
remaining funds are targeted for exclusive use by socially 
disadvantaged farmers.
    The direct operating loan program is one alternative that could 
provide aid to family farmers unable to obtain guaranteed OL with 
interest assistance loan funds. This program, with its availability of 
a lower interest rate for terms of up to 7 years, provides family 
farmers a means of financing their business operations at rates and 
terms comparable to the guaranteed OL with interest assistance loan 
program. As one would expect, demand for this program is also high. 
However, with historically low interest rates available through 
commercial lenders, many family farmers are able to utilize the 
guaranteed operating unsubsidized loan program. Use of funds in this 
program has increased by eleven percent compared to a year ago at this 
time, but there are still sufficient funds available to meet additional 
demand.
    Because the subsidy rate for the interest assistance program is 
significantly higher than for other farm loan programs, it is not cost 
beneficial to transfer funds for interest assistance loans.

                       COUNTRY OF ORIGIN LABELING

    Question. Madam Secretary, when the Omnibus Appropriation bill 
became law, it delayed the implementation date of Country of Origin 
Labeling from September of this year until September of 2006, except 
for certain fish. The Omnibus bill did not, however, change the date at 
which the actual regulations governing COOL need to be concluded, which 
is also September of 2004. The Department has nearly 2 years to work on 
the COOL regulation, so I am hopeful that USDA will, in fact, have 
those regulations completed. As you know there are many of us in 
Congress, in fact a bipartisan majority in the Senate, who want the 
COOL regulations completed and the date changed back. In fact, the date 
may be changed back to September of 2004, and I want to ensure that the 
Department is ready in that event, as the law currently requires. I 
read with interest some comments that the President made in Ohio 
recently. The President said, and I quote: ``I want the world to `buy 
America.' The best products on any shelf anywhere in the world say, 
`Made in the USA.' '' His comments were followed by applause. I think 
the President is right.
    If he says that, why does the Bush Administration oppose the COOL 
law that would ensure that consumers have the opportunity to buy 
American?
    Answer. In general, the Administration believes that providing more 
information for consumers on which to base their purchasing decisions 
is better than less information. However, if the costs of providing the 
additional information exceed the benefits, then there is no economic 
rationale for providing it. We are reviewing the comments received on 
the proposed regulations and will finalize the regulations to implement 
COOL as mandated by the 2002 Farm Bill and the Omnibus Bill.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    Question. Do you still intend to open the U.S. border to live 
Canadian cattle, especially in light of the discovery that two Canadian 
feed mills were the cause of the outbreak of mad cow disease?
    Answer. Today, the Animal and Plant Health Inspection Service 
(APHIS) closed the comment period on a proposed rule that would amend 
the regulations regarding the importation of animals and animal 
products to recognize, and add Canada to, a category of regions that 
present a minimal risk of introducing BSE into the United States via 
live ruminants and ruminant by-products. USDA will take into account 
the comments received on the proposed rule as we review this matter.

                RESIGNATION OF ADMINISTRATOR BOBBY ACORD

    Question. On March 23, Bobby Acord, head of USDA's Animal and Plan 
Health Inspection Service (APHIS), resigned effectively immediately.
    Was his resignation the result of a disagreement over policy?
    Answer. Bobby Acord resigned after almost 38 years of Federal 
service due to a number of factors, including illness in his family and 
his desire to spend more time in the places and with the people that he 
cares about most. In a letter to all APHIS employees dated March 24, 
2004, Mr. Acord stated, ``Those of you who know me well know that if 
nothing else, I am a decisive person. And this weekend, I decided it is 
simply time for me to pass the torch.''
    During Mr. Acord's tenure as APHIS Administrator, he led the Agency 
through the aftermath of the September 11, 2001, terrorist attacks, an 
outbreak of exotic Newcastle disease and its eradication, and the 
country's first detection of bovine spongiform encephalopathy. While 
Mr. Acord was administrator, the employees of APHIS were also named 
``2003 People of the Year'' by Progressive Farmer magazine.
    Mr. Acord is succeeded by Dr. Ron DeHaven, who joined APHIS in 1979 
and most recently served as the deputy administrator of APHIS for 
Veterinary Services.

                               BSE POLICY

    Question. We understand that there are a wide range of policy 
proposals to address various BSE issues.
    What are you doing to ensure that our decisions are science based 
and don't rest upon short-term political or public relations benefits?
    Answer. In addition to employing scientific and technical experts 
with working knowledge of transmissible spongiform encephalopathies, 
USDA has consulted with international experts through the Secretary's 
Foreign Animal and Poultry Disease Advisory Committee and with 
scientists at the Harvard Center for Risk Analysis to review the BSE 
surveillance plan and response. USDA bases its policy decisions on 
sound science and the advice we receive from such experts.
    Question. Japanese officials say that despite USDA officials' 
statements to the contrary, ``Ag Department officials from the United 
States have not been in recent contact with their Japanese 
counterparts. We're confused as to why some USDA officials have been 
saying otherwise.''
    Is the Japanese claim true and what is the status of the 
negotiations regarding the reopening of the Japanese market to U.S. 
beef imports?
    Answer. The Department has been and remains in close contact with 
Japanese government officials. Immediately following USDA's 
announcement of the BSE case, senior USDA officials and Japanese 
officials held talks in Tokyo, Japan, on December 29 and January 23. A 
Japanese technical team visited USDA in Washington, D.C., and the BSE-
incident command center in Yakima, Washington, during January 9-15. On 
March 23, the Agricultural Affairs Office, American Embassy in Tokyo, 
reported meetings with the Japanese Ministry of Health and Welfare 
(MHLW), Ministry of Agriculture, Fish and Food (MAFF), and the Food 
Safety Commission (FSC).
    There is still a significant difference in our official positions 
regarding BSE testing and specified risk material removal. On March 29, 
I sent a letter to Japanese Agriculture Minister Kamei proposing to 
have a technical panel made up of experts from the World Animal Health 
organization meet before April 26 to discuss a definition of BSE and 
related testing methodologies as well as a common definition of 
specified risk materials. On April 2, Japan rejected the proposal 
reasoning that the United States first needed to reach a bilateral 
scientific understanding on BSE. USDA is planning another high-level 
visit to Japan to continue talks in late April. The United States 
exported over $1.3 billion in beef to Japan in 2003, representing over 
50 percent of Japan's total beef imports. The import ban has severely 
impacted Japan's market supplies and beef prices. Given Japan's need 
for beef imports and the importance of beef exports to Japan for the 
U.S. beef and cattle industry, we are hopeful that a solution can be 
found.

                     DURUM AND SPRING WHEAT YIELDS

    Question. Recently, the Risk Management Agency mandated that durum 
yields be split out from spring wheat yields. The method which RMA is 
proposing to do this is causing durum growers to have disproportionate 
yield reductions in their actual production histories. It is also 
causing farmers to take an inordinate amount of time to retrace these 
yields. One solution to this problem is to allow producers to replicate 
yields.
    What are USDA's plans to resolve this problem and will USDA allow 
farmers to replicate yields?
    Answer. The U.S. Durum Wheat Growers Association (USDGA) requested 
Risk Management Agency (RMA) recognize spring and durum wheat as 
separate crop types due to quality and price differences, thus allowing 
each to be insured as a separate unit beginning with the 2004 crop 
year. This was done via publication in the Federal Register at 7CFR  
457.101 June 9, 2003.
    Insured areas most affected are all North Dakota counties, 18 
counties in Northern South Dakota, and 18 counties in Northeastern 
Montana. Some insured's will have increased spring wheat yields and 
some insured's will have increased durum wheat yields. The impact will 
vary depending upon individual yield history.
    On average 25-30 percent of all wheat in North Dakota is durum 
wheat. RMA's experience for 1999-2003 shows durum loss ratios in North 
Dakota under the APH yield based coverage are higher than that of 
spring wheat, 2.69 verses 1.09 for spring wheat.
    RMA explored viable options to alleviate some producers concerns 
while still maintaining program integrity.
    While producers have requested to be allowed to use replicated 
yields in their history database, this will generally overstate 
guarantees for durum wheat and will most likely generate significant 
complaints from insured's negatively impacted by replication, and from 
agents and insurance providers who have undergone considerable work to 
implement the procedures for splitting out the yields by type, and 
increase the risk of loss to companies and re-insurers providing 
protection in these areas.
    RMA is implementing a 10 percent yield limitation to provide relief 
to those that may experience declining yields. Implementing yield 
limitations is consistent with existing procedures for other situations 
that protect insured's from declining yields, and provides immediate 
protection while avoiding replicated yields that are too high that will 
adversely affect actuarial soundness for several years to come.

                        WOOL FOR BERETS IN IRAQ

    Question. Madam Secretary, it has come to my attention that the 
Coalition Provisional Authority (CPA) in Iraq has let a contract for 
berets for Iraqi security forces. While the CPA has indicated that the 
contract is open to all bidders, the contract's parameters have put 
American wool producers at a distinct disadvantage by specifying that 
the berets be made of 100 percent Australian wool! Such preferential 
treatment is not only unfair but is a serious concern that deserves 
immediate attention. There are 64,170 U.S. wool producers, including 
over a thousand in North Dakota, that produce some of the finest wool 
in the world. Given a fair field on which to compete, I am certain they 
will win such a contract.
    Given the time-sensitive nature of this issue, I want to know if 
you will work with others in the Administration to ensure that the CPA 
is directed to re-let that contract to ensure that no country receives 
preferential treatment?
    Answer. Thank you for this question which has brought this issue to 
our attention. We have been in contact with USDA personnel in Iraq and 
were able to learn a great deal about this contract and procurement. 
Unfortunately, the contract has been awarded and the tender 
specifications did, in fact, specify Australian wool. This tendering 
was not done by the CPA directly and did not involve U.S. government 
funds.
    As part of our reconstruction efforts in Iraq, we are trying to 
bring greater transparency and predictability to the public tendering 
process. This is of vital importance if we are to regain market share 
for American agricultural products in this potentially significant 
export market. Bringing about a market based, open and transparent 
public tendering process is an uphill battle and this is a perfect 
example. We will be working closely with CPA and Iraqi authorities to 
ensure that oversights like this do not happen again.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                            SPECIALTY CROPS

    Question. The crop insurance program has expanded significantly 
over the past 10 years providing farmers and ranchers with increased 
financial security. Even in California it is now commonplace for 
bankers to require crop insurance prior to approval of operating loans. 
However, there are still many specialty crops that have no crop 
insurance program available. Many of these crops are grown on 
relatively few acres nationwide compared to the more traditional 
commodity crops.
    How does the USDA plan to expand the insurance programs to the 
remaining specialty crops not currently covered?
    Answer. Through the use of feasibility studies and pilot programs, 
RMA plans to expand the insurance programs to cover additional 
specialty crops. Risk Management Agency has made significant progress 
in providing new crop insurance programs available to specialty crop 
growers. For example, during 1998-2002: The number of insurable 
specialty crops increased 29 percent The number of active policies 
increased 28 percent The amount of coverage (liability) increased 98 
percent
    Since 2001, RMA has entered into over 90 contracts and partnerships 
with the majority focusing on providing crop insurance or other non-
insurance risk management tools for producers of specialty crops. 
Feasibility studies to determine whether crop insurance programs can be 
developed have been completed for direct marketing of perishable crops, 
fresh vegetables, Hawaii tropical fruits and trees, lawn seed, and 
quarantine insurance. The fresh vegetables project is in the 
development stage with crop year 2007 as the target year for 
implementing a pilot program. Insurance programs for Hawaii tropical 
fruits and trees and quarantine insurance are in the development stage 
with crop year 2006 as the target year for implementing pilot programs. 
The feasibility study for lawn seed is projected for completion in the 
fourth quarter of fiscal year 2004. The feasibility study for direct 
marketing of perishable crops is projected for completion in the first 
quarter of fiscal year 2005.
    Most specialty crops of significant size or value have either a 
program already developed or are a future project on RMA's Prioritized 
Research and Development Plan. The ten highest valued specialty crops 
not insured are listed below with the current plan for addressing each:

                           [In dollar amount]
------------------------------------------------------------------------
                                       Crop Insurance
               Crop                        Status              Value
------------------------------------------------------------------------
Bedding/Garden Plants.............  Target 2007 crop          $2,392,495
                                     year.
Lettuce...........................  Target 2007 crop           2,261,185
                                     year.
Mushrooms.........................  Industry not                 911,509
                                     interested.
Sod...............................  Industry not                 800,694
                                     interested.
Cut Flowers & Cut Greens..........  No action based on           717,612
                                     Feasibility Study.
Carrots...........................  No action based on           551,433
                                     Feasibility Study.
Broccoli..........................  Target 2007 crop             536,226
                                     year.
Cut Christmas Trees...............  Target 2005 crop             441,604
                                     year.
Cantaloupes.......................  Target 2007 crop             404,685
                                     year.
Melons............................  Target 2007 crop             328,550
                                     year.
------------------------------------------------------------------------
Note: Pilot program is scheduled for implementation in the target year.

    In addition, RMA recently issued a statement of objectives request 
for proposals for innovative and cost effective approaches to providing 
crop insurance for crops with small value. The purpose is to develop a 
program that responds to small value crop producers, provides a minimal 
requirement transaction between a producer and insurance provider, and 
identifies the vulnerabilities for waste, fraud and abuse. A contract 
was awarded in March 2004 to begin research for possible development of 
a new approach that provides crop insurance coverage for crops with 
small value. One possible approach that may be proposed is some form of 
whole farm program, perhaps similar to the existing Adjusted Gross 
Revenue program, which is being piloted in a limited number of counties 
in California.

                         REVENUE BASED PROGRAMS

    Question. The crop insurance program has been piloting a number of 
new programs which address not only production losses, but revenue 
losses as well. However, most of these programs have been made 
available to only the major commodities: corn, wheat, cotton, rice etc. 
I understand that in certain states in the mid-west a corn grower has 
up to 6 different options in insuring their crop.
    When will these new revenue based programs be made available to 
specialty crop growers?
    Answer. RMA conducted a feasibility study for developing a revenue 
model of insurance for certain specialty crops, which is currently in 
the process of development for revenue based programs tailored to those 
specialty crops. The new revenue based programs should be made 
available to specialty crop producers for the following crops in the 
proposed pilot program states for the crop year 2007, pending approval 
by the FCIC Board of Directors. The list of crops and states include: 
Apples, NY, PA, OR, VT, and WA; avocados, grapefruit, and oranges, FL; 
dry beans (Baby Lima, Blackeye Peas, and Large Lima), CA: dry peas and 
lentils, ID; maple syrup, ME, NH, NY, and VT; and revenue product 
modification (corn), IA, IL, and IN.

                     ADJUSTED GROSS REVENUE PROGRAM

    Question. There is currently a pilot crop insurance program 
available in a very limited number of counties Nation wide called the 
``Adjusted Gross Revenue'' (AGR) program. The program is available in 8 
counties in California. However, I understand the Agency has put a hold 
on further expansion of the program pending an evaluation.
    When is the evaluation expected to take place and when is the 
earliest that expansion of this program can be expected?
    Answer. The Adjusted Gross Revenue (AGR) pilot program began in 
1999 in five States (36 counties). In 2000, six more States and 52 new 
counties were added. In 2001, RMA made a number of significant changes 
to the program in order to increase the number of eligible producers, 
coverage available, and producer acceptance. At the same time, AGR was 
expanded into six additional States and 126 new counties to provide a 
broader base upon which to test the pilot program.
    The Agricultural Risk Protection Act (ARPA) required the expansion 
of AGR into at least eight counties in California and into at least 
eight additional counties in Pennsylvania. RMA worked with the 
respective State Departments of Agriculture to select the expansion 
counties, gathered the data necessary for expansion and the FCIC Board 
of Directors approved expansion into eight counties in both states for 
2003. Effective for 2003, AGR was available in 17 states and 214 
counties.
    RMA is currently in the process of contracting for an evaluation to 
be conducted of the AGR pilot program. The evaluation will commence 
during 2004 using 2001-2003 AGR experience data reflecting the program 
changes and broad expansion made in 2001. Once the evaluation is 
completed, the results will be made available to the Board of 
Directors, who will determine any future direction and expansion of 
this pilot program.

            TECHNICAL ASSISTANCE FOR SPECIALTY CROPS PROGRAM

    Question. The Technical Assistance for Specialty Crops (TASC) 
program, authorized in the 2002 Farm Bill, was developed exclusively to 
provide the specialty crop industry with financial assistance to help 
overcome trade barriers such as sanitary, phytosanitary, and technical 
barriers that prohibit or threaten exports. Funds are applied for by 
industry and distributed upon approval by USDA. The need for the 
program is great as noted by the overwhelming requests by industry for 
assistance. During the past 2 years, since the program's inception, 
USDA has received 111 proposals totaling $20 million in funding 
requests--compared to actual funding of only $4 million. The $2 million 
annually, while beneficial, is clearly insufficient.
    What is USDA doing to expand this program and encourage growth of 
specialty crop exports?
    Answer. The Technical Assistance for Specialty Crops (TASC) program 
was established in the Farm Security and Rural Investment Act of 2002. 
As program managers, the Foreign Agricultural Service (FAS) is 
responsible for ensuring all funds are used in the most effective way 
to maximize benefits to U.S. specialty crops. To accomplish that 
objective, FAS has taken several steps to maximize the use and 
effectiveness of this program that include:
  --outreach to the U.S. specialty product industries to maximize 
        awareness of the program;
  --established regulations to ensure fair and equitable allocation of 
        the funds to worthy projects;
  --program flexibility to address unexpected trade barriers, enabling 
        the availability of funds throughout the year; and
  --selected projects that had the highest expected return in value to 
        expanding exports.
    In addition, FAS continues to support the specialty crops through 
ongoing activities such as market intelligence, trade policy, and 
export market development. The Market Access Program (MAP) includes 
over 30 nonprofit associations that represent specialty crops and 
received $40 million of MAP funds in fiscal year 2003.

                   FRUIT AND VEGETABLE PILOT PROGRAM

    Question. The 2002 Farm Bill authorized a $6 million Fruit and 
Vegetable Pilot program in fiscal year 2003 to provide free fruit and 
vegetable snacks to students in 25 schools each in Michigan, Ohio, 
Indiana, Iowa, and seven schools in the Zuni Nation in New Mexico. 
Results of the program have been positive. According to a report by the 
USDA Economic Research Service, the pilot has shown consumption 
increases in school children by at least one serving a day.
    Various nutrition groups, the United Fresh Fruit and Vegetable 
Association, and other anti-obesity advocates have been pushing for 
expansion of this successful fresh fruit and vegetable pilot program 
under the Child Nutrition Reauthorization Bill.
    However, due to funding technicalities, the expansion of the pilot 
has been removed from the House bill. The Child Nutrition 
Reauthorization Bill is being written so it contains very little 
opportunity for participants to access fresh fruit and vegetables, at a 
time when childhood obesity is becoming an enormous issue.
    What is the USDA doing to increase the consumption of fresh fruits 
and vegetables in the school lunch, school breakfast, WIC and related 
programs?
    Answer. The Department shares your interest in the fruit and 
vegetable initiative, and would support its expansion provided Congress 
is able to fund it through savings or offsets that do not compromise 
access to school meal benefits. USDA, as part of the Department's 
Strategic Goal 4: ``Improve the Nation's Nutrition and Health,'' 
established a specific performance measure to improve the diets of 
children and low-income people by at least five points as measured by 
their Healthy Eating Index (HEI) scores; and to increase the score for 
the broader U.S. population by at least two points. USDA is working 
harder than ever with stakeholders to devise program initiatives to 
achieve these changes. Since fruit consumption and vegetable 
consumption are two of the ten elements of the HEI on which the most 
progress can and should be made, I am particularly keen to see 
innovations addressing these areas.
    The Department believes that the Federal nutrition assistance 
programs are an effective way to support and promote the consumption of 
fruits and vegetables. For example, I know that children who 
participate in the National School Lunch Program eat nearly twice as 
many servings of vegetables at lunch as non-participants and School 
Breakfast Program participants eat twice as many servings of fruit at 
breakfast as non-participants. USDA nutrition assistance programs 
provide over $8 billion in support for fruit and vegetable consumption 
annually by supporting consumer purchases in the marketplace through 
the Food Stamp Program; purchasing and distributing these foods 
directly to schools, food banks, and other institutions; and through 
nutrition education and promotion. I will provide some additional 
information for the record.
    [The information follows:]
    To maximize the results of this investment in increasing 
consumption for children and others, the Department is taking action to 
motivate all consumers to eat more of these healthful foods. We are 
expanding the Department of Defense fresh produce program to distribute 
fresh fruits and vegetables to schools, enhancing the variety and 
availability of fruits and vegetables in the school meals, as well as 
expanding the Food Distribution Program on Indian Reservations fresh 
produce initiative.
    The Department has recently published Fruit and Vegetables Galore, 
a guide developed as part of Team Nutrition that helps schools offer 
and encourage consumption of a variety of fruits and vegetables. In 
addition, the Department is expanding dissemination of the EAT SMART. 
PLAY HARD.TM (ESPH) materials that promote vegetable and 
fruit consumption. One theme of ESPH--Grab Quick and Easy Snacks--
promotes fruits and vegetables as snacks.
    More broadly, we continue to pursue our partnership with the 
National Cancer Institute (NCI) and the Centers for Disease Control and 
Prevention (CDC) in the expanded national 5-A-Day for Better Health 
program. The 5-A-Day campaign's goal is to increase consumption of 
fruits and vegetables to 5 to 9 servings every day, and inform 
consumers of the health benefits gained from eating fruits and 
vegetables.
    Regarding the WIC Program, the WIC food package currently plays a 
key role in contributing to fruit and vegetable consumption by 
providing 100 percent fruit and vegetable juices to program 
participants. In addition, WIC nutrition education emphasizes the 
relationship between nutrition and health, and fruits and vegetables 
are promoted as part of a complete diet. Both the Dietary Guidelines 
and the Food Guide Pyramid are foundation nutrition education materials 
used by WIC to emphasize the importance of fruit and vegetable 
consumption. Also, many WIC State agencies have adopted the National 
Cancer Institute Campaign, Five A Day, to promote the intake of fruits 
and vegetables. WIC's nutrition education approach is designed to teach 
participants and caregivers about the important role nutrition plays in 
health promotion and disease prevention as well as overcoming specific 
risk conditions.
    Finally, a contract was awarded in September 2003, to the Institute 
of Medicine (IOM), through the Food and Nutrition Board to review the 
WIC food packages in a 22-month study. This study will use current 
scientific information to review the nutritional requirements and 
assess the supplemental nutrition needs of the population served by 
WIC. IOM is currently scheduled to provide the Department with a final 
report in February 2005. Assuming the report is received on schedule, 
USDA expects to publish a Notice of Proposed Rulemaking for public 
comment in December 2005, and a final rule in December 2006.
    The WIC Farmers' Market Nutrition Program (FMNP) provides WIC 
participants with coupons that can be exchanged at authorized farmers' 
markets for fresh fruits and vegetables. The FMNP is currently in 
operation at 44 sites--36 States, the District of Columbia, Guam, 
Puerto Rico and 5 Indian Tribal Organizations. During fiscal year 2002, 
just over 2.1 million participants were served. The FMNP educates WIC 
participants on selecting, storing, and preparing fresh fruits and 
vegetables and how to make fruits and vegetables part of healthy meals.

                       TRAINING OF DHS EMPLOYEES

    Question. As the Department of Homeland Security (DHS) was being 
organized, a significant part of USDA's funding for import inspections 
was placed within DHS. There remains significant concern that DHS will 
not place a high enough priority on invasive pest and disease detection 
at the border and that inspectors that are cross trained in other types 
of import inspections will not be sufficiently vigilant to prevent 
importation of pest on imported produce.
    The agriculture industry, and in particular fresh fruit and 
vegetable growers, have been very vocal that it is not acceptable for 
Customs agents to be cross-trained to detect pests and diseases in 
imported products. That capability is a specialized skill. Given the 
enormous increases in fresh fruit and vegetable imports over the last 5 
years, it is very unwise to reduce the Federal Government's capability 
to detect invasive species.
    Costs of eradication and elimination are higher than taking 
preventive measures, if pests enter the United States the Federal 
Government will need to pay for increased pest and disease eradication, 
due to failures to interdict these threats at the border.
    What is the U.S.D.A. doing to ensure that inspectors will have 
sufficient training and experience to detect and prevent entry of new 
pests on imported produce?
    Answer. To facilitate the transfer of the agricultural inspection 
force, USDA and the Department of Homeland Security (DHS) signed a 
Memorandum of Agreement that specifies the functions and funding 
transferred to DHS and establishes mechanisms between the two agencies 
regarding the training of employees, use of employees, and other areas 
described in the Homeland Security Act of 2002. The Agreement is meant 
to emphasize the importance of continuing and enhancing the 
agricultural import and entry inspection functions.
    As specified in the Agreement, USDA continues to train DHS 
inspectors who conduct agricultural inspections. DHS is maintaining an 
inspection force of agricultural specialists, who must meet certain 
educational requirements and go through a 2-month training course in 
our import requirements and pest and disease identification, among 
other things, at APHIS' Professional Development Center in Frederick, 
Maryland. APHIS and DHS' Bureau of Customs and Border Protection (CBP) 
are also implementing a joint quality assurance program to ensure that 
the inspection process continues to function effectively. As part of 
this effort, APHIS will provide on-the-job training for both 
agricultural specialists and primary inspectors. APHIS also provides 
basic training in the agricultural inspection process for general CBP 
inspectors at CBP's training center in Atlanta.

                            SUDDEN OAK DEATH

    Question. Sudden Oak Death (SOD) is a serious, often fatal disease 
of California native oaks, and has been found in two nurseries 
(Monrovia, Azusa and Specialty Plants, San Marcos) in Southern 
California. The discovery of this disease in the nursery trade, in 
warm, dry Southern California and many miles from the epicenter of the 
disease in the Bay Area has caused five states to quarantine California 
nursery products. Monrovia nursery is one of the largest nursery 
producers in the United States and ships plants throughout the United 
States and Canada as well as other foreign destinations. Current 
economic losses to Monrovia at this juncture are estimated at $4.3 
million. A general embargo on California nursery stock will cause the 
state incalculable economic damage.
    What is the USDA doing to assess the extent of the disease both 
within California and within the United States and take action to 
contain the spread and prevent new areas from being affected by the 
disease?
    Answer. To assess the extent of SOD, we are conducting 
``tracebacks'' to determine the nursery or nurseries from which 
infected plant material originated, and ``trace forwards'' to determine 
where a particular nursery has sent infected plant material. Also, we 
are conducting a national survey of nurseries and forests. These 
activities will help us determine the extent of SOD migration within 
California and to other States. In addition, we plan to impose a 
Federal quarantine on the interstate movement of known and 
``associated'' SOD hosts from all California nurseries. This quarantine 
will be based on sound science and a measured risk response. Associated 
hosts are plants which are not technically hosts, but are nevertheless 
susceptible to SOD. This action would preclude States from imposing 
their own quarantines, and would provide for the resumption of safe 
trade in California nursery plants--albeit under strict conditions. As 
a result, we would be able to prevent further SOD spread via shipments 
from California nurseries, while still allowing the interstate movement 
of healthy plants.

                       GLASSY-WINGED SHARPSHOOTER

    Question. Other pests like the Vine Mealy bug and Glassy winged 
sharpshooter are impacting crops in California and elsewhere. What is 
U.S.D.A. doing to contain the spread of and eliminate these pests?
    Answer. Since fiscal year 2000, we have led an extremely successful 
cooperative Glassy winged sharpshooter (GWSS) research and control 
program in California. This program includes nursery stock inspections, 
a Statewide survey, and site-specific urban treatments. These 
activities help us quickly detect, control, and mitigate the GWSS. 
Also, we develop strategies to reduce the pest problem in agricultural 
production areas. This approach supports Statewide activities to 
promote trade, and remove the pest from State commerce routes. In areas 
where 100 or more GWSS had been found in traps each week, the program 
now finds approximately five. This success demonstrates the benefits 
not only of rapid response to a pest introduction, but also of 
cooperating with stakeholders, universities, extension services, 
agricultural researchers, and growers.
    In addition, we are continuing a successful pilot program 
throughout Kern County and conducting a similar program in infested 
areas of Riverside, Tulare, and Ventura Counties. In addition, we have 
expanded area-wide control activities into crucial production areas in 
Tulare County, Ventura County, and Coachella Valley in Riverside 
County. Our prompt implementation of these area-wide strategies has 
significantly reduced the incidence of GWSS in the new areas. This 
year, we continue to (1) develop management strategies and conduct 
area-wide treatments; (2) monitor the impact of GWSS control strategies 
on the environment; (3) mitigate Pierce's Disease spread in vineyards; 
(4) transfer control strategies to County Agriculture Departments; and 
(5) conduct regulatory activities through increased nursery stock 
inspections.
    At this time, APHIS does not have a program to control the Vine 
Mealybug. Since this non-native pest has no natural predators, 
eradication is not likely. Currently, producers are working to contain 
its spread using sanitation and chemical control.
    However, APHIS and the CDFA are continuing the highly successful 
California Mediterranean Fruit Fly (Medfly) Preventative Release 
Program. Since fiscal year 1996, only four Medflies have been detected 
in California. The most recent of these was a single adult found in 
late fiscal year 2002. This detection demonstrated the program's 
continued reduction of captured wild Medflies, while mitigating 
pesticide concerns. In fiscal year 2003, the program detected Mexican 
Fruit Flies (MFF) in San Diego County. This detection necessitated an 
emergency funds transfer, but we eradicated this infestation last 
September--less than a year after the pest was first detected in the 
area.

     ENVIRONMENTATL IMPACT OF ON-FARM BURIAL OF DOWNER/DEAD CATTLE

    Question. The new regulations issued by USDA to address BSE will 
help improve the safety of human food and animal feed and will help to 
keep export markets open. Two of the recently announced changes in 
regulations though may result in environmental issues for states with 
large dairy and cow-calf industries.
    Cattle carcasses buried on farm land can have adverse impact on 
watersheds and pose other issues to the environment and ecosystems 
should wildlife or other animals access the buried cattle.
    Because of the potential for creation of an environmental hazard, 
in Europe many countries have instituted regulations prohibiting the 
on-farm burial of dead and downer cattle. The collection and disposal 
of these animals is often subsidized by the government.
    This issue has potential to have substantial environmental impact 
for states with large dairy and cow-calf industries. There is potential 
for substantial economic impact on farmers and others needing to 
dispose of these animals.
    Has there been an evaluation of these impacts? If so what are the 
solutions and at what level of government do these solutions need to be 
addressed? Is there a research need to identify effective disposal 
options?
    Answer. USDA has had an aggressive BSE surveillance plan in place 
since the 1990's, and scientific experts--including those at Harvard 
who conducted the risk assessment for BSE--agree that, even given the 
find in Washington State, the disease would be circulating at extremely 
low levels in the U.S. cattle population if at all. With such a low 
prevalence rate, we do not anticipate large numbers of affected animal 
carcasses needing disposal during the next 12 to 18 months. Our 
recently announced enhanced surveillance plan should instead allow us 
to further assure consumers, trading partners, and industry that the 
risk of BSE in the United States is very low.
    With regard to concerns about cattle carcass disposal options, 
burying animals on the farm is not the only option for producers whose 
animals are non-ambulatory disabled. Other alternatives for disposal 
continue to be available to producers. These include rendering 
facilities, salvage slaughter facilities (i.e., not slaughtered for 
human consumption), and other animal disposal industries.
    USDA welcomes additional research into carcass disposal options and 
will continue to make decisions based on the most current science 
available.
    Question. Finally, is there a need to subsidize the collection and 
proper disposal of dead and downer animals, first to ensure inclusion 
in surveillance programs for disease, second to offset increases in 
costs associated with disposal of these animals and finally to ensure 
they do not create a hazard for other transmissible diseases? What is 
U.S.D.A. doing to assess and control this situation from becoming a 
potential hazard?
    Answer. Scientific experts from Harvard conducted risk assessment 
for BSE and concluded that, even given the find in Washington State, 
the disease would be circulating at extremely low levels in the U.S. 
cattle population if at all. With such a low prevalence rate, we do not 
anticipate large numbers of affected animal carcasses needing disposal 
during the next 12 to 18 months. Our recently announced enhanced 
surveillance plan allows us to further assure consumers, trading 
partners, and industry that the risk of BSE in the United States is 
very low.
    There are a number of options available to producers to dispose of 
animals that are non-ambulatory disabled. Options for disposal include 
burying animals on the farm, use of rendering facilities, salvage 
slaughter facilities (i.e., not slaughtered for human consumption), and 
other animal disposal industries.
    USDA has included cost recovery options in the budget for its 
enhanced BSE surveillance program. Payment for certain services will 
help cover additional expenses incurred by producers and the industries 
participating in the surveillance program and encourage participation. 
For example, costs for transporting an animal or carcass to the 
collection site from a farm or slaughter establishment may be 
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered. Other expenses 
may also be addressed in the program.
    Question. The collection of these animals is important for tracking 
and surveillance for Mad Cow. Collection and inclusion of these animals 
in tracking and surveillance sampling is important.
    Has consideration been given as to how to achieve inclusion of dead 
on the farm and downer cattle in the monitoring program?
    Answer. Throughout the history of our surveillance program, USDA 
has worked to obtain samples from the targeted animal population, 
wherever these samples may be located. In order to obtain the samples, 
USDA-APHIS has worked with facilities other than federally inspected 
slaughter establishments as part of BSE surveillance efforts. These 
facilities included renderers, salvage slaughter facilities (i.e., not 
slaughtered for human consumption), and other animal disposal 
industries.
    Under our new surveillance program, we will build on these efforts 
to ensure that we maintain access to our targeted surveillance 
population. We will also be reinforcing our educational and outreach 
efforts to producers, so they will know who to contact about testing 
dead or downer animals on the farm.
    USDA-APHIS-Veterinary Services' officials across the country will 
work closely with their State counterparts to build on existing 
relationships at these locations so that we can obtain the necessary 
samples.
    Payment for services will help cover additional costs incurred by 
producers and the industries participating in our surveillance program. 
For example, costs for transporting an animal or carcass to the 
collection site from a farm or slaughter establishment may be 
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered.

                NATIONAL ANIMAL IDENTIFICATION DATABASE

    Question. The USDA announced the immediate implementation of a 
National Animal Identification program. The pilot for this system has 
been underway with USDA for more than a year and a half to ensure 
uniformity, consistency and efficiency across this national system.
    Will this be a mandatory or voluntary system? If it is not 
mandatory could it satisfy requirements for international trade in beef 
and cattle?
    Answer. At the present time, participation with a national animal 
identification program would be on a voluntary basis while the USDA 
moves forward with the beginning stages of implementation. As the USDA 
learns more during the implementation of the system, USDA would likely 
move into rule-making.
    Implementing a national identification system that records animal 
movements will enable APHIS officials to complete the tracing of 
animals potentially exposed to a disease as timely as possible. 
Demonstrating our ability to contain and control the disease will 
provide the scientific data to document appropriate trade status 
issues. The animal tracking system will play a critical role in 
maintaining and/or restoring our export markets for U.S. livestock and 
animal products during and after an animal disease outbreak.
    Question. What considerations for maintaining the privacy of this 
information in a national animal identification database are being 
made?
    Answer. The USDA recognizes that producers are concerned about the 
confidentiality of the national system. USDA is not seeking marketing 
or production information, but only information that would help us 
track animals for disease purposes. We are examining all applicable 
laws and regulations, as well as the potential need for additional 
legislative authority, in our efforts to address this issue.
    Question. In 2002 many states, including California, suffered 
outbreaks of low-pathogenic avian influenza. USDA indemnified poultry 
producers in each of the affected states, except for California. In 
Virginia, West Virginia and North Carolina, USDA provided over $50 
million for indemnification. Despite inclusion of Report language 
directing USDA to indemnify California, Nicolas Turkey Breeders in 
Sonoma, California remains the only poultry operator omitted from this 
program.
    I would like to know what steps are you taking to rectify this 
situation?
    Answer. In 2002, when positive cases of Low Pathogen Avian 
Influenza had been found in New York; New Jersey, Texas, Maine, 
Michigan, and California; State authorities had taken the 
responsibility of controlling and eliminating the disease with no 
assistance provided from Federal authorities. In the case of Virginia, 
West Virginia, and North Carolina, LPAI was spreading at a rate that 
State officials could not control. At the request of the State of 
Virginia the USDA stepped in to provide assistance with depopulation, 
indemnities, cleaning and disinfection of premises; disposal of 
carcasses; epidemiology support; data management; and information 
dissemination. The California outbreak was relatively isolated and the 
State officials were able to control further spread. As a result, USDA 
does not intend to indemnify Nicolas Turkey Breeders for their turkey 
breeder flock.
                                 ______
                                 

            Questions Submitted by Senator Richard J. Durbin

                       SINGLE FOOD SAFETY AGENCY

    Question. Currently, Federal oversight for food safety is 
fragmented with at least 12 different Federal agencies and 35 different 
laws governing food safety. There are also dozens of House and Senate 
subcommittees with food safety oversight. With overlapping 
jurisdictions and scattered responsibilities, Federal agencies often 
lack accountability on food safety-related issues and resources are not 
properly allocated to ensure the public health is protected. Our 
Federal food safety statutes also need to be modernized to more 
effectively ensure that food safety hazards are minimized.
    President Bush and Secretary Ridge have both publicly discussed the 
concept of combining Federal food safety responsibilities into a single 
agency. In the past, USDA has stated its opposition for such a move.
    Assuming USDA's position has not changed, what do you see as the 
disadvantages of combining the Federal food safety agencies into a 
single agency? Are there any advantages?
    Answer. Over the years, there has been much discussion about 
consolidating all food safety, inspection, and labeling functions into 
one agency in an effort to increase the effectiveness of the food 
safety system. In 2002, the White House established a Policy 
Coordinating Committee (PCC), led by the Domestic Policy Council and 
the National Economic Council, to look into the single food agency 
issue. The PCC concluded that the goals of the Administration are 
better advanced through enhanced interagency coordination rather than 
through an effort to create a single food agency.
    USDA routinely communicates and coordinates with other government 
entities to ensure a safe and secure food supply. With authority over 
meat, poultry, and egg products, USDA's FSIS plays an integral role in 
ensuring the safety of America's food supply. As a partner in the U.S. 
food safety effort, FSIS strives to maintain a strong working 
relationship with its sister public health agencies. Cooperation, 
communication, and coordination are absolutely essential to effectively 
address public health issues.
    The present statutory framework recognizes distinctions associated 
with the relative risks and hazards of foods and the food safety and 
food security issues that bear on public health. USDA's mission is to 
provide leadership on food, agriculture, and natural resources based on 
sound public policy, the best available science, and efficient 
management. Within USDA, the nearly 10,000 employees of the FSIS 
dedicate their careers and lives to protecting public health. USDA 
inspectors are in plants every day enforcing our nation's food safety 
laws. The statutes that are administered are clear and demand 
unwavering attention to ensuring that consumers continue to enjoy the 
safest and most abundant food supply in the world. It is this focused 
attention to food safety, food security, and public health that is best 
supported by the current organizational placement of the USDA food 
safety mission.
    FSIS bases its policy decision on science, so the single food 
agency discussion boils down to one
    Question. will there be a measurable benefit to public health? In 
other words, would such an effort save lives and reduce foodborne 
illness rates? As with any new food safety and security effort, we must 
make sure that we maintain and continue improving on any progress that 
has been made to improve public health. It is important to make sure 
that any disruption to the current food safety system effectively 
improves food safety and public health. USDA looks forward to working 
with Congress to examine these issues and to continue to keep the 
nation's food supply safe and secure and strengthen public health.
    Question. We have recently witnessed the consolidation and creation 
of the Department of Homeland Security. Do you believe the creation of 
DHS could serve as a model for the creation of a single food safety 
agency?
    Answer. The outcome of the policy discussion concerning a single 
food safety agency may be addressed in answering one key
    Question. Will there be a measurable benefit to public health? We 
must assure that any disruption to the current food safety system 
effectively improves food safety and public health. Additionally, the 
costs associated with any major overhaul to the U.S. food safety system 
must be considered. It is important to determine what the financial and 
human costs associated with a single food safety agency might be and to 
determine if this cost will best leverage funding for food safety.
    Question. Secretary Veneman, I believe you have been noted as 
saying that the statutes governing meat inspection ``pre-date the Model 
T'' and have implied that these statutes need to be modernized. I agree 
with you. Please identify what efforts you have made in the past year 
to accomplish this goal.
    Answer. During the past year, we have taken a hard look at our 
statutory authorities, and have held meetings with consumer and 
industry groups to ensure that we received the input of a variety of 
sources. Our efforts culminated in the development of ``Enhancing 
Public Health: Strategies for the Future,'' the Food Safety and 
Inspection Service's (FSIS') 2003 Vision Paper, which was published in 
July 2003. In outlining the Department's food safety vision, steps have 
been identified that must be taken before consideration of changes to 
our statutory authorities.

                              SOYBEAN RUST

    Question. I am very concerned about the risk of importing Asian 
soybean rust into the continental United States. This could be a 
potentially devastating situation to our soybean crop and impose heavy 
economic burden on American farmers and consumers. I noticed this 
particular disease was not mentioned in your statement regarding APHIS' 
plan to deal with intentional and unintentional disease.
    I understand various pathways of entry for rust spores have been 
suggested which range from natural wind current to human or maritime 
transport. I am particularly concerned about the movement of soybeans 
and soybean meal through import channels. Soybean and soybean material 
produced in soybean rust-infected areas have the potential to carry 
viable spores when they are transported. I understand the potential 
viability of soybean rust spores can be eliminated if the soybean 
material is processed, heat-treated and handled properly.
    I, along with a number of my colleagues, wrote your office (a month 
ago) stating our concern on allowing imports from diseased areas until 
APHIS completes its risk assessment and has a plan in place to ensure 
we do no inadvertently import this devastating fungus. I would 
appreciate a response to these concerns. In addition, I would like to 
hear what the agency is doing to prevent the importation of soybean 
rust.
    Answer. Our response to your concerns about this disease was sent 
on March 25, 2004. As we indicated in the letter, APHIS officials are 
looking closely at our country's importation of soybean seed, meal, and 
grain. Our analysis to date has shown that clean soybean seed and 
soybean meal--which is a heat-treated, processed product--pose only 
minimal, if any, risk of introducing this disease.
    APHIS officials conducted site visits to soybean grain elevators in 
New Orleans on January 7, 2004, and to grain elevators and processing 
facilities in Brazil from February 10-12, 2004, to examine how the 
storage, loading, and shipping of export-quality soybeans are handled 
in the two countries. APHIS officials have determined that soybean leaf 
debris associated with the ``foreign material'' found in soybean grain 
shipments could present a potential pathway for the introduction of 
soybean rust. However, foreign material in soybean grain shipments 
typically amounts to less than 2 percent of the shipment. Moreover, as 
it is normal commercial practice to harvest soybeans after the plants 
have been defoliated, leaf debris should compose only a very minute 
part, if any, of the foreign material. Therefore, the foreign material 
found in soybean grain is an unlikely pathway for the introduction of 
soybean rust.
    APHIS has developed a strategic plan to minimize the impact of the 
introduction and establishment of soybean rust in the United States. 
The strategic plan describes our four-pronged approach to the disease, 
focusing on protection, detection, response, and recovery. We developed 
the plan in cooperation with our State cooperators, other USDA 
agencies, and industry representatives.
    Our protection efforts focus on preventing the human-assisted entry 
of soybean rust through the collection of off-shore pest information, a 
pathway pest risk assessment currently underway, and commodity entry 
standards. In this regard, Customs and Border Protection officials are 
inspecting imported shipments of soybeans to make sure that they meet 
our entry standards and notifying APHIS of these incoming shipments.
    We are currently conducting the risk assessment to evaluate the 
levels of risk involved with soybean imports and to develop mitigation 
measures to reduce any such risks. We have completed the first step in 
this process, a review of available scientific evidence on the risk of 
soybean rust's entry, and posted the document on APHIS' Web site. The 
collection of off-shore information from trading partners and APHIS 
personnel overseas is helping us to understand possible reservoirs and 
routes for infection and will enhance our detection, response, and 
recovery efforts.
    Our goal for the detection, response, and recovery aspects of the 
strategic plan is to ensure that a wide variety of stakeholders, 
including growers, crop consultants, State officials, extension agents, 
and many others can recognize the disease and know how to report 
possible introductions. We are monitoring sentinel soybean fields in 
eastern seaboard and southeastern States, the areas where we believe 
the disease would most likely enter the country, for the presence of 
soybean rust and have also begun training stakeholders in detection, 
identification, and disease management. We are also supporting the 
development of forecasting methods that would help predict where the 
disease would spread once it arrived in the United States.
    APHIS has established a Soybean Rust Detection Assessment Team, a 
rapid response team composed of scientific experts and State and 
regulatory officials. Team members met in January 2004 to plan specific 
emergency actions that would be immediately activated in response to a 
detection of soybean rust. Most recently, USDA officials participated 
in a soybean rust conference that was cooperatively organized by USDA, 
five pesticide companies, and the American Soybean Association. The 
primary goal of the conference was to disseminate to soybean farmers 
the knowledge, information, and techniques they will need to manage 
this pathogen when it reaches in the continental United States.

                           CHILDHOOD OBESITY

    Question. To address this issue, many schools have explored 
creative approaches to promote healthy eating, and some of those 
approaches have been successful.
    These include efforts to: integrate nutrition education into the 
school curriculum; experiment with food packaging; and expose students 
to different fruits and vegetables.
    Efforts in some states are promising, and a number of schools have 
reported increased vegetable consumption and student acceptance of 
other healthier food choices.
    Unfortunately, such efforts remain limited and are often 
compromised by budget pressures. Recognizing this, on February 5, 2004, 
I sent a letter to your office, expressing my desire to work with you 
and your department to establish demonstration projects in several 
Illinois school districts to identify effective strategies to increase 
student acceptance of healthy foods.
    My staff has been in contact with your office in efforts to obtain 
a response to this letter. I would like to know if it is going to be 
possible to establish these demonstration projects. What new programs 
does the USDA plan to initiate to combat this growing threat of 
childhood obesity?
    Answer. I asked Undersecretary Bost to respond to your letter, 
which I understand he did on March 15. USDA's Team Nutrition 
administers a competitive grant program that assist States on 
initiatives that promote the nutritional health of the Nation's 
children. Team Nutrition has worked with the State of Illinois in the 
administration of the seven grants awarded to the State over the past 9 
years totaling $1.2 million. The Department is preparing to review new 
proposals for the fiscal year 2004 Team Nutrition grant program. These 
proposals could include mini-grants for funding school districts 
interested in developing innovative programs to promote healthy eating 
choices.
    In addition, the Food and Nutrition Service has joined the working 
group you have launched to deal with childhood obesity; I understand 
they will begin to meet in the very near future to discuss the group's 
goals and potential opportunities to address this important issue.
    USDA did receive funds in fiscal year 2004 to pursue a number of 
initiatives, and has proposed additional ones for fiscal year 2005 to 
address obesity and promote healthy weight. With this additional 
funding, the Department is developing new interventions in WIC to 
promote healthy eating for infants and children--efforts that will help 
our youngest participants develop healthy habits for the long term. 
USDA received $14.9 million in its fiscal year 2004 appropriation to 
enhance WIC breastfeeding promotion through peer counseling. The use of 
peer counselors has proven effective in increasing initiation and 
duration of breastfeeding--the feeding practice best suited to giving 
most babies a healthy start. USDA also received $4 million in fiscal 
year 2004 to initiate WIC Childhood Obesity Prevention Projects, which 
build on the success of the Fit WIC to work in partnership with States 
on innovative strategies to use WIC to prevent and reduce childhood 
obesity. Ongoing funding for these initiatives is critical to ensuring 
continuous improvement; and a $5 million increase has been requested 
for each initiative in fiscal year 2005. In fiscal year 2004, $2 
million in WIC Special Project grant funding is being used to promote 
consumption of fruits and vegetables.
    In addition, $2.5 million was requested in fiscal year 2005 to 
expand the Eat Smart. Play Hard.? campaign and establish a cross-
program nutrition framework to help ensure a comprehensive, integrated 
approach to nutrition education in all nutrition assistance programs.
    The Department has efforts underway in other programs as well. 
USDA, as part of the Department's Strategic Goal 4: ``Improve the 
Nation's Nutrition and Health,'' established a specific performance 
measure to reduce overweight and obesity among Americans. As a partner 
with the U.S. Department of Health and Human Services and other public 
and private sector stakeholders, USDA will take actions to encourage a 
reduction in overweight and obesity such that adult obesity will be not 
greater than 20 percent by 2010 (it is currently 30 percent), and child 
and adolescent overweight will be no greater than 8 percent (when last 
measured 15 percent of the Nation's children ages 6 to 19 years of age 
were overweight). The efforts underway in all the Federal nutrition 
assistance programs promote proper nutrition and healthy weight. 
However, to help ensure progress on this performance measure, the 
Department is reshaping nutrition education in the Food Stamp Program 
to target activities that promote healthy weight; exploring new ways to 
support healthy weight through the WIC Program; and promoting increased 
fruit and vegetable intake through partnership with other Federal 
agencies and the National 5-A-Day Program.

                 BOVINE SPONGIFORM ENCEPHALOPATHY (BSE)

    Question. We still don't have a firm grasp of the prevalence of BSE 
in the nation's cattle herd. The USDA announcement on March 15th 
proposed an expansion of BSE testing to include over 200,000 cattle 
from the ``high risk'' group and 20,000 from clinically normal older 
cattle.
    Sampling approximately half of the high-risk group of cattle 
provides meaningful statistics on the prevalence of BSE in the sub-
population of cattle. However, 20,000 samples from an estimated 
population of 1 million older, clinically normal cows is not enough to 
validate disease prevalence for a population of that size.
    There are millions of cattle, mostly aged dairy cows, that are 
older than the FDA ruminant feed restrictions of August 1997. Many of 
these cows received potentially contaminated meat and bone meal, much 
of it imported from the EU, well into 1998. It is this sub-population 
of cattle that must be tested for BSE as they are processed into the 
human food supply.
    However, questions remain as to how the USDA can gain access to 
enough samples to meet the proposed number of cattle tested for BSE.
    I have sent you two letters which have yet to be addressed. I would 
appreciate a response to these letters and specifically these 
questions:
    You stated you did not know the ambulatory status of the Washington 
state Holstein cow that tested positive for BSE. I understand an 
investigation by the OIG has been opened. If it turns out the only 
animal that has tested positive for BSE in the United States was 
clinically normal and was found only through chance, then we must 
question the USDA's BSE surveillance program that focuses only on 
suspects, non-ambulatory and dead cattle.
    Answer. Prior to the passage of FDA ruminant feed restrictions in 
1997; USDA prohibited the import of ruminant-origin meat and bone meal 
from countries known to be affected by BSE beginning in 1989, and in 
1997 we prohibited the importation of ruminant-origin meat and bone 
meal from all of Europe. This was done to minimize the likelihood of 
aged dairy cattle in the United States being exposed to potentially 
contaminated meat and bone meal. Even more importantly, the United 
States has traditionally been a net exporter of rendered protein 
products. Our records simply do not show that there were significant 
imports of meat and bone meal from Europe for incorporation into 
livestock feed even when our regulations permitted such products to be 
imported.
    In addition, USDA has maintained an aggressive surveillance program 
since 1990. This surveillance has been targeted at the population where 
we are most likely to find the disease if it is present--adult animals 
that have some type of clinical signs that could be consistent with 
BSE. The index cow in Washington State fit in our targeted population, 
as she was not clinically normal. According to Agency records, when the 
index cow arrived at the plant, a Food Safety Inspection Service 
veterinarian conducted a clinical assessment and classified her as non-
ambulatory disabled. The Department stands behind that assessment.
    USDA continues to target its BSE surveillance efforts on cattle 
populations at the highest risk of having BSE. Specifically, 
surveillance has been targeted at cattle exhibiting signs of neurologic 
disease; condemned at slaughter for neurologic reasons; testing 
negative for rabies and submitted to public health laboratories and 
teaching hospitals; and appearing non-ambulatory (including those 
exhibiting general weakness severe enough to make it difficult but not 
impossible to stand), also known as ``downer cattle.'' We also target 
cattle that die on the farm for unexplained reasons.
    USDA's testing regime for BSE will follow our prescribed plan 
regardless of whether the afflicted animal in Washington State was a 
downer cow. There is a very important distinction to be made between 
``ambulatory'' cattle and ``apparently healthy'' cattle. An animal may 
be ambulatory but have other signs of disease that make it an 
appropriate animal to test. In addition, non-ambulatory cattle may be 
completely and entirely unable to walk, or intermittently so. It is not 
uncommon for a downer cow to be ``down'' then ``up'' several times over 
the course of the journey from farm to slaughter. Weak animals--either 
with a specific weakness, such as in their hind legs, or a general 
weakness--may be considered non-ambulatory for surveillance purposes 
because they cannot stand or walk completely normally. All evidence to 
date indicates that the animal in Washington State was selected 
appropriately for our targeted surveillance.
    As we recently announced, we plan to test as many cattle in the 
targeted high-risk population as possible in a 12-month to 18-month 
period and then evaluate future actions based on the results of this 
effort. The plan also incorporates a small random sampling of 
apparently normal aged animals at slaughter.
    The international standard setting organization--the World 
Organization for Animal Health--recognizes that focusing all BSE 
surveillance efforts on testing apparently healthy animals is the most 
inefficient and ineffective method of actually finding disease.
    In addition, no matter what the prevalence of the disease in the 
United States, there is a series of firewalls in place that 
dramatically reduce any possible risk to consumers. These safeguards 
include the ban on all parts of animals from high-risk populations from 
the food supply, along with potentially infective tissues--specified 
risk materials--from all cattle over 30 months of age.
    Question. If states are not allowed to do their own testing, then 
how does the USDA plan a ``robust'' expansion of its BSE testing from 
20,000 in 2003 to over 200,000 during the next 12-18 months?
    Answer. Throughout the history of our surveillance program, USDA 
has worked to obtain samples from the targeted animal population, 
wherever these samples may be located. In order to obtain the samples, 
USDA-APHIS has worked with facilities other than federally inspected 
slaughter establishments as part of BSE surveillance efforts. These 
facilities included renderers, salvage slaughter facilities (i.e., not 
slaughtered for human consumption), and other animal disposal 
industries.
    Under our new surveillance program, we will build on these efforts 
to ensure that we maintain access to our targeted surveillance 
population. We will also be reinforcing our educational and outreach 
efforts to producers, so they will know who to contact about testing 
dead or downer animals on the farm.
    USDA-APHIS-Veterinary Services' officials across the country will 
work closely with their State counterparts to build on existing 
relationships at these locations so that we can obtain the necessary 
samples. Payment for services will help cover additional costs incurred 
by producers and the industries participating in our surveillance 
program. Historically, all BSE testing in the United States has been 
performed exclusively at the National Veterinary Services Laboratories 
(NVSL) in Ames, Iowa. Under the new surveillance program, USDA plans to 
use a network of State and Federal veterinary diagnostic laboratories 
to conduct BSE surveillance tests. Confirmatory BSE testing will still 
be conducted at NVSL.
    Question. If state veterinary diagnostic laboratories or private 
companies meet or exceed the USDA standards for BSE test quality 
control and sample chain of custody, then why should states and private 
companies not be allowed to test animals for BSE within their states?
    Answer. USDA's targeted surveillance program is designed to 
identify the presence of BSE in the U.S. cattle population if it 
exists. Under our current surveillance plan, using APHIS' National 
Veterinary Services Laboratories and participating Animal Health 
Network laboratories, we can assure trading partners of the program's 
scientific legitimacy. We may not be able to make the same case to the 
international community if industry dictates the parameters of the 
testing program. Further, the use of a rapid test would imply a 
consumer safety aspect that is not scientifically warranted. Also, 
because USDA will be restricting BSE testing to public laboratories, we 
can ensure that our testing remains transparent but does not cause 
undue public concern if a rapid test produces a false positive 
reaction.
    Question. Given the limited access to suspect and non-ambulatory 
cattle, how many cows have been tested for BSE since January 1st of 
2004?
    Answer. Between January 1, 2004 and March 31, 2004, approximately 
5,500 cattle were tested for BSE. USDA anticipates the number of cattle 
tested per month to increase substantially once the enhanced 
surveillance plan is fully implemented on June 1, 2004.
    Question. Since there are no incentives for producers to submit 
non-ambulatory or sick animals for BSE testing, how can the USDA expect 
to test over 200,000 of these ``high risk'' animals during the next 12 
to 18 months?
    Answer. Throughout the history of our surveillance program, USDA 
has worked to obtain samples from the targeted animal population, 
wherever these samples may be located. In order to obtain the samples, 
USDA-APHIS has worked with facilities other than federally inspected 
slaughter establishments as part of BSE surveillance efforts. These 
facilities included renderers, salvage slaughter facilities (i.e., not 
slaughtered for human consumption), and other animal disposal 
industries.
    Under our new surveillance program, we will build on these efforts 
to ensure that we maintain access to our targeted surveillance 
population. We will also be reinforcing our educational and outreach 
efforts to producers, so they will know who to contact about testing 
dead or downer animals on the farm.
    USDA-APHIS-Veterinary Services' officials across the country will 
work closely with their State counterparts to build on existing 
relationships at these locations so that we can obtain the necessary 
samples.
    Payment for services will help cover additional costs incurred by 
producers and the industries participating in our surveillance program. 
For example, costs for transporting an animal or carcass to the 
collection site from a farm or slaughter establishment may be 
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered. Other expenses 
may also be addressed in the program.
    Question. How will the $70 million earmarked for expanded BSE 
surveillance be distributed among costs for tests, laboratory 
expansion, certification and manpower needs, sample collection and 
shipping, education, communications and incentives for collection of 
samples?
    Answer. We estimate that the full cost of the enhanced surveillance 
program will be approximately $76.4 million. However, USDA was able to 
offset some of these costs by directing funds from previous Commodity 
Credit Corporation transfers towards this 12- to 18-month effort.
    Of the total need identified, USDA anticipates spending the funds 
as follows:

                        [In thousands of dollars]
------------------------------------------------------------------------
                    Program Component                          Cost
------------------------------------------------------------------------
Personnel and Benefits (Includes investigators,                    9,078
 laboratory inspectors and manager, pathologists,
 program analysts, sample collectors in the field, staff
 veterinarians, etc.)...................................
Travel (includes trips for meetings, training sessions,            1,445
 outreach)..............................................
Transportation (Includes shipment of samples for testing          19,013
 and the transportation of animals, animal parts,
 carcasses, etc. for sampling and/or disposal)..........
Rent, Communication, Utilities (Includes offsite                     400
 collection/storage facilities).........................
Other Services (Includes agreements with contract labs,           36,994
 laboratory training set-up, costs associated with
 carcass/offal storage until test results confirmed,
 disposal of non-negative and certain other carcasses,
 database costs, printing, and indirect costs, etc.)....
Supplies and Materials (Includes shipping supplies--               4,400
 cooler box, centrifuge tubes, etc.; test kits).........
Equipment (Includes robotics and other equipment for               5,059
 cooperating labs, additional equipment for NVSL and
 Center for Vet Biologics)..............................
                                                         ---------------
      Total.............................................          76,389
------------------------------------------------------------------------

                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                       COUNTRY OF ORIGIN LABELING

    Question. I have the February 10th response from Bill Hawks, Under 
Secretary for Marketing and Regulatory Programs, to my December 2003 
letter. I ask you, Secretary Veneman, for a more substantial response 
to my initial question. How are you interpreting the 2-year delay on 
COOL, and will the delay apply to the rulemaking process?
    Answer. The Omnibus Bill delayed the implementation of mandatory 
COOL for all covered commodities except wild and farm-raised fish and 
shellfish until September 30, 2006. Accordingly, USDA is precluded by 
law from immediately implementing a mandatory COOL program for all 
commodities. Currently, we are reviewing the comments received on the 
proposed regulations and will continue to implement COOL as mandated by 
the 2002 Farm Bill and the Omnibus Bill.
    Question. Secretary Veneman, with respect to the feasibility of 
country of origin labeling, have you and your department reviewed the 
GAO report that Senator Daschle and I requested?
    Answer. Yes, my staff and I have reviewed the report.
    Question. Has the United States Department of Agriculture reviewed 
the multiple assertions on the part of GAO that deem country of origin 
labeling to be entirely feasible and much more cost effective than your 
department originally contended?
    Answer. Yes, we have reviewed the GAO assertions. The GAO report 
recognizes that the existing Federal, State, and foreign country 
programs that were suggested for use as models in implementing 
mandatory COOL will not be particularly useful for meat, fish, and 
shellfish due to the law's unique definitions of a U.S. product. The 
preliminary recordkeeping burden estimate that AMS published in 
conjunction with the voluntary country of origin program, which served 
as the basis for GAO's report, was $1.9 billion. While the report 
questions the assumptions used by AMS in formulating this estimate, it 
also recognizes that this estimate did not include the costs of 
segregating and storing foods and for labeling products.

              DEVELOPING THE ANIMAL IDENTIFICATION PROGRAM

    Question. How do you intend to develop the animal identification 
program, and what parties will you include in the process? Will 
producers and scientists be adequately represented and consulted?
    Answer. Implementation of a national animal identification system 
will begin through cooperative agreements to assist state and other 
entities to develop the capacity to interface with the national 
repositories. Federal funds would not be earmarked for hardware such as 
identification tags or electronic readers. Cooperators would decide to 
develop the interface and solicit producer and non-producer 
participation into the system. USDA expects that the funding level 
would start at the highest levels in Phases I and II as cooperators and 
species are added but then decline into a steady state maintenance 
level over time. USDA does not envision the Federal funding being used 
for hardware purchases in the long term, except for maintenance and 
additional development of the national allocators and repositories. 
USDA also expects that competition among vendors for adoption of their 
technologies by producers would result in private technology vendors 
also making investments in the system infrastructure to position their 
technologies.
    A major factor contributing to the success of this program will be 
state participation and communication with and educating producers and 
other stakeholders as to the operation of the program and their 
responsibilities. Some states have started activities that mirror, to 
various degrees, the identification of premises and animals. Many of 
these activities are supported by USDA funds. Cooperative agreements 
would support the interface of these systems with the National Animal 
Identification System. Some agreements with early cooperators would be 
established early in Phase I. USDA recommends that additional 
agreements with a broad range of cooperators be established later in 
Phase I and into Phase II.
    The decision process for these recommendations included a group 
effort of USDA's BSE response coordinator, the Deputy Under Secretary 
for Farm and Foreign Agricultural Services; USDA General Counsel; and 
USDA Chief Economist assisting the Chief Information Officer in 
developing a plan and strategy to implement a National Animal 
Identification System. The group relied heavily on the excellent 
information developed as part of the U.S. Animal Identification Plan 
(USAIP), and on the expertise of the USAIP Steering Committee; the 
Under Secretary for Marketing and Regulatory Programs; and the 
Administrator and staff of the Animal and Plant Health Inspection 
Service. The group also met with a broad spectrum of organizations and 
companies representing the meat supply system, from production through 
retailing. The recommendations of the group reflect the complex 
structure of the livestock industry and previous efforts to design and 
implement NAIS.

                              BSE TESTING

    Question. Secretary Veneman, a rapid, live test will be 
instrumental in reestablishing our trading opportunities in key 
markets. How much money would the department need to develop this test, 
and have you in fact initiated the process?
    Answer. The Agricultural Research Service is conducting research to 
develop live animal tests for transmissible spongiform 
encephalopathies. ARS has successfully developed such a test for 
scrapie in sheep and has contributed to such a test for CWD in farmed 
deer using non-brain tissues accessible in live animals. Unlike the 
sheep third eyelid and the deer tonsil tests, cow material does not 
contain prions at concentrations that can be detected with current 
technologies. Using current funding, ARS is enhancing the sensitivity 
of current tests to look for prions in blood where they may be present 
at very low levels. ARS is also developing novel proteomic approaches 
to prion detection. This research will be enhanced by an additional $1 
million included in the President's fiscal year 2005 budget which will 
support the studies to determine the genetic susceptibility of cattle 
to BSE. Such information will be helpful in identifying what peripheral 
tissues might be used to detect prions and/or what alternative genetic 
markers might be indicative of a cow being infected with BSE-causing 
prions.

                       ENERGY BALANCE OF ETHANOL

    Question. Dr. Collins, the United States Department of Agriculture 
has conducted extensive analysis on estimating the net energy balance 
of corn ethanol. Technological advances in ethanol conversion and 
increased efficiency in farm production have produced demonstrated 
improvements and a positive net energy balance.
    At a time of increasing prices for some inputs and the continued 
expansion of ethanol plants and capacity throughout the country, could 
you please summarize the USDA's latest conclusions as to the positive 
net energy balance of ethanol?
    Answer. Although it takes energy to produce ethanol, repeated USDA 
research shows a positive net energy balance of corn ethanol. the 
energy in ethanol exceeds the amount of energy used to produce it, and 
this energy balance has improved over time.
    Technological innovations in corn production and ethanol conversion 
are important factors in this improvement. Corn yields have improved, 
and ethanol plants are rapidly adopting innovations which substantially 
reduce the energy required to convert corn into ethanol. Our most 
recent estimate of the energy ratio is 1.67, up from 1.22 in 1995. This 
indicates that the energy content of ethanol is 67 percent greater than 
the energy used to grow, harvest, and transport corn, and to produce 
and distribute the ethanol. USDA will be presenting our most recent 
study at the Corn Utilization Conference, June 7-9, 2004 in 
Indianapolis, Indiana.
    Question. Dr. Collins, the Reformulated Gasoline Program (RFG) is a 
key contributor toward mitigating ozone problems in some of America's 
largest metropolitan areas. The principal oxygenate used in the RFG 
Program, MTBE, is linked to underground water contamination and several 
states have taken action to phase-out and then ban the use of MTBE as 
an oxygenate.
    Dr. Collins, as the Congress works to pass a renewable fuel 
standard, can you please summarize for the Committee the latest 
benefits of using ethanol as an oxygenate under the existing RFG 
Program?
    Answer. Ethanol contains 35 percent oxygen, and adding oxygen to 
fuel results in more complete fuel combustion, thus reducing harmful 
tailpipe emissions. Ethanol also displaces the use of toxic gasoline 
components such as benzene, a carcinogen. Ethanol is non-toxic, water 
soluble, and quickly biodegradable.
    According to the National Research Council, blending ethanol in 
gasoline reduces carbon monoxide tailpipe emissions. Additionally, RFG, 
including ethanol-blended fuels, reduce tailpipe emissions of volatile 
organic compounds, which readily form ozone in the atmosphere. Thus, 
the use of ethanol can play an important role in smog reduction.
    Importantly, where smog is of most concern, gasoline blended with 
ethanol must meet the same evaporative emission standard as gasoline 
without ethanol. This ensures that these ethanol blends provide further 
emissions reductions that limit ozone formation.
    Ethanol is produced from grains and other biomass in much the same 
way as beverage alcohol. MTBE, on the other hand, is a toxic additive 
produced from natural gas and methanol. Exposure to ethanol vapors 
coming from ethanol-blended gasoline is very unlikely to have any 
adverse health consequences. Because ethanol is naturally present in 
blood and the body rapidly eliminates ethanol, exposure to ethanol 
vapors is unlikely to be a health hazard.
                     standard reinsurance agreement
    Question. With respect to the Standard Reinsurance Agreement, my 
office has heard substantial complaints regarding the Risk Management 
Agency's proposed draft.
    Where are you in the process of reviewing these complaints, and how 
do you propose to change the SRA to ensure it is friendlier to 
producers and agents alike?
    Answer. RMA reviewed comments from insurance companies and 
interested parties to revise the first draft. On Tuesday, March 30, RMA 
announced the release of the second SRA proposal. RMA believes that the 
second draft demonstrates responsiveness to concerns raised by 
companies and interested parties in the first round of negotiations.
                                 ______
                                 

            Questions Submitted by Senator Mary L. Landrieu

             NATIONAL FINANCE CENTER--E-PAYROLL INITIATIVE

    Question. What, if any, action do you plan to take with respect to 
this proposal?
    Answer. USDA has worked with the Office of Personnel Management 
(OPM) to review and respond to the State of Louisiana's ``e-Government/
e-Payroll Project Initiative.'' OPM's e-Government Initiatives Office 
took the lead in working with the Payroll Advisory Council, the Office 
of Management and Budget (OMB), the various Federal councils, and 
others involved in the e-Payroll initiative to respond to the proposal. 
On April 19, 2004, OPM wrote the Honorable Don J. Hutchinson, Secretary 
of Louisiana's Department of Economic Development, to share with him 
the results of this review. A copy of this memorandum is attached.
    [The information follows:]

                            Office of Personnel Management,
                                    Washington, DC, April 19, 2004.
Hon. Don I. Hutchinson,
Secretary, Department of Economic Development, Baton Rouge, LA.
    Dear Secretary Hutchinson: Thank you again for the opportunity to 
review your ``e-Government/e-Payroll Project Initiative'' proposal. As 
a part of the evaluation process, you permitted our Payroll Advisory 
Council (PAC) the opportunity to review the proposal and provide 
comments. In February 2004, members of the PAC (that includes 
representatives from the Office Personnel Management, the Office of 
Management and Budget, 6-Payroll Providers, and Federal Councils) 
reviewed the proposal, and I would like to share the results with you.
    In general, the PAC determined that the proposal was very well 
thought out and contains valuable ideas. However, it does not appear to 
meet the needs of the Federal Government at this time and is not in 
alignment with the strategic goals of the e-Payroll initiative. For 
example, while it discusses including the Department of Agriculture's 
National Finance Center (NFC) in some loosely defined development 
activities, it merely mentions NFC's partnership with the Department of 
Interior, National Business Center (NBC). Additionally, the proposal is 
unclear in regard to considerations for the employees at the NBC and 
NFC who will be affected by the proposal. The proposal also indicates 
that the State of Louisiana and private concerns will provide $200 
million for the advancement of the facility. Not stated in the proposal 
is what, if any, obligations the Federal Government would have to 
reimburse that amount. It is also not evident how the proposed 
corporation will interact with OPM, other authority agencies; or 
customers. An established process for collaboration with Federal 
authority agencies and customers is extremely critical since competing 
needs could place significant demands on the provider. The PAC was also 
extremely concerned with how the proposed corporation would address key 
national security concerns, especially those of the Intelligence 
community. Additionally, the PAC was also unclear as to how the 
proposal complied with the principles of fair and open competition, 
considering that thee-Payroll Providers operate out of several 
different States.
    The proposal indicates that software development is one of the 
first priorities of the corporation. The PAC construed this to mean 
that the State does not have a viable product readily available to the 
Federal Government. Today, the e-Payroll Providers have independent 
systems; replacement of these four systems is targeted for fiscal year 
2007. To achieve replacement in fiscal year 2007, e-Payroll and the 
Providers are exploring options today by conducting a feasibility study 
to assess commercial off-the-shelf (COTS) and Government off-the-shelf 
(GOTs) products. Upon completion of this study, it is planned to test 
these applications under a structured demonstration lab. Should the 
State of Louisiana have a product available in the next several months, 
it could be considered for inclusion in the demonstration lab.
    Again, thank you for the opportunity to review the proposal. I 
would welcome any information that you might provide regarding the 
availability of software the State of Louisiana might have for 
inclusion in the upcoming demonstration lab.
            Sincerely,
                                              Norman Enger,
                         Director, e-Government Initiatives Office.

    Question. Since the activities of the NFC are outside the normal 
scope of business of the U.S. Department of Agriculture, in the event 
the Department cannot support this cost-effective approach to meeting 
the PMA, are you considering the possibility of the transition of the 
NFC to a structure or ``ownership'' that will facilitate this proposal?
    Answer. As part of the e-Payroll initiative, USDA/NFC in 
conjunction with the Department of the Interior's National Business 
Center (NBC), its e-Payroll business partner, submitted to OPM in 
August 2004, a proposal to combine the Government-wide, cross-servicing 
business lines of NFC and NBC into an organization characterized as:
  --Commercial-like, Federal corporate entity
  --Providing a wide range of services targeted at supporting the 
        President's e-Government Agenda
  --Operational flexibilities defined; i.e., human resource and finance
    This proposal is under review by OPM and OMB.
    Question. What specific actions can you take from here to make sure 
the Louisiana proposal receives the full attention of the Department of 
Agriculture?
    Answer. OPM's e-Government Initiatives Office has taken the lead in 
working with the Payroll Advisory Council, the Office of Management and 
Budget (OMB), the various Federal councils, and others involved in the 
e-Payroll initiative to respond to the proposal.
    Question. If Congress were to direct you, or suggest that you, your 
Department and the Department of Interior have authority to move out on 
a proposal like Louisiana's, would you support such legislative 
authority?
    Answer. We would work with OPM and OMB in support of any direction 
provided and work with them to implement this direction in line with 
the goals and objectives of the President's Management Agenda to 
further delivery of cost-effective services to Federal employees and 
agencies.
    Question. Is specific legislation necessary before you, your 
Department and the Department of the Interior proceed with some type of 
public/private partnership initiative like that proposed by the State 
of Louisiana?
    Answer. We believe that specific legislation would be necessary to 
charter and authorize the new entity as well as provide the necessary 
structure, human resource, and financial flexibilities necessary for 
the organization to be successful. OPM has identified the need for 
legislation as a primary critical path item if the merged proposal 
proceeds.

              NATIONAL FINANCE CENTER--THRIFT SAVINGS PLAN

    Question. Ms. Secretary, as you are aware, the Federal Retirement 
Thrift Investment Board (FRTIB) Chairman, Andrew Saul, in his February 
20, 2004 letter to you, said the Board is ``giving notice of 
termination of software maintenance services and mainframe operations 
by NFC'' for the Thrift Savings Plan. It is estimated that this action 
could result in the loss of as many as 35 to 40, if not more, of the 
highest paying jobs at NFC, and may lead to a subsequent decision by 
the ``Thrift'' Board to terminate the NFC's ``case management' of the 
TSP which involves another 400 jobs at the NFC. It is my understanding 
that according to some preliminary information received thus far from 
the ``Thrift'' Board and the NFC, the actions by the ``Thrift'' Board 
may not be warranted or justified at this point.
    Has your office considered what, if anything, can be done to 
reverse this action by the Federal Retirement Thrift Investment Board?
    Answer. The decision to purchase service from NFC is under FRTIB's 
control. USDA believes strongly that continued use of NFC is still a 
cost-effective, sound business decision. We have taken steps to improve 
communication between USDA/NFC and FRTIB in an effort to rebuild the 
strategic partnership and retain the business. However, we do not know 
all of the factors influencing the Board's decision, and therefore do 
not know if our actions will influence the outcome.
    Question. What have your offices, specifically in DC, done in reply 
to the February 20th letter?
    Answer. Tom Dorr, Senior Advisor to the Secretary, was appointed to 
represent USDA and to meet personally with senior FRTIB officials and 
to help clarify and resolve the issues. Mr. Dorr, as well as other 
executives of OCFO, has been in continuing contact with FRTIB and NFC 
since his assignment.
    Question. I am concerned that changing the operations of critical 
elements of the Thrift Savings Plan operations and functions from the 
National Finance Center to ``possible entities'' in Washington, D.C. 
may cause even more customer problems and be less cost effective.
    Please provide for the record any and all cost comparison studies 
or analyses the Department of Agriculture, the Thrift Board, or any 
other entities have done regarding ``outsourcing,'' moving,'' or 
``changing'' any and all TSP activities versus maintaining them at the 
National Finance Center.
    Answer. FRTIB has had several studies conducted over the years.
    Hewitt Associates prepared an analysis, Defined Contribution 
Outsourcing Feasibility Study, for FRTIB in November 1992. Continued 
service from NFC was the top ranked alternative under consideration. 
The Hewitt Associates experts concluded that keeping the TSP 
recordkeeping function at NFC with the existing software and management 
structure best met FRTIB's and TSP participant needs at that time.
    Logicon 4GT prepared a system review and recommendation report for 
FRTIB in 1995. NFC's services were again rated favorably. According to 
the consultants in 1995, the benefits that TSP participants received 
relative to the costs paid at NFC were excellent. TSP participants were 
paying less than one-half of the private sector cost. The industry 
standard for comparing mutual/retirement fund administrative expense 
ratios between competitors is percent of assets--typically referred to 
as basis points. (One percent equals 100 basis points.) At the time of 
the Logicon review, NFC's basis points were 7.7 of the 12 total TSP 
basis points.
    NFC's TSP costs are still low when compared to comparable efforts 
in industry. In his opening statement at the March 1, 2004, Senate 
Committee on Governmental Affairs, Senator Fitzgerald referenced the 
recent expense ratio of TSP and comparable private sector funds. In 
2003, the expense ratio of the average TSP fund was 11 basis points. 
Per Lipper Services, comparable index funds in the private sector have 
an average expense ratio of 63 basis points. Between 1994 and 2003 when 
TSP's basis points dropped from 12 to 11, NFC's share of the basis 
points decreased from 7.7 to only 4.4, a decrease of 43 percent. 
Without the increased cost efficiencies of NFC, total TSP 
administrative costs would have been significantly higher than 11 
points in 2003.
    On March 4, 2004, FRTIB issued a multi-year contract to a private 
vendor for a parallel call center. This will result in the eventual 
movement of 50 percent of the call center workload from NFC in New 
Orleans to the vendor located in the Washington, D.C., metropolitan 
area. NFC paired with its e-Payroll partner, Department of the 
Interior's National Business Center in Denver, to compete but lost the 
bid.
    Question. Also, please provide for the record, or to the 
Subcommittee staff and our offices all relevant correspondences, 
notices, and memos between the Federal Retirement Thrift Investment 
Board and any offices in USDA (in Washington or at the National Finance 
Center) from January 1999 to today, relating to TSP management and 
operations with respect to this issue.
    Answer. The information has been provided to the Subcommittee 
staff.

                NATIONAL FINANCE CENTER--DATA MIRRORING

    Question. The fiscal year 2005 USDA budget request provides 
$12,850,000 in additional funding for the ``acquisition of disaster 
recovery and continuity of operations technology of the National 
Finance Center's data.'' This additional funding may be necessary to 
complete the effort begun in fiscal year 2003 to fund a back-up, or 
data mirroring, center for the NFC. In fiscal year 2003, $12 million 
was appropriated for this center, subject to reporting requirements by 
Congress.
    As it appears that the Budget justification for fiscal year 2005 
submitted to the Subcommittee by the Department only provides a four-
sentence explanation with no budget table breakout, please provide for 
the record details and a specific breakout of what the $12.85 million 
request in fiscal year 2005 includes.
    Please provide for the record what has been obligated and or spent 
to date from the funds appropriated in fiscal year 2003 and for what 
purposes. In addition, please provide any relevant details.
    Answer. NFC delivers critical service to the entire Federal 
community. Its highest impact business lines are Thrift Savings Plan 
recordkeeping for 3.1 million participants and payroll/personnel 
support to 122 Federal agencies. Disruption in either of these services 
due to a disaster would have wide, significant repercussions across the 
nation. NFC has undertaken a multi-year initiative with appropriated 
funds to address short-term vulnerabilities and as well as to begin 
longer-term actions required to implement a more secure remote 
alternate data center at another location.
    The initial $12 million was to be used on immediate improvements to 
NFC's security and recovery infrastructure and to begin the actions 
required to establish the remote computing facilities. The immediate 
improvements were estimated at $3.6 million--$0.8 million for 
implementation of enhancements to network security and technical 
solutions to known network vulnerabilities and $2.8 million for interim 
implementation of high availability mirroring through expansion of the 
current commercial recovery center contract. The remaining $8.4 million 
was to begin implementation of the alternate computing facility. 
Details on the projects follow.
  --Implementation of enhancements to network security and technical 
        solutions to known network vulnerabilities: Estimated $800,000
    --Access control--no expenditure of appropriation required; will be 
            achieved through the upgrade of the operating system on May 
            29, 2004
    --Logging and monitoring--$26,977 expended for Blue Lance logging 
            and monitoring software; installed and fully operational; 
            $52,000 anticipated for intrusion detection enhancements 
            and installation/configuration of Tripwire (in the 
            procurement process)
    --Vulnerability management--$284,000 anticipated for vulnerability 
            scanning and management software (in the procurement 
            process)
    --Remote access--$157,689 expended, $157,787 obligated for Citrix 
            hardware and software
    --Encryption--$26,468 expended for Cisco encryption equipment; 
            installation in progress
    --Authentication--$95,000 anticipated; smart cards, technical 
            support, and server to support two-factor authentication 
            (estimated $75,000; in the procurement process); Sygate 
            Security Portal for remote connection policy enforcement 
            (estimated $20,000; in the procurement process)
  --Implementation of mirroring to provide high availability and 
        recovery of payroll/personnel data in NFC's reporting center 
        within 24 hours of a declared disaster: Estimated $2.8 million
    --Mirroring solution for payroll/personnel data in NFC's reporting 
            center--NFC has received the proposals from vendors and is 
            now in the process of evaluating them.
    --Network equipment upgrade at the recovery backup site to support 
            mirroring solution--$60,000 anticipated; in the procurement 
            process
    NFC initially estimated a one-time investment of approximately 
$34.1 million to establish a Federally controlled alternate site within 
350 miles of New Orleans that included collocation of business 
resumption capability. Final plans depended upon on the availability of 
facilities for lease or sublease in the targeted area that have already 
been outfitted for data center operations and the availability of 
funding. If NFC were able to secure space on an existing Federal 
facility that already meets Department of Homeland Security physical 
security standards, it could reduce costs below those shown in the 
original estimates. NFC is currently pursuing site location and 
business continuity options that would enable establishment of an 
alternate computing facilities environment that manages the risks 
associated with discontinued service. Final cost estimates are pending 
receipt of the responses from the Federal community. However, the 
remaining $8.4 million of the fiscal year 2003 appropriation and the 
$12.85 million proposed for fiscal year 2005 are expected to fund much 
of this critical investment.
    This one-time capital investment will address the following 
critical objectives:
  --Undertake actions to reduce enterprise risk and support data 
        mirroring capability. NFC is currently awaiting responses from 
        prospective Federal sources to its statement of requirements 
        seeking excess computing facility space.
  --Buy and install hardware and software needed to support the effort, 
        set up a new tape library system, and design and implement 
        point-in-time remote backup capability.
  --Evaluate emerging backup and recovery options and their associated 
        costs.
    The details of the initial $34.1 million capital investment 
estimates are below. These were included in our September 2003 report 
to Congress. We will update this budget once we receive feedback from 
the prospective Federal site sources.

        ONE-TIME CAPITAL INVESTMENT REQUIREMENT/SERVICEBASE COST
------------------------------------------------------------------------
                   Requirement/Service                       Base Cost
------------------------------------------------------------------------
Alternate Data Center:
    Mainframe hardware/software.........................      $2,650,000
    Distributed servers hardware/software...............       2,775,000
    Storage.............................................      10,550,000
    Tape................................................       3,450,000
    Firewalls/Virtual Private Network...................         675,000
    Telecommunications/LAN equipment....................       2,000,000
    Build-out cost/furniture for 16,000 sq. ft. data           6,444,000
     center space (including 11 employee workstations)..
    Design/engineering/project management contractual          2,854,000
     services...........................................
                                                         ---------------
      Subtotal..........................................      31,398,000
                                                         ===============
Collocation of Business Resumption Capability:
    Build-out cost for 52,000 sq. ft. office space......       1,352,000
    Furniture/workstations for 300 employees............       1,200,000
    Design/engineering/project management contractual            135,000
     services...........................................
                                                         ---------------
      Subtotal..........................................       2,687,000
                                                         ===============
      Total.............................................      34,085,000
------------------------------------------------------------------------

    Question. As of today, what specific sites are under consideration 
for this data mirroring center?
    Answer. We are preparing for solicitation from Federal sources. No 
specific sites are under consideration at this time.
    Question. The fiscal year 2003 Continuing Appropriations Conference 
Report section of the Agriculture Appropriations Bill, 108-10, Pages 
551-552, included report language directing the Secretary of 
Agriculture ``to submit a feasibility study to the Committee on 
Appropriations on the need for remote mirroring backup technology of 
the National Finance Center's data. This study should include a 
breakdown of the costs and time frame associated with acquiring such 
technology, and should designate an appropriate physical location for 
the site. . . .''
    This ``feasibility study'' did not make any specific 
recommendations but it did provide a timeline for specific site 
determination that included a ``competitive site selection for a 
secondary backup data center'' starting in fiscal year 2004. Has this 
process begun?
    Answer. Site specifications are complete. The next step is 
solicitation from Federal agencies, which will occur shortly.
    Question. What is the current timeline and plan for this site 
selection process?
    Answer. We anticipate sending the solicitation package to three 
Federal agencies and getting responses by the end of June 2004.
    Question. The ``feasibility'' report essentially claims as the key 
reason for site selection and criteria for that selection the 
elimination of the ``NFC's extreme vulnerability to the hurricanes 
common to the Gulf Coast.'' In fact, the report continually sites this 
reason as a critical factor.
    Please provide for the record the number of times the NFC has been 
completely shut down because of hurricane events over the last 20 
years. Also, provide for the record the number of times, over the same 
time period that the Department of the Interior's National Business 
Center, General Service Administrations comparable data center and the 
Department of Defense pay and personnel functions have been shut down 
for weather related reasons as well as any other factors. This should 
also include the Office of Personnel Management operations in 
Washington, D.C.
    Answer. Over the past 20 years, NFC was shut down on two occasions 
due to weather for a total down time of approximately 15 hours. On a 
third occasion, operations were limited due to weather conditions 
associated with a hurricane. Each of these occurrences took place since 
1998. Regarding other agencies and Departments of interest to the 
Committee, we learned that the Department of the Interior's National 
Business Center reports no complete building shutdowns. We have been 
unable to obtain up-to-date information from the other agencies 
identified.
                                 ______
                                 

             Questions Submitted by Senator Robert C. Byrd

                      HUMANE SLAUGHTER OPERATIONS

    Question. In fiscal year 2003, $5 million was provided to the Food 
Safety and Inspection Service to increase, by 50 full time equivalents, 
resources dedicated to enforcement of the Humane Methods of Slaughter 
Act (HMSA). The President's request for fiscal year 2005 includes $5 
million to continue this purpose.
    Please describe how the $5 million appropriated in fiscal year 2003 
was allocated, and how the $5 million proposed for fiscal year 2005 
will be allocated.
    Answer. The fiscal year 2003 Appropriations conference agreement 
provided $5 million over 2 years for at least 50 FTE's to enforce the 
HMSA. In 2003, FSIS directed the District Veterinary Medical 
Specialists (DVMSs) to evaluate the time spent conducting humane 
handling verifications. The DVMSs determined that FSIS inspectors and 
veterinarians would spend an estimated 130,000 hours conducting ante-
mortem and humane handling inspections, which translates to more than 
50 FTEs. Based on the survey data, USDA believes that the requirements 
are being met as evidenced by the increased hours of humane slaughter 
activities. At the time the funding was provided, FSIS was developing 
Humane Activities Tracking (HAT) system to allow the agency to more 
accurately capture the time spent on humane handling and slaughter 
enforcement activities by FSIS inspection personnel.
    In fiscal year 2005, the Administration has requested $5 million 
for FSIS to continue the work funded only for fiscal years 2003 and 
2004. This includes staffing and benefit costs directly associated with 
humane handling and slaughter enforcement activities.
    Question. Please explain why you believe the manner you have taken 
to meet the additional 50 full time equivalent requirement will provide 
more effective HMSA enforcement than by using the appropriation to hire 
50 individual inspectors dedicated solely to HMSA enforcement.
    Answer. USDA considers humane handling and slaughter a top 
priority, and FSIS veterinarians and inspectors are required to enforce 
humane handling and slaughter regulations at all of the more than 900 
federally inspected establishments. FSIS continues to improve training 
and education efforts to ensure that all field personnel understand 
their authority, obligation and accountability to rigorously enforce 
the Humane Methods of Slaughter Act (HMSA). The fiscal year 2003 
Appropriations conference agreement provided $5 million over 2 years 
for at least 50 full time equivalents (FTEs) to enforce the HMSA. FSIS 
secured at least 50 FTEs dedicated to HMSA enforcement during Calendar 
Year 2003. Based on the DVMS survey data, USDA believes that the HMSA 
requirements are being met as evidenced by the increased hours of 
humane slaughter activities across all federally inspected 
establishments. Because of the importance of this top priority to the 
entire field workforce, in fiscal year 2005, the Administration has 
requested $5 million for FSIS to continue the work funded in fiscal 
year 2003 and 2004.
    Question. Critics of current HMSA enforcement suggest that unless 
FSIS personnel are always present at animal handling and slaughter 
sites, there is no way to know if HMSA violations occur. Further, it 
has been suggested that plant employees use communication methods to 
warn handling and slaughter employees when FSIS personnel are 
approaching their work stations and, only then, is stricter compliance 
with HSMA requirements pursued by plant employees.
    Would you please respond to these criticisms?
    Answer. Humane handling activities and food safety systems are both 
under on-going regulatory activities as part of FSIS inspection 
personnel's everyday responsibilities. FSIS employees use a variety of 
methods to determine compliance with the HMSA and do not rely upon a 
single mode of evaluation. Some of these methods include standing in 
establishments where they cannot be observed, listening to unusual 
livestock vocalizations, viewing any changes in carcasses (e.g., 
bruising), communicating with plant employees to ask how they handle 
certain situations, and conducting off hours inspections (e.g., 
observing humane handling during off-loading at a plant that receives 
animals during the evening hours. The Veterinary Medical Officer (VMO) 
is authorized administrative overtime to come back for unscheduled 
observation during the evening).
    The DVMSs routinely work with the VMOs on the importance of 
utilizing different approaches to verifying humane handling 
requirements. DVMSs work with FSIS inspection personnel to emphasize 
the importance of, and methods of, observing humane handling in 
locations where inspection personnel are not readily identified. If 
there is not a location to verify animal handling without being 
observed, the VMO is instructed to stand in a location to listen for 
vocalization by the livestock, or excessive yelling by plant employees. 
Both are indicators that plant employees may be using excessive force 
to move the animals.
    Question. How many plants under the jurisdiction of HMSA have the 
capability to allow FSIS personnel to observe undetected plant animal 
handling slaughter operations?
    Answer. Most of the approximately 300 largest livestock operations 
have safe areas with minimal visibility where FSIS personnel can and do 
observe plant animal handling and slaughter operations without being 
observed by plant employees. In addition, DVMSs and VMOs are authorized 
to conduct off hours inspections to observe humane handling during off-
loading at a plant that receives animals during the evening hours. 
However, continuous visibility is the most effective method to observe 
HMSA compliance in small and very small operations. VMOs are trained to 
listen for changes in an animal's behavior and to look for indicators 
while observing carcasses. The need to be able to make this type of an 
assessment is part of the information provided by the DVMSs and is 
included in the new employee training for newly hired veterinarians.
    Question. What is USDA doing to increase this capability?
    Answer. FSIS inspection personnel have a continuous, on-going, 
daily presence in all livestock slaughter operations. The fact that 
FSIS personnel are constantly present and observing animal handling and 
slaughter procedures for compliance with the HMSA keeps the industry 
aware of the regulatory presence. DVMSs work with FSIS inspection 
personnel to emphasize the importance of, and methods of, observing 
humane handling in locations where inspection personnel are not readily 
identified. It is also addressed in the new training developed for 
newly hired veterinarians, and is addressed by the mentors provided to 
assist newly hired FSIS veterinarians. In addition, DVMSs and VMOs are 
authorized to conduct off hours inspections to observe humane handling 
during off-loading at a plant that receives animals during the evening 
hours.
    Question. Would USDA support a requirement to require such a 
capability?
    Answer. USDA has a continuous regulatory presence through its FSIS 
inspection personnel in all livestock slaughter operations under 
official inspection. FSIS conducts humane handling and slaughter 
verification using a complete array of inspection procedures and 
professional judgment to verify compliance with the HMSA. Requiring 
FSIS personnel to observe undetected plant animal handling slaughter 
operations would likely be a burden on small and very small plants.
    Question. Would USDA support a requirement for, as an option, the 
installation of a closed-circuit television monitor to allow FSIS 
personnel to make these observations from a remote location? If not, 
why?
    Answer. As the law requires, FSIS inspection personnel, including 
veterinarians, are in all federally inspected slaughter plants every 
day and every minute that they are in operation. An establishment may 
not slaughter without the presence of inspection personnel. Inspection 
personnel conduct humane slaughter verification procedures at these 
establishments on a daily basis. These procedures include observation 
of the establishment's stunning methods.
    Cost must also be considered as the installation of a closed-
circuit television monitor could place a burden on small and very small 
plants. If USDA were to bear the cost for such a system, substantial 
funding would be needed. In addition, maintenance costs would likely be 
problematic due to the potential difficulty in maintaining such a 
system in a high humidity environment.
    USDA does not believe that the addition of cameras would improve 
the observation capability of trained inspectors. FSIS veterinarians 
are technically trained to observe subtle signs indicative of humane 
handling and slaughter methods, which may not be identifiable under 
video surveillance. For example, ensuring animals are either dead or at 
the level of surgical anesthesia is critical when evaluating stunning 
effectiveness. This requires hands-on evaluation of the animal. If 
these very subtle signs are missed, animals can return to consciousness 
within a few seconds. The presence of FSIS inspectors in a plant is 
much more integral to enforcing the HMSA. All in-plant FSIS personnel 
are expected to enforce this Act and are held accountable for taking 
corrective and/or enforcement actions if it is violated.
    Question. Please provide information regarding the fiscal year 2005 
cost of integrating the Humane Animal Tracking System within the FAIM 
architecture.
    Answer. FSIS upgraded its electronic Animal Disposition Reporting 
System (eADRS) with the incorporation of HAT in February 2004. HAT will 
allow the agency to more accurately capture the time spent on humane 
handling and slaughter enforcement activities by FSIS inspection 
personnel. Fiscal year 2005 costs will be covered within base funding.
    Question. Please provide information regarding the number of FSIS 
personnel, in fiscal year 2003, who may have received agency 
reprimands, or similar actions, for taking any HMSA regulatory action 
against a plant operation which was later found to be inappropriate or 
unnecessary.
    Answer. All in-plant FSIS personnel are expected to enforce the 
HMSA and are held accountable for taking corrective and/or enforcement 
actions if it is violated. In fiscal year 2003, FSIS employees did not 
take any HMSA regulatory actions that were later found to be 
inappropriate or unnecessary. In fact, certificates of recognition have 
been provided to FSIS personnel for acting responsibly in certain HMSA 
enforcement situations.
    Question. Conversely, please provide information regarding 
recommendations by FSIS personnel to take an HMSA regulatory action 
against a plant operation which was subsequently rejected by an FSIS 
supervisor.
    Answer. USDA is not aware of any recommendations by FSIS personnel 
to take an HMSA regulatory action against a plant operation which was 
subsequently rejected by an FSIS supervisor. Because FSIS trains all 
in-plant Veterinary Medical Officers (VMOs) and slaughter line 
inspectors about humane handling responsibilities, the agency is 
confident in their ability to properly enforce the HMSA.
    Question. On pages 29 and 30 of GAO report 04-247, dated January 
30, 2004, on the subject of the Humane Methods of Slaughter Act, six 
specific recommendations are listed for you to further strengthen HMSA 
regulatory actions.
    Please describe steps you have taken to carry out each of these 
recommendations.
    Answer. USDA places a very high priority on ensuring that animals 
produced for food are treated in a humane manner and has taken swift 
action in instances where establishments have been found in violation 
of the Humane Methods of Slaughter Act (HMSA). FSIS has already 
incorporated many of the recommendations made by GAO that will improve 
the quality and consistency of our enforcement efforts. Below is FSIS' 
action plan in regards to the recommendations.

GAO Recommendation
    To provide more quantifiable and informative data on violations of 
the HMSA, GAO recommends that the Secretary of Agriculture direct FSIS 
to supplement the narrative found in noncompliance reports with more 
specific codes that classify the types and causes of humane handling 
and slaughter violations.

            USDA Response
    Noncompliance reports are stored electronically in the Performance 
Based Inspection System (PBIS). FSIS will determine whether it is 
feasible and appropriate to modify the PBIS to incorporate additional 
humane handling violation codes. The current database format contains 
detailed narratives from FSIS Noncompliance Records (NRs). These 
narratives contain a wealth of information beyond what is provided in a 
simple classification code and provide the basis for a thorough 
analysis.
    In addition, DVMSs are now using procedures and tracking tools to 
continually monitor regional trends and anomalies in establishment 
compliance. These procedures and tracking tools are currently separate 
from PBIS. All noncompliance reports are now being sent to the District 
Office where they are reviewed and analyzed by the DVMS.

GAO Recommendation
    To ensure that district officials use uniform and consistent 
criteria when taking enforcement actions, GAO recommends that the 
Secretary of Agriculture direct FSIS to establish additional clear, 
specific, and consistent criteria for District Offices to use when 
considering whether to take enforcement actions because of repetitive 
violations.

            USDA Response
    FSIS is developing guidance for inspection personnel which will (1) 
provide clear, specific, and consistent criteria for the District 
Offices when taking enforcement actions because of repetitive 
violations, (2) require the clear documentation of the basis for the 
decision regarding enforcement actions of repetitive HMSA violations 
and (3) provide criteria for determining when inspection personnel 
would issue an NR and when immediate suspension is warranted. FSIS 
expects to issue a Notice to inspection personnel this summer.
    In addition, FSIS Directive 5000.1, ``Enforcement of Regulatory 
Requirements in Establishments Subject to HACCP Systems Regulations'' 
issued on May 21, 2003, and the Food Safety Regulatory Essentials 
courses provide guidance and direction to inspection personnel to 
ensure consistent use of enforcement actions. These materials emphasize 
a thought process rather than fixed criteria for initiating enforcement 
action. They pose a series of questions for inspection personnel to 
consider when determining whether a second violation is an isolated 
incident or a trend of noncompliance is developing.

GAO Recommendation
    To ensure that district officials use uniform and consistent 
criteria when taking enforcement actions, GAO recommends that the 
Secretary of Agriculture direct FSIS to require that District Offices 
and inspectors clearly document the basis for their decisions regarding 
enforcement actions that are based on repetitive violations.

            USDA Response
    FSIS is developing guidance for inspection personnel which will (1) 
provide clear, specific, and consistent criteria for the District 
Offices when taking enforcement actions because of repetitive HMSA 
violations, (2) require the clear documentation of the basis for the 
decision regarding enforcement actions of repetitive violations and (3) 
criteria for determining when inspection personnel would issue an NR 
and when immediate suspension is warranted. FSIS expects to issue a 
Notice to inspection personnel this summer.
    FSIS is using the Administrative Enforcement Report (AER) process 
to ensure that the proper case support files and documents are in place 
when an enforcement action is taken. A key component of this case file 
is documentation generated by the FSIS in-plant employees. Properly 
documented NRs and memos of pertinent plant meetings, conversations, 
and other documentation are vital, and are important parts of the AER 
reporting process.

GAO Recommendation
    To ensure that FSIS can make well-informed estimates about the 
resources it needs to enforce the HMSA, GAO recommends that the 
Secretary of Agriculture direct FSIS to develop a mechanism for 
identifying the level of effort that inspectors currently devote to 
monitoring humane handling and slaughter activities.

            USDA Response
    FSIS has developed a new computer database, Humane Activities 
Tracking, to provide detailed and current data related to time spent on 
specific humane handling and slaughter verification activities by 
inspectors. HAT is one component of the Agency's updated electronic 
Animal Disposition Reporting System (eADRS) and e-gov initiative. eADRS 
will replace the current use of FSIS paper forms to report information 
about animals presented for slaughter. FSIS will utilize information 
and data from the new tool to determine the adequacy of its resources 
for enforcing humane handling and slaughter requirements at the 
individual plants.

GAO Recommendation
    To ensure that FSIS can make well-informed estimates about the 
resources it needs to enforce the HMSA, GAO recommends that the 
Secretary of Agriculture direct FSIS to develop criteria for 
determining the level of inspection resources that are appropriate on 
the basis of plant size, configuration, or history of compliance.

            USDA Response
    FSIS will use HAT and eADRS to document the number of animals 
slaughtered each day and the amount of time spent monitoring various 
aspects of humane handling and slaughter requirements. Information 
maintained in the eADRS will be regularly examined by FSIS managers to 
assist in inspection resource planning.

GAO Recommendation
    To ensure that FSIS can make well-informed estimates about the 
resources it needs to enforce the HMSA, GAO recommends that the 
Secretary of Agriculture direct FSIS to periodically assess whether 
that level is sufficient to effectively enforce the Act.

            USDA Response
    FSIS will use eADRS and HAT to document the number of animals 
slaughtered each day and the amount of time spent monitoring various 
aspects of humane handling and slaughter requirements. Information 
maintained in the eADRS and HAT will be regularly examined by FSIS 
managers to assist in inspection resource planning, and to determine if 
staffing levels are adequate. Additionally, FSIS will periodically 
assess whether the staffing level is sufficient to effectively enforce 
the Act.
    Question. With funds provided by this Committee in fiscal year 
2001, USDA established 17 District Veterinary Medical Specialist (DVMS) 
positions dedicated solely to HMSA activities.
    Please describe the activities of these DVMS personnel in fiscal 
year 2003, how they intend to carry out their responsibilities in 
fiscal year 2004, and how they will carry out their responsibilities in 
fiscal year 2005, and in particular, describe, if any, activities that 
are not related to HMSA enforcement including the percentage of time 
spent on non-HMSA enforcement. Specifically, what percentage of their 
time is spent in plants subject to HMSA jurisdiction?
    Answer. USDA considers humane handling and slaughter a high 
priority and is committed to ensuring compliance with the HMSA. In 
fiscal year 2003, each DVMS attended training and then conducted 
assessments of each livestock facility within their district. The DVMSs 
provided leadership for humane handling and slaughter activities by 
conducting on-site training for field personnel during their visits. 
They disseminated new information to field personnel and coordinated 
humane handling and slaughter non-compliance actions for their 
District.
    The DVMSs also participated in monthly conference calls and in 
working groups to assist the agency in humane handling strategies. The 
DVMSs have developed the Humane Interactive Knowledge Exchange (HIKE) 
tool, which provides humane handling and slaughter scenarios to help 
improve the uniform understanding of humane enforcement throughout the 
field. The DVMSs participated in the development of the Humane 
Activities Tracking system and have developed tools to analyze humane 
handling data within their District to ensure that Frontline 
Supervisors are informed of any data trends. The DVMSs developed and 
utilized established protocols for following up on humane handling 
violations. The efforts and recommendations made by the DVMSs have 
improved the consistency of humane handling enforcement among all 
Districts.
    In fiscal year 2004, DVMSs continue strengthening the humane 
handling and slaughter enforcement and education of FSIS inspection 
personnel. Thus far, in fiscal year 2004, each DVMS continues to 
conduct on-site training with field personnel and coordinate humane 
handling and slaughter non-compliance actions for their District. The 
DVMSs are utilizing HAT to document and capture the time spent by 
veterinarians and other FSIS inspection personnel conducting humane 
handling and slaughter activities. The DVMSs have provided expert 
advice for the development of new Directives and Notices used to inform 
inspection personnel of the requirements, verification activities, and 
enforcement actions for ensuring that the handling and slaughter of 
livestock is humane. The DVMSs have also surveyed field employees on 
their knowledge of and training needs for humane handling and slaughter 
verification, so that the agency can determine what additional needs it 
may have in these areas. The DVMSs continue developing the HIKE 
scenarios to help improve the uniform understanding of humane 
enforcement throughout the field. The DVMSs also distributed up-to-date 
information to industry and FSIS personnel about new FSIS policies and 
provided FSIS field employees with information on industry's Humane 
Good Management Practices and auditing systems so that they may 
encourage industry to not only follow FSIS regulations, but to also 
adopt a systems approach to continually improve livestock handling 
practices. In fiscal year 2004, the DVMSs also began a strategic 
planning process to continually improve their service to the field.
    The DVMSs will continue to build on the activities carried out in 
2004, expand their ability to analyze trends, improve the tracking of 
the time spent by FSIS personnel on humane handling and slaughter 
activities, and continually improve the effectiveness of FSIS' humane 
handling and slaughter verification activities. All DVMSs focus on 
humane handling and slaughter verification and will continue to do so.
    During 2004, DVMSs spent approximately 75 percent of their time 
conducting in-plant assessments at plants subject to HMSA jurisdiction.
    Question. To what extent do DVMS personnel visit locations in 
Districts other than their own?
    Answer. DVMS personnel visit other Districts on an as needed basis. 
Each FSIS District Manager evaluates the needs of the District in order 
to effectively utilize DVMSs and ensure that needs are fully met. DVMSs 
have also crossed District lines when the Agency must follow-up on 
specific concerns that have been brought to the Agency's attention.
    Question. Will USDA support assigning additional FSIS personnel to 
assist DVMS's in order to increase the frequency of plant visits?
    Answer. Currently, the DVMSs enable the Agency to fully ensure 
enforcement of the HMSA. However, as the need arises, FSIS will adjust 
accordingly. For example, to ensure adequate humane handling 
verification in Puerto Rico, FSIS trained a veterinarian in the DVMS 
methodology to assist in this remote location.

                      PASTURE-RAISED BEEF PROJECT

    Question. The February 2004, edition of Agriculture Research 
Solving--Problems for the Growing World, published by the Agricultural 
Research Service, contained a story entitled Grass Fed Cattle Follow 
the Appalachian Trail. It is a story about a project that I have been 
proud to secure funds for over the course of the past few years. It is 
doing important research regarding pasture-raised beef.
    Now that Mad Cow Disease has reared its ugly head here in the 
United States, the markets for pasture-raised beef, naturally grown 
without hormones or antibiotics, will continue to grow. That is causing 
hope for Appalachia's family farmers who are participating in this 
program. The goal of the project is to reduce foreign imports of beef 
by increasing the supply of healthy, grass-raised beef from Appalachia. 
This sounds like a wise use of the taxpayers dollars that will directly 
benefit the family farmers of West Virginia.
    With the Department highlighting the benefits of this project, can 
you then explain to me why this Administration, and the President, sent 
up a budget in February, the very month of the publication of this 
magazine, that would cut this program by 81 percent, from $1,625,024 to 
$301,312?
    Answer. We fully recognize the accomplishments of this project and 
its potential benefits to the family farmers of West Virginia. This 
project is part of the $169.4 million in unrequested projects 
appropriated to ARS between fiscal years 2001 through 2004. These 
unrequested projects were proposed for termination in the fiscal year 
2005 President's budget to redirect these resources towards the need to 
implement higher National priority initiatives, such as obesity 
research, food safety, emerging animal and plant diseases, controlling 
invasive species in plants and animals, and other research initiatives 
critical to advancing this Nation's food and agriculture economy. 
Setting priorities requires that these kinds of choices be made.

     FUNDING FOR FOOD SAFETY/ANIMAL HEALTH INSPECTIONS AND RESEARCH

    Question. In the fiscal year 2002 Supplemental Appropriations Bill, 
the Congress provided the President with resources to increase 
surveillance, inspections, and research to reduce the likelihood that 
diseases, such as Mad Cow Disease, would threaten American consumers. 
That bill included $5 million for animal health research, $13 million 
for food safety inspections (notably for imported products), and $39 
million for enhanced animal health inspection and surveillance 
programs. In several instances, these funds were specifically directed 
for Mad Cow Disease-related activities.
    However, when given the opportunity to make those funds available, 
the President refused to designate those needs as an emergency. As a 
result, you were deprived of significant resources to fight problems 
like Mad Cow Disease. I don't mean to imply that the use of those funds 
in fiscal year 2002 would have prevented the recent incident in 
Washington State, but it would have contributed toward greater 
surveillance and a better understanding of how to identify and control 
problems like Mad Cow disease.
    On January 6, 2004, I wrote President Bush a letter of admonishment 
pointing out that he let slip through his fingers resources which could 
have assisted him, and you, and the American people, be better prepared 
to meet the challenges that the introduction of a disease, such as Mad 
Cow Disease, would pose to this country.
    However, I note that the President's fiscal year 2005 budget 
request includes increases for what he is calling a Food and 
Agriculture Defense Initiative to carry out some of these same 
activities that he rejected 3 years earlier. It appears that the 
President is more properly trying to play catch up in areas that 
Congress tried to initiate before the public's attention was more 
brought to focus on these problems and the President began to feel the 
political heat. Even if the full Food and Agriculture Defense 
Initiative is funded in the fiscal year 2005 appropriations bill, those 
resources still will not be available until next fiscal year. Instead 
of immediate action, the President is proposing additional delay.
    Secretary Veneman, when the President was faced with the choice of 
using or rejecting those supplemental funds in 2002, did you make the 
case to President Bush that those resources should be utilized? If you 
didn't think those funds were needed in 2002, why do you think they are 
needed in 2005?
    Answer. Each year, the Department submits a budget request based on 
program area needs at the time, and the Administration developed a 
funding request that it thought was appropriate in view of fiscal 
realities. The additional funds Congress added above the request were 
deemed not necessary given the timeframe related to the supplemental.
    FSIS, in conjunction with other Federal agencies, has conducted 
vulnerability assessments along the farm-to-table continuum for 
domestic and imported products in order to protect against intentional 
or unintentional contamination of the food supply. Based, in part, on 
the vulnerability assessments, USDA, the Department of Health and Human 
Services and the Department of Homeland Security are working together 
to create a comprehensive food and agricultural policy, known as the 
food and agriculture defense initiative. The Department's fiscal year 
2005 budget request includes funding to support FSIS' components of the 
food and agriculture defense initiative--biosurveillance, the Food 
Emergency Response Network, data systems to support the Food Emergency 
Response Network, enhancing FSIS laboratory capabilities, and follow-up 
biosecurity training for front-line staff.
                                 ______
                                 

            Questions Submitted by Senator Daniel K. Inouye

                            BROWN TREE SNAKE

    Question. We understand that USDA-APHIS participated in a cross-cut 
budget process for invasive species funding with other departments and 
agencies and that brown tree snake was selected to be one of the ten 
issues to be focused on for enhanced effort.
    What level of new funding has been provided in the fiscal year 2005 
budget request to address the urgent needs of Wildlife Services 
Operations and Wildlife Services Methods Development efforts dealing 
with the brown tree snake on Guam and in the U.S.-affiliated Pacific?
    Answer. In the fiscal year 2005 budget request, APHIS had to 
address areas that posed the highest levels of risk and potential 
losses to American agriculture, such as enhancing efforts to prevent 
the introduction of foreign animal diseases and foreign plant pests 
from entering the United States; we could not address all identified 
needs and as such the fiscal year 2005 budget request does not include 
additional funding to address brown tree snakes on Guam.

                   PRECLEARANCE INSPECTIONS IN HAWAII

    Question. While fiscal year 2005 budget request seems to include 
funding for direct and interline preclearance inspections in Hawaii, 
the specifics are not clear.
    Please provide details on the funds requested for fiscal year 2005 
for direct and interline preclearance inspections in Hawaii, and 
provide a comparison for funds appropriated for fiscal year 2004.
    Answer. APHIS conducts pre-departure, agricultural inspections of 
passengers and cargo traveling from Hawaii and Puerto Rico to the 
mainland United States. To assist Hawaii, we also conduct inspections 
of passengers traveling from outlying Hawaiian Islands to the mainland. 
Prior to fiscal year 2003, Hawaii funded this service through a 
reimbursable agreement for $3 million. In fiscal year 2003, Congress 
provided $2 million for the interline inspection program, and Hawaii 
paid the remaining $1 million. Congress provided additional funding for 
the interline program in fiscal year 2004, bringing the total available 
for the program to $2.771 million. APHIS is not requesting funds for 
Hawaii interline inspections in fiscal year 2005 and will rely on a 
reimbursable agreement with Hawaii to conduct the program.

                               COQUI FROG

    Question. The coqui frog is an alien invasive pest with no natural 
enemies in Hawaii and is now established in many areas throughout the 
State of Hawaii. Their presence and population levels are disruptive to 
the export of potted flowers and foliage and to the peace and quite of 
many communities in the State.
    Has APHIS made any estimates of the funds needed to control the 
coqui frog in Hawaii? Has APHIS included any funds in its fiscal year 
2005 budget request to control coqui frog populations in Hawaii?
    Answer. APHIS Wildlife Services (WS) estimates it would take $1.85 
million annually to enhance management and methods development efforts 
for the control of Caribbean tree frogs in Hawaii. In the fiscal year 
2005 budget request, APHIS had to address areas that posed the highest 
levels of risk and potential losses to American agriculture, such as 
enhancing efforts to prevent the introduction of foreign animal 
diseases and foreign plant pests from entering the United States; we 
could not address all identified needs and as such the fiscal year 2005 
budget request does not include additional funding to control coqui 
frogs in Hawaii.

                          SUBCOMMITTEE RECESS

    Senator Bennett. On that happy note, the subcommittee is 
recessed.
    [Whereupon, at 3:01 p.m., Thursday, March 25, the 
subcommittee was recessed, to reconvene to subject to the call 
of the Chair.]
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