    [Senate Hearing 109-323]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 109-323, Pt. 3

                                                            Senate Hearings

                                     Before the Committee on Appropriations

    _______________________________________________________________________

                                                         Agriculture, Rural

                                                   Development, and Related

                                                    Agencies Appropriations

                                                                Fiscal Year
                                                                       2007

                                             109th CONGRESS, SECOND SESSION

                                                                  H.R. 5384

    PART 3

      DEPARTMENT OF AGRICULTURE

      DEPARTMENT OF HEALTH AND HUMAN SERVICES

      NONDEPARTMENTAL WITNESSES
     Agriculture, Rural Development, and Related Agencies Appropriations,
                                      2007
                              (H.R. 5384)--Part 3

                                                S. Hrg. 109-323, Pt. 3Sec.

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2007

    =======================================================================

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       on

                                   H.R. 5384

     AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
     AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
             YEAR ENDING SEPTEMBER 30, 2007, AND FOR OTHER PURPOSES

                                   __________

                                     PART 3

                           Department of Agriculture
                    Department of Health and Human Services
                           Nondepartmental Witnesses

                                   __________

             Printed for the use of the Committee on Appropriations

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html

                        U.S. GOVERNMENT PRINTING OFFICE
    27-147                      WASHINGTON : 2006
    _____________________________________________________________________________
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                                   __________

                          COMMITTEE ON APPROPRIATIONS

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

      Subcommittee on Agriculture, Rural Development, and Related Agencies

                       ROBERT F. BENNETT, Utah, Chairman
    THAD COCHRAN, Mississippi            HERB KOHL, Wisconsin
    ARLEN SPECTER, Pennsylvania          TOM HARKIN, Iowa
    CHRISTOPHER S. BOND, Missouri        BYRON L. DORGAN, North Dakota
    MITCH McCONNELL, Kentucky            DIANNE FEINSTEIN, California
    CONRAD BURNS, Montana                RICHARD J. DURBIN, Illinois
    LARRY CRAIG, Idaho                   TIM JOHNSON, South Dakota
    SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
                                         ROBERT C. BYRD, West Virginia
                                           (ex officio)
                               Professional Staff

                               Fitzhugh Elder IV
                                Hunter Moorhead
                                 Stacy McBride
                                 Dianne Preece
                           Galen Fountain (Minority)
                       Jessica Arden Frederick (Minority)
                           William Simpson (Minority)
                            Tom Gonzales (Minority)

                                C O N T E N T S

                                  ----------

                            Thursday, March 9, 2006

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

                            Tuesday, March 14, 2006

    Department of Health and Human Services: Food and Drug
      Administration.................................................   133

                            Thursday, March 30, 2006

    Department of Agriculture........................................   297
    Nondepartmental Witnesses........................................   527

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2007

                                  ----------

                            THURSDAY, MARCH 9, 2006

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 8:34 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett, Bond, Burns, Craig, Kohl, and
    Dorgan.

                           DEPARTMENT OF AGRICULTURE

                            Office of the Secretary

    STATEMENT OF HON. MIKE JOHANNS, SECRETARY
    ACCOMPANIED BY:
            CHARLES CONNER, DEPUTY SECRETARY
            KEITH COLLINS, CHIEF ECONOMIST
            W. SCOTT STEELE, BUDGET OFFICER

                 opening statement of senator robert f. bennett

        Senator Bennett. The subcommittee will come to order.
        I will tell our witnesses and spectators, as well as
    senators, that the full committee has a meeting scheduled at
    9:30 to hear Secretary Rumsfeld and Secretary Rice discuss the
    appropriations with respect to Katrina. So we will do our best
    to be finished with this hearing in time to go to the full
    committee for that hearing.
        And we are grateful to Secretary Johanns for his
    willingness to appear at this hour in the morning. There are
    some senators who say it isn't even light yet at 8:30, and what
    are we doing convening this early? But we are grateful, Mr.
    Secretary, that you would meet our schedule with respect to
    that, and we welcome you before the subcommittee.
        This is the Secretary's second appearance before the
    subcommittee, and we understand you celebrated your 1-year
    anniversary as the Secretary in January.
        And with you, we welcome Mr. Conner, Dr. Collins, and Mr.
    Steele.
        Before I speak about the specifics of USDA's budget
    request, I would like, Mr. Secretary, to take the opportunity
    to thank you and your Department for your efforts in the wake
    of Hurricane Katrina.
        Secretary Johanns. Thank you.
        Senator Bennett. We have heard a great deal of criticism
    about Katrina with respect to a number of other agencies, but
    the work that was done by USDA employees in feeding and housing
    thousands of people has gone unnoticed and unremarked upon in
    the national media. So I want to take this occasion to
    congratulate them through you for the work that all of your
    employees did.
        The Natural Resources Conservation Service and the Farm
    Service Agency are working to restore watersheds and farms and
    ranches throughout the region, which is vitally important.
        On a personal note, I would also like to thank you for your
    department's help in Utah, when we had a natural disaster.
    January of 2005, just a little over a year ago, Washington
    County experienced some of the worst flooding in its history.
    And NRCS rose to the challenge. It has helped restore the
    damage caused by those floods.
        And then, particularly, I want to recognize the efforts of
    Sylvia Gillen, one of your employees. She is the Utah State
    Conservationist. And she has been creative and helpful and
    responsive, and she does a great job for you, and she has done
    a great job for the people of Utah. And we want to recognize
    that.
        Now the USDA request for the subcommittee is approximately
    $15.6 billion, and this represents a 7 percent or $1.263
    billion decrease from last year. We don't usually deal with
    decreases around here, and these are the OMB numbers. We are
    awaiting more information from CBO that might change these
    numbers a little up or down, but basically, they will stay in
    the same ballpark.
        And quite frankly, Mr. Secretary, this is a fairly
    significant hole that this subcommittee is going to have to try
    to climb out of. The President's budget eliminates
    approximately $378 million of Federal support for agriculture
    research at the Nation's land grant colleges and universities,
    as well as USDA's own in-house research agency. That is
    something that concerns me. I am a strong supporter of research
    and the value that we get for that long term.
        Another $176 million is eliminated for conservation and
    watershed projects throughout the country. And one of the
    unfortunately standard budget tricks that every OMB, regardless
    of who is President or regardless of which party controls it,
    is in this budget. The budget includes $182 million in new user
    fees, which are not likely to be enacted by the Congress, which
    means we have got to find another $182 million in cuts to
    offset that projected revenue increase.
        Finally, funding is eliminated for the Grazing Lands
    Conservation Initiative, housing for very low-income families,
    and the Commodity Supplemental Food Program, among others. And
    I am sure members of the subcommittee will raise these issues
    with you this morning and give you the opportunity to talk
    about that.
        Now the budget does put an added emphasis on the Food and
    Agriculture Defense Initiative and activities related to avian
    flu, the highly pathogenic possible pandemic that we may be
    facing.
        So I will now turn to Senator Kohl, the Ranking Member.
    Members will be able to submit questions for the record if they
    are not here. And I will tell members through their staffs who
    are here; we hope that all questions to the subcommittee can be
    submitted by the close of business on Friday, March 17. And
    then we will forward those to you, Mr. Secretary.
        Senator Kohl.
        Senator Kohl. I thank you, Mr. Chairman.
        Secretary Johanns, we welcome you, and it is good to see
    you again. Mr. Conner, Dr. Collins, and Mr. Steele, we also
    extend our welcome to you.
        Mr. Secretary, at the outset, I think it is important that
    we recognize some of the very good work that you and the
    Department have done this last year. By all reports, the USDA
    response to the terrible storms in the Gulf Coast, especially
    from your nutrition and rural development programs, was among
    the very best in the Government.
        Your quick action meant lives saved and families placed
    firmly on the path toward recovery. So we congratulate you on
    your good work. But we all know that there have been some
    missteps at the Department over the past several months, which
    have too often crowded out the good work that you have done.
        Chairman Bennett and I face a tremendous challenge to craft
    a bill under the current budget constraints. The President's
    budget assumes too many unrealistic or unacceptable deficit
    reduction measures. It assumes more than $300 million in
    unauthorized user fees that Congress has rejected time and time
    again, and it calls for the elimination of a small, but vital
    feeding program for the elderly.
        And although this is in the authorizing arena, the
    President's proposal to tax dairy farmers in order to offset
    tax breaks for multi-millionaires is not acceptable.
        These are all topics we are likely to visit today, and I
    look forward to your statement.
        Mr. Chairman, I want to thank you and publicly state how
    grateful I am for the relationship that you and I have
    developed over the past 2 years on this subcommittee, and I
    look forward to working with you.
        Senator Bennett. Thank you very much.
        I will echo the comments about the working relationship.
    You and your staff have been a joy to work with, and we don't
    have any partisan differences here. Wish the rest of the
    Congress could get along as well as we do.
        Normally, we do not have additional opening statements. But
    since there is only one other member of the subcommittee here,
    Senator Craig, do you have something you would like to say
    before we hear from the Secretary?
        Senator Craig. Well, Mr. Chairman, thank you very much.
        I guess I was under some odd illusion that this was the Ag
    Committee, and at this hour, you were probably going to serve
    breakfast.
        But that doesn't appear to be the case.
        Senator Bennett. That is an illusion, sir.
        Senator Craig. All right. All right. Well, it is possible
    that the Secretary could have brought examples of products of a
    variety of States.
        Anyway, let me echo what both our Chairman and our Ranking
    Member have said about the performance of the Department over
    the last year and during, Mr. Secretary, some of these most
    difficult times. I am always amazed that one agency that was
    not designed to do what the press expected it to do, be a first
    responder, largely got criticism while so many others did so
    very well.
        The Chairman and the Ranking Member have expressed how USDA
    performed in Katrina. I chair the authorizing committee of
    Veterans Affairs, another unbelievable example of true heroism.
    Thousands of people rescued. No one lost their lives. We
    evacuated 3 hospitals and the pharmaceuticals and the families
    of the employees and the pets.
        And yet that has made no headlines as, once again, another
    agency of our Federal Government in a time of tremendous
    difficulty responded very gallantly, with its staff refusing to
    leave the hospitals in care of their patients. Concerned about
    their families, obviously, but not leaving.
        So there are great stories out there, and it is important
    that we recognize them because somehow they don't rise to the
    level of attention on the part of others.
        We are on the eve of a 2007 Farm Bill. It is looming large
    on the horizon, Mr. Secretary, at a time when the Chairman has
    already expressed the cuts that are proposed in this budget.
    And I think he was modest in saying a hole in which one will
    attempt to dig ourselves out. It is a hole, and we will see how
    we can handle it.
        At the same time, I think you and I were expressing the
    oddity this morning of a record snow storm in western Oregon
    and range fires in Kansas, all on the same morning, reported on
    the same news clip. Record drought in northern Texas and
    Oklahoma and Arizona and parts of Kansas, and it doesn't appear
    to be alleviating at this moment. There will probably be some
    extraordinary needs there that my guess is not in this budget.
        So with that, let us get to your testimony and the
    beginning of a very positive working relationship on this
    budget to resolve our differences and serve American
    agriculture.
        Thank you. Thank you, Mr. Chairman.

                              prepared statements

        The subcommittee has received statements from Senators
    Cochran and Durbin which will be placed in the record.
        [The statements follow:]

                   Prepared Statement of Senator Thad Cochran

        Mr. Chairman, thank you for holding this hearing on the fiscal year
    2007 United States Department of Agriculture budget. I welcome
    Secretary Johanns back to the Committee.
        I want to thank Secretary Johanns and his staff for their work
    throughout the Gulf Coast region for their assistance in the effort to
    recover from the devastating impact of Hurricanes Katrina and Rita. The
    Department has a large presence in the hurricane affected region which
    is an important asset to the communities of the Gulf Coast.
        The employees of the National Forest Service, Natural Resource
    Conservation Service, Rural Development, and Farm Service Agency were
    all ready to assist immediately following the hurricanes. These
    agencies are to be commended for their swift action and ability to not
    let ``red tape'' get in the way of providing immediate help to
    thousands of Mississippi residents devastated by Hurricanes Katrina and
    Rita. The efficient manner in which USDA was able to respond after the
    Hurricane Katrina should be an example for all agencies during times of
    crisis.
        All of Mississippi's agriculture industries were hurt by the
    hurricanes last summer. Producers and the residents of the rural areas
    of Mississippi appreciate the continued support USDA has provided for
    hurricane related losses. But, much more help is needed to get the
    disaster victims back on their feet. I look forward to continuing to
    work with USDA to further assist these family farms and ranches.
        An important aspect of the Agriculture Appropriations bill is the
    funding it provides for agriculture research. This research is a
    critical part of ensuring that U.S. producers remain the leaders in
    food and fiber production. The funding this bill invests in agriculture
    research is a small sum compared to the economic benefit it has on a
    farmer's bottom line. I thank Chairman Bennett and the Ranking Member
    Senator Kohl for their continued leadership to assist America's farmers
    and ranchers.
        Mr. Chairman, I thank you for holding this hearing and I look
    forward to the testimony.
                                     ______

                Prepared Statement of Senator Richard J. Durbin

        Mr. Chairman, I thank you for holding this hearing on the
    President's fiscal year 2007 Budget. I thank Secretary Johanns for
    giving his testimony and agreeing to be here.
        I see two main problems with the administration's budget proposal
    for programs within the jurisdiction of the U.S. Department of
    Agriculture (USDA). First, the budget does not give farmers the
    certainty they need from the Federal Government. Farmers and ranchers
    are engaged in a risky industry, and they do their best to mitigate
    these risks. Irregular weather systems, crop and livestock diseases
    that can travel across a continent in a matter of months, and crop and
    energy prices are among the variables that are out of the hands of
    individual producers. Farmers understand these risks and build them
    into their plans by purchasing crop insurance, planting more than one
    variety of a crop, and keeping up with advances in technology that make
    them more profitable. However, there's one source of uncertainty that
    should not tamper with the viability of farming: the Federal
    Government's spending priorities.
        We passed a Farm Bill in 2002 that made a commitment to farmers
    through 2007 when the bill expires. Now we all understand the need to
    reduce the deficit. However, farmers and the programs within the
    jurisdiction of the USDA are bearing the brunt of budget savings plans.
    Last year, mandatory programs within the mandate of the USDA took a
    $2.7 billion hit over 5 years. This cut amounted to 7 percent of the
    budget reconciliation savings, even though spending on USDA programs
    accounted for far less of a share of the Federal Government's budget.
    In addition, it's important to note that the Farm Bill has been far
    less expensive than its original price tag.
        On top of these cuts, the administration is now asking for a 5
    percent across-the-board cut in direct payments, counter-cyclical
    payments, and marketing loans. By my estimations, a 5 percent cut will
    mean that producers in the State of Illinois stand to take a hit of $65
    million. This cut would follow a crop year in which Illinois suffered
    from one of the worst droughts in the 100 years since modern records
    have been kept. With all the uncertainty surrounding the expiration of
    the Farm Bill in 2007, I can't understand why the administration is
    focusing so much of its budget-savings plans on agricultural producers
    that already have to be thinking constantly of their risks.
        Second, I believe that this budget demonstrates the
    administration's failure to support rural America. One of the most
    promising developments for rural America in recent years is the
    momentum behind biofuels and alternative energy sources. With soaring
    gasoline and diesel prices and an increasing acceptance of the fact
    that dependence on Middle Eastern oil is not a good thing, it has
    become clear to us all that we must develop alternative fuel sources.
    More E-85 pumps and more plants processing biofuels mean more jobs and
    development for rural areas. However, at this historic time, I'm afraid
    to say that the administration's budget actually cuts funding for the
    Clean Cities Program, a program that partners with local governments to
    encourage the use of clean non-petroleum fuels and alternative fuel
    vehicles. This type of program provides incentives to local communities
    to expand biofuel infrastructure, and, in doing so, increases demand
    for the production and processing of alternative energy sources.
        I thank the Chairman again for holding this hearing and hope that
    this subcommittee will consider giving farmers greater certainty and
    committing to true rural development in this year's appropriations
    bill.

        Senator Bennett. Mr. Secretary, we will be pleased to hear
    your statement.

                      STATEMENT OF SECRETARY MIKE JOHANNS

        Secretary Johanns. Well, thank you very much, Mr. Chairman,
    and I do appreciate the opportunity to be here in front of this
    subcommittee.
        I also appreciate the compliments relative to the Katrina
    response. I want to assure each of you that those compliments
    will be passed on to our employees, who were the ones who were
    truly at the front lines. And we always accept the criticism of
    missteps and see that as a challenge to get better.
        It has been a year since I became Secretary, and it has
    been quite a year. We have expanded farm exports. We have
    worked on new trade agreements. We have reopened beef markets,
    and we have witnessed strength throughout the farm economy.
        During 2005, we have also confronted some very serious
    issues--hurricanes, natural disasters, AI pandemic, and rising
    energy costs. USDA has played a significant role in responding
    to these challenges.
        President Bush and I are very proud of the efforts of our
    employees relative to the hurricanes in the Gulf Coast region.
    They provided food and shelter, protection, emergency
    assistance rapidly, and did so very professionally. And those
    are just a few of the ways that we assisted in that region.
        There does remain a great deal yet to be done to normalize
    their lives. People are struggling to get their homes back,
    their farms and ranches, and their communities. That is why I
    am pleased to announce that on January 26, 2006, based upon
    congressional action and the use of existing authorities, USDA
    made available $2.8 billion to assist those impacted by
    hurricanes. This additional funding brings our effort at USDA
    to $4.5 billion.
        On February 16, the President submitted a supplemental that
    includes $55 million for the USDA to recover additional costs
    of operating the National Finance Center, which is there in New
    Orleans, restore the ARS research lab in New Orleans, and to
    fund floodplain easements. A second supplemental submitted the
    same date includes $350 million for Public Law 480, Title II,
    international food assistance to meet emergency food needs.
        The President's 2007 budget for USDA does meet important
    priorities while exercising fiscal discipline in order to deal
    with the Federal deficit. Reducing the deficit is a critical
    part of the President's economic plan. It strengthens the
    economy and creates jobs.
        Farmers and ranchers know the importance of a healthy
    economy. It raises income, and it increases demand for the
    products that they raise. Farmers and ranchers also know that
    the deficit and resulting burden of debt have a profound impact
    on their way of life and the ability of future generations to
    participate in agriculture.
        Because of the overriding need to reduce the Federal
    deficit, USDA is sharing in the governmentwide effort. There
    are proposals in the budget that will produce real savings in
    both mandatory and discretionary spending. The President's 2007
    budget, which was released about a month ago, indicates that
    USDA expenditures are expected to decrease about $3 billion.
        The decrease in 2007 is due to CCC reductions from program
    changes, the legislative proposals, and because one-time
    supplemental funding is not continued. The discretionary
    appropriation request pending before this subcommittee which
    does not include Forest Service, as you know--is for $15.6
    billion.
        Some of the highlights, if I could just quickly run through
    those. Avian influenza. We have been closely monitoring the
    alarming spread of highly pathogenic AI around the world. I do
    want to assure you that USDA is a full partner in dealing with
    this potential pandemic.
        In response to the President's request, Congress provided
    over $91 million in 2006 emergency supplemental funding for
    USDA, and we thank you for that. That money will be used for
    our AI efforts. We are using those funds for international
    efforts, domestic surveillance of poultry and migratory birds,
    diagnostics, emergency preparedness and response, and research.
        The 2007 budget includes $82 million for avian influenza.
    Setting aside that one-time emergency supplemental, the $82
    million represents an increase of $66 million over 2006 funding
    levels.
        The budget proposes $322 million in USDA funding for the
    multi-agency Food and Agriculture Defense Initiative, which is
    funded now at nearly $540 million governmentwide. The USDA
    portion represents a $127 million increase over 2006. That
    figure does not include last year's one-time funding for the
    construction project in Ames, Iowa, for the National Centers
    for Animal Health because that project has been funded.
        But funding increases do exist. There is $23 million in
    increases to strengthen the Food Emergency Response Network and
    Regional Diagnostic Network. There's also $42 million in
    increases for research to ensure food safety, identify
    pathogens, develop improved animal vaccines, and better
    understand the genes that provide disease resistance. And then
    there's $62 million in increases to enhance surveillance and
    monitoring activities. That helps us detect pest and disease
    threats to improve response capabilities.
        Moving on to another priority, energy. I recently announced
    a comprehensive energy strategy. As I talked to farmers all
    across the country, they emphasized the high cost of energy,
    and so we went to work on that. I am pleased that this budget
    continues to provide tools that help producers with energy
    costs. It also funds the development of renewable energy
    resources and new energy-efficient technology.
        In 2007, we will have at least $345 million available for
    loans, grants, and other support for energy projects. Within
    this total, USDA's core investment in energy-related projects
    increases to $85 million from $67 million in 2006. This
    includes resources available to support renewable energy
    research and demonstration projects, as well as additional
    efforts to support energy development.
        In addition, we are targeting renewable energy and energy
    efficiency projects through our rural development loan and
    grant programs. We anticipate investments in excess of about
    $250 million each year in fiscal years 2006 and 2007.
        Throughout 2007, USDA will continue its many successful
    partnerships with the Energy Department, Department of the
    Interior, and the EPA. USDA's efforts will be coordinated by a
    newly created Energy Policy Council.
        In a related matter, I am pleased to be before this
    subcommittee today to make an announcement. I am pleased to
    announce the issuance of the final rule designating the first
    six items under the Federal Biobased Products Preferred
    Procurement Program. This rule is available for viewing at the
    Federal Register today. It will be published tomorrow.
        Under the biobased program, all Federal agencies will have
    to give the designated items preference in their procurement.
    We believe the designation of these six biobased items
    initiates a new, economic opportunity for farmers and ranchers.
    Increased Federal procurement will lead to greater acceptance
    of biobased products, lower prices, and more variety of
    products in the market.
        The final rule is the first of a series of rules that we
    expect to publish in 2006 that will designate biobased items
    consisting of hundreds of branded products. If I might just
    take a little personal privilege and thank Senator Tom Harkin.
    He worked very hard on this. When I sat down with him a year
    ago or more to talk about the biobased program, it was at the
    top of his list.
        We thank everybody who has been a part of this effort. If
    you will remember, this came out of the 2002 Farm Bill. So
    there has been a lot of effort to finalize the rule. We thank
    Congress for pushing this forward. I think it is really a good
    item.
        In terms of farm programs, last year, as we released the
    budget, there was an expectation by some that the Farm Bill
    expenditures would end up below 2002 projections. That is what
    we heard last year. This is not the case.
        In 2007, even with the proposed reductions, we expect to
    spend nearly $7 billion more than was projected in the 2002
    Farm Bill. And the Reconciliation Act passed weeks ago delays,
    but it does not reduce farm commodity programs. The one
    exception is the Step 2 program, which is the cotton program.
        We acknowledge that there are real reductions in
    Reconciliation, but they affect other programs, such as rural
    development, research, conservation. Thus, the administration
    is reproposing changes to reduce farm program spending. They
    include reducing commodity payments by 5 percent; reducing the
    payment limit, implementing small marketing assessments on
    sugar and milk; and operating the Dairy Price Support Program
    at minimum cost.
        In order to improve the effectiveness of providing good
    service to farmers, USDA also continues to work with Congress
    to modernize the field office structure of FSA. Although
    improvements have been made in modernizing a portion of the
    computer system, such as Web-based computing systems and the
    GIS, further investments are needed to replace the remaining
    outdated and obsolete legacy systems.
        This will also permit the full use of Web-based Common
    Computing Environment. This subcommittee has supported and
    funded that initiative, and I want you to know how much we
    appreciate that.
        FSA will also work with farmers and ranchers at the local
    level and with Congress to identify how to consolidate offices
    where appropriate and ensure that future investments are
    prudent and done so in a manner that uses tax dollars wisely.
        In reference to crop insurance, net expenditures for crop
    insurance are expected to grow since the reform of 2000 by
    about 50 percent between 2001 to 2007. At the same time,
    producers have continued to receive disaster payments, as you
    know, in ad hoc disaster programs. From 2001 to 2007, when crop
    insurance payouts did start to rise dramatically, we also
    delivered about $9 billion to producers in ad hoc actions.
        The budget again includes proposals to enhance crop
    insurance and reduce costs to deliver the program in order to
    reduce dependence on ad hoc disaster programs. The budget also
    requests such sums as necessary for mandatory costs associated
    with the program and includes funding for additional staffing
    that would focus on reducing fraud, waste, and any abuse that
    may exist in this program.
        In reference to trade, expanding access to global markets
    is important for agriculture. Trade plays a critical role. Our
    budget proposals for 2007 support our continued commitment to
    trade expansion. Increased funding is provided for the Foreign
    Agricultural Service to maintain its overseas office presence
    and continue its representation on behalf of American
    agriculture.
        The new FAS Trade Capacity Building initiative is funded
    for technical assistance and training activities to assist
    developing countries. The goal is to strengthen their
    agricultural policy-making and regulatory systems so they can
    become better trading partners in other parts of the world.
        For the foreign food assistance programs, the budget places
    increased emphasis on meeting the highest priority emergency
    and economic development needs, including maintaining funding
    for the McGovern-Dole International Food for Education and
    Child Nutrition Program.
        Regarding food safety, in order to continue the protection
    of the Nation's supply of meat, poultry, and egg products, the
    budget requests funds needed to maintain Federal support of
    inspection systems. The budget also requests funding to expand
    the Food Emergency Response Network to support the Food and
    Agriculture Defense Initiative. With this funding, FSIS will
    increase the capability of State and local laboratories to
    handle large volumes of testing.
        The budget proposes over $4 billion in mandatory funding to
    continue implementation of conservation programs arising out of
    the 2002 Farm Bill. Within the conservation total, $83 million
    in additional resources are requested to extend the
    Conservation Security Program into additional watersheds and to
    service prior year contracts. I would like to mention that the
    2006 CSP sign-ups began on February 13. They will continue
    through the end of March.
        To help meet the President's commitment to create, improve,
    and protect at least 3 million wetland acres over a 5-year
    period, beginning in 2004, the budget includes over $400
    million for Wetlands Reserve Program. This will allow for an
    additional 250,000 acres to be enrolled in the program in 2007.
    That is 100,000 more acres than estimated for 2006 and the
    largest 1-year enrollment since the program started in 1992.
        In the aggregate, funding in the budget will support
    enrollment of an additional 23 million acres in conservation
    programs, largely in EQIP. This brings total enrollment to
    about 197 million acres. That is the highest enrollment in
    conservation programs in our Nation's history. The budget also
    includes discretionary funding for ongoing conservation work to
    meet high-priority natural resources concerns.
        For rural development, that part of the budget includes
    $14.4 billion in direct loans, loan guarantees, and grants to
    improve economic opportunities in rural areas. This assistance
    could be used for everything from financing rural businesses,
    electric and telecommunications facilities, water and waste
    disposal projects, and other community facilities. It will also
    provide home ownership opportunities and assist in revitalizing
    our multi-family housing projects.
        The 2007 budget maintains the administration's commitment
    to revitalize multi-family housing and provides rent protection
    for tenants of projects that are withdrawn from the program.
        Senator, you mentioned research. In the research area, the
    2007 budget funds the highest-priority research facing American
    agriculture. It also increases the use of competition to
    improve the quality of research.
        The budget includes a $66 million increase for the National
    Research Initiative. The budget also includes $107 million in
    increases for high-priority research conducted by ARS
    scientists in areas such as food and agriculture defense,
    bioenergy, plant and animal genomics and genetics, and human
    nutrition and obesity prevention.
        Speaking of nutrition, we fully fund the expected
    requirements of the 3 major nutrition assistance programs--WIC,
    Food Stamps, and Child Nutrition. For WIC, which is the
    Department's largest discretionary program, the budget proposes
    $5.4 billion in program level to support the estimated level of
    WIC participation. Included in the budget is a $125 million
    contingency fund.
        For the Food Stamp Program, the budget includes resources
    to totally fund estimated participation and also provides a $3
    billion contingency fund should costs exceed what we are
    estimating. We expect an increased level of school lunch
    participation of about 2 percent, so the budget includes a $700
    million increase for that. There is also a new proposal for a
    $300 million contingency fund for the Child Nutrition Programs.

                              PREPARED STATEMENTS

        I just want to wrap up and say we are deeply committed to
    working on this deficit. We recognize that that is your
    challenge also. We look forward to working with this
    Subcommittee in that endeavor.
        Mr. Chairman, thank you.
        [The statements follow:]

                       Prepared Statement of Mike Johanns

        Mr. Chairman and distinguished members of this Committee, I am
    pleased to appear before you to discuss the fiscal year 2007 budget for
    the Department of Agriculture (USDA).
        I am joined today by Deputy Secretary Chuck Conner; Scott Steele,
    our Budget Officer; and Keith Collins, our Chief Economist.
        It has been a year since I was given the honor to serve our country
    as Secretary of Agriculture. It has been an eventful and challenging
    year. We have expanded farm export opportunities through new trade
    agreements; re-opened beef export markets that were closed after
    finding Bovine Spongiform Encephalopathy (BSE); responded immediately
    to severe natural disasters; and witnessed continued strength in the
    farm economy.
        A major priority has been working to achieve growth in the farm
    economy through trade. We continue to open foreign markets to U.S.
    agricultural exports. Since 2001, the administration completed free
    trade agreements with 15 countries, including the recently completed
    agreements with Peru, Colombia, and Oman and the Central America-
    Dominican Republic Free Trade Agreement (CAFTA-DR). The agriculture
    industry estimates that CAFTA-DR could boost our farm exports by $1.5
    billion. Negotiations for free trade agreements with a host of other
    important markets are continuing, and we look forward to initiating
    free trade negotiations with Korea, our sixth largest agricultural
    export market, in the near future.
        During the past year, we also have increased our efforts to reform
    agricultural trading practices. The United States presented an
    ambitious proposal to advance the World Trade Organization (WTO)
    agriculture negotiations and unleash the full potential of the Doha
    Development Agenda. Reforming global agriculture trade will create new
    jobs and promote economic development. Our goal is to open new markets
    by reducing or eliminating unfair competition from production and trade
    distorting agricultural subsidies and import barriers. We are now
    working very hard to reach agreement on the terms of an agricultural
    agreement by the end of April, as agreed to by WTO Members at the
    recent Hong Kong Ministerial.
        Another priority has been our efforts to re-open overseas markets
    for U.S. beef and beef products. We have achieved a great deal of
    progress. We have regained at least partial access to 28 markets. As
    you know, recently a shipment to Japan did not comply with the terms of
    our export agreement. We are working aggressively to secure a
    resumption of trade in the near future.
        During 2005, we also had to confront other serious issues, such as
    hurricanes and other natural disasters, the threat of an avian
    influenza pandemic, and rising energy costs. USDA has played a
    significant role in responding to these challenges and has made a
    tangible and positive difference in American lives.
        President Bush and I are very proud of the efforts USDA employees
    have made to provide assistance throughout the Gulf Coast Region in the
    immediate aftermath of recent hurricanes. These employees helped to
    rescue more than 600 survivors in Louisiana. We made available more
    than 22 million pounds of food and 2 million pounds of baby formula for
    use by the Red Cross, Salvation Army, and other organizations. USDA
    assisted over 10,000 evacuees obtain temporary housing in 45 States.
    USDA also aided in the transport of over 13,000 evacuees and our
    employees fanned out across the region to clear debris from farms,
    ranches and other watersheds. During the initial days and weeks
    following the storm, USDA worked closely with the Federal Emergency
    Management Agency to set up and support 80 disaster recovery centers in
    Louisiana and Mississippi. The Forest Service played a critical role by
    utilizing its incident management abilities, managing evacuation
    centers and base camps, providing logistical support, clearing
    roadways, helping with search and rescue operations, and operating
    mobilization centers and trailer staging areas.
        These are just a few of the ways that USDA was able to provide
    immediate assistance to that region. But there still remains a great
    deal to be done to normalize life for those struggling to take back
    their homes, their farms or ranches, and their communities. That is why
    I was pleased to announce on January 26, 2006, that based on
    Congressional action and the use of existing authorities, USDA has made
    available $2.8 billion to assist those impacted by the hurricanes. Of
    this amount, $1.2 billion will be made available to agricultural
    producers through various programs. In addition, $1.6 billion will be
    used to restore homes and rural communities. This additional funding
    brings total USDA aid to hurricane disaster victims to more than $4.5
    billion since September 2005. Finally, the supplemental request
    submitted on February 16 includes $55 million in funding to cover
    additional costs of operating the National Finance Center, repair
    damages to the Agricultural Research Service (ARS) laboratory in New
    Orleans and fund floodplain easements.

                                  2007 BUDGET

        The President's 2007 budget for USDA meets our most important
    priorities, while exercising the kind of fiscal discipline that is
    absolutely necessary to reduce the Federal deficit. Reducing the
    deficit is a critical part of the President's economic plan. It will
    strengthen the economy and create more jobs. Farmers, ranchers, and
    rural citizens know the importance of a healthy economy, which raises
    household incomes and increases demand for their products.
        Farmers, ranchers, and rural citizens also know that the deficit
    and resulting burden of debt have a profound impact on the economy and,
    thus, on their way of life and the ability of future generations to
    participate in agriculture. In the past few months, I had the
    opportunity to participate in over 20 Farm Bill forums. It provided me
    the opportunity to meet many producers and hear their ideas on farm
    policies and the economy. One aspect of the Farm Bill forums focused on
    the development of farm policy that supports future generations of
    farmers and ranchers. During these forums, I discussed with producers
    and community leaders how deficits increase the national debt and debt
    service costs and displace private consumption and investment, which
    can be roadblocks to future generations trying to enter agriculture.
    Producers across the country applauded us for that focus and encouraged
    us to take down roadblocks that stand in the way of young people. We
    cannot--on one hand--close our eyes to the deficit--while on the other
    hand claim to be supporting future generations of producers.
        USDA recognizes the overriding need to reduce the Federal deficit,
    and shares the responsibility of controlling Federal spending. There
    are proposals in the budget for USDA that will produce real savings in
    both mandatory and discretionary spending. With that said, the
    President's 2007 budget request for USDA does meet the Nation's
    priorities by growing the farm economy through trade; protecting
    America's food and agriculture; supporting sound land management
    practices and conservation; providing nutrition assistance to the needy
    at home and abroad; and creating economic opportunity in rural America.
    It also makes Government more effective by improving management and
    accountability and by eliminating, reforming, or phasing out programs
    that are not cost-effective or do not show measurable results.
        The President's 2007 budget, which was released on February 6,
    indicates that USDA expenditures are estimated to decrease from about
    $96 billion in 2006 to nearly $93 billion in 2007. For the Department's
    discretionary budget, the overall budget authority request is $19.7
    billion. This compares to $21.9 billion provided in 2006. There are two
    main reasons for these reductions. One is that we assume we will not
    need the emergency disaster assistance funding and other emergency
    supplemental funding that was needed in 2006. The second reason is
    proposed program reductions, which include some legislative changes.
    The discretionary appropriation request pending before this Committee,
    which does not include the Forest Service, is $15.6 billion.
        I would now like to focus on some specific program highlights.

                        PATHOGENIC AVIAN INFLUENZA (AI)

        For more than two decades, USDA has worked to prepare for and
    prevent an outbreak of dangerous strains of AI in our country. The
    greatest concern is the potential for highly pathogenic AI to develop
    into a human pandemic. We appreciate the $91.4 million in emergency
    supplemental funding provided in December 2005. Those funds are being
    used for specific one-time activities aimed at controlling the disease
    abroad and keeping it away from U.S. borders; enhancing surveillance of
    wildlife and domestic poultry; improving diagnostics; and enhancing
    preparedness.
        The 2006 Appropriations Act made $16 million available for on-going
    programs to deal with low pathogenic AI and other AI research. Low
    pathogenic AI is of concern for its potential costs to the poultry
    industry and potential ability to mutate into highly pathogenic AI. The
    2007 budget requests a total of $82 million for AI, an increase of $66
    million over the amount appropriated in 2006. Of this amount, $57
    million is related to highly pathogenic activities, including:
    surveillance and diagnostics work; preparedness and response efforts;
    and international veterinary capacity building. An additional increase
    of more than $6 million is requested for the development of methods to
    detect AI in the environment and further AI research, including
    development of poultry vaccines. An increase of $3 million is requested
    to expand activities related to the program for on-going low pathogenic
    AI.

                    FOOD AND AGRICULTURE DEFENSE INITIATIVE

        In order to protect American agriculture and the food supply from
    intentional terrorist threats and unintentional introductions, the
    budget proposes $322 million for USDA's part of the President's Food
    and Agriculture Defense Initiative, which is 60 percent of total
    governmentwide funding for the initiative. Funding for ongoing programs
    includes a $127 million increase, or 65 percent above 2006. This does
    not include funding for construction of the Ames, Iowa facility for
    animal research and diagnostics, which was fully funded in 2006. Of the
    total amount, an increase of about $30 million for Food Defense would
    enhance the Food Safety and Inspection Service's (FSIS) ability to
    detect and respond to food emergencies and for USDA research agencies
    to conduct related research. For Agriculture Defense, the budget
    includes an increase of about $97 million to improve the Animal and
    Plant Health Inspection Service's (APHIS) ability to safeguard the
    agricultural sector through enhanced monitoring and surveillance of
    plant and animal health, including wildlife; improve response
    capabilities, including provisions for the National Veterinary
    Stockpile; and further research on emerging and exotic diseases.

                                     ENERGY

        I have heard from farmers and ranchers as I traveled around the
    Nation about the burden of the high cost of energy. We are taking
    action to help farmers, ranchers, and rural businesses reduce their
    energy consumption and make alternative fuels more available. USDA is
    providing technical assistance and incentives for conservation
    practices that can result in substantial energy savings. The Natural
    Resources Conservation Service has recently provided an online tool
    that clearly demonstrates how costs can be reduced by using alternative
    tillage practices. In addition, I have directed the Farm Service Agency
    (FSA) to maximize the use of our guaranteed and direct farm loan
    programs to help eligible producers who face credit challenges due to
    increased energy-related operating costs. Because it is likely that
    energy prices will continue to remain high and fluctuate in the future,
    the Risk Management Agency will also examine risk management tools that
    can help farmers limit the negative impact of energy cost increases. To
    make sure that USDA is effectively using its resources to address
    energy issues confronting U.S. agriculture, I have recently announced a
    comprehensive energy strategy to help producers with high energy costs
    and to coordinate USDA's energy initiatives.
        These investments include: research and development, farmer and
    rancher education programs and using public lands to facilitate the
    generation and transmission of energy. We are seeking increases in
    research and development (R&D) and farmer and rancher education
    programs. We are also targeting renewable energy investments in Rural
    Development programs where we anticipate making loans and grants of
    $250 million or more depending on specific proposals received. USDA is
    continuing its successful biomass research and development partnership
    with the Department of Energy in 2007. Past projects funded through
    this collaborative effort have focused on improving the conversion of
    switchgrass and other cellulosic materials to ethanol as a replacement
    for gasoline. These R&D investments will pay off as the efficiency and
    cost effectiveness of using switchgrass increases.

                        FARM COMMODITY PROGRAM SPENDING

        As part of the President's program to exercise fiscal discipline
    and reduce the deficit, the budget proposes, once again, that the farm
    commodity programs funded through the Commodity Credit Corporation
    (CCC) contribute to the governmentwide deficit reduction effort.
    Despite record levels of net cash farm income and record agricultural
    exports, commodity subsidies are significant and near record highs.
    Payments are at the highest since the enactment of the 2002 Farm Bill.
    Compared to the original 2002 Farm Bill estimate, lower than expected
    expenditures from 2003 to 2004 are estimated to be offset by much
    higher net outlays during 2005 through 2007. Government farm support
    from 2005 to 2007 is at historically high levels. This recent trend
    reflects higher than expected program costs that are raising the
    deficit.
        Since the recent Reconciliation Act achieved only very limited
    savings in CCC programs, the 2007 budget proposes legislative changes
    similar to the ones included in the 2006 budget. The proposals, which
    are spread across commodity sectors, include: reducing farm program
    payments across the board by 5 percent; reducing the payment limitation
    to $250,000; operating the dairy price support program at the least
    cost; and applying small marketing assessments to sugar and dairy.
        Similar to last year, these proposals are designed to work within
    the existing structure of the 2002 Farm Bill to achieve savings of
    about $1 billion in 2007 and about $7.7 billion over 10 years. Even
    with the proposed reductions, CCC expenditures in 2007 are projected to
    remain $7 billion above the estimates made when the Farm Bill was
    enacted.

                             FARM PROGRAM DELIVERY

        Recognizing the importance of our farm programs to the livelihood
    and ongoing operations of farmers and ranchers throughout the Nation,
    we are continuing to review the farm program delivery system to ensure
    we are providing the highest level of customer service. In addition to
    the funding needed to support an adequate level of staffing to deliver
    program benefits in a timely manner, our budget proposes resources to
    make the IT investments that are critical to modernizing the delivery
    of these programs. I appreciate the Committee's support for efforts
    that have been made in recent years to design and implement a common
    computing environment (CCE) that allows the service center agencies to
    communicate via the internet and take advantage of shared services.
    However, critical needs remain in updating the so-called legacy farm
    program delivery systems that are currently operated with decades-old
    software and hardware that is no longer produced. It is imperative that
    these systems be updated so they can also take advantage of the CCE, a
    modern web-based system, and make the fullest use of investments being
    made to improve geographic information systems and data. The budget
    proposes $14 million to continue an effort to enhance the efficiency of
    program delivery by redesigning business processes and developing the
    IT systems to carry out those processes. I would appreciate the
    Committee's favorable consideration of this proposal.

                                 CROP INSURANCE

        Crop insurance is designed to be the primary Federal risk
    management tool for farmers and ranchers. Crop insurance expenditures
    are expected to grow by more than 50 percent between 2001 and 2007 with
    the implementation of crop insurance reforms in 2000, the expansion of
    the program to new crops, and the development of new types of coverage.
    Despite this growth, since 2000, four ad hoc disaster programs have
    been authorized, covering 6 crop years. These ad hoc payments add up to
    over $9 billion. The continued reliance on disaster assistance stems,
    in part, from the low coverage level of catastrophic crop insurance
    (CAT), which provides a maximum of 27.5 percent of the crop value for a
    total crop loss. When natural disasters occur, that low level of
    protection creates the demand for additional disaster assistance.
        In continuing the administration's efforts to more effectively
    budget and administer crop disaster programs, the 2007 budget
    reproposes changes included in the 2006 budget to encourage producers
    to purchase more adequate crop insurance coverage by tying the receipt
    of direct payments or any other Federal payment for crops to the
    purchase of higher levels of crop insurance. This change would ensure
    that the farmer's revenue loss would not be greater than 50 percent.
    Other changes include making catastrophic coverage more equitable in
    its treatment of both large and small farms, restructuring premium
    rates to better reflect historical losses, and reducing delivery costs.
    The combination of changes is expected to significantly improve the
    program and save the Government approximately $140 million per year,
    beginning in 2008. In total, this change should ensure that the
    majority of producers have crop insurance and that the minimum coverage
    level is sufficient to sustain the producer in times of loss.
        The 2007 budget includes about $81 million in discretionary funding
    to administer the Federal Crop Insurance Program, compared to about $76
    million for 2006. In support of our efforts to strengthen oversight and
    improve management efficiency, the budget includes funding for the
    replacement of a decade old IT system that has reached the end of its
    useful life. Funding is also included for additional staffing needed to
    reduce fraud, waste and abuse in the crop insurance program.
    Additionally, a legislative proposal will be submitted to collect a
    participation fee from insurance companies to help share in the cost of
    modernizing the existing IT system beginning in fiscal year 2008.

                                     TRADE

        As I mentioned, a top priority has been to restore access to the
    Japanese and other markets for American beef overseas. Having achieved
    positive results, we are disappointed that the Japanese market has
    temporarily closed again. The failure to meet all of the requirements
    of our export agreement with Japan is unacceptable. We are taking this
    matter seriously, recognizing the importance of our beef export market,
    and we have taken swift and firm action to address the situation.
        Last January after this incident occurred, I announced a series of
    follow-up actions we are taking to address this situation and outlined
    those actions in discussions with Japanese officials, including the
    Minister of Agriculture, Forestry, and Fisheries. Since then, the
    Department has conducted two detailed investigations of the incident,
    and we have provided the results to the Japanese Government for their
    review.
        We look forward to an expedited review of the situation by the
    Japanese Government and the resumption of beef trade in the near
    future. It is also worth noting that, despite the problems we have
    encountered with Japan, we are making progress in reopening other
    markets. Hong Kong, Taiwan, and Singapore have reopened their markets
    while Korea formally announced its plans to resume imports by March.
         Expanding access to global markets is important for all U.S. food
    and agricultural products, and plays a critical role in our efforts to
    ensure a prosperous future for America's farmers and ranchers. Our
    budget proposals for 2007 support our continued commitment to trade
    expansion activities. Increased funding is provided for the Foreign
    Agricultural Service (FAS) to maintain its overseas office presence and
    continue its representation and advocacy activities on behalf of
    American agriculture.
        A new FAS Trade Capacity Building initiative is funded for
    technical assistance and training activities that will assist
    developing countries to strengthen their agricultural policy-making and
    regulatory systems and become better trading partners. By assisting
    these countries to adopt policies that meet World Trade Organization
    standards and adopt regulatory systems that are transparent and
    science-based, we will improve access for U.S. products to their
    markets. Also, by enhancing their ability to benefit from trade, we
    encourage them to become more forthcoming and supportive in market
    access negotiations. These activities would complement the steps APHIS
    will take to open offices in strategic foreign locations to address
    technical sanitary and phytosanitary issues that can impede trade
    between the United States and other countries.
        For the foreign food assistance programs, the budget places
    increased emphasis on meeting the highest priority emergency and
    economic development needs. Funding for the McGovern-Dole International
    Food for Education and Child Nutrition Program is maintained at this
    year's level, with a modest increase in participation expected. The
    program is helping children in countries with severe needs in education
    and nutrition, such as Afghanistan. Over a 5-year period, USDA is
    providing over $50 million of assistance through the McGovern-Dole
    Program to Afghanistan where it is helping to build schools, improve
    attendance, and feed about 60,000 students each year.
        Food for Progress programming carried out with CCC funding is
    projected to increase slightly in 2007. The program provides assistance
    to developing countries and emerging democracies that have made
    commitments and are taking steps to introduce and expand free
    enterprise in their agricultural economies.
        To address emergency needs this year, the supplemental
    appropriations request submitted by the President on February 16
    includes an additional $350 million for Public Law 480 title II food
    aid donations, which is needed to bolster our response to urgent food
    needs in several regions of Africa. With this funding, the United
    States will be able to meet our target of providing 50 percent of the
    identified food needs in Darfur and other regions of Sudan. It will
    also help us to respond to what appears to be a burgeoning food crisis
    in East and Central Africa, which has been brought on by disappointing
    rains and other problems.
        The budget further enhances our ability to respond to emergency
    situations overseas in which food aid is critical to preventing famine
    and saving lives. In light of a heightened demand for emergency food
    aid in recent years, all funding for Public Law 480 food assistance in
    2007 is requested for the Title II donations program which is increased
    by $80 million. To help improve the timeliness, efficiency, and
    effectiveness of the U.S. Government's response to emergency
    situations, increased flexibility is requested in the purchasing of
    Title II commodities. The budget proposes that the Administrator of the
    Agency for International Development (AID) have the authority to use up
    to 25 percent of Title II funding to purchase commodities in locations
    closer to where they are needed, such as neighboring countries.

                                  FOOD SAFETY

        The Nation's current food safety inspection system has demonstrated
    that our food supply is among the safest in the world. Recent data
    released by the Centers for Disease Control and Prevention continues to
    show improvements based on historical reductions in the incidence of
    foodborne illness. The continued reduction in illnesses from pathogens
    like E. coli O157:H7 is a tremendous success story and USDA is
    committed to continuing this positive trend in the future. These
    results demonstrate that we are moving in the right direction. We have
    increased the focus of our policies on the goal to reduce human
    foodborne illness by measuring the prevalence and types of food safety
    failures and using this knowledge to focus resources and attention
    where the risks are the greatest. Through these actions, we are
    protecting the public's health through a safer food supply.
        The 2007 budget provides for continued protection of the Nation's
    supply of meat, poultry and egg products and includes a program level
    of $987 million for FSIS. This is an increase of $35 million over 2006.
    Approximately half of the increase in funds is for pay, including
    monies required to maintain Federal support of State inspection
    programs to meet the demand for inspection services. The remaining
    amount is for program changes, including funding to allow FSIS to move
    towards a more robust risk-based inspection system.
        In order to take further steps towards a more enhanced risk-based
    inspection system, funds are requested to develop risk-based
    verification and enforcement strategies that take into account the
    hazards posed by products and how well establishments are controlling
    those hazards. This would include additional microbiological sampling,
    inspector training, and the creation of an establishment database.
    Information from these initiatives will enable FSIS to wisely allocate
    resources to priority areas and provide increased understanding of
    which food safety systems prevent foodborne illness and promote the
    public's health. In addition, funding is requested to increase the
    speed at which the agency collects, analyzes, and reports Salmonella
    testing data, which will improve the agency's response to outbreaks of
    foodborne illness.
        The budget also requests funding to expand the Food Emergency
    Response Network (FERN) in support of the Food and Agriculture Defense
    Initiative. With this funding FSIS will continue to develop the network
    of food laboratories and the result will be an increase in the
    capability of a network of coordinated Federal, State and local
    laboratories to handle large volumes of testing that would be needed
    for biosurveillance or in the event of a widespread food emergency.
        For FSIS, the budget requests an appropriation of $863 million and
    $124 million in existing fees. In addition, the budget includes $105
    million that would be derived from new user fees to recover the cost of
    providing inspection services beyond an approved 8-hour-primary shift.

                                  CONSERVATION

        The 2002 Farm Bill represented an unprecedented commitment to
    conservation. The 2007 budget continues to support this commitment with
    a record level $4 billion request in mandatory funding to expand
    enrollment in these programs by an additional 23 million acres. Under
    the proposal, USDA would provide conservation assistance on 197 million
    acres, the greatest amount of conservation assistance in history.
        Within the total amount, the budget proposes over $400 million for
    the Wetlands Reserve Program (WRP), an increase of $153 million, or 61
    percent over 2006. The projected WRP enrollment for 2007 would be the
    largest ever, involving 250,000 acres, and will bring the total acreage
    enrolled in the program to over 2.2 million acres. The WRP is the
    principal supporter of the President's goal to restore, protect, and
    enhance 3 million acres of wetlands over 5 years beginning in 2004.
        Funding for the Conservation Security Program would be increased by
    $83 million, or 32 percent, to continue to extend the program to
    additional watersheds in 2007. Finally, the 2007 budget supports a net
    increase in enrollment of 2.7 million acres in the Conservation Reserve
    Program (CRP), which would bring total program enrollment to 38.9
    million acres by the end of 2007, a 7 percent increase in coverage. CRP
    funding represents more than one-half of the total for all Farm Bill
    conservation programs.
        The 2007 budget also includes $788 million in discretionary funding
    for on-going conservation work. This is a decrease of $207 million
    below the 2006 enacted level and reflects the realignment of the
    administration's priorities to direct limited conservation funding to
    the highest priority natural resource concerns. USDA will be able to
    deliver high quality and timely technical assistance to farmers and
    ranchers to address natural resource concerns on their operations. The
    budget does not request funding for watershed operations and planning,
    Grazing Lands Conservation Initiative, and earmarked projects. The
    budget also proposes to reduce the number of Federal coordinator
    positions funded under the Resource Conservation and Development (RC&D)
    program, for a savings of $25 million. Under this proposal, the number
    of authorized RC&D areas would be maintained at the current level of
    375 but coordinators will be responsible for providing assistance to
    multiple areas.

                               RURAL DEVELOPMENT

        The 2007 budget includes $14.4 billion in direct loans, loan
    guarantees and grants to improve the economic opportunities and quality
    of life in rural America. This assistance will be used to finance rural
    businesses, electric and telecommunications facilities, water and waste
    disposal projects and other community facilities; provide homeownership
    opportunities; and revitalize USDA's portfolio of multi-family housing
    projects. Most of the on-going rural development programs are
    maintained at current levels. There is a $3.6 billion reduction in
    2007, which is due primarily to the exclusion of $1.6 billion in 2006
    supplemental emergency funding for the Gulf Coast hurricanes and $1.5
    billion for a 2002 Farm Bill program to guarantee notes of private
    sector electric and telephone borrowers.
        The on-going electric and telecommunications programs are funded at
    the anticipated level of demand, over $4.9 billion in direct loans.
    About $200 million of this amount is expected to be used for new power
    supply projects for renewable energy that will support the President's
    energy policy.
        The community facilities program provides direct loans, guarantees,
    and grants to finance essential community facilities, with priority
    given to health and safety facilities. The 2007 budget provides $297
    million in direct loans, $208 million in guarantees, and $17 million in
    grants for this program--the same as was available for 2006. This level
    of funding will support over 560 new or improved health care
    facilities, child care, fire and emergency services and other
    facilities lacking in rural America.
        The proposed budget for the water and waste disposal programs would
    support almost $1.1 billion in direct loans. The program would be
    supported through loan subsidies and grants at about the same level in
    2006--$514 million for 2007 compared to $525 million for 2006. However,
    a greater portion of the subsidy would be applied to reducing interest
    rates charged to borrowers rather than providing grants. For most
    communities, which normally receive a combination of loan and grant
    assistance, the reduction in interest rates would be of greater benefit
    in terms of lowering the overall debt servicing costs of their
    projects, than they would otherwise receive from an equivalent amount
    of grant.
        The 2007 budget would support $4.8 billion in direct and guaranteed
    loans for single-family housing, about the same level as available for
    2006. This level of assistance will provide homeownership opportunities
    for nearly 41,000 rural families.
        The business and industry program is maintained at a level of about
    $1 billion in loan guarantees. The value-added program is also
    maintained at its current level of $19 million in grants. Overall, the
    rural development business programs are expected to create or save over
    56,000 rural jobs.
        The 2007 budget reproposes the administration's initiative to
    revitalize its portfolio of multi-family housing projects, which are
    home to close to half a million low-income families. A recent Supreme
    Court decision allows project sponsors to prepay their loans and
    convert their projects to uses other than low-income housing, putting
    tenants at risk of higher rents and potential loss of housing. A
    priority under the administration's initiative will be on providing
    housing vouchers to protect the rents of tenants of projects that are
    withdrawn from the portfolio. The administration will also pursue
    enactment of legislation it has already submitted to Congress to
    authorize debt restructuring and other incentives for project sponsors
    to remain in the program and make necessary repairs.

                                    RESEARCH

        The 2007 budget funds the highest priority research issues facing
    American agriculture and increases the use of competition to improve
    the quality of research. The budget includes a $66 million increase for
    the National Research Initiative, the Nation's premier competitive,
    peer-reviewed research program for fundamental and applied sciences in
    agriculture. The increase includes funding for high priority
    initiatives in food and agricultural security, gene mapping, the
    ecology and economics of biological invasions, plant biotechnology and
    water security. The budget also includes $107 million in increases for
    high priority research conducted by ARS scientists in areas such as
    food and agricultural defense, bioenergy, plant and animal genomics and
    genetics, and human nutrition and obesity prevention. These lines of
    investigation have great potential to benefit producers and consumers;
    assure an abundant, safe, and inexpensive supply of food; and ensure
    the preservation of our natural resource base.
        While the 2007 budget continues overall funding for both the Hatch
    and McIntire-Stennis programs at the 2006 appropriated level, the
    budget proposes an increase in the use of competition to improve the
    quality of USDA supported research. The 2007 budget includes a proposal
    to modify the Hatch and McIntire-Stennis formula programs so that over
    half of the funds would be competitively awarded by 2011. Under the
    proposal, the Hatch formula program would be modified by expanding the
    multi-State research component from the current base of 25 percent to
    about 55 percent of total Hatch funding. In 2007, 35 percent of Hatch
    funds will be awarded competitively to multi-State/multi-institutional
    projects. Over the course of the next 4 years, the remaining multi-
    State formula funds would be phased into competitive funding through an
    additional 5 percent increase each year as existing projects are
    completed. Therefore, by 2011, about 55 percent of funding under the
    Hatch program will be for competitively awarded multi-State projects
    and about 45 percent would be allocated as formula funds.
        The 2007 budget also modifies the McIntire-Stennis formula program
    by creating a multi-State research program that will comprise 59
    percent of program funding. The proposal calls for all McIntire-Stennis
    multi-State funds to be distributed through competitively awarded
    grants in 2007. These proposals take into account the expressed
    concerns of USDA partners in the land grant community, including
    smaller institutions, regarding the proposal in the 2006 budget. As a
    result, this new approach would sustain the use of Federal funds to
    leverage non-Federal resources, maintain program continuity, facilitate
    responsiveness to State and local issues, and leverage and sustain
    partnerships across institutions and States. Our intention is to craft
    the details of the programs in consultations with our land grant and
    forestry college partners.

                              NUTRITION ASSISTANCE

        The budget contains sufficient resources to fully fund expected
    participation, food cost inflation and contingency funds for the
    Department's three major nutrition assistance programs: Food Stamps;
    Women, Infants and Children (WIC); and Child Nutrition. Participation
    levels fluctuate with economic conditions and the budget keeps pace.
    WIC participation is expected to grow slowly in 2007 to a total of 8.2
    million participants. Food Stamp participation is expected to decrease
    about 4 percent from the 2006 projection to about 25.9 million in 2007
    as people affected by the hurricanes in the Gulf States get back on
    their feet. School Lunch participation is estimated to grow about 2
    percent to keep pace with the growing student population, as it has in
    recent years, to a new record level of 30.9 million children per day.
        For Food Stamps, legislation will be proposed that would exclude
    all qualified retirement savings accounts from eligibility
    determinations regardless of how other programs treat them. By 2009,
    this would allow about 100,000 additional people to participate who
    otherwise would have been ineligible unless they spent down their
    retirement savings. This would add an estimated $48 million in costs
    for 2007 and about $146 million in 2009 when fully implemented. The
    2007 budget also reproposes legislation to restrict participation among
    certain households with incomes or resources above normal eligibility
    thresholds. Affected households are those that do not receive cash
    Temporary Assistance for Needy Families (TANF) benefits, but become
    categorically eligible for food stamps because they receive a TANF-
    funded service, including one-time information and referral. This
    change would reduce costs by an estimated $71 million in 2007, with
    additional savings in subsequent years.
        The WIC request provides full funding for all those estimated to be
    eligible and seeking services. At the same time, the Department will
    work with stakeholders to contain costs and continue to improve the
    program's performance. WIC legislative proposals include limiting
    administrative funding to 25 percent of total program costs, and
    limiting categorical eligibility to those with incomes under 250
    percent of poverty. Also, the budget proposes legislation to require 20
    percent State matching for WIC administrative costs. The proposal would
    take effect in 2008, after State legislatures have had time to
    appropriate the matching funds. WIC is one of the few Federal programs
    that does not require States to provide matching funds for
    administrative costs.
        The 2007 budget does not request funding for the Commodity
    Supplemental Food Program (CSFP), which is not available nationwide and
    duplicates two of the Nation's largest Federal nutrition assistance
    programs--Food Stamps and WIC. Eligible women, infants and children
    participating in CSFP will be encouraged to migrate to the WIC Program.
    Eligible elderly CSFP recipients will be encouraged to migrate to the
    Food Stamp Program, where most are believed to be eligible. The budget
    includes temporary transitional benefits for CSFP participants 60 years
    of age or older equaling $20 per month for the lesser of 6 months or
    until the recipient starts participating in the Food Stamp Program.

                             DEPARTMENT MANAGEMENT

        The 2007 budget builds upon our progress in improving overall
    management of the Department. Increased funding is being sought for
    selected key priorities:
      --Beginning the acquisition of a modern core financial system to
            replace USDA's outdated system, which is no longer supported by
            a vendor. The current system relies on software that no longer
            meets financial management standards. The adoption of
            technology that meets these standards will increase the
            efficiency of the system, allow for less costly updates and
            strengthen internal controls.
      --Completing the expansion of the successful Equal Employment
            Opportunity complaints processing system to include complaints
            of discrimination levied by participants in the Department's
            programs.
      --Continuing renovations of USDA facilities in order to ensure that
            employees and customers have a safe and modern working
            environment.
        Over the course of the past year, USDA has continued to achieve
    success in implementing the President's Management Agenda (PMA). The
    PMA focuses our efforts on those things that are most critical to good
    management, including sound financial systems, innovative uses of IT,
    and ensuring the effective use of human resources. A major part of this
    effort has been the use of Program Assessment Rating Tool (PART) to
    inform funding and management decisions. Under PART, USDA has evaluated
    70 programs and developed plans to improve their performance. These
    improvement plans are available to the public on the recently released
    ExpectMore.gov website. The website provides the public with easily
    accessible information about Federal programs, their performance, and
    actions the administration is taking to improve performance in the
    coming year. The website is a new tool to help increase transparency
    and accountability in Federal programs.
        In summary, I want to emphasize that the President is serious about
    reducing the deficit to help maintain strong economic growth. This
    budget sets clear priorities for U.S. agriculture, conservation, and
    nutrition while responsibly restraining spending. This budget puts us
    in the right direction for reducing the deficit and protecting future
    generations of American producers by establishing the foundation for a
    strong economy.
        That concludes my statement. I look forward to working with members
    and staff of the Committee and will be glad to answer questions you may
    have on our budget proposals.
                                     ______

    Prepared Statement of Annabelle Romero, Deputy Assistant Secretary for
          Civil Rights, Office of Assistant Secretary for Civil Rights

        Mr. Chairman and members of the Subcommittee, thank you for the
    opportunity to submit this statement supporting the President's fiscal
    year 2007 budget proposal for the United States Department of
    Agriculture's (USDA) Office of the Assistant Secretary for Civil Rights
    (ASCR).
        The Office of the ASCR provides policy guidance, leadership,
    outreach, coordination, training, and complaint prevention and
    processing for USDA. Our mission is to provide equal opportunity, equal
    access and fair treatment for all USDA customers and employees.
        The Office of Civil Rights has made significant progress in
    addressing major civil rights challenges at USDA since the
    establishment of the ASCR position. The Office of Civil Rights began
    fiscal year 2005 with 1,331 pending EEO complaints and ended fiscal
    year 2005 with 1,402 EEO complaints. During fiscal year 2005, 662 new
    EEO complaints were received, and a total of 591 EEO complaints were
    closed. The Office started the fiscal year 2005 year with 363 pending
    program complaints and ended fiscal year 2005 with 404 program
    complaints.

                          FISCAL YEAR 2007 OBJECTIVES

        The Office of Civil Rights has the following four overarching
    strategic objectives for fiscal year 2007 that contributes to the
    Department's success. They are to:
      --Ensure equal opportunities for employees and applicants and equal
            access for USDA customers.
      --Ensure that equal employment opportunity and civil rights
            complaints are processed timely, efficiently, and in a cost
            effective manner.
      --Increase USDA-wide awareness and use of Alternative Disputes
            Resolution (ADR) for early resolution of civil rights
            complaints and non-civil rights disputes.
      --Establish effective outreach programs in USDA.

                         FISCAL YEAR 2007 KEY OUTCOMES

        The Office of Civil Rights plans to achieve the following key
    outcomes in fiscal year 2007: (1.) A reduced number of equal employment
    opportunity and civil rights program complaints. Increasing the
    education and awareness of civil rights is likely to decrease the
    number of EEO and civil rights program complaints filed. (2.) Efficient
    and cost effective processing of equal employment opportunity and civil
    rights program complaints within the regulatory timeframes. (3.) Timely
    and effective resolution of a larger number of civil rights and non-
    civil rights complaints through increased awareness and use of
    Alternative Dispute Resolution. (4.) Effective outreach programs in
    every agency. Strengthening the agencies' outreach efforts, developing
    outreach policies, and providing training on best outreach practices to
    ensure timely access to all customers, thereby improving minority and
    underserved population participation in USDA programs.

                        FISCAL YEAR 2007 BUDGET REQUEST

        The fiscal year 2007 Appropriation request for the Office of Civil
    Rights is $22.7 million. This is an increase of $2.7 million over
    fiscal year 2006. The funding request includes increases for the
    following:
      --Civil Rights Enterprise System Improvement--$1.987 million.--Funds
            for the Civil Rights Enterprise System are requested to
            continue the expansion of the complaints processing system.
            USDA agencies will be able to interface on a web-based system
            that will provide customers and employees real-time data
            regarding their discrimination complaints.
      --Compliance Monitoring Activities $0.354 million.--The Office of
            Civil Rights is mandated to conduct compliance reviews in the
            employment and program division. However, funding is needed to
            meet new requirements designed to meet the affirmative
            employment goals of the Equal Employment Opportunity
            Commission's Management Directive 715. Compliance reviews will
            result in civil rights complaint prevention and reduction.
      --Pay cost $0.401 million.--The request for pay cost is for the
            anticipated fiscal year pay raise.
        I would like to emphasize the importance of the Committee's
    approval of the President's $22.7 million budget for USDA's Office of
    Civil Rights. The proposed budget will help ensure that USDA continues
    progress in providing fair and equitable delivery of its services and
    programs to our customers and also protects the civil rights of USDA
    employees.
                                     ______

      Prepared Statement of Peter J. Thomas, Deputy Assistant Secretary,
                          Department of Administration

        Mr. Chairman and members of the Subcommittee, I want to thank you
    for the opportunity to submit this statement supporting the President's
    budget proposal for fiscal year 2007 for the Department of
    Agriculture's (USDA) Departmental Administration.
        Departmental Administration (DA) is responsible for a wide range of
    activities. Our mission is to promulgate Department-wide policies in
    areas such as Human Resources, Procurement, Property Management,
    Ethics, Security, and similar key administrative areas. DA also
    provides comprehensive facilities support services for the owned and
    leased offices that USDA has throughout the National Capital Area.
    Furthermore, DA directly provides the Secretary, his Subcabinet, and
    the principal staff offices with a full suite of administrative
    support. Because of DA's direct responsibilities over USDA's
    headquarters operations, and its policy oversight of USDA's vast
    property and human assets, it is also responsible for providing
    security both for worksites and, more importantly, for the employees
    housed in those worksites. Since September 11, 2001, DA has, largely
    using funds provided in the 2002 homeland security supplemental
    appropriations, greatly enhanced its protection of USDA's staff and its
    critical infrastructure.
        My statement covers three appropriations: The Departmental
    Administration Direct Appropriation, which funds most of our offices;
    the Agriculture Buildings and Facilities and Rental Payments
    Appropriation for the National Capital Area facilities and rental
    payments to the General Services Administration (GSA) for space
    occupied nationwide by USDA agencies except the Forest Service; and the
    Hazardous Materials Management Appropriation which funds clean-up
    activities under the Comprehensive Environmental Response,
    Compensation, and Liability Act (CERCLA). I would like to address the
    Agriculture Buildings portion first since our South Building renovation
    project, a key priority, is funded from this source.

                      AGRICULTURE BUILDINGS AND FACILITIES

        The fiscal year 2007 budget request for Agriculture Buildings and
    Facilities and Rental Payments of $209.8 million includes $155.9
    million for rental payments to GSA and, $53.9 million for operations,
    maintenance, repair, and security of our existing four-building
    headquarters' facilities, including $14.1 million towards repairing and
    renovating the aging South Building.
        Consistent with our goal to ensure a safe and functional USDA
    workplace, the $14.1 million funding to continue the repair and
    renovation of the South Building is critical. Funding for this project
    was not available in fiscal years 2004--2006 and it is important to
    resume funding for these renovations. This is a massive, multi-year
    project, and every year that we lose lengthens the period during which
    6,500 employees and thousands of visitors per year are exposed to
    health and safety hazards. The project began in 1998 and was designed
    to be accomplished in eight phases. Three phases have been completed
    and are occupied. Design of Phase 4A and construction of the new mail
    center facility began in September 2004. Among other things, critical
    work is being done on fire protection systems, abatement of hazardous
    materials and replacement of aged, unreliable and inefficient utility
    systems. The requested fiscal year 2007 funding will allow USDA to
    conclude construction of Phase 4 and to design Phase 5.

                DEPARTMENTAL ADMINISTRATION DIRECT APPROPRIATION

        The fiscal year 2007 request for the Departmental Administration
    (DA) Direct Appropriation is $28.3 million. We have made significant
    progress in a number of areas funded by the Departmental Administration
    Direct Appropriation, and I would like to outline some of them here and
    explain our proposals for continued improvement in fiscal year 2007.

                               PHYSICAL SECURITY

        As previously discussed, physical security in the National Capital
    Region is addressed within the Agriculture Building and Facilities
    Appropriation. DA also has responsibility for physical security policy
    for USDA owned and leased facilities worldwide. USDA conducts its
    programs in approximately 25,000 structures at more than 7,000 sites
    around the world. The Office of Procurement and Property Management
    within DA provides overall leadership and direction to USDA agencies in
    the management and coordination of security for these facilities. Major
    activities include policy development, education and training, and
    security assessments of facilities.
        After September 11, USDA understood there was a need to rethink the
    way it had historically approached physical security enhancements at
    its facilities. Given the number of buildings and sites at which USDA
    conducts its business and the finite resources available, we needed to
    find a process that would link available resources to our most critical
    needs and priorities. Partnering with each of our agencies, we
    developed an inventory of mission critical facilities where we should
    first focus our security efforts. Among the sites reviewed were labs
    conducting research involving biohazardous materials; labs responsible
    for protecting the Nation's food supply; facilities housing valuable
    germplasm collections; labs in foreign countries; USDA computer centers
    processing payroll, vendor, and program payments; and facilities
    housing aircraft. We hired a small staff of physical security
    specialists and retained contractors to perform security assessments at
    our critical facilities using a risk-management approach advocated by
    the Government Accountability Office. We also retained contractors to
    install security enhancements and develop a database, the Geographic
    Security Information System, to help us manage and track the progress
    in enhancing security to our mission critical facilities at the various
    locations. Following the guidance within Homeland Security Presidential
    Directive (HSPD) 7, this database was integrated into a Geographical
    Information System. To date we have completed security assessments at
    approximately 90 percent of ``mission critical'' facilities. We have
    also developed a comprehensive manual that provides our agencies with
    standards and guidelines as we continue to assess and improve our
    security posture with regard to: chemical, biological and radiological
    agents; information technology; food safety; animal and plant research;
    water resources; and aviation assets.
        In accordance with HSPD 7 (facility security assessment required)
    and HSPD 9 (facility security assessment conducted every 2 years), USDA
    is developing a self-assessment tool to be used by facility managers at
    any USDA location. This tool will serve as standard guidance for
    managers of smaller offices and facilities across the country. The site
    directors at these smaller facilities will have the capability to
    remotely provide critical site-specific security information to a
    security analyst in one central office and then be provided security
    guidance for their site. This guidance will enhance the protection of
    their facility and mission critical assets.
        In late 2005, DA began implementing HSPD-12 (Smart Card), following
    OMB and USDA guidance, for Personal Identification Verification (PIV).
    Under PIV, all new employees and new contractors must have a successful
    fingerprint processed by the FBI and a successful ``National Agency
    Check with Inquiries'' (NACI) by Office of Personnel Management (OPM),
    in order to receive a permanent badge with access rights to Federal
    facilities. In fiscal year 2006, the Office of Operations within DA
    provided guidance to all USDA agencies in the National Capital Region
    on issuing identification badges for new employees and contractors. DA
    will be determining which current USDA employees need to have a NACI
    processed in order to receive their permanent badge. This will be
    completed following a set schedule over the next 2 years. DA procedures
    are in full compliance with HSPD-12 PIV Stage I.

                       CONTINUITY OF OPERATIONS PLANNING

        DA continues to be an active participant in the Continuity of
    Government (COG) and Continuity of Operations (COOP) programs in the
    Department. One of our primary functions is to review the Department's
    and USDA agencies' COOP Plans on a regular basis to ensure
    responsiveness to current threat situations. To ensure plan viability,
    formal revision of all USDA COOP Plans will continue as a biennial
    requirement. In order to maintain readiness, USDA continues to conduct
    functional exercises and planning workshops. In fiscal year 2005,
    revisions to the USDA Headquarters COOP Plan were based on the updated
    Federal Preparedness Circular 65 requirements to develop devolution,
    reconstitution, and human capital plans. A functional exercise was
    conducted in June 2005 to disseminate lessons learned from the previous
    planning cycle. USDA had a robust participation in an interdepartmental
    exercise conducted in late June 2005. In fiscal year 2006, the USDA
    Headquarters plan will be revised to include pandemic influenza
    planning, refinement of devolution, reconstitution and human capital
    plans will continue, functional exercises will consist of a major
    interagency COOP exercise, evaluation of agency-sponsored exercises and
    COOP activities, Department-wide COOP awareness training, and the
    beginning of a formal revision of the HQ COOP Plan and agencies'
    supplements. In addition, support to the National Emergency Management
    Team will continue. In fiscal year 2007, agency supplement COOP plans
    will be formally reviewed; functional exercises will consist of testing
    pandemic influenza planning and participation in a major interagency
    COOP exercise, evaluation of agency-sponsored exercises and COOP
    activities, and the continuation of Department-wide COOP awareness
    training. Our fiscal year 2007 request includes $760,000 to ensure USDA
    is compliant with Executive Orders and Presidential Directives dealing
    with Emergency Preparedness and the requirements for Federal Executive
    Branch Continuity of Operations. With this increase, DA will have the
    funding needed to maintain the COOP for the Office of the Secretary,
    provide guidance and training to mission areas, and provide support and
    training to USDA's National Emergency Preparedness Team.

                       PERSONNEL AND INFORMATION SECURITY

        USDA will continue to improve the personnel security program in
    fiscal year 2007 through re-engineering and modernization efforts. The
    fiscal year 2005 in-house adjudication and processing time averaged 22
    workdays after receipt of the final background investigation report.
    These efforts are closely aligned with the President's Management
    Agenda eGovernment Initiative ``e-QIP'' (electronic processing of
    security questionnaires). Key Departmental personnel are now fully
    trained and capable of using the e-QIP system to electronically submit
    investigative requests. This system has resulted in further
    improvements in staff efficiency and additional reductions in
    processing and handling time for personnel security cases. Restoring
    our personnel security program has increased the reliability of public
    trust positions and ensures that staff members are cleared for national
    security classified information in positions needing such access.
    Annually, the Department requires approximately 2,400 investigations
    and reinvestigations each year to maintain the currency of its
    employees.
        USDA revitalized an information security assurance program intended
    to safeguard national security information. The post-September 11
    environment has made it clear that all Federal agencies have to make
    sure that national security information is properly safeguarded. Adding
    further importance, the USDA has been granted original classification
    authority to classify national security information to the secret
    level. To implement an effective program to safeguard this information,
    USDA has added information security specialists to the staff, launched
    an information security web site, drafted a security classification
    guide, briefed senior leadership on national security classification,
    and provided supplemental training to managers and front line staff.
    Finally, USDA established an inter-agency work group that includes nine
    additional Departments/agencies to address common issues, including
    development of an automated on-line security awareness refresher
    briefing for government-wide use
        The fiscal year 2007 request includes an increase of $1,840,000 to
    provide funds to ensure the Personnel and Document Security Program is
    operational and compliant with the Executive Orders and Presidential
    mandates. USDA plans include: development of training programs for
    employees who have security clearances; meeting the requirement that
    adjudicative results are furnished to the Office of Personnel
    Management within 90 days of receipt of a closed background
    investigations; and operating and maintaining an enterprise data base
    on national security clearances issued by the Department.

                            HUMAN CAPITAL MANAGEMENT

        The Office of Human Capital Management (OHCM) in DA provides policy
    guidance to USDA agencies on human capital management, one of the five
    initiatives of the President's Management Agenda. USDA faces a number
    of human resources challenges. Over the next few years, it is
    anticipated that an unprecedented number of executives and managers
    will retire, as will many of our cadre of researchers, veterinarians,
    and other critical professionals. Our workforce must be competent,
    reliable and dedicated to new business and scientific challenges in
    research, food safety, trade, and agricultural production and
    conservation. During fiscal year 2005, this office published the
    Strategic Human Capital Plan that set direction and frameworks for
    measuring accomplishments achieved in workforce planning, employee and
    leadership development, recruitment and retention, and performance
    management. USDA agency plans provide workforce assessments and
    strategies to narrow skill gaps in agency mission critical occupations,
    and link them to recruitment, hiring, and retention strategies to help
    meet succession plans. OHCM and other USDA agencies are developing an
    annual Recruiting Plan, including an evaluation process for cost-
    effectiveness to improve hiring and recruitment strategies. OHCM is
    leading USDA to strengthen its performance appraisal programs by
    aligning individual employee performance expectations with agency
    goals. As of the fourth quarter of fiscal year 2005, over 60 percent of
    USDA's employee performance plans are aligned with agency goals, as
    reflected in the PMA scorecard for human capital.
        Departmental Administration is requesting an increase of $2,348,000
    for providing support to policies and technical guidance for
    enhancements to HR performance programs. DA plans to review the current
    performance systems in USDA and evaluate possible alternatives that are
    available to Federal employees. More emphasis will be placed on
    contemporary performance-based solutions rather than historic
    processes.

                       ENTERPRISE HUMAN RESOURCES SYSTEM

        In order to secure the benefits of improved human resources
    management programs and to capture the data needed for workforce
    planning and organizational restructuring, DA has committed to building
    a Department-wide Human Resources Enterprise System (HRES). The system
    holds great promise to unify the manner in which agencies process
    personnel transactions, provide more timely and consistent workforce
    information, and enable improved management of USDA's Human Capital. In
    our commitment to building a Department-wide HRES, DA is actively
    engaged in the Department-wide implementation and deployment of
    Automated Recruitment Web-based Systems to streamline the hiring
    process to meet the 45 day hiring model set forth by OPM in order to
    meet the requirements of the Recruitment One-Stop initiative under the
    Presidential Management Agenda for eGovernment. DA is actively
    participating in other OPM Presidential Management Agenda initiatives
    including the Human Resources Line of Business to fulfill the vision of
    an HR shared service center complete with common solutions to
    standardized HR business processes, and the implementation of the
    Enterprise Human Resources Integration suite of products. DA is also
    collaborating with mission areas and staff agencies on the feasibility
    of a Department-wide web-based Worker's Compensation system with a
    direct link to the Department of Labor in an effort to meet the
    requirements of the President's ``Safety, Health and Return to Work''
    initiative.

                           GOVERNMENT ETHICS PROGRAM

        The Office of Ethics succeeded in reviewing virtually all of the
    nearly 1,000 financial disclosure reports submitted by USDA officials
    in a timely manner. We have implemented a web-based ethics training
    program that is used throughout the Department and in several Executive
    Branch organizations outside USDA. The majority of these training
    modules were migrated to AgLearn in fiscal year 2005. The Office of
    Ethics has developed an Ethics Orientation module for new USDA
    employees. The module is in a final testing phase and will be available
    in 2006. Also in final stages of testing is a self-service ``walk
    through'' guide to post-employment. More than 98 percent of the USDA
    employees required to submit financial disclosure reports completed
    ethics training in 2005.

                               PROCUREMENT POLICY

        DA continues to lead the implementation of the Integrated
    Acquisition System (IAS). IAS is a web-based commercial off-the-shelf
    procurement and contract management generation and administration tool.
    It provides USDA with an enterprise solution for requisitioning,
    automated workflow, commitment accounting, funds control, and contract
    closeout functions used by the procurement and financial communities.
    Additionally, it provides real-time interface to the Department's
    financial system in accordance with the Joint Financial Management
    Improvement Program. IAS supports e-Government legislation,
    Presidential Initiatives to improve the operation of government, and
    complements the Federal Integrated Acquisition Environment. Several
    USDA agencies have been implemented and we are working toward full
    deployment across the Department by the end of fiscal year 2006.

                                USE OF BIOFUELS

        The Department's continuing commitment to biofuels resulted in an
    estimated 207,600 gasoline gallon equivalents of biofuels (ethanol and
    biodiesel) used in USDA fleet vehicles, equipment, and facilities in
    fiscal year 2005 an increase of 72 percent over fiscal year 2004. Use
    of E85 ethanol fuel reached a new high in fiscal year 2005, to 179,625
    gallons. This continued increase is a successful result of the E85
    promotion program USDA initiated in fiscal year 2003, which included
    awareness training for Departmental headquarters and field fleet
    managers, providing them with E85 bumper stickers and other materials
    for use with USDA's ethanol-gasoline flexible fuel vehicles. USDA's
    flex-fuel E85 fleet inventory grew from 3,079 vehicles in fiscal year
    2004 TO 3,267 vehicles in fiscal year 2005. In fiscal year 2006, USDA
    is focusing on further increasing the use of B20 biodiesel and E85
    ethanol as a prime strategy to meet the new alternative fuel use
    requirements of the Energy Policy Act of 2005 and the Executive Order
    13149 of 20 percent petroleum reduction target for fleet vehicles.

            FEDERAL BIOBASED PRODUCTS PROCUREMENT PREFERENCE PROGRAM

        Section 9002 of the 2002 Farm Security and Rural Investment Act of
    2002 (Public Law 107-171) directed the USDA to develop and implement a
    procurement preference program for biobased products. DA is leading the
    design, development, testing, and USDA implementation of what is now
    known as the Federal Biobased Product Preferred Procurement Program
    (FB4P). The FB4P will consist of:
      --a biobased product preference program; and
      --a biobased product procurement promotion program. Section 9002 of
            the 2002 Farm Security and Rural Investment Act of 2002 (Farm
            Bill) (Public Law 107-171) mandates Federal agencies to have a
            biobased product procurement preference program in place within
            1 year after guidelines pertaining to procurement preferences
            for these products are published. These guidelines were
            published as a final rule in the Federal Register on January
            11, 2005.
        On January 10, 2006, USDA completed its Affirmative Procurement
    Program (APP) and posted it on its biobased website at http://
    www.usda.gov/biobased. The APP formally establishes USDA's Biobased
    Procurement Program for USDA-designated biobased items and provides
    agency-wide guidance for implementing an effective program. USDA's
    Biobased APP ensures items composed of biobased material will be
    purchased to the maximum extent practicable and meets the requirements
    of the final rule. The APP will also serve as the government-wide model
    to achieve the Section 9002 goals of the 2002 Farm Bill. Early in
    fiscal year 2006, USDA conducted a 3-month Biobased Pilot Project
    designed to test biobased/biodegradable food-service products such as
    cups, plates, cutlery, etc. During the pilot, over 33,000 patrons were
    served and cafeteria operations and services were not adversely
    impacted by the change to biobased products. The full-cycle approach of
    the pilot project: (1) replaced 100 percent of current Styrofoam and
    plastic food service items with biobased products wherever possible;
    (2) provided training to patrons on how to dispose of waste to prevent
    contamination with non-compostables and to compost the cafeteria
    residuals; (3) diverted cafeteria-derived organic recyclables from
    landfill disposal to a beneficial horticultural use; and (4) resulted
    in the production of over 44 cubic yards of compost to be used in the
    Whitten Building gardens. Overall USDA considers the pilot a success
    and will continue to promote biobased products in the future.

                         REAL PROPERTY ASSET MANAGEMENT

        USDA is proactively implementing Executive Order 13327, Federal
    Real Property Asset Management, which establishes a Presidential
    Management Initiative promoting the efficient and economical use of
    America's real property assets to assure management accountability for
    implementing Federal real property management reforms. USDA will focus
    on six major areas as the foundation for future efforts and compliance:
    real property management organization; real property planning and
    budgeting activities; utilization of inventory data in decision-making;
    performance measures and continuous monitoring asset inspection and
    condition index; and divesting ourselves of un-needed real property.
        In fiscal year 2004, USDA designated a Senior Real Property Officer
    (SRPO) to oversee implementation of this Executive Order. The SRPO
    established a Real Property Council within USDA to assist with this
    effort. By the end of fiscal year 2006, USDA will have an Asset
    Management Plan, incorporating final guidance provided by the Federal
    Real Property Council, in place and will have established a strategy
    for implementation of the performance measurements to achieve the goals
    and objectives outlined in the Asset Management Plan. USDA's goal is to
    achieve a yellow rating on the President's Management Agenda Asset
    Management scorecard in fiscal year 2006.
        USDA initiated a major corporate project to implement the first
    department-wide real property automated information system to improve
    management controls and accountability. This new department-wide
    system, Corporate Property Automated Information System (CPAIS), which
    was implemented in May 2004, provides an integrated solution, which
    standardizes USDA real property accounting (subsidiary ledger to the
    Foundation Financial Information System (FFIS)), real property business
    processes and provides management of the entire real property portfolio
    including owned real property, commercial leases, and General Services
    Administration assignments. In fiscal year 2006 and 2007, USDA will
    integrate personal property into CPAIS, thereby eliminating old legacy
    systems, and managing its assets to make maximum use of resources
    provided.

                        EXCESS PERSONAL PROPERTY PROGRAM

        Section 923 of the Federal Agriculture Improvement and Reform Act
    of 1996, authorized the Secretary of Agriculture to transfer excess
    Federal personal property to any of the 1994 Tribal Institutions,
    Hispanic-Serving Institutions, and the 1890 colleges and universities,
    including Tuskegee University. In fiscal year 2005, USDA transferred
    $2.3 million worth of excess personal property under the program,
    bringing the total to greater than $20.9 million since the program
    began in fiscal year 1998. This program provides much needed property
    and equipment to institutions that otherwise would not be able to
    acquire property due to limited funds and will improve the
    institutions' capability in the areas of research, education, and
    technical and scientific activities.

                   SMALL & DISADVANTAGED BUSINESS UTILIZATION

        USDA is a leader in the Federal Government in achieving small
    business program contracting goals. The Office of Small and
    Disadvantaged Business Utilization (OSDBU) utilizes an active outreach
    program to identify available small, small and disadvantaged,
    Historically Underutilized Business Zone (HUB Zone), service disabled
    veteran-owned, and women-owned businesses; to expand the number of
    small businesses securing contracts with USDA; to identify and provide
    assistance to underserved areas; and to identify and eliminate
    contracting barriers that prevent or restrict small business access to
    USDA procurements. During fiscal year 2005, OSDBU was the winner of two
    prestigious awards from the Small Business Administration: the Federal
    Gold Star Award and the Agency Goaling Award of Excellence. These
    awards recognize the exemplary performance of USDA agencies for
    attaining or exceeding the federally mandated small business goals that
    grow small business capacity and create jobs.
        OSDBU is aggressively taking steps to significantly increase
    contracting and subcontracting opportunities for Service Disabled
    Veteran-Owned Small Businesses and to carry out the requirements of
    Executive Order 13360 and Public Law 108-183--The Veterans Benefits Act
    of 2003. OSDBU is tracking the Service Disabled Veteran-Owned Small
    Business goal achievement for all USDA agencies. OSDBU continues to
    work with USDA agencies to secure contracts for Service Disabled
    Veteran-Owned Small Businesses.
        In addition, OSDBU continues its rural small business outreach
    efforts to increase small business opportunities and create jobs in
    rural areas. Small firms are paired in mentor-protege relationships
    with experienced Federal contractors to engage in USDA and other
    Federal Departments' contracting opportunities. OSDBU reviews contract
    opportunities to locate those suitable for directing to Tribal 8(a)s
    and other categories of small firms in rural America.
        Another important aspect of OSDBU's work is our support for people
    with severe disabilities working through the Javits-Wagner-O'Day (JWOD)
    program. The JWOD Program helps to meet Federal procurement needs while
    generating employment and providing training opportunities for
    Americans who are blind or have other severe disabilities. USDA's
    demand for JWOD products has grown over the past several years to
    include packaged food products that support USDA food programs inc

                         HAZARDOUS MATERIALS MANAGEMENT

        The purpose of the Hazardous Materials Management Program is to
    clean up and restore USDA-managed lands, and sites contaminated from
    past USDA activities; to enhance USDA's environmental performance in
    current operations; and to participate in Federal, State, and local
    efforts to plan for and respond to hazardous materials incidents. Since
    the Hazardous Materials Management Appropriation was established in
    1988, USDA has cleaned up over 2,250 sites. Many of these were
    underground storage tanks that did not meet current standards. On
    average, the program is completing about 30 site cleanups a year
    through a combination of Hazardous Materials Management Appropriation
    and agency funding.
        We currently estimate that uncontrolled releases of hazardous
    substances have occurred or may have occurred at more than 2,000
    additional sites. Many of these contaminated sites threaten human
    health or the environment, and make valuable resources unavailable for
    public use. Addressing these sites will, in general, be more complex
    and costly than those we have cleaned up so far.
        Program activities are aligned with USDA's Strategic Goal 6: to
    protect and enhance the Nation's natural resource base and environment.
    In addition, the program directly supports three USDA Objectives: (1)
    homeland security, through efforts to improve hazardous materials
    management and by representing USDA on the National Response Team for
    oil spills and hazardous material releases, and participating in the
    National Response Plan's Emergency Support Function 10 and 11, (2)
    management of natural resources, and (3) the quality of life in rural
    America by coordinating USDA efforts for the President's Brownfields
    program. This year our performance focus will shift from the number of
    cleanups we complete to the significance of the public benefits the
    cleanups create and the impact they have in relation to USDA and agency
    missions, goals, and program initiatives. The fiscal year 2007 budget
    seeks $12.0 million to continue this program.

                                   CONCLUSION

        Although administrative programs such as those conducted within DA
    are frequently not thought of by themselves usually considered, high
    visibility or high priority, Mission-area programs, cannot effectively
    meet the expectations of the Congress, the Administration or the public
    without a stable base of good administrative systems, policies and
    support functions. DA is committed to achieving and maintaining a high
    quality of mission program support and asks your assistance in this
    effort. Mr. Chairman and members of the Subcommittee, this concludes my
    statement on the Departmental Administration Budget for fiscal year
    2007.
                                     ______

     Prepared Statement of Nancy C. Pellett, Chairman and Chief Executive
                      Officer, Farm Credit Administration

        Mr. Chairman, Members of the Subcommittee, I am Nancy C. Pellett,
    Chairman and Chief Executive Officer of the Farm Credit Administration
    (FCA or Agency). On behalf of my colleagues on the FCA Board, Doug
    Flory of Virginia and Dallas Tonsager of South Dakota, and all the
    dedicated men and women of the Farm Credit Administration, I am pleased
    and honored to provide this testimony to the Subcommittee.
        At the FCA we are focused on ensuring a dependable source of credit
    and related services for agriculture and rural America as we maintain a
    flexible regulatory environment that allows the cooperative Farm Credit
    System to meet the credit needs of all eligible borrowers while
    ensuring safety and soundness.
        I would like to thank the subcommittee staff for its ongoing
    assistance during the budget process, and before I discuss the role and
    responsibility of the Farm Credit Administration and our budget
    request, I would respectfully bring to the Subcommittee's attention
    that the FCA's administrative expenses are paid for by the institutions
    that we regulate and examine. Said differently, the FCA does not
    receive a Federal appropriation, but is funded through annual
    assessments on Farm Credit System (System) institutions and the Federal
    Agricultural Mortgage Corporation (Farmer Mac). We fully support the
    proposed 2007 Budget Submission of the President.
        Mr. Chairman and Members of the Subcommittee, I will highlight the
    FCA's accomplishments during the past year; report to you briefly on
    the System, as well as Farmer Mac--the other Government-Sponsored
    Enterprise (GSE) that we regulate which serves agricultural lenders in
    the secondary market; and, in conclusion, I will present our fiscal
    year 2007 budget request.

                   MISSION OF THE FARM CREDIT ADMINISTRATION

        As directed by Congress, the FCA's mission is to ensure a safe,
    sound, and dependable source of credit and related services for
    agriculture and rural America.
        The Agency accomplishes its mission in two important ways. First,
    FCA ensures that the System and Farmer Mac remain safe and sound and
    that they comply with the applicable law and regulations. Specifically,
    our risk-based examinations and supervisory strategies focus on an
    institution's financial condition and any material existing or
    potential risk, as well as its board's and management's abilities to
    direct its operations. Supervisory strategies also evaluate each
    institution's efforts to serve all eligible borrowers, including young,
    beginning, and small farmers and ranchers.
        Secondly, the FCA approves corporate charter changes, and
    researches, develops, and adopts regulations, policies, and other
    guidelines that govern how System institutions conduct their business
    and interact with their customers. If a System institution violates a
    law or regulation, or operates in an unsafe or unsound manner, we can
    use our enforcement authorities to ensure appropriate corrective
    action.
        We constantly strive to maintain a regulatory environment that
    enables System institutions and Farmer Mac to remain financially strong
    so they can meet the changing demands of agriculture and rural America
    for credit and related services. In doing so, our primary focus is to
    ensure the long-term safety and soundness of the two GSEs that serve
    rural America and to develop rules and policies that reflect changing
    market forces.
        Finally, the FCA Board is committed to maintaining the public's
    trust and confidence in the Agency, the System, and Farmer Mac. The
    public is invited to attend the FCA Board Meetings, and we are
    committed to following the requirements of the Government in the
    Sunshine Act.
        The public can read on our Web site the comments received on
    current proposed rules and notices published in the Federal Register.
    Comments on regulations can also be submitted to the Agency
    electronically or through regular mail.

                        FISCAL YEAR 2005 ACCOMPLISHMENTS

        In 2005 we continued our efforts to achieve our Agency strategic
    goals through: (1) responsible regulation and public policy, and (2)
    effective risk identification and corrective action. The FCA has worked
    hard to maintain the System's safety and soundness and is continually
    exploring options to reduce regulatory burden on the FCS and ensure
    that System institutions provide agriculture and rural America
    continuous access to credit and related services.
        To ensure that the FCA is appropriately focused on economic and
    agricultural issues that are relevant to rural America, as well as to
    ensure that the Agency is operating in an effective and efficient
    manner, the FCA contracted with an independent consulting firm to
    conduct an extensive strategic study of the Agency. Of particular
    interest was the need to identify potential challenges that may arise
    in agriculture, the Farm Credit System, or the marketplace over the
    next 5 to 7 years and to realign the Agency where appropriate to enable
    it to proactively address these issues. The major outcomes of the study
    have been a realignment of the examination structure, a new team-
    oriented approach in the regulatory development office, and a merging
    of the major support functions of the Agency including technology,
    financial, and human resource functions.

              EXAMINATION PROGRAMS FOR FCS BANKS AND ASSOCIATIONS

        One of the Agency's highest priorities is the development and
    implementation of efficient and effective risk-based examination and
    oversight programs that meet the high standards and expectations of the
    Congress, investors in System debt obligations, the farmers, ranchers,
    and cooperatives that own System banks and associations, and the public
    at large. Our examination programs and practices have worked well over
    the years and have contributed to the present safe and sound overall
    condition of the System, but the results of our strategic study are
    clear--we must evolve and prepare for the increasingly complex nature
    of agricultural and rural America lending and financing. The FCA Board
    adopted a new policy statement reaffirming its commitment to risk-based
    supervision. This policy statement directs the maintenance of a ``risk-
    based'' approach to oversight and examination for System institutions,
    which will maximize our effectiveness and allow us to strategically
    address the System's safety and soundness and compliance with laws and
    regulations.
        We have taken initial steps to implement the new policy statement
    through realignment of our organizational structure. We believe the
    changes in the System coupled with pending retirements and normal
    attrition of staff necessitates a flexible organizational structure but
    also provides a unique opportunity to prepare for the future. Toward
    this goal, the Agency's Office of Examination (OE) is shifting its
    regionally based field office structure to division examination teams
    that are organized on a national basis. In the new structure, existing
    office locations will be retained, but the examination programs will be
    managed nationally to better match examiner skills to risks presented
    by institutions.
        On a national level, we actively monitor risks that may affect
    groups of System institutions or even the entire System, including
    risks that may arise from the agricultural, financial, and economic
    environment in which the System institutions operate. Our job is not to
    forecast specific events, but to understand the environment so that we
    can take steps in advance to help System institutions take pre-emptive
    actions before adverse trends develop.
        The FCA uses a risk-based examination and supervision program to
    differentiate the risks and special oversight needs of FCS
    institutions. We set the scope and frequency of each examination based
    on the level of risk in the institution. We continuously identify,
    evaluate, and proactively address these risks. The Farm Credit Act
    requires the Agency to examine each FCS institution at least once every
    18 months. However, we monitor the performance of all FCS institutions
    on an ongoing basis and conduct interim examination activities as risk
    and circumstances warrant in each institution.
        As part of our ongoing efforts, we monitor each institution's risk
    profile. The Financial Institution Rating System (FIRS) is the primary
    risk delegation used by the Agency to indicate the safety and soundness
    threats in an institution. The rating system is similar to other
    Federal financial regulators' CAMELS (capital, assets, management,
    earnings, liquidity, and sensitivity) rating scale. FIRS ratings range
    from 1 (for a sound institution) to 5 (for an institution that is
    likely to fail). Beginning in 2006, in addition to FIRS, examiners will
    use a new set of assessment criteria that focus on risk areas including
    credit, interest rate, liquidity, operational, compliance, strategic,
    and reputation.
        Throughout fiscal year 2005, FIRS ratings as a whole continued to
    reflect the stable financial condition of the FCS. The overall trend in
    FIRS ratings continued to be positive, with nearly 4 times as many 1-
    rated institutions (79 percent) as 2-rated institutions (21 percent).
    Significantly, there were no 3-, 4-, or 5-rated institutions. In
    addition, no FCS institutions were under enforcement action at the end
    of fiscal year 2005 or during the previous 3 years and no FCS
    institutions are in receivership. The overall financial strength
    maintained by the System reduces the risk to investors in FCS debt, the
    Farm Credit System Insurance Corporation (FCSIC), and FCS institution
    stockholders.
        Risks are inherent in lending, and managing risks associated with a
    single sector of the economy, such as agriculture, is particularly
    challenging for lenders. If the FCA discovers unwarranted risks, it
    works with an institution's board and management to establish a plan of
    action to mitigate or eliminate those risks. Appropriate actions may
    include reducing risk exposures, diversifying its portfolio of risks,
    increasing capital, or strengthening risk management. In those cases
    where the board and management are unable or unwilling to take
    appropriate action, the Agency has the authority to take a variety of
    actions including supervisory letters, written agreements, and cease
    and desist orders. In extreme cases, we also can remove management,
    issue civil money penalties, and/or liquidate the institution.
        During fiscal year 2005, FCA also performed various examination,
    training, and other services for the Small Business Administration
    (SBA), the United States Department of Agriculture (USDA), FCSIC, and
    the National Cooperative Bank (NCB). Each of these entities reimburses
    the FCA for its services. The safety and soundness of the System and
    Farmer Mac remain our primary objectives. However, we believe the
    continuing use of FCA examination resources by other agencies is a
    positive reflection on the expertise of FCA examiners and serves to
    broaden their examination skills while increasing job satisfaction and
    employee retention. It also helps us defray some of the costs of our
    operations while providing a valuable service.

                               REGULATORY ACTIVITY

        Congress has given the FCA Board statutory authority to establish
    policy and prescribe regulations necessary to ensure that FCS
    institutions comply with the law and operate in a safe and sound
    manner. The Agency's regulatory philosophy articulates our commitment
    to establishing a flexible regulatory environment that enables the
    System to offer high quality, reasonably priced credit to farmers and
    ranchers, their cooperatives, rural residents, and other entities on
    which farming operations depend. This translates into developing
    balanced, well-reasoned, flexible, and legally sound regulations. We
    strive to ensure that the benefits of regulations outweigh the costs;
    to maintain the System's relevance in the marketplace and rural
    America; and ensure that FCA's policy actions encourage member-
    borrowers to participate in the management, control, and ownership of
    their GSE institutions.
        For 2005 and early 2006, the Agency's regulatory and policy
    projects included the following:
      --A rule to allow a qualified lender to obtain a waiver of borrower
            rights when a loan is part of a loan syndication with non-
            System lenders that are otherwise not required by the Farm
            Credit Act to provide borrower rights.
      --A capital adequacy preferred stock rule to amend the Agency's
            preferred stock regulations, which are designed to ensure the
            stability and quality of capital at System institutions, to
            ensure the fair and equitable treatment of all shareholders of
            FCS preferred stock, and to minimize the potential for insider
            abuse.
      --A capital adequacy risk weighting final rule to more closely match
            the Agency's risk-based capital requirements with FCS
            institutions' credit exposures. The changes make the FCA's
            regulatory capital treatment more consistent with that of the
            other financial regulatory agencies and address financial
            structures and transactions developed by the market.
      --A liquidity rule to amend the Agency's previous liquidity reserve
            requirements for System banks. The purpose of the rule is to
            ensure that System banks have adequate liquidity in the case of
            market disruptions or other extraordinary situations, as well
            as to improve the flexibility of Farm Credit banks to meet
            liquidity reserve requirements and provide credit in all
            economic conditions.
      --A receivership repudiation final rule, specifying the conditions
            under which the FCSIC will not attempt to pull back specific
            assets into the conservatorship or receivership estate if a
            transaction meets certain conditions.
      --A bookletter issued by the Agency to all System institutions
            providing guidance on how they can utilize the Tobacco Buyout
            Program to meet their borrowers' financial needs by offering
            them the option to immediately receive Tobacco Buyout contract
            payments.
      --A bookletter on bank director compensation limits that makes a one-
            time adjustment to the bank director compensation limit to
            allow System banks to pay fair and reasonable director
            compensation for 2006.
      --A final rule on governance of FCS institutions providing for
            enhanced oversight of management and operations by
            strengthening the independence of System institution boards and
            incorporating best governance practices. The rule also supports
            borrowers' participation in the management, control, and
            ownership of their respective FCS institutions.
        In addition, relative to Farmer Mac, the Agency finalized a rule
    governing its investments and setting a liquidity standard and has
    undertaken a proposed regulatory project to update the Farmer Mac Risk-
    Based Capital Stress Test. The regulatory project is intended to
    incorporate a more accurate reflection of risk in the model in order to
    improve the model's output--Farmer Mac's regulatory minimum capital
    level.
        The Agency has also adopted an ambitious regulatory and policy
    agenda for 2006 and anticipates pursuing a number of issues, including:
      --Evaluating regulatory options for assessment and apportionment of
            FCA administrative expenses.
      --Continuing a pilot program that allows System institutions to make
            investments that further support their mission of providing
            credit to agriculture and rural America.
      --Continuing to review current regulatory requirements governing
            eligibility and scope of lending to determine if these
            requirements are reasonable in light of agriculture's changing
            landscape. Agency staff will identify issues and explore
            options for the Board's consideration.
      --Evaluating comments on a proposed termination rule that would amend
            and update the existing regulations that govern the termination
            of System status. Issues such as costs, timing, communication,
            voter quorums, tax implications, directors' rights, equitable
            treatment of dissenting stockholders, and overall effect on the
            System are considered in the proposal.
      --Considering regulatory changes for disclosure and reporting
            requirements for System institutions. We approved a proposed
            rule that is designed to improve the transparency of public
            disclosures, strengthen board and management accountability and
            auditor independence, and increase shareholder and investor
            confidence in the System. The proposed changes reflect the
            cooperative nature and unique structure of the System, while
            incorporating the best industry practices of public companies
            and recent changes in the reporting requirements of other
            Federal financial regulators, provisions in the Sarbanes-Oxley
            Act of 2002, and the Securities and Exchange Commission
            regulations.
      --Continuing the Agency's effort to streamline its regulations so the
            System can more efficiently fulfill its mission to provide a
            dependable source of credit to America's farmers, ranchers,
            aquatic producers, cooperatives, and rural residents. We
            approved a proposed rule to be published in March 2006 to
            reduce regulatory burden on System institutions by repealing,
            clarifying or updating current regulations.
      --Continuing a study on loan syndications and assignment markets that
            will help determine whether the Agency's approach to these
            issues should be modified.

                              CORPORATE ACTIVITIES

        The pace of System restructuring remained slow in fiscal year 2005.
    The number of corporate applications submitted for FCA Board review and
    approval during fiscal year 2005 declined to four applications,
    compared with seven applications the prior year. As of January 1, 2006,
    there were 109 Farm Credit System institutions, including 96
    associations, five banks, and eight service corporations and special
    purpose entities. Through mergers, the number of FCS associations has
    declined by 28 percent over the previous 5 years (37 associations) and
    the number of FCS banks has dropped by 29 percent (2 banks). Generally,
    these mergers have brought larger, more cost efficient, and better
    capitalized institutions with a broader, more diversified asset base,
    both by geography and commodity. The Agency estimates that within the
    next 5 years, the process of expansions and mergers will result in an
    increase in the size and complexity of System entities, with the
    average association exceeding $1 billion in assets.

                    STRATEGIC PLANNING AND PERFORMANCE PLANS

        The FCA Strategic Plan for fiscal years 2004 through 2009 guides
    the Agency's long range efforts. The FCA Board adopted the strategic
    plan unanimously and believes that it is vital to achieving the
    Agency's mission and goals by providing all staff with a clear focus
    and direction as well as prioritizing the issues, functions, and
    programs that require an investment of resources.
        During fiscal year 2005, our work focused on implementing
    initiatives to accomplish FCA's three strategic goals and on measuring
    the Agency's performance. Goal 1 is our public mission of ensuring that
    the FCS and Farmer Mac fulfill their public mission for agriculture and
    rural areas. Goal 2 is evaluating risk and providing timely and
    proactive oversight to ensure the safety and soundness of the FCS and
    Farmer Mac. Goal 3 is implementing the President's Management Agenda.
    In order to meet the goals of the strategic plan, the Agency continues
    to comply with the Government Performance and Results Act of 1993 by
    integrating the budgeting process into the planning and performance
    management process. We link performance goals with resource needs, so
    that we are in a better position to use the strategic plan to align the
    organization and budget structures with our mission, goals, and
    objectives. Other Activities and Accomplishments
        I would also like to note a few other Agency activities and
    accomplishments for 2005. First, an audit of the FCA's fiscal year 2005
    financial statements has been completed and I am pleased to report
    that--for the 12 year in a row--we have received an unqualified audit
    opinion.
        Second, for the fifth consecutive year, FCA's annual Federal
    Information System Management Act review reported no significant
    weaknesses in our information security program. We have, in the past
    year, taken several measures to strengthen our information security
    program. These measures include ensuring secure transmission of
    sensitive information over the Internet by providing our staff with an
    option to encrypt sensitive e-mail sent over the Internet. We also
    provided our computer users the capability to encrypt a portion of
    their portable storage devices for protection of sensitive stored
    information.
        Third, we continue to improve our ability to ensure continuity of
    our operations through refining our business continuity plan and
    through testing our disaster recovery plan. We also focused on business
    continuity and disaster recovery planning with the Farm Credit System
    through a series of visits to FCS banks and data centers. During these
    visits we encouraged membership in the Financial Services Information
    Sharing and Analysis Center (FS/ISAC) and sponsored FCS institutions'
    membership in the Government Emergency Telecommunications System
    (GETS). The FS/ISAC is an organization that provides information
    security and threat assessment information across the financial sector.
    The GETS provides priority access to landline telecommunications to
    support response in the event of an emergency.
        Fourth, we continue to develop our e-government capabilities. Our
    accomplishments in the area of e-government include:
      --A redesign of our Web site to be more user-friendly and more easily
            navigable.
      --Implementation of the use of electronic signature to facilitate the
            approval process among geographically--dispersed staff.
      --Enhancement of the ability of Farm Credit System institutions to
            easily and securely transfer examination-related information to
            FCA examination staff.
        During fiscal year 2005 we:
      --Implemented a machine-readable privacy policy on our Web site.
      --Enhanced the FCA Exam Manual on our Web site by adding a section on
            Information Technology.
      --Established a process for collecting survey data from FCS
            institutions on our Web site.
      --Established a process to begin sending bookletters and
            informational memorandums via electronic means to System
            institutions.

                      CONDITION OF THE FARM CREDIT SYSTEM

        I will now turn to the condition of the Farm Credit System. I am
    pleased to report that the System's overall condition and performance
    was solid and steady during 2005. Capital levels continued to increase,
    mostly through retained earnings and stock sales. Asset quality
    remained high, loan volume growth was strong, and favorable credit
    quality enabled the System to achieve $2.096 billion in earnings for
    the 12 months ended December 31, 2005. By and large, the System has
    knowledgeable and experienced managers at all levels.
        The FCS is fundamentally sound in all material respects, and it
    continues to be a financially strong, reliable source of affordable
    credit to agriculture and rural America. The quality of loan assets,
    risk-bearing capacity, stable earnings, and capital levels collectively
    reflect a healthy Farm Credit System.
        Loan volume continued to grow during 2005 while loan quality
    remained high. Gross loans increased by 10.3 percent to $106.3 billion.
    The level of nonperforming loans, including nonaccrual loans, decreased
    to 0.56 percent of gross loans. Delinquencies also remained minimal.
        Since 1993, the System has steadily earned more than $1 billion
    each year. This has resulted in a capital position that is at an all-
    time high. We believe this level of capital should enable the System to
    remain a viable and dependable lender to agriculture and rural America
    during any near term downturns in the agricultural economy.
        Despite an increase in total capital, the amount of total capital
    as a percentage of total assets declined from 17.1 percent to 16.3
    percent as of December 31, 2005. This was due to the substantial
    increase in loan volume. However, despite the increased loan volume,
    all institutions continued to exceed their minimum regulatory capital
    requirements, remaining well-capitalized. Permanent capital ratios at
    System banks and associations ranged from a low of 11.1 percent to a
    high of 28.9 percent--all well above the 7.0 percent minimum regulatory
    capital requirement.
        While the overall condition of the System continued to improve
    during 2005 and remains strong, I also must offer a cautionary note
    regarding several risks that could adversely affect borrower repayment
    capacity in the future:
      --Two major cost risks--high and volatile energy costs and rising
            interest rates--reduce borrower incomes and increase lender
            credit risks.
      --Government payments to agricultural producers have accounted for
            between 16 percent and 40 percent of net cash farm income in
            recent years. Reductions in farm subsidy payments could have a
            significant impact on farm incomes and on farmland values,
            especially in areas dependent on farm program crops.
      --Outbreaks of animal and plant diseases, especially Avian Influenza,
            and concerns over possible terrorist attacks on the food supply
            could increase costs and reduce access to export markets.
      --The structure of agriculture and rural America is changing in many
            ways and thus so is the nature of the System's market place.
            While the System's financial health is not threatened, it will
            be challenged as it adjusts to serving the changing needs of
            customers whose livelihood is increasingly dependent on the
            off-farm economy.

                   FEDERAL AGRICULTURAL MORTGAGE CORPORATION

        The FCA also has oversight, examination, and regulatory
    responsibility for the Federal Agricultural Mortgage Corporation, which
    is commonly known as Farmer Mac. Congress established Farmer Mac in
    1988 to provide secondary market arrangements for agricultural mortgage
    and rural home loans. In this capacity, Farmer Mac creates and
    guarantees securities and other secondary market products that are
    backed by mortgages on farms and rural homes. Through a separate office
    required by statute (Office of Secondary Market Oversight), the Agency
    examines, regulates and monitors Farmer Mac's disclosures, financial
    condition, and operations on an ongoing basis and provides periodic
    reports to Congress.
        Like the Farm Credit System, Farmer Mac is a Government-Sponsored
    Enterprise devoted to agriculture and rural America. The FCA and the
    financial markets recognize Farmer Mac as a separate GSE from the
    System's banks and associations. Farmer Mac is not subject to any
    intra-System agreements or to the joint and several liability of the
    FCS banks, nor does the Farm Credit System Insurance Fund back Farmer
    Mac's securities. However, by statute, in extreme circumstances Farmer
    Mac may issue obligations to the U.S. Treasury Department to fulfill
    the guarantee obligations of Farmer Mac Guaranteed Securities.
        The majority of Farmer Mac's common stock is publicly traded on the
    New York Stock Exchange. (In contrast, the cooperative Farm Credit
    System institutions are owned by their member-borrowers and their
    common stock is not publicly traded.) Accordingly, Farmer Mac is
    subject to certain Securities and Exchange Commission regulatory
    requirements and must file comprehensive disclosures that are available
    to its shareholders and the general public.
        Generally, secondary market GSEs, including Farmer Mac, operate at
    lower capital ratios than primary market lenders in recognition of
    differences in their risk profiles, as their business is targeted to
    specific types and quality of loans. Accordingly, regulating and
    monitoring Farmer Mac's capital and risk management are central
    components of FCA's oversight activities.
        In conclusion, FCA is proud of its efforts and accomplishments in
    promoting a constructive and dependable source of credit to farmers,
    ranchers, and their cooperatives. We will remain vigilant in our
    efforts to ensure that the Farm Credit System and Farmer Mac remain
    financially strong and focused on serving agriculture and rural
    America.

                        FISCAL YEAR 2007 BUDGET REQUEST

        Earlier this fiscal year, the Agency submitted a proposed total
    budget request of $45,500,000 for fiscal year 2007, which is the same
    as our fiscal year 2006 total budget request. The Agency's proposed
    budget includes an assessment on System institutions for fiscal year
    2007 of $40,500,000, the same as the fiscal year 2006 assessment. The
    total amount of assessments collected from the FCS and Farmer Mac with
    carryover funds equals $44,250,000. Since approximately 83 percent of
    the Agency's budget goes for salaries, wages, and related costs, almost
    all of the total budget amount will be used for these purposes.
        While the budget presented to you today is our best estimate of our
    future needs, it is just that--an estimate. Agriculture and rural
    America are undergoing rapid change, as is the Farm Credit System. It
    is such changes, along with administrative challenges, such as
    recruiting and maintaining a well-trained and motivated workforce, that
    the Farm Credit Administration is striving to keep up with. We
    appreciate the committee's past assistance and we ask for your
    continued help in the future.
        It is our intent to stay within the constraints of our fiscal year
    2007 budget as presented and we continue our efforts to be good
    stewards of the resources entrusted to us in order to meet our
    responsibilities. The Agency has worked hard to hold down the
    assessment to the System for our operations, and I believe we have
    achieved that objective over the past several years. Incidentally, the
    cost of FCA's operations to System borrowers is approximately 2.6 basis
    points, or about 2.6 cents for every $100 of assets, the lowest
    relative cost to the FCS in decades. The FCS is financially healthy and
    is poised to serve agriculture and rural America for years to come.
        While we are proud of our record and accomplishments, I assure you
    that the Agency will continue its commitment to excellence,
    effectiveness, and cost efficiency and remain focused on our mission of
    ensuring a safe, sound and dependable source of credit for agriculture
    and rural America.
        On behalf of my colleagues on the FCA Board and the Agency, this
    concludes my statement and I thank you for the opportunity to share
    this information.
                                     ______

       Prepared Statement of Roger J. Klurfeld, National Appeals Division

                                  INTRODUCTION

        The National Appeals Division (NAD) was established by the
    Secretary of Agriculture pursuant to the Reorganization Act of 1994.
    The act consolidated the appellate functions and staffs of several USDA
    agencies under a single administrative appeals organization. NAD
    appeals involve program decisions of the Commodity Credit Corporation,
    the Farm Service Agency, the Risk Management Agency, the Natural
    Resources Conservation Service, and Rural Development agencies. In
    States within the jurisdiction of the United States Court of Appeals
    for the Eighth Circuit, NAD Hearing Officers adjudicate and the
    Director makes final determinations on applications for fees under the
    Equal Access to Justice Act (EAJA). NAD is headquartered in Alexandria,
    Virginia, and has regional offices located in Indianapolis, Indiana;
    Memphis, Tennessee; and Lakewood, Colorado. NAD's staff of 108 includes
    64 Hearing and Appeals Officers.

                                    MISSION

        NAD's mission is to conduct evidentiary administrative appeals
    hearings and reviews arising out of program decisions of certain USDA
    agencies. Our strategic goal is to conduct independent evidentiary
    hearings and issue timely and well-reasoned determinations that
    correctly apply USDA laws and regulations. NAD's mission is statutorily
    specific, but its operation is dynamic and challenging, given the
    complexities of changing laws, regulations and policies affecting USDA
    program decisions.
        NAD's budget request for fiscal year 2007 is $14.8 million, which
    is $416 thousand above the fiscal year 2006 appropriation. The increase
    is for increases in pay costs.
        That concludes my statement, and I look forward to working with the
    Committee on the 2007 National Appeals Division budget.
                                     ______

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

        Mr. Chairman and members of the Committee, I appreciate the
    opportunity to submit a statement for this Committee's consideration in
    support of the fiscal year 2007 budget request for the National
    Agricultural Statistics Service (NASS). This agency administers the
    U.S. agricultural statistics program, which began in USDA in 1863.
    Since 1997, NASS has conducted the U.S. Census of Agriculture, first
    collected by the Department of Commerce in 1840. Both programs are
    aligned with the basic mission of NASS to provide timely, accurate, and
    useful statistics in service to U.S. agriculture.

                            FISCAL YEAR 2007 BUDGET

        The agency's fiscal year 2007 budget request is $152.6 million.
    This is a net increase of $13.3 million from the fiscal year 2006
    adjusted appropriations. The fiscal year 2007 request includes
    programmatic increases to continue the restoration and modernization of
    the NASS core survey and estimation program ($3.9 million), and to fund
    cyclical activities associated with preparing and conducting the Census
    of Agriculture ($7.3 million).

                             AGRICULTURAL ESTIMATES

        NASS statistical reports are critically important to assess the
    current supply and demand in agricultural commodities. They are also
    extremely valuable to producers, agribusinesses, farm organizations,
    commodity groups, economists, public officials, and others who use the
    data for decision-making. The statistics disseminated by NASS support
    fairness in markets where buyers and sellers have access to the same
    official statistics at the same pre-announced time. This prevents
    markets from being unduly influenced by ``inside'' information, which
    might unfairly affect market prices for the gain of an individual
    market participant. The efficiency of commodity markets is enhanced by
    the free flow of information, which minimizes price fluctuations for
    U.S. producers. Statistical measures relating to the competitiveness of
    our Nation's agricultural industry have become increasingly important
    as producers rely more on world markets for their sales.
        In fiscal year 2007, NASS is requesting an increase of $3.9 million
    and 6 staff years to fund the continuation of the restoration and
    modernization of the NASS core survey and estimation program. This
    increase is directed to continuing the modernization of the core survey
    and estimation program for NASS to meet the needs of data users at
    professionally acceptable levels of precision for State, regional, and
    National estimates. Decisions affecting billions of dollars in the U.S.
    food and agricultural sectors are facilitated in both public and
    private venues through access to reliable statistical information. The
    USDA-NASS statistical program serves most agricultural commodity data
    needs in the United States, as well as supplies important economic,
    environmental, and demographic data that are used for policy that will
    impact the livelihood and quality of life of rural residents. Funding
    received in the fiscal year 2004 through fiscal year 2006
    appropriations have been used to successfully improve the precision
    level from commodity surveys conducted by NASS for State, regional, and
    National estimates through sample size increases and better survey
    response. Funding requested in fiscal year 2007 promotes data quality
    by encouraging voluntary response through increased respondent
    awareness of market and policy reliance upon USDA-NASS statistical
    measures and by improving the data collection capabilities by local
    interviewers throughout the Nation.

                             CENSUS OF AGRICULTURE

        NASS is currently preparing for the 2007 Census of Agriculture
    scheduled to be mailed to the Nation's farmers and ranchers in December
    2007. The Census of Agriculture is taken every 5 years and provides
    comprehensive data at the national, State, and county level on the
    agricultural sector. The Census of Agriculture is the only source for
    this information on a local level, which is extremely important to the
    agricultural community. Detailed information at the county level helps
    agricultural organizations, suppliers, handlers, processors, and
    wholesalers and retailers better plan their operations. Demographic
    information supplied by the Census of Agriculture also provides a very
    valuable database for developing public policy for rural areas. The
    2007 Census of Agriculture is the first time respondents have the
    option of reporting electronically through the Internet. It also
    includes improved coverage of American Indians and expanded data on
    organic agriculture. Many additional improvements are being implemented
    to enhance the data from this comprehensive data source. Census of
    Agriculture programs are also conducted in Puerto Rico, Guam, and the
    Commonwealth of the Northern Mariana Islands as part of the census
    cycle. Results from all of the censuses are made available on the NASS
    website.
        NASS is requesting a cyclical increase of $7.3 million and 10
    staff-years for the Census of Agriculture. The total Census of
    Agriculture budget request is $36.6 million. The available funding
    includes monies to continue preparations for the 2007 Census of
    Agriculture. The increase will be used to collect data to measure
    coverage of the census mail list, prepare census mail packages, and
    prepare for data collection activities in fiscal year 2008. This
    increase is comparable to a $10.0 million increase required during the
    same period in the 2002 Census cycle.
    major activities of the national agricultural statistics service (nass)
        The ongoing expansion of global markets for U.S. goods and services
    continues to increase the need for modern and reliable statistical
    information. The periodic surveys and censuses conducted by NASS
    contribute significantly to economic decisions made by policymakers,
    agricultural producers, lenders, transporters, processors, wholesalers,
    retailers and, ultimately, consumers. Lack of relevant, timely, and
    accurate data contributes to wasteful inefficiencies throughout the
    entire production and marketing system.
        The need for timely, accurate, and useful statistics on U.S.
    agriculture has been highlighted in recent years due to several natural
    disasters. The catastrophic hurricanes which moved through Florida
    during the end of 2004 heavily impacted the citrus industry. The degree
    of this impact was measured by NASS through a special November forecast
    of citrus production. Normal processes do not include a November
    forecast. The special forecast allowed for a timely unbiased assessment
    of the damage resulting from the hurricanes. Likewise, the discovery of
    Asian Soybean rust in the United States resulted in heightened
    speculation of how growers would react to the fast-spreading, yield-
    reducing disease. Data collected by NASS allowed for an early
    assessment of farmer awareness of soybean rust and how its discovery
    would affect planting decisions for the 2005 crop. Results were
    published in the 2005 Prospective Plantings report.
        NASS works cooperatively with each State Department of Agriculture
    throughout the year to provide commodity, environmental, economic, and
    demographic statistics for agriculture. This cooperative program, which
    began in 1917, has served the agricultural industry well and is
    recognized as an excellent model of successful State-Federal
    cooperation. Working together helps meet both State and national data
    needs while minimizing overall costs by consolidating staff and
    resources, eliminating duplication of effort, and reducing the
    reporting burden on the Nation's farm and ranch operators. The forty-
    six field offices in NASS, covering all fifty States and Puerto Rico,
    provide statistical information that serves national, State, and local
    data needs.
        NASS has been a leader among Federal agencies in providing
    electronic access to information. All reports issued by NASS's
    Agricultural Statistics Board are made available to the public at a
    previously announced release time to ensure that everyone is given
    equal access to the information. All national statistical reports and
    data products, including graphics, are available on the Internet, as
    well as in printed form, at the time they are released. Customers are
    able to electronically subscribe to NASS reports and can download any
    of these reports in a format easily accessible by standard software. A
    summary of NASS and other USDA statistical data are produced annually
    in USDA's Agricultural Statistics, available on the Internet through
    the NASS home page, on CD-ROM disc, or in hard copy. All forty-six NASS
    field offices have home pages on the Internet, which provide access to
    special statistical reports and information on current local commodity
    conditions and production.
        NASS's Statistical research program is conducted to improve methods
    and techniques used for collecting, processing, and disseminating
    agricultural data. This research is directed toward achieving higher
    quality census and survey data with less burden on respondents,
    producing more accurate and timely statistics for data users, and
    increasing the efficiency of the entire process. For example, NASS has
    developed and released a new interactive mapping tool on the Internet.
    Data users can now customize maps using various data items from the
    Census of Agriculture. The growing diversity and specialization of the
    Nation's farm operations have greatly complicated procedures for
    producing accurate agricultural statistics. Developing new sampling and
    survey methodology, expanding modes of data collection, including
    electronic data reporting, and exploiting computer intensive processing
    technology enables NASS to keep pace with an increasingly complex
    agricultural industry.
        The primary activity of NASS is to provide reliable data for
    decision-making based on unbiased surveys each year, and the Census of
    Agriculture every 5 years, to meet the current data needs of the
    agricultural industry. Farmers, ranchers, and agribusinesses
    voluntarily respond to a series of nationwide surveys about crops,
    livestock, prices, chemical use and other agricultural activities each
    year. Periodic surveys are conducted during the growing season to
    measure the impact of weather, pests, and other factors on crop
    production. Many crop surveys are supplemented by actual field
    observations in which various plant counts and measurements are made.
        Administrative data from other State and USDA agencies, as well as
    data on imports and exports, are thoroughly analyzed and utilized as
    appropriate. NASS prepares estimates for over 120 crops and 45
    livestock items which are published annually in more than 400 separate
    reports.
        Approximately 60 percent of the NASS staff are located in the 46
    field offices; 21 of these offices are collocated with State
    Departments of Agriculture or land-grant universities. NASS field
    offices issue approximately 9,000 different reports each year and
    maintain Internet pages to electronically provide their State
    information to the public.
        NASS has developed a broad environmental statistics program under
    the Department's water quality and food safety programs. Until 1991,
    there was a serious void in the availability of reliable pesticide
    usage data. Therefore, beginning in 1991 NASS cooperated with other
    USDA agencies, the Environmental Protection Agency (EPA), and the Food
    and Drug Administration, to implement comprehensive chemical usage
    surveys that collect data on certain crops in specified States. NASS
    data allows EPA to use actual chemical data from scientific surveys,
    rather than worst case scenarios, in the quantitative usage analysis
    for a chemical product's risk assessment. Beginning in fiscal year
    1997, NASS also instituted survey programs to acquire more information
    on the post-harvest application of pesticides and other chemicals
    applied to commodities after leaving the farm. These programs have
    resulted in significant new chemical use data to help fill the void of
    reliable pesticide usage data. Surveys conducted in cooperation with
    the Economic Research Service (ERS) collect detailed economic and
    farming practice information to analyze the productivity and the
    profitability of different levels of chemical use. American farms and
    ranches manage nearly half the land mass in the United States,
    underscoring the value of complete and accurate statistics on chemical
    use and farming practices to effectively address public concerns about
    the environmental effects of agricultural production.
        NASS conducts a number of special surveys, as well as provides
    consulting services for many USDA agencies, other Federal or State
    agencies, universities, and agricultural organizations on a cost-
    reimbursable basis. Consulting services include assistance with survey
    methodology, questionnaire and sample design, information resource
    management, and statistical analysis. NASS has been very active in
    assisting USDA agencies in programs that monitor nutrition, food
    safety, environmental quality, and customer satisfaction. In
    cooperation with State Departments of Agriculture, land-grant
    universities, and industry groups, NASS conducted 151 special surveys
    in fiscal year 2005 covering a wide range of issues such as farm
    injury, nursery and horticulture, farm finance, fruits and nuts,
    vegetables, and cropping practices. All results from these reimbursable
    efforts are made publicly available.
        NASS provides technical assistance and training to improve
    agricultural survey programs in other countries in cooperation with
    other government agencies on a cost-reimbursable basis. The NASS
    international program focuses on the developing and emerging market
    countries in Asia, Africa, Central and South America, and Eastern
    Europe. Accurate foreign country information is essential for the
    orderly marketing of U.S. farm products throughout the world. NASS
    works directly with countries by assisting in the application of modern
    statistical methodology, including sample survey techniques. This past
    year, NASS provided assistance to Armenia, Belize, Brazil, China, El
    Salvador, Georgia, Guatemala, Honduras, Mexico, Nicaragua, Panama,
    Russia, Sudan, and the Ukraine. In addition, NASS conducted training
    programs in the United States for 220 visitors representing 30
    countries. These assistance and training activities promote better
    United States access to quality data from other countries.
        NASS annually seeks input on improvements and priorities from the
    public through the Secretary of Agriculture's Advisory Committee on
    Agriculture Statistics, interaction with producers at major commodity
    meetings, data user meetings with representatives from agribusinesses
    and commodity groups, special briefings for agricultural leaders during
    the release of major reports, and through numerous individual contacts.
    As a result of these activities, the agency has made adjustments to its
    agricultural statistics program, published reports, and expanded
    electronic access capabilities to better meet the statistical needs of
    customers and stakeholders.
        This concludes my statement, Mr. Chairman. Thank you for the
    opportunity to submit the statement for the record.
                                     ______

    Prepared Statement of Charles Christopherson, Chief Financial Officer,
                        Office of the Financial Officer

        Mr. Chairman and members of the Subcommittee, I am pleased to
    present the fiscal year 2007 budget request for the United States
    Department of Agriculture (USDA), Office of the Chief Financial Officer
    (OCFO) and the Department's Working Capital Fund (WCF).
        My remarks today address:
      --Results we have achieved recently;
      --Results on which we are currently focused;--Our fiscal year 2007
            budget request; and
      --The Department of Agriculture's Working Capital Fund.
        The Office of the Chief Financial Officer is responsible for the
    financial leadership of an enterprise, which if it were in the private
    sector would be one of the largest companies in the United States with
    almost $95 billion in annual spending, almost 110,000 full time
    equivalents (Staff Years) and over $132 billion in assets.
        These responsibilities are fulfilled by a headquarters staff in
    Washington, DC, with accounting operations support provided by USDA's
    Controller Operations Division in New Orleans, Louisiana.
        The National Finance Center (NFC), also located in New Orleans,
    provides payroll processing and related services for approximately 31
    percent of the Federal civilian workforce in more than 130 government
    entities. In fiscal year 2005, the NFC processed $32 billion in payroll
    for more than 565,000 Federal employees. NFC also services the Office
    of Personnel Management performing health benefit reconciliations and
    health care premium processing on a Government-wide level.

                           RESULTS ACHIEVED RECENTLY

        In fiscal year 2005, OCFO continued to make substantial progress in
    improving financial management, financial information, and financial/
    corporate systems throughout USDA. OCFO also actively worked on
    government-wide financial management issues affecting USDA to ensure we
    could achieve substantive and sustainable results. Some of the
    significant results USDA achieved in financial management, financial
    systems and related areas in fiscal year 2005 include:
      --Attained another clean financial audit opinion. Our ability to
            sustain this critical performance benchmark is powerful
            evidence of the Department's improved accountability, internal
            control and data integrity.
      --This year Hurricane Katrina had a major impact on the NFC and OCFO
            functions located in the New Orleans area. Thanks to the well-
            practiced continuity of operations plan (COOP), NFC and the
            other OCFO operations in New Orleans were able to recover
            operations quickly and to meet commitments to their customers
            without interruption. Critical information technology services
            were recovered within 24 hours; other essential operations were
            recovered as planned over the next 10 days. We are most proud
            that NFC was able to pay 565,000 employees accurately and on
            time from their alternate locations. More noteworthy, NFC
            converted two new customers, Transportation Safety
            Administration and U.S. Coast Guard to its payroll system
            during the 2 weeks following the storm and paid these new
            payroll employees on time. The swiftness and accomplishment of
            the recovery is a tribute to the employees of the NFC and OCFO
            who deployed to remote locations, some leaving their families
            behind, worked extended hours and assumed non-traditional jobs
            to get the job done.
      --The NFC and OCFO are now reconstituting operations back to the New
            Orleans location. Due to the personal impact on the employees'
            homes and the New Orleans infrastructure, the reconstituting is
            proving to be as difficult as the deployment. More than 96
            percent of the 1,250 employees of the NFC and OCFO have
            returned to New Orleans with some 400 of the employees located
            in trailers in a trailer park or at their homes. The overall
            productivity of the New Orleans-based operations have been
            impacted by the loss of a large number of experienced employees
            due to separations and retirements (13-percent of the workforce
            has retired or separated after Katrina to work on their homes
            or relocate from the area). OCFO operations have also been
            impacted by (1) the Postal Service releasing mail from three
            different Katrina storage facilities which contain potentially
            thousands of undelivered invoices each; (the first warehouse
            was released in February 2006) and (2) the loss of
            knowledgeable employees from earlier reductions in force. The
            payroll and human resources serviced by the NFC has been
            impacted by a doubling in the volume of retirements and
            separation transactions of its customer base and the loss of
            knowledge through staff adjustments in repeated reduction-in-
            force actions in 2005. Although they have difficult personal
            lives, the New Orleans staff is determined to eliminate the
            workload backlog through extensive overtime. OCFO in Washington
            D.C. continues to assist the operation and believes that the
            backlog will be cured in the coming months.
      --Met OMB interim and year-end accelerated deadlines for preparing
            the financial statements. Year-end statements were provided 45
            days after the close of the fiscal year, that is, by November
            15. USDA met these ambitious dates while sustaining data
            quality and provided USDA executives and program managers with
            financial results information more timely than ever before;
      --Reduced existing material internal control weaknesses from 32, 4
            years ago, to 2 existing deficiencies at the end of fiscal year
            2004. Although one new material weakness was reported in the
            fiscal year 2005 Performance and Accountability Report, for a
            total of three remaining for fiscal year 2006, we continue to
            aggressively work to resolve the underlying internal control
            and system issues. We will continue to work diligently to
            eliminating material weaknesses;
      --Improved quality assurance of financial data by continuing to focus
            on fixing ``root causes'' of data flow and accuracy problems.
            Regularly monitored a set of metrics to ensure data is timely
            and accurate and useful to USDA managers;
      --Closed 102 of 164 audits in fiscal year 2005 as compared to 96 in
            fiscal year 2004, a 6 percent increase in audit closures;--
            Successfully consolidated and standardized departmental travel
            procedures and policies;
      --Continued to monitor for travel card misuse, these efforts resulted
            in lowering the Department-wide individually billed accounts
            delinquency average of 4.68 percent in fiscal year 2004, to
            4.06 percent in fiscal year 2005, representing a 13 percent
            improvement;
      --During fiscal year 2005, the Forest Service submitted a competitive
            sourcing plan to OMB for approval. In addition, USDA completed
            2 competitive sourcing studies with results estimated to avoid
            costs of $8.1 million over a 5-year period with annualized
            amounts of over $1.62 million.
      --Implemented the real-time interface between the financial system
            and procurement system, integrating the financial and
            procurement systems for the first time and enhancing internal
            funds control and streamlining operations; and
      --Enhanced through a technology modernization the data warehouse
            reporting to provide more timely and useable financial and
            performance information to USDA executives and managers to
            manage daily operations.
        In addition to the above, during fiscal year 2005, USDA collected
    $1.1 billion of delinquent debt, $862 million through agencies using
    our internal tools and $238 million through the Department of Treasury
    Administrative Offset Program and other Debt Collection Improvement Act
    (DCIA) techniques. Since 1996, annual collections of delinquent USDA
    debt using DCIA tools have increased more than 276.6 percent from $63.2
    million in fiscal year 1996 to $238 million in fiscal year 2005. As of
    September 30, 2005, USDA had referred to the Treasury Offset Program 96
    percent of the $1.2 billion of eligible receivables and 97 percent of
    loans eligible for cross servicing compared to only 14 percent in 2001.
    Results on which we are Currently Focused
        We continue to be focused on delivering valuable results in fiscal
    year 2006 as a context for consideration of our fiscal year 2007 budget
    request. Three areas of focus are: internal control and management
    information; support and develop shared services to the Departments of
    the Federal Government; and the President's Management Agenda.
        In the area of internal control and management information, we are
    committed to:
      --Continuing to enhance USDA's system of internal controls and data
            integrity as reflected in sustaining in fiscal year 2006 USDA's
            unqualified ``clean'' opinions on the consolidated financial
            statements and component agency financial statements;
      --Meeting OMB's interim and year-end deadlines for financial
            statement and the Performance and Accountability Report;
      --Eliminating material weaknesses in internal controls and systems
            non-conformances with the requirements of the Federal Financial
            Management Improvement Act (FFMIA);
      --Implementing an online USDA corporate financial and performance
            reporting, system that the Secretary of Agriculture and his
            senior executives will use to drive program results;
      --Continuing to develop financial management and accounting
            operations leadership talent in-depth throughout all our
            agencies so as to enhance further USDA's culture of sound
            financial management and to sustain management results already
            achieved; and
      --Expanding the use of data warehousing technology to improve data
            integrity and timely availability of financial and performance
            information to USDA's executives and managers for the
            management of their daily operations.
        To support and develop shared services to the Departments of the
    Federal Government, we are focused on:
      --Completing the reconstitution and rebuilding the OCFO operations
            and the NFC operations in New Orleans to support the functions
            of the Federal Government and the USDA;
      --Structuring a Human Resources Line of Business (HR LoB) venture for
            the NFC while continuing to implement new customers into
            ePayroll. The HR LoB will provide a new business growth
            opportunity for NFC in providing human resources systems and
            services to all civilian Federal agencies;
      --Completing the transfer of the accounting and paralegal functions
            of the Thrift Savings Plan to the Federal Retirement Thrift
            Investment Plan;
      --Securing a location for the alternate worksite and computing
            center, which reduces the operational risk through continuous
            improvement of and practice in recovery operations for NFC and
            accounting operations;
      --Working with Office of Personnel Management (OPM) on retaining
            employees in critical positions with long-term learning curves
            and cycles at the NFC; and
      --Reviewing additional USDA sponsored financial services that can
            create savings in the Federal Government through a consolidated
            service center. These services include a Financial Management
            Line of Business.
        For President's Management Agenda (PMA) initiatives, we are:
      --Implementing the eTravel initiative throughout USDA to consolidate
            travel processes at the Department level and centrally manage
            them through a customer-centric, self-service, web-based
            environment providing end-to-end travel services;
      --Adding the personal property components to the Corporate Property
            Automated Information System (CPAIS). CPAIS was implemented in
            fiscal year 2004 and currently tracks all USDA real property
            whether owned or leased. Incorporating personal property into
            CPAIS will allow USDA, in one place, to have a full view and
            accounting of our property assets;
      --Taking aggressive action to implement the Improper Payments
            Information Act (IPIA), Public Law 107-300 by establishing
            measurements for programs that meet the required payment
            criteria. We strengthened guidance to agencies requiring
            detailed plans with key milestones and quality deliverables. We
            are monitoring accomplishments through monthly workgroup
            meetings, assessment of deliverables, evaluation of risk
            assessments, and agency scorecards for executives and managers;
      --Conducting Independent Verification and Validation (IV&V) review
            activities for the following: Feasibility studies conducted and
            submitted by USDA Agencies and Offices in support of the USDA
            Competitive Sourcing Green Plan; post-competition assessments
            for completed performance reviews along with the cost
            comparison; and independent validation verification of prior
            year achieved savings;
      --Collaborating with Departmental Administration to use competitive
            sourcing, where appropriate, to address core competency and
            skills gaps;
      --Sponsoring training sessions for USDA Agencies and Offices on
            various A-76 related topics including: FAIR Act Inventory;
            Feasibility Studies; Performance Work Statements; and Most
            Efficient Organizations; and
      --Facilitating departmental-wide collaboration efforts and working
            group sessions to develop standards for FAIR Act Inventory
            coding process: FAIR Act Inventory function code definitions
            are being standardized and Reason Code Justifications and
            Analyses are being evaluated to ensure compliance with OMB
            regulations.
    Fiscal Year 2007 Budget Request
        I would like to thank the Committee for your confidence in
    entrusting us with the basic resources required to provide stewardship
    over USDA financial processes. USDA's excellent results in sustaining
    and enhancing financial accountability in fiscal year 2005 were only
    possible because of your support. I would now like to focus on our
    fiscal year 2007 operating budget request, which is for $19,931,000, an
    increase of $14,116,000 or 242.8 percent more than the fiscal year 2006
    budget of $5,815,000. Approximately 90 percent of the Office of the
    Chief Financial Officer's current obligations are for the salaries and
    benefits of the OCFO employees. As part of this increase request, of
    $176,000 is to fund pay costs. The pay-related increases requested are
    necessary for us to accomplish key outcomes and to successfully meet
    our goals for fiscal year 2007. The remaining $13,940,000 of the
    request is for procurement of hardware and software to improve the
    financial management performance through implementation of a new core
    financial management system. OCFO is pursuing significant modernization
    of its technically outdated corporate financial, administrative
    payments and program general ledger systems. These outdated systems are
    no longer supported by the vendor and pose an unacceptable risk for
    USDA. Due to the current transaction services offered to other Federal
    Government entities, USDA has discussed with OMB the opportunity to
    offer a full financial solution to smaller agencies in the Federal
    Government.
    USDA Working Capital Fund
        The Working Capital Fund (WCF) serves as the Department's principal
    investment engine to achieve progress in developing and implementing
    new corporate systems. Last year, we again made use of authority
    granted to us by the Committee in the appropriations language to use
    unobligated balances as part of this developmental effort. In 2005, our
    plan for use of these resources was reviewed by Congress--as required
    under appropriations language--and executed to continue our progress in
    implementing an enterprise human resources information system, an
    integrated acquisition system, and a management information tracking
    tool. For 2006, we have prepared a plan to Congress to obligate funds
    in pursuit of further efforts in development of an integrated
    procurement system and an enterprise human resources system. That plan
    will be delivered to the Committees on Appropriations shortly. We are
    grateful for the support and look forward to working with the Committee
    as our efforts to improve corporate systems proceed.
        In addition to the investments in corporate systems, the WCF
    supports services in the areas of financial management, information
    technology, communications, administration, as well as record keeping
    and item processing. It is our objective to use this financing
    mechanism to provide to agencies of the Department, the most effective
    cost-efficient centrally managed services available.
        The President's fiscal year 2007 budget estimates that total
    operating costs for the WCF in fiscal year 2007 will be $515.1
    million--net of intrafund transfers between WCF activities--a $13.0
    million increase, or 2.6 percent over the fiscal year 2006 estimate.
    Costs to USDA agencies will increase more slowly, about 2.4 percent
    from fiscal year 2006 to fiscal year 2007.
        The increases in cost estimates reflect the fact that the WCF
    recovers costs on the basis of user demand for services with the
    objective of lowering total costs through centrally-managed services.
    Historically, the largest of the USDA-wide services has been the
    National Finance Center. However, its menu of services has been
    changing to reflect the changing needs of customers both inside and
    outside USDA. Information Technology Services will be the largest WCF
    activity in terms of cost in fiscal year 2006. Examples of other
    services supported by the WCF include mainframe computing and
    information technology services at the National Information Technology
    Center in the Office of the Chief Information Officer, and video and
    teleconferencing production services provided by the Broadcast and
    Media Technology Center in the Office of Communications. Departmental
    Administration provides a wide variety of personal property, mail, and
    duplicating services to USDA and non-USDA customers. Among the
    corporate systems activities supported by the WCF include: Corporate
    Financial Management Systems and Integrated Procurement Systems. The
    source of funds for these investments in systems includes direct
    billings, purchase card rebates, and the use of unobligated balances.
        I would like to point out that the WCF financing mechanism, as a
    reimbursement for goods and services provided, gives us an opportunity
    to refine our estimates as newer and better information becomes
    available regarding customer demand and costs. Our office is currently
    engaged in reviewing fiscal year 2007 estimates with the goal of
    reducing estimates wherever possible in costs for core services to USDA
    agencies. It was with this objective in mind that we were able to
    submit an operating estimate for fiscal year 2007 that is consistent
    with expected inflation. I think it is important to note that costs for
    core services--those corporate services in which all agencies share--
    will see cost increases of only 1.2 percent from fiscal year 2006 to
    fiscal year 2007. As we begin development of the fiscal year 2008
    budget this spring, we will be reexamining fiscal year 2007 estimates
    for more economies and savings. As we did last year, we will establish
    spending targets for WCF activities that take into account the
    Department's spending priorities among its agencies reflected in the
    President's budget.
        I would also like to express my appreciation to the Committee for
    all of the assistance and support provided to the Department in the
    wake of Hurricane Katrina. Specifically, the resources provided to us
    to address disaster recovery and resumption of business operations were
    essential to our success in bringing the National Finance Center and
    other activities in New Orleans back on line. The story of our recovery
    in New Orleans is primarily a story of people--dedicated workers who
    through their long hours of effort ensured that operations were resumed
    as quickly as possible. That we have been able to resume payrolling and
    financial operations activity to the extent we have is a reflection on
    their efforts and the support we have received from the Congress.
        Thank you, Mr. Chairman, for the opportunity to share the results
    we have achieved and our fiscal year 2007 budget request with the
    Committee. We especially look forward to working together with you and
    the Committee in fulfilling the vision for financial management we all
    have for the United States Department of Agriculture.
                                     ______

     Prepared Statement of Terri Teuber Moore, Director of Communications,
                            Office of Communications

        Mr. Chairman and members of the Subcommittee, I am pleased to
    discuss the fiscal year 2007 budget request for the Department of
    Agriculture's Office of Communications (OC).
        When Congress wrote the law establishing the U.S. Department of
    Agriculture in 1862, it said the department's `` . . . general designs
    and duties shall be to acquire and to diffuse among the people of the
    United States useful information on subjects connected with agriculture
    in the most general and comprehensive sense of the word.'' OC
    coordinates the implementation of that original mandate.
        OC coordinates communications with the public about USDA's
    programs, functions, and initiatives, providing vital information to
    the customers and constituency groups who depend on the Department's
    services for their well-being. For example, OC is coordinating the
    Department's communications efforts relating to the threat of avian
    influenza and is prepared to activate a Joint Information Center (JIC),
    which would support the Department in meeting its obligations in the
    event of an avian influenza outbreak. In addition, OC also coordinates
    the communications activities of USDA's seven major mission areas and
    provides leadership for communications within the Department to USDA's
    employees.
        OC is adopting new technologies to meet the increased demands for
    the dissemination of accurate information in a timely manner. Using the
    internet, radio, television and teleconference facilities, we are able
    to ensure that the millions of Americans whose lives are affected by
    USDA's programs receive the latest and most complete information. As
    the continuing concern over avian influenza demonstrates, these
    technologies are a critical resource used by the Secretary and the
    agencies to provide timely information, which helps to maintain
    consumer confidence and stabilize agricultural markets.
        OC's 5-year strategic goal is to support the Department in creating
    full awareness among the American public about USDA's major initiatives
    and services. This is essential to providing effective customer
    services and efficient program delivery. As a result, we expect more
    citizens, especially those in underserved communities and geographic
    areas, to access helpful USDA services and information.
        A central element of this support is OC's active participation in
    the Department's eGovernment initiative. OC plays a key role in
    ensuring that the Department's eGovernment implementation results in
    the public's improved access to more current, accurate, relevant, and
    organized USDA products, services, and information. The USDA.gov
    portal, managed by OC, is customer- or citizen-centric, allowing OC to
    target information by audience preference, subject and personalization.
    On average, the USDA.gov portal reaches 1.5 million citizens weekly.
    The demand by citizens and other constituencies for information, via
    the USDA.gov portal, web casting, electronic mail distribution,
    teleconferences, and publications, is expected to continue to increase.
         OC will continue to take an active part in policy and program
    management discussions by coordinating the public communication of USDA
    initiatives. We will continue to provide centralized operations for the
    production, review, and distribution of USDA information to its
    customers and the general public. Also, we will monitor and evaluate
    the results of these communications. Our staff is instructed to use the
    most effective and efficient communications technology, methods, and
    standards in carrying out communications plans.
        Also, we are focusing on improved communications with USDA
    employees, especially those away from headquarters. This will enhance
    their understanding of USDA's general goals and policy priorities,
    programs and services, and cross-cutting initiatives.
        Our office will continue to work hard to meet our performance goals
    and objectives. We will work to communicate updated USDA regulations
    and guidelines, conduct regular training sessions for USDA
    communications staff about using communication technologies and
    processes to enhance public service, foster accountability for
    communications management performance throughout USDA, and continue to
    work to create a more efficient, effective and centralized OC.
    Increasing availability of USDA information and products to underserved
    communities and geographic areas through USDA's outreach efforts is
    integral to our performance efforts. OC will also provide equal
    opportunity for employment and promote an atmosphere that values
    individuals.

                        FISCAL YEAR 2007 BUDGET REQUEST

        OC is requesting a budget of $9.7 million. This is a net increase
    of $0.28 million for the annualization of the fiscal year 2006 pay
    increase and the anticipated fiscal year 2007 pay increase.
        As more than 88 percent of OC's obligations are for salaries and
    benefits, the requested increase is vital to support and maintain
    staffing levels for current and projected demands for our products and
    services. While OC has realized some cost savings by replacing high
    grade employees who have retired with lower grade employees, our
    current budget leaves little flexibility for absorbing increased costs.
    In fact, OC would not be able to absorb the increased salary costs in
    fiscal year 2007 without placing considerable constraints on daily
    operations or impacting staff size and therefore the timely delivery of
    information to the public.
        Our central task is to ensure the development of communications
    strategies, which are vital to the overall formation, awareness and
    acceptance of USDA programs and policies. The World Wide Web is firmly
    established as an effective means by which the Department can provide
    information and receive comments on the whole range of agricultural
    programs, functions and issues of interest to the public here or around
    the world.
        OC will continue to strive to make the most effective use of this
    medium. OC has led the adoption of content management software which
    speeds the addition of new material, improves our quality control
    measures to ensure the accuracy of the information available through
    the USDA.gov portal, and reduces the staff time required for overall
    maintenance of the site.
        This improved control greatly reduces the time necessary to post
    important information to the media and the public while providing a
    greater ability to ensure the accuracy of the information. This allows
    OC to use a large document and web repository, sharing resources and
    information with mission areas and agencies as well as the public.
        OC looks forward to continuing our commitment to the American
    public by providing timely, accurate information about our programs and
    services.
        This concludes my statement, Mr. Chairman. I will be pleased to
    respond to any questions.
                                     ______

    Prepared Statement of David M. Combs, Chief Information Officer, Office
                        of the Chief Information Center

                                  INTRODUCTION

        Mr. Chairman and members of the Subcommittee, thank you for the
    opportunity to share with you our progress on using information
    technology (IT) to improve service delivery to the customers of the
    Department of Agriculture (USDA), while at the same time implementing
    Enterprise Architecture (EA) principles and eGovernment with IT.
        The Office of the Chief Information Officer (OCIO) is changing how
    USDA invests in and uses IT. Instead of single agency-centric systems,
    we are investing in common government-wide and Department-wide IT
    solutions. OCIO is leading USDA participation in 21 of the 25
    government-wide Presidential Electronic Government (eGovernment)
    initiatives. At the same time, under the framework of the Department's
    Enterprise Architecture, we are managing USDA IT investments to promote
    collaboration across common lines-of-business, reduce duplication with
    our internal ``Smart Choices,'' and finding savings by leveraging the
    USDA's size/economies-of-scale in Department-wide IT acquisitions.
        The President's fiscal year 2007 budget request for OCIO totals
    about $16.9 million. We are requesting an increase of approximately
    $639,000 to cover pay costs.

         USDA'S FISCAL YEAR 2007 INFORMATION TECHNOLOGY BUDGET SUMMARY

        During the fiscal year 2007 USDA budget preparation process, OCIO
    staff scrutinized agency IT investment plans to ensure alignment with
    USDA program delivery plans as well as the USDA Enterprise
    Architecture. In fiscal year 2007, the Department is requesting about
    $2.1 billion for IT. Components of the IT budget include:
      --37 percent of fiscal year 2007 IT spending--estimated at $783
            million, is transferred to the States for the development and
            maintenance of automated systems to support Food Stamps, WIC,
            and related programs
      --The following is a breakdown of the remaining $1.4 billion in IT
            discretionary funding:
      --35 percent--estimated at $483 million--will be used for advisory
            services (e.g. consultants)
      --27 percent--estimated at $372 million--will be used for Federal IT
            personnel costs
      --18 percent--estimated at $242 million--will be used for equipment
      --12 percent--estimated at $167 million--will be used for advisory
            services (e.g. telecommunications)
      --8 percent--estimated at $95 million--will be used for software.
        Overall, the IT related proposals in the USDA request represent
    about 3 percent of the total $64 billion proposed for IT investments
    for the Federal Government in fiscal year 2007.

                SERVICE CENTER MODERNIZATION INITIATIVE--(SCMI)

        Mr. Chairman, the modernization of our Service Center Agencies'
    (SCA) technology infrastructure continues to be one of USDA's highest
    IT priorities. The Common Computing Environment (CCE) initiative is
    managed by OCIO working in collaboration with the SCA. CCE supports
    over 45,000 SCA employees, volunteers and partners in the delivery of
    over $55 billion in programs through our field office delivery system.
    The new infrastructure is flexible and built around maximizing
    information sharing both within USDA and with other Federal, State and
    Local agencies, the private sector, and USDA customers.
        I would like to take a few minutes to update you on the status of
    the CCE technology, as well as our progress in merging the three SCA IT
    support staffs into a single organization under OCIO.
        The OCIO selected Information Technology Services (ITS) as the name
    of the converged organization, which came into being on November 28,
    2004. There were 785 full time equivalents transferred to the new ITS
    organization--264 were transferred from the Farm Service Agency, 351
    from the Natural Resources Conservation Service, 164 from the Rural
    Development mission area, and 6 from other OCIO organizational
    elements. A total of 684 personnel were transferred out from the SCA.
        ITS was established under the Department's Working Capital Fund to
    process revenue and obligations for ITS. The CCE appropriated dollars
    are to be utilized for capital expenditures, while the WCF will be used
    to pay ITS operating expenses for the CCE. Notifications to OMB and
    Congress were made to address the expansion of existing activities in
    our Working Capital Fund.
        The purpose of creating ITS was to have one unified organization
    dedicated to supporting both the shared and the diverse IT requirements
    of the SCA and their partner organizations. On the one hand, the
    agencies were already sharing and investing in a common computing
    environment (and its infrastructure, network systems, and associated
    hardware, software, and training); on the other hand, each agency had
    to manage its own distinct computing systems, software, and IT support
    teams.
        By converging both technology resources and skilled IT staff into
    one organization, ITS can efficiently focus a broad range of technology
    investment and diverse support, planning, and management services,
    spread equitably back to the agencies and replacing what might be
    considered triplicate efforts.
        The fiscal year 2007 CCE budget request is for $108,900,000. A net
    decrease of $1,172,000, comprising:
        An increase of $5,212,000 for the CCE Basic Infrastructure, the
    increase will restore CCE basic infrastructure funding to a level
    needed to provide a stable level of service, while increasing Web Farm
    capacity.
        A net decrease of $4,504,500 in the Farm Service Agency (FSA)
    Specific Funds. FSA is in the middle of a multi-year modernization
    project to reengineer its legacy application systems. The goals of
    modernization are twofold: (1) to eliminate FSA's dependency on a
    proprietary and restrictive operating environment by developing
    applications that are platform independent; and (2) to achieve a
    customer-centric focus, providing ease of access and convenience to FSA
    customers. As these applications are developed, they will be hosted on
    the CCE infrastructure. In fiscal year 2007, FSA is requesting a
    decrease of $4,504,500 in IT support to the $73,260,000 CCE fiscal year
    2006 base for agency specific needs. This decrease has occurred due to
    contract efficiencies realized with several of our support services
    contracts for infrastructure support. In addition, this decrease has
    occurred due to the completion of business modernization efforts in the
    Farm Loan Program area.
        An increase of $1,845,000 for the Natural Resources Conservation
    Service (NRCS). This increase will pay for increased telecommunications
    and related costs.
        A decrease of $2,277,000 in the Rural Development mission area. Now
    that ITS is operational, all the Web Farms are part of the ITS
    organization. The RD agency specific funds supports activities
    including the telecommunications support associated with Service Center
    modernization activities and the continued development and operation of
    the ITS Web Farms. RD has moved all of its major applications to the
    Web. A common infrastructure integrates Web services for RD customers,
    employees, and trading partners, making the Web a main stream for doing
    RD business. The public will be able to access more information and
    services online. The funds for this initiative will provide the
    continued support, enhancement of the common infrastructure hosting all
    applications for RD, regular software and hardware maintenance and the
    daily costs for operations and security.
        A net decrease of $347,000 in the OCIO Interagency e-Gov Funds.
    More of the interagency e-Gov costs are becoming operational in nature
    and less infrastructure related. Therefore, the amount of interagency
    e-Gov costs borne by the SCMI is decreasing. The e-Gov operational
    costs will be part of the service level agreements between the ITS and
    the Service Center Agencies.
        An offsetting decrease of $1,101,000 to reflect the permanent
    reduction of the fiscal year 2006 rescission from budget authority in
    fiscal year 2007.
        Congressional support for the CCE initiative has been key to its
    success. As we move forward with ITS, Congressional support will remain
    critical.

                              INFORMATION SECURITY

        Mr. Chairman, for many years USDA has been remiss in its
    responsibility to meet all Federal information security requirements.
    To address this situation, we have significantly improved the posture
    of our security program. FISMA and OMB Circular A-130 require all
    Federal agencies, including USDA, to certify and accredit (C&A) their
    systems. This effort has improved our security plans, updated and
    corrected our security documentation, tested our networks and
    applications for security weaknesses, and successfully engaged our
    business organizations in the discipline of security management.
        USDA IT security staffs are now in the process of addressing
    security issues that arose through our C&A activities. Action plans
    have been establish to mitigate specific security weaknesses and
    implement improved controls, and to meet the FISMA performance measures
    designed by OMB. Within the OCIO, we have established a rigorous
    process to track these corrective actions and ensure they are completed
    in a timely and efficient manner.
        As USDA's information security program matures, automated tools are
    necessary to quickly and efficiently address cyber risks. We continue
    to provide our agency security staffs with monitoring devices and
    automated patching processes that assist in preventing disruption by
    intrusion or the introduction of malicious programs. During fiscal year
    2006, we will deploy an improved incident tracking systems help us
    better manage and report detected breaches and we will continue to
    maintain a rigorous security training and awareness program which
    requires annual participation by all USDA and contract personnel.
        Through good preventative planning, such as system C&A combined
    with improving the Department's overall operational response to
    security Challenges, we are reducing the risk associated with the
    electronic use and delivery of USDA information and services.

                             ELECTRONIC GOVERNMENT

        Mr. Chairman, we continue to move aggressively to implement
    interagency and interdepartmental services to support common needs. The
    primary goals of our approach are to reduce costs and improve the
    quality of interactions with our customers.
        USDA, along with our partners in the other Federal agencies, has
    worked hard over the past 5 years to simplify citizens' access and
    interaction with their government. The results of these efforts are
    remarkable. Our efforts reduced the burden on citizens, partners, and
    employees by simplifying access to the Department's information and
    services and streamlining internal processes. For example:
        USDA helped citizens determine their eligibility for USDA benefits
    by incorporating pre-eligibility surveys onto a government-wide Web
    site, www.govbenefits.gov. Citizens are able to save time at a
    government office by completing the online survey in advance. They can
    learn ahead of time if they do not have go to the office, thereby
    saving unnecessary travel time. USDA provides access to 34 benefits
    programs on GovBenefits.gov. For the 12-month period ending August
    2005, the site generated over 140,000 referrals to USDA State and
    Federal programs' Web sites for more information.
        USDA simplified citizens' access to government recreational
    facilities through its leadership in developing www.recreation.gov. The
    government's online service provides a single point of access to
    accurate information about Federal recreation destinations. Citizens
    using www.recreation.gov can access information from the Forest
    Service, such as cabin/campsite materials, maps, facts and figures, and
    permit forms. Soon, advance reservations for Forest Service facilities
    can be made online through the National Recreation Reservation Service.
        USDA gives businesses easy, online access to resources that help
    them understand how to meet the compliance requirements for regulations
    affecting them. Currently, 13 USDA agencies are using www.business.gov
    to provide businesses with access to over 500 guidance resources and
    forms, plus compliance and regulatory information and relevant links.
        We worked with our Federal partners at www.regulations.gov to make
    it easier for the public to comment online about Federal regulations.
    The www.regulations.gov currently allows citizens to search and provide
    comments online on all regulations open for comment. USDA employees
    benefit from streamlined and consistent internal processes to review
    and process public comments. Currently, four USDA agencies have
    successfully moved from paper-based processes to the Federal Docket
    Management System (FDMS). USDA's other rule-making agencies are
    preparing to move to the online service in the near future.
        USDA is a major geospatial data producer and contributor to the
    Federal Government's www.geodata.gov. The Geospatial One-Stop site
    provides online access to geospatial data collected by the FSA, the
    Natural Resources Conservation Service, and the Forest Service. This
    online access enables the public and other Federal agencies to both
    avoid costs and realize cost savings. Recently, USDA added a link to
    the National Agricultural Imagery Program's vast library so that
    researchers, businesses, and the general public can now directly order
    data sets thus greatly improving the availability of this in-demand
    data.
        We streamlined the process of locating grant opportunities and
    applying for grants by working with our Federal partners to deploy a
    single, online access point for over 900 grant programs across the
    Federal Government on www.grants.gov. Citizens and business benefit
    through a simplified application process and reduced paperwork as the
    result of using the online service. As of December 2005, USDA had
    posted 404 funding opportunities and 57 application packages on
    www.grants.gov. USDA has received 340 electronic applications from the
    grants community via www.grants.gov.
        We have adopted the tools and services provided by the Federal
    Government's Integrated Acquisition Environment (IAE). This improves
    our ability to make informed and efficient purchasing decisions across
    USDA and helped us eliminate paper-based and labor-intensive processes.
    IAE allows us to avoid the cost of building and maintaining separate
    systems to post procurement opportunities and to record vendor and
    contract information. Our purchasing officials have access to databases
    from other Federal agencies on vendor performance.
        USDA consolidated its disaster relief information by posting it on
    www.disasterhelp.gov with similar information from agencies across the
    Federal Government. First responders can search for assistance from
    across the government in one place. USDA's disaster designations are
    prominently available on the site. This makes it easy for citizens and
    businesses to locate this critical information.
        The USDA eAuthentication Service currently protects more than 160
    of our applications. USDA employees and customers use a secure, single
    sign-on to access these applications, thereby reducing our customer
    support needs through improved security and usability. Every USDA
    employee that needs access to any of these integrated systems has a
    credential. USDA's eAuthentication Service was recently certified to be
    compliant with the government-wide standard for interoperability and
    was approved as a government-wide service provider. We integrated our
    eAuthentication Service with Exports.gov in December 2005.
        Our National Finance Center (NFC) is one of four Payroll Partner
    Providers selected by the Office of Personnel Management. NFC has a 30-
    year track record providing payroll services to more than 130 Federal
    organizations, representing all three branches of the government.
    Through the ePayroll Initiative, NFC is partnered with the Department
    of Interior's National Business Center to provide payroll services to
    approximately 50 percent of Federal employees.
        NFC was selected as a Federal Government human resources service
    provider for the Human Resources Management Line of Business. We
    provide services to the Department of Homeland Security, Library of
    Congress, and Government Accountability Office.
        USDA proudly implemented a newly designed USDA Web site that
    presents the Department's information and services by topic rather than
    on an organizational basis (www.usda.gov). As part of our support of
    the President's Management Agenda's promise of easy access to the
    government, customers may now easily locate USDA's online information
    and services. No longer do they have to traverse multiple agency Web
    sites to track down what they need. In addition, ``MyUSDA'' permits
    visitors to customize USDA's site to provide immediate access to the
    information they regularly want to see. Our visitors are pleased that
    our agencies are rapidly adopting the USDA ``look and feel.''
    Currently, 24 Web sites have moved to the Department's Web standards,
    and another 36 agency sites are in the process of doing so.
        USDA provided its employees with expanded educational opportunities
    by deploying AgLearn, www.aglearn.usda.gov, in partnership with the
    Office of Personnel Management's, USALearning--part of the E-Training
    Presidential Initiative. AgLearn provides employees around the world
    with access to a robust, competency-based library of courses.
    Geographically disparate offices are now able to easily collaborate in
    developing learning services to meet common needs and reduce costs.
    Employees and managers have constant access to their training
    curriculum and training records. In an average month, 20,348 employees
    completed 4,599 courses. AgLearn currently offers more than 2,300
    agency-specific courses.
        Our enterprise approach prevented USDA agencies from making
    independent investments in multiple systems for each of these services
    and numerous others. In addition, it greatly simplified the delivery of
    services to the public, unifying information from services from across
    the government.

                            ENTERPRISE ARCHITECTURE

        Mr. Chairman, USDA is managing its enterprise architecture as an
    enterprise-wide roadmap to achieve our mission within an efficient
    information technology environment. USDA's Enterprise Architecture
    Program identifies similar processes and opportunities to unify IT
    solutions across our agencies. A Budget and Performance integration
    conceptual data model has been created to improve consistency across
    Departmental systems. Information on Federal and USDA e-Gov
    architectures is being collected for easy dissemination throughout the
    Department. We are also assembling the data needed, at both the
    Departmental level and within individual agencies, to better organize
    and analyze all our business processes, information needs, and
    supporting technologies. Through the Enterprise Architecture
    Repository, a shared view of the Department's current and future
    business and IT environment are available for USDA decision-makers to
    leverage IT services, avoid redundant IT investments, improve
    information security, and align technology and business processes more
    closely to the Federal Enterprise Architecture.
        The USDA Enterprise Architecture Program complements the
    Department's IT Capital Planning and Investment Control (CPIC) process.
    USDA's central CPIC body reviews, monitors and approves all major IT
    investments to ensure alignment with the Department's strategic goals
    and objectives. The enterprise architecture provides a formal basis for
    evaluating a single investment against other investments in terms of
    its contribution to enhanced delivery of customer services and
    opportunities for collaboration and reuse. In addition to strengthening
    the CPIC process, the EA will enable USDA to improve key Department-
    wide enterprise hardware, software, and service agreements. In
    addition, USDA's E-Board reviews and makes final approval decisions
    regarding the Department's IT investment decisions. This board is
    comprised of the Under-Secretaries of the various Mission Areas. It is
    chaired by the Deputy Secretary.

                                 IT MANAGEMENT

        Mr. Chairman, we at USDA understand our responsibility to manage
    our IT assets and to ensure that major IT investments are completed on
    time, and within scope and budget. To support these responsibilities,
    USDA established an IT Investment and Project Management training
    program. This program provides project managers and project staff with
    the skills and competencies needed to ensure that all projects have a
    strong business case, meet organizational goals and are completed
    within their established cost and schedule goals. This training covers
    Federal best practices such as capital planning and investment control,
    information assurance, project management (PM), enterprise
    architecture, acquisition, eGovernment, and telecommunications issues
    as well as the nine knowledge areas specified by the Project Management
    Institute (PMI) in the Project Management Body of Knowledge, the
    industry standard for project management training. At the end of the
    training, participants are eligible to take the examination
    administered by PMI for certification as a Project Management
    Professional (PMP). This training has provided us with a growing number
    of PMI-certified project managers. Currently, USDA has 200 PMPs.
        To supplement the 5-week PM training, we have identified and
    delivered shorter classes to address more specific needs including:
    Earned Value Management, the Project Management Lifecycle (a high-level
    PM introduction) and Performance-Based Acquisition. These classes
    expand the level of understanding of PM concepts and ensure that the
    skills of our trained PMs are kept up to date.
        We believe that all agencies can benefit from this training and
    that USDA staff benefit from understanding other agencies' experiences.
    In addition to USDA employees, we have trained staff from the
    Environmental Protection Agency, the Department of Treasury, the
    Department of Homeland Security and the Department of Education.

                                   CONCLUSION

        Mr. Chairman, as I mentioned earlier, we are working hard to use
    technology to transform service delivery to USDA customers while
    reducing costs. With the continued support of the Congress, I am
    confident that we will continue to be successful in achieving these
    objectives.
                                     ______

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

                                  INTRODUCTION

        Mr. Chairman and members of the Subcommittee, I am pleased to have
    this opportunity to present our fiscal year 2007 budget request,
    provide you with an overview of our agency, and address some of the
    current activities and issues facing the Department.
        The Office of the General Counsel (OGC) is the law office for the
    Department. As an independent, central agency within the Department,
    OGC determines legal policy and provides legal advice and services to
    the Secretary of Agriculture and other officials of the Department of
    Agriculture with respect to all USDA programs and activities.
        OGC(s services are provided through 14 Divisions in Washington,
    D.C. and 17 field locations. The headquarters for OGC is located in
    Washington, D.C. The Office is directed by a General Counsel, a Deputy
    General Counsel, a Director for Administration and Resource Management,
    and six Associate General Counsels. The attorneys located in
    headquarters are generally grouped in relation to the agency or
    agencies served. Our field structure consists of four regional offices,
    each headed by a Regional Attorney, and 13 branch offices. The field
    offices typically provide legal services to USDA officials in regional,
    State, or local offices.

                         CURRENT ACTIVITIES AND ISSUES
             INTERNATIONAL AFFAIRS AND COMMODITY PROGRAMS DIVISION

        During this past year, OGC has provided a significant amount of
    assistance in connection with USDA's international activities. With
    respect to World Trade Organization (WTO) matters, OGC worked
    extensively with the Office of the United States Trade Representative
    (USTR) to prepare the United States' brief in support of its claims
    challenging the European Communities' (EC) suspension of approvals of
    all applications for biotech products. This action is being brought
    under the WTO Agreement on the Application of Sanitary and
    Phytosanitary Measures (SPS Agreement). The United States also
    challenged nine safeguard measures that have been enacted by six EC
    member States banning several biotech products that were already
    approved for sale in the European Union (EU) prior to 1998. The United
    States contended that the EU has imposed ``undue delay'' in connection
    with product approvals in violation of Article 8 of the SPS Agreement;
    has not made decisions based on risk assessments as required under
    Article 5.1; and has violated Article 5.5 which prohibits Members from
    adopting arbitrary or unjustifiable distinctions in their level of
    protection in ``different'' but comparable situations. A confidential
    interim report was issued by the WTO in this case on February 7, 2006.
    OGC attorneys have also continued to provide support to the USTR in
    connection with the challenge brought in the WTO by the Government of
    Brazil against virtually all aspects of the Department's domestic and
    export-related cotton programs. This case has major implications for
    the manner in which these programs are administered regarding cotton,
    and the legal principles at stake may also affect other commodity
    programs.
        In other WTO matters, OGC attorneys have provided advice to
    Departmental officials, primarily those in the Foreign Agricultural
    Service (FAS), with respect to various sanitary and phytosanitary
    issues, including reviewing responses to WTO notifications of proposed
    regulatory changes. These attorneys also advised FAS personnel in the
    review of various proposed changes to existing WTO agricultural
    provisions that would be the framework for future WTO negotiations.
        During the past year, OGC has also been involved in the
    implementation of a large number of foreign assistance agreements under
    which agricultural commodities acquired by the Commodity Credit
    Corporation (CCC) are donated overseas. This includes involvement in
    relief efforts addressing the humanitarian needs in Iraq and the Darfur
    region of Sudan. This work has involved extensive review of draft
    agreements, commodity procurement agreements, ocean transportation
    issues, and cargo loss and damage claims. OGC has also provided legal
    advice to FAS in relation to the operation of the Bill Emerson
    Humanitarian Trust through which reserves of commodities may be made
    available to meet unanticipated emergency needs and has assisted CCC's
    Kansas City Commodity Office in reviewing the commodity procurement
    processes under which agricultural commodities are acquired for their
    donation overseas. In the area of international food assistance, OGC
    reviewed and helped draft numerous agreements with private voluntary
    relief organizations, the World Food Program of the United Nations, and
    various foreign governments. This assistance included a combination of
    donations and concessional credit sales of grains, oilseeds, and other
    U.S. agricultural commodities.
        The Trade Adjustment Assistance Program for Farmers has also
    continued to require a significant amount of assistance from OGC
    attorneys. In general, this program assists agricultural producers who
    have incurred reductions in commodity prices due to increased imports
    of agricultural products into the United States as the result of trade
    agreements. At this point, a substantial number of appeals have been
    filed with the U.S. Court of International Trade challenging FAS's
    decisions on applications for payment. OGC attorneys are providing
    assistance to the Department of Justice (DOJ) in responding to these
    appeals.
        OGC also provides advice to FAS concerning cost-reimbursable
    agreements entered into by FAS and other USDA agencies with foreign
    governments or other U.S. government agencies that are engaged in
    international agricultural activities.
         During the past year, OGC attorneys provided extensive assistance
    with respect to the numerous commodity and conservation programs
    implemented by the Department under various statutes, including the
    Agricultural Adjustment Act of 1938, the CCC Charter Act, the Food
    Security Act of 1985, and the Farm Security and Rural Investment Act of
    2002. Most notably, with respect to 2004 hurricanes, OGC provided major
    support to the efforts of the President to provide assistance to
    agricultural producers affected by the unprecedented damage in Florida
    caused by the occurrence of 3 successive hurricanes. Working with
    senior Departmental officials and representatives of the Executive
    Office of the President, OGC attorneys were able to provide the legal
    framework under Section 32 of the Act of August 24, 1935 (Section 32)
    so that payments could be made to producers within weeks of the
    hurricane damage. Similarly, OGC has provided legal advice to the Farm
    Service Agency (FSA) in the development of regulations and program
    documents needed to deliver several billion dollars of disaster
    assistance payments to producers under the Military Construction
    Appropriations and Emergency Hurricane Supplemental Appropriations Act,
    2005, and under Section 32 with respect to Hurricanes Ophelia, Dennis,
    Katrina, Rita, and Wilma. OGC also continues to expend considerable
    time in providing assistance on legal issues involving the sugar,
    peanut, and dairy programs.
        Title VI of the America Jobs Creation Act sets forth amendments to
    existing statutes to terminate the Tobacco Price Support and Marketing
    Quota Programs. In addition, this act establishes a 10-year, $10
    billion program to provide payments to tobacco quota holders and
    tobacco producers with the funds coming from assessments on tobacco
    product manufacturers and importers. Implementation of this very
    complex and important program is requiring the substantial devotion of
    assistance by OGC.

                          FOOD AND NUTRITION DIVISION

        With respect to USDA's nutrition assistance programs, OGC has been
    heavily involved in: (1) the development, drafting and review of
    legislative reports and congressional testimony; (2) the implementation
    and enforcement of new legislation aimed at welfare reform and other
    program improvements; and (3) the ongoing program integrity and
    compliance initiatives. We expect the demand for legal services in
    connection with these and other activities to remain constant in fiscal
    years 2006 and 2007.
        More specifically, during this past year, OGC attorneys provided
    formal and informal advice on a number of issues affecting the
    administration of the nutrition assistance programs. OGC provided
    assistance in the drafting and subsequent enactment of section 780 of
    the Consolidated Appropriations Act, 2005, which prohibits the use of
    funds appropriated under that act to reimburse the administrative costs
    of States under the Special Supplemental Nutrition Program for Women,
    Infants and Children (WIC) for stores that receive more than 50 percent
    of their revenue from WIC transactions. This prohibition represents a
    significant cost savings for the WIC Program. OGC also worked
    effectively in the development of legislative proposals to limit
    categorical eligibility for the Food Stamp Program (FSP) to persons who
    receive actual cash benefits under the Temporary Assistance for Needy
    Families program and to authorize access, for program verification
    purposes, to the National Directory of New Hires. These legislative
    proposals supported the budgetary objectives of the administration. OGC
    also provided advice to the Center for Nutrition Policy and Promotion
    in connection with roll-out activities with respect to 2005 Dietary
    Guidelines for Americans and the associated MyPyramid.
        During the past year, OGC assisted in the defense of several legal
    challenges to the nutrition assistance programs. Among other issues,
    OGC worked closely with the DOJ Antitrust Division in the preparation
    of a lawsuit to challenge the merger of two dairy companies which would
    have severely restricted competition in the procurement of milk
    contracts for the National School Lunch Program in Arkansas and
    substantially contributed to the successful defense against allegations
    of denial of due process raised by a Child and Adult Care Food Program
    sponsor.
        OGC participated in the preparation and review of numerous
    significant documents, memoranda, rules, notices, and correspondence
    during this past year. As examples, OGC reviewed a substantial number
    of proposed and final Federal Register publications, including: (1)
    interim and final rules establishing new standards for the approval and
    operation of FSP electronic benefit transfer systems; (2) a proposed
    rule to amend the FSP regulations to implement the discretionary
    quality control provisions of Title IV of Public Law 107-171; (3) a
    proposed rule to revise regulations governing WIC food packages; and
    (4) a final rule to amend WIC regulations to address issues raised by
    WIC State agencies, members of the WIC community and the U.S.
    Government Accountability Office. Similarly, OGC provided legal review
    of the documentary basis for the Department's nutrition assistance
    response to disaster conditions caused by hurricanes Katrina, Rita, and
    Wilma along the Gulf Coast.
        OGC also provided advice on a number of issues affecting the
    efficient administration of the nutrition assistance programs. OGC
    provided valuable assistance and advice to Department officials
    regarding the preparation of a joint letter signed by the Secretaries
    of Agriculture and Health and Human Services issuing guidance to State
    Governors regarding the eligibility of faith-based drug and alcohol
    abuse treatment programs to act as retail food stores under the FSP.
    This effort required close coordination with the White House Counsel's
    Office and Office of Faith-Based and Community Initiatives, as well as
    the Office of Management and Budget. OGC provided legal advice to FNS
    in connection with the denial by FNS of the request of a State school
    district to impose gender-specific seating requirements in cafeterias
    operated under the National School Lunch Program. OGC also worked
    closely with Department officials in the review of a State proposal for
    the fundamental restructuring of the FSP application process with a
    focus on improved efficiency and effectiveness of the delivery of
    program benefits. This review required careful analysis of authorities
    related to electronic signatures and record-keeping and to authorities
    regarding merit pay requirements for State officials involved in the
    certification of applicants. OGC continues to work closely with
    Department officials engaged in evaluating and sanctioning States for
    their performance in administering the FSP under the quality control
    system.

                 MARKETING, REGULATORY AND FOOD SAFETY PROGRAMS

        OGC staff are providing the strongest possible legal support to the
    Food Safety and Inspection Service (FSIS) to ensure the safety of the
    Nation's meat, poultry, and egg products. We participate fully in the
    agency's work to enhance the effectiveness of the Hazard Analysis and
    Critical Control Points (HACCP)/Pathogen Reduction regulations, to
    support effectively the agency's compliance and enforcement program,
    and to defend FSIS in legal challenges to the implementation of its
    statutory authorities and regulations.
        OGC attorneys continue to work with DOJ attorneys in defending
    civil actions that have been initiated in Federal court against the
    Department involving FSIS' food safety programs. One such case involves
    a Bivens complaint filed by Nebraska Beef in the District Court for the
    District of Nebraska alleging that FSIS employees improperly suspended
    inspection services. Nebraska Beef has also filed a related lawsuit in
    Federal court challenging FSIS enforcement actions. A second case
    involves a Bivens complaint filed by Montana Quality Foods in the
    District Court for the District of Columbia alleging that FSIS
    employees took retaliatory action in enforcing FSIS' policy regarding
    E. coli O157:H7 contamination.
        OGC also provides assistance to FSIS in connection with its rule
    making activities. Our attorneys work with FSIS staff from the early
    stages of the agency's policy development activities, and participate
    in an array of agency working groups and regulation development teams.
    OGC has assisted FSIS in connection with ongoing rule making to
    strengthen protections against exposure to the bovine spongiform
    encephalopathy (BSE) agent. The interim rules require the removal of
    certain animals and specified risk materials from the human food chain,
    mandate additional process controls for establishments that use
    advanced meat recovery systems, require establishments to hold meat
    from cattle that have been tested for BSE until the test has been
    confirmed negative, and prohibit the air-injection stunning of cattle.
    We are working with the agency in developing a final rule that will
    encompass a careful evaluation of the comments submitted in response to
    the interim rule.
        OGC also assisted FSIS on an array of rules, notices and directives
    aimed at improving the Department's food safety program. The issues
    involved included safe food handling practices, food security plans,
    and emergency preparedness, and revisions to the agency's recall
    procedures to improve the dissemination of recall information. We also
    worked with FSIS and the Food and Drug Administration (FDA) to amend
    food standards and regulatory requirements to provide a more coherent
    approach to food safety.
        OGC devotes substantial resources to FSIS field operations
    activities and its critical compliance and enforcement programs. Our
    attorneys work on a daily basis with the agency's compliance and
    enforcement staff officials, with the Office of Inspector General
    (OIG), and with DOJ to achieve successful prosecution of criminal,
    civil and administrative cases involving violations of the meat,
    poultry, and egg products inspection laws, and to prevent the
    distribution of adulterated, misbranded, or uninspected products.
        In the past year, OGC handled numerous criminal, civil, and
    administrative cases in this area. The criminal cases involve not only
    violations of the Federal Meat Inspection Act (FMIA) and Poultry
    Products Inspection Act (PPIA), but also violations of provisions of
    U.S. criminal laws relating to false statements, bribery, conspiracy,
    and mail and wire fraud. The civil cases involved injunctions, seizure
    actions, bankruptcy and claims collections actions and the defense of
    civil lawsuits brought against the Department and its officials.
    Typically, OGC prepares proposed indictments, information and
    complaints, and provide whatever assistance is necessary for the
    successful prosecution or defense of the cases.
        OGC attorneys are responsible for prosecuting administrative
    actions initiated by FSIS to withdraw, suspend or deny Federal meat and
    poultry inspection or custom exemption services under the FMIA and PPIA
    based on criminal convictions, as well as on serious HACCP and Standard
    Sanitation Operating Procedures (SSOP) regulation violations.
        The Department's programs for safeguarding the animal and plant
    health of the United States is a matter of utmost importance to
    American agriculture and to the public as a whole. OGC works very
    closely with the Animal and Plant Health Inspection Service (APHIS) in
    carrying out that agency's program responsibilities. APHIS's program
    and regulatory activities continue to increase substantially. The focus
    of our work with APHIS remains the development and implementation of
    legally supportable measures to prevent the introduction and
    dissemination of animal diseases and plant pests, to ensure the safe
    entry of people and goods into the United States, and the facilitation
    of agricultural trade in compliance with our international obligations.
    The demands on OGC staff for timely and effective legal support
    continue to increase proportionately.
        During the past year, APHIS regulatory activities involving BSE
    have placed extraordinary demands on our attorney resources. Among the
    many challenging issues requiring extensive assistance was the agency's
    regulatory response to BSE in North America, particularly the
    litigation that followed on the publication of the rule to establish
    BSE minimal-risk regions. In addition, we assisted APHIS in its work on
    Asian longhorned beetle, emerald ashborer, grasshopper control, sudden
    oak death syndrome (SOD), control programs for low-pathogenic avian
    influenza, bovine tuberculosis, chronic wasting disease, and exotic
    Newcastle disease.
        In addition, requests for OGC's assistance in connection with
    APHIS' regulation of biotechnology has continued to increase, and we
    have devoted substantial resources to the biotechnology regulatory
    programs and the implementation and enforcement of agency regulations.
    This includes defending litigation challenging the agency's regulation
    of genetically modified turf grasses.
        OGC also handles a very substantial caseload of administrative
    cases on behalf of APHIS to enforce the agency's regulations. OGC
    attorneys have also continued our strong support for APHIS' Wildlife
    Services activities and programs and have defended these programs in a
    variety of litigation settings in the Federal courts.
        In the past year, OGC attorneys reviewed over 150 dockets, as well
    as many other documents relating to marketing orders, and provided
    daily legal advice to client agencies in connection with a wide variety
    of matters arising under both the fruit and vegetable and the milk
    marketing order programs. Substantial legal services were devoted to
    both formal and informal rulemakings. Formal rulemaking proceedings
    presented complex and substantial amendments and revision to a number
    of marketing order programs. Significant legal services were provided
    in connection with enforcement and defense of these programs. There is
    one administrative challenge to the legality of the California Raisin
    marketing order which is pending. In addition, OGC has filed numerous
    administrative complaints to enforce the terms of marketing orders
    which require regulated entities to pay their assessments and to comply
    with the requirements in the order. Significant legal services were
    provided in connection with an administrative challenge to
    classification determinations concerning Class I and Class II milk.
    There are also a number of complaints pending in the Federal courts
    filed by DOJ in order to obtain payments from milk handlers into the
    producer-settlement fund.
        An extensive amount of legal services was provided in the drafting
    of regulatory language in various rulemaking proceedings. OGC continued
    to provide legal assistance to the Agricultural Marketing Service (AMS)
    Dairy Programs on several rulemaking proceedings in the Mideast, Upper
    Midwest and Central Orders which provided for changes to the milk
    pooling standards and related issues. OGC continued work on the ongoing
    rulemaking proceeding involving potential changes in the producer-
    handler definition in the Pacific Northwest and Arizona-Las Vegas
    Orders including review of the recommended decision. OGC completed work
    on the amendment of the Appalachian, Florida, and Southeast Florida
    Orders to implement a temporary supplemental charge on Class I milk to
    be paid to handlers who incurred extraordinary transportation charges
    for moving milk to supply those markets because of the hurricanes in
    August and September 2005. OGC also completed work on changes to all
    the orders to reclassify milk used to produce evaporated milk and
    sweetened condensed milk in consumer-type packages from Class III to
    Class IV. OGC provided legal services on a rulemaking proceeding to
    amend the Class I fluid milk product definition in all milk marketing
    orders.
        OGC continued to provide legal assistance to DOJ and the client
    agencies in numerous administrative and Federal court cases involving
    challenges to the constitutionality of generic advertising funded by
    mandatory assessments in research and promotion programs. Since the
    United States Supreme Court May 2005 ruling upholding the
    constitutionality of the Beef Promotion and Research Act, in Veneman v.
    Livestock Marketing Association, USDA is advancing those same arguments
    in defense of the other challenged research and promotion programs. All
    research and promotion programs continue to receive legal services in
    the intervening period. For example, OGC expended substantial resources
    litigating more than 100 administrative and Federal court First
    Amendment cases arising under research and promotion programs. These
    cases involve some of the most important, complex, and controversial
    legal and public policy issues in constitutional and agricultural law.
    Research and promotion programs cumulatively collect and spend over
    $700 million a year on commodity promotions. OGC also provided
    extensive legal analysis for a proposed implementation of a new
    research and promotion program for mangos.
        OGC expended substantial resources in connection with the Animal
    Welfare Act and Horse Protection Act Programs. OGC attorneys serve as
    agency counsel in administrative enforcement actions brought under
    these two statutes, and in fiscal year 2005, OGC initiated 46
    enforcement cases, and 49 decisions were issued in ongoing cases. In
    addition, OGC reviewed and provided drafting assistance to APHIS in a
    number of rulemaking actions for publication in the Federal Register.
        OGC reviewed a variety of rulemaking and other documents in
    connection with this program. OGC continued to work with and advise the
    agency concerning program changes to better serve the grain industry in
    a more cost effective and efficient manner. OGC attorneys provided
    substantial advice and guidance in connection with a number of issues,
    including reauthorization of the program, use of contracting authority
    to provide inspection and weighing services and exemption of speciality
    grain from inspection and weighing requirements.
        In the Trade Practices area, we provide legal services under the
    Packers and Stockyards Act (P&S Act), the Perishable Agricultural
    Commodities Act (PACA), and the Capper-Volstead Act and provide the
    liaison for the Department under the Memorandum of Understanding
    between the Department, the Federal Trade Commission and the DOJ on
    competition issues. Under the P&S Act, the attorneys of the Trade
    Practices Division file administrative complaints to enforce the
    provisions of the statute, requiring prompt payment for livestock and
    poultry and ensuring that livestock auction markets and dealers are
    solvent, provide accurate weights and measures, and account accurately
    to sellers and producers of livestock.
        In 2005, OIG conducted an audit of the competition investigations
    and cases conducted by the Packers and Stockyards Program (P&SP). After
    several months, OIG issued a report finding that P&SP had difficulties
    defining and tracking investigations, planning and conducting
    competition and complex investigations, and making agency policy
    decisions. As a result, the report found that P&SP's tracking system
    was not reliable, competition and complex investigations were not being
    performed, and timely action was not being taken on issues that impact
    day-to-day activities. The report also found that P&SP should increase
    its communication and cooperation with OGC. As a result of the report's
    findings, GIPSA has requested OGC's assistance in streamlining
    procedures and in training its staff, and P&SP is seeking oral opinions
    and legal guidance on a more frequent basis.
        OGC has provided extensive legal services in support of the GIPSA
    program in a case against Valley Pride Pack, Inc., (``Valley Pride''),
    a beef slaughter and meat processing company with its corporate
    headquarters and principal place of business in Norwalk, Wisconsin.
    Valley Pride shut down, leaving cattle sellers unpaid for roughly $3.5
    million worth of livestock purchases from late July and early August
    2001. Following Valley Pride's financial collapse, OGC assisted in
    preparing an analysis of unpaid livestock sellers' claims pursuant to
    the P&S Act trust, which requires meat packers to hold inventories,
    receivables and proceeds from the sale of meat or livestock derived
    products in trust for the benefit of livestock sellers. The analysis
    found $3.4 million in apparently valid, timely claims by cattle
    sellers. These claims were subsequently paid by Valley Pride's primary
    pre-petition lender, GE Capital, which held a security interest in
    Valley Pride's inventory and receivables. Cattle sellers received
    additional funds from Valley Pride's packer bond. Following the trust
    and bond payouts, approximately sixty-five cattle sellers remained
    unpaid for roughly $50,000 worth of cattle purchased by Valley Pride.
    On behalf of GIPSA, OGC filed an administrative, disciplinary complaint
    against Valley Pride alleging failures to make timely payment for
    cattle purchases, and naming the company's sole owner and chief
    executive officer, as a respondent, alleging that the violations of the
    P&S Act occurred while the company was under his direction, management
    and control. After GE Capital made allegations of fraud, OGC amended
    the complaint against Valley Pride and the company's sole owner,
    alleging that the respondents had engaged in unfair and deceptive
    practices by creating false records, including invoices and payment
    receipts, evidencing cattle and/or meat sales by Valley Pride to third
    parties for which no sales actually occurred. Millions of dollars in
    fictitious assets had been used to offset real liabilities in Valley
    Pride's financial reports, thereby disguising the company's insolvency.
    At the end of the fiscal year, the parties were seeking resolution of
    the complaint through an agreement that would result in the full
    payment to all livestock sellers. On January 30, 2006, just prior to
    the scheduled hearing for GIPSA's administrative complaint against
    Valley Pride and the company's owner, the case was resolved by a
    negotiated consent decision. Respondents, Valley Pride and the
    company's owner, agreed to cease and desist from further violations of
    the Packers and Stockyards Act's prompt payment provisions and agreed
    to keep records that fully and correctly disclosed all transactions in
    their business. Valley Pride and the company's owner were also jointly
    and severally assessed a civil penalty of $80,000. By agreement between
    the parties, GIPSA agreed to hold $55,000 of the civil penalty in
    abeyance to facilitate payments by respondents to cattle sellers who
    still remained unpaid for cattle purchases by Valley Pride.
         OGC has also provided legal services to GIPSA in the review of the
    plan and data request for the Livestock and Meat Marketing Study
    (LMMS), a study requested by Congress to review the impact of long term
    contracting and use of captive supply by slaughtering packers. Captive
    supply is defined by P&S Programs as livestock that are committed to a
    packer more than 14 days prior to slaughter. The study was to review
    the question of whether such longer term commitment impacts the
    ``spot'' or cash market for livestock. OGC assisted P&S in the
    preparation of the information collection request for Departmental and
    OMB clearance, meeting with OMB officials on a number of occasions to
    address OMB's concerns regarding the agency's plans for the study and
    the treatment of confidential data.
        Trade Practices attorneys prepared and filed administrative
    enforcement actions under the PACA. Of particular significance, the
    Trade Practices Division has continued to litigate administrative
    disciplinary cases arising out of the criminal convictions of eight
    USDA inspectors and 12 individuals who were owners and/or employees of
    PACA licensed produce firms located on the market. Fruit and Vegetable
    Programs of AMS filed eight disciplinary complaints against nine
    produce companies located on the Hunts Point market: (1) Post & Taback,
    Inc., (2) M. Trombetta & Sons, Inc., (3) Cooseman's Specialties, Inc.,
    (4) KOAM Produce, Inc., (5) King Sol Produce, (6) BT Produce Co., Inc.,
    (7) Kleiman & Hochberg, Inc., (8) G&T Terminal Packaging Co., Inc. and
    (9) Tray Wrap, Inc. The complaints alleged that the companies, which by
    statute are held to an identity of action with their employees or
    agents, had violated section 2(4) of the PACA by making illegal
    payments to Federal produce inspectors. Seven of the complaints sought
    a sanction of revocation of the company's PACA license. One complaint
    sought a sanction of a finding of the commission of flagrant or
    repeated violations of section 2(4) of the PACA, rather than a
    revocation, because the company no longer had a PACA license. The
    sanctions sought also include employment sanctions against the
    principals of the nine produce firms.
        One of the eight cases, King Sol Produce, was decided by default.
    The remaining seven cases went to hearing before the Department's
    Administrative Law Judges (ALJ's), who have issued decisions in all
    seven cases (though the Respondent in BT Produce Co., Inc., has asked
    the Chief ALJ for reconsideration). Six of the ALJ decisions were
    appealed to the Department's Judicial Officer (JO), who has decided
    four of them (Post & Taback, Inc.; G&T Terminal Packaging Co. Inc.;
    Tray Wrap, Inc.; and M. Trombetta & Sons, Inc.), finding that the
    companies committed the alleged violations and issuing the sanctions
    requested by Fruit and Vegetable Programs. G&T Terminal Packaging Co.,
    Inc., and Tray Wrap, Inc., has been appealed to the 2nd Circuit Court
    of Appeals. One case, Post & Taback, Inc., was appealed to the U.S.
    Court of Appeals for the D.C. Circuit, which upheld the JO's decision
    (Post & Taback, Inc. v. Department of Agric., 123 Fed Appx. 406 (D.C.
    Cir. 2005).
        Also in support of the PACA Program, OGC and DOJ continued to
    defend against a challenge to an amendment of a PACA regulation that
    added coating or battering to the list of operations that do not alter
    the character of a fresh fruit or fresh vegetable so that it is no
    longer a ``perishable agricultural commodity''. The lawsuit, filed by a
    bankrupt wholesale grocer and retailer, argues that the regulatory
    amendment conflicts with the language and purpose of the PACA, and that
    the rulemaking process was inadequate. On June 7, 2004, a judge in the
    U.S. District Court for the Eastern District of Texas granted USDA's
    Motion for Summary Judgment. The judge found that the ``PACA
    ambiguously states that fresh fruits and vegetables of every kind and
    character' are perishable agricultural commodities'' and that, where
    legislative language is ambiguous, the Secretary is granted the
    authority to issue regulations to determine what may be classified as
    fresh fruits and vegetables for the purposes of the PACA. The judge
    also found that USDA followed the appropriate procedural requirements
    in amending the regulation. Therefore, the court found that the
    amendment to the regulation is valid. The grocer/retailer appealed the
    decision to the 5th Circuit Court of Appeals. Oral argument was held in
    New Orleans, Louisiana, on April 5, 2005. On February 1, 2006, the 5th
    Circuit Court of Appeals issued an unpublished decision affirming the
    decision of the U.S. District Court for the Eastern District of Texas
    upholding the validity of the amendment to the regulation. In its brief
    decision, the 5th Circuit affirmed, finding the regulation to be valid
    ``for the reasons articulated by the district court in its
    comprehensive opinion''.

                               RURAL DEVELOPMENT

        OGC also provides legal services to USDA agencies which manage some
    of America's largest loan portfolios. OGC continues to be heavily
    involved in debt collection, foreclosure, and bankruptcy matters for
    FSA, Farm Loan Programs and the Rural Development (RD) mission area.
    OGC is assisting these agencies' implementation of provisions of the
    Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that
    became effective on October 17, 2005, and greatly affected USDA as a
    creditor. OGC also has provided significant assistance in identifying
    and utilizing existing and new emergency authorities, responding to
    claims, and coordinating benefits in response to the many disasters
    that have recently impacted the southern United States including
    Hurricanes Katrina and Rita. OGC also has supported the agencies'
    efforts to implement eGovernment initiatives and move towards web-based
    credit application, servicing, and notification procedures.
        OGC continues to defend approximately 300 existing and newly filed
    lawsuits involving approximately 800 RD multi-family housing projects
    whose owners want to prepay their loans and, thereby, remove a
    significant number of low-income housing units from rural America. OGC
    has devoted significant time and resources to working closely with DOJ
    to support litigation efforts, particularly in providing information
    and analysis in the context of settlement negotiations.
        OGC is working extensively with the Rural Housing Service (RHS) on
    implementing several new programs. The Multi-Family Housing
    Preservation and Revitalization Restructuring Demonstration Program
    (Revitalization Program) will revitalize selected Rural Rental Housing
    (RRH) properties throughout the Nation. The Revitalization Program
    allows for loan servicing tools previously unavailable to RHS such as
    grants and subordinates section 515 loans with all principal and
    interest deferred as a balloon payment at the end of the loan term..
    OGC is currently working with RHS on drafting the Notice of Funding
    Availability and the legal documents necessary for restructuring the
    owners' loans. The Multi-Family Housing Voucher Demonstration Program
    (Voucher Program) will provide continued rental assistance to low-
    income households in prepaid RRH projects. RHS is providing continued
    rental assistance in the form of 1-year portable vouchers. OGC is
    working with the Department of Housing and Urban Development and RHS in
    drafting a Notice of Funding Availability and Interagency Agreement for
    the Voucher Program. OGC also assisted RHS in developing its
    Preservation Revolving Loan Fund program which was authorized as a
    demonstration program under the Agriculture, Rural Development, Food
    and Drug Administration, and Related Agencies Appropriations Act, 2005.
        OGC also has assisted the Rural Business-Cooperative Service (RBS)
    on various new and continuing initiatives. OGC reviewed RBS' final
    rules implementing the new Energy Systems and Energy Efficiency
    Improvements Program and the Biomass Research and Development Program
    under the Farm Security and Rural Investment Act of 2002. OGC also
    provided RBS legal assistance in revising its Business and Industry
    loan regulations. RBS has needed increased support on secondary market
    issues and its Rural Business Investment Program that funds rural area
    venture capital investment activities. In addition, OGC is providing
    significant support on several major defaults on guaranteed Business
    and Industry loans and negligent servicing by guaranteed lenders. OGC
    continues to experience a significant increase in requests for advice
    regarding various grant and cooperative agreement issues, and is
    assisting RBS' and RHS' implementation of the President's Faith-Based
    and Community Initiative to ensure that faith-based and community
    organizations have equal access to USDA programs.
        The need for legal services supporting the programs of the Rural
    Utilities Service (RUS) continued to grow significantly in fiscal year
    2005 as a result of sustained increased funding for RUS programs,
    increased responsibilities for RUS resulting from the passage of the
    Farm Security and Rural Investment Act of 2002, and the impact of
    continuing changes in the electric and telecommunications program
    structures and policies.
        The RUS Electric Program is the largest of these programs. Several
    of these loans involved large-scale generation and transmission
    projects. OGC furnishes the legal services necessary for RUS to
    document and secure these obligations, thereby enabling these programs
    to be delivered. OGC is providing a full range of legal services to RUS
    to enable successful administration of these programs, including the
    servicing of a direct and guaranteed loan portfolio.
        The 2002 Farm Bill amended the Rural Electrification Act of 1936 by
    adding a new Title VI which established a Broadband Direct and
    Guarantee Loan Program (Broadband Program) in RUS. The RUS Broadband
    Program plays a critical role in implementing the President's
    initiative to make access to broadband technology available to every
    American by 2007. OGC furnishes all legal services necessary to
    establish and maintain this program. Since the beginning of this
    program in February 2003, OGC has furnished all legal assistance needed
    by RUS in approval of all loans. During fiscal year 2005, OGC improved
    the legal documentation packages necessary to protect the government's
    financial interests in these transactions. During fiscal year 2005, OGC
    began assisting RUS and DOJ in collecting obligations from
    telecommunications borrowers aggregating approximately $50 million. The
    bulk of these obligations to the Broadband and Internet Services
    Programs were established as pilot programs in 2001. The volume of
    pilot projects in legal collection is expected to continue growing in
    fiscal year 2006 and carry over into fiscal year 2007 as an increasing
    number of pilot projects default.
        The 2002 Farm Bill also established a new guarantee program under
    Section 313A of the Rural Electrification Act which provides for RUS to
    issue guarantees of bonds and notes issued by lenders to electric
    cooperatives. OGC assisted RUS in developing the regulations to
    implement this new program. OGC provided substantial legal assistance
    to RUS in developing the legal documentation that enabled RUS to
    deliver its first guarantee. OGC efforts to provide legal support to
    RUS for administering these guarantee agreements will continue into
    fiscal year 2007.
        In addition to the new Broadband Program, OGC is providing legal
    services to support several other new RUS initiatives. OGC also
    supports the RUS mission by providing legal services to RUS that enable
    the agency's participation in the Rural Telephone Bank (RTB). During
    fiscal year 2005, RTB's demand for OGC legal services to support the
    process of dissolving the public/private RTB rose dramatically. As
    proposed in the 2007 President's budget, RTB is expected to be
    dissolved by fiscal year 2007. However, the complex process of winding
    up the affairs of RTB is expected to continue to place significant
    demands on OGC legal resources beyond the dissolution and distribution
    of RTB stock proceeds to the shareholders that is scheduled to occur
    during fiscal year 2006.
        Congress recently amended the Rural Electrification Act of 1936 to
    add new authority for RUS, in collaboration with the Department of the
    Treasury, to extend the maturities for outstanding loans associated
    with power plants and transmission lines which have been determined to
    have longer useful lives, e.g. in the case of a nuclear plant whose
    license has been extended by the Nuclear Regulatory Commission (NRC)
    for an additional 20-year term. The documentation and procedures for
    implementing this new authority, which also involves assessing a fee
    for this service, will need to be developed. OGC anticipates this
    program will be used extensively during fiscal year 2007.
        OGC continues to provide significant assistance in the area of
    Federal crop insurance. OGC supports DOJ in defending several multi-
    million dollar lawsuits brought by insured farmers and companies
    reinsured by the Federal Crop Insurance Corporation (FCIC). These suits
    involve a wide variety of issues government committed an error or
    omission as to its 2000 sugar beet policy. OGC also is providing a
    great deal of support to the Risk Management Agency (RMA) with regard
    to the financial collapse and liquidation of one of its largest
    insurance providers, implementation of new risk management programs
    developed by the private industry, and responding to new and emerging
    diseases and the spread of existing diseases. OGC also is assisting
    RMA's development of a new combo policy that incorporates the
    provisions of the actual production history and various revenue plans
    of insurance into a single policy, and updates of numerous other crop
    insurance policies.
        Implementation of the Agriculture Risk Protection Act of 2000
    continues to increase the responsibilities of RMA and OGC. Compliance
    efforts have included the development of administrative
    disqualification, suspension, and debarment actions against producers,
    agents, loss adjusters, reinsured companies and the update of
    associated regulations. OGC also is assisting RMA's development of
    conflict of interest requirements for reinsured companies, agents and
    loss adjusters and reviewing administrative actions to alleviate fraud,
    waste and abuse in the program.
        OGC continues to work with Department officials to reduce
    regulatory burdens and eliminate obsolete and unnecessary regulatory
    requirements, particularly in the areas of rural development, farm, and
    utility lending. Increased OGC assistance has been required in the
    defense of several significant civil rights actions against FSA and RHS
    and the continued implementation of the Pigford consent decree. We are
    assisting RHS and FSA in streamlining and rewriting loan-making and
    servicing regulations for the Guaranteed Single Family Housing Loan
    Programs, the Community Facilities Loan and Grant Programs, and the
    Farm Loan Programs. Our efforts on these long-range projects will
    continue into fiscal year 2007.

                               NATURAL RESOURCES

        OGC continues to provide substantial legal assistance related to
    Forest Service (FS) land management planning and program area
    compliance with environmental and administrative laws and regulations.
    Litigation involving agency compliance with the National Environmental
    Policy Act (NEPA), the National Forest Management Act (NFMA) and the
    Endangered Species Act (ESA) continues apace, with approximately 170
    cases pending at the end of fiscal year 2005, the same level as the
    previous year. OGC anticipates this level of litigation to continue or
    increase. Examples of litigation regarding program matters and
    regulatory actions include litigation related to the National Fire
    Plan, the State Petition Rule regarding roadless areas, the Planning
    Rule, the Northwest Forest Plan, the Sierra Nevada Framework and the
    Healthy Forest Restoration Act. Project level litigation involves among
    other things, timber sales, grazing permits, and special use
    authorizations.
         OGC has provided extensive assistance regarding the preparation
    and defense of the FS's 125 Land and Resource Management Plans.
    Significant legal services were provided in association with
    development of interim direction and other guidance respecting the
    agency's revised NFMA planning regulation. The implementation of the
    revised NFMA planning regulations is underway in forest plan revisions,
    requiring a heavy investment of OGC legal services. OGC continues to
    devote substantial time and resources to assisting the FS with large-
    scale planning initiatives and project preparation.
        USDA and FS efforts regarding the President's Healthy Forests
    Initiative and the Healthy Forests Restoration Act have also required
    significant assistance from OGC. This initiative will continue to
    require a substantial investment of OGC time and effort in defending
    agency reforms associated with this initiative. Numerous lawsuits are
    ongoing that challenge these reforms.
        OGC continues to provide legal advice to ensure FS and Natural
    Resources Conservation Service (NRCS) compliance with Federal
    administrative laws, such as the Administrative Procedure Act, the Data
    Quality Act, the Federal Advisory Committee Act, the Freedom of
    Information Act, the Paperwork Reduction Act, the Privacy Act,
    Executive Orders, and other authorities governing Federal
    decisionmaking, which can and do arise in a variety of legal and
    factual settings.
        In the recreation area, OGC drafted several FS directives
    implementing a new regulation governing management of off-highway
    vehicle use on National Forest System (NFS) lands. OGC provided
    significant legal advice regarding a final rule providing for cost
    recovery for processing special use applications and monitoring
    compliance with special use authorizations. OGC drafted a memorandum of
    understanding (MOU) among 5 Federal agencies and 31 shooting sports
    organizations regarding shooting sports activities on Federal lands.
    OGC created and updated standard special use authorization forms.
    Additionally, OGC developed FS accessibility guidelines for outdoor
    developed recreation areas and trails on NFS lands. OGC drafted a
    directive that extended the maximum term for FS outfitting and guiding
    permits from 5 to 10 years. OGC assisted with implementation of
    interagency recreation fee legislation that supplants the recreation
    fee authority in the Land and Water Conservation Fund Act and the
    Recreational Fee Demonstration Program statute. OGC defended a legal
    challenge to the FS's national trail classification system. OGC also
    provided assistance to the FS in requiring States and other non-Federal
    governmental entities that hold FS special use permits to insure and
    indemnify the United States under those permits.
        In the forest management program area, OGC continued to provide
    litigation support to DOJ in collecting millions of dollars in damages
    owed the government by defaulting timber sale purchasers. OGC continued
    to provide assistance to DOJ in on-going settlement negotiations of
    several consolidated cases, at one time numbering twenty, concerning
    the collection of tens of millions of dollars in principal damages plus
    interest owed the government pursuant to orders issued in two of the
    representative consolidated cases. To date, the government has
    collected more than $16 million in damages from the consolidated cases.
        OGC provided legal assistance on the defense of approximately 25
    lawsuits challenging timber sale suspensions, modifications and
    cancellations, and alleging breach of contract for unlawful
    suspensions, modifications and cancellations seeking tens of millions
    of dollars. Additionally, OGC provided legal assistance in drafting
    contract provisions to limit liability for contractual damages and to
    clarify the obligations of the parties to the timber sale contract. OGC
    continued to revise and present, twice annually, a 3-day course on
    Contract Law to train FS contracting officers on various aspects of
    contract law as it relates to their daily program activities.
        OGC continues to provide legal advice and assistance to FS
    regarding implementation of stewardship contracts and other forms of
    agreement which allow the agency to achieve forest resource management
    objectives in exchange for forest products. Under these stewardship
    contracts, timber is harvested while contractors perform services, such
    as road and trail maintenance, watershed restoration and restoration of
    wildlife habitat. OGC has reviewed and provided advice on the standard
    contract form and is working with the agency to adapt other instruments
    for use in a stewardship setting.
        As the FS continues to implement OMB circular A-76 on competitive
    outsourcing, OGC has continued to serve as its legal advisor in this
    effort. OGC anticipates committing significant time and resources to
    the provision of advice and assistance in this area.
        In congressional matters, the Natural Resources Division (NRD)
    provided extensive assistance in drafting various legislative
    proposals, including the FS's partnership initiative and
    reauthorization of the Secure Rural Schools and Community Self-
    Determination Act of 2000, and various FS appropriations provisions.
    NRD continued to provide assistance in addressing legal issues
    concerning implementation of the administration's Healthy Forest
    Initiative and related matters. NRD assisted the FS Legislative Affairs
    staff in preparation for numerous Congressional hearings. The
    Conservation and Environment Division provided similar assistance to
    the NRCS on legislative proposals affecting the agency's programs and
    activities.
        OGC has continued to work closely with the FS and the NRCS on real
    property matters. For example, OGC provided legal services to both
    agencies for the acquisition of lands and conservation easements under
    various programs, almost 500 easements under the Farm and Ranch Lands
    Protection Program for NRCS alone in fiscal year 2005. Numerous land
    transactions requiring the preparation of contracts, environmental
    compliance documents, land titles, and closing documents have occurred
    during the last year. OGC also provides legal services regarding access
    and rights of way to public lands, title claims and disputes, treaty
    rights, land appraisals and surveys, and other issues incident to the
    ownership and management of real property assets of the government. The
    agency's real estate practice is divided among its Washington DC
    office, which primarily handles legislative, regulatory, and policy
    matters, and the regional and field offices which conduct most of the
    transactional work.
        OGC has provided legal services on a number of significant issues
    concerning tribal relations. OGC assisted DOJ in the successful defense
    of suits alleging violations of the Religious Freedom Restoration Act
    and the Establishment Clause regarding land management activities in
    Arizona and Nevada. OGC provided substantial legal assistance regarding
    Federal laws, such as those concerning American Indian treaty rights
    and religious freedom, and historic and archaeological resource
    protection. OGC drafted legislation that would enhance FS tribal
    relations in areas involving access, use of forest products, and
    reburials of Indian remains. OGC assisted the FS in drafting
    regulations and guidelines to implement the Tribal Forest Protection
    Act of 2004. OGC also participated on FS sacred sites team, which is
    developing policy to protect tribal sacred sites on NFS land, as
    required under Executive Order 13007. OGC conducted trainings for FS
    employees in the field and Washington D.C. office regarding Indian law
    and tribal issues. OGC has provided legal services on a number of
    significant issues concerning tribal relations.
        OGC counseled FS on a number of wilderness and wild and scenic
    river management issues, including representation in litigation and
    issuance of opinions involving commercial outfitter operations,
    placement of structures and installations, and management plan and
    protection requirements. OGC provided analysis of revisions to an
    agreement between the FS and a fish and wildlife organization
    representing States, addressing jurisdictional issues and agency
    decision-making authorities. OGC assisted with drafting and review of
    revisions to Forest Service Handbook (FSH) provisions pertaining to
    wilderness management and wild and scenic river evaluation procedures.
    OGC assisted with drafting and implementation of an appeal decision
    involving fishing and boating user conflicts on a designated river in
    South Carolina.
        OGC has provided the FS extensive assistance regarding its
    cooperative authorities. In support of the FS's new Partnership Office,
    OGC drafted sections of the FS Partnership guide on ethics and conflict
    of interest. OGC also assisted the FS in drafting revisions to its FSH
    direction regarding the payment of overhead costs by FS cooperators. In
    addition, OGC advised the FS on drafting of numerous MOUs and
    cooperative agreements.
        In the minerals area, OGC provided extensive assistance to the FS
    in promulgating a final rule clarifying when authorization is required
    before a person can commence mining on NFS lands under the United
    States mining laws. OGC has experienced an increase in demand for legal
    services as the FS undertakes program reviews and issues instructions
    due to the passage of the Energy Policy Act of 2005. OGC also provided
    significant assistance to the FS and DOJ in defending precedential
    litigation challenging minerals projects on NFS lands. OGC helped the
    FS by analyzing the implication of numerous legislative proposals on
    the disposal of minerals on NFS lands.
        OGC provided extensive assistance to FS regarding hydroelectric
    licensing projects on NFS lands, including counseling FS regarding
    conditions on licenses, cost accounting requirements, and compliance
    with Federal Energy Regulatory Commission's (FERC) licensing
    procedures. OGC worked with counsel from the Departments of the
    Interior and Commerce to draft regulations in 90 days providing for
    expedited hearings involving challenges to conditions placed on
    hydropower licenses, as required under the Energy Policy Act of 2005.
    OGC provided guidance to the FS regarding the implications of the
    Energy legislation on the FS's conditioning authority, the information
    required to support filing of such conditions, and the hearing process
    that will occur before the Department of Agriculture's administrative
    law judges.
        The Conservation and Environment Division (CED) provided legal
    advice and services to the NRCS regarding its programs for natural
    resource conservation on private or other non-Federal farm, range,
    pasture and nonindustrial forest lands, including programs authorized
    by the Food Security Act of 1985 and other statutory authorities. The
    1985 Act, as amended in 2004, authorizes approximately $17 billion in
    conservation funding for the 2002-2014 period. In total, NRCS received
    more than $2.8 3.2 billion for natural resource conservation programs
    in fiscal year 20054, leading to an increase in requests for program
    related legal services. OGC provided legal counsel to the agency in
    developing new or revised regulations, standard form documents, and
    internal guidance needed to administer several conservation program
    authorities, such as the Conservation Security Program and the Farm and
    Ranch Lands Protection Conservation Program Technical Service Provider
    initiative. In addition, the administration of the Healthy Forest
    Reserve Program was transferred to NRCS from the FS in fiscal year
    2005. OGC provided assistance in reviewing and drafting the regulation
    implementing that program. The following are examples of natural
    resource conservation program areas where legal advice and services
    were provided by OGC to NRCS and the Department in fiscal year 20054:
    (1) publishing revised regulations for the Conservation Security
    Program which is authorized at $6 billion in program funding through
    2015; (2) negotiating and reviewing of cooperative agreements,
    conservation easements, and restoration agreements and/or providing
    title review across the easement programs and the purchase of several
    hundred conservation easements under the Grassland Reserve Program, the
    Emergency Watershed Protection Program, the Farm and Ranch Lands
    Protection Program, and the Wetland Reserve Program (WRP). As an
    example of the scope of thisis work, OGC has assisted NRCS in enrolling
    146,111 1,633,3 acres into the Wetland Reserve Program through 907
    easements or agreements. OGC provides title review for easement
    acquisitions as well as reviewing restoration contracts. It is
    anticipated that this program will continue to grow at an additional
    acreage increase of 150,000--200,000 acres per year; (3) assisting with
    enrolling 384,794 acres through 1,219 agreements in the Grassland
    Reserve Program, and 86,209 acres through 507 easement in the Farm and
    Ranch Lands Protection Program; and (4) providing training sessions for
    NRCS employees related to easement program implementation at two
    national meetings.
        OGC also assisted the Department in reviewing and commenting on
    regulations promulgated by the Environmental Protection Agency (EPA)
    under the Clean Water Act for oil spill prevention and for point source
    pollution control as they relate to farms, and regulations under the
    Clean Air Act for the particulate matter. In addition, OGC assisted the
    Department in reviewing the Air Quality Compliance Agreement developed
    by EPA for animal feeding operations.
        The CED Pollution Control Team (PCT) provided legal services and
    advice for all USDA agency matters related to the Resource Conservation
    and Recovery Act (RCRA) and Comprehensive Environmental Response,
    Compensation, and Liability Act (CERCLA). During the most recent fiscal
    year, the PCT negotiated with responsible parties to obtain substantial
    contributions to cleanup costs or cleanup work performed by responsible
    parties of more than $24 million. OGC also provided advice on
    compliance with pollution control standards concerning USDA programs
    and facilities, and provided advice on hazardous materials liability in
    real property transactions. Specific PCT efforts on behalf of USDA on
    pollution control matters include the following: (1) OGC is continuing
    to provide legal support to the FS as the lead agency for the cleanup
    of 9 phosphate mine sites contaminated with selenium in Southeastern
    Idaho where total response costs to address selenium contamination are
    projected to run as high as $225-450 million. This support includes
    negotiating Administrative Settlement Agreements and Orders on Consent
    and Consent Decrees with potentially responsible parties that conducted
    the phosphate mining under the Mineral Leasing Act; and (2) OGC
    continues to defend against claims concerning potential groundwater
    contamination by carbon tetrachloride used to fumigate grain at
    multiple former CCC grain storage facilities. OGC will continue to
    represent CCC in negotiating cleanup action at these affected sites.
    Such settlements will ensure appropriate response actions are taken to
    remediate aquifer contamination.
        With the passage of the Forest Service Facilities Realignment and
    Enhancement Act of 2005 (FSFREA), OGC anticipates a significant
    increase in requests for advice from the FS on the disposal of surplus
    facilities as the FS reduces its operations and maintenance costs on
    surplus facilities by selling them. This new authority, which provides
    that an unlimited number of administrative sites may be conveyed, will
    require greater OGC allocation of effort to ensure that the facilities
    are transferred from Federal ownership in accordance with the necessary
    CERCLA Section 120(h) requirements.

                              GENERAL LAW DIVISION

        The General Law Division (GLD) provides legal services to all
    agencies of the Department concerning those areas of law that apply
    generally to all agencies of the Federal Government. These services
    include, but are not limited to, the determination of claims filed
    under the Federal Tort Claims Act, personnel and labor matters,
    procurement, grants, fiscal law issues, and reviewing annually hundreds
    of Freedom of Information Act (FOIA) and Privacy Act appeals, each
    involving hundreds of pages of documents, in order to insure that the
    various agencies of the Department do not release or withhold documents
    inconsistent with applicable law. In addition, GLD attorneys assist DOJ
    with any litigation that arises in these and other areas, and represent
    the Department before the USDA Board of Contract Appeals and the Merit
    Systems Protection Board.
        GLD also serves as legal counsel on program matters to specific
    client agencies in the Research, Education, and Economics (REE) mission
    area as well as Departmental Administration and staff offices such as
    the Office of the Chief Financial Officer (OCFO), Office of the Chief
    Information Officer (OCIO), the Office of the Chief Economist (OCE),
    and the National Appeals Division. As program counsel to the REE
    mission area, GLD commits significant resources to the interpretation
    of REE program authorities, review of proposed agreements, and counsel
    regarding the special relationship of the Department with land-grant
    colleges and universities. As an example of work for staff offices, GLD
    has worked closely with in drafting item designation and labeling rules
    for the Federal Biobased Products Preferred Procurement Program that
    will be published in 2006.
        During the past fiscal year, GLD worked closely with employees and
    officials of APHIS and other Departmental officials regarding the
    confidentiality and releasability issues posed by the creation of a
    National Animal Identification System (NAIS). Since the Secretary
    announced that the NAIS should be maintained as a private system that
    can be accessed by State and Federal officials, we continue to be
    involved in advising APHIS regarding the potential applicability of
    FOIA to records in a privately maintained system. In connection with
    the BSE surveillance program, GLD also provided APHIS with extensive
    support with respect to interpretation of agreements and procurement
    contracts for equipment and sample collection, including defense in
    protest litigation.
        Also during the past fiscal year, GLD attorneys provided
    significant legal resources advising policy officials on election
    reform for FSA County Committees pursuant to section 10708 of the Farm
    Security and Rural Investment Act of 2002. GLD continues to advise FSA
    regarding various issues related to the county committee election
    process, as well as proposed regulations implementing the process.
        GLD provided extensive advice to OCFO in the past year with respect
    employment matters related to the reduction in Thrift Savings Plan work
    and with respect to the evacuation of the National Finance Center from
    New Orleans due to Hurricane Katrina. GLD also worked closely with the
    Office of Procurement and Property Management and other agencies in
    providing support for procurement and other response and recovery
    actions taken in response to Hurricanes Katrina.
        GLD continues to provide legal advice, and contract protest
    litigation defense, for the consolidation of Federal agency
    recreational reservation systems into the USDA FS and United States
    Army Corps of Engineers National Recreation Reservation Service as part
    of the Recreation One Stop Initiative. GLD also defended multiple
    protests against the FS award of 5-year national contracts for catering
    services for firefighters.

                              LITIGATION DIVISION

        Litigation Division attorneys, in cooperation with attorneys from
    DOJ and other divisions in OGC, presented USDA's position in appellate
    courts. These efforts included providing assistance to the Office of
    the Solicitor General and DOJ counsel, who represented USDA before the
    Supreme Court in Veneman v. Livestock Marketing Association, arguing
    that Congressionally-mandated assessments for generic advertising for
    beef research and promotion programs do not violate the First Amendment
    speech rights of cattle producers who disagree with the content of the
    advertisements. The Supreme Court issued an opinion which agreed with
    the position taken by the Department. In addition, our attorneys
    assisted DOJ attorneys in presenting, in the Courts of Appeals and the
    Supreme Court, arguments in cases addressing similar programs for pork
    and dairy products, which also have now been successfully resolved.
        The Litigation Division assisted DOJ attorneys in winning a
    reversal by the Sixth Circuit of an adverse district court decision
    invalidating the Attorney General's decision pursuant to the Westfall
    Act, 28 U.S.C. 2679(d)(1), to certify that a FS employee was acting
    within the scope of his employment when the employee denied that the
    allegations of the plaintiff's claim were true; and also assisted DOJ
    in representing the Secretary before the District of Columbia Circuit
    in a case addressing whether a party can receive attorneys' fees and
    costs under the Equal Access to Justice Act when the party has won a
    preliminary injunction against the United States, but not a final
    decision on the merits of the lawsuit. Litigation Division attorneys
    also assisted DOJ in representing the Secretary before the Federal
    Circuit in a case addressing the basis for a contract default
    termination and the subsequent award of damages to the contractor; and
    assisted DOJ in defending before the First Circuit the Secretary's
    National Organic Final Rule, 7 C.F.R. Part 205, promulgated pursuant to
    the Organic Foods Production Act of 1990, 7 U.S.C.   6501-6523. In
    addition, actions on other cases handled by Litigation Division
    attorneys include: (a) the District of Columbia Circuit upheld the
    authority of the Department to interpret legislation and set interest
    rates for sugar loans; (b) the District of Columbia Circuit upheld the
    Secretary's adverse administrative action against a company licensed
    under the PACA after an employee of the company was convicted of
    criminal charges related to inspections of the company's produce; and
    (c) the Sixth Circuit upheld the Secretary's administrative action
    against a horse trainer found to have violated the Horse Protection
    Act, 15 U.S.C.   1821-1831.

                              LEGISLATION DIVISION

        During fiscal year 2005, OGC reviewed approximately 260 legislative
    reports on bills introduced in Congress or proposed by the
    Administration, and cleared for legal sufficiency written testimony of
    approximately 380 witnesses testifying on behalf of the administration
    before Congressional committees. The Division provided extensive
    assistance to USDA policy officials in drafting and analyzing
    legislative proposals and amendments, and coordinated the legal review
    for USDA in the clearance of legislation and ancillary legislative
    materials. The Division drafted or provided technical assistance in the
    preparation of bills and amendments for the Secretary, members of
    Congress, Congressional committees, Senate and House Offices of
    Legislative Counsel, and agencies within USDA, including the: (1)
    Agriculture, Rural Development, Food and Drug Administration and
    Related Agencies Appropriations Act for fiscal year 2006, Public Law
    109-97; (2) Emergency Supplemental Appropriations to Address Hurricanes
    in the Gulf of Mexico and Pandemic Influenza, 2006, Division B,
    Department of Defense Appropriations Act for fiscal year 2006, H.R.
    2863; (3) Deficit Reduction Act of 2005, S.1932, H.R. 4241; and (4)
    legislation to protect the confidentiality of information collected in
    the developing Livestock Identification System.

                                  CIVIL RIGHTS

        For over 8 years, USDA has engaged in massive efforts to reform its
    civil rights performance. Critical to the achievement of these goals
    was the creation, in 1998, of the Civil Rights Division (CRD) within
    OGC. Recently, the Civil Rights Division reorganized into two distinct
    divisions; the Civil Rights Litigation Division (CRLD) and the Civil
    Rights Policy, Compliance and Counsel Division (CRPCCD). Staffed with
    attorneys with specialized expertise in civil rights and Equal
    Employment Opportunity (EEO) law, CRLD and CRPCCD maintain an
    extraordinarily diverse workload servicing the civil rights needs of
    the Secretary and USDA's agencies and staff offices.
        CRLD's litigation duties include 5 active program class actions in
    Federal District Court and 8 active employment class actions, most of
    which are pending before the Equal Employment Opportunity Commission
    (EEOC). The requested damages in these class actions total over $45
    billion. In addition, CRLD anticipates adding at least 1 new employment
    class action in the coming year to its litigation workload.
        USDA continues to implement the April 14, 1999, consent decree in
    Pigford v. Johanns, orginally, Pigford v. Glickman (Pigford). The
    Pigford complaint was filed in 1997 on behalf of African American
    farmers alleging racial discrimination in farm lending and benefit
    programs. The consent decree provided a framework which assigned tasks
    and time frames to specific parties to resolve the claims. Under the
    Consent Decree framework, claimants determined by the Facilitator to be
    members of the class could choose one of two ``tracks'' for processing
    their claims.
        Most claimants have chosen the more streamlined Track A which
    allows the claimant to submit a claim form upon which the Adjudicator
    issues a decision. A successful Track A claimant may receive a blanket
    payment of $50,000, plus loan forgiveness. Under Track B, those who
    believe they have evidence of extreme wrongdoing go before an
    Arbitrator to seek larger damages.
        As of January 31, 2006, 64 percent of the 22,244 Track A claims
    submitted to the Adjudicator were decided in favor of claimants. The
    government has paid approximately $685 million to 14,297 prevailing
    Track A claimants. In addition, USDA has provided approximately $22
    million in debt relief to over 1,341 prevailing claimants.
        CRLD has taken the lead in ensuring that USDA meets its commitments
    under the consent decree, by coordinating the production of relevant
    documents, providing necessary legal analyses, and ensuring USDA's
    compliance with Adjudicator and Arbitrator decisions. CRLD is working
    with FSA and the DOJ to develop timely and appropriate government
    responses to claims filed by eligible farmers. CRLD also plays a major
    role in the appeals process, which allows petitions to a Monitor to
    reevaluate claims.
        Key to settlement of the Pigford action was the 1998 enactment of
    the waiver of the Equal Credit Opportunity Act's statute of limitations
    that allows farmers with long-standing discrimination complaints to
    have their claims finally heard. CRLD and OGC field offices have
    represented USDA in over 130 cases in which a hearing was requested;
    the vast majority were dismissed on motions filed by OGC. With respect
    to farmer discrimination claims not covered by the Pigford settlement,
    CRLD works with the USDA Office of Civil Rights (CR) to ensure that all
    claims receive expeditious and fair consideration, within the bounds
    set by applicable law.
        CRLD also coordinates USDA's defense in 4 other program class
    actions in Federal District Court. These cases include 3 class actions,
    Keepseagle v. Johanns, Garcia v. Johanns, and Love v. Johanns, all
    originally filed by the same attorneys that initiated the Pigford
    litigation. To date, the Keepseagle case is furthest along in
    litigation and may be the best predictor for the outcome of the other
    cases. Despite a vigorous defense, District Judge Emmet G. Sullivan
    certified the Keepseagle class to include all Native American farmers
    or ranchers, who (1) farmed or ranched between January 1, 1981 and
    November 24, 1999; (2) applied to the USDA for participation in a
    Federal program during that time period; and (3) filed a discrimination
    complaint with the USDA individually or through a representative during
    the time period. The Keepseagle case is proceeding through lengthy and
    comprehensive discovery on the merits which has, to date, resulted in
    the production of nearly 400,000 pages of documents to the Plaintiffs.
        The Garcia and Love class actions were brought on behalf of
    Hispanic farmers and female farmers respectively, alleging
    discrimination in the administration of farm credit and disaster
    benefit programs. In September 2004, the D.C. District Court denied
    class certification in both cases. However, in December 2004, the U.S.
    Court of Appeals, D.C. Circuit, granted Plaintiffs' petitions to file
    appeals. In July 2005, the Circuit Court issued a consolidated briefing
    schedule for both cases that concluded in November 2005. Oral argument
    was held on February 6, 2006. On March 3, 2006, the Court of Appeals
    for the D.C. Circuit affirmed the District Court's denial of class
    certification in Love.
        The remaining program class action is Chiang v. Johanns, filed on
    behalf of all black citizens or qualified aliens who reside in the U.S.
    Virgin Islands alleging discrimination in the access to and
    participation in RD programs for credit, assistance, training,
    educational opportunities, housing, or home ownership. The Chiang class
    was certified by the District Court in the Virgin Islands and is
    proceeding on the merits. In response to the government's appeal of
    class certification, the Third Circuit limited the class definition to
    Virgin Islanders. In September 2005, the parties participated in
    mandatory mediation but were unable to resolve the litigation. The
    parties are now proceeding through discovery on the merits.
        CRLD provides primary litigation defense services in all employment
    class actions pending before EEOC. Since August of 2000, as a result of
    CRLD's vigorous defense, EEOC has dismissed over 20 class action
    employment complaints for failing to meet the legal standards for class
    certification.
        Currently, CRLD is involved in 8 active employment class actions.
    To date, CRLD is actively litigating 4 of these complaints. CRLD seeks
    to resolve those matters that, upon careful review, indicate a need to
    address apparent underrepresentation or policies that may have an
    adverse impact on a particular group of employees. For example, CRLD
    has assisted DOJ in negotiating settlements in 2 major class actions
    filed by employees of the FS Region 5, Donnelly and Regional Hispanic
    Working Group (RHWG)/Brionez. The Donnelly consent decree expired in
    January 2006. There was a contempt hearing in RHWG/Brionez on February
    10, 2006. The Court issued a brief order the next day, to be followed
    by a comprehensive opinion, which extended the Settlement Agreement for
    one year.
        CRLD also carries a full docket of over 50 complex and politically
    sensitive individual Equal Employment Opportunity (EEO) cases involving
    either issues of first impression or disputes over positions at the
    highest levels within USDA. CRLD litigates these cases on behalf of
    USDA without the assistance of DOJ. Moreover, recent years have seen a
    dramatic increase in the demand for CRLD's litigation services in a
    number of formal individual EEO complaints previously defended by non-
    attorney agency personnel staff. CRLD's litigation responsibilities
    also have expanded as a result of several changes in the law, including
    a 1999 Supreme Court decision holding that EEOC possesses the legal
    authority to require Federal agencies to pay compensatory damages in
    EEO cases.
        In addition to its primary litigation responsibilities, CRLD
    currently assists DOJ in the litigation of over 50 additional
    individual civil rights cases in both the employment and program areas
    pending in Federal district court. Although the Assistant U.S.
    Attorneys (AUSAs) and/or DOJ attorneys serve as lead counsel, CRLD is
    receiving an increasing number of requests for comprehensive litigation
    support, including drafting answers, dispositive motions, discovery
    responses; deposition participation; and witness preparation.
        The newly created CRPCCD provides advice and counsel to agency
    components on civil rights issues, including: (1) completing an
    impressive number of legal sufficiency reviews and legal opinions each
    year; (2) providing daily, informal legal advice to the client
    agencies; and (3) providing periodic training on civil rights issues.
    CRPCCD is also responsible for providing advice and assisting in the
    early resolution of informal EEO matters.
        In an average month, CRPCCD staff write at least 25 formal and
    informal opinions in response to, or in anticipation of, inquiries on a
    wide variety of civil rights topics. This advice is an essential
    element in CRPCCD's proactive relationship with its client agencies.
    CRPCCD anticipates that the demand for these services will only
    intensify. For example, CRPCCD continues to receive an increasing
    number of requests for advice on reasonable accommodation for employees
    with disabilities and program accessibility for customers with
    disabilities. In addition, CRPCCD receives numerous inquiries regarding
    the proper interpretation and application of Executive Order 13166
    requiring agencies to ensure that customers with limited English
    proficiency have access to USDA programs. CRPCCD's formal policy
    responsibilities are on the rise as well. CRPCCD has been working with
    the Assistant Secretary for Civil Rights to develop a Departmental
    Regulation on alternative dispute resolution (ADR). In addition, CRPCCD
    reviews civil rights impact analyses of all major reorganizations
    throughout the Department.
        In recent months, CRPCCD has also received an increasing number of
    requests for training presentations. CRPCCD has provided training to
    numerous agencies on issues such as reprisal, ADR, and reasonable
    accommodations.

                        FISCAL YEAR 2007 BUDGET REQUEST

        For fiscal year 2007, the budget proposes a total of $40,647,000
    for OGC salaries and expenses. This is an increase of $1,690,000 over
    the adjusted base for fiscal year 2006. This amount includes $515,000
    to maintain staffing levels and $791,000 for pay costs. This critically
    important increase is needed to support and maintain current staffing
    levels to meet the current and projected increased demand in delivering
    predecisional legal advice, training, and litigation legal services to
    agencies. Approximately 92 percent of OGC's budget is in support of
    personnel compensation, which leaves no flexibility for absorbing
    promotions, within-grade and pay cost increases.
        An increase of $384,000 and 5 staff years is requested to support
    significant workload increases in several areas of the office. Attorney
    staff years are needed to assist APHIS in addressing major animal
    health and food safety issues of the Department. There is a strong
    demand to add an additional attorney to support the farm loan and crop
    insurance programs, as well as an additional attorney to face the
    challenges in the areas of contracts, procurement, and outsourcing of
    Federal functions. Additional legal resources are also needed in OGC's
    Kansas City office in the areas of farm and loan programs, bankruptcy,
    risk management and contract law and also in OGC's San Francisco office
    to handle class action EEO complaints arising out of the activities of
    the FS Region 5 headquartered in Vallejo, California.

                                    CLOSING

        That concludes my statement. We very much appreciate the support
    the Subcommittee has given us in the past. Thank you.

        Senator Bennett. Thank you very much, Mr. Secretary.
        We have been joined by Senator Burns, who has another
    commitment that is going to take him out of here in about 3
    minutes. So if there is no objection, I would yield my time to
    Senator Burns before we turn to Senator Kohl. Then we will go
    to Senator Craig, and I will come in at the end, rather than
    the beginning.
        Senator Burns. Did you ask Senator Kohl about that?
        Senator Bennett. Well, I said if there is no objection, and
    I didn't hear a grunt from him.
        Senator Burns. I am not going to upstage my Ranking Member,
    I will tell you that. I know where I am on the pecking order.
        So I have just got a couple of comments. And Mr. Secretary,
    thank you very much and all the work that you have done. And I
    think you know out of this $97 billion, or whatever it is
    number that we got, I was interested in how much of that money
    goes out in direct payments to farmers in subsidies, and only
    around $25 billion.
        We do a lot of things that they said, well, you spend $97
    billion on farmers. Well, we don't spend $97 billion on
    farmers. There are a lot of programs that are very, very
    important, and conservation being one of those and a lot of
    things. And some of those dollars do make it down to
    agriculture that is not counted directly to the commodity
    support.
        Mr. Secretary, we are still concerned about the Japanese
    beef thing. I know you continue to work on that, and any good
    news that you give us would be welcome. If you have got bad
    news, well, we will just let that slide. But I would want some
    comment on that.
        And then the second question, we are having difficulties
    with high energy prices, and we can't get our arm around our
    production costs. Energy being one of those, both in our fuels,
    in our fertilizer with natural gas being high and being the
    feed stock, the fertilizer.
        We see another increase coming in fertilizer. We hear our
    producers are cutting back about a third of the fertilizer that
    is going on the ground this year because they just can't afford
    it, and that concerns me.
        And your move to be a producer kind of advocate, the EPA
    again over there--I wish you would have somebody to take a
    look--because by changing definitions of what is happening that
    the EPA changes has a huge impact on our producers, especially
    in confined feeding and the way we handle chemicals and the way
    we do things.
        A change of definitions has a huge impact on the costs we
    are having on the farm and ranch. And that appears to be
    happening over there, and we have got to take note of that and
    to work very closely with those groups that the impact on
    agriculture and our ability to produce food and fiber of this
    country is very, very important. You might want to comment on
    that.
        And then the third one is that with the new technologies, I
    think we are going to put agriculture in the energy business.
    That was the drive in 2002. It was the drive in 2005, when we
    passed the energy bill because of renewables and alternative
    fuels, and it seems to be working. And I think we are going to
    have to have a strong title in the 2007, especially with the
    advances we have made in technology, in plant residue, in the
    biomass area.
        We know that the production of ethanol and biodiesel is
    going to be very important. So agriculture is going to be in
    the energy business. And it needs to be because we need to
    increase our independence away from foreign oil, and if we can
    get our capacity of those alternative fuels up, we can deal
    with that along.
        And the other night, we were on a television show on RFD-TV
    with Secretary Dorr. We continue in the rural communities, the
    cornerstone to their growth is still broadband deployment and
    telecommunications because we cannot compete in the national
    economy or the international economy unless we can move massive
    amounts of information from our smaller towns and rural
    villages.
        So you might want to comment on that, and the Japanese
    situation, and then also the situation of working with the EPA
    to make sure that these definitions don't have a high impact on
    us.

                             BEEF EXPORTS TO JAPAN

        Secretary Johanns. In reference to Japan, I can assure you
    I don't have any bad news. So I can start there.
        Let me also say, Senator, how much we appreciate your
    tenacity relative to this issue. We can explain that to the
    Japanese, but it speaks volumes when House Members and Senators
    publicly explain how important this market is and the need to
    have it reopened. So we appreciate that.
        The report, regarding the ineligible shipment of veal to
    Japan is done. We did a very thorough investigation. We even
    went the extra step and invited the inspector general to take a
    look at the findings in the report. There were actually two
    investigation reports submitted to Japan. We have been
    receiving questions from Japan. About half of those questions
    are answered already. We are not taking any extra time. We are
    getting those questions answered and back on their desk.
        This weekend, I will have an opportunity to meet with
    Minister Nakagawa, who is my equivalent in Japan. I am very
    anxious to sit down with him. Our report has 475 pages. There
    was a lot of work put into it and I can assure you what we
    found out was that there was no attempt to hide anything here.
    There was just simply confusion on both sides.
        We had an e-mail trail that showed that the person making
    the order from Japan was confused about what was authorized. It
    is listed right there in the e-mail. And the plant was confused
    also.
        Now I don't offer that as an excuse, but we have a rather
    complicated agreement with Japan. So I am optimistic. They are
    probably going to have some additional inspection requirements.
    That is not a big issue for us. We will facilitate their
    requirements and get them in plants. My goal is to get this
    beef market reopened again just as quickly as we can.
        I don't really see any reason for extensive delay. We have
    got the investigation done. We can answer their questions. We
    will meet their requirements, and I think it is time to get
    beef moving back to Japan again.

                                RENEWABLE ENERGY

        In terms of renewable energy, I agree with your assessment.
    I do believe that as we think about farm policy for the future,
    a strong energy component for agriculture is critical. The news
    is very good.
        We estimate 22 percent of corn crops will be processed into
    ethanol by 2010. It is currently 14 percent. So we just
    continue to see dramatic increases there.
        Biodiesel, soybeans to biodiesel. Again, we just continue
    to see very dramatic growth in that area. There are also other
    biomass products that aren't as far along. And then there are
    still other areas, like wind energy to be developed.
        In terms of your comments about working with the EPA, we
    have got a good working relationship with them. I will pass on
    to them whatever issues you have on your mind, and I would be
    happy to facilitate a meeting, too, where we can sit down with
    you or other members of this subcommittee and deal with those
    issues.

                                  ENERGY COSTS

        Energy costs are a big issue among farmers and ranchers. We
    heard about it in our Farm Bill forums. We do have some really
    promising things going on out there. We designed an energy
    strategy, and we have had a good response to it. It is an
    online system in part, so producers can figure out how they
    might save some energy costs, some nitrogen application costs,
    and then I directed the USDA to do everything we can to move
    money that we have available into this area of energy
    assistance and provide grants and loans to try to help with
    projects related to energy.
        I wish I could tell you that I could bring the price of a
    barrel of oil down to $35, but I probably can't. But everything
    we can do at the USDA we have been doing to provide energy
    assistance.
        Senator Burns. If we could get a bushel of wheat to $6, you
    could offset it on that end, too.
        Secretary Johanns. That solves the problem, too, doesn't
    it?
        Senator Burns. You know, there are a lot of ways to offset
    this.
        I thank the Chairman for his courtesy, and thank you,
    Senator Kohl. I appreciate that very much.
        Senator Bennett. Senator Kohl? No, you go ahead. I will
    take Senator Burns spot.
        Senator Kohl. All right. Thank you, Mr. Chairman.

                                  DAIRY POLICY

        Mr. Secretary, dairy annually generates over half of
    Wisconsin's cash farm receipts, and last year about $20.5
    billion of economic activity in our State. So anything that
    disproportionately affects dairy and cheese disproportionately
    affects our entire State.
        I am sure you can appreciate then my profound
    disappointment that the President's budget seems to have it in
    for dairy. First, it seeks a 5 percent across the board
    reduction of all commodity payments to farmers. Second, it re-
    proposes a statutory mechanism for adjusting the butter/powder
    tilt in the dairy support program, the practical effect of
    which will reduce value to producers. And third, it recommends
    a 3 cent per hundredweight farmer assessment on all milk, which
    would have totaled about $7 million for Wisconsin producers
    last year.
        Earlier this week, a bipartisan group of senators joined me
    in a letter to the Senate Budget Committee urging rejection of
    this attack on dairy farmers.
        Now I know you do not put together the entire budget, but
    does it make sense, Mr. Johanns, to you in a budget that
    includes billions of dollars in tax cuts for investors that you
    are being asked to fight for a tax increase on dairy farmers?
    And is that really the policy that you are asking us to
    support?
        Secretary Johanns. I support the President's budget, as you
    might expect, Senator. And that probably comes as no surprise
    to anybody in this room.
        But let me, if I may, just try to identify some of the
    things that have stood out for me as I have worked on what is
    really my first opportunity to be involved in the budget
    process from start to finish.
        I hear your comments about the tax decreases, and what I
    would offer is that if you look at the revenue situation,
    revenues actually increased for the United States. What you are
    seeing is that those tax decreases, which really did apply
    across the board, improve the economy.
        I have worked around government budgets long enough to know
    that there are number of factors that you consider in trying to
    put a budget together and trying to decide what level of
    taxation you should place upon your citizens. If the level of
    taxation placed upon citizens is too high, you are going to
    depress the economy, whether that is a State economy or a
    national economy. What we saw is revenues actually increased,
    and our budget people can give you specific numbers on that.
        [The information follows:]

        As a direct result of this strong economic growth, receipts to the
    Treasury have returned to healthy growth in the past 2 years, with
    increases of 5.5 percent in 2004 and an extraordinary 14.5 percent in
    2005, more than 5 percentage points above the projection in last year's
    Budget. Growth in corporate receipts in 2005 was an astounding 47
    percent. Total receipts reached 17.5 percent of GDP, up from a low of
    16.3 percent of GDP in 2004. The administration projects that receipts
    will increase 6.1 percent in 2006 and an average of 5.9 percent
    annually through 2011. This cautious forecast is far slower than the
    14.5 percent growth experienced in 2005, but still faster than the
    projected rate of economic growth.

                          REDUCING THE FEDERAL DEFICIT

        Secretary Johanns. Now in reference to the situation
    relative to dairy, what we were trying to do is figure out a
    way to make these adjustments, whether it is a commodity
    program or the dairy program, recognizing that we have to deal
    with the Federal deficit, not in a way that picked on dairy,
    but in a way that we thought was fair to commodity programs
    whether you are a dairy farmer or a corn farmer or a soybean
    farmer.
        That is how we came up with this approach and this formula
    basically implies that in every area, we are going to make some
    adjustments to deal with the situation of having to reduce the
    deficit.
        So that is the philosophy behind it, Senator, and we may
    disagree on the approach. I hope we share the same goal of
    recognizing that somehow, some way we have got to deal with the
    Federal deficit.
        Senator Kohl. One other question, and then I will defer to
    our Chairman.

                      COMMODITY SUPPLEMENTAL FOOD PROGRAM

        Mr. Secretary, in Wisconsin alone, nearly 700 senior
    citizens are being turned away from the Commodity Supplemental
    Food Program this year, and well over 5,000 people are going to
    lose these food packages if we eliminate the program, which is
    what the budget proposes. Nationwide, the budget proposes to
    stop the CSFP food packages that are being delivered to 470,000
    people, most of whom are seniors.
        Many seniors, estimates go as high as 25 percent
    participating in CSFP, also participate in the Food Stamp
    Program because their Food Stamp benefit is too low to live on.
    I keep hearing about $10 a month. So, Mr. Secretary, do you
    have some advice for these people?
        Secretary Johanns. I have some thoughts on the CSFP
    program. It is an interesting program to study, Senator, from
    this standpoint. This is not a national program. It is a
    program that exists only in 32 States. Two Native American
    tribes, I believe, have the program also. But, it is not even
    national in terms of the tribes, and I believe we also have the
    program in the District of Columbia.
        The other interesting thing about the program is that even
    in the 32 States, it is not a statewide program. It is
    literally identified for certain areas, with certain States
    left out and certain parts of States that are left out. We have
    included in our budget request $2 million for the transition
    from CSFP to the Food Stamp Program.
        It is our belief that the people that receive the benefits
    of this food box will qualify for some other part of our
    nutrition programs--Food Stamps, maybe even WIC. We know who
    these people are. Our goal is to reach out and identify them
    and get them signed up for another nutrition program that we
    have.
        But again, as you study this program, it is a very
    interesting program. I am not arguing that people who receive
    these benefits don't enjoy them, but it is a program that never
    even got implemented statewide in the 32 States where it
    currently operates. We believe that with the $2 million
    transition money, that we can serve these people with nutrition
    programs that we actually have in existence across the entire
    country.
        Senator Kohl. As you can imagine, I am not satisfied with
    your answer, but----
        Secretary Johanns. I understand.
        Senator Kohl [continuing]. I appreciate that very much. And
    Mr. Chairman, it is up to you.
        Senator Bennett. Thank you very much.
        Senator Craig. Then I will take Senator Burns slot.
        Senator Craig. Okay. Thank you. Thank you for that
    courtesy.
        I have several questions here. I will ask some, Mr.
    Chairman, and submit others for the record.

                           MILK INCOME LOSS CONTRACT

        Senator Kohl, Mr. Secretary, expressed concern about dairy.
    As you know, Congress recently passed the $1 billion 2-year
    extension of the Milk Income Loss Contract, or milk program, in
    the budget deficit reduction act.
        The administration backed the extension of this subsidy
    program during the budget reconciliation debate this past year.
    Your 2007 budget seeks an assessment of 3 cents per
    hundredweight on milk produced by our dairymen in order to save
    $578 million over 10. Additionally, the 2007 budget seeks to
    reduce milk subsidy payments to dairy producers by 5 percent
    and to better manage the Dairy Price Support Program.
        So the administration backed a billion dollar extension of
    a discriminatory milk subsidy program. That is how my producers
    in Idaho see it. By law was intended to sunset in 2005. But you
    know, once you create these things, dependency hangs in there,
    and we now believe it is causing overproduction.
        The milk program encourages overproduction. It certainly
    doesn't encourage movement with the market. So what doesn't add
    up here?
        Secretary Johanns. Well, in the last few months, we have
    started to pay out again under the MILC program. That is a
    reflection of production up, prices down. I mean, that is, in
    effect, what kicks in with the MILC program when you hit a
    certain price level.
        We have supported the MILC program. The thought I would
    offer, in terms of that extension, is that the extension tied
    the program to the life of the Farm Bill and, in effect, joined
    it with other commodity programs that were out there.
        Next year, it is my hope that we will have a debate on farm
    policy and what farm policy should look like because 2007 is
    the year that we reauthorize the Farm Bill. And I believe it is
    an opportunity for us to look at all of our programs and make a
    decision about how best to approach them.
        As I explained or offered to Senator Kohl, we have made
    adjustments to the MILC program. As we looked at the need to
    deal with the deficit, we did not feel that we could leave any
    program out. And so, this was a way of making adjustments in
    that program that we hoped, at least, would reflect the changes
    that we are making in other commodity programs.
        The wheat growers in the Western part of the United States,
    for example, are going to get 5 percent less if the President's
    budget is approved. So we basically looked at the MILC program
    and said how do we make an adjustment there that at least
    reflects what we are doing in the other commodity programs?
        But just to summarize, Senator, the thought about the MILC
    program extension was along the lines of if you extend it for
    the life of the Farm Bill, you join it with the other commodity
    programs in the Farm Bill, and it is in the Farm Bill, where
    you decide what you want to do with the whole commodity title
    and farm programs in general.
        Senator Craig. Mr. Chairman, one last question. And thank
    you for that answer, Mr. Secretary.

                                RENEWABLE ENERGY

        Section 9006 of the 2002 Farm Bill provides for loans, loan
    guarantees, and grants to farmers and small businesses for
    projects that use renewable resources to create energy. This
    provision has gotten a lot of attention in Idaho. Some of those
    loans and guarantees have been provided, and it is working.
        And I think we are all quite impressed with the challenges
    farmers are stepping up to dealing with animal waste and crop
    refuse. You heard the senator from Montana talk about a variety
    of aspects of it. You have talked about biodiesel. Cellulose
    ethanol is something that is being looked at now. The President
    has spoken to it in his State of the Union.
        Even though this program is a win-win for agriculture, the
    environment, and the production of energy at a time when energy
    production is not adequate--and we all really do believe that a
    decade from now or two or three, American agriculture is going
    to be a sizable producer of energy for our country--why did you
    cut that budget? It was small to begin with. You cut it from
    $23 million to $10 million. It just doesn't seem to fit the
    arguments you have placed before this committee.
        Secretary Johanns. Senator, let me, if I could, quickly
    walk you through what we have for renewable energy in the
    budget. The 2007 budget provides funding to support about $35
    million for guaranteed renewable energy loans. The estimate for
    2006 is $177 million in loans. However, it is unlikely that
    that amount will be made.
        The 2007 budget provides nearly $8 million to award grants
    for use on renewable energy. This funding is about $3 million
    less, and we acknowledge that. However, the 2007 budget
    provides about a billion dollars in guaranteed loans under the
    Rural Business-Cooperative Service's business and industry
    program. This program can be used for financing renewable
    energy projects.
        So when you pull together the constellation of authority we
    have to assist through loans, guaranteed loans, and grants, it
    is a substantial, renewable energy package that we submitted to
    Congress.
        Also, when I was governor of Nebraska, I was the vice chair
    of the Governor's Ethanol Coalition, and I was the chairman of
    the Governor's Ethanol Coalition following Governor Tom Vilsack
    from Iowa. One of the things that I talked about during that
    period of time was that the standard of success in renewable
    energy is when it becomes economically self-sufficient, and we
    should celebrate that day.
        Now there is probably a debate about whether we are far
    enough along here. But I will tell you that in the ethanol
    industry, corn to ethanol, it has been a remarkable 12 to 24
    months. I mean truly remarkable.
        As a governor, I worked on financing for a number of
    ethanol plants, and we just never would have predicted the
    return on investment that I think you are seeing in some of
    these areas. Every plant is different. Every area is different.
    But the goal should be that we work toward energy production or
    we work toward economic independence in these projects. In some
    areas, like I said, it has been a remarkable few years.
        When you put all of that together, and you identify and
    pull together the constellation of what we have available, we
    think we can do some very, very exciting things in the
    renewable energy area, and we look forward to working with your
    staff and with you, sir, to make that happen.
        Senator Craig. Well, thank you very much. I think you
    recognize as well as I because you have obviously worked in
    that field at a time when it was almost considered an
    experimental start-up industry.
        One of the great difficulties we have in agriculture
    today--or anywhere, but especially agriculture--is when a new
    technology comes along, trying to put some capital behind it,
    to get it out on the ground and working so that from there
    grows changes and evolutions that make it increasingly more
    efficient.
        Frankly, if Government hadn't come along and subsidized
    ethanol when it did, we would not be where we are. And as a
    result of that, while I am not too excited about subsidies, it
    appears that is one that is probably going to work. It is on
    its own now, and you are right. It is all but standing alone,
    and it gets increasingly efficient and more productive and,
    therefore, profitable.
        Thank you.
        Secretary Johanns. The energy policies of Congress worked.
    Let me just be very clear about that. Sometimes I think we
    wonder, is this going to make a difference? This made a huge
    difference.
        What you are now seeing across the country is that Wall
    Street has discovered rural America.
        Senator Craig. Yes.
        Secretary Johanns. There is big debate about that. But
    quite honestly, Wall Street is beginning to realize this is a
    sound investment. But I will submit that through the efforts of
    the President and Congress, that is what led the way.
        Senator Craig. Thank you.
        Thank you, Mr. Chairman.
        Senator Bennett. Thank you.

                                AVIAN INFLUENZA

        Mr. Secretary, in your opening statement, you talked about
    avian flu. I would like to focus on that just a little more
    because I think that is one of the things that people who are
    watching are concerned about.
        In your opinion, how prepared is the United States
    agriculture for an avian flu outbreak?
        Secretary Johanns. My opinion, I believe we are well
    prepared. I say that for a number of reasons. One is that the
    funding, which Congress approved, which the President sought,
    is there, and that is helping us do a lot of really good
    things.
        But the other thing that I will share with you from our
    standpoint at the USDA, first of all, it is important to remind
    everyone that low path avian influenza is nothing new to the
    United States. It has been here 100 years. Birds have a flu
    season much like humans do. They pass through it every year.
    Typically, you don't even notice it.
        High path avian influenza, we have dealt with that, in
    fact, on three occasions. The most recent occasion was in 2004.
        We have a plan in place. We have surveillance in place. We
    have testing in place. As we have worked to expand testing
    capabilities, I can now tell you that we have those
    capabilities in 32 States, with 39 labs approved for AI
    testing. So we can identify where AI is domestically.
        But we feel ready. The other thing I will mention to you,
    is that we are not taking anything for granted. The President
    has led a Government-wide effort in AI. And more specifically
    at USDA, just within the last week, we have tabletopped our
    response to identify any areas where we see weaknesses. We are
    preparing like avian influenza is going to be here.
        Senator Bennett. Have you used the $91 million in the
    supplemental?
        Secretary Johanns. Yes, we are using those funds in a
    number of ways. One is we are assisting overseas. When foreign
    governments ask for technical assistance, part of that money
    helps us do that. We send people out to offer technical
    assistance. We work with our international partners.
        As you might expect, some countries are better prepared
    than others. It is just simply a case where some countries
    don't have the infrastructure or the resources to be very well
    prepared. That is not true in other countries. So it is a
    little bit of a mixed bag.
        We are also using that money for additional surveillance
    and research to enhance our capability to respond to avian
    influenza. We can give you a very detailed summary of how the
    money is being allocated.
        [The information follows:]

                    Planned Use of Pandemic Influenza Funds

        With $71.5 million appropriated to it and an additional $8.8
    million from the Office of the Secretary, APHIS plans to devote funds
    to both international and domestic efforts. These include:
      --$17.8 million for overseas in-country technical training and
            veterinary capacity building;
      --$16.4 million for domestic wildlife surveillance in migratory
            flyways and wildfowl;
      --$26.8 million for domestic surveillance and diagnostics (e.g.,
            State cooperative agreements for surveillance in live bird
            markets, upland game and waterfowl, commercial poultry
            operations; laboratory support; anti-smuggling efforts;
            training; outreach; other activities);
      --$19.3 million for domestic emergency preparedness (e.g., supplies
            and animal vaccines for the National Veterinary Stockpile
            (NVS); development of scenario models to direct efficient NVS
            acquisitions; preparedness training for State Incident
            Management Teams and the Veterinary Reserve Corps; related
            efforts).
        With $7 million appropriated to it, ARS plans to conduct research
    as follows:
      --$3 million for improved vaccines and mass immunization in domestic
            and wild birds;
      --$1 million for environmental surveillance methodology of avian
            influenza (AI) in commercial and wild birds;
      --$2 million for complete genome sequencing of outbreak AI viruses;
            and,
      --$1 million for biosecurity against virus transmission between and
            within farms.
        With $1.5 million appropriated to it, CSREES plans to conduct
    expanded AI surveillance in the Pacific flyway and associated
    activities.
        The following funds from the Office of the Secretary will be used
    for other needs:
      --$1.8 million for FAS to support the FAO, provide complementary
            overseas foreign surveillance, diagnostic, and other support;
      --$0.5 million for the Office of Communications to develop a variety
            of brochures, posters, videos, and for other initiatives to
            effectively communicate with the public;
      --$0.2 million for FSIS to develop a highly pathogenic AI module for
            its Non-routine Incident Management System to enable the agency
            to respond to an AI detection effectively and in a timely
            manner; and,
      --$0.1 million for Departmental Administration to revise its
            Continuity of Operations Plan to help ensure the Department
            maintains essential functions and services in the event of
            significant and sustained absenteeism.

        Secretary Johanns. So we have identified the key areas, and
    we have allocated those funds in a way that will boost our
    response in those areas.
        Senator Bennett. Very good. This is a nitpick, but it is
    the kind of thing that people pick up. I will use the
    inflammatory language, and then let you get to the more
    specifics. But this is the kind of thing that makes for
    headlines.

                         CENTRAL ADMINISTRATION FUNDING

        You have cut discretionary funding for rural development by
    13 percent. You have cut conservation by 20 percent. You cut
    research by 14 percent. But the spending for central
    administration has gone up by 12 percent. Now when I look at
    the chart with all of that on it, I realize that that is the
    smallest base. So adding $63 million to central administration
    is, percentage wise, a pretty big jump.
        But I hope you can explain to the committee why you need to
    go up in central administration and how the taxpayer is going
    to get a return for that over the long term in view of the
    other cuts that you have recommended?
        Secretary Johanns. Mr. Chairman, that is a really excellent
    question, and I must admit I did not analyze the individual
    areas that way in terms of central administration.
        Senator Bennett. Neither did I, but I have a very eagle-
    eyed staff.
        Secretary Johanns. And I have got a very eagle-eyed budget
    director, and I am going to let him offer a few thoughts on why
    you are seeing that impact.
        Mr. Steele. Thank you, Mr. Secretary.
        Mr. Chairman, we have included in our budget pay costs for
    all of our agencies, according to what the President is going
    to request. I think it is a 2.2 percent increase in pay costs
    across the board for all agencies.
        The other area in administrative costs that we are dealing
    with is IT expenditures. Throughout the Department of
    Agriculture, we have a number of systems in the Department that
    need enhanced funding. We really appreciate the funding that
    the Committee has provided us in the past to help modernize
    these systems. But there is still a large number of systems
    that we are asking for increased funding to get them up to
    standard.
        One of these areas is in the Farm Service Agency. The
    Common Computing Environment (CCE) has received substantial
    funding, but there are a lot of legacy systems that we have out
    in the field that utilize old software systems. We need to
    update those and migrate them onto this new Common Computing
    Environment so we can all use them efficiently.
        Throughout the department, we can give other examples of
    those kinds of issues. We also have some issues in the
    financial area. We have to start looking at our foundation
    financial systems that we have. Some of those are outdated, and
    we have some money requested in the budget to start looking at
    ways of upgrading these financial systems and other operating
    systems.
        Some of these IT systems were put in place in the 1980s and
    1990s, and you have to refresh them every so often to get them
    up to standard. And there are a number of requests for those
    types of systems throughout the budget as well.
        Senator Bennett. Give me an example of a financial system.
        Mr. Steele. Well, we have a central accounting system
    called the Foundation Financial Information System (FFIS).
        Senator Bennett. Are we talking about Food Stamps, WIC?
        Mr. Steele. I wouldn't say that. It is more of a
    Department-wide accounting system, that we use through the
    National Finance Center in New Orleans. This is where our
    agencies do procurement and other kinds of financial
    transactions and where accounting records are maintained.
        Some of those systems were put in place in the 1990s, and
    now we have new Government-wide standards that the OMB has put
    in place to achieve certain accountability in those accounting
    systems. Our Chief Financial Officer now is investigating ways
    of upgrading our financial systems so that they are up to the
    Government-wide standard.
        Now we are making progress, but we need to augment our
    funding. There is a request in the budget--I think $14 million
    or $15 million--to look into developing a better financial
    system at the Department.
        Senator Bennett. All right. Senator Dorgan.
        Senator Dorgan. Mr. Chairman, thank you very much.
        Mr. Secretary, welcome.
        Secretary Johanns. Thank you.

                      WEATHER-RELATED DISASTER ASSISTANCE

        Senator Dorgan. Mr. Secretary, last November or December,
    when we finished the emergency supplemental, I was one of the
    conferees. And I offered to the Senate conferees a $1.2 billion
    disaster aid package, which the Senate conferees accepted. The
    House conferees rejected it, and so we did not accomplish a
    disaster aid package.
        You, in your statement, said that USDA has made available
    $2.8 billion to assist those impacted by the hurricanes of
    which $1.2 billion will be made available to agricultural
    producers through various programs and so on. I fully support
    all of that, and a hurricane is devastating to the agricultural
    producers of that region.
        One community received one-third of its annual rainfall in
    24 hours in the northern part of North Dakota last year, and we
    had a million acres that couldn't be planted. I was up there
    recently, and the question they asked is why could there not be
    some sort of disaster program for the weather-related disaster
    that occurred there? Illinois has its third-driest year last
    year since 1895.
        So the question is, we came close to getting it in the
    conference. We did not get it because I was told that the House
    conferees, at the request of the Speaker, rejected it because
    the administration did not support it.
        What is the administration's position--because we will
    attempt to do this again on the next supplemental, emergency
    supplemental. What is the administration's position on a
    disaster package for farmers and ranchers outside of the Gulf
    Coast who suffered a weather-related disaster?
        Secretary Johanns. I would offer a couple of thoughts, if I
    could, on that issue. This first thing we would have to see is
    what is being proposed in the bill. But historically, as you
    know, pre-dating me, when disaster bills have come forward, the
    administration has taken a position of providing offsets.
        And as I understand the policy behind that, when the Farm
    Bill was created in 2002 and debate was occurring on what was
    going to be the allocation of funding into that Farm Bill, I
    think there was a look to the history of direct payments made
    to farmers. And the allocation was based upon not only
    emergency disaster payments that had been made, but in
    addition, some other ad hoc supplemental assistance payments.
        That is what has led to the issue of offsets. If there is
    going to be a disaster program, it has to be found within the
    budget of the Farm Bill.
        A couple of other things I would offer. In 2000, there was
    a very major reform of crop insurance. Interestingly enough, as
    we conducted our Farm Bill forums, we did hear from farmers
    that they thought as we went to work on another Farm Bill,
    there should be some effort put into crop insurance and how
    that process is working.
        And then the other thing I would mention, and again,
    interestingly enough--and Keith Collins can probably offer some
    thoughts on this--FCIC has actually paid out more in the
    Northern Plains for prevented planting than we have paid out
    for hurricane assistance. So those are some thoughts.
        When there is a bill that asks for disaster assistance, of
    course, we will look at it. But I can tell you historically at
    least that has been the position of the administration that
    offsets in the Farm Bill would have to be sought to support
    disaster assistance payments.
        Senator Dorgan. And Mr. Secretary, you would understand
    producers in one part of the country that suffer a weather-
    related disaster, lose their entire crop, they would probably
    look at this and say, well, I don't understand the difference
    in we provide disaster aid in one part without an offset, but
    you say in order to provide disaster aid in another part, even
    to consider whether you would support it, you have to have an
    offset.
        I am sure you understand how producers would look at that
    and say that really probably isn't fair. But at any rate, we
    will grapple with that because we don't have a disaster piece
    in the Farm Bill that we now have. We have got to do that year
    by year, and the Congress has actually, in most cases, stepped
    up. Last year, it did not.

                              FSA STAFFING LEVELS

        I would like to ask also about the staffing at the Farm
    Services Agency. The other thing I keep hearing in North Dakota
    from farmers and producers is that our county FSA offices we
    are losing a fourth of the people or 10 percent or 30 percent
    of the people in certain offices and they are not replaced. And
    it is interesting. Farmers are the ones that are coming,
    complaining, saying you need to have adequate staffing in these
    offices.
        What is the recommendation from the USDA on staffing for
    the Farm Service offices, the FSA offices?
        Secretary Johanns. We have a specific recommendation. The
    2007 budget provides resources to maintain permanent, non-
    Federal county staff levels at about 8,775 staff-years, which
    is about the same as the estimated 2006 level. The temporary,
    non-Federal county staff-years will remain at the 2006 level of
    650 staff-years.
        These levels reflect reductions made in early 2006 in
    response to the tobacco program budget. So there has been some
    shifting there.
        Scott, do you have anything more specific to offer on that?
        Mr. Steele. Well, there have been some changes in staffing
    in the Farm Service Agency due to changes in temporary
    employment. Every time you institute a new Farm Bill, you bring
    in a lot of temporary employees to implement the Farm Bill. And
    then as the workload tapers off, when you get the systems in
    place and get the payment structure set up, you find that you
    may not need as many temporary employees.
        We still are maintaining temporary employees but at a
    reduced level. We are also trying to maintain permanent, full-
    time staff at a modestly reduced level. There is no dramatic
    reduction here across the country in FSA staffing, but there
    could be some local areas where there could be some staffing
    shortages.
        There are a lot of small offices in FSA. I don't know the
    exact number, but there are a number of offices that have three
    or fewer people. We have situations where there are some
    offices where people retire, and they haven't been replaced.
    There has been some discussion that maybe there should be some
    consolidation of these small offices.
        Now we are working with the Congress dealing with how to go
    about consolidating offices, and there is report language in
    last year's appropriations bill as to how USDA should go about
    determining what the staffing should be and how offices should
    be handled in these various localities. We are working through
    these issues now with Committee staff and staff in your
    offices.
        Senator Dorgan. I am going to send you some questions about
    that.

                             BEEF EXPORTS TO JAPAN

        Mr. Chairman, if I might make one additional comment? A few
    moments ago, about an hour ago, the administration released the
    last month's trade deficit numbers. It was the highest in
    history, $68.5 billion for the most recent month, which, of
    course, is a complete disaster for our country. And both the
    President and the Congress have had their head in the sand on
    trade for a long while.
        On the issue of trade with Japan, because one Canadian cow
    found in the United States with BSE occurred, Japan has shut
    off, then started, then shut off again beef shipments to Japan.
        Obviously, you are working to try to open that market, and
    my own feeling is that if Japan doesn't open their market, they
    should ship all their goods to Kenya and see how quick they get
    rid of their exports. But I just want to say that when that
    market is open--let us say it is fully open tomorrow--not many
    know it, but 15 or 17 years after the beef agreement with
    Japan, every pound of beef that we do get into Japan will have
    a 50 percent tariff attached to it.
        At the end of the beef agreement, you would have thought
    both sides won the Olympics back in the late 1980s because they
    celebrated and thought it was wonderful, what a great agreement
    this is. Almost 17 years after the agreement, there would
    remain a 50 percent tariff because they have tariff reductions
    with a snapback on increased quantity.
        It is unbelievable to me that even if you get that back
    open--and it should be open tomorrow, the beef market in Japan
    for U.S. beef--even if it is reopened, there will remain a 50
    percent tariff on every pound of beef going to Japan. That is a
    colossal failure.
        And I simply wanted to mention one more demonstration that
    in the area of trade, all kinds of trade, our country lacks
    backbone and will to say to other countries, we insist on
    reciprocal treatment and fair treatment. It is not fair 17
    years after a beef agreement that they would continue to impose
    a 50 percent tariff.
        Now that is not the most important thing. The most
    important thing at the moment is prying open that market. I
    know you are working on that. I know the administration is
    working on it. I think it is unbelievable the trade deficit we
    have with Japan. Last year, I believe close to $70 billion or
    over $70 billion.
        And because one Canadian cow was found in the State of
    Washington with BSE, Japan has shut its market to U.S.
    producers. It is unbelievable to me. So keep working, and you
    can't be tough enough for my tastes. Whatever you do, the
    tougher you get, the more I will support it.
        Secretary Johanns. Thank you. I appreciate that. Thank you.
        Senator Bennett. Senator Bond.
        Senator Bond. Thank you very much, Mr. Chairman. And
    welcome, Mr. Secretary.
        Following up on the comments by colleague from the Dakotas,
    foreign trade is extremely important. And in agriculture, our
    surplus has been as high as $30 billion that our exporters can
    generate from exporting farm goods.
        And your budget officer talked about the need for 21st
    century IT for the central administration of USDA, and that
    sounds good. But farmers in the Midwest are telling me they
    need 21st century transportation if they are to get their goods
    to the world market.

                MISSISSIPPI RIVER TRANSPORTATION INFRASTRUCTURE

        And on the issue of having a competitive Mississippi River
    transportation and the Illinois system that serves the 21st
    century, as our 75-year-old system has served the previous
    century, I understand from news reports that you have
    reconfirmed that the administration does not oppose modernizing
    our aging locks on the Mississippi and Illinois Rivers. Is that
    correct?
        Secretary Johanns. Correct.
        Senator Bond. Thank you.
        Deputy Secretary Conner, I was very much encouraged by the
    comments you made in response to questions from my colleague
    Jim Talent in your confirmation hearing when you said
    Mississippi River commerce is absolutely essential and that we
    would be absolutely dead in the water without it and that you
    would be an advocate within the administration in helping that
    reality become understood.
        Does that remain your point of view?
        Mr. Conner. Absolutely, Senator.
        Senator Bond. Haven't lost any of your enthusiasm for it?
        Mr. Conner. No. No, those were not statements made as a
    result of my confirmation. We continue to believe strongly in
    those, Senator Bond.
        I don't think you need to look any further than the impact
    that Hurricane Katrina had on grain prices in the Midwest
    during that short period of time when the ports were closed to
    know just how essential this river transportation is to our
    farmers in the Midwest.
        Senator Bond. I was pleased that I even saw some mention in
    the national media that there was something coming down the
    river going through the port of New Orleans called grain. And
    this may have been the first recognition by the national media
    that we do export grain, and that it is very important for our
    rural economies and as well as our balance of trade.

                           GRAIN EXPORTS FORECASTING

        Dr. Collins, it is good to see you again. I remember very
    well, I believe it was 2 years ago, you told this subcommittee
    when asked about the requirement that the Corps come up with a
    50-year projection, you said that you could make a 10-year
    projection that our exports in corn are projected to rise about
    45 percent with about 70 percent of that expected to go out
    through the Gulf. And by extension, that means significantly
    down the Mississippi and Illinois Rivers.
        When I asked you why you didn't try to make a 50-year, 5-0,
    forecast as some people had charged the Corps of Engineers for
    doing, I believe you said that doing it for 10 is heroic
    enough. Is that a fair representation, and would you like to
    explain that?
        Mr. Collins. Senator Bond, I would still stand by that last
    comment. I think that 50-year projections are highly
    speculative. Our own 10-year projections, which we do every
    year to support the estimates in the President's budget, are
    also speculative.
        Nevertheless, those projections do show that, over time, we
    would expect to increase our grain exports, particularly our
    corn exports. However, the increase is not quite as high in our
    current set of forecasts, as you just mentioned. Nevertheless,
    it is still a substantial increase over the next decade.
        One of the reasons we lowered it was because of the
    increase in corn use for ethanol, which might compete a little
    bit in the export market. But even so, we show a strong
    increase in corn exports expected over the next decade. And we
    expect that roughly three quarters of those exports would move
    down the Mississippi River.
        Senator Bond. And they are trying to go beyond that with
    all of the variables, not only uses, but exchange rates.
    Perhaps even transportation. That becomes beyond the realm of
    the realistic?
        Mr. Collins. It is beyond what we normally try to forecast.
    Nevertheless, you can look out over the next 20, 30, 40, 50
    years, and you can look at the economic growth that is
    occurring in the world. The increase in incomes in developing
    countries, higher income developing countries, and we know they
    are going to change their diets. We know they are going to move
    more toward meat, and they are going to be demanding feed
    grains and oil seeds to grow livestock and poultry products.
        So we do think there is a good long-term market for grains
    and oil seeds in the world, and we think that the United States
    can compete successfully in that market. And I think having
    efficient infrastructure will help make that possible.
        Senator Bond. Thank you, Doctor. That is very important,
    and I certainly appreciate it.
        And I would ask Secretary Johanns' picture of some of the
    jammed up barges, on maybe even bringing some grain across from
    Nebraska to try to go into the world market. Do you agree that
    the system built 75 years ago with a 50-year projected life
    span that moves 80 million tons of commerce annually and two
    thirds of our exported grain has proved to be an important and
    wise investment?
        Secretary Johanns. Yes.
        Senator Bond. It is interesting that sometimes people are
    nay-sayers, and I would like to introduce you to a person,
    unfortunately, a dedicated man, well intentioned, bright,
    honorable. This is Major Charles L. Hall, the Rock Island
    engineer from 1927 to 1930.
        He advised President Hoover at the time that the proposed
    system that currently exists, that we have now, was not
    economically feasible. He argued that limited barge traffic did
    not indicate that a viable barge industry would develop.
        Fortunately, President Hoover and the Congress ignored the
    advice, and President Hoover said modernization would put the
    Nation's rivers back as great arteries of commerce after half a
    century of paralysis.
        Now I suspect that Major Hall may have some grandchildren
    or great-grandchildren working dutifully over at OMB.
        Senator Bond. But I ask that you let not just a positive
    vision of the future, but this history help inform you, the
    internal discussion on whether we should be trying to predict
    the future or shape the future, whether we want to compete or
    surrender.
        And I was very much encouraged by Dr. Collins's comments,
    and I think that shows that if we are willing to build the
    future, if we are willing to provide the infrastructure, we can
    and will see it grow. If we say, hey, the 75-year-old system is
    good enough, it is going to break down, and so are our exports.
        And I know that you are reluctant, Mr. Secretary, to
    comment in public about other agencies' budgets. But I think we
    all understand that there is absolutely no voice, nobody
    speaking up for agriculture at DOD, at CEQ, or at the Office of
    Management and Budget.
        At DOD, wonderful folks to work with, but they are afraid
    that they are going to get beaten down if they try to step out
    of line. If you and your colleagues, well-informed at the
    United States Department of Agriculture, don't fight for
    agriculture, agriculture will be without a voice.
        And I join with my colleagues in saying that voice not only
    needs to be for efficient, effective transportation, it needs
    to be for new technology, and we need to continue to develop
    the biotechnology and the other things that are significant.
        And we need to continue to fight to make sure that
    agriculture has a seat and a prominent place in lowering tariff
    barriers so that we can realize the potential of American
    agriculture in feeding the hungry of the world and assuring not
    only solid rural communities, but good incomes for farmers.
        Secretary Johanns. Thank you.
        Senator Bond. Thank you very much. Thank you, Mr. Chairman,
    Mr. Secretary.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Bennett. Thank you very much, Senator Bond.
        With the eye on the clock and the recognition that the full
    committee is meeting, we will submit additional questions to
    you, Mr. Secretary, in writing. And as I said in the opening
    statement, I hope that all Senators have those questions to the
    subcommittee staff by Friday, March 17.
        [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

                           USDA SHARE OF BUDGET CUTS

         Question. Congressional Quarterly analyzed the administration's
    budget request by appropriations subcommittee. The analysis shows that
    overall discretionary funding for this subcommittee, as proposed by the
    administration, is down 7 percent. Since the budget for the Food and
    Drug Administration is up 5 percent, we know all of the cuts come from
    the budget of USDA. No other department has taken such a large
    decrease.
        Why has USDA taken such a disproportionate share of the cuts to the
    non-defense, non-homeland security, portion of the discretionary
    budget?
         Answer. The President's budget for 2007 continues to support the
    priorities of the United States Department of Agriculture (USDA). USDA
    is committed to the President's plans to reduce the deficit which will
    strengthen the economy and create jobs.
        The reduction in USDA discretionary funding is largely the result
    of the following changes. First, the budget does not propose
    continuation of the one-time supplemental funding provided in 2006.
    Second, funding for selected programs, including earmarked research
    grants and watershed projects, is reduced or eliminated in the budget.
    Further, certain one-time funding, such as construction projects, is
    not continued in the budget. These reductions allow us to propose
    increases in high priority areas, including food and agriculture
    defense, avian influenza and food safety.

                      LEGISLATIVE PROPOSALS IN THE BUDGET

        Question. Historically, the Congress has not enacted new user fees
    for the Food Safety and Inspection Service. The 2007 budget request
    includes a legislative proposal that would generate an additional $105
    million.
        If the Congress does not agree to new user fee proposals, how do
    you propose we make up the difference?
        Answer. In 2007, the President's budget includes and requests the
    full amount of budget authority needed to operate FSIS' inspection
    services. We are requesting authority to charge user fees, deposit the
    fees into special receipt accounts, and use the fees subject to
    appropriations. We fully support the fee proposal as presented in the
    budget, which will shift the responsibility for funding these programs
    to those who most directly benefit.
        Question. Will you submit a budget amendment?
        Answer. No, the President's current budget includes and requests
    the full amount of budget authority needed to operate FSIS' inspection
    services.
        Question. Have you submitted the text of your legislative
    proposals?
        Answer. The proposal is currently being finalized and will be sent
    to Congress shortly.

                            WIC LEGISLATIVE PROPOSAL

        Question. In addition, the budget proposes another legislative
    proposal to limit nutrition services and administration grants in the
    Women, Infants, and Children (WIC) program, which reduces the program
    by $152 million.
        If the Congress does not agree to this proposal, how do you propose
    we make up the difference? Will you submit a budget amendment?
        Answer. The WIC Program will continue to serve as many eligible
    persons as possible with the funding level provided by the Congress,
    including use of the $125 million contingency fund as needed. We do not
    plan to submit a budget amendment.

                             ANIMAL IDENTIFICATION

        Question. Mr. Secretary, the Congress has provided over $66 million
    for the implementation of an animal identification system. This level
    of funding does not include an additional $18.7 million that was
    transferred from the Commodity Credit Corporation. With that in mind,
    the budget request for fiscal year 2007 proposes another $33 million to
    continue this animal identification exercise.
        Please provide us with an update on the status of animal
    identification and when you expect a national program to be fully
    implemented.
        Answer. Premises registration has been implemented in all 50 States
    and 2 Territories. Several Tribes are also registering their premises.
    The animal identification phase, in which APHIS will begin allocating
    animal identification numbers, is being implemented in March 2006. We
    anticipate the remaining systems elements will be operational in early
    2007, but private entities will need to supply information to fill the
    private databases.
        Question. To be more specific, infrastructure items such as ear
    tags, scanners, and private databases must be available for such a
    program to operate. Who will fund this infrastructure, the private
    sector or USDA?
        Answer. USDA will continue to provide funding to the States to
    carry out their responsibilities at the local level. In addition, USDA
    will continue to support the premises registration and animal
    identification numbering systems, the data system necessary to support
    and integrate multiple data systems held by private industry and State
    sectors, and public outreach and education efforts. The private sector
    will be assuming costs associated with scanners, private databases, and
    animal identification devices.
      office of the under secretary for marketing and regulatory programs
        Question. Mr. Secretary, the Under Secretary position for Marketing
    and Regulatory programs is currently vacant. This position is one that
    is very significant based on current issues that the Department of
    Agriculture continues to monitor. For instance, this office provides
    oversight and management of Department actions related to avian
    influenza, pest eradication programs, marketing and grading of
    commodities, and animal disease surveillance. Please provide us with an
    update on this Under Secretary position. Also, how long do you expect
    this position to be vacant?
         Answer. I appointed Dr. Charles ``Chuck'' Lambert as the Acting
    Under Secretary for Marketing and Regulatory Programs on November 14,
    2005. Dr. Lambert served as Deputy Under Secretary for Marketing and
    Regulatory Programs since December 2, 2002. I anticipate that the
    President will nominate someone for this position in the very near
    future.

              FARM SERVICE AGENCY (FSA)--COUNTY OFFICE REALIGNMENT

        Question. Mr. Secretary, the Farm Service Agency continues to
    review the current county office structure to determine how to better
    manage the agency's day-to-day operations. Any action taken by the
    agency will most likely include a number of office closures and
    relocation of current employees.
        Please provide us with an update of the current review process.
    Also, please take a moment to explain how altering the current office
    structure will impact productivity and customer service.
        Answer. Consistent with Congressional guidance provided in the 2006
    Appropriations Act, I have asked FSA's State Executive Directors (SED)
    to conduct independent reviews of the efficiency and effectiveness of
    FSA offices in their States. The SED and State committees will form
    review committees to identify what the optimum network of FSA
    facilities, staffing, training, and technology should be in each State
    within existing budgetary resources and staffing ceilings. Consistent
    with guidelines set out by Congress, the agency will notify
    Congressional delegations and conduct public hearings on proposals for
    closure or consolidation. There are no targets for office
    consolidations specified at the national level, but as you well know
    there is an urgent need to optimize the network of offices given the
    current number of inefficient offices.
        We are encouraging the SED to explore joint opportunities with the
    Natural Resources Conservation Service (NRCS) and other agencies
    utilizing the State Food and Agriculture Councils. The agencies are
    being asked to work cooperatively in this effort.
        We are committed to a continued dialogue with State and
    Congressional leaders to discuss how best to modernize the FSA county
    office system and the necessary steps required to improve its
    information technology (IT) infrastructure. As you know this budget
    contains a request for funding to develop a modern, web-based, program
    delivery IT infrastructure called MIDAS. The ultimate goal of the
    modernization/office consolidation process is to increase the
    effectiveness of FSA's local offices by upgrading equipment, investing
    in technology and providing personnel with critical training. IT
    modernization along with office consolidation is absolutely essential
    to ensure that America's farmers and ranchers continue to receive
    excellent service long into the future.

                            CLASSICAL CHINESE GARDEN

        Question. Mr. Secretary, your budget requests approximately $8.4
    million for the construction of a Classical Chinese Garden at the
    National Arboretum. I understand this is a joint project between China
    and the United States. In previous years, the Congress was unable to
    fully fund the administration's request in a number of priority
    research programs such as the National Research Initiative (NRI), food
    safety, nutrition, obesity, and emerging plant and animal diseases. It
    is almost certain that we will not be able to fund all of your
    priorities again this year. What is the Classical Chinese Garden's
    priority with respect to these other research objectives? Answer.
    Although the construction of the Classical Chinese Garden is a joint
    project between China and the United States, it is essentially a gift
    from China to the United States. The Chinese will provide all the
    structures, rockeries, plants, furniture and art objects which are
    valued at over $50 million. The $8.4 million requested in the fiscal
    year 2007 budget is for infrastructure preparation including,
    excavation of the lakes, and building a story palace for the Garden.
    The Department has ranked this project as the highest priority facility
    project for ARS in the fiscal year 2007 budget.

                        NATIONAL FINANCE CENTER--STATUS

        Question. USDA's National Finance Center (NFC), located in New
    Orleans, operates a centralized payroll, personnel, administrative
    payment, and central accounting system that serves more than 40
    departments, independent agencies, and congressional entities. NFC
    employs more than 1,400 staff in New Orleans to carry out this mission.
    Because of the devastation Hurricane Katrina wrought on the New Orleans
    area, NFC was forced to evacuate and initiate its Continuity of
    Operations Plan. NFC was not able to return to its New Orleans office
    for several months.
        The Hurricane supplemental that was passed in December provided $35
    million to support temporary space for NFC employees, equipment, and
    refurbishment of the New Orleans office. The most recent supplemental
    request seeks an additional $25 million for continued support of
    recovery efforts at the National Finance Center.
        Can you provide us with an update on the status of the National
    Finance Center and explain how these funds are being used?
        Answer. With the help of the $35 million appropriated to the
    Department, the National Finance Center is returning to normal
    operating conditions utilizing its New Orleans facility. Service levels
    to client agencies are continuing to improve. The staff remains
    committed to the continued uninterrupted delivery of services for
    financial reporting and human resource and payroll clients. The
    National Finance Center pays approximately 565,000 civilian Federal
    employees in over 140 Federal agencies, provides human resource
    services for several USDA, DHS, and other agencies, and host the
    financial management system for USDA.
        The National Finance Center and activities collocated with the
    Center incurred expenses for redeployment of personnel, for equipment
    and related technology to resume business operations as quickly as
    possible, for rental payments and contract costs associated with
    administering the emergency facility and for housing for personnel, and
    for emergency overtime for personnel working toward establishing
    operations. We are continuing to utilize and operate an interim
    computing facility in Philadelphia with a small on-site staff; all
    other employees are now operating out of the New Orleans facility.
        The additional $25,000,000 in supplemental funds represents funding
    to support recovery and continuity of operations efforts during the
    ``deployment'' and to continue supporting the operation of the interim
    computing facility in Philadelphia. Specifically, supplemental funds
    are to be applied in the following areas:
      --Extraordinary Personnel and Related Expenses.--Covers overtime and
            employee travel between New Orleans and the various alternate
            worksites. Additionally, provides continuing coverage of
            overtime and employee travel for staffing of the interim
            computing facility.
      --Rental Charges.--Covers the residential rental expenditures
            incurred for deployed employees.
      --Contracts.--Covers various contracts in support of the operation of
            the interim computing facility, backup facilities and the
            alternate worksites. Also includes space rental of the various
            alternate worksites.
      --Temporary Labor.--Covers the additional costs incurred to
            temporarily replace expertise lost due to the dislocation and/
            or loss of employees.
      --Other Services.--Covers essential support costs incurred and future
            costs needed to replace, refurbish, or rehabilitate facilities
            at the New Orleans site and the interim/backup computing
            facilities. This includes hardware leases and software licenses
            for the interim computing facility, replacement of destroyed
            furniture, office equipment, telecommunications infrastructure
            and support, and supplies.
      --Temporary Facilities.--NFC expects to be done with temporary
            buildings by early summer.

                NATIONAL FINANCE CENTER--DATA CENTER OPERATIONS

        Question. I understand that under the Continuity of Operations Plan
    the NFC's data center, meaning the main computer servers and equipment,
    was moved to a temporary site in Philadelphia. Six months after
    Hurricane Katrina, NFC's data center is still located in this temporary
    space.
        Can you provide us with an update on USDA's efforts to find a
    permanent site for NFC's data center?
        Answer. On February 8, 2006, the USDA sent out a facility
    requirements package to Department of Defense organizations and the
    General Service Administration requesting information on existing
    Federal facilities that could satisfy NFC's requirements. This package
    included a copy of NFC's current facility requirements (i.e. floor
    space, power, pricing, security, etc.). As of March 21, 2006,
    information on 17 available facilities has been received. NFC is
    currently evaluating those responses to determine the best
    alternatives. Once the best alternatives are determined, NFC will
    conduct visits to those sites to complete the assessment process. NFC
    is working to complete the assessment and site selection process as
    quickly as possible. This effort should be completed this spring.
        Question. Can the NFC use USDA's National Information Technology
    Center in Kansas City as a permanent site?
        Answer. NFC explored the possible use of USDA's National
    Information Technology Center (NITC) in Kansas City as a permanent
    site. However, it was determined that the pressing program needs of the
    Department at the Kansas City site would have resulted in
    implementation and operational costs that were incompatible with the
    current rate structure employed with NFC customers. On February 8,
    2006, the USDA sent out a facility requirements package to Department
    of Defense organizations and the General Service Administration
    requesting information on other existing Federal facilities that could
    satisfy NFC's requirements. Once responses are received and assessment
    and comparison of all acceptable alternatives are completed, a decision
    of where to locate NFC's permanent site will be made.

                              515 HOUSING PROGRAM

         Question. Mr. Secretary, the fiscal year 2007 budget request
    eliminates funding for the 515 Rural Rental Housing Program. The 515
    housing program provides funding for construction and revitalization of
    affordable rental housing for rural families who have very low to
    moderate incomes.
        If the Congress does not provide funding for the 515 housing
    program, will low income citizens have any other option when it comes
    to affordable housing?
         Answer. We stress that the Section 538 program, like the 515
    program, provides housing for very low income citizens. The 2007 budget
    includes almost $200 million for Section 538 guaranteed loans for rural
    rental housing--double the amount available for 2006. These guaranteed
    loans may be used for either new construction or repairs and
    rehabilitation. In most cases, they are used in conjunction with other
    sources of financial assistance. These guaranteed loans help increase
    the supply of rental housing in rural areas.
        As for the Section 515 program, the administration proposes to
    focus on the critical needs of the existing multi-family projects that
    have been financed under this program, primarily in the 1980's. Almost
    half a million rural people reside in these projects. A study completed
    in 2004 demonstrated that most of the projects are still viable for
    low-income housing; however, a substantial portion of these projects
    are in need of revitalization. Moreover, there is a risk that some
    projects will be prepaid and leave the program. This would put the
    tenants of those projects at risk of substantial rent increases and
    possible loss of their housing. The 2007 budget includes $74 million
    for housing vouchers to assist these tenants. The administration has
    also submitted a legislative proposal to Congress that authorizes debt
    restructuring and other incentives to encourage revitalization coupled
    with a long-term commitment from project sponsors to remain in the
    program. Further, the 2007 budget reflects the administration's
    commitment to fully funding the renewal of all expiring rental
    assistance contracts, which is vital to keeping the projects affordable
    to low income people.
        Also, opportunities need to be provided for low-income people to
    own their own homes. The 2007 budget supports about $1.2 billion in
    direct loans and $3.5 billion in guaranteed loans for single-family
    housing--about the same as available for 2006, except for emergency
    funding for the Gulf Coast hurricanes. This level of funding is
    expected to provide over 40,000 homeownership opportunities. All of the
    direct loans and about a third of the guaranteed loans are expected to
    go to low-income families with incomes below 80 percent of median
    income.

                    NATIONAL VETERINARY MEDICAL SERVICES ACT

        Question. In fiscal year 2006, Senator Kohl and I provided funding
    to implement the National Veterinary Medical Services Act (NVMSA), to
    help get more vets into underserved areas. No funds are requested by
    USDA to continue this program in fiscal year 2007. A March 2005
    Government Accountability Office report about agroterrorism states that
    : ``USDA officials told us they intend to increase the number of
    veterinarians entering public service by making new efforts to increase
    veterinary students' awareness of potential careers in public
    service.'' This appears to be inconsistent.
        Why the inconsistency?
        Answer. The $500,000 appropriated in fiscal year 2006 has not been
    obligated. Therefore, there was no need to request funds in the fiscal
    year 2007 budget. As no-year funds, they will be obligated when the
    program is developed and incur costs. CSREES is currently working with
    other agencies in the Department and informally discussing
    implementation options with program constituents to determine how best
    to design and deliver a full loan subsidy program. A critical initial
    task will be to determine criteria for demonstrating, measuring, and
    monitoring need for veterinarians across fields of service, geographic
    locations, and national service needs. Once these criteria and program
    guidance have been developed and made available for public comment,
    specific needs for the program can be estimated.
        Question. These vets will be extremely important as first
    responders in the case of an outbreak of a foreign animal disease.
        What is USDA doing to make sure that there will be enough vets
    familiar with foreign animal diseases to help protect U.S. agriculture?
        Answer. Veterinary Services, part of the U.S. Department of
    Agriculture's Animal and Plant Health Inspection Service (APHIS),
    administers the National Veterinary Accreditation Program. This
    voluntary program certifies private veterinary practitioners to work
    cooperatively with Federal veterinarians and State animal health
    officials. Accredited veterinarians are instrumental in increasing our
    capability to perform competent health certifications, maintain
    extensive disease surveillance and monitoring, and provide valuable
    veterinary service during national emergencies. Producers that export
    animals interstate and internationally rely on the expertise of
    accredited veterinarians to help ensure that exported animals will not
    introduce diseases into another State or country. The accreditation
    program has served the animal industry well for many years and remains
    integral to their future growth. There are currently over 60,000 active
    accredited veterinarians in the national database.
        The President's budget requests $2.4 million to enhance the
    National Veterinary Accreditation Program to develop web-based
    certification and training modules for veterinarians. This will provide
    a method for veterinarians to expand their knowledge of, and vigilance
    for foreign animal diseases.

                          MANDATORY COMMODITY PROGRAMS

        Question. Mr. Secretary, the administration's fiscal year 2007
    budget includes a legislative proposal to reduce farm program spending
    by approximately $1 billion in fiscal year 2007. This proposal would
    include a number of changes to the current farm law that would decrease
    commodity support.
        Please take a moment to describe this legislative proposal and the
    cost savings that will be achieved should it become law.
        Answer. The fiscal year 2007 Budget again proposes some changes in
    farm programs designed to save about $1.1 billion in fiscal year 2007
    and about $5 billion over a 5 year period. Key changes proposed
    include: a 5 percent reduction in all farm program payments; a
    reduction in the payment limit from $360,000 to $250,000 per natural
    person; a 1.2 percent assessment on all sugar marketed; a three cent
    per hundredweight assessed on milk marketed; cost minimizing
    adjustments for the dairy price support program, and some moderate
    changes in the crop insurance program, including modest reductions in
    premium subsidies and in administrative expenses paid to crop insurance
    companies.

                             FOREST SERVICE FUNDING

        Question. Please give us details on any funding provided by this
    subcommittee that benefits the United States Forest Service. Include
    agencies and amounts.
        Answer. The Forest Service receives a small amount of funding
    provided by the Agriculture Subcommittee to the Hazardous Materials
    Management (HMM) account. Funds are used to address environmental
    contaminations on Federal land. More details are provided for the
    record.
        [The information follows:]

        The appropriation language for the HMM account provides for the
    necessary expenses of the Department of Agriculture to comply with the
    Comprehensive Environmental Response, Compensation, and Liability Act
    (CERCLA) and the Resource Conservation and Recovery Act (RCRA). The
    funds remain available until expended and may be transferred to any
    agency of the Department for its use in meeting requirements pursuant
    to CERCLA and RCRA on Federal and non-Federal lands.
        Agencies compete for HMM funding by submitting proposals explaining
    the RCRA or CERCLA work that is needed, the strategic impact of that
    work, and the public benefits that will be realized. Funding priorities
    reflect those planned impacts and benefits. The following table shows
    actual amounts for fiscal year 2005, estimated fiscal year 2006, and
    requested fiscal year 2007 HMM budgets for USDA agencies:

                                 USDA HMM BUDGETS FOR FISCAL YEARS 2005, 2006, AND 2007
                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Fiscal year
                                 Agency                              -----------------------------------------------
                                                                        2005 actual    2006 estimate   2007 request
    ----------------------------------------------------------------------------------------------------------------
    Agricultural Research Service...................................           2,259           3,770           2,027
    Food Safety and Inspection Service..............................              17  ..............  ..............
    Forest Service..................................................           5,645           4,900           6,593
    Departmental Administration \1\.................................           2,580           1,533           1,700
    Office of the General Counsel...................................           1,484           1,677           1,700
                                                                     -----------------------------------------------
          Total.....................................................          11,985          11,880          12,020
    ----------------------------------------------------------------------------------------------------------------
    \1\ Actual reflects amounts under DA's Office of Procurement and Property Management, as well as for agencies
      not in the FFIS system, CCC, FSA, and Rural Development.

        The HMM funding the Forest Service receives in this process
    supplements the $10-15 million of annual Forest Service funding in
    support of USDA's Hazardous Materials Management Program. The Forest
    Service is not required to reimburse the account, except when cleanup
    costs are recovered from other responsible parties. It is estimated
    that HMM funding helped to leverage the estimated $22 million of
    environmental cleanup work responsible parties performed in lieu of
    cash payments in fiscal year 2005.
                          financial management system
        Question. The budget request includes an increase of $13.9 million
    to begin planning for the implementation of a new financial system. I
    understand that these funds will be used for hardware and software
    procurement.
        What, specifically, does USDA plan to purchase with this funding?
        Answer. USDA is pursuing modernization of its core financial
    management system and associated business practices. It is critical
    that this modernization be advanced now to ensure a sound financial
    management system to support the Department's large and diverse
    portfolio of programs. The new, web-based system will replace outdated
    technology that is costly to maintain and not fully compliant with
    current financial management standards. Further, the new system will
    allow full integration of existing and new eGovernment initiatives and
    provide efficiency through shared services. Funds requested for 2007
    are needed to begin the process of designing and implementing the new
    system. Specifically, the funds will support a contract to begin
    acquiring hardware and software. Implementation is expected to continue
    for approximately 5 years beginning with a 1-year planning and start-up
    phased during 2007.
        Question. What is the status of the planning and implementation
    effort for the new financial system?
        Answer. The new financial management system, called the Financial
    Management Modernization Initiative (FMMI), is in the early stages of
    procurement. A Request for Information was released in August, 2005.
    The information USDA received was used to further refine USDA's plans.
    A Request for Proposals was issued in late December, 2005 to solicit
    contractors to provide planning and integration services for the
    financial management system. USDA prefers to contract with one entity
    for both the hardware and software. It is expected that a contract will
    be awarded in the fourth quarter of fiscal year 2006 so that
    integration planning and implementation can begin and continue during
    fiscal year 2007.
        Question. Does USDA have an estimate for how much it will cost to
    fully implement the financial system?
        Answer. Until USDA receives and evaluates proposals, we will not
    know the total cost or schedule for implementing FMMI.
        Question. How does USDA plan to pay for this system? Will all of
    the funding come through the CFO account or will each USDA agency be
    asked to provide funding for the system?
        Answer. USDA will determine the funding approach after we receive
    and evaluate proposals for FMMI. The funding requested for fiscal year
    2007 is critical to permit the project to continue to move forward.

                         PROVINCIAL RECONSTRUCTION TEAM

        Question. Please provide detailed information on USDA's past
    participation in the Provincial Reconstruction Teams, including total
    funding obligated. Please give specific examples of the results
    achieved and the number of individuals who served as advisors and their
    employing agency.
        Answer. USDA agricultural advisors on Provincial Reconstruction
    Teams (PRTs) in Afghanistan provide technical guidance to PRT
    commanders, local and international non-governmental organizations, and
    individual farmers and herders. Advisors also provide training and
    information for local offices and staff of Afghanistan's Ministry of
    Agriculture, Animal Husbandry and Food, and the Ministry of
        Reconstruction and Rural Development. Additional information is
    provided for the record below.
        [The information follows:]
        Total funding obligated for these activities, including State
    Department International Cooperative Administrative Support Services
    (ICASS) costs, is shown below by fiscal year:

    ------------------------------------------------------------------------
                           Fiscal year                            Amount
    ------------------------------------------------------------------------
    2004....................................................        $940,000
    2005....................................................       2,628,000
    2006 (projected) \1\....................................       3,909,000
    2007 (projected)........................................       5,012,000
    ------------------------------------------------------------------------
    \1\Includes $1 million transferred to USDA from the U.S. Agency for
      International Development to help defray an unanticipated increase in
      security and other support costs.

        From 2003 through 2006, 39 USDA staff served on PRTs in
    Afghanistan. Currently, USDA has six advisors in Afghanistan, including
    an area agronomist for the Natural Resources Conservation Service from
    Brice, Utah, who serves on the Farah PRT.
        USDA agencies and the number of their staff participating over the
    years are as follows:
      --Natural Resources Conservation Service--17
      --Food Safety and Inspection Service--6 Farm Service Agency--4
      --Rural Business Cooperative Service--3
      --Animal and Plant Health Inspection Service--3
      --Cooperative State Research, Education, and Extension Service--2
      --Foreign Agricultural Service--2
      --Agricultural Marketing Service--1
      --Forest Service--1
        Below are some specific examples of results achieved:
      --USDA advisors guided their Afghan counterparts in organizing the
            protection of the endangered Koli-Kashman watershed. More than
            2,500 trees were planted to stabilize the watershed; other
            conservation plant materials were incorporated; and erosion
            control and other protective structures were established. More
            than 2,570 paid labor days were generated to benefit Afghan
            participants. Disarmed and demobilized combatants were trained
            and employed for this activity, as well as unemployed youth,
            women, the elderly, and disabled. The program is being
            replicated in 28 other provinces.
      --USDA advisors serving on PRTs in the Kandahar area designed,
            secured funding, and worked with their military counterparts to
            install 15 windmills to pump water for irrigation and
            livestock. The advisors established a distribution network and
            water user associations to operate and maintain the systems.
            Alternative sources of energy are extremely important in this
            country which has negligible reserves of fossil fuels.
      --A USDA veterinarian designed, secured funding, constructed, and
            trained Afghans to staff two veterinary clinics in Parwan and
            Kapisa Provinces. These clinics provide access to professional
            animal health care and herd improvement information for
            Afghanistan's livestock producers. Approximately 85 percent of
            Afghanistan's families own livestock; therefore, this is a
            critically important service.
      --A USDA advisor serving on the Kondoz PRT trained local non-
            governmental organizations to provide credit programs to
            farmers and rural businesses. Credit cooperatives were
            established throughout northeast Afghanistan, and they have
            remained functional and financially solvent for nearly 3 years.
            These credit programs have provided the first access to credit
            in decades for farmers in this region of Afghanistan, and have
            resulted in increased agricultural production and incomes.
      --USDA advisors provided training to faculty at the agricultural
            colleges in Jalalabad, Herat, Kandahar, and Kabul. Curricula
            were developed for new courses and new training materials were
            developed and shared with other agricultural training
            institutions. Training was provided in veterinary sciences,
            natural resources management, horticultural production, and
            farm management. This training provided these faculties with
            their first exposure in decades to modern course materials and
            technical information on current agricultural practices.
      --The USDA advisor serving on the Kandahar PRT established a
            province-wide poultry project that provided eggs to more than
            400 families, for consumption and sales. This project provided
            direct benefits to women and children through increased family
            incomes and improved nutrition.
        Question. How will the $5,000,000 requested in the budget to
    continue USDA's participation in the PRT be used, (e.g. salaries,
    training, equipment, logistical support)? How much will go to the
    Department of State or any other department?
        Answer. Approximately $3,400,000 is for salaries, benefits, and
    allowances and $830,000 is for travel, equipment, program costs, and
    other support. Approximately $782,000 is budgeted to go to the
    Department of State for projected ICASS and security costs.

                        FOREIGN SERVICE PERFORMANCE PAY

        Question. The budget requests $990,000 for foreign service
    performance pay. Why is this funding needed? How was this figure
    arrived at? What criteria will be used to award such funding? Why was
    this requested in the Office of the Secretary?
        Answer. The requested funding supports the first step of transition
    to a performance-based pay system and global rate of pay for Foreign
    Service personnel grade FS-01 and below. The forthcoming Foreign
    Service Modernization legislative proposal linked to this funding would
    amend Section 406 of the Foreign Service Act (22 USC 3966) to eliminate
    longevity-based pay increases and institute a strictly pay-for-
    performance system similar to that instituted for the Senior Foreign
    Service in Public Law 108-447.
        The proposal would also establish a global rate of pay for the
    Foreign Service to attract and retain a labor market for worldwide-
    available personnel, based on the needs of the Service, consistent with
    other pay systems with similar worldwide availability requirements.
    This global rate also addresses the increasing pay disincentive to
    overseas service, due to the frequent rotation of assignments,
    influenced by 5 USC 5304.
        The Modernization proposal would equalize the Foreign Service
    global rate at the Washington, DC, rate, including locality pay, over 2
    years. The requested funding supports the first step of this
    transition. Additional funding will be required in fiscal year 2008 and
    fiscal year 2009 to fully close the gap, in order to begin a new pay-
    for-performance system effective April 2008, under a uniform global
    rate pay system. Funds are requested in the Office of the Secretary so
    that further allocations can be made to the agencies within USDA that
    have Foreign Service personnel.

          CROSS CUTTING TRADE NEGOTIATIONS AND BIOTECHNOLOGY RESOURCES

        Question. How has the fiscal year 2006 funding for this been used
    (please be specific and give examples of the results achieved)? What
    agencies are involved in the utilization of this funding? What will the
    proposed increase of $366,000 achieve?
        Answer. Funding in the Office of the Secretary to support cross-
    cutting trade negotiation and biotechnology issues allows critical
    coordination of efforts that span several agencies within USDA. In
    addition to supporting the Senior Advisor to the Secretary, the
    agencies involved in the biotechnology funding are: the Animal and
    Plant Health Inspection Service; the Cooperative State Research,
    Education, and Extension Service; and the Foreign Agricultural Service.
    Their use of the money is described below.
        The proposed increase of $366,000 would enable the Department to
    more effectively address:
      --Quantitative analyses and studies needed to support increasingly
            complex compliance activities;
      --Expansion of a project to develop a regulatory and trade strategy
            for specialty crops;
      --Increased activity in the area of transgenic animals--domestically,
            in international markets, and in international standard setting
            organizations; and
      --Increasing need for communication materials for both domestic and
            international markets.
        [The information follows:]
        APHIS has used the fiscal year 2006 funding for a number of small
    to medium size projects that together will strengthen and improve the
    biotechnology regulatory process:
      --Extended an existing agreement with the National Plant Board to
            continue the collection of information from the States and
            stakeholders on key aspects of the agency's regulatory system
            and items that APHIS should consider during State evaluations.
            These efforts will help APHIS to improve the biotechnology
            regulatory process.
      --Extended our current agreement with the National Association of
            State Departments of Agriculture (NASDA) to coordinate and
            conduct the pilot program for State personnel to perform
            notification inspections. Once the pilot project is complete, a
            task group consisting of NASDA and APHIS personnel will conduct
            a full joint review of the program.
      --Continued work with Iowa State University to prepare additional
            chapters for the APHIS-Biotechnology Regulatory Services
            equipment inspection manual to be used to train third-party
            inspectors (State and other APHIS employees) on proper
            techniques and procedures for cleaning and inspecting equipment
            for contaminated materials.
      --Supported the agency's efforts to procure a geographical
            information system to assist in managing and analyzing program
            data. Examples include the production of large and small maps
            of regulated States, counties and sites to improve compliance,
            risk analysis, and program management functions; the ability to
            ``geo-identify'' sites that may have been affected by weather
            events such as hurricanes or tornados in order to respond
            appropriately to these events to evaluate the potential spread
            of regulated genetic materials; and the ability to layer a
            number of data sets on a single map to provide the APHIS
            biotechnology regulatory program with an enhanced data analysis
            capability.
        The fiscal year 2006 funding for Cooperative State Research,
    Education, and Extension Service has been used to begin the development
    of an
        implementation/business plan by a contractor to deal with
    biotechnology regulatory issues associated with specialty crops. To
    date, a Scope of Work was prepared, and proposals were received by the
    Specialty Crops Regulatory Initiative (SCRI) Steering Committee. The
    Steering Committee is composed of representatives of technology
    developers, including USDA, 1890 and 1862 land-grant universities,
    other universities, a spectrum of private sector companies, and
    commodity groups.It is anticipated that a consultant will be hired in
    May 2006, through an award to Arkansas State University. A draft
    business plan is anticipated by the end of the year, to include
    proposals for the structure and function of the SCRI, and
    implementation plans including mechanisms to fund the finalization of
    the operation of the SCRI.
        The Foreign Agricultural Service has applied the fiscal year 2006
    funds to address global market access issues, capacity building, and
    technical assistance needs associated with agricultural biotechnology.
    In collaboration with other Federal agencies, funds have been targeted
    to sustain and expand a number of ongoing bilateral and multilateral
    activities aimed at advancing the development of science and rule-based
    regulatory systems for the products of agricultural biotechnology and
    adherence to World Trade Organization principles. This in turn has
    helped foster global market access for U.S. agricultural products that,
    increasingly, are produced using modern biotechnology.
        Specifically, policy and technical engagement with Japan, China,
    Canada, and Mexico, as well as within the Asia Pacific Economic
    Cooperation (APEC) and other international fora, has helped maintain
    open access to these key markets for U.S. agricultural products,
    including those produced through modern biotechnology. A notable
    success of the engagement has been the continued market access for U.S.
    corn exports to Japan after an unapproved biotechnology corn product
    was found in the United States. Bilateral and multilateral efforts have
    been undertaken with countries in the Western Hemisphere, as well as
    China and Japan, which have helped guide implementation of the
    Cartagena Protocol on Biosafety in a practical and predictable manner
    that will maintain access to global markets for U.S. agricultural
    products. Numerous technical assistance and educational activities have
    been undertaken aimed at promoting adoption and acceptance of
    biotechnology. These have included outreach to farmers in Africa and
    efforts to promote farmer adoption of plum pox resistant plum
    production in Europe. Targeted technical assistance and policy
    dialogues on biotechnology have also been undertaken with numerous
    countries with which the United States is engaged in FTA negotiations.

                             OFFICE OF CIVIL RIGHTS

        Question. Please generally describe the Civil Rights Enterprise
    System and provide the following information: How much funding has been
    provided for this system through fiscal year 2006? What is the total
    anticipated cost of the system? How has this system helped improve the
    processing and resolution of discrimination complaints?
        Answer. The Civil Rights Enterprise System (CRES) is a web-based
    USDA enterprise-wide complaint tracking system used for tracking,
    processing and reporting employment and program complaints. The system
    is being implemented in two phases: Phase 1--Employment Complaints
    Tracking System in fiscal year 2004 and 2005, and Phase 2--Program
    Complaints Tracking System in fiscal year 2006 and fiscal year 2007.
        The CRES project is on schedule and within budget. Phase 1, the
    Employment Complaints Tracking System component, has been fully
    implemented and is currently operational. The employment complaint
    legacy systems have been shut down. Phase 2, the Program Complaints
    Tracking System is under development with testing scheduled for the
    summer.
        One of USDA's most significant achievements is the implementation
    of a web-based, Department-wide discrimination complaint tracking
    system in fiscal year 2004 to track, process and report on employment
    and program complaint activity.
        The Civil Rights Enterprise System is being implemented in two
    phases:
      --Phase 1--Employment complaint tracking system was implemented on
            time and within budget during fiscal year 2005.
      --Phase 2--Program complaint tracking system will be implemented in
            fiscal years 2006 and 2007.
        Additional information is provided for the record.
        [The information follows:]
        CRES planned budgeted cost is as follows:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Fiscal year 2003.............  System Planning.  $0.1 million, completed
    Fiscal year 2004.............  System             1.6 million, completed
                                    Acquisition &
                                    Implementation
                                    Costs.
    Fiscal year 2005.............  System             1.5 million, completed
                                    Acquisition &
                                    Implementation
                                    Costs.
    Fiscal year 2006.............  System               1.8 million, planned
                                    Acquisition &
                                    Implementation
                                    Costs.
    Fiscal year 2007.............  System             1.987 million, planned
                                    Acquisition &
                                    Implementation
                                    Costs.
                                                    ------------------------
          TOTAL..................  ................   6.987 million, planned
    ------------------------------------------------------------------------

        The Civil Rights Enterprise System has improved efficiency through:
      --Standardization and elimination of duplicative systems.
      --Real time access to EEO complaint data.
      --Support of a paperless environment.
      --Ability to track, process and report informal and formal employment
            complaint activity.
      --Implementation of accurate performance based reports.
        In fiscal year 2006, USDA is enhancing the Civil Rights Enterprise
    System, including ``eFiling'' and an online docketing system that will
    allow complainants and agency representatives to access real time
    complaint status information. These initiatives are currently in the
    development and testing phase.
        This includes the ability to respond to mandatory reporting
    requirements, including:
      --Annual Federal Equal Employment Opportunity Statistical Report of
        Discrimination Complaints (EEOC Form 462).
      --Notification and Federal Employee Antidiscrimination and
            Retaliation Act of 2002 (the No FEAR Act).
      --EEOC Management Directive 715.
        Question. What are the specific activities and their associated
    funding in the fiscal year 2007 budget that are targeted to the
    prevention of equal employment opportunity and program complaints?
        Answer. As Secretary of Agriculture, I am firmly committed to
    ensuring the civil rights of all USDA's customers and employees. The
    Office of the Assistant Secretary for Civil Rights was reorganized in
    July 2005 to facilitate the fair and equitable treatment of USDA
    customers and employees while ensuring the delivery and enforcement of
    civil rights programs and activities. This includes processing
    complaints in a time and cost effective manner and implementing
    initiatives to prevent EEO and program complaints. Additional
    information on prevention activities is provided for the record.
        [The information follows:]

                     OFFICE OF CIVIL RIGHTS PROGRAM FUNDING

    Conflict Prevention Resolution
        The Conflict Prevention and Resolution Center (CPRC) was
    established to lead and coordinate conflict management and ADR efforts
    throughout USDA. ADR programs exist in all USDA agencies and mission
    areas, and vary in both scope and level of activity. ADR itself is
    applicable, in a variety of forms, to workplace disputes, EEO
    complaints, USDA program disputes, including civil rights complaints,
    and group interventions. Reorganization and subsequent inclusion of
    CPRC in Civil Rights maintains the USDA-wide focus on conflict
    resolution, with additional emphasis in support of the Assistant
    Secretary for Civil Rights.
    Outreach
        The USDA Office of Outreach strengthens USDA outreach efforts to
    limited-resource farmers and ranchers and under-represented customers,
    coordinates program delivery outreach throughout USDA, and assists
    underserved customer groups in collaboration with the Agency Outreach
    Coordinators and State Outreach Councils. Outreach develops policy,
    thereby enhancing the building of partnerships with universities/
    colleges, community/faith-based organizations and other groups,
    associations and organizations. Outreach provides leadership through
    policy guidance, high-level strategic planning and goal setting,
    performance measurement and feedback to USDA national, State and local
    outreach coordinators and councils. Outreach monitors, analyzes, and
    evaluates trends related to USDA programs and activities through
    mission area outreach plans, outreach coordinators, and State outreach
    councils. Outreach develops and provides training and education in
    outreach function models, best practices, policies, environmental
    justice, strategic plans and goals to USDA employees and stakeholders
    to provide an effective educational resource and linkage to internal
    and external customers regarding USDA-wide programs.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Fiscal year                  Fiscal year                  Fiscal year
                                 Program                                2005 funding   Fiscal year   2006 funding   Fiscal year   2007 funding   Fiscal year
                                                                           actual       2005 FTEs      estimate      2006 FTEs      estimate      2007 FTEs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Outreach.........................................................      $1,338,387            8        $981,000            8      $1,001,000            8
    Conflict Prevention & Resolution Center..........................         706,700            6         736,000            6         751,000            6
                                                                      --------------------------------------------------------------------------------------
          Totals.....................................................       2,045,087           14       1,717,000           14       1,752,000           14
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                     ______

                  Questions Submitted by Senator Arlen Specter

                                DAIRY ASSISTANCE

        Question. Agriculture is the largest industry in Pennsylvania,
    producing over $45 billion annually and providing approximately 1 in 6
    jobs in agriculture and related businesses. Of this industry, dairy is
    the number one sector in the State and ranks number 4 in overall milk
    production in the entire Nation. Milk prices for dairy farmers have
    been on a down trend since January and economists project that the
    price of milk will continue to fall. The proposed 3 cent per cwt.
    assessment in the fiscal year 2007 Budget on all milk production will
    only compound the severity of this situation. Although the Milk Income
    Loss Contract (MILC) program, that I worked very hard on to be extended
    to October 2007, will provide the safety-net needed for our dairy
    farmers, the falling prices of milk and the continued high costs of
    fuel will make it more difficult for dairy farmers across America to
    survive.
        What does the Department plan on doing to help our Nation's dairy
    farmers when they need you the most?
        Answer. We share your concern about the rising cost-price pressures
    faced by dairy farmers and for that matter most farmers. In addition to
    the credit and other programs the Department has available to help
    producers when financial stress rises, our dairy programs are by design
    geared to provide support when prices decline. The dairy price support
    program puts a floor under milk prices to provide some protection in
    that way. And as you mentioned, the Milk Income Loss Contract (MILC)
    program will provide some counter-cycle protection by providing
    payments to eligible dairy producers when prices decline. As you will
    recall the President had proposed that this program be extended through
    the end of the 2002 Farm Bill and Congress did enact that extension in
    the recent Deficit Reduction Act. The Department is now implementing
    the newly extended program.

                      COMMODITY SUPPLEMENTAL FOOD PROGRAM

        Question. The Commodity Supplemental Food Program (CSFP) provides
    6.4 million food packages to over 400,000 mothers, infants, children,
    and primarily low-income seniors--in fiscal year 2005, 15,575
    households in PA received CSFP packages. CSFP food packages are
    delivered monthly, and provide $50 worth of food including cheese,
    milk, and canned fruits and vegetables. The President eliminated this
    program in his fiscal year 2007 budget, stating Food Stamps and the WIC
    program could meet the needs of CSFP recipients. However, seniors, who
    represent 90 percent of CSFP recipients, are not eligible for the WIC
    program, and many of these seniors are also not eligible for food
    stamps, or are eligible to receive only $10 per month in food stamp
    benefits. An additional benefit of the CSFP program to seniors with
    disabilities is that they do not have to leave their home to receive
    the CSFP food package.
        How does the Department plan to meet the needs of many of these
    seniors who depend on the CSFP program and who will not be eligible to
    receive any benefits, or will receive reduced benefits, from the Food
    Stamp program?
        Answer. Elderly participants who are leaving the CSFP upon the
    termination of its funding and who are not already receiving Food Stamp
    Program (FSP) benefits will be eligible to receive a transitional
    benefit worth $20 per month ending in the first month following
    enrollment in the FSP under normal program rules, or 6 months,
    whichever occurs first. We estimate that most elderly CSFP participants
    will be eligible to participate in the regular Food Stamp Program.
        Based on the information we have about the characteristics of all
    elderly food stamp participants, the average monthly food stamp benefit
    for an elderly person living alone was $65 per month in 2004. The
    percentage of food stamp households with elderly that received the
    maximum benefit (14 percent) was nearly as large as the percentage that
    received the minimum benefit of $10 (17 percent). Thus, most elderly
    food stamp participants receive more than the $10. We expect that this
    pattern would extend to new FSP participants leaving the CSFP as well.

                          LIVESTOCK PROTECTION PROGRAM

        Question. The Livestock Protection Program (LPP), implemented by
    the Pennsylvania Department of Agriculture, in conjunction with the
    U.S. Department of Agriculture's (USDA) Animal and Plant Health
    Inspection Service (APHIS) Wildlife Service (WS), the Pennsylvania Game
    Commission, and the Pennsylvania State University is a crucial pilot
    program that provides technical and operational assistance to help
    Pennsylvanian agriculture producers control wildlife damage to their
    crops and property. Started in 2005, this program is fully implemented
    in eight counties, while on a limited basis across the rest of the
    Commonwealth of Pennsylvania. The goal of the LPP is to expand fully to
    other counties in order to protect dairy farmers from feed loss due to
    starlings, protect sheep farmers from coyotes, and protect property
    from geese damage. On an annual basis, dairy farmers lose about $2,000
    from feed loss due to starlings. I, along with U.S. Senators Bennett
    and Santorum, and U.S. Representatives Sherwood, Holden, Shuster,
    English, Platts, Kanjorksi, Murphy, and Murtha sent you a letter on
    January 24th requesting that you direct any additional fiscal year 2006
    Agricultural Appropriations funding for APHIS Wildlife Services to the
    LPP in order to keep this important program in existence.
        What is the status of this request? Does the Department plan on
    redirecting extra funds to the Livestock Protection Program?
        Answer. The Department recognizes the vital role of agriculture and
    the LPP to Pennsylvania's economy. APHIS allocated $70,000 in fiscal
    year 2006 to support this program.
                                     ______

               Questions Submitted by Senator Christopher S. Bond

                         NATIONAL AGRO-FORESTRY CENTER

        Question. When USDA National Agro-forestry Center, a partnership
    between the Forest Service and NRCS, in Lincoln, NE, was affected by
    the NRCS re-organization, the USDA provided assurances that the center
    would be supported by NRCS at a funding level of $655,000.
        What was the actual NRCS funding for the above mentioned
    partnership in Lincoln, NE in 2006? How much is the NRCS funding for
    the above mentioned partnership in Lincoln, NE for 2007?
        Answer. NRCS continues a close collaboration with the National
    Agroforestry Center. A NRCS Lead Agroforester position was
    reestablished and filled at the beginning of fiscal year 2006 and
    additional direct support totals $140,000. This position serves as a
    liaison with the Center. Further support is provided from the three
    foresters at NRCS new National Technology Support Centers. Salaries and
    support total an estimated $360,000. The total support cost in fiscal
    year 2006 is $500,000. Specifics for the fiscal year 2007 Budget have
    not been developed.

                  NATIONAL INSTITUTE FOR FOOD AND AGRICULTURE

        Question. The President announced a major initiative as part of the
    State of the Union address to enhance America's competitive standing in
    the global marketplace. The American Competitiveness Initiative
    proposes to significantly boost the Federal Government's investment in
    basic research for the physical sciences acknowledging the vital
    importance of basic research to future discovery and eventual economic
    growth.
         How much basic research does USDA perform? Over the last two
    decades has that amount grown? Would the establishment of a National
    Institute for Food and Agriculture---similar to other National
    scientific institutes like the NIH or NSF enhance the future
    competitiveness of our farm and food sectors? If so, will you endorse
    its creation?
         Answer. While the distinction between basic and applied research
    is not clear cut, it is estimated that slightly less than half of the
    USDA research budget supports basic research.
        The National Institute for Food and Agriculture is one of several
    initiatives that have been proposed to strengthen the Nation's
    agricultural research system, with the ultimate goal of strengthening
    the competitive position of the U.S. farm and food sector. NIFA, among
    other proposals, has generated useful discussion among the diverse
    stakeholders of the food and agriculture research community that enrich
    future consideration of options for strengthening the research
    component of the farm and food sector.
        Question. The National Institutes of Health spends nearly $15 on
    research for every dollar spent by the USDA. In competitive, merit
    based, peer-reviewed grants--long considered the best way to achieve
    advances in fundamental science--the NIH outspends the USDA by more
    than 100 to 1.
        What is the cause for this funding imbalance? Do you believe the
    competitive interests of our farmers are being met with such a funding
    disparity?
         Answer. The administration continues to show strong support for
    the National Research Initiative (NRI), the competitive, merit-based,
    peer-reviewed grant program within USDA. Funding for the NRI has
    increased in recent years, and the administration has requested an
    increase of $66.3 million in fiscal year 2007. The NRI is a critical
    component of a balanced research portfolio of intramural and extramural
    research that is effectively serving the competitive interests of
    farmers.
        Question. In USDA's budget proposal for fiscal year 2007, your
    administration lists six strategic goals that describe the Department's
    major objectives which include enhancing international competitiveness,
    enhancing the competitiveness and sustainability of rural economies,
    enhancing food safety, improving the Nation's nutrition and health,
    protecting our natural environment, establishing energy independence
    and improving the quality of life in Rural America. Similar objectives
    were listed by the 2002 USDA Research, Education and Economics Task
    Force which called for the creation of a National Institute for Food
    and Agriculture to achieve these goals.
        Has the Department taken any steps to meet the objectives outlined
    in this task force report? My thought would be that if NIFA were in
    place for the last 15 years we probably would be producing at least 20
    percent of our energy needs from cellulose sources and other renewable
    fuels. Would you agree with that?
        Answer. The Department's fiscal year 2007 strategic goals are
    similar to those identified by the 2002 USDA task force report. This
    suggests that the Department's research agencies and programs are
    focused on achieving the same goals and objectives as those outlined in
    the task force report.
        Question. Mr. Secretary, since this administration financially
    supports joint research with major overseas competitors like India to
    improve farming technology as part of an Agricultural Knowledge
    Initiative, will this administration support an agricultural knowledge
    initiative here at home known as the National Institute for Food and
    Agriculture? It seems to me, Mr. Secretary that we ought to reinvest in
    our research infrastructure here at home before going overseas. I think
    my farmers would support a major U.S. Agricultural Initiative before
    they would support a U.S.-India Agriculture Initiative. Let's fix our
    own research problems before fixing those of our competitors.
        Answer. The Department has a strong agricultural research program
    that is generating new knowledge and technology that will enhance
    American farmers' ability to be competitive in global markets. In
    particular, the administration continues to support the National
    Research Initiative, USDA's flagship competitive research program. In
    the fiscal year 2007 Budget the President once again recommends
    increasing the investment in the NRI to help address the critical
    issues facing our Nation's farmers.

                                EPA REGULATIONS

        Question. Specific provisions of concern to Ag retailers and
    distributors regards the proposed EPA rules relating to secondary
    containment requirements covered under ``Scope and Applicability''--
    Section 165.141 (This defines facilities covered by these sections of
    the rule) through ``Administrative Standards''--Section 165.157.
        Included in these sections are new Federal requirements that relate
    to bulk pesticide containment only. For example, ``General Requirements
    for Containment Structures''--Sec. 165.146(a)(1)(2) and ``Specific
    Requirements for Liquid Bulk Containment Structures''--Section
    165.148(a) discuss types of containment structure Ag retailers would
    need to comply with.
        Will the above mentioned specific provisions be applied in a fair
    and even manner for the entire Ag sector? If not, then will these
    provisions be dropped from any final EPA rule and continue to allow the
    States to regulate this area as they have been doing for the past
    several decades without EPA oversight?
        Answer. EPA administers pesticide regulations under the Federal
    Insecticide, Fungicide and Rodenticide Act (FIFRA), and is responsible
    for their implementation and interpretation. USDA and EPA actively work
    together to ensure unnecessary regulatory burdens are not imposed on
    the agricultural sector. We will work with EPA to encourage them to
    adopt provisions in the rulemaking that can be applied in a fair and
    even manner for the entire Ag sector.
                                     ______

                  Questions Submitted by Senator Conrad Burns

                         RESUMING BEEF EXPORTS TO JAPAN

         Question. Mr. Secretary, many of my producers in Montana are
    frustrated that you don't appear to be taking a more firm stance with
    Japan regarding beef exports.
        Can you tell me what USDA is doing to get the borders back open?
         Answer. On January 20, when we announced that a U.S. exporter sent
    a shipment of veal to Japan that did not comply with the terms of the
    Export Verification Program, we made very clear that we take this
    matter very seriously. We immediately set about to implement follow-up
    actions that would prevent such an incident from occurring again and
    would help get exports to Japan resumed as soon as possible. To help in
    this effort, we made clear in a series of meetings with senior Japanese
    officials that this is a top priority and that our investigation of the
    incident would be thorough.
         On February 17, the results of the Department's investigation into
    the ineligible shipment of veal were announced. In conjunction with
    that announcement, a comprehensive USDA report was released that
    details the findings of the investigation and actions taken by USDA. At
    that time, it was announced that additional actions beyond those
    announced January 20 would be taken in response to findings in the
    report. These actions go beyond the circumstances of the incident to
    incorporate further efficiencies and protections into the U.S. export
    system.
         This information was submitted to Japanese authorities for their
    review. The document contained two distinct reports: an investigation
    by the Food Safety and Inspection Service and an audit by the Office of
    the Inspector General. Japanese authorities reviewed the two reports
    and transmitted questions to USDA about the report. USDA has responded
    to all of Japan's official questions and delivered them to the Ministry
    of Agriculture. In addition, a technical team will be traveling to
    Japan in late March for meetings to provide any necessary
    clarifications as well as respond to any remaining questions.
    Department of Agriculture officials, as well as those from other
    Executive Branch agencies, have pressed upon Japan the importance of
    resolving this matter and the need to provide a timeline for
    reestablishing trade. We have stated on a number of occasions that time
    is of the essence and that we need to have assurances that this process
    will not be drawn out. We have also made clear that Japan may be
    inviting a complication in our bilateral trade relationship if this
    matter is not resolved quickly.

                                   PESTICIDES

        Question. Mr. Secretary, you and I have often talked about the need
    for USDA to serve as an advocate for agriculture at EPA. I am concerned
    that rules relating to Superfund and pesticide containment are treating
    agriculture unfairly, and I believe that you need to step up on behalf
    of America's farmers and ranchers.
        Can you share with the Committee your thoughts on the relationship
    between EPA and USDA?
        Answer. The Department normally reviews proposed rules that EPA
    promulgates to evaluate their impact on USDA activities, and on
    production agriculture. We work cooperatively with EPA, and often
    provide comments, both informally and formally, in order to attain key
    environmental objectives without unduly penalizing farmers and
    ranchers.
        Representatives of USDA regularly meet with EPA personnel in a
    series of bi-monthly meetings to share progress on conservation
    programs, and look for opportunities to assist producers in proactively
    meeting regulatory constraints. These meetings also inform EPA staff so
    that they can tailor regulatory programs to achieve protection of the
    environment while allowing producers to have flexibility in achieving
    the desired results.
        For example, USDA has been working with EPA during their efforts to
    promulgate regulations on the containment of pesticides at storage
    facilities to achieve a final regulation that will not be unfairly
    burdensome to agricultural producers. The draft final rule would
    establish standards for removal of pesticides from containers and for
    rinsing containers; facilitate the safe use, refill, reuse, and
    disposal of pesticide containers by establishing standards for
    container design, labeling and refilling; and establish requirements
    for containment of large, stationary pesticide containers and for
    containment of pesticide dispensing areas. These regulations do not
    directly impact farm containers. Since this effort is not yet
    finalized, I am not at liberty to discuss any further details of the
    pending regulatory language, but we continue to evaluate proposed
    changes and will provide EPA with comments on their draft final rule.

                                RENEWABLE FUELS

         Question. Renewable fuel development holds tremendous potential
    for rural States like Montana, particularly the development of
    cellulose ethanol and biodiesel. I understand this is a top priority
    for USDA.
        Can you update the Committee on USDA's activities in implementing
    the Energy title of the Farm Bill and in making producers aware of the
    resources that USDA has available?
         Answer. Renewable fuel and bioenergy development remains a top
    priority for USDA. The Energy Title of the Farm Security and Rural
    Investment Act of 2002 (Farm Bill) authorized various renewable fuels
    programs. Section 9010 of the Farm Bill continued support for the
    bioenergy program to support increased production of bioenergy. Since
    fiscal year 2002, USDA has awarded over $450 million in payments to
    bioenergy producers through this program. Section 9004 established the
    Biodiesel Fuel Education Program through which USDA awards grants to
    educate governmental and private entities and the public about the
    benefits of biodiesel. USDA also continues to team with the Department
    of Energy on the Biomass Research and Development Initiative with
    authorized funding from section 9008. This initiative supports the
    development of new bioenergy technologies and biobased products.
        USDA conducts outreach to producers in many ways. Service Center
    Agencies provide information at their individual locations. USDA
    participates in many conferences each year that are designed to reach
    producers and potential producers.

                         BEGINNING FARMERS AND RANCHERS

        Question. I believe one of the most important things we can be
    debating, especially in light of Farm Bill reauthorization, is role the
    Federal Government can play in encouraging young farmers and ranchers
    to get into production agriculture.
        Is USDA considering incentives and/or elimination of barriers for
    young farmers and ranchers, and how will that play into Farm Bill
    proposals?
        Answer. I recently completed a series of Farm Bill listening
    sessions around the country. A recurring theme at these sessions was
    the need to help young farmers and ranchers to get into production
    agriculture. A number of comments and suggestions were received which
    warrant consideration during the upcoming Farm Bill debate. Further,
    the USDA Beginning Farmer and Rancher Advisory Committee will be
    meeting later this year. In the past, this committee has provided
    valuable guidance in framing Farm Bill debate pertaining to assistance
    to beginning farmers and ranchers.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

         Question. Producers in Montana continue to be concerned about the
    development of a national animal ID system. I hear concerns relating to
    cost, confidentiality, and liability.
         Can you please share what is being done to address these concerns?
         Answer. The size and scope of the National Animal Identification
    System (NAIS) demand that it be a cooperative program, with industry
    and government sharing the cost of the necessary elements. By the end
    of fiscal year 2006, USDA will have invested $84.8 million into
    developing NAIS in terms of premises registration, information
    technology development, education and outreach, and staffing. The
    animal identification component is USDA's next implementation priority,
    along with the information-technology architecture to support multiple
    tracking databases. The animal tracking databases themselves will be
    developed and maintained by industry and States, and the cost of
    capturing animal movement data will be their responsibility.
         USDA recognizes that some producers have concerns about misuse of
    the data that will be collected and how the information will be
    maintained. We are working with industry to establish an information
    technology solution for animal movement data to be maintained in animal
    tracking databases managed by the industry and States. As proposed,
    USDA will only be able to access the information through a querying
    mechanism initiated when a disease of concern has been reported. As
    industry develops data collection systems and this process moves
    forward, USDA will continue to keep producers informed. The NAIS will
    not expose producers to any unwarranted or additional liability.
                                     ______

                  Questions Submitted by Senator Sam Brownback

                      NEW USES EXPO FOR BIOBASED PRODUCTS

        Question. I recently sent a letter to you concerning the biobased
    products component of the Department of Agriculture's Research,
    Education and Economics ``Strategic Vision of 2005-2008''. I offered
    Kansas City as a site for the USDA to host a New Uses Expo to highlight
    new, non-food, non-feed uses for agricultural products. Your office was
    kind to reply to my letter by saying that the USDA ``hopes to sponsor,
    as resources allow, a National Biobased Products Conference to
    highlight new biobased products'' in 2007.
        Mr. Secretary, what resources does your department need in order to
    make this New Uses Expo happen?
         Answer. At this time, the Department has not committed to holding
    a Biobased Products Conference in 2007. If we decide to hold a
    conference, we will coordinate with other Federal agencies.

                                HORSE SLAUGHTER

        Question. Last year the Senate passed an amendment that sought to
    de-fund USDA inspections of horse packing plants. I believe this policy
    to be extremely short-sighted. Now horse packing plants are required to
    pay ``user fees'' for inspectors to certify the quality of the meat.
    This is essentially an extra tax on packing plants that will lead to a
    loss of jobs here in America. Plus, if we outlaw the slaughter of
    horses, I believe this will lead to less humane treatment of unwanted
    horses. Experts estimate 70-80,000 horses each year are disposed of
    because they are no longer viable, are old, infirm, unmanageable or
    unwanted. These same experts estimate this number will approach 100,000
    unwanted animals a year very shortly and could double within a few
    years. While most horses are sold, an unknown number are abandoned.
    When sold, approximately 55,000 animals will move to USDA-regulated and
    inspected processing plants, transported under USDA regulations,
    promulgated under the Commercial Transport of Equine for Slaughter
    provisions of the 1996 Farm Bill. Once they reach the processing plant,
    these animals are euthanized humanely under the Federal Humane
    Slaughter Act, and the meat is inspected and certified by USDA's Food
    Safety & Inspection Service (FSIS). While some meat is sold in the
    United States to satisfy cultural markets, the majority is exported.
    Some argue these unwanted animals can be easily moved to existing
    ``adoption'' facilities. The capacities of such facilities range from 5
    horses to, in rare instances, a maximum of 1,000 horses. The average
    capacity of one of these facilities, however, is 30 animals. In the
    first year of a Federal ban on horse processing, nearly 2,700
    additional facilities would be needed, according the American
    Association of Equine Practitioners (AAEP), the professional
    organization of equine veterinarians. This is PETA's first salvo in the
    war against meat. What's next, the outlawing of slaughtering cattle? I
    intend to undo this mistake we made last year.
        What is the administration's position on the ``Horse Slaughter''
    amendment as passed last year?
        Answer. USDA has abided by the prohibition of federally-funded USDA
    inspections of horses presented for slaughter at official
    establishments. The fiscal year 2006 Agriculture, Rural Development,
    Food and Drug Administration and Related Agencies Appropriations Act
    included a section prohibiting the use of appropriated funds to pay the
    salaries or expenses of personnel to inspect horses (ante-mortem
    inspection) after March 10. Conference report language for the act
    recognized FSIS' obligation under existing statutes to ``provide for
    the inspection of meat intended for human consumption (domestic and
    exported).''
        While the appropriations bill prohibited appropriated funds from
    being used to pay for ante-mortem inspection, it does not eliminate
    FSIS' responsibility under the FMIA to carry out post-mortem inspection
    of carcasses and meat at official establishments that slaughter horses.
    In response to a petition, FSIS established a fee-for-service program
    under which establishments can apply and pay for ante-mortem inspection
    of horses. The interim final rule became effective March 10, 2006.

                         LAND GRANT UNIVERSITY FUNDING

        Question. As a Senator from a State with a first class land-grant
    university and a graduate of that same university, I am very proud of
    the legacy the land grant university system has in our country. As you
    know the land grant university system makes up the infrastructure which
    is the basis of our country's agriculture research, teaching, and
    extension programs. These are programs that support our farmers,
    ranchers, youth, families, and rural residents. Without the base funds
    that our Land Grants schools receive for Hatch Act, McIntire-Stennis
    Cooperative Forestry, and the Animal Health programs many schools would
    be in dire straits to continue to offer programs that support our
    constituents. The President's budget proposes to cut 55 percent of
    Hatch Act funds, 50 percent of the McIntire-Stennis funds, that our
    Land Grant Universities currently get and make them available only to
    multi-state projects and eliminate the Animal Health funding. Some
    Universities would very likely have to terminate many of their
    Agriculture programs. Some may have to go as far as not offering
    agriculture as part of a curriculum. A University like Kansas State
    might suffer a loss of $1.6 million. Kansas State is an institution
    that would compete very well for those funds if in a multi-state pool.
    However, there would be major disruption in current programs while we
    had to go through the motions of competing. They would have to lay off
    faculty, stop on-going research projects, and undertake other
    disruptive measures. And then there would be no guarantee that my
    institution would get back to even. Without these funds the Land Grants
    system would be in disarray.
        In making this proposal, did you consider the financial and
    programmatic impacts there would be on each Land Grant institution and
    the other stakeholders who depend on these programs?
        If ``YES''--can you please provide the Committee with a copy of
    your analysis of these impacts?
        If ``No''--How can you expect us to embrace such a major change in
    program administration without a detailed analysis of how these changes
    will affect the Land Grant institutions in our State?
        Answer. Yes, we did consider the impact on eligible institutions.
    The analysis is provided for the record.
        [The information follows:]

       REVIEW OF STAKEHOLDER RESPONSE TO THE FISCAL YEAR 2006 BUDGET AS
      BACKGROUND FOR COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION
               SERVICE (CSREES) FISCAL YEAR 2007 BUDGET PROPOSAL

    Key Elements of the President's Fiscal Year 2006 Budget for CSREES
        The fiscal year 2006 budget expanded the NRI to $250 million;
    established a new, SAES Competitive Grants Program at $75 million; cut
    the Hatch and McIntire-Stennis research formulas by 50 percent in 2006,
    and 100 percent in 2007; cut the Animal Health (Section 1433) research
    formula by 100 percent, starting in 2006; and moved six competitive
    grants programs currently funded under Section 406, Integrated
    Competitive Grants programs, to the integrated programs area of the NRI
    initially provided through Congressional appropriations actions
    beginning in 2004. The proposal also called for full indirect cost
    recovery on all competitively award grants, up from the current level
    of 20 percent of direct costs, and an increase in integrated grants
    authority from 20 to 30 percent.
    Congressional Response
        In questions to the Agency during the hearing, and more intensively
    in post hearing, written questions, the House sought accomplishment
    information for formula based programs and asked the agency about
    stakeholder input and the administration's analyses leading to the
    recommendations to redirect formula funded research programs to
    competitive grants.
        The Senate committee is very unlikely to adopt the administration's
    proposal to redirect formula funds to competitive programs, and may be
    reticent to consolidate the 406 programs with the NRI, particularly if
    this action limits the integrated programs in the NRI which began in
    2004.
    University Response
        Agricultural Research and Extension Administrators, Land-Grant
    Universities (LGUs): The collective response of these administrators
    has been extraordinarily negative to the formula-competitive
    conversion. Initial analysis of the university director's response to
    the initial proposals in the President's fiscal year 2006 budget
    indicate that the primary concerns are: (1) lack of consultation with
    affected universities and stakeholders; (2) loss of matching funds; (3)
    program continuity and length of awards; (4) sustaining breadth of
    capacity in agricultural science and education nationwide; (5)
    providing responsiveness to State and local issues; and (6) leveraging
    and sustaining partnerships across institutions.
      --Directors particularly have cited consequences for employment
            (estimating as many as 2000 scientists and equal numbers of
            technicians and graduate students will lose their jobs; see
            CRIS tables on employment by Hatch projects for actual
            numbers.); concerns about program infrastructure; loss of
            matching funds; and continuity of efforts. In addition,
            agricultural research directors have expressed concern about a
            net decline in total research effort, if funds are diverted
            from direct scientific effort to covering indirect
            administrative expenses. They also are concerned by the speed
            with which these changes would be implemented especially given
            that they argue there was no consultation on the proposal. In
            2005, LGU agriculture deans and directors have declined the
            offer of CSREES to participate in a joint planning team to
            examine alternate strategies to implement fiscal year 2006
            proposed, competitive research programs.
      --Central Administrators at LGU's: Chancellors, Presidents and Vice
            President's for Research, particularly, though not exclusively,
            those at larger institutions, have expressed support for the
            proposals in the administration's fiscal year 2006 budget
            proposal. Their support appears predicated not only on the need
            for agricultural research grants to carry indirect cost
            recovery to the degree consistent with other Federal grants,
            but also to help bring agricultural science into the broader
            fold--and stature--of peer reviewed research on campus.
    Scientific Societies
        Individual organizations and consortia of scientific societies have
    supported growth in competitive research programs, and have been either
    fully supportive of the fiscal year 2006 administration budget, or
    supportive of the growth the NRI and other competitive programs while
    silent on the formula-related provisions. For example, the American
    Phytopathology Society has focused its lobbying efforts on seeking to
    expand competitive grants, as included in the fiscal year 2006
    proposal. Co-Farm, the Coalition for Funding Agricultural Research
    Missions, is seeking overall growth in funding for agricultural
    science, thus emphasizes programs with higher numbers than previous
    appropriations. Episodic reports from individual scientists have varied
    from concern about loss of start-up funds and preliminary studies
    needed to test approaches prior to developing proposals for grant
    funding provided by some institutions through formula programs to
    supporting increases in available funds for competitive grants
    especially to increase the average size and duration of awards.
    Public Citizens and Associations of Producers, Processors, Consumers
            and other Interests
        Few citizens or public stakeholder groups have expressed views to
    the Agency regarding funding mechanisms employed by CSREES. CARET, the
    Council for Agricultural Research, Extension and Teaching, collectively
    has called for the restoration of formula funds, although individual
    members have expressed an interest in developing alternative funding
    approaches. Major commodity groups have not expressed views on this
    issue.

                                   HATCH ACT

        Recipients of Hatch Act funds have the flexibility to distribute
    funds among research projects, infrastructure, and personnel as they
    wish to meet the needs of their university. The distribution of these
    dollars varies from State to State. The latest data on personnel
    supported with Hatch funds as reported into the Current Research
    Information System (CRIS) by recipients of Hatch Act Funds is for
    fiscal year 2004. The recipient institutions do not assemble the data
    until the close of the fiscal year and then the reporting process
    requires approximately 6 months. The fiscal year 2005 data is being
    collected now but not all institutions have made their reports
    available yet. Therefore, we do not have complete data for fiscal year
    2005 at this point. The recipient institutions do not report estimates
    to CSREES so estimates for fiscal year 2006 and 2007 are not available.
        The information is submitted for the record.
    summary of personnel supported with hatch act funds in fiscal year 2004

                        MCINTIRE-STENNIS FORESTRY GRANTS

        Recipients of McIntire-Stennis funds have the flexibility to
    distribute funds among research projects, infrastructure, and personnel
    as they wish to meet the needs of their university. The distribution of
    these dollars varies from State to State. The latest data on personnel
    supported with McIntire-Stennis funds as reported into the Current
    Research Information System (CRIS) by recipients of McIntire-Stennis
    Funds is for fiscal year 2004. The recipient institutions do not
    assemble the data until the close of the fiscal year and then the
    reporting process requires approximately 6 months. The fiscal year 2005
    data is being collected now but not all institutions have made their
    reports available yet. Therefore, we do not have complete data for
    fiscal year 2005 at this point. The recipient institutions do not
    report estimates to CSREES so estimates for fiscal years 2006 and 2007
    are not available.
        The information is submitted for the record.
        [The information follows:]

           SUMMARY OF PERSONNEL SUPPORTED WITH MCINTIRE-STENNIS FUNDS

                       ANIMAL HEALTH AND DISEASE RESEARCH

        Recipients of Animal Health and Disease Research funds have the
    flexibility to distribute funds among research projects,
    infrastructure, and personnel as they wish to meet the needs of their
    university. The distribution of these dollars varies from State to
    State. The latest data on personnel supported with Animal Health and
    Disease funds as reported into the Current Research Information System
    (CRIS) by recipients of Animal Health and Disease Funds is for fiscal
    year 2004. The recipient institutions do not assemble the data until
    the close of the fiscal year and then reporting process requires
    approximately 6 months. The fiscal year 2005 data is being collected
    now but not all institutions have made their reports available yet.
    Therefore, we do not have complete data for fiscal year 2005 at this
    point. The recipient institutions do not report estimates to CSREES so
    estimates for fiscal years 2006 and 2007 are not available.
        The information is submitted for the record.
        [The information follows:]

    SUMMARY OF PERSONNEL SUPPORTED WITH ANIMAL HEALTH AND DISEASE RESEARCH
                       PROGRAM FUNDS IN FISCAL YEAR 2004

        The Land Grant University System is supported through a broad
    portfolio of funding mechanisms at the Federal, State, and in the case
    of Cooperative Extension, the local level. The proposal in the fiscal
    year 2007 President's budget for CSREES seeks to expand the proportion
    of Federal funding flowing to agricultural research through credible,
    competitive processes, while building on the strengths of land grant
    universities to work together to solve research-based problems.
    University and USDA staff members currently are working together to
    design a multi-state program implementation plan such that universities
    could address issues of great importance locally, which collectively
    achieve regional or national goals in agriculture. The plan recognizes
    the value of expanding the capacity at smaller institutions through
    joint and collaborative work, addressing issues on local and State
    agendas to assure matching funds for the programs, and recognizing the
    geographically diverse nature of agriculture and natural resources.
        Issues which could be addressed through expanded multi-state and
    institutional collaboration include animal and plant disease, including
    current issues such as citrus greening and Asian soybean rust; water
    availability and management; best practices for small-sized
    agricultural producers. In addition, the multi-institutional research
    program has been used to expand access to subject matter colleagues
    across State lines, rapidly respond to emerging issues, and sustain
    national research support efforts, such as pesticide clearance.
        By sustaining funding through the Hatch and McIntire-Stennis
    programs, the President's budget proposal responds to concerns
    expressed by universities in previous years about retaining matching
    requirements, allowing planning and management of programs to remain in
    the context of the Agricultural Experiment Stations (AES) and
    Cooperative Forest Research programs, and proving continuity and
    planning through a full, 5 year award cycle to AES directors and
    Administrative Technical Representatives (McIntire-Stennis managers)
    for each multi-state project in which a State participates.
        Question. The Land Grant University System is currently undertaking
    a comprehensive review of all of these programs and how they might be
    changed in the context of the 2007 Farm Bill to meet the 21st century
    challenges facing agriculture, rural communities, and our entire food
    and fiber system through research, extension and teaching. Do you agree
    that such changes can best be considered through a collaborative
    process with an eye toward the 2007 Farm Bill as opposed to the
    implementation of drastic changes imposed unilaterally by USDA?
        Answer. Although revising the Farm Bill to restructure the research
    agencies at the U.S. Department of Agriculture could address some of
    the issues regarding sustainability of funding for science, other
    concerns such as competitiveness, quality and coordination of programs
    and projects, and linkage to other Federal Science programs also can be
    addressed through budget allocations and mechanisms.
        Question. Rather than imposing these drastic changes now, would you
    be willing to continue engage the Land Grant System in their efforts to
    review and build consensus for changes in our collaborative research,
    extension and teaching efforts?
        Answer. Currently, University and USDA staff members are working
    together to design a multi-state program implementation plan such that
    universities could address issues of great importance locally, which
    collectively achieve regional or national goals in agriculture.

                              FARM PROGRAM FUNDING

        Question. I applaud President Bush's proposal to reduce the payment
    limit from its current $360,000 level to $250,000. I've voted for
    lowering this limit in the past and I continuing to believe the payment
    limit should be lowered from its current level. Obviously, this could
    help play a role in reining in government spending. I also believe
    tougher enforcement on those who circumvent the payment limits could
    help us spend less money in commodity payments.
        What commitment level does this administration give to lowering
    payment limits, strengthening enforcement when loopholes are found and
    developing a measurable standard to determine who should and should not
    be receiving farm subsidies?
        Answer. The President's Budget for fiscal year 2007 includes a
    package of proposed farm program changes for the purpose of reducing
    spending in these programs as part of the effort to reduce the budget
    deficit. One of these proposals would reduce payment limits and
    significantly reform current payment limitation law. Among other things
    the proposal would reduce the overall payment limit from $360,000 to
    $250,000 per natural person. It would establish a form of direct
    attribution and strengthen provisions for enforcement against
    loopholes. These proposals would apply to the remainder of the 2002
    Farm Bill.

                  NATIONAL ANIMAL IDENTIFICATION SYSTEM (NAIS)

         Question. If States and private industry were to contribute the
    same amount of funding as the Federal Government for the implementation
    of the NAIS--$33 million per year in this budget request and in the
    previous 2 years--would it be possible to maintain the implementation
    timeline outlined in the Department's May 2005 Draft Strategic Plan
    (i.e., full program implementation by January 2009)? If not, what
    percentage of the total funding would have to come from outside the
    Federal Government in order to have an animal ID system fully
    operational by January 2009--would States and private industry be
    responsible for two-thirds of the funding, or three-fourths, or more?
         Answer. NAIS will be a fully operational system in early 2007 and
    consist of three main components: premises registration, animal
    identification, and animal tracking. Premises registration has been
    implemented in all 50 States and 2 Territories. Several Tribes are also
    registering their premises. In March, APHIS will begin distributing
    animal identification numbers. We anticipate the remaining systems
    elements will be operational in early 2007, but private entities will
    need to supply information to fill the private databases.
        Question. Does USDA have the authority under the Animal Health
    Protection Act, or any other statute, to require a mandatory animal
    identification program? Does the transfer of the animal-tracking
    database to the private sector affect the Department's ability to
    mandate participation as originally envisioned in the May 2005 Draft
    Strategic Plan?
        Answer. The Animal Health Protection Act provides authority to
    issue regulations establishing a mandatory National Animal
    Identification System. The inclusion of State or private animal
    movement tracking systems within the NAIS would not alter the
    Department's authority to mandate participation.

                               SERICEA LESPEDEZA

        Question. Sericea lespedeza is an important Federal field crop in
    the southeastern United States, but it is an invasive species in the
    central plains States, including my home State of Kansas, as it
    destroys the ecological balance of tallgrass prairie lands. Currently,
    conservation efforts in Kansas' tallgrass prairie cannot sequester
    USDA's assistance to find ecologically/economically compatible controls
    for Sericea lespedeza because of its status as a Federal field crop
    through APHIS. However, we need to address this critically important
    issue affecting our prairie before it's too late.
         How can we find a way to ascertain USDA's help in controlling this
    destructive invasive species in Kansas while ensuring that these
    methods of control do not compromise Sericea's production in the
    southeastern United States? Would APHIS be open to providing varying
    regional statuses for Sericea lespedeza?
         Answer. There is no formal definition of a ``Federal field crop.''
    APHIS' focus is on quarantine pests. The offending pest must be new to
    the United States, or present but not known to be widely distributed in
    the United States and currently under an active control program. S.
    lespedeza has been in the country for more than a century and is in at
    least 60 percent of the States. Consequently, it does not meet the
    requirements of a quarantine pest.
         However, regional effort is an option that could be pursued using
    State statutes. Currently, Kansas is the only State that regulates S.
    lespedeza as a State noxious weed.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                           HORSE SLAUGHTER/USER FEES

        Question. Meat inspection user fees have been proposed many times,
    but have ultimately been rejected by Congress because the general
    assumption was that statutory authorization was required before the
    Department could collect fees. However, based on your recently
    announced rule for fee inspection, and the subsequent court ruling,
    USDA apparently CAN collect user fees without explicit statutory
    language. Now that USDA lawyers assert that these fees can be
    collected, it seems this dramatically changes the dynamic.
        Can Congress assume that USDA still believes it has legal authority
    to collect these fees?
        Answer. User fees have been proposed for inspection under the
    Federal Meat Inspection Act (FMIA), the Poultry Products Inspection Act
    (PPIA), and the Egg Products Inspection Act (EPIA), because these
    statutes only authorize user fees for overtime and holidays. The
    Agricultural Marketing Act of 1946 provides USDA the legislative
    authority to collect user fees for ante-mortem inspection of horses.
    This authority also authorizes the collection of fees for other types
    of voluntary meat and poultry inspection activities, including
    inspection of species not covered by the FMIA.
        Question. Since USDA prevailed in court on the question of fees for
    horse inspection, does that same legal theory apply to other meat and
    poultry inspections, including those activities for which user fees are
    proposed in the budget?
        Answer. Under the Agricultural Marketing Act of 1946 (AMA), USDA is
    directed and authorized to provide, when requested, inspection of
    eligible species on a fee-for-service basis. Such fee-for-service
    inspections have long been provided by FSIS inspection program
    personnel for other species not eligible for inspection or not eligible
    to receive certain types of services under the FMIA. The AMA does not
    provide the authority necessary to recover the costs of providing
    inspection services under the FMIA, PPIA, or the EPIA.
        Question. Is USDA still in favor of user fees as a way to pay for
    meat and poultry overtime inspections?
        Answer. Yes. USDA will continue to recover the costs of providing
    overtime and holiday inspection through user fees. In addition,
    legislation will be submitted to Congress to authorize fees to recover
    the costs of providing inspection beyond a single approved primary
    shift.
        Question. Since the President's budget simply asks us to provide
    $757 million for FSIS, can Congress assume that you will be able to
    support all FSIS activities through the new user fees you propose
    whether or not the authorization committee takes action? If not, what
    is your contingency plan--what's going to get cut?
        Answer. The President's 2007 budget requests $863 million, the full
    amount of budget authority needed to operate FSIS' inspection services.
    We are requesting authority to charge user fees, deposit the fees into
    special receipt accounts, and use the fees subject to appropriations.

                           FOOD SAFETY BUDGET TRENDS

        Question. According to an OMB document published on January 23rd,
    fiscal year 2008 budget for FSIS decreases by $27 million from the
    fiscal year 2007 proposed level, and that trend continues.
        Should we be prepared for a trend in requesting fewer dollars for
    food safety activities? If these decreases on this OMB document
    actually occur over the next 5 years--one analysis maintains that it
    will equal a 17 percent cut--what activities are going to suffer?
        Answer. The fiscal year 2007 budget documents include estimates for
    fiscal year 2008 and beyond that reflect the President's commitment to
    reduce the Federal deficit in half by fiscal year 2009. These out-year
    estimates are computer generated using set formulae that do not reflect
    policy decisions. No conclusion on the administration's priorities for
    food safety or other USDA activities should be drawn from these
    numbers.

                      COMMODITY SUPPLEMENTAL FOOD PROGRAM

        Question. How much carryover did CSFP have at the end of fiscal
    year 2005?
        Answer. At the end of fiscal year 2005, the Commodity Assistance
    Food Program (CSFP) had a carryover amount of $118,000.
        Question. How much will be used to help fund the fiscal year 2006
    Shortfall? If this will not occur, please explain the reasoning,
    especially since the budget proposes to eliminate the program next
    year, making carryover into 2007 unnecessary.
        Answer. All of the fiscal year 2005 carryover funds will be used in
    2006. We plan to use all of the fiscal year 2005 funds in 2006.
        Question. What is the status of the $4 million additional funding
    provided for CSFP in the last supplemental? Could this be used to help
    the fiscal year 2006 shortfall? If not, why?
        Answer. The supplemental assistance will be offered to the three
    Gulf-area CSFP States that were directly affected by the hurricanes
    (Louisiana, Mississippi and Texas). These three CSFP States have the
    vast majority (over 93 percent) of all disaster assistance applicants.
    The assistance will be provided in the form of caseload, administrative
    funds, and commodities.
        The supplemental funding cannot be used to make up the fiscal year
    2006 shortfall. The legislation that provided the supplemental funding
    to CSFP requires that the supplemental funding be used ``for necessary
    expenses related to the consequences of Hurricane Katrina . . . .''
    Therefore, these funds cannot be used to restore caseload to all CSFP
    States.
        Question. Has there ever been a full evaluation of the CSFP, other
    than the administration's PART review, which stated that CSFP was a
    good alternative to the Food Stamp Program for senior citizens? If not,
    why wasn't one planned or carried out before this elimination?
        Answer. There is very limited information on the impact of the CSFP
    on participants' nutrition and health status, and no evaluation of
    which we are aware that characterized the program as a good alternative
    to the Food Stamp Program. A 1982 evaluation examined administrative
    and medical records data from 3 CSFP sites and found positive impacts
    for pregnant women and suggestive evidence of positive impacts for
    children. However, the program has changed substantially since this
    study was done. In particular, it did not include the elderly, who now
    account for about three-fourths of program participants.
        In 2005, the Economic Research Service began a study to examine
    participation and administrative issues related to the CSFP, including
    how CSFP fits into States' overall designs to address food insecurity
    among target populations, why some States choose not to participate,
    and who among those eligible tends to participate. The study will be
    published in early 2007.
        Though questions have been raised about the effectiveness of CSFP,
    other important factors influenced the administration's decision to
    eliminate program funding. The key consideration influencing this
    decision is that the program is not available nationally and is
    substantially redundant of other nutrition assistance programs that are
    available nationally.
        In the administration's view, ensuring adequate funding for
    programs that have the scope and reach necessary to provide access to
    eligible people wherever they may reside is a better and more equitable
    use of scarce resources than to allocate them to programs that cannot
    provide access to many areas of the country. For this reason, the
    administration has placed a priority on funding the Food Stamp, WIC,
    and other nationally-available programs that provide benefits to
    eligible people wherever they may live.
        Question. How many senior citizens do you estimate will be
    ineligible for the Food Stamp Program, or may choose not to participate
    for other reasons?
        Answer. Based on the best-available national information on the
    circumstances of all low-income elderly, we estimate that about 101,000
    elderly CSFP participants will not be eligible for food stamps, largely
    because they hold countable assets that put them over the Food Stamp
    Program's resource limit. Our budget request assumes that 88,000 CSFP
    participants will make the transition to food stamps and that about
    118,000 will choose not to even though they are eligible. We are
    prepared, however, to use the requested food stamp benefit reserve if
    necessary to support participation by all who are eligible. We have
    also requested $2 million for outreach to encourage elderly CSFP
    participants to participate in Food Stamps.
        Question. What is the average market value of the food boxes
    received in the CSFP program by seniors, and how does that compare to
    the $20 in temporary assistance you are offering to provide?
        Answer. We estimate that a CSFP food package for elderly
    participants would have a retail value of approximately $42.35, on
    average, if purchased at retail prices in 2005. However, this cost
    could vary greatly depending on type, brand, etc. of foods in the
    package. In comparison, the average food stamp benefit for a senior
    living alone was $65 per month in 2004.

                                GIPSA OIG AUDIT

        Question. I know that USDA is taking specific actions to try to fix
    all of the problems identified in a recent OIG audit of GIPSA. However,
    in 1997 and in 2000 GIPSA was reviewed and changes were suggested, but
    problems weren't fixed.
        Why will this time be different? How will you regain the confidence
    of the markets GIPSA is supposed to protect?
        Answer. GIPSA intends to restore confidence by implementing all
    recommendations in the OIG report. GIPSA has already issued policy
    directives in response to several of the recommendations and is
    initiating a review process to ensure that the directives are being
    followed and implemented properly.
        However, GIPSA has gone further than just the OIG recommendations.
    For example, the agency has requested a full scale organizational
    review to provide recommendations on how to improve the agency's
    operational effectiveness. Also, the new GIPSA Administrator recently
    ordered an Office of Personnel Management-administered Organizational
    Assessment Survey. The survey gives employees an anonymous opportunity
    to let the Administrator know what they think about the organization on
    a range of topics. Results will be used to make decisions about work
    environment improvements in the program and enhance its organizational
    effectiveness. The Administrator is also working to develop an
    organizational culture to ensure at all levels a recommitment to OIG
    and GAO recommendations and to redirect resources to achieve mission-
    critical activities.
        Question. On January 24th, I sent a letter to the Justice
    Department's Special Counsel for Agriculture, with a copy to USDA,
    encouraging them to work with you to prevent anti-competitive market
    conditions--especially while GIPSA is still working to improve its
    efforts. Have you, or anyone from USDA, been in touch with the Justice
    Department? Do you plan to work with them?
        Answer. USDA has undertaken a number of initiatives related to
    working with the Department of Justice (DOJ). First, an economist from
    GIPSA's Industry Analysis Division, has been detailed to work at DOJ
    for 4 months on a case. GIPSA is also currently working in
    collaboration with DOJ on an anti-competitive investigation. Finally,
    GIPSA has a memorandum of understanding between the Office of General
    Counsel (OGC) at USDA and DOJ in place. Already DOJ and OGC are
    coordinating on relevant issues where warranted.
        Question. Since this report came out after the budget was written,
    do you now think you need additional resources in order to implement
    all of OIG's recommendations?
        Answer. GIPSA is conducting an evaluation of program resources. If
    changes to resources are needed, they will be taken into consideration
    for the 2008 budget request.

                          SMALL FARM/DIRECT MARKETING

        Question. Can you point to any actions USDA has taken recently to
    help small producers work through regulatory problems that might stifle
    their ingenuity? Last year we provided funds for a new program to help
    promote farmers markets and other outlets for small producers, but they
    are not included in your budget.
        Answer. USDA has many programs that enhance the reliability and
    economic livelihood of small farmers and ranchers across America.
    Through these programs we actively encourage the growth and
    continuation of small, limited-resource, and minority farmers and
    ranchers, as well as local communities. Through outreach, research,
    market development, financial support, and technical assistance we are
    helping them compete.
        In January 2006, USDA issued its third progress and achievement
    report entitled ``Making a Difference for America's Small Farmers and
    Ranchers in the 21st Century.'' This report highlights USDA's
    continuing efforts to assist the Nation's small farmers, ranchers, and
    farm workers. It identifies the major achievements and continuing
    actions taken by USDA in response to the 8-policy goals and 146
    recommendations included in the USDA National Commission on Small
    Farms' report, A Time to Act.
        The Farmers Market Promotion Program is included in USDA's fiscal
    year 2007 budget. Following Congressional approval of funds for the
    administration of the Farmers Market Promotion Program for fiscal year
    2006, USDA has been rapidly implementing this grants program through
    the Agricultural Marketing Service. The program is designed to
    facilitate and promote farmers markets and other direct-to-consumer
    marketing channels for farm products. By the end of fiscal year 2006,
    AMS will administer approximately $1 million in grants, with a
    statutory maximum of $75,000 per grant, to eligible entities. A Notice
    of Funds Availability for the Farmers Market Promotion Program was
    published in the Federal Register on March 15, 2006. The Notice invites
    eligible entities to submit project proposals to AMS by May 1, 2006.
    Eligible entities include agricultural cooperatives, local governments,
    non-profit corporations, public benefit corporations, economic
    development corporations, regional farmers' market authorities, and
    Tribal governments. Grants will be awarded on a competitive basis
    following a comprehensive internal review.
        Question. What initiatives have you proposed to assist small
    farmers, to encourage their creativity, and to help American farmers
    remain independent?
        Answer. USDA's budget for fiscal year 2007 proposes to continue the
    Farmers Market Promotion Program, which is designed to facilitate and
    promote farmers markets and other direct-to-consumer marketing channels
    for farm products. In addition, AMS offers technical assistance useful
    to small farmers through its ongoing Wholesale, Farmers, and
    Alternative Markets and Transportation Services programs. Examples of
    recent initiatives include the creation of a Farmers Market Consortium
    in November 2005, bringing together Federal agencies and private
    foundations that support development of farmers markets which has
    already produced and released a Farmers Market Resource Guide in March
    2006. Also, the Federal-State Marketing Improvement Program offers
    grants that encourage creative solutions to local and regional
    agricultural marketing challenges.

                             BSE--JAPANESE EXPORTS

        Question. One of the things USDA is doing in response to the recent
    shipment of banned material to Japan is re-training the FSIS inspectors
    to make sure this never happens again.
        What is the status of that training, and what, exactly does it
    entail?
        Answer. On January 23, 2006, USDA's Food Safety and Inspection
    Service (FSIS) conducted interactive web-based training for its
    inspection program personnel at Export Verification (EV)-approved
    establishments. All FSIS inspection program personnel currently
    assigned to an establishment with an approved EV program completed the
    on-line training course by March 21, 2006.
        FSIS inspection personnel are provided computer-based follow-up and
    supplemental training. Inspectors who rotate into any establishment
    that produces product that is subject to EV requirements will also
    undergo training. All new employees hired after March 2006 will receive
    training.
        FSIS' EV training reviews policies pertaining to Export
    Certification, Re-Inspection of Product intended for Export, and
    Certifying Beef Products under the EV Programs and all pertinent Export
    Directives.
        To be certain that FSIS inspection program personnel are fully
    aware of specific products approved for export to countries
    participating in EV programs, the Agricultural Marketing Service (AMS)
    will maintain a list of specific products approved for export to each
    country on an internal Web site accessible to FSIS-trained inspection
    program personnel. AMS will also notify FSIS each time establishments
    are audited, listed or delisted for EV programs.

                         NON-AMBULATORY DISABLED CATTLE

        Question. A recent OIG report on BSE surveillance notes that there
    has been some confusion regarding what constitutes a ``downer'' animal.
    I understand that the number of times this happened is extremely low--
    less than 50, I believe, out of all of the animals processed during the
    time of enhanced surveillance. However, I also understand the effect
    that even one case of BSE can have on our markets.
        What steps is the Department taking in order to provide a more
    clear description of what animals are to be considered ``downers''?
        Answer. On January 12, 2004, USDA issued an interim final rule
    which includes requirements for the disposition of non-ambulatory
    disabled cattle. The preamble to the rule States, ``FSIS is requiring
    that all non-ambulatory disabled cattle presented for slaughter be
    condemned'' (Docket No. 03-025IF, Federal Register, January 12, 2004).
    The rule has not changed. However, in those extremely rare instances
    when a cow suffers an acute injury after passing ante mortem inspection
    and becomes non-ambulatory, the cow is not automatically condemned.
        Under an FSIS notice issued January 18, 2006, the animal is tagged
    as ``U.S. Suspect'' (FSIS Notice 05-06). The ``U.S. Suspect''
    designation was not created for this rare situation, but is a long-
    standing practice. Inspection program personnel conduct careful ante
    mortem reinspection of animals so designated. Pursuant to the notice,
    Public Health Veterinarians (PHVs) perform an examination on these
    animals to ensure that the injury is acute and not the result of a
    chronic condition. If there is any evidence of a chronic condition, or
    if the PHV cannot be sure the injury was not caused by a chronic
    condition, the notice provides that the animal is to be condemned.
        A previous notice, issued on January 12, 2004, addressed this rare
    situation but did not provide for tagging. The application of a ``U.S.
    Suspect'' tag will help the Agency to better track occurrences in which
    acute injuries occur after ante mortem inspection at the slaughter
    plant.
        All cattle tagged ``U.S. Suspect'' are eligible to go to slaughter.
    The ``U.S. Suspect'' designation indicates that the animal needs closer
    postmortem examination, and consequently the PHV makes the final
    postmortem disposition of every ``U.S. Suspect'' animal. All cattle
    designated as ``U.S. Condemned'' are banned from entering the slaughter
    establishment.
        Question. Is additional training or information being provided to
    your inspectors in this regard?
        Answer. Public Health Veterinarians (PHVs) have the requisite
    veterinary medical education to distinguish between chronic conditions
    and acute injuries. A significant part of PHV training is dedicated to
    determining acute versus chronic conditions. A chronic disposition
    often leads to condemnation because the condition is ongoing, whereas
    an acute condition would likely lead to condemnation of part of the
    animal.

                             BSE--JAPANESE EXPORTS

        Question. I understand that as part of the ``verification'' program
    set up to ship beef to Japan, two signatures are required to ensure
    that the shipment does indeed meet Japanese requirements.
        Are both of these signatures from FSIS employees?
        Answer. As the result of the January 20, 2006, discovery of three
    boxes of veal with vertebral column shipped from the United States, in
    violation of the terms of our Export Verification (EV) agreement with
    Japan, I announced 15 Action Steps, including the requirement of an
    additional signature during the EV process. Both the Agricultural
    Marketing Service (AMS) and the Food Safety and Inspection Service
    (FSIS) share the responsibility to confirm shipments for the EV program
    and employees from both agencies sign the documentation.
        Question. Do both verification form signatories physically check to
    make sure the shipment meets the proper standards?
        Answer. FSIS and AMS both have specific responsibilities for
    confirming that shipments meet the appropriate EV standards. These
    responsibilities do not require the signatories to physically check the
    shipment.
        AMS confirms that both the establishment and products are approved
    for export to the importing country.
        FSIS certifies and signs that all food safety requirements have
    been met. When signing an export certificate, an FSIS certifying
    official should receive the following from an establishment: (1) the
    original FSIS Form 9060-5, Meat and Poultry Export Certificate of
    Wholesomeness; (2) any other certificates required by the importing
    country; and (3) a copy of the letter from AMS that confirms that AMS
    conducted a review and that AMS has determined the items listed are
    approved for export to the country listed on the certificate and from
    the facilities listed.
        If all documents are acceptable, the FSIS certifying official will
    sign all certifications and maintain a copy of the AMS letter in the
    government file along with the certifications.
        Question. What steps is USDA taking to try to make the regulatory
    market more streamlined, as opposed to wide variety of requirements for
    each country to which we export?
        Answer. Most market openings (with the exception of Japan, where
    the terms of the market opening were negotiated in October 2004) have
    been for boneless beef from cattle under 30 months of age. The terms of
    these market openings were guided largely by international guidelines
    as maintained by the World Organization for Animal Health (OIE) and by
    precedents set by major importers, including the terms that the United
    States applies to imports from other countries that have experienced
    BSE. While these openings have resulted in a number of different import
    requirements by country, these requirements were negotiated with the
    full cooperation and knowledge of the U.S. industry with the intention
    of getting back into the market as quickly as possible with at least
    some product and the understanding that greater access would be
    negotiated at a later date. In our current negotiations USDA is pushing
    for broader access for U.S. beef overseas, arguing that OIE guidelines
    permit more favorable access than boneless/under 30 months.
        Question. I also understand that in this recent case of banned veal
    being sent to Japan, the inspector was an online inspector who was,
    according to FSIS regulations, not authorized to do the final
    inspection on this beef. Is this accurate?
        Answer. No, this is not accurate, because the inspector was
    authorized to do the final inspection of this beef. The problem arose
    from USDA inspection program personnel and the Japanese importer lacked
    familiarity with USDA's bovine export verification (EV) requirements
    for Japan.
        Question. What steps are you taking to prevent this from happening
    again, and to ensure that there are a sufficient number of offline
    inspectors to prevent online inspectors from having to perform duties
    they are not officially authorized to do?
        Answer. The problems have been identified and appropriate actions
    have been taken. The problem was not related to an online inspector
    conducting activities that person was not authorized to perform.
    Rather, the problem was related to USDA inspection program personnel
    and the Japanese importer lacking familiarity with USDA's bovine EV
    requirements for Japan. In response to this incident, the
    establishments involved were immediately removed from the approved
    list, and extensive training has been conducted with all involved FSIS
    inspection program personnel. AMS and FSIS also have strengthened
    coordination between their personnel. Eligibility of both the
    establishment and the products for export must be confirmed by AMS
    prior to FSIS certifying export documents.

                               ALTERNATIVE FUELS

        Question. Mr. Secretary, I believe you agree that American
    Agriculture has a strong role to play in energy development, so please
    explain why USDA's investments in this area are going down instead of
    up.
        Answer. The fiscal year 2007 Budget supports an estimated $345
    million in loans, grants, research and other support for energy
    projects. These funds will support investments to encourage additional
    biofuels production, develop improved feedstocks and efficient
    conversion technologies and increase energy efficiency. The bioenergy
    incentives program, funded at $60 million in 2006, expires at the end
    of 2006.
        Question. What is the status of new technology and knowledge about
    feed stocks that U.S. farmers and rural business people can use to
    provide new, cleaner, and less costly, sources of energy for this
    country?
        Answer. Progress is being made on the development of technologies
    for converting cellulosic biomass to useable energy. Commercial pilot
    facilities for fermenting agricultural residues such as wheat straw and
    corn stover to ethanol are either operational (Iogen--Ontario, CA) or
    under construction (Abengoa--York, Nebraska).
        Companies are also scaling up new technologies for gasifying
    biomass and producing methane. For instance, Frontline Bioenergy (Ames,
    Iowa) and Chippewa Valley Ethanol Corporation (CVEC--Benson, Minnesota)
    announced that construction will begin this year on a facility to
    gasify distillers dried grains, and eventually corn stover. Their
    gasification unit will eventually displace over 90 percent of the
    natural gas now used at CVEC's Benson site. And Viresco Energy
    (Riverside, California) plans to build a pilot plant to gasify a
    mixture of coal and wood. Technology also exists to convert the product
    gas from biomass gasification to methanol or diesel fuel.
        Technology is also being developed to pyrolyze biomass at or near
    the farm and produce an energy-dense bio-oil. The bio-oil could then be
    transported to a central refinery for conversion into hydrogen, diesel
    fuel or even gasoline.
        In spite of this progress, however, significant technology
    development is needed before a sizable industry for producing energy
    from agricultural and/or woody biomass can be realized.
        Question. What are USDA research and development programs doing to
    assist that effort?
        Answer. The Agricultural Research Service (ARS) has a number of
    programs to develop technologies that will enable the growth of a
    sizable industry for producing energy from agricultural and/or woody
    biomass.
      --ARS-Peoria, IL has a number of projects for improving the
            efficiency of fermenting cellulosic biomass to ethanol.
      --ARS-Lincoln, NE and a number of other ARS facilities are involved
            in a critical project to understand the long-term impact of
            harvesting crop residues, such as corn stover, on farm soils.
      --ARS-Albany, CA is working to sequence the genome of switchgrass,
            and to develop genetic tools for breeding new varieties of
            switchgrass with superior traits as an energy feedstock.
      --ARS-Corvallis, OR and ARS-Wyndmoor, PA have partnered with the
            Western Research Institute to develop a portable gasifier for
            converting wheat and grass-seed straw into methane, rather than
            burning these residues in the field as is currently practiced.
      --ARS-Wyndmoor, PA and ARS-University Park, PA are field-testing a
            portable gasifier for switchgrass.
      --ARS-Florence, NC is developing a proposed program to gasify manure
            wastes into methane, thereby eliminating effluent lagoons and,
            at the same time, generating useful fuel.
      --ARS-Albany, CA is developing a proposed program to investigate the
            fundamental, biological mechanisms involved in the production
            of cell walls, the component of plants that is the basis of all
            ligno-cellulosic biomass. This research is necessary to enable
            the breeding of new plants that will significantly lower the
            cost of biomass-derived energy.
        Additionally, CSREES, through the National Research Initiative's
    Biobased Products and Bioenergy Production Research Program, supports
    activities which expand science-based knowledge and technologies that
    support the efficient, economical and environmentally friendly
    conversion of agricultural residuals into value-added industrial
    products and biofuels.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                              USDA SERVICE CENTERS

        Question. Since 1993, the county-based agencies have been
    implementing streamlining plans to cut red tape and co-locate offices
    in the same county, with the goal of providing one-stop service for
    USDA customers. However, we have also witnessed the erosion of this
    customer service objective, first with the replacement of local USDA
    Rural Development offices with area offices that serve multiple
    counties and more recently with the Farm Service Agency directive to
    State offices to identify offices that can be closed and consolidated.
        If it is necessary to consider consolidating local offices, isn't
    it appropriate to consider the convenience of keeping together all
    agency services related to customer needs in any specific Service
    Center?
        Answer. USDA utilizes the State Food and Agriculture Councils
    (SFACs) to provide a cross-agency, decision-making and communication
    forum for administering programs at the local level. We are encouraging
    FSA, NRCS, RD and all other agencies to work together in a spirit of
    cooperation to work with the SFACs to achieve the optimum network of
    local offices, staffing, training and technology.
        USDA is committed to delivering farm program services through the
    Service Center model and is exploring all ``shared space''
    opportunities where multiple USDA agencies can share space, supplies,
    mailroom, printing, conference room, common computer facilities, and
    basic office equipment.
        USDA is committed to a continued dialogue with State and
    congressional leaders to discuss how best to modernize the FSA county
    office system and the necessary steps required to improve its
    information technology (IT) infrastructure. The ultimate goal of this
    process is to increase the effectiveness of FSA's local offices by
    upgrading equipment, investing in technology and providing personnel
    with critical training. We are committed to working with our partners
    to ensure that America's farmers and ranchers continue to receive
    excellent service long into the future.
        Question. Why hasn't USDA approached this as a Service Center issue
    rather than a decision by just one of USDA's agencies?
        Answer. Each USDA agency is faced with individual resource concerns
    as well as infrastructure problems. Although many p our customers are
    the same, each agency also has distinctly different clientele. As you
    note, the Service Center Agencies already maintain different office
    structures. For example, in your State of Iowa, Rural Development
    maintains a network of 10 area offices while FSA maintains a presence
    in all 99 counties of the State.
        However, USDA is committed to delivering farm program services
    through the Service Center model and is exploring all ``shared space''
    opportunities where multiple USDA agencies can share space, supplies,
    mailroom, printing, conference room, common computer facilities, and
    basic office equipment.
        Question. How is the Department coordinating the multiple mission
    areas of local Service Centers?
        Answer. State Food and Agriculture Councils (SFACs) are the primary
    vehicles for administering programs at the local level. SFACs provide a
    policy-level, cross-agency, decision-making and communication forum to
    achieve USDA's goals and objectives.
        Furthermore, the Farm Service Agency (FSA) State Executive
    Directors (SEDs) are currently conducting local-level reviews of the
    efficiency and effectiveness of FSA offices in each State. The SEDs and
    State committees are forming review committees to better identify what
    the optimum network of FSA facilities, staffing, training and
    technology should be for each State within existing budgetary resources
    and staffing ceilings. Each SED is also exploring potential joint-
    effort opportunities with the Natural Resources Conservation Service
    and other USDA agencies.

                          COMMON COMPUTING ENVIRONMENT

        Question. The objective of the Service Center Modernization
    Initiative is to create an environment of one-stop quality service for
    customers of the Farm Service Agency, the Natural Resources
    Conservation Service, and the Rural Development agencies. The Common
    Computing Environment (CCE) is intended to enable the 3 agencies to
    share information technology to improve customer service. Since fiscal
    year 1996, USDA has been planning and deploying an integrated
    information system to replace several old systems in Service Center
    Agencies that could not share data. In March 2000, the Office of Chief
    Information Officer was given direct management responsibility for the
    CCE.
         Given that this effort has been underway for 10 years, has USDA
    made sufficient progress in reaching the objective number of shared
    information technology and ability to share and transfer data?
         Answer. USDA has made significant progress in reaching the shared
    information technology objectives. The shared technology platform, the
    Common Computing Environment (CCE), is in place. The platform allows
    USDA to maintain one standardized environment for use by the Service
    Center Agencies (SCAs). The platform is the foundation for on-going
    efforts to modernize individual SCA systems and business processes.
    Despite the fact that full modernization has yet to be achieved, the
    platform has provided several administrative and technological
    benefits. Examples of the benefits have been provided.
        [The information follows:]
    Common Administrative Functions
        Common computer technology on each of 50,000 agency and
    contributing partner desks, including shared software;
        Shared networks, making higher speed connectivity affordable for
    the SCAs; and
        Common IT security with the capability to manage from a single
    operation nationwide.
    Centralized Computing Technology
        Shared Storage Area Network (SAN) technology (5 locations) for
    tabular and geospatial data and backup/disaster recovery (full
    redundancy);
        Common eAuthentication portal for user validation in the SCAs; and
        Web Farm Technology (consolidated IT locations) developed and
    deployed to support Web access for employees and customers.
    Telecommunications Architecture and Operations
        Maintenance for phones and network routers and upgrades to data
    network and technology to meet future demands; and
        Transition to the Departments Universal Telecommunications Network
    (UTN)--component of the USDA Enterprise Architecture in fiscal year
    2006.
    USDA Data Center
        Data acquisition for Geographic Information Systems (GIS)--
    examples: Common Land Use (CLU) data for FSA, Soils data for NRCS; and
        Data acquisition for aerial/high altitude imagery for mapping and
    compliance review--example: NAIP photography.

         Question. How has the cost of the common computing environment
    been allocated among program areas?
         Answer. The cost of the Common Computing Environment (CCE) is
    allocated across the three Service Center Agencies. A formula based on
    the number of computers an agency has connected to the CCE network was
    derived for the allocation of $19,538,000 for base infrastructure. For
    fiscal year 2006, FSA has 40 percent of the computers, NRCS has 39
    percent, and RD has 21 percent. Agency-specific and interagency funds
    account for the remainder of the CCE costs. These funds are:
    $73,260,000 (FSA-specific), $11,025,000 (NRCS-specific), $3,960,000
    (RD-specific), and $1,188,000 (Interagency eGoverment).
         Question. Is there any evidence that producers have begun to
    embrace the web-based system of program delivery?
         Answer. The Service Center Agencies (SCAs) have begun to see
    increased producer interest in Web-based program delivery. Examples of
    this interest have been provided.
        [The information follows:]

        As of March 1, 2006, over 32,000 producers have obtained an
    eAuthentication Level 2 ID. This credential is required to access,
    sign, and electronically submit loan applications and to review the
    combined customer statement that uses data from each of the SCAs.
        For the 2005 crop year, Service Centers used the Web-based
    Electronic Loan Deficiency Payment (eLDP) system to process about 87
    percent of the LDPs. As of March 23, 2006, over 1.287 million
    applications have been processed, resulting in the payment of over
    $4.258 billion. Of these, 16,630 eLDP applications were submitted
    directly from producers resulting in the payment of $75.9 million.
        Nearly 5,800 producers self-enrolled for the Electronic Direct and
    Counter Cyclical Payment Program (eDCP) for the 2005 crop year. As of
    March 21, 2006, FSA has enrolled over 1.35 million contracts for the
    2006 crop year with nearly 10,000 producers enrolling electronically.
        Over 1,700 FSA customers regularly conduct business via the eForms
    Web portal. Electronic forms submission has grown from 54 in fiscal
    year 2002 to 2,965 in fiscal year 2005.
        The NRCS Soil Data Mart is averaging 12,000 downloaded soil surveys
    and 17,800 online reports viewed per month. In addition, about 1,400
    users per day are using the Web Soil Survey, saving staff time at the
    Service Centers.

                                 CROP INSURANCE

        Question. The Group Risk Insurance Plan (GRIP) has grown by leaps
    and bounds over the past 2 years because of the perception held by
    farmers that they have a better chance of collecting an indemnity with
    a GRIP policy than a standard yield or revenue product. Many critics of
    GRIP claim that the product, in its present form, does not work like
    insurance but like a lottery. They allege that, under this program, a
    farmer could experience a significant loss but not be due an indemnity
    payment. The exact opposite scenario could also be true--the policy
    could pay farmers an indemnity even though they have a bumper crop. I
    am told that these situations have already occurred.
        Has RMA looked into the question of how common these overpayments
    or underpayments relative to actual crop losses on a specific farm
    actually are, and if so, what has the Agency found?
        Answer. The Group Risk Income Protection (GRIP) plan of insurance,
    as with Revenue Assurance (RA) and Crop Revenue Coverage (CRC), is
    designed to protect growers against an unexpected decline in revenue,
    not merely against a yield shortfall. GRIP indemnities are triggered by
    the declining value of the harvest not the quantity harvested. This is
    important because indemnities can be triggered by large price declines
    even as the producer harvests a bumper crop. Likewise, a producer could
    have significantly reduced yields but not receive an indemnity if a
    large price increase moderates the loss of revenue.
        RMA has not specifically studied the performance of the GRIP plan
    of insurance; however, the agency contracted for an outside study of a
    related product, the Group Risk Protection (GRP) program. This review
    addressed the question about GRP's effectiveness in reducing a grower's
    risk. The results are relevant for GRIP because it uses the same yield
    data for determining guarantees and indemnities. The external review
    found that:
      --GRP, on average, provides substantial risk reduction to growers.
      --GRP tends to be more effective where individual yields are more
            homogenous across the county.
      --GRP tends to be more effective in the major production regions.
        Question. Could the problem be addressed by re-rating the policies
    or acquiring more accurate information about county-level yields?
        Answer. The potential for a grower to receive an indemnity when he
    or she did not suffer a loss, or vice-versa, is inherent to a group
    based policy. This cannot be changed by re-rating. However, accurate
    information about county level yields is important to the performance
    of GRP and GRIP. Consequently, GRP and GRIP is limited to those
    counties with at least 30 years of NASS yield history and a minimum
    threshold for number of growers. NASS county yield estimates are likely
    to be the most accurate in these counties.
        To ensure that the GRIP program is functioning as intended, an
    outside review will be conducted during this year.
        Question. Should USDA or Congress consider revoking the authority
    to offer this type of insurance coverage?
        Answer. No, the authority to offer group products should not be
    revoked. Group-based coverage offers a reasonable alternative to the
    individual-based policies. In some cases, such as for pasture and
    rangeland, group coverage is the only viable method for offering
    meaningful crop insurance. Many growers find that group-based products
    provide effective risk management protection at a significant cost
    savings relative to individual plans of insurance.
        Question. In both 2005 and 2006, the President's budget proposed to
    cut funds for the Federal crop insurance program to the tune of $130
    million annually, cutting both to the premium subsidies provided to
    farmers who buy crop insurance and payments to the private companies
    that deliver crop insurance to farmers.
        Has USDA or any other government agency ever conducted an analysis
    of the effect on the crop insurance program were those cuts to be
    implemented?
        Answer. Yes, the administration's 2007 budget proposal would link
    the purchase of crop insurance to the participation in farm programs,
    such as the direct and counter-cyclical payment programs. This proposal
    would require farm program participants to purchase crop insurance
    protection for 50 percent, or higher, of their expected market value or
    lose their farm program benefits. Currently participation in crop
    insurance is voluntary; however, producers are encouraged to
    participate through premium subsidies, which currently average about 59
    percent of the total premium. By linking crop insurance to other farm
    programs, we anticipate that an estimated 20 million additional acres
    would be brought into the crop insurance program. We also anticipate
    that insurance companies would benefit from this feature via increased
    business and potential underwriting gains. I will provide additional
    details.
        [The information follows:]

        To offset the increased costs stemming from the increased crop
    insurance program participation, several proposals are made for
    garnering savings. One proposal is to reduce premium subsidies by 5
    percentage points for coverage levels of 70 percent or below and 2
    percentage points for coverage levels of 75 percent or higher. The
    primary impact of this feature falls on producers who would be required
    to pay a larger share of the premium. It is expected that a small
    number of producers would move to a lower level of coverage to offset
    the higher costs. Another change being proposed is to reduce the
    delivery expense reimbursement rate by 2 percentage points for all
    policies above the CAT level of coverage. The proposal would also
    adjust the administrative fees required to obtain CAT coverage to make
    the fee more equitable between small and large producers. Lastly, the
    proposal would increase net book quota share to 22 percent (from the
    current 5 percent). This proposal would require the participating
    companies to ``reinsure'' 22 percent of their retained premium with the
    Federal Government rather than with commercial reinsurers. As an
    offset, the companies would receive a 2 percent ceding commission. In
    recent years, the companies have been retaining about 80 percent of the
    premium, for which they received almost $3.6 billion in aggregate
    underwriting gains between 1996 and 2005. Over this period, the
    companies have sustained an underwriting loss in only 1 year (2002),
    and that underwriting loss was less than $45 million. In 2005 alone,
    the companies are expected to receive an underwriting gain of
    approximately $900 million. Conversely, the Federal Government has
    experienced underwriting losses of about $1.6 billion over this period
    on the remaining 20 percent of business the companies have ceded back
    to USDA.

        Question. Has any outside consultant been hired to conduct such an
    analysis?
        Answer. RMA has not contracted with any outside consultants for a
    study of the potential impacts of the proposed program changes.
        Question. If there is such an analysis, I would like to be provided
    a copy of it. If no such analysis has been conducted, how does USDA
    know that these cuts would not be deleterious to the crop insurance
    program?
        Answer. The proposed reductions in premium subsidies to producers
    and payments to companies are relatively small. The anticipated cost
    savings are shared equitably among producers and companies and are
    necessary to offset the additional costs of increased participation in
    an era of ever-tightening budgets. For purposes of the proposal, the
    linkage requirement was assumed to increase total acreage in the
    Federal crop insurance program by an estimated 20 million acres, for a
    participation rate of about 84 percent. This is essentially the same
    level of participation achieved in 1995. However, the structure of the
    current farm program is substantially different from that which existed
    in 1995, in particular because of the availability of direct payments.
    It is likely that the availability of direct payments could result in
    participation that is somewhat greater than that assumed and
    experienced with the previous linkage effort.
        If enacted, the administration's proposal should result in a
    substantial increase in total premium volume due to (1) CAT
    policyholders moving to a buy-up level of coverage, and (2) the
    addition of an estimated 20 million currently uninsured acres to the
    program. With this increase in premium volume, companies should
    experience greater economies of scale, thereby lowering their per-
    policy costs of delivering the program. At the same time, delivery
    expense reimbursements on the larger premium volume will offset much of
    the impact of the reduction in the reimbursement rate. Similarly,
    larger overall underwriting gains (on the higher premium volume) will
    offset much of the increase in the net book quota share. Further, if
    more than 20 million acres are added to the program, it is possible
    that total payments to companies could in fact increase under this
    proposal.

                                     TRADE

         Question. Last year, the U.S. agricultural trade surplus (exports
    minus imports) was only $3.5 billion, the lowest figure since 1959.
    However, the President's fiscal 2007 budget proposes to cut the main
    USDA trade promotion program, the Market Access Program (MAP), by 50
    percent from its Farm Bill level.
        In light of the disappearing trade surplus, how can you justify
    such a cut?
         Answer. The proposal to limit funding for the Market Access
    Program in 2007 reflects the administration's efforts to reduce the
    Federal deficit. Reducing the deficit is a key component of the
    President's economic plan and will help to strengthen the economy and
    create more jobs. Farmers, ranchers, and other residents of rural
    America understand the importance of a healthy economy, which raises
    incomes and increases demand for their products. This and other deficit
    reduction measures will contribute to a more prosperous future for our
    citizens.
         It should be noted that, even if the program is limited to $100
    million in 2007, that level is still higher than the $90 million
    program level that was authorized for MAP prior to the last Farm Bill.
    Also, limiting the program will result in better targeting of the
    assistance to those products and organizations that have the greatest
    need for it and can use it most effectively.
         With regard to the balance of trade, U.S. agricultural exports are
    expected to reach a record high of $64.5 billion in 2006 and have grown
    22 percent since 2001. During the same period, agricultural imports
    have also grown. However, import growth over the past decade has been
    in processed foods and beverages, not farm products. As such, a lower
    agricultural trade surplus does not signal reduced export
    competitiveness of the farm sector, but rather American consumer
    preference for a wide variety of foods and vegetables, including those
    from foreign suppliers.
         Question. If that proposed cut to MAP were to be adopted by
    Congress, how would USDA plan to implement it by cutting equally from
    all U.S. cooperators in MAP, or by dropping some participants from the
    program?
        Answer. USDA would not be required to implement any changes to the
    current funding allocation process if the proposed limitation on MAP
    funds were adopted by Congress. MAP funds are allocated to program
    applicants using a competitive process involving quantitative,
    performance-based criteria that are published in the Federal Register
    each year. Changes in program participation would reflect the results
    of that competitive process and cannot be predicted accurately in
    advance.

                                    FOOD AID

        Question. If the President's proposal to zero out funding for the
    Public Law 480 Title I concessional loan program were to be enacted,
    that would mean that a portion of those funds are no longer available
    to transfer to the Food for Progress program.
        For each of the past 5 years, how much money has been transferred
    from Title I to the Food for Progress program?
        Answer. We will submit for the record a table that provides the
    amount of annual Public Law 480 Title I funding that was allocated to
    Food for Progress programming during each of the past 5 years.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                Millions of
                           Fiscal year                            dollars
    ------------------------------------------------------------------------
    2001....................................................            77.7
    2002....................................................  ..............
    2003....................................................            88.6
    2004....................................................            86.3
    2005....................................................            67.9
    ------------------------------------------------------------------------

        Question. What would the loss of those funds mean in terms of lost
    or cut-back programs on the ground in developing countries,
    particularly in terms of numbers of targeted recipients?
        Answer. The impact of the reduction in Title I funding for Food for
    Progress programming would be mixed. USDA would need to reduce the
    number of Food for Progress programs by 5-10 projects. Up to 50,000
    beneficiaries could lose the benefits of the agricultural development
    projects. However, the increase in funding proposed for Public Law 480
    Title II would offset that reduction. The additional funding for Title
    II would increase the number of beneficiaries under that program, who
    suffer from critical food aid needs. The additional recipients under
    the Title II program would likely exceed 50,000 in number and thereby
    fully offset the reduced number under Title I-funded Food for Progress.

                                AVIAN INFLUENZA

        Question. The Department of Agriculture (USDA) has requested a
    total of $82 million to prepare for and prevent outbreaks of avian
    influenza in the United States. These resources include various
    domestic activities, such as wildlife surveillance, diagnostics, and
    emergency preparedness. I am concerned about providing adequate support
    and resources to State and local entities, such as State departments of
    agriculture and animal health care workers, to be used to prepare for a
    potential large scale avian influenza outbreak.
         What is the total amount of funds from USDA that will go to States
    to plan and prepare for an avian influenza outbreak?
         Answer. Currently, APHIS is working with other Federal agencies,
    States, and industry to prevent and control H5 and H7 avian influenza
    (AI) in U.S. commercial broilers, layers and turkeys, their respective
    breeders, and the live bird marketing system. Of the amount requested
    in the low-pathogenicity avian influenza line item in the APHIS fiscal
    year 2007 budget, approximately $8.1 million has been set aside for
    cooperative agreements with the States to support H5 and H7 AI
    surveillance activities. Of the amount requested in the high-
    pathogenicity avian influenza line item in fiscal year 2007, APHIS has
    set aside approximately $9.2 million for cooperative agreements with
    the States to further enhance our AI surveillance activities.
         Question. Will some of the funding for avian flu be available for
    interstate coordination during an avian flu outbreak which would
    include State officials and poultry producers?
         Answer. The high-pathogenicity avian influenza (HPAI) line item
    request does not include funding for an avian influenza outbreak. The
    HPAI program is for avian influenza preparedness. In the event of an
    outbreak, we would work closely with State officials.

                                  FOOD SAFETY

        Question. The Food Safety and Inspection Service (FSIS) recently
    announced an initiative to reduce Salmonella levels in poultry.
    However, USDA currently does not have the authority to enforce
    Salmonella performance standards nor does it have authority to require
    recalls of contaminated meat and poultry.
        Will USDA implement deterrents or incentives for industry to make
    lowering Salmonella levels in poultry a priority? If not, how will USDA
    require industry to decrease Salmonella levels decrease?
        Answer. USDA's Salmonella initiative does provide incentives to
    industry to improve Salmonella controls.
        Under the initiative, FSIS will provide the results of its
    Salmonella performance standard testing to establishments on a sample-
    by-sample basis as soon as they become available. The more rapid
    disclosure of testing results under the initiative will allow
    establishments to identify promptly any need for improved process
    controls in slaughter or dressing operations and respond effectively.
        In addition, FSIS will post quarterly nationwide data for
    Salmonella on its Web site, as compared to the current practice of
    posting annually; conduct follow-up sampling sets as needed; and
    provide new compliance guidelines for the poultry industry. If a
    facility does not meet the performance standards on two consecutive
    sets, a food safety assessment will be conducted. Categorization of
    establishments based on Salmonella positive samples will allow the
    Agency to pursue a comprehensive strategy for combating the pathogen
    and provide the industry incentives to control the prevalence of
    Salmonella.
        After that year of review, FSIS will reassess its policy. FSIS will
    consider whether there are further actions that should be taken to
    ensure that establishments improve their control of Salmonella and
    further enhance public health protection. For example, FSIS would
    consider actions that would provide an incentive to industry to improve
    controls for Salmonella, such as posting on the Agency Web site the
    completed Salmonella sample sets for each establishment. FSIS would
    consider allowing establishments producing product classes with
    superior performance to conduct pilot studies testing whether line
    speeds could be increased above the current regulatory limits.

                RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

        Question. The President's budget would cut the Resource
    Conservation and Development Program budget in half to $26 million.
    This cut is done by eliminating over 225 coordinator positions and
    requiring the remaining 150 coordinators to serve multiple RC&D areas.
    In Iowa, this program has had widespread benefits in achieving such
    important activities as reducing erosion in the Loess Hills, installing
    dry hydrants for rural firefighters, and providing companies with seed
    money to start up rural companies that create jobs for rural
    communities.
        Why did the President's budget target this program which involves
    local leaders at the grassroots to solve critical needs for rural
    communities and which has leveraged large additional investments beyond
    the modest investment from the Federal Government?
        Answer. The administration recognizes that the RC&D coordinators
    and councils play an important role in protecting the environment in a
    way that improves the local economy and living standards. However, the
    Department of Agriculture, like every Federal agency, must share in the
    government-wide effort to control Federal spending. The RC&D program
    received a ``Results Not Demonstrated'' evaluation in the
    Administration's Program Assessment Rating Tool results last year and
    as a result, the administration is proposing program streamlining and
    cost-cutting measures. The President's fiscal year 2007 budget proposal
    will save $25 million by reducing the number of coordinator positions
    while maintaining the current number of authorized RC&D Areas
    nationwide.
                                     ______

                 Questions Submitted by Senator Byron L. Dorgan

                                RESEARCH BUDGET

        Question. In your testimony this morning, you said ``reducing the
    deficit is a critical part of the President's economic plan-Farmers,
    ranchers, and rural citizens know the deficit and burden of debt have a
    profound impact on the economy and the ability of future generations to
    participate in agriculture.''
        I agree with you. That's why I'm deeply disappointed that the
    administration has chosen to support tax cuts for the wealthiest of
    Americans over agricultural research and programs that benefit
    America's family farmers. The administration proposes to cut USDA
    discretionary spending by 6.5 percent over last year's funding levels.
    And last year's funding levels were themselves $500 million lower than
    the year before.
        In the past few weeks, I have met with dozens of farmers, ranchers,
    researchers, and community leaders who depend on USDA's research and
    programs and who believe agricultural research is an investment in the
    future of our farm economy. They ask me: ``How does the President
    expect us to get by without this research?''
        So I would ask you that same question: how does USDA expect
    America's farm economy to remain competitive in the face of these deep
    cuts in vitally important agricultural research?
        Answer. Research is necessary for the farm economy to remain
    competitive and a vital part of the American economy. The USDA
    recognizes that a strong economy based on sound Federal investments and
    reduced public debt is also vital to the American farm economy. In this
    light, the USDA has presented budget requests that focus on the highest
    priority issues and greatest opportunities. We are proposing new
    research to protect crops and livestock so that the United States will
    be a reliable trading partner and a competitive producer of food. We
    have proposed new animal protection research on the vexing problem of
    bovine spongiform encephalopathies and other transmissible spongiform
    encephalopathies. We are supporting new research to greatly enhance the
    production of bioenergy from cellulosic materials by modifying cell
    walls of plants. We propose to address the national crisis of obesity
    through new research. In these financially challenging times, we plan
    to pay for these initiatives by having focused and efficient research
    programs that address high priority needs.

                              DISASTER ASSISTANCE

        Question. In your testimony today, you said that ``USDA has made
    available $2.8 billion to assist those impacted by the hurricanes, of
    which $1.2 billion will be made available to agricultural producers
    through various programs . . . Total USDA aid to hurricane disaster
    victims comes to more than $4.5 billion.''
        I support emergency relief for those in the Gulf States who were
    hit by Hurricanes Katrina and Rita. When people fall on tough times, we
    have an obligation to help them. But what I do not support picking and
    choosing which producers who suffered a weather-related disaster will
    get help, and which will not.
        North Dakota had over 1 million prevented plant acres last year,
    due to excessive moisture. Parts of Bottineau County along the Canadian
    border received one-third their annual rainfall in just 1 day. Every
    county in North Dakota has been named a Primary or Contiguous Disaster
    Area. But there has been no support from this administration for a
    disaster assistance package that would help those producers.
        USDA's own prediction is that net farm income will drop nearly 25
    percent this year because of record high energy costs. I think that is
    optimistic. North Dakota State University estimates that average farm
    income in my State will fall 88 percent in 2006.
        Outside North Dakota, farmers and ranchers in the Midwest
    experienced one of their worst droughts in decades in 2005. Last year,
    Illinois experienced its third-driest year since records first started
    being kept in 1895. Parts of Missouri, Iowa, Wisconsin, Indiana, and
    Arkansas were nearly as bad. USDA's own estimate last summer was that
    agriculture losses from Hurricane Katrina would be $900 million, but
    that losses from drought will be over $2 billion.
        My office gets phone calls every day from producers who are barely
    hanging on. They are meeting with their banker to see if they can
    squeeze out another year on the farm, or if they will have to abandon
    the farming lifestyle and the farm they grew up with. These farmers who
    call me do not understand why Congress has not acted to help them. I
    don't understand, either.
        My question to you is, do you support an agricultural disaster
    package for farmers and ranchers outside of the Gulf Coast? If not, why
    not?
        Answer. This administration has been, and continues to be, a strong
    supporter of the Federal crop insurance program. Crop insurance should
    be our first line of defense against the financial impact of natural
    disasters. Farmers and rancher should be encouraged to protect
    themselves through the purchase of crop insurance rather than expecting
    ad hoc disaster assistance from the Federal Government.
        Nation-wide, 2005 crop losses were not as severe as originally
    expected. The loss ratio for crop insurance currently stands at about
    0.54, meaning that producers have received 54 cents in indemnities for
    each dollar of premium. This is a historically low level which reflects
    stronger than expected yields and prices.
        Furthermore, we would note that the hurricane damage in the Gulf
    Coast differs markedly from the modest production losses sustained
    nation-wide. Gulf Coast producers lost productive capacity through the
    destruction of poultry houses, nurseries, and green houses and
    environmental degradation of farm lands. The disaster assistance
    provided to the Gulf States reflects this and is largely intended to
    restore the productive capacity of this region.

                          VALUE-ADDED PRODUCER GRANTS

        Question. The 2002 Farm Bill authorized the Value-Added Producer
    Grant Program to receive $40 million in mandatory spending annually for
    the life of the farm bill. In fiscal year 2004 and 2005, the program
    request and the final appropriations was $15 million, a cut of roughly
    60 percent each year. The USDA request for fiscal year 2006 was again
    $15 million, but in the final appropriations bill we were able to
    increase that amount to $20 million, still just half of the mandated
    farm bill amount, but moving in the right direction.
         What is USDA doing to ensure that this program is administered in
    a manner consistent with Congressional intent expressed in the
    manager's report language in the Farm Bill, which states that the
    program should: fund a broad diversity of projects, projects likely to
    increase the profitability and viability of small and medium-sized
    farms and ranches, project's likely to create self-employment
    opportunities in farming and ranching, and project likely to contribute
    to conserving and enhancing the quality of land, water and other
    natural resources?
        Answer. USDA published regulations for the Value-Added Producer
    Grant program in 2004 and publishes an annual notice soliciting
    applications. These documents provide detailed information on how the
    program is administered, including how applications are processed and
    scored. Lists of grant recipients and brief descriptions of their
    projects are available on-line at the USDA Rural Development website.
    The descriptions demonstrate that the program has funded projects with
    a wide variety of agricultural commodities combined with innovative
    ways to add value. In 2004, USDA Rural Development put program
    performance measures into place, and preliminary data on these measures
    is now being reported and collected. This data indicates that many
    grant recipients have experienced increased revenue and an expanded
    customer base for their value-added products, which is consistent with
    the Congressional intent that is expressed in the Conference Report on
    the 2002 Farm Bill.
         Question. Over the life of the existence of the VAPG program, how
    many total project proposals has USDA received?
        Answer. The Value-Added Producer Grant program was initially
    authorized by the Agriculture Risk Protection Act of 2000. Since this
    authorization, there have been 2,919 applications between 2001 and
    2005.
        Question. What was the total value of requested funds? Of these,
    how many proposals were funded, and what were the actual funding
    amounts?
        Answer. The total value of funds requested in the 2,919
    applications is $363,439,756. A total of 756 applications received
    $116,272,496 in funding.

                    NATIONAL VETERINARY MEDICAL SERVICES ACT

        Question. Many rural areas of this country face a severe shortage
    of veterinarians. I understand that there are one-half as many
    veterinarians available to respond in the event of an animal disease
    outbreak as there were 20 years ago. The National Veterinary Medical
    Service Act would help solve this shortage by providing loan repayments
    to veterinarians who agree to practice in areas with a serious
    veterinary shortage. Why is the National Veterinary Medical Services
    Act not a functioning program within your department despite the
    appropriation it received for fiscal year 2006?
        What steps are necessary to begin this program?
        Answer. USDA is exploring potential financial management strategies
    both within the Department and in collaboration with other Federal
    agencies in order to effectively run a loan repayment program. To
    evaluate these and other programmatic issues presented by the National
    Veterinary Medical Services Act, CSREES has constituted the National
    Veterinary Medical Services Act working group to develop potential
    program management strategies. The working group has met on four
    occasions and is exploring alternative strategies for managing National
    Veterinary Medical Services Act. We are working to ensure a well
    thought out program plan which includes collaborations with veterinary
    schools and other stakeholders to develop consensus regarding the
    candidate eligibility requirements, and metrics to support prioritized
    and weighted needs within the veterinary need areas identified within
    the Act. A draft program management proposal is presently being
    reviewed.
        Question. How long do you anticipate it will take to begin this
    program?
        Answer. CSREES anticipates that the processes required to begin
    this program will be completed in approximately 18 months.

                            APHIS BLACKBIRD CONTROL

        Question. Various species of blackbirds cause an estimated $200
    million in direct agricultural damage to a host of crops, including
    sunflower in my State of ND. Many urban areas and airports have serious
    problems as well.
        Please describe efforts in the Department to deal with this
    increasingly serious problem of what appears to be an accelerating
    population.
        Answer. We are undertaking a variety of actions to deal with
    blackbird damages. Scientists at APHIS' National Wildlife Research
    Center (NWRC) are studying ways to refine damage abatement methods and
    develop new methods to reduce blackbird damage to sunflower crops in
    the northern Great Plains. Of note, NWRC discovered two promising
    chemical compounds that might discourage blackbirds from feeding on
    sunflower. APHIS also conducts an annual cattail management program in
    North Dakota and South Dakota to disperse large concentrations of
    blackbirds from sunflower production areas. In addition, APHIS helps
    farmers, homeowners, and municipalities nationwide with blackbird-
    related problems. The agency develops site-specific management plans
    for airports to address several wildlife hazard issues, including those
    associated with blackbirds.
        Question. Damage to ripening sunflower in the Dakotas and Minnesota
    is as high as $20 million annually. Through this Subcommittee, I have
    been successful in adding funding to enhance blackbird control efforts
    in North Dakota. Yet APHIS has confirmed to my office that the agency
    is spending less than 50 percent of what it did just 2 years ago on
    this problem despite my efforts to provide direct funding for this
    purpose.
        What is the rationalization for diverting funds away from this
    important purpose?
        Answer. In 2003, Congress earmarked $368,000 for blackbird control
    plus $240,000 to conduct an environmental impact study (EIS) and
    $100,000 for cattail management activities. In 2005, Congress earmarked
    $368,000 for blackbird control efforts. In addition, APHIS provided
    $77,000 net in 2005 to ensure the highest level of service to sunflower
    producers with blackbird problems. APHIS has not diverted earmarked
    funds from this program and will continue to work with the National
    Sunflower Association to address all concerns. Earmarked funding for
    the continuation of these efforts in 2006 is $377,000.

                                 2007 FARM BILL

        Question. A number of farm and commodity organizations have
    endorsed proposals to extend the 2002 Farm Bill until after the
    completion of the latest round of WTO trade negotiations.
        Do you support extending the 2002 Farm Bill? If not, why not?
        Answer. I believe the appropriate approach under current
    circumstances is to proceed to develop a new 2007 farm bill which
    addresses the best interests of our producers and taxpayers. An
    extension of the 2002 Farm Bill until after WTO negotiations are
    complete would put us in a more reactionary rather than proactive
    stance.
        Question. I understand you have participated in a number of Farm
    Bill listening sessions all over the United States. When will you issue
    a final report on those listening sessions?
        Answer. A series of issue papers that summarize information and
    comments received in the Farm Bill forums around the country have been
    completed and were made available on March 29, 2006. We did obtain a
    great deal of input and a diverse range of ideas and comments which
    will merit further study as we attempt to focus on what are the most
    critical concerns to address in fashioning a new Farm Bill. As part of
    that process, I have asked Dr. Keith Collins, our Chief Economist, to
    develop a number of documents based on various themes that will provide
    a straight forward, unbiased analysis. We will post these documents on
    the USDA website and share them with all stakeholders.

                         STATE MEAT INSPECTION PROGRAM

        Question. The 2002 Farm Bill directed USDA to conduct a
    comprehensive review of State meat and poultry inspection programs and
    to report to Congress on these activities by the Food Safety and
    Inspection Service.
        What is the status of this report?
        Answer. USDA provided written interim updates on the Agency's
    review of State meat and poultry inspection programs to the House and
    Senate Agriculture Committees in September 2004, and again in July
    2005.
        On-site reviews of State Meat and Poultry Inspection programs have
    been completed for 20 of the 28 States. Fourteen of those States have
    been determined ``at least equal to'' the Federal inspection program,
    with Wyoming and Utah currently on deferred status. On February 7,
    2006, FSIS completed on-site reviews of New Mexico, North Carolina,
    Oklahoma, and South Carolina, but final reports for these four States
    have not yet been completed. The 8 remaining on-site reviews will take
    place in 2006. In April, on-site reviews are scheduled for Indiana,
    Louisiana, Maine, and West Virginia.
        Question. I understand that all 28 State programs have had annual
    record reviews and that the majority of them have had on-site reviews.
    Is there a preliminary assessment on, and recommendations for, Congress
    on State meat and poultry inspection programs?
        Answer. At this time, we have not conducted on-site reviews in 8
    States. USDA will not make recommendations to Congress on State meat
    and poultry inspection programs until all on-site reviews have been
    completed and evaluated.

                              BEEF IMPORTS AND BSE

        Question. I have heard from cattle producers in North Dakota who
    are concerned about USDA's approval of beef imports from Japan. As you
    know, the prevalence of BSE in Japan is many times greater than that in
    the United States.
        Many U.S. consumers believe that, because Japan requires testing
    for BSE of all meat intended for domestic consumption, meat exported
    from Japan to the United States will be also tested for BSE. However,
    the final rule adopted by USDA does not require such testing.
        How much, if any, Japanese beef coming into the United States is
    being tested for BSE, either by Japan or by the United States?
        Answer. The final rule, published in the Federal Register on
    December 14, 2005, established the conditions under which certain types
    of beef may be imported from Japan. The regulations do not require that
    the boneless beef be derived from animals that were tested for BSE. It
    is important to note that the available tests for BSE are not
    appropriate as food safety indicators.
        Question. Based on USDA's actions relative to importing beef from
    Canada, there is a presumption by the American public that meat coming
    from a country with a BSE-infected herd will be from younger cattle.
    However, USDA's final rule governing the importation of Japanese beef
    appears to put no such age limits on the beef imported from Japan,
    despite the fact that Japan restricted U.S. beef imports to cattle 20
    months of age and younger. This suggests that we should have more
    stringent rules regarding Japanese beef coming into the United States
    than we currently have.
        Does USDA consider it necessary to impose an age restriction on
    imports of Japanese beef similar to the restrictions previously placed
    on American beef exports to Japan?
        Answer. USDA did not include an age restriction in the import
    requirements for whole cuts of boneless beef from Japan. APHIS
    established the requirements for allowing the import of whole cuts of
    boneless beef from Japan based on a thorough risk analysis. BSE studies
    in cattle have not detected infectivity in boneless beef, which is what
    is eligible for import, regardless of the age of the animal. For these
    reasons, we consider whole cuts of boneless beef to be inherently low-
    risk for BSE and determined that they can be safely traded provided
    that measures are taken to prevent cross-contamination during
    processing.
        Question. What is USDA's position on allowing private testing of
    beef for BSE by U.S. producers and processors?
        Answer. Given the consequences and governmental actions that can
    result from BSE testing of animals, USDA believes that such testing is
    an inherently governmental function that must be conducted by Federal
    and State laboratories. We would also like to clarify that BSE tests
    are not conducted on cuts of beef. Rather, the tests are performed on
    brain tissue taken from dead or slaughtered cattle to diagnose the
    presence of BSE in that animal.
        Question. Why are the BSE importation rules not being changed to
    better reflect the current status of nations the U.S. imports beef
    from?
        Answer. The APHIS regulations concerning BSE-related restrictions
    have been changed over the past year to reflect both the status of
    certain countries regarding BSE and the currently accepted scientific
    guidelines for appropriate risk mitigations on various products.
    Further, APHIS regulations are consistent with international guidelines
    on BSE.

                                     GIPSA

        Question. There have been very disturbing reports about the failure
    of USDA's Grain Inspection, Packers, and Stockyards Administration to
    properly investigate claims of wrongdoing.
        Please tell me the steps you are taking to restore rural America's
    confidence in GIPSA and how you intend to make sure this agency
    fulfills its proper oversight role.
        Answer. GIPSA intends to implement all recommendations in the OIG
    report. GIPSA has already issued policy directives in response to
    several of the recommendations and is initiating a review process to
    ensure that the directives are being followed and implemented properly.
        However, GIPSA has gone further than just the OIG recommendations.
    For example, the agency has requested a full scale organizational
    review to provide recommendations on how to improve the agency's
    operational effectiveness. Also, the new GIPSA Administrator recently
    ordered an Office of Personnel Management-administered Organizational
    Assessment Survey. The survey gives employees an anonymous opportunity
    to let the Administrator know what they think about the organization on
    a range of topics. Results will be used to make decisions about work
    environment improvements in the program and enhance its organizational
    effectiveness. The Administrator is also working to develop an
    organizational culture to ensure at all levels a recommitment to OIG
    and GAO recommendations and to redirect resources to achieve mission-
    critical activities.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                              DISASTER ASSISTANCE

        Question. My first question pertains to the budget's assumption
    that there will be no ad hoc disaster relief spending for farmers this
    year. On January 26, 2006, your office announced that it would
    distribute $1.2 billion to producers that sustained losses due to
    Hurricane Katrina. This spending will go to producers in Mississippi,
    Florida, Louisiana, and other Gulf Coast States. However, as you know,
    there were natural disasters in many parts of the country that hurt
    producers significantly. In my home State of Illinois and many other
    parts of the Corn Belt, producers experienced one of the worst droughts
    since modern records have been kept. Almost every county in Illinois
    was declared a primary disaster area. According to crop indemnity
    statistics, Illinois yields were down significantly and indemnities
    rose.
        I would like an answer as to why emergency funds have not been
    directed to producers in my State, and I would like the relevant branch
    of the USDA to provide an estimate of the amount of losses sustained
    State-by-State due to natural disasters this past year.
        Answer. Yields in Illinois were down in 2005 when compared to the
    record production of 2004. However, when compared to historical
    averages, crop losses in Illinois were not as severe as expected.
    Current crop insurance data indicates that the loss ratio for Illinois
    is about 0.50. By contrast, the loss ratio in Florida stands at nearly
    3.0, the highest in the Nation. The difference in losses becomes even
    more apparent when you consider that nearly 85 percent of Illinois
    crops are insured at a 70 percent or higher coverage level meaning that
    the majority of producers needed a loss of just 10 to 30 percent to
    qualify for an indemnity. By contrast, less than 18 percent of Florida
    crops are insured at such high coverage levels. In fact, over 63
    percent of Florida crops are insured at the catastrophic level meaning
    they needed to sustain losses in excess of 50 percent to qualify for an
    indemnity.
        At the present time we do not have a break-down of losses sustained
    State-by-State due to natural disasters. However, the Risk Management
    Agency does have a break-down of losses sustained State-by-State due to
    all causes of loss; which may include losses stemming from price
    declines.
        [The information follows:]

                                                            FEDERAL CROP INSURANCE CORPORATION CROP YEAR STATISTICS FOR 2005 AS OF 3/20/2006
                                                                                     [Nationwide Summary--By State]
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Policies
                           State                         Policies Sold      Earning        Policies        Net Acres       Liabilities      Total Premium      Premium        Indemnity       Loss
                                                                            Premium       Indemnified       Insured                                            Subsidy                       Ratio
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    ALABAMA...........................................          13,358           6,175           1,275       1,037,905        266,638,428      30,294,966      18,286,761      14,719,917        .49
    ALASKA............................................              37              22  ..............           5,864            419,584          53,432          45,525  ..............  .........
    ARIZONA...........................................           2,109             973              72         381,969        150,917,945       8,497,319       5,256,239       1,877,860        .22
    ARKANSAS..........................................          33,456          17,706           3,730       4,564,203        489,344,042      45,621,410      33,525,853      27,975,089        .61
    CALIFORNIA........................................          32,945          24,939           3,140       3,817,389      3,322,510,070     169,072,162     120,901,931      79,763,804        .47
    COLORADO..........................................          36,022          17,140          10,117       3,928,423        579,414,985      84,784,549      48,770,711      96,305,825       1.14
    CONNECTICUT.......................................             411             296              40          22,152         70,382,422       3,517,559       2,376,180         622,699        .18
    DELAWARE..........................................           1,629           1,170             426         263,145         45,150,127       4,576,175       2,967,234       2,695,938        .59
    FLORIDA...........................................          17,886          14,491           3,612       1,373,469      2,978,645,459     106,546,097      77,499,714     310,683,797       2.92
    GEORGIA...........................................          34,796          14,321           3,467       2,449,745        727,871,287      78,312,292      48,135,009      56,789,355        .73
    HAWAII............................................             140             138               5          26,506         77,903,217         913,243         625,013         387,341        .42
    IDAHO.............................................          11,150           6,321           1,426       1,849,657        536,046,499      42,134,361      24,522,855      23,595,390        .56
    ILLINOIS..........................................         135,200         110,759          23,902      15,916,643      3,939,276,514     277,222,446     149,641,601     137,614,012        .50
    INDIANA...........................................          51,866          41,996           6,900       7,703,368      2,002,619,812     163,300,587      87,078,250      25,001,170        .15
    IOWA..............................................         151,329         127,408          12,734      19,909,552      4,513,906,738     310,561,169     166,880,925      67,947,493        .22
    KANSAS............................................         237,020         123,906          33,215      16,403,797      1,894,187,392     261,253,464     150,721,768     117,836,089        .45
    KENTUCKY..........................................          21,908          12,410           2,242       1,848,103        399,460,535      34,702,791      20,523,436      16,478,773        .47
    LOUISIANA.........................................          24,268           9,471           1,739       2,645,190        386,339,172      33,641,733      23,162,354      16,250,621        .48
    MAINE.............................................             670             518             160         100,357         60,150,179       5,087,398       3,530,434       5,573,387       1.10
    MARYLAND..........................................           5,563           4,179             804         750,124        175,680,023      15,024,802       9,883,561       4,266,926        .28
    MASSACHUSETTS.....................................             800             604             104          26,829         47,248,511       2,454,178       1,715,709       2,239,041        .91
    MICHIGAN..........................................          28,560          20,759           2,815       3,571,061        923,476,088      74,022,000      44,997,976      15,860,243        .21
    MINNESOTA.........................................         123,856          82,367          14,838      16,248,086      3,137,522,415     284,883,602     159,009,913     131,820,332        .46
    MISSISSIPPI.......................................          16,405           7,265           1,194       3,200,937        423,650,399      37,416,582      24,606,293      16,611,379        .44
    MISSOURI..........................................          76,164          46,459          13,414       7,039,822        970,677,140     111,472,976      69,187,614      74,237,351        .67
    MONTANA...........................................          39,785          22,567           3,326      33,915,723        672,585,090      96,239,181      56,274,382      24,573,063        .26
    NEBRASKA..........................................         159,011          95,153          21,766      14,121,474      2,726,193,994     253,899,361     141,880,921      79,564,839        .31
    NEVADA............................................             152             115              32          38,102         13,967,262       1,023,211         595,975         763,228        .75
    NEW HAMPSHIRE.....................................             118              98              17           8,121          9,515,182         381,105         275,311         490,792       1.29
    NEW JERSEY........................................           1,521           1,067             129         156,939         87,457,732       3,486,846       2,854,527       1,413,404        .41
    NEW MEXICO........................................           3,615           1,763             229         551,108         80,983,767      10,635,155       6,990,003       2,430,038        .23
    NEW YORK..........................................           6,329           4,340             658         714,682        233,205,271      17,854,230      12,421,731      12,031,267        .67
    NORTH CAROLINA....................................          35,045          19,037           4,783       3,101,172        906,615,258      77,458,243      46,861,372      63,726,912        .82
    NORTH DAKOTA......................................         170,987          74,758          26,596      20,393,248      2,032,938,321     308,384,516     178,545,676     222,427,856        .72
    OHIO..............................................          51,177          40,288          11,083       5,742,109      1,336,152,625     109,260,601      59,310,152      44,364,624        .41
    OKLAHOMA..........................................          36,002          19,698           6,453       4,668,500        408,355,429      60,183,880      36,530,873      26,770,647        .44
    OREGON............................................           6,082           3,506           1,080         878,217        544,055,132      18,199,764      11,366,471      25,330,774       1.39
    PENNSYLVANIA......................................          15,281          11,410           2,383       1,117,322        249,867,340      29,841,007      19,260,202      14,811,482        .50
    RHODE ISLAND......................................              57              36               6           1,529            840,333          60,232          45,452          55,859        .93
    SOUTH CAROLINA....................................          10,142           5,404           1,312       1,057,078        273,512,449      28,391,120      17,924,781      18,181,566        .64
    SOUTH DAKOTA......................................         112,973          62,641          19,023      13,583,329      1,618,226,090     230,818,186     134,592,001     116,288,325        .50
    TENNESSEE.........................................          16,646           9,217           1,179       1,865,720        651,254,289      32,535,870      22,291,662      12,693,138        .39
    TEXAS.............................................         172,730          74,337          16,955      13,604,810      1,988,774,231     315,743,910     198,748,630     146,587,572        .46
    UTAH..............................................           1,172             847             173         173,209         21,421,230       2,625,837       1,650,607       2,846,260       1.08
    VERMONT...........................................             596             509              43          72,085         16,753,118       1,201,826         837,124         329,444        .27
    VIRGINIA..........................................          12,238           6,745           2,008         970,105        271,737,055      23,357,692      14,259,115      14,251,573        .61
    WASHINGTON........................................          16,260          11,823           2,072       2,403,707      1,050,845,453      48,835,523      31,421,700      21,611,628        .44
    WEST VIRGINIA.....................................             942             494              84          45,381         11,247,813       1,285,520         870,190         641,063        .50
    WISCONSIN.........................................          37,485          28,708           5,471       4,053,136        857,353,335      80,504,835      47,060,824      35,885,299        .45
    WYOMING...........................................           6,371           3,968             869       7,490,239         93,006,210      10,534,970       6,466,884       6,034,049        .57
                                                       ---------------------------------------------------------------------------------------------------------------------------------------------
          Grand Total.................................       1,970,265       1,190,322         269,101     245,811,341     44,276,302,992   3,948,109,914   2,343,189,425   2,141,258,534        .54
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

        The issue of rural development is of serious concern to me. I just
    don't see how this budget demonstrates a commitment to the needs of
    rural America. Here's one item that jumps out at me: consolidation of
    Farm Service Agency (FSA) offices. I continue to be concerned that
    there are signals going out to State FSA directors that they will be
    able to shutter FSA offices.
        Consolidating these offices would mean that farmers have to spend
    more time driving around to access the essential services provided by
    FSA offices, and would result in a direct decrease in these services.

                              FSA OFFICE CLOSURES

        Question. The issue of rural development is of serious concern to
    me. I just don't see how this budget demonstrates a commitment to the
    needs of rural America. Here's one item that jumps out at me:
    consolidation of Farm Service Agency (FSA) offices. I continue to be
    concerned that there are signals going out to State FSA directors that
    they will be able to shutter FSA offices.
        Consolidating these offices would mean that farmers have to spend
    more time driving around to access the essential services provided by
    FSA offices, and would result in a direct decrease in these services.
        First, I would like to know what mechanism the Secretary proposes
    for State authorities to be given discretion to close FSA offices.
    Also, I would like the Secretary to respond in unequivocal terms that
    should State or Federal authorities choose to consolidate FSA offices,
    that Members of Congress be consulted. I would like to know what plans
    the Secretary has for keeping Members in the loop fully through the
    process.
        Answer. The Department and the Farm Service Agency (FSA) is
    committed to meeting the needs of farmers and ranchers in the 21st
    Century, and wisely investing in our employees, technology and
    equipment will only improve customer service delivery. We are also
    committed to coordinating with Congress, stakeholders, local groups and
    customers to ensure the Agency offers the best service possible.
        FSA is working with the State Executive Directors (SEDS) for each
    State. FSA is asking each SED to conduct an independent local-level
    review of the efficiency and effectiveness of FSA offices in their
    State. SEDs and State Committees will form a review committee to
    identify what the optimum network of FSA facilities, staffing, training
    and technology should be for your State within existing budgetary and
    staffing resources. Further, SEDs will explore potential joint-effort
    opportunities with the Natural Resources Conservation Service and other
    USDA agencies.
        There is no comprehensive national plan or formula for identifying
    the optimum network of FSA offices. Each State will review its own
    county office system before submitting recommendations for technology
    upgrades, staffing, training and facilities.
        As recommendations are received from each State, FSA will hold
    public hearings and coordinate communications efforts with area
    farmers, ranchers, and stakeholders. If the office closure or
    consolidation moves forward, FSA will notify the appropriate members of
    Congress, including those on the Appropriations Subcommittees.
        The Department is committed to a continued dialogue with State and
    congressional leaders to discuss how best to modernize the FSA county
    office system and the necessary steps required to improve its
    information technology (IT) infrastructure. The ultimate goal of this
    process is to increase the effectiveness of FSA's local offices by
    upgrading equipment, investing in technology and providing personnel
    with critical training. Optimizing the county office structure
    consistent with IT modernization is absolutely essential if the
    Agency's tradition of excellent customer service is to be maintained.
                                     ______

                   Questions Submitted by Senator Tim Johnson

                            IMPORTS OF JAPANESE BEEF

        Question. When Japan opened its market to U.S. exports of beef from
    animals under 20 months of age, the U.S. simultaneously opened up its
    market to a broad range of beef from Japan, including beef from animals
    over 30 months of age. Japan implemented its ruminant-to-ruminant feed
    ban in 2001, and has had more than 20 cases of Bovine Spongiform
    Encephalopathy (BSE).
        Can you explain how the U.S. import standard for beef from Japan
    meets the standards of the World Organization for Animal Health (OIE)
    for mitigating the risk of spread of BSE?
        Answer. The OIE guidelines provide for three possible BSE
    classifications for an exporting country: negligible risk, controlled
    risk, and undetermined risk, with export conditions increasingly
    stringent as the status of a region moves from negligible risk through
    controlled risk to undetermined risk. The import conditions for whole
    cuts of boneless beef from Japan, including the requirements for
    specified risk material removal and restrictions on stunning and
    pithing, are consistent with OIE's criteria for meat exported from
    controlled-risk regions.
        Question. How does this import standard take into account the fact
    that science is still evolving regarding the question of whether or not
    the prions responsible for BSE infection may be found in sciatic nerve
    tissue and muscle cuts of meat?
        Answer. APHIS recognizes that ongoing research with increasingly
    sensitive detection measures may find the presence of abnormal prions
    in different tissues. This does not negate the previous research
    studies nor the years of epidemiological evidence that demonstrate the
    lack of infectivity in muscle meat. The incidence of BSE worldwide
    continues to decrease, providing evidence that the established control
    measures are working. These control measures are based on previous
    research and epidemiological evidence, and demonstrate that this
    research has identified those tissues that contain essentially all of
    the relevant infectivity in cattle tissues.
        Question. Does this opening to beef from a country with a feed ban
    since 2001 comply with USDA's earlier position that risk mitigation
    required the existence of a feed ban for a minimum of 7 years?
        Answer. A feed ban in relation to the definition of a BSE-minimal
    risk region--which is not relevant to the import of boneless beef from
    Japan--requires that a minimal-risk region should maintain risk
    mitigation measures adequate to prevent widespread exposure and/or
    establishment of disease, including the fact that a ruminant-to-
    ruminant feed ban is in place and is effectively enforced. There is no
    time frame specified.
        Question. Why did the United States agree to impose less stringent
    import standards for meat from a country with BSE problems than that
    country agreed to impose on our exports?
        Answer. Japan requested that the USDA consider allowing the
    resumption of beef imports from Japan based on the safeguards they had
    implemented to prevent and control BSE. APHIS conducted a thorough risk
    analysis to evaluate this request, and determined that the importation
    of whole cuts of boneless beef could be allowed while continuing to
    protect the United States against the introduction of BSE.

                              IMPORTS FROM CANADA

        Question. In January of this year, Canada confirmed the detection
    of another animal infected with BSE in Alberta. The animal in question
    was born 3 years after Canada imposed its ruminant-to-ruminant feed
    ban. In addition, in December of last year, USDA's Inspector General
    confirmed that Canadian beef inspection officials were still not
    enforcing certain measures required of them in order to qualify for
    equivalence to the U.S. inspection system, despite the fact that USDA
    originally identified these problems in the Canadian system as early as
    2003. Yet FSIS is only now developing and implementing protocols to
    evaluate deficiencies in the Canadian system.
        In light of these developments, is USDA considering re-evaluating
    its Canadian import policy?
        Answer. USDA remains confident in the animal and public health
    measures that Canada has in place to prevent BSE, combined with
    existing U.S. domestic safeguards and additional safeguards outlined in
    the final rule recognizing Canada as a minimal-risk region for BSE.
        Question. Do you feel there are any additional safeguards that may
    be needed in our import regulations to account for the discovery of an
    infected animal Canadian born after the feed ban, and the continued
    deficiencies in Canada's meat inspection system?
        Answer. USDA feels that the safeguards currently in place are
    sufficient to protect public health against BSE. USDA requires that all
    foreign countries that export meat and poultry to the United States
    must have an inspection system equivalent to the one in this country.
    This means that all of our trading partners must meet our domestic
    regulatory standards, including the ban on specified risk materials
    (SRMs) and the prohibition of non-ambulatory disabled cattle from the
    human food supply.
        Canada has SRM removal requirements that are virtually identical to
    the current U.S. regulations. The only difference is that Canada does
    not consider tonsils to be SRMs in cattle less than 30 months of age.
    However, all meat exported from Canada to the United States must have
    the tonsils removed, pursuant to U.S. regulations.
        Question. If you don't believe any modifications in our import
    regulations are needed, why not?
        Answer. USDA remains confident in the animal and public health
    measures in place in both Canada and the United States. With respect to
    BSE, risk mitigation is not tied to the success or failure of one
    individual measure. It relies on an interlocking sequence of risk
    mitigation measures that provide an overall measure of risk protection.
    The Canadian BSE risk assessment evaluated the total effect of all of
    these measures, and was not based on one individual measure.

                           COUNTRY OF ORIGIN LABELING

        Question. American cattle producers often argue that one of the
    most important steps that could boost their competitiveness at home and
    abroad would be to differentiate their product to consumers as meat
    exclusively from animals born and raised in the United States. In fact,
    customers in some of our most important export markets are also
    demanding source verification of U.S. meat exports. Yet country of
    origin labeling is still not mandatory for U.S. meat products, and
    there is no way for consumers to distinguish whether meat packed in the
    United States is from U.S. animals or foreign animals.
        Does USDA see mandatory country of origin labeling for meat,
    including information on animal origin, as a competitive advantage for
    U.S. producers?
        Answer. Evidence from the marketplace suggests that the willingness
    of consumers to pay for information about the origin of their food is
    not high. If market premiums for country of origin information were
    available, there would be strong incentives for the industry supply
    chain to provide that information voluntarily to consumers. Since the
    level of voluntary labeling for country of origin of U.S. foods is
    minimal, the willingness of consumers to pay for the information
    appears to be small. That being the case, there most likely would be
    minimal competitive advantage for U.S. producers under a mandatory
    program.
        Question. If export customers are demanding such information,
    shouldn't U.S. consumers have access to the same information about the
    food they eat?
        Answer. Many groups, including consumers and industry associations,
    have expressed an interest in country of origin labeling. In general,
    providing more information to consumers to make informed purchase
    decisions is better than less or no information. If the costs of
    providing the additional information exceed the benefits, however, then
    there is no economic rationale for providing it.
        Question. What can USDA do to help ensure that U.S. producers can
    differentiate their product in the market?
        Answer. There are existing user-fee programs administered by USDA
    that address this issue, such as the Process Verified Program. Under
    this program, individuals can request that USDA verify live animal or
    product attributes, including the source of their animals. USDA's
    voluntary marketing programs are currently assisting U.S. producers in
    differentiating their products in domestic and international
    marketplaces.

                RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

        Question. I am concerned for the President's budget request for the
    Resource, Conservation, & Development program. RC&D leverages $8 in my
    community for every $1 the Federal Government invests. What other
    programs in your agency budget bring this type of return on investment
    to rural areas?
        Answer. USDA delivers a variety of rural economic development, farm
    support, research, conservation, and forestry programs that collaborate
    closely with local communities and landowners to address their locally
    identified priorities. Many of these programs cost share the financial
    and technical assistance costs with State and local governments, and
    the private sector, to more cost effectively deliver benefits for local
    communities.
        Question. It is my understanding that while we level funded RC&D
    that the following States lost funds in your new resource based
    allocations. Can you tell us what factors you used to determine the
    resource allocations? I note that States served by Members of this
    Subcommittee like Missouri, Kentucky, Kansas, California, Iowa,
    Illinois, and North Dakota lost funding under this process.
        Answer. State RC&D allocations are now based on 19 resource concern
    factors which reflect the four program statute purposes of Land
    Conservation, Land Management, Water Management, and Community
    Development; and State specific factors which reflect the cost of doing
    business within the State. In fiscal year 2006 the resource concern
    factors reflected 90 percent of the allocation and State specific
    factors reflected 10 percent. The new approach was designed so that no
    State received a reduction in allocation greater than 5 percent.
    Additional information, including a list of fiscal year 2006 allocation
    factors and weights used is provided for the record.
        [The information follows:]

        This new targeted allocation approach addresses Program Assessment
    Rating Tool (PART) concerns about the need for targeting resources to
    address the highest priority needs. It uses weighted state and local-
    level data elements collected through the Natural Resources Inventory
    (NRI), National Agricultural Statistics Service (NASS), U.S. Census
    Bureau, Economic Research Service and other reliable and statistically
    sound sources to highlight the resource needs in the States. The
    targeted allocations reflect national NRCS priorities and tie to long-
    term program goals.
        Question. Can you give us an update on management issues within the
    RC&D program including long term program goals and the status of the
    new POINTS database?
        Answer. There are a number of improvements underway for the program
    that address operating deficiencies highlighted through the PART
    results and through the national evaluation conducted in conjunction
    with RC&D councils in fiscal year 2004-2005.
        By the end of April, NRCS will have a new RC&D program performance
    reporting system, POINTS, in place that will enable more effective
    management of program performance and more closely link performance
    with budget requests. In addition, NRCS has recently developed new
    national long-term, outcome-oriented program performance measures and
    goals that meaningfully reflect the program's purpose. The new long-
    term performance measures, reflecting the core of activities undertaken
    by RC&D Councils, were developed using information provided by the
    National Association of RC&D Councils (NARC&DC).
        NRCS is working with RC&D Councils to develop Area Plans and annual
    plans of work that tie more closely to the new targeted approach to
    addressing the highest priority needs and be more accountable for
    showing program performance.
        NRCS is also taking steps with the National Association of RC&D
    Councils (NARC&DC) to increase program participation with Indian
    Tribes, an item of concern reported in the national program evaluation.
    Hands-on training is being provided to RC&D councils and coordinators
    on working more effectively with Tribes. In addition, a useful handbook
    has been developed to aid local councils in their daily interaction and
    outreach activities with Tribes.
        Question. RC&D was originally intended to be administered by NRCS
    yet bring to bear the resources of all USDA programs in a community. We
    hear from constituents that conservation and implementation of Farm
    Bill programs are the priority for NRCS employees associated with the
    program.
        What are you doing to maintain the integrity of the RC&D area
    planning process and ensure that in areas where rural development is a
    priority that council can still receive assistance from the Federal
    coordinator?
        Answer. All program improvements being implemented for the RC&D
    program are designed to maintain the integrity and authorities of the
    program. Under long-standing NRCS policy, the RC&D Area Plan developed
    by each council must address all four statutory components of the
    program: land conservation, water management, community development and
    land management. Rural development activities fall within these
    components. The technical assistance provided through RC&D coordinators
    and other NRCS employees address the high priority concerns outlined in
    the RC&D area plans to the extent that RC&D appropriations are
    available.
        Question. We hear that States no longer have full time coordinators
    and that part time program assistant positions have been eliminated in
    most States.
        The program was level funded. How has this happened?
        Answer. Despite continued increased costs relating to salaries,
    rent, equipment, supplies, fuel, etc., program efficiencies and more
    effective leveraging of Federal funds allow the program to deliver the
    high level of service in 2006 as in prior years.
        Question. Can you detail the level of support provided to each
    State?
        Answer. In fiscal year 2006 the following funds were provided to
    each State:

    ------------------------------------------------------------------------
                                                               Total fiscal
                              State                              year 2006
                                                                allocation
    ------------------------------------------------------------------------
    Alabama.................................................      $1,095,450
    Alaska..................................................         984,616
    Arizona.................................................         801,550
    Arkansas................................................         856,767
    California..............................................       1,465,350
    Colorado................................................         973,733
    Connecticut.............................................         274,083
    Delaware................................................         134,417
    Florida.................................................         940,917
    Georgia.................................................       1,343,633
    Hawaii..................................................         549,694
    Idaho...................................................       1,075,333
    Illinois................................................       1,221,917
    Indiana.................................................       1,095,450
    Iowa....................................................       1,947,467
    Kansas..................................................       1,096,716
    Kentucky................................................       1,704,033
    Louisiana...............................................         940,917
    Maine...................................................         672,083
    Maryland................................................         403,250
    Massachusetts...........................................         403,250
    Michigan................................................         940,917
    Minnesota...............................................       1,075,333
    Mississippi.............................................         940,917
    Missouri................................................       1,009,897
    Montana.................................................       1,075,333
    Nebraska................................................       1,460,600
    Nevada..................................................         403,250
    New Hampshire...........................................         268,833
    New Jersey..............................................         268,833
    New Mexico..............................................         979,469
    New York................................................       1,023,728
    North Carolina..........................................       1,217,167
    North Dakota............................................         998,832
    Ohio....................................................       1,095,450
    Oklahoma................................................       1,095,450
    Oregon..................................................         672,083
    Pennsylvania............................................       1,095,450
    Rhode Island............................................         134,417
    South Carolina..........................................         940,917
    South Dakota............................................         940,917
    Tennessee...............................................       1,217,167
    Texas...................................................       2,677,767
    Utah....................................................         940,917
    Vermont.................................................         268,833
    Virginia................................................         940,917
    Washington..............................................         940,917
    West Virginia...........................................         735,050
    Wisconsin...............................................         940,917
    Wyoming.................................................         672,083
    Pacific Basin...........................................         280,863
    Puerto Rico.............................................         403,250
                                                             ---------------
          Total Allocated to States.........................      47,637,100
    ------------------------------------------------------------------------

        Question. RC&D coordinators are being pulled from their program
    responsibilities to implement Farm bill programs. What is the average
    amount of time a coordinator spends on RC&D program activities
    nationally?
        Answer. RC&D coordinators are spending at least 75 percent of their
    time on RC&D program activities.
        Question. Is this time charged to the TA portion of Farm bill
    programs?
        Answer. NRCS time charges are directly connected to the benefiting
    program. If an RC&D Coordinator works on a Farm Bill related program
    their time is charged directly to those programs on a case-by-case
    basis. Only RC&D work is charged to the RC&D program.
        Question. Anecdotal evidence indicates that RC&D councils are
    taking on more and more of NRCS overhead and administrative costs.
        Can you provide a comparison by State of the administrative costs
    assessed to RC&D in proportion to other Federal programs in your
    agencies jurisdiction?
        Answer. The comparison by State for fiscal year 2006 is provided
    for the record.
        [The information follows:]

        Question. The House bill included report language that the
    Committee expects the NRCS to promptly fill RC&D coordinator vacancies.
    The Committee expects support provided under this act to be allocated
    equitably among the 375 existing councils and that priority be given to
    providing every council a full-time coordinator.
        What States returned funds to headquarters at the end of the fiscal
    year?
        Answer. Eight States, Alaska, Arizona, Florida, Illinois, Nevada,
    North Carolina, Utah, and Washington had unused funds at the end of
    fiscal year 2005 in amounts ranging from $10,000 to $101,000. There
    were 20 other States that had unused funds of less than $10,000; they
    were Alabama, Arkansas, Georgia, Hawaii, Indiana, Maine, Massachusetts,
    Michigan, Mississippi, Montana, New Jersey, New York, North Dakota,
    Oregon, Rhode Island, Tennessee, Texas, Virginia, Wisconsin, and
    Wyoming. The Funds were then redistributed using the allocation
    formula.
        Question. Please provide a chart of coordinator vacancies that took
    place in fiscal year 2006 and the length of time it took to fill the
    position with a permanent employee?
        Answer. Since the beginning of fiscal year 2006 there are 10
    vacancies.

    ----------------------------------------------------------------------------------------------------------------
                                                                         Number of     Vacant since
                                  State                                 vancancies         est.        Length vacant
    ----------------------------------------------------------------------------------------------------------------
    Florida.........................................................               1           10/05        6 months
    Georgia.........................................................               1            2/06        2 months
    Kentucky........................................................               1            1/06        3 months
    Louisiana.......................................................               1            2/06        2 months
    Massachusetts...................................................               1            1/06        3 months
    Michigan........................................................               1            1/06        3 months
    North Carolina..................................................               1            1/06        3 months
    Ohio............................................................               1            1/06        3 months
    Oklahoma........................................................               1            1/06        3 months
    South Dakota....................................................               1            3/06         1 month
    ----------------------------------------------------------------------------------------------------------------

        Question. Include an explanation of how appropriated funds were
    used while there were extended vacancies. Will vacancies that occur in
    fiscal year 2006 be promptly filled?
        Answer. Funds are allocated to the States to support RC&D
    activities within the State. In most cases when there is a vacancy,
    appropriated funds are used for another NRCS employee to serve in an
    acting capacity for the Coordinator. If that is not possible, the funds
    are not used until the position is filled. When the positions are
    filled, the funds are used to cover salary and relocation costs
    incurred in filling the position. In some cases relocation costs can
    exceed $100,000. In situations where funds are limited, filling
    vacancies is deferred until the employee relocation costs and salary
    can be absorbed. Vacancies that occur in fiscal year 2006 are being
    filled as funding permits.
        Question. Why has no input been asked for or taken from local RC&D
    councils in regard to the fiscal year 2006 Goaled Performance Measures
    in accordance with Public Law 107-171 and NRCS's own Programs Manual
    part 513 on RC&D program (May, 2002) section a, b, and c?
        Answer. In fiscal year 2005, NRCS established goaled performance
    measures for all programs covering a two-year period, fiscal year 2005
    and fiscal year 2006. However, information provided by the NARC&DC,
    representing the 375 councils nationwide, was used in the development
    of the new annual, long-term and efficiency measures for the program
    being implemented for fiscal year 2006 and 2007. The NARC&DC, through a
    cooperative agreement with NRCS, provided eight long term program
    performance measures, and four program priorities based on their
    research of local RC&D council area plans.
        Question. Why should local RC&D Council Members who are volunteers
    continue to spend their time on RC&D goals which are decided at the
    Washington DC level, rather than at the local, grassroots community
    level which was the intent of the RC&D legislation?
        Answer. Performance goals established for the RC&D program are
    required by the Government Performance and Results Act of 1993. The
    goaled performance measures established for the RC&D program relate to
    the statutory elements outlined in the authorizing legislation and
    reflect program benefits that RC&D councils have been reporting for
    many years. Participation in the RC&D program is voluntary and not
    limited to goaled performance measures. However, the goaled performance
    measures are tied to program budget requests and the types of
    activities for the Federal coordinator.
        Question. How can the Office of Management and Budget ignore the
    statutory mission established for the RC&D program?
        Answer. The Office of Management and Budget does not ignore the
    statutory mission established for the RC&D program. Performance goals
    relate to the four statutory elements in the authorizing legislation of
    the program.
        Question. Are there any other programs that have the ability to
    bring together grassroots community vision and mission based on local
    needs and leverage the dollars to local communities at 6:1-10:1?
        Answer. USDA delivers a variety of rural economic development, farm
    support, research, conservation, and forestry programs that provide
    technical and financial assistance to address local needs.
        Question. Why has the NRCS abandoned grassroots priority-setting
    for the RC&D program in response to the PART review conducted by OMB?
        Answer. NRCS has not abandoned grassroots priority setting for the
    RC&D program. RC&D Councils can set their priorities as they relate to
    the four statutory elements in the authorizing legislation.

                      COMMODITY SUPPLEMENTAL FOOD PROGRAM

        Question. In relation to the Commodity Supplemental Food Program,
    why would you eliminate a Federal program that provides a $50 retail
    value of food each month, at a cost of just $16 a month to the tax
    payers, with $20 worth of food stamps? This would equate to a loss of
    $30 in benefits to our Nation's elderly at a time of rising medical and
    utility costs. Isn't this an example of a judicious use of the tax
    payer's dollars being discarded?
        Answer. The CSFP is a relatively small program that operates in
    limited areas of 32 States, two Indian reservations, and the District
    of Columbia. Its benefits are to a great extent redundant of those
    available through other nutrition assistance programs. In an era of
    fiscal constraint, we must ensure that limited resources are targeted
    to those programs that are available to needy individuals and families,
    regardless of the communities in which they reside. The populations
    served by CSFP are eligible to receive similar benefits through other
    Federal nutrition assistance programs that offer them flexibility to
    meet their individual nutritional needs and preferences. The
    administration has proposed this change to better target limited
    resources to those major programs that are available nationwide,
    promoting equity and effectiveness. If Congress adopts the budget
    request, we will work closely with CSFP State agencies to ensure that
    any negative effects on program participants are minimized and that
    they are transitioned as rapidly as possible to other nutrition
    assistance programs for which they are eligible.
        Elderly participants who are leaving the CSFP upon the termination
    of its funding and who are not already receiving FSP benefits will be
    eligible to receive a transitional benefit worth $20 per month ending
    in the first month following enrollment in the FSP under normal program
    rules, or 6 months, whichever occurs first. The average food stamp
    benefit for an elderly person living alone was $65 per month in 2004.
    The percentage of food stamp households with elderly that received the
    maximum benefit (14 percent) was nearly as large as the percentage that
    received the minimum benefit of $10 (17 percent). Thus, most elderly
    food stamp participants receive more than $10 per month, and we expect
    that this pattern would extend to new FSP participants leaving CSFP as
    well.
        Question. Why would you consider eliminating the CSFP, unlike any
    other, that receives donations of goods, services and volunteer hours
    with a value nearly equal to the administrative reimbursement by USDA?
    Besides providing a critical food supplement to our low income seniors,
    CSFP also provides a $1 donation for every $1 of administrative costs.
        Answer. We greatly appreciate our CSFP partners at the State and
    local level who have worked on behalf of this program and hope that
    their efforts can be directed toward volunteer opportunities in other
    USDA commodity programs, including the Emergency Food Assistance
    Program (TEFAP). Under TEFAP, local nonprofit organizations that are
    staffed mainly by volunteers, including many faith-based and community
    organizations, provide USDA commodities to the needy, either as
    prepared meals in soup kitchens, or through food pantries as
    commodities to be used by households. In addition, many TEFAP local
    organizations actively seek donations of commodities from other
    sources, including local grocery stores.
        Question. What will you do for the 25 percent of the CSFP
    participants who are already enrolled in the food stamp program and
    would be losing a critical benefit?
        Answer. CSFP recipients who are already enrolled in the FSP will
    continue to receive monthly food assistance benefits and have access to
    nutrition education services.
        Question. Isn't it true that the FSP and CSFP are supplemental
    programs that are meant to work with each other to ease the burden upon
    our low income seniors?
        Answer. The Food Stamp Program is the cornerstone of the national
    nutrition safety net, and the largest elderly nutrition assistance
    program, serving nearly 2 million seniors in an average month. Because
    the CSFP operates in limited areas, some low-income elderly have access
    to nutrition assistance through commodities and/or Food Stamps, while
    most others must rely exclusively on Food Stamps for such help. In the
    administration's view, ensuring adequate funding for programs that have
    the scope and reach necessary to provide access to eligible people
    wherever they may reside is a better and more equitable use of scarce
    resources than to allocate them to programs that cannot provide access
    to many areas of the country. For this reason, the administration has
    placed a priority on funding Food Stamps, WIC, and other nationally-
    available programs that provide benefits to eligible people wherever
    they may live, including communities currently served by CSFP. Many
    elderly CSFP participants are expected to be eligible for, and to make
    use of the FSP, from which they may receive benefits that can be more
    flexibly used to avoid conflicts with their individual dietary needs
    and preferences.
        Question. Why would you consider eliminating a program that has
    grown by 15 States since 2000, has 5 States on a waiting list and has
    current participating States asking for thousands of additional
    caseload slots?
        Answer. We face difficult challenges and decisions with regard to
    discretionary budget resources and have chosen to not request funding
    for this program for several reasons. Resources are not available to
    permit CSFP to operate nationwide. In an era of fiscal constraint, we
    must ensure that limited resources are targeted to those programs that
    are available to needy individuals and families, regardless of the
    communities in which they reside. The priority of the administration is
    to ensure the continued integrity of the national nutrition assistance
    safety net, including the Food Stamp Program and WIC.
        Question. Some seniors have spoken that they prefer commodities to
    food stamps as was shown during your pilot program, of commodities in
    lieu of food stamps, in Connecticut and North Carolina. What do you say
    to those seniors?
        Answer. We recognize that some seniors prefer commodity packages to
    food stamps. However, the Food Stamp Program is the Nation's primary
    domestic nutrition assistance program for low-income households.
    Because the CSFP operates in limited areas, some low-income elderly
    have access to nutrition assistance through commodities and/or FSP,
    while most others must rely exclusively on Food Stamps for such help.
        In the administration's view, ensuring adequate funding for
    programs that have the scope and reach necessary to provide access to
    eligible people wherever they may reside is a better and more equitable
    use of scarce resources than to allocate them to programs that cannot
    provide access to many areas of the country. For this reason, the
    administration has placed a priority on funding the Food Stamp, WIC,
    and other nationally-available programs that provide benefits to
    eligible people wherever they may live and offer flexibility in
    benefits to meet their individual nutritional needs and preferences.

                              SUBCOMMITTEE RECESS

        Senator Bennett. We thank you for your testimony, sir, and
    for the expertise that you bring here. The next hearing of the
    subcommittee will be with the Food and Drug Administration on
    Tuesday, March 14 at 10 a.m., and the subcommittee is recessed.
        [Whereupon, at 9:54 a.m., Thursday, March 9, the
    subcommittee was recessed, to reconvene at 10 a.m., Tuesday,
    March 14.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2007

                                  ----------

                            TUESDAY, MARCH 14, 2006

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:05 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett, Craig, Kohl, and Harkin.

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

    STATEMENT OF HON. ANDREW C. VON ESCHENBACH, ACTING
                COMMISSIONER
    ACCOMPANIED BY:
            KATHLEEN HEUER, CHIEF FINANCIAL OFFICER AND ASSOCIATE
                COMMISSIONER FOR MANAGEMENT
            RICHARD TURMAN, DEPUTY ASSISTANT SECRETARY FOR BUDGET,
                TECHNOLOGY, AND FINANCE, DEPARTMENT OF HEALTH AND HUMAN
                SERVICES
            STEVE SUNDLOF, DIRECTOR, CENTER FOR VETERINARY MEDICINE

                 OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. The subcommittee will come to order.
        And this morning, we are happy to welcome Dr. Andrew von
    Eschenbach, who is the acting Commissioner of the Food and Drug
    Administration. And we also welcome Ms. Heuer and Mr. Turman.
    We appreciate very much your being here.
        This is the second subcommittee hearing we have convened
    since receiving the President's fiscal 2007 budget request, and
    it is the first time that Dr. von Eschenbach has appeared
    before the subcommittee.
        The FDA did pretty well under the President's budget
    process. The budget request, not including user fees and fiscal
    2006 supplemental funding, represents an overall increase of
    $70 million from the level of funding in fiscal 2006. Not all
    portions of this subcommittee's budget did as well in terms of
    the President's recommendations.
        The FDA budget includes increases for pandemic influenza
    preparedness, food defense, drug safety, tissue safety, animal
    drug and medical device review, and a new initiative, called
    the Critical Path Initiative, to speed development of medical
    products.
        But it does include more than $50 million in base funding
    reductions. We have been given very little information about
    the impact of these reductions, and I expect that we will
    discuss those in some greater detail in the hearing this
    morning.
        Now given the fact that we are competing with other
    subcommittees, had to fight your way down the hall to get
    around the corner to come in here, and we are in the midst of
    the budget discussions on the floor, we are going to keep
    members to 5-minute rounds.
        We will use the ``early bird'' rule. That is, Senators will
    be recognized in the order of their arrival, and members will
    be allowed to submit questions for the record. We want all of
    the questions to the subcommittee to be here by the close of
    business on the 24th of March.
        Senator Kohl and I will be the only two to give opening
    statements. And when we have finished with our opening
    statements, then we will go directly to Dr. von Eschenbach for
    his presentation and then begin the questioning rounds.
        So with that statement of the ground rules, Senator Kohl.
        Senator Kohl. I thank you, Mr. Chairman.
        Dr. von Eschenbach, it is good to see here you here today,
    and we also want to welcome Ms. Heuer and Mr. Turman as well as
    the rest of your staffs.
        There has been, as you know, lots of interest in your
    budget, which appears to receive the most robust increase in
    the entire agricultural appropriations bill. I am pleased to
    see additional funding for drug and tissue safety as well as
    avian flu and food defense.
        Also in the budget, though, there is a redirection of $52
    million and funding for some important activities and staffing
    levels actually decreases. These decreased activities,
    according to your budget, include generic drug contracts,
    analysis of food import samples, compliance and recall
    functions, certain safety activities in the biologics program,
    dietary supplement activities, and inspections of veterinary
    food and human drugs manufacturers.
        This is not at all a complete list. This is obviously a
    concern, and we are interested to know how the priorities in
    this budget were determined.
        We are hopeful that you will provide detailed information
    on this redeployment as well as your budgeted increases here
    today. And so, we look forward to your statement and the
    opportunity to ask questions.
        Thank you, Mr. Chairman.
        Senator Bennett. Thank you.
        Dr. von Eschenbach, your prepared statement has been
    received and will be included in the record at this point in
    its entirety. But we would appreciate it now if you would give
    us a summary and whatever introductory comments you may wish to
    make.

                   STATEMENT OF DR. ANDREW C. VON ESCHENBACH

        Dr. von Eschenbach. Thank you, Mr. Chairman.
        Good morning, Senator Kohl. And good morning, Senator
    Craig, and other members of the staff.
        I am very honored to be here as the acting Commissioner of
    the Food and Drug Administration to present this 2007 fiscal
    year budget. But most of all, to also have the opportunity to
    thank you for the continued support and commitment that you
    have made to the FDA in helping to assure that it continues to
    be the gold standard around the world for the safety and
    effectiveness of the interventions that we provide to people.
        Our 2007 budget request proposes a total budget of $1.95
    billion, of which $1.54 billion is in discretionary budget
    authority and $402 million will be in user fees from the firms
    that we regulate. These funds are precious, and they are, in
    fact, essential to FDA's continuing effort to assure that
    Americans can go to bed each night confident that the food they
    ate is safe, the medical devices they use are reliable, and the
    drugs that they gave to their children and grandchildren were
    safe and effective.
        As we developed this 2007 proposal, the first thing we
    focused on was FDA's most precious asset, its people. The funds
    we are requesting are essential for us to continue to recruit,
    retain, and nurture a critical and diversified staff of highly
    skilled professionals and scientists who make it possible for
    the FDA to achieve the gold standard in regulating foods,
    drugs, and medical products.
        Our request includes $20 million for cost of living
    increases that are essential to meet payroll obligations and
    needed funds for the infrastructure to support our workforce
    and consolidate FDA operations in modern facilities at White
    Oak.
        In addition to the workforce-related issues, we have also
    focused on emerging urgent public health challenges and
    opportunities. The increase of $30.5 million over fiscal year
    2006 for pandemic preparedness is for a comprehensive program
    that is designed to safeguard Americans from the danger of
    avian flu by enhancing and integrating our programs across
    vaccine development, antivirals, enhancement of devices for
    detection as well as for human protection, and also include
    issues with regard to animal welfare and human health.
        The $20 million for food defense is to protect the Nation's
    food supply both from intentional terrorist attacks as well as
    to enhance our ability to safeguard the food supply from
    unintentional contamination.
        $4 million for human drug safety, plus an additional
    $700,000 in user fees, we believe will strengthen our capacity
    to recognize and act upon emerging drug safety concerns. And
    the $2.5 million for human tissue safety is in response to the
    dramatic growth that we are experiencing in the use of tissues
    for transplantation and the anticipation of the emerging
    challenges that will come from tissues obtained through
    bioengineering.
        With regard to the request for $6 million for the Critical
    Path to Personalized Medicine, this initiative is an essential
    investment, an investment in FDA's ability to respond to the
    explosion in molecular medicine that is responsible for and
    resulting in progress toward new treatments, diagnostics, and
    preventive interventions.
        By using the science and technology of the 21st century,
    Critical Path will help ensure that FDA can guide these new
    discoveries through the development process so that they are
    able to be delivered to patients in a rapid, safe, and
    effective manner.
        A modern, robust Critical Path will lead to solutions that
    will deliver on the promise of making our future health care
    personalized, predictive, preemptive, and, in fact, more cost
    effective.
        As you have indicated, to partially offset the cost of
    these initiatives and, most importantly, as good stewards of
    the resources that you have already provided, FDA has undergone
    a process to identify and an activities for opportunities for
    efficiencies and proposes to strategically redeploy $52 million
    in base funds.
        We have done this, first and foremost, with the principle
    to not undermine or impair our commitment to public health. But
    we believe by looking at opportunities within the portfolio to
    determine where there are programs that could be effectively
    carried out by alternative or other strategies, where there are
    opportunities to eliminate waste and maximize the impact of our
    investment, we believe that we can modernize and transform our
    business operations, as well as our programmatic operations, to
    address the emerging needs of the 21st century.
        We will accomplish this strategic redeployment while
    assuring you that we will maintain our century-old commitment
    to assuring the health and welfare of the American public.
        There are two new user fees that are being proposed. One
    covers the cost of re-inspecting facilities that fail to meet
    standards, and the second would cover the cost of issuing food
    and animal feed export certificates.
        As you have pointed out, the investment in the FDA in this
    budget is investment in the future of our country and our
    commitment to continue to ensure the health and safety of the
    American public. We propose to use these resources wisely and
    carefully as good stewards and, in doing so, assure a healthier
    America for generations to come.

                               PREPARED STATEMENT

        We really are grateful and appreciate your commitment and
    your interest to working together with us, as we will with you,
    to be sure that we fulfill that goal.
        [The statement follows:]

               Prepared Statement of Dr. Andrew C. Von Eschenbach

    Introduction
        Good morning Chairman Bennett, Senator Kohl, and distinguished
    members of the Subcommittee. I am very honored to have been appointed
    by President Bush 6 months ago as Acting Commissioner of the FDA, and I
    consider it a privilege to present our fiscal year 2007 budget request
    on behalf of this extraordinary agency. I am joined today by Ms. Kathy
    Heuer, FDA's Chief Financial Officer and Associate Commissioner for
    Management, and Mr. Richard Turman, Deputy Assistant Secretary for
    Budget, Technology, and Finance of the Department of Health and Human
    Services (DHHS). I also have members of FDA's senior leadership with me
    at today's hearing.
        Last September, President Bush selected me to lead an agency to
    which I appreciate, we, as Americans owe a great debt of gratitude.
    Millions of Americans go to sleep each night, secure in the knowledge
    that the food they ate and the medicines they gave their child were
    safe and effective. They do so, thanks to the thousands of dedicated
    professionals at FDA who work to assure the safety, efficacy, and
    security of drugs, vaccines and biological products, medical devices,
    our Nation's food supply, and other consumer products.
        This year, the Food and Drug Administration will celebrate its
    100th birthday, marking a century as America's gold standard for safety
    and consumer protection. We began in 1906, when Congress passed and
    President Theodore Roosevelt signed the Food and Drugs Act. This
    statute entrusted the Bureau of Chemistry, an office in the U.S.
    Department of Agriculture, to implement the sweeping new law. The
    Bureau eventually became the FDA, an agency of the Department of Health
    and Human Services. As the first consumer protection agency in the
    United States, FDA has a distinguished record, established during its
    100 years of service to the American public.
        Today, the products we regulate represent almost 25 percent of U.S.
    consumer spending and include 80 percent of our food supply and all
    human drugs, vaccines, medical devices, tissues for transplantation,
    equipment that emits radiation, cosmetics, and animal drugs and feed.
    FDA takes great pride in its heritage and accomplishments, promoting
    and protecting the health and well-being of all Americans.
        I assure you that the precious resources you provide this agency in
    fiscal year 2007 will be used wisely and judiciously to ensure that we
    maintain this record of excellence, as well as work to respond to the
    growing challenges to advance the Nation's public health in a new era
    of rapidly developing science and individualized medicine.
        I want to thank the Subcommittee members for providing FDA with
    several key increases in the fiscal year 2006 appropriation. The
    Subcommittee demonstrated its commitment to FDA's mission by providing
    increases for drug safety, the Critical Path Initiative, review of
    direct-to-consumer advertising, Food Defense, medical device review,
    and the FDA consolidation project at White Oak, Maryland. In addition
    to the amounts in the annual appropriations bill, I also want to
    express my thanks to Congress for the supplemental appropriation of $20
    million to contribute to our Nation's preparedness for the threat of
    pandemic flu. FDA enters this appropriation cycle mindful of our
    responsibility and stewardship, and that all Federal agencies must
    operate in an environment where our dollars must go to the greatest
    need.
    FDA's 2007 President's Budget Request
        In our fiscal year 2007 budget, the Administration proposes a total
    program level for the FDA budget of $1.95 billion, an increase of 3.8
    percent above the fiscal year 2006 amount. This includes $1.54 billion
    in discretionary budget authority and $402 million in current law user
    fees. Our budget also includes $25.5 million for two new user fees. Our
    budget request maintains critically important core functions and
    demonstrates that our programs meet a firm test of accountability. At
    the same time, we are heeding the President's call to assure continued
    progress by fostering innovation and focusing on emerging priorities.
    In fiscal year 2007, FDA will employ resources to advance its mission
    to protect the public health by assuring the quality of food and
    medical supplies and by implementing advanced technologies to monitor
    and speed innovations to market that will make foods safer and medical
    products more effective, safer, and more affordable. We will also
    implement advanced tools to ensure that the medical community can use
    molecular biology to improve outcomes for patients. We must accomplish
    these goals in a way that provides the public with the accurate,
    science-based information they need to use food and medicine to improve
    their health.
        The President's budget focuses on six emerging, and urgent
    challenges and opportunities. To address these challenges, the budget
    proposal increases funding in these targeted activities above the
    amount provided in fiscal year 2006: $30.5 million for Pandemic
    Preparedness, $19.9 million for Food Defense, $5.9 million for the
    Critical Path to Personalized Medicine, $4.0 million for Human Drug
    Safety (plus an additional $0.7 million in user fees), $2.5 million for
    Human Tissue Safety, and $7.4 million to meet the statutory triggers of
    the Animal Drug and Medical Device user fee programs. In addition to
    these high priority initiatives, the budget requests $20.3 million for
    inflationary cost-of-living increases that will enable the agency to
    recruit, nurture, and retain a critical mass of highly skilled
    professionals and scientists. This dedicated staff is necessary to
    respond to greater challenges in the regulatory process, including
    increased complexity of the sciences and technology and the need for a
    more rapid pace.
        FDA also seeks $1.2 million for the Unified Financial Management
    System, and an investment of $14.3 million for the agency's
    infrastructure needs. To partially offset the cost of these
    initiatives, the President's budget proposes to strategically redeploy
    $52.3 million in base funds. Even in an era of declining budgets, FDA
    recognizes the need to modernize and transform operations to address
    the emerging needs of the 21st century. Therefore, we engaged in an
    ongoing process to strategically redeploy resources to address high-
    risk public health challenges while maintaining our century-old
    commitment to principles that have made us the world's ``gold
    standard'' for regulating food and medical products. In doing so, the
    proposed budget will permit FDA to meet its ongoing statutory and
    regulatory responsibilities, while allowing us to initiate new and
    expanded efforts in critical areas of our mission. Now I would like to
    provide you with greater detail on our proposed budget increases.
    Pandemic Preparedness (+$30.5 million)
        To safeguard Americans from the danger of pandemic influenza, FDA
    requests a total base program of $55.3 million in fiscal year 2007.
    This amount is $30.5 million more than the fiscal year 2006 enacted
    level, which includes the $20 million in supplemental appropriations
    provided by Public Law 109-148. The supplemental will allow FDA to
    rebuild and enhance its infrastructure; provide personnel and expertise
    in the essential clinical, product and manufacturing areas necessary to
    support new vaccine development for pandemic influenza. With the fiscal
    year 2007 funds, we will conduct a more comprehensive program to
    prepare for and respond to the risks of a pandemic flu outbreak. The
    resources will build upon the program this Congress launched in the
    supplemental, and will allow FDA to:
      --Engage in public-private partnerships to select, prepare, and test
            pandemic seed strains of variants of the H5N1 virus.
      --Develop reagents (used to assess vaccine potency) that are
            essential for successful large-scale manufacturing.
      --Evaluate and license flu vaccines that rely on current egg-based
            technology as well as encouraging the development of new
            approaches such as cell culture-based vaccines, recombinant
            vaccines, and vaccines that contain adjuvants--substances added
            to vaccines to stimulate an immune response.
      --Provide essential technical support to vaccine manufacturers
            throughout the vaccine development process, including support
            throughout the manufacturing phase.
      --Develop analytical methods to detect, identify, and quantify
            antiviral residues in poultry, so that these drugs do not
            promote drug resistance in humans.
      --Develop and validate methods to detect avian influenza in foods and
            advise American consumers about how to safely handle and cook
            these foods.
        We make this request because public health experts tell us that the
    risks of being unprepared for a pandemic could mean the death of up to
    200,000 Americans (based on a medium-level pandemic scenario) and
    economic losses of up to $160 billion. In the near term, our pandemic
    initiative will stimulate broader interest among vaccine manufacturers,
    as they recognize that FDA will provide consistent technical support to
    overcome vaccine development hurdles. We have already seen results in
    this area. In the longer term, our fiscal year 2007 investment will
    yield essential seed strains and reagents, and allow us to transfer
    this technology to manufacturers, while we also perform our regulatory
    responsibilities of evaluating and licensing pandemic influenza vaccine
    products. Over the next 2-4 years, we will also fulfill our public
    health responsibilities related to foods and veterinary products, by
    delivering methods to detect antiviral residues and by educating
    Americans about safe food practices.
    Food Defense (+$20 million)
        FDA seeks an investment of an additional $20 million in fiscal year
    2007 to protect the Nation's food supply from terrorist attack, by
    developing and deploying improved methods to screen food and feed
    imports and expanding the Food Emergency Response Network (FERN).
        FERN is a network of Federal and State laboratories designed to
    ensure that we have the analytic surge capacity to respond to an attack
    on the food system. By the end of fiscal year 2006, we plan to have an
    operational FERN system of 10 Federal and 10 State labs. The fiscal
    year 2007 funds ($13 million) will allow FDA to expand the current
    network by six additional labs, located at existing State facilities,
    and we will work to bring these on-line before the end of the fiscal
    year. We will fully equip these new labs, and provide operational
    funding and technical assistance so that they can conduct food defense
    activities. Our technical assistance will include proficiency testing
    on the new equipment and training to validate their ability to conduct
    food testing in response to an emergency. The result of this investment
    will be a more robust and more geographically diverse capability to
    provide the essential surge capacity to test contaminated food samples
    and allow us to warn the public about threats to the food supply. By
    working cooperatively with State facilities, we can stretch our Federal
    dollars and strengthen food defense at the Federal and State level.
        Within the $20 million increase, we will also:
      --Conduct food defense research ($1 million) to fill in gap areas
            that we identified in the vulnerability assessments we
            conducted on 23 major food products such as baby food, infant
            formula, dairy products, soft drinks, and bottled water.
      --Strengthen the Electronic Laboratory Exchange Network (eLEXNET), an
            Internet based data exchange system used by Federal, State, and
            local government food safety laboratories. Using fiscal year
            2007 funds, we will use eLEXNET to provide food sector-specific
            information to sister agencies and build a secure interface so
            that we can exchange data with DHS. Finally, we will purchase
            essential reagents and test kits to conduct biomonitoring
            surveillance. In fiscal year 2007, we will spend $2 million of
            the Food Defense increase for these activities.
      --Improve our Emergency Operations Network ($1 million) to allow FDA
            to conduct more sophisticated incident tracking for food-
            related emergencies.
      --Continue Field support of food defense operations ($3 million),
            including the targeting of potentially high-risk imported foods
            through Prior Notice Import Security Reviews based on
            intelligence, FDA inspection reports, discrepancies in prior
            notice reporting and sample collection and analysis.
    Critical Path to Personalized Medicine (+$5.9 million)
        FDA requests an increase of $5.9 million in fiscal year 2007 for
    the Critical Path to Personalized Medicine initiative. This will allow
    us to increase the predictability and efficiency of developing new
    medical products, and deliver greater benefits to patients as we
    accelerate the field of personalized, predictive, preemptive, and
    participatory medicine. Our goal is to stimulate a new generation of
    scientific tools that will enable product sponsors to evaluate and
    predict the safety and effectiveness of drugs. This will permit
    physicians to tailor therapies to individual patients and avoid
    potentially dangerous adverse events. The Critical Path to Personalized
    Medicine Initiative also fulfills the Congress' expectation under the
    Food and Drug Administration Modernization Act, when it charged FDA to
    work collaboratively with partners in government, academia, and
    industry to advance medical product development. A modern, robust
    Critical Path will lead to solutions that will deliver on the promise
    to make our future health care, personalized, predictive, preemptive,
    and more cost effective.
        The fiscal year 2007 investment will support:
      --Imaging Initiative.--Our Critical Path investment will support
            efforts to accelerate an understanding of the use of positron
            emission tomography (PET) and other advanced imaging
            technologies as surrogate endpoints for developing new cancer
            drugs. A surrogate endpoint helps to predict the benefit that a
            patient may experience from therapy. In fiscal year 2007, we
            will participate in developing technical standards for PET
            imaging--the tools that will enable drug developers to evaluate
            and improve the effectiveness of new products.
      --Improving Stent Design.--Cardiovascular disease is a significant
            cause of morbidity and mortality in the United States, and drug
            eluting stents have become a standard therapy to address
            cardiac disease in many patients. Today, most vascular stents
            eventually fail and alternative designs are difficult to test
            in humans. Our objective is to improve stent performance and
            safety by predicting and avoiding product failures. In fiscal
            year 2007, we will develop the preliminary components of a
            simulation model of drug eluting stent behavior in adults and
            children. Also in fiscal year 2007, we will work to develop
            open source imaging software to assess stent performance and
            begin to develop guidance for industry on using the simulation
            model to predict stent performance.
      --ECG Warehouse.--We will invest funds to develop the tools to permit
            searches of electrocardiogram (ECG) data submitted with drug
            applications so that we can identify cardiovascular risk
            patterns associated with unsafe drugs. We will also partner
            with academia and the public sector in fiscal year 2007 to
            conduct additional ECG analyses. This will improve our ability
            to identify cardiac safety concerns before we approve a drug
            for marketing and also detect post market safety signals.
            Through these activities, we will help ensure that therapies
            are safe and effective, and we will improve outcomes for
            patients who are using products that are already on the market.
        The need for new medical treatments and the investment of billions
    of dollars in basic biomedical research led many in the medical
    community to anticipate a new wave of medical products capable of
    dramatically saving and extending lives. Yet the recent slowdown in the
    rate of new medical treatments actually reaching patients is a
    significant concern at FDA. Products fail before they reach the market
    because clinical trials fail to demonstrate safety or efficacy, or they
    cannot be manufactured at a consistently high quality. Despite recent
    innovations, many serious and life-threatening diseases still lack
    effective treatments.
        At FDA, we witness the full spectrum of drug, device, and biologic
    product development. From this unique perspective, it is clear that the
    development of evaluative scientific tools to utilize in medical
    product development has not kept pace with the rapid advances in basic
    sciences. The path from cutting-edge medical discovery to the delivery
    of safe and effective treatments is long, arduous, and uncertain--and
    it does not yield extensive information on product performance. To
    correct this imbalance, FDA initiated the Critical Path to Personalized
    Medicine, a program designed to modernize medical product development
    to ensure more efficient and more informative product development and
    clinical use. FDA considers the Critical Path Initiative to be its top
    scientific policy initiative for at least the next 5 years.
        FDA's Critical Path Initiative will stimulate research community
    efforts to identify the essential biomarkers and improved clinical
    trial designs that will accelerate product development. Biomarkers are
    measurable characteristics that reflect physiological or disease
    processes. Medicine can use biomarkers to predict or monitor response
    to therapy. The initiative will generate essential information to
    identify patients likely to benefit from a treatment and patients more
    likely to respond adversely to a product. Without clinically proven
    biomarkers and innovative trial designs, we cannot modernize medical
    product development and realize the potential of personalized medicine.
    The subcommittee recognized this need when it appropriated funds for
    FDA in fiscal year 2006 to study cardiovascular biomarkers predictive
    of safety and clinical outcomes, and the funds that we request in
    fiscal year 2007 will support broader efforts to achieve personalized
    medicine.
    Drug Safety (+$4.7 million in budget authority and user fees)
        FDA will build on recent improvements to its drug safety activities
    with an fiscal year 2007 increase of $4.7 million (a $3.96 million
    increase in budget authority and $0.74 million in PDUFA user fees). The
    proposed fiscal year 2007 budget will provide a significant increase to
    our base resources for drug safety and will allow FDA to continue to
    strengthen our capacity to recognize and act on emerging drug safety
    concerns.
        As we plan for fiscal year 2007, we must continue to focus on the
    needs of the patient. We must constantly ask ourselves--how can we
    achieve the proper risk/benefit balance while speeding patient access
    to safe and effective products? U.S. pharmacies fill approximately 3.7
    billion prescriptions per year and consumers make more than 5 billion
    over-the-counter drug purchases annually. The effect of these medicines
    on the full spectrum of our population causes unforeseen problems to
    surface that may not have appeared during the sometimes-lengthy drug
    review process.
        Our fiscal year 2007 drug safety request will permit us to launch a
    web-based system that provides agency analysts faster access to adverse
    event reports. Known as AERS II, this system will allow FDA to more
    easily evaluate potential safety issues, and improve our ability to
    take follow-up actions to protect patients. Fiscal year 2007 funding
    will also allow us to analyze valuable drug safety information housed
    in CMS and other population-based databases and to conduct studies of
    high priority safety issues in the Medicare population. Studies
    conducted on these types of databases will provide more supporting
    evidence about drug use under a broader range of conditions, and more
    detailed evidence about drug safety in subgroups of patients, such as
    the elderly, and in patients with multiple medical conditions. This
    will provide FDA with many of the tools necessary to formulate and
    communicate safety information to health care practitioners, consumers,
    and the research community in a more timely and user-friendly way.
        We have made important drug safety enhancements during the past
    year, and I would like to highlight these activities for your now. The
    members of this Subcommittee provided an increase of $9.9 million in
    FDA's fiscal year 2006 budget. We will bolster premarket and postmarket
    drug safety functions by using these funds to:
      --Increase the professional staff in FDA's Center for Drug Evaluation
            and Research (CDER) who perform high priority drug safety
            reviews.
      --Increase the number of staff with expertise in critical areas, such
            as risk management, risk communication, and epidemiology.
      --Expand our information technology infrastructure for monitoring
            post-marketing data by increasing access to a wide range of
            clinical, pharmacy, and administrative databases.
      --Hire additional experts to enhance use of multidisciplinary, multi-
            office teams to interpret drug safety data.
      --Access external population-based ``linked'' databases to identify
            drug safety signals.
        Other important drug safety accomplishments during the past year
    include:
      --Establishing a Drug Safety Oversight Board to provide independent
            oversight and advice on drug safety and disseminating safety
            information. The Board conducted 5 meetings in 2005 to discuss
            17 drug products with potential risks.
      --Appointing a new director of CDER's Office of Drug Safety.
      --Conducting a public meeting of experts to assess risk communication
            about drugs and to plan future communication efforts.
      --Unveiling a major revision to the format of prescription drug
            information, commonly called the package insert, to give
            healthcare professionals clear and concise prescribing
            information.
        These efforts emphasize our commitment to providing the American
    public with safe and effective medical products.
    Tissue Safety (+$2.5 million)
        FDA requests an increase of $2.5 million to provide the essential
    resources to support a human tissue safety, including our role in
    monitoring the expanding field of tissue transplantation and the
    emerging challenges of bioengineering. These funds will allow the
    agency to:
      --Commence a comprehensive risk-based approach to assure the safety
            and quality of human cells, tissues and cellular and tissue-
            based products used for transplantation. Examples include
            corneas, heart valves, ligaments, joints, skin, or other
            tissues.
      --Promptly monitor and investigate adverse events and tissue product
            problems.
      --Take early action to improve tissue practices and prevent tissue-
            related injuries and deaths.
      --Educate industry, the medical community, and the public about human
            tissue safety.
      --Support promising new technologies that use cells and tissues,
            including therapies for diseases such as cancer, AIDS,
            Parkinson's disease, hemophilia, diabetes, and other serious
            conditions.
        This program will provide guidance and predictability to more than
    2,000 registered establishments that process and distribute tissue
    products used in medical procedures that save or enhance the lives of
    recipients. FDA has seen its workload in the area of human tissue
    transplants rise dramatically as transplants have increased from
    approximately 350,000 in 1990, to more than 1,000,000 annually. The
    number of transplants will continue to rise in the years ahead.
        With these resources, FDA will conduct 75 additional tissue
    inspections in fiscal year 2007 and thereby increase our annual
    inspection coverage to 325 facilities. Through inspection and
    monitoring activities, we can ensure that establishments demonstrate
    safety and efficacy of their products. These funds will also permit FDA
    to rapidly review, track, and analyze tissue deviation reports.
    Finally, we will issue guidance for industry on emerging issues
    relating to the eligibility of donors and good tissue practices. The
    goal of these efforts is to ensure safe outcomes for patients when they
    receive tissue transplants.
        FDA's announcement in early February that we ordered a New Jersey
    company to cease operations is evidence that we will take action to
    protect the public health against tissue manufacturers that fail to
    follow safety requirements. This is an example of the targeted
    enforcement action we will conduct to protect the public health when we
    have evidence unsafe tissue practices.
    Budget Authority in Support of User Fee Programs--MDUFMA and ADUFA
            (+$7.4 million)
        To achieve more timely and cost-effective review of new medical
    devices and animal drugs, we continue to implement Medical Device User
    Fee and Modernization Act (MDUFMA) and the Animal Drug User Fee Act
    (ADUFA). Congress enacted these statutes to allow the agency to collect
    user fees from companies that submit medical device and animal drug
    applications.
        In fiscal year 2007, we are requesting a total increase of $7.4
    million in new budget authority ($4.9 million for medical devices and
    $2.5 million for animal drugs) to ensure that we meet statutory
    requirements, known as triggers, and fulfill the fiscal year 2007
    performance commitments under these programs. If we do not receive
    sufficient budget authority to meet the statutory triggers, FDA will
    lose the right to collect $55.3 million in user fees. The flow of
    potentially life saving medical devices will decline and the use of
    unapproved drugs in food-producing animals will likely rise.
        Under both these user fee programs, we pursue a complex and
    comprehensive set of product review goals. Each year brings additional
    goals, and the goals become more aggressive. FDA provides a complete
    report on its performance on under these programs at the end of each
    year.
        The proposed increase will permit FDA to maintain its highly
    skilled scientific and professional review staff and conduct speedier
    review and approval of safe and effective medical devices. Under
    MDUFMA, FDA is meeting, or is on track to meet, nearly all of the
    performance goals for fiscal year 2003, fiscal year 2004, and fiscal
    year 2005. We will continue to make program improvements to ensure we
    meet the goals for fiscal year 2006 and fiscal year 2007. Under ADUFA,
    FDA expects to meet or exceed all performance goals.
    Cost of Living--Paying our People (+$20.3 million)
        Soon after the President appointed me Acting Commissioner, I told
    my FDA colleagues that the well-being of our agency's employees was one
    of my top priorities. The talented and dedicated FDA employees are the
    agency's most precious asset and are the primary reason for our
    success.
        The proposed increase of $20.3 million to meet inflationary pay
    costs is essential to FDA's ability to accomplish its public health
    mission. Payroll costs account for more than 60-percent of the FDA
    budget, and the Agency is not able to absorb inflationary increases on
    such a significant portion of its resources. These funds will allow FDA
    to maintain its world-class workforce and achieve the promise of a
    healthier America.
        FDA's diverse portfolio of pubic health responsibilities demands
    that we maintain a large cadre of scientists and professionals with the
    training and experience to respond to complex and escalating public
    health challenges. This workforce is directly engaged in both
    developing the science of regulation as well as administering
    regulatory functions.
        FDA professionals are increasingly challenged by evolving food
    defense responsibilities as well as growing responsibilities in
    regulation of vaccine, drug, and device, development. Within the past
    year, they have addressed threats such as BSE (Mad Cow Disease),
    Salmonella, West Nile Virus, and pandemic flu. The FDA workforce
    reviews, approves, and continues to ensure the safety and effectiveness
    of products to manage cancer, diabetes, and heart disease, as well as
    oversee products intended to preserve health. FDA principally expends
    its budget for payroll that allows us to recruit and retain a skilled
    workforce dedicated to safeguarding the public using advanced tools to
    preempt public health threats.
    Unified Financial Management System (UFMS) (+$1.2 million)
        In fiscal year 2007, FDA seeks an increase of $1.2 million to fully
    utilize the Unified Financial Management System (UFMS) for all of our
    financial transactions. These funds will allow FDA to achieve a major
    program milestone in the implementation of a new centralized financial
    management system under the Department of Health and Human Services
    (HHS). These additional funds would bring the fiscal year funding level
    to $14.1 million.
        UFMS is changing the way HHS agencies do business at it improves
    efficiencies in business processes and technology It will replace five
    redundant and outdated accounting systems in use at the National
    Institutes of Health, the FDA, the CDC, the Centers for Medicare and
    Medicaid Services, and the DHHS Program Support Center. The requested
    increase and the base funds in our budget will support dual functions.
    First, as a component of the Department-wide system, FDA resources will
    support testing and integration of the UFMS system, as well as regular
    operation and maintenance of UFMS. Second, fiscal year 2007 funding
    will support FDA-specific functions such as the purchase of reporting
    tools and software licenses, essential system upgrades and new software
    releases, and training to support FDA users of this new system. This
    will ensure that we satisfy financial requirements and provide timely
    financial information to executives and managers to support better
    decision making. As FDA fully integrates UFMS into our systems and way
    of doing business throughout fiscal year 2007, we expect to witness the
    projected efficiencies for this vital enterprise and be able to use
    UFMS' full financial management capability.
    Infrastructure (+$11.3 million)
        In fiscal year 2007, FDA submits a modest request to fund three
    fundamental components of our physical infrastructure:
      --An increase of $10.5 million for rent payments to the General
            Services Administration (GSA).
      --An increase of $3.8 million in budget authority to maintain
            progress on the White Oak Consolidation project.
      --A reduction of nearly $3 million below the fiscal year 2006
            appropriated level for our Buildings and Facilities account.
        In total, these proposals would result in a net increase of $11.3
    million for fiscal year 2007.
        We also plan to commit $8.2 million in PDUFA carryover funds to the
    White Oak project and $1.9 million for GSA rental payments. FDA
    continues to seek support for the White Oak project with the goal of
    eventually housing over 7,700 staff in 2.3 million square feet of
    space. As of the end of calendar year 2005, we have approximately 1,850
    staff on site at White Oak, in three buildings with almost 700,000
    square feet. The new buildings will eventually replace all 40 existing,
    fragmented facilities in 16 locations that support the Office of the
    Commissioner, and all of our Centers and the Field headquarters, other
    than the Center for Food Safety and Applied Nutrition and the National
    Center for Toxicological Research.
    Proposed User Fees: Reinspection and Food/Animal Drug Export
            Certificates ($25.5 million)
        In addition to those user fees authorized by statute, the FDA is
    proposing two new user fees. The first, estimated at $22.0 million,
    would pay the full cost of reinspection and other FDA follow-up work if
    a manufacturer fails to meet important FDA requirements such as Good
    Manufacturing Practices, which help ensure high quality and safety of
    FDA regulated products. When a firm fails an inspection, FDA must
    conduct a reinspection and perform associated laboratory analysis to
    verify the firm's corrective measures.
        The reinspection user fee will ensure that facilities that fail to
    comply with established health and safety standards bear the cost of
    FDA follow-up inspection. We are asking Congress to assess the cost of
    follow-up inspections on those who fail to comply, rather than on the
    American taxpayer, who bears the cost today. The natural consequence of
    this change will be that manufacturers will work to ensure that they
    meet established standards.
        The second proposed new user fee will cover the cost of issuing an
    approximately 37,000 food and animal feed export certificates. We have
    estimated the cost of this user fee program at $3.5 million. Although
    the agency's effort to issue these certificates benefits industry
    exports, FDA must support this function at the cost of other vital
    public health activities. FDA's proposal for user fees would establish
    a source of dedicated funding for this activity and allow the agency to
    better perform this function. The domestic food and animal feed
    industry would benefit from the agency's enhanced ability to facilitate
    the exportation of their products.
        The Federal Food, Drug, and Cosmetic Act (the Act) authorizes FDA
    to collect user fees for export certificates for human drugs, animal
    drugs, and devices. However, this authority does not extend to
    collecting user fees for export certificates for foods and animal feed.
    FDA expends significant resources annually to issue these certificates,
    and the agency needs to focus its resources on activities that are
    central to its public health mission. The Administration has asked that
    Congress fund these two user fee programs with mandatory budget
    authority.
    Current Law User Fees (+$20.2 million)
        We are also requesting an increase of $20.2 million for user fees
    that support prescription drug review, medical device review, animal
    drug review, mammography inspections, export certification, and color
    certification fees, for a total fiscal year 2007 user fee level of $402
    million. These fees enable FDA to review medical products in a timely
    manner and reimburse FDA for two services (color certification and
    export certification for human drugs, animal drugs, and devices) that
    we provide to industry. All of these requested fee increases are
    authorized under current law. In fiscal year 2007, FDA will work with
    Congress on the reauthorization of the PDUFA, MDUFA, and ADUFA user fee
    programs.
    Closing
        Mr. Chairman, I look forward to working with you, members of the
    Subcommittee, and your staffs to maximize FDA's resources in the best
    interest of the American people and our country as we move into fiscal
    year 2007. The agency's program level request of $1.95 billion is
    necessary to perform our mission--established by Congress a Century
    ago--to protect and promote the health and safety of the American
    public. At the Food and Drug Administration, we work tirelessly to
    fulfill these public health responsibilities. Our goal is to maximize
    the benefits and minimize the risks from the products we regulate.
        Among my highest priorities as Acting Commissioner--for as long I
    am privileged to serve at the helm of FDA--will be to foster the
    development of the FDA of the 21st Century. Building on the success of
    the past, we will maintain our ``covenant of trust'' with patients and
    the public. We will assure they have safe, effective, modern, and cost
    efficient solutions for the challenges to their health and well-being,
    and the health and well-being of their children and grandchildren. A
    well managed and adequately funded FDA will mean a healthier America
    for many generations to come.

                             STRATEGIC REDEPLOYMENT

        Senator Bennett. Thank you very much.
        You talk about reprogramming and redirecting the $52
    million. Would you please provide for the record more specific
    information on each program that you plan to either reduce or
    eliminate and the impact this will have?
        Dr. von Eschenbach. Yes, sir. We will be very pleased to
    provide that for the record in significant detail.
        [The information follows:]

        Senator von Eschenbach. We have gone through the entire
    portfolio across the various centers and offices with the FDA,
    worked extensively with the staff within those offices to look
    for those opportunities and those efficiencies where we could
    leverage, synergize, and partner, and we will provide the
    detail for each of those particular parts of the portfolio for
    you.

                               PANDEMIC INFLUENZA

        Senator Bennett. All right. Thank you.
        Last night, as I was watching television, which I don't
    often do--the news programs on television strike me as being
    more fictional than the sitcoms in many cases--running across
    the bottom of one of them was constant reference to Secretary
    Leavitt's warning with respect to pandemics.
        And you discussed pandemic influenza preparedness at some
    length in your testimony, and we provided $20 million for
    pandemic preparedness in fiscal 2006. Now you are asking for an
    additional $30 million.
        For those who do watch television and the streamer that
    runs across the bottom, could you discuss FDA's overall role in
    preparing for a pandemic and kind of tell us what you see in
    that whole area coming ahead for us?
        Dr. von Eschenbach. Thank you, Mr. Chairman.
        I believe your question points out a very essential and
    critical element in our overall plan for a pandemic, and that
    particular element is the essential role that the FDA must play
    across a large portfolio of opportunity.
        The role being to make certain that we are proactively
    helping to develop and to approve vaccines, antivirals and,
    devices that could be used for diagnostic purposes as well as
    devices that may have to be used ultimately with regard to
    human protection and support. And the important area that needs
    to be included in the portfolio, and that is the attention that
    needs to be paid to food animal.
        In each of these areas, FDA plays and must continue to play
    a critically important role in that process. We are engaged,
    for example, in working proactively with companies in the
    industry to help stimulate the development of vaccines, to help
    them improve current vaccine production capabilities, including
    the utilization of cell-based techniques in addition to the
    traditional egg-based techniques that have been used.
        Senator Bennett. Let me interrupt you there quickly because
    I have been contacted by an American company that works on the
    issue of cell-based techniques as opposed to egg-based. And I
    want to call your attention to the fact that there are American
    companies that are in this field, and there has been concern
    raised about contracts being given overseas that are primarily
    to egg-based fixes, while there are American companies that
    complain that they are being overlooked.
        And I would ask you to pay personal attention to that as we
    go forward because it has to do with volume.
        Dr. von Eschenbach. I certainly will continue to look into
    that, as will the rest of the agency, and pay very close
    attention to that. Because our commitment is to broaden the
    portfolio as widely as possible to make as many opportunities
    and options available with regard to the development of new
    vaccines, specifically directed to H5N1.
        With regard to antivirals, just as an example of the FDA's
    commitment, we are actively looking at opportunities to enhance
    shelf life of antivirals such as Tamiflu, which would
    significantly increase and enhance our abilities with regard to
    stockpile.
        In devices, we work collaboratively with the CDC and
    recently approved in a very rapid period of time a diagnostic
    device, which can be used in processes of screening and looking
    for the first and earliest signs of H5N1.
        And one of the areas I have pointed out which we needed to
    include into the FDA's commitment, and where a significant
    amount of the new funds are being directed, has to do with
    issues with regard to animal welfare, including the ability to
    regulate how animals will be used and making sure that we check
    and look for residue or traces of antivirals because we are
    concerned about the development of resistance in animals and
    humans.
        But also should there be an outbreak or pandemic of avian
    flu within our bird population, the destruction of those food
    animals places the FDA in a critically important role with
    regard to regulating the processes of destruction and assuring
    that there is no contamination and risk for human health.
        So it is a very broad portfolio, and we initiated after I
    arrived at FDA an integrated task force within FDA so that all
    these parts and pieces are now being coordinated and integrated
    into a cohesive effort so that FDA contributes appropriately to
    the larger initiative being carried out at the Department of
    Health and Human Services and in other agencies.
        Senator Bennett. Thank you very much. I would note that the
    company that contacted me is not located in Utah.
        Senator Kohl.
        Senator Kohl. Thank you, Mr. Chairman.

                                 GENERIC DRUGS

        Dr. von Eschenbach, the FDA plans to spend over $400
    million to approve approximately 88 new brand-name drugs and
    just $65 million to approve over 400 new generic drugs in
    fiscal year 2007. There are currently over 800 generic drugs
    waiting to be reviewed at FDA, and the generics waiting list is
    expected to grow, as you know.
        Now I understand the importance of reviewing and approving
    new drugs. They are often breakthroughs in the treatment of
    disease. However, according to the Congressional Budget Office,
    generic drugs on the market now save consumers an estimated $8
    billion to $10 billion a year at retail pharmacies, and this
    doesn't include the money saved when they are used in
    hospitals.
        As you know, they bring a big bang for the buck. And while
    the backlog continues to grow, your budget doesn't seem to make
    any effort to reduce that backlog. It seems that a relatively
    small increase, especially in relation to the money you spend
    to approve brand-name drugs, could make a big dent with respect
    to generics. How do you answer that?
        Dr. von Eschenbach. Thank you very much, Senator Kohl, for
    addressing what we believe is a very important and critical
    issue.
        As you point out, we do want to continue to be sure that we
    are nurturing and supporting the innovative opportunities to
    continue to bring new solutions to patients, especially based
    on the progress that is being made in biomedical research and
    molecular medicine. At the same time, however, we are equally
    committed to being certain that we can provide access to
    patients to a wide portfolio of these drugs, including the
    availability of generics.
        Over a period of time, we have a commitment to the generic
    program using all of the dollars that have been authorized for
    that purpose and have seen a continuous increase in the number
    of generics being approved each year. It is also true that the
    number of applications have also continued to increase.
        We are attempting to address this problem in a variety of
    ways. First, we are giving priority to the first generic
    available. That is enabling us to assure that at least across
    the entire portfolio, Americans have access to one alternative
    to the innovator drug.
        In fact, we believe that program has been successful, to
    the extent that we are approving first generics almost
    simultaneously with patent issues having been resolved. We have
    narrowed any gap between the legal barriers and the regulatory
    barriers making those drugs available to patients.
        With regard to volume, we are at a point now where we are
    approving more than one generic drug on the average every day.
    Having said that, we also recognize the need for continuous
    improvement in the process, to continue to expand our ability
    to grow the portfolio to alleviate the backlog.
        We are directing more people to the effort of the approval
    process. We are working with manufacturers to enhance the
    quality of their submissions in order to reduce cycle time to
    approval.
        Most importantly, we are improving our own internal
    processes, especially by moving from paper-based regulatory
    approval processes to electronic based. And we believe this
    electronic infrastructure will be a significant step forward in
    enhancing the rapidity of our ability to process these
    applications and eliminate the backlog.

                              GENERIC DRUG BACKLOG

        Senator Kohl. In spite of all of that, there are 800
    generic drugs waiting to be reviewed and approved at the FDA,
    and that waiting list is expected to grow. So why don't we find
    a way, understanding how important these generic drugs are in
    helping people save money, why don't we find a way to more
    quickly address this backlog?
        Do you see that as a high priority that you want to get at,
    or is it business as usual?
        Dr. von Eschenbach. No, sir.
        Senator Bennett. If I could just do the math? If they have
    800, and they are doing one a day, and they don't work
    Saturdays and Sundays, that is about 3 years of backlog.
        Senator Kohl. Thank you.
        Dr. von Eschenbach. Senator, let me approach the question
    in the following way. We are committed, as you are, to being
    able to expand the portfolio of access to various solutions for
    the American people. And to do that, I believe really requires
    a process improvement. It is a way of looking at this entire
    continuum and looking for places in which we can improve cycle
    time, where we can improve the ability to move larger volumes
    of these applications more effectively through the system.
        And as I indicated, the strategies that we are embarking
    upon are more people, more effective means of processing
    applications, including electronic submissions and electronic
    review, and working more collaboratively and proactively with
    the manufacturers of these generics in order for them to be
    able to enhance their applications and improve the application
    process.
        We believe that by a multi-pronged effort, we will find
    incremental benefits along the entire process improvement
    continuum. The end result being more generic drugs coming,
    being made available to the American people.
        Senator Kohl. Of course, you understand the American people
    want every generic drug that can be approved to be approved
    because it is an immediate tremendous saving in their pocket,
    right? And that is why we are here. That is a basic reason why
    we are here.
        I just make that comment, and I turn it back to you, Mr.
    Chairman.
        Senator Bennett. Yes. I mean, a 3-year backlog, and you add
    in holidays, you get to 3.5.
        Senator Kohl. Thank you again.
        Dr. von Eschenbach. Well, I think----
        Senator Bennett. That is more significant than I had
    realized.
        Dr. von Eschenbach. Well, I think one of the important
    things I would like to also emphasize--and apologize if I
    didn't make it as clear as I should have--is that in looking at
    the large volume of generics and what is available to the
    American people, we are looking at this in a hierarchical
    fashion.
        First and foremost, we want to be sure that across the
    continuum of drugs that there is at least one generic available
    for any one of those particular drugs or solutions. Then there
    are follow-on generics after that or additional generics that
    are complementary or perhaps identical to that same generic.
        Now the entire portfolio will always continue to grow, but
    there is a point where we believe that at least being sure that
    there are available drugs, generic drugs for every condition
    and in every situation and circumstance will be our first
    priority.
        Senator Bennett. So you are saying you are prioritizing
    them so that the generic that would benefit the greatest number
    of people will get moved up in the----
        Dr. von Eschenbach. Exactly, sir. In order to put the
    backlog into perspective, it would be one thing if we had a
    backlog in which there was an innovator drug for which there
    was no alternative generic. That would be a backlog that would
    have a critical impact on the health and welfare of the
    American people.
        But if the backlog is one in which we already have three or
    four generics available for that particular drug, and there is
    a backlog of three or four other applications, that is going to
    get less priority in the hierarchical system.
        Senator Bennett. Well, I encourage you to continue to do
    that, and that is prudent management. But it would be helpful
    if the total number could come down and the total backlog could
    shrink a little.

                     CRITICAL PATH TO PERSONALIZED MEDICINE

        Let me focus for a minute on your new initiative called the
    Critical Path to Personalized Medicine. That is an intriguing
    title, and this is obviously a long-term investment on your
    part.
        Tell us what the ultimate goals are and how long you think
    it will take to achieve those goals. Or is this something that
    the goals will always be coming up, so this is a long-term
    program that will continue?
        Dr. von Eschenbach. Well, Mr. Chairman, I have benefitted
    greatly from my previous experience in being able to witness
    firsthand the tremendous progress that is being made in
    biomedical research and the literal explosion in our ability to
    understand diseases and even human health and nutrition from a
    genetic and molecular perspective.
        And that discovery is really opening up for us the
    opportunity to develop new solutions, new products that are
    very different and unlike the products and solutions that we
    have seen in the past. We need a new bridge between that
    discovery to the delivery of those new solutions to patients,
    and that bridge of development is the bridge that the FDA is
    responsible for and is nurturing.
        And it is the critical path from that discovery to that
    delivery that we are committed to by bringing to the regulatory
    process the science that has been involved in the discovery and
    the development of these new interventions and the science and
    technology that will be necessary in order to regulate and
    approve these new solutions and new products with regard to
    their safety and their efficacy.
        So, in that context, with regard to that vision of what we
    are trying to accomplish, it will be an ongoing iterative
    process. We will continue to develop it as the science and
    technology continues to develop it.
        But our goal is to make certain that these new solutions
    that we are experiencing by virtue of our investment in
    biomedical research at the NIH and in other areas will, in
    fact, translate into solutions that can and will be delivered
    rapidly, effectively, and safely to the American people.
        Senator Bennett. Well, one of the frustrations that I have
    had since I have been in the Senate is that almost none of the
    discussion about health care has anything to do with health. It
    is always focused on acute care or after the fact kind of care.
        And if I hear correctly what you are saying, FDA is making
    a commitment for keeping people healthy prior to the time when
    they would need acute care and taking advantage of the science
    that is being developed at NIH and elsewhere.
        And if we are successful and keep people healthy at the
    front end, we presumably save money at the back end. Is this a
    fair summary of what it is you are aiming for?
        Dr. von Eschenbach. It is an absolutely insightful summary,
    and I appreciate you framing it in that way. We believe that
    the opportunities that are now available to us, the
    opportunities that the FDA can make possible for the American
    people, and for the rest of the world, by virtue of this
    critical path from discovery to delivery is the fact that
    medicine will be more preemptive or preventive.
        We will have the tools to be able to understand the
    earliest stages in the development of many diseases and be able
    to then have products that will be able to be delivered to
    preempt that process. Being able to develop and regulate
    approval of those products will require a new FDA, the FDA of
    the 21st century.
        And so, we will see cost benefits to that by moving out of
    a model that is predominantly focused on the treatment of
    established disease to a model in which we will have the
    solutions and tools to detect diseases much earlier in their
    development and then to be able to intervene and preempt them.
        It will also be personalized. We are seeing increasingly
    opportunities to be able to define the right intervention for
    the right patient based on our understanding of these
    fundamental molecular mechanisms. And we are seeing new
    targeted drugs becoming available and coming to the FDA for
    regulatory approval.
        If we get the right drug to the right patient, we eliminate
    the waste that occurs in the old system, the empiric system,
    where we are giving patients an intervention based on a
    statistical probability of success, but not knowing whether it
    will work in that patient or another patient. Just the fact
    that we can eliminate waste will have significant implications
    for our total expenditures in health care.
        Senator Bennett. I would like to pursue that with you in
    some detail because I think, ultimately, that is the only
    solution to our spiraling increase in Medicare and private
    health care costs.
        Dr. von Eschenbach. I would look forward to that, Senator.
        Senator Bennett. Yes. Senator Kohl.

                                 GENERIC DRUGS

        Senator Kohl. Thank you very much.
        Just to add a final word on generics, you stated that you
    prioritized to be sure that we have at least a generic, if not
    two, available for every brand-name drug. I would like to ask
    my staff to work with your staff to satisfy me that, in fact,
    we are doing a good enough job in meeting at least that minimum
    kind of a condition which, as you point out, is very important,
    and I would agree.
        Dr. von Eschenbach. We would welcome that, Senator.
        Senator Kohl. Thank you.
        Dr. von Eschenbach. And look forward to working with your
    staff.

                                AVIAN INFLUENZA

        Senator Kohl. Dr. von Eschenbach, I was recently looking at
    some news reports on avian flu, and these two reports seemed to
    summarize, I think, what many people are feeling.
        The first report quoted Dr. Gerberding of the CDC as saying
    that our current situation is not a good one. Secretary
    Johanns, on the other hand, was quoted that same day as stating
    that bird flu is coming to America, but he said that we are
    ready and ``know how to deal with it, and we will deal with
    it.'' And just last week, he testified to us that, ``We are
    well prepared for bird flu.''
        It is understandable why many people are confused and
    uncertain and concerned about how to react. So from your
    perspective, are we prepared for a bird flu outbreak? How much
    vaccine do we have on hand now? And please talk about our
    ability to obtain or make more vaccine.
        Dr. von Eschenbach. Well, Senator----
        Senator Kohl. Do you think we are well prepared?
        Dr. von Eschenbach. Pardon me, sir?
        Senator Kohl. How would you summarize our situation with
    respect to the possibility of a bird flu outbreak?
        Dr. von Eschenbach. One of the things that I have
    appreciated is the fact that, as Secretary Leavitt has
    indicated, we are in a race. We are in a race with regard to
    our ability to mobilize and prepare all of the particular
    interventions and solutions that will be necessary to deal with
    an avian flu outbreak in humans.
        And that race to prepare is in contrast to the race that
    the virus is engaged in with regard to its mutations. We don't
    know and can't predict exactly how long it may take for the
    virus to undergo the mutations that might be necessary for
    human-to-human transmission. We certainly have seen enough with
    regard to the virus to be alarmed and concerned that that
    ultimately might occur.
        Having witnessed the mobilization that is occurring with
    regard to not only our own infrastructure within the United
    States, but around the world, I believe that we are engaged now
    in a very positive and very constructive and productive effort
    to bring all of the components to bear. As I indicated, the FDA
    is taking its role in a very integrated and comprehensive way
    to look across this continuum, to accelerate the ability to
    develop vaccines.
        We cannot develop a vaccine for the human-to-human virus
    until that virus occurs, but we are developing vaccines for the
    H5N1 that has already occured. And we are also developing seed
    strains so that we have in place variations of the virus so
    that we would be already prepared to move to the next step to
    mass production of vaccines once we got the right match.
        So I use that as an example to point out that it is a
    problem that requires a comprehensive, integrated,
    collaborative solution. It is one in which we will look across
    the wide portfolio of interventions, and it will go beyond just
    vaccines to also include, as I have indicated before,
    antivirals, and diagnostic devices.
        Senator Kohl. But just last week, the United Nations stated
    that bird flu could arrive in the United States between 6 and
    12 months from now, which is imminent. So if these predictions
    are correct, the virus could arrive in the United States before
    we have the capability to make mass quantities of vaccines.
        What advice do you have for people all across our country
    who are concerned about this imminence, this possibility within
    6 to 12 months?
        Dr. von Eschenbach. Well, I think, as Secretary Leavitt has
    indicated, we need to be aware of the threat. We need to not
    panic, but we need to prepare in the sense of anticipating and
    being aware of the fact that this is a threat that could strike
    us.
        It has not happened at this point in the sense of having
    the avian form of the disease in the United States, but that is
    expected to occur. It has not happened with regard to a strain
    that has human-to-human transmission capabilities.
        But I think as far as the public is concerned, the
    continued support of the efforts that are being made across the
    public health continuum--not only in the Department of Health
    and Human Services, but throughout the rest of the academic
    world and in conjunctions with WHO--as you pointed out, I think
    it is a commitment to prepare and to prepare as rapidly as
    possible is the most important contribution we could make at
    this point.
        Senator Kohl. Thank you, Mr. Chairman.
        Senator Bennett. Senator Harkin.

                        BOVINE SPONGIFORM ENCEPHALOPATHY

        Senator Harkin. Thank you very much, Mr. Chairman. And I
    apologize for being late. We had an authorizing committee
    hearing prior to this, not the appropriations.
        But I thank you, Mr. Chairman, and welcome our witnesses
    here, especially Dr. von Eschenbach, whom I have worked with a
    great deal at NIH over the years.
        I will get right to the point. Maybe this has been asked
    before, but I don't know if anything has been brought up about
    the recent case of BSE that was just discovered in Alabama.
        Senator Bennett. It hasn't been asked. So go ahead.
        Senator Harkin. Thanks, Mr. Chairman.
        Well, as you know, it is in the press now that it was
    confirmed that we have another animal, a 10-year-old cow in
    Alabama tested positive for BSE, and now they are looking at
    the herd and the feed and everything else to try to figure out
    if there were other animals contaminated or where this
    contamination may have come from.
        Now FDA recently proposed several changes to the feed ban
    rule that it first adopted in 1997. The main adjustment
    proposed is that brain and spinal cord from cattle would be
    banned from all animal feed, not just from cattle feed, okay?
    So far, so good.
        However, the loophole that currently exists of allowing
    poultry litter--yes, you heard me right--poultry litter to be
    fed to cattle would continue.
        So we have a situation where you can take some of the SRMs,
    specified risk material, from cattle, a ruminant animal, feed
    it to chicken. Some of that gets into the litter. The litter is
    then fed to a ruminant animal. The prions exist, and they may
    exist in the SRMs from the slaughtered, go into chicken feed,
    fall into the litter, and be fed back to a ruminant animal.
        Canada is in the process of strengthening its feed ban rule
    to prohibit all, all specified risk materials from all animal
    feed, including pet food. That is, Canada is going beyond just
    the brain and spinal column. Canada has already banned poultry
    litter and plate waste from cattle feed.
        Now FDA clearly acknowledges that the main cause of BSE in
    cattle is from contaminated feed. In fact, the feed rules are
    routinely cited by USDA and FDA officials as our first line of
    defense against BSE. But in this case, FDA, with these new
    proposed rules, appears to be preparing to come out with a
    weaker feed rule than Canada, weaker than has been called for
    by experts on BSE.
        In other words, it would still be permissible to feed
    cattle byproducts with a high risk of BSE back to cattle
    through poultry litter. Now, again, I don't know what the
    reasons for allowing that are, but I am just wondering with
    this proposed rule, FDA proposed rule, FDA will only prohibit a
    partial list of SRMs from all animal feed, a partial list.
        In addition, FDA is not closing the loophole that currently
    exists by allowing poultry litter to be fed to cattle. This
    leaves a clear circle of transmission wide open, where the SRMs
    that are not prohibited by the proposed rule could be fed to
    poultry, and then the poultry litter fed back to cattle. How
    does the FDA justify not closing the poultry litter loophole?
        Dr. von Eschenbach. Senator, let me first begin by saying I
    appreciate the question and thank you for it because it is
    addressing an issue that, as you pointed out, with the recent
    awareness in the press of another cow being detected with BSE,
    it has raised concerns. And it is important that we address
    them.
        The feed ban that was put in place in 1997 was done in a
    way to be able to ban high-risk materials and to be able to
    over a period of time, continue to monitor and inspect and be
    sure that processes were being appropriately applied. So FDA
    has been working closely with USDA. As it has been responsible
    for the issues with regard to cattle, FDA has been approaching
    the issues with regard to animal feed.
        Throughout that period of time, and as you have pointed
    out, the processes that we put in place have, as we have gone
    through looked for compliance with regard to the processes, we
    have found in all the inspections over 99 percent compliance
    with the rules. And during that period of time, over 800,000--
    or at least at this point with regard to 650,000 high-risk
    animals that the FDA has identified, there have only been 2
    cases of BSE, and those 2 cases have been in animals that were
    born before the feed ban was put in place.
        Now I emphasize that because I think it is important to
    point out that the processes that have been in place since 1997
    have had a high degree of compliance, and in fact, the risk of
    BSE in the cattle population at this point in time has only
    involved 2 animals, and both those animals were born before
    this ban was put in place.
        Having said that, as you have pointed out, the FDA recently
    went a step further to further strengthen the feed ban rule and
    put in additional bans, as you have indicated.
        Now with regard to the specifics of the transmission of BSE
    in prions in the droppings from poultry, if I could permit--
    with your permission--to have Steve Sundlof, the head of our
    Center for Veterinary Medicine, who is responsible for this
    area, he may be able to give you a much more precise scientific
    answer with regard to the risk of that particular aspect of
    possible transmission of BSE.

                      POULTRY LITTER AND BSE TRANSMISSION

        Senator Harkin. It is up to the Chairman.
        Senator Bennett. We could follow up.
        Senator Harkin. It is up to the Chairman. Yes, that is
    fine.
        Senator Bennett. Do you want to follow up quickly?
        Senator Harkin. If that would be okay with you, Mr.
    Chairman?
        Senator Bennett. Sure. Go ahead.
        Mr. Sundlof. Thank you, Senator Harkin.
        I am Steve Sundlof, the Director of the FDA Center for
    Veterinary Medicine, and it is my center that regulates the
    safety of all animal feeds, including pet foods.
        To get to your precise question regarding poultry litter,
    first of all, we have evaluated the potential risk of poultry
    litter to spread BSE among cattle, and we find that to be very
    low for a number of reasons. First of all, the amount of animal
    protein in that poultry litter is very small. Secondly, it
    comprises a small part of the cattle diet. Thirdly, when we put
    it through some of our risk assessment models, it appears that
    that risk presently, as the rule is written, represents an
    extremely low risk.
        By proposing that all brains and spinal cords from cattle
    over the age of 30 months be eliminated from all animal feeds,
    you have taken 90 percent of whatever remaining infectivity
    there exists out there, and you have taken that out of any
    poultry diet. So now with the new proposed rule, you have
    actually reduced any potential risk from poultry litter by
    another 90 percent.
        And again, that is 90 percent of a very, very small risk to
    begin with. And so, the proposal really addresses a lot of the
    issues that remain around poultry litter.
        Senator Harkin. Is it possible, Mr. Sundlof, is it possible
    for the prions to come from a ruminant animal that actually
    might be fed to poultry or drop in the litter, and that litter
    could then possibly be fed back to a ruminant animal?
        Mr. Sundlof. It is possible, but the amount that would be--
    first of all, if you take the brain and spinal cord out, you
    have eliminated 90 percent of whatever infectivity could go
    into that.
        Senator Harkin. I understand. I understand that.
        Mr. Sundlof. But the amount of animal protein that is in
    the litter is very, very small. Now, you know, we don't say, we
    never can say that the risk is absolutely zero. And so, to
    answer your question, yes, it is possible. But the probability
    of that occurring is very, very remote.
        Senator Harkin. Well, now, Canada has already banned
    poultry litter, right, from being fed?
        Mr. Sundlof. That is true.
        Senator Harkin. That is true in Europe, too?
        Mr. Sundlof. Yes.
        Senator Harkin. It is true around the rest of the world as
    far as I know. And my question, I guess you just raised this
    question in my mind, if poultry litter is so low in protein,
    why are they feeding it?
        Senator Bennett. Yes, that was the question I have. If it
    is so small, what does poultry litter bring to the table?
        Mr. Sundlof. Well, a little cattle physiology here. Cattle
    are able to convert non-protein materials like cellulose, in
    terms of grass, actually into protein. So a large part of
    cattle diet is made up of material that is very low in protein,
    but in the rumen of the cattle, the microorganisms actually
    make protein, which then the cattle digest.
        So in terms of why Canada and Europe and other countries
    don't feed poultry litter has to do more with the demographics.
    In the South, especially in the southeastern United States,
    cattle are raised on open land. They are raised in areas where
    there is a lot of poultry production in addition to cattle
    production.
        Poultry litter becomes an issue. The poultry industry has
    to get rid of this product somehow. They can either spread it
    onto the land and use it for fertilizer. But in general, there
    is more than can be disposed of by that method. It does have a
    fairly high nutritional value for cattle. It is something that,
    strangely enough, cattle seem to like to eat. And those
    conditions really don't occur in other parts of this country
    and especially in Canada and Europe.
        Senator Harkin. Well, again, since everyone else has banned
    it, it seems like we are always looking for ways to somehow get
    around banning the elements, all SRMs, not just the high risk,
    but all SRMS from getting back into ruminant feed. There are
    ways we can do that. Other countries have done it.

                     BSE RULE AND HARMONIZATION WITH CANADA

        Now I am told, Mr. Chairman, I am told that some FDA people
    told my staff they were working with Canada to make its rules
    similar to the United States. In other words, FDA is working,
    hoping to see that Canada weakens it rule to match that of the
    United States. Is that so? Are we working to try to get Canada
    to weaken its rule?
        Dr. von Eschenbach. We are exploring harmonization efforts
    with Canada.
        Senator Harkin. Now what does that mean?
        Dr. von Eschenbach. Well, that means that we are exploring
    whether or not, you know, this is a proposal----
        Senator Harkin. Are we exploring to get to their level or
    get them to our level?
        Dr. von Eschenbach. Well, we are holding discussions where
    we are looking at their assumptions behind their risk models
    compared to our risk models. And if we find that their risk
    models are a better reflection than what we have developed,
    then we would be willing to adjust our rule.
        But also we are just in the discussion phases now, where we
    are sitting down and examining the assumptions that went into
    each of our rules to determine whether or not those are valid
    in our particular countries, and there may be. And in the case
    with Canada, there may be some valid reasons why they should be
    different.
        Senator Harkin. Mr. Chairman, you have given me more than
    enough time. I do have some follow-up questions on the next
    round.
        Senator Bennett. Surely. We will have another round.
        Dr. von Eschenbach--and thank you, sir, for your expertise.
    You told me more about chicken litter than I probably wanted to
    know.

                            MEDICAL DEVICE USER FEES

        One of the things that I have been interested in since I
    have had this assignment in the Senate has been user fees and
    particularly medical device user fees. I found that FDA was
    delighted to have the extra money from the user fees, which
    were being paid somewhat reluctantly on the part of the users,
    but paid in an effort to increase the performance and lower the
    backlog of approvals.
        And there was a period when FDA simply took the money and
    then took the appropriated money that would have gone into
    improving performance and spent it someplace else. And I have
    been a bit of a nag on that issue and got an agreement out of
    OMB that that sort of thing would stop, that the user fees
    would, in fact, be matched with appropriated funds, and the two
    would be coupled rather than one becoming the replacement for
    the other. It is only fair that that be the case.
        Could you bring us up to date on where we are with
    performance out of MDUFMA? Now I have a copy of the answer that
    was given in the House with respect to this, and that is part
    of the transcript now of the House hearing. And I find that
    useful, but give you the opportunity to comment in general
    terms as to where we are with respect to greater performance in
    the medical device area and other areas where user fees are
    being paid in an effort to make sure that things move more
    rapidly.
        Dr. von Eschenbach. Well, Senator, as I have come to
    understand it and appreciate it, with regard to MDUFMA, or the
    medical devices user fees, that particular program has not had
    as long a history of experience and process improvement as has
    PDUFA with regard to the experience at FDA. And obviously, with
    medical devices, that introduces its own set of complexities
    with regard to the review process.
        Having said that, as MDUFMA has been implemented at the
    FDA, in most cases, there has been a full compliance with
    regard to the targets or the milestones that were put in place.
    But at the same time, it is also true that it has not been the
    case uniformly across the entire board and, in fact, in looking
    at even where we have met those milestones, the incremental
    improvement in terms of really being able to significantly
    reduce cycle time and streamline and accelerate the time to
    market is not to the degree that even we would be happy with
    and comfortable with.
        So we are looking at this from the point of view of process
    improvement. We are looking at it and working collaboratively
    and cooperatively with the industry in order to be able to
    continue to find ways to accelerate the process and make it
    more effective.
        We think there are opportunities to work with the industry,
    for example, with the preparation of their applications in a
    way that will help us proactively and prospectively be able to
    do that by greater consultations. We have noticed with regard
    to PDUFA that that opportunity for consultations before the
    application process has proven to be something highly
    attractive and very positive with regard to their experience.
        So we are looking at this. As you have pointed out, these
    dollars will be focused and targeted for a specific purpose,
    and that will remain so. And we will look to continue to
    improve the process.
        Senator Bennett. Thank you. I don't want user fees to
    become general taxes that just go into the general fund and
    then may or may not be producing the result for which people
    are paying extra.
        Senator Kohl.

                                FIELD INSPECTORS

        Senator Kohl. Thank you, Mr. Chairman.
        Dr. von Eschenbach, looking at your budget, it states that
    your field force of inspectors is going to decrease by some 48
    to 60 people. It also says in your budget in the very same
    section that the number of FDA-regulated imported products
    requiring inspection is increasing exponentially.
        Some of the other examples of activities that won't be
    performed as often by these inspectors, as I said, the analysis
    of imported and also domestic samples of food, inspections of
    veterinary feed manufacturers, inspections of human drug
    manufacturers, compliance and recall functions, including food,
    drugs, and animal drugs and feeds.
        How do you justify cutting field inspectors right now when
    the requirement for them seems to be going up and not down? Do
    you really believe that this is the best place for you to be
    trying to save money?
        Dr. von Eschenbach. What we are attempting to do, Senator,
    is to look at this again--as I have indicated in an answer to a
    previous question--as a process improvement issue. In looking
    at the total portfolio of activities and asking questions,
    where can we streamline? Where can we make this more efficient
    so that we are getting more outputs vis-a-vis the resources
    that we have to utilize to do that, including the human
    resources and the number of people that are involved?
        We think that there are opportunities to continue to
    improve the process. By, for example, focusing on preapproval
    inspections, working with manufacturers, working with regard to
    good manufacturing practice requirements, we can improve some
    of the processes and opportunities with regard to a proactive
    approach.
        We are targeting inspections to areas of high risk so that
    we are utilizing the workforce in a more efficient, more
    targeted way so that we are focusing on the areas where we see
    the highest concerns or the highest risks as opposed to simply
    disseminating those resources with less impact.
        So it is a process improvement problem. Looking at modern
    technologies that will enable us to enhance the ability to
    utilize the inspection process is another way we think we can
    continuously get more outputs, meet our responsibilities, but
    do that in a way that is efficient in the use of the human
    resources that we have so that we are deploying those where we
    see areas of higher public health need.

                          DRUG SAFETY OVERSIGHT BOARD

        Senator Kohl. All right. Dr. von Eschenbach, your budget
    talks about the creation last year of an independent Drug
    Safety Oversight Board to oversee the management of important
    drug safety issues.
        A quote from Secretary Leavitt regarding this board says,
    ``The public has spoken. They want more oversight and more
    openness. We will address their concerns by cultivating
    openness and enhanced independence.'' That is his quote.
        And yet the FDA has received criticism because the board
    now has no public representatives, meets in private, and
    publishes only vague summaries regarding what is discussed in
    these meetings. So how do you respond to these criticisms?
        The board may be independent, but is it really transparent
    when the only members are from the FDA and other Government
    agencies and reports are so vague?
        Dr. von Eschenbach. Senator, this is an important area,
    obviously, with regard to our commitment to drug safety. And
    the Drug Safety Oversight Board, as you point out, does go
    beyond FDA, and it does include other Federal employees from
    the National Institutes of Health and from the Veterans
    Administration.
        That provides us a couple of opportunities. One, it does
    broaden the input. It does enhance the expertise that is
    involved in this oversight review, and it does take it outside
    the walls of the FDA so that it is subject to a larger and
    more, if you will, independent analysis and review by
    individuals who are not part of the agency and not part of the
    FDA internal process.
        The very fact that they are Government employees, however,
    provides a great deal of efficiency in the terms of which this
    board is able to function. First of all, it enables us to avoid
    some of the potential problems and barriers in timeliness that
    would come from having to have to resolve conflict of interest
    issues or problems should this be outside of the Government.
        It allows us to deal with confidential proprietary
    information within the confines and constraints of the
    committee so that we are looking at data and information that
    is much more sensitive and, therefore, has the potential to be
    much more important and insightful with regard to the safety
    issues.
        So we believe that it is a balance and a balance between a
    process that is framed within the rules and regulations of
    FOIA, the rules and regulations with regard to conflict of
    interest, while at the same time, it is broadening the input
    beyond the FDA and assuring that we have the right expertise of
    individuals who will be able to improve the oversight of these
    drug safety issues.

                    OPENNESS OF DRUG SAFETY OVERSIGHT BOARD

        Senator Kohl. Well, Secretary Leavitt said that he wants to
    see more openness, more independence, and that he would take
    steps to improve that. Now if you meet in private, if the
    members are not public representatives, and if the reports that
    emanate from your meetings are not specific, what kind of
    openness is that?
        Dr. von Eschenbach. Well, I think there can be a great deal
    of attention paid to the openness and transparency of the
    process and the rules and regulations that frame how an
    oversight is being conducted. But the issues with regard to
    what is occurring in the internal discussions dealing with
    proprietary information, that in itself needs to continue to be
    protected or we won't be able to get the right information that
    we need to analyze and assess.
        So I think it is a balance, and it is an interplay between
    a process that is well defined, open, and, if you will, perhaps
    more precisely is transparent in terms of how it is being
    conducted with the rules that govern and frame how things are
    being done.
        But then the discussions occur within the context of the
    confidentiality that is required in order to protect
    proprietary interests and information that is not appropriate
    to disclose in a public venue. And the committee has been
    vigilant and active in its effort. There have been five
    meetings in 2005 looking at 17 different products.
        So it is active. It is engaged. It is an ongoing effort,
    and I think it is a process of balance between making sure that
    there is an additional layer of oversight, but one that is
    still being conducted within the constraints and confines of
    what the law and the regulatory process makes possible.
        Senator Kohl. Thank you, Mr. Chairman.
        Senator Bennett. Senator Harkin.

                        BOVINE SPONGIFORM ENCEPHALOPATHY

        Senator Harkin. Thank you, Mr. Chairman. Just one last
    follow-up on the BSE.
        I understand that FDA is going with the weaker rule because
    they are concerned about the costs of a stronger rule. Well, we
    can't ignore cost, but consider the cost that our country is
    bearing in lost export markets already because of that. Or
    consider the potential cost if consumers lose confidence in
    eating beef.
        I mean, you can argue about science and risk, but some
    things just make common sense. I mean, how many people know
    that cattle are fed chicken litter? Now that is not just the
    straw and the bedding, that is fecal matter. They are eating
    chicken feces, okay? And they are eating a lot of stuff that
    could fall into that litter that could be parts from SRMs that
    are fed a lot to poultry, a lot.
        And since other countries have banned it, I don't know why
    we are so reluctant to do that. Ask anybody even in this
    audience, how many, if you had a choice between hamburger from
    a cow that never ate fecal matter or one that did, what do you
    think you would get? It makes common sense.
        And my big concern is that with this recent case of BSE,
    obviously, I have an interest in this because I represent a lot
    of cattle feeders. I represent cattle people, and they are
    concerned about the loss of confidence that may happen if more
    of these problems start popping up.
        You may hear from the other side or some other side about
    this. But it seems to me that a big part of the problem that we
    have right now is that both FDA and USDA are telling the public
    that the feed rules are a firewall, a true safeguard. But now
    what I am hearing is you are saying that the feed rules are
    based on probabilities, 90 percent here, 90 percent there. You
    know, probabilities.
        Well, so what we are hearing, the rhetoric and the facts
    don't match. And I am just, again, concerned that we don't move
    ahead more aggressively to prohibit all SRMs, not just the high
    risk, all SRMs from all animal feed, including poultry, and to
    eliminate, finally get over that hurdle of plate waste.
        I can't believe we still permit plate waste in this country
    going into ruminant animals. Most other countries don't, but we
    still permit it. So, again, that is all I have to say on that.

                             FOOD AND NUTRITION FTE

        A couple of other things, Dr. von Eschenbach. Is it true
    that in this budget that there are somewhere between 50 and 80
    FTEs that will be taken away or transferred out of the food
    safety and nutrition area? Am I wrong in that?
        Are there any at all in this budget, are there FTEs being
    cut in food and nutrition?
        Dr. von Eschenbach. With regard to the area of food and
    nutrition, Senator, we are looking at redeploying activities
    within that area and synergizing and partnering in order to be
    able to meet the necessary commitments that we have within the
    budget. But do that in a way that is more efficient and more
    effective.
        We are looking at opportunities, for example, where
    mechanisms with regard to our management of personnel and
    opportunities for early buyout will enable us to reduce the
    cost of our workforce without necessarily reducing the number
    of FTEs. I would have to----
        Senator Harkin. Okay. Are there any in the budget? That is
    all I want to know. In this budget before us, is there a
    reduction in full-time equivalents in food and nutrition?
        Dr. von Eschenbach. I will have to give you for the record
    the specific----
        Senator Harkin. Okay. If you don't know, then if you could
    get back to us, I would sure appreciate it.
        Dr. von Eschenbach [continuing]. FTE reductions. But as I
    indicated to a prior question, I want to reassure the committee
    that whatever reductions and whatever redeployments are made in
    resources, we are doing that in a way that it has not
    compromised the commitment to public health and to safety.
        Senator Harkin. I appreciate that.
        [The information follows:]
                             Food and Nutrition FTE
        The strategic redeployment will be offsetting the requested
    increases in fiscal year 2007 for critical, high priority initiatives
    such as Pandemic Preparedness and Food Defense. This would be a change
    in FTE levels of -64 for Center for Food Safety and Applied Nutrition
    and -22 in Food related Field activities.
        The redeployment of the FTE in Center for Food Safety and Applied
    Nutrition will be made from programs such as food additives and food
    contact substances, research, cosmetics, dietary supplements, outreach
    and regulatory activities. The redeployment of the Food related Field
    FTE will be made in areas such as the collection and analysis of
    domestic and import food samples and in the management, supervision,
    and coordination of personnel at multiple locations.

                    DIETARY HEALTH SUPPLEMENTS EDUCATION ACT

        Good manufacturing practices. Senator Hatch, the other
    Senator from Utah, and I 12 years ago joined forces. We got a
    bill passed called DSHEA, the Dietary Supplement Health and
    Education Act.
        At that time, we put a provision in the law that mandates
    that FDA is supposed to come with good manufacturing practices,
    GMPs we called them. About every 2 years since that, we have
    been told that FDA is going to come up with good manufacturing
    practices, going to come up with the regulations. This
    persisted in the 1990s. It has persisted since then.
        Twelve years later, we still don't have good manufacturing
    practices regulations. The industry is crying out for this. The
    public needs it. It will tend to get some of the bad actors and
    those that might be out there out of the business. It will set
    up good standards. And here I am told again, ``very soon.''
        Can you give us your personal assurance that you will work
    with OMB to get the GMPs published, and can you give us any
    definitive date?
        Dr. von Eschenbach. Thank you, Senator. And we are, along
    with you, committed to continuing to the full implementation of
    DSHEA and meeting the requirements that have been involved in
    that important law.
        With regard to the dietary supplement GMP, as you have
    indicated, it is at OMB. The staff of CFSAN have been working
    directly with them with regard to addressing any particular
    issues with regard to that GMP being finally issued.
        I will continue to commit to you and ensure you that FDA
    will do everything that is needed and required to work with OMB
    to bring that about as rapidly as possible. I understand that
    it is----
        Senator Harkin. It is frustrating.
        Dr. von Eschenbach [continuing]. Imminent. But----
        Senator Harkin. It is frustrating. Dr. Crawford, when he
    was before the help committee last year, said--he assured us
    that the GMPs for dietary supplements will be published in the
    Federal Register within months. Still hasn't happened.
        Senator Bennett. Depends on your definition of ``months.''
        Senator Harkin. Okay. Well, I suppose if you meant a lot of
    months, yes.
        Dr. von Eschenbach. I have looked into this, Senator, and I
    can tell you that it is in process and in progress. I am led to
    believe and understand that the issues are being and have been
    addressed.
        Senator Harkin. Can you give us any idea, can we see
    something happening here in the next 30, 60, 90 days? Anything
    at all that we can hold you accountable for?
        Dr. von Eschenbach. Please hold me accountable for working
    with the OMB in an effort to make this come forward as you have
    requested.
        Senator Harkin. I won't press the issue further.
        I just have one last question. I will wait until my next
    round. Thank you.
        Senator Bennett. Thank you.
        The experience of working with OMB is one that I have had,
    and it was an administration 30 years ago or longer, I guess.
    But I don't think OMB has changed that much, and it is very
    difficult many times.
        And I have been in the position of being a witness where I
    know what I want to say, but OMB has told me what I can say. So
    I think Dr. von Eschenbach's commitment is probably the only
    one he can make under these circumstances.

                      UNIFIED FINANCIAL MANAGEMENT SYSTEM

        Unified Financial Management System. This is a project
    initiated in 2001 to integrate several financial management
    systems across the department. I am assuming we are talking IT
    here, all right?
        Dr. von Eschenbach. Financial management, yes, sir.
        Senator Bennett. Everyone has experience with IT programs
    that start out with great hope and anticipation and then end up
    being over budget and behind time. Originally, FDA's share of
    the total project through fiscal 2007 was estimated at $36.5
    million. This subcommittee has provided more than $50 million
    over the last 5 years, and your budget requests an additional
    $1.2 million.
        These are not large sums, but it is my understanding that
    annual costs for the system were supposed to level off and go
    down after fiscal 2005. This has not been the case. Since 2004,
    annual costs have gone up roughly 37 percent.
        Can you give us any kind of light at the end of this tunnel
    as to where we are going and what kind of progress we have been
    making?
        Dr. von Eschenbach. I would be happy to, Senator, and I
    also, with your permission, will call Kathy Heuer, who is the
    head of our Office of Finance and Management, to provide
    additional details.
        As I have understood and appreciated the process, FDA is
    contributing its appropriate share to the larger HHS effort
    with regard to the UFMS initiative, and it has, in fact,
    undergone an activation period of time with activation costs
    for contractor support, training, vendor support for new tools
    and licenses, and a need to continue to stabilize the process
    with regard to its utilization.
        We are anticipating and expecting that those activation
    costs will come to an end through the year 2007 and into early
    2008, which will bring us then into a level of cost reductions
    and cost savings, in fact, with regard to once we have
    implemented the system fully.
        So that is my expectation and anticipation of the process
    and how it will unfold. Kathy, if you would add to that?
        Ms. Heuer. Thank you, Senator.
        UFMS will be the largest financial management system on the
    civilian side of the Federal Government when fully implemented.
    It is a way to consolidate financial management across Health
    and Human Services, allowing for better integration of
    information, comparability of information, and sounder
    management decisions based on easier access to data.
        The cost increase you reflected in terms of 2005, 2005 is
    the year that we implemented UFMS. We went live in April 2005.
    The original budget projections did not include operations and
    maintenance projections. Those are about $3 million per year.
        We have a consolidated operations and maintenance structure
    with the department. So that is something that we have to pay
    in addition. Those were not part of the original estimates in
    terms of the budget.
        The original estimate in terms of the budget was just the
    project development, and that is why there is that increase, as
    you mentioned, the 37 percent going up because that was not
    included. Originally, it was just development. But now the
    operations and maintenance is on top of that.
        As Dr. von Eschenbach said, when UFMS is fully developed
    into 2008, then the development costs will be eliminated, and
    our ongoing costs will just be the operations and maintenance
    costs.
        Senator Bennett. Thank you. I wish you well.
        Ms. Heuer. Thank you.
        Senator Bennett. Senator Kohl.
        Senator Kohl. Thank you, Mr. Chairman. I have finished my
    questioning. I will defer to Senator Harkin.
        Senator Bennett. Senator Harkin.

                             STRATEGIC REDEPLOYMENT

        Senator Harkin. Mr. Chairman, just one last thing. And
    again, Dr. von Eschenbach, you are going to get back to us on
    these FTEs?
        Dr. Von Eschenbach. Yes, sir.
        Senator Harkin. The question I asked, I had information
    that in the budget there is a cut in FTEs in food and
    nutrition?
        Dr. Von Eschenbach. Senator, I am looking forward to
    presenting to the entire committee for the record a detailed
    explanation----
        Senator Harkin. Okay.
        Dr. von Eschenbach [contining]. Of the redeployment
    strategy across all of the centers and offices within FDA. So
    that it will define what the programmatic shifts are in those
    programs, along with what the FTE changes will be. And we will
    give that to you not only with regard to CFSAN, but with regard
    to the entire portfolio so that you will have that with regard
    to answering your question.

                    GELATIN CAPSULES FOR DIETARY SUPPLEMENTS

        Senator Harkin. Okay. My last question has to do with U.S.
    companies that want to export dietary supplements with gelatin
    capsules to Europe are first required to obtain a health
    certificate from the Food and Drug Administration, required to
    do so by the European Union.
        Now I wrote you a letter about this on February 28. I don't
    expect you to have replied. That is a short time ago. But I
    wrote you a letter about this on February 28.
        Now as I understand it, the EU requires U.S. companies to
    get a health certificate from FDA's Center for Food Safety and
    Nutrition. But according to the exporters that have talked to
    me, the EU does not require these certificates for
    pharmaceutical companies that are using the same gelatin
    capsules to export pharmaceuticals. But if you have a dietary
    supplement, same gelatin capsule, they require the FDA to give
    a health certificate.
        Well, I am told that the FDA does not issue such
    certificates. I don't know if that is so or not, but do you
    have any--I don't want to catch you flat-footed on this, but I
    am told that FDA does not issue them. So they are kind of
    caught.
        The EU says they have got to have a health certificate, and
    yet FDA says they don't issue those. So----
        Dr. von Eschenbach. Senator, I cannot give you the specific
    details in answer to that question. I would be happy to do that
    for the record or have one of the FDA staff that would be
    responsible for that respond.
        Senator Harkin. Well, please have your staff, and you
    personally, take a look at the letter I wrote you on February
    28. My staff will give you a copy here. I understand how those
    things go. But take a look at that because it is a big issue.
        Because it is the same gelatin capsule that pharmaceutical
    companies use. They order them from the same place, but the EU
    has rules that say you can't without a health certificate.
        So, they are sort of caught in a bind here. I need to find
    out about that and what we can do to help them overcome this
    trade barrier.
        Dr. von Eschenbach. I will look into that for you, Senator.
        Senator Harkin. I appreciate that very much.
        Thank you, Mr. Chairman.
        [The information follows:]

                    Health Certificates for Gelatin Capsules

        FDA issues a certificate, sometimes called a health certificate,
    for bulk gelatin for human consumption exported to the European Union,
    also known as EU. In the certificate, FDA certifies compliance with
    relevant U.S. standards, which have been recognized for this purpose as
    equivalent to EU requirements for foods including dietary supplements.
    The EU requires the certificate include affirmations from the
    manufacturer and periodic state inspections confirming the gelatin is
    produced in accordance with U.S. standards, the gelatin meets certain
    criteria, and that raw materials are appropriately sourced.
        The EU legislation separates requirements for foods and
    requirements for pharmaceuticals. However, to date it is only the
    United Kingdom, in its implementation of EU legislation, has stopped
    shipment of gelatin capsules containing dietary supplements. It is our
    understanding that our EU counterparts are trying to resolve the
    situation since the gelatin used in human food is, in most cases,
    identical to the gelatin used for pharmaceuticals.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Bennett. Thank you.
        Dr. von Eschenbach, we appreciate your attention to all of
    these questions and you and your staff's response to what our
    concerns are.
        Dr. von Eschenbach. Thank you, Mr. Chairman. And may I
    express to you and to the committee our gratitude, as I
    indicated at the very beginning, for your support.
        I would also like to express personally, for however long I
    have the privilege to serve in this role, that both myself and
    the staff of the leadership of the FDA would look forward to an
    ongoing conversation and relationship about many of the
    important issues that you raise. Not simply at a time, for
    example, when we are requesting a budget appropriation, but in
    an ongoing basis.
        We intend to be responsive and timely to requests that are
    provided to us by mail, but I look forward to that opportunity
    in person as well. And I know that that is reflected by the
    talented and wonderful people who are sitting behind me, who
    are the content experts that are at your disposal.
        Thank you, sir.
        [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

             MEDICAL DEVICE USER FEE AND MODERNIZATION ACT (MDUFMA)

        Question. Please provide, for the record, specific information
    regarding FDA performance in each of the medical device user fee goal
    areas.
        Answer. Secretary Thompson's November 2002 letter to Congress, also
    known as the FDA commitment letter, defines the performance objectives
    FDA is pursuing under the Medical Device User Fee Act, or MDUFMA. The
    commitment letter defines a comprehensive set of challenging goals and
    a schedule for meeting the goals.
        To allow FDA time to build its capacity to meet the ultimate goals
    set by MDUFMA for fiscal year 2007, the commitment letter provides for
    a phased implementation of goals, with the addition of more goals and
    higher performance expectations each year. In fiscal year 2005, 18
    additional goals went into effect, with two exclusively for the Center
    for Biologics, Evaluation and Research, also known as CBER. Six
    additional goals go into effect in fiscal year 2006. In fiscal year
    2007, FDA will be responsible for a total of 77 quantitative goals
    covering five receipt cohorts. FDA is expected to pursue eight
    additional nonquantifiable commitments, such as developing an
    appropriate bundling policy, continuing our efforts to develop
    mechanisms for the electronic receipt and review of applications, and
    improving the scheduling and timeliness of preapproval inspections.
        Although we do not expect to meet every goal specified by MDUFMA,
    the trends are promising. Since some goals involve so few applications
    that missing the review time frame for a single application by a single
    day can result in ``failure'' to meet a MDUFMA goal. We are, in
    general, showing better performance as we implement new policies and
    procedures designed to improve the timeliness of our review processes.
    Although it is too soon to know what our final performance statistics
    will show, since many goals still have applications that remain open,
    our performance on applications within more recent receipt cohorts is
    better than our performance within older cohorts. If you had taken a
    snapshot of performance for the fiscal year 2003, fiscal year 2004, and
    fiscal year 2005 receipt cohorts on December 31, 2005, you would see
    that FDA is meeting or exceeding 19 of the 24 goals in effect, and is
    not meeting only two goals. No applications have qualified for the
    remaining three goals.
        We are confident that MDUFMA is producing positive results for FDA,
    for industry, and--of critical and highest importance--for patients and
    health care professionals.
        I would be happy to provide FDA's performance report for fiscal
    year 2004 for the record. We will forward our fiscal year 2005 report
    when it is complete.
        [The information follows:]

                            MEDICAL DEVICE USER FEES

        Question. During operation of the medical device user fee program,
    has the agency been able to determine specific direct and indirect
    costs of performing the various types of PMA and 510(k) device
    approvals? Will FDA be able to determine incremental direct and
    indirect costs that will be associated with improving review times
    under more aggressive performance goals in the future?
        Answer. FDA is engaging with industry and stakeholders as we work
    on the MDUFMA reauthorization. If the MDUFMA reauthorization results in
    changes to the performance goals, we will be able to estimate direct
    and indirect costs. During fiscal year 2005, FDA contracted with Dr.
    Dale R. Geiger, a recognized expert in the field of government cost
    accounting, to prepare a report of the costs of FDA medical device
    review processes. The statement of work for this report did not require
    Dr. Geiger to make findings and conclusions. Rather, Dr. Geiger
    prepared analysis for FDA to consider during the MDUFMA
    reauthorization. Dr. Geiger examined FDA medical device reviews
    conducted during fiscal year 2003 and fiscal year 2004, including
    investigational device exemption applications, investigational new drug
    applications, premarket approval applications, or PMAs, PMA
    supplements, biologics licensing applications, or BLAs, BLA
    supplements, and 510(k) premarket notifications.
        The methodology employed by Dr. Geiger follows generally accepted
    accounting principles for U.S. Government reporting entities, and
    parallels the methodology applied by an earlier Arthur Anderson study
    that measured PDUFA costs for 1992 and 1993. Dr. Geiger examined both
    direct and indirect costs, at CBER, CDRH, the Office of Regulatory
    Affairs, or field, and FDA general and administrative costs. This work
    will assist FDA with cost analysis in regards to the performance goals
    resulting from the MDUFMA reauthorization.
        Question. What criteria does the agency use to determine the
    allocation and priority for distribution of staff increases across FDA
    components, including offices, divisions, branches, regions, and
    districts resulting from medical device user fees and related
    Congressional appropriations?
        Answer. In the absence of a Congressional directive, FDA allocates
    medical device user fees and other medical device appropriations to
    best achieve FDA's public health objectives, the performance goals, and
    other expectations established under the Medical Device User Fee and
    Modernization Act of 2002 and its amendments. Resources have been
    allocated to reflect the workload balance between the Center for
    Devices and Radiological Health, or CDRH, and the Center for Biologics
    Evaluation and Research, or CBER. Soon after MDUFMA was enacted, FDA
    estimated that 83 percent of the device review work was performed in
    CDRH and 17 percent was performed in CBER. The Field resources
    associated with each Center are included in these percentages. FDA's
    fiscal year 2003 to fiscal year 2005 allocations were based on these
    percentages. FDA is presently reexamining this allocation and expects
    this examination will result in a higher percentage of MDUFMA being
    allocated to CDRH.
        Field resources are allocated among districts by the Office of
    Regulatory Affairs, or ORA, according to each district's projected
    medical device workload. To illustrate the use of workload to determine
    distribution of resources, CDRH's MDUFMA hiring priorities were
    established by product group experts who made recommendations about the
    type and order of new hires that would best contribute to improving the
    device review process. For example, the CDRH cardiovascular group,
    which included experts on those types of devices from across the
    Center, concluded that their highest priority for improving and
    speeding the review of cardiovascular devices were additional
    statisticians. Other product review teams--for example, those for in
    vitro diagnostic devices, ophthalmic and ENT devices, ob-gyn, gastro-
    renal, and urological devices--identified the priority needs they
    believed were essential to improving the quality and timeliness of the
    review process.

                            POSTMARKET SAFETY ISSUES

        Question. At the industry-agency workshop on ongoing efforts to
    improve post-market safety activities in February of this year, several
    issues came up that are of potential concern.
        With regard to the notion of requiring ``unique product
    identifiers,'' how would this requirement differ from and improve on
    the existing device tracking requirements for high risk devices? What
    technical and labeling issues arise with regard to such a requirement
    for all devices?
        Answer. The device tracking requirement applies to manufacturers of
    a small set of mostly implantable devices, and intends to ensure that
    manufacturers can quickly locate defective devices and notify patients.
    Conversely, the idea underlying unique device identification, or UDI,
    is to require manufacturers to apply a unique code to the label of a
    variety of medical devices, in both human and machine readable formats,
    like barcodes. When combined with other health information technology
    efforts, UDI has the potential to provide a number of benefits to
    improve patient safety. Important potential benefits include the
    reduction of device-related medical errors through the recognition of
    compatibility and interoperability issues; facilitating the population
    of device information in patients' electronic health records; and
    improving the accuracy of information about marketed devices through
    the standardized identification of specific devices in adverse event
    reports. Additionally, an effective system of device identification
    should allow more efficient recall of defective devices and also assist
    in fighting counterfeit devices.
        The type of information included in the UDI will determine what
    technical and labeling issues arise. FDA is currently considering the
    appropriate scope of such information and intends to address these
    issues in a rulemaking.
        Question. With regard to the draft guidance document on
    requirements for additional information to be to be included in annual
    reports, does FDA already have this information in various formats and
    disparate offices throughout the device center? Would it make more
    sense for the agency to break down its internal barriers that prevent
    effective utilization of information already collected by the Center
    for Devices and Radiological Health?
        Answer. The Center for Devices and Radiological Health, also known
    as CDRH, believes that data and information gathered in the postmarket
    setting is critical to our continued confidence in the safety and
    effectiveness of marketed devices. Premarket Approval, or PMA, annual
    reports are one of the important tools that FDA relies upon to gather
    information about the device once it is marketed. For this reason, CDRH
    is assessing the information provided in annual reports to ensure that
    these submissions provide meaningful information for the agency and
    industry to assure postmarket safety. At this time, CDRH has not made a
    final decision as to the type of information that should be included in
    a PMA annual report. Once the decision is made, CDRH will take the
    necessary steps to ensure that the information required in the annual
    report is not duplicative of other regulatory reporting requirements.
        CDRH is also reviewing our internal processes and systems for
    communicating post-market information across the center. As part of its
    on-going effort to improve all aspects of post-market safety, CDRH
    initiated the Postmarket Transformation Leadership Team that consists
    of CDRH managers and external experts to guide the Center in this
    effort.

                            CRITICAL PATH INITIATIVE

        Question. FDA is requesting an increase of $5.9 million for the
    Critical Path Initiative. This funding is specified for the Center for
    Drug Evaluation and Research. However, I understand that the Critical
    Path Initiative is intended to speed the development of all medical
    products regulated by FDA.
        Will the requested funding be made available to other FDA Centers?
    If so, how much will be made available to each FDA center?
        Answer. All FDA centers will participate in Critical Path
    activities in order to achieve the public health benefits envisioned by
    FDA in its Critical Path report of March 16, 2004, and the Critical
    Path Opportunities List announced on March 16, 2006. In fact, several
    of the projects described in our budget request are cross-center
    projects, such as work to create a library of digital
    electrocardiograms, also known as ECGs, that involves both the Center
    for Drug Evaluation Research and the Center for Devices and
    Radiological Health.
        The Agency is still working with our partners in government,
    academia, and industry to determine which Critical Path activities, in
    addition to those identified in our fiscal year 2007 budget request,
    are the most appropriate activities to fund in fiscal year 2007.
        I would be happy to provide for the record the Critical Path
    Opportunities List that was announced on March 16, 2006.
        [The information follows:]

                          REUSE OF SINGLE-USE DEVICES

        Question. Last summer, Congress passed the Medical Device User Fee
    Stabilization Act to continue the medical device user fee program,
    adjust user fees, and tighten up branding provisions related to
    reprocessed devices.
        How soon will FDA issue the final guidance related to reprocessed
    devices?
        Answer. We hope to issue the final guidance shortly.
        Question. Will the final guidance differ significantly from the
    current draft?
        Answer. Because the guidance has not yet been finalized and
    cleared, we cannot say whether or not it will differ significantly from
    the current draft.
        Question. Will the final guidance assure that reprocessed single-
    use devices are adequately marketed so reports of malfunctions and
    serious injuries are reported correctly during the entire time a
    particular device is being reprocessed or reused?
        Answer. Yes. FDA believes that the final guidance will be adequate
    to ensure that reprocessed single-use devices are adequately marked to
    ensure that reports of malfunctions and serious injuries are reported
    correctly during the time a reprocessed device is used.
        Question. Will the FDA ensure that the labels that meet the
    branding requirements actually make it in to the patient chart when
    used by a hospital?
        Answer. FDA's primary task will be to ensure and monitor that
    reprocessed single use devices include the appropriate identification
    and labeling. The hospitals and other facilities that use these devices
    will have responsibility for ensuring that health care personnel attach
    labels to patient charts as appropriate. FDA intends to work with
    manufacturers, hospitals, and the Joint Commission for the
    Accreditation of Health Organizations to do outreach and encourage
    health care facilities to establish procedures to ensure that these
    labels are properly attached to patient charts.
        Question. Recent media attention to the reprocessing of single use
    devices has raised many concerns about the practice. The original
    Medical Device User Fee and Modernization Act required the FDA to
    review the most commonly reprocessed devices. The FDA reviewed a small
    subset of reprocessed single use devices and nearly 50 percent of the
    reviewed devices were either withdrawn or were declared not-
    substantially-equivalent.
        What is FDA doing to ensure patient safety is not compromised by
    the use of reprocessed single use devices? Can FDA do more to ensure
    patient safety is not compromised by the use of these reprocessed
    single use devices?
        Answer. FDA implemented the new premarket requirements put into
    place by the Medical Device User Fee Act, or MDUFMA, for reprocessed
    single-use devices, also known as SUDs. Manufacturers who intend to
    reprocess certain types of SUDs must now submit premarket 510(k)
    notifications for these devices which contain validation data on
    cleaning, sterilization and functionality. The additional premarket
    requirements apply to reprocessed SUDs determined to be high risk for
    transmission of infection or inadequate function following
    reprocessing, involving those reprocessed SUDs intended to come into
    contact with tissue at high risk of being infected with the causative
    agents of brain-wasting Creutzfeldt-Jakob disease. The reprocessed SUDs
    that are subject to the additional premarket requirements noted include
    21 device types that were previously exempt from premarket notification
    requirements, and 52 device types that were already subject to 510(k)
    premarket notification requirements, but were not previously required
    to submit validation data.
        FDA's postmarket oversight of reprocessors of SUDs includes
    inspections of manufacturing operations and review of adverse event
    reports. Since August 2000, FDA has inspected 29 reprocessing companies
    and over 200 hospitals to ensure that the third party reprocessors are
    following quality system regulations and that any hospitals engaged in
    reprocessing are also in compliance with these manufacturing
    requirements. During that time period, FDA issued eight warning letters
    to third party reprocessors and obtained two injunctions against firms.
    FDA issued regulatory correspondence outlining violations to four
    hospitals but has found that most hospitals are no longer reprocessing
    SUDs. In fiscal year 2005, FDA inspected seven reprocessing companies
    and found all of them in substantial compliance with applicable
    regulations.
        FDA continues to review adverse events submitted by manufactures,
    user facilities and the general public for problems associated with
    reprocessing of single use medical devices. FDA changed its MedWatch
    reporting forms to make it easier for device users to inform the agency
    when a reprocessed SUD is associated with an adverse event. In
    addition, FDA recently issued draft guidance to implement the provision
    of the Medical Device User Fee Stabilization Act, or MDUFSA, that
    requires reprocessors to ensure that each SUD clearly identifies the
    reprocessor. The new provision, which will go into effect in August
    2006, is intended to facilitate accurate reporting of adverse events
    involving reprocessed SUDs.
        FDA believes the measures Congress put into place for reprocessed
    single use devices under MDUFMA establish appropriate controls to
    provide reasonable assurance of safety and effectiveness for these
    devices. The controls, which include additional data requirements,
    premarket review, and labeling provisions, have supplemented the
    inspection and enforcement authorities FDA already had in place.

                                 FDA DETAILEES

        Question. Please provide information on the FDA detailees sent to
    work in the Congress over the past 10 years, including the office they
    work in at FDA, the office they were or are detailed to in the
    Congress, the length of service, and FDA's policy on providing
    detailees to the Congress.
        Answer. I would be happy to provide that and the HHS Instruction
    300-3, Detail of Employees for the record.
        [The information follows:]

                                                      FDA DETAILEES
    ----------------------------------------------------------------------------------------------------------------
                     Name                        FDA offices            Detail location          Length of detail
    ----------------------------------------------------------------------------------------------------------------
    David Dorsey, J.D....................  Office of the            Senate Health,           Jan. 2001-Present
                                            Commissioner; Office     Education, Labor, and
                                            of the Chief Counsel.    Pensions Committee.
    Dr. Brian Harvey.....................  Center for Drug          White House, American    Oct. 2000-Oct. 2001
                                            Evaluation and           Political Science
                                            Research Office of New   Association
                                            Drugs.                   Congressional
                                                                     Fellowship.
    Stacy M. McBride.....................  Office of the            Senate Appropriations    April 2005-Nov. 2005
                                            Commissioner; Office     Subcommittee.
                                            of Management.
    Dr. Kevin Mulry......................  Center for Devices and   Office of Senator        Jan. 1998-Aug. 1998
                                            Radiological Health;     Richard Durbin Office
                                            Office of Device         of Legislative Affairs.
                                            Evaluation.
    Thomas B. O'Brien....................  Office of the            House Appropriations     Feb. 2004-Nov. 2004
                                            Commissioner; Office     Committee.              Jan. 2005-Feb. 2006
                                            of Management; Office
                                            of Financial
                                            Management.
    Dr. Donna-Bea Tillman................  Center for Devices and   Congresswoman Louise     Jan. 2000-July 2000
                                            Radiological Health;     Slaughter-New York.
                                            Office of Device
                                            Evaluation.
    Lisa Siegel..........................  Office of the            House Agriculture        Feb. 1999-Oct. 1999
                                            Commissioner; Division   Appropriations
                                            of Budget Formulation    Subcommittee.
                                            and Presentation.
    Maureen Holohan......................  Office of the            House Agriculture        Feb. 2000-Oct. 2000
                                            Commissioner; Office     Appropriations
                                            of Planning.             Subcommittee.
    Margaret Carlson.....................  Center for Food Safety   Senate Health,           Mar. 2002-Jan. 2004
                                            and Applied Nutrition.   Education, Labor, and
                                                                     Pensions Committee.
    Dennis Strickland....................  Center for Biologics     Office of Senator        Jan. 1996-Dec. 1996
                                            Evaluation and           William Frist
                                            Research; Office of      (Brookings Legislative
                                            Communication,           Fellows Program).
                                            Training and
                                            Manufacturers
                                            Assistance.
    Tracy Summers........................  Center for Food Safety   Office of Senator        Aug. 1999-Nov. 1999
                                            and Applied Nutrition;   Edward Kennedy FDA
                                            Office of the Director.  Desk.
    Diane Prince.........................  Office of the            House Energy and         May 1998-Jul. 1998
                                            Commissioner; Office     Commerce Subcommittee.
                                            of Legislative Affairs.
    Jeff Shuren..........................  Office of the            Senate HELP Committee    Nov. 1999-Nov. 2000
                                            Commissioner; Office     Office of Senator
                                            of Policy.               Edward Kennedy's
                                                                     Office.
    Theresa Mullin.......................  Office of the            Office of Senator Byron  Mar. 2000-Aug. 2000
                                            Commissioner; Office     Dorgan.
                                            of Planning.

    Dave Doleski.........................  Center for Biologics     Office of Senator Paul   Jun. 1999-Dec. 1999
                                            Evaluation and           Wellstone (Brookings
                                            Research;                Legislative Fellows
                                            Manufacturers Branch     Program).
                                            II.
    Serina Vandegrift....................  Office of the            Senate Agriculture       Jan. 2004-Jan. 2005
                                            Commissioner; Office     Committee (Chairman
                                            of Policy.               Cochran).
    Tim Lynagh...........................  Office of the            Office of Congressman    2003
                                            Commissioner; Office     Chris Smith.
                                            of Legislation.
    Mike Skonieczny......................  Office of the            Office of Congresswoman  2001
                                            Commissioner; Office     Rosa DeLauro.
                                            of Legislation.
    ----------------------------------------------------------------------------------------------------------------

                              HHS TRANSMITTAL 96.2
                                PERSONNEL MANUAL

    Issue Date: 2/22/96
        Material Transmitted.--HHS Instruction 300-3, Detail of Employees
    (pages 1-3)
        Material Superseded.--HHS Instruction 300-3 (all).
        Background.--This Instruction has been substantially streamlined in
    accordance with National Performance Review recommendations, and in
    support of HHS administrative initiatives calling for more streamlined
    rules and greater delegations of authority.
        Any reference to ``OPDIV'' in this Instruction now includes the PHS
    agencies, the Office of the Secretary, the Program Support Center,
    HCFA, ACF, and AOA.
        This issuance is effective immediately. Implementation under this
    issuance must be carried out in accordance with applicable laws,
    regulations, and bargaining agreements.
        Filing Instructions.--Remove superseded material and file new
    material. Post receipt of this transmittal to the HHS Check List of
    Transmittals and file this transmittal in sequential order after the
    check list.
                                              John J. Callahan,
                         Assistant Secretary for Management and Budget.

                               INSTRUCTION 300-3
                       DISTRIBUTION: MS (PERS): HRFC-001
                        HHS PERSONNEL INSTRUCTION 300-3
                  DELEGATION OF AUTHORITY TO DETAIL EMPLOYEES

    A. Authority Delegated
        1. Heads of Operating Divisions (including PHS agencies and the
    Program Support Center), the Assistant Secretary for Management and
    Budget for the Office of the Secretary (OS), and the Inspector General
    (for OIG) are delegated the authority to:
        a. detail and extend details of civil service personnel within the
        Department in increments not to exceed 120 days, pursuant to 5
        U.S.C. 3341; and
        b. detail and extend details of civil service personnel to or from
        other Federal organizations on either a reimbursable or a non-
        reimbursable basis pursuant to 31 U.S.C. 1535.
        2. These authorities may be redelegate with further redelegation
    authorized.
    B. Restrictions
        1. The term ``Federal organizations'' in paragraph A.1.b. above
    does not include the Executive Office of the President and the
    Legislative and Judicial Branches of Government.
        2. The Assistant Secretary for Management and Budget retains the
    authority to approve all details to or from the Executive Office of the
    President and to or from the Legislative and Judicial Branches of
    Government (including the General Accounting Office, the Library of
    Congress, and the Government Printing Office).
    C. Exclusions
        1. This delegation does not cover:
        a. Assignments of excepted employees other than those with Schedule
        A and B or VRA appointments to competitive service position (5 CFR
        6.5);
        b. Details of Administrative Law Judges (5 U.S.C. 3344);
        c. Details to certain Executive positions (5 U.S.C. 3344-3349) ;
        d. Details of members of the Senior Executive Service (5 CFR
        317.903) ;
        e. Details of PHS Commissioned Officers (42 U.S.C. 215):
        f. Details between HHS and a non-Federal organization under Section
        214 of the PHS Act, as amended;
        g. Details under the Intergovernmental Personnel Act of 1970 (5
        U.S.C. 3372-3374; and 5 CFR Part 334); and
        h. Details to an International organization (5 U.S.C. 3343; and 5
        CFR 352.304).
    D. Information and Guidance
        1. The authorities delegated in paragraphs A.1.a and b. above must
    be exercised in accordance with the requirements and/or provisions in
    the following references:
        a. U.S.C. 112 (Details to the Executive Office of the President)
        b. U.S.C. 3341 (Details within Executive or Military Departments)
        c. Civil Service Rule 5 CFR 6.5 (Assignment of Excepted Employees)
        d. 31 U.S.C. 1301 (Appropriation Restrictions on Assignment of
        Employees)
        e. 31 U.S.C. 1535 (Assignment of Employees Between Executive Branch
        Departments and Agencies and Written Agreements Between Agencies
        Detailing Employees)
        f. 4 CG 848-849, April 13, 1925 (Appropriations and Transfer)
        g. 21 CG 954, April 27, 1942 (Details to the Legislative Branch)
        h. 21 CG 1055, May 26, 1942 (Details to the Legislative Branch)
        i. 64 CG 370, B-211373, March 20, 1985 (Nonreimbursable Details)
    E. Prior Delegations
        This delegation supersedes the February 19, 1991, Delegation of
    Authority to Detail Personnel, as amended September 29, 1993, from the
    Assistant Secretary for Personnel Administration to the Heads of
    Operating Divisions and Regional Directors. To the extent that previous
    redelegations of the authority to detail personnel made to other
    officials within HHS are consistent with the provisions of this
    delegation, they may remain in effect until new redelegations are made
    under the authority of this delegation.
    F. Effective Date
        This delegation is effective on the date of this transmittal.

                                 BSE--FEED BAN

        Question. Yesterday afternoon, USDA announced that the third cow in
    United States history tested positive for BSE, commonly known as mad
    cow disease.
        The FDA feed-ban rule, issued in 1997, is the first line of defense
    in preventing BSE infection in U.S. cattle.
        What is FDA doing to ensure that it is inspecting all entities that
    are subject to the feed ban?
        Answer. FDA inspects a wide variety of firms in the animal feed
    industry to confirm compliance with the ruminant feed ban regulation.
    Every firm that manufactures, processes, blends, transports, or
    distributes animal feed or feed ingredients for any animal species is
    subject to inspection under the FDA ruminant feed ban compliance
    program. Firms are subject to inspection under the FDA ruminant feed
    ban regardless of whether prohibited material is used or the relative
    risk the firms practices may pose to the U.S. BSE feed control program.
    In addition to feed manufacturers and distributors, over one million
    farm operations feeding ruminants such as dairy and beef cattle are
    subject to the rule.
        The BSE Ruminant Feed Inspection Compliance Program guidance
    document constitutes the FDA risk-based inspection priority approach
    used by FDA and state investigators. FDA gives highest priority to
    inspecting firms that manufacture or process animal feeds or feed
    ingredients that contain prohibited material. This industry segment of
    renderers, protein blenders, and feed mills are inspected annually to
    ensure that ruminant feeds do not contain prohibited materials.
        FDA also conducts inspections on firms considered to have a reduced
    risk producing or causing contamination of ruminant feed. The agency
    conducts inspections of these lower risk firms to detect overall
    compliance trends. If FDA detects compliance trends, agency staff
    implements more targeted inspectional initiatives to increase our
    presence in some of these lower risk industry segments.

                               PANDEMIC INFLUENZA

        Question. How is FDA using the $20 million for pandemic influenza
    provided in the fiscal year 2006 supplemental?
        Answer. The $20 million supplemental was received at the end of the
    first quarter and the funds were available on January 26, 2006. I would
    be happy to provide the spending plan for the record.
        [The information follows:]

        Question. How does FDA plan to use the $30.5 million requested in
    fiscal year 2007?
        Answer. I would be happy to provide that information for the
    record.
        [The information follows:]

                               IMPORT INSPECTION

        Question. FDA plays a significant role in import inspection at
    ports. For example, FDA inspects food, human drugs, animal feeds, and
    medical devices at ports of entry across the country.
        For FDA-regulated food products, FDA estimates that by 2007 the
    amount that comes across the border will have nearly quadrupled since
    1999. In a typical year, FDA physically examines less than 1 percent of
    these food imports. How does FDA keep up with the ever increasing
    amount of imported products?
        Answer. FDA attempts to keep up with the increasing volume of
    imported products by using a risk based approach when selecting
    shipments to inspect and sample. All products are screened
    electronically by FDA's Operational and Administrative System for
    Import Support, also known as OASIS, against a set of criteria
    established as a result of previous laboratory findings, foreign
    inspections, information received from other regulatory agencies, and
    the relative risks posed by the products in question.
        The Public Health Security and Bioterrorism Preparedness and
    Response Act of 2002 requires anyone intending to import or offer for
    import a food product must provide prior notice to the FDA before the
    shipment arrives at the border. Every Prior Notice submission is
    screened electronically. If specific criteria are met, FDA's Prior
    Notice Center will review those submissions using various intelligence
    targeting parameters to protect the Nation's food supply against
    terrorist acts and other public health emergencies. For example,
    currently, working with information submitted through Customs and
    Border Protection's electronic systems used for import entries or
    through FDA's internet-based Prior Notice System Interface, FDA screens
    shipments electronically before they arrive in the United States to
    determine if the shipments meets identified criteria for physical
    examination or sampling and analysis or warrants other review by FDA
    personnel. This electronic screening allows FDA to better determine how
    to deploy our limited physical inspection resources at the border on
    what appear to be higher-risk food shipments while allowing lower-risk
    shipments to be processed in accordance with traditional import
    procedures after the electronic screening.
        Question. Does FDA have adequate resources to properly inspect
    imports?
        Answer. The rapid growth of imports combined with ever present
    security concerns has increased the need to assess the status of
    imported products. FDA estimates it will review more than 19 million
    import lines for admissibility into domestic commerce in fiscal year
    2007. To help ensure the safety of imported products entering the
    United States, FDA electronically screens imports through the
    Operational and Administrative System for Import Support, also known as
    OASIS. OASIS is an automated system for processing and making
    admissibility determinations for FDA regulated products that are
    offered for import. FDA also performs laboratory analysis on products
    offered for import into the United States; conducts foreign inspections
    to evaluate manufacturing conditions of products before they are
    offered for import; and performs periodic filer evaluations to ensure
    that the import data being provided to FDA is accurate.
        The Prior Notice Center, also known as PNC, is another important
    part of FDA's import strategy. The mission of FDA's PNC is to identify
    imported food and feed products that may be intentionally contaminated
    with biological, chemical or radiological agents, or which may pose
    significant health risks to the American public, and intercept them
    before they enter the United States. FDA will continue to focus
    resources on Intensive Prior Notice Import Security Reviews of products
    that pose the highest potential bioterrorism risks. The PNC uses a
    combination of adaptable targeting strategies and weighted risk
    indicators in the threat assessment process including contemporary
    intelligence involving terrorist activities, a history of prior notice
    violations, and compliance with admissibility standards as indicated by
    the results of import field exams, filer evaluations, firm inspections,
    repeated prior notice violations, and feedback from Field
    Investigators. By using a risk based approach, the PNC can intercept
    potentially hazardous products before they enter the United States.
        The benefit of these reviews comes from the quality and targeting
    of review activities; not from the volume of imports inspected. Thus
    the quality of import screening is a better measure of FDA's import
    strategy rather than simply focusing on the items physically examined.

                                  DRUG SAFETY

        Question. Drug safety is a topic that has been very much in the
    news over the past year, and in your written testimony, you discuss the
    challenges the agency faces in balancing the need for proper risk
    analysis while trying to speed the review process.
        This subcommittee has closely followed FDA's drug safety
    activities. Last year, we provided an increase of $10 million for drug
    safety. This amount was $5 million more than the budget request. In
    fiscal year 2007, FDA is requesting an additional $3.9 million for drug
    safety.
        How is FDA using the $10 million increase we provided last year?
        Answer. In its fiscal year 2006 budget submission to Congress, FDA
    requested a base increase of $5 million to bolster the drug safety
    functions performed within the Center for Drug Evaluation and
    Research's Office of Drug Safety, also known as ODS. These included
    three important increases. First, ODS will increase the professional
    staff in ODS who manage and lead safety reviews. Second, ODS will
    increase the number of staff with expertise in critical areas, such as
    risk management, risk communication, and epidemiology. Third, ODS will
    expand our information technology infrastructure for monitoring post-
    marketing data by increasing access to a wide range of clinical,
    pharmacy, and administrative databases. Valuable information regarding
    the safety of drug products is available in these types of databases
    for use by our scientists in ODS.
        The approval by Congress of the Administration's fiscal year 2006
    request for a $5 million increase significantly strengthens the ability
    to conduct drug safety activities within ODS.
        Congress increased our $5 million request to $10 million, adding to
    our original request an additional $5 million for general drug safety
    program activities. The Center for Drug Evaluation and Research will
    use these funds to increase its emphasis on effective risk
    communication. The additional funds will further enable FDA to
    modernize its drug safety program and expand the understanding of,
    involvement in, and access to, external population-based and ``linked''
    databases, such as the CMS Medicare and Medicaid databases. Accessing
    these databases represent the future of more thorough and continued
    monitoring of drug products after they are marketed. Information
    obtained from these databases, combined with voluntarily reported
    adverse event information, will substantially increase the agency's
    ability to efficiently and effectively identify, investigate, and
    notify consumers of possible drug safety concerns and take appropriate
    regulatory actions. FDA will also continue its efforts to improve the
    Adverse Event Reporting System, also knows as AERS, so the agency can
    more efficiently review medication error reports and more quickly take
    appropriate action to avert further medication errors.
        These funds will also allow FDA to hire additional expert staff
    across the Center to enhance the ability to use multidisciplinary,
    multi-office teams to analyze and interpret drug safety data before and
    after product approval. FDA plans to hire additional scientists to
    address its highest priority safety needs, such as responding to
    emerging drug safety issues, supporting FDA's Drug Safety Oversight
    Board, and increasing resources devoted to risk assessment and
    communication activities. These funds will also assist Center efforts
    to ensure that drug safety information is available to healthcare
    professionals, patients, and other consumers.
        Question. What will the additional $3.9 million allow FDA to
    accomplish in fiscal year 2007?
        Answer. FDA requested additional funds in fiscal year 2007 to
    continue to modernize its AERS system and create ``AERS II''--a
    replacement web-accessible computer system that will enable FDA to
    maintain the current level of AERS functionality, while providing
    enhancements in several areas. With more than 5 years of experience
    with the database, we have identified areas of critical new
    functionality, including generating web-accessible adverse event
    information. The current AERS system is FDA's principal post-marketing
    monitoring tool. It allows FDA to identify events that were not
    observed or recognized before approval. It allows FDA to identify
    adverse events that might be happening because patients and prescribers
    are not using the drug as anticipated.
        Beyond the modernization of the AERS system, however, we requested
    these funds because the AERS system alone is not adequate for a
    successful, state-of-the-art drug safety program. To appropriately
    monitor drug safety after marketing, it is essential that FDA have
    access to a wide range of clinical, pharmacy, and administrative
    databases. These include databases maintained by organizations such as
    the Center for Medicare and Medicaid Services, the Department of
    Veterans Affairs, the Department of Defense, and the Indian Health
    Service. We will also access clinical and hospital and pharmacy
    networks and insurers, such as health maintenance organizations,
    preferred provider organizations, and pharmacy benefit management
    organizations.
        FDA is actively evaluating the utility and feasibility of
    conducting specific studies of high priority safety issues using such
    linked databases. Studies conducted on these types of databases will
    provide more evidence about drug use in a broader range of conditions,
    including more detailed evidence about drug safety in subgroups of
    patients. The planned modernizations for AERS are expected to optimize
    internal access and review of adverse event.

                              HUMAN TISSUE SAFETY

        Question. In February of this year, FDA ordered a New Jersey human
    tissue recovery firm to cease operation because it found that the
    company had seriously violated FDA regulations governing donor
    screening and record keeping practices. FDA inspection and action
    followed a news article that uncovered the fact that this company was
    regularly and illegally harvesting human tissues from funeral homes.
    These tissues were subsequently transplanted into dozens of patients.
        What is FDA doing to make sure situations like this do not happen
    again?
        Answer. FDA wishes to clarify information regarding this matter. As
    part of an audit consistent with FDA regulations, a tissue processor in
    Florida noticed discrepancies in records supplied to it by the New
    Jersey tissue recovery firm. The Florida firm then took the following
    steps: initiated a recall of tissue it had processed and distributed,
    quarantined tissue it still had in its possession, and notified FDA.
    FDA began an inspection of the New Jersey firm in October, 2005, and
    found that the firm had failed to comply with regulations designed to
    prevent the spread of communicable diseases. Tissues harvested by the
    New Jersey firm had been sold to several processors and subsequently
    transplanted.
        FDA is committed to establishing and maintaining high standards for
    tissue safety and to detecting, investigating and taking enforcement
    action against violations of its regulatory requirements. FDA continues
    to evaluate its tissue regulations and policies on an ongoing basis.
        Question. Is there a certification or licensing procedure that
    tissue processing firms must go through before they can begin
    operating?
        Answer. FDA regulations require that tissue processing
    establishments register with FDA and list their products within 5 days
    after beginning operations. FDA's District Offices use these
    registrations to schedule inspections to assure compliance with the
    regulations designed to promote patient safety and to prevent the
    spread of communicable diseases.
        Question. Does FDA regularly inspect human tissue firms?
        Answer. FDA performed 270 inspections of human tissue
    establishments in fiscal year 2005. The Agency anticipates it will
    perform 250 inspections in fiscal year 2006 and 325 inspections in
    fiscal year 2007. FDA is in the process of implementing its new risk-
    based approach to assure the safety of human cells, tissues, and
    cellular and tissue-based products, or HCT/Ps. The Agency is using a
    comprehensive approach for regulating existing and new cell and tissue
    products. FDA is in the process of addressing issues related to safety
    and effectiveness of a rapidly growing industry.
        A rule expanding the types of tissue facilities required to
    register with the FDA and list their HCT/Ps became effective January
    21, 2004. The donor eligibility rule became effective May 25, 2005, and
    focuses on donor screening and testing measures to prevent the
    transmission of communicable diseases from the donor through HCT/Ps.
    The current good tissue practice rule also became effective May 25,
    2005. This rule requires manufacturers to recover, process, store,
    label, package and distribute HCT/Ps in a way that prevents the
    introduction, transmission, or spread of communicable diseases. These
    rules are critical new tools that give FDA the ability to monitor human
    tissue adverse reactions to target more effectively the products with
    the highest risks.

                               PROPOSED USER FEES

        Question. FDA is proposing two new user fees in the budget request.
    One will require manufacturers to pay for the full cost of follow-up
    inspections when FDA must revisit facilities because of initial bad
    inspection reports. The second fee would reimburse FDA for the cost of
    issuing export certificates for food and animal feeds.
        Can you explain why you believe these fees are necessary?
        Answer. Although FDA issues export certifications for all products
    it regulates, the agency only has authority to charge a fee to issue
    export certifications for human and animal drugs, and medical devices.
    Timely issuance of food and feed export certificates funded through
    user fees would improve the ability of food and animal feed producers
    to export their products and would eliminate the current preferential
    treatment of the food and feed industry differences in authority to
    collect fees for the food and feed industries.
        FDA conducts post-market inspections of food, human drug, biologic,
    animal drug and feed, and medical device manufacturers--both domestic
    and foreign--to assess their compliance with Current Good Manufacturing
    Practice, or CGMP, and other FDA requirements. In 2004, approximately
    1,500 out of 21,000 firms inspected were found non-compliant with CGMPs
    and other important FDA requirements. Under current law, FDA does not
    have the authority to assess fees for any follow-up inspections
    conducted by FDA to ensure that manufacturers have addressed violations
    that were found during the previous inspection. A fee for repeat
    inspections will serve as an incentive to industry to conform to CGMPs
    and other FDA requirements and will ensure that the financial burden of
    re-inspections is more equitably shared between industry and the
    public.
        Both fees are designed to improve the overall management of these
    activities.
        Question. Has FDA sought input from impacted organizations?
        Answer. Discussions with industry have not yet been held.
        Question. Have you submitted the text of your legislative proposal
    to the authorizing committee?
        Answer. The legislative proposals are in the final stages of
    review. We expect the proposals will be submitted to the Congress
    within the next several weeks.
        Question. Please explain the services FDA will be reimbursed for by
    the re-inspection user fee.
        Answer. If a firm undertakes corrective action to achieve
    compliance, FDA will verify the appropriateness and completeness of the
    corrective action. For the firm to satisfy FDA's concerns and, if
    regulatory action was taken, to resume its full ability to market
    products, the firm must be reinspected by FDA and found in compliance.
        These user fees will provide funding to FDA to act in a timely
    manner to ensure that noncompliant firms have taken appropriate
    corrective action and to facilitate the return of compliant firms to
    full marketing of violative products. Some of the activities that FDA
    performs in conducting reinspections include the scheduling and
    preparatory reinspection work by the FDA investigator, the reinspection
    itself, sample analyses, report writing, compliance officer review and
    analysis, conferring with experts, and travel and administrative time.
        Question. Please explain the services FDA will be reimbursed for by
    the food and animal feed certification fee.
        Answer. The services FDA will be reimbursed for by the food and
    animal feed certification fee include: reviewing applications and
    attestations; checking of field and headquarters administrative
    records, and with personnel for the compliance status of the firm;
    review of the product label for compliance with the law; preparing,
    processing, and issuing of the certifications, including notarization;
    maintenance of applications and copies for tracking of services
    rendered and for provision of certificate copies when requested; all
    other clerical procedures necessary to issue the certifications within
    20 days including processing of billing and receipts, and other costs
    attributable to the issuance of certifications. Currently
    certifications are processed on an ``as resources permits'' basis.

                                  FOOD DEFENSE

        Question. Over the past 5 years, this subcommittee has provided
    more than $600 million for food defense activities at FDA. The fiscal
    year 2007 budget requests an increase of $19.8 million for food defense
    activities. This is a significant investment.
        How has FDA used the funding we have provided to make the food
    supply safer?
        Answer. FDA uses the food defense funding to build upon the
    Nation's core food safety and public health systems and to strengthen
    our capabilities to address terrorist threats. FDA's efforts to protect
    the food supply focus primarily on six major crosscutting initiatives
    under Homeland Security Presidential Directive-9, also known as HSPD-9,
    for food defense.
        One example of FDA's HSPD-9 activities is the establishment of the
    Food Emergency Response Network, a national network also known as FERN,
    to increase analytic surge capacity in the event of terrorist attack by
    developing adequate laboratory testing capacity for biological,
    chemical and radiological agents in food. The Agency continues to
    develop FERN by providing laboratory infrastructure, training, and
    proficiency testing to member laboratories. FDA is conducting targeted
    food defense research efforts, including prevention technologies,
    methods development, determination of infectious dose for certain
    agents when ingested with food, and agent characteristics within
    specified foods. Also, FDA is performing more effective targeted risk-
    based inspections using data from FDA's Prior-Notice system and Prior
    Notice Import Security Reviews based on intelligence, FDA inspection
    reports, discrepancies in prior notice reporting, and sample collection
    and analysis. As part of the government-wide Biosurveillance
    Initiative, FDA is improving coordination and integration of existing
    food surveillance capabilities with the Department of Homeland
    Security's integration and analysis function. FDA is upgrading and
    expanding its Emergency Operations Network Incident Management System
    to assist in the management and coordination of the Agency's response
    to incidents affecting the U.S. food supply. Along with the U.S.
    Department of Agriculture, the Federal Bureau of Investigation, and
    Department of Homeland Security, FDA began a new collaborative effort
    with States and private industry to protect the Nation's food supply
    from terrorist threats through the Strategic Partnership Program
    Agroterrorism Initiative. FDA has spearheaded this effort to identify
    sector-wide vulnerabilities, mitigation strategies, and research needs
    to protect our Nation's food supply.
        Question. Does FDA have an overall plan for food defense, including
    out-year costs? Can you provide this information for the record?
        Answer. FDA's overall plan for food defense aligns with the
    activities outlined in Homeland Security Presidential Directive-9 also
    known as HSPD-9, which establishes a national policy to defend the food
    and agriculture system. The directive lays out a framework for
    augmenting the Nation's food safety protections by identifying and
    prioritizing sector-critical infrastructure and key resources for
    establishing protection requirements, developing awareness and early
    warning capabilities to recognize threats, mitigating vulnerabilities
    at critical production and processing nodes, enhancing screening
    procedures for domestic and imported products, and enhancing response
    and recovery procedures.
        With regard to future activities, the fiscal year 2007 requested
    funds will be used expand the Food Emergency Response Network, also
    known as FERN, to include 16 State laboratories, provide grants and
    technical support to these laboratories, and build analytic surge
    capacity to respond to a terrorist attack. We will also use these funds
    to manage, through the National Program Office, the network and to
    provide training and proficiency testing for FERN laboratories. We will
    continue Field support for food defense operations, including targeting
    potentially high-risk imported foods through Prior Notice Import
    Security Reviews based on intelligence, FDA inspection reports,
    discrepancies in prior notice reporting, and sample collection and
    analysis.
        FDA also will continue laboratory preparedness efforts and valuable
    short-term food defense research projects. Many of the projects
    undertaken are derived from direct interaction with industry following
    vulnerability assessments. The results of these projects can be
    communicated directly to industry. These efforts will result in a
    better understanding of which interventions work, and which do not, for
    certain agents in specific foods.
        In addition, the fiscal year 2007 requested funds will further
    joint food defense and food safety assignments that will enhance and
    facilitate the integration of food defense with food safety. In these
    assignments, samples obtained as part of routine food safety programs
    will also be tested in a variety of laboratories for a range of select
    agents that are of most concern. The foods chosen for these assignments
    are generally foods that we have most concern about based on
    vulnerability assessments.
        Out-year activities will further strengthen our food defense system
    and advance the objectives identified in HSPD-9.

           DRUG EFFICACY STUDY IMPLEMENTATION (DESI) MONOGRAPH SYSTEM

        Question. In response to Senate Committee Report language
    accompanying the fiscal year 2005 agriculture appropriations bill, FDA
    prepared a report on the feasibility of developing a drug monograph
    system for older prescription drugs that have been marketed for a
    material extent and material amount of time without documented safety
    problems. In this report, FDA stated that a monograph system would be
    scientifically infeasible and cost prohibitive. However, FDA did not
    propose an alternate solution to this monograph system.
        The Senate Committee Report to accompany the fiscal year 2006
    Agriculture appropriations bill requested a second report asking FDA to
    propose an alternate approach that provides for the uniform and
    transparent regulation of these products.
        What is the status of this report?
        Answer. FDA is working on this report and hopes to submit it to
    Congress this summer.
        Question. Has FDA developed an alternate method as requested in the
    report language?
        Answer. The agency is working on its approach to the regulation of
    these products and plans to discuss alternatives in our report to the
    subcommittee.

                             MEDICAL IMAGING DRUGS

        Question. Since FDA terminated the Medical Imaging Drugs Advisory
    Committee in 2002, FDA has tried to fill the gap in medical imaging
    expertise by retaining experts as special government employees and
    appointing them on an ad hoc basis to meetings of a standing advisory
    committee when a medical imaging product or issue needs advisory
    committee review. I understand that at the last advisory committee
    meeting to consider a medical imaging product, which was held in March
    2005, FDA appointed three medical imaging drug experts to a standing
    panel of 17 experts. In light of the increasingly important role of
    medical imaging drugs and medical imaging biomarkers under FDA's
    Critical Path initiative, I am interested in FDA's ability to get the
    necessary medical imaging expertise on these panels. How many medical
    imaging experts has FDA retained as special government employees?
        Answer. Currently, FDA has a list of 89 special government
    employees, or SGEs, with medical imaging expertise who may be requested
    to participate in regulatory activities, including FDA drug advisory
    committee and device panel discussions. The 89 SGEs includes 72 members
    of various Medical Devices Advisory Committees and consultants. These
    SGEs are also accessible for drug review consultation.
        Question. What is FDA doing to improve the recruitment of medical
    imaging experts as special government employees? Are there any barriers
    to such recruitment?
        Answer. The ability of a special governmental employee, or SGE, to
    assist in FDA activities varies considerably, based predominantly upon
    competing SGE commitments and timelines. Hence, FDA is actively
    recruiting additional SGEs via interactions with professional societies
    and visiting professor lecture activities. Barriers to SGE recruitment
    relate to conflict of interest considerations and the limited
    reimbursements to SGEs.
        Question. How many medical imaging expert special government
    employees does FDA intend to hire in the future?
        Answer. FDA is currently processing materials for 12 medical
    imaging experts as potential special government employees. When
    vacancies are imminent on Medical Devices Advisory Committees, FDA
    requests professional society assistance in obtaining voluntary
    applicants.

                              COLOR CERTIFICATION

        Question. The fiscal year 2007 budget request includes an increase
    in current law user fees of $180,000 for the Color Certification
    Program. Please explain this increase.
        Answer. As in previous years, FDA estimates that an increase of 3
    percent in poundage will be submitted for color certification in fiscal
    year 2007 over fiscal year 2006. This will generate an estimated
    $180,000 in additional color certification revenue and is not related
    to any rate increase for the Color Certification Program.
        Question. In April 2005, FDA increased the color certification fee
    through an interim final rule, with no opportunity for comment from
    industry. FDA has stated this was necessary in order to ensure that the
    fund was not depleted. At the same time, FDA stressed the need to keep
    adequate reserves in order to ensure adequate levels of funding. Given
    that FDA has worked to ensure an adequate reserve fund, would it be
    possible for FDA to seek public comment in advance of any future color
    certification fee increase?
        Answer. Historically, solicitation of public comment has not been
    deemed a prerequisite for increasing color certification fees. As
    required under the Federal Food, Drug, and Cosmetic Act, also known as
    the FD&C Act, Section 721(e), the fees assessed for color certification
    reflect those costs necessary to provide, maintain, and equip an
    adequate service for such purposes. Section 721(e) does not provide for
    notice-and-comment rulemaking for assessing or increasing fees. Since
    passage of the 1938 FD&C Act, FDA increased the color certification
    fees several times, most recently in 1963, 1982, 1994 and 2005. FDA
    stated, in the March 29, 2005 interim final rule, that the fee
    modification is necessary because of a general increase in all costs of
    operating the certification program. In the interim final rule, FDA
    found under 5 U.S.C. 553(b)(B) and 21 CFR 10.40(e) that providing for
    public comment before establishing the fees, and for revising the basis
    for calculating the fees, is contrary to the public interest. Despite
    this finding, the agency stated in the interim final rule that it
    invited and would consider public comments on the requirements in the
    rule. The interim final rule became effective on April 28, 2005, and
    FDA requested comments by May 31, 2005. Comments, as well as a request
    for a stay of the effective date and a citizen petition, were submitted
    to the docket and are under consideration.
        Question. Has FDA taken any steps to make the color certification
    fees and program expenses more transparent?
        Answer. FDA's Office of Financial Management, also known as OFM,
    occasionally submits certification fund updates to industry
    representatives; this information is always provided to industry
    representatives upon request. OFM maintains detailed accounting records
    of color certification expenditures and other related non-proprietary
    information. These statements include expenditure reports, status of
    funds reports, and projected yearly estimates for the various
    allowances within the Color Certification program.
        Question. Please provide a list of anticipated equipment needs,
    including estimated costs, necessary to maintain adequate service for
    certification of batches of color additives.
        Answer. I would be happy to provide that information for the
    record.
        [The information follows:]

      COLOR CERTIFICATION PROGRAM--ANTICIPATED EQUIPMENT NEEDS AND RELATED
                    COSTS--FISCAL YEAR 2007-FISCAL YEAR 2009
    ------------------------------------------------------------------------
                                                              Estimated Cost
                   Item                      Description        (per three
                                                                  years)
    ------------------------------------------------------------------------
    Maintenance contract for computer   Certification               $300,000
     database.                           operating system
                                         and web-based
                                         industry interface.
    Maintenance contracts for large     High-performance             250,000
     equipment.                          liquid
                                         chromatographs
                                         (approximately 21
                                         systems).
                                        Liquid chromatograph/         25,000
                                         mass selective
                                         detector.
                                        X-ray fluorescence            60,000
                                         spectrometer.
                                        Atomic absorption             30,000
                                         spectrometer.
                                        Ion chromatograph...          16,500
                                        Microwave digestion           15,000
                                         and ashing systems.
    Replacement parts for equipment...  X-ray fluorescence            75,000
                                         spectrometer (x-ray
                                         tubes, sample
                                         changer parts,
                                         helium/vacuum
                                         switch).
                                        Atomic absorption             30,000
                                         spectrometer
                                         (furnace tubes,
                                         lamps).
                                        Microwave digestion            7,500
                                         and ashing systems
                                         (parts, crucibles).
                                        Shatterbox (grinding           5,000
                                         tools).
                                        Pellet press (press            2,500
                                         tools).
    Anticipated new large equipment...  High-performance             460,000
                                         liquid
                                         chromatographs
                                         (expect to purchase
                                         two annually).
                                        X-ray fluorescence           350,000
                                         spectrometer.
                                        Liquid chromatograph/        120,000
                                         mass selective
                                         detector.
                                        Ion chromatograph...          10,000
                                        Preparative high-             45,000
                                         performance liquid
                                         chromatograph.
                                        Flash preparative             25,000
                                         chromatograph.
                                        Automatic titrator..          17,000
                                        Microwave ashing              20,000
                                         system.
                                        Fusion machine and            50,000
                                         platinum ware.
                                        Freeze drier........          15,000
                                        Microwave                     20,000
                                         synthesizer.
                                        Uninterruptible               30,000
                                         power supply.
                                        Reaction system.....          20,000
    Anticipated new small equipment...  Analytical balances          250,000
                                         (5), top-loading
                                         balances, lab
                                         computers,
                                         spectrophotometers,
                                         fluorescence
                                         detector, moisture
                                         analyzer,
                                         centrifuge rotor,
                                         digital camera.
    Hazardous waste disposal..........  Disposal of chemical         300,000
                                         waste.
    Stockroom contract................  Reagents, glassware,         330,000
                                         misc. lab supplies.
    Misc. purchases...................  Computer software,           400,000
                                         reagents, misc. lab
                                         supplies.
                                                             ---------------
          Total.......................  ....................       3,278,500
    ------------------------------------------------------------------------

        Question. What is the anticipated timeframe for these equipment
    needs?
        Answer. Certification requirements are assessed in 3 year cycles.
    FDA's anticipated timeframe for these equipment needs is 3 years.

                            FOOD CONTACT SUBSTANCES

        Question. Since its implementation 6 years ago, the Food Contact
    Notification program has been successful. I understand that the Food
    Contact Notification program requires less FDA resources than the
    previously used Food Additive Petition process because the FCN program
    does not require the Agency to follow Notice and Comment Procedures and
    promulgate a new regulation. In addition, the clearance of a new
    material under the Food Additive Petition program typically took 2 to 4
    years, but the Notification program only takes 4 months. The success of
    the program has led to the clearance of over 500 new types of packaging
    materials.
        If the FCN program is more efficient, why would FDA seek to
    eliminate the program and return to promulgating regulations, and how
    does FDA plan to accomplish its statutory mandate under the food
    additive petition process when it does not seek to add additional
    resources to handle these submissions?
        Answer. The Food Contact Notification, also known as FCN, program
    has been very successful. Under the FCN program, if FDA does not object
    within the 120-day review period, a company can legally market its
    product. To date, FDA has always met the 120-day deadline. In contrast,
    under the Food Additive Petition, also known as FAP, program, the
    petitioned food contact substance cannot lawfully be marketed until a
    regulation is published by FDA. Reverting to the FAP process for food
    contact substances will not have an adverse impact on the public health
    because these substances cannot be marketed until FDA completes a full
    safety review of each substance. Prior to the implementation of the FCN
    program, FDA had implemented many changes to the FAP process and had
    made significant progress in streamlining the review of food additive
    petitions. Although FDA does not expect to be able to meet its
    statutory mandate of publishing a decision on a petition within 180
    days of filing, we will continue our efforts to streamline the petition
    review process and to reach decisions in a timely manner.
        Question. What is FDA's assessment of the impact that the
    elimination of the FCN program will have on packaging innovation and on
    public health?
        Answer. Elimination of the FCN program will not have a significant
    adverse impact on the public health because pre-market approval of food
    contact substances will still be required and food contact substances
    will still have to meet the same safety standard so that unsafe food
    contact substances do not reach the market. As in the past, petitions
    in which the subject additive is intended to have an impact on the
    public health, for example reducing pathogens on food, will be
    prioritized and expedited through the review and administrative
    process. Thus any impact on public health will be minimal.

                             NEW DRUG APPLICATIONS

        Question. On February 13, 2006, the Justice Department, on behalf
    of FDA, represented to the U.S. District Court for the District of
    Columbia that the Omnitrope New Drug Application, which was submitted
    in fiscal year 2003, is still undergoing active review by the Agency.
    However, in the FDA's fiscal year 2007 budget submission the Agency
    reported that, for NDA submissions during fiscal year 2003, which would
    include this application, FDA reviewed and acted on ``100 percent of
    82'' fiscal year 2003 NDA submissions by the end of fiscal year 2004.
    Please explain this apparent discrepancy. Was action completed on all
    NDAs or are there submissions from fiscal year 2003 still under review?
        Answer. As FDA described in an August 2004 letter to the sponsor of
    the Omnitrope NDA, the reviewing division had completed its review of
    the information in the NDA. However, because the agency was considering
    related scientific and legal issues in its review of pending citizen
    petitions, and scientific considerations related to the approval of
    products like Omnitrope were to be the subject of a series of public
    meetings, FDA was not ready to make an approval decision on the
    application. The agency deferred a decision on the Omnitrope NDA until
    the agency knew whether the data in the NDA was sufficient for approval
    and, if not, what additional substantive information and data might be
    necessary to support approval. The letter identified what additional
    steps had to be completed before the agency could inform the sponsor of
    the actions necessary to place the Omnitrope NDA in condition for
    approval. Therefore, it was considered an action in accordance with the
    PDUFA performance goals. All fiscal year 2003 NDA submissions have been
    completed and final performance has been reported.

                              SUNSCREEN MONOGRAPHS

        Question. The statement of managers accompanying the fiscal year
    2006 conference report directed FDA to issue a comprehensive final
    monograph for labeling over-the-counter sunscreen products, including
    UVA and UVB labeling requirements, by May 10, 2006. Please describe the
    status of FDA's efforts or plans to finalize the sunscreen labeling
    guidelines by this deadline.
        Answer. We are currently working on a rulemaking for OTC sunscreen
    drug products to address both UVA and UVB labeling requirements. We are
    currently working to publish the document for this rulemaking in the
    Federal Register.
                                     ______

                 Questions Submitted by Senator Mitch McConnell

         NATIONAL INSTITUTE FOR PHARMACEUTICAL TECHNOLOGY AND EDUCATION

        Question. In June 2005 the Center for Drug Evaluation and
    Research's Office of Pharmaceutical Science within the Food and Drug
    Administration (FDA) signed a Memorandum of Agreement with the National
    Institute for Pharmaceutical Technology and Education (NIPTE). The
    University of Kentucky (UK) is a member of NIPTE.
        As the FDA considers funding priorities for fiscal year 2007, I am
    interested in answers to the following questions raised by NIPTE and
    UK.
        The Memorandum of Agreement expresses the FDA's desire to
    collaborate with NIPTE on issues related to pharmaceutical development,
    manufacturing practices and technologies.
        To date, what interaction has the FDA had with NIPTE?
        Answer. FDA has had some preliminary discussions with NIPTE about
    issues of mutual interest. NIPTE has expressed concerns about the level
    of products failing during development.
        Question. NIPTE has concerns that product failure during
    development is often related to the transition from a laboratory
    prototype to final product. They have expressed concerns that the
    limited amount of research into these failures causes production
    technology to lag behind efforts to discover new compounds.
        Do you anticipate that the relationship between FDA and NIPTE will
    promote a more efficient therapy development and production process and
    if so, how?
        Answer. It is not possible to determine, at this time, the outcome
    of any interactions with NIPTE. FDA works with many academic
    institutions and other interested parties on pharmaceutical development
    and manufacturing research to support FDA policy relating to Process
    Analytical Technologies product applications.
        Question. The FDA's stated goal of the Critical Path to New Medical
    Products initiative is to modernize the scientific process through
    which drugs and other treatments are transformed from ``proof of
    concept'' into medical products.
        How can the FDA take advantage of the infrastructure and resources
    of NIPTE's member institutions to promote the goals of the Critical
    Path initiative?
        Answer. We expect the new manufacturing science created through
    CDER's contract with NIPTE to promote manufacturing process
    improvements as part of the Critical Path Initiative. It is not
    possible to determine, at this time, whether FDA can take further
    advantage of infrastructure and resources at NIPTE. FDA believes that
    the best way to advance the goals of Critical Path is to stimulate
    broad-based efforts that advance the goals of this initiative.
                                     ______

                  Questions Submitted by Senator Sam Brownback

                                CLINICAL TRIALS

        Question. I understand the FDA has regulatory authority to utilize
    a number of various controls to determine efficacy in the clinical
    trials process, which include the use of historical controls and
    placebo controls.
        Is the FDA considering increasing the frequency of approval for
    study designs involving historical controls or even Bayesian
    statistics?
        Answer. FDA is actively considering, under its critical path
    initiative, a variety of study designs, methods of analysis, and uses
    of data from other studies to improve decision making and the rate of
    success of studies. Although FDA does not approve study designs, we do
    discuss with sponsors whether we are likely to consider a particular
    design as representing an adequate and well-controlled study that could
    support approval under the Federal Food, Drug, and Cosmetic Act. The
    appropriate use and applicability of historical controls in which
    treatment of a group of patients is compared to well-documented
    experience from other studies is considered in detail in the ICH
    guidance E-10 known as the Choice of Control Group and Related Issues
    in Clinical Trials. FDA's regulations at 21 CFR 314.126, state that
    historical controls can be an acceptable kind of ``adequate and well-
    controlled study,'' but only in special circumstances, such as studies
    of diseases with high and predictable mortality. Such controls are
    regularly used now, for example, in accelerated approvals of anti-
    cancer drugs based on tumor response rates. See 21 CFR 314.500. It is
    possible, and is worth studying, particularly for rare diseases, that
    better documentation of the natural history of diseases will provide a
    basis for wider use of historically controlled trials. With regard to
    medical devices, FDA's regulations at 21 CFR 860.7, allow for a wide
    variety of valid scientific evidence for premarket approval
    applications, including historical controls, where appropriate.
        FDA has viewed Bayesian approaches as an alternative method in the
    design and evaluation of clinical studies. The frequency of use of such
    an approach is related to the medical product itself, the sponsor, the
    target population, and many other factors. Although FDA would consider
    the use of Bayesian statistics, few drug sponsors propose such designs.
    In May 2004, in an effort to emphasize our willingness to examine such
    designs, FDA and Johns Hopkins University jointly sponsored a very
    well-attended workshop for industry, academia, and government entitled,
    ``Can Bayesian Approaches to Studying New Treatments Improve Regulatory
    Decision-Making?'' The Center for Devices and Radiological Health has
    accepted designs involving Bayesian statistics since 1998, and there
    has been an increase in the frequency of investigational device
    exemptions that use Bayesian design and plan appropriate analyses.
        Question. Please list the number of cancer drugs for which the FDA
    approved a study design that included a placebo-controlled trial, over
    the past 4 year period.
        Answer. FDA does not ``approve'' study designs or protocols.
    Companies generally develop an overall drug development strategy,
    including specific protocols, to seek registration or approval in
    multiple countries such as the European Union, Japan, Switzerland,
    Canada, and Australia. FDA reviews, but does not approve these
    protocols.
        In cancer settings, the term placebo-controlled is a misnomer. It
    is very rare for a cancer patient to only receive a placebo. Whenever
    possible, FDA encourages use of another available therapy as an active-
    control rather than a placebo. In situations where an active-control
    study cannot be conducted, FDA seeks to ensure that all patients
    receive best supportive care in addition to the test-article or placebo
    to which they are randomized.
        Question. Please describe the process by which a cancer patient who
    has exhausted all other treatment options can gain access to a drug
    that has shown efficacy in an earlier stage of the clinical trials
    process.
        Answer. The FDA has a long-standing commitment to desperately ill
    patients, including patients with cancer, to facilitate the
    availability of promising new drugs during the drug development
    process, when promising drugs are being studied, but are not yet
    approved for marketing. FDA's statute and regulations enable a patient
    suffering from a serious or immediately life threatening disease for
    whom no comparable or satisfactory alternative drug or other therapy is
    available to get access to a promising investigational drug. FDA is
    developing regulations to further clarify and publicize the expanded
    access mechanisms for such treatment use of investigational new drugs,
    in the belief that such new regulations will increase the awareness of
    and participation in expanded access programs. However, it should be
    noted that FDA does not have authority to compel a sponsor to make an
    investigational new drug available for treatment use.
        In December 2003, FDA submitted to Congress its report on Patient
    Access to New Therapeutic Agents for Pediatric Cancer. This report
    includes how patients can access investigational drugs under current
    rules. I would be happy to provide for the record, the section of the
    report that describes our current system.
        [The information follows:]

                               EXISTING PROGRAMS

    Access Outside of Clinical Trials
        It is not always possible for all patients who want access to
    investigational drugs to enroll in clinical trials. Patients may not
    meet eligibility criteria or may be geographically isolated from a
    study site. It may be difficult to find an ongoing trial for a
    particular type and stage of cancer. In these situations, FDA and NCI
    believe that it is appropriate to help make certain promising, but as
    yet unproven, products available outside of a clinical trial (non-
    protocol) to patients with cancer as well as other serious and life-
    threatening illnesses. Non-protocol investigational therapy should be
    offered in a way that does not pose an unreasonable risk to the patient
    or an unreasonable risk of losing valuable information about the effect
    of the drug. For these reasons, although treatment is focused on the
    individual patient, a study plan (protocol) may be written to ensure
    that the treatment is administered appropriately and that patients are
    monitored for toxicity. The programs available through both agencies
    are discussed below. It is important to note that a pharmaceutical
    manufacturer must first agree to provide the requested product for a
    non-protocol investigational therapy to begin. NCI and FDA cannot
    mandate that the requested products be supplied to these programs; the
    agencies can only review and approve proposals to use them.
    FDA Programs for Non-protocol Access
        FDA programs that permit non-protocol access to investigational
    agents for patients with serious or life-threatening disease include
    the single patient IND, the emergency IND, and the Treatment IND
    (sometimes informally referred to as an expanded access protocol). The
    lay public frequently refers to these programs as compassionate use,
    although the term compassionate use does not appear in FDA regulations.
    Single patient or emergency INDs refer to a treatment program for a
    single individual. Treatment IND refers to a single study plan used to
    treat multiple patients.
                Single Patient IND Submissions
        Single-patient IND submissions can represent entirely new uses for
    a drug or exceptions to an ongoing clinical trial protocol for a
    patient who does not meet protocol entry criteria. Single patient IND
    requests can be submitted as amendments to an existing IND or as an
    entirely new IND. They can be submitted by a drug manufacturer (usually
    amending an existing IND) or by an individual physician, following
    usual procedures for IND filing, including IRB review and informed
    consent. If the need for treatment is urgent and does not allow time
    for submission of an IND, an emergency IND can be obtained allowing FDA
    to authorize shipment of a drug for the specified use before the IND is
    submitted (21 CFR 312.36). The IND should then be submitted as soon as
    possible after receiving authorization. As with all INDs, both
    mechanisms require adverse event reporting and an annual summary to be
    submitted to FDA.
                Treatment IND
        Treatment IND study plans ``facilitate the availability of
    promising new drugs to desperately ill patients as early in the drug
    development process as possible, before general marketing begins, and
    obtain additional data on the drug's safety and effectiveness'' (21 CFR
    312.34). Certain criteria must be met for a drug to be considered for
    approval in a Treatment IND,1 including:
      --The patients' disease must be serious or life-threatening.
      --No comparable or satisfactory treatment is available to the target
            population of patients.
      --The drug is in clinical trials (generally Phase 3 and not
            ordinarily prior to Phase 2).
      --The sponsor of the clinical trials is actively pursuing marketing
            of the drug.
        FDA may refuse the request if:
      --For a serious disease, sufficient evidence of safety and potential
            efficacy is not provided to support use of the drug to treat
            it.
      --For a life-threatening disease, available scientific evidence does
            not provide a reasonable basis for concluding that the drug may
            be effective and would not expose patients to serious
            additional risk of illness or injury.
        The same safeguards and reporting requirements that apply to any
    IND study apply to a Treatment IND, including IRB approval. The study
    plan must contain a rationale for the use of the investigational drug,
    as well as a list of what available regimens should be tried prior to
    its use, or an explanation of why the use of the investigational drug
    is preferable to the use of available marketed treatments.
    NCI Programs for Non-protocol Access
        At NCI, Special Exception and Group C protocols provide access to
    investigational agents for those patients unable to participate in a
    clinical trial.
                Special Exception
        The Special Exception is comparable to the single patient IND, but
    investigators may obtain investigational agents directly from NCI using
    NCI's Special Exception mechanism instead of filing a new IND with FDA.
    NCI does not grant these requests for drugs in Phase 1 development,
    because NCI requires some demonstration of efficacy before permitting
    individual treatment. The written policy for this program requires
    objective evidence that the investigational agent is active in the
    disease for which the request is being made.
        Anecdotal reports or reports that show low response rates or
    responses of brief duration are not sufficient to justify approval of
    the request. Patients must be ineligible for ongoing research protocols
    and must have received standard therapies.
                Group C
        Group C designation is an expanded access program similar to a
    Treatment IND that allows broadened access to investigational agents
    with reproducible activity in one or more specific tumor types. An
    agent must alter or be likely to alter the pattern of treatment of the
    disease, and properly trained physicians without specialized supportive
    care facilities must be able to administer the agent safely. For an
    agent that meets this definition, CTEP may submit a formal application
    to FDA to authorize distribution of the agent (Group C distribution) by
    NCI for the specific indication described in the application. This
    application is not a marketing application, and FDA approval of a Group
    C protocol does not replace an FDA conclusion that the drug is safe and
    effective. The study plan must contain the indication, dosage,
    precautions, warnings, known adverse events of the product, and an
    informed consent form. Approval of the Group C protocol carries the
    obligation of the usual safety reporting requirements. This mechanism
    is used only with agents for which activity is sufficiently established
    and for which a New Drug Application (NDA) or Biological Licensing
    Application (BLA) approval is considered likely in the relatively near
    future.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                                  FIELD STAFF

        Question. We discussed earlier the decrease in FDA field force, and
    I was told that this was a result of the streamlining of the FDA
    inspection process, and would not result in fewer, or less effective,
    inspections.
        Please provide specific numbers of inspections that are scheduled
    to take place by all FDA field staff members in fiscal year 2007.
    Please organize these into the types of inspections FDA performs--for
    example, inspections of feed manufacturers, ports, food manufacturers,
    drug companies, overseas companies, etc. How do each of these numbers
    compare to fiscal year 2006 and 2005 levels?
        Answer. I will be happy to provide a table that lists activities,
    by type of inspections, for fiscal years 2005, 2006, and 2007 for the
    record. Traditionally, that information is captured in a table
    entitled, ``Combined Field Activities--ORA Program Activity Data'' that
    appears in the published fiscal year 2007 FDA Congressional
    Justification, pages 272-277.
        [That information follows:]

                                  COMBINED FIELD ACTIVITIES--ORA PROGRAM ACTIVITY DATA
    ----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year     Fiscal year     Fiscal year
                                                                        2005 actual    2006 estimate   2007 estimate
    ----------------------------------------------------------------------------------------------------------------
                               FOODS FIELD

    Program Outputs--Domestic Inspections:
        Domestic Food Safety Program Inspections....................           4,573           3,400           3,400
        Imported and Domestic Cheese Program Inspections............             477             400             400
        Domestic Low Acid Canned Foods/Acidified Foods Inspections..             481             400             400
        Domestic Fish & Fishery Products (HACCP) Inspections........           2,467           2,480           2,480
        Import (Seafood Program Including HACCP) Inspections........             500             500             500
        Juice HACCP Inspection Program (HACCP)......................             490             375             375
        Interstate Travel Sanitation (ITS) Inspections..............           1,510           1,700           1,700
        State Contract Food Safety (Non HACCP) Inspections..........           6,992           8,130           8,130
        State Contract Domestic Seafood HACCP Inspections...........             953           1,135           1,135
        State Contract Juice HAACP..................................              35              35
        State Partnership Inspections...............................           1,284           1,300           1,300
                                                                     -----------------------------------------------
          Total Above FDA and State Contract Inspections............          19,774          19,855          19,855
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................             523             523             523
                                                                     ===============================================
        State Contract and Grant Foods Funding......................      $6,825,000      $7,100,000      $6,940,000
        Number of FERN State Laboratories...........................               8              10              16
        Annual FERN State Cooperative Agreements/Operations.........     $12,270,000      $7,037,000     $12,236,000
                                                                     -----------------------------------------------
          Total State & Annual FERN Funding.........................     $19,095,000     $14,137,000     $19,176,000
                                                                     ===============================================
        Domestic Field Exams/Tests..................................           3,528           5,000           5,000
        Domestic Laboratory Samples Analyzed........................          15,390          11,425           9,425
        All Foreign Inspections.....................................             129             200             100
                                                                     -----------------------------------------------
          Total Foreign Reinspections (Non-add).....................              15              15              15
                                                                     ===============================================
        Import Field Exams/Tests....................................          84,997          75,000          71,000
        Import Laboratory Samples Analyzed..........................          25,549          31,600          29,600
                                                                     -----------------------------------------------
        Import Physical Exam Subtotal...............................         110,546         106,600         100,600
                                                                     ===============================================
        Import Line Decisions.......................................       8,672,168      10,059,715      11,669,269
        Percent of Import Lines Physically Examined.................            1.27            1.06            0.86
        Prior Notice Security Import Reviews (Bioterrorism Act                86,187          45,000          60,000
         mandate)...................................................

                             COSMETICS FIELD

    Program Outputs--Domestic Inspections:
        All Inspections.............................................             138             100             100
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................               7               7               7
                                                                     ===============================================
    Program Outputs--Import/Foreign Inspections:
        Import Field Exams/Tests....................................           1,983           2,000           2,000
        Import Laboratory Samples Analyzed..........................             241             200             200
                                                                     -----------------------------------------------
          Import Physical Exam Subtotal.............................           2,224           2,200           2,200
                                                                     ===============================================
        Import Line Decisions.......................................       1,146,049       1,398,180       1,705,779
          Percent of Import Lines Physically Examined...............            0.19            0.16            0.13

                               DRUGS FIELD

    Program Outputs--Domestic Inspections:
        Pre-Approval Inspections (NDA)..............................             149             130             130
        Pre-Approval Inspections (ANDA).............................              81             135             135
        Bioresearch Monitoring Program Inspections..................             562             520             520
        Drug Processing (GMP) Program Inspections...................           1,365           1,500           1,440
        Compressed Medical Gas Manufacturers Inspections............             125             155             150
        Adverse Drug Events Project Inspections.....................             106             135             135
        OTC Monograph Project Inspections and Health Fraud Project                53              11              45
         Inspections \1\............................................
        State Partnership Inspections: Compressed Medical Gas                     85             110             110
         Manufacturers Inspections..................................
        State Partnership Inspections: GMP Inspections..............              57              50              50
                                                                     -----------------------------------------------
          Total Above FDA and State Partnership Inspections.........           2,594           2,780           2,715
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................             220             220             220
                                                                     ===============================================
        Domestic Laboratory Samples Analyzed........................           1,446           1,735           1,600
                                                                     ===============================================
    Programs Outputs--Import/Foreign Inspections:
        Foreign Pre-Approval Inspections (NDA)......................             163             180             180
        Foreign Pre-Approval Inspections (ANDA).....................              77              60              60
        Foreign Bioresearch Monitoring Program Inspections..........              85              65              65
        Foreign Drug Processing (GMP) Program Inspections...........             217             195             195
        Foreign Adverse Drug Events Project Inspections.............              10              25              25
                                                                     -----------------------------------------------
          Total Above Foreign FDA Inspections.......................              52             525             525
                                                                     -----------------------------------------------
          Total Foreign Reinspections (Non-add).....................              17              17              17
                                                                     ===============================================
        Import Field Exams/Tests....................................           4,288           4,400           4,400
        Import Laboratory Samples Analyzed..........................           1,045             355             300
                                                                     -----------------------------------------------
        Import Physical Exam Subtotal...............................           5,333           4,755           4,700
                                                                     ===============================================
        Import Line Decisions.......................................         264,559         317,471         380,965
        Percent of Import Lines Physically Examined.................            2.01            1.50            1.23
                                                                     ===============================================

                             BIOLOGICS FIELD

    Program Outputs--Domestic Inspections:
        Bioresearch Monitoring Program Inspections..................             121             156             156
        Blood Bank Inspections......................................           1,439           1,130           1,070
        Source Plasma Inspections...................................             188             165             160
        Pre-License, Pre-Approval (Pre-Market) Inspections..........               3              10              10
        GMP Inspections.............................................              42              36              36
        GMP (Device) Inspections....................................              14              35              35
        Human Tissue Inspections....................................             270             250             325
                                                                     -----------------------------------------------
          Total Above Domestic Inspections..........................           2,077           1,782           1,792
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................              50              50              50
                                                                     ===============================================
    Program Outputs--Import/Foreign Inspections:
        Blood Bank Inspections......................................              16              24              24
        Pre-License Inspections.....................................               6  ..............  ..............
        GMP Inspections.............................................              15              24              17
                                                                     -----------------------------------------------
          Total Above Foreign FDA Inspections.......................              37              48              41
                                                                     -----------------------------------------------
          Total Foreign Reinspections (Non-add).....................               4               4               4
                                                                     ===============================================
        Import Field Exams/Tests 1..................................             143             100             100
        Import Line Decisions.......................................          39,979          44,377          49,258
        Percent of Import Lines Physically Examined.................            0.36            0.23            0.20

                       ANIMAL DRUGS & FEEDS FIELD

    Program Outputs--Domestic Inspections
        Pre-Approval/BIMO Inspections...............................              72             140             110
        Drug Process and New ADF Program Inspections................             230             210             210
        BSE Inspections.............................................           3,025           3,760           3,760
        Feed Contaminant Inspections................................               3              15              15
        Illegal Tissue Residue Program Inspections..................             203             245             245
        Feed Manufacturing Program Inspections......................             369             240              40
        State Contract Inspections: BSE.............................           3,309           4,562           4,562
        State Contract Inspections: Feed Manufacturers..............             457             347             347
        State Contract Inspections: Illegal Tissue Residue..........             370             750             600
        State Partnership Inspections: BSE and Other................             988             900             900
                                                                     -----------------------------------------------
          Total Above FDA and State Contract Inspections............           9,036          11,169          10,789
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................             173             173             173
                                                                     ===============================================
        State Animal Drugs/Feeds Funding............................      $1,300,000      $1,700,600      $1,800,000
        BSE Grant Increase..........................................      $3,000,000      $3,000,000      $3,000,000
        State Contract for Tissue Residue...........................        $220,000        $220,000        $210,000
                                                                     -----------------------------------------------
          Total State Funding.......................................      $4,520,000      $4,920,600      $5,010,000
                                                                     ===============================================
        Domestic Laboratory Samples Analyzed........................           1,841           1,770           1,730
                                                                     ===============================================
    Programs Outputs--Import/Foreign Inspections:
        Foreign Pre-Approval/Bioresearch Monitoring Program Inspec                26              45              45
         tions......................................................
        Foreign Drug Processing and New ADF Program Inspections.....              12              10              10
                                                                     -----------------------------------------------
          Total Above Foreign FDA Inspections.......................              38              55              55
                                                                     -----------------------------------------------
          Total Foreign Reinspections (Non-add).....................               3               3               3
                                                                     ===============================================
        Import Field Exams/Tests....................................           4,298           4,500           4,500
        Import Laboratory Samples Analyzed..........................             753           1,120             900
                                                                     -----------------------------------------------
        Import Physical Exam Subtotal...............................           5,051           5,620           5,400
                                                                     ===============================================
        Import Line Decisions.......................................         212,254         235,602         261,518
        Percent of Import Lines Physically Examined.................            2.38            2.39            2.06
                                                                     ===============================================

                              DEVICES FIELD

    Programs Outputs--Domestic Inspections:
        Bioresearch Monitoring Program Inspections..................             329             300             300
        Pre-Approval Inspections....................................              64             130             130
        Post-Market Audit Inspections...............................              63              65              65
        GMP Inspections (Levels I, II, III and Accredited Persons)..           1,430           1,530           1,530
                                                                     -----------------------------------------------
          Total Above Domestic Inspections: Non MQSA................           1,886           2,025           2,025
                                                                     ===============================================
        Inspections (MQSA) FDA Domestic (non-VHA)...................             366             335             371
        Inspections (MQSA) FDA Domestic (VHA).......................              32              32              32
        Inspections (MQSA) by State Contract........................           8,340           7,924           7,700
        Inspections (MQSA) by State non-Contract....................             545             530             530
                                                                     -----------------------------------------------
          Total Above Domestic Inspections: MQSA....................           9,283           8,821           8,633
                                                                     -----------------------------------------------
          Total Domestic Reinspections (Non-add)....................             237             237             237
                                                                     ===============================================
        State Contract Devices Funding..............................      $1,350,000        $250,000        $275,000
        State Contract Mammography Funding..........................      $9,800,000      $9,200,000      $9,940,000
                                                                     -----------------------------------------------
          Total State Funding.......................................     $11,150,000      $9,450,000     $10,215,000
                                                                     ===============================================
        Domestic Radiological Health Inspections....................             107             130             130
        Domestic Field Exams/Tests..................................             944           1,215           1,215
        Domestic Laboratory Samples Analyzed........................             200             217             217
                                                                     ===============================================
    Programs Outputs--Import/Foreign Inspections:
        Foreign Bioresearch Monitoring Inspections..................               6              10              10
        Foreign Pre-Approval Inspections............................              17              34              34
        Foreign Post-Market Audit Inspections.......................              26              27              27
        Foreign GMP Inspections.....................................             225             207             189
        Foreign MQSA Inspections....................................              16              15              15
        Foreign Radiological Health Inspections.....................               9              19              19
                                                                     -----------------------------------------------
          Total Above Foreign FDA Inspections.......................             299             312             294
                                                                     -----------------------------------------------
          Total Foreign Reinspections (Non-add).....................              24              24              24
                                                                     ===============================================
        Import Field Exams/Tests....................................           6,901           5,000           5,000
        Import Laboratory Samples Analyzed..........................           1,333           1,440           1,440
                                                                     -----------------------------------------------
        Import Physical Exam Subtotal...............................           8,234           6,440           6,440
                                                                     ===============================================
        Import Line Decisions.......................................       3,484,393       4,460,023       5,708,829
        Percent of Import Lines Physically Examined.................            0.24            0.14           0.11
    ----------------------------------------------------------------------------------------------------------------
    \1\ The OTC Monograph and Health Fraud Inspections will no longer be planned separately in fiscal year 2006.

                                   AVIAN FLU

        Question. Is there any vaccine currently available that would
    protect humans from the H5N1 flu virus? How much? Please include
    experimental and approved, and explain the difference, and how the
    distribution would occur.
        Answer. There is currently no FDA-approved vaccine available to
    protect humans from the H5N1 influenza virus that currently is
    circulating in Asia and parts of Europe. However, candidate H5N1
    vaccines are in development.
        In 2004, the National Institute of Allergy and Infectious Diseases,
    or NIAID, awarded two contracts for the production and clinical testing
    of H5N1 vaccines based on an H5N1 reference strain produced through
    reverse genetics. These vaccines are currently under evaluation in
    clinical trials, under protocols developed with FDA input. We have
    stated that, if provided adequate data, we would be able to approve a
    pandemic influenza strain that is used in an existing licensed vaccine
    process, in an expedited manner and without requiring a new license.
    Therefore, as the results of these studies are submitted to us by
    licensed manufacturers, we will be able to consider them rapidly for
    approval as supplements to existing vaccine licenses. Currently,
    unlicensed vaccines made with new technologies or with the addition of
    adjuvants to stimulate the immune response would require more extensive
    evaluation by FDA as new products. However, we are providing
    accelerated development and evaluation pathways to help assure the
    safety and immunogencity of new influenza vaccines as efficiently and
    rapidly as possible.
        To help manufacturers develop pandemic and seasonal influenza
    vaccines, we recently issued two draft guidances. These guidances
    provide recommendations on developing the information needed to show
    safety and effectiveness for new vaccines and outline expedited
    pathways to licensure. Among the issues discussed in the guidances are
    the use of new technologies, such as cell culture, recombinant
    technologies, and the use of adjuvants, in vaccine development and
    production.
        To facilitate the availability of pandemic influenza vaccines prior
    to their licensure, if needed in an emergency, FDA could evaluate the
    benefit/risk ratio of pandemic influenza vaccines and, where
    appropriate, make such vaccines available under other regulatory
    mechanisms, including investigational new drug or Emergency Use
    Authorizations. With regard to vaccine distribution, the Department of
    Health and Human Services, or HHS, has announced procurement for the
    Strategic National Stockpile, also known as SNS, which includes
    vaccines that could be distributed for use in the event of a potential
    influenza pandemic. HHS provides oversight of the SNS, including
    responsibility for procurement and maintenance of vaccines and other
    medical products to be used in the event of an influenza pandemic or
    other public health emergency. FDA's role is to provide technical
    assistance and support for HHS efforts regarding the development,
    procurement, maintenance, and deployment of pandemic influenza
    countermeasures and other medical products held in the SNS.
        After consultation with HHS, FDA offers the following information
    on the status of HHS efforts to support the stockpiling and
    distribution of candidate pandemic vaccines. Based on the latest
    scientific research, which indicates that two 90 microgram doses of the
    pre-pandemic H5N1 vaccine will be effective as a course of vaccination,
    HHS has ordered approximately 4 million courses of the vaccine. Of the
    4 million courses, approximately 3.75 million courses have been
    manufactured, with the remaining courses on order. These courses are
    not being held in the Strategic National Stockpile; rather, they are
    being stored in bulk at cGMP-compliant storage facilities of the
    vaccine manufacturers awaiting instructions for formulation and fill
    finish into final containers. HHS will review clinical results from
    studies this summer which may indicate that adding adjuvant to the H5N1
    vaccine may boost immune response to those who receive the vaccination.
    Once these results have been obtained and all doses are formulated and
    filled accordingly, they may be distributed to critical workforce
    groups as needed. Currently plans are for the H5N1 vaccine to reside
    with the vendor or vaccine manufacturer until deployment.
        Question. Please summarize the FDA's ability, and timeframe
    necessary, in order to mass-produce vaccines for a human strain of
    H5N1?
        Answer. FDA is actively engaged in facilitating the efforts of
    DHHS, manufacturers and other partners to develop and make available
    influenza vaccines, including those for the currently circulating H5N1
    strain. While FDA can rapidly evaluate and approve the use of a new
    vaccine strain by a licensed manufacturer, and a new vaccine could
    start to become available within 4 months of its identification,
    current U.S. influenza vaccine manufacturing and the available
    technologies that support it are not adequate to quickly produce enough
    pandemic vaccine for the U.S. population. Therefore, we are
    aggressively supporting multiple efforts to increase manufacturing
    capacity using both new and existing technologies, including antigen
    sparing vaccines using both aluminum and novel adjuvants, which is a
    nonspecific simulators of immune response, as well as live attenuated
    vaccines, and cell-culture based and recombinant vaccines, which
    involves combining DNA from two or more sources. FDA scientists work
    with manufacturers throughout the year to collect information on the
    capability of new influenza viruses to be used for large-scale
    production of influenza virus vaccines and to provide needed reagents
    and technical assistance. FDA has initiated annual inspections of
    licensed influenza vaccine manufacturers to help ensure that
    manufacturers are in compliance with good manufacturing practices, and
    to identify and, where possible, prevent problems ahead of time, and
    thus are able to manufacture safe and effective pandemic influenza
    vaccines in emergent circumstances.
        Increasing the Agency's capacity to facilitate rapid evaluation,
    product testing, licensure, and production of vaccines is critical to
    expanding product availability, assuring timely and expert evaluation
    of product quality, supporting national preparedness and response
    capacities for pandemic influenza, and achieving public confidence in
    vaccine products. The funds requested for fiscal year 2007 are critical
    to achieving our goal of supporting a process whereby manufacturers can
    produce pandemic influenza vaccine in the shortest possible time to
    protect the greatest number of people, using a vaccine that is safe,
    effective, and easy to deliver.
        With regard to vaccine production issues, we will use fiscal year
    2007 requested funds to facilitate HHS and manufacturers' efforts to
    increase domestic manufacturing capacity to meet HHS goals, including a
    stockpile with enough vaccine to vaccinate 20 million people. FDA is
    supporting the longer term goals of HHS, manufacturers, and other
    partners to achieve pandemic surge production capacity that would make
    it possible to provide licensed vaccine for the entire U.S. population
    within 6 months of a strain being isolated, using a combination of
    current egg-based and, potentially, new high-volume, rapid response
    cell-based production. How quickly these goals can be met will in part
    be dependent on the results of current industry vaccine development
    programs, mostly assisted by HHS, including ongoing studies of
    adjuvanted and cell culture vaccines. In 2005, we were able to very
    rapidly facilitate the evaluation and U.S. licensure of an additional
    annual influenza vaccine, using our accelerated approval process,
    helping avoid major shortages. We will continue to do everything
    possible to facilitate both the process of vaccine development and the
    enhancement of manufacturing capacity, and Congress' support is
    critical in assuring FDA's capacity to both prepare for and respond to
    a pandemic.
        Question. The budget proposes over $55 million for pandemic flu
    preparedness. The very earliest this funding would be available is
    October 1, but we are hearing reports that the virus could arrive here
    in the United States, at least in birds, and potentially in humans,
    prior to that.
        Do you believe we can afford to wait until the fiscal year 2007
    bill to make this money available to FDA? If so, why? Would you support
    adding the additional funding to the pending supplemental in order to
    make it available more quickly?
        Answer. Thank you for the opportunity to discuss the funding of
    FDA's Pandemic Preparedness activities. We appreciate your interest in
    supporting the FDA efforts in this initiative. The President's budget
    requests in fiscal year 2006 and fiscal year 2007 were carefully
    considered with respect to identifying the immediate needs and the
    urgent nature of the overall initiative. The most immediate needs are
    identified in the fiscal year 2006 supplemental request and the fiscal
    year 2007 request builds upon the activities identified in fiscal year
    2006. In fiscal year 2006, total enacted funding for Pandemic
    activities is approximately $24.8 million. Included in this number is
    the fiscal year 2006 $20 million supplemental increase and
    approximately $4.8 million in base spending. The $20 million
    supplemental was received at the end of the first quarter of fiscal
    year 2006 and the funds were available on January 26, 2006.
        The fiscal year 2007 total funding request for Pandemic
    Preparedness request is approximately $55.3 million and includes the
    $24.8 million from the fiscal year 2006 that includes the emergency
    supplemental appropriation and a requested increase of $30.5 million
    over the fiscal year 2006 enacted level for pandemic influenza. We
    would be happy to provide the activities covered under the fiscal year
    2006 supplemental request.
        [The information follows:]

                   GENERIC DRUGS USER FEES/CITIZEN PETITIONS

        Question. I understand that FDA believes it is time to implement a
    user fee program for generics. The generic drug industry has several
    criticisms of this idea. One is that they will still face many
    regulatory issues after their drug is approved. Another is that their
    budget has been chronically under funded--especially in relation to
    dollars spent approving new drugs, even without including user fee
    money.
        How would you respond to these criticisms?
        Answer. First, FDA has made significant investments to improve the
    generic drug review process with the funds appropriated by Congress.
    These investments have helped lower the median review time by 2 months.
    FDA has not made any decisions concerning a user fee program for
    generics. Given the existence of user fee programs for other product
    reviews, there have been suggestions that the idea may need to be
    explored, but these suggestions are general comments. There is no
    commitment to propose generic user fees and no formal Administration
    proposal for a generic user fee program. If a proposal is considered,
    we will certainly consider the concerns and criticisms about the
    proposal from the generic industry. We continue to work with the
    generic industry to address their current concerns with the Office of
    Generic Drugs.
        Question. Have you begun working on legislation?
        Answer. FDA has not made any decisions concerning a user fee
    program for generics, nor has the Agency begun work on legislation to
    enact such a program. Given the existence of user fee programs for
    other product reviews, there have been suggestions that the idea may
    need to be explored, but these suggestions are general comments. There
    is no commitment to propose generic user fees and no formal
    Administration proposal for a generic user fee program. If a proposal
    is considered, we will certainly consider the concerns and criticisms
    about the proposal from the generic industry. We continue to work with
    the generic industry to address their current concerns with the Office
    of Generic Drugs.
        Question. It has been reported that one cause of unnecessary delays
    in getting generic drugs on the market are certain citizen petitions. I
    am aware that FDA is working on a study to figure out what the actual
    effects of these citizen petitions are. In last year's Senate report,
    we asked for an update on this study--including any changes FDA plans
    to make in the process. I understand that this report is still in your
    clearance process, but can you give us a preview of what we might be
    provided?
        Answer. The Senate report is currently undergoing final clearance,
    but I would be happy to provide you with an overview of how FDA is
    addressing potential improvements to the citizen petition process. In
    response to the significant increase in the number of citizen petitions
    submitted to FDA's Center for Drug Evaluation and Research, CDER, and
    an increasing backlog of pending petitions, the Center's Office of
    Regulatory Programs or ORP, initiated an extensive review of CDER's
    processes for responding to citizen petitions.
        The Office of Generic Drugs has made organizational changes
    designed to improve the citizen petition response process. The office
    has dedicated a specific group of scientists who will be responsible
    for addressing citizen petition responses. This organizational change
    is expected to increase the consistency, quality, and speed of the
    Office of Generic Drug's input on citizen petition responses.
        ORP is currently undertaking an initial review of its citizen
    petition process improvement efforts. Although FDA has been
    implementing changes to its process for less than a year, the agency is
    trying to gather some early data to evaluate whether these new
    processes have been helpful and to examine whether additional
    improvements might be beneficial. The review and response to citizen
    petitions, however, requires careful and painstaking research, precise
    writing and editing, and thorough legal review to produce a document
    that is a clear representation of FDA's scientific and legal opinion of
    what are often very complex issues. This process requires input from
    many agency components.
        In addition, ORP, the Office of Generic Drugs, and the Office of
    Chief Counsel plan to review blocking petitions that have been denied
    to consider such factors as the timing of the petition and the nature
    and age of the data upon which the petition was based. In some cases,
    individuals submitted petitions that were very close to the date of
    patent or exclusivity expiration were based on information that was
    readily available well before the petitions were submitted. Where we
    believe that further investigations may be warranted, the agency is
    considering the option to refer the cases to the Federal Trade
    Commission.
        I would be happy to provide for the record a timeline for our
    recent activities related to improvements to the citizen petition
    process.
        [The information follows:]

    Timeline for Improvements to Citizen Petition Process
        Fall of 2004.--ORP convened a process improvement team comprising
    representatives from ORP, the Office of New Drugs, and the Office of
    Generic Drugs and consulted with other offices involved in the petition
    process, such as the Office of Chief Counsel, to discuss improvements
    to the petition process.
        October 2004 to May 2005.--The process improvement group generally
    met on a biweekly basis; sometimes more frequently. The group began by
    describing the existing process in detail and then looked for areas
    where FDA could make improvements and achieve efficiency.
        June 2005.--ORP finalized new procedures to improve the citizen
    petition process and began full implementation of process improvements.
    ORP instituted some of these improvements while the meetings to
    identify improvements were ongoing.
        May and June 2005.--ORP presented process improvement efforts to
    senior management within CDER and various groups involved in working on
    citizen petition responses.
        Currently.--ORP is documenting its new procedures in a Manual of
    Policies and Procedures, also known as MAPP.

                             GENERIC DRUG APPROVAL

        Question. I appreciate your response to my letter of February 6th,
    regarding generic drugs and the FDA strategic redeployment. However,
    there were some questions that were not answered.
        What additional staffing and funding would be required to decrease
    the backlog of generic drug applications by 1/3 over the next fiscal
    year?
        Answer. FDA understands that Congress and the public are concerned
    about the high cost of prescription drug products. Generic drugs play
    an important role in granting access to products that will benefit the
    health of consumers and the government. Prompt approval of generic drug
    product applications, also known as abbreviated new drug applications,
    or ANDAs, is imperative to making generic products available to
    American consumers at the earliest possible date. This has been a high
    priority for FDA.
        FDA believes that making improvements in the process for the review
    of generic drug applications offers the best promise for reducing ANDA
    review time. Total spending on the Generic Drug Program is $64.6
    million, which is more than a 66 percent increase from the comparable
    fiscal year 2001 amount, and has helped lower the median review time.
    In addition, FDA believes that making improvements in the process for
    the review of generic drug applications offers the best promise for
    reducing ANDA review time. With this goal in mind, in fiscal year 2005,
    FDA's Office of Generic Drugs, or OGD, focused on streamlining efforts
    to improve the efficiency of the ANDA review process. OGD added
    chemistry and bioequivalence review teams and has taken steps to
    decrease the likelihood that applications will face multiple review
    cycles. OGD also instituted revisions to the review process such as
    early review of the drug master file as innovator patent and
    exclusivity periods come to an end, cluster reviews of multiple
    applications, and the early review of drug dissolution data.
        In fiscal year 2006, we will build on these process improvements.
    We have begun a major initiative to implement Question-based Review for
    assessment of chemistry, manufacturing, and controls data in ANDAs.
    This improvement builds on the Quality-by design and risk-based review
    initiatives of FDA's Center for Drug Evaluation and Research. This
    mechanism of assessment is consistent with the International Conference
    on Harmonization Common Technical Document and will enhance the quality
    of evaluation, accelerate the approval of generic drug applications,
    and reduce the need for supplemental applications for manufacturing
    changes.
        FDA's OGD will continue institute efficiencies in the review
    process to accelerate the review and approval of ANDAs. FDA will also
    continue to work very closely with the generic manufacturers and the
    generic drug trade association to educate the industry on how to submit
    applications that can be reviewed more efficiently and that take
    advantage of electronic efficiencies that speed application review. We
    will also work with new foreign firms entering the generic drug
    industry. The agency recognizes that it will take time for these new
    firms to understand the requirements for generic drug products. In the
    long term, however, these efforts should shorten overall approval time
    and increase the number of ANDAs approved during the first cycle of
    review. In fiscal year 2006, FDA plans to spend $62.8 million relating
    to generic drugs and, specifically, $28.3 million in OGD. In fiscal
    year 2007, FDA plans to spend $64.6 million relating to generic drugs
    and $29 million in OGD.
        Question. What additional staffing and funding is required to
    decrease the length of time it takes to approve a generic drug
    application by 25 percent?
        Answer. FDA recognizes that generic drugs play an important role in
    granting access to products that will benefit the health of consumers
    and the government. The total spending on the Generic Drugs Program is
    $64.6 million, which is more than a 66 percent increase from the
    comparable fiscal year 2001 amount. This has helped lower median drug
    review time by 2 months. FDA believes that making improvements in the
    process for the review of generic drug applications offers the best
    promise for reducing Abbreviated New Drug Application, also known as
    ANDA, review time. With this goal in mind, in fiscal year 2005, FDA's
    Office of Generic Drugs, or OGD, focused on streamlining efforts to
    improve the efficiency of the ANDA review process. In fiscal year 2006,
    we will build on these process improvements, including efforts to
    implement Question-based Review. FDA's OGD will continue institute
    efficiencies in the review process to accelerate the review and
    approval of ANDAs. FDA will also continue to work to educate the
    industry on how to submit applications that can be reviewed more
    efficiently. We will also work with new foreign firms entering the
    generic drug industry. The agency recognizes that it will take time for
    these new firms to understand the requirements for generic drug
    products. In the long term, however, these efforts should shorten
    overall approval time and increase the number of ANDAs approved during
    the first cycle of review.
        Question. Please provide the number of new drug applications that
    have been submitted and approved in each of the last 5 years, including
    the average timeframe for approval. How does this number compare with
    the number of generic drugs that have been submitted and approved?
        Answer. I would be happy to provide that information for the
    record.
        [The information follows:]

        The following two tables provide a 5-year summary of approval
    statistics for new drugs. Please note: The submissions approved in a
    particular fiscal year are not necessarily filed in that fiscal year.

                                 APPROVAL TIMES FOR PRIORITY AND STANDARD NEW DRUG AND BIOLOGIC APPROVALS, NDAS/BLAS FISCAL YEARS 2001 TO 2005--APPROVAL TIMES IN MONTHS
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Priority                                                        Standard
                                                                     -------------------------------------------------------------------------------------------------------------------------------
                               Fiscal year                              Submissions       Number       Mean Approval      Median        Submissions       Number       Mean Approval      Median
                                                                           Filed         Approved          Time        Approval Time       Filed         Approved          Time        Approval Time
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    2001............................................................              10              10             7.9             6.0              86              61            17.8            15.0
    2002............................................................              12              10            14.3            13.0              84              54            19.4            14.8
    2003............................................................              19              14            18.2             6.0              82              72            21.9            13.3
    2004 \1\........................................................              28              19            13.8             9.0              94              74            19.7            12.7
    2005 \1\........................................................              32              27            10.1             6.0              71              82            20.6            12.9
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Beginning in fiscal year 2004, CDER figures include BLAs for therapeutic biologic products which were transferred from CBER to CDER.

                               APPROVAL TIMES FOR PRIORITY AND STANDARD NEW MOLECULAR ENTITIES, NMES AND NEW BIOLOGICS FISCAL YEARS 2001 TO 2005--APPROVAL TIMES IN MONTHS
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Priority NMEs/New Biologics \1\                                 Standard NMEs/New Biologics \1\
                                                                     -------------------------------------------------------------------------------------------------------------------------------
                               Fiscal Year                                                Number       Mean Approval      Median                          Number       Mean Approval      Median
                                                                       Number Filed      Approved          Time        Approval Time   Number Filed      Approved          Time        Approval Time
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    2001............................................................               8               5             8.5             6.0              24              10            24.7            21.9
    2002............................................................               8               8            13.7            13.0              14              14            16.4            12.5
    2003............................................................              12               8             9.0             6.0              17              13            21.6            22.8
    \1\ 2004........................................................              18              13            12.7             6.0              15              14            22.8            19.3
    \1\ 2005........................................................              18              17            12.4             6.0              14              10            25.5           23.9
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Beginning in fiscal year 2004, CDER figures include BLAs for therapeutic biologic products which were transferred from CBER to CDER.

        The following table provides information regarding generic drug
    approvals

                   APPROVAL TIMES FOR GENERIC DRUG FISCAL YEARS 2001 TO 2005--APPROVAL TIMES IN MONTHS
    ----------------------------------------------------------------------------------------------------------------
                                                        Receipts of      Number of     Mean Approval      Median
                       Fiscal Year                    Original ANDAs     Approvals         Time        Approval Time
    ----------------------------------------------------------------------------------------------------------------
    2001............................................             307             241            20.9            18.4
    2002............................................             361             296            21.4            18.3
    2003............................................             449             284            20.7            17.3
    2004............................................             563             320            20.5            16.3
    2005............................................             766             361            19.5            16.3
    ----------------------------------------------------------------------------------------------------------------

        Question. What total funding has been spent annually on approval of
    new drugs for the past 5 years? Please list appropriated funding and
    user fees separately.
        Answer. I would be happy to provide the amount spent annually on
    the approval of new drugs in the past 5 years for the record.
        [The information follows:]

                          FUNDING TOTALS FOR NEW DRUGS
    ------------------------------------------------------------------------
                                                                  Amount
    ------------------------------------------------------------------------
    Fiscal year 2001:
        Appropriated Funding................................     $76,000,000
        User Fees...........................................      47,500,000
                                                             ---------------
          Total.............................................     123,500,000
                                                             ===============
    Fiscal year 2002:
        Appropriated Funding................................      70,000,000
        User Fees...........................................      49,300,000
                                                             ---------------
          Total.............................................     119,300,000
                                                             ===============
    Fiscal year 2003:
        Appropriated Funding................................      75,000,000
        User Fees...........................................      56,500,000
                                                             ---------------
          Total.............................................     131,500,000
                                                             ===============
    Fiscal year 2004:
        Appropriated Funding................................      72,000,000
        User Fees...........................................      76,900,000
                                                             ---------------
          Total.............................................     148,900,000
                                                             ===============
    Fiscal year 2005:
        Appropriated Funding................................      75,200,000
        User Fees...........................................      83,400,000
                                                             ---------------
          Total.............................................     158,600,000
    ------------------------------------------------------------------------

                                DRUG ADVERTISING

        Question. I understand that FDA issued approximately 15 warning
    letters to drug companies regarding advertisements in 2005, an increase
    from the past several years. As we all know, though, the number of
    drugs ads has also increased. I am pleased that drug companies have
    published guidelines for their ads, and appear to be working with the
    FDA to try to ensure that ads are more responsible and presented
    fairly. I believe FDA is working on guidance to be published this year
    to assist drug companies in that effort.
        Can you give us an update on FDA's activities relating to drug ads?
    Is it still FDA's position that companies should not be required to
    submit ads to FDA prior to their publication?
        Answer. On November 1 and 2, 2005, the FDA held a two-day public
    hearing to provide an opportunity for broad public participation and
    comment on direct-to-consumer, also known as DTC, promotion of
    regulated medical products, including prescription drugs for humans and
    animals, vaccines, blood products, and medical devices. FDA is in the
    process of developing additional guidance for industry. Our major
    effort is a draft guidance to address the presentation of risk
    information in prescription drug and medical device promotion. Another
    effort is to finalize the draft guidance on the brief summary of risk
    information for the page adjacent to direct-to-consumer print
    advertisements for prescription drugs. FDA will conduct a series of
    three studies to examine the format and content of brief summaries in
    direct-to-consumer print advertisements to assist the agency in
    finalizing this draft guidance. FDA is also working to finalize the
    draft guidance on criteria FDA uses to distinguish between disease
    awareness communications and promotional materials, to encourage
    manufacturers to disseminate educational messages to the public, and
    the guidance on the manner in which restricted device firms can comply
    with the rules for disclosure of risk information in consumer-directed
    broadcast advertising for their products. FDA has created a Promotion
    Steering Committee to leverage policy development for prescription drug
    promotion, including DTC promotion. The committee consists of
    representatives from the Office of the Commissioner, Office of Chief
    Counsel, and each center responsible for medical products. The
    committee meets to determine how to best allocate our limited resources
    for policy development.
        Under current law and regulations, FDA cannot require companies to
    submit promotion materials prior to use. In addition, there are tens of
    thousands of promotional pieces per year, prior review, even if
    authorized, would be a major challenge.
        Question. If legislation were enacted calling for prior approval of
    prescription drug ads before airing, would your agency have adequate
    personnel and resources to meet this mandate? Could you provide us more
    information on this?
        Answer. The Administration has not established a position on the
    legislative proposal you describe. The Center for Drug Evaluation and
    Research receives over 54,000 pieces per year, of which 9,000 are
    direct-to-consumer, or DTC. Of the 9,000 pieces of DTC final materials,
    only 467 are sent in as proposals. Providing timely review of these
    promotional material would represent a tremendous increase in workload
    and FDA could not conduct timely reviews of these promotional material
    with the resources available.
        FDA feels that it is highly valuable to the public for us to review
    and provide advice to manufacturers about broadcast advertisements
    while they are being produced. Therefore, we have made that one of our
    highest priorities. This helps ensure DTC compliance and reduces the
    number of advertisements that might otherwise violate the Food, Drug &
    Cosmetic Act from appearing in public.

                                  FOOD DEFENSE

        Question. Dr. Von Eschenbach, the past several years have seen huge
    increases for ``food defense'': $20.5 million in fiscal year 2004,
    $35.5 million in fiscal year 2005, $10 million in fiscal year 2006, and
    the budget this year proposes an increase of nearly $20 million.
        In your written statement, you spend just under two pages
    discussing what this money will buy. FERN Labs, eLexnet systems, and
    Emergency Operations Networks all sound, and I'm sure in fact are, very
    important, but this is a lot of money, and I think we should spend a
    little more time focusing on it--especially if these increases are
    coming at the expense of other activities.
        Can you walk us through a scenario that illustrates how this money
    will be used, in a practical way, to prevent or contain an outbreak
    involving contaminated food of drugs? How are we safer now that all of
    this money has been spent?
        Answer. In one such scenario, a truck driver for a food
    manufacturing plant introduces a biological, chemical, or radiological
    agent into truck loads of a byproduct en route between the food
    manufacturing plant and one of several plants that converts the
    byproduct into a usable food ingredient. The food ingredient is
    distributed nationwide as well as overseas. The ingredient is used in
    the manufacture of a variety of seemingly unrelated food items. Many of
    these food items are themselves used as ingredients in other foods.
    Consequently, contaminated ingredients from several plants would end up
    in a large number of foods, under a variety of brand names, with
    national distribution.
        Food Emergency Response Network, or FERN, laboratory testing in the
    scenario listed above would likely include finished product testing of
    foods implicated in human illness; and, food of the same lots as those
    implicated in human illness at various points in the production and
    distribution systems totaling approximately 100,000 samples for
    analysis. To fully recover from this scenario or from a terrorist
    attack or national emergency, FDA would need to conduct recalls,
    seizures, and/or disposal of contaminated food which would then restore
    confidence in the Nations food supply.
        Food Defense funding supports FDA's five key areas of awareness,
    prevention, preparedness, response, and recovery. FDA strives to
    increase awareness of the role of food as a vehicle for terrorism,
    various illnesses, and symptoms that are caused by foodborne threat
    agents; and, by educating and coordinating the dissemination of
    information to State and local partners, relevant associations, and
    industry. With Food Defense funding, FDA is able to conduct
    surveillance, inspectional and sampling programs to monitor
    manufacturers and their products for the presence of threat agents
    where such an intentional tampering may be found prior to full human
    consumption. FDA studies food prevention technologies to improve the
    safety of food and establish guidelines and or performance standards
    for industry which might prevent the contamination altogether. FDA has
    worked on method validation and matrix extension to strengthen the
    Nation's food testing laboratory capability in order to be prepared to
    quickly detect threat agents in the food supply. In addition, the FERN
    provide response capabilities by rapidly testing large numbers of
    samples of food. The Emergency Operations Network, or EON, is an
    enhanced communication system that provides seamless information access
    to all FDA offices, enabling them to respond quickly to the full range
    of FDA emergencies.
        Question. With regard to the technology we are buying and labs we
    are outfitting- are they flexible? Can they be used for other
    activities when there are no emergencies? How do they complement or
    duplicate similar USDA labs?
        Answer. Many of the agents we are concerned about in food defense
    are also of food safety concern. Therefore, the equipment is useful for
    our routine food safety surveillance programs as well as food defense
    activities. The state Food Emergency Response Network, or FERN,
    Chemistry laboratories that were awarded FDA FERN chemistry Cooperative
    Agreements in fiscal year 2005 are utilizing the equipment and
    resources provided by FDA to increase capability of FERN analytical
    methods and for surveillance of the food supply. Currently, these
    laboratories are actively engaged in increasing the number of analytes
    and food commodities that the current FERN Chemistry methods can
    detect. This method validation work not only increases the capabilities
    of the Cooperative Agreement laboratories but also increases the
    capabilities of the entire FERN Network when the expanded methods are
    shared with all FERN Chemistry laboratories.
        In addition, the Cooperative Agreement laboratories are involved in
    the surveillance of the food supply through ad hoc analysis of food
    commodities for Food Defense analytes. These surveillance analyses are
    based on vulnerability and risk assessments. This surveillance sampling
    provides a wider food shield and an opportunity to demonstrate and
    assess the capabilities, capacity, and communication within the FERN.
    Cooperative Agreement laboratories also analyze proficiency test
    samples throughout the year to demonstrate their continuing capability
    to analyze particular food commodities for identified analytes. These
    proficiency test samples build confidence in each laboratory's ability
    to find threat agents in a variety of food commodities, were there to
    be terrorist attack or a national emergency.
        To avoid duplication, FDA has taken the lead in funding both
    Chemistry and Radiological FERN laboratories to build capability and
    capacity for these disciplines across the Nation, whereas United States
    Department of Agriculture, or USDA, is responsible for funding the
    Microbiological laboratories. Therefore, our coordinated efforts are
    complementary to FDA's overall FERN program.
        Question. Do you anticipate a time we won't have to provide huge
    increases every year for these activities--when will we simply be able
    to maintain our safeguards?
        Answer. Thank you for the opportunity to address FDA's efforts to
    safeguard the food supply from attack. FDA regulates $240 billion worth
    of domestic food and $15 billion of imported food. The American food
    industry contributes approximately 20 percent of the U.S. Gross
    National Product, employs about 14 million individuals, and provides an
    additional 4 million jobs in related industries. FDA's capacity to
    defend the food supply from attack and to maintain consumer confidence
    in our ability to do so has significant impacts on the public health
    and the Nation's economy.
        Our plan for food defense aligns with the mandate of Homeland
    Security Presidential Directive-9, which establishes a national policy
    to defend the food and agriculture system. Among the key food defense
    projects funded to date is the Food Emergency Response Network, or
    FERN. FERN establishes and expands a national laboratory network to
    increase analytic surge capacity for biological, chemical and
    radiological agents in food. Other key food defense projects include
    targeted food defense research; targeted, risk-based inspections;
    Biosurveillance, to improve coordination and integration of existing
    food surveillance capabilities under the government-wide
    Biosurveillance Initiative; and emergency Operations Network Incident
    Management System, to upgrade and expand FDA's management and
    coordination capabilities for responding to incidents affecting the
    U.S. food supply.
        FDA conducts these activities in the context of an ever-increasing
    volume of imported foods and the growing complexity of the food
    industry and of the technologies used in food production and packaging.
    This transformation will continue to present fresh challenges for FDA
    and for the plans and strategies we use to defend the food supply from
    attack. We will direct any food defense funding provided in fiscal year
    2007 to address these new challenges, to build upon past successes, and
    to strengthen our capabilities to address terrorist threats to the food
    supply.
        Although the Administration has not formulated a budget for fiscal
    year 2008 and later years, the long-term recommendation for the FERN
    program is for FDA to achieve a total of 50 state laboratories. With
    the funding in our fiscal year 2007 budget, we estimate that we will
    increase the number of operational facilities to 16 laboratories. You
    are correct in pointing out that we will not need budget increases to
    expand the number of FERN laboratories once we establish all of these
    labs. However, there may still be an annual need for resources to
    maintain and support FERN labs.

                              UNIFORM FOOD SAFETY

        Question. Does FDA support the National Uniformity for Food Act as
    passed recently in the House of Representatives? Please explain why or
    why not.
        Answer. The Administration has not taken a position on this
    legislation.

                             POST-MARKETING STUDIES

        Question. What activities, if any, is FDA undertaking in order to
    decrease the number of post-marketing studies that have been pledged to
    FDA but not yet undertaken? Does FDA see this as a problem? Why or why
    not?
        Answer. Postmarketing Study Commitments, also known as PMCs, for
    approved drug products, including biological drugs, are studies that a
    product sponsor either is required or agrees to conduct after FDA
    approves a product for marketing to further define the safety,
    efficacy, or optimal use of a product. FDA closely monitors the status
    of PMCs to ensure that product sponsors initiate and complete the
    studies in a timely manner. In some cases, the studies can take years
    to complete, even if everything is on schedule. In other cases, there
    are considerable obstacles, such as difficulty in recruiting patients
    and investigators to participate in a clinical trial when an approved
    therapy is available. Sponsors must resolve these issues before they
    can complete the studies. When obstacles arise, FDA works closely with
    sponsors to address these obstacles. Approximately 38 percent of the
    currently pending PMCs for new drug applications were established in
    applications approved between October 1, 2003 and September 30, 2005.
    Depending on the complexity of the study, FDA would expect that many of
    these studies would not have been initiated yet.
        As of the Senate Hearing date, FDA had planned to undertake a
    review of the decision-making process behind requests for PMCs but had
    not formally issued a contract. On April 5, 2006, FDA awarded a
    contract to an outside organization to conduct a thorough evaluation of
    the postmarketing study commitment process for collecting medical
    information. The contractor will examine in-depth the agency's internal
    processes regarding PMCs and make recommendations regarding ways to
    improve FDA's PMC processes and practices. The outside contractor will
    evaluate how review divisions decide whether to request PMCs, how
    divisions make decisions surrounding what kinds of PMCs to request, and
    how divisions establish reasonable timeframes for completing PMCs. The
    study will serve to assist FDA in determining whether industry needs
    better guidance regarding PMCs and to ensure there is a standardization
    of the procedures. In addition, the Centers within FDA also have
    undertaken activities to improve the response on postmarketing and
    post-approval studies.
        FDA takes its statutory obligations under the Food and Drug
    Administration Modernization Act of 1997 to track and monitor the
    progress of PMCs very seriously. FDA recently published a final
    guidance for industry to describe in greater detail the content,
    format, and timing of PMC annual status reports submitted by the drug
    industry. Furthermore, FDA reports annually in the Federal Register on
    the performance of applicants in conducting their PMCs and maintains a
    public Web site that contains the basic information that FDA committed
    to make available to the public. These initiatives, along with other
    FDA internal procedures, are all intended to ensure that industry
    undertakes their commitments and completes them in a timely manner.
        On January 1, 2005, the Center for Devices and Radiological Health,
    also known as CDRH, initiated the use of the new Condition of Approval
    Tracking System. As of that date, all postapproval studies are entered
    into the system, along with the due dates of any agreed upon report
    deliverables. CDRH monitors the system daily to see that sponsors are
    honoring their commitments. Procedures are in place to notify the
    sponsor immediately if deadlines are not met, and also to acknowledge
    the receipt of reports that are on time and are reviewed. Under the new
    system, all reports have been delivered on time.
        CDRH is also developing the Postapproval Study Web site that will
    be available to the public. This Web site will list the postapproval
    studies being done, briefly describe the study, and document the status
    of studies, as reported by industry.
        FDA believes that changes to the Condition of Approval study
    program will improve communication with industry about these studies
    and increase collaboration in designing high quality studies with
    targeted end points. The results of these studies will be important to
    FDA, industry and the health care community. Acknowledgement of receipt
    of study reports and follow-up on overdue reports will encourage
    compliance. Finally, we believe the public Web site will prompt
    industry to conduct the studies and report to FDA on time.

                          MICROBIOLOGICAL DATA PROGRAM

        Question. The USDA is proposing to eliminate that Microbiological
    Data Program, currently carried out by the Agricultural Marketing
    Service. One reason offered for this proposal is that FDA currently
    undertakes, or will continue, the work of this program. Reports of
    increased food illnesses from fruits and vegetables appear to highlight
    the importance of the Microbiological Data Program.
        Has FDA worked with AMS in order to ensure that none of the
    sampling currently carried out through the Microbiological Data Program
    will be eliminated?
        Answer. As a science-based agency, FDA collects data that can be
    used to direct policy decisions, risk assessments, regulatory actions,
    and other actions. In comparison, the Microbiological Data Program, or
    MDP, program of the USDA Agricultural Marketing Service, also called
    AMS, is a non-regulatory sampling survey. Because the MDP program is
    not bound by the same regulatory requirements as FDA, it provides an
    opportunity for collection of a much larger data set. However, the MDP
    is not designed to provide the same source information, traceback, or
    support for regulatory follow-up that are built into the FDA sampling
    assignments. If a positive sample is found in an FDA produce sampling
    assignment, follow-up action can be taken, while the design of the MDP
    program does not allow for follow-up. Therefore, if AMS does eliminate
    the MDP program, it would not produce a surveillance gap as FDA defines
    this term.
        Question. Is FDA already working on similar activities?
        Answer. Since 1999, FDA has routinely issued sampling assignments
    for selected commodities produced both domestically and abroad. The
    purpose of FDA's produce sampling assignments is to gather information
    on both the incidence of contamination and the practices and conditions
    associated with contaminated produce and to take regulatory action, as
    appropriate, when contaminated produce is found. The FDA sampling
    assignments differ from the Agricultural Marketing Service's
    Microbiological Data Program, also known as MDP, in important ways. FDA
    samples are routinely collected at the farm gate or packinghouse for
    domestic produce or at the border for imported produce. With domestic
    samples, if contamination is present, it must have occurred at the farm
    or packing facility. MDP samples are routinely collected at a later
    stage of the supply chain, such as a distribution center, making it
    more difficult to narrow down where contamination might have occurred.
    The MDP program is a blind study. It does not collect information about
    the samples that would allow traceback to the source; therefore, it
    does not provide an opportunity to visit farms or packinghouses
    associated with positive sample to gather information about practices
    or conditions at those firms that may have led to contamination. FDA
    samples are tested in FDA laboratories, while MDP samples are tested at
    state laboratories. FDA data have a relatively well known performance
    standard across the United States.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                                   AFLATOXIN

        Question. Late last year, a pet food company based in South
    Carolina initiated a recall of dog food that had been made with corn
    contaminated with aflatoxin, produced by mold that sometimes develops
    in crops under drought or other weather stress conditions. The death of
    dozens of dogs has been attributed to consumption of this product both
    before and after the recall was announced.
        What steps has FDA taken to address this situation to ensure the
    recall is fully and effective and completed?
        Answer. FDA determined that this situation represented a serious
    life-threatening health hazard to pet dogs and pet cats and classified
    this recall as Class I. In a Class I Recall, FDA requests that the firm
    conduct 100 percent effectiveness checks of their consignees to confirm
    that they received notification about the recall and have taken
    appropriate action. Additionally, our Atlanta district office issued
    audit check assignments in coordination with the Center for Veterinary
    Medicine to determine the effectiveness of the company's recall. The
    vast majority of FDA audit checks are completed and show the recall of
    dog food to be effective. FDA will monitor the disposal of all
    recovered products. FDA will terminate this recall when disposition of
    the recalled products is finalized.
        Question. How can we assure the pet owners of this country that
    this kind of event won't happen again?
        Answer. As part of the investigation, FDA evaluated the company's
    descriptions of the actions it has implemented at all of its plants to
    ensure that an aflatoxin event does not happen again and found the
    corrective actions acceptable. This situation generated much attention
    and has served as a reminder to the pet food industry of the importance
    of using appropriate manufacturing and quality control procedures.

                                  BIOTERRORISM

        Question. In December of 2004, the outgoing Secretary of Health and
    Human Services Tommy Thompson stated ``I, for the life of me, cannot
    understand why the terrorists have not attacked our food supply,
    because it is so easy to do.'' The President's 2007 budget increases
    funding for food defense to continue lab preparedness efforts and
    expand State laboratories. However, it cuts funding for food import
    inspections at ports of entry which a terrorist might use to smuggle
    contaminated food products into the country. Since 1994, food imports
    have grown five-fold to 6 million food import shipments annually, but
    the FDA inspects less than 2 percent of these shipments.
        Won't these proposed budget cuts for import inspection and testing
    actually weaken FDA's ability to prevent an attack on the food supply
    and make more likely the event that Secretary Thompson predicted?
        Answer. For fiscal year 2007, FDA is requesting an increase of
    $19.9 million in food defense to a total request of $178.2 million.
    This is a 21,500 percent increase in funds from fiscal year 2001. The
    funds requested would continue to improve laboratory preparedness and
    food defense field operation, food defense research, surveillance, and
    incident management capabilities. FDA uses a risk-based approach to
    allocate resources. By focusing on risk through the cooperative work of
    Customs and Border Protection, or CBP, FDA's Prior Notice Center, and
    FDA field examinations, we will work smarter to target higher risk
    products, manufacturers, and importers to ensure the safety of the
    public health, protect the Nation's food supply and prevent an attack
    on the Nation's food supply.
        For example, currently, working with information submitted through
    CBP's electronic systems used for import entries or through FDA's
    internet-based Prior Notice System Interface, FDA screens shipments
    electronically before they arrive in the United States to determine if
    the shipments meets identified criteria for physical examination or
    sampling and analysis or warrants other review by FDA personnel. This
    electronic screening allows FDA to better determine how to deploy our
    limited physical inspection resources at the border on what appear to
    be higher-risk food shipments while allowing lower-risk shipments to be
    processed in accordance with traditional import procedures after the
    electronic screening.
        Question. Instead of cutting border inspection, shouldn't the Bush
    administration apply more resources to food import inspections to
    bolster our defenses against bioterrorism?
        Answer. Through smart allocation of FDA resources, fine tuning
    FDA's risk based approach, and smarter screening criteria, the FDA will
    be able to continue ensuring a safe food supply and protecting the
    pubic health despite cuts in border inspections, which will allow
    funding to other higher risk food defense and lab preparedness areas.

                                   SUNSCREEN

        Question. Skin cancer is on the rise in the United States. A
    significant contributor is exposure to UVA rays. FDA has been
    developing a monograph for sunscreens since 1978 to address the
    critical issue of UVA rays but has not, thus far, issued it. As part of
    the Fiscal year 2006 Agriculture Appropriations Act, FDA was asked to
    issue a ``comprehensive final monograph for over-the-counter sunscreen
    products, including UVA and UVB labeling requirements within 6 months
    of enactment.''
        What is the status of the monograph?
        Answer. We are currently working on a rulemaking for OTC sunscreen
    drug products to address both UVA and UVB labeling requirements.
        Question. Will the monograph be issued by May 10th, the date the
    fiscal year 2006 Act requires?
        Answer. We are working to publish the document for this rulemaking
    in the Federal Register.

                                 GENERIC DRUGS

        Question. Generic drugs help to make health care more affordable.
    Currently, FDA has a backlog of 850 applications for generic drugs--
    there are expected to be more over the next several years. Yet, the
    President's budget flat funds the Office of Generic Drugs. In your
    testimony before the Committee, you stated that generics were reviewed
    in priority order, meaning that new generics for branded drugs without
    a generic counterpart would be bumped to the front of the line.
    However, more price competition between generics is also a valuable way
    to decrease the price consumers pay for drugs. Therefore, I believe
    prioritization is not, in and of itself, a sufficient solution to the
    problem. In addition, approval delays effectively extend the patent
    life of branded drugs despite Congress' clear intention otherwise. FDA
    has increased its generic drugs Full Time Evaluators (FTEs) from 134 in
    2001 to 201 in 206. Despite the increase, I am concerned FDA is not
    devoting enough personal and resources to generic drugs given the
    current workload and the future increase.
        How many FTEs would be required to eliminate the current backlog
    within the next year?
        Answer. FDA understands that Congress and the public are concerned
    about the high cost of prescription drug products. Generic drugs play
    an important role in granting access to products that will benefit the
    health of consumers and the government. Prompt approval of generic drug
    product applications, also known as abbreviated new drug applications,
    or ANDAs, is imperative to making generic products available to
    American consumers at the earliest possible date. This is a key
    priority for FDA. Since 2001, FDA has increased spending on the Generic
    Drugs Program to $64.6 million for fiscal year 2007, which is more than
    a 66 percent increase from the comparable fiscal year 2001 amount. This
    has allowed FDA to reduce median review time by 2 months.
        FDA believes that making improvements in the process for the review
    of generic drug applications offers the best promise for reducing ANDA
    review time. With this goal in mind, in fiscal year 2005, FDA's Office
    of Generic Drugs, or OGD, focused on streamlining efforts to improve
    the efficiency of the ANDA review process. OGD added chemistry and
    bioequivalence review teams and has taken steps to decrease the
    likelihood that applications will face multiple review cycles. OGD also
    instituted revisions to the review process such as early review of the
    drug master file as innovator patent and exclusivity periods come to an
    end, cluster reviews of multiple applications, and the early review of
    drug dissolution data.
        In fiscal year 2006, we will build on these process improvements.
    We have begun a major initiative to implement Question-based Review for
    assessment of chemistry, manufacturing, and controls data in ANDAs.
    This improvement builds on the Quality-by design and risk-based review
    initiatives of FDA's Center for Drug Evaluation and Research. This
    mechanism of assessment is consistent with the International Conference
    on Harmonization Common Technical Document and will enhance the quality
    of evaluation, accelerate the approval of generic drug applications,
    and reduce the need for supplemental applications for manufacturing
    changes. FDA believes that these process improvements will work to make
    more generic drugs available to the public.
        FDA's OGD will continue institute efficiencies in the review
    process to accelerate the review and approval of ANDAs. FDA will also
    continue to work very closely with the generic manufacturers and the
    generic drug trade association to educate the industry on how to submit
    applications that can be reviewed more efficiently and that take
    advantage of electronic efficiencies that speed application review. We
    will also work with new foreign firms entering the generic drug
    industry. The agency recognizes that it will take time for these new
    firms to understand the requirements for generic drug products. In the
    long term, however, these efforts should shorten overall approval time
    and increase the number of ANDAs approved during the first cycle of
    review. In fiscal year 2006, FDA plans to spend $62.8 million relating
    to generic drugs and, specifically, $28.3 million in OGD. In fiscal
    year 2007, FDA plans to spend $64.6 million relating to generic drugs
    and $29 million in OGD.
        Question. How much would that cost?
        Answer. FDA recognizes that generic drugs play an important role in
    granting access to products that will benefit the health of consumers
    and the government. FDA believes that making improvements in the
    process for the review of generic drug applications offers the best
    promise for reducing ANDA review time. With this goal in mind, in
    fiscal year 2005, FDA's Office of Generic Drugs, or OGD, focused on
    streamlining efforts to improve the efficiency of the ANDA review
    process. In fiscal year 2006, we will build on these process
    improvements, including efforts to implement Question-based Review.
    FDA's OGD will continue institute efficiencies in the review process to
    accelerate the review and approval of ANDAs. FDA will also continue to
    work to educate the industry on how to submit applications that can be
    reviewed more efficiently. We will also work with new foreign firms
    entering the generic drug industry. The agency recognizes that it will
    take time for these new firms to understand the requirements for
    generic drug products. In the long term, however, these efforts should
    shorten overall approval time and increase the number of ANDAs approved
    during the first cycle of review.
        Question. Does FDA estimate the number of future Abbreviated New
    Drug Applications when making decisions to allocate resources to hiring
    and training FTEs?
        Answer. FDA attempts to project application numbers by ongoing
    tracking of receipts and by looking at the products that will be going
    off patent as well as other industry forecasts of trends. FDA also
    ensures that it can meet the specified budget earmark for the generic
    drug review program.

                          EARLY FOOD SAFETY EVALUATION

        Question. I understand your agency is nearing publication of its
    final Early Food Safety Evaluation, (EFSE) guidelines. I'm happy to
    hear that as it is an important issue for American agriculture and I
    look forward to its release.
        Can you offer us more specifics on when we can expect to see final
    publication?
        Answer. We are moving to complete the last steps necessary to
    finalize the guidance. For example, we are currently nearing completion
    of the requirements of the Paperwork Reduction Act of 1995. The comment
    period for the Notice for the agency information collection activities
    recently closed on March 13, 2006. We expect publication soon after
    completion of these final steps.

                                  FOOD IMPORTS

        Question. More than 80 percent of the seafood and an estimated 20
    percent of fresh produce that Americans consume is imported.
    Increasingly, imported foods are the source of food-borne illness. For
    example, in 2003, a hepatitis A outbreak associated with green onions
    imported from Mexico sickened over 550 people, killing at least 3.
    There are many other examples of contaminated food that caused large
    scale outbreaks and fatalities in the last 10 years.
        How do you intend to improve FDA's oversight of imported food?
        Answer. FDA will continue to implement the Public Health Security
    and Bioterrorism Preparedness and Response Act of 2002, which provides
    FDA with authorities aimed at enhancing the security of imported foods.
    For example, the requirement for domestic and foreign facilities to
    register with FDA will help FDA quickly identify, locate, and notify
    the facilities that may be affected in the event of a potential or
    actual terrorist incident or outbreak of foodborne illness. The advance
    information about imported food shipments, provided under the prior
    notice requirement, enables FDA, working closely with Customs and
    Border Protection, or CBP, to more effectively target inspections of
    food at the border at the time of arrival to ensure the safety and
    security of imported food. This advance notice not only allows FDA's
    and CBP's electronic screening systems to review and screen the
    shipments for potential serious threats to health, intentional or
    otherwise, before food arrives in the United States, but it also allows
    FDA staff to review prior notice submissions for those products flagged
    by the systems as presenting the most significant risk and determine
    whether the shipment should be held for further investigation.
        For fiscal year 2007, FDA is requesting an increase of $19.9
    million in food defense to a total of $178.2 million. This is a 21,500
    percent increase in funds from fiscal year 2001. The funds requested
    would continue to improve laboratory preparedness and food defense
    field operation, food defense research, surveillance, and incident
    management capabilities.
        FDA has worked to develop an automated risk-based import entry
    examination system. This system is designed to assess risk in
    individual import shipments. The system will combine expert knowledge,
    open source intelligence and advanced self-learning algorithms to
    dynamically assess entry-line level risk. In 2005, the first of a
    series of research and analysis papers on this system provided timely
    and relevant information to serve as the basis for exogenous-source
    rules development for risk-based import examination. The goal in the
    project is to provide early identification and assessment of events,
    conditions, and situations in the world that could have an impact on
    the safety or security of FDA-regulated imports. The project is
    currently focused on imported seafood.
        Question. How much would it cost to increase food import
    inspections from 2 percent to 5 percent or 10 percent?
        Answer. During fiscal year 2005, the Field conducted approximately
    85,000 Import Food Field Exams/Tests; analyzed approximately 25,550
    food import lab samples; and, made 8,672,168 Import Line Decisions.
    Over 1.27 percent of food import lines were physically examined during
    fiscal year 2005. In addition, critical steps in our counter terrorism
    efforts are the Prior Notice Security Import Reviews. During fiscal
    year 2005, the Field conducted 86,187 Prior Notice Security Import
    Reviews in the foods area.
        The mission of FDA's Prior Notice Center, or PNC, is to identify
    imported food and feed products that may be intentionally contaminated
    with biological, chemical or radiological agents, or which may pose
    significant health risks to the American public, and intercept them
    before they enter the United States. FDA will continue to focus
    resources on Prior Notice Import Security Reviews of products that pose
    the highest potential bioterrorism risks. The PNC uses a combination of
    adaptable targeting strategies and weighted risk indicators in the
    threat assessment process including contemporary intelligence involving
    terrorist activities, a history of prior notice violations, and
    compliance with admissibility standards as indicated by the results of
    import field exams, filer evaluations, firm inspections, repeated prior
    notice violations, and feedback from Field Investigators. By using a
    risk based approach, the Prior Notice Center can intercept potentially
    hazardous products before they enter the United States.
        The benefit of these reviews comes from the quality and targeting
    of review activities; not from the volume of imports inspected. Thus,
    the quality of import screening is a better measure of FDA's import
    strategy rather than simply focusing on the items physically examined.
        Question. Could FDA improve its oversight of imports if it had
    inspectors checking farms and factories in the country where our food
    originates?
        Answer. FDA continues to enhance our risk based approach to target
    higher risk products, manufacturers, and importers with available
    resources. FDA-conducted foreign inspections are an important aspect of
    this multifold approach. It is important to understand, however, that
    this is only one component of our approach. We also use previous
    examination and laboratory sampling results, compliance information
    received from other domestic and foreign regulatory agencies,
    examination at the ports of entry, and general risk factors posed by
    the products in question to provide controls of the safety of import
    food commodities. FDA also focuses on risk by working cooperatively
    with Customs and Border Protection and through the FDA's 24/7 Prior
    Notice Center in counter- and bioterrorism targeting and evaluation of
    supply chain integrity.
        Although foreign inspections and border operations provide some
    assurance that imported foods are safe, the agency continues to work to
    foster international agreements and harmonize regulatory systems. For
    example, we actively participate in the Canada/United States/Mexico
    Compliance Information Group, which shares information on regulatory
    systems and the regulatory compliance status of international firms to
    protect and promote human health. In addition, FDA is heavily involved
    in the Codex Alimentarius Commission Committees, which develop Codes of
    Practice and standards to harmonize international food safety
    practices.

                                  FOOD RECALL

        Question. The Food and Drug Administration (FDA) does not have
    mandatory authority to recall contaminated food products and instead
    relies on voluntary cooperation by food companies to get contaminated
    food out of supermarkets, restaurants, and consumers' homes. In a
    recent GAO study, FDA identified over 3,000 recalls of non-meat and
    poultry foods from 1986 to 1999 and GAO identified nine instances
    during that time where companies delayed or refused compliance with an
    FDA recall request.
        Should FDA have mandatory recall authority in order to protect
    American consumers from contaminated food? Why or Why not?
        Answer. The vast majority of food recalls are initiated voluntarily
    by firms when a problem is discovered, often after the product has
    entered the marketplace. It is the responsibility of the recalling firm
    to account for product remaining under its direct control, to quickly
    notify direct consignees of the identity of the product and any
    potential hazard that it presents, and to request subrecalls where
    indicated. FDA monitors recalls and either discusses follow-up actions
    with the firm if it appears that the recall is not effective, or if
    necessary, takes direct action to complement actions taken by the firm.
    FDA encourages firms to conduct recalls that are effective and may take
    enforcement action to remove products from the market if a firm is
    unable or unwilling to do so.
        When the hazard is significant, FDA expects that firms will
    initiate a public notification process to make the public aware of the
    problem and to recommend steps to be taken in order to prevent injury
    or illness. Recall notifications provide the corrective action
    necessary and a means for returning and/or reporting the status of the
    recalled product.
        In the event that public notice is not provided or is not
    sufficient, FDA has and will continue to notify the public of the
    hazard.
        Question. If a terrorist attack against the food supply occurred,
    how would FDA ensure the food was removed from the distribution chain,
    supermarket shelves, and people's homes?
        Answer. The Public Health Security and Bioterrorism Preparedness
    and Response Act of 2002 includes a number of provisions that give new
    authority to FDA to take action to protect the food supply against the
    threat of intentional or accidental contamination of the food supply.
    If a terrorist attack on the food supply occurs, FDA would work with
    State and local food safety officials to remove products from store
    shelves and distribution channels. FDA would also work with the press
    to alert the trade industry and consumers about the potential hazard
    and would provide consumers with information on how and where to
    dispose of contaminated foods. We would include information to
    consumers on what they should do if they had been exposed to the
    contaminated food.
        To ensure efficiency if an emergency occurred, FDA continues to
    take additional measures to improve the success of recalls. On November
    3, 2003, FDA posted guidance to the industry on our website intended to
    assist industry in handling all aspects of a product recall, including
    all corrections and removals. We also continue to develop the Recall
    Enterprise System, which, when completed, will post recalls on our
    website in real time.

                                 METHYLMERCURY

        Question. FDA and EPA have issued a joint advisory warning pregnant
    women and women planning a pregnancy to avoid swordfish, shark, some
    types of tuna and king mackerel, since those fish accumulate large
    quantities of methylmercury which can harm their unborn children.
    Eating seafood is the leading cause of exposure to methylmercury, a
    toxin that can cause neurological damage to the developing fetus and
    young children.
        Although the advisory is useful, some groups have complained that
    it is complicated and hard-to-remember. The Center for Science in the
    Public Interest recently recommended that all grocery stores and fish
    retailers should post the warning at the counter where consumers
    actually purchase the seafood.
        Why doesn't FDA enforce the limit for methylmercury in seafood,
    e.g. test and remove seafood from the market that exceeds the limit of
    1 ppm?
        Answer. Risk from methylmercury is generally understood to derive
    from substantial exposure over time of many meals that include fish.
    That is why we issued a consumer advisory on methylmercury directed
    toward women of childbearing age and young children. We are conducting
    surveys to determine how the public, including pregnant women and
    health care providers, are reacting to the consumer advisory on
    methylmercury and to other information they may be receiving from all
    sources about seafood risks and benefits.
        It is useful to note that data from the National Health and
    Nutrition Examination Survey, operated by the Centers for Disease
    Control and Prevention, that measures levels of methylmercury in U.S.
    women of childbearing age and young children through 5 years of age
    reveal that the overwhelming majority of both women of childbearing age
    and young children are exposed to methylmercury at very low levels. The
    next phase of our risk management process for methylmercury involves a
    risk analysis that is examining the likelihood of adverse effects
    through the range of exposures being experienced by U.S. consumers.
    This project is also examining the likelihood of health and nutritional
    benefits from eating fish at various levels of consumption.
        Question. To make the advisory truly effective, why doesn't FDA
    require point-of-purchase notices giving consumers detailed information
    on which types of fish contain high levels of methylmercury at the fish
    counter?
        Answer. FDA, in conjunction with the Environmental Protection
    Agency, or EPA, has implemented a cost-effective public education
    campaign. This campaign is designed to inform high-risk consumers about
    reducing their exposure to high levels of mercury, while emphasizing
    the health benefits of consuming fish and shellfish. This has resulted
    in raising awareness about methylmercury in seafood. We believe the
    steps that have been taken are more appropriate and more effective than
    using point-of-purchase signage to convey a complex consumer message.
    The program uses health professionals and the media to inform high-risk
    populations, including women who may become pregnant, pregnant women,
    nursing mothers and the parents of young children, about mercury in
    seafood. The goal is to inform these high-risk consumers that they
    should avoid or restrict their consumption of certain kinds of fish,
    while emphasizing the importance of fish and shellfish as part of a
    healthy diet.
        The public education campaign includes an extensive outreach effort
    to over 9,000 print and electronic media outlets. FDA and EPA have also
    distributed over four million brochures about the advisory on
    methylmercury in fish and shellfish to members of over 50 organizations
    of healthcare providers to women and children. The brochures have also
    been given to all practicing pediatricians, obstetricians,
    gynecologists, nurse practitioners, and nurse midwives throughout the
    country for office distribution. And, finally, we distribute it through
    exhibits at medical and public health professional organization
    meetings. This information is also available on our Web site for use by
    States, food facilities, health care professionals, and consumer
    groups.
        In August 2005, FDA launched an educational program entitled ``Food
    Safety Moms-To-Be'' that builds upon several food safety messages and
    includes information for use by health educators about the advisory on
    methylmercury in fish and shellfish. More than 45,000 Educator
    Toolkits, including an Educators Resource Guide, video, and DVD were
    sent to health professionals who have direct contact with pregnant
    women via pregnancy planning, prenatal and post-natal care, and
    childbirth education classes.
        FDA also established a Web site for pregnant women to obtain
    information about foodborne safety. The Web site received more than
    35,000 visitors in its first full month of September 2005, is available
    in both English and Spanish, and has an ``email a friend'' feature that
    allows users to share this information with others.

                                    FOODNET

        Question. The Foodborne Diseases Active Surveillance Network
    (FoodNet) is the principle foodborne disease component of CDC's
    Emerging Infections Program (EIP). It is a collaborative project of the
    CDC, FDA, and USDA. Unlike the direct funding that comes from USDA
    which has remained consistent, the funds from CDC and FDA are derived
    from the larger Food Safety Initiative and are thus subject to being
    reallocated. Over the last 5 years the program has experienced a 10
    percent decrease in funding. Cuts to the FoodNet Program will have a
    direct effect on our Nation's ability to identify and track foodborne
    illness.
        How have these cuts impacted our ability to identify and track
    foodborne illness?
        Answer. FDA has provided a consistent level of funding in support
    of FoodNet over the years and has experienced no change in the
    availability of information we need to direct and evaluate the
    effectiveness of our regulatory programs. FDA will work with the
    Committee if specific funding information is needed from CDC.
        Question. Do you support giving direct line item funding to the
    FoodNet Program?
        Answer. While FDA believes that FoodNet is a valuable tool for
    identifying and tracking foodborne illness, which allows the agency to
    evaluate the effectiveness of its regulatory programs, FDA does not
    support giving direct line item funding to the FoodNet program in the
    FDA appropriation.
                                     ______

                 Questions Submitted by Senator Byron L. Dorgan

                          IMPORTED PRESCRIPTION DRUGS

        Question. Given the substantial price differences between products
    sold in the United States and abroad, it should come as no surprise
    that millions of Americans already import prescription drugs.
        How much did the FDA spend in fiscal year 2005 to prevent Americans
    from importing prescription drugs from Canada and other countries?
        Answer. FDA prevents unauthorized importation of drugs from other
    countries through post-market import inspections and post-market import
    laboratory analyses. In fiscal year 2005, the Office of Regulatory
    Affairs spent $6.4 million on post-market import inspections and $1.7
    million on post-market import laboratory analyses of human drug imports
    from all countries. Post-market import inspections are defined as
    physical inspections, product information, line entry & label review.
    They include all the activities relating to the decision to permit or
    refuse entry to regulated products. Examples include: import field
    exams, import sample collections, Operational and Administrative System
    for Import Support on-screen reviews, review of physical documents,
    detention without physical examination, private laboratory report
    review and audit activities, filer evaluation, and follow up to
    refusals. Post-market import laboratory analyses are defined as sample
    analysis, product testing, methods development for testing purposes,
    specific regulatory problems that FDA develops solutions for. They
    exclude applied research and premarket review analyses and include
    fingerprinting.
        Question. Much of the apparatus for assuring safe consumer access
    to imported drugs is already in place. Under current law, drug
    companies are free to manufacture prescription drugs in other countries
    and import them for sale in the United States. More than $40 billion of
    the prescription drugs consumed by Americans in 2002--one quarter of
    all drugs--was made in other countries and imported to the United
    States for sale by pharmaceutical manufacturers.
        If importation can be deemed safe for manufacturers, why can't it
    be made safe for consumers? Wouldn't a regulated system be safer than
    what is occurring today?
        Answer. 21 USC 381(d)(1) was included in the Federal Food, Drug,
    and Cosmetic Act with the understanding that the manufacturer of a drug
    product is in the best position to know if a drug product destined for
    import into the United States is their genuine product, and not a
    counterfeit, and whether it has been stored or handled in such a way as
    to affect the integrity of the product. Because counterfeiters are so
    sophisticated in their methods of copying drug products and packaging,
    consumers, distributors, and retailers, are not in a position to easily
    distinguish genuine from counterfeit drug product. Oftentimes, the
    manufacturer must perform costly and complicated analysis to determine
    if a product is genuine or not.
        The HHS Drug Importation Task Force Report issued in December 2004
    outlined the measures that would be needed to implement an importation
    program that provides adequate safeguards and resources to ensure that
    the imported drugs are safe and effective. A program that does not take
    these measures into consideration, regulated or not, would perpetuate
    the buyer beware situation that is currently occurring and consumers
    would continue to put themselves at risk for harm by importing
    unapproved drugs into the United States for personal use.
        Specifically, the Task Force made a number of significant finding
    about an importation program. The Task Force determined that first,
    integrity of the distribution system must be ensured by, among other
    measures, requiring drug pedigrees with adequate documentation,
    limiting ports of entry and distribution channels, and allowing
    commercial importation only from licensed foreign wholesalers to
    authorized sellers in the United States. The program must exclude
    personal shipments via the mail and courier services. Indeed,
    regulating personal importation could be extraordinarily costly, on the
    order of $3 billion a year based on estimates of the current volume.
        Second, any program must limit importation to those prescription
    drugs most likely to yield savings--namely high-volume products for
    which a United States--approved generic is not available--and allow
    importation only from countries for which we have a high degree of
    confidence in the comparability of their drug regulatory systems. In
    the Administration's view, Canada is the only country from which
    importation should be considered at this point. Congress should also
    exclude drugs or classes of drugs that pose increased safety risks in
    the context of importation, such as controlled substances and drugs
    that require refrigeration during shipping.
        Third, any program must require that imported prescription drugs be
    dispensed pursuant to a valid U.S. prescription pursuant to advice from
    a trusted medical professional.
        Fourth, measures must be included to ensure that any purchasers of
    imported drugs are given full and adequate information regarding, among
    other things, the source of the drugs, and that packaging and labels on
    imported drugs meet all FDA requirements.
        Fifth, any importation program must ensure effective oversight and
    adequate government resources to protect American consumers.
        Sixth, any program must include the ability to use streamlined
    inspection procedures, and ensure appropriate remedial steps can be
    taken in the event of adverse events from imported drugs.
        Seventh, any program must avoid anti-competitive provisions such as
    so-called ``forced sale'' provisions, and other types of price
    controls.
        The Task Force found that such a system would have minimal cost
    savings.
        Question. Congress has twice enacted legislation to allow for the
    importation of prescription drugs. Both times provisions were included
    that required the Secretary of Health and Human Services to certify
    that imported drugs would be safe and would result in significant
    savings for the American consumer. The Congressional Budget Office has
    already determined that legalizing importation will reduce prescription
    drug expenditures by $50 billion. CBO estimates Federal savings of $1.6
    billion over the 2006-2010 period and $6.1 billion over the 2006-2015
    period. That takes care of the savings argument.
        In terms of safety, how do you guarantee the safety of drugs that
    are sold in the United States? How did the FDA guarantee the safety of
    Vioxx? Why is the bar set higher for imported drugs?
        Answer. At FDA, the Center for Drug Evaluation and Research, or
    CDER, is responsible for ensuring that America's drug product supply is
    safe, effective, adequately available, and of the highest quality.
    CDER's responsibility for ensuring drug safety is two fold, consisting
    of premarket safety review and postmarket safety surveillance. We
    evaluate the safety of a drug before it can be marketed in the United
    States in a pre-market safety review. FDA grants approval to drugs
    after a sponsor demonstrates that they are safe and effective for their
    intended use. Since the full magnitude of some potential risks do not
    always emerge during the mandatory clinical trials conducted before
    approval to evaluate these products for safety and effectiveness, if
    CDER approves a drug, we continue to monitor the safety of that drug
    after it is on the market by collecting data about its use and watching
    for signs of troubling or dangerous side effects. We call this post-
    market safety surveillance.
        No drug product is ``perfectly'' safe. Moreover, FDA approval of a
    drug is not a ``guarantee'' that the drug is ``perfectly'' safe. All
    approved drugs pose some level of risk since every drug that affects
    the body will have some side effects. FDA considers both the benefits
    and risks of all medications before approval and unless a new drug's
    demonstrated benefit outweighs its known risk for an intended
    population, FDA will not approve the drug. Medications needed to treat
    very severe or life-threatening illnesses such as cancer treatments may
    be approved with more serious side effects than other types of
    medications. FDA makes sure the label or package insert accurately
    describes the benefits and risks discovered in the clinical trials and
    after marketing. With the help of a health-care provider, a patient
    should decide if the benefits for the drug outweigh the risks.
        The pre-market process for approving drug products begins with the
    drug companies who must first test their products. CDER monitors their
    clinical research to ensure that people who volunteer for studies are
    protected and that the quality and integrity of scientific data are
    maintained. CDER assembles a team of physicians, statisticians,
    chemists, pharmacologists, and other scientists to review the company's
    data and their proposed use for the drug. If the drug is effective and
    we are convinced that it is safe for its intended use-- meaning that
    its health benefits outweigh its risks, we approve it for marketing in
    the United States CDER does not actually test the drug when we review
    the company's data. By setting clear standards for the evidence FDA
    needs to approve a drug, including evidence for demonstrating the
    safety of the drug for its intended use, the Agency helps medical
    researchers bring new drugs to American consumers more rapidly.
        Once a drug is approved for sale in the United States, FDA monitors
    the use of marketed drugs for unexpected health risks, either through
    post-marketing clinical trials or through spontaneous voluntary
    reporting of adverse events from patients, doctors, and nurses through
    MedWatch system that are entered into the Adverse Event Reporting
    System, or AERS. Our safety reviewers monitor the data in AERS looking
    for indications of potential serious, unrecognized drug-associated
    reactions. If new, unanticipated risks are detected after approval, we
    take steps to inform the public and change how a drug is used or even
    remove a drug from the market.
        Following the process and fundamental principles just described,
    FDA originally approved Vioxx in May 1999 for the reduction of signs
    and symptoms of osteoarthritis, as well as for acute pain in adults and
    for the treatment of primary dysmenorrhea. The original safety database
    included approximately 5,000 patients on Vioxx and did not show an
    increased risk of heart attack or stroke. A later study, VIGOR, which
    stands for VIOXX GI Outcomes Research, was primarily designed to look
    at the effects of Vioxx on GI effects such as stomach ulcers and
    bleeding and was submitted to the FDA in June 2000. The study showed
    that patients taking Vioxx had fewer stomach ulcers and bleeding than
    patients taking naproxen, another NSAID, however, the study also showed
    a greater number of heart attacks in patients taking Vioxx. The VIGOR
    study was discussed at a February 2001 Arthritis Advisory Committee and
    the new safety information regarding all that was known at the time
    about the potential risk of cardiovascular effects with Vioxx from this
    study was added to the labeling for Vioxx in April 2002. Merck then
    began to conduct longer-term trials to obtain more data on other
    potential indications of this product. All trials for chronic use were
    designed to monitor carefully for cardiovascular safety. The serious
    side effect risks for which Vioxx was ultimately withdrawn from the
    market voluntarily by Merck were identified when Merck collected new
    data from a trial called the APPROVe, which stands for Adenomatous
    Polyp Prevention on VIOXX trial where Vioxx was compared to placebo.
    The purpose of this new trial was to see if Vioxx 25 mg was effective
    for a new indication--for preventing the recurrence of colon polyps.
    This trial was stopped early because there was an increased risk for
    serious cardiovascular events, such as heart attacks and strokes, first
    observed after 18 months of continuous treatment with Vioxx compared
    with placebo.
        The bar is not set higher for imported drugs. In fact, the bar is
    identical to that for FDA-approved drugs. The problem with illegally
    imported prescription drugs is that we often have no assurance that
    they have been manufactured, processed and held according to the same
    requirements and standards as FDA-approved drugs. FDA drug approvals
    are manufacturer- and product-specific and include many requirements
    relating to the product, such as manufacturing location, formulation,
    source and specifications of active ingredients, processing methods,
    manufacturing controls, packaging location, container/closure system,
    and appearance (21 CFR 314.50). Frequently, drugs sold outside of the
    United States are not manufactured or packaged by a firm that has FDA
    approval for that drug. Moreover, even if the manufacturer has FDA
    approval for a drug, the version produced for foreign markets may not
    meet all of the specific requirements of the United States approval,
    and thus would be considered to be unapproved (section 505 of the Act
    (21 U.S.C. 355)).
        In December 2004, the HHS Drug Importation Task Force Report on
    Prescription Drug Importation concluded that any safe system of
    importation would likely produce only modest savings on the national
    level. The small quantity of available drugs to import would result in
    little aggregate cost savings. The Task Force included a report with
    the results from a Department of Commerce study. That study concluded
    the reduction of research and development of competitive markers for
    generic medicines, thereby denying consumers in those markets benefits,
    including lower prices that Americans obtain as result of competition
    between generic and brand-name drugs. In fact, U.S. consumers would
    pay, on average, 50 percent more for their generic medications if they
    bought them abroad.
        Question. Mark McClellan has said, ``If you're certain you're
    buying approved Canadian drugs from an approved Canadian pharmacy,'' he
    says, ``you can have a high level of confidence that that's a good
    product.''
        If we could figure out a system that makes importing drugs just
    like walking into a brick and mortar Canadian pharmacy, wouldn't it be
    safer than what is occurring today?
        Answer. The HHS Drug Importation Task Force Report on Prescription
    Drug Importation issued in December 2004 outlined measures that would
    be needed to implement an importation program that provides adequate
    safeguards and resources to ensure that the imported drugs are safe and
    effective within the meaning of the Federal Food, Drug, and Cosmetic
    Act. An importation program that does not take these measures into
    consideration would frustrate our ability to ensure that the
    prescription drugs imported for personal use were safe and effective
    for their labeled uses.
        Specifically, the Task Force made a number of significant finding
    about an importation program. The Task Force determined that first,
    integrity of the distribution system must be ensured by, among other
    measures, requiring drug pedigrees with adequate documentation,
    limiting ports of entry and distribution channels, and allowing
    commercial importation only from licensed foreign wholesalers to
    authorized sellers in the United States. The program must exclude
    personal shipments via the mail and courier services. Indeed,
    regulating personal importation could be extraordinarily costly, on the
    order of $3 billion a year based on estimates of the current volume.
        Second, any program must limit importation to those prescription
    drugs most likely to yield savings--namely high-volume products for
    which a United States--approved generic is not available--and allow
    importation only from countries for which we have a high degree of
    confidence in the comparability of their drug regulatory systems. In
    the Administration's view, Canada is the only country from which
    importation should be considered at this point. Congress should also
    exclude drugs or classes of drugs that pose increased safety risks in
    the context of importation, such as controlled substances and drugs
    that require refrigeration during shipping.
        Third, any program must require that imported prescription drugs be
    dispensed pursuant to a valid U.S. prescription pursuant to advice from
    a trusted medical professional.
        Fourth, measures must be included to ensure that any purchasers of
    imported drugs are given full and adequate information regarding, among
    other things, the source of the drugs, and that packaging and labels on
    imported drugs meet all FDA requirements.
        Fifth, any importation program must ensure effective oversight and
    adequate government resources to protect American consumers.
        Sixth, any program must include the ability to use streamlined
    inspection procedures, and ensure appropriate remedial steps can be
    taken in the event of adverse events from imported drugs.
        Seventh, any program must avoid anti-competitive provisions such as
    so-called ``forced sale'' provisions, and other types of price
    controls.
        The Task Force found that such a system would have minimal cost
    savings.
        Question. The FDA claims that more than 10 percent of drugs
    worldwide are counterfeit.
        What is this based on? What is the percentage in the European
    Union? Canada? Are drugs made in Canada that enter the United States
    considered counterfeit?
        Answer. FDA has not stated that 10 percent of the drugs worldwide
    are counterfeit. Many sources have attributed FDA with this figure;
    however, it did not come from FDA. In fact, FDA does not know what the
    prevalence of counterfeit drugs is globally, in the European Union, EU,
    or in Canada. Drugs that are made in Canada are not considered
    counterfeit unless they meet the definition of ``counterfeit drug''
    under 21 U.S.C. 321(g)(2). Rather, virtually all prescription drugs
    imported into the United States from Canada for personal use violate
    the Federal Food, Drug, and Cosmetic Act, the Act, because they are
    unapproved new drugs (section 505 of the Act (21 U.S.C. 355)), labeled
    incorrectly (sections 502 and 503 of the Act (21 U.S.C. 352 and 353)),
    dispensed without a valid prescription (section 503(b)(1) of the Act
    (21 U.S.C. 353(b)), or imported in violation of the Act's ``American
    goods returned'' provision (21 U.S.C.  381(d)(1)). Under the American
    Goods Returned provision of 801(d)(1), it is illegal for anyone other
    than the original manufacturer of the drug to import into the United
    States a prescription drug that was originally manufactured in the
    United States and sent abroad. Because a consumer is not the
    manufacturer, they are not permitted to reimport prescription drugs
    into the United States, even if the drugs were made in the United
    States. Importing a drug into the United States that does not comply
    with the labeling and dispensing requirements in the Act and/or is an
    unapproved new drug is prohibited under section 301(a) and/or (d) of
    the Act (21 U.S.C. 331(a) and/or (d)).
        Question. There have been several recent reports that your agency,
    along with the Customs and Border Patrol, has increased enforcement
    efforts to stop prescription drugs from coming into the United States.
    Did the FDA change its policy?
        Answer. FDA's guidance on the personal importation of prescription
    medicine has not changed. However, we have accommodated CBP's new role
    in the initial screening of packages containing pharmaceuticals by
    adjusting the application of our procedures for handling pharmaceutical
    products shipped through international mail facilities. We anticipate
    that efficiencies gained as a result of the revised CBP procedures will
    allow CBP and FDA to screen and process a larger number of packages
    than in the past.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                              DIETARY SUPPLEMENTS

        Question. Most dietary supplements provide great health benefits
    for many Americans. As you know, I have worked for years to ensure that
    dietary supplements are safe for the public--I hope that the dietary
    supplement adverse reporting system is enacted in the near future.
    Clearly, such a system would increase the workload of the FDA, and
    Congress would need to do its part and provide extra funding for your
    agency.
        In the meantime, please advise the Subcommittee on the timeline to
    publish the final rule on Good Manufacturing Practices for dietary
    supplements, which were mandated by Congress 12 years ago and still
    have yet to be finalized.
        Answer. The proposed rule was published March 13, 2003, and
    included responses to numerous comments received after publication of
    the advanced notice of proposed rulemaking in 1997. The comment period
    for the proposed rule was extended until August 2003. We held public
    stakeholder meetings on April 29, 2003, in College Park, MD, and on May
    6, 2003, in Oakland, CA. We also held a public meeting, via satellite
    downlink, on May 9, 2003, with viewing sites at our district and
    regional offices throughout the country. After the comment period
    closed, we began the process of analyzing the comments submitted to the
    proposed rule. The issues raised by the comments are complex, legally
    and substantively, and in some cases, novel. We have expended
    significant internal resources on reviewing and preparing responses to
    the comments received. In addition, we have worked to ensure that the
    goals of Dietary Supplement Health and Education Act are carried out
    with careful consideration of the impact on the dietary supplement
    industry. We are working to complete the rulemaking.

                                 WOMEN'S HEALTH

        Question. In late August, Dr. Susan Wood, the Assistant FDA
    Commissioner for Women's Health and Director for the Office of Women's
    Health, resigned over the Administration's refusal to issue a final
    decision on the emergency-contraception (Plan B) application. She said,
    ``I can no longer serve as staff when scientific and clinic evidence,
    fully evaluated and recommended for approval by professional staff
    here, has been overruled.'' This decision was contrary to the
    recommendations of the FDA's advisory commission and its review staff.
    I requested a GAO study, released in November, which found that the
    decision process to deny the application ``was unusual.'' It is my
    understanding that the FDA is currently considering a revised request
    to make emergency contraception available over the counter to women,
    but require a prescription for younger girls.
        What is the status of this request, and what is the FDA doing to
    further all aspects of women's health?
        Answer. On May 6, 2004, the FDA issued a ``Not Approvable'' letter
    to Barr Laboratories, sponsor of a supplemental New Drug Application
    proposing to make the currently approved Plan B emergency contraception
    prescription product available as an over-the-counter, or OTC product.
    After reviewing the supplemental application, FDA concluded that the
    application could not be approved at that time because adequate data
    were not provided to support the conclusion that young adolescent women
    can safely use Plan B for emergency contraception without the
    professional supervision of a licensed practitioner and a proposal from
    the sponsor to change the requested indication to allow for marketing
    of Plan B as a prescription-only product for women under 16 years of
    age and a nonprescription product for women 16 years and older was
    incomplete and inadequate for a full review.
        The applicant chose to revise its application, and in a July 2004
    resubmission, the applicant requested to market Plan B as prescription-
    only for women under the age of 16 and OTC for women 16 years of age
    and older. In addition, they proposed an educational program for
    healthcare providers, pharmacists, and patients.
        On August 26, 2005, FDA issued a letter to Duramed Research, the
    successor to the Barr Laboratories application, in response to their
    July resubmission. The response concluded that the available scientific
    data are sufficient to support the safe and effective use of Plan B as
    an OTC product for women who are 17 years of age and older. However,
    the Agency stated that it was unable to reach a decision on the
    approvability of the application because of unresolved issues that
    relate to whether a drug may be both prescription and OTC, depending on
    the age of the patient, how an age based distinction could be enforced,
    and whether Rx and OTC versions of the same active ingredient may be
    marketed in a single package.
        On the same date that FDA issued this letter to Duramed Research,
    FDA issued an advance notice of proposed rulemaking. This rulemaking
    requested comment on whether to initiate a rulemaking to codify its
    interpretation of section 503(b) of the Food, Drug, and Cosmetic Act
    regarding when an active ingredient may be simultaneously marketed as
    both a prescription and OTC drug product. The comment period on this
    notice closed on November 1, 2005, and FDA is currently evaluating
    those comments.
        With regard to your question on what FDA is doing to further
    women's health, FDA's Office of Women's Health also known as OWH
    continues to expand patient protection and empower consumers for better
    health by providing consumer information and funding research. OWH
    continues its Take Time to Care Campaign, a multi-faceted campaign that
    focuses on the dissemination of health education materials for
    consumers through activities and collaborative partnerships. OWH
    continues its Menopause and Hormones Education Campaign providing clear
    and useful information to women about the use of hormones during
    menopause. OWH continues to develop and distribute numerous consumer
    information fact-sheets about FDA-regulated products for women and
    their families. OWH consumer information and publications are available
    in approximately 20 different languages.
        OWH funds research projects related to FDA products and relevant to
    women's health and sex differences. The office funds research projects
    at FDA and academic institutions that are of regulatory significance to
    FDA. OWH partners with other HHS organizations to identify gaps in
    women's health research and to leverage limited funding. The office
    participates in national medical, scientific, and health care
    conferences sharing information with consumers about FDA regulated
    products and participating in scientific discussions and presentations
    advancing the science related to sex and gender differences.
        OWH enhances patient protection and consumer health by maintaining
    an extensive and current electronic ``contact database'' used to inform
    patient advocacy groups, health professionals, national organizations,
    and large insurance carriers of innovative products approved by FDA and
    important safety information related to FDA regulated products.
        OWH is working to transform systems and infrastructure to support
    critical agency operations regarding electronic knowledge/information
    management for an integrative IT environment across FDA Centers. The
    office is developing a ``SMART'' document approach for FDA reviewers to
    enhance review quality and consistency. OWH has been working on a
    business case plan to better allow for electronically tracking the
    inclusion of women and sex-specific analyses in studies submitted to
    FDA.

                              ADVISORY COMMITTEES

        Question. As you know, Congress required FDA to publish a quarterly
    report on your efforts to find unconflicted scientists for FDA panels.
    Your first report, published January 2006, gave some raw numbers (over
    200 resumes review for a limited number of slots) but did nothing to
    document any specific efforts to find unconflicted scientists.
        What specific steps other than cursory resume reviews have you
    taken to find scientists to serve on advisory committees this year that
    don't have conflicts of interest?
        Answer. FDA has instituted a number of additional steps this year
    to find experts with limited or no conflicts of interest to serve on
    FDA advisory committees and panels. FDA scientific and technical staff
    and their managers generally identify and contact experts, inviting
    them to fill vacancies on advisory committees or panels. In the past
    year, FDA's Advisory Committee and Management Staff in the
    Commissioner's Office and committee management staff at the Center
    levels have briefed FDA scientific and technical staff and their
    managers on the importance of identifying potential committee nominees
    with limited or no conflicts of interest. In an effort to help identify
    potential conflicts at the earliest possible stage, staff and
    management were also advised to consider, to the extent possible, the
    types of products likely to be discussed at upcoming committee and
    panel meetings when interviewing candidates about financial holdings
    and industry relations.
        Panel and committee members themselves also identify possible
    candidates to serve on advisory committees and panels. Current
    committee and panel members are therefore advised to consider possible
    conflicts of interest when recommending candidates for participation.
        We anticipate that the efforts described above will result in the
    need for fewer waivers in the future. Because committee and panel
    vacancies are often filled well ahead of meetings, it can be difficult
    to identify the relevant sponsors or competing companies, and therefore
    potential conflicts of interest, during the nomination stage.
    Importantly, one of the most critical mechanisms for preventing and
    addressing conflict of interest issues continues to be the rigorous
    analysis FDA conducts to identify conflicts of interest once we know
    the context of a committee or panel meeting, as well as the process,
    guided by both Federal statutes and regulations, for determining
    whether conflict of interest waivers are appropriate. As we pursue
    FDA's mission to protect the public health, we strive to fill committee
    and panel vacancies with qualified experts who satisfy the committee
    composition requirements set forth by Federal law. Finding experts who
    have no or limited conflict of interest remains one of multiple
    considerations in identifying who will fill a committee or panel
    vacancy.
        Question. On January 23, a joint meeting of the FDA's
    Nonprescription Drug Advisory Committee and the Endocrinologic and
    Metabolic Drugs Committee met to discuss GlaxoSmithKline's weight loss
    drug, Orlistat, going over-the-counter. It was eventually approved 11-
    3. Seven scientists were granted waivers for that meeting, including
    two who had direct ties to Glaxo.
        Do you think that public's faith in this committee's decision is
    undermined by the fact that so many scientist required waivers of
    conflicts of interest? Does your staff have enough resources to conduct
    adequate background research on potential advisory committee members to
    find people without such conflicts?
        Answer. We believe that several factors should serve to bolster the
    public's faith in the advisory committee recommendation described
    above.
        First, the conflict of interest waivers were granted in accordance
    with Federal law. The waivers approved for the meeting described above
    were granted in compliance with 18 U.S.C. 208(b)(3), 21 U.S.C.
    355(n)(4), and the applicable Office of Government Ethics regulations.
        Second, information regarding these waivers and the underlying
    conflicts of interest was made publicly available before the advisory
    committee meeting, as required by law. Waiver documents and information
    regarding the nature and magnitude of the underlying conflicts of
    interest were posted on FDA's Internet page prior to the meeting.
        Third, the voting results of this meeting do not suggest a bias
    resulting from conflicts of interest. Five of the seven waivers were
    granted for members with minimal interests in competing companies. If
    financial bias was present, one might expect that the final vote would
    have been directed against the product under discussion. Instead, a
    significant majority of the members voted in support of the product.
    Moreover, as stated in the waiver documents posted online, the two
    additional waivers were granted to scientists receiving minimal
    compensation that arguably did not constitute ``financial interests''
    under 18 U.S.C. 208(a). FDA proceeded with waivers for these
    individuals, however, out of an abundance of caution.
        To identify potential conflicts at the earliest possible stage,
    staff and management are advised to consider, to the extent possible,
    the types of products likely to be discussed at upcoming committee and
    panel meetings when interviewing candidates about financial holdings
    and industry relations. Panel and committee members themselves also
    identify possible candidates to serve on advisory committees and
    panels. Current committee and panel members are therefore advised to
    consider possible conflicts of interest when recommending candidates
    for participation. We believe these steps are sufficient and adequately
    resourced.

                                 METHYLMERCURY

        Question. It is well known that mercury occurs naturally in the
    environment and can also be released into the air through pollution. It
    is well established that exposure to elevated levels of mercury during
    fetal development can have adverse effects on the developing brain and
    nervous system that can lead to delayed speech and motor development.
    For these public health reasons, what else can be done to reduce the
    amount of mercury in seafood?
        Answer. There is no technical process that can remove methylmercury
    from fish. Therefore, FDA and the Environmental Protection Agency (EPA)
    have implemented a comprehensive public education campaign through
    health professionals and the media to inform high-risk populations,
    including women who may become pregnant, pregnant women, nursing
    mothers and the parents of young children, about mercury in seafood.
    The purpose of this campaign is to inform these high-risk consumers
    that they should avoid or restrict their consumption of certain kinds
    of fish, while emphasizing the importance of fish and shellfish as part
    of a healthy diet.
        The public education campaign includes an extensive outreach effort
    to over 9,000 print and electronic media outlets, including magazines
    about pregnancy and young children. Information has also been sent to
    members of over 50 organizations of healthcare providers to women and
    children, such as the American Academy of Pediatrics, the American
    Academy of Family Physicians, the American College of Obstetricians and
    Gynecologists, and the American College of Nurse Midwives, directors of
    the Women, Infants, and Children programs, as well as all local health
    departments.
        In addition, brochures about the methylmercury advisory have been
    sent to all practicing pediatricians, obstetricians, gynecologists,
    nurse practitioners, and nurse midwives throughout the country for
    distribution in their offices. The brochures are accompanied by a
    letter to the health professional that emphasizes the health benefits
    of fish. The advisory is also being distributed through exhibits at
    medical and public health professional organization meetings.
        To date, FDA and EPA have distributed over four million brochures.
    The brochures are currently available in English and Spanish, and will
    soon be available in Korean, Cambodian, Chinese, Vietnamese, Hmong, and
    Portuguese. This information is also available on our Web site for use
    by States, food facilities, health care professionals, and consumer
    groups.
        FDA and EPA will continue to review these recommendations and make
    adjustments, as needed, so that consumers have access to clear, sound
    dietary information. We recognize that the marketplace often has
    multiple, and at times confusing or contradictory, messages. FDA will
    continue to provide a clear channel for public health information
    concerning methylmercury and other foodborne contaminants.
        To reiterate FDA's position, consumers should continue to eat a
    diet that follows the advice given in the 2005 Dietary Guidelines,
    including eating a variety of seafood. It is useful to note that data
    from the National Health and Nutrition Examination Survey, operated by
    the Centers for Disease Control and Prevention, that measures levels of
    methylmercury in U.S. women of childbearing age and young children
    through 5 years of age reveal that the overwhelming majority of both
    women of childbearing age and young children are exposed to
    methylmercury at very low levels.
        The next phase of our risk management process for methylmercury
    involves a risk analysis that is examining the likelihood of adverse
    effects through the range of exposures being experienced by U.S.
    consumers. This project is also examining the likelihood of health and
    nutritional benefits from eating fish at various levels of consumption.
        Question. You recently met with Dr. David Acheson, Director of Food
    Safety, regarding the adequacy of the FDA's mercury advisory. Dr.
    Acheson said that the advisory is geared toward childbearing women and
    young children and the information is disseminated through healthcare
    providers. At present levels of mercury in canned light tuna, a child
    would exceed the recommended maximum level of mercury consumption by
    eating as few as two sandwiches a week that contain tuna.
        What steps can the FDA take to better educate consumers about
    avoiding excessive mercury intake?
        Answer. FDA and the Environmental Protection Agency, also know as
    the EPA, have implemented a comprehensive public education campaign
    through health professionals and the media. The campaign is intended to
    inform high-risk populations. These include women who may become
    pregnant, pregnant women, nursing mothers and the parents of young
    children, about mercury in seafood. The purpose of this campaign is to
    inform these high-risk consumers that they should avoid or restrict
    their consumption of certain kinds of fish, while emphasizing the
    importance of fish and shellfish as part of a healthy diet.
        The public education campaign includes an extensive outreach effort
    to over 9,000 print and electronic media outlets, including magazines
    about pregnancy and young children. Information has also been sent to
    members of over 50 organizations of healthcare providers to women and
    children, such as the American Academy of Pediatrics, the American
    Academy of Family Physicians, the American College of Obstetricians and
    Gynecologists, and the American College of Nurse Midwives, directors of
    the Women, Infants, and Children programs, as well as all local health
    departments.
        In addition, brochures about the methylmercury advisory have been
    sent to all practicing pediatricians, obstetricians, gynecologists,
    nurse practitioners, and nurse midwives throughout the country for
    distribution in their offices. The brochures are accompanied by a
    letter to the health professional that emphasizes the health benefits
    of fish. The advisory is also being distributed through exhibits at
    medical and public health professional organization meetings.
        To date, FDA and EPA have distributed over four million brochures.
    The brochures are currently available in English and Spanish, and will
    soon be available in Korean, Cambodian, Chinese, Vietnamese, Hmong, and
    Portuguese. This information is also available on our Web site for use
    by States, food facilities, health care professionals, and consumer
    groups.
        FDA and EPA will continue to review these recommendations and make
    necessary adjustments to ensure consumers have access to clear, sound
    dietary information. We recognize that the marketplace often has
    multiple, and at times confusing or contradictory, messages. FDA will
    continue to provide a clear channel for public health information
    concerning methylmercury and other foodborne contaminants.
        To reiterate FDA's position, consumers should continue to eat a
    diet that follows the advice given in the 2005 Dietary Guidelines,
    including eating a variety of seafood. It is useful to note that data
    from the National Health and Nutrition Examination Survey, operated by
    the Centers for Disease Control and Prevention, that measures levels of
    methylmercury in U.S. women of childbearing age and young children
    through 5 years of age reveal that the overwhelming majority of both
    women of childbearing age and young children are exposed to
    methylmercury at very low levels.

                                 DRUG LABELING

        Question. The FDA recently issued a final rule on warning label
    requirements for prescription drugs. In the proposed rule, which was
    issued in December of 2000, the FDA stated that the rule would NOT
    preempt state law. Then, in the final rule, the agency asserts that the
    rule should be interpreted to preempt state law and state tort
    liability.
        Given that the FDA provided no notice of its intention to preempt
    state law, how did the FDA comply with the notification and
    consultation requirements mandated by both the Administrative
    Procedures Act and an existing Executive Order?
        Answer. The Administrative Procedure Act requires the Agency to
    address the comments it receives in response to proposed rules. The
    discussion you reference in the preamble to the final rule regarding
    Federal preemption was written in response to the comments received and
    merely restates the Agency's longstanding position as articulated in
    amicus briefs filed in court by the Department of Justice, or DOJ, in
    cases regarding Federal preemption and drug labeling. These product
    liability cases involved state law challenges to FDA approved labeling.
    DOJ argued on behalf of FDA that such law suits are preempted by the
    Federal Food, Drug, and Cosmetic Act when State requirements cause drug
    products to be misbranded under Federal law.
        Next, you correctly reference the preamble to the proposed rule's
    statement that it was not intended to preempt state actions. Because
    the rule itself is about the labeling of prescription drugs and is not
    a rule regarding preemption, and because the codified language did not
    expressly propose to preempt state law, FDA included the statement you
    reference in the proposed rule. However, FDA received comments about
    the product liability implications of the proposed rule and in
    responding to those comments, FDA mentioned its view of preemption law
    as it relates to the Physician Labeling Rule. In fact, the rule itself
    does not create new preemption law in any way; FDA was simply stating
    in the preamble what it believes the law already is with regard to
    implied conflict preemption. In addition, implied conflict preemption
    works to preempt state law when ever conflict with Federal law arises.
    The agency need not state in a proposed rule that implied preemption
    might arise for it to actually do so.
        With regard to the Executive Order relating to Federalism, although
    the preamble to the final rule merely stated the agency's view of
    current implied conflict preemption law and is not part of the codified
    portion of the rule, FDA consulted with a variety of State officials
    and representative organizations that represent State officials and
    governments on its proposed course of action before the final rule was
    published. FDA considered their input before proceeding.
        Question. The FDA had a long-standing policy of allowing States to
    implement additional safety requirements that would compliment FDA's
    rules and regulations. Why did the FDA recently stray from the long-
    standing policy and assert that any differing state law or requirement
    should be extinguished in favor of the Federal standards, especially in
    light of new evidence showing some FDA-approved drugs and medical
    devices are dangerous?
        Answer. All drug products have risks and their FDA-approved
    labeling is designed to reflect the known risks at any given time.
    Companies are put in the impossible situation of complying with
    conflicting Federal and state law when Federal law demands they use
    approved drug labeling and state law requires different warnings. The
    preamble language represents FDA's view of preemption law and does not
    abrogate the State's ability to implement safety requirements. States
    can do so as long as they do not attempt to impose requirements that
    conflict with Federal law nor frustrate the purposes of Federal law. In
    addition, the preamble language reflects FDA's long standing views
    about Federal preemption law and does not reflect a change in FDA
    policy.
        Question. Unelected Federal agencies like the FDA cannot decide, on
    their own, to extinguish an entire area of state law without
    congressional authority. Given that Congress never gave the FDA the
    authority to wipe out numerous state safety laws and requirements, how
    does the agency find the authority to assert this position?
        Answer. FDA did not decide to extinguish an entire area of state
    law without congressional authority. The six examples in the preamble
    describe the types of instances where FDA believes that under the
    Supremacy Clause of the U.S. Constitution and relevant case law,
    Federal law trumps state law. For instance, state law can not require a
    warning that would misbrand the product under the Federal Food, Drug,
    and Cosmetic Act. Similarly, FDA is the expert agency charged by
    Congress in evaluating the safety and efficacy of drug products, and
    implied conflict preemption would arise if a State allowed a product
    liability suit for failing to warn about a specific risk that FDA
    excluded from the approved label. Companies could be held liable under
    state law where state requirements neither conflict with Federal
    requirements nor frustrate Federal purposes.
        Question. The final rule makes clear the agency's position that
    even if a drug company failed to warn doctors about a drug's known
    potential dangers--but the warning label was approved by the FDA--the
    company would be immune from liability no matter how many patients are
    injured or killed. In those situations, why shouldn't States be allowed
    to protect their own citizens and allow consumers to hold these drug
    companies accountable?
        Answer. All drug products carry risk. With regard to safety, FDA
    attempts to approve drugs that have favorable risk benefit balances,
    and to approve labeling that accurately reflects the known risks about
    the product. It is unfortunate that people are injured and killed by
    drug products, but FDA believes that Federal law mandates what warnings
    are appropriate in the form of approved drug labeling, and that state
    law requiring different warnings is trumped by Federal law under the
    doctrine of implied conflict preemption.

                         ADDITIONAL SUBMITTED STATEMENT

        Senator Bennett. The subcommittee has received a statement
    from the Advanced Medical Technology Association which will be
    inserted in the record at this point.
        [The statement follows:]

       Prepared Statement of the Advanced Medical Technology Association

        AdvaMed is pleased to provide this testimony on behalf of our
    member companies and the patients and health care systems we serve
    around the world. AdvaMed is the largest medical technology trade
    association in the world, representing more than 1,300 medical device,
    diagnostic products and health information systems manufacturers of all
    sizes. AdvaMed's members manufacture nearly 90 percent of the $86
    billion of health care technology products purchased annually in the
    United States, and more than 50 percent of the $220 billion purchased
    annually around the world. AdvaMed members range from the largest to
    the smallest medical technology innovators and companies and directly
    employ about 350,000 workers in the United States. More than 70 percent
    of our members have less than $30 million in domestic sales annually.
        AdvaMed supports the President's fiscal year 2007 budget request of
    $229,334,000 for the Food and Drug Administration's (FDA's) Center for
    Devices and Radiological Health (CDRH). This inflationary increase
    amount satisfies the fiscal year 2007 requirements of the Medical
    Device User Fee and Modernization Act (MDUFMA--Public Law 107-250) and
    the Medical Device User Fee and Stabilization Act (MDUFSA--Public Law
    109-43) and is crucial to ensure patients have timely access to
    lifesaving and life-enhancing products.
    Medical Device User Fees
        The increasing number and complexity of medical device submissions
    have overwhelmed CDRH over the last decade. When MDUFMA was crafted,
    review times for breakthrough products often exceeded over 400 days,
    despite a statutory ceiling of 180 days. To address these chronic
    delays, Congress passed MDUFMA in October of 2002 to supplement FDA's
    resources and expertise and reduce review times for medical
    technologies. MDUFMA creates a predictable and adequate funding base
    for CDRH through a combination of industry-paid user fees and an
    increase in Congressional funding for the agency. Congress also passed
    MDUFSA last year to ensure the continuance of this critical program.
        Medical technology companies have already paid over $80 million in
    user fees and will add more than $150 million to CDRH resources during
    the first 5 years of the historic MDUFMA agreement. Although the
    additional appropriations did not materialize in the first 2 budget
    years of the MDUFMA agreement, Congress provided the nearly $26 million
    requested by the President for fiscal year 2005 and the President's
    inflationary requested amount for fiscal year 2006. This, along with
    the fiscal year 2007 request for an inflationary increase, maintains
    the MUDFMA program.
        CDRH must be funded adequately to ensure the goals of MDUFMA are
    met, maintain the United States' position in the rapidly advancing
    field of medical technology, and ensure patients' timely access to
    needed medical breakthroughs. AdvaMed requests that the fiscal year
    2006 Agriculture Appropriations bill fully fund CDRH at $229,334,000 to
    accomplish these important goals.
    Additional Fees and Issues
        AdvaMed notes with interest that the President's budget calls for
    collecting some $22 million for re-inspection fees. We are interested
    to learn more about the nature of these fees and to which services
    currently provided by the FDA they will apply. As was discussed last
    year during crafting of MDUFSA, we are still working with the FDA to
    learn how the current device user fees are used and generally have
    concerns about additional fees being applied without better
    understanding of their use and reflection of costs for providing the
    intended services. AdvaMed believes any additional fees must be
    additive to the baseline and must be associated with clearly identified
    increased performance to benefit the fee payer above and beyond current
    performance.
        Additionally, AdvaMed is concerned that, as in years past, attempts
    will be made in the fiscal year 2007 appropriations process to alter
    FDA policy and procedures related to the regulation of new and existing
    devices. AdvaMed generally opposes such attempts to alter fundamental
    FDA regulatory policy for medical devices on appropriations bills. We
    stand ready to offer our expertise on such matters should the need
    arise in the coming months.
    Background on the Medical Device User Fee Program
        America is on the cusp of an unprecedented revolution in medical
    technology driven by major private and public investments in scientific
    research and computer technology. Congress has also made a multi-
    billion dollar commitment to double medical research at NIH and unravel
    the human genome. Medical technology companies also doubled research
    and development spending in the decade of the 90's.
        The vibrant medical technology sector has driven employment gains
    and a strong balance of trade much to the benefit of the American
    patient and economy over the last several years. At the same time, the
    growing number and complexity of new medical devices throughout the
    last decade, coupled with a drop in the absolute number of reviewers at
    CDRH has resulted in severe budget strain and increasing delays in
    approval of new medical technologies for patients.
        Prior to passage of MDUFMA, CDRH faced increasing challenges as a
    result of dwindling resources and accelerating innovation. Staff levels
    had dropped by 8 percent between 1995 and 2001. By 2001, the average
    total review time for premarket approval applications had risen to 411
    days, more than twice the statutory review time. An FDA science panel
    warned at the time that increasingly rapid advances in technology
    ``threaten to overwhelm'' CDRH's limited resources.
        On October 26, 2002, President Bush signed MDUFMA, which was
    unanimously passed by Congress, into law to give CDRH additional
    resources and expertise to help provide timely patient access to new
    medical technologies. It established an industry-funded user fee
    program to provide up to $35 million each year to help the agency meet
    rigorous new performance goals.
        Key regulatory reforms in MDUFMA are designed to:
      --Eliminate bureaucratic delays in review of combination products by
            establishing a new office to oversee these technologies
      --Authorize FDA to accredit third-party inspectors to audit medical
            technology companies with a good track record of compliance;
      --Encourage timely, thorough premarket reviews by codifying the PMA
            ``modular review'' program and extending the third-party review
            program for 510(k)s;
      --Permit paperless device labeling and electronic facility
            registration.
      --Strengthen FDA regulation of reprocessed disposable devices.
        From bioengineered organs and implantable artificial hearts to
    gene-based diagnostic tests and molecular imaging systems, America's
    medical technology companies are developing thousands of promising new
    tests and treatments. AdvaMed believes full implementation of MDUFMA
    will help ensure these advances reach the millions of patients who need
    them.
        The user fee provisions in the law set fees for premarket approval
    applications, supplements and 510(k) submissions. Under the original
    law, these fees, combined with funds from increased appropriations,
    will provide FDA's device program with more than $225 million in
    additional resources over the 5 years of the program. A letter
    agreement accompanying the bill sets review performance goals for the
    agency.
        To assure that these user fees would have an additive effect on the
    CDRH budget, MDUFMA requires CDRH receive a $15 million appropriations
    increase in each of the first 3 years of the program (fiscal year 2003,
    fiscal year 2004 and fiscal year 2005) for a total of $45 million by
    the end of fiscal year 2005, or the user-fee program terminates in
    fiscal year 2006. These funds are designed to allow CDRH to upgrade
    information technology and other infrastructure necessary to carry-out
    a user-fee program and to meet the performance goals.
        MDUFMA passed both houses of Congress on the last day of the
    regular session in October 2002. Owing to the extremely late timing of
    MDUFMA passage and a very tight budget climate, MDUFMA funding targets
    were not met in either of the first 2 years of the MDUFMA agreement.
    MDUFSA was passed last year to allow the program to continue despite
    the funding shortages in the early years of the program. MDUFSA also
    addressed the significant rate of increases in fees paid by industry.
    As Congress has struggled to provide its funding, industry paid user
    fees (per submission) that far exceed what was expected by MDUFMA.
    Increases of 35 percent, 15.7 percent and a projected 20 percent for
    fiscal year 2006 for individual PMA submissions were troubling to
    industry, and we appreciate the steps Congress took to limit the rates
    of increase until the program can be reauthorized in 2007.
        To maintain the MDUFMA program and protect investments made by the
    Agency, American consumers and a leading source of job growth in our
    economy, we ask Congress to again meet the President's fiscal year 2007
    budget request for CDRH.
    Conclusion
        AdvaMed appreciates the Subcommittee's efforts last year and urges
    them to continue on this path to fully fund MDUFMA and ready FDA for
    the coming era of biomedical innovation and patients that await timely
    access to the coming dramatic breakthroughs in medicine. AdvaMed
    requests that the fiscal year 2007 Agriculture Appropriations, Rural
    Development, Food and Drug Administration and Related Agencies bill
    fully fund CDRH at $229,334,000 to accomplish these important goals. We
    have concerns about the inclusion of new fees for the FDA to carry out
    core mission activities and urge the committee to refrain from altering
    FDA policy and procedures related to the regulation of new and existing
    devices in the fiscal year 2007 appropriations process.
        AdvaMed thanks the committee for this opportunity to present our
    views and we look forward to working with you to help prepare FDA for
    the coming revolution in medical technology.

                              SUBCOMMITTEE RECESS

        Senator Bennett. Thank you very much.
        The subcommittee is recessed.
        [Whereupon, at 11:25 a.m., Tuesday, March 14, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2007

                                  ----------

                            THURSDAY, MARCH 30, 2006

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Robert F. Bennett (chairman)
    presiding.
        Present: Senators Bennett and Kohl.

                           DEPARTMENT OF AGRICULTURE

    STATEMENTS OF:
            KEITH COLLINS, CHIEF ECONOMIST
            J.B. PENN, UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL
                SERVICES
            MARK REY, UNDER SECRETARY, NATURAL RESOURCES AND ENVIRONMENT
            ERIC M. BOST, UNDER SECRETARY, FOOD, NUTRITION, AND CONSUMER
                SERVICES
            RICHARD RAYMOND, M.D., UNDER SECRETARY, FOOD SAFETY
            CHARLES LAMBERT, ACTING UNDER SECRETARY, MARKETING AND
                REGULATORY PROGRAMS

                 OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. The subcommittee will come to order.
        This is the subcommittee's third and final hearing on the
    administration's budget request for fiscal 2007 for the
    Department of Agriculture.
        And today, we have the following witnesses: Dr. Keith
    Collins, who is the Chief Economist at USDA; Dr. J.B. Penn, the
    Under Secretary for Farm and Foreign Agricultural Services; Mr.
    Mark Rey, the Under Secretary for Natural Resources and
    Environment; Mr. Eric Bost, the Under Secretary for Food,
    Nutrition, and Consumer Services; Dr. Richard Raymond, Under
    Secretary for Food Safety; and Dr. Charles Lambert, Acting
    Under Secretary for Marketing and Regulatory Programs.
        And if Dr. Lambert nods off during the hearing, we will
    understand and forgive him. He has just gotten off an airplane
    from Japan. We want to ask you, Dr. Lambert, about what you
    found when you got over there with the activities.
        They are accompanied by Mr. Dennis Kaplan, of the Office of
    Budget and Program Analysis. And we thank you all for being
    here this morning.
        We are going to focus on the budget for the mission areas
    that each of you is responsible for, but not limited to those
    areas, if you have additional information to share with us.
    This is production, agriculture, trade, conservation,
    nutrition, food safety, animal and plant health, and
    marketing--a wide portfolio represented by this group of half
    dozen under secretaries at the table.
        Unfortunately, the Under Secretaries for Rural Development
    and Research, Education, and Economics could not join us this
    morning. But we will receive information from them later. The
    mission areas of the under secretaries before us demonstrate
    the breadth of the programs offered by USDA.
        Now the combined fiscal year 2007 discretionary budget
    request for the agencies under the jurisdiction of this group
    of under secretaries is $11.1 billion. And to compare where we
    are, discretionary funding provided in fiscal 2006 for these
    mission areas was approximately $11.3 billion. So there has
    been a cut. A real cut, not a Washington cut.
        A Washington cut is where you spend more than you did last
    year, but less than somebody thought you should. A real cut is
    where you spend less than you did last year, and there is a
    real cut of $200 million. And that represents a 2 percent
    decrease from fiscal 2006 levels.
        Now you drill down below that top number, and the fiscal
    2007 budget request for Under Secretary Rey is 21 percent below
    fiscal 2006. For Secretary Raymond, it is 9 percent below
    fiscal 2006. For Secretary Bost, it is 2 percent on the overall
    number below 2006. Secretary Penn, 2 percent above 2006. And
    Acting Secretary Lambert is 11 percent above fiscal 2006.
        So while the 2 percent number is enough to get our
    attention as a whole, you get into the specifics, and you get
    even closer attention that has to be paid. And I am sure we
    will discuss that.
        Now some will say that the message from this is that it is
    better to be an acting under secretary than an under secretary.
        But I think that is coincidence.
        Now, before I turn to Senator Kohl for his remarks, I would
    like to specifically mention the efforts of the Farm Service
    Agency, Natural Resources Conservation Service, and the Food
    and Nutrition Service in the wake of Hurricane Katrina.
        The employees of these agencies rescued and fed people in
    the immediate aftermath, and they are currently helping the
    region recover from this terrible disaster. And we would be
    remiss if we did not formally acknowledge their work and the
    leadership that you gentlemen provided to them in that time of
    great national distress.
        Now, members who are not here are free to submit questions
    for the record. Senator Kohl and I may have some questions for
    the record, in addition to the round of questioning.
        But again, gentlemen, we welcome you here and thank you for
    your service.
        Senator Kohl.
        Senator Kohl. I join Chairman Bennett this morning in
    welcoming members of this panel who represent nearly all of the
    agencies within USDA. Your presence shows the diverse missions
    of the USDA, and this panel is an excellent representative of
    the many priorities that we must balance--farm support,
    nutrition, marketing, foreign aid, food safety, conservation.
    All of those mission areas are represented here today.
        American farmers are no strangers to adversity, harsh
    weather, or unpredictable markets. And the past year or so has
    led them to again face hard times. Storms have hammered the
    Gulf State coast. Drought has gripped much of the Nation.
    Wildfires have raged across prairie lands. Energy costs have
    cut profit margins, and foreign markets for certain products
    have been closed.
        Around the world, drought continues to devastate Africa.
    Millions of Americans were displaced because of the hurricanes
    and are still trying to find their way. Another case of mad cow
    disease and the impending arrival of avian flu remind us just
    how at risk we really are.
        It is not fortunate, therefore, that the President's budget
    calls for cuts in nearly all of these areas. It proposes
    significant cuts to support programs for dairy and other
    producers. It imposes new fees for farmers and rural families
    seeking credit. It eliminates many ongoing conservation and
    research projects. It eliminates a small, but important elderly
    feeding program. It proposes food safety user fees that have
    been rejected time and again.
        On the other side of the coin, technology and market
    conditions are giving U.S. producers an important role in
    helping this Nation move closer to energy independence.
    However, our central challenge is to help guide these changes
    so that they benefit everyone and not just a few.
        Mr. Chairman, I look forward to working with you to develop
    an appropriations bill to help support all of USDA's
    constituencies in what we all know is going to be a challenging
    year.
        Thank you.
        Senator Bennett. Thank you very much.
        Let us go in the order in which I introduced the witnesses,
    which means, Dr. Collins, that we start with you.

                           STATEMENT OF KEITH COLLINS

        Mr. Collins. Thank you very much, Mr. Chairman, Mr. Kohl.
    Thanks for the opportunity to begin this hearing with some
    brief comments on the general economic environment for U.S.
    agriculture, which I hope will provide a backdrop for your
    deliberations on the USDA's budget.
        Over the past 2 years, U.S. agriculture has experienced
    solid growth in both domestic and export demand. We have had
    record-high cattle, broiler, and milk prices; record-high net
    farm income in 2004; near record-high again in 2005; and
    record-high net wealth.
        Such accomplishments in agriculture occur only
    periodically. And when they occur, they provide the opportunity
    for savings and wealth creation that enables many farmers to
    maintain their operations during less prosperous times.
        Large harvests last fall, adverse weather, higher energy
    prices, the continued loss of Asian beef markets, the global
    spread of avian influenza are some of the challenges the farm
    economy must surmount in 2006. And facing these and other
    challenges, I would like to highlight several key developments.
        First, global and U.S. farm product demand generally
    remains favorable. The United States and world economies show
    strong growth, despite this morning's reduced GDP estimate for
    the fourth quarter, we are looking for an improvement in 2006.
    U.S. agricultural exports are forecast to be a record-high
    $64.5 billion, and U.S. food and industrial product demand is
    expanding.
        Second, most world commodity markets are moving toward
    better supply and demand balance. The record-high crops of 2004
    raised global stock levels and reduced market prices. But this
    year, we have generally lower world production, higher
    consumption, and as a result, stocks of major commodities are
    likely to decline, but they will still remain above the levels
    of 2 years ago.
        A notable exception is soybeans, where with very large
    South American harvests in prospect we once again will add to
    our already large supplies.
        The U.S. market is showing more of an imbalance than the
    world market as we face a second consecutive year of higher
    corn, soybeans, and cotton stocks. Last fall's large harvests
    are more than offsetting increased corn demand for ethanol and
    strong soybean and cotton exports to China.
        Wheat and rice look a little more robust as poor weather is
    reducing the 2006 global wheat production prospects, and rice
    has the tightest global market in over 3 decades. All of this
    for this year means a mixed picture for U.S. crop prices
    compared to the across-the-board declines we saw last year.
        A third observation is that U.S. livestock and poultry
    production is now rising fairly rapidly. Meat and poultry
    production is expected to be up 3 percent this year, led by a 5
    percent increase in beef production. As U.S. cattle numbers are
    increasing, we expect more live cattle imports from Canada.
        The large increase in meat supplies is reducing cattle,
    hog, and broiler prices. With progress in opening foreign beef
    markets, we expect higher beef exports in 2006, although they
    will remain well below the pre-BSE levels. Pork continues to
    benefit with another record-high export year in prospect.
        And for poultry, as a result of avian influenza, we have
    been reducing our export forecast. But at this point, we still
    expect exports to be slightly above a year ago. Leg quarters,
    in fact, have become quite a bargain. Prices ranged from 40 to
    50 cents a pound late last fall. Last week, they were selling
    for under 20 cents a pound, which should attract foreign buyer
    interest.
        Milk production is expected to increase a hefty 3 percent
    for the second year in a row this year, and that will lead to
    lower prices, Milk Income Loss Contract payments, and a modest
    increase in price support purchases for nonfat dry milk.
        This year's return to trend in many markets means somewhat
    lower farm cash receipts. Also, Government payments are
    expected to be down by $4.5 billion because of lower disaster,
    tobacco, and marketing loan payments.
        Higher interest rates and energy costs are expected to
    increase farm production expenditures again in 2006. Thus, we
    have lower revenues and higher costs, that suggests the U.S.
    farm income in 2006 will drop from the unusually high levels of
    the last few years to the long-term average level.

                               PREPARED STATEMENT

        Meanwhile, farm land values are expected to keep rising,
    net worth for farmers is expected to set another record high,
    and the farm debt-to-asset ratio is expected to drop to the
    lowest level in over 4 decades.
        While the coming year will present more of a financial
    challenge for many producers, a strong balance sheet, average
    cash flows, and the resiliency in managerial capacities of
    America's farmers should help them meet this year's challenges.
        Thank you, Mr. Chairman.
        [The statement follows:]

                      Prepared Statement of Keith Collins

        Mr. Chairman and Members of the Subcommittee thank you for the
    opportunity to discuss the general economic situation in U.S.
    agriculture as background for the Subcommittee's review of the
    Department of Agriculture's (USDA) fiscal year 2007 budget submission.
    I will review the major factors affecting agricultural markets in the
    coming year and their implications for financial conditions in U.S.
    agriculture.
        U.S. agriculture experienced an extremely strong recovery following
    the economic slowdown at the start of this decade. With solid growth in
    domestic and export demand, large crop harvests, and record-high
    cattle, broiler and milk prices, net farm income reached a record high
    in 2004. In 2005, net farm income reached the second highest level on
    record despite a large increase in crop stocks which reduced crop
    prices; multiple hurricanes that shut down the central marketing
    infrastructure of the country; sharply higher energy prices that raised
    production, marketing and processing costs; continued loss of Asian
    beef markets; and the emergence of global Avian Influenza (AI)
    concerns. Adverse factors were partially offset by continued strong
    global demand for food, the ability of the agricultural system to
    rebound from shocks, a substantial increase in government support
    spending and continued strong livestock and livestock product markets.
        In the year ahead, global economic growth and food demand is
    expected to remain strong, but markets for major crops will face lower
    prices from higher stock levels built up from the large production
    levels the past 2 years. In addition, expansion of livestock and
    livestock product production following several years of profitable
    returns will likely reduce market prices somewhat. Higher interest
    rates and energy costs and continued disruption of markets due to
    animal diseases and weather are also likely to be factors affecting
    economic performance. Together, these factors suggest that net cash
    farm income will drop in 2006. Even with the contraction and more
    financial stress for some farming operations, the overall farm economy
    is expected to perform at long-term average levels with farm household
    income remaining strong and farm net worth continuing to increase.
    Global Economic Growth and Farm Product Demand
        The U.S. economy grew at 3.5 percent in 2005, down from 2004's 4.2
    percent but well above 2003's 2.7 percent. For 2006, U.S. Gross
    Domestic Product (GDP) growth is expected to be slightly less than last
    year. The decline in the rate of growth in 2006 from last year is
    expected to be due to slower growth in consumption, housing, and tight
    energy markets. Increased tightness in labor markets is likely also to
    be a factor. As the unemployment rate continues to decline, the lack of
    unemployed labor resources tends to slow real productivity and output
    growth.
        Foreign economic growth retreated in 2005 from 2004's strong growth
    rate of 4.0 percent, with most areas slowing, particularly Western
    Europe. This year, Western Europe is expected to have the strongest
    growth since 2000, and growth prospects appear good in Canada, Japan,
    East Asia and Mexico--all important markets for U.S. agriculture.
    Foreign economic growth is expected to rise to 3.4 percent in 2006, up
    from 2005's 3.2 percent, which would be the second strongest rate of
    foreign economic growth since 2000.
        With the U.S. economy expected to have another year of steady
    growth, consumption expenditures on food remain positive, although the
    rate of growth is likely to decline to near 3.5 percent from the
    unusually high 5 percent levels in 2004 and 2005. Average growth was
    less than 2.5 percent during the slowdown in 2001 and 2002. This year,
    slower growth in consumer spending on food is likely, as consumers face
    heavier debt loads, higher energy costs, and are less likely to use
    household assets to finance consumption. Consumer spending, which
    accounts for two-thirds of GDP, increased only 1.4 percent in the last
    quarter of 2005, sharply below the third-quarter, but a rebound is
    expected in the first quarter of 2006.
    U.S. Agricultural Trade
        Turning to foreign demand for U.S. agricultural products, our
    latest quarterly forecast for farm exports in fiscal year 2006,
    released in February, is a record-high $64.5 billion, up $2 billion
    from 2005's record and unchanged from our last quarterly forecast.
    Stronger horticultural product, cotton, and beef exports are expected
    to show the greatest gains, while oilseeds and their products, the
    largest decline compared with fiscal year 2005. The increase in
    forecast beef exports assumes that the current suspension in Japanese
    imports is a temporary divergence from the earlier Japanese policy
    decision to resume imports. We have no information as to when imports
    will resume, but for the purposes of making a forecast, we simply
    assume Japan resumes imports of U.S. beef during the second quarter of
    2006.
        U.S. agricultural imports are forecast at $63.5 billion, up $2
    billion from our last forecast, and $5.8 billion more than in fiscal
    year 2005. Much of the increase from last year and from our last
    forecast is due to increased imports of coffee, cocoa, sugar, wine,
    beer, and fruits. The agricultural trade surplus for fiscal year 2006
    is forecast at $1 billion, down from $3 billion in our last forecast
    and $4.7 billion in fiscal year 2005.
        While the agricultural export-weighted value of the dollar
    appreciated in the second half of 2005, at the start of 2006, it was
    still over 10 percent below the start of the 2003 level. The current
    period of strong foreign economic growth and continued effects of the
    decline in the value of the dollar from several years ago should show
    up in higher U.S. agricultural exports in the future and a modestly
    improving trade balance. However, the strong consumption growth in the
    United States and the consumer desire for horticultural products
    suggest the trade balance in the future will be much smaller than in
    the past. USDA's long-run projections issued in February forecast U.S.
    agricultural exports rising to nearly $73 billion by fiscal year 2010
    and imports of $70.5 billion, leaving a trade surplus of a little over
    $2 billion. By 2015, projected exports equal projected imports.
    Crops: Supply, Demand, and Price
        The 2004/2005 marketing year began with relatively tight crop
    supplies, but global production of grains, oilseeds and cotton reached
    record-highs. As a result, stock levels increased, market prices
    declined, and farm program costs rose. In 2005/2006, global production
    was near-record high for most major crops, except for oilseeds
    production which set another record-high. Global total use this year is
    expected to be about the same as last year for rice and higher than
    last year for wheat, coarse grains, oilseeds, and cotton. With
    generally lower production and rising consumption, global stocks of
    most major commodities will decline this year but remain above the
    level of 2 years ago. In the United States, supplies for feed grains,
    cotton, rice and soybeans are at record highs this year, although not
    for wheat. Unlike the world market where major crop stocks are expected
    to decline, the large 2005-crop U.S. production levels are expected to
    cause an increase in corn, soybean, and cotton stocks this year, while
    wheat remains about the same and rice declines.
        World grain (wheat and coarse grain) consumption this year is
    expected to exceed last year's record high and slightly exceed reduced
    world production. This will lead to a drawdown in world grain stocks,
    with world stocks as a percent of total use not excessive. The picture
    for oilseeds is quite different. Global oilseed production is forecast
    to be record high for the 10 consecutive year. And, in the coming year,
    this increase in production is expected to exceed the increase in
    consumption, resulting in higher global stocks. For soybeans, global
    stocks as a percent of use is forecast to exceed the high set in 1986.
        For the United States, the 2003/2004 grain and oilseed markets,
    which featured strong demand and tight supplies, was a major
    contributor to the record high farm income of the past 2 calendar
    years. The current market prospects have changed as a result of 2
    consecutive years of large production and increasing stock levels.
        The U.S. soybean situation reflects the world situation, with U.S.
    stocks expected to be excessive, rising nearly 400 percent above the
    level of 2 years ago. This jump reflects our bumper harvest this past
    fall and strong competition from Brazil. For example, Brazil had record
    high soybean exports during the October-December 2005 quarter, and a
    rebound in Brazilian production from last year's drought is expected to
    boost Brazil's soybean production this spring to 58.5 million tons, up
    from 53 million last year. Still, U.S. soybean prices this winter have
    been strong in the face of this prospective stock buildup, reflecting
    perhaps a risk premium, purchases by index funds, or other factors. For
    the year as a whole, the average price received for soybeans is
    expected to average $5.50 per bushel compared with $5.74 last marketing
    year. If the Southern Hemisphere crop and the increase in U.S. stocks
    materialize as expected, soybean prices will likely drop in the second
    half of the year and into 2006/2007.
        For 2006/2007, last year's record-high soybean yields, pressure to
    rotate to more soybeans from corn, and high energy costs may cause some
    shifting of corn to soybeans. We expect an increase in soybean planted
    area of nearly 2 million acres to 74 million. The increase in planted
    area, combined with trend yields, would result in production levels
    near expected demand; consequently, carryover levels would remain about
    the same. With continued heavy stocks and large expected supplies in
    South America, weaker prices are expected for soybeans.
        The U.S. corn market in 2005/2006 is expected to see another year
    of increasing carryover with ending stocks 150 percent above 2 years
    ago. Corn prices have rebounded from the extraordinary lows following
    the hurricanes when the transportation network was impaired and are
    expected to average $1.90 per bushel this year, down from $2.06 last
    year. As of the end of February, the average corn loan deficiency
    payment rate made so far on 9.75 billion bushels of corn (88 percent of
    the 2005 crop), was $0.44 per bushel, up sharply from $0.27 averaged on
    the 2004 crop. In addition, producers received marketing loan gains
    averaging $0.42 per bushel on 569 million bushels of corn.
        Another important influence on this year's and future corn and
    other crop markets is biofuels. While biodiesel production has
    increased from less than a half million gallons in 1999 to over 70
    million in 2005, it remains relatively small, equivalent to 3 percent
    of soybean oil production. That is about where ethanol production was
    relative to corn production in 1983. Ethanol production this marketing
    year is expected to account for 14 percent of U.S. corn production. The
    USDA baseline, released on February 10, 2006, projects ethanol
    production will account for 22 percent of corn use by 2010 and drive
    corn prices to $2.60 per bushel.
        In 2004, ethanol accounted for about 2 percent of motor gasoline
    use in the United States on a btu basis. Under the Department of
    Energy's baseline projections for motor gasoline and ethanol use to
    2010, gasoline use is expected to grow 1.2 percent per year, and
    ethanol use at over 15 percent per year. Consequently, ethanol is
    expected to account for over one-quarter of the increase in motor
    gasoline use through 2010.
        For 2006/2007, with soybean area expected to expand, high corn
    stocks, and high energy prices, corn planted area is forecast to
    decline 1.3 million acres to 80.5 million. Less acreage and stronger
    ethanol use is expected to reduce carryover and raise corn prices $0.25
    per bushel, or 13 percent, over the 2005/2006 expected average farm
    price.
        The 2005/2006 wheat market is in good overall balance, with
    carryover stocks forecast to be nearly the same as last year and the
    year before. Farm prices are forecast to average $3.40 per bushel, the
    same as in each of the past 2 marketing years. After much of the 2005-
    crop had been marketed, wheat prices started to rise reflecting reduced
    2006-crop prospects due to deteriorating weather conditions in the
    United States and abroad and a currently tight situation for hard red
    winter wheat. The last week of February saw the nearby Kansas City
    wheat futures price reach a 40-month high.
        For 2006/2007, wheat acreage, which has been trending down and is
    now 30 million acres less than 25 years ago, is expected to increase by
    less than 1 million acres to 58 million due to more winter wheat
    planted last fall. Fall seedings were up reflecting the better price
    prospects than other crops and good planting weather in the Corn Belt.
    Yield prospects for the 2006 crop are clouded by the intense drought in
    the South in areas west of the Mississippi River. Winter wheat in Texas
    was rated 89 percent poor or very poor as the end of February and the
    quality of the wheat crop is also reported to be down sharply in
    Oklahoma. Wheat yield problems are also expected in the Former Soviet
    Union, an important grain producer, where planted acreage of winter
    grains are down and a very harsh winter is likely to result in above
    average winterkill. These poor starting conditions suggest global wheat
    production will be down again in 2006/2007. If at this point we use
    trend yields, U.S. wheat production would be near expected demand and
    wheat 2006/2007 carryover levels and average farm price would remain
    about the same as this year.
        U.S. cotton production reached an all-time high in 2005/2006, and
    stocks are expected to rise for the second year in a row to 7 million
    bales, double the level 2 years ago. The increase is expected despite a
    forecast of record-high exports of 16.4 million bales, up 2 million
    from last season. About half of U.S. cotton exports are expected to go
    to China where domestic use is rising rapidly and production is down
    from last season. U.S. cotton mill use continues to trend down as
    textile mill activity continues to move offshore. Mill use this year is
    forecast at 5.9 million bales, compared with 6.7 million last season.
    Even with stocks increasing, farm prices of cotton have been running
    above year-ago levels as the world stock situation is tightening.
         For 2006/2007, lower production is expected to support prices as a
    third consecutive record-high crop is unlikely. With the prospect of
    continued strong exports, ending stocks will likely decline to more
    average levels in 2006/2007.
        Despite a near-record crop, a sharp increase in exports is moving
    the U.S. rice market into balance with only a slight rise in stocks
    expected this year compared with 2 years ago. Rice ending stocks are
    forecast at 26.5 million cwt., down from carry-in stocks of 37.7
    million cwt. Medium grain stocks at 5.25 million cwt are the tightest
    on record (since 1982/1983-first year of supply and use statistics for
    rice by class). The global rice market is the major factor contributing
    to strong exports and steady U.S. farm prices, as global ending stocks
    are expected to be the lowest since 1982/1983, with the stocks-to-use
    ratio the lowest since 1974/1975. U.S. average farm-level rice prices
    are forecast at $7.80 per cwt. this season compared with $7.33 last
    season.
        For 2006/2007, a rebound from last fall's reduced yields would
    raise rice production, but with production costs rising, producers are
    expected to reduce plantings causing production to decline for the
    second year in a row. As in 2005/06, total use is expected to outpace
    production leading to another decline in carryover stocks and higher
    rice farm prices in 2006/2007.
        Under the 2002 Farm Bill, lower prices for major crops trigger
    increases in counter-cyclical payments and marketing assistance loan
    benefits, thus increasing farm program costs. Based on current market
    price projections, counter-cyclical payments could reach $5.2 billion
    for the 2005/2006 crops, up from about $4.3 billion for the 2004/2005
    crops and $0.5 billion for the 2003/2004 crops. Marketing assistance
    loan benefits (loan deficiency payments, marketing loan gains and
    certificate exchange gains) are projected to increase from less than $1
    billion for the 2003/2004 crops to $5.5 billion for the 2004/05 crops
    to about $6.1 billion for the 2005/2006 crops. In addition, program
    crop producers receive nearly $5.3 billion annually in direct payments.
        The 2005/2006 sugar market has been very different from other crops
    this year as hurricane-reduced production has driven prices up
    substantially. Since this market is heavily regulated by USDA, the
    Department has substantially increased import quotas to meet this
    year's demand and help relieve market tightness. In the current
    marketing year, sugar imports are forecast to reach 3.1 million tons,
    up from 2.1 million tons last year and 1.8 million tons 2 years ago.
        Fruits, vegetables, nursery and greenhouse products continue to
    provide good news for U.S. agriculture. They are expected to generate
    $49 billion in sales in 2006, similar to 2005, and account for 21
    percent of farm cash receipts. Sales of these products are now about
    equal to the value of sales of program crops. U.S. horticultural
    exports are forecast at $16.3 billion and imports at $28.2 billion,
    indicating a continuing widening of the sector's traditional trade
    deficit.
    Livestock & Livestock Products: Production, Demand and Price
        Turning to livestock and poultry markets, U.S. meat exports
    continue to be heavily influenced by animal diseases. Although we
    expect rising beef exports in 2006 as trade with Japan eventually
    resumes, beef exports are still expected to be only about 40 percent of
    the level of 2003. Our current forecast assumes shipments to Japan
    resume in the second quarter and does not include any exports to South
    Korea. We expect the Korean market to open soon and at that time we
    will incorporate exports to South Korea into our forecasts. With
    continuing limitations on beef exports, pork exports are forecast to be
    4 percent higher than 2005's record high. Lower broiler prices this
    year would normally help increase exports. However, in January, the
    forecast of the rate of growth in poultry exports was lowered to a 4
    percent increase, half the rate of our prior estimate and down from
    last year's 9 percent increase, due to reduced consumption in some
    countries due to AI concerns. In recent weeks, AI has been found in
    Europe and other areas, suggesting USDA's poultry export forecast could
    go lower in the months ahead.
        While animal disease issues are surrounding meat and poultry export
    prospects, U.S. production of meat and poultry is expected to be
    record-high in 2006, leading to record-high U.S. per capita meat and
    poultry consumption. With a 3 percent increase in U.S. meat and poultry
    production in 2006, a mixed export picture, and some slowing in the
    growth of overall consumer expenditures, lower live animal, meat and
    poultry prices are expected in 2006.
        Even though several countries continued to block imports of U.S.
    beef, U.S. livestock markets were very strong in 2005. The index of
    prices received for meat animals was an all-time high, 4 percent above
    2004 and 17 percent above 2003. Although U.S. cattle numbers increased
    for the first time in 9 years in 2005, cattle slaughter continued to
    drop. For 2006, the situation will change. First, the U.S. cattle
    inventory on January 1, 2006 was up 2 percent over last year,
    indicating that producers are now moving well into the expansion phase
    of the cattle cycle. Second, live cattle imports from Canada will be up
    in 2005. Third, higher carcass weights are expected. And lastly,
    drought conditions in Texas and Oklahoma are causing some producers to
    market additional animals and to place cattle in feedlots sooner.
    Consequently, cattle slaughter and beef production are expected to
    increase a strong 5 percent in 2006. Despite the increase in output,
    choice fed cattle prices are expected to decline only about 2 percent
    to about $85 per cwt., and retail beef prices are expected to be down
    about 3-4 percent.
        Despite sustained profitability in hog production, hog producers
    have been cautious about expanding the past few years. Still, with
    back-to-back years of good returns, we expect hog slaughter and pork
    production to be up about 3 percent in 2006 following a modest increase
    of 0.8 percent in 2005. Hog prices are expected be average $44 per cwt.
    in 2005, down about 13 percent from last year, but still stronger than
    during the 1998 to 2003 period.
        Broiler production is expected to again be record high in 2006. A
    nearly 4 percent increase in production in 2005 was driven by record-
    high broiler prices in 2004 and low feed prices. Although broiler
    prices fell about 5 percent in 2005, they remained fairly strong and
    with favorable feed costs, broiler production is expected to be about 2
    percent higher in 2006. Wholesale broiler prices are expected to
    average 67 cents per pound, down from 70.8 cents last year. However,
    this forecast was made prior to the finding of AI in Europe and the
    current acceleration in its spread. As AI has become more widespread,
    world poultry trade has slowed, which is now adversely affecting U.S.
    poultry exports and broiler prices. In late February, prices of leg
    quarters, the principal U.S. broiler export product, had fallen to the
    low 20-cents-per-pound range, after reaching the high 40-cents-per-
    pound range in late fall.
        Milk, like meat and poultry, is coming off 2 years of strong
    prices. Widespread forage problems and reduced rBST are largely behind
    producers now, and following record and near record milk prices in 2004
    and 2005, milk production is accelerating. U.S. milk production in
    January 2006 was up an extremely strong 5 percent over January 2005. In
    2004, milk production was flat; in 2005, it rose 3.3 percent; and in
    2006, it is forecast to be up nearly 3 percent despite declining
    prices. Increased milk production this year is expected to exceed the
    trend growth in dairy product demand, consequently, the all-milk price
    is forecast to average $13.45 per cwt. in 2006, down 10 percent from
    2005. Payments were triggered under the newly reauthorized Milk Income
    Loss Contract Program beginning in December 2005, following essentially
    no payments from the second quarter of 2004 through the third quarter
    of 2005. The payment rate for March will be $0.41 per cwt. the highest
    rate since March 2004. Cheese prices have recently declined to near
    support levels and price support purchases of nonfat dry milk and
    cheese are likely during 2006. There were no purchases of dairy
    products under the milk price support program in 2005.
    Farm Income and Government Payments
        In 2004, net farm cash income reached nearly $86 billion, up from
    the previous record of $72 billion in 2003. Declining crop prices and
    increasing production expenses caused net cash farm income to decline
    to $83 billion in 2005. In 2006, the farm economy is pulling back from
    the strong crop prices and production levels in 2003 and 2004 and the
    record livestock and milk prices of 2004 and 2005. With higher crop
    stocks, reduced crop prices, and a modest decline in livestock sector
    receipts, the value of 2006 farm marketings is expected to decline
    about $7 billion from the last year's near record $239 billion, with
    two-thirds of the decline in crops. With further increases in
    production expenses and lower government payments, net cash farm income
    is forecast to fall to $65 billion in 2006, or about equal to the
    previous 10-year average.
        In 2005, government payments to producers were a record high $23
    billion, up from $13 billion in 2004. In 2005, increased marketing loan
    costs aggravated by the marketing system disruption caused by the
    hurricanes, increased counter-cyclical payments, ad hoc disaster
    assistance, and tobacco program buyout payments all contributed to
    higher government payments. Payments to farmers are expected to decline
    by $4.5 billion in 2006 due to lower ad hoc disaster payments,
    marketing assistance loan outlays, and tobacco buyout payments.
        Cash production expenses are expected to rise 4 percent in 2006
    following increases of 6 percent in 2005 and 5 percent in 2004. Energy-
    related input (fertilizer, lime, fuels, oils, and electricity) and
    interest expenses increased by $6.5 billion in 2005 and are expected to
    rise by over $4 billion or 10 percent in 2006. For 2006, the Department
    of Energy projects that diesel and natural gas will cost another 5
    percent more on top of the increases of around 35 percent that these
    fuels saw in 2005. Corn, a heavy user of energy for fertilizer,
    irrigation and grain drying, can be used to illustrate the impact of
    higher energy costs on crop returns. For 2006, energy is expected to
    add about 5 cents to national average corn operating costs compared
    with a year ago and 23 cents more than 2 years ago. These rising costs
    will reduce farm income and have some effect on crop acreage and
    production in 2006. This forecast increase in energy expenses assumes
    producers will not alter their production methods to reduce energy use
    and lower costs, and of course, many will do so.
        Net farm income is expected to decline for all major types of crop
    and livestock farms and in all production regions. Farm household
    income is also expected to decline for the first time in 7 years, but
    at over $80,300, would still be 20 percent higher than in 2003 and well
    above the average of all U.S. households.
        Despite the drop in income and the increase in interest rates, we
    project that farm real estate values will rise 6.5 percent in 2006,
    down slightly from the 7 percent gain in 2005. Another land value
    increase would continue the recent strong improvement in the farm
    sector balance sheet. The ratio of real estate value to net cash farm
    income, a concept similar to a price-to-earnings ratio, is forecast to
    spike up in 2006 to the highest level since the early 1980s. If that
    ratio were to stay high over the next few years, it would suggest the
    increase in farmland values may not be sustainable. For the last 3
    years in a row, farm net worth has gone up by an average of nearly $95
    billion per year, which is more than the increase in farm income each
    year and much more than the $6 billion annual increase in farm debt.
    That is expected to be true again in 2006. Farm net worth, or equity is
    now a record high at $1.4 trillion and the debt-to-asset ratio at the
    end of 2006 is forecast at 13.1 percent, the lowest in 45 years.
        A return to average national farm income, lower enterprise and
    regional farm income, lower cash margins, and an increase in farm debt
    do not indicate an impending financial crisis in U.S. agriculture. Yet,
    they do suggest there is likely to be greater financial stress for an
    increasing number of producers. That stress is likely to show up in
    tighter credit standards, delayed loan repayments and loan extensions,
    and more demand for USDA credit guarantees. The coming year will
    present more of a financial challenge for U.S. agriculture than in
    recent years. In addition, agriculture will have to contend with
    questions over the effect of rising interest rates on the durability of
    the U.S. economic recovery, the value of the dollar, issues raised by
    the Federal budget deficit, trade negotiations, bird flu, BSE, oil
    prices, and terrorism. Producers will likely need to draw more on their
    resiliency and managerial capabilities in 2006 than during in the past
    couple of years of abnormally high farm income.
        That completes my comments and thank you.

        Senator Bennett. Thank you very much.
        Dr. Penn.

                             STATEMENT OF J.B. PENN

        Mr. Penn. Thank you, Mr. Chairman.
        I am pleased to be here with you and Senator Kohl again
    this year and to present the budget and program proposals for
    the Farm and Foreign Agricultural Services mission area. As you
    will recall, this mission area is comprised of the Farm Service
    Agency, the Risk Management Agency, and the Foreign
    Agricultural Service.
        The budgets we are discussing today provide the resources
    needed to ensure our continued ability to implement our
    programs effectively. Although the budget is constrained by the
    need to reduce the Federal deficit, it meets our priorities and
    ensures our continued efforts on behalf of America's farmers
    and ranchers.
        I would like to discuss the three agencies and their
    budgets individually, beginning first with the Farm Service
    Agency (FSA). FSA is the lead agency, as you know, for
    delivering farm assistance, and the budget places a priority on
    maintaining and enhancing our ability to provide efficient,
    responsive services to all producers.
        Recently, FSA has faced a series of program implementation
    challenges that have required the full commitment of agency
    resources. Last year and this year, several new disaster
    programs have been implemented. We have had the tobacco buyout
    program while continuing administration of the 2002 Farm Bill
    programs.
        The 2007 budget is designed to ensure the agency's
    continued delivery of its services. The budget provides a total
    program level for FSA salaries and expenses of nearly $1.4
    billion, a net increase of $86 million above 2006. Now this
    requested level will support a ceiling of about 5,250 Federal
    staff-years and 9,400 non-Federal staff-years, and temporary
    staffing will remain at the 2006 levels.
        FSA also provides a variety of direct loans and loan
    guarantees to farm families who would otherwise be unable to
    obtain the credit they need to continue their operations. And
    by statute, a substantial portion of the direct loan funds are
    reserved each year for assistance to beginning, limited
    resource, and socially disadvantaged farmers and ranchers.
        The 2007 budget includes funding for about $930 million in
    direct loans and $2.5 billion in loan guarantees. This level of
    funding is consistent with the actual program use in 2005, and
    we believe these proposed loan levels will be sufficient to
    meet the demand in 2007.
        Turning to the Risk Management Agency (RMA), the Federal
    Crop Insurance Program is another part of the strong safety net
    that is available to our Nation's agricultural producers. Last
    year the crop insurance program provided about $45 billion in
    protection on over 246 million acres out of the total crop land
    base of about 325 million acres.
        We project that for last year, the total indemnity payments
    will be about $3.3 billion. And despite all of the droughts and
    freezes and floods and hurricanes, that is about the same level
    of indemnities that we had in 2004. Our current projection
    shows that for the coming year, we will insure about $49
    billion worth of product.
        For salaries and expenses of RMA, the budget provides $81
    million in discretionary spending. That is an increase of $4.5
    million from the 2006 level, and this net increase includes
    additional funding for information technology (IT) and
    increased staff-years to improve our monitoring of the
    financial health of the insurance companies.
        The budget also includes a proposal to implement a
    participation fee to fund IT modernization and maintenance
    costs. The fee would be assessed on the insurance companies
    that participate in the program and that benefit from the
    subsidies paid by the Federal Government.
        Finally, let me turn to the Foreign Agricultural Service
    (FAS) and our international activities. I am pleased to report
    that we have made considerable progress in trade expansion
    activities this past year, but challenges remain.
        FAS has been very actively involved in supporting all of
    the trade negotiations, including the comprehensive World Trade
    Organization (WTO) negotiations, but also the several bilateral
    and regional free trade negotiations. It has been very actively
    involved in reopening the markets closed because of bovine
    spongiform encephalopathy (BSE) and other animal and plant
    diseases. And the agency continues to work to expand foreign
    sales and, at the same time, provide foreign food aid.
        The proposed budget provides a program level of $162
    million for 2007. That is an increase of $11 million above
    2006. This funding is proposed to meet higher overseas
    operating costs in the agency's overseas posts, including
    increased payments to the Department of State for
    administrative services that are provided in the embassies in
    which our personnel are posted.
        Funding is also included for FAS's contribution to the
    Capital Security Cost Sharing Program operated by the State
    Department. The budget also includes a small increase for trade
    capacity building. This initiative assists developing countries
    in adopting policies that meet WTO standards and to adopt
    regulatory systems that are transparent and science based and
    modeled after ours.
        The budget also includes a projected program level of $1.3
    billion for the Public Law 480 program, and the budget proposes
    that all of the Public Law 480 funding will be through Title II
    donations. This reflects our recent experience in which an
    increasing share of the foreign food assistance has been
    directed to emergency situations, where such aid is critical to
    preventing famine and saving lives.
        For the McGovern-Dole Food for Education Program, the
    budget continues funding at the 2006 level.
        So, in conclusion, Mr. Chairman, our 2007 budget and
    program proposals provide the resources we need to continue the
    important work that these agencies do on behalf of America's
    farmers and ranchers.

                              PREPARED STATEMENTS

        We certainly appreciate the support for our mission area
    that we have received from this committee in past years, and we
    look forward to working with you in the future.
        Thank you.
        [The statements follow:]

                        Prepared Statement of J.B. Penn

        Mr. Chairman and Members of the Committee, I am pleased to appear
    before you this morning to present the 2007 budget and program
    proposals for the Farm and Foreign Agriculture Services (FFAS) mission
    area of the Department of Agriculture (USDA). The FFAS mission area is
    comprised of three agencies: the Farm Service Agency, Risk Management
    Agency, and Foreign Agricultural Service.
        Statements by the Administrators of the FFAS agencies, which
    provide details on their budget and program proposals for 2007, have
    already been submitted to the Committee. My statement will summarize
    those proposals, after which I will be pleased to respond to any
    questions you may have.
        Mr. Chairman, the FFAS mission area and the programs it carries out
    are critical for meeting three of the Department's strategic
    objectives: enhancing the international competitiveness of American
    agriculture in order to increase export opportunities; enhancing the
    competitiveness and sustainability of the rural and farm economies; and
    protecting and enhancing the Nation's natural resource base and
    environment. By providing the diverse array of programs offered by our
    agencies--price and income support, farm credit assistance,
    conservation and environment incentives, risk management tools, and
    trade expansion and export promotion programs--we are in the forefront
    of efforts to accomplish the Department's mission of service to
    American agriculture.
        The 2007 President's budget provides the resources needed to ensure
    continuation of these diverse activities. Although the budget does
    include proposals for savings in both discretionary and mandatory
    programs, as part of government-wide efforts to reduce the deficit, it
    meets our priorities and ensures our continued efforts on behalf of
    America's agricultural producers.

                              FARM SERVICE AGENCY

        The Farm Service Agency (FSA) is the lead agency for delivering
    farm assistance. It is the agency that the majority of farmers and
    ranchers interact with most frequently. Producers rely on FSA to access
    farm programs such as direct and countercyclical payments, commodity
    marketing assistance loans, loan deficiency payments, farm ownership
    and operating loans, disaster assistance, and certain conservation
    programs, such as the Conservation Reserve Program (CRP). Because FSA
    is the prime delivery agency for most of the major farm assistance
    programs, the budget places a priority on maintaining and enhancing
    FSA's ability to provide efficient, responsive services to our
    producers.
    Farm Program Delivery
        FSA has faced a series of program implementation challenges that
    have required the full commitment of agency resources. Last year, FSA
    implemented the Emergency Hurricane Supplemental Appropriations Act of
    2005, which included more than a dozen programs and $2.9 billion for
    farmers and ranchers who were affected by drought and other weather-
    related problems in 2003 and 2004. FSA also implemented an emergency
    relief program, supported with $600 million of section 32 funds, for
    Florida's citrus, nursery, and vegetable growers who were affected by
    three hurricanes in 2004.
        In addition, FSA was required to implement the tobacco buy-out
    program during 2005, with very little lead time to prepare. Under the
    program, transition payments of about $950 million per year are being
    made to tobacco quota holders and producers, ending all elements of the
    Federal tobacco price support program effective with the 2005 crop.
        Although the emergency supplemental provided some funds to cover
    administrative costs of delivering disaster assistance, they were not
    sufficient to meet those costs fully. As a result, FSA had to cut
    expenses aggressively in all but the most essential areas and was
    forced to divert IT resources away from planned modernization to
    provide the resources needed to implement these new programs. In 2006,
    FSA is again meeting the challenge of delivering disaster assistance to
    producers affected by hurricanes in the Gulf Coast states.
        In the fall of 2005, FSA reduced permanent staffing through the use
    of buy-out authority to adjust staffing due to workload changes
    resulting from elimination of the tobacco program and other changes.
    Although the demands on FSA's resources have tightened and workload and
    staffing needs have shifted, the FSA office structure has remained
    stable for several years. FSA now has hundreds of county offices with
    three or fewer employees that are increasingly expensive to maintain
    and are hard pressed to provide effective customer service. As you
    know, the agency terminated its ``FSA Tomorrow'' plan to close and
    consolidate county offices, but the need to streamline operations and
    office structure continues. FSA has asked its State Executive Directors
    to conduct independent, local-level reviews of the offices and
    operations in their states. This ongoing effort will follow the
    guidelines established in the 2006 Agriculture Appropriations Act with
    respect to public meetings, Congressional notification, and
    communications with affected producers. This will ensure the most
    appropriate adjustments are made, consistent with local needs and
    within the constraints of available resources.
        The 2007 budget is designed to ensure the agency's diverse efforts
    can move forward. It provides a total program level for FSA salaries
    and expenses of nearly $1.4 billion, a net increase of $86 million
    above 2006. The requested level will support a ceiling of about 5,250
    Federal staff years and 9,425 non-Federal staff years. Staff levels
    have been reallocated among FSA's program activities to reflect the
    decreased workload associated with the tobacco program and other areas.
    Permanent Federal staff years will be reduced by 65 and permanent full
    time non-Federal county staff years will be reduced by 24, while
    temporary staff years will remain at 2006 levels.
        FSA is taking other actions designed to improve their services on
    behalf of America's producers. Among the most important of these are
    information technology (IT) improvements, including the adoption of
    web-based applications that allow farmers to sign up for programs, as
    well as receive payments, on line. This reduces the paperwork burden
    significantly and provides for more timely receipt of payments.
        Critical to the success of this endeavor is the need to replace
    farm program delivery software now running on FSA's remaining legacy
    computer system which is obsolete and incapable of meeting future
    needs. In order to complete the transition to the modern web-based
    technology system, the budget proposes $14 million for a multi-year
    investment in streamlining farm program delivery processes and software
    to allow retirement of the legacy system.
    Commodity Credit Corporation
        Domestic farm commodity price and income support programs are
    financed through the Commodity Credit Corporation (CCC), a Government
    corporation for which FSA provides operating personnel. CCC also
    provides funding for conservation programs, including the CRP and
    certain programs administered by the Natural Resources Conservation
    Service. In addition, CCC funds most of the export programs
    administered by the Foreign Agricultural Service.
        In 2005, CCC outlays were relatively high at $20.2 billion due to
    recent large crops that have contributed to growing supplies and
    weakened prices. CCC outlays are now projected to reach $21.3 billion
    in 2006 and $20.2 billion in 2007 under current law, which reflects the
    recent enactment of the Agricultural Reconciliation Act of 2005.
        In light of the continuing high levels of CCC outlays and the
    continuing budget deficit, the President's budget again includes a
    number of proposals to reduce the level of farm spending consistent
    with the government-wide goal of reducing the Federal deficit. These
    proposals are designed to work within the existing structure of the
    2002 Farm Bill and achieve savings over the next 10 years. The
    proposals, which are spread across the entire agricultural sector,
    include reducing commodity payments across the board by 5 percent;
    tightening payment limits; lowering dairy program costs; and
    reinstituting a 1.2 percent marketing assessment on sugar processors as
    well as a 3 cent per hundredweight assessment on milk marketings.
        These proposals are expected to save $1.1 billion in 2007 and $7.7
    billion over 10 years. The majority of the savings is achieved through
    the across-the-board reduction in program payments.
    Conservation Programs
        The 2002 Farm Bill provided for significant growth in the
    Department's conservation programs. The CRP, which is funded by CCC and
    administered by FSA, is the Department's largest conservation/
    environmental program. The Farm Bill extended CRP enrollment authority
    through 2007 and increased the enrollment cap by 2.8 million acres to a
    total of 39.2 million acres.
        As of January, CRP enrollment totaled 35.9 million acres. The 2007
    budget assumes general signups will be held this year and next to
    enroll about 2.5 million and 4.9 million acres, respectively. In
    addition, a major effort is underway beginning this year to re-enroll
    or extend a large number of CRP contracts that will begin expiring over
    the 2007-2010 period.
        Our current baseline assumptions are that CRP acreage will increase
    gradually to 39.2 million acres by 2008 and remain at that level
    through 2016.

                               FARM LOAN PROGRAMS

        FSA plays a critical role for our Nation's agricultural producers
    by providing a variety of direct loans and loan guarantees to farm
    families who would otherwise be unable to obtain the credit they need
    to continue their farming operations. By law, a substantial portion of
    the direct loan funds are reserved each year for assistance to
    beginning, limited resource, and socially disadvantaged farmers and
    ranchers. For 2007, 70 percent of direct farm ownership loans are
    reserved for beginning farmers and 20 percent are reserved for socially
    disadvantaged borrowers, who may also be beginning farmers.
        The 2007 budget includes funding for about $930 million in direct
    loans and $2.5 billion in guarantees. This level of funding is
    consistent with actual program use in 2005, and we believe these
    proposed loan levels will be sufficient to meet demand in 2007.
        The 2007 budget provides funding of $4 million for the Indian Land
    Acquisition program, double the amount provided in 2006. For the Boll
    Weevil Eradication loan program, the budget requests $59 million, a
    reduction of $41 million from 2006. This reduction is due to the
    successful completion of eradication efforts in several areas. The
    amount requested is expected to fully fund those eradication programs
    operating in 2007.
        For emergency disaster loans, no additional funding is requested.
    As of January, about $175 million is available for use in 2006, and
    sufficient funding is expected to carry forward into 2007 to assist
    producers whose farming operations have been damaged by natural
    disasters.

                             RISK MANAGEMENT AGENCY

        The Federal crop insurance program represents one of the strongest
    safety net programs available to our Nation(s agricultural producers.
    It provides risk management tools that are compatible with
    international trade commitments, creates products and services that are
    market driven, harnesses the strengths of both the public and private
    sectors, and reflects the diversity of the agricultural sector.
        In 2005, the crop insurance program provided about $45 billion in
    protection on over 246 million acres. Our current projection is that
    indemnity payments to producers on their 2005 crops will be about $3.3
    billion, which is about the same level as in 2004. Our current
    projection for 2007 shows a moderate increase in the value of
    protection to more than $49 billion. This projection is based on the
    Department(s latest estimates of planted acreage and expected changes
    in market prices for the major agricultural crops, and assumes that
    producer participation remains essentially the same as it was in 2005.
        The 2007 budget requests an appropriation of ``such sums as are
    necessary'' as mandatory spending for all costs associated with the
    program, except for Federal salaries and expenses. This level of
    funding will provide the necessary resources to meet program expenses
    at whatever level of coverage producers choose to purchase.
        The Risk Management Agency (RMA) is making significant progress in
    preempting fraud, waste, and abuse through the expanded use of data
    mining. RMA has preempted million of dollars' worth of improper
    payments and continues to identify ways to reduce program abuse. RMA
    continues to use data mining to identify anomalous producer, adjuster,
    and agent program results and, with the assistance of FSA offices,
    conducts growing season spot checks to ensure that new claims for
    losses are legitimate. These spot checks based on data mining have
    resulted in a significant reduction in anomalous claims for certain
    situations.
        Despite the successes of the crop insurance program, more can be
    done to improve its effectiveness. One of the overarching goals of the
    crop insurance program has been the reduction or elimination of ad hoc
    disaster assistance. However, in recent years Congress has passed four
    disaster bills covering 6 crop years and costing the government about
    $10 billion. Therefore, the budget includes a proposal to link the
    purchase of crop insurance to participation in farm programs, such as
    the direct and counter-cyclical payment programs. This proposal would
    require farm program participants to purchase crop insurance protection
    for 50 percent, or higher, of their expected market value or lose their
    farm program benefits. This level of coverage is nearly double the
    amount of protection currently provided at the catastrophic level.
        Additionally, participants in the Federal crop insurance program
    would contribute to the President's deficit reduction program. The
    budget includes several proposals that would reduce subsidies paid to
    producers and approved insurance providers. In total, these changes are
    expected to save about $140 million annually beginning in 2008.
    Salaries and Expenses
        For salaries and expenses of RMA, $81 million in discretionary
    spending is proposed, an increase of $4.5 million from the 2006 level
    of about $77 million. This net increase includes additional funding for
    IT, increased staff years to improve monitoring of the insurance
    companies, and pay costs.
        The budget also includes a proposal to implement a participation
    fee to fund IT modernization and maintenance costs. The fee, of about
    one-half cent per dollar of premium, would be assessed on the insurance
    companies that participate in the program and benefit from the
    subsidies paid by the Federal Government. The fee will be collected
    beginning in 2008 and will initially supplement the annual
    appropriation to provide for modernization of the IT system. After
    modernization is completed, the fee would be shifted to maintenance and
    would at that point reduce the discretionary appropriation required by
    RMA.
        RMA has an aging IT system; the last major overhaul occurred about
    12 years ago. At that time, the crop insurance program offered seven
    plans of insurance covering roughly 50 crops and providing about $14
    billion in protection. In 2005, protection was offered through more
    than 20 plans of insurance covering 370 crops, plus livestock and
    aquaculture, and providing over $44 billion in protection.
        Several major changes also have occurred over the years in the way
    producers protect their operations from losses. In 1994, there were no
    plans of insurance that offered protection against changes in market
    prices. Today, over 50 percent of the covered acreage has revenue
    protection and nearly 62 percent of the premium collected is for
    revenue based protection. In addition, the Agricultural Risk Protection
    Act (ARPA) of 2000 authorized the development of insurance products to
    protect livestock. RMA has implemented several new livestock price
    protection products. Because livestock production occurs year-round,
    these products must be priced and sold in a different manner than
    traditional crop insurance. The advent of new types of insurance, not
    contemplated when the IT system was designed, has placed tremendous
    strain on an aging system.
        ARPA also instituted new data reconciliation, data mining, and
    other anti-fraud, waste, and abuse activities that require the data to
    be used in a variety of new ways. The current IT system was not
    designed to handle these types of data operations. Consequently, the
    data must be stored in multiple databases which increases data storage
    costs and processing times, and increases the risk of data errors.
        Finally, I would note that the budget for RMA includes a request
    for 15 additional staff years. This increase will provide RMA with the
    additional resources necessary to improve oversight and internal
    controls of the insurance providers. In 2002, American Growers', the
    Nation's largest crop insurance company, failed. RMA, in concert with
    the Nebraska Department of Insurance, did a tremendous job of ensuring
    that both the producers' and the Government's interests were protected,
    indemnities paid, and policies transferred to other insurance
    providers. The additional staffing will help to ensure that a similar
    failure does not occur in the future.

                          FOREIGN AGRICULTURAL SERVICE

        I would now like to turn to the international programs and
    activities of the FFAS mission area. One of the goals that Secretary
    Johanns has established for the Department is to enhance the
    international competitiveness of American agriculture in order to
    provide increased export opportunities for our farmers and ranchers.
    The FFAS mission area is a primary contributor to that goal through
    activities that expand and maintain opportunities for U.S. agricultural
    exports; enhance the global sanitary and phytosanitary system to
    facilitate agricultural trade; and support international economic
    development and trade capacity building.
        We made noteworthy progress in our export expansion activities
    during the past year. During fiscal year 2005, the value of U.S.
    agricultural exports was once again at a record level, and we are
    presently on course to set another record--$64.5 billion--during fiscal
    year 2006.
        One of our highest priorities this past year was working to achieve
    an agreement on reform of agricultural trading practices in the Doha
    Round of multilateral trade negotiations. Last fall, the United States
    tabled an ambitious proposal to advance the negotiations that we
    believe provides the basis for their successful conclusion. Although
    the ambition of our proposal has not been matched by others, Members of
    the World Trade Organization (WTO) have agreed to reach agreement on
    the modalities (i.e., reduction formulas and methodologies) for a final
    agreement by the end of April, and we are working diligently to achieve
    that goal. We have a tremendous opportunity to achieve significant
    reforms in this Round, and we are committed to achieving a successful
    outcome that will provide new and meaningful opportunities for export
    growth in future years.
        Regional and bilateral trade agreements are another, very important
    avenue for opening new markets. Just last month, the President
    announced that South Korea and the United States intend to negotiate a
    bilateral free trade agreement that will offer significant
    opportunities for increased sales of U.S. food and agricultural
    products in what is already our sixth largest overseas market. In
    addition, we have recently completed free trade negotiations with Peru,
    Colombia, and Oman and are continuing negotiations with an array of
    other countries that are expected to provide new opportunities for U.S.
    agricultural sales.
        One of our other very important priorities during the past year has
    been our efforts to recover access to overseas markets for U.S. beef
    that were closed following the discovery of bovine spongiform
    encephalopathy (BSE) in the United States in 2003. Despite our recent
    setback with Japan in this regard, we have made significant progress.
    To date, we have regained at least partial access to 28 markets (not
    including Japan). Restarting shipments to Japan is now of paramount
    importance. We are confident the steps Secretary Johanns has directed
    be implemented in response to recent developments in Japan lay the
    groundwork for resumption of sales there. The Department has provided a
    full report on this matter to Japan, and we will continue to engage our
    Japanese counterparts to achieve our objective of resuming sales in
    near future.
    Salaries and Expenses
        The Foreign Agricultural Service (FAS) is the lead agency for the
    Department's international activities and is in the forefront of our
    efforts to expand and preserve overseas markets. Through its network of
    77 overseas offices and its headquarters staff here in Washington, FAS
    carries out a wide variety of activities that contribute to the
    objective of providing increased export opportunities for our
    agricultural products.
        During the past year, FAS has continued to review its activities
    and operations in order to ensure that it is structured appropriately
    to address priority issues that will characterize global agriculture in
    the 21st century. As a result of the agency's review, FAS has increased
    its focus on inherently governmental functions such as trade
    negotiations, enforcement of trade agreements, and strategic management
    of country relationships. In response to the increased importance of
    sanitary and phytosanitary issues for trade, FAS has stepped up its
    monitoring and enforcement activities and increased its efforts through
    international standard-setting bodies to support the development of
    science-based regulatory systems. It also has increased its emphasis on
    trade capacity building activities that facilitate achievement of the
    U.S. trade agenda.
        With trade of such critical importance to the future health and
    vitality of American agriculture, it is imperative that FAS have the
    resources needed to continue to represent and advocate for American
    agriculture on a global basis and to open new markets overseas. The
    budget provides a program level of $162 million for FAS in 2007, an
    increase of $11 million above 2006. This includes funding to meet
    higher overseas operating costs at the agency's overseas posts,
    including increased payments to the Department of State for
    administrative services provided at overseas posts.
        Funding is also included for FAS' contribution to the Capital
    Security Cost Sharing Program. Under that program, agencies with an
    overseas presence in U.S. diplomatic facilities are contributing a
    proportionate share of the construction of new, safe U.S. diplomatic
    facilities over a 14-year period.
        The budget also includes funding to support a new Trade Capacity
    Building initiative that supports U.S. trade policy objectives. By
    assisting developing countries to adopt policies that meet WTO
    standards and regulatory systems that are transparent and science-
    based, we will improve access for U.S. products to their markets. At
    the same time, by enhancing their ability to benefit from trade, we
    encourage them to become more forthcoming and supportive in market
    access negotiations. As their ability to participate in and benefit
    from global trade is improved, they will become better markets for U.S.
    agricultural exports.
    International Food Assistance
        The United States continues to provide leadership in global efforts
    to provide humanitarian relief and promote economic development through
    foreign food assistance. Emergency needs for food assistance remain at
    high levels, particularly in sub-Saharan Africa. To help meet those
    needs, the supplemental appropriations package submitted by the
    President on February 16th includes a request for $350 million to
    support additional Public Law 480 Title II food donations. This funding
    will be used to respond to humanitarian food aid needs in the Darfur
    region of Sudan, including for refugees in neighboring Chad; other
    regions of Sudan; and other areas facing critical food situations,
    including those in East and Central Africa.
        For 2007, the budget continues our support for these efforts by
    providing an overall program level of nearly $1.6 billion for U.S.
    foreign food assistance activities.
        For the Public Law 480 program, the budget includes a projected
    program level of $1.3 billion. This includes $1.2 billion of
    appropriated funding requested in the budget, plus projected
    reimbursements from the Maritime Administration for prior year cargo
    preference related expenses. The budget proposes that all funding for
    Public Law 480 will be provided through Title II donations in 2007 and,
    therefore, includes no new funding for additional Title I concessional
    credit or grant programs.
        This proposal reflects the experience of recent years in which an
    increasing share of U.S. foreign food assistance has been directed to
    emergency situations in which food aid is critical to preventing famine
    and saving lives. At the same time, demand for food assistance provided
    through concessional credit has declined significantly. This year, only
    two government-to-government agreements are expected to be signed.
        The budget also proposes that the Administrator of the Agency for
    International Development have the authority in emergency situations to
    use up to 25 percent of Title II funding to purchase commodities in
    locations closer to where they are needed. This authority is intended
    to expedite the response to emergencies overseas by allowing food aid
    commodities to be purchased more quickly and closer to their final
    destination, while increasing the total amount of commodities that can
    be procured to meet those emergencies. It is important to emphasize
    that U.S. commodities will continue to play the primary role in U.S.
    foreign food aid purchases and will be the first choice for meeting
    global needs. Furthermore, with this authority commodities would be
    purchased from developing countries that are eligible for official
    development assistance and not from developed countries, such as the
    European Union.
        For the McGovern-Dole International Food for Education and Child
    Nutrition Program, the budget continues funding at the 2006 level. With
    the conclusion of 2005 programming, this program and its predecessor,
    the Global Food for Education Initiative, will have provided assistance
    to more than 10 million children, mothers, and infants throughout the
    world. Particularly noteworthy, this assistance has helped establish
    sustainable programs in four countries--Kyrgystan, Lebanon, Moldova,
    and Vietnam--where parents and local governments have assumed
    responsibility for continuing the feeding programs, allowing United
    States support to be ended.
        The budget also includes an estimated program level of $161 million
    for the CCC-funded Food for Progress program, which supports the
    adoption of free enterprise reforms in the agricultural economies of
    developing countries.
    Export Promotion and Market Development Programs
        FAS administers the Department's export promotion and market
    development programs that play an important role in our efforts to
    enhance the international competitiveness of American agriculture.
        The CCC export credit guarantee programs provide payment guarantees
    for the commercial financing of U.S. agricultural exports. The
    guarantees facilitate exports to buyers in countries where credit is
    necessary to maintain or increase U.S. sales. For 2007, the budget
    projects a program level of nearly $3.2 billion for CCC export credit
    guarantees.
        For the Department's market development programs, including the
    Market Access Program and Foreign Market Development Program, the
    budget includes funding of $148 million. This level reflects a proposal
    to limit the Market Access Program to $100 million in 2007, which is
    intended to achieve savings in mandatory spending and contribute to
    government-wide deficit reduction efforts.
        The budget also includes $35 million for the Dairy Export Incentive
    Program and $28 million for the Export Enhancement Program.
    Trade Adjustment Assistance
        For the Trade Adjustment Assistance (TAA) for Farmers Program, the
    budget includes $90 million, as authorized by the Trade Act of 2002.
    The program provides assistance to producers of raw agricultural
    commodities, who have suffered lower prices due to import competition,
    and to fishermen who compete with imported aquaculture products. In
    order to qualify for assistance, the price received by producers of a
    specified commodity during the most recent marketing year must be less
    than 80 percent of the national average price during the previous 5
    marketing years. In addition, a determination must be made that
    increases in imports of like or competitive products ``contributed
    importantly'' to the decline in prices.
        During 2005, 14 petitions for TAA were approved, including 9 that
    were recertified for a second year of assistance. Commodities that were
    approved for assistance included Pacific salmon, shrimp, lychees,
    California black olives, Idaho potatoes, and Concord juice grapes.
    Total program costs for 2005 were approximately $21 million.
        The deadline for submission of petitions for 2006 TAA closed on
    January 31. To date, TAA petitions have been certified for producers of
    Florida avocados and Indiana snapdragons. Additional petitions are
    under review, and decisions on their eligibility should be announced in
    the near future.
        That concludes my statement, Mr. Chairman. I would be pleased to
    answer any questions that you and other Members of the Committee may
    have.
                                     ______

     Prepared Statement of Teresa C. Lasseter, Administrator, Farm Service
                                     Agency

        Mr. Chairman and Members of the Subcommittee, I appreciate the
    opportunity to appear before you for the first time as Administrator of
    the Farm Service Agency (FSA). I have taken the helm at a challenging
    moment for FSA--a moment when the agency is at a crossroads. As things
    currently stand, we are faced with a choice between delivering programs
    to the best of our ability using current methods, or modernizing the
    agency in terms of structure and technology to respond more quickly to
    new legislation, provide better access to our programs and data for our
    customers and business partners, and more efficiently implement a 2007
    Farm Bill. Our fiscal year 2007 budget request provides a fiscally
    responsible approach which addresses these agency priorities while also
    doing our part to restrain discretionary spending to help reduce the
    deficit. Before I begin discussing the details of the budget, I would
    like to comment on how we arrived at our current position, provide a
    status of some of our current initiatives and challenges, and solicit
    your support and partnership for approval of this budget request.
    Office Structure
        As competition and accountability for limited resources continue to
    increase, we want to ensure we are still providing our customers with
    the efficient, accurate and timely service they deserve. Quite frankly,
    FSA as presently structured must change in order to best serve our
    customers. There have been numerous program changes over the past few
    years as well as improvements in technology that have shifted our
    workload. Also, reductions in the number of employees in the past 3
    years require that we adjust our present structure. As you know, we set
    aside our FSA tomorrow plan and stopped all actions on county office
    restructuring and office closures under that plan. Many of our State
    Executive Directors, however, are experiencing extreme difficulty in
    providing services due to the increased number of offices that have two
    or fewer employees in them, and the increasing number of managers who
    are responsible for more than one county and must divide their time
    between two or more offices.
        At present we have 36 offices that have no permanent employees in
    them, 144 offices with only one employee, 372 offices with 2 employees,
    and 266 offices that share a manager. Providing a full range of
    services to our customers full-time is impossible in these offices. We
    must reorganize, modernize and streamline this agency from the bottom
    up. We must reinvent FSA on a technological platform that feels more
    like 2006 than 1980. Having set aside the national FSA Tomorrow plan,
    and in accordance with your guidance, we have asked our State offices
    for a full review of their technology, training, staffing and
    facilities. We know that we need widespread technology upgrades. We
    know that we need to provide our people with better training. We know
    that absent our ability to hire more employees, temporaries and
    contractors, we need technology to streamline our operations to
    increase productivity.
        FSA's State Executive Directors (SEDs) will conduct independent,
    local-level reviews of the efficiency and effectiveness of the FSA
    office structure in each State. SEDs and State committees will form
    review committees to identify what the optimum network of FSA
    facilities, staffing, training, and technology should be in each State
    within existing budgetary resources and staffing ceilings. Furthermore,
    SEDs will also explore potential joint-effort opportunities with the
    Natural Resources Conservation Service and other Department of
    Agriculture agencies.
        As recommendations are received from each State, FSA's Deputy
    Administrator for Field Operations will review and validate the
    proposed changes. After the recommendations are shared with the
    affected Congressional delegations, the agency will hold public
    hearings and coordinate communications efforts with area farmers,
    ranchers, and stakeholders.
        We will faithfully follow your instructions as outlined in Public
    Law 109-97. If State offices recommend that any of our offices be
    closed or consolidated, we will hold public hearings within 30 days and
    notify Congress of all impending changes within 120 days.
    Administrative Budget Trends
        Congress has provided an increase in the appropriations for our
    Salaries and Expenses (S&E) account each year, and we appreciate the
    support of the Committee reflected in those numbers. At the same time,
    however, operational costs such as pay costs, information technology
    infrastructure and legacy systems, rents, and utilities have been
    increasing at a faster pace. The President's Budgets have taken this
    reality into account in the requested levels. However, for the past 3
    years the enacted appropriations for S&E together with the FSA
    component of the Common Computing Environment account have averaged
    about 3.8 percent below the budget request. In addition, during fiscal
    year 2005, FSA implemented the newly enacted Tobacco Buyout Program
    under the American Jobs Creation Act of 2004 and disaster programs for
    2003, 2004, and 2005 crop losses as directed by the Military
    Construction Appropriation and Emergency Hurricane Supplemental
    Appropriations Act, 2005. It is estimated that these programs cost the
    Agency a minimum of $26 million to administer.
        These effective reductions in the agency resource level have been
    addressed through aggressive cost-cutting measures. For example, FSA
    reduced discretionary non-information technology (IT) expenses such as
    travel, equipment and supplies by 39.5 percent from fiscal year 2003
    levels. FSA also deferred and realigned investment funding intended for
    modernization of IT systems in order to fund uncontrollable increases
    in non-discretionary IT and non-IT expenses. FSA successfully carried
    out its new programs at the expense of its modernization progress. In
    addition, Federal and non-Federal permanent staffing ceilings were
    reduced by 5 percent and 3 percent from fiscal year 2003 to fiscal year
    2005.
        Mr. Chairman, we in FSA have always considered ourselves a ``can-
    do'' agency. That is why in recent years we have told an optimistic
    story even while facing resource challenges. And that is why it is
    difficult to come before you sounding a less optimistic note today. The
    time has passed, however, when we can promise to do more with less. The
    time has come when we must make some difficult choices. This brings me
    back to the crossroads I mentioned earlier: do we direct our resources
    to maintaining the status quo as nearly as possible to focus on near-
    term program delivery? Or do we make the investments needed for future
    program delivery, which would divert resources from current activities?
    Even with your support for the President's budget, we must work with
    our stakeholders on an acceptable office consolidation plan to ensure
    we are providing our customers with the quality service they are
    entitled to.
        Our restructuring plan is not limited to our county offices but
    will involve a comprehensive review of the organization and operations
    at all levels of the agency, including State and national offices. We
    need to wisely invest in our employees, technology and equipment. With
    the 2007 requested level for both our Salaries and Expenses and the
    Common Computing Environment accounts, we can achieve this by providing
    critical training to our employees, upgrading computer systems,
    networks and software, and modernizing local office equipment. With
    over 45 percent of FSA offices staffed with three or fewer people, IT
    modernization has become significantly more important.
    Employee Buyout Program
        During first quarter of fiscal year 2006, we conducted two employee
    buyout programs, commonly known as the Voluntary Separation Incentive
    Program (VSIP) or ``buyouts'' and the Voluntary Early Retirement
    Authority (VERA) or ``early outs''. A total of 424 Federal and non-
    Federal employees were separated from FSA with buyout payments of up to
    $25,000. Several factors influenced our decision to request VSIP and
    VERA authority, including legislative changes ending the tobacco
    program, a transfer of the bulk of the administrative activity FSA
    previously performed for the Natural Resources Conservation Service
    (NRCS) on the Environmental Quality Incentives Program back to NRCS in
    fiscal year 2005, and shifts in program participation in certain States
    causing workload decreases in those States and a resulting staffing
    imbalance. As a result, reductions to staffing levels could be absorbed
    at the affected locations, without severely impacting their ability to
    deliver ongoing programs. The buyouts resulted in a 3-percent reduction
    in FSA permanent staffing levels. Through the use of buyout/early out
    authority we were able to more efficiently align ourselves within
    existing resources and begin to right-size in an employee friendly
    manner without the need for a reduction-in-force. In partnership with
    stakeholders, implementation of a comprehensive agency-wide
    restructuring plan will enable us to address our remaining workforce
    right-sizing challenges.
    Disaster Assistance
        The past 2 years have presented producers with tremendous
    challenges from Mother Nature, with record rainfall in parts of the
    country, a pervasive drought in the West, and the worst hurricane
    season in decades. The Emergency Supplemental Appropriations to Address
    Hurricanes in the Gulf of Mexico and Pandemic Influenza Act, 2006
    (Public Law 109-148) included $404 million for the Emergency Forestry
    Conservation Reserve Program, which will provide assistance for farmers
    and ranchers who have suffered forestry damage directly related to
    hurricanes Katrina, Ophelia, Rita, Dennis and Wilma. FSA anticipates
    publishing the rule and issuing software by late winter, and holding a
    2006 signup in the spring. In addition, $199.8 million was designated
    for the Emergency Conservation Program (ECP). The language of the
    Supplemental Appropriations Bill provides for assistance with
    restoration of activities such as oyster operations not normally
    covered by ECP. Therefore, new regulations are required to make certain
    that new practices are developed that achieve the goals of the program
    while ensuring program integrity. We expect ECP regulations to be
    published soon, with signups anticipated in early spring.
        In addition, Secretary Johanns authorized $250 million for crop
    disaster, livestock, dairy, tree and aquaculture assistance. These
    funds are authorized under Section 32 of the Agricultural Act of August
    24, 1935, which allows the Secretary to restore producers' purchasing
    power. These funds will be distributed by way of five new programs: the
    Tree Indemnity Program (TIP), the Livestock Indemnity Program (LIP),
    the Feed Indemnity Program (FIP), the Hurricane Indemnity Program
    (HIP), and an Aquaculture Block Grant program. The Secretary announced
    these programs on January 26, 2006. For TIP, LIP, FIP, and HIP, interim
    final regulations are in final clearance, and signups will begin in
    late June. For the Aquaculture Program, memorandums of understanding
    will be sent to the States in early March.
        Prior to the President's signing of the Emergency Supplemental
    Appropriations Bill, FSA made more than $30 million in Emergency
    Conservation Program assistance available to agricultural producers
    suffering damage from Hurricane Katrina. In addition, USDA's Commodity
    Credit Corporation implemented immediate changes to its Marketing
    Assistance Loan Program to allow producers to obtain loans for on-farm
    grain storage on the ground in addition to grain bins and other
    normally approved structures.
    Tobacco Transition Program
        FSA has expeditiously implemented the provisions of the ``The Fair
    and Equitable Tobacco Reform Act,'' otherwise know as the ``tobacco
    buyout'' program which was part of the American Jobs Creation Act of
    2004, signed by the President on October 22, 2004. The Act terminated
    the tobacco quota and price support program of more than 65 years,
    which had restricted production and kept domestically produced tobacco
    prices high. The program allows producers and quota owners to sign up
    for 10 years of transition payments to ease the economic adjustment
    process.
        As of December 20, 2005, the Commodity Credit Corporation (CCC) had
    approved 382,972 quota holder contracts valued at $6.6 billion, and
    181,696 producer contracts valued at $2.9 billion. CCC disbursed fiscal
    year 2005 payments to 563,770 contracts holders, valued at $945.9
    million.
        On October 17, 2005, CCC implemented the successor-in-interest
    provision of the Tobacco Transition Payment Program or TTPP. The
    successor-in-interest program allows contract holders to transfer their
    remaining contract rights in full to a third party in return for a
    lump-sum payment. As of December 2, 2005, 89,885 quota holder and
    producer contracts valued at $1.5 billion were sold to lump-sum
    providers. There are over 60 financial institutions participating in
    the successor-in-interest program.
        As of February 28, 2006, approximately $934.6 million had been
    disbursed for fiscal year 2006 TTPP payments. County offices will
    continue to disburse payments through March. Contracts requiring a
    correction for over- or under-payments have been delayed. The
    correction software is complex and deployment is targeted for late
    April.

                                BUDGET REQUESTS

        Turning now to the specifics of the 2007 Budget, I would like to
    highlight our proposals for the commodity and conservation programs
    funded by the Commodity Credit Corporation (CCC); the farm loan
    programs of the Agricultural Credit Insurance Fund; our other
    appropriated programs; and administrative support.

                          COMMODITY CREDIT CORPORATION

        Domestic farm commodity price and income support programs are
    administered by FSA and financed through the CCC, a government
    corporation for which FSA provides operating personnel. Commodity
    support operations for corn, barley, oats, grain sorghum, wheat and
    wheat products, soybeans, minor oilseed crops, upland cotton and extra
    long staple cotton, rice, milk and milk products, honey, peanuts, pulse
    crops, sugar, wool and mohair are facilitated primarily through loans,
    payment programs, and purchase programs.
        The 2002 Farm Bill authorizes CCC to transfer funds to various
    agencies for authorized programs in fiscal years 2002 through 2007. It
    is anticipated that in fiscal year 2006, $1.797 billion will be
    transferred to other agencies.
        The CCC is also the source of funding for the Conservation Reserve
    Program administered by FSA, as well as many of the conservation
    programs administered by the Natural Resources Conservation Service. In
    addition, CCC funds many of the export programs administered by the
    Foreign Agricultural Service.
    Program Outlays
        The fiscal year 2007 budget estimates largely reflect supply and
    demand assumptions for the 2006 crop, based on November 2005 data. CCC
    net expenditures for fiscal year 2007 under current law are estimated
    at $20.2 billion, down about $1.1 billion from $21.3 billion in fiscal
    year 2006. If the President's proposals for farm program savings are
    enacted, CCC outlays would decline by an additional $1.1 billion in
    fiscal year 2007.
        This net decrease in projected expenditures is attributable to
    decreases for crop, tree and livestock disaster payments, tobacco
    payments, loan deficiency payments, and the Noninsured Assistance
    Program, partially offset by an increase in counter-cyclical payments.
    Reimbursement for Realized Losses
        CCC is authorized to replenish its borrowing authority, as needed,
    through annual appropriations up to the amount of realized losses
    recorded in CCC's financial statements at the end of the preceding
    fiscal year. For fiscal year 2005 losses, CCC was reimbursed $25.4
    billion in fiscal year 2006.
    Conservation Reserve Program
        The Conservation Reserve Program (CRP), administered by FSA, is
    currently USDA's largest conservation/environmental program. For 20
    years it has cost-effectively assisted farm owners and operators in
    conserving and improving soil, water, air, and wildlife resources by
    converting highly erodible and other environmentally sensitive acreage,
    normally devoted to the production of agricultural commodities, to a
    long-term resource-conserving cover. CRP participants enroll acreage
    for 10 to 15 years in exchange for annual rental payments as well as
    cost-share assistance and technical assistance to install approved
    conservation practices.
        The 2002 Farm Bill increased authorized enrollment under this
    program from 36.4 million acres to 39.2 million acres. Under the fiscal
    year 2005 continuous and Farmable Wetlands Program (FWP) signups, a
    combined total of 387,000 acres was enrolled. We issued incentive
    payments totaling approximately $76 million in fiscal year 2005 under
    continuous signup, Conservation Reserve Enhancement Program (CREP), and
    FWP under the incentives program that began in May 2000 to boost
    continuous signup participation. As of January 2006, total CRP
    enrollment is 35.9 million acres, nearly 92 percent of the 39.2 million
    acres authorized under the Farm Bill.
        The CREP is also a major initiative under CRP that seeks to address
    recognized environmental issues of States, Tribes, and the Nation. CREP
    is a voluntary program implemented through Memoranda of Agreement with
    partners, such as States, Federal agencies, and private groups. FSA
    currently has 34 CREP agreements with 27 States with over 2 million
    acres reserved for enrollment. The program is very popular with
    environmental and wildlife groups, in addition to States and private
    landowners. More than 772,000 acres are currently enrolled in CREP
    nationwide. Most recently, in July 2005, FSA launched a new CREP
    project in Indiana.
        No general signup was held in fiscal year 2005. However, the fiscal
    year 2007 budget assumes general signups in fiscal years 2006 and 2007
    to enroll approximately 2.5 million acres and 4.9 million acres,
    respectively. In fiscal years 2006 and 2007, we anticipate enrolling
    410,000 acres and 774,000 acres under continuous signup and the CREP.
    About 40,000 acres are estimated to be enrolled in the FWP in fiscal
    year 2006 and 40,000 acres in fiscal year 2007. Additionally, the
    fiscal year 2007 budget assumes early re-enrollments and extensions of
    fiscal year 2007-2010 expiring contracts. Overall, CRP enrollment is
    assumed to gradually increase from 35 million acres at the end of
    fiscal year 2005 to 39.2 million acres by fiscal year 2008, and to
    remain at 39.2 million acres through fiscal year 2016, maintaining a
    reserve sufficient to provide for continuous signup and CREP.

                               FARM LOAN PROGRAMS

        The loan programs funded through the Agricultural Credit Insurance
    Fund provide a variety of loans and loan guarantees to farm families
    who would otherwise be unable to obtain the credit they need to
    continue their farming operations.
        The fiscal year 2007 Budget proposes a total program level of about
    $3.5 billion. Of this total, approximately $1 billion is requested for
    direct loans and nearly $2.5 billion for guaranteed loans offered in
    cooperation with private lenders. These levels should be sufficient to
    provide adequate funding throughout the year. While the total request
    is below the amounts provided by Congress in fiscal year 2005 and 2006,
    it is nearly $500 million above the amount actually obligated in fiscal
    year 2005.
        For direct farm ownership loans we are requesting a loan level of
    $223 million. The proposed program level would enable FSA to extend
    credit to about 1,921 small and beginning farmers to purchase or
    maintain a family farm. In accordance with legislative authorities, FSA
    has established annual county-by-county participation targets for
    members of socially disadvantaged groups based on demographic data.
    Also, 70 percent of direct farm ownership loans are reserved for
    beginning farmers, and historically about 35 percent are made at
    reduced interest rates to limited resource borrowers, who may also be
    beginning farmers. Recently, however, the reduced-rate provisions have
    not been utilized since regular interest rates are lower than the
    reduced rates provided by law. For direct farm operating loans we are
    requesting a program level of $644 million to provide approximately
    14,525 loans to family farmers.
        For guaranteed farm ownership loans in fiscal year 2007, we are
    requesting a loan level of $1.2 billion. This program level will
    provide about 4,600 farmers the opportunity to acquire their own farm
    or to preserve an existing one. One critical use of guaranteed farm
    ownership loans is to allow real estate equity to be used to
    restructure short-term debt into more favorable long-term rates. For
    guaranteed farm operating loans we propose a fiscal year 2007 program
    level of approximately $1.3 billion to assist nearly 7,800 producers in
    financing their farming operations. This program enables private
    lenders to extend credit to farm customers who otherwise would not
    qualify for commercial loans and ultimately be forced to seek direct
    loans from FSA.
        In addition, our budget proposes program levels of $4 million for
    Indian tribe land acquisition loans and $60 million for boll weevil
    eradication loans. For emergency disaster loans, our budget does not
    request any new appropriation; anticipated carryover funding will
    support a program level of approximately $70 million, which should
    provide sufficient credit to producers whose farming operations are
    damaged by natural disasters.
        The 2007 budget request reflects the Administration's proposed
    increase in the fees producers pay to secure guaranteed farm ownership
    or guaranteed unsubsidized farm operating loans. This change will bring
    the fees for these loans more in line with the fees charged to secure
    other types of guaranteed loans. This proposal will be implemented
    through the rulemaking process and is expected to save about $30
    million annually.

                          OTHER APPROPRIATED PROGRAMS

    State Mediation Grants
        State Mediation Grants assist States in developing programs to deal
    with disputes involving a variety of agricultural issues including
    distressed farm loans, wetland determinations, conservation compliance,
    program payment eligibility, and others. Operated primarily by State
    universities or departments of agriculture, the program provides
    neutral mediators to assist producers--primarily small farmers--in
    resolving disputes before they culminate in litigation or bankruptcy.
    States with mediation programs certified by FSA may request grants of
    up to 70 percent of the cost of operating their programs.
        For fiscal year 2006, grants have been issued to 32 States. Two
    additional States are expected to become certified during the fiscal
    year. For fiscal year 2007, we anticipate that the requested $4.2
    million will provide grants to 34 States and seed funding for 2 new
    States.
    Emergency Conservation Program
        Since it is impossible to predict natural disasters, it is
    difficult to forecast an appropriate funding level for the Emergency
    Conservation Program, and in recent years the program has been funded
    through supplemental appropriations. During fiscal year 2005 Congress
    provided $150 million for the program to assist producers in repairing
    damage caused by natural disasters. For fiscal year 2006, as I
    mentioned earlier, the program received supplemental funding of $199.8
    million specifically for hurricane damage to the Gulf States. On March
    3, $63 million of the $199.8 million was allocated. The eligible States
    have requested a total of $374 million. Nationwide, as of March 3,
    $20.6 million is pending allocation to 28 States, and $4.8 million has
    already been allocated, for recovery from various disasters utilizing
    funds carried forward from fiscal year 2005 together with recoveries of
    unused prior allocations. As of March 3, $5.1 million is available for
    allocation nationwide. The fiscal year 2007 Budget proposal does not
    include funding for this program.
    Dairy Indemnity Program
        The Dairy Indemnity Program (DIP) compensates dairy farmers and
    manufacturers who, through no fault of their own, suffer income losses
    on milk or milk products removed from commercial markets due to
    residues of certain chemicals or other toxic substances. Payees are
    required to reimburse the Government if they recover their losses
    through other sources, such as litigation. As of March 1 we have paid
    fiscal year 2006 DIP claims totaling $44,000 in 3 States.
        The fiscal year 2007 appropriation request of $100,000, together
    with unobligated carryover funds expected to be available at the end of
    fiscal year 2006, would cover a higher than normal, but not
    catastrophic, level of claims. Extended through 2007 by the 2002 Farm
    Bill, DIP is a potentially important element in the financial safety
    net for dairy producers in the event of a serious contamination
    incident.
    Grassroots Source Water Protection Program
        The Grassroots Source Water Protection Program (GSWPP) is a joint
    project by the Farm Service Agency and the nonprofit National Rural
    Water Association (NRWA) designed to help prevent surface and ground
    water pollution through voluntary practices installed by producers at
    the local level. With the fiscal year 2006 appropriations of $3.7
    million, the NRWA is hiring a rural source water technician in each of
    the 36 participating States to work with FSA State and county directors
    as well as State conservation specialists to develop water protection
    plans within priority watersheds.
        Legislative authority for the GSWPP will expire September 30, 2007.
    The budget requests no funding for this program.

                             ADMINISTRATIVE SUPPORT

        The costs of administering all FSA activities are funded by a
    consolidated Salaries and Expenses account. The account comprises
    direct appropriations, transfers from loan programs under credit reform
    procedures, user fees, and advances and reimbursements from various
    sources.
        The fiscal year 2007 Budget requests $1.41 billion from
    appropriated sources including credit reform transfers, for a net
    increase of about $86 million over the fiscal year 2006 level. The
    request reflects increases in pay-related costs to sustain essential
    program delivery and increases in information technology investments.
    The request would fund IT operational expenses, technical analysis and
    design documentation of the Modernize and Innovate the Delivery of
    Agricultural Systems (MIDAS) program, and development and enhancements
    necessary to support legacy IT systems and maintain current IT
    operations during the transition to Web-based systems. It would also
    shift to the S&E account certain costs previously included in the
    Common Computing Environment (CCE) account, such as the Universal
    Telecommunications Network and enterprise licensing. These increases
    are offset by decreases in both Federal and non-Federal county office
    staff years and operating expenses.
        As I have already noted, FSA has taken aggressive action over the
    past 3 years to reduce discretionary administrative expenditures and
    live within available funding. In conjunction with this effort, the
    employee buyout/early out program I mentioned earlier yielded a
    reduction of 143 Federal and 281 non-Federal staff-years for fiscal
    year 2006. The fiscal year 2007 request reflects a total of 5,253
    Federal staff-years and 9,425 non-Federal staff-years, representing
    decreases of 65 and 24 staff-years, respectively, from the fiscal year
    2006 levels. Temporary non-Federal county staff-years will remain at
    the fiscal year 2006 level of 650.
        I would like to emphasize the importance of the support of FSA's
    modernization effort that is provided through the Department's CCE
    account. Funding made available to FSA under this account will provide
    needed telecommunications improvements and permit us to continue
    implementation of GIS, which is so crucial to rapid and accurate
    program delivery. If this source of funding were not available, the
    additional costs would have to be covered by FSA's S&E account.
        Mr. Chairman, this concludes my statement. I will be happy to
    answer your questions and those of the other Subcommittee Members.
                                     ______

        Prepared Statement of A. Ellen Terpstra, Administrator, Foreign
                              Agricultural Service

        Mr. Chairman, Members of the Subcommittee, I appreciate the
    opportunity to review the work of the Foreign Agricultural Service
    (FAS) and to present the President's budget request for FAS programs
    for fiscal year 2007.

                                  INTRODUCTION

        FAS is a small agency with a big mission: working to expand and
    maintain international export opportunities for U.S. agricultural, fish
    and forestry products; supporting international economic development
    through trade capacity building and sustainable development practices;
    and supporting the adoption and application of science-based Sanitary
    and Phytosanitary (SPS) regulations to facilitate agricultural trade.
    In addition to our Washington-based staff, the Agency maintains a
    network of overseas offices that provide critical market and policy
    intelligence to support our strategic goals, respond quickly in cases
    of market disruption, and represent U.S. agriculture in consultations
    with foreign governments.
        To meet new international challenges, FAS has refined the three
    functions essential to our mission--market access, intelligence, and
    analysis; trade development; and agricultural development for national
    security. While the first two functions represent the historic
    activities of the Agency, the third reflects new tasks that we have
    identified as essential to support U.S. agriculture and broader U.S.
    Government policy goals.
        In addition, we have developed a new strategic focus for the
    Agency. We are placing a greater priority on inherently governmental
    functions such as trade negotiations, enforcement of trade agreements,
    and strategic management of country relationships. We have increased
    our emphasis on SPS issues by stepping up our monitoring and
    enforcement activities and increasing efforts to work through
    international standard-setting bodies to support the development of
    science-based regulatory systems. We are placing greater emphasis on
    trade capacity building activities that are in line with the
    President's trade agenda, and we are shifting from implementing
    individual development activities to coordinating USDA international
    activities.
    Market Access, Intelligence, and Analysis
        Our core objective continues to be the expansion and maintenance of
    overseas market opportunities for U.S. agriculture. If we are to help
    U.S. food and agricultural exporters build on three consecutive years
    of record export sales, expanding market opportunities will be vital
    for America's food and agricultural sector. We all recognize the United
    States is a mature market, while around the world we see emerging
    markets with rapidly growing middle classes.
        Our primary tool to expand access is the negotiation of new
    bilateral, regional, and multilateral trade agreements that lower
    tariffs and reduce trade impediments. FAS provides the critical
    analysis and policy advice to ensure U.S. agriculture achieves
    substantial benefits in these negotiations.
        Over the past several years, maintaining existing market access has
    grown in importance. We monitor foreign compliance with trade
    agreements, analyze trade issues, and coordinate with other trade and
    regulatory agencies to develop effective strategies to avoid or reverse
    trade-disruptive actions. We also use the extensive expertise within
    USDA to pursue solutions to difficult technical issues that restrict
    trade, such as those related to bovine spongiform encephalopathy (BSE)
    and biotechnology or those that create barriers to trade, such as
    sanitary and phytosanitary or food safety regulations. We have
    increased our efforts to ensure that more trading partners use science-
    based regulatory systems and follow international guidelines in order
    to reduce the number of technical problems and non-science based
    policies that hinder trade. We also work with the Office of the U.S.
    Trade Representative to ensure trade agreements are enforced through
    formal dispute mechanisms, when necessary.
    Trade Development
        Our trade development function includes price/credit risk
    mitigation and market development programs that support U.S. firms and
    industries in their efforts to build and maintain overseas markets for
    U.S. agricultural products. The price/credit risk mitigation programs
    include the GSM-102 Export Credit Guarantee Program, the Supplier
    Credit Guarantee Program and the Facility Guarantee Program.
        FAS administers two major market development programs--the Foreign
    Market Development (Cooperator) and Market Access Programs. These are
    carried out chiefly in cooperation with non-profit agricultural trade
    associations and private firms. Several smaller programs--Technical
    Assistance for Specialty Crops (TASC) and the Quality Samples Program
    (QSP)--also provide financial and technical support to U.S. exporters.
    Agricultural Development for National Security
        President Bush's National Security Strategy recognizes
    international economic development, along with defense and diplomacy,
    as one of the three pillars of U.S. foreign and national security
    policy. The Strategy recognizes that the lack of economic development,
    particularly in fragile and strategic countries and regions, results in
    economic and political instability, which can pose a national security
    threat to the United States. For most developing countries, a
    productive and sustainable agricultural sector and open markets are the
    key elements for economic growth.
        FAS deploys USDA's unique resources and expertise in agricultural
    development activities to promote market- and science-based policies
    and institutions, and sustainable agricultural systems. One way that
    USDA helps developing countries increase trade and integrate their
    agricultural sectors in the global economy is to improve regulatory
    frameworks. Promoting productivity-enhancing technologies that will
    help increase food security is also a priority. In addition, we support
    agricultural reconstruction in post-conflict or post-disaster countries
    or regions such as in Afghanistan.

                           MAJOR ACTIVITIES AND GOALS

        In 2005, FAS was a key contributor to the bold U.S. agriculture
    proposal that has been credited with providing new impetus to the Doha
    Development Agenda of the World Trade Organization (WTO) negotiations.
    While much work needs to be done to bring the negotiations to a
    successful conclusion, we believe that the Hong Kong Ministerial
    Declaration laid a solid foundation for the final phase of the
    negotiations. Later this week, Secretary Johanns will participate in a
    Ministerial meeting in London. Ministers will be working to narrow
    differences in order to meet the April target for defining modalities.
        In preparation for and follow-up to the Hong Kong Ministerial, FAS
    actively worked to convince developing countries, particularly cotton-
    producing African countries, of the benefits of trade to their economic
    growth. In addition, FAS conducted several technical assistance
    programs to help improve those countries' ability to trade. These
    efforts played a key role in helping move the Doha trade talks forward.
        Last year saw Congressional ratification of the Central America-
    Dominican Republic-United States Free Trade Agreement. FAS worked in
    tandem with the Office of the United States Trade Representative (USTR)
    on the development, analysis and negotiation needed to bring the
    agreement to completion. When implemented, it will provide U.S.
    exporters improved access to 40 million consumers with growing incomes.
        In 2005, we worked to recover trade lost as a result of the finding
    of BSE in the United States when 51 markets closed their borders to our
    products. I am pleased to report that we have regained at least partial
    access to 26 (not including Japan) of these markets for beef and beef
    products, representing 45 percent of our 2003 export value. Momentum in
    reopening export markets for U.S. beef gained considerably since Japan
    announced on December 12, 2005, that it was resuming imports of U.S.
    beef. Hong Kong, Korea, Taiwan, and Singapore all agreed to open to
    boneless beef. In addition, Mexico announced the lifting of its import
    ban on U.S. bone-in beef. These openings represented market access
    gains of 82 percent of our 2003 export value for beef and beef products
    (includes Japan). Unfortunately, as you know, Japan ($1.4 billion
    market) has since closed its market due to the finding of vertebral
    column in a few boxes of a U.S. veal shipment, reducing our regained
    market access to $2.5 billion. We continue to work on regaining
    Japanese confidence in U.S. beef and our ability to meet Japan's import
    requirements.
        We successfully defended U.S. export market access in a number of
    countries. In the European Union (EU), our intervention delayed the
    implementation of debarking requirements for wood packaging materials.
    This ensured continued smooth trade in U.S. exports packed in or on
    wood packaging materials. That trade is valued at nearly $80 billion
    annually. With the help of our industry partners, we were able to
    preserve $300 million in corn gluten feed exports to the EU.
        Through our monitoring and enforcement of the WTO Sanitary and
    Phytosanitary Agreement, we reviewed over 600 foreign SPS regulations
    and took direct action against 40 that were inconsistent with U.S.
    regulations or did not comply with the WTO Agreement. Our successes
    with India and China are particularly noteworthy. As a result of our
    efforts, India relaxed import requirements that could have blocked U.S.
    shipments of almonds, pulses, and horticultural products. Almond
    shipments, the top U.S. agricultural export to India, increased from
    $95 million to $118 million, and U.S. sales of pulses grew from
    $500,000 to over $3 million in 1 year. Our actions caused China to
    change its import regulations on meat, wine, spirits and fresh fruit.
    U.S. exports of these products grew from $142 million to $252 million.
        FAS has worked aggressively to recover, maintain and expand markets
    for U.S. farm products that have been produced with agricultural
    biotechnology. A high priority is assisting other countries in their
    efforts to develop, safely regulate, and begin using this important
    tool to reduce hunger and alleviate poverty. For example, for the past
    2 years, the United States has aggressively pursued a WTO case against
    the EU's moratorium on agricultural biotechnology, which has cost U.S.
    producers of corn and related products, hundreds of millions of dollars
    each year. In addition, FAS leads U.S. efforts to work with like-minded
    countries to assure that international rules and regulations for
    agricultural biotechnology are science-based and implemented in
    transparent and predictable ways.
        As in the case of the EU's biotechnology moratorium, when we are
    unable to resolve problems bilaterally, we have used the WTO dispute
    settlement mechanism to advance our trade objectives. In 2005, we were
    successful in cases with Japan on fire blight in apples and with Mexico
    on rice and high-fructose corn syrup.
        Just as we look to the WTO to enforce our complaints against
    trading partners, we must also live up to WTO decisions that raise
    questions about U.S. programs. After the WTO decision in the Brazil
    cotton case, we were able to revise our export credit guarantee
    programs to comply with the deadline imposed by the WTO. Officials of
    several developing countries have complimented the United States on our
    efforts to bring our export credit guarantee programs in line with the
    WTO decision. Of course, we also recognize the important role that the
    Congress has played in working with the Administration to address these
    critical issues. We appreciate that Congress recently approved
    legislation including repeal of the Continued Dumping and Subsidy
    Offset Act--the Byrd Amendment--and the Step 2 cotton program. Both
    programs were ruled inconsistent with our WTO obligations. This action
    demonstrates that the United States intends to live up to our WTO
    commitments.
        In the area of trade development, we launched several e-gov
    initiatives to improve electronic access to key programs to meet
    requirements of the President's Management Agenda. We launched a new
    electronic registration system for the export credit guarantee programs
    that allows U.S. exporters to quickly register sales via the Internet.
    We are implementing a streamlined, integrated process to manage grant
    applications.
        Our projects to promote agricultural development took us to many
    countries. We participated in post-conflict reconstruction efforts in
    Afghanistan by sending 26 USDA advisors to nine provinces to assist
    with livestock management, irrigation methods, and rudimentary food
    safety procedures. We expanded trade capacity building and technical
    assistance efforts in Armenia, Algeria, Malawi and Yemen. We worked
    with African countries to help them develop the institutional capacity
    to expand their exports and to regulate imports according to principles
    of sound science. We placed pest risk assessment advisors in the trade
    hubs sponsored by the U.S. Agency for International Development, and we
    are training 200 people from 35 countries on a wide variety of sanitary
    and phytosanitary issues. We hosted an Avian Influenza Conference last
    summer for the Asian Pacific Economic Cooperation (APEC) forum that was
    attended by more than 100 officials from the 21 APEC economies.
        Under the Cochran Fellowship Program, we provided short-term
    training for nearly 500 participants from 81 countries. Cochran
    participants meet with U.S. agribusiness, attend policy and food safety
    seminars, and receive technical training related to market development
    and trade capacity building. Under the Borlaug Fellows program,
    launched in 2004, 120 researchers, policymakers and university staff
    received short-term scientific training and research opportunities at
    U.S. colleges and universities.
        Our food aid programs have helped millions of hungry people around
    the world. For example, under the McGovern-Dole International Food for
    Education and Child Nutrition Program, a record 3.4 million children
    and mothers benefited from our 2005 programming efforts.
        In 2006, our goals include bringing the multilateral trade talks to
    a successful conclusion, working to complete the outstanding bilateral
    free trade agreements with the United Arab Emirates, Peru, Panama and
    Thailand, launching new negotiations with Korea, and monitoring
    existing agreements. We also will continue our efforts to ensure that
    more trade partners use science-based regulatory systems and follow
    international guidelines, particularly regarding BSE and products from
    agricultural biotechnology. Our trade capacity activities will be used
    to support all these efforts. We will continue the process to realign
    our overseas staff to meet the changing world trading environment,
    focusing on Asia.

                                 BUDGET REQUEST

        Mr. Chairman, our fiscal year 2007 budget proposes a funding level
    of $162.5 million for FAS and 974 staff years, an increase of $11.0
    million above the fiscal year 2006 level. The budget has been developed
    to ensure the agency's continued ability to conduct its full array of
    activities and provide services to U.S. agriculture.
        The budget proposes an increase of $7.4 million to meet higher
    operating costs at FAS overseas offices. The FAS network of 77 overseas
    offices covering over 130 countries is vulnerable to macro-economic
    events and developments that are beyond the agency's control but which
    must be met if FAS' overseas presence is to be maintained.
    Specifically, these increases include:
      --$3.4 million for wage and price increases to meet higher operating
            costs at overseas offices. Declines in the value of the U.S.
            dollar, coupled with overseas inflation and rising wage rates,
            have led to sharply higher operating costs that must be
            accommodated in order to maintain our current overseas
            presence.
      --$1.1 million for increased payments to Department of State (DOS)
            for International Cooperative Administrative Support Services
            (ICASS). The DOS provides overseas administrative support for
            foreign affairs agencies through the ICASS system. FAS has no
            administrative staff overseas, and thus relies entirely on DOS/
            ICASS for this support.
      --$2.9 million for the Capital Security Cost Share program
            assessment. In fiscal year 2005, DOS implemented a program
            through which all agencies with an overseas presence in U.S.
            diplomatic facilities pay a proportionate share for accelerated
            construction of new secure, safe, and functional diplomatic
            facilities. These costs are allocated annually based on the
            number of authorized personnel positions. This plan is designed
            to generate a total of $17.5 billion to fund 150 new facilities
            over a 14-year period. The FAS assessment will increase
            annually in roughly $3 million increments until fiscal year
            2009 to total annual assessed level of $12 million. This level
            is assumed to remain constant at that point for the ensuing 9
            years.
        The budget also requests $1.5 million in support of the President's
    trade policy agenda for Trade Capacity Building. One of the challenges
    we face is obtaining the dedicated funding that can be used throughout
    the Department in support of this initiative. Through technical
    assistance, training, and related activities, this initiative will
    support U.S. trade policy objectives on a proactive basis by assisting
    developing countries to adopt scientifically sound health and safety
    standards that will enable U.S. exporters to take advantage of
    negotiated market access. It will also strengthen their ability to
    participate in, and benefit from, the global trading arena and,
    thereby, enhance opportunities for U.S. agricultural exports.
    Successful Free Trade Agreement (FTA) implementation requires that
    market access issues based on SPS problems be resolved, otherwise the
    benefits of the FTA are not realized by either side. In this regard,
    FAS works closely with USDA agencies, such as APHIS and FSIS, and the
    Food and Drug Administration. Obtaining a dedicated source of funding
    will lay the foundation for more effective resolution of ongoing and
    emergent SPS market access issues without recourse to time-consuming
    and costly dispute resolution procedures.
        Finally, the budget includes an increase of $2.1 million to cover
    higher personnel compensation costs associated with the anticipated
    fiscal year 2007 pay raise. Without sufficient funding, absorption of
    these costs in fiscal year 2007 would primarily come from reductions in
    agency personnel levels that will significantly affect FAS efforts to
    address market access for U.S. food and agricultural exports.

                                EXPORT PROGRAMS

        Mr. Chairman, the fiscal year 2007 budget proposes approximately $4
    billion for programs administered by FAS designed to promote U.S.
    agricultural exports, develop long-term markets overseas, and foster
    economic growth in developing countries.
    Export Credit Guarantee Programs
        The budget includes a projected overall program level of $3.2
    billion for export credit guarantees in fiscal year 2007. Under these
    programs, the Commodity Credit Corporation (CCC) provides payment
    guarantees for the commercial financing of U.S. agricultural exports.
    Last year, we announced changes to these programs to comply with the
    WTO cotton decision in a dispute with Brazil. We implemented a risk-
    based fee structure for the GSM-102 and Supplier Credit Guarantee
    Programs. Fee rates are now based on the country risk that CCC is
    undertaking, as well as the repayment term and repayment frequency
    under the guarantee. We also suspended operation of the GSM-103
    program, effective July 1, 2005, in response to a WTO dispute panel
    decision. In addition, USDA proposed legislative changes to the cotton
    and export credit programs. Congress passed legislation to repeal the
    Step 2 Program and the repeal will take effect on August 1, 2006.
        As in previous years, the budget estimates reflect actual levels of
    sales expected to be registered under the programs and include:
      --$2.5 billion for the GSM-102 program;
      --$602 million for Supplier Credit guarantees; and
      --$30 million for Facility Financing guarantees.
        The fiscal year 2005, the GSM-102 program provided credit
    guarantees which facilitated sales of approximately $2.2 billion of
    U.S. agricultural exports to 8 countries and 6 regions. In fiscal year
    2005, the Supplier Credit Guarantee Program (SCGP) registered
    approximately $455 million in credit guarantees which facilitated sales
    of over $700 million to 9 countries and 8 regions. USDA has also
    undertaken a top-to-bottom review of the Supplier Credit Guarantee
    Program. Most recently, USDA announced an Advanced Notice of Proposed
    Rulemaking on the SCGP and invited suggestions on changes that would
    improve program operations and efficiency. Several factors are behind
    the effort to improve program operations. As the SCGP has grown,
    defaults have also increased. Although CCC has improved its claims
    recovery process, further changes may be necessary. The comment period
    closed in late February and USDA is reviewing the comments.
    Market Development Programs
        Funded by CCC, FAS administers a number of programs to promote the
    development, maintenance, and expansion of commercial export markets
    for U.S. agricultural commodities and products. For fiscal year 2007,
    the CCC estimates include a total of $148 million for the market
    development programs, $100 million below the fiscal year 2006 level and
    includes:
      --$100 million for the Market Access Program;
      --$34.5 million for the Foreign Market Development (Cooperator)
            Program;
      --$10 million for the Emerging Markets Program;
      --$2.5 million for the Quality Samples Program; and
      --$2 million for the Technical Assistance for Specialty Crops
            Program.
        The lower program level for these activities reflects a proposal to
    limit funding for the Market Access Program to $100 million in fiscal
    year 2007, which is intended to achieve savings in mandatory spending
    and contribute to government-wide deficit reduction efforts.
    International Food Assistance
        The United States continues to play a leading role in providing
    international food aid. In this regard, the fiscal year 2007 budget
    includes an overall program level for U.S. foreign food assistance of
    $1.6 billion consisting of:
      --$1.3 billion for Public Law 480 which is expected to provide
            approximately 2.2 million metric tons of commodity assistance.
            The budget proposes that all Public Law 480 food assistance be
            provided through the Title II donations program in fiscal year
            2007, which is administered by the U.S. Agency for
            International Development. In recent years, there has been
            significant decline in demand for food assistance provided
            through concessional credit financing, accordingly, no funding
            is requested for Title I credit sales and grants. The budget
            includes an appropriation request of $1.2 billion for Public
            Law 480 Title II, an increase of $80 million over the 2006
            enacted level, and proposes a new provision that will allow up
            to 25 percent of the funding to be used to purchase commodities
            locally in emergency situations thereby saving more lives.
      --$161 million for the CCC-funded Food for Progress Program. Funding
            at that level is expected to support 300,000 metric tons of
            commodity assistance.
      --$103 million for the McGovern-Dole International Food for Education
            and Child Nutrition Program. This comprises $99 million in
            appropriations and an estimated $4 million in reimbursements
            from the Maritime Administration. Funding at this program level
            will assist an estimated 2.5 million women and children through
            the donation of nearly 80,000 metric tons of commodities.
    Export Subsidy Programs
        FAS administers two export subsidy programs through which payments
    are made to exporters of U.S. agricultural commodities to enable them
    to be price competitive in overseas markets where competitor countries
    are subsidizing sales. These include:
      --$28 million for the Export Enhancement Program (EEP). World supply
            and demand conditions have limited EEP programming in recent
            years and therefore, the budget assumes a limited program level
            for 2007. However, the 2002 Farm Bill does include a maximum
            annual EEP program level of $478 million which could be
            utilized should market conditions warrant reactivation of the
            awarding of bonuses.
      --$35 million for the Dairy Export Incentive Program (DEIP), $33
            million above the fiscal year 2006 estimate of $2 million. This
            estimate reflects the level of subsidy expected to be required
            to facilitate export sales consistent with projected United
            States and world market conditions. The actual level of bonuses
            awarded may change during the programming year as market
            conditions warrant.
    Trade Adjustment Assistance for Farmers
        Authorized by the Trade Act of 2002, the Trade Adjustment
    Assistance Program for Farmers authorizes USDA to make payments of up
    to $90 million annually to members of eligible producer groups when the
    current year's price of an eligible agricultural commodity is less than
    80 percent of the national average price for the 5 marketing years
    preceding the most recent marketing year, and the Secretary determines
    that imports have contributed importantly to the decline in price.
        This concludes my statement, Mr. Chairman. I will be pleased to
    answer any questions.
                                     ______

       Prepared Statement of Eldon Gould, Administrator, Risk Management
                                     Agency

        Mr. Chairman and members of the Subcommittee, I am pleased to
    present the fiscal year 2007 budget for the Risk Management Agency
    (RMA). Although this budget was developed by my predecessor, I have
    been fully briefed on the funding issues facing RMA and I support the
    funding level requested in this budget submission.
        One of my principle goals is to make the crop insurance program
    more efficient so farmers can be less reliant on ad hoc disaster
    payments. When I accepted this position, Secretary Johanns charged me
    with administering the crop insurance program in a timely and farmer-
    friendly manner. I take this charge very seriously; cooperation and
    unity between the Government and our reinsured partners are necessary
    to meet our common goals of providing effective insurance products,
    processing timely and accurate claims when losses occur and identifying
    and eliminating waste, fraud and abuse in the program to the greatest
    extinct possible. In addition, effective outreach to our stakeholders
    and customers is necessary to identify attributes of the program that
    are working well and the aspects that need to be changed to improve
    efficiency and effectiveness. Administration of the crop insurance
    program requires all interested parties working together to identify
    viable insurance products and solutions that meet farmer/rancher needs
    of the agricultural community. Moreover, if the program is to continue
    to be successful, the checks and balances necessary to guard against
    the risks of fraud, waste and abuse need strengthening.
        The Federal Crop Insurance Corporation continues to improve the
    economic stability of agriculture through a sound system of crop
    insurance, in paying out approximately $3.3 billion in losses in fiscal
    year 2005. Overall, the program provided farmers with more than $44
    billion in protection on about 246 million acres with a participation
    rate of about 80 percent (principal crops). In order to maintain and go
    beyond our current participation rate, while at the same time reducing
    the expectation of ad hoc disaster payments when bad weather or natural
    disasters strike, a strategy that compels the purchase of crop
    insurance must be implemented.
        The 2007 budget supports more than $49 billion in protection on
    approximately 286 million acres through about 1.2 million policies. The
    appropriations required for this level of risk protection is $4.2
    billion, which includes program administration, product evaluation and
    program oversight, as well as premium subsidies, administrative
    expenses reimbursements, and payments for excess losses estimated above
    the mandated loss ratio of 1.075. The funding level proposed for the
    Federal Crop Insurance Corporation (FCIC) Fund is $4.1 billion and for
    the Administrative and Operating Expenses, $80.8 million.

                                   FCIC FUND

        The fiscal year 2007 budget proposes that ``such sums as may be
    necessary'' be appropriated to the FCIC Fund. This ensures the program
    is fully funded to meet the contractual obligation to pay claims, to
    reimburse for expenses incurred in delivering insurance to farmers and
    ranchers, and to provide premium subsidies to make crop insurance
    affordable. Of the total funding requested for the FCIC budget, 66
    percent is for premium subsidies. This level of subsidy is necessary to
    maintain participation in the program and to encourage producers to
    purchase higher levels of coverage.
        To make the crop insurance program more efficient and to reduce the
    reliance on ad hoc disaster payments, the 2007 budget includes a
    proposal to encourage producers to purchase more adequate crop
    insurance coverage by linking direct payments or any other Federal
    payment for crops to the purchase of crop insurance. This change will
    ensure farmer's revenue loss would not be greater than 50 percent.
    Other changes include making catastrophic coverage more equitable in
    its treatment of both large and small farms, restructuring premium
    rates to better reflect historical losses, and reductions in delivery
    costs. Essentially, the majority of producers will have crop insurance
    and the minimum coverage level will be sufficient to support the
    producers when losses occur. The estimated savings to the program is
    $140 million beginning in 2008. This proposal will be submitted along
    with the other mandatory proposals for farm programs that support the
    President's Budget.
        The FCIC budget estimates are $2.7 billion for premium subsidy,
    $940.3 million for delivery expenses, $379.8 million for estimated
    excess losses, and $74.5 million for Agricultural Risk Protection Act
    of 2000 (ARPA) initiatives. With the exception of ARPA initiatives,
    these estimates are based on program indicators derived from USDA's
    latest projections of planted acreage and expected market prices.
                  administrative and operating expenses (a&o)
        RMA's fiscal year 2007 request of $80.8 million for Administrative
    and Operating Expenses represents a base of $76.3 million, which
    includes $3.6 million for data mining, and an increase of about $4.5
    million from fiscal year 2006. The increase includes funding for an
    increase in Compliance staffing, $1.3 million; improving monitoring of
    the insurance companies, $1.0 million; pay costs, $1.2 million; and
    information technology costs of $1.0 million.
        The 2007 budget requests $1.3 million to support an increase of 15
    staff years. This will raise RMA's employment ceiling from 553 to 568.
    The 15 staff years will support the increased workload for the
    Compliance function to provide the staffing to address outstanding OIG
    and GAO recommendations to improve oversight and internal controls over
    insurance providers. In response to several OIG audit reports, RMA
    needs to improve the process of auditing insurance providers to detect
    and correct vulnerabilities to proactively prevent improper payment of
    indemnities. The additional staffing will provide the necessary
    oversight to ensure taxpayers' funds are expended as intended.
        Also included in the 2007 budget is $1.0 million to expand the
    monitoring and evaluation of reinsured companies. RMA is requesting
    funds to establish a process of monitoring, evaluating, and auditing,
    on an annual basis, the performance of the product delivery system.
    These funds will be used to support insurance company expense audits,
    performance management audits and reinsurance portfolio evaluations to
    ensure effective internal and management controls are in place and
    operating for each reinsured company's business operations.
        An increase of $1.2 million is requested for pay costs. These funds
    are necessary to maintain required staffing to carry out RMA's mission
    and mandated requirements.
        Lastly, an increase of $1.0 million is requested for immediate IT
    requirements that will support patch-work enhancements to the existing
    IT system. If RMA is to continue to pay out billions of dollars in
    indemnity payments, it is prudent and necessary to have a current and
    reliable operating system to deliver the crop insurance program. To
    effectively manage a $4 billion crop insurance program, a modernized IT
    system is necessary to replace RMA's core IT operating system that is
    over 12 years old.
        In light of that, an additional legislative proposal in the 2007
    budget is being offered to require the reinsured companies to share in
    the cost to develop and maintain a new IT system. The companies would
    be assessed a fee based on one-half cent per dollar of premium sold.
    The fee is estimated to generate an amount not to exceed $15 million
    annually. After the IT system has been developed, the assessment would
    be shifted to maintenance and would be expected to reduce the annual
    appropriation of the salaries and expenses account of the agency.

                               PROGRAM MANAGEMENT

        The following is an update on accomplishments and events in 2005
    regarding key initiatives, activities and products:
      --FCIC Board Activities
      --Reinsurance
      --Hurricane Crop Losses
      --Pilot Programs
      --Product Development
      --Education and Outreach Program
      --Agricultural Management Assistance
      --Program Integrity
        The FCIC Board of Directors consists of 10 members. The Board
    receives, reviews, and approves policies and plans of insurance and
    other related materials for reinsurance, risk subsidy, and
    administrative and operating subsidy. During 2005, the Board considered
    62 action items during eight board meetings. The actions included 6
    expert reviews, 23 program revisions and modifications, 10 new program
    submissions, and 23 corporate administrative items.
    Reinsurance
        Currently, there are 16 approved insurance providers. Recent
    entrants into the crop insurance program include: Austin Mutual
    Insurance Company and its managing general agent (MGA), Crop USA;
    Westfield Insurance Company and its MGA, John Deere Risk Protection,
    Inc., and Stonington Insurance Company and its MGA, Agro National, LLC.
    The new Standard Reinsurance Agreement has been put in place, effective
    beginning the 2005 crop year.
        During 2005, RMA published a proposed rule for premium reduction
    plans (PRP). The PRP authorizes a company to pass confirmable cost
    savings to insured in the form of premium reductions. After a 60-day
    comment period, an interim final rule was published. Currently, nine
    insurance providers are eligible to offer a premium reduction plan for
    the 2006 reinsurance year. However, due to a provision in the 2006
    appropriations act, the PRP will not be available for the 2007
    reinsurance year which begins July 1, 2006.
    Hurricane Crop Losses
        Like other Federal agencies, RMA had a role in responding to
    victims of last years' hurricanes. When Wilma, Katrina and Rita hit the
    southeast and Gulf Coast areas, RMA's delivery system was available to
    respond to the crop losses ensuring the timely disbursement of
    payments. In addition, the Agency put in place emergency loss
    procedures to help producers who were subject to cancellation or
    termination dates for indebtedness or unpaid premium. This change
    allowed producers who might have become ineligible for the 2006 crop
    year to have additional time to either make payment of the premium due
    or execute a payment agreement with the approved insurance provider.
    This primarily impacted about 1,500 crop insurance policies that earned
    premium mostly on nursery, wheat, sugarcane, and oat crops. An
    estimated 500-600 insured producers were impacted. The following are
    the current 2005 loss estimates of the hurricanes:

    ----------------------------------------------------------------------------------------------------------------
                     Hurricane                          States Impacted             Liability       Estimated Losses
    ----------------------------------------------------------------------------------------------------------------
    Wilma......................................  Florida......................     $1,196,400,000       $194,000,000
    Katrina....................................  Alabama, Florida,                    525,710,000        129,709,000
                                                  Mississippi, Louisiana.
    Rita.......................................  Arkansas, Louisiana, Texas...         130,183,00         15,447,000
                                                                               -------------------------------------
          Total................................  .............................      1,852,293,000        339,156,000
    ----------------------------------------------------------------------------------------------------------------

    Pilot Programs
        RMA has 26 active pilot programs in various phases of development.
    The pilot programs for crop year 2005 are Adjusted Gross Revenue (AGR)
    and AGR-Lite, apple pilot quality option, avocado actual production
    history, avocado revenue, avocado/mango trees, cabbage, cherries,
    citrus (dollar), coverage enhancement option, cultivated clams,
    cultivated wild rice, Florida fruit trees, forage seed, fresh market
    beans, the Income Protection plan of insurance, mint, mustard, onion,
    pilot stage removal option, processing chile peppers, processing
    cucumbers, rangeland, raspberry/blackberry, strawberries, sweet
    potatoes, and winter squash/pumpkins. After about three to five years
    of experience, pilot program evaluations are performed to determine
    whether the plans of insurance should be converted to permanent
    programs and offered in counties where the crop is routinely grown.
    During 2005, RMA completed evaluations on eight pilot programs
    including: cherries, chile peppers, California citrus, processing
    cucumbers, strawberries, winter squash, AGR and avocado revenue. After
    consideration by the FCIC Board, winter squash and processed cucumbers
    were terminated; cherries, chile peppers, and California citrus were
    continued as pilots until the 2006 crop year; and strawberries extended
    through the 2008 crop year. Consideration of the evaluations of AGR and
    avocado revenue pilots will come before the Board in the 2006 fiscal
    year.
    Product Development
        In January 2006, the FCIC Board approved two new pilots, pasture
    range and forage programs set to begin for the 2007 crop year. These
    are group-risk programs, one using a temperature adjusted normalized
    difference vegetative index and the other a rainfall index program. The
    programs will be piloted in different States and areas with sales
    beginning this fall. In addition, RMA plans to seek expert review of a
    third proposal this spring in an attempt to create viable products for
    commodities representing over 550 million acres.
    Education and Outreach Program
        A total of $4.4 million was distributed for education and outreach
    projects with State departments of agriculture, universities and non-
    profit organizations. As a result, crop insurance education was
    provided to producers in Connecticut, Delaware, Maine, Pennsylvania,
    Rhode Island, Maryland, Massachusetts, Nevada, New Hampshire, New
    Jersey, New York, Utah, Vermont, West Virginia and Wyoming. These
    educational projects will promote risk management education
    opportunities by informing agribusiness leaders about new trends in
    risk management and by delivering risk management training to producers
    with an added emphasis on reaching small farmers.
        Similar to last year, RMA awarded 40 commodity partnership
    agreements at a cost of $5.5 million. These agreements will provide
    outreach to specialty crop producers to broaden their risk management
    education. In addition, RMA also directs education and outreach efforts
    toward women, small, and limited resource farmers, and ranchers. In
    2005, 63 outreach projects were funded at a cost of $7 million. RMA
    continues to partner with community-based organizations such as 1862,
    1890, and 1994 land grant colleges, universities, as well as, with
    Hispanic serving institutions to provide technical assistance and risk
    management education on managing farming risks.
    Agricultural Management Assistance
        In 2005, RMA provided $4.1 million in financial assistance to
    producers purchasing spring buy-up crop insurance policies in 15
    targeted States. The primary goal of the program is to encourage
    producers to purchase higher levels of coverage, and to provide an
    incentive for new producers to enter the program. In 2005, RMA paid up
    to 15 percent of producers' out-of-pocket premium costs to encourage
    increased participation.
    Program Integrity
        RMA, the Farm Service Agency (FSA), and the reinsured companies
    continue to improve program compliance and integrity through: (l) data
    reconciliation and matching of disaster program payments; (2)
    evaluating and amending procedures for referring potential crop
    insurance errors or abuse between FSA and RMA; and (3) creating anti-
    fraud distance learning training packages as required by Agricultural
    Risk Protection Act of 2000. Compliance managers have increased efforts
    to integrate new data mining projects to improve program results and
    are exploring ways to expedite processing of sanctions requests.
        The efforts of FSA and the results from the data mining and
    analysis tools have greatly improved the referral activity to and from
    RMA. As a result, from the period of January to December, 2004, an
    estimated $71 million reduction in program costs has been identified by
    preventing or deferring unsubstantiated claims.
        Currently, to manage the referral activity and the responsibilities
    of data reconciliation RMA has dealt with the added workload by
    increasing emphasis on data management and computer based resources.
    But the workload continues to create a challenge for Compliance to
    accomplish current activities along with new requirements mandated by
    ARPA without the benefit of additional resources. Therefore, the fiscal
    year 2007 budget includes 15 additional staff years for Compliance to
    strengthen the front-end reviews of approved insurance providers and to
    address outstanding recommendations to improve oversight and internal
    controls over insurance providers.

                                   CONCLUSION

        RMA is faced with many challenges to make the crop insurance
    program more efficient and effective. But along with these challenges
    come opportunities to provide more meaningful insurance products and
    tools, ensure a first-rate delivery system and the opportunity to
    verify and validate that the program is solvent and administered with
    integrity. I look forward to working with our stakeholders to make this
    program even better than it is today. However, the improvements require
    the resources requested in the 2007 budget along with passage of the
    proposed legislations.
        Mr. Chairman, this concludes my statement. I will be pleased to
    answer any questions.

        Senator Bennett. Thank you, sir.
        Mr. Rey.

                             STATEMENT OF MARK REY

        Mr. Rey. Thank you, Mr. Chairman and Senator Kohl.
        I am pleased to appear before you today to present the
    fiscal year 2007 budget and program proposals for the Natural
    Resources Conservation Service (NRCS).
        Overall, for fiscal year 2007, the President's budget
    recommends a record $4 billion in mandatory funding to expand
    participation in Farm Bill conservation programs throughout the
    department. Proposals in the 2007 budget will produce savings
    in both the mandatory and discretionary accounts. These savings
    will enable the administration to target funding based on
    resource needs and program results.
        The 2007 budget request for the Natural Resources
    Conservation Service provides $2.8 billion in total funding,
    with $788.6 million in discretionary funding and $2 billion in
    mandatory funding, including $1 billion for the Environmental
    Quality Incentives Program.
        Also, on the mandatory side, the budget request includes an
    increase of $153 million for the Wetlands Reserve Program to
    enroll an additional 250,000 acres in fiscal year 2007. This
    represents a total investment of $402 million for the Wetlands
    Reserve Program and will bring the total acreage enrolled in
    the program to more than 2.2 million acres.
        The Wetlands Reserve Program is the principal supporting
    program for the President's Wetlands Initiative to restore,
    protect, and enhance 3 million acres of wetlands over a 5-year
    period that began in June 2004. The Wetlands Reserve Program
    contributes roughly one third of all of the acres included in
    the President's initiative.
        The appropriations request includes $634.3 million for the
    Conservation Technical Assistance Program, the base
    conservation program that enables NRCS to successfully
    implement Farm Bill conservation programs. In past testimony,
    the department has discussed the excellent score NRCS received
    in the measure of customer satisfaction for conservation
    assistance.
        Today, I am pleased to announce that we are releasing a new
    report from the American Customer Satisfaction Index, conducted
    by the University of Michigan, that gives NRCS an overall score
    of 76 out of 100 for administering the Conservation Security
    Program (CSP). This score for CSP is considerably higher than
    the 2005 national average of 71 for other Federal Government
    programs.
        We are very proud of the results of this survey, as it
    highlights our commitment to quality customer service. In
    addition, we have continued to make strides in streamlining our
    operations as well. We are striving to keep the administration
    of conservation programs as efficient and as lean as possible.
        This year alone, we have streamlined program forms to make
    them more consistent among like programs, such as the easement
    programs. We have consolidated program manuals where possible.
    We have established a process for rapid watershed assessments
    to provide initial estimates of where conservation investments
    can best address resource concerns, and we have instituted
    programmatic reforms, such as a pilot sign-up process for
    conservation planning and technical assistance.
        We are also preparing for the future with a new strategic
    plan that charts the agency's future over the next 10 to 20
    years. The plan introduced a new mission statement--``helping
    people help the land.''
        This mission and the accompanying vision statement affirm
    the agency's commitment to assist private land owners and
    solidify the essential connection between working agricultural
    lands and sustaining a healthy environment.

                              PREPARED STATEMENTS

        In summary, I believe that the administration's fiscal year
    2007 budget request reflects sound policy and provides solid
    support for the vital mission of voluntary conservation on
    private lands.
        Thank you very much.
        [The statements follow:]

                         Prepared Statement of Mark Rey

        Mr. Chairman and members of the Subcommittee, I am pleased to
    appear before you today to present the fiscal year 2007 budget and
    program proposals for the Natural Resources Conservation Service (NRCS)
    of the Department of Agriculture (USDA). I am grateful to the Chairman
    and members of this Subcommittee for the ongoing support of private
    lands voluntary conservation and the protection of soil, water, and
    other natural resources.
        Farmers, ranchers, and other private landowners across America play
    a vital role in conserving our Nation's soil, water, air, and wildlife
    resources, while producing abundant food and fiber. More than 70 years
    of ``helping people help the land'' gives NRCS a firm foundation to
    meet the challenge of balancing production agriculture with resource
    conservation. For fiscal year 2007, the President's Budget meets that
    challenge by recommending a record $4 billion in mandatory funding to
    expand participation in Farm Bill conservation programs.

                      PRESIDENT'S FISCAL YEAR 2007 BUDGET

        The President's fiscal year 2007 budget request for NRCS provides
    resources for the ongoing mission of NRCS, while ensuring that new
    challenges faced by landowners can be addressed.
        Because of the overriding need to reduce the deficit, NRCS, like
    every Federal agency, will share in the responsibility of controlling
    Federal spending. There are proposals in the fiscal year 2007 Budget
    that will produce savings in both the mandatory and discretionary
    accounts. These savings will enable the Administration to target
    funding based on need and program results.
        With that said, the President's fiscal year 2007 budget request for
    NRCS recognizes the vital role that natural resource conservation plays
    in securing America's national security. Without productive soil, clean
    water and air, and farmers and ranchers who can make a living off the
    land, the United States would not be the strong Nation it is today.
        The fiscal year 2007 budget request for NRCS provides $2.8 billion
    in total funding, with $788.6 million in discretionary funding, and $2
    billion in mandatory funding, including $1 billion for the
    Environmental Quality Incentives Program.
        Also on the mandatory side, the Budget request includes an increase
    of $153 million for the Wetlands Reserve Program (WRP) to enroll and
    additional 250,000 acres. This represents an investment of $402 million
    for WRP, and will bring the total acreage enrolled in the program to
    more than 2.2 million acres.
        WRP is the principal supporter of the President's Wetlands
    Initiative to restore, protect, and enhance 3 million acres of wetlands
    over a 5 year period that will begin in June 2004. WRP also contributes
    roughly one-third of all the acres toward the goals of the President's
    Wetlands Initiative.
        The appropriation request includes $634.3 million for the
    Conservation Technical Assistance (CTA) Program, which is the base
    program that supports the Department's conservation efforts with State
    and local entities, and the basic conservation planning and decision
    support needed to successfully implement Farm Bill conservation
    programs.

                    BUILDING STRONG ACCOUNTABILITY MEASURES

        In the current budget environment, it is more important than ever
    to continue working diligently on accountability and results
    measurement for the funds provided by Congress. Mr. Chairman, I am
    proud of the great strides NRCS has made in the past year on this
    effort as well as on making NRCS information more accessible to
    farmers, ranchers, and the general public. NRCS has taken bold steps to
    address all the challenges identified as a result of the Office of
    Management and Budget's Program Assessment Rating Tool (PART) scores
    for various conservation programs. PART reviews have been completed for
    12 NRCS programs. The Agency has used these assessments to develop
    long-term outcome based performance measures and to become even more
    results oriented.
        Meeting the President's Management Agenda is critical to all of us
    at USDA. Linking program requirements and program allocations to
    performance and accountability measures helps both the Administration
    and Congress make the most informed budget decisions.
      conservation security program (csp) customer service results survey
        Mr. Chairman, in past testimony before this Subcommittee, I have
    discussed the excellent score NRCS received in a measure of customer
    satisfaction for conservation assistance. I am proud to report that
    according to the American Customer Satisfaction Index (ACSI) conducted
    by the University of Michigan, NRCS received an overall score of 76 out
    of 100 for administering CSP. This voluntary program supports ongoing
    stewardship of private agricultural land by providing payments for
    maintaining and enhancing natural resources.
        NRCS' score for CSP is considerably higher than the 2005 national
    average of 71 for the Federal Government and right on track with
    earlier scores for the Environmental Quality Incentives Program (75)
    and the Wildlife Habitat Incentives Program (77) from surveys conducted
    in 2004.
        The four drivers of satisfaction that were measured for CSP include
    its Self-Assessment Workbook, the one-on-one personal interview with
    NRCS, the contract review and award process, and NRCS staff. This is
    the first customer satisfaction survey for this new program.

                      STREAMLINING FOR CONSERVATION GAINS

        NRCS continues to make strides in streamlining operations. In this
    process, the Agency is striving to keep the administration of
    conservation programs as lean as possible. We are doing that by:
      --Streamlining the payment process;
      --Building our eGovernment infrastructure, including eForms, and the
            programs Web site;
      --Reducing required paperwork for customers through a common computer
            database in USDA Service Centers;
      --Streamlining program forms that are used, trying to be more
            consistent between like programs such as the easement programs,
            and consolidating program manuals when possible;
      --Costing and revising program allocation formulas to distribute
            funds to States on resource-based methodology;
      --Working on an automated application ranking tool;
      --Establishing a process for rapid watershed assessments to provide
            initial estimates of where conservation investments can best
            address resource concerns;
      --Continuing to place programmatic and technical information
            available on the Agency's Web site to give our employees and
            customers access to the latest, high-quality information; and
      --Instituting programmatic reforms such as a pilot sign-up process
            for conservation planning technical assistance.

                    ACCELERATING CONSERVATION IMPLEMENTATION

        Accelerating conservation implementation is essential. Wise
    management of resources is critical. We need to get the 5 to 10-year
    contracts the Agency has signed with farmers completed, get the
    conservation on ground, and at the same time, aware of the realities of
    farm economics. Conservation is a wise investment in the future of our
    country's healthy soil, clean water, and abundant wildlife; but
    practicing good conservation also makes good economic sense.

                       STRATEGIC PLANNING FOR THE FUTURE

        I am proud of the accomplishments NRCS achieved in 2005. An effort
    that particularly stands out is one undertaken to chart the future by
    completing a new strategic plan. The strategic planning process
    incorporated internal and external assessments of natural resources,
    human capital, civil rights, and other issues. The information
    collected through this assessment served as the foundation to formulate
    the new strategic plan. This plan will be a comprehensive roadmap to
    guide the Agency over the next 10 to 20 years.
        The plan introduced a new mission statement, ``helping people help
    the land.'' This mission, and an accompanying vision statement,
    articulates the Agency's role to assist private landowners and solidify
    the essential connection between retaining a viable agricultural
    presence on the landscape and sustaining a healthy environment.

                                   CONCLUSION

        Mr. Chairman, in summary, we are planning for the future under an
    atmosphere of increasingly austere budgets and economic uncertainties
    along with a multitude of other unknowns on the domestic and
    international fronts. I believe that the Administration's fiscal year
    2007 Budget request reflects sound policy, and will provide stability
    to the vital mission of voluntary conservation on private lands. The
    Budget request reflects sound business management practices and the
    best way to work for the future and utilize valuable conservation
    dollars efficiently and wisely.
        I thank members of the Subcommittee for the opportunity to appear,
    and would be happy to respond to any questions that Members might have.
                                     ______

        Prepared Statement of Bruce I. Knight, Chief, Natural Resources
                              Conservation Service

        Thank you for the opportunity to appear before you today to discuss
    our fiscal year 2007 budget request for the Natural Resources
    Conservation Service (NRCS).
        As we look ahead to fiscal year 2007, and the contents of the
    Administration's budget request, I want to take a moment to reflect
    upon the successes that NRCS has faced in the past year and what we are
    doing to move the Agency forward. It has been a productive year for
    NRCS, our partners, and landowners across America. We have assisted
    landowners to treat over 42 million acres of conservation and develop
    over 4,400 Comprehensive Nutrient Management Plans (CNMP). This brings
    the total CNMPs applied with NRCS support since 2002 to more than
    14,000. In addition, last year NRCS and our partners:
      --Served nearly 3.8 million customers around the country;
      --Completed or updated soil survey mapping on 31.2 million acres, of
            which, 1.8 million acres were on Native American or Native
            Alaskan lands;
      --Conducted a comprehensive study of technical assistance,
            reaffirming the intrinsic value of scientifically based tools
            and activities including developing conservation plans and
            encouraging a knowledge-based approach to conservation;
      --Committed to over 49,000 Environmental Quality Incentives Program
            (EQIP) contracts for multi-year conservation obligations;
      --Enrolled over 3,300 Wildlife Habitat Incentives Program (WHIP)
            contracts;
      --Expanded the Conservation Security Program nationwide to recognize
            outstanding land stewards and enable them to do more;
      --Helped land managers create, restore, or enhance more than 284,000
            acres of wetlands primarily through WRP;
      --Facilitated nearly 1 million hours of Earth Team volunteer service;
            and
      --Registered over 2,500 Technical Service Providers to assist in
            conservation planning and implementation efforts, obligating
            $52.7 million in fiscal year 2005. This provided the equivalent
            of 520 staff years to attain additional conservation
            achievements.
        As we look ahead to this year and beyond, we will direct our
    efforts toward ensuring that all of the potential conservation gains
    are fully realized. What I mean by that is NRCS will be focusing on
    fine-tuning our business tools and solidifying the progress we have
    made in working with farmers and ranchers across America to implement
    conservation programs. We want to make sure everything works smoothly--
    for our employees and our customers. We want our decisions and
    processes to be transparent. We want to be even more efficient,
    effective and focused on meeting our customers' needs.

                          HELPING PEOPLE HELP THE LAND

        For over 70 years, NRCS has been committed to locally led,
    voluntary cooperative conservation. Last year, one of our district
    conservationists from Iowa suggested that we describe our mission as
    ``helping people help the land.'' The phrase is succinct and it
    effectively describes what we do, so our Agency has adopted ``helping
    people help the land'' as our new mission statement.

                               NEW STRATEGIC PLAN

        In fiscal year 2005, NRCS initiated an aggressive strategic
    planning process to develop a roadmap to guide the Agency over the next
    10 to 20 years. This new NRCS Strategic Plan refines and builds on the
    goals and successes of past plans; and directly supports the new U.S.
    Department of Agriculture (USDA) Strategic Plan. The NRCS plan was
    developed around three foundations:
      --Agency customers;
      --Agency business lines and associated products and services; and
      --Priority and newly emerging natural resource conservation issues.
        The new plan emphasizes three overarching strategies--cooperative
    conservation, the watershed approach, and market-based approaches to
    conservation. These complementary strategies will be used effectively
    to assist private landowners manage their lands and resources to
    achieve national natural resource goals and objectives.
        The plan includes six mission goals oriented toward existing and
    emerging natural resource challenges. Three are Foundation Goals which
    reflect long-standing conservation priorities and include: high
    quality, productive soils; clean and abundant water; and healthy plant
    and animal communities. Also, new in this plan are three Venture Goals
    that reflect emerging areas of natural resource interest, posing
    challenges for niche definition and capacity building. The Venture
    Goals include: clean air, an adequate energy supply, and working farm
    and ranch land preservation.
        Even though the agency's new strategic plan has not yet been
    implemented, there are things that we are doing already to make this
    plan operational. We have integrated the concepts of business lines and
    new Agency goals in our fiscal year 2006 business planning process. Our
    Strategic Human Capital Plan has adopted the strategic plan as a
    framework, ensuring that succession planning aligns with the Agency's
    long-term goals and objectives. We are emphasizing cooperative
    conservation and market-based and watershed approaches in our programs,
    such as in the Cooperative Conservation Partnership Initiative and
    Conservation Innovation Grants that offer competitive grants to a broad
    and diverse array of potential customers.

                          HUMAN CAPITAL STRATEGIC PLAN

        NRCS is in the process of developing a Human Capital Strategic Plan
    to help us focus on the future workforce of our Agency. Over the next 5
    years, more than half of Federal employees are eligible to retire. This
    pool of potential retirees includes highly skilled key personnel such
    as our engineers, hydrologists, soil scientists, and agronomists, just
    to name a few. Because of the importance of these disciplines to our
    organization, it is vital that we have a strategy in place to fill-in
    behind these employees and provide the high level of expertise that our
    customers have come to expect. We will develop this plan to address the
    potential loss of so many employees and to compete for talent in a
    shrinking pool of candidates; primarily due to generational changes in
    employment trends, and shifts in academia from agriculture related
    disciplines to more ecology and ecological related degrees. We need a
    strategy that will continue to make NRCS the ``employer of choice'' for
    highly skilled individuals interested in serving in voluntary
    conservation.

                               EMPHASIS ON ENERGY

        One of the issues facing many farmers today is the high cost of
    fuel, fertilizer and other energy-related inputs. In early December
    2005, Secretary Johanns announced the USDA Energy Strategy, which is a
    concerted effort to look at both reducing demand for oil and natural
    gas and increasing supply through bio-fuels.
        To assist in this effort, NRCS has developed the three-click Energy
    Estimator Tool, which helps farmers and ranchers determine how much
    they could save by switching from conventional tillage to no-till or
    another reduced tillage system.
        I am pleased to announce that we recently released a Nitrogen
    Estimator Tool. Farmers can use this tool to better estimate how much
    nitrogen they are applying on the ground in order to better manage and
    minimize the amount of fertilizer applied. A large part of fertilizer
    costs relate to energy; this tool can help result in a net savings for
    farmers and ranchers that apply the technology.
        Beyond these two tools, the Agency is also working on an Irrigation
    Estimator Tool to help show water savings garnered by switching to less
    intensive water conservation practices.
        The Agency is working on an enhancement that would help farmers
    figure out how much they could save through improved irrigation
    systems. A second enhancement will enable producers to predict their
    savings by switching from fossil fuel fertilizer to animal manure.

                             WEB BASED SOIL SURVEY

        One of the fundamental building blocks of conservation is
    knowledge. We know that farmers, ranchers, contractors, and homeowners
    need sound data about the land where they live. In continued efforts to
    make conservation data as transparent and available as possible, we
    launched a Web Soil Survey to make soils data available upon demand
    through the internet. Soil survey maps and related information are
    available online for more than 95 percent of the Nation's counties.
        As we move forward in fiscal year 2006, there is some innovative
    technology that can help farmers and ranchers realize even bigger gains
    in their conservation efforts. We look forward to building upon the
    technology foundation achieved this year to implement even more
    voluntary conservation on America's private lands.

                             DISCRETIONARY FUNDING

        The President's fiscal year 2007 budget request for NRCS reflects
    our ever-changing environment by providing resources for the ongoing
    mission of NRCS and ensuring that new opportunities are realized.

                            CONSERVATION OPERATIONS

        The President's fiscal year 2007 budget request for Conservation
    Operations (CO) proposes a funding level of $745 million, which
    includes $634.3 million for Conservation Technical Assistance (CTA),
    $89.3 million for Soil Surveys, $10.6 million for Snow Surveys, and
    $10.7 million for the 26 Plant Materials Centers. As in past requests,
    the Budget does not fund continuation of fiscal year 2006 congressional
    earmarks.
        Mr. Chairman, while for years we have stated that CO is the heart
    of everything our Agency does, we need to do a better job describing
    the program's scope and effect. The Office of Management and Budget's
    Program Assessment Rating Tool (PART) process has been an important
    step in developing meaningful, quantifiable long-term performance
    measures. This review has helped the Agency streamline the program and
    focus on national priorities in fiscal year 2005 including, development
    of CNMPs that will help landowners meet regulatory challenges;
    reduction of non-point source pollution (nutrient, sediments,
    pesticides, or excess salinity); reduction of emissions, such as
    particulate matter, that contribute to air quality impairment;
    reduction of soil erosion from agricultural lands; and promotion of at-
    risk species habitat conservation.
        Mr. Chairman, I am pleased to report that in fiscal year 2005, NRCS
    developed and implemented the first comprehensive CTA Program policy
    that improves transparency and clarifies the program's mission in an
    era of increased accountability. This year, NRCS revised the allocation
    process for the CTA Program to ensure that dollars go where the needs
    are greatest. This new methodology will provide a more transparent
    allocation that addresses resource issues. The new allocation formula
    also aligns with the new CTA policy and national priorities, and
    integrates program performance measures that were developed in the PART
    process.
        In addition, this year we had 9 States participate in NRCS' first
    conservation planning sign-up. This is a pilot initiative that
    emphasizes the importance of conservation planning to help producers be
    better prepared to apply for conservation programs and to comply with
    Federal, State, tribal and local governmental regulations. The sign-up
    enabled landowners to plan more realistically to implement practices
    and apply for conservation programs in a more comprehensive approach.
        All of these improvements will ensure that the most pressing
    conservation needs on America's private lands are addressed and will
    help NRCS meet its strategic planning objectives and improve
    accountability.

                   WATERSHED AND FLOOD PREVENTION OPERATIONS

        Through the Watershed Protection and Flood Prevention Operations
    program that NRCS administers, our employees work in partnership with
    local leaders to improve the overall function and health of the
    Nation's watersheds. Each project developed under this program has a
    specific purpose and benefit; most address a primary purpose of flood
    control, while other project benefits include upland conservation
    practices that address a variety of natural resources needs such as
    water quality improvement, soil erosion control, animal waste
    management, irrigation, water management, water supply development, and
    recreation enhancement. However, the Administration proposes to
    terminate funding for WFPO in fiscal year 2007 for several reasons.
        First, the decrease in funding in the WFPO will enable the
    Administration to focus limited resources to other higher priority
    conservation programs. It is expected that those high-priority
    watershed projects not yet completed will continue to receive strong
    local support from project sponsors, and that progress on them will
    continue to be made.
        In 2004, the Administration compared the benefits and costs of
    three Federal flood damage reduction programs operated by NRCS, the
    Corps of Engineers, and the Federal Emergency Management Agency. The
    analysis found that of the three programs, the WFPO program provided
    the least net flood damage reduction benefits.
        Mr. Chairman, I would also note that the amount of funding
    earmarked by Congress for this program nearly equaled the amount
    appropriated. This seriously hampers the Department's ability to
    effectively manage the program, and does not permit the Agency to
    prioritize projects based upon merit and local need.

                         WATERSHED SURVEYS AND PLANNING

        The Watershed Surveys and Planning authorities are directed toward
    assessment of natural resource issues and development of watershed
    plans to conserve and utilize natural resources, solve local natural
    resource and related economic problems, avoid and mitigate hazards
    related to flooding, and provide for advanced planning for local
    resource development. This includes Floodplain Management Studies,
    Cooperative River Basin Studies, Flood Insurance Studies, Watershed
    Inventory and Analysis, and other types of studies, as well as Public
    Law 566 Watershed Plans.
        With the elimination of Watershed and Flood Prevention Operations
    (WFPO), continuation of this planning component is no longer necessary.
    The fiscal year 2007 budget proposes to redirect this program's
    resources to other higher priority programs. It is expected that local
    sponsoring organizations, as well as State and local governments, will
    assume a more active role in identifying water resource problems and
    their solutions.

                            WATERSHED REHABILITATION

        The Watershed Rehabilitation program addresses the problem of aging
    dams, especially those with a high risk for loss of life and property.
    Fifty-six dams have rehabilitation plans authorized and implementation
    of the plans is underway.
        NRCS currently has 107 dams that have rehabilitation plans
    authorized, and the projects are completed or implementation of the
    plans is underway. This number adds to the 728 rehabilitation
    assessment reports already completed.
        The Administration requests $15.3 million to address critical dams
    with the greatest potential for damage to life and property.

                 RESOURCE CONSERVATION AND DEVELOPMENT PROGRAM

        The purpose of the Resource Conservation and Development (RC&D)
    Program is to encourage and improve the capabilities of State, local
    units of government, and local nonprofit organizations in rural areas
    to plan, develop, and carry out programs for resource conservation and
    economic development. The program provides technical assistance to
    local communities to develop strategic plans that address their locally
    identified natural resource and economic development concerns. The
    budget proposes to reduce funding by $25 million and consolidate the
    number of RC&D coordinators from 375 to about 150. The current number
    of authorized RC&D Areas nationwide will be maintained at the current
    375. The responsibilities and duties of the RC&D Coordinator position
    would be modified to provide more coordination and oversight duties
    instead of hands-on, day-to-day activities.
        The reduction in funding for the RC&D Program will require that it
    be more focused on multi-county/parish planning, intergovernmental
    relations, serving as the Federal Government Representative on any
    Federal contracts with the RC&D Councils, and coordinating USDA
    assistance available toward implementation of RC&D Area Plans. The
    overall proposed budget for RC&D in fiscal year 2007 is $25.9 million.

                         FARM BILL AUTHORIZED PROGRAMS
                            WETLANDS RESERVE PROGRAM

        The Wetlands Reserve Program (WRP) is a voluntary program in which
    landowners are paid to retire cropland from agricultural production if
    those lands are restored to wetlands and protected, in most cases, with
    a long-term or permanent easement. Landowners receive fair market value
    for the land and are provided with cost-share assistance to cover the
    restoration expenses. The 2002 Farm Bill increased the program
    enrollment cap to 2,275,000 acres. WRP also is the principle USDA
    program to help meet the President's Wetland Initiative goal to create,
    restore and enhance 3 million acres of wetlands by 2009.
        The President's 2007 budget proposes $402 million for the WRP, an
    increase of $153 million over the 2006 level. This will allow an annual
    enrollment of 250,000 acres; an increase of 100,000 acres, and will
    bring total cumulative enrollment to 2,225,700 acres.

                    ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

        The purpose of the Environmental Quality Incentives Program (EQIP)
    is to provide flexible technical and financial assistance to landowners
    that face serious natural resource challenges that impact soil, water,
    and related natural resources, including grazing lands, wetlands, and
    wildlife habitat management.
        In fiscal year 2005, EQIP funding was almost $1 billion. Over
    49,000 contracts were written to assist landowners in treating an
    estimated 18.1 million acres.
        Mr. Chairman, in addition, NRCS assumed all contracting and
    administration responsibilities for EQIP (including payments to
    participants) were previously made through the Farm Service Agency. All
    functions were carried out through a Web-based contracting software
    program called ``ProTracts.'' This streamlining of procedures
    eliminated duplication of effort and resulted in real-time data.
        Technical Service Providers (TSPs) were used to a greater extent
    last year and have more than doubled since fiscal year 2003. NRCS
    obligated over $52 million in EQIP for TSPs to complement the
    conservation planning activities carried out under this program.
        NRCS offered approximately $20 million in Conservation Innovation
    Grants (CIG) to stimulate the development and adoption of new
    innovative conservation approaches while leveraging Federal investment.
    This program was authorized under EQIP in the 2002 Farm Bill and allows
    competitive grants to be awarded to eligible entities, including State
    and local agencies, non-governmental organizations, tribes or
    individuals to accelerate technology transfer and to develop promising
    new technologies to address some of our Nation's most pressing natural
    resource concerns.
        The President's budget proposes a level of $1 billion for EQIP,
    about the same level as in 2006.

                           GRASSLAND RESERVE PROGRAM

        The 2002 Farm Bill authorized the Grassland Reserve Program (GRP)
    to assist landowners in restoring and protecting grassland by enrolling
    up to 2 million acres under easement or long-term rental agreements.
    The 2002 Farm Bill authorized $254 million for implementation of this
    program during fiscal year 2003 through fiscal year 2007. No additional
    funding was requested in the President's budget for GRP in fiscal year
    2007 as the program reached its statutory funding limit in fiscal year
    2005.

                         CONSERVATION SECURITY PROGRAM

        The Conservation Security Program (CSP), as authorized by the 2002
    Farm Bill, is a voluntary program that provides financial and technical
    assistance for the conservation, protection, and improvement of natural
    resources on tribal and private working lands. The program provides
    payments for producers who practice good stewardship on their
    agricultural lands and incentives for those who want to do more.
        In 2005, CSP was implemented in 220 watersheds nationwide,
    including Puerto Rico, and resulted in about 12,000 eligible
    applications covering more than 9 million acres of privately owned
    land. In fiscal year 2004, NRCS initiated the program in 18 watersheds
    within 22 States. In the 2-year period since, NRCS has rewarded nearly
    14,800 stewards on 10.9 million acres of working agricultural land.
        Through the CSP enhancement provisions and the application of
    intensive management measures, producers are achieving even greater
    environmental performance and additional benefits for society. Several
    new conservation activities will allow producers to further enhance
    their operation and the natural resources. For example, the energy
    component of CSP is rewarding farmers and ranchers for converting to
    renewable energy fuels such as soy bio-diesel and ethanol. Because CSP
    enhancements go beyond the minimum requirements, innovative producers
    are pushing conservation technology to produce even greater
    conservation benefits.
        Recently, the Secretary announced the fiscal year 2006 sign-up for
    CSP which runs through March 31, 2006, in 60 watersheds across all 50
    States, the Caribbean, and Guam. The fiscal year 2006 announcement
    marks the third CSP sign-up.
        The President's fiscal year 2007 budget requests $342.2 million in
    program funding an increase of $83 million to continue expanding the
    program and rewarding excellent conservation stewards.

                      WILDLIFE HABITAT INCENTIVES PROGRAM

        The Wildlife Habitat Incentives Program (WHIP) is a voluntary
    program that provides cost-sharing for landowners to apply an array of
    wildlife practices to develop habitats that will support upland
    wildlife, wetland wildlife, threatened and endangered species,
    fisheries, and other types of wildlife. The budget proposes a funding
    level for WHIP of $55 million, with the additional $10 million
    supporting the improvement and restoration of streams and rivers for
    migratory fish species. NRCS will prioritize WHIP resources to deliver
    community-driven, small dam and river barrier removal projects in
    coastal States to enhance populations of key migratory fish species.

                    FARM AND RANCH LANDS PROTECTION PROGRAM

        Through the Farm and Ranch Lands Protection Program (FRPP), the
    Federal Government establishes partnerships with State, local or tribal
    government entities or nonprofit organizations to share the costs of
    acquiring conservation easements or other interests to limit conversion
    of agricultural lands to non-agricultural uses. FRPP acquires perpetual
    conservation easements on a voluntary basis on lands with prime,
    unique, or other productive soil that presents the most social,
    economic, and environmental benefits. FRPP provides matching funds of
    no more than 50 percent of the purchase price for the acquired
    easements. The budget proposes a level of $50 million for FRPP in
    fiscal year 2007.

                    EMERGENCY RESPONSE TO HURRICANE KATRINA

        In addition Mr. Chairman, the NRCS helped communities across the
    Gulf Coast region recover from the devastation caused by the 2005
    hurricanes through the Emergency Watershed Protection (EWP) Program.
    The purpose of the EWP program is to undertake emergency measures,
    including the purchase of floodplain easements, for runoff retardation
    and soil erosion prevention to safeguard lives and property from
    natural disasters. The typical process for delivery of this program
    starts with the local sponsor requesting assistance for a disaster
    recovery effort. NRCS then conducts a damage assessment to identify if
    the project is eligible and develops an estimated cost. Typical work
    under this program consists of debris removal from clogged streams
    caused by flooding; installing conservation measures, like reseeding
    native grasses to prevent soil erosion on hillsides after a fire; or
    replanting and reshaping streambanks due to erosion caused by flooding.
    At the request of communities across the Gulf Coast region recovering
    from Hurricanes Katrina and Rita, NRCS completed nearly $23 million in
    recovery work under the EWP Program immediately following the damage.
    In addition, the fiscal year 2006 Supplemental Appropriations provided
    $300 million for EWP hurricane recovery efforts.
        As part of USDA's hurricane relief efforts, NRCS assisted
    hurricane-impacted States by providing maps used by first responders to
    assess ground conditions during the search and rescue of survivors.
    Current satellite and airborne imagery is used to locate possible
    dangers, such as fires, and the safest route to rescue survivors. Soil
    survey data layers are used to locate the best areas for animal debris
    disposal and burial that will not endanger water sources. NRCS
    continues to work with other USDA agencies, the Federal Emergency
    Management Agency (FEMA), and State emergency agencies to assist with
    post-disaster cleanup and restoration projects in Louisiana, Florida,
    Mississippi, Texas, and Alabama.
        The President recently made a request for $10 million of additional
    funding under WFPO for the EWP Program for the purchase of easements on
    floodplain lands in disaster areas affected by Hurricane Katrina and
    other hurricanes of the 2005 season. Under the EWP Floodplain Easement
    Program, a landowner voluntarily sells a permanent conservation
    easement to NRCS and, in return for a payment for the agricultural
    value of the parcel, foregoes future cropping and development on the
    land. NRCS restores the natural features and characteristics of the
    floodplain to generate public benefits, such as increased flood
    protection and reduced need for future public disaster assistance.

                                   CONCLUSION

        As we look ahead, it is clear that the challenges before us will
    require the dedication of all available resources--the skills and
    expertise of the NRCS staff, the contributions of volunteers, and
    continued collaboration with partners and TSPs.
        I am proud of the work and the conservation ethic our people
    exhibit day in and day out as they go about the job of getting
    conservation on the ground. Through Cooperative Conservation, we have
    achieved a great deal of success. We are sharply focusing our efforts
    and will work together with our partners to consolidate our gains this
    coming year. I look forward to working with you, as we move ahead in
    this endeavor.
        This concludes my statement. I will be glad to answer any questions
    that Members of the Subcommittee might have.

        Senator Bennett.
        Thank you.
        Mr. Bost.

                           STATEMENT OF ERIC M. BOST

        Mr. Bost. Mr. Chairman and Senator Kohl, I thank you for
    the opportunity to present the administration's fiscal year
    2007 budget for Food, Nutrition, and Consumer Services.
        However, before I do that, there are a couple of
    accomplishments I would like to note that I think are very
    important. We continue to ensure programmatic success to all of
    those that are eligible and in need of benefits. Most recently,
    26 million people are participating in our Food Stamp Program,
    29 million children are participating in our National School
    Lunch Program every day, and we are serving approximately 8
    million children, women, and infants in our WIC Program.
        In addition to that, last year we released ``My Pyramid,''
    and we are up to 1.5 billion hits to that site. In addition, we
    released ``Pyramid For Children,'' and we are over 500 million
    hits.
        The Chairman made reference to this, but I also want to
    note the outstanding work done by the FNS staff and our
    partners; APHSA, America's Second Harvest, and FRAC in terms of
    addressing the needs of those persons in our Gulf that were
    affected by the hurricanes.
        As a result of FNS's efforts, we provided over $900 million
    in food stamp benefits to over 1.9 million affected households.
    We also provided over 22 million pounds of baby food, formula,
    meats, and pasta products to persons in need. We were on the
    ground and operating 1 day after the hurricane hit, and it is
    something that we are very proud of.
        In terms of the fiscal year budget for 2007, we are
    requesting funds in the amount of $57 billion. This will allow
    us to meet the needs of approximately 25.9 million persons in
    our Food Stamp Program, monthly participation in our WIC
    Program in the amount of 8.22 million persons, serve 30.9
    million children in our National School Lunch Program, and
    serve 10.3 million students in our School Breakfast Program.
        If our estimates in terms of program participation or costs
    are too low, we continue to request $3 billion in contingency
    funds for the Food Stamp Program, and for the first time, are
    requesting $300 million for our Child Nutrition Programs.
        When you put together a budget, you are not able to do all
    of the things you might want to do. As a result, we had to make
    some tough choices and decisions. That is why we are requesting
    the ability to phase out the Commodity Supplemental Food
    Program (CSFP) program for a couple of reasons.
        First and foremost, CSFP is only operating in limited areas
    in 32 States, 2 Indian reservations, and the District of
    Columbia. We believe that we can serve these affected persons
    in other nutrition assistance programs.
        The other thing that I would say that we also believe is
    very important is the fact that the error rate in the Food
    Stamp Program is at 5.88, which is the lowest that it has ever
    been in the history of the Food Stamp Program. It is something
    we are also very, very proud of.
        With that in mind, we are requesting additional resources
    to be able to maintain that level of efficiency in our program.
        This budget also requests $675 million to continue in our
    efforts to move Americans toward a healthier lifestyle.
    Approximately 62 percent of all Americans in this country are
    overweight. Thirty percent of us are obese. Twenty-two percent
    of all adolescents are overweight. We have seen a doubling in
    the rate of Type 2 diabetes among children.

                              PREPARED STATEMENTS

        According to the numbers at the Centers for Disease Control
    and Prevention (CDC), we spend approximately $123 billion in
    health-related costs because we eat too much and exercise too
    little.
        I am really pleased to be able to present this budget
    request and am more than happy to answer any questions that you
    may have.
        [The statements follow:]

                       Prepared Statement of Eric M. Bost

        Thank you, Mr. Chairman, and members of the subcommittee for this
    opportunity to present the Administration's fiscal year 2007 budget
    request for USDA's Food, Nutrition, and Consumer Services (FNCS).
        I am here today to discuss with you the President's budget request
    which demonstrates the Administration's steadfast commitment to our
    Nation's nutrition assistance programs. These programs ensure a
    nutrition safety net for the Nation's children, elderly and low-income
    households and, in conjunction with the Center for Nutrition Policy and
    Promotion, inform all Americans about the importance of good nutrition
    and physical activity. I am proud of our accomplishments and honored to
    work for a President who provides clear and continued support for these
    programs that protect our children and low-income households from
    hunger, and help to prevent the health risks associated with poor
    nutrition and physical inactivity for all our citizens.
        Our Federal nutrition assistance programs are there to meet the
    needs of Americans, not just in their everyday life, but also in times
    of disaster. I am so proud of my staff's efforts in the aftermath of
    the recent hurricanes. When the victims of Hurricanes Katrina, Rita and
    Wilma needed our programs, we responded immediately. Cutting through
    red tape, simplifying requirements, trucking and airlifting food,
    expediting services, working around the clock, our staff worked side by
    side with State and local staff and volunteers to help the evacuees get
    the food they needed. We even negotiated with other States to borrow
    eligibility workers to help meet high program demand within disaster
    States. Over $900 million in Food Stamp benefits were provided to over
    1.9 million affected households. For situations where food stamps could
    not meet the needs, we worked in cooperation with the Agricultural
    Marketing Service, made commodity purchases; sped up planned deliveries
    already in the pipeline; and diverted product from other parts of the
    country to move commodities where they were most needed. In total, we
    provided over 22 million pounds of baby food, formula, meats, pasta
    products, fruits and vegetables for congregate feeding and also for
    distribution to households for home consumption.
        I am proud to report to you today that the Federal nutrition
    assistance programs staff, at every level, succeeded in providing a
    timely and robust nutrition response to these devastating storms. This
    response underscores the value and high level of performance of these
    programs and the people at the Federal, State and local level who make
    them work across the country, every day. These programs truly operated
    as a safety net in the days and months immediately following these
    disasters. The President's budget is committed to keep these vital
    programs strong.
        Mr. Chairman, this budget, more than any other I have presented to
    you, reflects the fundamental challenge of this Administration:
    ensuring that the needs of all eligible persons seeking to participate
    in our programs are met while at the same time protecting the interests
    of current and future generations who must accept the consequence, both
    economic and social, of the unsustainable levels of deficit spending
    and Federal debt. Not all of our existing programs are funded in this
    request, but we have been very careful to make certain to provide
    access to nutrition assistance programs for all eligible populations we
    serve.
        We have made tough choices and developed a budget request that
    makes every dollar produce maximum benefit for the vulnerable
    populations served by our programs and for the Nation as a whole. This
    is the first budget request I have presented to you that includes an
    overall decrease in resources requested. That decrease, however, in no
    way represents a wavering in the Administration's demonstrated,
    consistent support for the Nation's nutrition safety net. Funds
    requested within the budget fully support our best estimates of demand
    for program services and cost for the major nutrition assistance
    programs in fiscal year 2007.
      --This includes a monthly average participation of 25.9 million
            persons in the Food Stamp Program. This represents a decrease
            of approximately 1 million from fiscal year 2006, the first
            projected decrease in participation in 5 years. This reduction
            results, in large part, from sustained strong economic
            performance and the transition of Gulf Coast disaster
            participants to self-sufficiency.
      --Participation in the WIC program is expected to rise slightly in
            fiscal year 2007 from 8.17 million participants a month to 8.22
            million.
      --In the School Meals Programs, daily meal service to our youth will
            reach 30.9 million students in the National School Lunch
            Program and 10.3 million students in the School Breakfast
            Program.
        Three principle objectives guide our administration of these
    programs, (1) to ensure that low-income people have access to food by
    ensuring sufficient funding for the major nutrition assistance
    programs; (2) to promote healthful diets and active lifestyles by
    making nutrition education an integral part of the nutrition assistance
    programs; and (3) to manage prudently and efficiently so that every
    dollar invested has maximum benefit for those truly in need. The
    President's budget request for fiscal year 2007, like all prior
    requests submitted by this Administration, reflects these prime
    objectives.

                ENSURING LOW INCOME PERSONS HAVE ACCESS TO FOOD

        At its most basic level, ensuring program access must begin with
    making certain that sufficient resources are available so all who are
    eligible and in need can have ready access to benefits. The President's
    fiscal year 2007 budget requests funds to support anticipated
    participation in the Food Stamp Program, the Child Nutrition Programs
    and the WIC Program. The Administration's strong commitment to
    adequately fund these critical programs acknowledges the inherent
    difficulties in anticipating future demand for program services, and
    provides for contingency funding should program costs exceed our
    estimates. Should our estimates of program participation or costs prove
    too low, we have continued to protect program access for all eligible
    persons, a key objective of the President and myself, through properly
    funded contingency reserves. In the Food Stamp Program we have
    continued the funding for the contingency reserve of $3 billion. These
    funds are especially important as the program transitions out of a
    period of growth and begins to reflect the benefits of strong economic
    performance the Nation has been enjoying. In the WIC Program,
    approximately $125 million remains available to ensure that the
    essential food, nutrition education, and health care referral services
    remain available to all who need them.
        For the first time, the President has proposed a contingency
    reserve for the Child Nutrition Programs. The reserve, proposed at $300
    million, will ensure that sufficient resources are available to fully
    fund the mandatory entitlement payments to our State and local partners
    who make certain that nutritious, appealing meals are available to all
    our children in schools and many childcare settings.

                PROMOTING HEALTHFUL DIETS AND ACTIVE LIFESTYLES

        Our programs provide nutrition assistance, including both access to
    healthy food and nutrition education and promotion to support and
    encourage a healthy lifestyle. With this nutrition mission in mind, and
    the Center for Nutrition Policy and Promotion's (CNPP) focus on the
    broader population, we play a critical role in the integrated Federal
    response to the growing public health threat posed by overweight and
    obesity which affects well over half of adult Americans.
        The Federal nutrition assistance programs play a critical role in
    combating this epidemic by providing not just access to healthful food,
    but also promoting better health through nutrition education and
    promotion of physical activity. These FNS program services, along with
    the work of the CNPP to improve the diets of all Americans, are a key
    component of the President's HealthierUS Initiative. I believe the
    American public is served well by USDA's contributions to addressing
    the critical nutrition- and health-related issues facing us today. This
    budget request provides approximately $675 million in resources tied
    specifically to improving the diets, nutrition knowledge and behavior
    and promoting the importance of physical activity among the people we
    serve.
        The CNPP continues to have an integral role in the development and
    promotion of updated dietary guidance and nutrition education. The
    Dietary Guidelines for Americans (Guidelines), published jointly every
    5 years by the USDA and the U.S. Department of Human Services (HHS), is
    the cornerstone of Federal nutrition policy, allowing the Federal
    Government to speak with one voice. This request features an increase
    of $2 million to support the efforts of the CNPP to maintain and
    enhance the extremely well-received food guidance system,
    MyPyramid.gov, which is one of the most frequently visited of all
    Federal websites for the public. In addition, base funding will allow
    CNPP to begin preparations for the 2010 update to the Dietary
    Guidelines for Americans for which USDA is the lead Federal agency.

                       MANAGING PRUDENTLY AND EFFICIENTLY

        With this budget request, we are asking the Nation to entrust us
    with over $57 billion of public resources. We are keenly aware of the
    immense responsibility this represents. To maintain the high level of
    public trust that we have earned as good stewards of the resources we
    manage, we will continue our ongoing commitment to program integrity as
    an essential part of our mission to help the vulnerable people these
    programs are intended to serve.
        This is not a new commitment. As I noted earlier, in fiscal year
    2004, the most recent year for which data is available, the Food Stamp
    Program achieved a record high payment accuracy rate of 94.1 percent,
    up 0.7 percent points from the fiscal year 2003 level of 93.4 percent.
    Our budget request included an increase of $4 million in the Nutrition
    Program Administration account focused on sustaining the momentum we
    have achieved to improve the Food Stamp payment accuracy and overall
    program integrity.
        We have proposed elimination of restrictive language that prohibits
    the use of funds appropriated in the program accounts for the purpose
    of studies and evaluations. This proviso has limited our capacity to
    support and assess program innovations, many of which are initiated by
    our State and local partners. Lifting this restriction will help us to
    document results more effectively, and contribute to better program
    management.
        We also continue to develop strategies to improve the accuracy of
    eligibility determinations in our school meals programs--an issue of
    mutual concern to all those that care about these programs. The Federal
    administrative resources provided for in this budget will allow us to
    advance our close work with our State and local program partners on
    both of these essential integrity initiatives--continuing both our
    successes in the Food Stamp Program and our intensified efforts in
    school meals.
        In the remainder of my remarks, I'd like to discuss in greater
    detail a few of the key proposals contained in the President's fiscal
    year 2007 request.

                               FOOD STAMP PROGRAM

        The Food Stamp Program is fully funded in the President's budget at
    $37.9 billion. This will support an anticipated average monthly
    participation of 25.9 million persons, about 1 million persons lower
    than expected in fiscal year 2006. This displays a key strength of the
    Food Stamp Program: its ability to respond dynamically to the changing
    levels of need within American society. We responded to the hurricanes
    in the Gulf Coast this past fall, providing benefits to 1.9 million
    affected households. Elsewhere, the program is now responding to the
    strength of the economy, and is no longer growing as it did in recent
    years.
        Should our estimate of fiscal year 2007 program participation or
    cost prove to be too low, the program continues to be protected by a
    contingency reserve, proposed at $3 billion in new budget authority for
    fiscal year 2007. As an alternative to the contingency reserve, the
    President's request offers a proposal of indefinite authority. This
    form of appropriation would eliminate the need for an annual
    contingency reserve appropriation, while at the same time guaranteeing
    that sufficient funds will be available to meet the entitlement
    components of the program.
        We continue to aggressively promote the message that Food Stamps
    Make America Stronger, in the sense that the program puts healthy food
    on the tables of low-income families and has a positive effect on local
    economies. The President's budget features proposals targeted at
    ensuring those in need can access benefits without sacrificing their
    retirement savings, making certain that all persons in need face the
    same program eligibility requirements regardless of where they live,
    and improving the ease and accuracy of the certification process so
    each household receives the proper benefit level. Given tough budget
    constraints, the food stamp proposals focus on those who are most
    needy.
        The President's budget proposes to expand and make mandatory the
    exclusion, first made a State option for 401(k) and Keogh accounts in
    the 2002 Farm Bill, of the value of tax-preferred retirement accounts
    from the asset test. This exclusion strengthens retirement security
    policy and enables low-income people to get nutrition assistance
    without depleting their retirement savings. It also simplifies food
    stamp resource policy and makes it more equitable because under current
    law some retirement accounts are excluded and some are included. This
    proposal supports the President's Ownership Society Initiative, by
    increasing the ability of low-income people to save for retirement. It
    is expected, when fully implemented, to add approximately 100,000
    persons to the program and to increase benefits by $592 million over 5
    years. The majority of the new participants will be workers and their
    families, most with children. On average, each new household will get
    $122 in benefits each month.
        While we seek to encourage all who are eligible and in need to
    participate in the program, we feel strongly we must also ensure that
    access to the program is administered in an equitable manner across all
    States. For this reason we have once again included a proposal to
    eliminate categorical food stamp eligibility for Temporary Assistance
    for Needy Families (TANF) participants who receive only services and
    not cash benefits. The people affected by this proposal have income or
    assets that exceed the program's regular limits. When fully implemented
    in fiscal year 2008, this change is estimated to affect approximately
    300,000 individuals and save $658 million over 5 years. The President's
    proposal restores equity among participants and ensures that food stamp
    benefits go to individuals with the most need while retaining
    categorical eligibility for the much larger number of recipients who
    receive cash assistance through TANF, Supplemental Security Income and
    General Assistance.
        Also included in the budget request is a proposal to add the Food
    Stamp Program to the list of programs for which States may access the
    National Directory of New Hires. Access to this national repository of
    employment and unemployment insurance data will enhance States' ability
    to quickly and accurately make eligibility and benefit level
    determinations, improving program integrity. This proposal is expected
    to produce a net savings of $1 million annually beginning in fiscal
    year 2008.
        Finally, the budget request reflects our continued commitment in
    two important areas. First the President's request includes a proposal
    to exclude special military pay received by members of the armed forces
    deployed in combat zones when determining Food Stamp Program
    eligibility and benefit amounts for their families back home. This
    proposal has been provided for in appropriations law in previous years,
    where it is requested again. Second, the Administration remains
    committed to working with Congress on a name change for the program.
    The President's request continues the process that began in 2006 to
    gather information related to a proposed name change for Congressional
    consideration.

                            CHILD NUTRITION PROGRAMS

        A base increase of $685 million is requested to fully fund the
    Child Nutrition Programs including our three largest programs serving
    children, the National School Lunch Program, the School Breakfast
    Program, and Child and Adult Care Food Program. This increase will
    support the continuing growth in meal service in these programs with
    more than 9 billion appealing, nutritious meals provided to all of our
    children in schools and many childcare settings. Since fiscal year
    2000, average daily participation in the National School Lunch Program
    has climbed from 27.2 million to an estimated 30.9 million in fiscal
    year 2007. In the School Breakfast Program, 10.3 million children will
    be served each day in fiscal year 2007, up from 7.8 million in fiscal
    year 2000.
        Should this increase not prove sufficient to fully cover program
    costs, the budget request proposes an additional increase of $300
    million to, for the first time, fund a contingency reserve for the
    Child Nutrition Programs. This reserve will serve to ensure access to
    these important services to all children and make certain that funds
    are available to meet our mandatory obligations to our State and local
    partners in the administration of the Child Nutrition Programs.
        Improving both the nutrition of children and their awareness of the
    role that healthy food choices and physical activity play in promoting
    overall well being are core goals of these programs. The Food and
    Nutrition Service is reviewing the new Dietary Guidelines, as well as
    the Dietary Reference Intakes, and working to incorporate their
    recommendations into our nutrient standards and meal patterns.
    Additional resources requested under the Nutrition Program
    Administration for Cross-Program Nutrition Education will help us to
    incorporate family-based approaches to nutrition education into the
    Child Nutrition Programs and to leverage those messages and materials
    to improve nutrition education and promote smart food choices and
    physical activity across all of the nutrition assistance programs. We
    also are continuing efforts to promote healthy behaviors through
    support for implementation of local school-based wellness programs
    required by the Child Nutrition and WIC Reauthorization Act of 2004.

                                      WIC

        In fiscal year 2007, the President's budget request of $5.2 billion
    anticipates supporting critical services to a monthly average
    participation of 8.2 million women, infants and children through the
    Special Supplemental Nutrition Program for Women, Infants and Children
    (WIC). While this request is a small decrease from the enacted fiscal
    year 2006 level, in combination with available prior-year resources it
    will support a slight increase from anticipated fiscal year 2006
    participation levels. The $125 million contingency reserve appropriated
    in fiscal year 2003 and replenished in fiscal year 2005, remains
    available to the program should participation or food costs exceed our
    projections. We currently do not anticipate the need to access the
    contingency reserve in either fiscal year 2006 or fiscal year 2007.
        In all of the Federal nutrition assistance programs, the
    Administration is committed to ensuring that benefits are targeted to
    those most in need. WIC applicants can currently receive adjunctive or
    automatic eligibility for benefits based on their participation in
    other means-tested programs such as the Food Stamp Program and
    Medicaid. However, in some States, individuals with incomes higher than
    those established for participation for WIC are eligible for Medicaid.
    Included in the budget request is a proposal to limit adjunctive
    eligibility based on participation in Medicaid to those individuals
    whose incomes are below 250 percent of Federal poverty guidelines.
        The budget also reflects the Administration's dual commitment to
    both support the WIC Program and to control discretionary spending
    growth. We are committed to working with our State partners to manage
    program costs to ensure future access to this critical program for all
    who are eligible and seek its services. The President's budget contains
    a two-part proposal that will allow us to reduce Federal expenditures
    on Nutrition Services and Administration (NSA) with the participation
    of the States. WIC is currently one of the few Federal programs that do
    not require matching funds for administration funds. The President's
    budget proposes a 20 percent State matching on NSA funds that would
    take effect in fiscal year 2008. The 1-year delay in implementation is
    essential so that the States can incorporate this new requirement into
    their fiscal plans. As a transitional step, we are renewing our
    proposal to cap the level of NSA funding at 25 percent of the total
    level grants to States in fiscal year 2007. We will also continue our
    long successful partnership with the States in containing food package
    cost growth through sharing of best practices and providing technical
    assistance in the implementation of food cost containment strategies.

                   COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

        The President's fiscal year 2007 budget request does not fund CSFP.
    We face difficult challenges and decisions with regard to discretionary
    budget resources and have chosen to not request funding for this
    program for several reasons. First, CSFP is not available in all
    States. It currently operates in limited areas of 32 States, two Indian
    reservations, and the District of Columbia. Second, its benefits, to a
    great extent, overlap those available through other nutrition
    assistance programs. Finally, we believe our limited resources are best
    focused on those programs that are universally available to serve these
    needy populations. The priority of the Administration is to ensure the
    continued integrity of the national nutrition assistance safety net,
    including the Food Stamp Program and WIC. However, we want to
    acknowledge our CSFP partners at the State and local level who have
    worked on behalf of this program.
        USDA will work closely with CSFP State agencies to ensure that any
    negative effects on program participants are minimized, and that they
    are transitioned as rapidly as possible to other nutrition assistance
    programs for which they are eligible. The budget request includes funds
    to support the transition of CSFP participants to nationally available
    FNS nutrition assistance programs such as WIC and FSP. The budget
    requests $2 million to provide outreach and to assist individuals to
    enroll in the Food Stamp Program. Elderly participants who are not
    already receiving food stamp benefits will be eligible to receive a
    transitional benefit worth $20 per month ending in the first month
    following enrollment in the Food Stamp Program under normal program
    rules, or 6 months, whichever occurs first. CSFP women, infants, and
    children participants who are eligible for WIC benefits will be
    referred to that program. Commodities obtained under agriculture
    support programs will be redistributed for use in other nutrition
    assistance programs, such as TEFAP.

                 THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

        TEFAP plays a critical supporting role for the Nation's food banks.
    This support takes the form of both commodities for distribution and
    administrative funding for States' commodity storage and distribution
    costs. Much of this funding flows from the States to faith-based
    organizations, a cornerstone of the food bank community. The
    President's budget requests the fully authorized level of $140 million
    to support the purchase of commodities for TEFAP. Additional food
    resources become available through the donation of surplus commodities
    from USDA's market support activities. State and local administrative
    costs, which support the food bank community, are funded at $49.5
    million in the President's request.

                       NUTRITION PROGRAMS ADMINISTRATION

        We are requesting $160.4 million in our Nutrition Programs
    Administration account, which reflects an increase of $18.6 million in
    our Federal administrative funding. This account supports Federal
    management and oversight of a portfolio of program resources totaling
    $57 billion, almost 60 percent of the USDA budget.
        A key component of this year's request is a $4 million increase to
    support additional program integrity and accountability efforts in the
    Food Stamp Program. These resources would support up to 40 additional
    staff dedicated to continuing our strong record of results in improving
    payment accuracy and improving our ability to provide oversight and
    technical assistance to our State partners. While I am very proud of
    our accomplishments in program integrity, maintaining those gains and
    achieving further improvement in payment accuracy is a daunting
    challenge. This request represents a small investment that will pay big
    dividends in our continuing efforts to make certain we get the right
    benefits to the right people.
        The budget also requests an increase of $2 million to support the
    efforts of the Center for Nutrition Policy and Promotion. These
    resources will continue the Center's work on MyPyramid and will support
    up to an additional 4 staff years dedicated to this initiative.
        Also included in the President's request is $6 million to support
    important program assessment and evaluation activities examining
    program integrity issues and ways to improve the delivery of benefits
    and services with the Food Stamp Program.
        Other increases contained in the budget request include the $3
    million for Cross-Program Nutrition Education efforts, $3.5 million to
    support FNCS' participation in the OMB's government-wide initiative to
    modernize and better integrate financial management systems, and $2.8
    million to support base pay cost increases.
        The increases requested within this budget are essential to
    ensuring that FNCS can continue to successfully execute its basic
    program administration, oversight and fiscal stewardship duties. We
    understand the difficult budgetary circumstances the Federal Government
    now faces and support and have participated in the tough choices that
    must be made. However, it is essential that FNCS address the serious
    challenge posed by both the accumulated effect of over a decade of
    staffing reductions and the loss of critical skills and experience
    inherent in the impending retirement of close to 30 percent of its
    workforce over the next 5 years.
        I have begun that process by improving the management of human
    capital planning processes, strengthening services provided to
    employees, and implementing programs designed to improve the
    efficiency, diversity, and competency of the work force. With just
    nominal increases for basic program administration in most years, FNCS
    has reduced its Federal staffing levels significantly over time. We
    have compensated for these changes by working smarter--re-examining our
    processes, building strong partnerships with the State and local
    entities which administer our programs, and taking advantage of
    technological innovations. We are extremely proud of what we have
    accomplished and continue to seek new ways to meet the challenges
    before us. However our ability to continue to reliably meet these
    challenges will be in question if staffing levels continue to decline.
        Mr. Chairman, I appreciate the opportunity to present to you this
    budget and what it means for the millions of Americans that count on us
    for nutrition assistance. I would be happy to answer any questions you
    may have.
                                     ______

     Prepared Statement of Eric J. Hentges, Executive Director, Center for
                         Nutrition Policy and Promotion

        Thank you, Mr. Chairman, and members of the Subcommittee, for
    allowing me this opportunity to present testimony in support of the
    Administration's budget for fiscal year 2007.
        With the Nation facing significant public health issues related to
    the quality of the American diet, I believe that the outcome-based
    efforts of the Center for Nutrition Policy and Promotion are key to
    promoting more healthful eating behaviors and lifestyles across the
    Nation. Working from its mission to improve the health of Americans by
    developing and promoting dietary guidance that links scientific
    research to the nutrition needs of consumers, the Center for Nutrition
    Policy and Promotion has a critical role in how USDA meets its
    strategic goal to improve the Nation's nutrition and health.

        TRENDS CONTINUE TO SHOW NEED FOR REVISED NUTRITION GUIDANCE AND
                               EDUCATIONAL TOOLS

        Recent studies of America's dietary and physical activity behaviors
    reveal disturbing trends. First, a combination of poor diet and
    sedentary lifestyle not only undermines quality of life and
    productivity, but it also contributes to the preventable causes of
    deaths each year in the United States.
        Second, specific diseases and conditions, such as cardiovascular
    disease, hypertension, overweight and obesity, and osteoporosis, are
    clearly linked to a poor diet. Recent statistics are staggering: 65
    percent of adults (ages 20 to 74) are overweight, with 31 percent among
    this group classified as obese. Children and adolescents have not
    escaped this unhealthy outcome: among 6- to 19-year-olds, 16 percent
    (over 9 million) are overweight--triple what the proportion was in
    1980. Another 15 percent are at risk of becoming overweight. With
    statistics showing an increase in overweight and obesity and estimates
    indicating that obesity-attributable medical expenditures in the United
    States reached $75 billion in 2003, the health of Americans is a
    serious concern that must be addressed.
        Third, the lack of physical activity has been associated with a
    number of conditions, including diabetes, overweight and obesity,
    cardiovascular disease, and certain cancers. Supporting evidence
    indicates less than half (46 percent) of the U.S. population meets the
    recommended level of physical activity. USDA's involvement is critical
    in helping to stem and eventually reverse some of these disturbing
    trends.

      DIETARY GUIDELINES FOR AMERICANS ESTABLISH FEDERAL NUTRITION POLICY

        In conjunction with the Department of Health and Human Services,
    USDA released the sixth edition of the Dietary Guidelines for Americans
    on January 12, 2005. This science-based blueprint for promoting good
    nutrition and health encourages Americans to ``(1) Make smart choices
    from every food group, (2) Find your balance between food and physical
    activity, and (3) Get the most nutrition out of your calories.''
        The Guidelines, the basis for Federal nutrition policy, provide
    advice for healthy Americans, ages 2 years and older, about food
    choices that promote health and prevent disease. These Guidelines not
    only form Federal nutrition policy, but they also set standards for the
    nutrition assistance programs, guide nutrition research and education
    efforts, and are the basis for USDA nutrition promotion activities.
        As the lead Federal agency in administration of the 2010
    Guidelines, USDA's Center for Nutrition Policy and Promotion has
    already begun laying the foundations--planning the management
    strategies that USDA will use to lead in interagency coordination and
    putting into place an evidence-based system. An evidence-based system
    will provide a framework or protocol for comprehensive analysis and
    synthesis of scientific literature, ranking its strengths according to
    established criteria. In developing nutrition guidance, this system
    will enable government decision makers to make the best policy
    supported by the strongest scientific evidence available, giving both
    the Executive and Legislative branches of government along with the
    scientific community and the general public a continued confidence in
    nutrition policies, guidelines and recommendations that are being
    developed and promoted.

                   MYPYRAMID SERVES AS PREMIER TEACHING TOOL

        MyPyramid, based on the 2005 Dietary Guidelines for Americans,
    supports two pillars of the President's HealthierUS Initiative: to
    ``Eat a Nutritious Diet'' and to ``Be Physically Active Every Day.''
    MyPyramid is an individualized, interactive tool to help Americans
    build the Guidelines into their daily lives. Included in the MyPyramid
    webpage are the MyPyramid Plan and MyPyramid Tracker. MyPyramid Plan
    helps consumers find the types and amounts of food they should eat to
    meet nutrient requirements. MyPyramid Tracker, which has nearly 1
    million registered users to date, is for consumers who want a detailed
    assessment and analysis of their current eating and physical activity
    behaviors; and it provides guidance on how to improve those behaviors.
    Since its launch in April 2005, MyPyramid.gov has received over 1.5
    billion hits.
        USDA also launched MyPyramid for Kids, a child-friendly version of
    MyPyramid targeted to schoolchildren. This tool is designed to
    encourage children to make smart food choices each day. An interactive
    learning computer game; lesson plans for educators; colorful posters
    and flyers; and other resources are available to help children make
    those choices. To reach an even broader audience, Spanish language
    versions of MyPyramid (MiPiramide) and MyPyramid for Kids (MiPiramide
    para Ninos) have been developed. These materials have been distributed
    to tens of thousands of schools across America and are also available
    online.
        The President's budget requests an increase of $1.98 million for
    CNPP. These funds will support maintenance and enhancements to
    MyPyramid, improvements in customer support and outreach capabilities.
    This budget will help USDA determine whether the use of the Dietary
    Guidelines and MyPyramid by the American public, teachers, students,
    and health professionals ultimately improves the American diet.
        Planned activities directly related to MyPyramid include the
    procurement of ongoing web hosting and maintenance of MyPyramid.gov and
    MyPyramid Tracker, which assist the public in monitoring and developing
    individualized healthy eating plans. In addition, this funding will
    provide for the maintenance and upgrading of related hardware and
    software; increased operational costs realized from spikes in the usage
    of the website; developmental costs associated with improvements to
    MyPyramid Tracker; and acquisition of new food and nutrient composition
    data bases and integration of the Healthy Eating Index into MyPyramid
    Tracker.
        With this budget, CNPP will procure the development and
    implementation of a continual evaluation plan for MyPyramid to
    ascertain its usefulness by the American consumer. Additionally, CNPP
    plans to enhance the MyPyramid.gov website with interactive
    capabilities to encourage behavior change that promotes healthful diets
    across a broad spectrum of American society. This would include a meal
    planning feature which is currently missing, a recipe file feature, and
    a shopping list feature all of which have been requested by the public
    and the professional nutrition community.
        With thousands of emails, written correspondence, telephone
    inquiries and hotline calls that have resulted from the overwhelming
    success of the Dietary Guidelines for Americans and MyPyramid.gov, CNPP
    also intends to use appropriated resources toward four additional staff
    years devoted exclusively to assisting the public in the areas of
    information dissemination and improvement of the CNPP, Dietary
    Guidelines and MyPyramid websites. These additional staff years would
    allow CNPP to provide customer support in timely manner; enhance the
    outreach and promotion of MyPyramid.gov; and support USDA's
    Nutrition.gov website and USDA's on-line ``Ask the Expert.''
        With your support, we look forward to continuing to build, enhance,
    and better promote personalized and individualized nutrition guidance
    tools--such as MyPyramid.gov--reaching millions of Americans daily.
    Your support will also help us improve customer support and outreach as
    well as set the foundation for future development of scientific
    nutrition policy, which is vital to addressing the growing problems of
    overweight and obesity and the related health challenges in America.
        I thank the Committee for the opportunity to present this written
    testimony.
                                     ______

        Prepared Statement of Roberto Salazar, Administrator, Food and
                               Nutrition Service

        Thank you, Mr. Chairman, and members of the Subcommittee for
    allowing me this opportunity to present testimony in support of the
    fiscal year 2007 budget request for the Food and Nutrition Service
    (FNS).
        FNS is the agency charged with administering the fifteen Federal
    nutrition assistance programs which create the Nation's nutrition
    safety net and providing Federal leadership in America's ongoing
    struggle against hunger and poor nutrition. Our stated mission is to
    increase food security, reduce hunger and improve health outcomes in
    partnership with cooperating organizations by providing children and
    low-income people access to nutritious food and nutrition education in
    a manner that inspires public confidence and supports American
    agriculture. The budget request clearly demonstrates the President's
    continuing commitment to this mission and our programs as well as
    strengthens the Federal nutrition assistance safety net in a time of
    competing priorities and limited resources. Balancing program access,
    good nutrition, and program integrity, this budget makes tough choices
    to meet our key commitments:
      --To ensure that low-income people have access to food by ensuring
            sufficient funding for the major nutrition assistance programs.
      --To promote healthful diets and active lifestyles by making
            nutrition education an integral part of nutrition assistance
            programs.
      --To manage prudently and efficiently so that every dollar invested
            has the maximum positive benefit for those truly in need.
        A request of $57 billion in new budget authority is contained
    within the fiscal year 2007 budget to fulfill this mission through the
    FNS nutrition assistance programs. These critical programs touch the
    lives of more than 1 in 5 Americans over the course of a year. Programs
    funded within this budget request include the National School Lunch
    Program (NSLP), which will provide nutritious school lunches to 30.9
    million children each school day, the WIC Program, which will assist
    with the nutrition and health care needs of 8.2 million at risk
    pregnant and postpartum women, infants and children each month, and the
    Food Stamp Program (FSP), which will ensure access to a nutritious diet
    each month for an estimated 25.9 million people. The remaining programs
    include the School Breakfast Program (SBP), the Summer Food Service
    Program (SFSP), the Child and Adult Care Food Program (CACFP), The
    Emergency Food Assistance Program (TEFAP), the Food Distribution
    Program on Indian Reservations (FDPIR) and the Farmers' Market
    Programs.
        We are proposing, with this budget request, the elimination of the
    Commodity Supplemental Food Program (CSFP). The priority of the
    Administration, as reflected in the President's budget request, is to
    ensure the continued integrity of the national nutrition assistance
    safety net. CSFP is only available in limited areas. It operates in
    parts of 32 States, two Indian Tribal Organizations, and the District
    of Columbia. Its benefits and target populations to a great extent,
    overlap with two of the largest nationwide Federal nutrition assistance
    programs--Food Stamps and WIC. FNS seeks to serve the children and low-
    income households of this Nation. We believe the President's budget
    request, allows us to focus scarce resources on addressing the diverse
    ways which hunger and nutrition-related problems present themselves
    through the core programs of the nutrition safety net.
        The resources we are here to discuss represent an investment in the
    health, self-sufficiency, and productivity of Americans who, at times,
    find themselves in need of nutrition assistance. Under Secretary Bost,
    in his testimony, has outlined the three critical challenges which the
    Food, Nutrition and Consumer Services team has focused on under his
    leadership: promoting access and awareness of the Federal nutrition
    assistance programs; addressing the growing epidemic of obesity; and,
    improving the integrity with which our programs are administered. In
    addition to these fundamental priorities specific to our mission, the
    President's Management Agenda provides an ambitious agenda for
    management improvement across the Federal Government as a whole. I
    would like to report on our efforts to address three specific items
    under this agenda: reducing improper payments and enhancing the
    efficiency of program delivery, building partnerships with faith and
    community-based organizations, and systematically planning for the
    human capital challenges facing all of the Federal service.

                       THE CHALLENGE OF IMPROPER PAYMENTS

        Good financial management is at the center of the President's
    Management Agenda. As with any Federal program, the nutrition
    assistance programs require sustained attention to program integrity.
    We cannot sustain these programs over the long term without continued
    public trust in our ability to manage them effectively. Program
    integrity is as fundamental to our mission as program access or healthy
    eating. Our efforts to minimize improper program payments focus on (1)
    working closely with States to improve food stamp payment accuracy; (2)
    implementing policy changes and new oversight efforts to improve school
    meals certification; and (3) improving management of CACFP providers
    and vendors in WIC. We have identified these 4 programs as ones
    susceptible to improper payments and will continue to enhance the
    efficiency and accuracy with which these programs are delivered.
        I am happy to report that in fiscal year 2004, the most recent year
    for which data is available, we have achieved a record level of food
    stamp payment accuracy with a combined payment accuracy rate of 94.12
    percent. This is the sixth consecutive year of improvement, making it
    the lowest rate in the history of the program. With this budget
    request, we will continue our efforts with our State partners toward
    continued improvement in the payment accuracy rate. We will continue
    efforts to address the issue of proper certification in the school
    meals programs in a way that improves the accuracy of this process
    without limiting access of eligible children. Analytical work has begun
    to better assess the accuracy of eligibility determinations in the
    CACFP.

                FAITH-BASED AND COMMUNITY ORGANIZATIONS OUTREACH

        Faith-based and community organizations have long played an
    important role in raising community awareness about program services,
    assisting individuals who apply for benefits, and delivering benefits.
    President Bush has made working with these organizations an
    Administration priority, and we intend to continue our outreach efforts
    in fiscal year 2007. The partnership of faith-based and community
    organizations and FNS programs, including TEFAP, WIC, CACFP and NSLP is
    long-established. Significant numbers of faith-based schools
    participate in the NSLP and many child care providers and sponsors are
    faith-based and community organizations. In addition, the majority of
    food pantries and soup kitchens that actually deliver TEFAP benefits
    are faith-based and community organizations. Across the country, faith-
    based organizations have found over the years that they can participate
    in these programs without compromising their mission or values. They
    are valued partners in an effort to combat hunger in America. I am
    happy to report we have provided eight grant awards of approximately $2
    million to community and faith-based organizations to test innovative
    food stamp outreach strategies to reach underserved, eligible
    individuals and families.

                            HUMAN CAPITAL MANAGEMENT

        We currently estimate that up to 80 percent of our senior leaders
    are eligible to retire within five years, as is nearly 30 percent of
    our total workforce. FNS must address this serious challenge by
    improving the management of the agency's human capital, strengthening
    services provided to employees, and implementing programs designed to
    improve the efficiency, diversity, and competency of the work force.
    With just nominal increases for basic program administration in most
    years, the FNS has reduced its Federal staffing levels significantly
    over time.
        We have now reached a critical point within our agency staffing
    levels; we simply must have the ability to develop the resources
    necessary to continue to assure appropriate access to the agency
    programs while maintaining stellar integrity outcomes. While we have
    compensated in the past by building strong partnerships with the State
    and local entities which administer our programs and taking advantage
    of technological innovations, the President's budget proposes the
    addition of 40 staff years to perform fundamental program integrity
    activities for the Food Stamp Program.
        It is also important that we have the ability to conduct research
    on our programs and we ask that we not be prohibited from doing so. We
    are extremely proud of what we have accomplished. In order to continue
    to achieve improvements in program integrity and program access; I
    believe full funding of the Nutrition Program Administration (NPA)
    request in this budget is vital.
        Now, I would like to review some of the components of our request
    under each program area.

                               FOOD STAMP PROGRAM

        The President's budget requests $37.9 billion for the Food Stamp
    account including the Food Stamp Program and its associated nutrition
    assistance programs. These resources will serve an estimated 25.9
    million people each month participating in the Food Stamp Program
    alone. Included in this request is the continuation of the $3 billion
    contingency reserve provided for the program in fiscal year 2006. While
    we anticipate improvement in the general economy, the turning point of
    participation continues to be challenging to predict.
        To better meet this challenge, we have proposed, as an alternative
    to the traditional contingency reserve, indefinite funding authority
    for program benefits and payments to States and other non-Federal
    entities. These contingency resources are important to not only
    ensuring the availability of basic program benefits, but also to
    ensuring that adequate funds are available in the event of disasters.
    The Food Stamp Program is designed to respond, not only to the economy
    but also to disaster-related food assistance needs. Our recent
    experience with the Gulf Coast disasters made this very clear when over
    $900 million in food stamp benefits have been issued to date to over
    1.9 million households affected by Hurricanes Katrina, Rita and Wilma
    in the fall of 2005. In addition, we have made a concerted effort to
    encourage working families, senior citizens and legal immigrants to
    apply for benefits.
        The President's budget request contains three legislative proposals
    for the Food Stamp Program. These proposals work together to strengthen
    the national framework of the Food Stamp Program by setting national
    standards that better target benefits to low-income persons. They
    support the priorities of access and nutrition assistance for those in
    need while ensuring integrity in the program.
        The budget proposes to exclude the value of tax-preferred
    retirement accounts from the Food Stamp certification asset test. This
    exclusion strengthens retirement security policy and enables low-income
    people to get nutrition assistance without depleting their retirement
    savings. It also simplifies food stamp resource policy and makes it
    more equitable because under current law, some retirement accounts are
    excluded while others are not. This proposal is consistent with the
    President's Ownership Society Initiative, by increasing the ability of
    low-income people to save for retirement.
        Our budget once again proposes to eliminate categorical Food Stamp
    eligibility for Temporary Assistance for Needy Families (TANF)
    participants who receive only non-cash TANF services. Fully implemented
    in fiscal year 2008, this change is estimated to affect approximately
    300,000 individuals and save $658 million over five years. We believe
    this proposal ensures that food stamp benefits will go to the
    individuals with the most need and retains categorical eligibility for
    the large number of recipients who receive cash assistance through
    TANF, Supplemental Security Income and General Assistance.
        Also included in the budget is a proposal to add the Food Stamp
    Program to the list of programs for which States may access the
    National Directory of New Hires. Access to this national repository of
    employment and unemployment insurance data will enhance States' ability
    to quickly and accurately make eligibility and benefit level
    determinations, supporting continued program integrity. The budget also
    requests a continuation of a policy included in last year's
    appropriations act to exclude special military pay received by members
    of the armed forces serving in combat zones when determining food stamp
    benefits for their families back home.
        Finally, the Administration remains committed to proposing a name
    change for the program to Congress. We will continue the process that
    began in 2006 to gather information related to a proposed name change
    for Congressional consideration.

                            CHILD NUTRITION PROGRAMS

        The budget requests $13.6 billion for the Child Nutrition Programs,
    which provide millions of nutritious meals to children in schools and
    in childcare settings every day. This level of funding will support an
    increase in daily NSLP participation from the current 30.2 million
    children to approximately 30.9 million children. Requested increases in
    these programs reflect rising school enrollment, increases in payment
    rates to cover inflation, and proportionately higher levels of meal
    service among children in the free and reduced price categories. To
    ensure that Child Nutrition Programs respond to unforeseen increases in
    participation, the request provides $300 million in contingency
    funding. This contingency reserve would make supplemental funding
    requests unnecessary at times of budgetary shortfalls. Similar to the
    Food Stamp Program, such a shortfall could result from larger than
    anticipated program participation growth, responses to natural
    disasters or other national emergencies.
        We are continuing to implement program changes and new activities
    resulting from the 2004 reauthorization of these programs including the
    Fruit and Vegetable Program. We are also continuing our efforts to
    promote healthy behaviors by supporting the implementation of local
    wellness policies. We created the HealthierUS Schools Challenge to
    encourage communities to improve the foods offered at school and other
    aspects of a healthy school nutrition environment and to recognize
    schools that made improvements.
        FNS is continuing to integrate the 2005 Dietary Guidelines for
    Americans recommendations into the school meal programs. By law, school
    meals are required to be consistent with the Guidelines. Meals in the
    NSLP must provide one third of the Recommended Dietary Allowances
    (RDAs), while meals in the School Breakfast Program must provide one
    fourth of the RDAs. An FNS workgroup is reviewing the new Guidelines as
    well as the Dietary Reference Intakes (DRIs) nutrient standards to
    identify potential changes in the meal patterns within the existing
    meal reimbursement structure.
        The workgroup will make recommendations based on its review. USDA
    will publish a proposed rule with changes to the meal patterns and
    actively seek public comment. Federal, State and local staff will work
    together to implement the new requirements, plan improved recipes and
    menus, modify contracts to obtain the needed ingredients or modified
    products, and train staff who prepare and serve the food.

    SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN
                                     (WIC)

        The President's budget request includes $5.2 billion for the WIC
    Program. This request will provide food, nutrition education, and a
    link to health care to a monthly average of 8.2 million needy women,
    infants and children during fiscal year 2007, including former CSFP
    participants.
        The budget contains a two-part proposal that reflects our
    commitment to both support core activities of the WIC Program and
    reduce Federal discretionary spending. We are proposing to cap the
    level of Nutrition Services and Administration (NSA) funding to no more
    than 25 percent of the total WIC State grant amount for fiscal year
    2007. We continue to believe the reduction in NSA funding will not have
    a significant impact on the delivery of core WIC services. States will
    be encouraged to work with Federal program staff to seek efficiencies
    in the delivery of the program to ensure that the reduction in NSA
    funding does not impact core services.
        Looking forward to fiscal year 2008, the budget proposes to replace
    this NSA cap with a 20 percent State match requirement. WIC is
    currently one of the few Federal programs that do not require State
    matching funds for administrative purposes. The proposal is not
    effective until fiscal year 2008 so that States are provided adequate
    notification to allow their legislatures to appropriate funds.
        The President's budget request contains a proposal which limits
    automatic (adjunctive) eligibility based on participation in Medicaid
    to those individuals whose incomes are below 250 percent of Federal
    poverty guidelines. In the WIC Program, applicants can currently
    receive automatic (adjunctive) eligibility for benefits based on their
    participation in other means-tested programs such as the FSP and
    Medicaid. However, in some States, Medicaid permits participation of
    individuals with incomes higher than those established for eligibility
    for WIC (185 percent of the Federal poverty level). This proposal will
    better target WIC benefits to those most in need and, if enacted, the
    proposal will affect six States (Missouri, Maryland, Minnesota,
    Vermont, New Hampshire and Rhode Island).
        The $125 million contingency fund provided in the fiscal year 2003
    appropriation and replenished in fiscal year 2005, continues to be
    available to the program. We currently do not anticipate using the
    reserve in either fiscal year 2006 or 2007, as available resources in
    fiscal year 2006 and the President's budget request will fully meet our
    projected program need for those 2 years.
        FNS is continuing its efforts to review and consider revisions to
    the WIC food package. In September 2003, FNS contracted with the
    National Academies of Sciences' Institute of Medicine (IOM) to
    independently review the WIC food packages. The IOM recommendations on
    the WIC Food Packages were published in a final report in April, 2005.
    FNS has used these recommendations along with comments received on the
    public notice soliciting comments on food package changes to develop a
    proposed rule to update the WIC food packages. This proposed rule is in
    clearance and is expected to be published in the Summer of 2006.
        The President's budget also requests the continuation of the
    moratorium on the authorization of new WIC-only stores. The current
    moratorium was put in place through the fiscal year 2006 appropriations
    bill and will expire at the end of this year. We believe it is
    important to continue this moratorium due to the uncertainty that
    States encountered concerning the status of our regulations
    implementing new management controls on WIC vendor authorizations. This
    uncertainty arose as a consequence of a law suit filed by the National
    Women, Infants, and Children Grocers Association and the subsequent
    Temporary Restraining Order (TRO) issued by the Federal District Court.
    Although the law suit was resolved in favor of the government, States,
    particularly those covered by the TRO, were delayed several months in
    moving ahead with the implementation of new requirements. Therefore, to
    give States reasonable opportunity to put into place approved plans
    effecting these new cost control requirements, we believe continuation
    of the moratorium is prudent.

                   COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

        CSFP serves elderly persons and at risk low-income pregnant and
    post-partum and breastfeeding women, infants and children up to age
    six. The budget does not request funding for this program which is not
    available nationwide and duplicates two of the Nations' largest Federal
    nutrition assistance programs--Food Stamps and WIC. This program
    operates in selected areas in just 32 States, the District of Columbia,
    and two Indian Tribal Organizations. The populations served by CSFP are
    eligible to receive similar benefits through other Federal nutrition
    assistance programs that offer them flexibility to meet their
    individual needs. The Administration has proposed this change to better
    target limited resources to those major programs that are available
    nationwide, promoting equity and effectiveness.
        The President's budget does include a request for funds to support
    the transition of CSFP participants to nationally available FNS
    nutrition assistance programs such as WIC and FSP. USDA will work
    closely with CSFP State agencies to ensure that any negative effects on
    program participants are minimized. We plan to implement a transition
    strategy to encourage those women, infants and children that are
    eligible for WIC to apply for that program, and to encourage elderly
    CSFP recipients to apply for the Food Stamp Program.
        The budget request includes $2 million to provide outreach and to
    assist individuals enrolling in the FSP. Elderly participants who are
    leaving the CSFP upon the termination of its funding and who are not
    already receiving FSP benefits will be eligible to receive a
    transitional benefit of $20 per month. This transition benefit will end
    in the first month following enrollment in the FSP under normal program
    rules, or in 6 months, whichever occurs first. CSFP women, infants, and
    children participants who are eligible for WIC benefits will be
    referred to that program. Commodities obtained under agriculture
    support programs that would be used to support CSFP will be donated for
    use in other nutrition assistance programs, such as TEFAP.

                 THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

        As provided for in the Farm Bill, the budget requests $140 million
    for commodities in this important program. Our request for States'
    storage and distribution costs, critical support for the Nation's food
    banks, is $50 million. The Food and Nutrition Service is committed to
    ensuring the continuing flow of resources to the food bank community
    including directly purchased commodities, administrative funding, and
    surplus commodities from USDA market support activities. Much of this
    funding is provided, at the local level, to faith-based organizations.
    Surplus commodity donations significantly increase the amount of
    commodities available to the food bank community from Federal sources.

               SENIORS' FARMERS MARKET NUTRITION PROGRAM (SFMNP)

        The President's budget request includes two provisions that improve
    the value of the SFMNP benefits. The first provision prohibits farmers
    selling eligible foods under the SFMNP from charging sales tax on fresh
    fruits and vegetables that are purchased using SFMNP checks or coupons,
    or that are provided to eligible recipients through community supported
    agriculture. The second provision ensures that the value of benefits
    provided to eligible recipients is not considered as income in the
    process of determining eligibility for any other Federal or State
    programs, such as food stamps, TANF, energy assistance, and housing
    assistance. It would also ensure that the value of the SFMNP benefit
    would not be considered as income in calculating the recipients'
    Federal or State tax obligations. These proposals are consistent with
    the way benefits are treated in all other Federal nutrition assistance
    programs.

                    NUTRITION PROGRAMS ADMINISTRATION (NPA)

        We are requesting $160.4 million in this account, an increase of
    $18.6 million over our fiscal year 2006 level. This increase will
    partially offset personnel-related costs of the FNS workforce in fiscal
    year 2007. Our request for Federal administrative resources is needed
    to sustain the program management and support activities of our
    employees nationwide. The NPA account supports both FNS' administration
    of the nutrition assistance programs and CNPP's nutrition policy
    development and promotion activities targeted at the general
    population. Specific requests for this account include $2 million to
    support continuing work on MyPyramid; $4 million to support initiatives
    to improve program integrity within the Food Stamp Program and $3
    million to improve the coordination of nutrition education efforts
    across all of the our programs.
        Our request for $6 million to fund critical research and evaluation
    activities examining program integrity issues and ways to improve the
    delivery of program services is essential to the management of our
    programs, as is the $3.5 million request to fund FNS' participation in
    Office of Management and Budget's initiative to modernize and better
    integrate financial management system across the government. I firmly
    believe we need this increase in NPA funding in order to maintain
    accountability for our $57 billion portfolio and to assist States to
    effectively manage the programs and provide access to all eligible
    people.
        Thank you for the opportunity to present this written testimony.

        Senator Bennett. Thank you very much.
        In spite of how much we eat, we still have surpluses that
    Dr. Collins talks about. That is why we need to export.
        Yes, sir. Dr. Raymond.

                          STATEMENT OF RICHARD RAYMOND

        Dr. Raymond. Thank you, Mr. Chairman and Senator Kohl.
        I am pleased to appear before you today to discuss the
    status of the Food Safety and Inspection Service (FSIS)
    programs and the fiscal year 2007 budget request for food
    safety within the U.S. Department of Agriculture.
        As we begin another new year at USDA, I would like to point
    out that this one marks the 100th anniversary of the passage of
    the Federal Meat Inspection Act. We can look back over the past
    century with pride and certainly gain a greater appreciation
    for what USDA has done to protect our food supply and further
    public health protection.
        Today, I will share with you some recent accomplishments,
    as well as our priorities to further protect the food supply,
    and will conclude with some highlights of our fiscal year 2007
    budget request.
        FSIS is accountable for ensuring safe meat, poultry, and
    egg products for 295 million people in this country and
    millions more around the world. In addition, we are accountable
    for ensuring compliance with the Humane Methods of Slaughter
    Act, so that all livestock used for human food are humanely
    handled and slaughtered.
        There are indications that our risk-based Hazard Analysis
    and Critical Control Point, known as HACCP, system is working.
    We have seen dramatic declines in the prevalence of pathogens
    in the products that we regulate and the numbers of food-borne
    illnesses stemming from these pathogens.
        Our regulatory sampling for E. coli O157:H7 and Listeria
    monocytogenes shows evidence of our successes. We have gone
    from a 0.86 prevalence rate for positive E. coli O157:H7
    samples in calendar year 2000 to only 0.17 percent prevalence
    rate for positives in the calendar year 2004. That is a four-
    fold drop.
        During the same period, the prevalence rate for Listeria
    monocytogenes samples testing positive dropped from 1.45
    percent in calendar year 2000 to only 0.55 percent in calendar
    year 2004, a three-fold drop.
        Another success has been the break in the annual cycle of
    multi-million pound recalls and a dramatic decline in the
    number of recalls each year. We reached an all-time high of 113
    recalls, totaling nearly 61 million pounds of product in 2002,
    and in 2004, we were down to only 48 recalls, totaling
    approximately 3 million pounds of product.
        We have also seen the effect that the declining number of
    positive E. coli: O157:H7 and Listeria monocytogenes samples is
    having on food-borne illnesses caused by these two pathogens
    over an 8-year period of time. Illnesses caused by E. coli
    O157:H7 have decreased by 42 percent. That is less than 1
    person per 100,000 population. And those illnesses caused by
    listeria have dropped by 40 percent.
        I might add, these numbers do come from the CDC. These are
    not our numbers. I do feel that a picture is worth more than
    1,000 words, and I have included graphs with our submitted
    written testimony with those numbers.
        These successes would indicate that our risk-based approach
    is working and that we are protecting public health through a
    safer food supply. If we make the assumption, from the E. coli
    and Listeria data, that using product sampling trends can also
    be indicators for human illness trends, then we do have a
    glaring problem. That would be Salmonella.
        According to our sampling data, the number of product
    samples positive for Salmonella has been on the rise in several
    poultry categories over the past 3 years, specifically in young
    chicken or broiler carcasses. The overall incidence of
    Salmonella infections also remains far greater than for other
    food-borne pathogens.
        In 2004, according to data, again from the CDC, there were
    14.7 cases of culture-proven Salmonella infections per 100,000
    population in this country. This means 115 people are infected
    by Salmonella every day, or 42,000 every year. The CDC also
    says this is an underestimate by a factor of 38, which means
    that nearly 1.3 million people actually had Salmonella
    infections last year. In my view, that is way too high.
        Salmonella infection rates are not declining like they are
    for the E. coli, Listeria, and Campylobacter bugs. In fact,
    they are rising for certain Salmonella serotypes. Last month,
    we announced an initiative to reduce Salmonella in meat and
    poultry products. This initiative will help FSIS be more
    proactive and will prevent illnesses.
        It incorporates 11 steps, including increased product
    sampling and food safety assessments in plants where they are
    most needed, and our quarterly publication of nation-wide
    Salmonella data by class.
        A $602,000 increase that we are requesting for our risk-
    based Salmonella approach in fiscal year 2007 would, among
    other things, allow us to do serotyping more quickly and to
    initiate more food safety assessments at high-risk
    establishments before an outbreak occurs.
        Our next priority for the year is the cornerstone strategy
    to further improve food safety, implementing a more robust
    risk-based inspection system. Our 100-year-old inspection
    system was based on visual examination for visible signs of
    disease. The future demands that we also be able to identify
    things that the human eye cannot see, things the nose cannot
    smell, and things the fingers cannot feel.
        We need to be able to better anticipate and more quickly
    respond to food safety challenges before they negatively affect
    the public's health. The $2.6 million increase that we are
    seeking in the 2007 budget for risk-based inspection services
    will help FSIS reallocate its resources to focus more closely
    on food safety systems and prevent public health problems
    before they occur.
        Finally, to further improve our food defense capabilities,
    we are asking for an increase of $15.8 million for food and
    agriculture defense. A major component of this request will be
    allocated for the enhancement of the Food Emergency Response
    Network, known as FERN, which is a joint laboratory partners
    project between FSIS, Department of Health and Human Services,
    FDA, and selected State public health laboratories.
        We saw what happened to laboratory capacity and the U.S.
    Postal Service efficiency when just a few letters were sent
    containing anthrax to just a few persons. That same thing can
    happen again with one phone call to the Washington Post
    indicating that the meat supply has been contaminated
    intentionally.
        That is why our $13 million request for FERN will provide
    23 selected existing State or local laboratories with the
    necessary training, equipment, and supplies that they need so
    that surge capacity can be handled more quickly and closer to
    home.
        From a public health standpoint, an investment in FERN is
    absolutely essential if we want to prevent or mitigate the loss
    of life and economic hardship if an intentional or an
    unintentional incident affecting the food supply or even a hoax
    were to happen.
        We must also be prepared for the distinct possibility that
    one or all of our three FSIS laboratories could be
    intentionally incapacitated in an attack on our food supply.
        Overall, in fiscal year 2007, FSIS is requesting an
    appropriation under current law of $862.9 million, a net
    increase of about $33.5 million from the enacted level for
    fiscal year 2006. This request supports the agency's basic
    mission, providing continuous or daily inspection in each U.S.
    meat, poultry, and egg products plant. The agency's permanent
    statutory obligation to provide continuous inspection is a
    labor-intensive mandate, therefore making its salary costs
    relatively inflexible.
        An increase of $16 million for the FSIS inspection program
    is requested to provide for a 2.2 percent pay raise for FSIS
    employees as well as $1 million for salary increases in
    cooperating State inspection programs in fiscal year 2007 to
    assure that the agency is provided sufficient funds to maintain
    its programs.

                               PREPARED STATEMENT

        Mr. Chairman, thank you again for providing me the
    opportunity to speak with the subcommittee and submit testimony
    regarding the steps that we are taking to continue our public
    health leadership role. Implementation of these budget
    initiatives is imperative so that we can continue to ensure the
    safety of the products that we regulate.
        I look forward to working with you and the subcommittee to
    further improve our food safety program, and I would welcome
    any questions from the committee that you might have.
        [The statement follows:]

                     Prepared Statement of Richard Raymond

        Mr. Chairman and Members of the Subcommittee, I am pleased to
    appear before you today to discuss the status of the Food Safety and
    Inspection Service's (FSIS) programs and the fiscal year 2007 budget
    request for food safety within the U.S. Department of Agriculture
    (USDA). I am Dr. Richard Raymond, Under Secretary for Food Safety. With
    me today is Dr. Barbara Masters, Administrator of FSIS.
        USDA Secretary Mike Johanns and I share a passion for public
    health. I accepted this position last year because of the Secretary's
    commitment. I knew he would support and allow us to move forward to
    further enhance public health protection. The long history this Agency
    has of protecting public health was another aspect that drew me to this
    opportunity.
        In fact, this year marks the 100th anniversary of the passage of
    the Federal Meat Inspection Act (FMIA), which ushered in a new era of
    food safety on a national level. Even prior to the passage of the FMIA,
    FSIS' predecessor agency, the Bureau of Animal Industry (BAI), carried
    out many important responsibilities to protect public health here and
    abroad. With an appropriation of $150,000 in 1884--the first year of
    its existence--the BAI focused on preventing diseased animals from
    being used as food. Then in 1891, the initial Meat Inspection Act of
    1890 was amended to cover the inspection and certification of all live
    cattle and beef for export.
        As you see, the USDA has a long and proud history in protecting
    public health through food safety. To give you an idea of how far we
    have come in protecting public health, let me share these two facts
    with you.
        One hundred years ago in the United States, the life expectancy was
    45 years. Now it is approximately 75 years. And 100 years ago in the
    United States, one in five coffins contained a child under 5 years old.
    Today that number in the United States is only one in 100 coffins.
        These are amazing accomplishments that have had a profound effect
    on our society and everyone here. Clean water, proper sewage treatment,
    vaccines and antibiotics have all played an important role, but a safer
    food supply has also played a vital role in this amazing improvement.
        This is truly a good story, but the journey is far from over. There
    is much more we need to do. Both Secretary Johanns and I want to push
    the envelope to improve food safety and public health. We all must
    strive to do better because of constantly evolving threats and
    challenges to food safety and our public health system. Having been in
    the medical profession for 27 years as a doctor in both rural and urban
    parts of Nebraska, and having spent the last 6 years prior to USDA in
    public health, I know that the public health environment constantly
    evolves and it is not always a nine-to-five job. Product recalls during
    off hours and the Agency's response in the aftermath of Hurricane
    Katrina are just a couple of examples of the many instances when FSIS
    personnel worked many hours beyond their regular tours of duty.
        This is why I am truly proud and impressed by the dedicated
    professionals at FSIS, who often put in long hours when needed to
    ensure that our meat, poultry and egg products supply is the safest in
    the world. Their support and the Agency's successes in protecting the
    health and well being of millions of consumers worldwide would not have
    been possible without the resources you have so generously given to us.
    I will cover FSIS' successes in more detail, our priorities in the
    coming year, and conclude with a discussion of the fiscal year 2007
    budget request.
    Accomplishments
        We are accountable for protecting the lives and well-being of 295
    million people in this country and millions more around the world.
    There are indications that our risk-based system to protect these
    consumers is working. We have seen dramatic declines in the prevalence
    of pathogens in the products we regulate and the numbers of foodborne
    illnesses stemming from these pathogens due to many actions by the
    Agency including the use of risk assessments, working with our partners
    along the farm-to-table continuum, and basing our policies on sound
    science.
    Regulatory Sampling
        One such success is apparent in our regulatory sampling for E. coli
    O157:H7 and Listeria monocytogenes.
        Let's take a look at results from our microbiological surveillance
    testing program for E. coli O157:H7. We have gone from 59 positives in
    7,010 samples for E. coli O157:H7 in CY 2001 to only 14 positives in
    8,010 samples in CY 2004. Each year's prevalence rate is listed below.
      --In CY 2001, our testing program yielded 59 positive results out of
            7,010 samples for a rate of .84 percent;
      --In CY 2002, there were 55 positive results from 7,025 samples for a
            rate of .78 percent;
      --In CY 2003, there were 20 positives out of 6,584 samples for a rate
            of .3 percent; and
      --In CY 2004, there were 14 positives out of 8,010 samples for a rate
            of .17 percent.
        Our testing for Listeria monocytogenes (Lm) in all ready-to-eat
    (RTE) products shows similar progress. Compared to a decade ago before
    HACCP was implemented, we have made substantial progress in Lm control,
    as these statistics from our RTE sampling program indicate:
      --In 1995, 3.02 percent tested positive;
      --In 1996, 2.91 percent tested positive;
      --In 1997, 2.25 percent tested positive;
      --In 1998, 2.54 percent tested positive;
      --In 1999, 1.91 percent tested positive;
      --In 2000, 1.45 percent tested positive;
      --In 2001, 1.32 percent tested positive;
      --In 2002, 1.03 percent tested positive;
      --In 2003, .76 percent tested positive; and
      --In 2004, .55 percent tested positive.
    Recalls
        Another success has been the break in the annual cycle of multi-
    million pound recalls and a dramatic decline in the number of recalls
    each year. The number of recalls had been increasing since the mid
    1990s, with at least one multi-million pound recall being conducted
    every year until 2002.
        For example:
      --In 1997, there were 27 recalls for a total of nearly 28 million
            pounds;
      --Followed by 44 recalls of just over 44 million pounds in 1998;
      --58 recalls in 1999 for 40 million pounds of product;
      --76 recalls of almost 23 million pounds in 2000;
      --87 recalls in 2001 for 33 million pounds; and
      --Reaching an all-time high of 113 recalls in 2002, totaling nearly
            61 million pounds.
        After we implemented science-based policies for E. coli O157:H7,
    Listeria monocytogenes, and Salmonella, we saw a dramatic decline in
    recalls, culminating in a reduction of nearly 18 percent in the number
    of pathogen-related recalls, from 28 in 2003, to 23 in 2004.
    Foodborne Illnesses
        Another significant measure of how our science-based policies are
    making a major impact on public health is from the annual FoodNet
    preliminary report published by the Department of Health and Human
    Services' (DHHS) Centers for Disease Control and Prevention (CDC) every
    spring [the annual report is published later each year]. I will discuss
    FoodNet later, but according to the CDC, there have been significant
    declines from 1996 to 2004 in illnesses caused by E. coli O157:H7,
    Listeria monocytogenes, Campylobacter, and Yersinia. Compared to the
    1996-98 baseline, illnesses caused by E. coli O157:H7 decreased by 42
    percent; Listeria monocytogenes dropped by 40 percent; Campylobacter
    fell 31 percent; and Yersinia decreased by 45 percent.
        This is just raw data. To put these figures into real human terms,
    in 2004, we saved at least an additional 21,815 people from suffering
    the debilitating effects of a foodborne illness. That is nearly the
    number of people who work inside the Pentagon on a daily basis.
        Stated another way, in 2004, compared to the 1996-98 baseline, an
    additional 1,939 people did not miss work because of E. coli O157:H7.
    Five hundred thirty-five more people did not suffer from a high fever
    caused by Listeria monocytogenes. Nearly 17,250 consumers did not have
    severe abdominal cramps caused by Campylobacter. And approximately
    2,100 people did not have to think, ``What did I eat?'' thanks to an
    illness caused by Yersinia.
        Taken together, these human health results, declines in recalls,
    and decreasing numbers of pathogens in our sampling program indicate
    that our risk-based approach is working, and that we are protecting
    public health through a safer food supply. While this is good news, we
    still have areas of concern.
    Salmonella
        A specific concern is Salmonella. When FSIS reported its 2003 data,
    the Agency acknowledged concern that the percentage of positive
    Salmonella tests had increased slightly in all three poultry
    categories. While the 2004 data showed more mixed results, there was a
    continued increase for young chicken (or broiler) carcasses and that
    number rose again in 2005.
        It is clear that the overall incidence of Salmonella infections
    remains far greater than our objective. In 2004 FoodNet data, there
    were 14.7 cases of culture-proven Salmonella infections per 100,000
    people. This means 115 people are infected by Salmonella every day, or
    42,000 every year. In my view, as someone with a medical background,
    that is way too high.
        The CDC's 1999 estimate of Salmonella infections is even higher.
    They estimate about 1.4 million cases of infection each year, with
    about 16,000 hospitalizations, 580 deaths and $3.1 billion in health
    care costs.
        The CDC's 2005 FoodNet report (of 2004 data) did not look any
    better. While it did report that Salmonella infections dropped 8
    percent, only one of the five most common strains, which accounted for
    56 percent of the reported Salmonella infections in 2004, declined
    significantly. That strain was Salmonella Typhimurium which declined 38
    percent.
        Salmonella Enteritidis and Salmonella Heidelberg neither increased
    nor decreased significantly. However, incidences of Salmonella Newport
    increased by an alarming 41 percent.
        It is clear that we must do better if we are going to meet DHHS'
    Healthy People 2010 objective for Salmonella, which is 6.8 infections
    per 100,000 people. We have already met the DHHS' Healthy People 2010
    objective of 1.0 cases of E. coli O157:H7 per 100,000 people. In 2004,
    the CDC reported 0.9 cases of E. coli O157:H7 infections per 100,000
    people.
        However, I do believe there is a way this year to combat Salmonella
    as I will explain later. I believe that we can leverage new
    technologies and cutting edge research, not only to reach the Healthy
    People 2010 objective, but to drive the numbers even lower.
    Cooperation and Collaboration with Other Agencies and Food Safety
            Partners
        Another significant accomplishment from 2005 has been unprecedented
    cooperation and collaboration with other Federal, State and local
    agencies and food safety partners.
        For starters, Avian Influenza has received a significant amount of
    press recently. FSIS takes this animal health issue very seriously. We
    will require a multi-agency effort to address this issue, and we have
    embarked on such an approach. FSIS has a Memorandum of Understanding
    with the Animal and Plant Health Inspection Service (APHIS), in which
    FSIS agrees to promptly notify APHIS if FSIS inspection program
    personnel detect signs of foreign animal disease. FSIS is also
    participating in several interagency groups that include DHHS, as well
    as State and local government agencies.
        In food defense, FSIS has been working very closely with DHHS' Food
    and Drug Administration (FDA), the Department of Homeland Security and
    the National Association of State Departments of Agriculture in
    developing guidelines and procedures for State and local first
    responders and Federal food regulatory agencies. This interagency
    response plan will facilitate cooperation with State and local
    emergency efforts when responding to incidents involving the food
    supply. We have already started testing these guidelines. We conducted
    an exercise through our district office in California with the
    California Department of Agriculture, the California Department of
    Health, Environmental Protection Agency, FDA, Federal Bureau of
    Investigation, CDC, and local and county health officials. We intend to
    hold more of these exercises with each FSIS district office and our
    partners so that we can make continuous improvements to the guidelines.
        We also have been working closely with industry to help them
    develop voluntary comprehensive food defense activities for every
    establishment. We feel it is essential that all slaughter, processing,
    import and export establishments take steps to ensure the security of
    their operations. Earlier in 2005, we made available on FSIS' Web site
    an ``Industry Self-Assessment Checklist for Food Defense'' and model
    food defense activities that they can use to guide their actions to
    defend the safety of their product. In addition, we have our inspectors
    ready and trained to assist industry as they enhance the protections
    they already have in place. As of this date, FSIS inspection program
    personnel have conducted over 1.3 million evaluations of establishment
    food defense activities and have found less than 1,500 areas that
    needed to be addressed.
        The model food defense activities were developed as a result of the
    vulnerability assessments that FSIS conducted for selected domestic and
    imported food products. These assessments allowed us to rank food
    products and potential contaminating agents in order of highest
    concern. Using this risk-based ranking, during periods of heightened
    awareness, FSIS' laboratories examine samples for threat agents posing
    the greatest risk as identified in FSIS' vulnerability assessments.
        Although the findings from these vulnerability assessments are
    classified, FSIS has been training industry representatives in how to
    conduct the assessments. As a result, many companies are now conducting
    their own assessments and taking appropriate measures to defend their
    processing lines and distribution chains from intentional
    contamination.
        Another example of collaboration is the Food Emergency Response
    Network (FERN). This joint FSIS-FDA effort of national, State, and
    local laboratories provides ongoing surveillance and monitoring of food
    and will promptly respond to an intentional contamination that targets
    the Nation's food supply. I will discuss FERN in more detail later when
    I go over our priorities for fiscal year 2007.
        We are also working closely with the CDC and FDA to improve our
    ability to link foodborne illness estimates with different food
    vehicles. Data on foodborne illnesses due to specific pathogens also
    needs to be connected with data on the prevalence of different
    pathogens in specific foods.
        The Foodborne Diseases Active Surveillance Network, or FoodNet
    which I mentioned before, is part of CDC's Emerging Infections Program,
    and it allows FSIS and our Federal, State, and local food safety
    partners to integrate foodborne illness data to determine the burden of
    foodborne disease, monitor foodborne disease trends, and determine the
    extent of foodborne diseases attributable to specific foods. Since
    1995, FSIS has worked closely with the CDC, FDA, and State and local
    epidemiologists and public health laboratories in making FoodNet an
    essential public health tool.
        FoodNet includes active surveillance of foodborne diseases, case-
    control studies to identify risk factors for acquiring foodborne
    illness, and surveys to assess medical and laboratory practices related
    to foodborne illness diagnosis. It provides estimates of foodborne
    illness and sources of specific diseases that are usually found in the
    United States and interprets these trends over time. Data are used to
    help analyze the effectiveness of our HACCP rule and other risk-based
    regulatory actions, as well as to develop public education initiatives.
    Consumer Safety Education
        Speaking of education, last year FSIS reached nearly 120 million
    citizens by developing and distributing brochures, technical papers,
    and booklets through the media, educators, the Agency's Web site, the
    Meat and Poultry Hotline, FSIS' virtual representative ``Ask Karen,''
    and the USDA Food Safety Mobile. As a medical doctor, I truly value the
    importance of effective and continuous food safety outreach to
    consumers. It is the key to any multi-pronged strategy to prevent
    people from getting sick and possibly dying.
        In fiscal year 2005, our Meat and Poultry Hotline handled nearly
    88,000 consumer calls on the safe storage, preparation, and handling of
    meat, poultry and egg products and over 130 media and information
    multiplier calls that included requests from newspapers, magazines and
    book authors along with live interviews with radio and television
    stations. From a public health standpoint, we still want to serve
    consumers even if an unexpected event affects the Washington, DC
    metropolitan area. No one should have to suffer through a foodborne
    illness after they have tried to contact our Hotline and have found it
    is down due to some unforeseen incident in the capital area. That is
    why in fiscal year 2006, we are expanding and upgrading the Hotline
    communication equipment to ensure uninterrupted service to the public
    in the case of an unexpected event.
        Research has shown FSIS that the at-risk, under-served, and
    Spanish-speaking populations require education and messages geared to
    their needs. In fiscal year 2005, FSIS continued to develop education
    programs for elderly, immune-compromised, and other at-risk
    individuals, and assisted with revisions to the American Medical
    Association/CDC/FDA/FSIS Diagnosis and Management of Foodborne Illness:
    A Primer for Physicians. We also developed a brochure titled, What
    Transplant Recipients Should Know About Food Safety. This is just one
    in a series of publications that will be developed targeting other at-
    risk audiences.
        In an unprecedented effort to reach those underserved, yet at-risk
    for foodborne illness, FSIS is cosponsoring a food safety conference
    entitled, ``Reaching At-Risk Audiences and Today's Other Food Safety
    Challenges,'' with the FDA, CDC, and private sector organizations. The
    goals of this conference include sharing current surveillance and
    epidemiological data on foodborne illness; presenting strategies
    leading to enhanced food safety knowledge, skills, and abilities in the
    general population and among at-risk populations; and to communicate
    the latest science-based safe food handling principles and practices.
        Also, FSIS produced a public service announcement (PSA) ``Fight
    BAC!'' in Spanish and distributed more than 50,000 copies to a
    national network of physicians' offices. In addition to being able to
    view the PSA, patients had access to flyers describing listeriosis, a
    foodborne illness more common in the Hispanic population.
        The USDA Food Safety Mobile that I mentioned earlier tours
    nationwide to support food safety education efforts and reach consumers
    where they live. In fiscal year 2005, the Mobile appeared at State and
    county fairs, food events, media events, schools, libraries, grocery
    stores, community events, parades, festivals, health and safety expos,
    trade shows, conventions, FSIS District Offices, and at FSIS events in
    conjunction with visits and presentations by USDA officials. Hundreds
    of thousands of educational items have been distributed and millions of
    consumers have been reached through media coverage of the Mobile. Since
    its launch in March 2003, the Food Safety Mobile has traveled more than
    66,000 miles, appearing in 247 events in approximately 185 cities, in
    48 States and the District of Columbia.
    Hurricane Katrina Response
        The Mobile was a vital component of our Hurricane Katrina response
    strategy. We deployed it in September 2005 to areas affected by
    Hurricane Katrina to provide firsthand food safety education and
    assistance to prevent any outbreaks of foodborne illness. I realized
    that food safety would not be one of the top priorities with many of
    the affected populace, given that they were displaced, grieving the
    loss of loved ones, or looking for missing family and friends. However,
    we were gravely concerned about the public health consequences of the
    hurricane's aftermath. With power outages and flooding of contaminated
    water, the potential for people consuming contaminated food was
    alarmingly high, which was why I ordered the Mobile to immediately
    abandon its previously scheduled course in the Northeast and head down
    to the Gulf Coast. I also directed FSIS to lease a second Food Safety
    Mobile to go to the affected areas.
        During its two-and-one-half month tour of the Gulf States, the Food
    Safety Mobile reached nearly 41,000 total consumers and distributed
    food safety brochures, bleach, hand wipes and thermal bags. The second
    Mobile appeared at 18 events, reaching an additional 15,000 consumers.
        In addition to our swift and aggressive consumer outreach, FSIS
    worked as rapidly as possible with industry to resume operations at
    meat, poultry and egg product establishments in the affected areas of
    the Gulf States. By September 5, 2005, FSIS had deployed approximately
    30 additional inspection program personnel and compliance staff
    personnel to this area so these plants could quickly resume operations.
    These personnel also oversaw the appropriate disposal and
    decontamination procedures at the plants.
        On September 20, 2005, FSIS began increased Salmonella testing of
    raw meat and poultry products in the affected areas of the Gulf Coast
    to provide microbial data to compare with nationwide data. FSIS also
    trained additional non-field staff to assist in conducting intensified
    verification tests in ready-to-eat establishments for Listeria
    monocytogenes, including collecting food-contact surface and
    environmental samples, to supplement product sampling and food safety
    assessments. These provided an additional layer of microbial testing
    and verification to ensure the safety of the ready-to-eat meat
    products.
    Building the Foundation of a More Robust Risk-Based Inspection System
        The successes from 2005 are varied and significant, ranging from
    reductions in pathogen prevalence to a quick and concerted response in
    the aftermath of Hurricane Katrina. The examples I just covered
    indicate that our food safety system works and is strong. However, I do
    not want to serve as just a caretaker of a good system.
        Even though FSIS has accomplished a lot, people still get sick and
    die each year from consuming contaminated food. As a medical doctor,
    that simply does not set well with me. I did not accept this job last
    year to recall hamburger, ham, sausage or any other product on a
    routine basis. I want to focus our time and valuable resources on
    prevention, rather than on response. It is a common sense, cost-
    effective public health strategy that best serves the American
    consumer.
        However, in order to move forward with this approach, we are going
    to need the help of everyone along the farm-to-fork continuum and
    Congress. I know with your support, we can further improve upon the
    food safety successes that we have already seen.
        The cornerstone of our strategy is to move forward on implementing
    a more robust risk-based inspection system. Our current system, while
    strong, is not suited to the future realities of food safety and public
    health, and we will need the new capabilities offered by an enhanced
    risk-based system.
        Our 100-year old inspection system was based on visual examination
    for visible signs of disease. The future demands that we be able to
    focus more on things that the human eye cannot see, things the nose
    cannot smell, and things the fingers cannot feel.
        We will also need the ability to anticipate and quickly respond to
    food safety challenges before they negatively affect public health.
    This is vital, as is a system that will allow us to use our finite
    resources more effectively and efficiently to further improve food
    safety. As a public health agency, we must have the capability and
    capacity to be smarter and act more efficiently, quickly and flexibly.
        This means a move away from a regulatory agency that protects
    public health by recalling dangerous product or withdrawing marks of
    inspection toward one that is focused on actively preventing foodborne
    illnesses from ever occurring. However, it is important to note that
    FSIS already uses a risk-based approach to food safety. Our goal is to
    further enhance and strengthen that system so that we are prepared for
    the food safety challenges in the next century. This is why we are
    requesting in the fiscal year 2007 budget an increase of $2.6 million
    to help us move toward our goal of a more robust risk-based inspection
    system.
        To continue our progress toward a more robust risk-based inspection
    system, we need to be sure that we communicate openly and often with
    all of our food safety stakeholders. We will use a transparent and
    inclusive process to seek input on a wide range of issues related to
    creating a more robust risk-based inspection system.
        We will proceed through a public process, gaining input from all of
    our stakeholders. At the last meeting of the National Advisory
    Committee on Meat and Poultry Inspection (NACMPI) in November, the
    Committee recommended a third-party approach to assist us in reaching
    out to, and gaining input from, our stakeholders. For this purpose, we
    are now in the process of selecting a third party. We have already
    established a NACMPI subcommittee to provide regular, ongoing guidance.
    It is important that we ensure everyone participates in this process.
        In fiscal year 2007, we plan to advance risk-based inspection in
    processing establishments through team inspection. This approach will
    utilize Agency-developed measures, which gauge an establishment's
    inherent hazard; monitor how well establishments are controlling
    hazards and complying with regulatory requirements; and provide for
    risk-based verification testing for Listeria monocytogenes in ready-to-
    eat products and the environment, and for Salmonella and E. coli
    O157:H7 in raw products.
        Effective implementation of team inspection in processing and risk-
    based verification testing will require not only workforce training for
    risk-based inspection, but also implementation support activities to
    ensure consistency of application after training.
        As part of a comprehensive risk-based inspection system, we will
    develop risk-based verification strategies for meat and poultry in
    commerce that can be used by FSIS personnel. Such activities would
    complement inspection activities performed in-plant. This initiative in
    fiscal year 2007 covers the cost of testing the policies, methods, and
    information technology (IT) applications to determine which mix
    provides the best consumer protections within FSIS' regulatory
    authority.
        Data obtained through surveys enable the Agency to base policies
    and regulations for inspection on a comprehensive understanding of the
    measures taken by establishments to reduce foodborne risks and the
    efficacy of such measures as processing technologies and pathogen
    reduction interventions. These surveys will be used to measure the
    potential impact of proposed regulatory changes, identify which
    segments of the industry may be achieving a regulatory standard, and
    identify improvements other establishments will need to make to achieve
    the standard.
    Risk-Based Salmonella Control
        Part of the $2.6 million request for risk-based inspection is for
    risk-based Salmonella control, which amounts to $602,000. Given the
    challenge we face with Salmonella that I mentioned earlier and the fact
    that there has been an increasing concern about outbreaks attributed to
    emerging and multi-drug resistant strains of Salmonella, it is
    imperative that we take a risk-based approach to investigating and
    controlling the incidence of Salmonella in meat, poultry and egg
    products.
        Since the prevalence rate in broiler chickens seems to be a trouble
    spot, we are looking into revising the performance measure for
    Salmonella on this particular product. Since 1998, FSIS has used the
    prevalence of Salmonella on broiler chickens, which is a regulatory
    performance standard for the production of raw poultry carcasses
    (broilers), to measure the Agency's performance in achieving its goal
    of reducing foodborne illness.
        However, FSIS has identified three weaknesses with the current
    measure. The first one is that the measure is scientifically unsound.
    The FSIS regulatory testing program that is the source of the data used
    in the current performance measure does not provide a true measure of
    prevalence of the pathogen.
        The second weakness is that the current measure overlooks an
    important public health issue. The current measure is for generic
    Salmonella, including those that are not attributed to foodborne
    illness. Not all serotypes of Salmonella are equally dangerous for
    humans. There are many known serotypes of Salmonella found in broilers,
    some of which cause human illness with varying severity. In fact, the
    most common serotype is not a significant factor in human foodborne
    illness.
        The third weakness is that the current testing program is not
    consistent with FSIS' goal of transitioning to a more risk-based
    inspection system. Plant process controls for Salmonella vary widely.
    Since 2003, aggregate percent positives in sample sets have increased
    each year from 11.5 percent in 2002, to 16.3 percent in 2005 while
    still remaining within regulatory performance standards. In order to
    improve program performance, FSIS is working to strengthen its
    verification testing program by making it more risk-based.
        Recognizing these weaknesses, FSIS will develop a new performance
    measure that more accurately measures:
      --Agency performance in achieving its goal of reducing foodborne
            illness; and
      --Plant performance, including identification of those plants that
            are most likely to have Salmonella serotypes that cause human
            illness.
        FSIS has analyzed data from approximately 7 years of regulatory
    testing for Salmonella in broilers. The Agency found strong evidence
    that plants that have consistently achieved a percent positive rate in
    sample sets at or below half the current regulatory performance
    standard are less likely to produce raw product that have the serotypes
    of Salmonella that are causes of human illness. Since these plants have
    been successful in controlling overall Salmonella to low levels, they
    would also have low levels of serotypes that are causes of human
    illness.
        As a result, achievement of performance goals established under the
    new measure would provide a better indication of process control and
    relate more directly to the improved safety of broilers. Consequently,
    we are developing a new measure to replace the existing Salmonella
    performance measure that would demonstrate the potential for reduction
    in exposure of humans to the serotypes of Salmonella most commonly
    associated with human illness.
        As we move forward on Salmonella, much can be learned from the
    success from our risk-based model dealing with E. coli O157:H7. In
    2002, FSIS issued a Federal Register notice to manufacturers of raw
    ground beef to conduct reassessments of their HACCP plans. Our
    scientifically trained personnel conducted food safety assessments
    through the first-ever, comprehensive reviews of all-beef products. The
    reassessments and enhanced process control by plants, with assessments
    by FSIS and testing, led to reductions in E. coli O157:H7 percent
    positives in FSIS' verification testing program.
        Using this model, we are planning to re-evaluate the broiler
    industry's process controls for serotypes of Salmonella that cause
    human illness. We will use food safety assessments as tools to reassess
    higher risk plants, which have the greatest potential to operate above
    the existing Salmonella performance standard. A food safety assessment
    is a systematic evaluation of a plant's scientific basis, design,
    validation and execution of its HACCP plan. In an example of how
    effective food safety assessments are, one broiler plant had a 30
    percent positive Salmonella rate. After our enforcement, investigation,
    and analysis officers conducted the assessment, the plant has a two
    percent positive Salmonella rate and is holding steady. This is the
    kind of result we anticipate for Salmonella.
    Outreach to Small and Very Small Plants
        In order to move forward with a more robust risk-based inspection
    system, we need to have the support of industry. All plants need to
    fully embrace HACCP, and a critical sector of the industry we regulate
    are small and very small plants, which comprise the majority of the
    plants we oversee each day.
        We realize that small and very small plants have unique needs when
    it comes to full-scale HACCP implementation and that they might not
    have as many resources as large plants do. Therefore, I made an
    absolute priority of increasing the communication between FSIS and the
    small and very small plants so that we can identify and respond to
    their needs faster and more efficiently with regard to full-scale
    implementation of their HACCP plans.
        Since September 2005, we have held listening sessions for small and
    very small plant owners and operators in Montana, California and
    Pennsylvania. These sessions gave us a better understanding of what was
    causing gaps between a plant's performance and our expectations for
    them to operate under HACCP. As a result, we have taken several actions
    to remedy any misunderstanding and deliver what small and very small
    plants need to embrace HACCP effectively.
        I do believe that education facilitates a greater understanding and
    helps close any performance gaps in implementation of HACCP plans. It
    also keeps FSIS from having to take enforcement action on
    establishments. I would be much happier with a solution that calls for
    increased education rather than for increased regulation; however, I
    have made the point to industry that we will do whatever it takes to
    ensure that a robust HACCP system is implemented and maintained in each
    and every plant, large or small. Public health is our responsibility
    and we will take regulatory action as necessary.
        This is absolutely necessary to move forward because when a child
    eats a hamburger, that burger should be as safe as it possibly can be,
    regardless of the size of plant it comes from. If that child gets E.
    coli O157:H7 or Salmonella, then that child, the child's parents and
    the child's doctor do not care what size that plant was, or how much
    ground beef it produced.
    Workforce Training
        In addition to industry's complete embracing of HACCP, training
    FSIS' workforce is a key component to ensure a robust risk-based
    inspection system. I understand that it requires a large investment in
    FSIS employees to ensure they have the training and skills they need to
    be successful in a risk-based environment. However, it is an investment
    that I know will continue to provide food safety dividends well into
    the future. If they succeed, then the American consumer is better off
    as well.
        Training enables inspection program personnel a wider range of
    opportunities to make a real difference in public health, and it also
    opens new avenues of career advancement to our employees. I also
    believe training improves job satisfaction, which leads to increased
    employee retention and recruitment.
        One of the Agency's top priorities in recent years has been to
    aggressively address the training and education of its workforce. We
    truly appreciate the support you have provided for us to pursue this
    goal. The increased workforce capabilities made possible by the changes
    and improvements in FSIS training have led to measurable improvements
    in public health, as I mentioned before using the data from the CDC.
    The declines in pathogen contamination further demonstrate that your
    support for our investment in training is a critical component of our
    public health infrastructure.
    Public Health Communications Infrastructure
        Another critical building block for the foundation of a robust
    risk-based inspection system is to have a public health communications
    infrastructure that has the ability to collect, assess and respond to
    data in real-time. This is why we are requesting $1.9 million in fiscal
    year 2007 to enhance our communications infrastructure.
        It is vital for our in-plant personnel to have this data in real-
    time in order to do their jobs properly and effectively. If they can do
    their jobs effectively, then FSIS will be able to react more rapidly in
    a crisis to better protect public health and ultimately save lives.
        Enhancing effective field communication capabilities has been a
    major goal of FSIS. Yet, while these efforts are continuing,
    approximately 40 percent of FSIS' field inspection workforce remains
    without timely communication capabilities. Part of the $1.9 million
    request for the communications infrastructure would be $615 thousand
    dedicated specifically toward inspector communication enhancement. With
    a need for increases in food safety assessments, enforcement actions
    and increased readiness, timely communication is vital to more
    effectively protect consumers.
        We need to continue the progress we have been making in replacing
    dial-up connections with high speed telecommunication lines for our
    field force. High-speed access enables us to receive real-time data and
    thus react more quickly to protect the public health. It is also an
    essential time-saving and cost-saving mechanism that makes management
    of the Agency's operations more efficient in the long run. We provided
    high speed telecommunication lines first to slaughter establishments
    with inspection personnel having bovine spongiform encephalopathy
    regulatory enforcement responsibilities. In fiscal year 2006, we are
    continuing this strategy of bringing broadband service to over 2,300
    base plant locations.
        In addition, the rapid pace of technological change in operating
    systems, application software and hardware, as well as the failure/
    repair rates for equipment, necessitates the replacement of computers
    every 3 years. The $1.3 million requested for computer replacements
    will enable FSIS to meet the demands of major operating system changes
    and eliminate the need for warranties extended beyond 3 years and
    expenditures not covered by the warranties. We need to ensure our
    compliance officers, supervisory and inspection program personnel, as
    well as State inspection personnel receive replacement computers. At
    present, this accounts for about 4,000 microcomputers in the field, and
    our goal is to replace 1,300 to 1,400 computers annually.
    Food Emergency Response Network
        To continue the advancements in food defense that I mentioned
    earlier, we are asking for an increase of $15.8 million for food and
    agriculture defense. A major component of this request would be
    allocated for the Food Emergency Response Network (FERN), which I also
    mentioned earlier.
        Consumer safety and public health protection will be enhanced
    through FERN. This will be possible through achieving FERN's four
    primary objectives. The first objective is to help us and partnering
    agencies prevent, or at least mitigate the brunt of, any attacks on the
    food supply through surveillance testing. The second objective is to
    prepare for emergencies by strengthening laboratory capabilities
    through the development and validation of analytical methods, analyst
    training and proficiency testing. The third objective is to respond to
    threats, attacks and emergencies in the food supply by providing a
    communications network and the necessary laboratory surge capacity. And
    the final objective is to provide laboratory support for investigations
    of, and recovery from, terrorism-related events.
        Being able to respond rapidly to a sudden surge in demand for
    testing is imperative, if we are going to restore consumer confidence
    in the safety of the Nation's food supply and to maintain U.S. economic
    stability in spite of the event. We only need to look back at the
    anthrax attacks in the autumn of 2001 to learn a valuable lesson. Only
    a few envelopes containing traces of anthrax were opened and only a few
    people died.
        But what happened in this bioterrorism event was that all Americans
    became fearful of exposure to anthrax when they came in contact with
    any white, powdery substance. Demand for laboratory testing of these
    substances was nationwide, and most laboratories did not have the
    necessary resources to handle this surge, causing prolonged delay
    before people knew if they had been exposed or not, putting a great
    burden on the Nation's psyche.
        When I worked in Nebraska's Department of Public Health, we had set
    up and maintained an effective laboratory testing system that could
    handle surge capacity within that State, whether it was for events
    stemming from intentional acts or Mother Nature. If we had not built
    such capacity, then only a few State laboratory technicians would have
    been inundated with West Nile virus testing when the virus hit
    Nebraska. We had an integrated system, so that when West Nile did
    become a public concern, we were able to call upon laboratory
    technicians from hospitals and universities to start testing for the
    virus. Having several hundred laboratory technicians test for West Nile
    as opposed to having only several do the job was certainly a much more
    sensible and effective public health strategy.
        If something were to happen in the food and agriculture sector that
    would cause public alarm, then our current system simply would be
    inundated. FSIS has three regulatory sampling laboratories and they
    work great under normal conditions. However, we need the surge capacity
    to help us handle at least three potential likely scenarios. The first
    one would be a hoax--let's say someone or some organization claims they
    have contaminated the food supply, but have not. The second would be an
    actual attack on the food supply by an individual or group. The third
    would be an outbreak stemming from an act of Mother Nature. In all
    three cases, there would be mass public concern and significant
    economic consequences. In the last two cases, there could potentially
    be hundreds, perhaps thousands, of people getting sick and dying. The
    sad reality is that we do not at this time have a laboratory system
    effective enough to handle the surge capacity if one of these three
    scenarios were to happen today or tomorrow.
        This is why FSIS' $13 million request for FERN will help provide
    participating laboratories with the necessary training, laboratory
    equipment and supplies so that we can handle surge capacity and achieve
    the other three objectives I mentioned earlier. From a public health
    standpoint, an investment in FERN is an absolute essential priority if
    we want to prevent, or mitigate, the loss of life and economic hardship
    if an intentional or unintentional incident affecting the food supply
    were to happen.

                        FISCAL YEAR 2007 BUDGET REQUEST

        I appreciate having the opportunity to discuss a number of FSIS'
    accomplishments and priorities with you. Now, I would like to present
    an overview of the fiscal year 2007 budget request for FSIS.
        Implementation of these budget initiatives is imperative to helping
    us attain FSIS' public health mission. In fiscal year 2007, FSIS is
    requesting an appropriation under current law of $862.9 million.
    Supporting FSIS' Basic Mission
        The FSIS budget request for fiscal year 2007 supports the Agency's
    basic mission of providing continuous food safety and inspection in
    each meat, poultry, and egg products establishment in the United
    States.
        The Agency's permanent statutory obligation is to provide
    continuous inspection of meat, poultry, and egg products is a labor
    intensive mandate, thereby making its salary cost relatively
    inflexible. An increase of $16 million for the FSIS inspection program
    is requested to provide for the 2.2 percent pay raise for FSIS
    employees in fiscal year 2007 to assure that the Agency is provided
    sufficient funds to maintain programs. Failure to provide the full
    amount for pay and benefit costs jeopardizes the effectiveness of FSIS
    programs and weakens food safety.
        We also seek an increase of $1.9 million for Agency efforts to
    support the President's Management Agenda in the area of IT. As I
    pointed out earlier, the Agency is seeking ways to have electronically
    stored information from all FSIS personnel integrated and available in
    real-time. This would allow inspectors ready access to information
    necessary to protect the public health.
        As I mentioned several times, as someone with a medical background,
    I view the bottom line of preventing foodborne illness and saving lives
    very stringently. My focus is on prevention, and I believe the request
    for increases of $2.6 million for risk-based inspection and $15.8
    million for food and agriculture defense will move us where we need to
    be to further enhance public health protection.
        In order to facilitate cross-agency coordination of information,
    FSIS seeks an increase of $600,000 for International Food Safety in
    order to link to the International Trade Data System managed by the
    Department of Homeland Security's Customs and Border Protection.
    User Fees
        Inspection services for the cost of Federal meat, poultry and egg
    products during all approved shifts are now paid with Federal funds.
    Legislation will be re-submitted to Congress, which would provide USDA
    with the authority to collect fees for inspection services beyond one
    eight-hour shift per day, saving significant Federal costs by
    transferring these costs to the industries that directly benefit from
    services performed. New industry costs would be a small fraction of one
    cent per pound of production, but would allow FSIS to ensure a safe
    food supply. Of the $862.9 million requested in the fiscal year 2007
    budget, $105 million is proposed to be derived from these user fees.

                                    CLOSING

        We will continue to engage the scientific community, public health
    experts, and all interested parties in an effort to identify science-
    based solutions to public health issues to ensure positive public
    health outcomes. It is our intention to pursue such a course of action
    this year in as transparent and inclusive a manner as is possible. The
    strategies I discussed today will help FSIS continue to pursue its
    goals and achieve its mission of reducing foodborne illness by
    protecting public health through food safety and security.
        Mr. Chairman, thank you again for providing me with the opportunity
    to address with the Subcommittee and submit testimony regarding the
    steps that FSIS is taking to remain a world leader in public health. I
    look forward to working with you to improve our food safety system,
    ensuring that we continue to have the safest food supply in the world.

                                     ______

       Prepared Statement of Dr. Barbara J. Masters, Administrator, Food
                         Safety and Inspection Service

        Mr. Chairman and members of the Subcommittee, I am pleased to be
    here today as we discuss public health and the U.S. Department of
    Agriculture's (USDA) fiscal year 2007 budget request for the Food
    Safety and Inspection Service (FSIS).
        This year marks the 100th anniversary of the passage of the Federal
    Meat Inspection Act (FMIA), which ushered in a new era of food safety
    on the national level. Although FSIS was established under its current
    name by the Secretary of Agriculture on June 17, 1981, our history
    dates back prior to 1906. Our mission is to ensure that meat, poultry,
    and egg products distributed in commerce for use as human food are
    safe, secure, wholesome, and accurately labeled. FSIS is charged not
    only with administering and enforcing the FMIA, but also the Poultry
    Products Inspection Act (PPIA), the Egg Products Inspection Act (EPIA),
    portions of the Agricultural Marketing Act, and the regulations that
    implement these laws.
        At FSIS, we are committed to the idea that an effective food safety
    and food defense system must be rooted in science. To meet its goal of
    protecting public health, FSIS will continue to review policies and
    regulations in light of what the science demands. We will also work
    with interested parties to modernize and enhance our inspection and
    food safety and defense verification efforts. All of this is necessary
    if we are to fulfill our public health mandate and stay ahead of the
    evolving threats to America's food safety.
        I am pleased to report that progress is being made in measurable
    and significant ways. An effective gauge of how our scientific policies
    are working is looking at how public health is positively impacted. Our
    efforts are clearly on the right track, as evidenced by the decline in
    foodborne illness over a recent 6-year span. For instance, the Centers
    for Disease Control and Prevention (CDC) last spring reported continued
    reductions in foodborne illnesses from 1996-1998 through 2004 stemming
    from E. coli O157:H7, Listeria monocytogenes, Campylobacter, and
    Yersinia. The report indicates that reductions in foodborne illness
    reported in 2003 were not an isolated event and that sustained progress
    is being made toward reducing illness from very dangerous foodborne
    pathogens.
        While these reported declines in foodborne illness are dramatic, we
    believe more can--and will--be done. We will realize further progress
    in the food safety dynamic by implementing a more robust, risk-based
    inspection system.
        The foundation of this system will be the ability to anticipate and
    quickly respond to food safety challenges before they have a negative
    impact on public health. While FSIS incorporates risk assessments in
    our approach to food safety, our goal is to further strengthen the
    system so that inspection program personnel may more effectively
    anticipate problems before they happen. A more robust, risk-based
    inspection system will ensure that our Agency's resources are used in
    the most effective and efficient way possible. We need a more robust
    system to help us meet future food safety challenges, some of which are
    either evolving or unknown today. An optimal risk-based inspection
    system is what FSIS is striving to achieve, and it will continue to
    guide our activities in fiscal year 2007.
        Ensuring the safety of America's meat, poultry, and egg products
    requires a strong infrastructure. To accomplish this task, FSIS has
    dedicated public health servants stationed throughout the country and
    in laboratories, plants, and import houses everyday. In fiscal year
    2005, the Agency had approximately 7,600 full-time personnel protecting
    the public health in 5,870 Federally-inspected establishments
    nationwide. FSIS inspection program personnel performed ante-mortem and
    post-mortem inspection procedures at 1,700 slaughter establishments to
    ensure public health requirements were met in the processing of 140
    million head of livestock, 9.4 billion poultry carcasses, and about 4.3
    billion pounds of liquid egg products. In fiscal year 2005, FSIS
    inspection program personnel also conducted over 8 million procedures
    to verify that establishments met food safety and wholesomeness
    requirements. In addition, during fiscal year 2005, approximately 4.3
    billion pounds of meat and poultry and about 8.4 million pounds of egg
    products were presented for import inspection at U.S. ports and
    borders.
        In an Agency the size of FSIS, with employees stationed all around
    the country, it quickly became apparent to me that effective
    communication was central to our mission. I have made improved
    communication a major priority, and we have greatly enhanced our
    communications tools including a redesigned, consumer-friendly Website;
    the debut of an Intranet for employees where they can access important
    and vital information; the launch of ``all-employee'' meetings via Web-
    cast; and more regular communications from the Administrator's office
    to the field. We continue to work on communications enhancements in
    order to ensure our entire workforce remains fully knowledgeable about
    the Agency's mission and goals.
        Fulfilling our public health mandate to ensure a safe and wholesome
    food supply is a demanding responsibility and an exciting challenge. I
    would like to thank you for providing FSIS with the resources to
    protect meat, poultry, and egg products. For fiscal year 2006, FSIS
    received $837.7 million ($829.4 million after rescission), and these
    funds are helping to move the public health agenda forward. For
    instance, for fiscal year 2006, Congress approved $2.2 million in
    additional funds for frontline inspection. This funding is enabling us
    to hire additional supervisory consumer safety inspection personnel,
    thus freeing up time for Public Health Veterinarians to focus on more
    complex and demanding food safety projects such as conducting food
    safety assessments and focusing on the design of food safety systems.
    Further, the additional funding you have provided us in the area of
    food defense has helped the Agency in further developing our response
    to contamination of the food supply, whether intentional or accidental.
    I will provide additional information on both these subjects later in
    this document.
        Today, I would like to share with you how we will further implement
    a more robust, risk-based inspection system, as well as some of our
    leading pathogen control efforts; our enhanced outreach to small and
    very small plants; our workforce training initiatives; our food defense
    activities; and our public health communications programs.
    FSIS' Six Priorities
        First, I want to reiterate that the Agency operates under six
    operational priorities, which I first shared with you 2 years ago. FSIS
    continues to hold itself accountable for improving public health. When
    we established these priorities, we outlined a series of actions to
    enable us to better understand, predict, and prevent contamination of
    meat and poultry products to improve health outcomes for American
    families. Since then, we have been building upon these priorities, all
    equally important, and continue to improve the Agency's infrastructure
    with a greater attention to risk so that we can continue improving our
    performance under the public health model. I should note that even
    though our priorities remain the same, we are constantly raising the
    bar so we can move forward to enhance public health protection. These
    priorities are building the infrastructure for further implementation
    of a more robust, risk-based inspection system.
    Continuing Evolution of Inspection and Enforcement: The Three Pillars
        The first major initiative I want to discuss today is the
    continuing evolution of inspection and enforcement. The evolution of
    inspection and enforcement is most closely aligned to our building a
    more robust, risk-based inspection system. (See Attachment.)
        This process can best be described by an illustration we have often
    used at FSIS. Namely, a more robust, risk-based system is a major
    structure built on a strong foundation with three pillars providing
    support. The pillars, taken together, maintain the system's integrity.
    The three pillars are: industry, FSIS personnel, and consumers.
        The Hazard Analysis and Critical Control Point (HACCP) system is
    the core of the industry pillar, and FSIS has a vital role in
    educating, as well as regulating industry's ability to achieve a
    positive outcome. Industry, for its part, is responsible for designing
    and implementing an effective food safety system. In this regard, we
    have been enhancing our outreach efforts, especially to small and very
    small plants, which I will describe later in this document.
        The FSIS personnel pillar is necessary so that we can collect,
    assess, and respond to public health data. Our verification must be
    uniform and consistent, especially in areas of greatest risk. Under a
    more robust, risk-based inspection system, we must use science as our
    guiding principal. In other words, we follow the core functions of the
    public health model--assessment, policy development, and assurance.
    Thus, the type and intensity of inspection at each plant would be
    determined by an analytical process which allows our inspectors to
    foresee problems so they can focus their efforts at plants and in
    processes that pose a public health risk. But in order to reach this
    point, we must develop a new system that will allow us to collect,
    assess, and respond to public health data. This need is emphasized in
    our budget request.
        The third pillar is one which represents consumers. Consumers--
    including all of us here today regardless of title--need to have
    confidence in a safe and well-defended food supply.
        As we move towards a more robust, risk-based inspection system, our
    goal is to ensure that we receive input from all stakeholders
    (industry, employees, and consumers) along every step of the process.
    We need to ensure that all food safety partners are aware of the
    expectations and goals and have had the opportunity to provide input in
    moving towards a more robust, risk-based inspection system.
    Risk-Based Pathogen Controls
        FSIS' Listeria monocytogenes verification sampling is a good
    example of how we have taken a more risk-based approach in processing
    plants. Under this initiative, FSIS tailors its verification activities
    to the interventions that plants choose to adopt and to the potential
    for Listeria monocytogenes growth in their products. In other words,
    FSIS conducts less sampling in those plants that have the best Listeria
    monocytogenes control programs and more sampling in plants that adopt
    less vigorous programs. Thus, plants have an incentive to do more to
    control Listeria monocytogenes.
        Considering all the progress that has been made in reducing
    Listeria monocytogenes, E. coli O157:H7, Campylobacter, and other
    pathogens, FSIS believes that it is time to enhance the risk-based
    approach to investigating and controlling the incidence of Salmonella
    in meat, poultry, and egg products. Salmonella is the most frequently
    reported foodborne illness in the United States, causing culture proven
    cases of foodborne illness at a rate of 14.7 per 100,000 population.
    The Department of Health and Human Services' (DHHS) Healthy People 2010
    calls for a rate of Salmonella infections of 6.8 per 100,000
    population. We have a long way to go.
        Salmonella includes over 2,300 serotypes, all of which are
    considered pathogenic in humans. Although most of the reported cases in
    the United States are associated with a relatively small number of
    serotypes--some of which are commonly found in raw meat and poultry
    products--there has been increasing concern about outbreaks attributed
    to relatively rare strains of Salmonella resistant to multiple
    antibiotics.
        While the Agency responds quickly to positive findings of
    Salmonella linked to human illness at any establishment, our risk-based
    Salmonella approach for raw product would help us be proactive before
    human illness is associated with our regulated products rather than
    reactive. It is essential that FSIS proceeds with its new Salmonella
    performance measure because it more accurately reflects Agency
    performance in reducing foodborne illness and plant performance in
    reducing the pathogen in its processes. Our risk-based Salmonella
    approach would also provide us with an early warning capability for the
    high-risk Salmonella serotypes from meat, poultry, and egg products in
    particular geographic areas.
        Our budget request would allow us to fully characterize isolates;
    initiate a Food Safety Assessment at a high-risk establishment before
    an outbreak occurs rather than as part of the investigation of why an
    outbreak has occurred; conduct more testing in areas where a cluster of
    serotypes is identified to determine if an unusual prevalence is
    occurring; and continually feed to CDC and State public health
    officials any data concerning patterns. We are requesting $602,000 for
    this risk-based Salmonella approach.
        In many ways, our foundational work has already started. We held
    public meetings to work with our stakeholders to find ways to reduce
    food safety hazards. In August 2005, for example, we held a public
    meeting on Advances in Pre-Harvest Reduction of Salmonella in Poultry
    in Athens, Georgia. The meeting, with over 208 participants, focused on
    research and practical experiences aimed at reducing Salmonella at the
    poultry production level, or before poultry reaches Federally-inspected
    plants. Based on input from the meeting and other information available
    to us, we are developing compliance guideline materials for producers
    that address pre-harvest food safety and Salmonella control. We held a
    second public meeting on February 23 and 24, 2006, in Atlanta, Georgia,
    which outlined new approaches to in-plant controls for Salmonella.
    Approximately 150 attended the meeting, with close to 100 joining the
    meeting by phone or netcast; the netcast was available both days. This
    meeting discussed new FSIS actions for encouraging industry to control
    Salmonella. Both of these meetings served as important steps in our
    foundational work.
    Funding Progress
        As a more robust, risk-based inspection system is the Agency's
    number one priority, we are requesting $2.6 million for this risk-based
    effort in fiscal year 2007. I will go over in more detail the specific
    funding needs for these efforts later when I review our budget request.
    However, it is worth highlighting here the following ways in which the
    Agency will prepare for the further evolution of the risk-based system
    through the improvement of Agency support:
      --$602,000 Salmonella risk-based inspection system approach described
            above.
      --Advance risk-based inspection in processing establishments through
            reprogramming databases to better assess plant data to
            determine where to sample based on risks to public health.
      --Development of risk-based verification strategies for meat,
            poultry, and egg products in commerce that can be used by FSIS
            personnel. We will collaborate with State, local, and public
            health officials at the retail level to determine strategies
            for enhanced consumer protections within our regulatory
            framework. These activities would complement inspection
            activities performed in-plant.
      --Use of data to base policies and regulations for inspection on
            information obtained that defines measures taken by
            establishments to reduce foodborne risks and the efficacy of
            measures implemented to reduce risk, e.g., pathogen reduction
            interventions.
      --Use of new technologies to increase the effectiveness of the risk-
            based inspections that inspectors perform including such things
            as rapid tests for residues and microbes.
    Training, Education, and Outreach
        The next priority I want to discuss is training, education, and
    outreach. Training is the foundation of our public health successes and
    a key element in our strategy to meet the Healthy People 2010 goals.
    All employees need to be equipped with the knowledge and technical
    expertise to operate within a public health framework, and the Agency
    has made great strides in achieving a well-trained workforce that is
    not only able to identify threats to the public health, but also to
    anticipate possible threats. We continue to have a need for training
    and are moving beyond the entry level and basic HACCP training provided
    to our workforce. As new employees join the Agency, they still require
    the basic training. With ongoing changes in policy, and as we move to a
    more robust, risk-based inspection system, new training and refresher
    training will be needed by all employees. Additionally, we are
    beginning to explore intermediate and advanced training opportunities
    for our employees. Based on new, innovative ways of reaching our
    employees, the Agency is using its existing budget to conduct this
    training.
        It has been easier to reach our employees and provide them training
    with the implementation of our regional training system to deliver
    vital training courses closer to employees' worksites. This innovative
    program ensures that our workforce receives critical scientific
    training in a timely manner. Providing this training efficiently and
    effectively has been a key element in the on-going reductions of
    foodborne pathogens.
        Due to improvements FSIS has made to its training program, 100
    percent of those hired as entry-level employees, as well as those who
    are promoted into inspection and enforcement occupations, now receive
    mission-critical training within 1 year of entering Agency duty. Many
    of these employees will receive the training within the first 6 months
    of being hired, or sooner.
        FSIS' Food Safety Regulatory Essentials (FSRE) training program has
    equipped inspection program personnel in verifying an establishment's
    HACCP system. Customized HACCP training is then provided, based on the
    types of products being produced at the establishments where inspectors
    are assigned. Approximately 1,400 FSIS employees received FSRE training
    in fiscal year 2005, and an additional 1,200 are slated to complete
    this customized job-training program this fiscal year. We continue to
    provide specialized training to our Public Health Veterinarians (PHVs),
    and this year, for the first time, this training will be required as a
    condition of employment, meaning that employees must successfully
    complete the curriculum in order to remain in our workforce. Since
    being launched in fiscal year 2004, over 230 PHVs have received the 9-
    week classes. We plan to hold eight PHV training classes this year,
    reaching nearly 200 people.
        We are also partnering with other Federal agencies to leverage
    resources for training. FSIS PHVs are trained to identify signs and
    symptoms during ante-mortem and post-mortem inspection that could
    potentially signify the presence of a foreign animal disease or
    suspicious condition, and they learn the appropriate response and
    reporting procedures. Working closely with our sister agency, the
    Animal and Plant Health Inspection Service, we are developing a
    training module on this issue that is available anytime, anywhere
    through the Department's AgLearn system. The course is also currently
    available through CD-ROM.
        In addition, we recognize that we employ individuals who must
    maintain their professional licenses. That is why we became a certified
    continuing education units outlet so that many of our courses can be
    utilized by the PHVs to obtain continuing education credit.
        FSIS is also in the midst of a comprehensive, multi-year training
    and education effort designed to ensure that every FSIS employee fully
    understands their role in preventing, or responding to, an attack on
    the food supply. Efforts began in fiscal year 2002 with food defense
    awareness training for supervisors. Since then, we have expanded with
    contracted anti-terrorism training that was provided to more than 5,000
    field and headquarters employees. Food defense awareness training is
    also being conducted with local partners, such as State and local
    inspectors, in a cooperative effort with other Federal agencies (Food
    and Drug Administration, USDA/Food and Nutrition Service, and USDA/
    Agricultural Marketing Service).
        With a regional approach to training, we have been able to deliver
    training faster and more efficiently to employees entering mission-
    critical occupations. Through e-learning techniques, we have been able
    to distribute training materials more rapidly to the workforce on vital
    issues such as bovine spongiform encephalopathy (BSE) policy. Through a
    policy of training as a condition of employment, we have also been able
    to ensure that all employees have the competencies to perform
    successfully. The regional approach also allows us to better leverage
    our resources so that our trainers can also provide outreach and
    education to small and very small plants, as well as in the course of
    interacting with their FSIS colleagues.
        FSIS is exploring a wide range of methods to reach its
    geographically dispersed workforce with on-going training updates. The
    newest vehicle FSIS has used is netcast. Most recently, Export
    Verification training was provided to inspection program personnel via
    netcast at establishments that produce beef products for export under
    Export Verifications programs.
        We know that for a more robust, risk-based inspection system to be
    successful then all plants must have well-designed, food-safety
    systems. To that end, we have been enhancing our outreach efforts,
    especially to small and very small plants, to ensure everyone is
    meeting the same requirements. We are significantly changing the
    dynamic of our workforce in order to improve our outreach efforts in
    this area. It is clear to us from our existing communication efforts
    that effective outreach can lead to important changes in food safety
    designs by industry. Small and very small plants are also part of the
    industry pillar that supports a more robust, risk-based inspection
    system, and any performance gaps that exist between them and the larger
    plants needs to be closed.
        One method we know is succeeding in this area is our actions
    following Food Safety Assessments (FSA), which have remained consistent
    over the past 3 years. For example, out of 1,501 FSAs conducted in
    2005, 912 of the establishments were found in compliance. We believe we
    have a vital role in educating and regulating industry to achieve this
    outcome, so we are assessing all aspects of our industry outreach. In
    2005, we held outreach and listening sessions with small and very small
    plants in Montana and California. Early this year, we held two more in
    Pennsylvania. From these sessions, we are gathering critical feedback
    to ensure plants do not fall behind in HACCP implementation.
        FSIS recognized, based on responses and comments from the outreach/
    listening sessions, the need to update its outreach strategy from one
    focused on initial development of a HACCP plan, to one that is geared
    towards the scientific basis of the HACCP plan. In other words, we need
    to shift from ``execution'' of HACCP plans to ``design'' of those
    plans. FSIS especially wants to continue to work with small and very
    small plant owners and operators so they can continue to enhance the
    design of their food safety systems.
        Ultimately, making certain that the Nation's food supply is safe
    makes good business sense, as well as good public health. We realize
    plant owners and operators must have the necessary tools for success,
    so education through outreach is an important focus for us. Likewise,
    plant owners and operators must seek this education and these tools and
    follow them. If educational or training opportunities are repeatedly
    ignored then we have made it clear that public health is our
    responsibility and we will take regulatory action as necessary.
        Most recently, the International HACCP Alliance hosted a strategy
    session attended by senior-level FSIS employees to discuss and discover
    the needs business owners, especially those of small and very small
    plants, have in relation to fully implementing HACCP. Both Dr. Raymond,
    Under Secretary for Food Safety, and I attended the meeting to show how
    important and valuable we view these sessions. The recommendations from
    this session are being included as part of an implementation plan by a
    group of senior-level FSIS employees. While the implementation plan is
    not yet finished, I can tell you that a uniform, consistent, and
    effective message regarding food safety regulations is a critical
    deliverable on the part of the Agency.
    Consumer Education Initiatives
        In the area of consumer education this year, the Food Safety Mobile
    played perhaps our most prominent role when it visited the Hurricane-
    ravaged Gulf Coast region. This eye-catching ``food safety educator-on-
    wheels'' brings important public health information to consumers and
    builds on our partnerships in grassroots communities across the
    country. Through the Food Safety Mobile, FSIS is sharing its food
    safety message with the public, especially culturally diverse and
    underserved populations and those with the highest risk from foodborne
    illnesses. In addition to dispensing important food safety tips in
    areas hit with power outages and water damage, the Food Safety Mobile
    distributed food safety brochures, bleach, hand wipes, and thermal
    bags. During its two-and-one half month tour of the Gulf States, the
    Food Safety Mobile reached nearly 41,000 total consumers face-to-face.
    In fact, the Food Safety Mobile was so successful that a second mobile
    was launched in October 2005, appearing at 18 events in 11 additional
    cities in Texas and Louisiana following Hurricane Rita. Food Safety
    Mobile II reached an additional 15,000 consumers affected by the
    hurricanes.
        In another inter-agency collaborative effort to educate about the
    importance of food safety, FSIS is cosponsoring with the DHHS' Food and
    Drug Administration (FDA), CDC, and private sector organizations an
    international food safety education conference this September, focusing
    on reaching at-risk audiences. An unprecedented effort, the goals of
    the conference include sharing current surveillance and epidemiological
    data on foodborne illness; presenting strategies leading to enhanced
    food safety knowledge, skills, and abilities in the general population
    and among at-risk populations; and to communicate the latest science-
    based safe food handling principles and practices.
    Food Defense
        The third priority is our substantial effort to continue to improve
    our food defense capabilities. The Agency has accomplished much in the
    area of food defense, making a strong system even stronger. The name of
    the office which handles this important area was changed from the
    Office of Food Security and Emergency Preparedness to the Office of
    Food Defense and Emergency Response. This reflects the fact that we
    have restructured the office to focus on developing strategies to
    protect and defend the food supply from intentional contamination and
    to respond to both intentional acts of adulteration, as well as large
    scale food emergencies.
        Last year, FSIS developed four model food defense plans, which are
    available on our website. These models are designed to assist Federal-
    and State-inspected meat, poultry, and egg products establishments, as
    well as import facilities, to develop their own defense measures to
    deter the threat of intentional contamination or similar attacks on the
    food supply. During 2005, the Agency held workshops on these plans in
    Dallas, TX; Oakland, CA; Chicago, IL; and Philadelphia, PA. In addition
    to webcasting the Oakland and Philadelphia workshops, FSIS also
    conducted four additional web casts to ensure that as many people as
    possible had the opportunity to participate. Two of these webcasts were
    targeted specifically to State officials, and the Agency also partnered
    with the University of Puerto Rico in holding an entire webcast in
    Spanish, which also drew participants from Latin America. In all, it is
    estimated that these workshops reached over 1,200 people.
        The model food defense plans have been issued in the form of
    guidance documents and are voluntary. However, FSIS believes that every
    establishment should have a written plan that describes and documents
    controls to ensure that the premises are defended from potential
    threats.
        FSIS continues to assess vulnerabilities in the food supply. The
    Strategic Partnership Program on Bioterrorism, a program including the
    Federal Bureau of Investigation, FDA, and Department of Homeland
    Security (DHS), along with FSIS and other USDA agencies, carries out
    joint vulnerability assessments on the food supply with industry and
    States, and we have been working in conjunction with the CDC, the FDA,
    epidemiologists, and public health laboratories in several States
    through the FoodNet and PulseNet programs. FSIS is also conducting an
    assessment of vulnerabilities of the food supply from illegally
    imported products.
        The majority of the $15.8 million increase in our fiscal year 2007
    food and agriculture defense budget request focuses on the Food
    Emergency Response Network (FERN). FERN is a joint FSIS-FDA effort of
    national, State, and local laboratories to provide ongoing surveillance
    and monitoring of food and to promptly respond to an intentional
    contamination that targets the Nation's food supply, or a foodborne
    illness outbreak brought about by Mother Nature. To date, $4 million in
    funding allocated in fiscal year 2005 and fiscal year 2006 has been
    used to build on the expertise of the Federal, State, and local
    laboratories that are now part of FERN, and these laboratories are
    currently conducting method development for testing and performing
    proficiency testing. FERN has also established five Regional
    Coordination Centers that serve as the primary points of contact for
    laboratories across the country.
        This effort enables FSIS to utilize State and local laboratories in
    handling the numerous samples required to be tested in the event of an
    attack on the food supply, a natural outbreak, or even a hoax,
    involving a meat, poultry, or egg product. It is vital for the Agency
    to respond rapidly to such emergencies to not only protect the public's
    health, but also to ensure public confidence in the safety of the food
    supply and to prevent an economic collapse in the meat or poultry
    industries. The first line of this rapid response is the laboratories,
    which must be provided with training, methodology, and state-of-the-art
    laboratory equipment. Ultimately, our goal is to have 100 State and
    local laboratories actively testing the food supply for FERN, like the
    18 FSIS-affiliated biological and eight FDA-affiliated chemical
    laboratories with which FERN now has cooperative agreements.
        Another important example of inter-agency cooperation, and one that
    is designed to allow the FERN labs to test methods and proficiency, is
    a joint project between USDA's Food and Nutrition Service, Agricultural
    Marketing Service (AMS), and FSIS. Product samples will be taken from
    facilities in four States that provide ground beef to the National
    School Lunch Program. FSIS labs will test those samples for threat
    agents, in addition to the regular pathogen testing that is performed
    by AMS. Then, once that product has been sent to warehouses, it will
    then be retested for the same threat agents by non-FSIS labs in the
    FERN network that have a cooperative agreement with the FERN network.
    The project will be held later this year and is the first one to focus
    on FSIS-regulated products. Earlier projects held in November and
    December of 2004 tested FDA-regulated products.
    Risk Analysis
        Fourth, is our risk analysis priority--which includes risk
    assessment, risk management, and risk communication. This is an
    extremely important process, one that provides FSIS with a way to focus
    resources on hazards that pose the greatest risk to public health.
        A good risk assessment needs good data in order to be effective.
    Therefore, we are conducting a series of nationwide baseline studies
    that will help determine the levels of various pathogenic
    microorganisms in raw meat and poultry. These baseline studies are
    designed to provide FSIS and the regulated industry with data
    concerning the prevalence and quantitative levels of selected foodborne
    pathogens and microorganisms that serve as indicators of process
    control.
        The first baseline study, which began in August and will continue
    to December 2006, is for E. coli O157:H7 and indicator organisms in
    beef trim and subprimals. Data from this study will guide Agency
    decisions on performance standards and allocation of inspection
    resources. In September of last year, a contract was awarded to a
    third-party laboratory to perform the microbial analyses for future
    baseline studies on: young chicken carcasses, ground chicken, and swine
    carcasses. From this, a new baseline study for young chicken carcasses
    will be initiated within the next few months. The young chicken
    baseline will include prevalence and quantified levels for both
    Salmonella and Campylobacter. This scientific information will allow
    FSIS to make the decisions necessary to move to a more robust, risk-
    based inspection system.
        Regarding BSE, USDA has contracted with Harvard University to
    update its risk assessment to ensure previous measures implemented
    through the interim final rules were appropriate. USDA is drafting a
    final rule based on the comments received on the interim final rule,
    the results of the updated Harvard Risk Assessment and results of the
    USDA enhanced surveillance program.
        During the past year, FSIS assumed the Chair of the USDA Food
    Safety Risk Assessment Committee (FSRAC), whose purpose is to enhance
    communication and coordination among USDA agencies, to promote sound
    risk assessments in support of food safety policy, and regulatory
    decisions. FSIS also became the co-lead for the Interagency Risk
    Assessment Consortium to share information and coordinate food safety
    risk assessment approaches among 18 Federal agencies, including DHHS,
    the Department of Defense, and the Environmental Protection Agency.
    Management Controls and Efficiency
        Our fifth priority is management controls and efficiency, which is
    a priority we added as a mechanism to best achieve our operational
    goals and objectives within each program area. Every task undertaken by
    the Agency has an effect on public health. Because of this, we are
    requiring each program area to illustrate through documentation that
    they are meeting their established goals.
        In order to ensure that proper management controls are implemented,
    FSIS' Office of Program Evaluation, Enforcement, and Review (OPEER)
    branch will audit all Agency program areas to measure the outcomes. In
    fiscal year 2005, the Agency began development of a two-phase
    management control audit protocol and agenda to systematically verify
    and evaluate management controls. Phase 1 will verify the
    implementation of the management controls for each program area; Phase
    2 will verify that each program is achieving its objectives, and that
    their controls are adequate and are achieving the program's desired
    results.
        During fiscal year 2005, we developed and implemented management
    controls that established operational performance standards for
    verification of HACCP requirements, ante-mortem/post-mortem
    requirements, Food Safety Assessments, administrative enforcement
    actions, food defense verification, and recall procedures.
        FSIS launched the AssuranceNet project team in fiscal year 2006.
    This team is developing a state-of-the-art management control reporting
    system that will tie into key Agency databases. The AssuranceNet team
    collects information on Agency management controls and the items the
    Agency needs in the way of a reporting tool. The team is working with
    Agency technical staff and outside contractors to develop the system
    according to industry standards and best practices. The AssuranceNet
    system will undergo extensive real world testing before it becomes
    fully available for use in June 2006.
        An area of management efficiency which we at FSIS emphasize is
    human resources (HR) modernization and reform. In 2004, FSIS launched
    an initiative to reshape the HR system to better support our human
    capital and strategic plans and to facilitate every-day mission
    performance. The resulting internal work group has developed innovative
    HR practices that can be implemented under current law, as well as
    identifying innovations that require Federal legislation or regulatory
    changes. We stand committed to the belief that the Agency requires an
    alternative HR system that emphasizes pay-for-performance.
    Public Health Communications Infrastructure
        Our sixth priority is the public health communications
    infrastructure with the ability to collect, assess, and respond to data
    in real-time. Because this is also a foundation of a more robust, risk-
    based inspection system, we are constantly looking for ways to improve
    communication within the Agency, between the Agency and its
    stakeholders, as well as cross-Agency communications. FSIS is examining
    its data needs to make our field operations more effective. Having the
    same data from the border, the districts, and field and laboratory
    personnel at the same time is essential so that everyone can connect
    the dots and proactively respond to this wealth of information rather
    than just react after a problem surfaces. Proactively interpreting our
    data will better protect public health from the prospect of non-
    intentional or intentional contamination. By collecting, assessing, and
    responding to data in real time, lives can be saved.
        A key part of this process is through the effective management of
    information technology (IT). Through an Enterprise Architecture Working
    Group, we have been working closely with the Office of Management and
    Budget (OMB) and others involved in the Federal-government wide e-
    Government efforts to develop IT systems that facilitate cross-Agency
    analysis and identification of duplicative investments, gaps and
    opportunities for collaboration within and across agencies.
        Another way we are working to enhance cross-Agency communication in
    fiscal year 2007 is to create electronic linkages with the Department
    of Homeland Security's Customs and Border Protection's International
    Trade Data System in order to provide FSIS with a stronger ability to
    screen and verify the security of products imported into the United
    States in an efficient way. FSIS is also working with its Federal
    partners through the Federal Health Architecture initiative to build a
    system that all Federal agencies can communicate through to better
    protect imported products.
        On the Agency level, FSIS is working to have electronically stored
    information from all FSIS personnel integrated and available in real-
    time, allowing managers and administrators to make management decisions
    more efficiently as events are unfolding and with greater access to
    information. This is necessary for our inspection program personnel to
    do their jobs properly and effectively and to react more rapidly in a
    crisis to better protect public health and save lives. An example of
    this was shown in a recent test of an updated version of our Consumer
    Complaint Monitoring System (CCMS). When implemented later this year,
    this new version of CCMS will include improved scientific tools to
    enable us to act more quickly to prevent further foodborne illness. In
    one scenario, as we were testing this new version of CCMS, we were able
    to find an E. coli O157:H7 outbreak 3 weeks faster than with our
    present technology. FSIS is partnering with States to integrate this
    system so that this real-time data could be accessed and shared by all
    to help prevent outbreaks and/or limit their scope. Other aspects would
    also include procuring PDA-type hardware and related software
    integrating into existing Agency computer and communications equipment
    for inspection program personnel. It also includes keeping up with
    rapid changes in microcomputer technology.
        We believe these efforts to improve upon the Agency's IT systems
    will greatly enhance the Agency's efforts to support the President's
    Management Agenda, and move us towards more efficient e-Government
    solutions to the challenges we face.
    InsideFSIS Debuts
        Other ways that we have improved our communications includes
    InsideFSIS, the Agency's employee intranet which was launched in June.
    With InsideFSIS, employees are able to gain instant access to important
    Agency information and may participate in netcasts, as was the case
    with a State of the Agency meeting held in September last year. We also
    have an extensive food handlers' education program that encompasses
    everything from bilingual pamphlets on using thermometers to our Food
    Safety Mobile.
        I have already mentioned the prominent role the Food Safety Mobile
    played on the hurricane-ravaged Gulf Coast, but the Food Safety Mobile
    was not the only way the Agency played an important role in our
    strategy to respond to the hurricanes. Prior to both hurricanes'
    landfalls, FSIS issued videotaped consumer alerts with food safety tips
    following a power outage or flood that were satellite broadcast to
    media outlets in Alabama, Louisiana, Georgia, and Florida. In addition,
    the Agency's Meat and Poultry Hotline began 24-hour service to handle
    any food safety questions from consumers. Our outreach to American
    consumers continued into September, when FSIS recorded and distributed
    public service announcements offering food safety tips.
    Fiscal Year 2007 Budget Request
        I appreciate the opportunity to discuss FSIS' priorities with you.
    Now, I would like to present an overview of the fiscal year 2007 budget
    requests for FSIS. These budget initiatives are vital to helping us
    attain FSIS' public health mission, as outlined by our priorities. In
    fiscal year 2007, FSIS is requesting an appropriation of $862.9
    million.
    Risk-Based System
        FSIS is seeking a total increase of $2.6 million for the
    improvement of Agency support for risk-based inspection and risk-based
    Salmonella control. We are requesting $1.9 million for Agency support
    of risk-based inspection. Finally, for our risk-based Salmonella
    approach, we are requesting $602,000.
    Food and Agriculture Defense Initiative
        The fiscal year 2007 budget also requests a total increase of $15.8
    million for FSIS to support the Food and Agriculture Defense Initiative
    in partnership with other USDA agencies, the DHHS, and the Department
    of Homeland Security. Because food contamination and animal and plant
    diseases could have catastrophic effects on human health and the
    economy, the three Federal departments involved are working together on
    a comprehensive food and agriculture policy that will enrich the
    Government's ability to respond to the dangers of disease, pests, and
    poisons, whether natural or intentionally introduced. The total is
    broken down as follows:
        Central to FSIS' food defense efforts is FERN, for which we are
    seeking an increase of $13 million. These funds are critical to help
    FSIS provide participating laboratories with the necessary training,
    laboratory equipment and supplies so that we can handle surge capacity,
    whether from events stemming from a hoax, intentional acts or mother
    nature. From a public health standpoint, an investment in FERN is an
    absolute essential priority if we want to prevent, or mitigate, the
    loss of life and economic hardship if an intentional or unintentional
    incident affecting the food supply were to happen.
        We are also requesting $2.5 million for two data systems to support
    FERN--the electronic laboratory exchange network (eLEXNET), and a
    repository of analytical methods. The eLEXNET is a national, web-based,
    electronic data reporting system that allows analytical laboratories to
    rapidly report and exchange standardized data. This system is currently
    operational in nearly 100 food-testing, public health, and veterinary
    diagnostic laboratories across the country. The fiscal year 2007 budget
    request would make eLEXNET available to additional FERN and other
    analytical, food-testing laboratories. This will require eLEXNET system
    management, travel, on-site computer programming, and training.
        Access to current, properly validated methods used for screening,
    confirmation, and forensic analysis is critical to all laboratories.
    For this reason, FSIS is working with FDA to develop a Web-based
    repository of analytical methods compatible to eLEXNET. Access to these
    methods will greatly enhance the ability of FERN and other laboratories
    to respond to emergencies, to use new methodologies and technologies,
    to enhance efficiency, and to trouble-shoot problems. The requested
    funding will be used to enhance the repository and to populate the
    repository with numerous methods that will be obtained from analytical
    laboratories.
    Communication
        In order to facilitate cross-Agency coordination of information,
    FSIS seeks an increase of $600,000 for International Food Safety in
    order to link to the Import Trade Data System managed by the Department
    of Homeland Security's Customs and Border Protection. Currently, FSIS
    relies on the importer of record to present shipments for reinspection,
    and the lack of network linkages among import data systems maintained
    by different agencies contributes to a prolonged, sometimes incomplete
    rendering of product dispositions and document certification for
    imported meat and poultry products at U.S. ports of entry.
        We are also requesting funds for Agency efforts to support the
    President's Management Agenda in the area of IT. As I pointed out
    earlier, the Agency is seeking ways to have electronically stored
    information from all FSIS personnel integrated and available in real-
    time. This would allow inspectors ready access to information necessary
    to protect the public health. For inspector communication enhancements,
    such as the PDA-type hardware for inspectors mentioned earlier, we are
    seeking $615,000.
        Our experience has shown that the originally postulated life cycle
    of 5 years for microcomputers delivered to the field inspection
    workforce is not practical, given the rapid pace of technological
    changes. To replace a 5-year lifecycle for computer hardware with a 3-
    year lifecycle, the Agency seeks $1,271,000. This accounts for the
    approximately 4,000 microcomputers in the field. Our goal is to replace
    1,300 to 1,400 computers annually.
    Personnel Pay Increase
        An increase of $16 million for the FSIS inspection program is
    requested to provide for the 2.2 percent pay raise for FSIS employees
    in fiscal year 2007 to assure that the Agency is provided sufficient
    funds to maintain programs. Failure to provide the full amount for pay
    and benefit costs jeopardizes the effectiveness of FSIS programs and
    weakens food safety.
    User Fee Proposal
        Once again this year, our budget reproposes the implementation of a
    new user fee. As you know, inspection services for the cost of Federal
    meat, poultry, and egg products during all approved shifts are
    currently paid for with Federal funds, provided that the species or
    product is covered under our legislative authority. However, most
    plants run beyond one 8-hour shift per day. A fee for services beyond
    that would save significant Federal costs by transferring these costs
    to the industries that directly benefit from them. The proposed fiscal
    year 2007 savings are projected at $105.4 million to reflect
    collections of receipts for three quarters of the year.
    Closing
        As we mark the 100th anniversary of the passage of the FMIA, FSIS
    will continue to engage the scientific community, public health
    experts, and all interested parties in an effort to identify science-
    based solutions to public health issues to ensure positive public
    health outcomes. It is our intention to pursue such a course of action
    this year, as we have in the past, in as transparent and inclusive a
    manner as possible. The strategies I discussed today will help FSIS
    continue to pursue its goals and achieve its mission of reducing
    foodborne illness, and protecting public health through food safety and
    defense.
        Mr. Chairman, thank you again for providing me with the opportunity
    to speak with the Subcommittee and submit testimony regarding the steps
    that FSIS is taking to remain a world leader in public health. I look
    forward to working with you to improve our food safety system and
    ensuring that we continue to have the safest food in the world.

        Senator Bennett. Thank you. Dr. Lambert.

                          STATEMENT OF CHARLES LAMBERT

        Mr. Lambert. Thank you, Chairman Bennett, Senator Kohl.
        I am pleased to appear before you to discuss the activities
    of the Marketing and Regulatory Programs and to present our
    2007 budget proposals.
        With me today are Dr. Ron DeHaven, who is the Administrator
    of the Animal and Plant Health Inspection Service (APHIS); Mr.
    Lloyd Day, Administrator of the Agricultural Marketing Service
    (AMS); and Mr. James Link, who is the Administrator of the
    Grain Inspection, Packers and Stockyards Administration
    (GIPSA). And those are the three agencies that make up
    Marketing and Regulatory Programs (MRP).
        In addition, Mr. Dennis Kaplan from the department's Budget
    Office is here with us.
        MRP has addressed several broad goals and objectives to
    increase marketing opportunities and to protect American
    agriculture from damages caused by pests and diseases, both
    intentional and unintentional. The key to private sector
    financial success is relatively simple. First, offer high-
    quality products. Second, produce them at a competitive cost.
    And third, earn a fair price in the marketplace.
        In relation to this, MRP has identified three areas for
    special attention to make American agriculture more
    competitive. They include protecting plant and animal health;
    ensuring quality; and continuing to work with the Department of
    Homeland Security to exclude agricultural health threats and
    with farmers and ranchers to control endemic pests and diseases
    once they are here.
        Through MRP's commodity grading and inspection programs, we
    support producers in the marketing of high-quality crops and
    livestock.
        Second is through enhancing market access by reducing
    technical barriers to trade. And third is harmonizing
    international standards by redoubling our efforts in a variety
    of international standard-setting organizations and working
    closely with our sister agencies to ensure that technical
    standards do not become technical barriers.
        MRP activities are funded both by the taxpayers and
    beneficiaries of program services. The budget proposes that the
    MRP agencies carry out programs of close to $2 billion, with
    $412 million funded by fees charged to direct beneficiaries and
    $450 million from customs receipts.
        On the appropriation side, the President's budget requests
    about $959 million for APHIS, $85 million for AMS, and $42
    million for GIPSA.
        The budget proposes user fees that, if enacted, would
    generate about $42 million in savings to the U.S. taxpayer. The
    budget also includes a proposal to terminate the AMS
    Microbiological Data Program, given its limited use to
    determine the source of food-borne illnesses and other reasons.

                              PREPARED STATEMENTS

        Mr. Chairman, the increases that you referred to are
    generally in the exclusion of foreign animal and plant diseases
    and pests and for enhanced monitoring and surveillance
    primarily related to avian influenza.
        I look forward to working with the committee on the 2007
    budget for marketing and regulatory programs. We believe the
    proposed funding amounts and sources of funding are vital to
    improving plant and animal health and ensuring quality and
    enhancing market access and achieving harmonization of
    international standards. It also works to reduce the deficit
    and protects American agriculture from terrorists.
        We are happy to answer any questions. Thank you.
        [The statements follow:]

                     Prepared Statement of Charles Lambert

        Mr. Chairman and members of the Committee, I am pleased to appear
    before you to discuss the activities of the Marketing and Regulatory
    Programs (MRP) of the U.S. Department of Agriculture and to present our
    fiscal year 2007 budget proposals for the Animal and Plant Health
    Inspection Service (APHIS), the Agricultural Marketing Service (AMS),
    and the Grain Inspection, Packers and Stockyards Administration
    (GIPSA).
        With me today are Mr. Jeremy Stump, Acting Deputy Under Secretary
    for MRP; Dr. Ron DeHaven, Administrator of APHIS; Mr. Lloyd Day,
    Administrator of AMS; and Mr. James Link, Administrator of GIPSA. They
    have statements for the record and will answer questions regarding
    specific budget proposals.
        MRP has addressed several broad goals and objectives to increase
    marketing opportunities and to protect American agriculture from
    damages caused by pests and diseases, both intentional and
    unintentional. The key to private sector financial success is
    relatively simple. First, offer the highest quality products. Second,
    produce them at the lowest possible cost. And, third, earn a fair price
    in the marketplace.
        MRP helps American farmers and ranchers in several ways. AMS and
    GIPSA certify the quality of agricultural commodities and provide
    industry with a competitive edge earned by the USDA seal of approval
    for grading and inspection. APHIS protects the health of plants and
    animals, thereby keeping costs low. APHIS also provides plant and
    animal sanitary and phytosanitary (SPS) expertise during international
    negotiations to maintain and open markets around the world, and GIPSA
    works to ensure that livestock producers have a level playing field
    upon which to compete. A healthy and marketable product provides the
    foundation of competitive success.

                                MRP INITIATIVES

        MRP has identified three areas for special attention to make
    American agriculture more competitive. They include:
        Protect Plant and Animal Health and Ensure Quality.--MRP will
    continue to work closely with the Department of Homeland Security (DHS)
    to prevent the entry of foreign plant and animal pests and diseases
    through the Agricultural Quarantine Inspection Program (AQI). We will
    continue to work with farmers and ranchers to control endemic pests and
    diseases at minimal levels. Through MRP's commodity grading and
    inspection programs, we will support our producers in the marketing of
    their high quality crops and livestock.
        Enhance Market Access.--Market access can be impaired through
    technical barriers and SPS measures. MRP will continue to work closely
    with international counterparts to educate them about our systems; to
    learn more about the foreign country requirements; and to certify that
    U.S. products meet their standards.
        Harmonize International Standards.--MRP will continue to provide
    expertise in an effort to harmonize sanitary and phytosanitary
    measures. Since risk is inherent and fair trade relies upon the same
    standards being applied to all parties, MRP will increase its efforts
    with the World Organization for Animal Health and the International
    Plant Protection Convention to develop standards and processes for two-
    way trade to exist, with restrictions and mitigations based on science
    to reduce risk. Moving away from an ``all or nothing'' approach makes
    trade therefore less risky, as a localized or contained outbreak has
    fewer effects on exports and thus on the economy. In a similar vein, a
    level playing field in world markets depends on technical standards
    that describe the quality and other characteristics of agricultural
    products in a manner that does not discriminate against U.S. producers
    and shippers. MRP will redouble its efforts in a variety of
    international standard setting organizations and work closely with our
    sister agencies to ensure that technical standards do not become
    technical barriers.

                                FUNDING SOURCES

        The MRP activities are funded by both the taxpayers and
    beneficiaries of program services. The budget proposes that the MRP
    agencies carry out programs of close to $2 billion, with $412 million
    funded by fees charged to the direct beneficiaries of MRP services and
    $450 million from Customs receipts.
        On the appropriation side, the Animal and Plant Health Inspection
    Service is requesting about $953 million for salaries and expenses and
    $6 million for repair and maintenance of buildings and facilities; the
    Agricultural Marketing Service is requesting $85 million; and the Grain
    Inspection, Packers and Stockyards Administration is requesting $42
    million.
        The budget proposes user fees that, if enacted, would generate
    about $42 million in savings to the U.S. taxpayer. Legislation will be
    proposed to provide USDA the authority to recover the cost of
    administering the Packers and Stockyards Act, developing grain and
    other commodity standards that are used to support fee-based grading
    programs and for other purposes, providing Federal oversight of
    marketing agreements and orders, and inspecting entities regulated
    under the Animal Welfare Act. I will use the remainder of my time to
    highlight the major activities and our budget requests for the
    Marketing and Regulatory Programs.

                   ANIMAL AND PLANT HEALTH INSPECTION SERVICE

        The fundamental mission of APHIS is to anticipate and respond to
    issues involving animal and plant health, conflicts with wildlife,
    environmental stewardship, and animal well-being. Together with their
    customers and stakeholders, APHIS promotes the health of animal and
    plant resources to enhance market access in the global marketplace and
    to ensure abundant agricultural products and services for U.S.
    customers. I would like to highlight some key aspects of the APHIS
    programs:
        Improve Plant and Animal Health.--While APHIS continues to work
    closely with the Department of Homeland Security (DHS) to exclude
    agricultural health threats, it retains responsibility for promulgating
    regulations related to entry of passengers and commodities into the
    United States. APHIS' efforts have helped keep agricultural health
    threats away from U.S. borders through increased offshore threat-
    assessment and risk-reduction activities. APHIS has also increased an
    already vigilant animal and plant health monitoring and surveillance
    system to promptly detect outbreaks of foreign and endemic plant and
    animal pests and diseases.
        Since June, 2004, when we launched the one-time, significantly
    enhanced surveillance program for BSE, we have tested about 660,000
    high-risk animals as of March 20, 2006, and an additional 21,000
    clinically-normal animals. Only two samples have tested positive. APHIS
    is in the process of evaluating the enhanced program, though it
    certainly would not be premature to say that by any measure the
    incidence of BSE in the United States is extremely low.
        In addition, we are moving ahead with the National Animal
    Identification System (NAIS). All 50 States, five Tribes, and two U.S.
    Territories are registering premises with an estimated total of about
    213,000 premises registered as of March 7, 2006. APHIS and its State
    and Tribal cooperators are registering hundreds of premises each week,
    and we are also in the preparation stage to begin allocation of
    individual animal identification numbers.
        We have been closely monitoring the very alarming spread of highly
    pathogenic avian influenza overseas. USDA is a full partner in the
    government-wide effort to prepare the country for a potential pandemic
    and the worldwide effort to stop the spread of H5N1 virus at its source
    overseas. We appreciate funding provided through the December, 2005,
    pandemic influenza emergency supplemental. We are using those funds for
    international efforts, domestic surveillance of poultry and migratory
    birds, diagnostics, and emergency preparedness and response.
        Because efforts to exclude foreign pests and diseases are not 100
    percent successful, APHIS also assists stakeholders in managing new and
    existing agricultural health threats, ranging from threats to
    aquaculture, crops, tree resources, livestock and poultry. In addition,
    APHIS assists stakeholders on issues related to conflicts with wildlife
    and animal welfare.
        Enhance Market Access.--The Trade Issues Resolution and Management
    efforts are key to ensuring fair trade of all agricultural products.
    APHIS' staff negotiates SPS standards, resolves issues, and provides
    clarity on regulating imports and certifying exports which improves the
    infrastructure for a smoothly functioning market in international
    trade. Ensuring that the rules of trade are based on science helps open
    markets that have been closed by unsubstantiated SPS concerns.
        In fiscal year 2005, reopening markets for United States products
    posed one of the greatest challenges. In regard to beef markets that
    were closed to U.S. exports because of BSE, APHIS has contributed to
    regaining at least partial access to 26 markets. Altogether, APHIS
    resolved 79 SPS issues in fiscal year 2005, allowing approximately $1.4
    billion worth of trade to occur.
        Recent developments in biotechnology underscore the need for
    effective regulation to ensure protection of the environment and food
    supply, reduce market uncertainties, and encourage development of a
    technology that holds great promise. APHIS' Biotechnology Regulatory
    Services unit coordinates our services and activities in this area and
    focuses on both plant-based biotechnology and transgenic arthropods. We
    also are examining issues related to transgenic animals.

                           APHIS' 2007 BUDGET REQUEST

        In a year of many pressing high-priority items for taxpayer
    dollars, the budget request proposes about $953 million for salaries
    and expenses. There are substantial increases to support the
    Administration's Food and Agriculture Defense Initiative, enhance avian
    influenza efforts, address SPS trade barriers, and deal with specific
    threats to the agriculture sector. In addition, existing user fees of
    about $139 million will support Agricultural Quarantine Inspection and
    related activities. A brief description of key efforts supported by the
    2007 budget request follows.
        A Total of About $182 Million for Foreign Pest and Disease
    Exclusion.--Efforts will focus on enhancing our ability to exclude
    Mediterranean fruit fly, foreign animal diseases, and screwworm. In
    addition, we also request funds to open offices in Thailand, India,
    Italy, and West Africa to facilitate U.S. exports.
        A Total of About $304 Million for Plant and Animal Health
    Monitoring and Surveillance.--Due to the critical role of APHIS in
    protecting the Nation from both deliberate and unintentional
    introductions of an agricultural health threat, the budget requests an
    increase of about $62 million as part of the Food and Agriculture
    Defense Initiative. This request would provide: enhanced international
    information gathering about potential threats abroad; greater plant
    pest detection and safeguarding; increased national wildlife and animal
    health surveillance; improved ability to respond to plant or animal
    disease outbreaks; and vaccines and supplies for the National
    Veterinary Stockpile. We will also continue efforts to build the
    National Animal Identification System to limit the spread of a
    potential animal disease outbreak.
        A new request is intended to stop, slow, or otherwise limit the
    spread of highly pathogenic avian influenza to the United States and to
    limit the domestic spread of a pandemic. The budget includes an
    additional $57 million for international capacity building (e.g.,
    providing in-country veterinary expertise overseas); domestic
    surveillance and diagnostics (including wildlife surveillance); and
    emergency preparedness and response. This would continue efforts that
    were started with funds from the December, 2005, pandemic influenza
    emergency supplemental.
        A Total of $344 Million for Pest and Disease Management Programs.--
    Once a pest or disease is detected, prompt eradication will reduce
    long-term damages. In cases where eradication is not feasible (e.g.,
    European gypsy moth), attempts are made to slow the advance, and
    damages, of the pest or disease. APHIS provides technical and financial
    support to help control or eradicate a variety of agricultural threats.
    The budget proposes a number of increases, including those for citrus
    canker, emerald ash borer, and sudden oak death. Other programs are
    reduced. For example, successes in boll weevil eradication efforts
    allow a reduction in that program. Included is an increase of $10
    million for competitive grants to fund the application of innovative
    private-sector solutions to real-world pest and disease problems.
        A Total of $20 Million for the Animal Care Programs.--Additional
    funding will help APHIS maintain its animal welfare and horse
    protection programs despite the rapid growth in the number of new
    licensees and registrants. The budget includes a proposal to collect $8
    million in fees from regulated entities to help cover costs associated
    with inspections under the Animal Welfare Act.
        A Total of $94 Million for Scientific and Technical Services.--
    Within USDA, APHIS has chief regulatory oversight of genetically
    modified organisms. To help meet the needs of this rapidly evolving
    sector, the budget includes a request to, in part, enhance our
    regulatory role towards transgenic animals and disease agents. Also,
    APHIS develops methods and provides diagnostic support to prevent,
    detect, control, and eradicate agricultural health threats, and to
    reduce wildlife damages (e.g., coyote predation). It also works to
    prevent ineffective or harmful animal biologics from being marketed.
        A Total of $10 Million for Improving Security and IT Operations.--A
    portion of the increase would be used to upgrade key computer resources
    for eGov requirements and other efforts. It also includes providing the
    State Department funds to help cover higher security costs for APHIS
    personnel abroad.

                         AGRICULTURAL MARKETING SERVICE

        The mission of the AMS is focused on facilitating the marketing of
    agricultural products in the domestic and international marketplace,
    ensuring fair trading practices, and promoting a competitive and
    efficient marketplace to the benefit of producers, traders, and
    consumers of U.S. food and fiber products. The Agency accomplishes this
    mission through a wide variety of publicly and user funded activities
    that help its customers improve the marketing of their food and fiber
    products and ensure such products remain available and affordable to
    consumers. Consequently, most AMS programs enhance access to current
    trading information, including availabilities of supply, location and
    size of demand, underutilized market facilities, and availability of
    means of transportation. In addition, the Standardization program
    contributes to the harmonization of international quality standards.
        Market News.--Market news reports improve market efficiency for all
    parties by offering equal and ready access to current, unbiased market
    information so that agricultural producers and traders can determine
    the best place, price, and time to buy or sell. AMS Market News
    provides this information by reporting current prices, volume, quality,
    condition, and other market data on farm products in more than 1,300
    production areas and specific domestic and international markets. In
    October 2005, AMS launched a new Market News Web Portal, making Fruit
    and Vegetable and Livestock and Grain reports immediately available for
    users, with other AMS commodities to be added in coming months.
        The Livestock Mandatory Price Reporting Program continues to
    provide more than 100 daily, weekly, or monthly reports on fed cattle,
    swine, lamb, beef, and lamb meat market transactions. However, since
    legislative authority for the Program lapsed on September 30, 2005, the
    program operates on a voluntary basis. The Government Accountability
    Office recently reviewed the program and we are making improvements in
    response to their recommendations.
        Commodity Standards.--AMS works with the agricultural industry to
    establish and improve commonly recognized quality descriptions for
    agricultural commodities that support access to domestic and
    international markets. The Standardization program supports exports of
    U.S. agricultural products by helping to represent the interests of
    U.S. producers in a variety of international standards development
    meetings. AMS experts continue to participate in developing
    international dairy, meat, poultry, fruit, and vegetable standards.
        Country of Origin Labeling.--AMS is implementing a Country of
    Origin Labeling surveillance and enforcement program for fish and
    shellfish. Labeling requirements for these products became mandatory on
    April 4, 2005, and AMS has educated the industry on the documentation
    and records required to substantiate country of origin and method of
    production claims.
        National Organic Program.--The National Organic Standards program
    supports market access for organic producers by setting national
    standards for organic products sold in the United States, which
    provides assurance for consumers that the organic products labeled
    ``organic'' uniformly meet those requirements. The U.S. organic food
    industry has increased to an $18 billion annual sales level and is
    still growing.
        Pesticide Data and Microbiological Data Programs.--AMS also
    provides consumer assurance by collecting pesticide residue data and
    microbiological baseline data. In 2005, the Pesticide Data program
    performed over 120,000 analyses on more than 13,000 samples. The data
    gathered and reported by AMS on pesticide residues supports science-
    based risk assessments performed by a number of entities, including
    regulatory agencies.
        Transportation Services.--The Transportation Services program
    supports market access by facilitating the movement of U.S. agriculture
    products from farm to market. This program helps maintain farm income,
    expand exports, and sustain the flow of food to consumers by providing
    ``how to'' technical expertise, research, and data on domestic and
    international transportation to growers, producers, and others in the
    marketing chain, and for government policy decisions. The
    Transportation Services program also produces periodic publications
    that improve market access by providing information for agricultural
    producers and shippers on trends, availability, and rates for various
    modes of transportation, including grain and refrigerated transport,
    agricultural containers, and ocean shipping. In fiscal year 2005, the
    program greatly expanded its reporting to keep the Secretary and
    Administration officials well-apprised on the impacts of Hurricanes
    Katrina and Rita on agricultural transportation.
        Wholesale, Farmers, and Alternative Markets.--AMS program experts,
    in cooperation with local and city agencies, improve market access to
    market facilities by assisting local efforts to develop or improve
    wholesale and farmers markets, and to discover other direct marketing
    opportunities. This program also supports research projects to help
    agricultural producers discover new or alternative marketing channels
    and new technology. For 2006, AMS was appropriated funds to implement
    the Farmers Market Promotion program. The program will make grants of
    up to $75,000 to eligible entities, such as agricultural cooperatives,
    local governments, and others, to establish, expand, and promote
    farmers' markets and other direct-to-consumer marketing channels.
        Federal/State Marketing Improvement Program (FSMIP).--AMS helps to
    resolve local and regional agricultural market access problems by
    awarding Federal matching grants for projects proposed by State
    agencies. In 2005, the FSMIP program allocated grant funds to 21 States
    and Puerto Rico for 27 projects such as studies on linking producers
    with new buyer groups and innovative uses for locally important
    agricultural products.
        Commodity Purchases.--USDA nutrition programs provide growers and
    producers with access to an alternative outlet for their commodities.
    AMS food purchases stabilize markets and support nutrition programs,
    such as the National School Lunch Program, the Emergency Food
    Assistance Program, the Commodity Supplemental Food Program, and the
    Food Distribution Program on Indian Reservations. AMS works in close
    cooperation with both the Food and Nutrition Service (FNS) and the Farm
    Services Agency (FSA) to administer USDA commodity purchases and to
    maximize the efficiency of food purchase and distribution operations.
    In fiscal year 2006, we will begin the development of a Web-based
    Supply Chain Management System, which will enhance our ability to track
    bids, orders, purchases, payments, inventories, and deliveries of
    approximately $2.5 billion of commodities used in all food assistance
    programs every year in addition to those price-support commodity
    products maintained in inventory.

                            AMS' 2007 BUDGET REQUEST

        For 2007, the AMS budget proposes a program level of $730 million,
    of which $195 million (nearly 27 percent) will be funded by existing
    user fees, $450 million (approximately 62 percent) by Section 32 funds
    and $85 million (about 12 percent) by appropriations, which includes
    $14.5 million to be derived from proposed new user fees. More
    specifically, the budget includes the following:
        An Increase of About $1 Million for the National Organic Program.--
    This request is to ensure that the National Organic Program can meet
    the needs of the rapidly growing organic industry. The increase will
    support: rulemaking needed to address a court order that found three
    elements of the national organic standards regulations inconsistent
    with statutory authority; renewal of substances on the National List of
    Approved and Prohibited Substances that are set to expire on October
    21, 2007; and increased compliance actions, including training sessions
    for certifying agents.
        An Increase of About $400,000 for the Federal Seed Act Program.--
    AMS would assume seed testing in those States that have withdrawn from
    the program and work with seed producers and States to improve the
    accuracy of seed sampling and testing programs.
        An Increase of About $2.8 Million for a Food Protection Program.--
    AMS would promote the protection of commodities provided to the
    National School Lunch Program (NSLP) and other Federal nutrition
    assistance programs by incorporating food security attributes into
    purchase specifications, conducting vulnerability assessments needed to
    develop industry guidance on how to protect products purchased for
    distribution through NSLP, and development of model food security plans
    for products of importance to NSLP.
        Funding of More than $1 Million for Payments to States.--Under the
    Federal-State Marketing Improvement Program, AMS awards Federal
    matching grant funds to State agencies to address local and regional
    agricultural marketing problems.
        Funding of Nearly $10 Million Within Marketing Services for the
    Web-based Supply Chain Management System.--As mentioned earlier, this
    system, the successor to the Processed Commodities Inventory Management
    System, will improve information technology systems used to manage and
    control commodity orders, purchases, and delivery. Discretionary
    appropriated funding is requested in fiscal year 2007 to continue
    developing the system.
        As Secretary Johanns testified before this committee last month,
    the 2007 budget funds our most important priorities while exercising
    fiscal discipline that is necessary to reduce the Federal deficit. The
    AMS budget has proposals that moves us in the right direction while
    continuing to meet key priorities.
        A Decrease of About $6.3 Million for the Termination of the
    Microbiological Data Program (MDP).--The fiscal year 2007 budget does
    not request funding to continue the MDP because it is difficult to
    determine to what extent the data is used to support risk assessments.
    Sample origin data is not collected which limits the use of the data in
    epidemiological investigations aimed at determining the source of
    outbreaks of foodborne illness. In response to these findings and the
    need to limit Federal spending, the program is proposed for termination
    in 2007.
        User Fees.--The budget proposes to collect about $2 million through
    user fees for the development of domestic commodity grade standards
    that are associated with a grading program. Users of grading services
    are direct beneficiaries of commodity standards and, therefore, should
    be charged for the development of commodity grades associated with the
    grading and inspection program. In order to implement this proposal,
    legislation will be submitted to Congress to authorize these fees.
    Likewise, approximately $12 million in user fees would be collected for
    Federal administration of marketing agreements and orders, which is
    currently funded through Section 32. The local market administrator or
    committee will be billed for their portion of Federal administrative
    costs.

            GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION

        GIPSA's mission is to enhance market access for livestock, meat,
    poultry, cereals, oilseeds, and related agricultural products and to
    promote fair and competitive trade for the benefit of consumers and
    American agriculture. GIPSA fulfills this through both service and
    regulatory functions in two programs: the Packers and Stockyards
    Programs (P&SP) and the Federal Grain Inspection Service (FGIS).
        Before proceeding, I want to note that we are taking very seriously
    the recent audit by the Office of Inspector General (OIG) of the P&SP
    and we have established an aggressive schedule to improve enforcement
    of the Packers and Stockyards Act. The audit identified areas where
    program management was not up to the high standard that this
    Administration expects and our stakeholders deserve. The OIG provided
    ten recommendations for strengthening the P&SP. GIPSA concurs with all
    recommendations and is taking aggressive action to implement them.
        Packers and Stockyards Programs.--Recognizing what needs to be
    improved, the strategic goal for P&SP is to promote a fair, open and
    competitive marketing environment for the livestock, meat, and poultry
    industries. Currently, with 152 employees, P&SP monitors the livestock,
    meatpacking, and poultry industries, estimated by the Department of
    Commerce to have an annual wholesale value of about $120 billion. Legal
    specialists and economic, financial, marketing, and weighing experts
    work together to monitor emerging technology, evolving industry and
    market structural changes, and other issues affecting the livestock,
    meatpacking, and poultry industries that the Agency regulates.
        The Swine Contract Library began operation on December 3, 2003, and
    continues, though since October, 2005, it has been on a voluntary basis
    since the legislative authority in the Livestock Mandatory Price
    Reporting Act lapsed. Producers can see contract terms, including, but
    not limited to, the base price determination formula and the schedules
    of premiums or discounts, and packers' expected annual contract
    purchases by region.
        Progress continues to be made on the Livestock and Meat Marketing
    Study, which examines broad issues surrounding packer ownership of
    livestock. The contractor for the study, the Research Triangle
    Institute (RTI), released an interim report in August, 2005. The final
    report is scheduled for release in early 2007. We recognize that this
    is later than expected, but given the complexity of issues, more time
    is needed to adequately analyze them.
        Federal Grain Inspection Service.--FGIS facilitates the marketing
    of U.S. grain and related commodities under the authority of the U.S.
    Grain Standards Act and the Agricultural Marketing Act of 1946. As an
    impartial, third-party in the market, we advance the orderly and
    efficient marketing and effective distribution of U.S. grain and other
    assigned commodities from the Nation's farms to domestic and
    international buyers. We are part of the infrastructure that undergirds
    the agricultural sector.
        GIPSA works with government and scientific organizations to
    establish internationally recognized methods and performance criteria
    and standards to reduce the uncertainty associated with testing for the
    presence of biotechnology traits in grains and oil seeds. It also
    provides technical assistance to exporters, importers and end users of
    U.S. grains and oilseeds, as well as other USDA agencies, industry
    organizations, and other governments. These efforts help facilitate the
    sale of U.S. products in international markets.
        Our efforts to improve and streamline our programs and services are
    paying off for our customers, both in terms of their bottom lines and
    in greater customer satisfaction. In fiscal year 2005, GIPSA employees
    issued nearly 3 million certificates representing approximately 245
    million tons of grain. One indicator of the success of our outreach and
    educational initiatives is the number of foreign complaints lodged with
    FGIS regarding the quality or quantity of U.S. grain exports. In fiscal
    year 2005, FGIS received only ten complaints regarding poor quality and
    one complaint regarding inadequate weights from importers on grains
    inspected under the U.S. Grain Standards Act. These involved 456,069
    metric tons, or about 0.4 percent by weight, of the total amount of
    grain exported during the year.
        I would like to acknowledge the efforts of GIPSA employees in the
    aftermath of Hurricanes Katrina and Rita. We are proud to report that
    no service requests were denied as a result of the hurricanes. GIPSA
    personnel were on duty and ready to provide service as soon as the
    industry resumed operations. Our local personnel showed fortitude and
    determination in addressing both the personal and work-related
    challenges created by the storms.

                          GIPSA'S 2007 BUDGET REQUEST

        For 2007, the budget proposes a program level for salaries and
    expenses of about $84 million, of which more than $42 million is from
    existing inspection and weighing user fees. Of the appropriations
    request of almost $42 million, approximately $20 million is devoted to
    the grain inspection activities including standardization, compliance,
    and methods development activities and about $21 million to the P&SP.
    The 2007 budget includes the following program increases:
        About $2.9 Million for IT Initiatives.--This would continue the
    agency's multi-year IT modernization efforts, of which $1.4 million is
    one-time funding. The agency's eGov initiatives would facilitate the
    electronic transfer of information to and from stakeholders, and allow
    more efficient utilization by GIPSA of information such as program
    reviews and evaluations, agricultural product standards, inspection
    data, field test equipment reporting.
        About $400,000 to facilitate U.S. grain exports to Asia. GIPSA
    would establish an ongoing presence in Asia to expand upon our
    successful international services and trade activities currently
    provided on a temporary basis.
        User fees. Two user fees are included in the budget. One would be
    charged to recover the costs of developing, reviewing, and maintaining
    official U.S. grain standards used by the grain industry. This fee
    proposal would enable GIPSA to recover almost $4 million in fiscal year
    2007. Also, a further $16 million in license fees would be collected
    for the Packers and Stockyards program.

                                   CONCLUSION

        This concludes my statement. I am looking forward to working with
    the Committee on the 2007 budget for the Marketing and Regulatory
    Programs. We believe the proposed funding amounts and sources of
    funding are vital to improving plant and animal health and ensuring
    quality, enhancing market access, and achieving harmonization of
    international standards. It also reduces the deficit and protects
    American agriculture from terrorists. We are happy to answer any
    questions.
                                     ______

        Prepared Statement of Lloyd C. Day, Administrator, Agricultural
                               Marketing Service

        Mr. Chairman and Members of the Committee, I am pleased to have
    this opportunity to represent the Agricultural Marketing Service (AMS)
    in presenting our fiscal year 2007 budget proposal. Although I have
    worked with AMS only since early August, I understand the importance of
    efficient and effective marketing systems for U.S. agricultural
    producers and consumers. My previous Government experience was focused
    on international trade issues at the Foreign Agricultural Service and
    the California Trade and Commerce Agency; in private industry, I have
    managed business development and marketing activities.
        To provide a starting point for discussion of our budget proposals,
    I would like to begin by reviewing our agency's mission in the context
    of USDA's strategic objectives. I will also discuss a few of the
    programs through which we carry out that mission, and mention a few
    recent accomplishments and issues of interest to AMS clientele.

                                    MISSION

        AMS is a key component in USDA's strategic objective to increase
    the efficiency of domestic agricultural production and marketing
    systems. This objective recognizes that the long-term viability of
    agricultural producers depends on their ability to manage an efficient
    and profitable operation. Once produced, agricultural goods need
    efficient and equitable market outlets. AMS plays an integral role in
    the U.S. marketing system by ensuring that buyers and sellers in the
    food production and distribution chain have equal access to market
    information and technical services. Although our focus is generally on
    domestic marketing, some of our programs also support USDA's efforts to
    assist U.S. agricultural producers in international marketing.
        The mission of AMS is to facilitate the marketing of agricultural
    products in the domestic and international marketplace, ensure fair
    trading practices, and promote a competitive and efficient marketplace
    to the benefit of producers, traders, and consumers of U.S. food and
    fiber products. We accomplish our mission through a wide variety of
    appropriated activities and through our user-funded grading,
    certification, and Perishable Agricultural Commodities Act programs.
    Although our user-funded and reimbursed programs are important to
    agricultural marketing, most of my discussion today will focus on our
    appropriated programs.

                                  AMS PROGRAMS

        AMS programs work together, in cooperation and coordination with
    other Federal agencies within USDA and outside the Department, and with
    State partners to provide services that support our mission. Our
    ``clients'' span the marketing chain from the producer to the consumer.
    For example, we collect and disseminate current market information on
    agricultural prices, quality, supply, demand, and other data useful for
    production, sales, and purchase decisions. We also publish current
    rates and availability information on agricultural product
    transportation modes. We provide technical advice and support on market
    facilities, methods, and technology, plus matching grants for regional
    projects that support agricultural marketing. We offer independent,
    official verification services to provide assurance for sellers and
    buyers that commodities meet contract specifications, quality and
    marketing claims, labeling, and Federal requirements, and to ensure
    fair trading of agricultural production in the United States. Consumers
    benefit directly from organic labeling, graded foods, farmers markets,
    and pesticide residue information. Our programs assist commodity
    producer groups by providing technical and regulatory support for
    federally-authorized self-help programs, and we purchase food
    commodities that are in short-term oversupply for use in USDA nutrition
    assistance programs.

                               MARKETING SERVICES

        Our Marketing Services programs provide services that benefit all
    agricultural producers, traders, and consumers of dairy products,
    fruits, vegetables, specialty crops, livestock and meat, poultry,
    cotton, and tobacco. These programs facilitate marketing by providing
    information, technical expertise, and buyer assurance. They are funded
    through annual appropriations and include our Market News,
    Standardization, Shell Egg Surveillance, Federal Seed, National
    Organic, Pesticide Recordkeeping, Country of Origin Labeling, Pesticide
    Data, Transportation Services, and Wholesale, Farmers, and Alternative
    Market Development programs.

                                  MARKET NEWS

        AMS' Market News service reports market data on farm products in
    more than 1,300 production areas and many domestic and international
    markets. Market News reports for over 700 commodities are disseminated
    within hours of collection via the Internet and other electronic means
    and through the news media. In October 2005, we made available a new
    Market News Web Portal to the public, making Fruit and Vegetable and
    Livestock and Grain reports immediately available for users, with other
    AMS commodities to be added in coming months. The portal allows the
    agricultural industry and other interested users to customize the data
    they receive, build their own reports, and query the database back to
    1998. We have already received an enthusiastic response to the expanded
    availability of data through the portal.
        Market news data is provided by buyers and sellers for most
    commodities on a voluntary basis. However, Congress established
    Livestock Mandatory Price Reporting (LMPR) in 2000 to ensure that
    information on meat and livestock trades would continue to be available
    for producers in a consolidating industry, including formula and
    contract market information. LMPR generates more than 100 daily,
    weekly, or monthly reports on fed cattle, swine, lamb, beef, and lamb
    meat market transactions. Legislative authority for LMPR lapsed on
    September 30, 2005, following a 1-year extension. As both Houses of
    Congress were considering bills to continue the program, AMS sent
    letters to all packers previously required to report, requesting
    voluntary cooperation in continuing to submit information required
    under the mandatory program. Consequently, most of the reports continue
    to be published--only the imported boxed lamb cuts and slaughter cow
    reports have been discontinued.
        The Government Accountability Office recently reviewed the program
    and recommended some improvements. To improve reporting transparency,
    AMS will inform Market News readers about the general guidelines
    followed by AMS reporters in making reporting decisions through
    periodic public reports on the volume of submitted transactions that
    are excluded by reporters and the effect that such exclusions had on
    net price distributions on all reported commodities. We also have
    established a toll-free telephone information line for questions about
    reporting which gives producers an opportunity to obtain information on
    how the data for the livestock they sold is used in reporting.
        To help verify the overall accuracy of the transaction data
    supplied by packers and to identify recurring significant problems, AMS
    will implement additional or modified auditing methods to increase the
    overall effectiveness of compliance activities. The program is
    reviewing sample selection, the need for more audits at plants that
    demonstrate a higher frequency of non-compliances, and additional
    analyses to identify any widespread reporting problems. To ensure
    timely and consistent follow-up to audit findings, AMS has developed
    new procedures that greatly improve the audit process, including
    timeframes for corrective action and a hierarchy for categorizing the
    severity of non-compliances. AMS also has modified its audit process to
    more closely review transactions reported at the low-price end of the
    market. All of these improvements will be completed by the end of this
    fiscal year.
        Livestock and meat information is used as a basis for developing
    contracts between producers and packers, as well as packers and
    retailers. We believe that the program has resulted in the availability
    of comprehensive information that has improved the transparency of the
    marketplace. Therefore, we request continued funding and support
    reauthorization of Livestock Mandatory Price Reporting.

                           COUNTRY OF ORIGIN LABELING

        This year, we are implementing a Country of Origin Labeling (COOL)
    surveillance and enforcement program for fish and shellfish. Labeling
    requirements for these products became mandatory on April 4, 2005, and
    we have used the intervening months to educate the industry--suppliers
    and retailers--on the documentation and records required to
    substantiate country of origin and method of production claims.
    Mandatory labeling requirements for all other covered commodities were
    delayed until September 30, 2008. The delay will allow us to develop an
    operational infrastructure before mandatory labeling for all other
    commodities covered by the Act--beef, lamb, pork, perishable
    agricultural products, and peanuts--becomes effective.

                                 TRANSPORTATION

        Our Transportation Services program facilitates the movement of
    U.S. agricultural products to market. As part of that effort, the
    program produces periodic publications that provide information for
    agricultural producers and shippers on various modes of transportation,
    including grain transportation, refrigerated transport, ocean rates and
    transportation trends, and agricultural containers. In 2005, the
    program greatly expanded its reporting to keep the Secretary and
    Administration officials well-apprised of the impacts of Hurricanes
    Katrina and Rita on agricultural transportation; issuing 22 daily and 5
    weekly briefing reports from August 29, 2005 to October 26, 2005. In
    early November, the program switched to issuing a Weekly Transportation
    Update, which continued to provide information on the recovery status
    of the transportation systems. During the aftermath of the hurricanes
    AMS participated with the Army Corps of Engineers in briefing staff
    from both houses of Congress and supported Departmental testimony on
    the recovery.

                               MARKET DEVELOPMENT

        Our Wholesale, Farmers, and Alternative Market Development program
    experts, in cooperation with local and city agencies, assist local
    efforts to develop or improve wholesale and farmers market facilities,
    and to discover other direct marketing opportunities. This program also
    supports research projects on marketing channels and market technology
    improvements, as well as numerous marketing conferences and workshops
    across the country. For 2006, AMS was appropriated funding to implement
    the Farmers Market Promotion program. The program will make grants of
    up to $75,000 to eligible entities to establish, expand, and promote
    farmers' markets and other direct-to-consumer marketing channels. These
    eligible entities include agricultural cooperatives, local governments,
    regional farmers' market authorities, and nonprofit, public benefit,
    and economic development corporations.

                                   SECTION 32

        AMS also receives appropriated funding for activities authorized
    under Section 32 of the Act of August 24, 1935. AMS' Commodity Purchase
    program buys perishable non-price supported agricultural commodities--
    meat, poultry, fruits, vegetables, and fish to encourage domestic
    consumption. Commodity purchases support the market for these
    agricultural commodities by reducing supplies in temporary surplus, by
    providing foods used by domestic nutrition assistance programs, and by
    purchasing commodities for use in disaster relief efforts. The
    purchased foods are donated to the National School Lunch Program and
    other domestic nutrition programs. In fiscal year 2005, AMS purchased
    1.46 billion pounds of commodities that were distributed by the Food
    and Nutrition Service through its nutrition assistance programs. As
    directed by the Secretary, this program may also make emergency
    diversion and relief payments to producers in temporary distress. In
    addition to commodity purchasing activities, Section 32 funds the
    Federal administration of Marketing Agreements and Orders, which help
    producers in the marketing of their milk, fruit, vegetables, and
    specialty crops.

                                  PARTNERSHIPS

        Discussion of AMS' programs is not complete without a brief mention
    of the extensive partnerships with other Federal agencies, State
    agencies, and industry that characterize our program delivery.
        The Agricultural Marketing Act of 1946, the authority on which we
    rely for a great number of our programs, encourages Federal-State
    cooperation in carrying out market facilitating activities. AMS depends
    on strong partnerships with cooperating State and Federal agencies to
    operate many of our programs. AMS provides guidance and coordination to
    State agency partners who collect data, provide inspection, monitoring,
    and laboratory services, and otherwise maximize the value of both State
    and Federal resources through sharing and coordination. For instance,
    AMS' Market News program maintains cooperative agreements with 38
    States to coordinate their local market coverage with the regional and
    national coverage needed for AMS' market reporting. State employees,
    who inspect shipments of seed within a State, provide information to
    AMS' Federal Seed program on potential violations in interstate
    shipments. Our transportation and direct marketing programs work with
    Federal, State, city and local policy makers to maintain an efficient
    national transportation system and expand and improve market outlets
    for U.S. agricultural products. Under Section 32, USDA's food purchase
    programs have developed partnerships that maximize the unique expertise
    that each agency brings to the process. AMS works in close cooperation
    with the Food and Nutrition Service (FNS) and the Farm Service Agency
    (FSA) to support USDA's nutrition assistance and administer surplus
    commodity programs.

                        FISCAL YEAR 2007 BUDGET REQUEST

        This leads us into our budget requests for fiscal year 2007. In
    Marketing Services, we propose to strengthen the operations of the
    National Organic and Federal Seed Act programs, implement a new Food
    Protection program for purchased commodities, and continue work on the
    Web-based Commodity Supply Chain Management System. The budget also
    includes a proposal to terminate the Microbiological Data program and
    institute new user fees for the development of grade standards and the
    Federal administration of Marketing Agreements and Orders.

                            NATIONAL ORGANIC PROGRAM

        The U.S. organic food industry has grown approximately 20 percent a
    year to an $18 billion annual sales level and provides an important
    marketing opportunity for many producers. We are requesting additional
    funding of $1.1 million for fiscal year 2007 so that we can more
    effectively manage the statutory and operational requirements of the
    National Organic Program (NOP) to ensure that it meets producers' needs
    and consumers' expectations.
        The National Organic program (NOP) provides assurance for consumers
    that organic products uniformly meet established requirements
    nationwide. Program personnel work in partnership with the National
    Organic Standards Board, which is appointed by the Secretary to
    represent industry and consumer interests. In January, six new members
    were appointed to the Board. Based on earlier Board recommendations,
    AMS has hired an Executive Director and developed a plan to establish a
    peer review panel. The panel will assist in evaluating applications of
    certifying agents seeking accreditation and ensure that the
    accreditation process is consistent with the intent of the law.
        The budget request will provide the funds needed for independent
    peer audits that evaluate all aspects of the NOP accreditation program
    and for program staffing to implement the results of those audits and
    otherwise assist in the delivery of this program. The audits, which
    will be conducted every 2 years, are necessary to maintain the
    program's credibility with the organic industry and for continuous
    improvement of the program's management systems.
        The program also needs additional resources to avoid interruption
    of organic production. As provided in statute, the approvals for some
    174 materials originally placed on the National List of approved and
    prohibited substances for organic production will sunset in October
    2007. AMS program staff works with the National Organic Standards Board
    to update and maintain the National List and each of the expiring
    materials must be re-evaluated. To ensure that the Board and all
    interested parties have sufficient time to evaluate such a large number
    of materials, AMS published an Advance Notice of Proposed Rulemaking in
    June 2005 that began the public comment process on whether the specific
    exemptions or prohibitions should be continued. Due to heightened
    interest, technological obsolescence, or available alternatives, we
    expect that almost one-third of those materials will have to undergo
    independent scientific reviews before their use can be reauthorized.
    Our fiscal year 2007 budget request includes funding for the program to
    work with the Board to complete the re-evaluation of the National List.
        The requested funding also will provide the resources needed to
    resolve other issues facing the program: (1) strengthening compliance
    and enforcement activities to maintain trade and consumer confidence;
    (2) developing organic standards for additional products, which will
    require extensive public input; and (3) dealing with current issues
    such as recent amendments to the Organic Foods Production Act and
    questions on access to pasture for organically produced ruminants.
    Although Congressional action amending the Organic Foods Production Act
    of 1990 (OFPA) restored the program to its status before the decision
    by the U.S. District Court for the District of Maine in the case of
    Harvey v. Johanns, certain procedural issues remain to be resolved. The
    court found, on June 9, 2005, that USDA had in two instances exceeded
    its statutory authority in developing program regulations. To reduce
    the impact of the court's ruling on the organic industry, Congress
    amended the OFPA on November 10, 2005, to permit the use of synthetic
    ingredients and the transitioning of dairy farms.

                            FEDERAL SEED ACT PROGRAM

        Our fiscal year 2007 budget request includes an increase of
    $432,000 for our Federal Seed Act program. The Federal Seed Act
    protects anyone who purchases seed by prohibiting false labeling and
    advertising on seed shipped interstate. The program prevents financial
    losses to farmers by detecting mislabeled, low quality seed before it
    is planted and creates a level playing field for seed companies that
    market truthfully labeled seed. In States where seed monitoring
    programs exist, AMS works with State partners who refer interstate
    violations to us. However, in States that do not have their own
    monitoring programs, we estimate that the percentage of mislabeled seed
    doubles. To better enforce the Act to protect growers, we propose to
    assume seed testing in 8 States--Maine, Vermont, New Hampshire,
    Connecticut, Rhode Island, New York, Michigan, and Wisconsin--that
    receive most of their seed from other States but do not have their own
    monitoring programs.

                            FOOD PROTECTION PROGRAM

        For fiscal year 2007, we are requesting a $2.75 million increase in
    Marketing Services to establish a new Food Protection program that will
    better protect the recipients of commodities that are purchased by USDA
    and distributed through the National School Lunch Program (NSLP) and
    other Federal nutrition assistance programs.
        The Food Safety and Inspection Service (FSIS) and the Food and Drug
    Administration (FDA) are doing significant work with the food industry
    to promote food defense. AMS is pleased to be participating in several
    FSIS and FDA initiatives. Additional funding is necessary to ensure
    that all possible actions are taken in assessing and eliminating
    vulnerabilities in the production and distribution of foods for NSLP
    and other Federal nutrition assistance programs that serve vulnerable
    population segments. The resources we are requesting will enable us to
    work effectively with our vendors in their protection of their
    production facilities and with distributors in the transport of food
    products to State warehouses. AMS will ensure that our vendors are
    aware of FSIS' and FDA's food defense guidance and that they are early
    and effective adopters of that guidance.
        In full partnership with FSIS and FDA, AMS will work with the
    vendor community to conduct vulnerability assessments, develop guidance
    on protecting products purchased for distribution through Federal
    programs, fund studies on improving security through safer packaging
    and transportation, and incorporate food protection attributes into our
    purchase specifications. AMS has begun developing specialized training
    materials to ensure that agency staff involved in contract acceptance
    are properly trained and supervised. With additional resources, we plan
    to offer food protection training for about 6,000 employees of State
    partner agencies, along with workshops and training sessions for vendor
    employees. With the funds being requested we can protect Federal
    commodity purchases and help advance the food defense efforts of FSIS
    and FDA by ensuring that AMS' vendors are implementing effective food
    defense plans in their facilities.

                  FEDERAL-STATE MARKETING IMPROVEMENT PROGRAM

        The Federal-State Marketing Improvement Program (FSMIP) helps to
    resolve local and regional agricultural marketing problems by awarding
    Federal matching grant funds for projects proposed by State agencies.
    Our fiscal year 2007 budget request includes $1.3 million for FSMIP.
    These matching grant funds are made available to State departments of
    agriculture and other State agencies for 25 to 35 projects each year,
    with the State agencies contributing at least half of the project cost.
    In 2005, the program allocated grant funds to 21 States and Puerto Rico
    for a total of 27 projects, including studies on linking producers with
    new buyer groups and innovative uses for locally important agricultural
    products. The program encourages projects that use a collaborative
    approach between the States, academia, and the farm sector, that have
    regional or national significance, and that address challenges or
    opportunities posed by the global economy, changing consumer
    preferences, agricultural diversity, technical innovation,
    transportation, and distribution.

                WEB-BASED SUPPLY CHAIN MANAGEMENT SYSTEM (WBSCM)

        For fiscal year 2007, we are proposing to continue development of
    the Web-based Supply Chain Management System at a reduced level of $9.9
    million, and we are requesting funding from Marketing Services so that
    this project is funded from discretionary resources. As $20 million was
    provided from Section 32 in fiscal year 2006, our budget request for
    Commodity Purchases Administrative funds in fiscal year 2007 has been
    reduced by that amount.
        The WBSCM system will support $2.5 billion worth of USDA food
    purchases distributed through the National School Lunch Program and
    other domestic and international food assistance programs. WBSCM will
    replace USDA's existing Processed Commodity Inventory Management System
    (PCIMS) that links the procurement and distribution functions of AMS,
    FNS, and FSA. PCIMS is over 15 years old and is inflexible, resource
    intensive, and costly to maintain. AMS initiated and coordinated the
    budget request for this initiative on behalf of all three agencies.
        The implementation of WBSCM will save USDA's nutrition programs
    several million dollars annually, in operational and maintenance costs,
    increased productivity, and reduced purchase and shipping costs. WBSCM
    will create a single point of access for customers, allowing the
    agencies to share information with customers more quickly and
    conveniently. The new system will improve efficiency by greatly
    reducing the time required for processing purchases; shortening
    delivery times; improving USDA's ability to collaborate with other
    Departments; improving reporting capabilities; reducing transportation,
    inventory, and warehousing costs; and enabling future systems updates
    as needed. Successful completion of this initiative will support clean
    financial audits for the Department, the agencies' ability to
    effectively and efficiently work with recipients and vendors, and
    USDA's ability to respond to natural disasters.

                    MICROBIOLOGICAL DATA PROGRAM TERMINATION

        The fiscal year 2007 budget does not request funding to continue
    the Microbiological Data Program (MDP) which was established in 2001 to
    establish a national database on foodborne pathogens on domestic and
    imported produce. It is difficult to determine to what extent the data
    obtained through this program are used to support risk assessments by
    other Federal agencies such as the Food and Drug Administration.
    Furthermore, the use of these data by agencies, such as the Centers for
    Disease Control and Prevention, involved in epidemiological
    investigations aimed at determining the source of outbreaks of
    foodborne illness is limited because data on sample origin is not
    collected, as directed by Congress. In response to these concerns and
    the need to limit Federal spending, the program is proposed for
    termination in 2007.

                                 NEW USER FEES

        Our Marketing Services request for fiscal year 2007 includes $2.2
    million to be recovered through new user fees, based on a proposed
    legislative change that would convert most of our domestic standards
    activities to user-fee funding. USDA will submit legislation that will
    amend the Agricultural Marketing Act of 1946 and authorize the agency
    to implement, collect, and retain user fees for domestic standards that
    are associated with AMS' grading and certification services. Also,
    $12.3 million is proposed to be recovered for the Federal
    administration of Marketing Agreements and Orders through increased
    assessments on program beneficiaries, which is currently funded through
    Section 32.

                              STANDARDS USER FEES

        This budget again proposes to recover the costs for developing and
    updating domestic standards through user fees paid by those requesting
    AMS' grading and certification services. This proposal was recommended
    by the Program Assessment Rating Tool (PART) review conducted for the
    fiscal year 2006 budget. On average, we expect the cost for Standards
    development will be about 2 percent of the cost of grading services.
    The Department has proposed a legislative amendment authorizing
    standards user fees.
        AMS' Standardization program works closely with interested parties
    in agriculture and the food marketing system to ensure that quality
    descriptions are aligned with current U.S. marketing practices because
    efficient markets need widely-recognized agricultural product
    descriptions in commercial sales and purchases. The agriculture
    industry uses these descriptions to convey commodity quality in
    purchase specifications and sales contracts. AMS currently maintains
    about 600 U.S. agricultural quality standards for domestic and
    international trading of cotton, tobacco, dairy products, fruits and
    vegetables, livestock, meat, poultry, eggs, and rabbits.
        The Standardization program also supports exports of U.S.
    agricultural products by representing the interests of U.S. producers
    in a variety of international standards development organizations. We
    are proposing to retain appropriations to fund these activities.

                   MARKETING AGREEMENTS AND ORDERS USER FEES

         Marketing Agreements and Orders are requested by producers and
    handlers to help establish orderly marketing conditions for milk,
    fruits, vegetables, and tree nuts. AMS evaluates and conducts hearings
    on proposed Marketing Orders, which are subject to approval by
    producers of the regulated community. Section 32 funds have been
    appropriated for Federal costs in administering the order at the
    national level, including public hearings, referenda on new programs
    and proposed revisions, and enforcement. The Milk Marketing Order
    Administrators and Fruit and Vegetable Marketing Order Committees, who
    oversee local administration of Marketing Orders, operate on
    assessments paid by their industries. Our fiscal year 2007 budget
    proposes to charge user fees to recover the cost of Federal oversight.
    The assessments already charged to beneficiaries for local program
    administration would be increased to cover Federal costs. USDA is
    preparing a legislative amendment to authorize recovery of these costs.

                             BUDGET REQUEST SUMMARY

        Our budget request includes $81.5 million in appropriated funds and
    $2.2 million in new user fees for a total budget of $83.7 million in
    Marketing Services; we also request $1.3 million for FSMIP grants
    funding. For administration of Section 32 activities, we request $11.6
    million to support commodity purchasing and a total of $16.4 million
    for the Marketing Agreements and Orders program--$4.1 million in
    appropriations and $12.3 million from user fees. Our Marketing Services
    and Section 32 administrative funding requests include an increase for
    pay costs.
        Thank you for this opportunity to present our budget proposal.
                                     ______

      Prepared Statement of Dr. W. Ron DeHaven, Administrator, Animal and
                        Plant Health Inspection Service

        Mr. Chairman and members of the Subcommittee, it is a pleasure for
    me to represent the Animal and Plant Health Inspection Service (APHIS)
    before you today. APHIS is an action-oriented agency that works with
    other Federal agencies, Congress, States, agricultural interests, and
    the general public to carry out its mission to protect the health and
    value of American agriculture and natural resources. This mission is
    vital not only to protect the livelihoods of agricultural producers and
    the industries related to them, but also to United States homeland
    security and food and agriculture defense. The past year has brought
    many challenging agricultural issues our way, such as the threat of a
    pandemic Highly Pathogenic Avian Influenza (HPAI) outbreak and Bovine
    Spongiform Encephalopathy (BSE); outbreaks of Medfly, Sudden Oak Death,
    and Emerald Ash Borer; as well as the spread of citrus canker in
    Florida due to the heavy hurricane season last year. APHIS remains
    committed to preventing the spread of animal and plant pests and
    diseases in the United States and our Agency has continued its vigilant
    effort to prevent foreign agricultural pests and diseases from entering
    the country. We also remain committed to keeping American agricultural
    products moving overseas. APHIS' mission of protecting the health and
    value of United States agricultural and natural resources encompasses a
    wide variety of activities. I would like to report on our fiscal year
    2005 highlights, and our fiscal year 2007 budget request.

                          FISCAL YEAR 2005 HIGHLIGHTS

    Pest and Disease Exclusion Activities
        APHIS' efforts begin with offshore threat assessment and risk
    reduction activities at the sources of exotic agricultural pests and
    diseases. Through our pest and disease exclusion programs, we follow
    animal and plant health throughout the world and use this information
    to set effective agricultural import policy, and facilitate
    international trade by clarifying and amending import requirements, as
    necessary. Our off-shore risk reduction activities also include
    conducting pest and disease eradication programs in foreign countries
    and pre-clearance inspection of certain commodities in off-shore
    locations; performing intense monitoring and surveillance for exotic
    fruit flies and cattle fever ticks in high-risk, border areas of the
    United States; and cooperating with the Department of Homeland
    Security's Bureau of Customs and Border Protection (CBP) to inspect
    arriving international passengers, cargo, baggage, mail, and other
    means of conveyance.
        Officials with our Agricultural Quarantine Inspection, Trade Issues
    Resolution Management, Foreign Animal Disease/Foot and Mouth Disease
    (FAD/FMD), and Import/Export programs track plant and animal health
    issues around the world and use the information to set import policies
    to ensure that agricultural diseases are not introduced through
    imports. This information also helps determine what pests and diseases
    might have pathways into the United States and informs our monitoring
    and surveillance efforts here at home. APHIS is establishing a formal
    international information gathering program under the FAD/FMD and Pest
    Detection line items to build on these efforts. Through its off-shore
    pest information system, APHIS has identified more than 600 plant pests
    that pose risks to U.S. agriculture. APHIS uses this information to
    provide guidance to CBP on inspection protocols and to target cargo
    from certain areas for increased inspection.
        To ensure our import regulations are enforced and adequately
    protect United States agricultural and natural resources, we work
    closely with CBP to monitor and intercept prohibited items that arrive
    at United States ports of entry. In fiscal year 2005, agricultural
    inspectors checked the baggage of nearly 66 million arriving passengers
    and cleared 49,394 ships and 2,239,813 cargo shipments. In total,
    agricultural inspectors intercepted 49,665 reportable pests at land
    borders, maritime ports, airports, and post offices. These include
    exotic fruit flies, various moth species, scale insects, and rust
    diseases.
        In fiscal year 2005, APHIS and CBP also began enforcing new entry
    requirements for solid wood packaging materials, which can harbor
    serious forest pests. The introduction of pests such as the Asian
    longhorned beetle and emerald ash borer has been linked to solid wood
    packaging materials used as crates and boxes for shipping all kinds of
    commodities. The new regulations are based on an international standard
    that will be used by more than 150 countries to address this world-wide
    problem.
        APHIS continued to support the FMD barrier between Central America
    and Columbia and began plans to move it further away from the United
    States to reduce the risk of an FMD introduction. We reported 29 FMD-
    positive cases in countries bordering Columbia: 21 in Ecuador and eight
    in Venezuela. Agency officials in these two countries maintained
    relationships with local governments and strengthened cooperative
    agreements for FMD eradication. In particular, we supported 15 new
    cattle movement control posts along the Columbian-Ecuador border that
    will begin operating in November 2007 to establish a buffer zone to
    prevent the introduction of FMD in Columbia.
        APHIS is actively engaged in ensuring that U.S. agricultural
    producers benefit from the global trade system established under the
    World Trade Organization (WTO), particularly the WTO Sanitary/
    Phytosanitary (SPS) Agreement. APHIS' scientific and technical
    expertise is key to enforcing our rights under the SPS Agreement
    involving animal and plant health measures. As a direct result of our
    efforts, 79 SPS trade issues were resolved in fiscal year 2005,
    allowing trade of U.S. agriculture exports worth close to $1.4 billion
    to occur. These accomplishments involved retaining or expanding
    existing markets as well as opening new markets for U.S. products. The
    products involved range from poultry exports to China, apples to Japan,
    stonefruit to Mexico, almonds to India, and feeder cattle to Canada.
        Our efforts to remove unjustified trade barriers related to BSE and
    AI are prime examples of APHIS work in this area. In fiscal year 2005,
    we successfully addressed barriers for U.S. poultry and poultry
    products in 25 export markets worth a combined $254 million. We
    resolved BSE-related trade issues involving 19 foreign markets for U.S.
    bovine genetics, beef and beef products, allowing exports worth $58
    million in fiscal year 2005. Furthermore, APHIS leadership in
    international standard setting resulted in important science-based
    changes to the international standards for BSE and AI that we believe
    will encourage greater reliance on sound science in the trade of beef
    and poultry products.
    Animal and Plant Monitoring and Surveillance
        To minimize agricultural production losses and export market
    disruptions, APHIS quickly detects and responds to new invasive
    agricultural pests and diseases, or other emerging agricultural health
    threats, through our plant and animal health monitoring programs. The
    Agency creates and updates endemic pest and disease information
    systems, and monitors and conducts surveys in cooperation with States
    and industry. APHIS also conducts surveys for exotic plant pests and
    investigates reports of suspicious animal pests and diseases to reduce
    their spread, which eliminates significant losses and helps maintain
    pest-free status for export certification of agricultural commodities.
        The Animal Health Monitoring and Surveillance (AHMS) and Pest
    Detection programs coordinate national detection efforts for animal and
    plant pests and diseases. Both work closely with State and university
    cooperators to ensure that any introduction of exotic or foreign pests
    and diseases is quickly detected. These programs are also working
    closely with USDA's Cooperative State Research, Education, and
    Extension Service (CSREES) to coordinate the National Animal Health
    Laboratory Network and the National Plant Diagnostic Network to
    increase testing capacity in the United States for economically and
    environmentally significant animal and plant diseases.
        To quick detect and contain foreign animal disease incursions from
    spreading, APHIS thoroughly investigates all suspicious situations. In
    fiscal year 2005, the AHMS program conducted 1,027 foreign animal
    disease investigations, up from 870 in fiscal year 2004. The most
    common investigation was for vesicular conditions. Most suspected cases
    were investigated and subsequently diagnosed as not being an FAD. The
    program also continued to implement an enhanced surveillance program in
    response to the December 2003 detection of BSE in Washington State.
    With additional funding from the Commodity Credit Corporation, as of
    March 20, 2006, APHIS has sampled more than 660,000 animals for BSE
    since the inception of the enhanced surveillance program. To date, two
    samples have tested positive. Most samples were from high-risk
    categories (such as those animals exhibiting signs of central nervous
    system disorders); however, we also tested more than 21,000 samples
    from clinically normal adult animals. APHIS is in the process of
    analyzing data from the enhanced surveillance effort to determine what
    appropriate conclusions to draw about BSE prevalence, though it
    certainly would not be premature to say that the incidence of BSE in
    the United States is extremely low. At the conclusion of the enhanced
    BSE surveillance effort, we will continue our BSE monitoring program by
    conducting a minimum of 40,000 tests annually, which would still allow
    us to find BSE in one million cattle, with a confidence level of 95
    percent.
        To facilitate response efforts in the event of a future foreign
    animal disease outbreak, APHIS and its State and industry cooperators
    continue to implement the National Animal Identification System (NAIS)
    designed to identify, within 48 hours of discovery, any agricultural
    premise exposed to a disease so that potential outbreaks can be
    contained and eradicated as quickly as possible. The NAIS is a
    networked computerized system that will allow us to identify livestock
    and poultry and record their movements over their life-spans. All 50
    States, five Tribes, and two U.S. Territories are currently registering
    premises with an estimated total of 213,000 premises registered. APHIS
    and its State and Tribal cooperators are registering hundreds of
    premises each week, and we are also in the preparation stage to begin
    allocation of individual animal identification numbers.
        Through the Pest Detection program, APHIS targets pests based on
    their risk of entry and potential to cause significant economic or
    environmental damage. In fiscal year 2005, our national Cooperative
    Agricultural Pest Survey network resulted in the detection of several
    significant pests and diseases, including citrus greening in Florida
    and swede midge and sirex beetle in New York. While the responses to
    these pests will differ based on many factors, the early detections
    made by the Pest Detection program are allowing APHIS or the affected
    State to take action to address the outbreaks and mitigate their
    effects.
        In addition to conducting traditional surveys, the Pest Detection
    program and its cooperators are implementing ongoing monitoring
    activities at high-risk sites such as nurseries and warehouses that
    receive international cargo. In June 2005, California personnel
    detected an Asian longhorned beetle (ALB) introduction at a Sacramento
    warehouse as part of these efforts. ALB is present in urban locations
    in New York, New Jersey, and Chicago, Illinois. To control the beetle
    in these places, APHIS and cooperators have removed more than 10,000
    trees at a significant cost to U.S. taxpayers. Because the Sacramento
    introduction was detected and addressed at its source, APHIS and State
    officials believe they have eliminated the threat of an ALB infestation
    in California by fumigating the warehouse and quickly tracking other
    products from the same shipment. Surveys will continue through 2008 to
    make certain that the beetle is not present.
        In fiscal year 2004, Asian soybean rust (SBR) was detected for the
    first time in the United States. Because SBR cannot be eradicated,
    soybean producers must adjust to its presence and the costs associated
    with it, namely the application of fungicides to protect crops. Early
    detection of SBR in each new area is critical for effective disease
    management because the application of fungicides is most effective if
    applied as a preventive measure, before a field is infected. However,
    fungicide application is cost prohibitive (an average of $25 per acre)
    if a particular area is not at risk for infection. Accordingly, USDA
    (including APHIS and CSREES) implemented a short-term monitoring and
    surveillance network for the disease in fiscal year 2005. The survey
    data collected by the program in 36 States provided soybean producers
    with accurate information to use in determining whether or not to treat
    their fields and prevented the unnecessary application of fungicides.
        Under the Animal and Plant Health Regulatory Enforcement program,
    our Investigative and Enforcement Services unit continues to provide
    support to all APHIS programs by conducting investigations of alleged
    violations of Federal laws and regulations under APHIS' jurisdiction
    and taking appropriate civil or criminal enforcement actions.
    Regulatory enforcement activities prevent the spread of animal and
    plant pests and diseases in interstate trade. In fiscal year 2005,
    APHIS conducted 842 investigations involving animal health programs,
    resulting in 440 warnings, 104 civil penalty stipulations, three
    Administrative Law Judge Decisions, and $345,044 collected in fines.
    APHIS also conducted 1,773 investigations involving plant quarantine
    violations resulting in 456 warnings, 744 civil penalty stipulations,
    157 Administrative Law Judge decisions, and approximately $2 million
    collected in fines.
        The Agency maintains a cadre of trained professionals prepared to
    respond immediately to potential animal and plant health emergencies.
    APHIS' Emergency Management System (EMS) is a joint Federal-State-
    industry effort to improve the ability of the United States to
    successfully manage animal health emergencies, ranging from natural
    disasters to introductions of foreign animal diseases. The EMS program
    identifies national infrastructure needs for anticipating, preventing,
    mitigating, responding to, and recovering from such emergencies. The
    Preparedness and Incident Command group of the EMS continued its
    ongoing efforts to complete, review, and update response plans for
    foreign animal diseases, such as BSE, Avian Influenza, and Classical
    Swine Fever.
    Pest and Disease Management
        APHIS also works closely with State, industry, and academic
    partners to maintain national detection networks and emergency response
    teams for plant and animal pest and disease outbreaks that may occur
    here in the United States. We work with these same partners to manage
    or eradicate economically significant endemic pests and diseases, and
    manage wildlife damage to agricultural and natural resources.
        APHIS continues the cooperative effort with States and cotton
    producers to eradicate the Boll Weevil, and, by the end of fiscal year
    2005, the program had eliminated the boll weevil from approximately 85
    percent of the 15 million acres of cotton grown in the United States,
    up from 80 percent the previous year. We are on track to achieve full
    eradication by the end of fiscal year 2009.
        At the end fiscal year 2005, 47 States were in full compliance with
    the Johne's national program standards with the goal being 45 States
    enrolled. Only 3 States, Massachusetts, Montana, and Wyoming, have not
    adopted the Voluntary Bovine Johne's Disease Control Program (VBJDCP).
    By the end of the year, 7,860 herds were enrolled in the VBJDCP. Since
    the initial goal was to enroll 4,000 herds, we exceeded the target by
    96 percent.
        APHIS continues to address the last stubborn pockets of endemic
    animal diseases such as pseudorabies, brucellosis, and bovine
    tuberculosis (TB). At the end of fiscal year 2005, all 50 States and 3
    territories were in Stage V (free) status for pseudorabies. A full
    declaration of National Pseudorabies eradication will be possible after
    all 50 States and 3 territories have maintained free status for 2
    consecutive years. Throughout fiscal year 2005, 48 States and three
    Territories remained classified at Brucellosis Class Free status, and
    two States, Texas and Wyoming, continued their Brucellosis Class A
    status classification for bovine brucellosis. In addition, at the end
    of fiscal year 2005, the TB program designated 49 States and
    Territories and portions of two others as accredited TB-free, thus
    exceeding the target of 47 States and territories considered class
    free.
        Through our Wildlife Services Operations program, the Agency's
    cadre of wildlife disease biologists provided technical assistance,
    conducted surveillance, and maintained control of more than 18 wildlife
    diseases including Chronic Wasting Disease, West Nile Virus, bovine and
    swine brucellosis, pseudorabies, classical swine fever and plague. In
    addition, APHIS reinforced oral rabies vaccination zones along the
    Appalachian Ridge through the distribution of 5.52 million baits on
    31,000 square miles from the Ohio-Pennsylvania border through northern
    Alabama.
        APHIS wildlife biologists provided wildlife hazard management
    assistance to over 580 airports nationwide for the protection of human
    safety and property in fiscal year 2005, more than 12 times the amount
    in 1990 with only 42 airports. Wildlife strikes cost U.S. civil
    aviation nearly $500 million in 2004.
        APHIS has been challenged with numerous emergencies over the last
    several years. As such, we took quick and aggressive action to address
    plant and animal health situations with BSE, Mediterranean fruit fly,
    citrus canker, sudden oak death, and emerald ash borer. The Secretary
    approved approximately $177 million in Commodity Credit Corporation
    funding releases for APHIS programs in fiscal year 2005, of which $8
    million was funded through unused balances and $169 million from new
    funds.
    Animal Care
        APHIS ensures the humane care and treatment of animals covered
    under the Animal Welfare Act (AWA) and the Horse Protection Act. Under
    this legislation, first enacted in 1966 and amended several times
    thereafter, APHIS carries out activities designed to ensure the humane
    care and handling of animals used in research, exhibition, the
    wholesale pet trade, or transported in commerce. APHIS places primary
    emphasis on inspection of facilities, records, investigation of
    complaints, inspection of problem facilities, and training of
    inspectors. Regulations supporting the AWA provide minimum standards
    for the handling, housing, feeding, transportation, sanitation,
    ventilation, shelter from inclement weather, and veterinary care of
    regulated animals. APHIS continues to focus on conducting quality
    inspections at USDA licensed and registered facilities. The program's
    risk-based inspection system concentrates activities on facilities
    where animal welfare concerns are the greatest. During fiscal year
    2005, the program conducted 16,474 inspections of licensees,
    registrants, and prospective applicants. This represents a 9 percent
    increase over fiscal year 2004.
        APHIS conducted 575 animal care investigations in fiscal year 2005,
    resulting in 391 formal cases submitted for civil administrative
    action. We also issued 219 letters of warning for animal care. During
    fiscal year 2005, we resolved 87 cases with civil penalty stipulations
    resulting in $160,184 in fines. Administrative Law Judge decisions
    resolved another 82 cases resulting in $946,184 in fines. High-priority
    and significant cases included several involving the sale of dogs and
    exotic animals by unlicensed dealers as well as numerous handling
    violations involving exhibition animals attacking and/or injuring the
    public.
    Scientific and Technical Services
        The programs within this component ensure the effectiveness of the
    technology and protocols used in APHIS programs. The Agency conducts
    these programs to develop new or improved methods for managing wildlife
    damage and detecting and eradicating animal and plant pests and
    diseases. The Agency also conducts laboratory testing programs to
    support disease and pest control and/or eradication programs.
    Additionally, those programs provide advice and assistance to APHIS on
    environmental compliance requirements with respect to pesticide
    registration and drug approvals for products used in implementing these
    programs.
        APHIS has successfully regulated the biotechnology industry for
    almost 20 years. During that time, the Agency has overseen
    approximately 10,000 field trials without any adverse impacts on human
    health or significant environmental harm, and has evaluated more than
    90 petitions for deregulation to ensure these plants posed no threat to
    other plants or the environment. As of September 30, 2005, APHIS has
    granted 68 petitions for deregulation for varieties of the following
    crops: tomatoes, squash, cotton, soybeans, rapeseed, potatoes, papayas,
    beets, rice, flax, tobacco, and corn.
        To carry out its goal of safeguarding U.S. agricultural resources
    from foreign pest and disease introductions, APHIS needs the
    appropriate technological tools. The Plant Methods program develops new
    or improved existing tools to enhance APHIS' safeguarding capabilities.
    The program met its fiscal year 2005 performance target of developing
    five new quarantine treatments or detection methods or improving
    existing ones for commodities of trade.
        In our Veterinary Biologics program, APHIS issued 97 product
    licenses in fiscal year 2005. Veterinarians and animal owners now have
    16 new products for the diagnosis, prevention, or treatment of animal
    diseases. Of the 16, four new product licenses were issued for
    biotechnology-based products.
        APHIS exceeded its long-term performance measure target in fiscal
    year 2005 to have 39 States involved with the National Animal Health
    Laboratory Network (NAHLN). At the end of fiscal year 2005, the NAHLN
    consisted of 49 State and university laboratories in 41 States that are
    available to assist our National Veterinary Services Laboratory in
    animal disease testing. The laboratory network forms the nation's
    strongest weapon against bioterrorism: an effective network of
    laboratories capable of integrated and coordinated response to
    emergencies that could otherwise devastate the U.S. economy and food
    supply. This key resource of APHIS has increased testing capacity
    significantly. APHIS and its NAHLN partners are currently testing up to
    10,000 samples per week for BSE, 4,800 samples per week for chronic
    wasting disease, and 4,800 samples per week for scrapie. Additionally,
    in a period of extraordinary demands caused by an adverse animal
    disease event, the network could test up to 18,000 samples per day for
    AI/Exotic Newcastle Disease or 15,000 samples per day for classical
    swine fever or FMD.
        Growing populations of Canada geese, a Federally-protected species,
    continue to pose problems for homeowners across the country. In
    September 2005, APHIS' National Wildlife Research Center (NWRC)
    received a Notable Technology Development Award from the Federal
    Laboratories Consortium Mid-Continent Region for its role in the
    development and registration of OvoControl-G Canada goose bait. Which
    is the first EPA approved oral contraceptive of its kind. The NWRC also
    continued work to support the Environmental Protection Agency's
    approval of a new chemical treatment to reduce the hatchability of eggs
    laid by treated Canada geese.

                        FISCAL YEAR 2007 BUDGET REQUEST

        The fiscal year 2007 Budget Request for Salaries and Expenses
    totals just over $953 million, an increase of $146 million over the
    fiscal year 2006 Agriculture Appropriations Act and an increase of $75
    million when the fiscal year 2006 supplemental for avian influenza is
    included. About $9.2 million of the increase is for pay raises. Of the
    total request, approximately $453 million is identified in the
    President's Homeland Security initiative, including $314 million in
    discretionary funding. Of the $453 million, $188 million is also
    identified in the President's Food and Agriculture Defense Initiative,
    which serves to protect the agriculture and food system in the United
    States from intentional, unintentional, or naturally occurring threats.
        The increase, approximately 15 percent above the fiscal year 2006
    appropriation, is for initiatives designed to address the increasing
    domestic and international threats to the health of United States
    agriculture. In the international arena, APHIS plans to use additional
    funding to establish a formal international information collection
    program that will help us set agricultural import policy and inform
    others of our monitoring and surveillance efforts here in the United
    States, and protect and expand the $53 billion annual agricultural
    export market, among other things. We are also addressing HPAI threats
    in other countries by requesting additional funding to provide
    technical assistance to develop knowledge and experience in
    surveillance and control techniques, which will help prevent the spread
    of HPAI to the United States. On the domestic side, our efforts include
    enhancements to both animal and plant health surveillance systems and
    diagnostic capabilities; the ability to track animal and plant
    pathogens and toxins identified as Select Agents; the build up of our
    animal disease vaccine bank; the ability to address wildlife disease
    threats to livestock health; an investment to substantially reduce
    emergency fund transfers for a variety of plant pest and disease
    programs; and continuing enhancements to our Biotechnology Regulatory
    Services program. Our goal is to reduce economic damage that pests and
    diseases can cause to American agriculture. As such, APHIS is in the
    process of developing a new performance measure that will allow us to
    assess the value of the pest and disease damage that our programs are
    preventing or mitigating, and we will utilize this information to help
    determine future funding requests. We will begin applying this measure
    to all of our programs.
        The following paragraphs detail some of the funding increases and
    associated accomplishments expected under the fiscal year 2007 budget
    request:
    Pest and Disease Exclusion
        An increase of $6.4 million for the Foreign Animal Disease/Foot-
    and-Mouth Disease program and $4.7 million under Pest Detection to
    expand the program's formal collection of international health
    information, which will allow APHIS to conduct risk assessments and
    regulate imports more effectively as well as provide an overall picture
    of global animal health trends.
        An increase of $13.85 million for the Fruit Fly Exclusion and
    Detection program to strengthen the Moscamed (Mediterranean fruit fly)
    program along the Mexico-Guatemala border to prevent the northward
    spread of the Medfly into Central Mexico thereby reducing the threat to
    the United States.
        An increase of $4.68 million for the Trade Issues Resolution and
    Management program to increase work on Free Trade Agreements, and
    expand and retain markets to provide new market access and facilitate
    trade worth $2.4 billion in fiscal year 2007.
    Animal and Plant Monitoring and Surveillance
        An increase of $8.5 million for the Animal Health Monitoring and
    Surveillance program to enhance the current disease monitoring and
    surveillance system by increasing and integrating its infrastructure to
    better protect the nation's animals from emerging and foreign animal
    disease. The fiscal year 2007 request also includes continued funding
    for the maintenance of monitoring and surveillance of BSE
    (approximately $17 million for 40,000 samples) and continued
    implementation of the National Animal Identification System
    (approximately $33 million).
        An increase of $1.2 million for the Animal and Plant Health
    Regulatory Enforcement to provide additional support to APHIS programs
    by conducting investigations of alleged violations of Federal laws and
    regulations under the Agency's jurisdiction.
        An increase of $9.1 million for Emergency Management Systems to
    improve readiness at the Federal, State, Tribal, and local levels to
    respond to disease incursions or acts of bioterrorism, and respond
    effectively and efficiently to all hazardous animal health incidents.
    We will also stockpile sufficient levels of supplies, vaccines,
    materials, and equipment needed to respond to an outbreak of 50 percent
    of the most damaging disease agents, or four of the eight most damaging
    and highly contagious foreign animal diseases.
        $57 million for the new HPAI program (initially funded via fiscal
    year 2006 supplemental appropriation) to continue the development of
    the Agency's new HPAI surveillance and preparedness program through
    efforts with international capacity building ($5.01 million) and
    domestic surveillance and preparedness ($51.72 million).
        An increase of $15.4 million for Pest Detection activities to
    enhance early detection efforts through an increase in the number and
    intensity of surveys conducted throughout the United States for high-
    risk plant pests; enhance emergency response capabilities; and develop
    molecular diagnostic tools for high-risk pests.
        An increase of $1.8 million for the Select Agents program to
    register facilities desiring to handle select agents, and enhance
    current physical security requirements to expand the barcode inventory
    tracking system.
        Approximately $2 million for the new Wildlife Disease Monitoring
    and Surveillance program to establish methods for surveillance data
    collection in wildlife populations and investigate the prevalence of
    specific diseases that may move from wildlife to domestic livestock or
    poultry populations.
    Pest and Disease Management
        A $16 million shift in funding from Boll Weevil and Pink Bollworm
    programs to establish a new program, Cotton Pests, to improve technical
    efficiency by formally merging resources to simplify administration of
    both programs and help move toward the goal of eradication of both
    pests.
        An increase of approximately $27 million for Emerging Plant Pests
    to enhance survey and tree removal to control emerald ash borer ($21
    million); continue conducting surveys for various citrus pests and
    diseases in Florida ($2 million); conduct additional inspections in
    nurseries to determine extent of P. remora (Sudden Oak Death) in
    California, Oregon, and Washington State ($3.45 million); and continue
    containment activities for Karnal bunt ($1.25 million).
        An increase of approximately $10 million for Invasive Species to
    establish a new competitive grant program to the private sector to
    apply innovative and cost-effective methods for responding to and
    controlling invasive species.
        An increase of approximately $3 million for the Low Pathogenic
    Avian Influenza (LPAI) program to continue addressing LPAI on a
    national level in live bird markets and commercial industries, and
    develop and oversee production of AI test reagents to be distributed to
    State and industry laboratories approved to participate in the LPAI
    program.
        An increase of $3 million for the Wildlife Services Operations
    Airport Safety program to enhance human safety by reducing wildlife
    strikes to aircraft.
        An increase of $1.75 million for rabies control under the Wildlife
    Services Operations program to maintain the oral rabies vaccination
    barrier to prevent the spread of this disease.
        An increase of $5 million for Homeland Security and Food and
    Agriculture Defense to enhance wildlife disease surveillance.
    Animal Care
        An increase of almost $1.5 million for the Animal Welfare program
    to enhance current program operations through the application of the
    new regulation to inspect facilities that contain mice, rats, and birds
    not involved in research. We will continue to use a risk-based
    inspection system to concentrate activities on facilities where animal
    welfare concerns are greatest, while also developing strategies for
    effective outreach and education programs to develop expertise and
    promote voluntary compliance.
    Scientific and Technical Services
        An increase of $3.3 million for the Biotechnology Regulatory
    Services program to enhance our infrastructure for a transgenic program
    by conducting additional risk assessments; preparing environmental
    assessments; advising on policies related to animal and disease agent
    biotechnology; developing and implementing regulations and guidelines
    regarding transgenic animals and disease agents; and providing
    leadership to advance the Agency's use of biotechnology oversight to
    protect and enhance American agriculture. We will also strengthen
    regulatory validation activities by developing scientific personnel
    exchange programs with academia and industry; conducting peer reviews
    for significant scientific components of biotechnology policies and
    regulations; and conducting quantitative analyses and studies to
    support regulatory decisions.
        An increase of $1 million for Plant Methods Development
    Laboratories to establish a new National Crop Biosecurity Center to
    coordinate technical and scientific needs for detecting and responding
    to high-consequence plant pests and diseases. We also will assess
    current and emerging threats and develop a laboratory accreditation
    program to certify State and university laboratories to conduct tests
    for high-risk diseases that have the potential to generate large
    volumes of samples and overburden the current testing capacity.
        An increase of $3.5 million for Veterinary Biologics to reduce the
    time it takes to review and test new veterinary biologics products
    entering the market. We also will address containment requirements to
    meet the required standards for the use of select agents and toxins
    maintained by the Center for Veterinary Biologics. In addition, we plan
    to expand activities in pharmacovigilance (the post-marketing
    monitoring of adverse events associated with the use of licensed
    veterinary biological products) with the implementation of a standard
    data system for sharing resources, data collection methods, and review
    processes for adverse events reporting with the Food and Drug
    Administration.
        An increase of approximately $5.5 million for Veterinary
    Diagnostics to expand diagnostics capability to include additional
    foreign animal diseases; expand the National Animal Health Laboratory
    Network to address significant biological and chemical threats to
    animal agriculture and our national food supply; address security
    requirements and meet standards related to Select Agents; and achieve
    NVSL lab accreditation.
        A $3.2 million shift in funding within Wildlife Disease Methods
    Development to dedicate funding to conduct avian influenza methods
    development research to improve environmental sample diagnostics, and
    characterize and evaluate the risk that feral swine pose in the
    generation and maintenance of avian influenza subtypes of domestic
    animal and human health concern.
    Decreases
        To support our high priority programs while continuing to meet the
    goal of reducing the Federal deficit, we propose several offsetting
    decreases. Within our Pest and Disease Exclusion activities, we propose
    a reduction of $2 million for the Hawaii Interline program within the
    appropriated Agricultural Inspection Quarantine line item, which we
    expect to conduct in the future via a reimbursable agreement with the
    State of Hawaii; a reduction in Cattle Fever Tick activities to the
    fiscal year 2005 level because we do not anticipate outbreaks occurring
    outside of the quarantine zone nor an increase in incursions into the
    quarantine zone; and, a reduction of $1.2 million in the Import/Export
    program to dedicate resources to higher priority activities.
        Within our Animal and Plant Monitoring and Surveillance activities,
    we propose a $2.3 million shift in funding within the Animal Health
    Monitoring and Surveillance program and an $830,000 shift in funding
    within the Pest Detection program to dedicate resources to higher
    priority activities.
        Within our Pest and Disease Management activities, we propose a
    reduction of $25.9 million for Boll Weevil program activities due to
    the program's success in eradicating boll weevil, and other reductions
    ($1.5 million for Brucellosis; $3.3 million for Chronic Wasting
    disease; $1.14 million for Grasshopper; $9.9 million for Johne's; $1.92
    million for Pink Bollworm; and $763,000 for Noxious Weeds) to dedicate
    resources to higher priority activities.
        Also, in fiscal year 2007, we are re-proposing new user fees for
    the Animal Welfare program, which would generate $8.22 million.
        Finally, within our Scientific and Technical Services activities,
    we propose a shift of $371,000 in our Veterinary Diagnostics program
    and a $3.2 million shift in our Wildlife Disease Methods Development
    program to dedicate resources to higher priority activities.

                                   CONCLUSION

    7    APHIS' mission of safeguarding United States agriculture is
    becoming ever more critical. Although the processes by which we protect
    America's healthy and diverse food supply are being increasingly
    challenged by increased trade and tourism, APHIS is committed to taking
    the lead in building and maintaining a world-class system of pest and
    disease exclusion, surveillance, detection, diagnosis, and response.
    Healthy plants and livestock increase our market potential
    internationally, and thus contribute to a healthy U.S. economy. The
    APHIS budget consists of interdependent components that, when combined,
    truly protect the health and value of American agriculture and natural
    resources.
        On behalf of APHIS, I appreciate all of your past support and look
    forward to continued, positive working relationships in the future. We
    are prepared to answer any questions you may have.
                                     ______

     Prepared Statement of James E. Link, Administrator, Grain Inspection,
                     Packers and Stockyards Administration

                                  INTRODUCTION

       Mr. Chairman and Members of the Committee, I am pleased to
    highlight the accomplishments of the Grain Inspection, Packers and
    Stockyards Administration (GIPSA), and to discuss the agency's fiscal
    year 2007 budget proposal.
        GIPSA's activities are an integral part of USDA-wide efforts to
    support a competitive global marketplace for U.S. agricultural
    products. Our mission is to facilitate the marketing of livestock,
    poultry, meat, cereals, oilseeds, and related agricultural products,
    and to promote fair and competitive trading practices for the overall
    benefit of consumers and American agriculture.
        We fulfill our service and regulatory roles through our Packers and
    Stockyards Program, which promotes a fair, open, and competitive
    marketing environment for the livestock, meat, and poultry industries
    and our Federal Grain Inspection Service, which provides the U.S. grain
    market with Federal quality standards and a uniform system for applying
    these standards to promote equitable and efficient marketing.

                                  ORGANIZATION

         We carry out our mission with a dedicated staff of 680 employees
    working in partnership with a variety of State and private entities.
    Our Packers and Stockyards Program relies on three regional offices
    which specialize in poultry, hogs, or cattle/lamb. Our grain inspection
    services are delivered by the national inspection system, a network of
    Federal, State, and private inspection personnel. The system includes 9
    GIPSA field offices, 1 Federal/State office, and 56 State and private
    agencies authorized by GIPSA to provide official services.

                         PACKERS AND STOCKYARDS PROGRAM

        Our Packers and Stockyards Program (P&SP) administers the Packers
    and Stockyards Act (P&S Act) to promote fair and competitive marketing
    in livestock, meat and poultry for the benefit of consumers and
    American agriculture. The P&S Act is intended to protect producers,
    other market actors, and consumers against unfair, discriminatory, or
    deceptive practices that might be carried out by those subject to the
    Act.
        To meet this objective, GIPSA seeks to educate, regulate and
    investigate individuals and firms subject to the P&S Act; to respond to
    anti-competitive behavior, unfair, deceptive, or unjustly
    discriminatory trade practices; and to ensure livestock producers and
    poultry growers are paid for their products. GIPSA takes corrective
    action when there is evidence that firms or individuals have violated
    the P&S Act.
        In April 2005, the USDA's Office of Inspector General (OIG)
    initiated an audit in response to Congressional concerns with the
    Agency's management and oversight of P&SP. The audit identified four
    primary areas where program management was not up to the high standard
    that this Administration expects and our stakeholders deserve.
        The OIG provided ten recommendations for strengthening P&SP. GIPSA
    concurs with all recommendations and is taking immediate actions to
    implement them. We have already taken steps to improve the management
    of investigations, to correct how we categorize and track
    investigations and to implement additional recommendations from prior
    OIG and Government Accountability Office reviews. The Administration
    takes the Inspector General's findings very seriously and we have
    established an aggressive schedule to improve the enforcement of the
    P&S Act.
        While improvements are needed, P&SP has delivered valuable services
    to the livestock, meatpacking, and poultry industries. With only 136
    employees, we continued to regulate these industries, estimated by the
    Department of Commerce in fiscal year 2002 to have an annual wholesale
    value of $120 billion. At the close of fiscal year 2005, 5,569 market
    agencies and dealers and 1,858 packer buyers were registered. In
    addition, there were 1,443 facilities that provided stockyard services,
    an estimated 6,000 slaughtering and processing packers, meat
    distributors, brokers and dealers, and 202 live poultry dealers
    operating subject to the P&S Act.
        Our regulatory responsibilities are the heart of our mission to
    administer the P&S Act. To this end, GIPSA closely monitors practices
    that may violate the P&S Act. Last fiscal year, we conducted 1,936
    activities related to compliance with the P&SP Act. These activities
    included 1,491 regulatory activities such as financial audits and scale
    check weighs and 445 investigations of P&S Act violations. As a result
    of these investigations, P&SP helped recover over $14.1 million for
    producers and enforced the restoration of nearly $350 million to
    custodial accounts and business balance sheets to protect producers
    from financial harm.
         We continue to work with violating firms to achieve voluntary
    compliance, and continue to initiate appropriate corrective action when
    we uncover evidence that the P&S Act has been violated. In fiscal year
    2005, with assistance from the Office of the General Counsel, we filed
    18 administrative or justice complaints alleging violations of the P&S
    Act. These formal disciplinary complaints resulted in 21 decisions
    ordering the payment of $116,300 in civil penalties and suspending 7
    registrants from operating for periods ranging from 21 days to 6 years.
    In one specific case, GIPSA worked through informal resolution channels
    to obtain voluntary compliance when a market agency and dealer
    operation in the Midwest discovered one of its employees had defrauded
    the company in excess of $1 million. Through GIPSA's timely
    intervention, the firm secured sufficient financial protection so that
    none of the company's livestock sellers suffered losses.
         We regularly assist the FBI, State and local law enforcement
    agencies with their investigations. Some of our investigations involve
    overlapping jurisdiction, and sometimes these agencies call on GIPSA
    for its expertise. In addition, we communicate with our sister agencies
    within USDA, the Department of Justice, the Commodity Futures Trading
    Commission, and local and State governmental organizations to discuss
    common issues and when appropriate, coordinate plans.
        GIPSA maintains a toll-free hotline (800-998-3447) as an avenue for
    receiving complaints and other communications from livestock producers,
    poultry growers and other members of the industry or general public.
    Use of the hotline allows callers to voice their concerns or file a
    complaint anonymously without fear of retaliation. In fiscal year 2005,
    GIPSA's Packers and Stockyards Program received 39 hotline calls. Those
    calls that related to livestock or poultry issues resulted in
    investigations. To encourage voluntary compliance, we regularly attend
    industry meetings and conduct orientation sessions (28 in 2005) for new
    auction market owners and feed mills to educate them about their
    fiduciary and other responsibilities under the P&S Act.
        In fiscal year 2005, we continued working with stakeholders and
    other interested parties to develop and publish two additional
    voluntary industry standards for technologies used to assess quality
    and determine payment for livestock, meat, or poultry. The tentative
    code was published by the American Society for Testing and Materials in
    the 2006 National Institute of Standards and Technology--Handbook 44
    ``Specifications, Tolerances and Other Technical Requirements for
    Weighing and Measuring Devices'', which was released in October 2005.
    The new standards will help producers receive full value for the
    quality of livestock they produce as well as help packers pay only for
    the product they want to purchase. We will continue to work with
    stakeholders to develop additional standards, as needed, to enhance
    transparency in the marketplace.
         GIPSA continues to operate the Swine Contract Library (SCL) which
    includes information pertaining to price, premiums, discounts, grids,
    formulas, and other important contract terms extracted from offered and
    available contracts used to purchase hogs. The data is available on
    GIPSA's website on a real time basis. In October 2005, the reporting
    requirements under the Livestock Mandatory Reporting Act of 1999 became
    voluntary due to the sunset of the law.
        GIPSA continues to administer a livestock and meat marketing study
    that examines the broad issues surrounding packer ownership of
    livestock. Research Triangle Institute (RTI), the firm with whom GIPSA
    has contracted to complete the study, released an interim report in
    August 2005. RTI began contacting survey respondents in November 2005
    and collecting transaction data in February 2006. The final report is
    scheduled for release in early 2007.

                        FEDERAL GRAIN INSPECTION SERVICE

        Our Federal Grain Inspection Service (FGIS) facilitates the
    marketing of U.S. grain and related agricultural products through the
    establishment of standards for quality assessments, regulation of grain
    handling practices, and management of a network of Federal, State, and
    private laboratories that provide impartial, user-fee funded official
    inspection and weighing services under the authority of the U.S. Grain
    Standards Act and the Agricultural Marketing Act of 1946.
        FGIS establishes terms and methods for quality assessments that the
    grain industry uses to buy and sell about $50 billion of commodities
    annually. These standards for quality assessments provide the U.S.
    grain marketing system with the means to align post-harvested crop
    quality with the diverse end-use needs of today's food and feed
    industry. GIPSA currently maintains 131 unique standards and quality
    assessment factors to characterize the quality of grain and grain-
    related products.
        We continue work with producers, technology providers, and food and
    feed manufacturers to consensually identify the essential quality
    attributes that require standard measurement to effectively
    differentiate quality and add value to U.S. agriculture. In fiscal year
    2005, GIPSA implemented artificial neural network (ANN) technology to
    streamline and improve the accuracy of the wheat protein testing
    program, and to offer, for the first time, a barley protein testing
    service. The new official ANN protein testing services facilitate the
    marketing of these grains by providing a fair, accurate, and
    transparent third-party determination, backed by a national quality
    control process, and standardized instrumentation, reference samples,
    calibration, and procedures.
        GIPSA also conducted activities related to soybeans in fiscal year
    2005. GIPSA verified and adopted an American Oil Chemists' Society
    (AOCS) gas chromatographic method as a reference method to measure
    levels of various fatty acids in soybeans, including linolenic acid.
    Soybeans with lower linolenic acid levels were introduced during 2004.
    ``Low-lin'' soybeans produce oil that has half the linolenic acid level
    of commodity soybean oil, making it more stable and reducing or
    precluding the need for hydrogenation--the process that creates
    unhealthy trans fats in foods. This standard quality assessment method
    will help the market capture the full value of this emerging product.
    GIPSA continues to explore rapid tests for fatty acid contents of
    soybeans and other grains.
        We are also working with the wheat industry in an effort to regain
    the U.S. wheat market share which has declined from 33 percent of the
    international market in 1995 to an estimated 25 percent in 2005.
        Our goal is to develop rapid measurement methods to differentiate
    wheat quality at the first point of sale and allow the U.S. wheat
    industry to better meet the needs of foreign buyers. To date, working
    with the wheat industry, we have identified several key quality
    attributes, such as gluten strength, that require rapid measures, as
    well as the need to validate international reference methods relating
    to the attributes.
        In fiscal year 2005, GIPSA validated and adopted three widely used,
    internationally recognized reference methods that assess various
    aspects of protein quality in wheat: the Farinograph reference method
    to measure water absorption and dough strength; the Glutomatic
    reference method for wet gluten quantity; and the Alveograph reference
    method to measure dough strength.
        Gaining consensus on the salient wheat attributes and reference
    methods will allow GIPSA to pursue the development of rapid analytical
    methods for use at the first point of sale.
        As we develop measures of new attributes entering the market, we
    are ensuring the current measurement methods are accurate and cost-
    effective. For example, we are working to transform the measurement of
    grain moisture. Maintaining current calibrations for moisture
    measurement is time consuming and resource intensive. Advances in the
    basic means to measure moisture, led by GIPSA, have the potential to
    greatly reduce maintenance costs and improve the accuracy of moisture
    measurements over a much wider range. These advances will benefit the
    entire grain industry, from producer to food manufacturer.
        We are also working with stakeholders to ensure grading standards
    further facilitate trade. GIPSA is developing national feed pea
    standards to meet surging production and use of peas for feed. As the
    global competition in soybean markets intensifies, we are collaborating
    with the soybean industry to determine whether changes in analytical
    methods and grading standards would improve the U.S. competitive
    position. One grading factor under review is test weight per bushel, a
    factor used to market soybeans in the United States for over a half
    century, but not used by our major international competitors. We are
    also working closely with the wheat industry to ensure the wheat
    standards facilitate the expansion of the new and evolving market for
    Hard White Wheat. In 2005, we amended the U.S. Standards for Wheat to
    change the definition of contrasting classes in Hard Red Winter wheat
    and Hard Red Spring wheat. The new standard and policy will ensure the
    purity of both the Hard White and the Hard Red classes, which is
    essential to promote market growth and meet the needs of those making
    high-quality wheat products for consumers around the world. All of
    these activities improve the American agriculture's ability to deliver
    the specific quality of grain desired by food manufactures and
    consumers, and strengthen its competitive position in the global
    market.
        In the biotechnology arena, we are improving the reliability and
    accuracy of testing for the presence of modern biotechnology-derived
    grains to help U.S. agriculture avoid market disruption as trading
    partners around the world implement new import requirements. Our Test
    Kit Evaluation Program validates the performance of commercially
    available rapid tests for biotechnology-derived grains. Our Proficiency
    Program improves the performance and reliability of government and
    private laboratories that test for biotechnology-derived grains in the
    United States and worldwide. More than 115 organizations participated
    in the program in fiscal year 2005, compared to 22 in 2002.
        In response to the results of the proficiency program, we are
    working to harmonize international reference materials and
    biotechnology measurement methods used in commerce to measure the level
    of biotechnology-derived events in raw agricultural products. The
    current focus of many laboratories is to assay for the presence or
    absence of a particular transgenic event, whereas the regulatory
    requirements evolving for agricultural products usually require
    reliable methods to measure the quantity of a biotechnology derived
    event.
        Our international outreach goes beyond work in the area of
    biotechnology. We work cooperatively with other government agencies to
    support market development and remove obstacles to U.S. grain reaching
    world markets.
        In recent years, we have focused on providing technical support to
    the Mexican and Asian markets. Last year, GIPSA worked with Mexico's
    private and public grain sectors to harmonize sampling and analytical
    methods with the goal of minimizing trade disruptions due to
    differences between GIPSA-certified quality and an importer's own
    quality assessment. We conducted seminars at three major grain
    importing locations in Mexico for personnel from Mexican commercial
    firms and government agencies to educate buyers on grain contracting,
    U.S. grain standards, sampling, and inspection procedures. We also
    spearheaded the establishment of a government-to-government grain
    industry consultative group as a technical-level forum to address
    cross-border grain quality issues. Finally, GIPSA led a USDA team that
    visited key Mexican border inspection offices to facilitate cross-
    border trade by addressing Mexico's inspection and clearance process
    for U.S. grain shipments to Mexico.
        Since fiscal year 2002, GIPSA has placed a temporary duty officer
    in Asia to address immediate and long-term issues in the region, to
    promote a better understanding and adoption of U.S. sampling and
    inspection methods to minimize differences in inspection results and to
    develop face-to-face relationships with customers, USDA cooperators and
    government officials. During fiscal year 2005, a GIPSA officer served
    on a 7-month assignment in the region. In fiscal year 2005, this
    program allowed GIPSA to respond face-to-face to importers in Japan who
    raised concerns regarding dockage levels in U.S. wheat; to Taiwanese
    importers about differences in grain weight; and to representatives of
    Malaysia and Singapore regarding U.S. soybean quality. We also were
    able to share samples with Japan to allow them to monitor pesticide
    residue levels in U.S. wheat, rice, and barley, before they implement
    new domestic residue limits. Finally, GIPSA's representative
    participated in several marketing seminars sponsored by USDA cooperator
    organizations to inform importers and their governments about the role
    and responsibilities of GIPSA and the national inspection system.
        We also provide technical consultative services for international
    customers. During fiscal year 2005, GIPSA facilitated the reopening of
    Iraqi grain markets to the United States for the first time since 1999,
    leading to wheat sales of $107 million in 2005. We provided technical
    monitoring and on-site inspection expertise for U.S. wheat shipments
    from their departure point in the United States to their arrival in
    Syria and final destination in Baghdad.
        Also during the fiscal year, GIPSA installed and check tested
    laboratory equipment to inspect and grade wheat in Yemen; conducted
    wheat grading and inspection seminars in El Salvador and Tunisia;
    worked with Algerian grain buyers to address Karnal bunt concerns; met
    with Peruvian officials to discuss the effects of their new rice import
    regulations; developed sample collection procedures for Japan's
    Ministry of Agriculture, Forestry and Fisheries; participated in
    several international meetings on implementing the Biosafety Protocol;
    continued to work with Chinese officials to discuss biotechnology, the
    Biosafety Protocol, and their impact on trade; helped the USDA/Foreign
    Agricultural Service and Animal and Plant Health Inspection Service
    resolve various grain quality issues in other countries that would
    otherwise have restricted U.S. grain exports; and briefed visiting
    trade and governmental teams representing 44 countries around the
    world.
        In addition to facilitating the marketing of U.S. grain by
    developing grain quality assessment methods and carrying out
    international outreach efforts, GIPSA administers a national inspection
    system comprising Federal, State, and private laboratories. These
    laboratories provide valuable service to all sectors of the grain
    industry on a user fee basis, 24 hours a day, 7 days a week. The world
    recognizes the certificates issued by these laboratories as the gold
    standard for grain quality certification. Buyers and sellers around the
    world have confidence in and rely on the GIPSA certificate to trade
    grain.
        This confidence was earned. The dedicated Federal, State, and
    private employees of the national grain inspection system work
    tirelessly to ensure the integrity and reliability of the national
    inspection system. The dedication and professionalism of GIPSA
    employees was proven last year in the aftermath of Hurricanes Katrina
    and Rita. Four GIPSA offices (New Orleans and Lake Charles, Louisiana,
    and League City, and Beaumont, Texas) were in the paths of these
    storms. Through the superlative efforts of employees in New Orleans,
    Louisiana, and League City, Texas, all agency employees were located
    and inspection personnel were working with industry with 48 hours after
    the hurricanes passed to get U.S. export port operations in the Gulf
    online. Within a week, employees in the affected area had set up an
    alternate field office and were responding to industry service
    requests. Local GIPSA employees, many of whose homes were lost or
    destroyed, were on duty. Within 3 weeks, the New Orleans field office
    was fully operational.
        GIPSA's Beaumont, Texas, and Crowley/Lake Charles, Louisiana,
    offices took direct hits from Hurricane Rita. The Crowley/Lake Charles
    office suffered moderate damage and was fully functional within a week.
    The Beaumont suboffice was severely damaged by Rita and closed for a
    month but is now fully operational.
        We are proud to report that no service requests were denied as a
    result of the hurricanes. GIPSA personnel were on duty and ready to
    provide service as soon as the industry resumed operations. Our local
    personnel showed fortitude and determination in addressing both the
    personal and work-related challenges engendered by the storms. All
    told, GIPSA employees issued nearly 3 million certificates representing
    approximately 245 million tons of grain during fiscal year 2005.
        GIPSA continuously works to improve service delivery by this
    network of laboratories and meet the needs of a changing market. In
    fiscal year 2005, we revised the regulations on short-voyage
    fumigations to facilitate the movement of waterborne grain shipments of
    5 days or less duration.

                             EGOVERNMENT SOLUTIONS

        Our most ambitious undertaking to improve program operations and
    service to the public is a sweeping, multi-year project to upgrade
    information management systems and modernize our business functions.
    Our current information management system consists of several
    independent systems that have served specific purposes over the years
    well, but are not integrated. This has limited our ability to meet the
    growing demand for electronic, or web-based, delivery of our services.
    It also impedes our efforts to improve the cost effectiveness and
    efficiency of our internal business practices. The enterprise-wide
    system currently under development will modernize nearly every aspect
    of GIPSA operations and provide a great opportunity to improve current
    business practices and service delivery. The new system includes
    twenty-seven applications to be built over 5 years.
         New funding provided in fiscal year 2005 and fiscal year 2006
    along with the redirection of existing funds has enabled GIPSA to begin
    development on ten of the twenty-seven GIPSA Application Modernization
    modules. Currently funded components of the new system will be deployed
    incrementally in 2006 and 2007 with the first seven applications
    scheduled for deployment in the spring of 2006. This long term
    initiative is scheduled to continue through fiscal year 2009. We have
    requested additional funding in fiscal year 2007 to support this
    important initiative.
         When completed, customers will have online access to the
    information and applications they need to file complaints with GIPSA
    via the Internet; receive status reports on a complaint; place claims
    against bonds required under the P&S Act; register as a grain exporter
    or livestock dealer; submit required annual reports; request grain
    inspection services; receive reports on service status; see the status
    of their user-fee account; and receive final certified results online
    which will, in turn, allow customers to integrate official inspection
    data into their own information and document management systems.
    Private and State inspection agencies interested in being authorized to
    provide official inspection services will also be able to apply for
    GIPSA designation and re-designation on-line. Once officially
    designated, these agencies will have direct access through the web to
    GIPSA's extensive quality assurance program to ensure their inspection
    results align with the official standards maintained by GIPSA.
        This modernization effort will create synergy across GIPSA programs
    and data sources, allowing GIPSA to improve internal program
    efficiencies and effectiveness. This large multi-year initiative will
    deliver improved performance and reduce costs years into the future.

                            PROTECTING THE HOMELAND

        In addition, GIPSA has dedicated resources to homeland security
    efforts. We continue to work closely with the USDA Office of Crisis
    Planning and Management (OCPM) to refine the Department's and the
    Agency's Continuity of Operations Plan (COOP) and to support and staff
    the Department's Crisis Action Team (CAT). In fiscal year 2005, GIPSA's
    COOP and CAT representatives participated in critical disaster-related
    exercises and training sessions, including a major government-wide
    exercise.
        We provided technical assistance related to homeland security
    issues to a number of industry and governmental groups, including the
    USDA Homeland Security Working Group; worked with the National Food
    Laboratory Steering Committee to coordinate and integrate resources to
    support key components of the Food Emergency Response Network (FERN);
    and participated on an Federal Bureau of Investigation-led team that
    conducted a threat assessment of a major export grain elevator.

                              2007 BUDGET REQUEST

         To fund important initiatives and address the Agency's
    responsibilities, GIPSA's budget request for fiscal year 2007 is $41.5
    million under current law for salaries and expenses and $42.5 million
    for our Inspection and Weighing Services. These budgets include
    additional requests of $673,000 for employee compensation; $2,870,000
    to continue the modernization of our information management systems and
    business functions; and $405,000 for international services; and a
    decrease of $500,000 for the corn growers initiative. In addition our
    request includes a proposal to recover $19.7 million through user fees
    to cover the costs of grain standardization activities and Packers and
    Stockyards program activities.
        An increase of $673,000 for employee compensation will enable GIPSA
    to meet its objectives consistent with the priorities established by
    the Secretary of Agriculture. This critically important increase is
    needed to support and maintain current staffing levels to meet
    projected increased demand.
         We are requesting an additional $2,870,000 for our IT
    modernization initiative. This multi-year project will upgrade
    information management systems and modernize our business functions.
    This request includes $1.4 million to continue the development of eGov
    solutions and $1.5 million for recurring costs associated with the
    maintenance of these applications.
         We are also requesting an additional $405,000 to establish an
    ongoing presence in Asia allowing GIPSA to continue and expand upon our
    successful international services and trade activities currently
    provided on a temporary basis. GIPSA's hands-on approach of assigning a
    temporary duty officer in Asia to facilitate trade of U.S. grain has
    provided a positive impact on existing and potential buyers. These
    buyers say their concerns related to grain quality are addressed
    effectively. Continuing and expanding this program is crucial not only
    to increasing U.S. grain exports and reducing market disruptions due to
    technical differences in analytical methods and standards, but to
    increase satisfaction and loyalty among our current customers in an
    extremely competitive marketplace. The U.S. trade dollars saved upon
    the resolution of just one grain shipment complaint can far outweigh
    the costs associated with maintaining a GIPSA presence in Asia.
         Part of our appropriation request will be derived from proposed
    new user fees. The budget proposes collecting $3.7 million from grain
    standardization user fees and $16.0 million from Packers and Stockyards
    Program licensing fees after a 3 month start-up period.

                                   CONCLUSION

        Mr. Chairman, Members of the Committee, thank you for the
    opportunity to share some of the accomplishments made by our dedicated
    staff and highlight our future plans to facilitate the marketing of
    U.S. agricultural products and to promote fair and competitive trading
    practices for the overall benefit of consumers and American
    agriculture.
        I would be pleased to address any issues or answer any questions
    that you may have.
        Thank you.

        Senator Bennett. Thank you very much. Appreciate the
    testimony of all of you.

                                   USER FEES

        Dr. Collins, let us talk about user fees. FSIS proposes a
    user fee. If this were authorized, what would be the impact on
    domestic slaughter capacity and facilities? Would this increase
    the price of meat at the supermarket counter? Would it be
    absorbed? How would that happen?
        Mr. Collins. Mr. Chairman, a user fee is an increase in
    processing costs, and the way economics looks at that is that
    if slaughter is a competitive industry, that is, it is buying
    its inputs from a competitive industry and selling its outputs
    in a competitive industry that, over time, the increase in
    processing costs will be passed on. It will not be borne by the
    processor. It will be passed back in some form to the supplier
    of the live animal to the slaughterhouse. It will also be
    passed forward to consumers.
        Generally, because consumer demand for meat is so
    unresponsive to price, most of the processing costs over time
    would be passed on to consumers. The user fee that I believe
    has been proposed, which is for inspection beyond the regular
    8-hour shift, would generate about $105 million in revenue.
        That would be small in the context of our meat production;
    we produce or we expect to produce in 2006 about 90 billion
    pounds of meat in the United States. That would be red meat,
    plus poultry. So if you divide that production into $105
    million, it turns out to be about one-tenth of one cent effect
    on the price of meat if that user fee is passed fully forward
    100 percent to the consumers.
        So I find it hard to suggest that the fee would have much
    effect at all on the meat packing industry, which,
    incidentally, is getting a little bit better margins right now
    compared to a year ago.
        Senator Bennett. Okay. Thank you.

                                AVIAN INFLUENZA

        Let us talk about avian flu. If a widespread depopulation
    should occur, what do you think the effect of that would be on
    the industry as a whole? I am not predicting that it would
    occur----
        Mr. Collins. No, you are hypothesizing a widespread
    incident in the United States?
        Senator Bennett. Right.
        Mr. Collins. We have already seen it, of course, in many
    countries around the world, which has had some impact on our
    exports.
        If we had such an outbreak in the United States, there are
    a lot of scenarios that could play out. But clearly, the effect
    is going to be focused in two areas--the exports of poultry
    products, including broilers, turkeys, and eggs, and in the
    domestic demand for those products with secondary effects on
    feed markets.
        I think the impact is going to depend very much on the size
    of the outbreak, where the outbreak occurs, whether it is in
    major or minor producing States. It is also going to depend on
    the effectiveness of APHIS in eradicating the outbreak. So the
    economic effects will depend on those factors.
        But, of course, we would immediately lose some exports. It
    would be incumbent upon Dr. Lambert and Dr. Penn to work with
    other countries to ensure that any suspension of imports by
    those countries would be quickly regionalized just to those
    States where the outbreak occurs. If that is the case, then we
    might be able to reduce, fairly quickly, the effect on our
    exports.
        Regarding domestic demand, the United States has been
    incredibly resilient in the face of any kind of animal disease
    for many, many years. You can go back to the 1983-1984 high
    pathogenic avian influenza (HPAI) outbreak in Pennsylvania and
    the eastern States, and poultry consumption actually went up
    that year. We have had other high-path incidents, such as Texas
    in 2004 with no effect on poultry consumption.
        There could possibly be some small effect because of the
    front-page news that Avian influenza (AI) has had for so long.
    But I think, again, effective eradication and depopulation
    would limit any domestic consumer effect.
        You know, we use as a rule of thumb, if we were to lose 10
    percent of our exports, we say that would probably reduce
    poultry prices by about 3 percent, which on a $23 billion
    industry for broilers would be about $700 million.
        So there are any number of scenarios that you can play out
    here, but I think that on the domestic side, it ought to be
    manageable. And I think with good work by APHIS and our trade
    experts, we can limit the damage on the export side.
        Senator Bennett. Thank you. That kind of analysis is
    helpful in a world that is filled with hype about all of these
    various issues.

                        BOVINE SPONGIFORM ENCEPHALOPATHY

        Dr. Lambert, let me swing back to you now, as long as we
    are talking about these kinds of problems, and have you tell us
    what happened in Japan when you were over there. And they have
    shut their market down again because of a single cow with BSE.
        And you have just returned. You are quoted extensively, I
    hope accurately. But having been in public life now, I know
    that is not always the case. So tell us, briefly, what you
    found and what you see with respect to our possibility of
    reopening the export market for beef in Japan.
        Mr. Lambert. Thanks, Mr. Chairman.
        The technical team that went to Japan consisted of
    representatives from APHIS and AMS and MRP, but also the Food
    Safety and Inspection Service and the Foreign Agricultural
    Service. And we were there after the finding of this one cow
    that was not consistent with Japanese criteria in January. The
    Japanese government did shut off all imports or suspended all
    imports of U.S. product.
        The Secretary promised a thorough and extensive
    investigation into that incident. We have completed that
    investigation and submitted a 475-page report. After that,
    there were follow-up questions to which we responded. Then, in
    spite of those efforts, there were continued gaps in the
    understanding of officials in Japan about how this incident
    occurred and the measures that we were going to put into place
    to assure that we can at least minimize, to the extent humanly
    possible and hopefully prevent another incident like this from
    happening.
        So the team was there primarily to address these gaps in
    understanding. I feel that we were successful in doing that. We
    have both identified the next steps that our governments will
    take.
        From the USDA side, we will provide a checklist of all the
    new measures that the Secretary indicated and that were
    indicated in the report and that we agreed to during our
    discussions these last couple of days. We will provide a
    checklist of that to the Japanese government and get
    concurrence that these are the changes that processing plants
    need to make in order to resume trade.
        Once that happens, FSIS and AMS will re-audit the plants
    that are eligible to export to Japan with an eye toward getting
    Japan's technical people into the plants to do follow-up
    verification audits and verify, in fact, that we have made the
    changes we said we would, and re-establish trade.
        Senator Bennett. Do you have any kind of guess as to the
    timetable?
        Mr. Lambert. These timelines are always a crap shoot. We
    have committed that we will respond just as fast as we can with
    the checklist. Once that takes place, we will have people in
    the plants and perform the verification audits just as fast as
    we can. That probably will take in the neighborhood of 10 days
    to 2 weeks. The next challenge will be to get the audit teams
    from Japan onsite to conduct the verification visit.
        We are optimistic, but in these types of situations,
    unanswered questions continue to arise. I should mention, too,
    that while we are doing the audits, the Japanese government
    will begin communication and outreach with their consumers to
    explain the changes that have taken place and to help reassure
    Japanese consumers of the safety and wholesomeness of the
    product as we move forward to reopening trade.
        Senator Bennett. Good. Thank you very much.

                         PUBLIC LAW 480 TITLES I AND II

        Dr. Penn, the fiscal 2007 request provides no funding for
    Public Law 480, Title I. But it does provide an increase of $80
    million for Title II. Do you want to talk about that?
        Mr. Penn. Yes, Mr. Chairman, thank you for the question.
        We have, for the first time ever, not asked for funding for
    Title I because, as I indicated in my statement, it has been
    our experience that the use of that program has dwindled away.
    In the last fiscal year, we only had two government-to-
    government concessional programs operating. And so, various
    countries are using that program less and less.
        Senator Bennett. Just for information, which two countries?
        Mr. Penn. One in Latin America and one elsewhere, but I
    can't tell you off the top of my head.
        Senator Bennett. Okay. Fine. All right.
        Mr. Penn. But we did, as you noted, propose an increase of
    $80 million for Title II. So all of the Public Law 480 funding
    will be made available through Title II.
        More and more of that is used for emergency purposes. We
    are seeing a greater need all around the world, and especially
    on the African continent, for emergency funding. And so, more
    and more of the resources will be devoted to that.
        Senator Bennett. Okay. Fine.
        Senator Kohl, I will come back later on. But let us hear
    from you. Thank you.

                               SPECIALTY MARKETS

        Senator Kohl. Dr. Lambert, at one of our hearings last
    year, I asked about opportunities for small farmers who are
    seeking niche or specialty markets. The response I got, talked
    about credit programs that are available and a number of grant
    programs to help with the value-added product development.
        Both things help, but I think there are a lot of
    opportunities out there for men and women who are creative,
    willing to work hard as independent business owners, and don't
    want to have their livelihoods controlled by some large mega
    grain or livestock company.
        This past November, USDA proposed a rule change to allow
    China to export processed poultry products back into the United
    States. It seems to me that if the department could find a way
    to help Chinese poultry make their way back into the United
    States, they should push as hard or harder to help our own
    farmers develop niche or specialty markets.
        So can you point to any USDA actions taken recently to help
    small producers?
        Mr. Lambert. Well, we have a number of programs within MRP
    that work with small producers. Among these are the process
    verified and organic programs. There are ways that producers
    can verify that they have a unique or specialty product to
    market in niche or specialty markets.
        The organics program is rapidly growing. One of the budget
    requests we have this year is for an additional $1 million for
    the organics program based solely on the expanding demand for
    organic products. So there are a number of programs where we
    work with small and mid-sized farmers.
        We also have the farmers markets that allow individual
    producers to market their produce and goods directly to
    consumers, and that has been a growing and very successful
    program.
        With respect to the processed poultry from China,
    basically, that is for only United States or Canadian product,
    or product that is eligible for export to the United States to
    be processed or value-added in China and then re-exported to
    the United States. But, as I say, we do have a number of
    programs that support specialty crops, including block grant
    programs for specialty crop producers that facilitate niche
    marketing both by small and mid-sized producers.
        Senator Kohl. On these farmers markets, last year we
    provided funds for the program to promote farmers markets. But
    they are not included in your budget this year. Have I missed
    something?
        Mr. Lambert. The 2007 budget includes $1 million that
    provides for block grants of up to $75,000 per farmers market
    to do outreach and promote those activities. That is included
    in the 2007 budget.

                               ALTERNATIVE FUELS

        Senator Kohl. Thank you.
        Dr. Collins, over the past several years, there has been a
    lot of talk about alternative fuels. The President's State of
    the Union address increased interest in this subject.
        As an economist, do you believe that the development of
    alternative fuels is good for our country and, in particular,
    is it good for rural America? Can you describe how the market's
    regulations and technology have changed over the recent years
    and have made alternative fuels more or less attractive?
        Mr. Collins. Certainly, Senator Kohl.
        Yes, I think we are in the midst right now of quite a
    transformation in thinking about alternative fuels. I can
    remember when I first started working at the department, we
    actually had our energy office being an opponent of ethanol. We
    were worried about creating a subsidy-dependent commodity with
    an uncertain value.
        But I think as we have gone through the 1990s, and
    particularly in this decade, there has been a substantial
    change. This substantial change relates to, of course, what
    happened on 9/11, the concern about energy security, the
    concern about diversification of energy supplies.
        We have an exploding trade deficit. One third of our trade
    deficit is oil imports. We have also had energy prices soar to
    unprecedented levels. That has changed the backdrop in which
    alternative fuels now are looked.
        In addition to that, we have the environmental side of
    alternative fuels. Today, people are valuing alternative fuels
    not just for their BTU content in the gasoline tank, but for
    their environmental value, for their rural development,
    employment creation opportunities, for their trade deficit
    reduction, for their energy security.
        I would say that many people are valuing it that way. The
    Wall Street Journal aside, of course--if you saw their
    editorial this week--which seems to miss most of those points.
        I would say also a point that you made is the development
    of new technologies. You could probably go back into the 1980s
    and find ethanol being produced at a cost of over $2 a gallon.
    It fell by the early 2000s to about 95 cents a gallon as its
    cost of production. It is now probably about $1.10 a gallon,
    mainly because of the higher price of energy, as a lot of
    natural gas is used in ethanol production.
        But I think this combination of new technologies and, of
    course, the President talked about down the road by 2012,
    hopefully, the commercialization of cellulosic conversion to
    ethanol, this advent of all of these new technologies, combined
    with the environment in which we find ourselves with high fuel
    costs, have really changed the thinking about ethanol.
        And of course, you are seeing that in the explosion of
    production across rural America. And yes, I do believe that
    this is an enormously important opportunity for rural economic
    development.
        If you look at the value of our oil imports, they exceed
    the total net cash income of agriculture. So even capturing a
    small portion of that for agriculture could be very important
    to farm income and rural economic growth.

                   COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

        Senator Kohl. Thank you.
        Mr. Bost, when Secretary Johanns was here, we briefly
    discussed elimination of the Commodity Supplemental Food
    Program, CSFP, which, as you know, provides food boxes to low-
    income elderly individuals and also some women, infants, and
    children.
        He stated several reasons why USDA believes this program is
    no longer necessary, including the fact that seniors can move
    to food stamps, there simply isn't enough money, and that the
    program only operates in a limited number of States.
        Is CSFP the only nutrition program that operates in a
    limited number of States?
        Mr. Bost. Senator Kohl, in this particular program, it is
    not only in a limited number of States, in those States, it is
    not even State wide. Right now, it is in 32 States, 2 Indian
    reservations, and the District of Columbia.
        As I said in my opening statement, when you put together a
    budget, you are not able to do everything that you would like
    to do. We feel strongly that many of the people currently
    served in this specific program would be better served in other
    nutrition assistance programs that essentially are in existence
    across the Nation--for example, the WIC Program and, for the
    elderly participants, the Food Stamp Program.
        Senator Kohl. Well, a little bit of the math on that. The
    CSFP program was last year funded at $109 million, and it
    served over 420,000 people, nearly 90 percent of whom were
    seniors. The increase in food stamps in the budget to take care
    of these people the USDA says it plans to switch from CSFP is
    only $50 million, with an additional $18 million in transition
    benefits.
        So it seems to me that the funding levels show a
    discrepancy, and how would you explain that people are not
    going to lose benefits under this plan?
        Mr. Bost. Senator Kohl, as we are transitioning the elderly
    eligible participants in this program, we are providing them
    with $20 a month until they do participate in the Food Stamp
    Program. However, it is true given the income levels of some of
    the CSFP participants, they probably would not be eligible to
    participate in the Food Stamp Program.
        One final point, the average amount of money that we
    believe many of the elderly would be eligible to receive in the
    Food Stamp Program would be approximately $63. So, they would
    actually get more. Some of them--not all of them--would
    actually get a higher benefit under the Food Stamp Program as
    opposed to the value of their benefit as a participant in CSFP.
        Of course not all of the elderly are eligible for the
    average Food Stamp benefit, which currently is about $63. The
    food box that they get in CSFP is delivered. They do not have
    to go get it. There is some belief that many of these seniors
    will not participate in the Food Stamp Program for this reason.
        But we believe that, working with our partners, building in
    transition, we will be able to pick up and offer these services
    to a significant number of persons.
        The other point that I want to make, finally, is for those
    that are not eligible for either the Food Stamp or WIC Program,
    there is another nutrition program we have available in which
    they will probably be able to participate, which is our TEFAP
    program.
        Senator Kohl. So you are saying that in many States, like
    my own State, those people who are receiving the benefits of
    this program won't be disadvantaged?
        Mr. Bost. Some of them may be, but not all of them. That is
    why it is a very difficult budget decision for us to make
    because some may be adversely affected.
        But we are going to do our best to ensure that those who
    are eligible to participate in our nutrition assistance
    programs, are picked up. And for those that are not eligible
    they will be provide with other resources like the TEFAP
    program.

                      MEAT AND POULTRY IMPORT REQUIREMENTS

        Senator Kohl. One question for Dr. Raymond. We have
    recently heard reports that FSIS is working to set up a trial
    program during which some Canadian plants will be able to
    export beef into the United States without requiring daily
    inspections, which is something that we require in this
    country.
        I know that most recently this trial has been put off until
    at least July, but apparently, it is not off the table. One of
    our most important safety requirements for bringing food into
    this country is that the exporting country has to have the
    equivalent food safety requirements as we do, and this project
    appears to throw that out the window.
        Are you considering lessening the requirements on our food
    plants at home for less than daily inspections? Do you think
    this would be wise, especially when certain countries already
    have questions about our food safety program? Would you talk
    about this trial program that you have on the table?
        Dr. Raymond. Certainly, Senator Kohl.
        First of all, to clarify, the trial program has not been
    established as exactly what it will look like. One of the
    possibilities is that the Canadian government would do daily
    inspection for 3 months in 50 plants that export to the United
    States and do intensified laboratory testing for food-borne
    pathogens. Then they would do 3 months of less than daily
    inspection and continue with the enhanced laboratory testing so
    they could compare food product contamination rates for daily
    inspection and for less than daily inspection.
        When that product is tested, that product would not be
    shipped across the border to the United States until it tested
    negative for food-borne pathogens. That is just one proposal.
    That is not necessarily the proposal that will take place.
        First of all, they may not do any project. They may not do
    any test for equivalency of less than daily. That is their
    choice.
        But the point right now is that they cannot export product
    to America unless they have daily inspection in those plants,
    which they are now doing. All of the facilities that export to
    the United States have daily inspection.
        If they want to try to show us that less than daily
    inspection is equivalent in safety, they have to devise a
    project that would satisfy our requirements to evaluate that.
    We are still in negotiations with them on that issue.
        I hope that clarifies that issue. They have been doing
    daily inspection since August 22, 2005.
        Senator Kohl. Okay. Well, I understand there is a trial
    program under consideration in Australia to export beef to
    America from plants that pay for their own inspectors,
    something that we don't allow in this country. As you know, we
    pay for meat inspectors, believing Government employment is the
    best way to make sure that our meat stays safe.
        Are we thinking about a program with Australia that would
    allow them to export beef from companies that employ their own
    inspectors?
        Dr. Raymond. At this time, Senator Kohl, there are no
    Australian establishments certified to export to the United
    States that are using their meat safety enhancement program.
        Senator Kohl. So there is really nothing to that
    consideration of a trial program to allow them to export meat?
        Dr. Raymond. They have had one plant that has expressed
    interest, and at this point, that plant has not been certified
    for export to the United States.
        Senator Kohl. Thank you.
        Mr. Chairman.
        Senator Bennett. Thank you very much.

                      GRAZING LAND CONSERVATION INITIATIVE

        Mr. Rey, let us talk about invasive species. They affect
    forage quality and range land health and wildlife and watershed
    function and all of those things.
        And in fiscal 2006, we provided $4.1 million to control and
    manage invasive species through the Grazing Land Conservation
    Initiative. And these funds were leveraged with private
    matching, and the administration eliminated funding for Grazing
    Land Conservation Initiative.
        I have a series of questions on this, but just talk about
    that generally and let us see what your thinking is with
    respect to this problem.
        Mr. Rey. Our thinking generally is that we are trying to
    consolidate and better organize a variety of the conservation
    programs. The Grazing Land Conservation Initiative is one that
    fulfills functions that are already being fulfilled under
    Conservation Technical Assistance and under the Environmental
    Quality Incentive Program (EQIP).
        Much of the work that would have been done was being done
    under the Grazing Land Conservation Initiative. In our 2007
    budget that work will be done under the other two programs, and
    will include work on invasive species.
        We are also investing $2 million in our 2007 budget request
    in the cooperative conservation partnership initiatives to deal
    specifically with invasive species, and that issue, invasives,
    will be one of the top priorities in that area and in the EQIP
    area as well.
        Senator Bennett. Have you had any response or comment from
    the various stakeholders with the elimination of the funding
    for GLCI?
        Mr. Rey. Not so far. I expect as the budget process unfolds
    and as we talk about that, we will hear from them. Particularly
    where GLCI earmarks were directed toward specific States and
    locales, we are going to have to lift a burden of proof to
    demonstrate that the work will still be done if those earmarks
    are eliminated.

                          AIR AND WATER QUALITY ISSUES

        Senator Bennett. Okay. Let us see, Mr. Rey, Conservation
    Technical Assistance. Senator Kohl and I made this a priority
    last year. We provided $12 million, a major increase in light
    of the budget that we faced last year. There is no similar
    request for the 2007 budget. Why did the budget request not ask
    for funding to continue the progress that we started last year?
        Mr. Rey. Well, the funding request for Conservation
    Technical Assistance is a total of $634.3 million, which is a
    fairly significant budget line item.
        Senator Bennett. No. I am sorry. I am talking about
    specific money to meet water quality and air quality
    requirements. I apologize. I didn't pose the question properly.
        Mr. Rey. Sorry. We have established as a priority for the
    EQIP program and for the General Conservation Title programs at
    large to work on air and water quality issues, and we are
    making substantial progress in those areas. So I think what you
    are going to see in the mix of program priorities from both
    EQIP and Conservation Technical Assistance is a substantial
    amount of work directed toward water quality and air quality,
    particularly in addressing the air and water quality in packs
    of confined animal feeding operations.
        Senator Bennett. So you are saying that the amount we very
    specifically focused on this will be taken care of in the
    overall, and we don't need to worry about it?
        Mr. Rey. Correct. In 2006, we spent the amount that you
    earmarked for air and water quality, but we also spent a
    substantially greater amount of that as part of the overall
    EQIP and Conservation Technical Assistance budgets to deal with
    air and water quality issues.
        Senator Bennett. So you are telling us the emphasis is
    still there?
        Mr. Rey. Correct.
        Senator Bennett. All right. I am sure we will watch that
    and appreciate that.
        I have some additional questions, but I think we will
    submit those for the record.
        Okay. Senator Kohl.

                                 FARM SUBSIDIES

        Senator Kohl. Thank you, Mr. Chairman.
        I would like to address this to Dr. Penn and Dr. Collins.
    There was an article in the Wall Street Journal recently about
    the future of farm subsidies. The article discussed how
    subsidies can promote overproduction and lead to other
    problems, including issues with the World Trade Organization.
        It also noted that American citizens, both rural and urban,
    are becoming concerned about the way traditional farm programs
    affect farmers in poor African countries and elsewhere, as well
    as the effect they have on our environment here.
        These issues, as you know better than I, are very complex.
    There are several different ways to estimate this, but I
    understand that in the past 3 years, farm payments averaged
    approximately 25 percent of net farm income, which is more
    generous than some countries and less generous than others.
        This is an issue that could consume an entire hearing all
    by itself, but while we have you here, I am interested in your
    views. Can you talk about this shift in public opinion? Can you
    talk about the WTO?
        Can you talk about traditional farm programs, if they were
    to decrease or to be eliminated? What thoughts do you have on
    the best way to protect not only our farmers, but our rural
    America?
        For after all, all this money that the farmers get is spent
    in rural America in ways that keep rural America alive. So
    where do you see this whole issue going in terms of its impact
    on our rural economy?

                                      WTO

        Mr. Penn. Senator Kohl, let me begin by discussing the WTO
    aspects of the question. As you indicated, it is a very broad
    question and one that we could spend a lot of time discussing.
        But let me say before I turn to Dr. Collins that in recent
    times, there has been a much greater consideration given to the
    impact of our domestic farm programs on our trading partners.
    And I think that this has been around since the Uruguay round
    agricultural agreement was concluded in the mid 1990s.
        This was the first multilateral or international agreement
    to include food and agriculture in a very substantive way. So
    we have been much more cognizant of this connection between the
    trade impacts and the domestic farm program impacts since that
    time.
        Now this really came to a head quite recently when some of
    our programs were challenged in the WTO. Brazil and some other
    countries launched the so-called ``cotton case'' in which they
    singled out cotton and other various programs and challenged
    those for the very reasons that you indicate. They said that
    the programs were stimulating additional production here at
    home. We then exported that production into the world market.
    That extra production had a price-depressing effect.
        Now we certainly think that that effect is greatly
    overstated, but nonetheless, Brazil prevailed in that WTO
    challenge, and they prevailed on the appeal. So that has now
    caused us to take into account the effects of our programs on
    others, or the extent of the trade distortions that our
    programs may have.
        So as we approach the 2007 Farm Bill, as we approach what
    we hope to be the successful conclusion of the Doha trade
    negotiations, we are now much more mindful of the form in which
    we provide support to our producers than perhaps we have been
    in the past.
        The WTO has established various color boxes. The amber box,
    which is the most trade distorting form of domestic support;
    the blue box, which is less trade distorting; and the green
    box, which is non- or minimally trade distorting.
        So we are having to give more and more thought about
    switching our support for our farmers from amber box to blue
    box to green box, so that we can continue to provide support
    for domestic agriculture, but do it in a way that doesn't
    negatively or adversely affect our trading partners around the
    world.
        That is sort of the trade aspects. But as you know, Dr.
    Collins has spent most of his career studying all of the other
    aspects of your question. So I will turn to him.
        Mr. Collins. That is very kind of a senior author of a
    multiple edition agricultural policy book to hand that off to
    me.

                     PUBLIC OPINION ON AGRICULTURAL POLICY

        Mr. Collins. Mr. Kohl, your question deserves a
    comprehensive and thoughtful answer, and Dr. Penn mentioned the
    trade implications of our programs and how that can affect
    future agricultural policy.
        One of the things you asked about was how public opinion
    has shifted, which is part of what the Wall Street Journal
    article was about. I guess my feeling is that the great
    majority of Americans really don't know much about agricultural
    policy, and I think they are very positive about agriculture
    and about farmers. So I don't sense a great shift among most
    people, urban residents, for example.
        However, within agriculture in rural areas, I think there
    is a shift, and I think part of it reflects a broader and
    deeper understanding about farm programs. Some of that has come
    because of the international scrutiny of our programs--WTO
    challenges, the loss of the cotton case, for example, the
    understanding that programs are ``amber box'' in many cases and
    have resource allocation effects.
        Also there has been a lot of discussion about the effects
    of farm programs on land values, the equity of the payments
    across commodities, across regions, and across size of
    producers. Much data has been presented in recent years about
    those things. And so, I think there is a bigger and deeper
    understanding about some of the consequences of our current
    structure of programs than perhaps we have had in the past, and
    that is starting to show in the public discourse.
        As you probably saw yesterday, the department released 41
    short papers, which are the summaries of what the department
    heard at the 52 Farm Bill forums that were held by the
    Secretary and people at this table. If you look through some of
    the comments, you will find that people are questioning.
        Well, you mentioned 25 percent of net farm income or net
    cash income coming from Government payments. You know, this
    year, it is going to be about 30 percent in 2006. That is
    roughly $20 billion the last couple of years.
        People are saying, well, $20 billion a year is a lot of
    money and are there other ways that that money can be used to
    continue to promote rural well-being, address some of the
    problems with the current programs, and also deal with some of
    the new emerging issues that people want dealt with.
        You already talked about promoting niche opportunities for
    small producers in rural America. Maybe more could be done
    there. People want to do more in energy. We had an energy title
    in the last Farm Bill. Very little money went into that energy
    title. Maybe money is not the answer for energy, but that is
    something to think about.
        There is the question of specialty crops. I have been
    struck by the fact that 20 years ago, the cash receipts that
    farmers earned from specialty crops was half of what was earned
    from program crops. And this year, it is going to be equal to
    what is earned from program crops. So we have had this
    incredible growth in specialty crops in the United States, and
    specialty crops are not really party to that $20 billion.
        So I think there is a discussion going on within
    agriculture in rural areas about farm programs and about what
    is the best way to deal with the problems that farmers face,
    which certainly are there, but also deal with the needs of
    rural areas.
        And of course, you asked, how we thought that might come
    out, and I guess my answer to that would be, well, we will wait
    and see how that comes out in the 2007 Farm Bill. But that is
    the landscape behind the debate that is emerging, and I do
    think that there has been some shifting of opinion within rural
    areas and agriculture.
        You even see that in some of the reports that some of the
    farm groups are putting out. The National Corn Growers and the
    American Farm Bureau Federation have put out some very
    thoughtful pieces about where we should go in the long run with
    our agricultural policy and it is a little bit different than
    you might have heard 10 or 15 years ago.
        Senator Kohl. Do you anticipate that there will be some
    very detailed discussion of this whole issue surrounding the
    Farm Bill in 2007 and maybe some significant changes?
        Mr. Collins. I guarantee you there will be detailed
    discussion. As to the significant changes, my forecasting
    ability there has failed me in the past. So I am not sure. But
    there is always that potential.
        Senator Kohl. But isn't it true in the sense that if we
    spend the money in different ways, the direct payments to
    farmers, as they go down, will have a direct impact on farming?
    I mean, if we are spending $20 billion a year----
        Mr. Collins. Right. Right.
        Senator Kohl. And we take that money and spend a portion of
    it or a large amount of it in other ways to impact in a
    positive way rural America, but the money doesn't go through
    the farmer, what will happen to the farmer?
        Mr. Collins. Well, it may or may not. Look at the situation
    now. The $20 billion, most of that goes to a small set of
    farmers.
        Senator Kohl. That is true.
        Mr. Collins. Most of that goes to wheat, corn, cotton,
    rice, soybeans, and so on. It is not going to another big part
    of agriculture. So you could already argue that there is some
    relative disadvantage in place right now with the current
    structure.
        So if you start to reapportion things, change things
    around, it is true that some farmers would stand to lose. Other
    farmers would stand to gain.
        And there also may be alternative ways that those producers
    who would lose their direct payments or their counter-cyclical
    payments or their marketing loan benefits could pick up those
    benefits through other programs--other programs that exist now,
    such as expanded conservation programs, or other programs yet
    to be designed in the 2007 Farm Bill.
        So I don't think you can conclude that automatically every
    producer is going to lose. They are not. There is going to be a
    distribution of losers and of gainers, and always part of the
    dilemma in changing farm policy is how to deal with anybody
    that is perceived as a loser.
        We have figured out how to do that in some cases. We had a
    peanut buyout program. We had a tobacco buyout program. Who
    knows? Maybe there will be new ways that we can think about how
    we can transition from one structure to another structure and
    minimize the losers.
        Senator Kohl. Thank you very much, gentlemen.
        Mr. Chairman.

                        ADDITIONAL SUBMITTED STATEMENTS

        Senator Bennett. The subcommittee has received statements
    from Rural Development and Research, Education and Economics
    which will be placed in the record.
        [The statements follow:]

         Prepared Statement of Thomas C. Dorr, Under Secretary, Rural
                                  Development

        Mr. Chairman, members of the Subcommittee, I appreciate this
    opportunity to appear before you today to present the President's
    fiscal year 2007 Budget request for USDA Rural Development.
        With me today are Jim Andrew, Administrator of our Rural Utilities
    Programs; Russell Davis, Administrator of our Rural Housing and
    Community Facilities Programs, and Jack Gleason, Acting Administrator
    of our Rural Business and Cooperative Programs.
        On behalf of all of us, let me say that it is indeed a privilege
    for us to be here today representing over 6,800 dedicated men and women
    of USDA Rural Development. They are spread across every State and are
    your neighbors. They do an outstanding job.
        And if I may, I would like to take just a moment to pay a special
    tribute to the extraordinary contributions so many of them made this
    past year under very difficult circumstances in the wake of the 2005
    hurricanes. This is not the place for an extended discussion, but I do
    want to say that amidst all the controversies, a great deal of good
    work by good people has gone unremarked.
        I have visited the Gulf Coast repeatedly since the hurricanes, and
    I have been inspired by the resiliency, commitment, and energy of
    hundreds of USDA Rural Development people in the affected areas. Some
    of them, in fact, had lost their own homes--but in those first days
    after landfall, all of them were working around the clock helping to
    provide emergency shelter, financial support, and transitional housing
    to evacuees. And they are hard at work now helping with the rebuilding
    of homes and businesses across the region.
        We are a relatively small agency and, in the context of the
    hurricanes, a relatively small part of a much larger story. But this
    was truly a case where we punched above our weight. I am tremendously
    proud of the work our people did, and not just those in Louisiana,
    Mississippi, Alabama, and Texas, but also their colleagues around the
    country.

                                     VISION

        Mr. Chairman, I am both honored and humbled by the opportunity
    President Bush has given me to serve as Under Secretary for Rural
    Development. I am committed to the future of rural America. My home is
    outside Marcus, Iowa, a metropolis of about 1,100. I am a farmer. I
    treasure the rural way of life and understand the pressures faced by
    rural communities in our rapidly urbanizing society. But I also believe
    that the traditions and values of rural America remain a vital part of
    our national heritage.
        I believe also that the future of rural America is bright.
    Certainly there are challenges; there always are. But rural communities
    enjoy many assets as well: the quality of life, a clean environment,
    peace and quiet, livable small towns, a lower cost of living, strong
    communities, and traditional values. These are communities worth
    preserving, and they have a future well worth building.
        The mission of USDA Rural Development is to provide leadership,
    infrastructure, venture capital, and technical support to enable rural
    communities to prosper in a dynamic new environment defined by
    globalization, the Internet revolution, and the rise of new
    technologies, products, and markets.
        In this effort, we begin with the recognition that rural America is
    extraordinarily diverse. It includes some of the fastest growing
    communities in the Nation, areas that are suffering from long-term
    economic and population decline, and everything in between. One size
    does not fit all.
        We understand as well that sustainable development must be market
    driven, not program dependent. And finally, we recognize that our role
    is to encourage and support local initiatives, both public and private.
    We know that our success depends on our ability to attract both private
    and other public partners; our success, indeed, is measured primarily
    by their success.
        I believe in this mission. And I believe firmly that rural America
    today is more competitive . . . more attractive as a place to live,
    work, and do business . . . and better positioned for self-sustaining
    growth . . . than has been the case for many years.

                        FISCAL YEAR 2007 BUDGET REQUEST

        The President's fiscal year 2007 Budget proposes $2.1 billion in
    budget authority and a program level of $13.7 billion for rural
    housing, community facilities, infrastructure, and economic
    development. Under the USDA Rural Development programs, each Federal
    dollar supports 6.5 dollars of investments in rural America. We are
    also able to leverage our funds with those of the private sector, as
    well as create partnerships with State, local, and tribal governments,
    community development organizations, and for-profit and not-for-profit
    companies.
        In a challenging budget environment, this is an important means of
    maximizing the return on scarce budget dollars. It should be
    emphasized, however, that this emphasis on leveraging is a sound policy
    choice quite independent of current budget constraints. Indeed, the
    evolution of program emphasis within USDA Rural Development has for
    some years been away from grants and direct loans and toward a greater
    reliance on loan guarantees. This has allowed us to serve more
    individuals, businesses, and communities for any given level of budget
    authority. It also reinforces our strategic objective of fostering
    sustainable development based, on market orientation and private
    investment.
        I would like to touch briefly on some highlights of our fiscal year
    2007 request.

                            RURAL UTILITIES PROGRAMS

        USDA Rural Development provides financing for electric,
    telecommunications, and water and wastewater services that enhance the
    quality of life and provide the foundation for economic development in
    rural areas. For fiscal year 2007, the President's Budget proposes $553
    million in budget authority to support a program level of $6.3 billion
    for rural utilities programs.
        Of this total, $3.8 billion is for the rural electric program. With
    the support of the President and Congress over the last several years,
    we have eliminated the backlog in electric program applications and
    believe that the funds proposed for fiscal year 2007 will be sufficient
    to meet the demand.
        In addition, the President's budget proposes $1.414 billion in
    loans and grants for rural water and wastewater projects. To enhance
    the ability of low-income communities to finance vital water and
    wastewater improvements, we propose to change the calculation of the
    ``poverty'' interest rate for this program from the current fixed 4.5
    percent to an adjustable rate set at 60 percent of the market rate.
    This change is reflected in the higher subsidy rate projected in fiscal
    year 2007 for Water and Wastewater Program Direct Loans. We also
    continue to believe that in the current low interest rate environment,
    rural communities can afford to finance a higher share of project
    costs, and we therefore propose to shift the loan-grant ratio to an
    approximate 75-25 percent ratio.
        The President's budget proposes $690 million in telecommunications
    loans and the investment of $356 million in loans to accelerate the
    deployment of broadband to rural communities. Broadband is fast
    becoming an essential tool for businesses, both large and small, and we
    are acutely aware that broadband deployment continues to lag in rural
    areas. Ensuring broadband access is essential to achieving a dynamic
    rural economy. The budget request is expected to be sufficient to meet
    the demand for the next year. This represents a reduction from the
    nominal fiscal year 2006 program level of $495 million, but as this
    Subcommittee knows, we have to date been unable to obligate all the
    broadband loan funds that Congress has made available to us. The volume
    of viable applications that either we or the Congress anticipated has
    simply not materialized.
        It is clear, therefore, that the rural broadband deployment model
    must be improved. This has been a top priority since my confirmation
    last summer. We are now engaged in a thorough review to identify
    obstacles to borrower participation. In the meantime, we look forward
    to working with the Congress, the telecommunications industry, and
    rural stakeholders to accelerate deployment of this vital technology.
        In addition, the President's budget includes $24.8 million for the
    Distance Learning and Telemedicine (DLT) Grant Program, which enables
    rural communities to enhance their educational options and access the
    resources of big city medical centers via the Internet. This request
    maintains the fiscal year 2006 program level for DLT Grant Program.

                RURAL HOUSING AND COMMUNITY FACILITIES PROGRAMS

        Safe, modern, affordable housing is essential to healthy
    communities. USDA Rural Development works to extend the benefits of
    homeownership to low- and moderate-income Americans and to historically
    disadvantaged communities. We finance affordable rental housing and
    essential repairs for low- and very-low income homeowners. We also
    assist rural communities in providing quality health care, police and
    fire services, day care, educational and recreational facilities, and
    other essential community services.
        The fiscal year 2007 budget request for rural housing and community
    facilities exceeds $6.27 billion. This includes an increase in funding
    for both direct and guaranteed homeownership loans, to $1.2 billion and
    $3.56 billion, respectively. We anticipate that this level of funding
    will provide homeownership opportunities for over 40,000 rural
    families. In order to meet this goal, we propose raising the guarantee
    fee from 2 percent to 3 percent. This nominal increase will provide an
    additional $2.86 billion in single family guaranteed loans.
        For multi-family housing, the budget proposes shifting funding from
    direct to guaranteed lending in order to increase our leveraging and
    serve more residents at a lower cost. A total of $198 million--double
    the fiscal year 2006 program level for guaranteed lending--is requested
    for this purpose.
        We also propose $486 million for rental assistance, a figure which
    reflects a shift from 4 to 2 year contracts. We believe it is
    unnecessary to renew contracts for 4 years especially while
    revitalization is underway, and the Administration remains committed to
    renewing contracts as needed. However, 2 years is the minimum contract
    term the program should have to operate efficiently from year to year.
        In addition, the budget proposes $74 million to fund our multi-
    family housing revitalization initiative. As this Subcommittee knows,
    the multi-family housing portfolio faces longstanding issues of
    deferred maintenance. This is compounded by the threat of prepayment by
    the owners of some complexes who may wish to exit the program, leading
    to the displacement of significant numbers of elderly and low-income
    tenants. The $74 million will fund the voucher program to help
    displaced tenants from USDA financed multifamily housing properties
    where the owner has chosen to pre-pay the Rural Development loan and
    withdraw the property from the program. The $74 million is proposed in
    the Budget solely for funding the anticipated need for the voucher
    program. Funding debt restructuring without the proper legislative
    authorizations in place would be premature. However, in order to allow
    for balancing of needs in anticipation of the new authorization
    passing, the appropriations language does allow for the funds to be
    used for this purpose if debt restructuring authorization language is
    enacted. While modest in budgetary terms, this is a very significant
    investment in the long-term stabilization and revitalization of the
    rural rental housing portfolio.
        Finally, the budget proposes to increase the program levels for the
    Farm Labor and Self Help Housing Programs to $55 million and $38
    million, respectively. It continues Community Facilities Loans and
    Grants at their fiscal year 2006 levels.

                    RURAL BUSINESS AND COOPERATIVE PROGRAMS

        The third leg of the Rural Development stool is business
    development and job creation. The future of rural communities depends
    on their ability to attract and regain young families. A diversified,
    growing rural business sector is essential to offering opportunity to
    young adults and a future to growing families.
        To support these goals, the President's budget for fiscal year 2007
    requests $103 million in budget authority to support a program level of
    $1.138 billion for our Rural Business and Cooperative Programs.
        Our request for fiscal year 2007 is--as it was last year--
    consistent with the Strengthening American Communities Initiative,
    which called for a consolidation of several economic development
    programs within the Department of Commerce. We are confident of our
    ability to partner with the Department of Commerce to ensure that rural
    America participates fully in this broader funding pool.
        Of the programs remaining in USDA Rural Development, the Business
    and Industry Guaranteed Loan Program (B&I) accounts for approximately
    42 percent of proposed budget authority and 87 percent of total program
    level for fiscal year 2007. We will also continue to provide technical
    assistance, development, and research support for rural cooperatives,
    targeted investment in alternative energy and energy conservation, and
    support for intermediary lending institutions through a variety of
    smaller programs. We estimate that total business program investment in
    fiscal year 2007 will create or save over 56,000 jobs.

                                    CLOSING

        In closing, Mr. Chairman, I want to emphasize that the bottom line
    for USDA Rural Development is not budget numbers; it is water lines
    laid, families able to afford a new home, new businesses and jobs
    created or saved, and rural communities strengthened by what we do. It
    is a privilege to work with the members of this Subcommittee to advance
    these objectives despite the stringent budget environment we face
    today. This concludes my formal statement and I will be glad to answer
    any questions you may have.
                                     ______

     Prepared Statement of Jackie J. Gleason, Acting Administrator, Rural
                          Business-Cooperative Service

        Mr. Chairman and members of the Subcommittee, I am pleased to
    present the Administration's fiscal year 2007 Budget for the Rural
    Development's rural business and cooperative programs.
        Mr. Chairman, the programs and services of Rural Development, in
    partnership with other public and private sector businesses, continue
    to improve the economic climate of rural areas through the creation or
    preservation of sustainable business opportunities and jobs. Rural
    Development continues to invest in rural America, especially in the
    under-served rural areas and populations. Rural Development programs
    help close the gap in opportunity for these under-served rural areas
    and populations, moving them toward improved economic growth by
    providing capital, technology and technical assistance. The $103
    million requested in budget authority for Rural Business-Cooperative
    Service programs will support $1.138 billion in direct and guaranteed
    loans and grants and will assist in creating or saving over 56,000 jobs
    and providing financial assistance to more than 1,200 small businesses.
        The cooperative form of organizational governance continues to be a
    cornerstone of business development in our rural communities, whether
    in the traditional form that brings day care services to a rural
    community or today's new generation ethanol cooperatives that lessen
    our dependence on foreign oil. From the large agricultural marketing
    cooperative that brings additional value to its members products, to
    the small rural telephone cooperative that brings broadband technology
    to its community's businesses and residents, to the elder care
    cooperative that brings desperately needed services to our ``greatest
    generation,'' cooperative organizations provide our rural residents
    with new and exciting job opportunities, enhanced educational and
    health care opportunities, and products and services that enable viable
    rural communities to compete with their urban and suburban
    counterparts.
        Rural Development's mission is ``to increase economic opportunity
    and improve the quality of life for all Rural Americans.'' Rural
    Development's business and cooperative programs successfully carry out
    this mission by providing an array of educational, technical
    assistance, research, and loan and grant programs to rural Americans.

                 BUSINESS AND INDUSTRY GUARANTEED LOAN PROGRAM

        For the Business and Industry (B&I) Program, the fiscal year 2007
    budget includes
        $43.16 million in budget authority to support $990 million in
    guaranteed loans. We estimate that the funding requested for fiscal
    year 2007 will create or save over 23,667 jobs and provide financial
    assistance to approximately 554 businesses. The B&I program allows
    lenders to better meet the needs of rural businesses. Through the
    lender's reduced exposure on guaranteed loans, they are able to meet
    the needs of more businesses at rates and terms the businesses can
    afford. B&I guaranteed loans may also be used by individual farmers to
    purchase cooperative stock in a start-up or existing cooperative
    established for value-added processing.
        I would like to illustrate how this program partners with a lender.
    Desert View Regional Medical Center Holdings, LLC was approved for a
    Business and Industry Guaranteed Loan in the amount of $17.5 million.
    The funds will be used to construct a 25 bed acute-care surgical
    hospital in Pahrump, NV, which currently does not have hospital
    services. The facility will include 22 medical beds, 3 birthing suites,
    and emergency rooms with 8 treatment bays and trauma unit. The surgery
    department will have 2 operating rooms; the imaging department will
    include radiology, fluoroscopy, mammography, ultra sound, C/T, and
    mobile MRI; and there will be a clinical laboratory, cardiopulmonary,
    physical, and occupational therapies. At present, residents of the
    Pahrump area must travel approximately 60 miles to Las Vegas for acute
    primary hospital care. Approximately $12 million in equity and other
    funds will be contributed to the project. In addition to benefiting the
    community with a critical access hospital, the new hospital will bring
    140 new jobs to the area, which includes 40 doctors and nurses.
        I would also like to share with you another example of how this
    program partnering with a lender, Comerica Bank, has supported
    alternative energy development in rural America. The Snowflake White
    Mountain Power, LLC, was approved for a B&I guaranteed loan of $6
    million in addition to a Section 9006, Renewable Energy System
    Guaranteed Loan of $10 million to build a 20 megawatt biomass
    electrical generating plant 17 miles southwest of Snowflake, Arizona.
    The raw materials for generation are burnt trees from the Abitibi Paper
    Mill which is located adjacent to the proposed plant. About six jobs
    will be created directly and 40 jobs from subcontractors. This is a
    good example of how two programs within Rural Development were jointly
    utilized to purchase the guaranteed loan assistance needed for the
    project to be realized.

                       VALUE-ADDED PRODUCER GRANT PROGRAM

        For fiscal year 2007, the budget requests $20.295 million for the
    value-added producer grant program, the same as in the previous year.
    The Value-Added Producer Grant (VAPG) program encourages independent
    agricultural commodity producers to further refine or enhance their
    products, thereby increasing their value to end users and increasing
    the returns to producers. Grants may be used for planning purposes such
    as conducting feasibility analyses or developing business plans, or for
    working capital accounts to pay salaries, utilities and other operating
    costs. Program revisions were made in fiscal year 2006 that will
    increase the number of eligible applicants competing for this
    critically important funding, and in support of the President's e-Gov
    initiative, administrative processes were refined to enable producers
    to complete an electronic application template and submit their
    completed applications through Grants.gov.
        The successes of the Value-Added program are evident throughout the
    country. Alternative crops are two vital words for the survival of
    agriculture in today's world. For example, Paulk Vineyards of Wray,
    Georgia, is a family-based grower of southern grapes, commonly known as
    muscadines. While this alternative crop is used in wines, jellies,
    jams, and juice, studies have shown that the product and its by-
    products have tremendous health benefits. Paulk Vineyards received a
    $126,350 VAPG to develop processes that would turn muscadine seeds into
    anti-oxidant powders and a healthy, good-tasting juice. Muscadine seeds
    are higher in reseratol antioxidant, ellagic acid, and total
    antioxidants than any other fruit analyzed according to several
    researchers, including the University of Georgia. When dried, crushed,
    and encapsulated, this value-added product can be sold on the market to
    biomedical companies, health food stores, natural food stores, and the
    public. As a result of being able to develop these new processes with
    the value-added grant, the Paulk family is building a new processing
    facility for its extract and powder lines which will substantially
    increase employment in this rural area.
        Since the passage of the 2002 Farm Bill, funding for the
    Agricultural Marketing Resource Center (AgMRC) has been set at 5
    percent of the funding made available to the other value-added
    programs. Therefore, approximately $1.015 million of the $20.295
    million budget request will fund the AgMRC's activities. AgMRC is an
    electronically based information center that creates processes,
    analyzes, and presents information on value-added agriculture. The
    center is housed at Iowa State University; however, it has partners at
    Kansas State University and the University of California-Davis. The
    center provides producers, processors, and other interested parties
    with critical information necessary to build successful value-added
    businesses.

                  RURAL COOPERATIVE DEVELOPMENT GRANT PROGRAM

        For fiscal year 2007, the budget requests $4.95 million for the
    Rural Cooperative Development Grant Program. The Rural Cooperative
    Development Grant program provides funds to establish and operate
    centers for developing new cooperatives and improving the operations of
    existing cooperatives with the primary goal of improving the economic
    conditions of rural areas. This program complements our national and
    State office technical assistance efforts by increasing outreach and
    developing feasibility studies and business plans for new cooperatives,
    and assisting existing cooperatives in meeting the demands of today's
    ever-changing global economy.
        For example, when Cooperative Development Services, Inc. (CDS)
    started fielding inquiries to start new food cooperatives, they found
    this to be very unique. Not since the 1970s had a major number of new
    food cooperatives been developed in the United States. While CDS'
    consultants work with over 100 food cooperatives in rural Wisconsin,
    Minnesota, and Iowa, assisting with all phases of leadership
    development; store growth, and expansion; and operations improvement,
    it needed additional financing for the technical assistance necessary
    to meet the growing demands of start-up cooperatives. With a Rural
    Cooperative Development Grant from USDA's Rural Development, CDS was
    able to advise and assist two steering committees as they moved through
    the steps of cooperative development, including market research,
    feasibility analysis, business planning, equity formation, and, in one
    case, the hiring of the cooperative's manager. The results have been an
    overwhelming success. Harvest Market Co-op, located in the Village of
    Barneveld, opened a grocery store cooperative that has 348 members. The
    store is thriving with projections calling for the store to reach
    breakeven profitability this year. A second cooperative, Just Foods Co-
    op, has already grown in membership to over 1,100. These start-ups
    served as the catalyst for CDS to create a national model to guide the
    development of food cooperatives across the country. Implemented in
    June 2005, the model has been adopted by other cooperative associations
    and is expected to grow the number of food cooperatives throughout the
    country in the next 10 years from 300 to 500.

                      GRANTS TO ASSIST MINORITY PRODUCERS

        For fiscal year 2007, the budget requests $1.485 million for
    funding for cooperatives or associations of cooperatives whose primary
    focus is to provide assistance to small, minority producers whose
    governing board and/or membership comprise at least 75 percent minority
    members. Grants may be used for developing business plans, conducting
    feasibility studies, or developing marketing plans for farmers,
    ranchers, loggers, agricultural harvesters and fishermen whose gross
    annual sales do not exceed $250,000.

                        COOPERATIVE RESEARCH AGREEMENTS

        For fiscal year 2007, the budget requests $495,000 for cooperative
    research agreements to encourage the study of those issues essential to
    the development and sustainability of cooperatives. Because so much of
    rural America's business endeavors are cooperatively formed, their
    continued success is critical for the continued sustainability of the
    Nation's rural communities. Through cooperative research agreements,
    Rural Development can continue to develop and maintain the information
    base vital for innovative, creative, and prudent decision making.

                         INTERMEDIARY RELENDING PROGRAM

        The fiscal year 2007 budget also includes $14.951 million in budget
    authority to support $33.925 million in loans under the Intermediary
    Relending Program (IRP). We estimate that the proposed level of funding
    will create or save approximately 25,952 jobs over the 30-year period
    of this year's loans. Participation by other private credit funding
    sources is encouraged in the IRP program, since this program requires
    the intermediary to provide, at a minimum, 25 percent in matching
    funds. To illustrate the benefits IRP provides to rural America, I
    would like to share with you a success story from rural Iowa.
        A $625,000 IRP loan was made to the Corn Belt Power Cooperative in
    Humboldt, Iowa, for the purpose of expanding their existing Revolving
    Loan Fund. Together with private sector matching funds, the loan fund
    was increased to approximately $2,250,000. Based on historical
    performance, Corn Belt Power estimates that approximately 95 jobs will
    be created in rural areas with this new injection of funding.

      RURAL BUSINESS ENTERPRISE GRANT PROGRAM/RURAL BUSINESS OPPORTUNITY
                                 GRANT PROGRAM

        The Rural Business Enterprise Grant (RBEG) and the Rural Business
    Opportunity Grant (RBOG) programs are being proposed to be consolidated
    into the Federal Economic and Community Development programs as part of
    the President's initiatives to help strengthen America's transitioning
    and most needy communities. These grant programs, along with others
    will be transformed into a new, two-part program: (1) the Strengthening
    America's Communities Grant Program, a unified economic and community
    development grant program, and (2) the Economic Development Challenge
    Fund, a bonus program for communities.

               RURAL ECONOMIC DEVELOPMENT LOAN AND GRANT PROGRAMS

        The fiscal year 2007 budget includes $7.568 million in budget
    authority to support $34.652 million in Rural Economic Development
    Loans (REDL) and $10 million in Rural Economic Development Grants
    (REDG). This program represents a unique partnership, since it directly
    involves the Rural Development electric and telecommunications
    borrowers in community and economic development projects. It provides
    zero-interest loans and grants to intermediaries, who invest the funds
    locally. The return on our equity from rural America is strong.
        The following is an example of how one REDL will benefit two States
    by allowing a Wisconsin firm to expand its capacity. A loan of $740,000
    was provided to the Northwest Telephone Cooperative Association on
    behalf of the Laurens Industrial Foundation for Link Snacks, Inc.
    Laurens, Iowa has a population under 1,500. The loan will be used to
    assist with the purchase of a warehouse facility and equipment to
    accommodate Link Snacks, Inc., of Minong, Wisconsin. Link Snacks, Inc.
    will use the facility as freezer storage and international distribution
    center for a snack and meat production company. In addition, some meat
    products will be processed at this site. As a result, the loan will
    increase opportunities, help fill vacant space, and create up to 150
    new jobs in an area suffering from population decline.

                 RENEWABLE ENERGY GRANTS/LOAN GUARANTEE PROGRAM

        The Renewable Energy Systems and Energy Efficiency Improvements
    Program were authorized by the Farm Security and Rural Investment Act
    of 2002. The program authorizes loans, loan guarantees, and grants to
    farmers, ranchers, and rural small businesses to (1) purchase renewable
    energy systems, and (2) make energy efficiency improvements. The fiscal
    year 2007 budget proposes a $7.92 million grant program and a budget
    authority of $2.243 million to support $34.560 million guaranteed loan
    program. The program supports the President's energy policy goals by
    helping to develop renewable energy supplies that are environmentally
    friendly. In addition, the program contributes to local rural economies
    through the creation of jobs and provides new income sources to rural
    small businesses, farmers, and ranchers. Finally, the program helps to
    reduce the costs of doing business for farmers, ranchers, and rural
    small businesses by encouraging the use of energy efficient physical
    plant systems. We anticipate 37,440 households will be served, 388
    million-kilowatt hours of energy generated while reducing greenhouse
    gasses by 0.1 million metric tons. These loans and grants will reduce
    oil imports by 73 million barrels in the year funded.
        Reducing the costs of operating a business is significant in terms
    of job retention. In June, 2005, an energy efficiency improvement grant
    of $98,873 was awarded to the New Holland Brewing Company, a Limited
    Liability Corporation in Holland, Michigan. Using the grant, as well as
    leveraged funds of almost $400,000, the company installed a low
    pressure boiling storage system and a new lighting fixture with motion
    sensors. Thus, the lights are only on when a person is present to use
    them. It is estimated that the energy efficiency improvements are
    saving the business between 40 percent and 50 percent of their normal
    energy costs.

                    BIOMASS RESEARCH AND DEVELOPMENT GRANTS

        The Biomass Research and Development Grant program, authorized
    under section 9008 of the 2002 Farm Bill, is jointly administered by
    USDA and the Department of Energy. During fiscal year 2006, Rural
    Development will assume USDA's part of the administration of this
    program from the Natural Resources Conservation Service. The fiscal
    year 2007 budget includes funding to provide up to $12 million in
    grants to organizations involved in researching biomass energy
    alternatives and developing bio-based energy products.
        Mr. Chairman, and members of the Subcommittee, this concludes my
    testimony for the Rural Development fiscal year 2007 budget for rural
    business-cooperative programs. I look forward to working with you and
    other Committee members to administer our programs. I will be happy to
    answer any questions the Committee might have.
                                     ______

     Prepared Statement of Russell T. Davis, Administrator, Rural Housing
                                    Service

        Mr. Chairman and members of the Subcommittee, thank you for the
    opportunity to present the fiscal year 2007 President's Budget for the
    USDA Rural Development rural housing and community facilities programs.
        As an integral part of Rural Development, the rural housing
    programs assist rural communities with a wide array of single and
    multi-family housing options to residents of rural communities. We also
    help to fund medical facilities, fire and police stations, childcare
    centers, and other essential community facilities.
        The proposed budget for rural housing and community facilities
    programs in fiscal year 2007 supports a program level of approximately
    $6.27 billion in loans, loan guarantees, grants, and technical
    assistance. It also maintains the Administration's strong commitment to
    economic growth, opportunity, and homeownership for rural Americans. We
    believe that our efforts, combined with the best of both the non-profit
    and private sectors, will ensure that this budget makes a tremendous
    difference in rural communities. The fiscal year 2007 Budget also
    includes a major initiative to revitalize the rural rental housing
    programs.
        Let me share with you how we plan to continue improving the lives
    of rural residents under the President's fiscal year 2007 Budget
    proposal for our rural housing programs.

                               PROGRAM HIGHLIGHTS

        I am pleased to provide you with an update on several highlights
    from our major programs, as well as key initiatives being undertaken.
        In fiscal year 2005, we were instrumental in the Federal response
    efforts to hurricanes Katrina and Rita. Immediately following the
    hurricanes we had our people who were already living in the gulf States
    coordinating relief efforts and assisting evacuees with their housing
    needs. Our Multi-Family Housing program was able to place about 10,000
    individuals or nearly 4,000 hurricane evacuee families nationwide and
    was able to offer approximately $17 million in emergency Rental
    Assistance. In our Single Family Housing program, we provided immediate
    housing payment moratoriums for over 18,000 of our affected borrowers,
    suspended foreclosure actions, and opened up our single family housing
    inventory properties nationwide in order to place some evacuees. We are
    continuing to provide relief and assistance through aggressive loan
    servicing, and new loans and grants in the affected areas.
        In December 2005, the Department of Defense Appropriations Act for
    2006 provided some relief for areas affected by the hurricanes of 2005.
    The legislation provides approximately $175.593 million in program
    level for section 502 direct single family loans, $1.293 billion in
    program level for section 502 guaranteed single family loans, $34.188
    million in program level for section 504 home repair loans, and $20
    million for section 504 home repair grants. In addition to funding,
    Congress gave Rural Development flexibility within their current
    statutes and regulations to meet the needs of those affected by the
    hurricanes.
        We will soon be announcing details for the rural housing voucher
    demonstration program and expanded revitalization demonstration program
    that were authorized in the 2006 Appropriations Act. We expect to have
    these programs fully underway within the next few months.

                         MULTI-FAMILY HOUSING PROGRAMS

        The Multi-Family Housing (MFH) budget preserves Rural Development's
    commitment to maintaining the affordable housing for the many rural
    Americans who rent their homes. Our existing portfolio provides decent,
    safe, sanitary, and affordable residences for about 470,000 tenant
    households.
        The total program level request is $825.4 million. Four hundred and
    $86 million will be used for rental assistance (RA) for contract
    renewals, farm labor housing, and preservation. These funds will renew
    more than 46,000 2-year RA contracts.
        The fiscal year 2007 budget also requests funds for a program level
    of $41.6 million in loans and $13.9 million in grants for the Section
    514/516 Farm Labor Housing program, and program level of $1.5 million
    in loans for credit sales, and $9.9 million for housing preservation
    grants.
    Multi-Family Housing Revitalization
        The fiscal year 2007 budget extends the Administration's proposal
    to revitalize USDA's multi-family housing projects by providing $74.2
    million for rural housing vouchers for tenants of projects that have
    withdrawn from the program. Upon enactment of legislation the
    Administration has already submitted to Congress, these funds could
    also be used to provide incentives for project sponsors to stay in the
    program and make essential repairs and rehabilitations.
        We anticipate our revitalization efforts will span the next several
    years and have initiated a demonstration program using existing
    authority during fiscal year 2005 to test the viability of the
    revitalization concepts. The demonstration validated some of the basic
    revitalization concepts and helped us identify an efficient process for
    implementing the fiscal year 2006 demonstration program and preparing
    for the full scale implementation of the revitalization initiative. The
    2005 demonstration effort will revitalize 22 rental properties through
    12 transactions in the States of Missouri, Wisconsin, Louisiana,
    Arkansas, and Georgia. Through these efforts, 559 tenant families will
    continue to live in affordable rental housing. Eight of the
    transactions have closed and we will complete the remaining shortly.
    Section 538 Guaranteed Rural Rental Housing Program
        The fiscal year 2007 budget request will fund $198 million in
    section 538 guaranteed loans, funds that may be used for new
    construction and repairing 515 properties. The section 538 guaranteed
    program continues to experience ever-increasing demand and brisk
    growth, and is rapidly becoming recognized within the multi-family
    housing finance, development, and construction industry as a viable
    conduit to facilitate the financing of housing projects.
        In fiscal year 2005, we distributed more than $97 million in
    guarantees to fund housing projects that attracted over $338 million in
    other sources of funds. The risk exposure to the government continues
    to be very low, as loan guarantees to total development costs are well
    under 30 percent. We also have a delinquency rate of zero. Over 90
    percent of the applications were awarded Low-Income Housing Tax Credits
    from the various State governments where the projects were located.
    This type of leveraging helps ensure that properties are affordable for
    low-income families.
        Since inception of the program, the section 538 guaranteed program
    has closed approximately 100 guarantees totaling over $185 million.
    These closed guarantees will provide over 4,500 rural rental units at
    an average rent per unit of approximately $500 per month. In addition,
    the program has more than 100 applications in the works.
        The rural housing program recently published a final rule on
    January 19, 2005, to address program concerns from our secondary market
    partners and to make the program easier to use and understand. The
    fiscal year 2007 proposed budget of $198 million will enable Rural
    Development to fund a significant number of additional guaranteed loan
    requests.

                         SINGLE FAMILY HOUSING PROGRAMS

        The Single Family Housing (SFH) programs provide several
    opportunities for rural Americans with very low- to moderate-incomes to
    purchase homes. Of the $4.80 billion in program level requested for the
    SFH programs in fiscal year 2007, $3.56 billion will be available as
    loan guarantees of private sector loans, including about $99 million
    for refinancing more affordable loans for rural families. Also, with
    $1.237 billion available for direct loans, an increase of 10 percent
    over the 2006 enacted level, our commitment to serving those most in
    need in rural areas remains strong. This level of funding will provide
    homeownership opportunities for approximately 40,760 rural families.
        Effective outreach and a quality guarantee product, coupled with
    low interest rates, have increased demand for the section 502
    guaranteed program. Currently, approximately 2,000 lenders participate
    in the guaranteed SFH program. The competitive low-interest rate
    environment has enabled the rural housing program to serve low-income
    families, who would typically receive a section 502 direct loan, with a
    guaranteed loan instead. To help decrease the Federal cost of this
    program, we are requesting the authority to charge up to a 3 percent
    guarantee fee for purchase loans. Without the proposed fee change the
    budget authority requested will support only $601 million in loans
    compared to $3.56 billion available if the 3 percent fee were in place.
    In addition, we are ensuring that this program is not redundant with
    other Federal guarantee housing loan programs by requiring that the
    lender certify that the borrower does not qualify for another guarantee
    that the lender offers and that they would not issue the loan without
    the guarantee.
    Section 523 Mutual and Self-Help Housing
        The President's fiscal year 2007 Budget requests $37.6 million for
    the mutual and self-help housing technical assistance program, an
    increase of 12 percent over fiscal year 2006 levels.
        The fiscal year 2005 ended with over $42 million awarded for
    contracts and 2-year grants. There were 39 ``pre-development'' grants
    awarded in fiscal year 2005, including many first-time sponsors,
    several faith-based groups, and groups in States with no self-help
    housing programs. Pre-development funds may be used for market
    analysis, determining feasibility of potential sites and applicants,
    and as seed money to develop a full-fledged application. Groups in the
    pre-development phase typically need 6 to 12 months before they are
    ready to apply for full funding.
        The fiscal year 2007 proposed budget also includes approximately
    $36.4 million in program level for home repair loan funds and $29.7
    million for grants to assist elderly homeowners. It also includes
    approximately $5 million in loan level for each of two site loan
    programs, $10 million in loan level for sales of acquired properties,
    and approximately $990 thousand for supervisory and technical
    assistance grants.

                               COMMUNITY PROGRAMS

        The Community Facilities budget request will provide essential
    community facilities, such as educational facilities, fire, rescue, and
    public safety facilities, health care facilities, and child care
    centers in rural areas. The total requested program level of $521.7
    million includes $297 million for direct loans, $207.9 million for loan
    guarantees, and $16.8 million for grants.
        In partnership with local governments, State governments, and
    Federally-recognized Indian Tribes, the fiscal year 2007 budget will
    support more than 300 new or improved public safety facilities, 125 new
    and improved health care facilities, and approximately 90 new and
    improved educational facilities to serve rural Americans.
        In fiscal year 2005, we invested over $163 million in 155
    educational and cultural facilities serving a population totaling over
    1.8 million rural residents, over $136 million in 523 public safety
    facilities serving a population totaling over 2.4 million rural
    residents, and over $426 million in 166 health care facilities serving
    a population totaling over 2 million rural residents. Funding for these
    types of facilities totaled $725 million. The remaining balance was
    used for other essential community facilities such as: food banks,
    community centers, early storm warning systems, child care centers, and
    homeless shelters.

                                   CONCLUSION

        Through our budget, and the continued commitment of President Bush,
    rural Americans will have the tools and opportunities they can put to
    work to improve both their lives and their communities. We recognize
    that we cannot do this alone and will continue to identify and work
    with partners to improve the lives of rural residents.
        I would like to thank each of you for your support of the rural
    housing and community facility programs' efforts. I look forward to
    working with you in moving the fiscal year 2007 Budget forward, and
    welcome your guidance as we continue our work together.
                                     ______

     Prepared Statement of James M. Andrew, Administrator, Rural Utilities
                                    Service

        Mr. Chairman, members of the Subcommittee, thank you for the
    opportunity to present the President's fiscal year 2007 budget for USDA
    Rural Development utilities programs. This is my first appearance
    before you and I appreciate the opportunity. We value the work and
    support you and other members of this subcommittee have provided us so
    that together we can provide a strong, dependable infrastructure in the
    rural United States.
        A strong rural America is important for a strong Nation. We
    consider the rural utilities programs an important part of the USDA
    Rural Development mission. Safe, affordable, modern utility
    infrastructure is an investment in economic competitiveness and serves
    as a fundamental building block of economic development. Changes in the
    landscape of rural America, along with developments in technology and
    changes in market structure, combined with an ageing utility
    infrastructure, are impacting the electric, telecommunications and
    water sectors. Without the help of USDA Rural Development's utilities
    programs, rural citizens face monumental challenges in participating in
    today's economy, as well as maintaining and improving their quality of
    life.
        The $43.5 billion rural utilities loan portfolio includes
    investments in 8,000 small community and rural water and waste disposal
    systems, as well as approximately 2,000 electric and telecommunications
    systems serving rural America. This local/Federal partnership is an
    ongoing success story. Eighty percent of the Nation's landmass
    continues to be rural, encompassing 25 percent of the population. For
    an economy to prosper, we need infrastructure investment to spur
    economic growth, create jobs and improve the quality of life in rural
    America.

                                ELECTRIC PROGRAM

        The Electric Program budget proposes a program level of $3.8
    billion supported by $2.7 million in budget authority. This includes a
    hardship program level of $99 million and a $39.6 million program level
    for municipal rate loans. The Direct Treasury rate loan program level
    is proposed to be $700 million. There is also $3 billion for the
    guarantee of Federal Financing Bank (FFB) direct loans. The FFB loans
    are made at the cost of money to the Federal Government plus an one-
    eight of a percent. Both the President and Congress have provided very
    generous loan levels over the past four years and we have been able to
    eliminate the backlog in loan applications. I believe the President's
    budget request will meet the demand during the 2007 fiscal year.
        To meet the demands of economic growth across our Nation, the need
    for transmission lines to deliver electric power where it is needed is
    placing new demands on cooperatives providing transmission service.
    Last year we predicted that because in the last twenty years no new
    base load capacity had been built, there would be an increasing demand
    for power generation and transmission. We are now seeing the first of
    many applications for those base load requirements. However, past
    history has shown that base load is riskier than other projects. We
    intend to develop a separate subsidy rate that reflects the increased
    risk and incorporates a fee to offset the cost. Legislation will be
    necessary to allow for a fee. Within the $700 million requested for
    direct loans, we plan to make $200 million available for renewable
    energy projects.

                           TELECOMMUNICATIONS PROGRAM

        The area of rural telecommunications is the most rapidly changing
    aspect of rural utilities infrastructure. Job growth, economic
    development, and the quality of life in rural America are directly tied
    to access to today's high speed telecommunications. We administer the
    Broadband Loan Program, the traditional Telecommunications
    Infrastructure Loan Program, as well as Distance Learning and
    Telemedicine Loan and Grant Programs.
        The fiscal year 2007 Broadband Loan Program budget proposes a
    program level of $356.4 million driven by $10.8 million in budget
    authority. This replaces the mandatory funding provided by the Farm
    Bill for the 2007 fiscal year. Moreover, as a result of decreased
    subsidies, the President's budget will deliver nearly the same program
    level as was anticipated by the Farm Bill. When the 2002 Farm Bill was
    enacted, the mandatory funding anticipated a program level of
    approximately $400 million a year. The proposed budget is reflective of
    the intent of the Farm Bill and as it has turned out, more in concert
    with the demand in qualified loan applications.
        Included in the broadband loans budget proposal is $29.7 million in
    direct 4 percent loans requiring $3 million in budget authority; $297
    million in direct Treasury Rate loans is requiring $6.4 million in
    budget authority, and $29.7 million in guaranteed loans requiring $1.4
    million in budget authority.
        We are reviewing every aspect of the program with a view toward
    making needed improvements. We must continue to balance fiduciary
    responsibility with mission delivery. Making bad loans helps no one;
    making successful loans helps everyone.
        In the regular Telecommunications Program, the 2007 budget proposes
    a program level of $689 million. Included is $143.5 million in direct 5
    percent loans, $246.7 million in direct Treasury Rate loans, and $299
    million in Federal Financing Bank (FFB) direct loans guaranteed by USDA
    Rural Development. All of this is driven by $605,000 in budget
    authority.
        I am happy to report that the dissolution of the Rural Telephone
    Bank is progressing on schedule. No funds are requested for that
    program.
        Distance learning and telemedicine technologies are having a
    profound impact on the lives of rural residents. This program helps
    rural schools and learning centers to take advantage of the information
    age and enables rural hospitals and health care centers to have access
    to quality medical services only found in large hospitals. The Distance
    Learning and Telemedicine (DLT) program pulls together the best of
    Federal assistance and local leadership. The DLT grants are budgeted at
    $24.75 million. The President's proposal does not request loan program
    funding simply because the demand for loans to schools and hospitals
    has never developed and funding is available from previous years to
    support new loans in fiscal year 2007.

                        WATER AND ENVIRONMENTAL PROGRAMS

        The Water and Environmental Programs provide the most basic of
    infrastructure needs for rural citizens: clean, safe, affordable
    drinking water and ecologically sound wastewater disposal. No element
    is more vital to human life and dignity as clean, safe water. Rural
    communities are challenged to provide this vital service while facing
    increasing regulatory requirements and persistent drought conditions
    across a large area of the country.
        The budget request seeks a program level of $1.4 billion in loans
    and grants, costing $514 million in budget authority. The total is
    divided with $990 million in direct loans and $75 million in loan
    guarantees for the Water and Waste Disposal programs. The direct loan
    program requires $164.7 million in budget authority. The budget request
    also includes $345.9 million in Water and Waste Disposal Grants and
    $3.4 million in Solid Waste Management Grants.

                                    SUMMARY

         Rural Utilities infrastructure programs are interwoven in the
    fabric of USDA Rural Development programs. To provide safe, clean,
    water; modern communications; and reliable, affordable electric power
    means businesses can develop, homes can have light and heat, and
    markets can be opened to the rest of the world. We will play our part
    in building communities from the ground up.
        Thank you for the opportunity to present the President's fiscal
    year 2007 Budget for USDA Rural Development utilities programs.
                                     ______

      Prepared Statement of Dr. Joseph J. Jen, Under Secretary, Research,
                            Education, and Economics

        Mr. Chairman, members of the Committee, it is my pleasure to appear
    before you to discuss the fiscal year 2007 budgets for the Research,
    Education, and Economics (REE) mission area agencies of the USDA. I am
    accompanied by Dr. Merle Pierson, Deputy Under Secretary of REE and the
    Administrators of the four agencies: Dr. Edward Knipling, Administrator
    of the Agricultural Research Service (ARS); Dr. Colien Hefferan,
    Administrator of the Cooperative State Research, Education, and
    Extension Service (CSREES); Dr. Susan Offutt, Administrator of the
    Economic Research Service (ERS); and Mr. Ronald Bosecker, Administrator
    of the National Agricultural Statistics Service (NASS). Also present is
    Dr. Scott Steele, Director of the Office of Budget and Program Analysis
    of the Department. Each Administrator has submitted written testimony
    for the record.
        The President is committed to reducing the budget deficit by half,
    and USDA as well as many departments across the Federal Government have
    been called on to help make this a reality. The President's fiscal year
    2007 budget proposes $2.283 billion for the four REE agencies to
    conduct research, education, economics and statistical programs. This
    represents a slight decrease of $39 million from the level in the
    President's fiscal year 2006 budget and a $401 million decrease from
    the total REE appropriation in fiscal year 2006. Within this decrease,
    the agency budgets have critical increases in high priority areas such
    as food and agricultural defense, nutrition and obesity, genomics, and
    animal and plant diseases.
        Agricultural research is truly the lynchpin of the American food
    and agricultural system. A great deal of the system's success over many
    decades is attributable to the new scientific understandings and
    technology generated by our national food and agricultural research
    system, of which USDA's research agencies are key components. Numerous
    studies have found that the return on investment in agriculture
    research is high. Whether measured in productivity, competitive
    strength in global markets, environmentally sustainable production
    practices, or new science-based food safety technology, research and
    development underpins essentially all advances in the food and
    agriculture sector. It provides a necessary condition for success.
    Natural events, market conditions and resistance to adoption of new
    technologies can be formidable barriers to success. At the same time,
    absent cutting-edge research, the food and agriculture sector runs the
    risk of losing its edge in increasingly competitive global markets. In
    that context, I look forward to your consideration of the many
    important requests for the four REE agencies proposed in the
    President's budget.
        The budget we are discussing today includes what I consider to be
    an innovative and excellent proposal for restructuring the Hatch and
    McIntire-Stennis formula programs. The Administration has been on
    record for some years as believing that competitive programs provide
    the most effective mechanism for allocating research funds to solve
    pressing national problems. Consistent with that proposition, the
    fiscal year 2007 President's budget proposes an innovative approach to
    introducing competition into the Hatch and McIntire-Stennis formula
    programs. Under the proposal, the current Hatch multi-state research
    program will be expanded from 25 percent to approximately 56 percent of
    the total Hatch funding in 5 years. As current multi-state projects are
    completed, an increasing portion of these multi-state funds will be
    competed. A similar proposal is made for the McIntire-Stennis formula
    program, with the introduction of a new nationally-competed multi-state
    program in fiscal year 2007.
        This design of the proposal for the two formula programs is
    responsive to the concerns raised by many stakeholders to last year's
    budget proposal. Among other things, the new proposal sustains matching
    funds and sustains the land grant institutions' Federal funds for
    leveraging non-Federal resources. In addition, it does not reduce
    appropriated funding from the fiscal year 2006 enacted level. The
    Department looks forward to working with the State Experiment Stations
    and forestry colleges in developing an implementation plan for this
    expanded multi-state program.
        Before turning to the individual agency budgets, I would like to
    describe increases in three particularly high priority areas for the
    Department: food and agricultural defense, nutrition and obesity, and
    genomics.
        Food and Agricultural Defense Initiative.--Now in its 5 year, the
    Food and Agriculture Defense Initiative is designed to strengthen the
    Federal Government's capacity to defend the Nation's food and
    agricultural systems against terrorist attacks, major disasters and
    other emergencies. The fiscal year 2007 budget provides increased
    program funding of $42.3 million for ARS and $7.1 million for CSREES to
    expand their participation in this initiative.
        Under the Food Defense component of the initiative, ARS increases
    will allow the agency to expand its food safety research, particularly
    focused on developing technology that rapidly identifies suspected food
    pathogens and toxins. The budget also proposes an increase of $4.2
    million for ARS' National Plant Disease Recovery System which is
    designed to ensure that disease resistant seed varieties are
    continually developed and made available to producers in the event of a
    natural or intentional catastrophic disease or pest outbreak. An
    increase of $24.6 million will support strengthening ARS' ongoing
    research on rapid response systems to bioterror agents, improved
    vaccines, and identification of genes affecting disease resistance.
        The budget provides CSREES $12 million, an increase of $2.1 million
    from fiscal year 2006, to maintain and enhance the Regional Diagnostic
    Network of public agricultural institutions that serves as a component
    of APHIS diagnostic laboratories for both animals and plants. The
    initiative also includes $5 million for a competitive Higher Education
    Agrosecurity Program that promotes the training of food system defense
    professionals critically needed in securing our Nation's agriculture
    and food supply.
        Nutrition and Obesity.--Concern continues regarding the epidemic of
    obesity in the Nation. Particularly distressing is the incidence of
    obesity in children, estimated to be approximately 16 percent for
    children and adolescents ages 6 to 19. Recent studies show that Type 2
    diabetes, previously considered an adult disease associated with
    obesity, is increasingly found in children. Future projections of the
    incidence of diabetes, particularly for Hispanic and African-American
    children, are alarming. The causes of obesity are many and complex.
    Levels of physical activity, reliance on convenience food, large food
    portions, and genetic make-up all play a role. Whatever the set of
    causes and their interplay, collectively they portend greater problems
    for individuals, families, communities and the country, with the
    potential for significant productivity losses to the economy and
    increases in health-related expenses. Funding for research now could
    significantly contribute to the reduction of these negative impacts in
    the future.
        As the Federal Government department most closely associated with
    food policy and programs, USDA has an important role in addressing the
    obesity challenge and more broadly promoting healthy nutrition and
    weight. Its food assistance, nutrition education, and nutrition
    research programs are all addressing this major national public health
    problem.
        Under the President's HealthierUS Initiative, the fiscal year 2007
    budget proposes increases and program redirections for ARS, CSREES, and
    ERS that will strengthen the Department's capacity to address obesity
    and associated issues. The increases focus on gaining a better
    understanding of food consumption patterns and the factors influencing
    them, and on developing effective interventions to promote healthy
    dietary choices.
        ARS increases and redirection of funds total $11.3 million, of
    which $4.7 million will support a longitudinal study to assess the
    long-term benefits and approaches to controlling weight. We know that
    it is easy for people to control weight for a short period, but very
    difficult to do so for extended periods of time. This initiative will
    be the only one of its type to address the efficacy of the healthful
    eating and physical activity patterns set forth in the Dietary
    Guidelines in preventing obesity in the U.S. population, with
    particular attention focused on children. One aspect of the obesity
    conundrum is that the factors affecting dietary choices and the effects
    of those choices are not only complex, but vary with subpopulations.
    Redirected funds in ARS will be used to gain a better understanding of
    dietary patterns that contribute to obesity in low socioeconomic and
    minority populations. Other redirected funds will support research to
    develop effective, and likely distinct, dietary strategies for
    children, middle-aged adults and Native Americans.
        An ERS increase of $1.6 million under the agency's new consumer
    data and information system will be used to obtain food-away-from-home
    data that is important in supporting the development and targeting of
    USDA policies and programs to help improve the diets and nutrition of
    all consumers, particularly low-income consumers.
        Genomics.--The future of agriculture rests in genomics and
    associated molecular biology. Moreover, in many ways that future is
    here. Genomics and molecular biology are now effectively being used in
    many types of food and agricultural research focused on a wide range of
    research objectives. Over the last several years, ARS and CSREES have
    increased their investment in genomics and molecular biology, helping
    to lay the foundation for their use today in applied research. Past
    increases have supported sequencing the genome of important
    agricultural plants and animals and learning about the functions of
    different genes and how they can be turned on and off. ARS and CSREES
    supported researchers are now aggressively using the technology
    associated with genetic and molecular biology toward such goals as
    developing rapid detection tests, isolating disease resistant plant
    varieties, and enriching the nutrients in food.
        Both the ARS and CSREES budgets continue a trend of requested
    increases in genomics. The President's fiscal year 2007 budget provides
    a total of almost $17.7 million for the two agencies. The ARS budget
    provides an additional $8.7 million to identify genes that influence
    animal and plant growth and quality, disease resistance, and other
    economically important traits. The proposed increases in the National
    Research Initiative (NRI) of CSREES would support new or more research
    in domestic animal genomics ($5 million), genomics to improve
    production of biofuels and biobased products ($1 million) and molecular
    biology to improve the water use-efficiency of plants ($3 million).
        An important part of the ARS and CSREES genomics programs is active
    partnering with other science institutions and governments. For
    example, research on plant genomics, in particular sequencing the
    soybean genome, is being supported through a CSREES partnership with
    the U.S. Department of Energy. ARS and CSREES are both coordinating
    their genomics research with NIH's National Human Genome Research
    Institute, and the National Science Foundation.
        Classical Chinese Garden.--Under the ARS Building and Facilities
    program, the President's budget proposes $8.4 million towards a
    Classical Chinese Garden at the U.S. National Arboretum. The Garden is
    a gift from the Chinese government and people to the U.S. Government
    and people. Once completed, the Garden will be the finest example of a
    Classical Chinese Garden outside of China. The Garden will also enrich
    the Arboretum's research program, through increasing the availability
    of vast numbers of plants from China that can be used to develop new
    and improved ornamental and floral plants in the United States. The
    proposed $8.4 million will be used for design validation,
    infrastructure, and site preparation only. An estimated equivalent of
    over $50 million will be contributed by the China's State Forestry
    Administration towards the Garden. The Chinese government is providing
    the garden structures, rockeries, furniture, art objects, and unique
    plants and is reassembling all the structures and placing them on the
    infrastructure foundation provided by the United States.

                        REE FISCAL YEAR 2007 INITIATIVES

        I would now like to turn briefly to the budgets of the four REE
    agencies.
        Agricultural Research Service.--The Agricultural Research Service
    fiscal year 2007 budget requests slightly over $1 billion in ongoing
    research and information programs and facilities. Within the total, the
    budget proposes increases of $57.7 million dedicated to high priority
    programs addressing issues of national and regional importance, several
    of which were previously described. The budget also proposes $49.1
    million in program redirections of ongoing base resources to enhance
    priority research objectives. To offset the increases, terminations of
    approximately $195.7 million in current programs are proposed. As the
    principal intramural biological and physical science research agency in
    the Department, ARS continues to play a critical role for the
    Department and the larger agricultural community in conducting both
    basic and mission-oriented research. Results from ARS' basic research
    provide the foundation for applied research carried out by ARS,
    academic institutions and private industry. ARS' applied research and
    technology development address the research needs of other USDA
    agencies, as well as of those engaged in the food and agriculture
    sector.
        In addition to the increases previously described, the ARS budget
    proposes increases to strengthen its research program addressing
    several diseases, pests, and pathogens threatening crop and animal
    production and marketing and in some cases, human health. Bovine
    Spongiform Encephalopathy (BSE) continues to be a challenge for the
    livestock sector, particularly as it relates to foreign markets. An
    increase of $9.8 million will support ARS scientists in the development
    of countermeasures to detect, control, and eradicate future BSE and
    Chronic Wasting Disease. Rust diseases, such as Asian soybean rust,
    pose severe problems throughout the United States. A $3.9 million
    increase will focus on controlling or minimizing the spread of rust
    diseases of grains and soybeans. Throughout the country, different
    varieties of invasive weeds, insects, and pathogens cause tens of
    billions of dollars of agricultural losses each year. Research on these
    wide-ranging threats such as the Asian Longhorned Beetle and Salt Cedar
    will be enhanced with a proposed $5.4 million increase.
        Development of biobased fuels continues to be a high Administration
    priority. Research is critical to both improve the agricultural biomass
    feedstock for the production of energy and to develop the technologies
    to produce biofuels from the feedstock. An increase of $3.6 million
    will enhance ARS on both these research objectives, as well as
    development of other biobased products. Other priority programs to be
    strengthened through funding increases or redirections include climate
    change and associated carbon sequestration, water quality and
    technologies to minimize vulnerability to drought, and air quality in
    the context of animal feeding.
        The Abraham Lincoln National Agricultural Library (NAL), one of
    four national libraries, serves as a valuable national resource for
    information on food and agricultural sciences. Full integration of many
    kinds of digital information and fast, seamless navigation among them
    are essential for NAL to meet the increasingly complex customer
    demands. Proposed funding of $4 million will be used to sustain the
    national collection of agricultural information warranted by a national
    library. The funds will also be used to continue developing information
    technology to manage and deliver information efficiently.
        Cooperative State Research, Education, and Extension Service--The
    President's fiscal year 2007 budget provides the Cooperative State
    Research, Education, and Extension Service just over $1 billion, which
    is approximately the same as the President's fiscal year 2006 budget
    and $161.3 million less than fiscal year 2006. In providing critical
    funding for the research, education, and extension programs of the Land
    Grant system and other universities and organizations across the
    country, CSREES continues to play a central role in the generation of
    new knowledge and technology, and the transfer of that knowledge and
    technology to stakeholders.
        The restructuring of the Hatch and McIntire-Stennis formula
    programs at the same overall funding levels as fiscal year 2006 is a
    critical part of CSREES' budget proposal. The budget also includes
    important increases to strengthen high priority programs.
        The NRI, the agency's flagship competitive research program,
    continues to be a very effective avenue for supporting cutting-edge
    research conducted by the finest scientists across the country. The
    fiscal year 2007 budget proposes a $66.3 million increase in the NRI.
    In addition to the increases in genomic research previously described,
    the budget provides for increases in animal production, emerging issues
    in food and agricultural biosecurity, and invasive species. A $42.3
    million increase in the NRI on-going programs is being shifted from the
    Integrated Activities account to the NRI to achieve greater efficiency
    in program administration. The focus of the programs, including water
    quality and food safety, will stay the same.
        The proposed CSREES budget also includes an increase of about $1
    million to a total of $6.9 million to fund outreach and technical
    assistance for socially disadvantaged farmers and ranchers.
        Economic Research Service.--The Economic Research Service is
    provided $82.5 million in the President's fiscal year 2007 budget. As
    the Department's principal intramural economics and social science
    research agency, ERS conducts research and analysis on the efficiency,
    efficacy, and equity aspects of issues related to agriculture, food
    safety, human nutrition, the environment, and rural development. In
    addition to the increases described above related to obesity and
    nutrition, the budget includes $5 million to fund a new Agricultural
    and Rural Development Information System, a comprehensive data
    collection and research program to monitor the economic health and
    well-being of farm and non-farm households in rural areas. The increase
    will support collection of multiple-year, longitudinal information on
    rural household in areas with specific challenges, such as persistent
    poverty and population loss, and adds a longitudinal component to
    USDA's Agricultural Resource Management Survey (ARMS) to collect
    information on farms in the same areas. In particular, the information
    generated will support programs administered by the Department's Rural
    Development mission area.
        National Agricultural Statistics Service.--The National
    Agricultural Statistics Service budget requests $152.5 million, an
    increase of $13.3 million over the fiscal year 2006 Act. NASS'
    comprehensive, reliable, and timely data are critical for informing
    policy decisions to keep agricultural markets stable, and to ensure a
    level playing field for all users of agricultural statistics. The
    President's budget provides increases in the agency's agricultural
    estimates program and the Census of Agriculture.
        An increase of $3.9 million is directed at the continuing
    restoration and modernization of the agency's core survey and
    estimation program begun in fiscal year 2004. Producers rely on the
    NASS surveys as being comprehensive and accurate in making their
    decisions. Funding received in the fiscal year 2004 through fiscal year
    2006 appropriations has been used to successfully improve the precision
    level for commodity surveys conducted by NASS for State, regional, and
    national estimates through sample size increases and better survey
    response. Funding requested in fiscal year 2007 will promote data
    quality by encouraging voluntary response through increased respondent
    awareness of market and policy reliance upon USDA-NASS statistical
    measures and by improving the data collection capabilities of local
    interviewers throughout the Nation. The budget also provides an
    increase of $7.3 million for the Census of Agriculture based on its 5
    year cycle. The increase supports the normal increase in the level of
    activity as the next Census year, 2007, approaches. The 2007 data will
    be collected in 2008. For the first time, respondents will be able to
    complete the survey over the Internet.

                                    SUMMARY

        In summary, the REE agencies' budgets we are discussing today
    present a balanced research, education, and economics portfolio, with
    investments in such high priority issues as animal disease, nutrition
    and obesity, food safety and farm household well-being. Such a budget
    is particularly notable at a time of severe budget constraints.
        Reflecting back on the importance of research to the long-term
    success and competitiveness U.S. agriculture, it is critical that a
    strong, dynamic, and focused food and agricultural research portfolio
    be sustained. The proposals for REE in the President's budget will do
    just that. This concludes my statement. Thank you for your attention. I
    look forward to answering your questions.
                                     ______

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

        Mr. Chairman, and members of the Subcommittee, I appreciate this
    opportunity to present the Agricultural Research Service's (ARS) budget
    recommendations for fiscal year 2007. The President's fiscal year 2007
    budget request for ARS' research programs is a little over $1 billion,
    a net decrease of $123 million or about 11 percent from the fiscal year
    2006 funding level. There are several components to ARS' fiscal year
    2007 budget request: (1) $106.8 million for new and expanded priority
    research initiatives ($57.7 million represents a net increase in budget
    authority and $49.1 million is from reprogramming); (2) $15.4 million
    for pay costs; (3) $3.1 million for reprogramming recommendations to
    transfer resources from existing locations in support of priority
    research needs; and (4) $195.7 million for proposed program and project
    terminations.
        Of the proposed new and enhanced research increases, $48.2 million
    is in support of the Federal Government's initiative to strengthen the
    Nation's homeland security. Homeland security research is in the areas
    of food safety, emerging and exotic diseases of animals and crops, and
    for the National Plant Disease Recovery System. ARS is also proposing
    new and expanded initiatives for research on Bovine Spongiform
    Encephalopathy (BSE), invasive species of animals and plants, nutrition
    and obesity, genetics and genomics, biobased products and bioenergy,
    air and water quality, and climate change. Increases for the National
    Agricultural Library and information technology are also requested.
        The budget proposes the termination of a number of research
    laboratories and projects and associated resources appropriated in
    recent years totaling $195.7 million. The savings to be achieved
    through the proposed terminations will finance the higher priority
    research initiatives proposed in ARS' budget, as well as help reduce
    overall Federal spending.
        The ARS budget also includes $8.4 million under its Buildings and
    Facilities account for the construction of infrastructure for a
    Classical Chinese Garden at the U.S. National Arboretum in Washington,
    DC.

                  PROPOSED PROGRAM INCREASES AND REDIRECTIONS

        These high priority increases respond to urgent, nationwide issues
    in critical areas, such as homeland security, emerging diseases, food
    safety, obesity, climate change, invasive species, and genomics and
    genetics, that affect the entire country.
      --Food Safety--$13.8 Million.--Ensuring the safety of the Nation's
            food supply is essential and vitally important to the Nation's
            homeland security. Bioterrorism against our food supply would
            affect the health and safety of consumers and their confidence
            in the safety of the foods they consume. It would also have
            far-reaching impacts on the country's economy, since U.S.
            agriculture employs nearly one-quarter of the Nation's
            workforce and annually contributes over one trillion dollars to
            the gross domestic product. ARS research will focus on
            assessing the vulnerabilities of the food supply, strengthening
            and expanding laboratory preparedness, and developing
            technologies which rapidly identify suspected food pathogens
            and toxins. ARS will work in these areas of prevention,
            detection, and response with the Food Safety and Inspection
            Service and other USDA agencies, through programs, such as the
            Collaboration for Animal Health and Food Safety Epidemiology.
      --Human Nutrition/Obesity Prevention Research--$11.3 Million.--Two of
            every three American adults and an increasing number of
            children are overweight or obese, making obesity one of this
            country's fastest growing public health problems. It
            contributes to heart disease, cancer, diabetes, and other
            illnesses resulting in hundreds of billions of dollars in
            health care costs each year. Understanding food consumption
            trends and the factors that influence dietary choices is
            critical for developing strategies for preventing and
            mitigating obesity. ARS will use the proposed increase to
            conduct nutrition surveys and research to prevent childhood and
            adult obesity, and to develop strategies which encourage
            healthy food choices.
      --Avian Influenza (AI) and Foot-and-Mouth Disease (FMD)--$6.1
            Million.--Animal health officials define a foreign animal
            disease as a transmissible livestock or poultry disease that
            has a potentially significant health or economic impact. AI and
            FMD are two of the most serious foreign animal diseases which
            presently threaten the United States. ARS will use the proposed
            increase to: develop diagnostic detection tools that can be
            more widely used in field situations, increase our
            understanding of disease epidemiology (i.e., spread of virus,
            routes of transmission, persistence of infection), and deploy
            countermeasures in the form of vaccines and antivirals.
      --Bovine Spongiform Encephalopathy (BSE) and Chronic Wasting Disease
            (CWD)--$9.8 Million.--BSE is a progressive, degenerative, fatal
            disease affecting the central nervous system of adult cattle.
            It is believed that eating contaminated beef products from BSE-
            affected cattle causes a variant form of Creutzfeldt-Jacob
            Disease in humans. The first case of BSE was identified in the
            United States on December 23, 2003. CWD is a disease which
            affects deer and elk. Unlike BSE, CWD does not appear to be
            transmissible to humans, but it is worrisome because it could
            jump species barriers and become more virulent or infectious.
            The proposed increase will enable ARS scientists to develop
            countermeasures to detect, control, and eradicate future BSE
            and CWD outbreaks.
      --Soybean and Wheat Stem Rust--$3.9 Million.--Rust diseases pose
            severe problems in crops throughout the United States. Since
            2000, Stripe Rust has caused hundreds of millions of dollars in
            losses to wheat growers. Asian Soybean Rust (SBR) is reported
            to cause up to 80 percent yield losses in numerous countries
            around the world. The first incidence of SBR, in nine soybean
            producing States in the United States, was confirmed by the
            Animal and Plant Health Inspection Service (APHIS) in 2004. The
            proposed increase will be used to control or minimize the
            spread of SBR, Stripe Rust, and other rust diseases of grains
            and soybeans.
      --Emerging and Exotic Diseases of Animals and Plants--$15.3
            Million.--The United States is increasingly vulnerable to
            emerging animal and plant diseases which could threaten the
            Nation's homeland security. The threat of new diseases--whether
            they are a result of bioterrorism or of naturally occurring
            epidemics--is an urgent and growing challenge to livestock
            producers. Bovine Viral Diarrhea in cattle, Porcine
            Reproductive Respiratory Syndrome in swine, and Marek's disease
            virus in chickens are examples of these exotic diseases.
            Harmful animal diseases introduced to the United States in
            recent years from foreign countries include Exotic Newcastle
            Disease and Monkeypox. Brucellosis, Leptospiroris, and West
            Nile Virus are still other examples of zoonotic diseases that
            pose a threat not only to animals but to humans as well.
            Similarly, exotic and emerging plant diseases--wheat and barley
            rusts, citrus canker, and corn viruses--present a potential
            threat to the Nation's agriculture industry. With the proposed
            increase, ARS will develop vaccines, intervention strategies,
            and diagnostics for the detection, identification, control, and
            eradication of these animal and plant disease threats.
      --Emergency Research Needs and Research to Assist APHIS--$7.4
            Million.--APHIS has requested help from ARS in controlling
            various animal diseases, such as FMD, Rift Valley Fever, and
            Classical Swine Fever, and plant diseases, such as Citrus
            Canker and Citrus Leprosis Virus. There is also a need for ARS
            to be able to respond to unanticipated special research needs
            and emergencies. Often, funds are not readily available for
            these situations. The proposed increase will provide ARS with
            the flexibility to respond quickly to special needs and
            emergencies as well as support APHIS' efforts to control and
            eradicate pests and diseases.
      --National Plant Disease Recovery System--$4.2 Million.--The
            emergence or spread of certain plant diseases, such as soybean
            rust, citrus variegated chlorosis, or bacterial wilt, could
            seriously harm America's agriculture. Recovery from a
            significant disease outbreak requires a national system to
            manage host/pathogen interactions using cultural, biological,
            and chemical control strategies and deploy resistant plant
            resources. Homeland Security Presidential Directive (HSPD-9)
            has charged ARS with the responsibility for leading this effort
            with the Cooperative State Research, Education and Extension
            Service (CSREES), APHIS, and others. ARS will use the proposed
            increase to minimize the impacts of devastating crop diseases
            by documenting and characterizing plant diseases, developing
            germplasm and plant varieties with improved disease resistant
            characteristics, implementing integrated pest management
            approaches, and transferring genetic resources (i.e., disease
            resistant plant varieties) to its customers.
      --Invasive Species--$5.4 Million.--Invasive weeds, insects,
            pathogens, and other pest species cost the United States tens
            of billions of dollars each year in agricultural losses,
            negatively impacting the environment and biodiversity as well.
            Sudden Oak Death has had negative effects on California's plant
            nurseries. Salt Cedar and Yellow Starthistle (invasive weeds)
            have caused agricultural and environmental damage in several
            western States. Lobate Lac Scale, Asian Longhorned Beetle, and
            Emerald Ash Borer (invasive insects) have caused damage to a
            wide range of plant species. Animals are also at risk. Imported
            Fire Ants, which inhabit over 350 million acres in 12 southern
            States, from Texas to Virginia, damage crops and are a threat
            to livestock, wildlife, and humans. ARS will use the proposed
            increase to target its research on controlling invasive species
            including Imported Fire Ants, Sudden Oak Death, Salt Cedar,
            Yellow Starthistle, Lobate Lac Scale, Asian Longhorned Beetle,
            and Emerald Ash Borer.
      --Applied Genomics--$8.7 Million.--Genomics holds the key to
            maintaining America's agricultural competitiveness in global
            markets. Advances in genomics research can improve the
            production and quality of food products, prevent animal and
            plant diseases, and produce foods which are richer in
            nutrients. To capture the potential of genomics, ARS needs to
            continue its work on characterizing, identifying, and
            manipulating the useful properties of genes and genomes. In
            this regard, ARS will use the proposed increase to identify
            genes that influence animal and plant growth and quality,
            disease resistance, and other economically important traits.
            ARS will continue to coordinate its genomics research with
            National Institutes of Health's National Human Genome Research
            Institute, CSREES, and the National Science Foundation.
      --Genetic Resources--$2.6 Million.--The rate of extinction of lines
            and strains of food animals and plants is accelerating. The
            Nation needs a more comprehensive program to maintain
            threatened germplasm to prevent the loss of genetic diversity.
            An adequate supply of useful genes is essential in the event of
            bioterrorism or other crises (e.g., FMD, Exotic Newcastle
            Disease, etc.). With the proposed increase, ARS will enhance
            its ability to collect, identify, characterize, and incorporate
            plant germplasm into centralized gene banks. The additional
            funding will help sustain ARS' National Plant Germplasm System
            repositories; it will also enable further development of
            cryopreservation technologies for long-term storage of
            important animal germplasm (i.e., of poultry, aquaculture,
            cattle and swine).
      --Biobased Products/Bioenergy Research--$3.6 Million.--The Biomass
            Research and Development Act of 2000 and the Food Security and
            Rural Investment Act of 2002 encourages the development and use
            of biobased products. There is also a need to expand the
            development of bioenergy. ARS will focus its research on: (1)
            improving the quality and quantity of agricultural biomass
            feedstocks for the production of energy and biobased products,
            (2) developing technologies to produce biofuels from
            agricultural commodities and byproducts, and (3) developing
            technologies leading to new value-added products from food
            animal byproducts. Increased development of bioenergy and
            biobased products will expand market opportunities for U.S.
            agriculture, reduce the Nation's dependence on petroleum
            imports from unstable regions, and improve environmental
            quality by reducing air pollution and greenhouse gas emissions.
      --Air/Water Quality and Drought Mitigation--$3.5 Million.--Millions
            of Americans are exposed to air pollution levels that exceed
            the Environmental Protection Agency's air quality standards.
            Agriculture activities, such as animal production operations,
            which produce ammonia, particulate matter, and volatile organic
            compounds, can adversely affect air quality. Another concern is
            the quantity and quality of water available in the United
            States. Drought and its impacts annually cost the Nation $6 to
            $8 billion. ARS will use the proposed increase to develop new
            technologies that reduce gaseous and particulate matter
            emissions from animal feeding operations. It will also provide
            technologies that help ensure adequate water for agriculture
            and improve the health of the Nation's streams, rivers, and
            lakes.
      --Global Climate Change--$3.2 Million.--Climate change encompasses
            global and regional changes in the earth's atmospheric,
            hydrological, and biological systems. Agriculture is vulnerable
            to these environmental changes. The objective of ARS' global
            change research is to develop the information and tools
            necessary for agriculture to mitigate climate change. ARS has
            research programs on carbon cycle/storage, trace gases (i.e.,
            methane and nitrous oxide), agricultural ecosystem impacts, and
            weather/water cycle changes. ARS will use the proposed increase
            to develop climate change mitigation technologies and practices
            for the agricultural sector. Specifically, ARS will: (1)
            conduct interdisciplinary research leading to technologies and
            practices for sustaining or enhancing food and fiber production
            and carbon sequestration by agricultural systems exposed to
            multiple environmental and management conditions, (2) expand
            the existing network of ARS sites conducting measurements of
            greenhouse gas fluxes between the atmosphere and the land, and
            (3) identify ways to decrease methane emissions associated with
            livestock.
      --National Digital Library for Agriculture and Improved Agricultural
            Information Services--$4.0 Million.--In 2001, both a ``Blue
            Ribbon Panel'' and an advisory board concluded that the
            National Agricultural Library (NAL) needed increased resources
            to meet its potential, taking advantage of technological
            innovations for timely information access and retrieval. Full
            integration of many kinds of digital information and fast,
            seamless navigation among them are essential for NAL to satisfy
            the increasingly complex interdisciplinary information needs of
            its customers. The proposed funding will support the
            revitalization of NAL, enabling it to better deliver relevant
            information products, satisfy increasingly complex customer
            demands, and provide leadership as the premier agricultural
            information resource of the United States.
      --Information Technology--$4.1 Million.--ARS information technology
            (IT) systems and networks are exposed to an unprecedented level
            of risk. Of particular importance is safeguarding the Agency's
            pathogenic, genomic, and other sensitive research information
            from being acquired or destroyed by unauthorized intruders
            through unprotected or undetected cyber links. Agencywide
            centralized security measures are needed to counter security
            threats. ARS must also ensure that its IT infrastructure (i.e.,
            computers, network hardware, etc.) is up-to-date and reliable.
            ARS will use the proposed increase to replace, upgrade, and
            secure its IT equipment and systems.

                          PROPOSED OPERATING INCREASES

        In addition to the proposed research initiatives, ARS' fiscal year
    2007 budget provides funding to cover costs associated with pay raises.
    An increase of $15.4 million is essential to finance these costs and to
    avoid erosion of the Agency's base resources.

                           PROPOSED PROGRAM DECREASES

        ARS is proposing the reduction/termination of selected research
    programs and projects, totaling $195.7 million, to finance higher
    priority research and support the Administration's efforts to reduce
    spending and the Federal deficit. As the country faces new challenges
    in the areas of homeland security, food safety, and obesity, ARS needs
    to reprioritize and reallocate resources. Many of the projects being
    reduced or terminated pertain to research carried out by other ARS
    locations or other research institutions.

                            PROPOSED REPROGRAMMINGS

        The proposed budget includes $3.1 million to reprogram programs and
    resources currently operating at Baton Rouge, Louisiana and Lane,
    Oklahoma. Funding for Soil and Water research at Baton Rouge, Louisiana
    is proposed to be reprogrammed to higher priority initiatives and
    obesity research at the Pennington Biomedical Research Center at Baton
    Rouge. Similarly, funding for crop genetics research at Lane, Oklahoma
    is proposed to be reprogrammed to higher priority forage-livestock
    research at ARS' El Reno and Woodward, Oklahoma locations.

                 PROPOSED INCREASE FOR BUILDINGS AND FACILITIES

        The fiscal year 2007 budget recommends $8.4 million for ARS'
    Buildings and Facilities account. The Agency is recommending these
    funds be used to assist in the construction of a Classical Chinese
    Garden (CCG) at the U.S. National Arboretum (USNA) in Washington, DC,
    most of which will be built and paid for by the People's Republic of
    China. The Garden will serve as a symbol of friendship between the
    Chinese and American people and help promote better relations between
    the two nations. The proposed new garden will also serve as a major
    research facility. The project will enable the introduction of unique
    Chinese flowers and plants into the United States for horticultural
    research purposes.
        CCG is a priority project for the USDA and the People's Republic of
    China (PRC). The design was developed by a joint team from the PRC and
    the United States and has been approved by the National Capital
    Planning Commission and the District of Columbia Commission on Fine
    Arts.
        The structure, landscaping, and interior furnishings of the CCG
    will be provided by the Chinese State Forestry Administration. The land
    at USNA has been made available by USDA. As part of this venture, USDA
    is responsible for providing the infrastructure and site work,
    including grading and foundations. The proposed $8.4 million is to
    cover these activities. USDA will subsequently be responsible for the
    security and maintenance of the garden.
        Mr. Chairman, this concludes my presentation of ARS' budget
    recommendations for fiscal year 2007. I will be happy to respond to any
    questions the Committee may have.
                                     ______

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

        Mr. Chairman and Members of the Committee, I appreciate the
    opportunity to present the President's fiscal year 2007 budget for the
    Cooperative State Research, Education, and Extension Service (CSREES),
    one of the four agencies in the Research, Education, and Economics
    (REE) mission area of the United States Department of Agriculture
    (USDA).
        The CSREES fiscal year 2007 budget proposal is just over $1
    billion. CSREES, in concert with the Secretary of Agriculture and the
    intent of Congress, works in partnership with the land-grant university
    system, other colleges and universities, and public and private
    research and education organizations to initiate and develop
    agricultural research, extension, higher education, and related
    international activities to advance knowledge for agriculture, the
    environment, human health and well-being, and communities. In addition,
    CSREES implements grants for organizations to better reach and assist
    disadvantaged farmers and ranchers in accessing programs of USDA. These
    partnerships result in a breadth of expertise that is ready to deliver
    solutions to problems facing U.S. agriculture today.
        The fiscal year 2007 CSREES budget request aligns funding and
    performance with the USDA strategic goals. CSREES manages its many
    budget elements in support of research, education, extension, and
    outreach programs as part of a cohesive whole supporting all six of the
    Department's strategic goals. The Agency defines distinct performance
    criteria, including strategic objectives and key outcomes with
    identified annual targets. As part of an integrated budget and
    performance process, CSREES conducts periodic portfolio reviews by
    external experts to monitor overall program progress, suggest
    alternative approaches, and propose management improvements.
        In support of the Administration's commitment to ensure that
    Federal funds are used to support the highest quality research, the
    fiscal year 2006 Budget proposed to increase overall funding for
    competitive peer reviewed research and reduce funding for formula grant
    programs that do not allocate funds based on a competitive process.
    Extensive analysis of the stakeholder response to the proposal
    indicated that primary concerns included the lack of consultation with
    affected universities and stakeholders, loss of matching funds, program
    continuity and length of awards, sustaining breadth of capacity in
    agricultural science and education nationwide, providing responsiveness
    to State and local issues, and leveraging and sustaining partnerships
    across institutions.
        In response to the concerns, CSREES proposes a new initiative that
    supports the Administration's belief that the most effective and
    flexible way to fund research projects is through peer reviewed
    competitive awards that address national issues, while at the same
    time, responds to stakeholder concerns and still retains overall
    funding at enacted levels. CSREES recognizes that multi-state programs
    have been an effective part of the portfolio of work funded through the
    Hatch formula, assuring focused, non-duplicative, collaborative,
    problem-solving science. This program lends itself to national peer
    review. To achieve the goals of expanding competitiveness and peer
    review, we propose an approach that would expand and continuously
    recompete the multi-state awards of the Hatch Act program; and
    establish a similar, though separately authorized, program for
    McIntire-Stennis Cooperative Forestry (McIntire-Stennis) funds.
        In fiscal year 2007, CSREES is proposing to distribute a portion of
    the Hatch Act and the McIntire-Stennis formula programs to nationally,
    competitively awarded multi-state/multi-institutional projects based on
    high priority national topics decided by CSREES in consultation with
    our land grant partners. This new plan for multi-state programming
    sustains the matching requirement and the leveraging of Federal funds.
    It also allows institutions to focus on program strengths they identify
    and sustain through linking local issues to broad national goals. The
    Agency is eager to work with the agricultural experiment station and
    university forestry research communities to develop an implementation
    plan for the expanded multi-state/multi-institutional effort.
        CSREES also will continue to distribute a portion of the Hatch Act
    and McIntire-Stennis funds on the basis of the formula. The requested
    $177 million of Hatch Act funds will support research at the SAES
    related to producing, marketing, distributing, and utilizing crops and
    resources; enhancing nutrition; and improving rural living conditions.
    Funds will support research topics such as water and other natural
    resources, crop and animal resources, people and communities,
    competition and trade, and human nutrition. In addition, $22 million of
    the funding requested for the McIntire-Stennis program will continue to
    support research related to timber production, forest land management,
    wood utilization, and the associated development of new products and
    distribution systems. Both the Hatch Act and McIntire-Stennis programs
    allow 5 year projects supporting the goal of continuity.
        CSREES proposes to eliminate funding for the Animal Health and
    Disease Program. Alternative funding from the National Research
    Initiative (NRI) program could be used to support aspects of this
    program. Recent, large Coordinated Agricultural Project (CAP) grants
    have supported animal disease issues, such as Johnes Disease and Avian
    Influenza.
        CSREES continues to provide new opportunities for discoveries and
    advances in knowledge through the NRI program. The fiscal year 2007
    budget request of $247.5 million for the NRI is a strong statement of
    the importance that the Administration places on competitively awarded
    grants to advance knowledge for agriculture.
        The NRI will continue to support current high priority programs
    with an emphasis on critical issues. For example, under the NRI CAP,
    multi-million dollar awards support multi-year large-scale projects to
    promote collaboration, open communication, and coordinated activities
    among individuals, institutions, States, and regions to address
    priority issues of national importance. Under the NRI Animal
    Biosecurity Program, CSREES is investing funds to support three animal
    disease CAPs. CAP awards for Avian Influenza ($5 million/3 years with
    18 States involved), Porcine Reproductive and Respiratory Syndrome
    ($4.4 million/3 years with 16 States involved), and Johne's Disease
    ($4.4 million/3 years with 21 States involved) are working to
    accelerate research discoveries and the translation of basic and
    applied research into significant outcomes that diminish the impact and
    threat from these diseases. These projects provide a strategic
    framework of objectives that integrate research, education, and
    extension specialists representing academia, producers, veterinarians,
    pharmaceutical and other biologics companies, Federal agencies, State
    partners, and international institutions.
        Under the Applied Plant Genomics Program in the NRI, CSREES
    supports two CAPs--rice ($5 million/4 years representing 12 States) and
    wheat ($5 million/4 years representing 17 States.) Activities under
    these CAPs are working to bridge the gap between cereal grain genomics
    and traditional breeding practices. The Project Directors for the CAPs
    recently met to discuss facilitating synergistic activities across the
    CAPs that will provide lasting benefits to U.S. agriculture through
    improved varieties. Also discussed was how the U.S. public breeding
    programs can capitalize on advances in genomics. The Agency also
    continues support for a CAP focused on food safety at North Carolina
    State University.
        Expanded partnerships with other Federal agencies on research
    topics of mutual interest will be possible with the increase in the NRI
    funding. For example, research on plant genomics, in particular
    sequencing of the soybean genome, will be supported through a
    partnership with the U.S. Department of Energy. The research
    collaboration will substantially contribute to advances in soybean
    breeding, with great potential to improve the environmental and
    nutritional quality of the plant, leading to improved efficiency of
    production, reduced environmental impact, and healthier foods.
        The NRI also will support research on animal genomics. Substantial
    public investment in the Human Genome Project has led to technologies,
    practices, and knowledge which enable cost-effective research in animal
    genomics. The considerable similarities of the genomes of livestock
    species, fish, and birds to that of human will reduce the need for
    whole genome sequencing. An increase of $5 million in the NRI to
    support domestic animal genomics including bioinformatics is requested.
        CSREES proposes that $42.3 million from the Integrated Activities
    account for programs that focus on water quality, food safety, methyl
    bromide, organic transition, and pest-related programs be administered
    through the NRI. This transfer is proposed as a means to streamline the
    CSREES budget portfolio. Funding for these programs will be sustained
    at the fiscal year 2006 levels.
        Under the NRI, an increase of $1 million is requested for genomics
    and biomass/biofuels that focus on the functional genomics and
    bioinformatics of microorganisms to increase the efficiency of
    biological conversion of pulp and paper products to bioenery and
    biobased products and the development of new products including
    biologically-based fuels. These efforts will tap into the power of
    genomics to provide insights into new approaches for converting low
    value, agricultural feedstocks to high value fuels and products.
        An increase of $12 million is proposed to address emerging issues
    in food and agriculture biosecurity under the NRI. The requested
    funding will support research, education, and extension activities on
    emerging pathogens and antibiotic production for animal protection and
    biosecurity, and on microbial forensics of food safety pathogens.
        In fiscal year 2007 an increase of $3 million is proposed under the
    NRI for ecology and economics of biological invasions. The requested
    funds will support projects that couple the economic predictions of
    costs of prevention and control with ecological processes that govern
    the entry, spread, and damage by invasive species.
        Under the NRI, an increase of $3 million is proposed in fiscal year
    2007 for plant biotechnology and water security. The funds will support
    research on methods of modern molecular biology to improve the water
    use-efficiency of crops, managed forests, and horticulture plants.
        In continuing and expanding our efforts for agricultural security
    and in support of the President's Food and Agriculture Defense
    Initiative, CSREES, through cooperative efforts with the Animal and
    Plant Health Inspection Service, has established a unified Federal-
    State network of public agricultural institutions to identify and
    respond to high risk biological pathogens in the food and agricultural
    system. The network is comprised of 13 State animal diagnostic
    laboratories and 6 plant diagnostic laboratories, strategically located
    around the country. These 19 key laboratories are developing a two-way,
    secure communications network with other university and State
    Department of Agriculture diagnostic laboratories throughout their
    respective regions. The diagnostic laboratories are responsible for
    identifying, containing, and minimizing the impact of exotic and
    domestic pests and pathogens that are of concern to the security of our
    food and agricultural production systems. For example, the National
    Animal Health Laboratory Network (NAHLN) with its 12 founding
    laboratories in New York, Louisiana, Georgia, Texas, Wisconsin, Iowa,
    Colorado, Washington, California, Arizona, North Carolina and Florida
    continued efforts to enhance national preparedness against foreign
    animal disease appearing in the United States by conducting activities
    related to Avian Influenza (AI). AI is one of the new high-consequence
    animal pathogens covered by the NAHLN protocols. In its efforts to
    increase the ability to respond to outbreaks, NAHLN increased the
    number of laboratories that can run the real time polymerase chain
    reaction for AI using a standardized assay and protocol. Annual
    proficiency testing is required of individuals conducting testing to
    ensure quality results. The budget proposal requests an increase of
    $2.1 million for a total of $12 million to maintain the current level
    of diagnostic capabilities across the Nation.
        CSREES proposes $5 million for the Agrosecurity Education Program
    to support educational and professional development for personnel so
    strengthen our national capacity to secure the Nation's agricultural
    and food supply. The program will develop and promote curricula for
    undergraduate and graduate level higher education programs that support
    the protection of animals, plants, and public health. The program is
    designed to support cross-disciplinary degree programs that combine
    training in food sciences, agricultural sciences, medicine, veterinary
    medicine, epidemiology, microbiology, chemistry, engineering, and
    mathematics (statistical modeling) to prepare food system defense
    professionals. Also proposed is $2.3 million for the Asian Soybean Rust
    Program. The funds will provide stakeholders with effective decision
    support for managing diseases of legume crops, particularly soybean
    rust, to continue surveillance of sentinel plots.
        CSREES continues to expand diversity and opportunity with
    activities under 1890 base and educational programs, and 1994, insular
    areas, and Hispanic-Serving Institutions educational programs. In
    fiscal year 2007, the budget requests an increase of approximately $1.2
    million for both the research and extension 1890 base programs. Funding
    for our 1890 base programs provides a stable level of support for the
    implementation of research and extension programming that is responsive
    to emerging agricultural issues. Funding for the 1994 Institutions
    strengthens the capacity of the Tribal Colleges to more firmly
    establish themselves as partners in the food and agricultural science
    and education system through expanding their linkages with 1862 and
    1890 Institutions. Proposed funding for the Resident Instruction Grants
    for Insular Areas Program will be used to enhance teaching programs at
    higher education institutions located in U.S. insular areas that focus
    on agriculture, natural resources, forestry, veterinary medicine, home
    economics, and disciplines closely allied to food and agriculture
    production and delivery systems. Continued funding for the Hispanic-
    Serving Institutions promotes the ability of the institutions to carry
    out educational training programs in the food and agricultural
    sciences. This proven path of research, extension, and educational
    program development rapidly delivers new technologies into the hands of
    all citizens, helping them solve problems important to their lives.
        CSREES also will continue to effectively reach underserved
    communities through increased support for the Outreach and Assistance
    for Socially Disadvantaged Farmers and Ranchers (OASDFR) Program.
    CSREES will fund competitive multi-year projects to support outreach to
    disadvantaged farmers and ranchers by providing grants to educational
    institutions and community-based organizations to support these groups.
    Funds for the OASDFR program will encourage and assist socially
    disadvantaged farmers and ranchers in their efforts to become or remain
    owners and operators by providing technical assistance, outreach, and
    education to promote fuller participation in all USDA programs. CSREES
    requests an increase of about $1 million for the OASDFR program.
        The CSREES higher education programs contribute to the development
    of human capacity and respond to the need for a highly trained cadre of
    quality scientists, engineers, managers, and technical specialists in
    the food and fiber system. The fiscal year 2007 budget provides a $.8
    million increase in the Food and Agricultural Sciences National Needs
    Graduate Fellowship program. This program prepares graduates to deal
    with emerging challenges in such areas as agricultural biosecurity to
    ensure the safety and security of our agriculture and food supply,
    natural resources and forestry, and human health and nutrition,
    including problems related to obesity such as diabetes and
    cardiovascular health. Other higher education programs will provide
    important and unique support to Tribal Colleges, the 1890 Land-Grant
    Colleges and Universities, and the 1862 Land-Grant Universities as they
    pilot important new approaches to expand their programs.
        CSREES is requesting funds to accelerate and innovate the New
    Technologies for Agricultural Extension (NTAE) to establish an
    eXtension network which will offer Americans unparalleled access to
    scientifically-derived and unbiased information, education, and
    guidance. The fiscal year 2007 budget proposal includes a $1.5 million
    increase for the NTAE Program to allow the Cooperative Extension System
    to make available research-based education offered through eXtension to
    a technology conscious Nation.
        To ensure the highest quality research which addresses national
    needs within available funding, the fiscal year 2007 budget proposes to
    eliminate earmarked projects. Peer-reviewed competitive programs that
    meet national needs are a much more effective use of taxpayer dollars
    than earmarks that are provided to a specific recipient for needs that
    may not be national. Based upon its broad scope, including the expanded
    integrated authority, and proposed funding increase, alternative
    funding from the NRI could be used to provide a peer-reviewed forum for
    seeking and assessing much of the work funded through earmarks. For
    example in the past four years, CSREES supported research in animal
    identification and/or animal tracking under earmarked projects which
    fit within the scope of the NRI. In addition, earmarked projects for
    human nutrition and food safety also could fit within the program areas
    of the NRI.
        The fiscal year 2007 budget proposes changes in the general
    provisions including increasing the amount provided for the NRI that
    may be used for competitive integrated activities from up to 22 percent
    to up to 30 percent. Also proposed is the elimination of the cap on
    indirect costs for competitively awarded grants. In the past indirect
    cost rate caps have resulted in recipients' inability to recover
    legitimate indirect costs, thus penalizing recipients who choose to do
    business with CSREES. This elimination allows full indirect cost
    recovery under competitive awards and places CSREES competitive
    programs on an equal footing with other Federal assistance programs, so
    that top scientists will be more likely to apply for CSREES grant
    programs.
        CSREES consulted widely in the development of program goals and
    budget priorities for fiscal year 2007. In discussions with the land-
    grant university system, forestry researchers, and others, stakeholders
    expressed their concerns over the approach to expand competitive
    research grant programs. The President's fiscal year 2007 budget
    proposal addresses their concerns, and is consistent with the view that
    the most effective use of taxpayer dollars is through competitively
    awarded grants that meet National goals. CSREES, in collaboration with
    university and other partners nationwide, continues to enhance its
    responsiveness and flexibility in addressing critical agricultural
    issues. This proposal provides support for research, extension, higher
    education, and outreach and assistance activities in the food,
    agricultural, and human sciences that can make a difference in solving
    problems facing the Nation.
        Mr. Chairman, this concludes my statement. I will be glad to answer
    any questions the Committee may have.
                                     ______

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

        Mr. Chairman and members of the Committee, I am pleased to have the
    opportunity to present the proposed fiscal year 2007 budget for the
    Economic Research Service (ERS).

                                    MISSION

        The Economic Research Service informs and enhances public and
    private decision making on economic and policy issues related to
    agriculture, food, the environment, and rural development.

                                     BUDGET

        The agency's request for 2007 is $82.5 million, which includes
    increases for two initiatives and pay costs. The agency is requesting
    an increase of $5 million to develop an agricultural and rural
    development information system that will monitor the changing economic
    health and well-being of farm and non-farm households in rural areas;
    and an increase of $1.6 million to continue the development of an
    integrated and comprehensive data and analysis framework of the food
    system beyond the farm-gate that will provide a basis for
    understanding, monitoring, tracking, and identifying changes in the
    food supply and in consumption patterns.

             AGRICULTURAL AND RURAL DEVELOPMENT INFORMATION SYSTEM

        In fiscal year 2007, ERS is requesting an increase of $5.0 million
    to fund the Agricultural and Rural Development Information System, to
    implement a comprehensive data collection and research program that
    will monitor the changing economic well-being of farm and non-farm
    households in rural areas. This initiative supports collection of
    survey data from farm and non-farm households over time to analyze the
    effects of policy adjustments in rural areas facing specific
    development issues, such as persistent poverty or substantial out
    migration. Data and analysis from this Agricultural and Rural
    Development Information System will be critical to identifying the most
    successful economic development strategies for different types of rural
    areas, the adjustments that farm households and rural communities make
    in response to agricultural policy changes, and the importance of the
    linkages between farm and non-farm economies in assessing farm and
    rural policy effects. The initiative also supplies the better and more
    useful information on the status of farm, market, and rural economics
    that USDA partners and customers seek.
        The $5.0 million total amount requested would be allocated to four
    specific sets of activities. The first, collecting longitudinal data
    from rural households, will involve developing and supporting an
    integrated set of surveys, which include core components to track
    critical indicators over time as well as modules on specific topics
    related to emerging policy issues. The second, collecting longitudinal
    data from farm households, will build on USDA's Agricultural Resource
    Management Survey (ARMS). The third will be to expand public internet
    access to ERS agricultural and rural data. A portion of the initiative
    funds would be devoted to providing State and local governments, trade
    and commodity associations, other interest groups, and the public,
    easy, interactive access to a new Agricultural and Rural Development
    System. The fourth is to assure research capacity to analyze, interpret
    and apply new agricultural and rural development information.
        Data are not currently available to allow analysts to distinguish
    the effects of rural development, farm, and agricultural resource
    programs from one another, and from the myriad of other forces
    affecting the economic well-being of farm and rural households. The
    Census Bureau's Census of the Population provides information on rural
    households within the context of their local area, but it does not
    include a longitudinal component that allows assessment of individual
    household response to changing policies and programs over time. The
    American Community Survey will, in time, provide social and economic
    data at the census tract level, but it does not use a longitudinal
    framework to understand individual household change. Other data
    sources, such as the Survey of Income and Program Participation, have a
    longitudinal component but do not have sufficient detail or statistical
    reliability to allow analyses of local rural area household response
    for specific areas facing specific development challenges.

                      CONSUMER DATA AND INFORMATION SYSTEM

        In fiscal year 2007, ERS is requesting an increase of $1.6 million
    to augment the Consumer Data and Information System that was provided
    funds in fiscal year 2006. New funding will be used to obtain data on
    consumption of food away from home to improve the understanding of how
    individuals make food choices. A major change in U.S. food consumption
    patterns in the last several decades has been the increasing popularity
    of foods consumed away from home. The importance of data on food-away-
    home consumption for understanding food choices and nutritional
    outcomes is growing, as Americans now spend about 50 percent of their
    total food budget on food-away-from-home in 2004, up from 27 percent in
    1962.
        The additional funding requested this year supports ERS long-term
    goals and objectives for research on food choices, including:
      --Identifying differences in consumption of food away from home by
            region and customer/household demographics (such as income,
            education level, age, and presence of children in the
            household);
      --Measuring the effect of prices of food away from home on food
            choices, by region and customer/household demographics;
      --Assessing how low-income households differ in the away-from-home
            food choices they make and the prices that they pay;
      --Assessing how households' away-from-home food choices change
            through consumers' life cycle. For example, households with
            young children tend to favor fast food restaurants over sit-
            down restaurants. Older Americans are known to eat out less
            frequently than young adults; and
      --Examining the extent by which convenience of eating away from home
            is impact American's food choices.
        USDA officials require timely information on food prices, product
    movements, and potential consumer reactions to events to effectively
    make commodity support decisions, provide nutrition education, and
    ensure the safety of food. The components of the Consumer Data and
    Information System already implemented with prior years' funding will
    provide USDA with current food prices, sales volumes, food purchases, a
    database on consumer characteristics and purchasing behavior, and the
    ability to quickly survey consumer reactions, knowledge, attitudes, and
    awareness on a host of issues. For example, we will be able to
    determine how consumers respond to USDA's nutrition information
    efforts, such as the Food Guide Pyramid and recommendations to increase
    consumption of whole grains.
        The Consumer Data and Information System has three major components
    providing intelligence across and within the food and agricultural
    complex. The Food Market Surveillance Report will provide policy
    officials with the most up-to-date information on food prices,
    purchases, and sales data publicly or privately available. This
    information will improve USDA decision-making and provide data for
    understanding consumer purchasing behaviors.
        The Rapid Consumer Response Module will provide real-time
    information on consumer reactions to unforeseen events and disruptions,
    current market events, and government policies. The module question
    will be asked of members of several proprietary consumer data panels
    currently maintained by private vendors. The Rapid Consumer Response
    Survey is awaiting OMB approval.
        Using fiscal year 2005 and fiscal year 2006 funding, ERS has
    continued development of the third major component of the Consumer Data
    and Information System, the Flexible Consumer Behavior Survey (FCBS).
    This survey will complement data from the National Health and Nutrition
    Examination Survey (NHANES) by providing information needed to assess
    linkages among individuals' knowledge and attitudes about food safety
    and dietary guidance, their economic circumstances, their food-choice
    decisions, and their nutrient intakes. Combining the NHANES with this
    new survey allows analysis of how individual behavior, information, and
    economic factors affect food choices, dietary status, and health
    outcomes. The FCBS is scheduled to appear on the 2007-2008 NHANES with
    research data available in 2009.

                    ERS CONTRIBUTIONS TO MISSION AREA GOALS

        ERS supports the six USDA strategic goals to: (1) enhance
    international competitiveness of American agriculture; (2) enhance the
    competitiveness and sustainability of rural and farm economies; (3)
    support increased economic opportunities and improved quality of life
    in rural America; (4) enhance protection and safety of the Nation's
    agriculture and food supply; (5) improve the Nation's nutrition and
    health; and (6) protect and enhance the Nation's natural resource base
    and environment.
    Goal 1: Enhanced International Competitiveness of American Agriculture
        ERS helps the U.S. food and agriculture sector adapt to changing
    market structures in rapidly globalizing, consumer-driven markets by
    analyzing the linkages between domestic and global food and commodity
    markets, as well as the implications of alternative domestic and
    international policies on competitiveness. ERS economists analyze
    factors that drive change in the structure and performance of domestic
    and global food and agriculture markets; provide economic assessment of
    structural change and competition in the agricultural sector; analyze
    the price impacts of evolving structural changes in food retailing;
    analyze how international trade agreements and foreign trade
    restrictions affect U.S. agricultural production, exports, imports, and
    income; and provide economic analyses that determine how fundamental
    commodity market relationships are adjusting to changing trade,
    domestic policy, and structural conditions. ERS will continue to work
    closely with the World Agricultural Outlook Board (WAOB) and USDA
    agencies to provide short- and long-term projections of United States
    and world agricultural production, consumption, and trade.
        In 2006, several initiatives are increasing the timeliness and
    availability of data and information, while simultaneously saving staff
    time. We are increasing the transparency of our commodity projections
    processes, and automating calculations where possible, and embedding
    them within databases. Our goals are to: (1) make the work transparent,
    inviting critique from both internal and external users; (2) transition
    to fewer outlook analysts as retirements near, and (3) increase
    timeliness in the release of data. Our redesigned feedgrains database
    provides a wider range of data with automatic updates from our ongoing
    commodity analysis reports. A new database on base acres allows users
    to download and map county-level farm program and planted acreage data
    for nine major program crops.
        Large developing countries--such as China, India and Brazil--are
    becoming more important to U.S. agriculture. China is one of the top 10
    markets for U.S. agricultural exports and is the world's largest
    producer and consumer of a range of commodities. ERS research continues
    to examine key factors that will shape the size and pattern of China's
    agricultural trade: water scarcity, implementation of WTO commitments,
    changes in Chinese consumers' demand for food, and new directions in
    agricultural policy and investment in agriculture and rural areas. ERS'
    China briefing room on our website provides access to a new queriable
    Agricultural and Economic database containing information on
    agricultural production, food consumption, price indices, macroeconomic
    information and industrial output. India's strong economic growth and
    rising middle class are creating new markets for agricultural products.
    ERS research examines the policy environment and prospects for growth
    in key commodity markets, such as cotton, oilseeds, poultry and apples.
        Food price determination is increasingly important for
    understanding domestic and international markets and opportunities to
    promote U.S. agriculture. ERS food markets research focuses on
    enhancing knowledge and understanding of food prices, both their
    objective measurement and how they are set by firms at different stages
    of the food system. ERS has begun to use micro-level household and
    store scanner data to measure the impact of changing store formats on
    food prices in order to focus on the changing economic environment and
    how these changes could affect customers' retail food purchasing
    habits.
        ERS will continue to work closely with the Foreign Agricultural
    Service (FAS) and the Office of the U.S. Trade Representative to ensure
    that ongoing negotiations on the Doha Development Agenda under the
    auspices of the World Trade Organization (WTO) and regional trade
    agreements are successful and advantageous for U.S. agriculture. The
    demands of developing countries for sharp cuts in domestic agricultural
    policies, along with exemptions that would limit the opening of their
    markets, serve as stumbling blocks to reaching an agreement in current
    WTO negotiations. ERS has developed new analytic tools, including its
    PEATSIM (Partial Equlibrium Trade Simulation) modeling framework, to
    provide more detailed analysis of the global benefits of trade
    liberalization. It has also completed studies of important issues
    affecting developing countries, including preferential trade agreements
    and forces shaping global cotton markets after the end of the
    Multifiber arrangement.
    Goal 2: Enhanced Competitiveness and Sustainability of Rural and Farm
            Economies
        ERS provides assessment of the effects of farm policy on commodity
    markets and the food and agricultural sector. For example, the 2005
    USDA report, The 20th Century Transformation of U.S. Agriculture and
    Farm Policy provides perspective on the long-term forces that have
    helped shape agricultural and rural life and considers the extent to
    which farm policy design has or has not kept pace with the continuing
    transformation of American agriculture. ERS is also preparing a series
    of nine commodity background studies to augment information available
    to policy decision makers.
        Changes in U.S. farm structure can have wide-ranging impacts on
    agricultural productivity, opportunities for farm operators, and the
    distribution of benefits from government programs. ERS research focuses
    on two elements of change: the widespread shift of production to larger
    farms, and the growing use of formal contracts between farmers and
    buyers, used to guide farm production and marketing decisions. An
    updated Family Farm report will be released in 2006, as well as an
    Economic Brief detailing the impact of structural change on the
    distribution of Federal commodity payments.
        ERS recently released a report, using 2003 data, on the growing use
    of agricultural contracts (Agricultural Contracting Update: Contracts
    in 2003). For producers, contracting can reduce income risks of price
    and production variability, ensure market access, and provide higher
    returns for differentiated farm products. For processors and other
    buyers, vertical coordination through contracting is a way to ensure
    the flow of products, obtain differentiated products, ensure
    traceability for health concerns, and guarantee certain methods of
    production. But widespread contract use can also limit the efficiency
    of cash markets, and under certain circumstances contracts can allow
    buyers to extend market power. A September, 2005 ERS report (Did the
    Mandatory Requirement Aid the Market? Impact of the Livestock Mandatory
    Reporting Act) examined the effects of expanded price reporting
    requirements on contract and cash markets for cattle.
        Current research is examining the effects of contract use in hog,
    dairy, and poultry sectors. For example, ERS research has found that
    marketing contracts between packers and producers can facilitate
    industry efforts to address pork quality needs by reducing measuring
    costs, controlling quality attributes that are difficult to measure,
    facilitating adaptations to changing quality standards, and reducing
    transaction costs associated with relationship-specific investments in
    branding programs.
        Organic farming continues to be one of the fastest growing segments
    of U.S. agriculture and can potentially enhance environmental
    protection, as well as economic opportunities for producers.
    Appropriations received in fiscal year 2005 and fiscal year 2006 will
    enable ERS to continue to explore in greater depth the market for
    organic products and the performance of organic farm sectors. In 2005,
    ERS hosted an interagency USDA workshop on organic agriculture which
    assessed producer options and obstacles in adopting organic farming
    systems, and evaluated new developments in organic marketing and
    technology. Also in 2005, ERS began adding a targeted sample of organic
    producers to the USDA Agricultural Resources Management Survey (ARMS).
    The first of these enhanced ARMS surveys, targeting organic dairy
    producers, will be administered in 2006, and will be followed by an
    over sample of organic soybean producers in the subsequent ARMS survey.
    Survey data for both organic and conventional operations will enable,
    for the first time, a side-by-side comparison of the profitability,
    productivity, energy efficiency, and other economic characteristics of
    these farms.
        The Agricultural Resource Management Survey (ARMS) helps support
    important estimates, analyses, and research produced by ERS. Two key
    uses of ARMS are to underpin estimates of income and value-added that
    are provided to the Department of Commerce for use in preparing the
    U.S. national accounts, and to produce estimates of income for
    different types of commercial-size farm businesses, such as those that
    produce program crop commodities, that were required by the Congress in
    the 2002 Farm Bill. Data from ARMS are used in a collaborative effort
    between ERS and the National Agricultural Statistics Service to measure
    annual production expenses in U.S. agriculture.
        A special emphasis of ARMS in 2006 is to measure use of purchase
    practices and strategies by farm managers in acquiring production
    inputs, including energy-based inputs such as fertilizers, chemicals,
    and fuels. These data will be used to help provide a broader
    understanding of how changes in inputs costs affect different types of
    farms and areas of the country. Additional funding provided for ARMS in
    fiscal year 2003 was used to increase the number of farm businesses
    included in the ARMS sample and to more effectively disseminate annual
    survey results to data users. In the 2005 calendar year survey, now in
    the field to be enumerated, about 34,000 farmers will be interviewed
    nationwide. The larger sample for ARMS gives us greater confidence in
    income and financial measures produced for the and geographic areas,
    and for types and sizes of farms engaged in U.S. agriculture. ERS
    continues to focus on improving the dissemination of ARMS data so that
    annual survey results are more readily available and easily accessible
    to data users, while assuring that sensitive data are not disclosed.
    The web-based, secure ARMS data retrieval and summarization tool,
    implement in late 2004, has now been through a successful update with
    release of the latest annual data in November, 2005. About 700 unique
    data users access ARMS results through this web-based outlet each
    month.
    Goal 3: Support Increased Economic Opportunities and Improved Quality
            of Life in Rural America
        ERS assesses rural needs by examining the changing demographic,
    employment, education, income, and housing patterns of rural areas.
    Data from the 2000 Census and other Federal information sources provide
    the most up-to-date information on the current conditions and trends
    affecting rural areas, and provide the factual base for rural
    development program initiatives. In 2006, the agency is continuing its
    series of publications that report current indicators of social and
    economic conditions in rural areas for use in developing policies and
    programs to assist rural people and their communities. Rural America at
    a Glance: 2006 and Rural Employment at a Glance, designed for a policy
    audience, will summarize the most current information on these topics.
        ERS research focuses on the determinants and consequences of
    critical themes in contemporary rural America, including changing
    population composition and industrial restructuring. One emerging rural
    population trend is baby boomer migration as they retire. The oldest
    members of the baby boom cohort are now 60 years old, just entering the
    stage in their lives when they tend to migrate for retirement. The
    growth of baby boomer populations in rural and small town America
    depends on demographic, natural amenity, housing market, urban
    proximity, and economic factors affecting their migration flows. ERS
    will publish a report in 2006 analyzing the impact of these factors
    during the 1990s, which will help policymakers and planners better
    anticipate the likely increase in migration of baby boomers into rural
    areas over the next 20 years.
        ERS is examining the effects of industrial change on the geography
    of low-skill employment. Today many rural labor market areas find
    themselves in the midst of industrial transformation as regional,
    national, and global forces reshape the geography of economic activity.
    ERS research is addressing how the transformation of rural America from
    an economy based on manufacturing and extraction to one based on
    services and amenities has changed the prospects for workers with
    limited skills and education. A recent ERS study analyzed trends in
    rural low-skill employment in the 1990s and identified the industrial
    and occupational components of this change. The findings suggest that
    investment in education and training, rather than industrial targeting,
    is a more effective approach to raising skill levels in the rural
    economy. In 2006, ERS will publish a second report looking at the
    regional variation in the rural shift toward a service economy, and in
    the effects of this shift on low-skill labor demand. The expected
    result is a better understanding of how global economic forces,
    including broader trade liberalization and rapid technological change,
    can affect rural communities and how Federal and local responses can
    assist in the resulting restructuring.
    Goal 4: Enhance Protection and Safety of the Nation's Agriculture and
            Food Supply
        In response to increased risks to the Nation's agriculture and food
    supply due to bio-terrorism, ERS embarked on an ambitious project known
    as Geo-Spatial Economic Analysis (GSEA). The GSEA system merges an
    extensive Geographic Information System with the analytical expertise
    of ERS's economists. The Security Analysis System for U.S. Agriculture
    (SAS-USA), which is being updated and enhanced in 2006 under a
    cooperative agreement with the Massachusetts Institute of Technology,
    systematically ties all food supply processes from farm production,
    food manufacturing, distribution of food products, to food consumption
    in every region of the country and other non-agricultural sectors, such
    as energy and services. The GSEA system is designed to serve as a
    platform for collaborative analysis across agencies in USDA and with
    appropriate groups in FDA and the Department of Homeland Security
    (DHS). These capabilities mean that emergencies can be managed
    efficiently and expeditiously by assessing vulnerabilities and
    predicting outcomes. The first simulation system prototype will
    completed this year as part of a joint project with the Army Corps of
    Engineers, the Tennessee Valley Authority, and Oak Ridge National Lab
    to improve our ability to measure the economic consequences in the food
    and agricultural industries caused by transportation disruptions. In
    support of broad USDA initiatives such as the National Plant Disease
    Recovery System, the GSEA system will serve as a tool to improve
    economic assessments of crop and animal disease outbreaks using
    alternative control strategies.
        As part of several national homeland security activities, ERS
    continues to develop and expand the capacity to assess the impact of
    accidental and intentional disruptions to our food and agricultural
    system. This year ERS will provide access to the GIS platform for
    selected staff in USDA and other government agencies. The GIS platform
    allows analysts to quickly manage the county-level crop, livestock,
    demographic and economic data needed to provide scope and context in
    the event of an emergency. ERS staff are prepared to conduct the
    complex economic analysis needed to assess the cost of securing our
    food supply, which includes protecting production, processing,
    distribution, and consumption of food and agricultural products. ERS is
    working with the Homeland Security Office (HSO), Office of Risk
    Assessment and Cost Benefit Analysis (ORACBA), Animal and Plant Health
    Inspection Service (APHIS), and the Food and Drug Administration (FDA)
    to improve tools for the analysis of disruption and disease mitigation
    strategies that require both sound biological and economic analysis.
        ERS has become well-known for its pioneering estimates of the
    societal costs associated with foodborne illnesses due to E. coli and
    other known pathogens. ERS and researchers from Harvard and the
    University of Wyoming are collaborating to develop new methodologies
    for more accurately eliciting and measuring the value of reductions in
    health risk associated with foodborne pathogens. This project applies
    state-of-the-art valuation methodologies to measure the benefits of
    improving food safety. A survey conducted in 2004 presented respondents
    with information on duration and severity of foodborne illness and
    asked respondents how much they would be willing to pay for a food with
    lower risk of foodborne illness. Another survey conducted in 2005
    provided respondents with information about the likelihood of foodborne
    illnesses and asked them about their food consumption and food safety
    practices. Analysts will explore the linkage between food choices and
    food safety information using the information obtained by this survey.
        In the event that unsafe food enters the marketplace, public health
    officials and food safety regulators ultimately rely on records
    maintained by private industry and retailers to track the manufacture
    and distribution of that food. Privately maintained traceability
    bookkeeping records provide investigators with information on the
    extent and distribution of a contaminated product--and on how to remove
    such a product from distribution channels efficiently. The strength of
    private traceability systems and the readiness of the food industry to
    track and recall a contaminated product is important for safeguarding
    the Nation's food supply. In 2006, ERS will continue work with
    agricultural economists from the University of Arkansas to investigate
    how various food companies in different industries handle product
    recalls, the operation of designated recall teams, and the frequency
    and results of mock recalls. The research will examine the type and
    scope of information collected from auditing and certification
    activities, characteristics of firms with recall practices, and the
    proportion of firms in given sectors participating in auditing and
    certification activities.
    Goal 5: Improve the Nation's Nutrition and Health
        ERS research has a major focus on the economic dimensions of
    obesity, including understanding the societal costs of obesity,
    explaining obesity trends among different demographic and income
    groups, and assessing the benefits and costs of alternative options for
    influencing Americans' food choices and dietary behaviors, including
    roles for nutrition education and Federal food and nutrition assistance
    programs. ERS investigated consumers' likely response to a tax on snack
    foods a public health issues generated by rising U.S. obesity rates.
    Findings suggest that the impacts on dietary quality from the tax are
    small and negligible at the lower tax rates. If taxes were earmarked
    for funding information programs, as several proponents suggest, taxes
    would generate a revenue stream the public health community could use
    for nutrition education.
        In 2006, ERS is investigating the factors that influence consumers'
    food choices when eating away from home using the NHANES data. This
    research will focus on discovering consumer preferences, such as
    convenience and entertainment that compete with healthy eating.
    Information about these factors help social marketers design effective
    campaigns to influence consumers' away from home eating behavior.
    Whether the poor pay more for food than other income groups matters to
    their nutrition and health; therefore, the operating costs of the
    stores at which they shop matter. An ERS study found overall operating
    costs of stores with high food stamp redemption rates are not
    significantly different from those of stores with moderate redemption
    rates. If the poor do pay more, factors other than operating costs are
    likely to be the reason.
        ERS is currently conducting a study of the economic factors
    affecting the cost of infant formula and rebates issued to the Special
    Supplemental Nutrition Program for Women, Infants, and Children Program
    (WIC). Over half of all infant formula sold in the United States is
    purchased through USDA's Special Supplemental Nutrition Program for
    Women, Infants, and Children (WIC). In fiscal year 2004, WIC State
    agencies obtained $1.6 billion in rebates from infant formula
    manufacturers for formula purchased through WIC. In recent years, some
    States awarding new infant formula contracts have seen a marked
    decrease in the size of the rebate. As a result, concern has been
    raised that the cost to the States of providing infant formula to WIC
    participants is increasing, a result that if sustained, could have far-
    reaching negative implications for the WIC program A final report will
    be released in 2006.
        ERS continues to monitor U.S. households' food security--their
    access to enough food for active, healthy living--and the extent and
    severity of food insecurity. ERS funds a national food security survey,
    conducted by the Census Bureau, and reports annually on the food
    security of the Nation's households. The Committee on National
    Statistics (CNSTAT) of the National Academy of Sciences will complete
    its review, funded by ERS and USDA's Food and Nutrition Service, of the
    methods and procedures that underlie the current measures of food
    security. ERS will lead USDA's work to enhance and strengthen these
    methods for monitoring, evaluation, and related research purposes
    pursuant to CNSTAT findings and recommendations.
        As part of our effort to improve the timeliness and quality of the
    Department's food consumption data, in 2003 ERS launched an interagency
    effort to develop a proposal for an external review of USDA's food
    consumption data needs and gaps. Enhancements to the food consumption
    data infrastructure are critical to understanding and addressing many
    market and policy issues in the Department. The interagency effort led
    to the funding of a review by the National Research Council's Committee
    on National Statistics. The Committee issued its final report in 2005,
    which included several recommendations. An interagency working group
    has been established to take responsibility for the systematic
    development and use of diet and food consumption data to address policy
    and research questions of the Federal Government, as recommended by the
    Committee. ERS is participating in this working group, which will
    consider priorities and methods for obtaining additional food and
    nutrition-related data in the National Health and Nutrition Examination
    Survey. As recommended by the committee, ERS is also evaluating the use
    of data on food purchases, prices, and consumption from proprietary
    retail scanner systems, household scanner panels, and household
    consumption surveys. This evaluation will examine the quality of the
    data, consider ways to reduce the cost of access to the data, and
    determine the highest priority applications for the information.
    Goal 6: Protect and Enhance the Nation's Natural Resource Base and
            Environment
        ERS continues to provide comprehensive information to public and
    private users on programs in the Conservation Title of the Farm
    Security and Rural Investment Act of 2002. The ERS report, Flexible
    Conservation Measures on Working Land: What Challenges Lie Ahead?
    released in 2005, deals with the complexities associated with the
    design of working-land payment programs. Program design and
    implementation will largely determine the extent to which environmental
    goals are achieved, and whether they are achieved cost-effectively.
    Empirical analysis also shows how the environment, commodity prices,
    and farm incomes could be affected by alternative designs.
        In the course of the production of food and fiber, agriculture also
    produces many by-products (positive externalities) such as open space,
    recreational amenities, scenic views, groundwater recharge, and
    wildlife habitat. Historically, the standard policy practice has been
    to address each externality through a separate policy instrument.
    However, when the transaction costs of administering policies (e.g.,
    information gathering, contract formulation, enforcement) are positive,
    using one instrument to address each externality or objective may not
    be optimal. Using an empirical analysis focusing on the CRP, the ERS
    report The Multiple Objectives of Agri-Environmental Policy, to be
    released in 2006, explores the extent to which environmental attributes
    may be jointly produced, e.g., efforts to reduce soil erosion may also
    reduce nutrient runoff and increase soil carbon, with implications for
    simultaneously targeting multiple environmental and cost objectives.
        Furthermore, applying environmental policies in an uncoordinated
    fashion fails to account for interactions among environmental mediums
    (i.e., air, land, water). This can result in conflicting policies, in
    that addressing one environmental problem can make another worse. The
    ERS report, Manure Management for Multimedia Environmental Improvement:
    A Comparison of Single Media versus Multi-Media Policy Optimization,
    released in 2005, provides a concrete example of the tradeoffs of
    alternately and simultaneously meeting air and water quality
    objectives, in terms of farmers' costs, production decisions, and
    environmental indicators, by focusing on livestock and poultry
    production. Among the results in the report is that, if enacted,
    restrictions on ammonia emissions from concentrated animal feeding
    operations could increase the cost of meeting Clean Water Act
    regulations for spreading manure.
        In 2006, ERS will release an update of its popular Agricultural
    Resources and Environmental Indicators report, which describes trends
    in resources used in and affected by agricultural production, as well
    as the economic conditions and policies that influence agricultural
    resource use and its environmental impacts. Each chapter provides a
    concise overview of a specific topic with links to sources of
    additional information.
        In fiscal year 2005, ERS continued the Program of Research on the
    Economics of Invasive Species Management (PREISM) that was initiated in
    fiscal year 2003. PREISM supports economic research and the development
    of decision support tools that have direct implications for USDA
    policies and programs for protection from, control/management of,
    regulation concerning, or trade policy relating to invasive species.
    Program priorities have been selected through extensive consultation
    with APHIS, the Office of Budget and Program Analysis (OBPA) and other
    agencies with responsibility for program management. In 2004 and 2005,
    APHIS used an ERS-supplied pest ranking decision tool to determine
    which pests would be on its Federal-State Cooperative Agricultural Pest
    Survey list, making transparent the basis for selecting the pests for
    which State cooperators could receive targeted pest surveillance and
    detections funds. The recent and rapid spread of the pathogen, soybean
    rust (SBR), in South America prompted ERS, in April 2004, to publish a
    study of the potential economic impacts and policy impacts of its
    windborne entry into the United States, Economic and Policy
    Implications of Wind-Borne Entry of Asian Soybean Rust into the United
    States. USDA used this study to refine rapid response strategies to SBR
    entry, which was confirmed by APHIS in November 2004. ERS built on this
    work to examine the value to producers of USDA's coordinated framework
    to detect and report the presence of Asian soybean rust in different
    producing areas in The Value of Plant Disease Early-Warning
    Information: USDA's Soybean Rust Coordinated Framework, to be published
    in 2006.
        In addition to ERS-led analyses of invasive species issues, PREISM
    has allocated about $3.6 million in extramural research cooperative
    agreements since fiscal year 2003 through a peer-reviewed competitive
    process. These agreements and their accomplishments through 2005 are
    documented in a new report, Program of Research on the Economics of
    Invasive Species Management: Fiscal 2003-2005 Activities. PREISM-funded
    projects are developing analytical tools to address Federal and State
    decision issues such as trade regulation, design and choice of
    exclusion policies, and the selection of options or strategies to
    manage plants pests and animal diseases. For example, researchers from
    Virginia Polytechnic Institute developed a framework and assisted APHIS
    in analyzing the impacts of a trade regulation to allow imports of
    avocados from approved orchards and packers in the state of Michoacan,
    Mexico. The economic model, analysis, and responses to public comments
    were published along with the new avocado regulation in the Federal
    Register (Nov. 30, 2004). To share and review progress made by
    cooperators who received PREISM funding, and to provide a forum for
    dialogue on economic issues associated with agricultural invasive
    species, ERS organized workshops in 2004 and 2005, each with about 100
    attendees from academia and Federal agencies. Among the projects funded
    in fiscal year 2005 were studies of the value of animal traceability
    systems is managing contagious animal diseases, the economic effects of
    phytosanitary barriers to U.S. seed exports, and the benefits and costs
    of policy options to manage risks associated with commercial imports of
    non-native nursery stock.

                     CUSTOMERS, PARTNERS, AND STAKEHOLDERS

        ERS shapes its program and products principally to serve key
    decision-makers who routinely make or influence public policy and
    program decisions. This clientele includes White House and USDA policy
    officials and program administrators/managers; the U.S. Congress; other
    Federal agencies, and State and local government officials; and
    domestic and international environmental, consumer, and other public
    organizations, including farm and industry groups interested in public
    policy issues.
        ERS depends heavily on working relationships with other
    organizations and individuals to accomplish its mission. Key partners
    include: NASS for primary data collection; universities for research
    collaboration; the media as disseminators of ERS analyses; and other
    government agencies and departments for data information and services.
    Examples of successful partnerships with other agencies include
    conservation policy design (NRCS), creating a component to the National
    Health and Nutrition Examination Survey (FNS, Center for Policy and
    Promotion, along with the Department of Health and Human Services), and
    the economics of invasive species management (APHIS). ERS augments its
    research capacity with 93 cooperative agreements, 14 research grants,
    and 26 Memorandums of Understanding (MOUs).

                                CLOSING REMARKS

        I appreciate the support that this Committee has given ERS in the
    past and look forward to continue working with you and your staff to
    ensure that ERS makes the most effective and appropriate use of public
    resources. Thank you.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Bennett. Thank you. Thank you all for your
    testimony.
        We will have some written questions for you, but we
    appreciate your service and appreciate your appearing here
    today.
        [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

                     CAPITAL SECURITY COST SHARING PROGRAM

        Question. The Department of State requires all agencies with an
    overseas presence in U.S. diplomatic facilities to pay a share of costs
    through the Capital Security Cost Sharing Program. The fiscal year 2007
    budget request for the Foreign Agricultural Service (FAS) includes $2.9
    million for this program. What assurances have you received from the
    State Department that FAS is paying for space that they actually
    occupy? Is the agency currently paying for space in facilities where
    they do not have a presence?
        Answer. The State Department has not provided any specific
    assurances that FAS will actually occupy the space for which we are
    billed; however, they are working very closely with the affected
    agencies. Currently, the State Department depends on several databases
    and a data call issued to Posts to collect personnel data. Once the
    data is collected, FAS reviews the results and verifies each position.
    If the State Department numbers differ from ours, we will file an
    appeal.
        The fiscal year 2007 Capital Security Cost Sharing Program is
    estimated to require an additional $2.9 million over the fiscal year
    2006 costs for a total of $6 million.

                     RISK MANAGEMENT AGENCY--CROP INSURANCE

        Question. The fiscal year 2007 budget request includes two new
    legislative proposals for the crop insurance program. One proposal
    would tie farm payments to the purchase of crop insurance protection at
    50 percent or higher of their expected market value. The other proposal
    would allow for a new participation fee that would generate funding for
    information technology improvements. Please explain both legislative
    proposals.
        Answer. The first legislative proposal would provide savings to
    reduce the Federal deficit while increasing participation in the
    Federal crop insurance program. The proposal contains several key
    features that, in combination, are expected to save about $140 million
    on an annual basis. The proposal is identical to last year's deficit
    reduction proposal which was not enacted by Congress. The proposal's
    specifics are summarized below.
      --The proposal would require any farmer that receives a Federal
            commodity payment for his/her crop to buy crop insurance at a
            minimum coverage level of 50/100. This is intended to ensure
            farmers have adequate protection in the event of a natural
            disaster without resorting to ad hoc disaster assistance.
      --The proposal reduces premium subsidies by stated percentages points
            for buy-up coverage levels.
      --The proposal modifies the administrative fee on CAT to equal the
            greater of $100 or 25 percent of the imputed CAT premium,
            subject to a maximum fee of $5,000. This change would make the
            administrative fee more equitable between small and large
            producers.
      --The proposal would also lower the imputed CAT premium rate by 25
            percent.
      --Finally, the proposal reduces the A&O reimbursement on all buy-up
            coverage by 2 percentage points and increases the net book
            quota share to 22 percent, but provides a ceding commission to
            the companies of 2 percent.
        The second proposal is to provide the authorization for a
    participation fee. The participation fee would be used to help fund the
    modernization and maintenance of the Risk Management Agency's computer
    systems. The proposed fee would initially be used, beginning in 2008,
    to fund modernization of the existing information technology (IT)
    systems and would supplement the annual appropriation provided by
    Congress. Subsequently, the fee would be shifted to maintenance and
    would be expected to reduce the annual appropriation. The participation
    fee would be charged to insurance companies participating in the
    Federal crop insurance program; based on a rate of about one-half cent
    per dollar of premium sold. Because it is the companies that will most
    benefit from better, more advanced computer systems, it is reasonable
    that they contribute to the modernization and maintenance of these
    systems. The fee is expected to generate an amount not to exceed $15
    million annually.
        Question. Will the implementation of the proposal to tie payments
    to higher levels of crop insurance eliminate the need for ad hoc
    disaster assistance to farmers?
        Answer. Much of the demand for ad hoc disaster assistance is
    believed to be driven by producers who do not purchase crop insurance,
    or who purchase catastrophic (CAT) coverage. CAT coverage provides a
    maximum indemnity of only 27.5 percent in the event of a total loss.
    The low coverage level for CAT has produced significant pressure for
    additional relief. Linking eligibility for farm program payments to the
    purchase of buy-up levels of crop insurance should mitigate some of the
    demand for ad hoc disaster assistance as a much larger percentage of
    the losses experienced by producers will be covered by the Federal crop
    insurance program.
        Question. Also, in regard to the one half cent per dollar on
    premiums, when was the last time this type service fee was increased or
    has the cost of participating in the program been set for a number of
    years?
        Answer. The fiscal year 2007 budget proposes a ``new''
    participation fee designed to help pay for the modernization and
    maintenance of the Risk Management Agency's computer systems. The
    participation fee to be paid by insurance companies, will generate
    funds estimated to be consistent with similar past Agency budget
    requests. The participation fee will initially supplement the existing
    appropriation to support improved IT systems for the many new programs
    and program enhancements occurring within the Federal crop insurance
    program. Modernization is expected to take about 2 years to complete,
    after which the participation fee will be available to reduce the need
    for appropriated funding. The Federal crop insurance program has seen
    substantial growth over the past several years, yet the Agency's IT
    budget has remained constant. Modernization of the RMA IT system is
    critical in light of the existing systems reaching the end of their
    expected useful life. The modernization system will provide substantial
    benefits to the participation insurance companies and will improve
    RMA's ability to comply with Congressional mandates regarding data
    mining and data reconciliation/data sharing with the Farm Service
    Agency.

                       CODEX AND TRADE CAPACITY BUILDING

        Question. USDA has publicly stated that the vitality and science
    based independence of the United Nations standard setting organizations
    under FAO, specifically Codex Alimentarius and the International Plant
    Protection Convention (IPPC) are critical to advance U.S. agricultural
    trade objectives. A strong American policy presence within these
    organizations is important to effectively represent U.S. agriculture
    interests. Yet, concern has been raised by the U.S. industry that the
    EU policy personnel, and consequently the EU influence, in those
    organizations is far greater than the United States. For example, I
    understand that of the 100 Associate Professional Officers (APOs) at
    FAO, only one is from the United States. Can you speak to this issue
    within the context of your $1.5 million budget request for trade
    capacity building and explain how the requested budget is intended to
    address this stated imbalance.
        Answer. It is critical to place Americans in key positions within
    international bodies like the CODEX and IPPC where they can influence
    policies in crucial areas such as standard-setting. These bodies are
    essential for implementing the Doha Development commitments. The APO
    program is a useful tool for placing more Americans in international
    organizations. Currently, the Netherlands funds about 30 APOs, Germany
    11, Italy 9, and Spain 8. The advancement of science-based, decision-
    making practices in agricultural trade is a well known U.S. priority.
    The APO program, operating within organizations like FAO, not only
    helps to increase U.S. influence in these bodies, but it also assists
    developing member countries to build capacity to better participate in
    standard-setting bodies, comply with international trade agreements,
    and engage as full partners in global trade.
        Part of the $1.5 million requested would be used to expand the APO
    program and place at least one APO in the IPPC or CODEX secretariats,
    where the United States currently has no representation. This would not
    only allow the United States to quickly place competent Americans in
    these increasingly important secretariats, but past experience has
    shown that the APO program can also leverage additional resources from
    the international organizations themselves as well as from other member
    countries. For example, USDA provided $500,000 in funding for two APO's
    to develop a pilot International Food Safety, Animal and Plant Health
    portal at FAO. This initial funding has leveraged additional funding
    from FAO, the Netherlands, Norway, and the Standards and Trade
    Development Facility. The portal was launched at the 2nd Global Forum
    of Food Safety Regulators in Bangkok in 2004. It provides a single
    electronic access point for official information which increases
    transparency in SPS measures and improves national laws and regulations
    across the sectors of food and animal and plant health.
        Another way USDA influences CODEX is through leadership on the
    CODEX Commission as well as chairing and hosting various Committee
    meetings. Ms. Karen Hulebak of USDA's Food Safety Inspection Service
    (FSIS) was elected this year to serve as a Codex Commission vice-Chair.
    Also, the U.S. Codex Office hosts meetings for three Codex Committees--
    the committee on Food Hygiene, which FSIS also chairs; Committee on
    Residues of Veterinary Drugs and Food; and the Committee on Processed
    Fruits and Vegetables. In addition, FSIS provided an employee on a
    temporary duty assignment for a year and a half to the Codex
    Secretariat, who provided secretarial support to the group of
    consultants making recommendations on Codex committee structure and
    mandates, monitored contracts to translate standards into Chinese and
    developed and edited FAO/Codex publications (e.g. ``Understanding
    Codex'').

                 RESOURCE CONSERVATION AND DEVELOPMENT PROGRAM

        Question. The fiscal year 2007 budget proposes to fund the Resource
    Conservation and Development program at $25,933,000. This is a
    reduction of $25,971,000 and 230 staff years. How was this level of
    funding and staff years determined? What is your plan to allocate RC&D
    coordinators? Will you evaluate the needs of each council before
    allocating RC&D coordinators? Since many of the sponsors of these
    councils are local governments, how will this budget affect USDA's
    relationship with rural county commissioners and mayors?
        Answer. The fiscal year 2007 President's Budget recognizes the
    important role RC&D coordinators and councils play in protecting the
    environment in a way that improves the local economy and living
    standards. USDA's goal is to improve Federal efficiency and reduce
    spending. The rationale for the RC&D proposal reflects the belief that
    many councils will have the capacity to be more autonomous by fiscal
    year 2007. An assessment leading up to the proposal included a review
    of current RC&D Coordinator duties and responsibilities to find ways to
    increase efficiency and reduce costs without reducing effectiveness.
    Geographic considerations for remoteness and very large distances were
    included in the overall proposal. The Budget assumes, on average, that
    RC&D coordinators will serve multiple RC&D areas. Large geographic
    distances and complexity in service area will be taken into
    consideration.
        NRCS is updating its analysis on the staffing impacts associated
    with the President's Budget proposal. At the time the Budget proposal
    was initially developed, the Agency estimated that up to 225 current
    RC&D coordinators would need to be reassigned, without counting
    potential retirements.
        The plan to provide assistance through a federally funded RC&D
    coordinator to each RC&D Council takes into consideration three
    different factors. First, NRCS will conduct a business analysis that
    takes into consideration current geographic considerations for
    remoteness and very large distances to see if there could be some
    effectiveness gained through this analysis. In addition, it is expected
    that some RC&D coordinator positions would become vacant due to
    attrition. Over the next 5-years, more than half the Federal workforce
    is eligible to retire. This will create opportunities to once again
    assess effectiveness and service needs. And lastly, there will be many
    opportunities for promotions within the agency for existing RC&D
    coordinators. RC&D employees possess a variety of highly skilled,
    highly desirable, multi-disciplinary backgrounds and would have many
    opportunities for promotion to other positions within the Agency. This
    again would provide the Agency the opportunity to consider service and
    effectiveness criteria on a case-by-case basis.
        NRCS Regional Assistant Chiefs will work closely with State
    Conservationists throughout their regions. Parameters for the number of
    positions per State and Region will include an understanding of the
    geographic attributes and needs associated with serving multi-
    jurisdictions within the region, including the needs of each council.
        USDA will continue to have a strong working relationship with rural
    county commissioners and mayors. For several years, USDA has been
    working with the National Association of RC&D Councils (NARC&DC) to
    increase council capacity by providing resources, training and
    expertise. By fiscal year 2007, many councils will be ready to take a
    more active and autonomous role in addressing local concerns identified
    in their area plans.
        Examples of council capacity building tools used and/or available
    include:
        Publication of a manual for RC&D Council members entitled:
    ``Guidebook For RC&D Directors.'' This manual is designed to help
    Council members carry out their personal and corporate responsibilities
    in governing the RC&D area. This publication is available in hard copy
    and can be downloaded from the NARC&DC website: www.rcdnet.org.
        Training courses with accompanying information that include:
      --RC&D (A Primer)
      --What, Why & How (Basic Roles and Responsibilities)
      --Organizational Capacity Building
      --Nonprofit Financial Management
      --Strategies for Stronger Associations
      --Hiring 101
        Development, publication, and dissemination of guidelines for rural
    communities to use to recognize and respond to drought conditions.
        National and regional workshops for RC&D Councils to increase
    diversity from underrepresented individuals and groups in area plan
    development and implementation.
        National workshop or ``Forum on Entrepreneurial Development'' with
    an emphasis on meaningful community economic development and
    disseminate the information to RC&D Councils.
        National conference on the utilization of alternative energy and
    disseminate information to RC&D Councils.

                           WATERSHED PROJECT BACKLOG

        Question. Please provide the status of the watershed project
    backlog assessment that Bruce Knight mentioned in testimony in December
    2005 before the House Committee on Agriculture. How long will it take
    to complete this assessment? How much will this assessment cost? Which
    account will fund this assessment?
        Answer. The current watershed project unfunded list totals $1.8
    billion. The funding provided for fiscal year 2006 will fund projects
    where sponsors have acquired the necessary land rights and permits to
    proceed with construction. In addition, there are some projects on this
    list categorized as active that have been on the records for 40 years
    or longer. Clearly it is time to work with local sponsors to assess the
    viability of each individual project.
        NRCS is committed to working with local project sponsors to
    determine more accurately the viability of the potential watershed
    project unfunded list. NRCS will assess the viability of unfunded
    projects in two steps. First, we will use internal databases along with
    employee and partner knowledge to determine which projects are clearly
    active and viable. NRCS identified watershed projects that have not had
    requests for implementation funding for the last 2 years or where the
    NRCS state water resource long range plans do not indicate planned
    implementation activity over the next 3 to 5 years. Second, for
    projects that are not clearly active or viable, the sponsors will be
    contacted to establish their continued interest in project
    implementation. The sponsor's role in completing this effort will be
    critical. Upon mutual agreement with the project sponsor, adjustments
    to NRCS's watersheds database will be completed by each State to
    reflect changes agreed upon with regard to project viability. This
    effort is currently underway and will be completed by June 2, 2006.
        The staff time associated with this effort will be minimal. To date
    most of the assessment work has been completed through existing program
    manager knowledge, phone calls and record checks. Depending on the
    sponsor, additional individual case investigations for the assessment
    could be completed with Watershed Surveys and Planning, and/or
    Conservation Technical Assistance funds.

                          RAPID WATERSHED ASSESSMENTS

        Question. How many watersheds have undergone the rapid watershed
    assessment? In which states? In total how many watersheds will go
    through these assessments? How much has been spent on these
    assessments? From which account(s)? How have these assessments improved
    conservation? Please give examples. How much will be spent in fiscal
    year 2007 on these assessments?
        Answer. Thirteen watersheds have been completed using the rapid
    watershed assessment (RWA) approach in California, Oregon, and Idaho.
    Georgia and Ohio have developed assessments similar to RWAs.
    Approximately $390,000 has been spent on these assessments.
        Individual states and local stakeholders decide if they will
    conduct RWAs. NRCS currently anticipates the average cost of completing
    a single RWA on an 8-digit hydrologic unit to be in the range of
    $25,000 to $50,000. NRCS plans to mainly use Conservation Technical
    Assistance Program funding to complete RWAs.
        NRCS has been active with a variety of local, State and Federal
    agencies as well as non-government organizations in developing RWAs in
    the Klamath Basin. Through the use of rapid watershed assessments, NRCS
    and stakeholders have more efficiently targeted specific conservation
    measures to specific watersheds, ensuring the best use of available
    program funds for securing permanent solutions to the issues related to
    the quality and quantity of water.
        The Upper Klamath Basin includes 271,700 acres of irrigated
    agriculture. Based on a series of rapid watershed assessments, NRCS
    determined that approximately 260,500 acres of these irrigated lands
    need some level of conservation treatment including improvements to
    existing irrigation systems. Also identified in the RWAs, the Lower
    Klamath Basin has approximately 41,000 irrigated acres needing
    treatment to improve irrigation water management. Through the RWA
    process, local landowners were able to effectively address these
    conservation issues and identify potential funding sources for
    implementing irrigation improvements.
        NRCS's Upper Klamath Rapid Watershed Assessment concluded improving
    water quality and riparian habitat in Upper Klamath Lake and its
    tributary streams would provide the greatest benefits to the Endangered
    Species Act listed Shortnose and Lost River suckers. As a result of the
    RWA, irrigation improvement practices were identified that would have
    an impact in reducing the amount of warm, nutrient rich irrigation
    tailwater that return to area streams. It identified additional wetland
    and riparian habitat that needed restoring around the lake or along its
    tributary streams, resulting in clean, cool water as well as spawning
    and rearing habitat for endangered suckers.
        Funding decisions have not been made for fiscal year 2007 regarding
    the completion of additional RWAs.

        COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)--PROGRAM ELIMINATION

        Question. The budget request eliminates the Commodity Supplemental
    Food Program, which serves 32 States, 2 Indian reservations, and the
    District of Columbia. The elimination of this program results in a $108
    million reduction from the fiscal year 2006 appropriation. Please
    explain why you chose to eliminate this program. What will the
    participants in CSFP do if the program is eliminated?
        Answer. The President's fiscal year 2007 budget request proposes to
    discontinue CSFP operations and transition eligible CSFP participants
    to other nutrition assistance programs such as the Food Stamp Program
    (FSP) and the Special Supplemental Nutrition Program for Women,
    Infants, and Children (WIC Program). The CSFP is a relatively small
    program which operates in limited areas of 32 States, two Indian
    reservations, and the District of Columbia. In an era of fiscal
    constraint, we face a difficult challenge with regard to discretionary
    budget resources, and must ensure that those limited resources are
    targeted to those programs that are available to needy individuals and
    families, wherever they live.
        If Congress adopts the budget request, we will work closely with
    CSFP State agencies to ensure that any negative effects on program
    participants are minimized and that they are transitioned as rapidly as
    possible to other nutrition assistance programs for which they are
    eligible.
        We are requesting $2 million to provide outreach and to assist
    individuals to enroll in the FSP. We also propose that elderly
    participants who leave the CSFP upon the termination of its funding and
    who are not already receiving FSP benefits will be eligible to receive
    a transitional benefit worth $20 per month ending in the first month
    following enrollment in the FSP under normal program rules, or 6
    months, whichever occurs first. CSFP women, infants, and children
    participants who are eligible for WIC Program benefits will be referred
    to that program as appropriate.

                       FOOD STAMP PROGRAM--PARTICIPATION

        Question. The budget request anticipates declining participation in
    the Food Stamp Program. Specifically, overall participation is expected
    to decrease by 1.1 million in fiscal year 2007. Can you take a moment
    to explain why participation is declining and do you expect these
    reductions to continue?
        Answer. One of the key strengths of the Food Stamp Program is its
    ability to adjust automatically to changing economic conditions. The
    number of participants generally rises as the economy weakens and
    unemployment and poverty increase, and falls as the economy grows.
    Between January 2004 and January 2006, the unemployment rate fell from
    5.7 percent to 4.7 percent, and the number of people working increased.
    In 2005, program participation began to flatten before the Gulf Coast
    hurricanes of the fall. As a result, we expect the number of food stamp
    participants to decline between 2006 and 2007. We currently project
    additional reductions through 2009, after which food stamp
    participation is projected to be fairly flat.

     SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)--
                              LEGISLATIVE PROPOSAL

        Question. The fiscal year 2007 budget request includes a
    legislative proposal to cap State nutrition services and administration
    (NSA) grants at 25 percent. A savings of $152 million is assumed in the
    budget for this proposal. Please explain this proposal. What is the
    current NSA cap, and how will enacting this proposal further the goals
    of the WIC program? If the legislative proposal is not enacted, does
    the budget request fully fund the WIC program?
        Answer. The cap on WIC NSA funding will be applied at the national
    level. In other words, the funds available from the WIC appropriation
    for grants to State agencies will be divided into two components: 75
    percent of the available funds will be released to WIC State agencies
    as food funds and 25 percent of the available funds will be for NSA.
    The requested funding level for fiscal year 2007 would equally reduce
    each State agency's NSA grant from the prior year's NSA grant level as
    needed to ensure that the national total of funds allocated for NSA
    stays within the 25 percent cap.
        Currently, funds available from the WIC appropriation for grants to
    States are divided between food and NSA funds to provide a nationally
    guaranteed administrative grant per participant. During fiscal year
    2006, 26.5 percent of available funds were provided for NSA.

     SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)--
                                  FOOD PACKAGE

        Question. In April 2005, the National Academy of Sciences Institute
    of Medicine released a report that recommended revisions to the food
    package offered to WIC participants. The report recommends that
    revisions to the food package encourage consumption of fruits and
    vegetables, emphasize whole grains, lower saturated fat, and appeal to
    diverse populations. In accordance with these recommendations, I
    understand that a final rule updating the WIC food package will be
    released at the end of 2006. Will the final rule be released at the end
    of this year as required? I understand that the final rule will be cost
    neutral, meaning that the total cost of the food package will not
    change. Will keeping changes to the package cost neutral have an affect
    on the overall make up of the food package?
        Answer. Absent further delays, we fully anticipate that a proposed
    rule can be published this summer. However, affording opportunity for a
    full 90-day public comment period for this important rule may preclude
    issuing an interim final rule within the 18-month statutory deadline of
    November 2006.
        Adding new items to the food package requires adjustments to
    current items in the package. As such, the overall make up of the food
    package would change.

                               MINORITY OUTREACH

        Question. The Food and Nutrition Service provides outreach and
    information on the programs it operates and dietary guidelines. What is
    FNS doing to make sure these important messages are appropriately
    targeted to minority populations, including the rapidly growing
    Hispanic population in the United States? How much does FNS spend
    annually on these information campaigns and specifically on minority
    outreach?
        Answer. For all of the major nutrition assistance programs, program
    outreach and information materials are targeted to reach low-income
    populations, including minority populations and those who speak Spanish
    and other languages beyond English. This includes making program
    application easier for non-English speakers by expanding the number and
    types of products available in Spanish and other languages.
        In food stamps, USDA's largest nutrition assistance program, FNS
    identified three target populations for food stamp outreach
    activities--seniors, the working poor, and immigrants. Each of these
    groups contain large subsets of minority populations, including
    Hispanics. These target populations were selected because they
    represent populations that are hard to reach and have historically low
    food stamp participation rates. FNS makes special efforts to reflect
    cultural diversity in all outreach materials, tools, and resources
    (including photos and cultural sensitivities) and to provide outreach
    materials in multiple languages, whenever possible. Numerous outreach
    materials are available in Spanish as well as English. In addition,
    about six informational publications are available in more than 30
    other languages. Food stamp outreach activities include:
      --Posters, flyers, and brochures available in English and Spanish
            featuring diverse families and individuals.
      --Informational materials available in 35 languages.
      --Collection of ``10 FSP Myths and Facts'' handouts for various
            populations in English and Spanish.
      --Television PSA available in English and Spanish.
      --Toll free number offering information and service in English and
            Spanish.
      --Paid radio advertisements for the past 3 years in English and
            Spanish.
      --Award of small outreach grants awarded to community organizations
            that serve immigrants and minority populations (every year
            since 2001 with the exception of 2003).
      --Photo gallery featuring images of outreach and nutrition education
            for use by State and local outreach providers and featuring
            diverse families and individuals.
      --Food stamp pre-screening tool in English and Spanish.
        In WIC, USDA developed the Fathers Supporting Breastfeeding
    Project, which focuses on educating fathers about the benefit of
    breastfeeding so that they may have a positive impact on a mother's
    decision to choose to breastfeed. The primary target audience for this
    project is African American males because African American females have
    the lowest breastfeeding rates compared to other racial/ethnic groups.
    USDA also recently launched the WIC Hispanic Breastfeeding Promotion
    and Education Project to develop educational resources that
    specifically address the barriers to breastfeeding for Hispanic WIC
    participants.
        USDA conducts a wide range of nutrition education and promotion
    activities to motivate participants to improve their eating and
    physical activity behaviors. Food and Nutrition Service (FNS) nutrition
    education efforts are targeted primarily to participants or potential
    participants in the nutrition assistance programs, rather than to the
    general public. The Center for Nutrition Policy and Promotion (CNPP)
    provides nutrition information for the general public. USDA makes the
    development of materials that promote healthy food choices to the
    Spanish-speaking community, in ways that are understandable and
    culturally relevant, a critical priority. Key efforts include:
      --Development of a comprehensive nutrition education initiative
            targeting low-literacy and Spanish-language populations, to
            help Food Stamp Program recipients and other groups served by
            USDA to overcome their barriers to healthy eating and physical
            activity behaviors, based on the Dietary Guidelines for
            Americans. The materials are planned for release in 2007.
      --Eat Smart. Play Hard. Materials in Spanish promote healthy eating
            and physical activity, including activity sheets, bookmarks,
            posters, and brochures. Over 2.4 million of these Spanish-
            language materials have been ordered by program cooperators to
            date.
      --Development of Eat Smart, Live Strong, a behavior-focused nutrition
            and physical activity intervention for able-bodied, low-income
            seniors, 60-74 years old. The intervention focuses on two key
            behaviors: increasing fruit and vegetable consumption and
            physical activity.
      --The Food Stamp Nutrition Connection (FSNC), an online resource
            system designed to facilitate communication and resource
            sharing among Food Stamp Nutrition Education providers. There
            are 70 nutrition education materials written in Spanish on the
            FSNC Web site, http://www.nal.usda.gov/foodstamp.
        One of the main tenets and philosophies of CNPP's new MyPyramid
    Food Guidance System was to personalize and individualize dietary
    guidance. Upon the release of MyPyramid in April 2005, children and
    Spanish speakers were the first two sub-groups of the U.S. population
    to receive personalized attention. Within the year, USDA released
    MyPyramid for Kids and MiPiramide, the Spanish-language version.
    MyPyramid for Kids features Tips for Families in both English and
    Spanish, an interactive computer game, posters, worksheets, and
    classroom materials to help children learn about the benefits of
    healthful diets and physically active lifestyles.
        With the funds requested for 2007, the CNPP will seek expanded
    translation of MyPyramid materials. We will also look for greater
    message dissemination supported by culturally appropriate consumer
    research and seek greater outreach through public/private partnerships.
        Major FNS/CNPP nutrition education and information expenditures are
    listed below:

         FNS NUTRITION EDUCATION AND INFORMATION ESTIMATED EXPENDITURES
                            [In thousands of dollars]
    ------------------------------------------------------------------------
                                                Fiscal year     Fiscal year
                     Program                       2006            2007
    ------------------------------------------------------------------------
    Food Stamp Program......................         262,900         263,004
    Team Nutrition (for Child Nutrition               15,039          15,034
     Programs)..............................
    WIC Program (general nutrition education         305,599         290,510
     and information).......................
    WIC Program (breastfeeding promotion and          91,091          91,241
     education).............................
    Food Distribution Program...............             200           1,200
    Other Nutrition Education...............           7,504           8,634
                                             -------------------------------
          TOTAL, FNS........................         682,423         669,624
    CNPP Nutrition Education and Information           2,865           4,898
     Expenditures...........................
                                             -------------------------------
          Total, FNCS.......................         685,288         674,522
    ------------------------------------------------------------------------

        Each fiscal year, FNS spends $8 million on national outreach
    activities to promote the nutrition benefits of food stamps. As
    described above, most all of our food stamp outreach activities touch
    minority populations in some way. Thus, while it is not possible to
    break out how much is spent on minority outreach specifically, we
    believe that almost all of it is spent on program information
    activities that impact minority populations.

                 FOOD DEFENSE--FOOD EMERGENCY RESPONSE NETWORK

        Question. The fiscal year 2007 budget requests an increase of $15.8
    million to expand the Food Emergency Response Network (also known as
    FERN) and upgrade FSIS' laboratory capabilities for evaluating a
    broader range of threat agents for food. A part of the President's food
    and agricultural defense initiative, the Food Emergency Response
    Network will be a national network of 100 laboratories for testing of
    food samples for contaminants. The Food Emergency Response Network has
    been an ongoing partnership with FSIS, FDA, and State laboratories
    since fiscal year 2005. How many labs currently participate in FERN?
    Where are they?
        Answer. Currently, there are 26 laboratories actively participating
    in FERN. Of these 26 laboratories, FSIS has cooperative agreements with
    18 State laboratories to begin to build what is, at this time, a very
    limited capacity to test for biological threat agents in food, while
    the Department of Health and Human Services' Food and Drug
    Administration has agreements with 8 State laboratories to develop
    capacity to respond to chemical attacks on the food supply. Over 100
    more laboratories have completed a checklist and volunteered to share
    data with FERN.
        FSIS has cooperative agreements with the following 18 State
    laboratories to build a still very limited capacity to test for
    biological threat agents in food:

    ------------------------------------------------------------------------
                       State                              Division
    ------------------------------------------------------------------------
    Virginia..................................  Virginia Division of
                                                 Consolidated Laboratory
                                                 Services
    Arkansas..................................  Arkansas Department of
                                                 Health
    Delaware..................................  Delaware Health and Social
                                                 Services
    Florida...................................  Florida Department of
                                                 Agriculture and Consumer
                                                 Affairs
    Hawaii....................................  Hawaii State Laboratories
                                                 Division, Department of
                                                 Health
    Indiana...................................  Indiana State Department of
                                                 Health
    Massachusetts.............................  Massachusetts Department of
                                                 Public Health, State Lab
                                                 Institute
    Michigan..................................  Michigan Department of
                                                 Agriculture & Michigan
                                                 Department of Health
    Minnesota.................................  Minnesota Department of
                                                 Agriculture
    Montana...................................  Montana Department of Public
                                                 Health & Human Services
    Nebraska..................................  Nebraska Department of
                                                 Agriculture
    New Hampshire.............................  New Hampshire Public Health
                                                 Laboratories
    New Jersey................................  New Jersey Department of
                                                 Health and Senior Services
    New York..................................  New York State Department of
                                                 Agriculture
    Ohio......................................  Ohio Department of
                                                 Agriculture, Consumer
                                                 Analytical Lab
    Rhode Island..............................  Rhode Island Department of
                                                 Agriculture
    South Carolina............................  South Carolina Department of
                                                 Health & Environmental
                                                 Control
    South Dakota..............................  South Dakota Animal Disease
                                                 Residue & Diagnostic Lab,
                                                 South Dakota State
                                                 University
    ------------------------------------------------------------------------

        The Department of Health and Human Services' Food and Drug
    Administration has agreements with the following 8 State laboratories
    to develop capacity to respond to chemical attacks on the food supply:

    ------------------------------------------------------------------------
                       State                              Division
    ------------------------------------------------------------------------
    Iowa......................................  University of Iowa
    California................................  Regents of the University of
                                                 California
    Arizona...................................  Arizona Department of Health
                                                 Service
    Connecticut...............................  Connecticut Agriculture
                                                 Experimental Station
    Virginia..................................  Virginia Division of
                                                 Consolidated Labs
    Minnesota.................................  Minnesota Department of
                                                 Agriculture
    New Hampshire.............................  New Hampshire Department of
                                                 Public Health
    Florida...................................  Florida Department of
                                                 Agriculture
    ------------------------------------------------------------------------

        Question. How many labs do you hope to add with the increased
    funding?
        Answer. Using fiscal year 2005 funds, FSIS spread $1.2 million
    between 18 laboratories with which the agency has cooperative
    agreements. As a result, more funding is needed to make these labs
    operational within FERN. An operational FERN lab is defined as a
    laboratory that has developed the capability and demonstrated
    proficiency to test meat, poultry, and egg products for 2-3 threat
    agents, either as a screening test or a confirmatory test. It is
    important to note that not all labs will test for the same threat agent
    or agents. The request was for $15.8 million, $13 million of which will
    go to build laboratory capacity and $2.8 million for electronic
    communication in real-time between the laboratories for more rapid,
    timely information sharing and response. With the $13 million FERN
    request for fiscal year 2007, FSIS will be able to ensure that those
    original 18 laboratories plus five additional laboratories are
    operational FERN labs. Thus, by the end of fiscal year 2007 with the
    funding requested, 23 State labs would be capable of operating in FERN
    in the event of an intentional attack, an act of nature, or a hoax and
    help USDA ensure product safety and consumer confidence in the food
    supply.
        FSIS also requests $2.5 million for two data systems to support
    FERN: the electronic laboratory exchange network (eLEXNET), and a
    repository of analytical methods. The eLEXNET is a nationwide, Web-
    based electronic data reporting system that allows analytical
    laboratories to rapidly report and exchange standardized data. This
    system is currently operational in nearly 100 food-testing, public
    health, and veterinary diagnostic laboratories across the country. The
    funding will be used to make eLEXNET available to additional FERN and
    other analytical, food-testing laboratories.
        FSIS is working with FDA to develop a Web-based repository of
    analytical methods compatible with eLEXNET. Access to these methods
    will greatly enhance the ability of FERN and other laboratories to
    respond to emergencies, to use new methodologies and technologies, and
    to enhance efficiency. The requested funding will be used to enhance
    the repository and to populate the repository with numerous methods
    that will be obtained from analytical laboratories.
        Question. What does USDA provide for the State labs with this
    funding--staff, equipment, training?
        Answer. FERN establishes the network of communication between
    levels of government and ensures that all laboratories participating
    have the necessary capacities and capabilities needed to respond to an
    attack, act of nature, or hoax affecting the food supply. FERN enhances
    the abilities of existing laboratories to perform procedures and tests
    through training, proficiency testing, food defense exercises,
    acquisition of new equipment, and the repository of validated methods.
    FERN is able to offer these, and other, resources to the State and
    local labs primarily through funding from cooperative agreements. No
    staff years are provided with these funds.
        Question. How, exactly, do the labs assist USDA in protecting the
    food supply from a potential terrorist attack?
        Answer. FERN enables FSIS to leverage State and local laboratories
    for surge capacity in handling the numerous samples that would be
    required in the event of an attack, act of nature, or hoax that affects
    the food supply and to maintain product safety and consumer confidence
    in the U.S. food supply. The request was for $15.8 million, $13 million
    of which will go to build laboratory capacity and $2.8 million for
    electronic communication in real-time between the laboratories for more
    rapid, timely information sharing and response. The $13 million budget
    request for FERN will enable the agency to manage, maintain, and expand
    the capacities and capabilities of the existing FERN labs and bring new
    labs into the network. The $2.5 million requested for eLEXNET and the
    repository of analytical methods, will enhance the data systems
    supporting FERN.
        There are estimated to be over 50,000 food types and literally
    thousands of biological, chemical, and radiological agents that can be
    added to food that pose a threat to humans. Many different laboratory
    analytical methods are needed to detect these agents. For a large
    number of agent/food combinations, there are no proven or validated
    methods. Part of the FERN effort will be to develop and validate these
    methods and to provide the necessary equipment and training to the
    member laboratories. Because there are such a large number of agent/
    food combinations that may require testing, no single laboratory will
    be able to respond to every threat. The mission of FERN is to develop
    the capability and capacity of existing labs to respond to any type of
    threat to food. Some analyses can be done at a rate of over 1,000 per
    day while others are much slower, perhaps only 10 per day. The
    laboratory capacity is dependent on the specific scenarios and the
    specific threat agent involved. The goal of 100 State labs to be fully
    functional under FERN is an estimate of the capacity necessary to
    address many of the common foodborne threats agents in the vast array
    of food matrices.

                     BUDGET REQUEST--CONSTRUCTION AUTHORITY

        Question. The budget request includes $565,000, from current
    resources, for construction of a laboratory receiving facility at an
    Agricultural Research Service lab in Athens, GA. FSIS currently does
    not have authority to construct facilities, and this is the first time
    FSIS has requested such authority through the budget process. Why is
    this sample receiving facility necessary and how will it benefit FSIS
    operations and performance?
        Answer. In the event of a food safety emergency, a sample receiving
    facility that is separate and distinct from the laboratory in Athens,
    Georgia, would be essential. For instance, if a hazardous material
    arrived at the present sample receiving area, FSIS may have to shutdown
    and decontaminate the entire laboratory. As a result, all incoming test
    samples would be delayed while shipped to one of only two other FSIS
    laboratories and in a food safety emergency, such delays could have a
    serious impact on public health. The Agricultural Research Service
    laboratories in the same building could also be shut down and need to
    be decontaminated. Decontamination can be a long, tedious process. For
    example, the Hart Senate Office Building was closed for a lengthy
    period of time for decontamination. FSIS cannot afford to have its only
    BSL-3 laboratory and a major ARS research laboratory closed for any
    length of time. Thus, a separate sample receiving facility would enable
    the laboratory to continue with its work, even if the receiving
    facility was forced to shut down.
        Question. If funding for the facility comes from current resources,
    what current activities will be negatively impacted by this reduction?
        Answer. No current essential public health activities would be
    negatively impacted by the construction of a laboratory receiving
    facility in Athens, Georgia. Only after the essential public health
    needs are met will the agency consider using other available resources
    to build the facility.

                                     CODEX

        Question. The work of the U.S. Government through Codex has been
    critical in advancing trade in U.S. food and agriculture. So important,
    in fact, that several years ago dedicated funding was identified to
    support the U.S. Codex office. In fiscal year 2006, funding for Codex
    through this appropriations bill is slightly more than $3 million. This
    funding is intended, in part, for international outreach efforts with
    other countries to advance U.S. policy positions. The U.S. food
    industry has expressed concern that these dedicated resources are not
    available for Codex outreach as intended but are being directed to
    general FSIS program activities. Does your office provide an accounting
    of how the Codex money is spent?
        Answer. The U.S. Codex Office is part of the Office of the
    Administrator for the Food Safety and Inspection Service (FSIS), which
    provides funding and tracks expenditures for U.S. Codex Office
    operations, outreach and representational events. The Manager of the
    U.S. Codex Office reports directly to the Under Secretary for Food
    Safety and keeps the Under Secretary informed about the status of the
    U.S. Codex Office budget and expenditures.
        Question. Are other organizations or initiatives, outside of direct
    Codex work, being funded by this specific amount?
        Answer. No, the funding provided will be used for activities
    associated with the work of the Codex Alimentarius Commission and its
    committees, task forces, and working groups.
        Question. Please identify the international outreach programs for
    fiscal year 2007.
        Answer. The U.S. Codex Office manages a vigorous program of
    outreach to developing countries, which involves co-hosting committee
    meetings, organizing multi-day technical seminars on a variety of
    issues, and inviting delegates from developing countries to meet U.S.
    delegates at special, issue-specific workshops. These meetings provide
    opportunities for Codex officials from developing countries to exchange
    views with experts from the United States for the purpose of developing
    working relationships and building confidence in the U.S. positions on
    issues under negotiation.
        One of the United States' on-going objectives is to broaden
    participation in Codex, especially participation by developing
    countries. Many of the least developed countries have varied levels of
    food safety infrastructure, and participation in Codex by
    representatives of these countries is largely disconnected from the
    national experience. While the United States believes that capacity-
    building activities should be funded and managed by other
    organizations, the outreach program of the U.S. Codex Office can help
    developing countries to set priorities for their participation in Codex
    and identify specific objectives for building their capacity to
    participate effectively in Codex negotiations.
        Africa has become a priority for developing new working
    relationships. On April 19-21, 2006, the U.S. Codex Office hosted a
    technical seminar in Maputo, Mozambique for Codex contact points from
    African countries. In 2007, the U.S. Codex Office will follow up on the
    outcomes of this technical seminar.
        The Latin American and Caribbean communities will continue to be
    top priorities, and the U.S. Codex Office will build on the working
    relationships existing with these countries to organize additional
    outreach events, just as the U.S. Codex Office has organized events
    with Latin America and the Caribbean in the previous 3 years.
    Currently, the U.S, Codex Office is working with Argentina, Mexico, and
    Brazil to organize a technical seminar with the member countries of the
    Codex Committee for Latin America and the Caribbean (CCLAC), except
    Cuba. Argentina holds the rotating presidency of CCLAC, Mexico is the
    representative for Latin America and the Caribbean on the Codex
    Executive Committee, and we propose to host this seminar with the
    Brazilians in Rio de Janeiro, June 1-3, 2006. This seminar has two main
    purposes: (1) to enhance the capacity of officials in Latin America and
    the Caribbean countries to participate more effectively in meetings of
    the Codex Alimentarius Commission and its Committees; and (2) to
    strategize about potential new work and new directions for the Codex
    Alimentarius Commission to respond to emerging food safety and trade
    issues in which the United States and the CCLAC members have common
    interests. The agenda features presentations and panel discussions with
    U.S., Latin American and Caribbean experts, and experts will also be
    invited from inter-American institutions (such as the Pan American
    Health Organization (PAHO), the Inter-American Institute for
    Cooperation on Agriculture (IICA)) and from the Food and Agriculture
    Organization (FAO) and the World Health Organization (WHO) which are
    the sponsoring organizations of the Codex Alimentarius Commission.
        In addition, FSIS' Food Safety Institute of the Americas (FSIA),
    established in October 2004 to improve food safety and public health
    training throughout the Western Hemisphere, is promoting more effective
    participation in the Codex Alimentarius Commission. The Western
    Hemisphere has many shared interests in food safety, many of which are
    raised in Codex. FSIA wants to assist these countries in becoming more
    aware of these shared hemisphere interest, and encourage joint
    scientific and unified responses in Codex by the hemisphere. FSIA will
    do this by working with governments throughout the hemisphere to
    establish permanent food safety and public health training programs in
    each country at all educational levels--high school, university, and
    graduate levels. FSIA has its own budget. No Codex funds are used for
    FSIA activities.
        Through FSIA, FSIS hopes to encourage countries to adopt the food
    safety standards developed by Codex as minimum food safety standards
    within their countries.
        By building relationships throughout the hemisphere on a non-
    regulatory basis, FSIA can improve trade and public health in the
    hemisphere. With new trade agreements being implemented, FSIA has an
    opportunity to work closely with these countries to provide a forum for
    discussions about the food safety and public health needs of the
    hemisphere. Scientifically based education and training need
    improvement throughout the hemisphere, and by sharing information and
    finding common solutions, we will all benefit.
        FSIA provides training and education materials to educational
    institutions throughout the hemisphere. Many excellent but
    underutilized educational programs have been developed by international
    and hemispheric organizations such as the PAHO, the IICA, the FAO, and
    the WHO. FSIA promotes these types of existing programs.

                                HUMANE SLAUGHTER

        Question. There are allegations that USDA does not adequately
    inspect the transport and slaughter of horses. Please comment on the
    adequacy of USDA's effort for both of these critical functions.
        Answer. Under USDA's Slaughter Horse Transport Program (SHTP),
    administered through the Animal and Plant Health Inspection Service
    (APHIS) and described in the 1996 Farm Bill, only horses that are fit
    to travel may be shipped in accordance with APHIS regulations. Upon
    arrival at a U.S. slaughter plant, APHIS Veterinary Services personnel
    (1) examine each shipment of horses; (2) accept and review the owner/
    shipper certificate; (3) question the shipper to verify compliance; (4)
    examine each horse after off-loading; (5) inspect the animal cargo area
    of the conveyance; (6) document any violations; and (7) ensure the
    plant provides food and water after off-loading.
        At U.S. borders, port veterinarians review and compare the health
    certificate and the owner/shipper certificate for each shipment. If
    discrepancies are noted, port veterinarians visually examine the horses
    to determine if the crossing should be permitted or refused.
        The SHTP helps ensure that horses are transported humanely to
    slaughter by preventing injuries and ensuring adequate food and water
    so that the horses do not endure unnecessary suffering prior to
    slaughter. Examination of the horses prior to and after shipment is
    critical to ensuring that owners and shippers transport horses humanely
    to slaughter.
        USDA has abided by the prohibition of federally-funded USDA
    inspections of horses presented for slaughter at official
    establishments. The fiscal year 2006 Agriculture, Rural Development,
    Food and Drug Administration and Related Agencies Appropriations Act
    included a section prohibiting the use of appropriated funds to pay the
    salaries or expenses of personnel to inspect horses (ante-mortem
    inspection) after March 10, 2006. Conference report language for the
    Act recognized the Food Safety and Inspection Service's (FSIS)
    obligation under existing statutes to ``provide for the inspection of
    meat intended for human consumption (domestic and exported).''
        While the appropriations bill prohibited appropriated funds from
    being used to pay for ante-mortem inspection, it does not eliminate
    FSIS' responsibility under the Federal Meat Inspection Act (FMIA) to
    carry out post-mortem inspection of carcasses and meat at official
    establishments that slaughter horses. In response to a petition, FSIS
    established a fee-for-service program under which establishments can
    apply and pay for ante-mortem inspection of horses. The interim final
    rule became effective March 10, 2006.
        The fee-for-service program meets all of the Federal inspection
    requirements for slaughter. Under the fee-for-service program, all
    requirements in the regulations authorized by the FMIA that pertain to
    official establishments that slaughter horses continue to apply.
    Inspection program personnel are to continue to conduct all inspection
    activities, including ante-mortem inspection, in accordance with the
    requirements of the FMIA and applicable Federal meat inspection
    regulations, including regulations pertaining to humane handling.
        Question. Will the recently implemented fee-for-service regulations
    regarding ante-mortem inspection of horses at slaughter diminish USDA's
    ability to carry out its duty under the humane slaughter act?
        Answer. No, USDA considers humane handling and slaughter high
    priorities and is committed to ensuring compliance with the Humane
    Methods of Slaughter Act (HMSA). USDA strictly enforces the provisions
    of the HMSA, which, like other Federal meat inspection regulations,
    continues to apply under the fee-for-service program.
        FSIS employs a veterinarian and slaughter line inspectors at every
    federally inspected slaughter establishment. FSIS compliance officers
    also make further inquiries and prepare reports of instances in which
    there are alleged violations of regulations, including violations of
    the humane handling and slaughter regulations. All FSIS livestock
    inspection personnel are trained in humane handling and understand that
    they are obligated to take immediate enforcement action when a humane
    slaughter violation is observed.
        Question. Will the recently enacted language in the Agriculture
    Appropriations Bill allow the USDA to adequately inspect the transport
    of horses for humane treatment?
        Answer. With the language included in the fiscal year 2006
    Agriculture Appropriations Bill, USDA will be able to continue to
    adequately inspect the transport of horses for humane treatment by
    supporting this activity through user fees.
        Question. Do you believe that the USDA is able to insure the humane
    transport and slaughter at these plants in the United States?
        Answer. As long as APHIS is authorized to carry out the SHTP
    activities through either Federal funding or user fees, program
    personnel will be able to help ensure the humane transport of horses to
    slaughter. SHTP personnel help prevent injuries and ensure that the
    horses have adequate food and water so that they do not endure
    unnecessary suffering prior to slaughter. Examination of the horses is
    critical to ensuring that owners and shippers transport horses humanely
    to slaughter.
        All requirements in the regulations authorized by FMIA that pertain
    to official establishments that slaughter horses continue to apply.
    Inspection program personnel are to continue to conduct all inspection
    activities, including ante-mortem inspection, in accordance with the
    requirements of the FMIA and applicable Federal meat inspection
    regulations, including regulations pertaining to humane handling. FSIS
    can deny or withdraw ante-mortem inspection services at horse slaughter
    establishments for any applicable reason under Federal regulations.

                             ANIMAL IDENTIFICATION

        Question. The Congress has provided over $66 million for the
    implementation of an animal identification system. This level of
    funding does not include an additional $18.7 million that was
    transferred from the Commodity Credit Corporation. With that in mind,
    the budget request for fiscal year 2007 proposes another $33 million to
    continue this animal identification exercise. Please provide us with an
    update on the status of animal identification and when you expect a
    national program to be fully implemented.
        Answer. USDA anticipates that the National Animal Identification
    System (NAIS) will be a fully operational system in early 2007, and it
    will consist of three main components: premises registration, animal
    identification, and animal tracking. The standardized premises
    registration system provided by USDA is operational in 40 States. The
    remaining States are using one of several compliant premises
    registration systems, for which they are financially responsible.
    Premises registration continues to be USDA's priority, which the Agency
    supports by providing cooperative agreement funding to States and
    Tribes. The States and Tribes themselves administer the premises
    registration process. APHIS has established benchmarks and timelines to
    achieve full participation in this aspect of the NAIS by fiscal year
    2009.
        The component of NAIS that enables individual animal identification
    became operational in March 2006 and is funded by USDA. Animal
    identification devices will be purchased by producers. The NAIS
    implementation plan calls for increased levels of animals to be
    identified with the Animal Identification Number starting in 2006, and
    for all newborn animals born throughout 2008 to be identified when
    moved from their birth premises.
        The final component of NAIS--the animal tracking databases--will be
    managed and owned by the industry and States. The cost of the animal
    tracking databases will be covered by the industry and States. An
    interim/development phase for these tracking systems will be launched
    in April 2006, and fully operational systems will be in place by
    February 2007. USDA is developing the metadata system that supports the
    integration of multiple animal tracking databases.
        Question. How do you plan to address the infrastructure needs
    (i.e.; eartags, scanners, and private databases) to implement this
    program? For instance, if all the cattle in the United States are ear
    tagged, without a network of scanners in place, the program will be
    unable to operate.
        Answer. In developing NAIS, USDA is establishing data standards and
    the design of the data system. Once the identification system is
    designed, stakeholders will determine which technologies are the most
    appropriate to meet the needs of the system and which methods are most
    cost-efficient and effective. Producers are in the best position to
    determine which animal identification and data collection technologies
    are used, and they will have responsibility for purchasing them.
        Although the marketplace will determine which technologies are used
    to support the NAIS, USDA has established minimum standards and
    requirements for certain species. For example, a visual eartag with the
    Animal Identification Number (AIN) imprinted on the tag has been
    established as the de facto standard for cattle. Other forms of
    identification that may be used with the AIN tag are referred to as
    ``supplemental identification.'' The use of such supplemental
    identification is a decision to be made by the producer. This ensures
    that the additional cost of advanced technology is optional at the
    producer level. Some producers may elect not to use such technologies
    within their herd management program, and USDA does not want to limit
    their participation in the NAIS.
        It is true that automated data collection devices will help the
    industry effectively obtain information on their animals. The
    integration of the NAIS data standards into management systems and
    processes will result in the most successful and cost-effective
    systems. The selection of such technology is best determined by the
    industry sector to ensure their preferences are met in incorporating
    the data standards with their management practices and information
    systems. However, as long as animals are identified according to
    uniform standards established through the NAIS, State and Federal
    animal health officials will have a much better chance of carrying out
    a successful epidemiologic investigation than they would otherwise. The
    technology for identifying animals is rapidly evolving. USDA
    acknowledges the need to have compatibility of systems throughout the
    pre-harvest production chain, but believes producers and the
    marketplace are in the best position to determine which technologies
    are used.
        Question. Please provide a legal opinion explaining the authority
    of the Secretary to create a mandatory national animal identification
    system.
        Answer. The Animal Health Protection Act (AHPA), 7 USC  8301-8317,
    authorizes the Secretary of Agriculture to carry out operations and
    measures to detect, control, or eradicate livestock pests or disease.
    It also provides ample authority to establish and implement either a
    mandatory or voluntary system of animal identification. Further, the
    AHPA enables the Secretary to enter into agreements with States or
    other stakeholder organizations to implement either a mandatory or
    voluntary animal identification program.

                             PREMISE IDENTIFICATION

        Question. Please provide information by State on the total number
    of premises, the total number of premises identified, and the
    percentage of premises identified. Please keep the subcommittee updated
    on these figures quarterly.
        [The information follows:]

        Please note: The estimated number of premises for each State was
    obtained from USDA's National Agricultural Statistics Service 2002
    Census of Agriculture. Based on NASS' definition of a farm, the
    estimated number of premises may not accurately reflect the total
    number of premises in each State for purposes of the NAIS. (Number of
    premises identified as of March 2006)

    ----------------------------------------------------------------------------------------------------------------
                                                                           Total         Number of     Percentage of
                                  State                                  estimated       premises        premises
                                                                         premises       identified      Identified
    ----------------------------------------------------------------------------------------------------------------
    Alabama.........................................................          48,036           1,766            3.68
    Arkansas........................................................          52,878           5,542           10.48
    Arizona.........................................................           9,443             234            2.48
    California......................................................          52,234           2,343            4.49
    Colorado........................................................          36,747           1,667            4.54
    Delaware & Maryland.............................................          13,406           2,108           15.72
    Florida.........................................................          41,458           2,215            5.34
    Georgia.........................................................          46,836           1,385            2.96
    Iowa............................................................          64,327           3,134            4.87
    Idaho...........................................................          29,502          15,073           51.09
    Illinois........................................................          40,810           3,745            9.18
    Indiana.........................................................          49,500           5,105           10.31
    Kansas..........................................................          54,030           3,057            5.66
    Kentucky........................................................          80,823           5,026            6.22
    Louisiana.......................................................          27,650             517            1.87
    Maine...........................................................           7,525             326            4.33
    Michigan........................................................          45,706          10,221           22.36
    Minnesota.......................................................          61,625          10,606           17.21
    Missouri........................................................         109,082           7,771            7.12
    Mississippi.....................................................          41,272             543            1.32
    Montana.........................................................          32,370             312            0.96
    North Carolina..................................................          51,309           2,699            5.26
    North Dakota....................................................          19,716           7,182           36.43
    Nebraska........................................................          43,236           5,734           13.26
    New Jersey......................................................           9,169              70            0.76
    New Mexico......................................................          19,338             467            2.41
    Nevada..........................................................           4,764             934           19.61
    New York........................................................          40,134          13,176           32.83
    Ohio............................................................          72,543           1,417            1.95
    Oklahoma........................................................         105,158           2,904            2.76
    Oregon..........................................................          48,188           1,930            4.01
    Pennsylvania....................................................          68,699          27,987           40.74
    South Carolina..................................................          23,115           1,361            5.89
    South Dakota....................................................          32,216           3,842           11.93
    Tennessee.......................................................          93,529           9,008            9.63
    Texas...........................................................         277,493           9,711            3.50
    Utah............................................................          20,981           6,807           32.44
    Virginia........................................................          51,097           2,686            5.26
    Vermont.........................................................           7,341              78            1.06
    Washington......................................................          34,541             947            2.74
    Wisconsin.......................................................          74,511          47,171           63.31
    West Virginia...................................................          26,582           7,452           28.03
    Wyoming.........................................................          14,615             227            1.55
                                                                     -----------------------------------------------
          Total.....................................................       2,083,535      236,486I77  ..............
    ----------------------------------------------------------------------------------------------------------------

      OFFICE OF THE UNDER SECRETARY FOR MARKETING AND REGULATORY PROGRAMS

        Question. The Under Secretary position for Marketing and Regulatory
    programs is currently vacant. This position is one that is very
    significant based on current issues that the Department of Agriculture
    continues to monitor. For instance, this office provides oversight and
    management of Department actions related to avian influenza, pest
    eradication programs, marketing and grading of commodities, and animal
    disease surveillance.
        Please provide us with an update on this Under Secretary position.
    Also, how long do you expect this position to be vacant?
        Answer. The Secretary appointed Dr. Charles ``Chuck'' Lambert as
    the Acting Under Secretary for Marketing and Regulatory Programs on
    November 14, 2005. Dr. Lambert served as Deputy Under Secretary for
    Marketing and Regulatory Programs since December 2, 2002. The
    Department anticipates that the President will nominate someone for
    this position in the very near future.

                                AVIAN INFLUENZA

        Question. Please give us a status of avian influenza worldwide.
        Answer. Avian influenza (AI) is a disease found among poultry. AI
    viruses can infect chickens, turkeys, pheasants, quail, ducks, geese,
    and guinea fowl, as well as a wide variety of other birds, including
    migratory waterfowl. Each year, there is a flu season for birds just as
    there is for humans and, as with people, some forms of the flu are
    worse than others.
        AI viruses can be classified into low pathogenicity and highly
    pathogenic forms, based on the severity of the illness they cause in
    poultry, and within each of these forms are numerous subtypes. Most AI
    strains are classified as low pathogenicity avian influenza (LPAI) and
    cause few clinical signs in infected birds. Incidents of LPAI are
    commonly detected in domestic poultry flocks, and LPAI does not pose a
    serious threat to human health. However, two subtypes of LPAI can
    potentially mutate into a more dangerous form, and USDA is initiating
    programs to monitor those subtypes.
        In contrast, high pathogenicity avian influenza (HPAI) causes a
    severe and extremely contagious illness and death among infected birds.
    The HPAI subtype that is considered to be the most serious is H5N1. Of
    the few avian influenza viruses that have crossed the species barrier
    to infect humans, H5N1 has caused the largest number of detected cases
    of severe disease and death in humans.
        The World Organization for Animal Health reports that H5N1 HPAI has
    been detected in over 40 countries in 2005 and 2006. Nine countries
    have reported laboratory-confirmed cases of H5N1 influenza in humans,
    according to the World Health Organization.
        There is no evidence that HPAI currently exists in the United
    States. Historically, there have been three HPAI outbreaks in poultry
    in this country--in 1924, 1983 and 2004. No significant human illness
    resulted from these outbreaks.
        Question. Also, please provide an update on actions taken by your
    agency and how you are preparing for avian influenza.
        Answer. Our safeguarding system against avian influenza (AI)
    encompasses, among other things, (1) cooperation with States in
    targeted and passive surveillance; (2) cooperative efforts and
    information sharing with States and industry; (3) outreach to producers
    regarding the need for effective on-farm biosecurity practices; (4)
    trade restrictions on poultry and poultry products from overseas; and
    (5) anti-smuggling programs.
        Surveillance.--National surveillance for AI is accomplished through
    several means: (1) the National Poultry Improvement Plan (NPIP), a
    cooperative Industry-State-Federal program, which has a program for
    breeder flocks that has been in place since 1998; (2) State and
    university laboratories, which test suspect cases; (3) industry, which
    works with States to conduct export testing at slaughter; and (4)
    States, which conduct surveillance in areas where AI has historically
    been a concern (e.g., the live bird marketing system).
        Low Pathogen Avian Influenza (LPAI) Surveillance and Control.--
    APHIS has developed a Federally-coordinated and State-assisted domestic
    LPAI program that provides surveillance for H5/H7 AI in two areas: (1)
    the live bird marketing system, and (2) the U.S. commercial broiler,
    layer, and turkey industries. By doing so, USDA and its partners will
    prevent the possible mutations and reassortments of the low-
    pathogenicity virus to its highly pathogenic form; reduce the
    likelihood of the virus becoming a zoonotic agent, thereby protecting
    the public (human health); and preserve international trade in poultry
    and poultry products.
        Live Bird Market System.--In October 2004, APHIS established the
    live bird market segment of the National Control Program by publishing
    uniform standards to prevent and control the H5 and H7 LPAI subtypes in
    live bird markets. These standards are now being implemented. APHIS
    enters into cooperative agreements with States that have live bird
    market activities, as well as Official State Agencies and NPIP
    authorized laboratories participating in the NPIP LPAI program. States
    will use funds to implement uniform guidelines for all participants in
    the live bird market system in the areas of State licensing, AI
    testing, recordkeeping, sanitation, biosecurity education and outreach,
    surveillance, inspections, and response to positive facilities. Funds
    also provide for equipment, supplies, and personnel to inspect and
    collect samples within the live bird market system; perform trace backs
    and trace forwards; and support additional field and laboratory
    activities essential to the program. By the end of fiscal year 2005,
    cooperative agreements for the live bird market system LPAI program
    were initiated with 21 States (California, Delaware, Florida, Georgia,
    Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Minnesota,
    Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania,
    South Carolina, Texas, Vermont, and Virginia).
        Commercial Poultry.--The NPIP is developing the commercial poultry
    segment of the LPAI surveillance. The surveillance program will provide
    for H5 and H7 AI monitoring of participating broiler, table egg, and
    turkey production flocks and their respective breeding flocks. The
    adopted program is currently proceeding through the regulatory process
    that will fully establish this voluntary program as part of the NPIP.
    Official State Agencies use funds to work with NPIP LPAI participants
    to conduct active and passive surveillance and to develop State
    containment and response plans to enhance their ability to detect and
    respond to LPAI. This also facilitates trade through the documentation
    of disease-free status. Funds also provide for supplies and labor for
    conducting tests, laboratory cost for conducting LPAI clinical
    diagnostic surveillance, laboratory equipment to conduct the official
    tests of the NPIP LPAI program, site visits, sample collection,
    transportation, and submission to authorized laboratories and NVSL.
    APHIS has memoranda of understanding in place with 48 official State
    agencies to carry out commercial flock surveillance through the NPIP.
    The rule to establish the surveillance program is in the final stages
    of clearance.
        Domestic Surveillance of Migratory Birds.--On March 20, 2006, USDA
    announced an enhanced national framework for early detection of HPAI in
    wild migratory birds in the United States. This readiness plan and
    system builds on, significantly expands, and unifies ongoing efforts
    among Federal, State, regional and local wildlife agencies. Because
    Alaska is at the crossroads of bird migration flyways, scientists
    believe the strain of highly pathogenic H5N1 currently affecting
    Southeast Asia would most likely arrive there first if it spreads to
    North America via migratory birds. Thus, the plan recommends a
    prioritized sampling system with emphasis in Alaska, elsewhere in the
    Pacific flyway, and the Pacific islands, followed by the Central,
    Mississippi, and Atlantic flyways.
        The ability to effectively prevent the spread of highly pathogenic
    H5N1 to domestic poultry operations is greatly enhanced by being able
    to rapidly detect the pathogen if it is introduced into wild migratory
    birds in the United States. The interagency plan outlines five specific
    strategies for early detection of the virus in wild migratory birds,
    including (1) investigation of disease outbreak events in wild birds;
    (2) expanded monitoring of live wild birds; (3) monitoring of hunter-
    killed birds; (4) use of sentinel animals, such as backyard poultry
    flocks; and (5) environmental sampling of water and bird feces.
        In spring 2006, under the interagency plan, the USDA and its
    cooperators plan to collect between 75,000 and 100,000 samples from
    live and dead wild birds in all States and 50,000 samples of water or
    feces from high-risk waterfowl habitats across the United States. The
    U.S. Geological Survey will initially screen 11,000 of the live bird
    samples at its National Wildlife Health Center in Madison, Wisconsin.
    The remaining samples will be initially tested at labs certified by
    USDA in the National Animal Health Laboratory Network. Suspected
    findings of HPAI will be further tested and diagnosed by the National
    Veterinary Services Laboratory. Since the summer of 2005, the
    Department of Interior (DOI) has been working with Alaska to
    strategically sample migratory birds in the Pacific flyway. DOI has
    already tested more than 1,700 samples from more than 1,100 migratory
    birds. No highly pathogenic isolates have been detected. Since 1998,
    USDA has tested over 12,000 migratory birds in the Alaska flyway; since
    2000, almost 4,000 migratory birds in the Atlantic flyway have been
    tested. All birds in these flyways have tested negative for the highly
    pathogenic H5N1 virus of concern.
        Education and Outreach.--The USDA's Biosecurity for the Birds
    Campaign is an outreach initiative designed to educate noncommercial
    poultry owners about the signs of AI and other poultry diseases;
    promote the importance of practicing biosecurity; and encourage rapid
    reporting of clinical signs of disease and/or unexpected deaths. The
    advertising campaign began in July 2004 and has reached a circulation
    of over 125 million.
        Trade Restrictions and Anti-Smuggling Program.--USDA maintains
    import restrictions on poultry and poultry products from countries
    affected by H5N1. Furthermore, all imported live birds (and returning
    U.S.-origin pet birds) must be quarantined for 30 days and tested for
    the AI virus before entering the country. USDA works closely with the
    Department of Homeland Security's Customs and Border Protection to
    enforce import restrictions. To ensure compliance with restrictions,
    APHIS concentrates on identifying smuggled poultry products and live
    birds from H5N1-affected countries. APHIS also conducts routine
    surveys, special operations, and marketing activities focusing on H5N1
    products in commerce and at ports of entry. All suspected violations
    are forwarded to APHIS' Investigative and Enforcement Services staff
    for further investigation. Civil and/or criminal penalties may be
    issued for violations.
        APHIS has also increased its monitoring of domestic commercial
    markets for illegally smuggled poultry and poultry products. USDA works
    with trading partners and the World Organization for Animal Health
    (OIE) to maintain safe trade.
        Responding to an Outbreak.--In the event of an HPAI outbreak, APHIS
    has the Foreign Animal Disease management infrastructure to conduct an
    emergency response that would occur at the local level, in accordance
    with the National Animal Health Emergency Management System's
    guidelines for highly contagious diseases. Should the disease be
    detected in commercial flocks or in back yard flocks, affected flocks
    would be quickly quarantined to prevent spread. Sick and exposed birds
    would be euthanized and the premises cleaned and disinfected to stamp
    out the disease. USDA would conduct epidemiology investigations to
    determine the source of the virus, and to track the movement of birds
    to contain spread.
        To ensure immediate deployment of supplies necessary to contain,
    control, and eradicate an HPAI outbreak, APHIS is building a stockpile
    of needed vaccines, antiviral, and therapeutic products including
    reagents, disinfectants, and equipment. We are also conducting
    simulated exercises specific to avian influenza to ensure an effective
    response to an outbreak of the disease. Further, APHIS is developing
    models of the potential impacts of avian influenza outbreak in the
    United States and alternative control strategies.
        If the scope of the HPAI outbreak is beyond APHIS' and the affected
    State's immediate resource capabilities, additional resources can be
    obtained through the following mechanisms: the National Response Plan's
    Emergency Support Function #11 ensuring that animal-health emergencies
    are supported in coordination with the emergency support function that
    covers public health and medical services; and the National Animal
    Health Emergency Response Corps and various State response corps can be
    activated. These private veterinarians and animal health technicians
    are ready to assist on short notice.

                              HURRICANE ASSISTANCE

        Question. The Congress recently provided emergency funding through
    the hurricane supplemental for a number of programs that are within the
    rural development mission area. To be more specific, we provided
    supplemental funding for the Rural Community Advancement Program and
    Rural Housing.
        Please provide us with an update on the Department's use of the
    funds. What additional needs are you aware of in rural areas that were
    affected by Hurricane Katrina?
        Answer. On March 13, 2006, Rural Development published a Notice of
    Funding Availability (NOFA) in the Federal Register implementing the
    hurricane supplemental provisions of Public Law 109-148.
        The supplemental provided $35 million in budget authority for our
    direct and guaranteed homeownership programs, $10 million for direct
    homeownership repair loans, and $20 million in direct homeownership
    repair grants. These funds have been allocated to the gulf region. We
    expect that all direct loan and grant funds will be obligated in fiscal
    year 2006. Of the $15 million of budget authority for guaranteed
    homeownership loans ($1.3 billion in deliverable program level), we
    expect the majority of these funds will be carried over into fiscal
    year 2007. We are also planning to use a portion of this budget
    authority to implement a mortgage recovery program for our guaranteed
    homeownership customers. Under this program, Rural Development will
    advance to a lender up to 1 year's worth of payments to bring the
    customer to a current status. To be eligible for the program, the
    customer had to be in good standing with the lender prior to the
    hurricanes and have a reasonable prospect for success. The debt would
    be secured by a non-interest bearing soft-second lien on the property
    payable upon sale or transfer of title. Rural Development will be
    publishing a NOFA on this initiative in the near future.
        The Water and Environmental Programs received $45 million in budget
    authority. We continue to monitor the situation with regard to
    telecommunications and electric demands, but to date, we have not
    received any applications. The first request for 2005 hurricane funds
    was received on April 10, 2006, and is in the process of being reviewed
    for funding qualifications.
        Additional demand for our programs is still difficult to estimate.
    Rebuilding of the housing stock in the gulf region is very dependent on
    ensuring that adequate infrastructure exists, on-going negotiations
    between existing homeowners seeking Federal Emergency Management Agency
    (FEMA) and insurance benefits, lack of builders, and high building
    costs. Our local field offices continue to work with our customers and
    within these rural communities to help with recovery efforts.

                              515 HOUSING PROGRAM

        Question. The fiscal year 2007 budget request eliminates funding
    for the 515 Rural Rental Housing Program. The 515 housing program
    provides funding for construction and revitalization of affordable
    rental housing for rural families who have very low to moderate
    incomes.
        If the Congress does not provide funding for the 515 housing
    program, will low income citizens have any other option when it comes
    to affordable housing?
        Answer. Yes. Rural Development's section 538 Guaranteed Rural
    Rental Housing Program (GRRHP) provides affordable housing to very-low
    and low income families. The section 538 program works in partnership
    with other financing entities to create affordable housing. The lender
    provides the financing to construct or renovate affordable housing,
    Rural Development guarantees the loan. Guaranteed loans generate 10
    times more loan funds for the same budget authority than do direct
    loans, and attract 2.5 times more private sector leveraged money. More
    than 90 percent of the closed loans in the portfolio have 9 percent tax
    credit dollars. Tax credits require owners to achieve affordability
    targets, resulting in high percentages of low and very low income
    tenants. Many tenants in section 538 properties have section 8 vouchers
    which assist the tenants in paying rent. The program also offers
    interest credit subsidies that assist in lowering the interest rate
    throughout the term of the loan. The subsidized interest rate keeps
    rents low for tenants. The section 538 program requires that rents not
    be more than 30 percent of 115 percent of the area median income, and
    average rents for all units at the property cannot be more than 30
    percent of 100 percent of area median income.
        For example, last year the following was provided for new
    construction:
        [The information follows:]

    COMPARING RENTAL UNITS PRODUCED IN FISCAL YEAR 2005 WITH SECTION 515 AND
                              538 BUDGET AUTHORITY
    ------------------------------------------------------------------------
                                                                Guaranteed
                                               Direct loans        loans
    ------------------------------------------------------------------------
    Budget Authority........................     $13,200,000      $3,462,000
    Funding Authority.......................     $28,013,000     $99,200,000
    Units Produced..........................             783           3,313
    Tenants < 60 percent of Area Median                  720           1,000
     Income (Est.)..........................
    ------------------------------------------------------------------------

        While the average incomes may appear different ($10,036/year
    adjusted income in Section 515 vs. $18,400/year gross income in Section
    538), the aggregate number of families served in the very low income
    category is greater in Section 538.

                         RURAL HOUSING VOUCHER PROGRAM

        Question. In fiscal year 2006, Congress included $16 million for a
    new rural housing voucher program. This funding is available to assist
    tenants who are unable to reside in the current rental arrangement due
    to a property owner exiting the program. The fiscal year 2007 budget
    request increases the funding level for housing vouchers to $74
    million.
        Please take a moment to explain the current status of the $16
    million that was provided for fiscal year 2006. Also, do you expect the
    funding that has been provided for the current fiscal year to meet the
    demand?
        At this point, it seems difficult to determine how many owners will
    choose to prepay and exit the program. Please explain how the
    Department determined this level of funding for fiscal year 2007.
        Answer. On March 20, 2006, Rural Development published a NOFA
    announcing the availability of a voucher demonstration program and has
    started to utilize the $16 million that was provided for fiscal year
    2006. The first Rural Development Vouchers were issued in early April.
    We anticipate that demonstration funding will be sufficient to provide
    2,700 vouchers to protect tenants in projects that prepay during fiscal
    year 2006.
        The Comprehensive Property Assessment (CPA) found that 10 percent
    of the properties (approximately 1,700) could be economically viable to
    prepay, if permitted. This is estimated to be about 46,000 units, with
    approximately one-third of the prepayments occurring in each of the
    first 3 years. The $74 million proposed fiscal year 2007 funding level
    allows USDA to fund approximately 15,000 units at a per voucher funding
    level of slightly over $400 per month. This will include the renewal of
    up to 2,700 vouchers funded during fiscal year 2006. However, the
    specific dollar amount and number of tenants is dependent on the number
    of properties that pre-pay, their location, and the market conditions
    at the time.

                              WATER AND WASTEWATER

        Question. The budget request proposes to change the calculation of
    the interest rate for water and wastewater grants from the fixed rate
    of 4.5 percent to a floating rate set at 60 percent of the market rate.
        Please take a moment to explain the reason why this proposal has
    been included and how it will affect the current program.
        Answer. The reason the President's budget proposed a change in the
    method it uses to determine its loan interest rates is to enable
    communities to better use available loan funds and make the lowest rate
    more reflective of changing market rates. Under our current method of
    establishing a three-tier interest rate, the market rate is indexed
    quarterly to the Bond Buyer 11 GO Bond Index. The poverty rate is fixed
    at 4.5 percent and the intermediate rate is halfway between the market
    and poverty rates.
        In the last 12 quarters the market rate has been at or below 4.5
    percent 7 times, effectively reducing our three-tier to a one-tier
    interest rate schedule. To avoid this, we are proposing to index all
    three interest rate tiers to the 11 GO Bond Index. The market rate will
    remain at the 11 GO Bond Index, the intermediate rate will be 80
    percent of the 11 GO Bond Index and the poverty rate will be 60 percent
    of the 11 GO Bond Index. The final rate will be 3.2 percent for fiscal
    year 2007.
        Question. Most importantly, would this be an administrative change
    or will it require legislative language?
        Answer. The change in rate calculation is administrative.

                                ORGANIC RESEARCH

        Question. Please provide information on all current research on
    organic agriculture performed by ERS and ARS or funded through CSREES.
        Answer. A search of the Current Research Information System
    indicates that there are 187 active organic agriculture research
    projects supported by CSREES. These projects are being conducted in 42
    States with 57 different cooperating land-grant university or other
    institutional partners. In total, these projects support an equivalent
    of 46 scientist years, and the funds are fairly evenly distributed
    across the four CSREES regions. The $10.2 million invested in these 187
    projects is further leveraged by the State partners to increase funding
    support to $20.5 million for organic research.
        An assessment of all Agricultural Research Service research
    activities supporting organic agriculture has been completed. Of $18.4
    million spent by ARS that directly benefits organic agriculture, $4.7
    million is spent for research conducted in the field under conditions
    that are the same or similar to certified organic. Other ARS research
    that indirectly benefits organic agriculture totals $44.1 million. ARS
    now has a national program leader for Integrated Agricultural Systems
    who oversees ARS organic agriculture research. Based on the customer
    input from the 2005 ARS organic agriculture workshop, ARS scientists
    are encouraged to incorporate organic agriculture objectives into
    research plans as part of the next national program cycle. New organic
    field research sites are being planned at Ames, Iowa, Mandan, North
    Dakota, and Fort Pierce, Florida, in addition to field research already
    conducted at Salinas, California, Lane, Oklahoma, Beltsville, Maryland,
    Dawson, Georgia, Morris, Minnesota, Weslaco, Texas, and Orono, Maine.
    ARS is developing a national strategy to identify the greatest barriers
    to organic agriculture production in different regions of the country.
    ARS will use organic agriculture customer input to develop specific
    research problems for the 2007 Integrated Agricultural Systems National
    Program Action Plan.
        The Economic Research Service has been tracking organic acreage and
    livestock, by commodity since 1997, and partnered with NASS in
    increasing the availability of production data and statistics. More
    recently, ERS has gotten involved in organic marketing and social
    science research, including work comparing United States to European
    organic policy, issues and trends in retailers and handlers and
    consumer data analysis. The most recent addition to their research
    projects is data tracking wholesale organic produce prices. In terms of
    leading the research agenda, ERS has sponsored two workshops in the
    past 5 years to frame the consumer, production and environmental issues
    that warrant more research.
        The National Agricultural Library, through its Alternative Farming
    Systems Information Center, general reference and referral services,
    document delivery services and collection development provides access
    to and/or can obtain access to published research on organics conducted
    outside the United States. Some of the information is made available
    through the AFSIC Web site, the NAL Agricola database and through other
    databases to which NAL has access. NAL helps organic farmers to locate
    information on organic research that is conducted nationally and
    internationally.
        Question. Please provide information on all statistics on organic
    agriculture published through NASS.
        Answer. Only one directed question on organic sales was included in
    the 2002 Ag Census, and NASS reported statistics for the value of
    certified organically produced sales by total sales and number of
    farms. The 2007 Census of Agriculture was modified to address the
    increasing data needs of the organic sector and will ask a number of
    new questions of producers in Section 22. Respondents will be asked
    whether the operation is a certified organic operation, how many acres
    were used for organic production, the total value of sales for crops
    and livestock produced and sold, and how many acres were being
    converted to organic production in the past year.
        NASS also conducts the Agricultural Resource Management Survey
    (ARMS) that asks very specific questions about production practices,
    including organic, which together with other detailed data could
    provide rich analyses of the financial performance, sociodemographic
    and marketing choices and trends of organic producers. This cooperative
    arrangement with the Economic Research Service is likely to increase
    the level of data and research available. For example, the ARMS for
    dairy, added an oversample of 700 organic dairy farmers to this survey.
    An expanded section on pasture, organic certification, and other
    questions to capture aspects of organic production that can be
    contrasted with conventional dairy production systems were also added.
    A similar project is underway to explore the costs and production
    practices of organic soybean producers through the ARMS survey program.
        Question. How would the amount of research and statistical
    information available for organic agriculture compare to that for other
    sectors of agriculture?
        Answer. According to the World Trade Organization's International
    Trade Centre, certified organic products make up between 2 and 2.5
    percent of total retail food sales in the United States. ARS research
    in direct support of organic agriculture is $18.4 million, or 1.4
    percent of its total budget in fiscal year 2005. CSREES research in
    direct support of organic agriculture is $10.2 million or 0.8 percent
    of its total budget in fiscal year 2005.
        The data on organic production has been relatively scarce, a
    situation that is being remedied with the ERS/NASS ARMS, and will also
    improve with the addition of questions to the 2007 Ag Census. With the
    increasing inclusion of questions on organic sales, acres and
    production practices relevant to organic producers, comparable data
    will be available on organic producers.
        On the marketing side, data and statistics on organic agriculture
    are less available than for conventional products. Again, ERS has taken
    lead in increasing the amount of information available for some
    products and geographic markets, but until the Agricultural Marketing
    Service (AMS) adapts their price reporting to include more delineations
    for organic product lines, and explores how prices are discovered
    differently, for example through direct markets, little useful price
    information will be available to organic producers and marketing
    channel partners. AMS is currently making changes that will result in
    greater availability of marketing information on organic products.
        Question. What are the organic agriculture's greatest areas of need
    for research and statistical information?
        Answer. The research topics identified at the ARS Organic
    Agriculture Customer Workshop in January 2005 suggest where more
    research is needed in core areas of production, processing, resource
    management and economics. These topics include how organic production
    contributes to different aspects of food quality, safety and security,
    developing production systems to increase profitability, ways to manage
    and measure the health of soils, the environmental benefits from
    organic production systems, ways to achieve the greatest productivity
    in organic production, the contributions of organic production to
    overall sustainability, genetic materials specific to organic
    production systems, and biologically-based strategies to manage
    diseases, weeds and insect pests.
        A recent white paper on organic agriculture developed by CSREES
    identified a number of research priorities that will facilitate organic
    production. The research priorities include developing an improved
    understanding and management of soil fertility, pest management,
    livestock production and health; the development and evaluation of
    adapted cultivars and breeds, assessment of the long term impacts of
    whole-farm systems; the evaluation of the economic, business and social
    aspects of various organic production systems to improve grower
    returns, reduce market barriers, marketing strategies to increase
    consumer demand; the development of science-based information on which
    to base organic regulations, thereby assuring rational regulation,
    providing options to overcome current constraints, and assisting in
    overcoming the increasing number of complex, technical barriers to
    foreign trade; assessment of the production and processing practices
    for impact on consumer valuation of various attributes such as
    identifying: varieties with enhanced flavor and nutrition, improved
    practices to add value and enhance shelf life and quality, effects of
    production systems on product nutrition and quality, and mechanisms to
    minimize GMO contamination of organic products; and the identification
    of the marketing and policy constraints on the expansion of organic
    agriculture, especially among conventional growers who would otherwise
    transition to organic.
        The high interest in, and widespread use of, data collected by the
    ERS on organic production scale and growth would suggest that any new
    data that can be collected on certified acres, including the detailed
    information collected in the Agricultural Resource Management Survey,
    would be a good investment. But, after consultation with the Economic
    Research Organic Work team, the true need is information on prices,
    marketing margins, marketing practices, trade data and other
    information that would allow for better research on competitiveness,
    profitability, emerging marketing trends and how the organic food
    market performs under its evolving growth and change in structure.

                                   AVIAN FLU

        Question. Please provide information on all current USDA research
    on highly pathogenic avian influenza. Please provide a brief
    description of the research topic, where it is being performed, and the
    funding history by fiscal year.
        Answer. Avian influenza (AI) presents a major disease threat to the
    U.S. poultry industry. The recent highly publicized outbreak of H5N1
    avian influenza (AI) in chickens and people in Hong Kong illustrates
    the potential public health concerns that may surface as a result of AI
    infections. In 1997, a deadly form of AI (H5N1) infected poultry farms
    and live poultry markets in Hong Kong and was associated with 18
    hospitalized human cases, of which six died. More recently, a similar
    virus has been seen spreading in poultry throughout Asia and Europe and
    is occasionally infecting humans (approximately 200 cases and 100
    deaths). Less pathogenic strains of avian influenza have caused
    problems in many U.S. turkey flocks and live poultry markets since the
    1960's, although few commercial chicken flocks were involved. Because
    of research on AI viruses in recent years we now know that some viruses
    can rapidly change from causing only mild disease to ones that cause a
    deadly disease in chickens. It is likely that the longer a virus
    infects commercial poultry, the more likely it is to cause the severe
    form of the disease. This research seeks to understand the changes that
    are required for this shift in ability to cause disease. The research
    also seeks to control the presence of AI viruses in poultry by
    development of new and more effective vaccines and to develop tests to
    more rapidly diagnose infection in chickens.
        It is crucial that we both seek ways to eradicate or control these
    AI viruses and to understand their potential for a virulence shift. The
    research takes several approaches to these goals including: identifying
    and evaluating the best vaccination approaches to control the disease;
    identifying the source(s) and family relationships of the viruses;
    characterizing the events leading to increase in virulence;
    characterizing the chicken's response to infection with AI viruses; and
    characterizing the factors that allow AI viruses to cross infect other
    species of animals. To aid in the detection and control of the virus,
    ARS developed and APHIS validated a rapid detection assay for Avian
    Influenza Virus (AIV), which is now widely deployed into the National
    Animal Health Laboratory Network.
        For the control of low pathogenic AI outbreaks, vaccination is
    being more commonly considered, because it can potentially help control
    an outbreak at a lower cost than depopulation programs. At ARS, the use
    of currently available and new vaccination strategies are being
    investigated for the control of AI. Currently only two types of
    vaccines are available for use for AI, killed adjuvanted vaccines and
    fowlpox-vectored vaccines. Our research has shown that to get optimal
    protection from these vaccines, it is important to match the vaccine to
    the challenge strain. A better match of vaccines allows less virus to
    be shed from vaccinated but infected birds. Additional research has
    shown that when vaccination is used on a widespread basis antigenic
    drift, similar to what is seen with human influenza viruses, can be a
    problem for decreased effectiveness for the vaccine. Additional
    research has been focused on using viral-vectored or recombinant
    vaccines for AI including fowlpox vectored vaccines, replication
    incompetent alphavirus vectors, and Newcastle disease virus vectored
    vaccines. All three of these vaccines types have shown to provide
    protection from influenza challenge, and can provide the advantage of
    use as a DIVA (differentiate infected from vaccinated animals) vaccine.
    These vaccines are still being evaluated to determine if they have
    significant advantages over commercially available vaccines and can be
    produced in a cost-effective manner. Additional vaccine technologies,
    including the reverse genetics approach to create AI viruses that can
    also be used with the DIVA approach have also been shown to be
    effective.
        To aid in the understanding of AI epidemiology, AI viruses received
    recently from U.S.A. (low pathogenic), Hong Kong, Italy, El Salvador,
    Chile, Netherlands, Indonesia, Viet Nam, and South Korea are being
    classified for disease causing potential. Research studies include
    molecular characterization related to the lethality of the viruses, the
    search for genetic markers for this lethality, and investigating the
    epidemiology and spread of the viruses. Pathogenic potential of the
    viruses is being assessed in disease free chickens held in
    biocontainment facilities. ARS is developing and evaluating techniques
    to predict which mild forms of viruses will change to more deadly forms
    of the AI virus. Furthermore, ARS is assisting the Centers for Disease
    Control and Prevention with evaluating recombinant vaccines to assure
    human vaccines will not cause disease in poultry.
        With the supplemental funding received in fiscal year 2006, ARS
    plans to conduct the following:
      --research on developing and validating existing and new vaccines to
            ensure that they can be distributed to domestic poultry or wild
            waterfowl before, during, or after an outbreak to help them
            build immunity and resistance to AI infection. In addition, ARS
            will provide direct support to the appropriate in-country
            counterparts in Asia for testing and evaluating different
            vaccine formulations via challenge studies; in addition to
            virus sequencing, cross hemagglutination inhibition titers, and
            neutralization titers.
      --ARS with partners will develop rapid, State laboratory based or
            site-deployable tools and other assays that will allow rapid
            detection and classification of AI viruses. The tests will be
            accurate for detecting AI virus in various samples including
            birds (domestic and wild) and environmental specimens. The
            other assays will include: (1) development, bench validation
            and limited field validation of a real-time RT-PCR (RRT-PCR)
            for screening of wild birds for AI viruses; (2) microarray test
            development for AI virus classification; (3) more sensitive
            penside tests for avian influenza.
      --genome sequencing of poultry outbreak and wild bird AI viruses in
            SEPRL archive and those obtained by on going surveillance, and
            characterize them biologically. ARS will sequence genomes and
            then mine the sequence data for viral evolution, relationships,
            and determinants of virulence as well as identify diagnostic
            sequences and potential vaccine antigens. Viruses will be
            studied to determine genomic changes that define host
            adaptation and specificity and changes necessary for AI viruses
            to cross to new avian and mammalian hosts.
      --ARS with partners will conduct epidemiological studies to identify
            the risk factors for transmission of virus between farms and
            biosecurity mitigation steps to reduce transmission. In
            addition, targeted surveillance of wild birds and poultry at
            high risk for avian influenza will be conducted to assess risk
            of introduction to farms.
        ARS supports APHIS and poultry industry action programs with
    epidemiology, molecular virology, pathogenesis research, and technical
    assistance on AI. ARS is directly assisting APHIS in trade negotiations
    of poultry products by determining the risk for low and high
    pathogenicity AI in poultry meat and the ability of pasteurization to
    inactivate AI in egg products.
        The funding for Avian Influenza Disease research for fiscal years
    2005, 2006 and 2007 are provided below for the record.

    ----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year     Fiscal year     Fiscal year
                                                                           2005            2006            2007
    ----------------------------------------------------------------------------------------------------------------
    Athens, GA......................................................      $2,171,200  \1\ $2,344,400      $5,418,400
    ----------------------------------------------------------------------------------------------------------------
    \1\ Does not include the fiscal year 2006 supplemental funding of $7 million.

                           RENEWABLE ENERGY RESEARCH

        Question. Please provide information on all current USDA research
    on renewable energy. Please provide a brief description on the research
    topic, where it is being performed, and the funding history by fiscal
    year.
        Answer. Both the Agricultural Research Service (ARS) and the
    Cooperative State Research, Education, and Extension Service (CSREES)
    support renewable energy research. ARS, as the Department of
    Agriculture's in-house research agency, has a nationwide network of
    facilities and research scientists who conduct basic and applied
    research for the purpose of solving problems associated with regional
    and national high priority issues, including renewable fuels, affecting
    producers and consumers of U.S. agricultural products ARS cooperates
    closely with the Cooperative State Research, Education, and Extension
    Service (CSREES) and the university system.
        ARS conducts a national Bioenergy and Energy Alternatives Research
    Program (http://www.ars.usda.gov/research/programs/
    programs.htm?NP_CODE=307), with the vision of meeting America's energy
    needs with renewable resources. The mission of this research addresses
    national goals of improving energy security, environmental quality, and
    the economy, with an emphasis on the rural economy. Major program goals
    include:
      --Sustainable energy from agriculture that is energy efficient and
            economic.
      --Understanding the recalcitrance of biomass.
      --Exploiting the potential of molecular biology to improve quantity
            and quality of agricultural biomass feedstocks and to improve
            the effectiveness of conversion organisms.
      --Matching the characteristics of biomass feedstocks with the
            requirements of conversion organisms.
      --Devising value-added biofuel coproducts.
      --Meeting on-farm and rural community energy needs for liquid fuel,
            electricity, and heat.
      --Reduce energy cost for agricultural operations.
        To achieve these goals, research is conducted from feedstock,
    including crops, crop residues, byproducts, and wastes, to fuel,
    including ethanol, biodiesel, biogas, and hydrogen. Examples include:
      --Genetic modification of plants to improve the quality
            characteristics and increase the quantity of feedstock
            produced.
      --Technology to sustainably produce and harvest the biomass, to
            efficiently handle, add value, store, and deliver the
            feedstock, and to quickly measure its quality at any point in
            the process.
      --Technology for biological or thermochemical conversion of feedstock
            to fuel and coproducts. This includes processes, organisms, and
            product separation for energy efficient and economical
            application for use on-farm, in local community size plants,
            and in large biorefineries.
      --Technology to improve quality, performance, and ease of using the
            biofuels produced.
        Successful completion of the proposed work will promote the
    enhanced use of agricultural commodities by providing additional
    markets for farmers and for fuel producers. The public will benefit
    from reduced environmental pollution and enhanced energy security
    associated with using a domestic resource that reduces dependence on
    imported petroleum and improves the balance of trade. Outcomes and
    impact include:
      --Successful and sustainable systems of bioenergy production
      --Energy crops with greater yield and more desirable properties
      --Energy efficient conversion of herbaceous crops and crop residue to
            ethanol
      --Biodiesel with reduced emissions and better performance
      --Less costly biofuels
      --Distributed rural energy production for farm, rural community, and
            national needs
      --Enhanced rural economy
        With its nationwide capabilities in natural resources and
    sustainable agricultural systems, in quality and utilization of
    agricultural products, in crop production and management, and in animal
    production and management, ARS has the research capacity and is well
    positioned to lead and to partner with other Federal agencies, States
    and private interests to develop energy efficient, economical,
    sustainable, and socially acceptable technologies to make agriculture
    energy independent and for agriculture to be a major supplier of energy
    for the Nation.
        Components of ARS Bioenergy and Energy Alternatives Research are
    conducted at the following locations:
      --Energy Crop research:
        --Western Regional Research Center, Albany, California:
          --Genetic manipulation to develop crops more easily converted to
                ethanol.
      --Lincoln, Nebraska:
        --Grasses with improved biomass yield and quality and sustainable
                grass production management practices.
      --St. Paul, Minnesota:
        --Legumes with improved biomass yield and quality and sustainable
                legume production management practices.
      --Corvallis, Oregon; El Reno, Oklahoma; Mandan, North Dakota; Tifton,
                Georgia; and University Park, Pennsylvania:
        --Germplasm, physiology, and management technology for herbaceous
                energy crop production on agricultural lands managed for
                conservation.
      --Madison, Wisconsin:
        --Harvesting, handling, storage, and characterizing quality of
                energy crops and plant residues.
      --Ethanol research:
      --Eastern Regional Research Center, Wyndmoor, Pennsylvania:
        --Process technologies and systems that reduce cost of ethanol
                production.
        --Environmentally sustainable processes to maximize ethanol yield
                from starch.
        --Processes for generating high value products from parts of corn
                not converted to ethanol.
        --Processes to integrate production of ethanol from stover and from
                grain.
      --National Center for Agricultural Utilization Research, Peoria,
                Illinois:
        --Development of superior microbes and enzymes for conversion of
                agricultural commodities to ethanol.
        --Processes for conversion of cellulosic agricultural materials to
                ethanol.
        --Technologies to recover valuable coproducts during ethanol
                production.
      --Western Regional Research Center, Albany, California:
        --Integration of plant molecular biology, genomics, bioinformatics,
                and plant transformation to produce ethanol from cereal
                crops.
        --Enzymes, which work at lower temperatures, to improve energy
                efficiency.
        --Biomaterial membranes that improve separation of water and
                ethanol.
      --Richard B. Russell Research Center, Athens, Georgia:
        --Characterization of herbaceous plant parts suitable for
                conversion to ethanol.
        --Methods to evaluate plant material composition.
        --Enzymatic processes to extract carbohydrates from corn stover.
      --Brookings, South Dakota:
        --Processes and products to enhance value of distillers dried
                grains.
        --Converting cellulosic ethanol by-products into value-added
                coproducts.
        --Processes that add value to cellulosic feedstocks on the farm.
      --Biodiesel research:
      --Eastern Regional Research Center, Wyndmoor, Pennsylvania:
        --Enzymatic processes to convert animal fats, vegetable oils and
                restaurant greases into biodiesel.
        --Burning of fats and oils as heating fuel.
      --National Center for Agricultural Utilization Research, Peoria,
                Illinois:
        --Quality and performance, including storage stability, cold flow,
                and emissions reduction, of diesel fuels and additives
                produced from vegetable oils.
        --Use of biodiesel as aviation fuel.
      --Bushland, Texas:
        --Performance and emissions of biodiesel as affected by feedstock.
        --On-farm biofuel production.
      --Other renewable energy research:
      --Beltsville, Maryland:
        --Production of electricity from animal manure via anaerobic
                digestion and use of the methane produced to generate
                electricity.
      --Wyndmoor, Pennsylvania:
        --Thermo-chemical conversion of plant biomass to hydrogen.
      --Peoria, Illinois:
        --Biological production of hydrogen.
      --Bushland, Texas:
        --Systems to provide renewable energy for on-farm and remote
                agricultural needs.

                        CSREES RENEWABLE ENERGY RESEARCH

        CSREES with Hatch Act, McIntire-Stennis, Evans-Allen, National
    Research Initiative, Special Research Grants, and Federal
    Administration funding supports research projects focused on renewable
    energy. CSREES is the lead agency for the USDA Small Business
    Innovation Research Program. Funding for this program comes from CSREES
    and other USDA agencies and also supports projects on renewable energy.
    The majority of projects address technical obstacles to the cost-
    effective conversion biomass to energy. The majority of conversion
    technologies are biological or thermo/chemical conversion of vegetable
    oils, starches and lignocellulosic materials into biofuels. The
    information that is requested is listed below according to the funding
    authority.
    I. Competitive awards through the National Research Initiative
    (1) NOVEL BIOMASS PROCESSING CHEMISTRY
        START: 01 September 2003.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $175,000.
        PROJECT LOCATION: Institute of Paper Science And Technology,
    Atlanta, Georgia.
        OBJECTIVES: The objective of this program is directed at using
    ionic liquid-based systems to develop novel oxidative/reductive
    chemistry that will fragment and convert lignin into high-value, low
    molecular weight chemicals that could be employed as a feedstock for
    the plastic and chemical industries. This research program will take
    advantage of recent advances in ionic liquids to develop new chemical
    reactions that will convert waste biomass lignin into high-value
    chemical components including phenol derivatives for adhesive/polymer
    industry, polycarboxylate derivatives that will be employed by the
    detergent and metal chelant industry and/or lignin fragments for
    polymer synthesis.

    (2) PROCESS FOR XANTHOPHYLLS FROM CORN
        START: November 2003.
        COMPLETION DATE: 14 November 2006.
        TOTAL BUDGET: $142,000.
        PROJECT LOCATION: University of Illinois, Urbana, Illinois.
        OBJECTIVES: The overall objective is to develop a process for the
    production of xanthophylls from corn using a combination of solvent
    extraction, membrane technology and chromatography. There are two
    specific objectives in this proposed research: (1) Screen membranes for
    their separation characteristics and stability in organic solvents, and
    optimize performance parameters of selected membranes for the
    concentration of xanthophylls extracted from corn. (2) Develop a method
    for producing high-purity xanthophylls by chromatography. This project
    benefits human health by creating a low-cost source of lutein and
    zeaxanthin. It also benefits the dry-grind ethanol industry by creating
    a high-value coproduct that can offset the need for tax waivers and
    subsidies. Xanthophylls can generate an income of $1-2 per bushel of
    corn which is 25-33 percent increase in net revenue with no additional
    materials coming in to the plant.

    (3) GENETIC ENGINEERING OF YEAST FOR CO-FERMENTING ALL FIVE CELLULOSIC
        SUGARS TO ETHANOL
        START: 01 September 2003.
        COMPLETION DATE: 31 August 2005.
        TOTAL BUDGET: $227,003.
        PROJECT LOCATION: Purdue University, West Lafayette, Indiana.
        OBJECTIVES: Researchers have developed recombinant Saccharomyces
    yeast that can effectively ferment xylose, a major sugar molecule in
    cellulosic biomass, to ethanol. The objective of this project is to
    make the yeast also able to effectively ferment other sugars in
    cellulosic biomass so that the engineered yeast can be more effective
    in using this ideal feedstock to produce fuel ethanol.

    (4) SORGHUM AS A VIABLE RENEWABLE RESOURCE FOR BIOFUELS AND BIOBASED
        PRODUCTS--SHORT TITLE: SORGHUM BIOCONVERSION RESEARCH (SBR)
        START: 01 September 2004.
        COMPLETION DATE: 31 August 2007.
        TOTAL BUDGET: $450,000.
        PROJECT LOCATION: Kansas State University, Manhattan, Kansas.
        OBJECTIVES: Identify hybrids, and elite germplasm, with genetic
    variation for a range of selected compositional characteristics
    (starch, starch type, hardness, protein, grain phenotype, etc). Develop
    a coordinated understanding of the relationship among composition,
    chemical structure, physical features, and the availability of
    fermentable/usable-stored glucose (starch). Expand a demonstrated
    micro-fermentation system to allow higher-throughout screening of test
    samples, and test conditions, for the production of ethanol and lactic
    acid. Integrate the results from the above experiments to determine the
    impact of compositional, structural, and physical factors on the
    efficiency of bioprocessing, and to identify the key interactions
    impacting fermentation yield from sorghum grain. Create an Energy Life
    Cycle Analysis Model to quantify and prioritize the savings potential
    from factors identified in the above research, based on both energy and
    economics.

    (5) PROTEOMIC ANALYSIS OF ETHANOL SENSITIVITY AND TOLERANCE IN
        THERMOPHILIC AND ANAEROBIC BACTERIA
        START: 01 September 2004.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $330,000.
        PROJECT LOCATION: University Of Kentucky, Lexington, Kentucky.
        OBJECTIVES: The specific objectives are to: Characterize
    alterations in the proteomic profile of C. thermocellum and T.
    ethanolicus in response to ethanol challenge. Determine the proteomic
    profile of ethanol resistant strains. Examine if proteomic changes
    elicited by ethanol are similar to those caused by environmental
    stresses including temperature, pH, and organic solvents. Evaluate
    alternative approaches to identify and quantify changes in proteomes of
    thermophilic bacteria.

    (6) AN INTEGRATED APPROACH TO REDUCED RISK OF PHOSPHORUS POLLUTION OF
        SURFACE WATERS IN CROP-LIVESTOCK BASED MANAGED ECOSYSTEMS OF THE
        MIDWEST
        START: 15 August 2005.
        COMPLETION DATE: 14 August 2009.
        TOTAL BUDGET: $490,000.
        PROJECT LOCATION: Nebraska Corn Development, Utilization and
    Marketing Board Lincoln, Nebraska
        OBJECTIVES: Develop methods for removing phosphorus (P) from corn
    milling by-products, or improving P availability through while
    minimizing the loss of feed value for ruminants and for enzymatic
    degradation of phytate to P to produce value added products such as
    inositol, inositol phosphates and struvites. Develop a decision tool on
    the cost effectiveness of composting livestock manure to improve the
    economics of transporting manure greater distances to more land for
    agronomically and environmental sound application rates. Determine the
    effects of manure applied several years previously, of deep
    incorporation of surface soil with excessively high soil P, and the
    effects of setback alternatives on the potential for P delivery to
    surface waters. Validate and calibrate a watershed characterization
    model and two P-indexes for assessment of the potential for P delivery
    to surface waters. Provide education to various stake-holders on P
    related issues.

    (7) LIGNIN BLOCKERS FOR LOWER COST ENZYMATIC HYDROLYSIS OF PRETREATED
        CELLULOSE
        START: 01 September 2004.
        COMPLETION DATE: 31 August 2007.
        TOTAL BUDGET: $401,000.
        PROJECT LOCATION: Thayer School of Engineering, Hanover, New
    Hampshire.
        OBJECTIVES: The primary goal is to more fully develop lignin
    blocker technology for biological conversion of pretreated cellulosic
    biomass to glucose that can be converted to ethanol and a range of
    other products either biologically or chemically. In particular, to
    understand and apply lignin blockers to reduce enzyme loadings and
    costs for enzymatic digestion of pretreated cellulose to glucose. The
    first objective of the research is to screen different soluble proteins
    and other promising compounds not yet considered with pretreated
    biomass to define a library of promising lignin blockers that could
    reduce cellulase loadings and costs. The second objective is to measure
    cellulase and blocker adsorption and desorption when applied with
    different lignin blockers and cellulase addition strategies and
    pretreatment conditions. The third objective is to define the impact of
    the most promising lignin blockers on enzymatic hydrolysis of
    pretreated cellulose to determine how performance of the system is
    influenced by amounts of lignin blocker, cellulase, cellulose, and
    lignin; temperature; pH; glucose accumulation; beta-glucosidase
    supplementation; and ingredient addition strategies. The fourth
    objective is to investigate the performance of the most promising
    lignin blockers when used with pretreated cellulose in simultaneous
    saccharification and fermentation (SSF) to define the impact on
    performance versus cellulase use because SSF eliminates equipment and
    speeds rates, yields, and concentrations of ethanol production while
    inhibiting invasion by unwanted organisms. The final objective is to
    develop models to relate enzymatic hydrolysis rates and yields to
    concentrations of lignin blockers and cellulase; the cellulose, lignin,
    and other component content of pretreated biomass; process conditions;
    and the use of other ingredients (e.g., supplemental beta-glucosidase).
    This research element will focus on improving the understanding of how
    adsorption and desorption of lignin blockers and cellulase are
    influenced by processing conditions and how they in turn affect the
    performance of hydrolysis systems and use that information to project
    pathways to further improve performance

    (8) NOVEL MEMBRANE TECHNOLOGY FOR VOLATILE BIOPRODUCT RECOVERY FROM
        FERMENTATION BROTHS
        START: 01 September 2003.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $168,700.
        PROJECT LOCATION: New Jersey Institute of Technology, Newark, New
    Jersey.
        OBJECTIVES: Develop a novel composite membrane system from surface
    modified porous hydrophobic polypropylene (PP) hollow fibers and an
    appropriate liquid membrane in the macropores of the PP hollow fibers
    and determine their separation performances from model solutions of
    individual bioproducts, such as butanol, ethanol, acetic acid,
    propionic acid and butyric acid under the influence of permeate side
    vacuum. Study a batch fermentation system externally coupled with the
    novel membrane device and total broth recycle for the production and
    recovery of acetone, butanol and ethanol (ABE) from Clostridium
    acetobutylicum. Study batch fermentation also with total broth recycle
    for the production and recovery of propionic acid.

    (9) BEYOND THE BARRIER: ETHANOL FROM LIGNOCELLULOSIC BIOMASS USING
        METABOLIC ENGINEERING
        START: 01 SEP 2004.
        COMPLETION DATE: 31 AUG 2007.
        TOTAL BUDGET: $451,000.
        PROJECT LOCATION: North Carolina State University, Raleigh, North
    Carolina.
        OBJECTIVES: The main objective is to use genetically engineered
    lignocellulosics as the feedstock for fuel ethanol production. Produce
    desirable transgenic trees for ethanol conversion. Establish systems
    for high throughput, micro-scale component analysis of treatment
    streams. Determine the chemical and enzymatic digestibility of the
    transgenic materials and their ability to ferment ethanol, with the
    emphasis of using Novozyme's efficient, low cost cellulase cocktail.
    Perform cost versus performance studies of sugar/ethanol production
    from transgenics with diminished recalcitrance.

    (10) ECONOMIC IMPACTS FROM INCREASED COMPETING DEMANDS FOR AGRICULTURAL
        FEEDSTOCKS TO PRODUCE BIOENERGY & BIOPRODUCTS
        START: 15 August 2003.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $136,000.
        PROJECT LOCATION: University of Tennessee, Knoxville, Tennessee.
        OBJECTIVES: The overall objective of this proposed project is to
    develop a national bioenergy and bioproduct expansion curve. As
    bioenergy and bioproduct production increases, demand for, and price of
    agricultural products will increase. This analysis will quantify these
    expected increases considering various demand quantities of bioenergy
    and bioproducts.

    (11) REGULATION OF N-ACYLETHANOLAMINE METABOLISM IN SEEDS
        START: 01 September 2002.
        COMPLETION DATE: 30 September 2006.
        TOTAL BUDGET: $145,000.
        PROJECT LOCATION: University of North Texas, Denton, Texas.
        OBJECTIVES: We propose to continue our efforts to examine the
    catabolism of N-acylphosphatidylethanolamine (NAPE) and N-
    acylethanolamine (NAE) in plants. Our approach is targeted toward the
    functional characterization of candidate NAE amidohydrolase(s) from
    several plant sources (Arabidopsis thaliana, Medicago truncatula and
    cotton) as well as a detailed characterization of several putative
    NAPE-phospholipase D(s) identified in germinated cottonseeds. The
    overall goal will be to place this new biochemical and molecular
    information into the physiological context of seed development,
    germination and seedling growth, stages determined previously to be
    active in NAPE/NAE metabolism, in an effort to improve our
    understanding of the role(s) of this pathway in plants. Specifically,
    to (1) functionally identify and biochemically characterize plant NAE
    amidohydrolase(s) (or fatty acid amide hydrolase, FAAH), (2)
    functionally identify and biochemically characterize seed-derived NAPE-
    phospholipase D(s), and (3) evaluate NAE amidohydrolase and NAPE-
    phospholipase D expression during seed development, desiccation,
    imbibition, germination, and seedling growth.

    (12) VAPOR PHASE BIOREACTORS TO TREAT AIR POLLUTANTS EMITTED FROM CORN-
        BASED ETHANOL PRODUCTION FACILITIES
        START: 01 September 2003.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $178,500.
        PROJECT LOCATION: University of Texas, Austin, Texas.
        OBJECTIVES: The primary objective of the project is to develop a
    vapor phase bioreactor system specifically optimized to treat the
    hazardous air pollutants (HAPs) and volatile organic compounds (VOCs)
    emitted from corn-derived ethanol production facilities. Specific
    objectives include: (1) Assess the biodegradability of VOC/HAP mixtures
    representative of those emitted from ethanol production facilities; (2)
    Evaluate the effect of key operating parameters on pollutant removal in
    vapor phase bioreactors treating ethanol plant emissions; (3) Evaluate
    the feasibility of using a hybrid biofilter/biotrickling filter system
    to treat plant emissions.

    (13) QUANTITATIVE ASSESSMENT OF CARBOHYDRATE, LIGNIN AND EXTRACTIVE
        DEGRADATION PRODUCTS IN PRETREATED LIGNOCELLULOSE
        START: 01 September 2003.
        COMPLETION DATE: 31 August 2006.
        TOTAL BUDGET: $175,000.
        PROJECT LOCATION: Baylor University, Waco, Texas.
        OBJECTIVES: The overall project goal is to improve fundamental
    quantitative understanding of the effect of pretreatment conditions on
    the production of a wide range of hydrolysate degradation products.
    Objectives to achieve this goal are to: (1) Develop a Liquid
    Chromatography-Mass Spectrometry method that will quantify diverse
    biomass degradation products and (2) Correlate product concentrations
    with pretreatment conditions of temperature, reaction time, pH,
    severity, and combined severity.

    (14) CELLULASES FOR BIOMASS CONVERSION FROM TRANSPLATOMIC PLANTS
        START: 01 September 2005.
        COMPLETION DATE: 31 August 2008.
        TOTAL BUDGET: $399,963.
        PROJECT LOCATION: University of Wisconsin, Madison, Wisconsin.
        OBJECTIVES: Enhance translation efficiency leading to higher
    expression levels through N-terminal extension addition to three
    different cellobiohydrolases. Compare the efficiency of expression of
    the three enzymes at the trnI/A locus and trnG/fM locus. Combine
    chloroplast-derived cellobiohydrolase expression with existing nuclear-
    derived E1cd endoglucanase expression through breeding.

    (15) PHOTOSYSTEM I NANOSCALE PHOTODIODES FOR CREATING
        PHOTOELECTROCHEMICAL DEVICES
        START: 01 December 2004.
        COMPLETION DATE: 30 November 2006.
        TOTAL BUDGET: $165,000.
        PROJECT LOCATION: Vanderbilt University, Nashville, Tennessee.
        OBJECTIVES: This project will utilize nanoscale components from
    green plants for solar energy conversion, exemplifying the use of
    natural resources to promote responsible environmental stewardship by
    providing alternative, biobased energy resources for our society. The
    overall objective of this project is to create an environmentally clean
    and biologically inspired photoelectrochemical device that incorporates
    one of nature's optimized nanoscale photodiodes, the Photosystem I
    (PSI) reaction center.
    II. Competitive awards through the Small Business Innovative Research
            Program
        Processing of Poultry Manure for Fuel Gas Production.--Advanced
    Fuel Research, Inc., East Hartford, CT, $79,849/6 months. The objective
    of this phase I research is to convert poultry manure into a usable
    syngas fuel. Project completed, received phase II in 2005.
        Modified Soybean Oil as a Deposit Control Fuel Additive.--Mountain
    View Systems, LLC, Canfield, OH, $80,000/6 months. This phase I project
    seeks to produce a fuel additive from soybean oil that will enhance the
    performance of biofuels by reducing deleterious deposits formed by
    biofuel combustion in engines. Project is ongoing with an extension.
        Improved Quality Soy-oil Based Biodiesel Fuel.--BioPlastic Polymers
    and Composites, LLC, Midland, MI, $40,000/6 months. The goal of this
    phase I project is to improve the process for converting soybean oil
    into biodiesel fuel. Project completed, received Phase II in 2005.
        Cellulases for Biomass Conversion from the Transgenic Maize
    System.--Prodigene, Inc., College Station, TX, $296,000/24 months. The
    enzymatic conversion of biomass is limited by the availability and
    expense of enzymatic catalysts. This phase II project seeks to develop
    an economically feasible method for producing cellulases in industrial
    scale quantities with reduced cost. Project is ongoing.
        Fiscal year 2005 projects:
        Biosolids for Biodiesel.--Emerald Ranches, Sunnyside, WA, $295,606/
    24 months. The goal of this Phase II project is to set up a facility
    that is capable of extracting oil from canola seed and transforming the
    oil into biodiesel fuel through a base catalyzed esterification
    reaction. Project is ongoing.
        A New Process for Biodiesel Production Based on Waste Cooking Oils
    and Heterogeneous Catalysts.--United Environment & Energy, LLC, Orchard
    Park, NY, $80,000/8 months. The overall objective of this Phase I
    project is to study the feasibility of a proposed new process for cost-
    effective production of high value biodiesel from waste cooking oils.
    Project completed, applied for Phase II in 2006, pending.
        Improved Quality Soy-Oil Based Biodiesel Fuel.--Bioplastic Polymers
    & Composites, LLC, Midland, MI, $296,000/24 months. The overall
    objective of this Phase II project is to produce biodiesel from fats
    and vegetable oils that has better low temperatures flow properties,
    such as lower viscosity, is more volatile, and is more resistant to
    thermal breakdown than current biodiesels. Project is ongoing.
        Lignin-based Polymeric Materials from Byproduct of Biomass
    Conversion.--NaSource Company, Newbury Park, CA, $80,000/8 months. The
    conversion of agricultural biomass to biofuels produces a waste stream
    of materials that require further conversion to create value-added
    products and improve the economics of fuel production. The objective of
    this Phase I project is to chemically modify certain waste stream
    components to produce lignin-based plastics. Project is ongoing with an
    extension.
        Processing of Poultry Manure for Fuel Gas Production.--Advanced
    Fuel Research, Inc., East Hartford, CT, $296,000/24 months. The
    objective of this Phase II project is to develop the technology for
    converting poultry manure into combustible gases that can be integrated
    with various electrical power generation devices and have widespread
    agricultural use for poultry manure removal, resource recovery, and
    power generation. Project is ongoing.
        Improved Anaerobic Digestion of Dairy Manure for Energy and High-
    value Co-products.--Andgar Corporation Ferndale, WA, $80,000/8 months.
    This Phase I project seeks to develop the anaerobic digestion
    technology to convert manure produced by dairy cows into biogas and
    high-quality, value-added fiber. Project is ongoing with an extension.
        Camelina Sativa.--A Multiuse Oil Crop for Biofuel, Omega-3 Cooking
    Oil, and Protein/oil Source for Animal Feed: Great Northern Growers
    Cooperative, Sunburst, MT, $80,000/8 months. The objective of this
    Phase I project is to evaluate a new crop for the Northern Plains
    States that is suitable for economic conversion into biodiesel,
    biolubricants, and an omega-3 fatty acid-rich cooking oil for human
    consumption. Project is completed, applied for Phase II in 2006, and is
    pending.
      --High Yield, High Efficiency Bio-refining.--Advanced Materials and
            Processes, San Marcos, TX, $79,966/8 months. The objective of
            this Phase I project is to develop technology to improve yields
            in vegetable oil processing by extracting fatty acids from
            vegetable oils and biodiesel without creating emulsions.
            Project is completed, applied for Phase II in 2006, and is
            pending.
      --Ultra-Clean Mobile Incinerator for Chicken Litter/Waste Disposal.--
            Mel McLaughlin Company, Upper Marlboro, MD, $80,000/8 months,
            The objective of this phase I is to validate the feasibility of
            the ultra-clean mobile incinerator for chicken litter/waste
            disposal. Project is completed, applied for Phase II in 2006,
            and is pending.
      --Cost Effective and Reliable Anaerobic Digestion for Agricultural
            Byproducts.--Hansen Energy and Environmental, East Garland, UT,
            $80,000/8 months. The objective of this phase I project is to
            study an anaerobic induced blanket reactor (IBR) system and
            verify performance for treating manure and food waste
            economically. Project is completed, applied for Phase II in
            2006, and is pending.
    III. Special Research Grants and Federal Administration Research grants
    (1) IOWA BIOTECHNOLOGY CONSORTIUM
        The primary goal of this project is to conduct fundamental and
    applied research aimed at enhancing the recovery and utilization of by-
    product materials from new and emerging biotechnology industries, with
    emphasis on agribusiness. Grants have been awarded from funds
    appropriated as follows: fiscal year 1989, $1,225,000; fiscal year
    1990, $1,593,000; fiscal year 1991, $1,756,000; fiscal year 1992,
    $1,953,000; fiscal year 1993, $2,000,000; fiscal year 1994, $1,880,000;
    fiscal years 1995-1996, $1,792,000 each year; fiscal year 1997,
    $1,738,000; fiscal years 1998-2000, $1,564,000 each year; fiscal year
    2001, $1,560,559; fiscal year 2002, $1,530,000; fiscal year 2003,
    $1,753,528; fiscal year 2004, $1,789,380; fiscal year 2005, $1,774,688;
    and fiscal year 2006, $1,757,250. A total of $30,586,405 has been
    appropriated. Research is being conducted at Iowa State University, the
    University of Iowa, and various sites throughout Iowa.
    (2) FEEDSTOCK CONVERSION
        The original goal of this research was to develop the mission of
    the Sun Grant Initiative, to identify five leading universities as
    regional centers, to plan individual and collaborative activities at
    each center, and to establish a working relationship between these
    universities and Federal agencies. The work supported by this grant
    began in fiscal year 2002, and the appropriation was $560,000 in fiscal
    year 2002; $556,360 in fiscal year 2003; $671,017 in fiscal year 2004;
    $667,616 in fiscal years 2005; and $668,250 in fiscal year 2006. A
    total of $3,123,243 has been appropriated. Research is conducted at
    South Dakota State University at Brookings, Cornell University at
    Ithaca, University of Tennessee at Knoxville, Oklahoma State University
    at Stillwater, and Oregon State University at Corvallis. The
    anticipated completion date for fiscal year 2005 funds is September 30,
    2006.
    (3) BIODESIGN AND PROCESSING RESEARCH CENTER
        The Center will address economic viability of farmers, and will
    include conversion of agricultural wastes to value-added products. The
    Center will also provide educational and outreach programming for
    students, farmers, woodland owners and processors in the region. During
    the first year of this project, research will focus on converting
    animal waste to energy, as a strategy for animal waste management. The
    appropriation for fiscal year 2006 is $940,500. The Center is located
    at Virginia Polytechnic Institute and State University, Blacksburg,
    Virginia. This project will be completed in fiscal year 2009.
    (4) BIOMASS-BASED ENERGY RESEARCH
        This research addresses conversion of biomass to ethanol, and
    chemicals. Through an Oklahoma State University, University of
    Oklahoma, and Mississippi State University Consortium, the three
    universities are developing an ethanol gasification-bioconversion
    process that utilizes all of the plant biomass, including the lignin.
    While making the process more cost efficient than other methods of
    ethanol production, this process utilizes all portions of a variety of
    biomass and feedstock material that includes grasses, crop residues,
    and processing plant byproducts. The primary goal is to develop a cost-
    effective biomass conversion-to-ethanol production system utilizing a
    unique gasification-fermentation process. The work supported by this
    grant began in fiscal year 2001, and the appropriation for fiscal year
    2001 was $900,016; for fiscal year 2002, $960,000; for fiscal year
    2003, $1,142,525; for fiscal year 2004, $1,022,929; for fiscal year
    2005, $1,014,816; for fiscal year 2006, $1,188,000. The total amount
    appropriated is $6,228,286. This work is carried out at Oklahoma State
    University, University of Oklahoma, and Mississippi State University.
    This project is expected to be completed in 3 years.
    (5) INSTITUTE FOR BIOBASED PRODUCTS AND FOOD SCIENCE
        The Biobased Institute funds research projects that increase
    profitability of agriculture, enhance human health through improved
    nutrition, and reduce reliance on non-renewable energy by production of
    biofuels, ethanol and biolubricants. Research activities include
    producing ethanol from biomass, and reducing the cost of producing
    biodiesel. Technology transfer collaborations have been set up to
    ensure efficient transfer to the marketplace for all products under
    development at the Institute. The funding for this project began in
    fiscal year 2003, and $596,100 was appropriated for fiscal year 2003;
    $532,838 for fiscal year 2004; $562,464 for fiscal year 2005; $557,370
    for fiscal year 2006. A total of $2,248,772 has been appropriated.
    Currently this work is being carried out at Montana State University.
    (6) ALTERNATIVE FUELS CHARACTERIZATION LABORATORY
        Through a national collaboration, the National Alternative Fuels
    Laboratory matches about half of its Federal funding with non-Federal
    money to work on industry fuel relevant research. The National
    Alternative Fuels Laboratory has developed a Federal Aviation
    Administration-certified lead-free ethanol- and biodiesel-containing
    alternative to leaded aviation gasoline. The fuel is now commercially
    available in South Dakota and will be introduced at airports throughout
    the United States in response to increasing demand. They have resolved
    ethanol-in-gasoline performance and environmental issues to accelerate
    the use of ethanol, and they have initiated new biomass fuel
    developments, including processes, to produce Environmental Protection
    Agency-approved, high-octane, emission-clean gasoline additives from
    agricultural resources. In addition, they have initiated and
    coordinated a 27-member Red River Valley Clean Cities Coalition to
    increase the number of alternative fuel vehicles in regional public and
    private fleets and have built refueling sites for disbursing fuels
    containing 85 percent of ethanol in North Dakota. The primary goal was
    to develop a database of at-the-pump-sampled conventional,
    reformulated, and alternative transportation fuels sold in the upper
    Midwest and throughout the United States to enable comparison of
    current and historical fuels on the basis of chemical and physical
    properties. This fuel database has been expanded to include how
    gasoline chemistry affects air quality and fuel performance. The goal
    of developing nonfuel products derivable from bio-oils generated via
    fast pyrolysis of lignocellulosic biomass was achieved during fiscal
    year 2005. Another original goal was to provide information on
    conversion of crop residues, agriculture processing wastes, high-
    cellulose-content municipal wastes, and other biomass materials to
    alternative fuels. The National Alternative Fuels Laboratory program
    supported the Red River Valley Clean Cities Coalition, conducted
    chassis dynamometer tests comparing three major brand E10 gasoline and
    one E8 fuel, and collaborated with the American Lung Association of
    Minnesota to assess the greenhouse gas reduction potential of E85 fuel.
        The National Alternative Fuels Laboratory began in fiscal year 1991
    and was, in part, sponsored by this grant. Federal appropriations in
    fiscal year 1991 through fiscal year 1993 were $250,000 per year. Later
    awards were $235,000 in fiscal year 1994; $204,000 in fiscal year 1995;
    $218,000 per year in fiscal years 1996 through 2000; $258,430 in fiscal
    year 2001; $294,000 in fiscal year 2002; $300,037 in fiscal year 2003;
    $268,407 for fiscal year 2004; $281,728 in fiscal year 2005; and
    $279,180 in fiscal year 2006. A total of $3,960,782 has been
    appropriated. The work is performed at the University of North Dakota
    Energy and Environmental Research Center in Grand Forks.
    (7) AGRICULTURE WASTE UTILIZATION
        The original goal was to determine the applicability of anaerobic
    digestion to convert organic waste materials to energy in the form of
    biogas, thereby reducing the amount of organic matter for disposal. The
    goal has gone beyond the testing of waste materials in the digester and
    proceeded with a program to determine pathogen reduction by anaerobic
    digestion and to economically use the digested sludge. The subsequent
    goal is to manage the remaining solids from anaerobic digestion in an
    environmentally-sound manner. This research indicates that for at least
    cryptosporidium parvum, the thermophilic temperature and the anaerobic
    digestion process are critical in the inactivation of the organism.
    Field trials of using digester solids for potatoes and broccoli showed
    significant increases in growth over the control experiment. The work
    supported by this grant began in fiscal year 1998, and the
    appropriation for fiscal year 1998 was $360,000; for fiscal year 1999,
    $250,000; for fiscal year 2000, $425,000; for fiscal year 2001,
    $494,909; for fiscal year 2002, $600,000; for fiscal year 2003,
    $685,515; for fiscal year 2004, $617,336; for fiscal year 2005,
    $648,768; and for fiscal year 2006, $683,100. A total of $4,764,628 has
    been appropriated. Research is conducted at West Virginia State
    College, Institute. The principal researchers anticipate the work for
    this project will be completed in 2006.
    (8) MICHIGAN BIOTECHNOLGY INSTITUTE
        The goal of this research is to select and develop market-viable
    technologies for the production of industrial products from
    agricultural raw materials, and to accelerate development of product
    and related technologies that are critical to the sustainability of the
    agricultural and rural economy. Accomplishments for 2005 include
    optimization of Ammonia Fiber Explosion treatment for conversion of
    crop residues for maximum recovery of glucose and xylose sugars,
    improved extraction of protein from distillers grains and switchgrass
    using an aqueous ammonia process; and identification and cloning of two
    genes for enhancing succinic acid production from glycerol-containing
    waste streams. Demonstrations of technology occur throughout the United
    States. The work supported by this grant began in fiscal year 1989, and
    the following amounts have been appropriated: in fiscal year 1989,
    $1,750,000; in fiscal year 1990, $2,160,000; in fiscal year 1991,
    $2,246,000; in fiscal years 1992-1993, $2,358,000 per year; in fiscal
    year 1994, $2,217,000; in fiscal year 1995, $1,995,000; in fiscal years
    1996 and 1997, $750,000 per year; in fiscal years 1998-2000, $675,000
    per year; in fiscal year 2001, $723,405; in fiscal year 2002, $481,000,
    in fiscal year 2003, $623,918; in fiscal year 2004, $558,684; in fiscal
    year 2005, $554,528; and in fiscal year 2006, $549,450. A total of
    $22,099,985 has been appropriated. The research is being conducted on
    the campus of Michigan State University and at the Michigan
    Biotechnology Institute. Current objectives are expected to be
    completed in fiscal year 2007.
    IV. Hatch Act, McIntire-Stennis, and Evans-Allen Projects, the formula
            funded projects include about 40 projects with a renewable
            energy component for a total amount of approximately $1.3
            million for fiscal year 2005. However, the fifteen projects
            described below were selected for their innovative and cutting
            edge technologies that complement the portfolio of projects
            supported through competitive grant programs.
    A. FUEL CELLS, HYDROGEN
    (1) SYSTEMS FOR BIOLOGICAL PRODUCTION OF HYDROGEN GAS, fiscal years
            2004-2008, Oregon State University, Corvallis, Oregon:
        The purpose of this project is to develop bacterial strains to
    produce hydrogen efficiently and sustainably at high rates. Mutant
    strains of Clostridium acetobutylicum and a hydrogen detection method
    have been developed. Using microorganisms to produce hydrogen from
    water, using sunlight as an energy source, or from renewable
    carbonaceous materials, can contribute to meeting
    (2) HYDROGEN FUEL PATHWAYS FOR TRANSPORTATION IN CALIFORNIA, fiscal
            years 2003-2008, University of California, Davis, California:
        Decisions on how to proceed with the use of hydrogen as the fuel of
    the future, will have profound implications for the economy and for
    society. This project addresses decision-making based on sound
    knowledge from a wide variety of disciplines. The primary focus is the
    manufacture, storage and distribution of hydrogen for use in fuel cell
    vehicles. On-going research includes developing lifecycle environmental
    analysis models, innovative approaches to measure potential demand for
    hydrogen vehicles and designs for hydrogen energy stations. The outcome
    will be a set of tools and a body of knowledge to inform public sector
    debates and private sector investments.
    (3) BIOENERGY BASED ELECTRICAL SYSTEMS AND THEIR SAFE, EFFICIENT
            APPLICATIONS, fiscal years 2003-2008, Michigan State
            University, East Lansing, Michigan:
        The purpose of this study is to develop specifications for
    installation and economic analysis of alternative systems to convert
    biogas to electrical energy. A coalition of organizations has been
    formed to address the conversion of livestock biomass to energy in
    stationary fuel cells. Proposals have been submitted to the National
    Electrical Code to address inadequate rules for the installation of the
    direct current portion of renewable energy production systems. If
    proposals are accepted, the result will be practical and safe rules.
    (4) FEASIBILITY STUDY TO ANALYZE THE ECONOMIC VALUE PROPOSAITON AND
            RELATED MARKETING STRATEGY FOR A MODULAR, PRESSURIZED ANAEROBIC
            DIGESTION, fiscal years 2004-2005, Cornell University, Ithaca,
            New York:
        Biogas, i.e. methane, from traditional anaerobic digestion
    technology is typically produced at atmospheric pressure, with little
    attempt made to harness this energy source for compressed natural gas
    or for application to fuel cells for stationary power generation. A
    novel design for producing biogas has been developed that delivers pure
    and compressed biogas that is promising for these applications. The
    current focus is on evaluating the commercial potential of this new
    technology for New York State dairy farms, and for farming economics
    and public policy. This technology offers a sustainable strategy to
    problems associated with animal manure management.
    B. AGRICULTURAL RESIDUES, WASTES
    (1) BIOFUELS PRODUCTION FROM COTTON GIN WASTE AND RECYCLED PAPER
            SLUDGE, fiscal years 2005-2010, Virginia Polytechnic Institute,
            Blacksburg, VA:
        Cotton gin waste can potentially be used ethanol production. Unlike
    other lignocellulosic feedstocks, this material is concentrated at the
    processing sites and therefore harvesting and transportation costs are
    considerably less than those for other agricultural and forestry
    residues. This project is developing an in situ detoxification process
    for the bioconversion of cotton gin waste and recycled paper sludge
    mixture into ethanol at high yields. Processing of agricultural
    residues is a value-added activity and will assist in implementing new
    ethanol production capacity in the southern United States.
    (2) BIOLOGICAL CONVERSION OF CROP RESIDUES TO FUELS AND CHEMICALS,
            fiscal years 2005-2008, North Carolina A&T State University,
            Greensboro, North Carolina:
        This project addresses the biological conversion of crop residues
    to ethanol, hydrogen and succinic acid. Pretreatment steps include
    physical and chemical treatment followed by enzymatic hydrolysis and
    anaerobic fermentation. Economic and environmental evaluations will be
    conducted to validate commercialization potential.
    (3) ANEROBIC DIGESTION OF AGRICULTURAL AND FOOD WASTE BIOMASS FOR THE
            EFFICIENT PRODUCTION OF HIGH QUALITY BIOGAS, fiscal years 2004-
            2008, Ohio State University, Wooster, Ohio:
        This research is developing a laboratory scale anaerobic digestion
    system to determine the metabolic and nutritional requirement of
    digesters for efficient conversion of diverse biomass feedstocks to
    biogas energy. Feedstocks used include dairy cattle manure, corn and
    potato based snack foods and corn silage. Biogas production must be
    clean and reliable for process heat, combustion or turbine engines, or
    solid-oxide fuel cells. A closed anaerobic digestion system of
    agricultural wastes offer the opportunity to produce a clean form of
    fuel, methane and/or hydrogen, with minimal environmental emissions of
    ammonia, methane and fossil fuel based carbon dioxide.
    (4) PROCESSING OF NON-TRADITIONAL AGRICULTURAL MATERIALS FOR VALUE-
            ADDED UTILIZATION, fiscal years 2004-2009, Auburn University,
            Auburn Alabama:
        The purpose of this project is to develop procedure and methodology
    for the pelleting of poultry litter and energy crops, and to quantify
    the storage and handling of the manufactured pellets. This project is
    also testing the pelleted materials as a biofuel in a pellet furnace.
    Results to date indicate that energy saving up to 30 percent can be
    obtained with the use of a biofuel furnace in a greenhouse. The ash
    obtained from pellet combustion has value as s substrate component.
    Pelleted biofuels provide obvious environmental benefits such as use of
    wastes from agro-processing, reduced greenhouse gas emissions and
    potential on-site generation of fuel.
    (5) MICROBIAL CONVERSION OF AGRICULTURAL WASTES TO ELECTRICITY, fiscal
            years 2003-2004, University of Massachusetts, Amherst,
            Massachusetts:
        The purpose of this study is to determine whether a microbe-
    electrode system could be used to degrade compounds that are an odor or
    environmental concern in animal wastes and at the same time provide
    electrical power that could be applied to farm operations. Fuel cells
    inoculated with swine waste have been shown to produce less methane and
    to eliminate butyrate faster than controls. Ongoing research will
    define under what conditions organic loads are lessened by the presence
    of electrodes in both fuel cell and potentiostat mode. In addition,
    analysis of the microbial community associated with the graphite
    electrodes will provide further insight into the mechanism of swine
    waste treatment.
    C. NEW ENERGY CROPS
    (1) CARBON AND NITROGEN CYCLING AND MANAGEMENT IN ALTERNATIVE CROPPING
            SYSTEMS, fiscal years 2004-2007, Washington State University,
            Pullman, Washington:
        Agricultural activities impact nitrate contamination of groundwater
    and particulate emissions. Alternative cropping systems can lessen
    negative impacts and expand environmental benefits. This project
    includes determining the biomass production and partitioning of Giant
    Reed, Arundo donax, at rain-fed and irrigated locations in Washington
    State. Results to date show biomass production potential greater than
    20 dry tons per acre in the second year, with hemicellulose and
    cellulose contents similar to other grasses. Variations in wheat
    cultivars and exotic species are being evaluated to identify
    economically and environmentally sound cropping options for supplying
    bioenergy feedstocks.
    (2) AGRICULTURAL AND ENVIRONMENTAL BENEFITS FROM ENERGY, FIBER AND
            FORAGE CROPS IN ALABAMA, fiscal years 2003-2008, Auburn
            University, Auburn, Alabama:
        This project addresses biomass crops and cropping-livestock
    production systems to realize agricultural and environmental benefits
    for the southeastern United States. Small plot experiments are underway
    and include switchgrass, mimosa, giant reed, fescue, ryegrass, and a
    comparison of productivity of goats and stocker cattle. This research
    will lead to commercialization of bioenergy in Alabama, especially co-
    firing biomass with coal to produce electricity.
    (3) SUGARCANE IMPROVEMENT FOR ARID, ALKALINE ENVIRONMENTS, fiscal years
            2000-2006, Texas A&M University, College Station, Texas:
        This project is developing sugarcane as an energy crop through a
    conventional breeding and genetic engineering program. Sugarcane has
    been crossed with Miscanthus, a perennial grass that is promising as an
    energy crop, and has cold resistance and good fiber quality. New
    sugarcane varieties will allow the grower to increase production,
    reduce costs, and expand into the renewable energy market.
    D. COMMODITY ENERGY CROPS
    (1) VALUE-ADDED PRODUCTS FORM AGRICULTURAL COMMODITIES, fiscal years
            2004-2009, Purdue University, West Lafayette, Indiana:
        This research is addressing the use of mixtures of soybean methyl
    esters, i.e. biodiesel, with jet fuel, quantifying the physical
    properties and measuring turbine jet engine combustion performance and
    emissions. Aviation jet fuels are a unique energy fuel market due to
    the critical nature of fuel weight/energy density required for jet
    flight. A key performance limitation of soy methyl esters is the very
    low freezing point required for jet fuel. This project has developed a
    fractionation technology that removes the saturated components to
    produce workable fuel blends with existing jet fuels. The byproduct of
    biodiesel production is glycerin. This project is also evaluating the
    use of glycerin for aviation deicers to replace ethylene/propylene
    glycol deicers. The fractionation process and glycerin deicer product
    are being patented and Purdue is working with industrial partners to
    commercialize the technologies.
    E. ECONOMICS
    (1) ECONOMIC ASSESSMENT OF CHANGES IN TRADE ARRANGEMENTS, BIOTERRORISM
            THREATS AND RENEWBLE FUELS RQUIREMENT IN THE U.S. GRAIN AND
            OILSEED SECTOR, fiscal years 2004-2009, Iowa State University,
            Ames, Iowa:
        This project includes analyzing the effect of U.S. renewable energy
    programs as one of several factors that affect international trade and
    markets for corn, soybeans, and wheat. The impacts of energy policy
    changes on grain and byproduct markets that include gluten feed and
    distillers' grain are being addressed, along with the effects of the
    expanding bioenergy industry on the organization and performance of
    local and international grains markets. Specific studies include
    pricing in local and international grain markets, and international
    competitiveness of the ethanol industry compared to Brazil and the
    appropriate scale and organization of value-added processing. Improved
    private investment and public policy decisions will result from better
    information about the bioenergy industry.
    (2) RURAL COMMUNITIIES, RURAL LABOR MARKETS AND PUBLIC POLICY, fiscal
            years 2002-2007, Virginia Polytechnic Institute, Blacksburg,
            Virginia:
        Rural America is experiencing substantial demographic and economic
    change and its future depends on solid policy analysis. This project
    examines how rural markets adjust to economic change and how policy can
    be formulated assist in these adjustments. Findings indicate that
    several sources of renewable fuels could be viable in Virginia.
    Biomass, particularly electricity generation through switchgrass and
    wood chips has more widespread viability than wind or solar
    technologies. Biofuels could provide additional incomes to land owners
    in depressed areas, but overall economic impacts are likely to be
    modest. Further research is needed to overcome persisting technical
    problems with switchgrass transport and processing leading to higher
    costs and lower competitiveness. It is estimated that a single 600
    megawatt coal-fired power plant that co-fires with 5 percent
    switchgrass could improve the financial viability of 140 families and
    have total economic impacts of more than $2 million per year.
                                     ______

                  Questions Submitted by Senator Arlen Specter

        Question. With the dairy industry responsible for cash receipts of
    $27,367,857,000 (2004) representing 11.3 percent of total agriculture
    cash receipts for the Nation, why is the Agricultural Research Service
    terminating the Dairy processing and products Research Unit located at
    Wyndmoor, Pennsylvania, when this is the only USDA laboratory
    conducting research on dairy processing and products? In addition, it
    is my understanding that the scientists assigned to this laboratory
    have the capability of addressing the issue of bio-security research to
    help prevent the intentional contamination of the milk supply and
    support the dairy industry with research on prevention and removal of
    threat agents from the milk supply. How will this crucial research be
    accomplished if this program is eliminated?
        Answer. The consideration to close the lab was based on the fact
    that the unit has largely met its objectives and the return on
    investment was lower than for other high priority areas of research. As
    mentioned, the need for the research is reduced due to improvements in
    milk processing, much of which has been developed by the lab. If
    additional work in the area of dairy processing does arise, such work
    could and has been done in the past at the ARS Beltsville Agricultural
    Research Center (Beltsville, Maryland) or the National Animal Disease
    Center (Ames, Iowa).

                          PEST MANAGEMENT ALTERNATIVES

        Question. This question is directed to Under Secretary Jen
    regarding a letter that Sen. Rick Santorum and I sent to you on
    February 17, 2006. Pennsylvania is the Nation's number one producer of
    mushrooms, producing 59 percent of all pounds grown and valued at more
    than $420 million. Trichoderma green mold remains the most serious
    disease faced by mushroom growers, as crop losses can quickly reach
    epidemic levels. Both Sen. Santorum and I urge you to strongly support
    the research proposal, ``Resistance Management Program for Trichoderma
    Green Mold on Mushrooms,'' submitted by Drs. Peter Romaine and Daniel
    Royse, at The Pennsylvania State University, under the Special Grants
    Program--Pest Management Alternatives. This was all detailed in our
    February 17 letter.
        Are you taking this research proposal under serious consideration
    and when can we expect a response to our letter?
        Answer. In his response dated April 3rd, 2006, former Under
    Secretary Jen indicated that funds appropriated for the Pest Management
    Alternatives Program, which is administered by the Cooperative State
    Research, Education, and Extension Service, are distributed through a
    peer review competitive grants process. Priorities for the program are
    developed in consultation with stakeholders and land-grant university
    partners through the Regional Integrated Pest Management Centers. A
    major emphasis of this program is cropping systems where the loss of
    pest management alternatives has led to a loss of pest control or the
    development of pest resistance to the alternatives. The proposal from
    the Pennsylvania State University received full and fair consideration
    by the peer review panel. Applicants will be notified in the coming
    weeks of final funding decisions under the fiscal year 2006 Pest
    Management Alternatives Program.

                          COUNTY OFFICE RESTRUCTURING

        Question. The Farm Service Agency (FSA) had intended to implement
    ``FSA Tomorrow'' last Fall. This plan intended to reduce the number of
    FSA county offices throughout the entire Nation through consolidation.
    Across the United States, 713 county offices were planned to be
    consolidated, in Pennsylvania alone 14 offices were planned to be
    consolidated bringing the number of offices to 32. While I understand
    the importance of efficiency, farmers work hard all day and to require
    them to drive long distances to see their FSA office puts further
    strain on their work. Under Secretary Penn, the FSA fiscal year 2007
    Budget request is $33,891,000, down from the fiscal year 2006 budget
    estimate of $36,797,000; a decrease of about 8 percent.
        Does the Department of Agriculture intend to implement a
    consolidation plan in light of the reductions in the President's fiscal
    year 2007 Budget request?
        Answer. FSA has asked our State Executive Directors (SEDs) to
    conduct an independent, local-level review of the efficiency and
    effectiveness of FSA offices in their State. Each State's SED and State
    Committee will form a review team to identify the State's optimum
    network of FSA facilities, staffing, training, and technology within
    existing budgetary resources and staffing ceilings.
        There is no comprehensive national plan or formula for the ideal
    field structure. Each State will review its own county office system
    and submit a plan for the best distribution of resources.
        Each SED is exploring potential joint-effort opportunities with the
    Natural Resources Conservation Service (NRCS) and other Department of
    Agriculture (USDA) agencies. State Food and Agriculture Councils
    (SFACs) are the primary vehicles for coordinating programs at the local
    level. SFACs provide a policy-level, cross-agency, decision-making and
    communication forum to achieve USDA's goals and objectives. In
    accordance with the SFAC mission, FSA, NRCS, and other agencies will
    work together to develop the plan for the most effective mix of local
    offices, staffing, training and technology.
        If FSA county office closures create a disadvantage for some
    producers in accessing services, those producers may request a new
    administrative county office if there is one that will be more
    convenient. The flexibility of producer choice is an important part of
    consolidation efforts. FSA is committed to delivering farm program
    services through the Service Center model.
        Question. If so, does the Department plan on bringing this to the
    attention of Congress before any implementation takes place?
        Answer. After recommendations are received from a State and
    validated by FSA's Deputy Administrator for Field Operations, any
    consolidation recommendations will be shared with the potentially
    affected Congressional delegation. The Agency will hold public hearings
    and coordinate communications efforts with area farmers, ranchers, and
    other stakeholders. Where a decision is made to consolidate offices,
    Congress will be notified 120 days before a closure takes place. FSA is
    committed to a continued dialogue with congressional delegations and
    State leaders as to how best to modernize the FSA county office system.

                                 MUSHROOM SPAWN

        Question. I have been contacted by mushroom spawn manufacturers in
    my state regarding their difficulties in exporting mushroom spawn to
    certain countries which require phytosanitary certificates, for which
    mushrooms spawn is apparently ineligible. It is my understanding that
    many countries require U.S.-exported spawn to be accompanied by APHIS-
    issued phytosanitary certificates; however APHIS cannot issue
    certificates for this product. This situation is especially problematic
    since governments of foreign competitors are willing to issue such
    certificates. Therefore, American spawn manufactures are unable to
    obtain the necessary phytosanitary certificates, whereas foreign
    competitors can obtain them. As a result, our Nation's mushroom spawn
    exporters are in danger of losing access to some of their most valuable
    export markets, valued at more than $8.7 million. Maintaining access to
    export markets is vital to the spawn industry in Pennsylvania and
    across the country.
        How do you intend to resolve this problem and when can constituents
    in my home State expect a solution?
        Answer. As you indicate, several countries require phytosanitary
    certificates for mushroom spawn. However, the countries in question
    (including China, Oman, and several others) have not provided
    information on what pests are associated with mushroom spawn that are
    of concern to them or of quarantine significance. Phytosanitary
    certificates are generally used to provide assurance that a shipment or
    product is free of specified pests, usually a list of quarantine pests
    provided by the importing country. Accordingly, APHIS is not able to
    issue phytosanitary certificates for this product since it is
    essentially grain inoculated with a fungus and there are no known
    quarantine pests associated with it. Our officials sent letters to the
    countries explaining that we cannot issue phytosanitary certificates
    without knowing what to certify the product for. We also explained
    APHIS policy regarding the import of mushroom spawn into the United
    States (the genus and species must be identified on the commercial
    invoice and the shipment must be free of soil) and officially requested
    that they adopt equivalent policies. In late March 2006, officials from
    APHIS and USDA's Foreign Agricultural Service met with the American
    Mushroom Institute to discuss this situation. We believe that the
    importing countries are more concerned with product quality than with
    plant health risk. In addition to working with our counterparts in the
    importing countries regarding their requirements, we are also working
    with USDA's Agricultural Marketing Service to find an alternative to
    phytosanitary certificates for mushroom spawn exports.
                                     ______

                    Questions Submitted by Senator Herb Kohl

                         SIMPLIFIED SUMMER FOOD PROGRAM

        Question. Mr. Bost, as you know, the Simplified Summer Food Program
    is currently available in half of the States, including my home State
    of Wisconsin. Have States that participated in this program attracted
    more program sponsors, operated more program sites and served more low-
    income children than those States not participating in the program?
    Would USDA consider this program a success? Would USDA be supportive of
    expanding this program to additional States?
        Answer. States participating in the Simplified Summer Food Program
    have shown an increase in participation as measured by sponsors, sites,
    and meals served to eligible children during the summer months. During
    the same time, those States not participating in the program have
    experienced a decrease in each of the corresponding categories.
    However, since the inception of the Simplified Summer Food Program,
    many States have also had the opportunity to operate a seamless summer
    feeding program through the National School Lunch Program (NSLP).
    Because these two initiatives have operated concurrently in these
    States, we are not able to identify the extent to which changes in
    sponsors, sites, and children result from the Simplified Summer Food
    Program, from the NSLP seamless summer feeding program, or from a
    combination of both.
        Although modest, there are costs associated with expanding the
    program to additional States. Assuming appropriate offsets could be
    found, USDA would support expansion of the program because it reduces
    paperwork burden on sponsors and aligns the program's meal
    reimbursement procedures with our school-based and day care-based Child
    Nutrition Programs.

                                   NSA GRANTS

        Question. Mr. Bost, one of the hallmarks of the WIC program is that
    it goes beyond providing healthy foods to provide participants with
    nutrition education, breastfeeding support, and health care referrals.
    These services are a critical complement to the WIC food package and
    they are all funded with NSA grants. The WIC program has also achieved
    extremely effective cost-containment, particularly with regard to
    infant formula costs. The administrative costs associated with these
    accomplishments are funded with NSA grants.
        In a 2001 report, the GAO found that since the late 1980s important
    new nutrition services and administrative demands have been placed on
    State and local WIC agencies without accompanying increases in NSA
    funds. Isn't it the case that under WIC's authorizing statute NSA
    grants per-participant have remained at the same inflation-adjusted
    level for the past 19 years? If this proposal is not adopted, will your
    request level for WIC still be adequate? What effect do you believe
    this administrative proposal will have on cost-containment?
        Answer. In 1990 the guaranteed per participant nutrition services
    and administration (NSA) grant was $9.32. Adjusting the grant for
    inflation resulted in a guaranteed NSA grant of $14.12 in fiscal year
    2006.
        If this proposal is not adopted, the funds requested in the budget
    for food will be approximately $152 million less than the estimated
    amount needed to provide food benefits to a monthly average of 8.2
    million WIC participants in fiscal year 2007.
        We believe this proposal will encourage State agencies to seek cost
    saving practices and efficiencies in program management and in
    providing participant services funded with NSA grants.

     SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)--
                              LEGISLATIVE PROPOSAL

        Question. Mr. Bost, another legislative proposal included in the
    WIC account will prevent any State from allowing participation in the
    WIC program to anyone whose family income is more than 250 percent of
    poverty. How many States will this affect? Will it save any money? Is
    it true that the affected States, because their WIC participants are
    automatically deemed eligible, will have to re-check the eligibility of
    all of their participants? How many individuals would lose eligibility
    for WIC if the Administration's proposal to limit Medicaid adjunct
    eligibility were adopted? Do you intend to provide additional
    administrative funding for these States to conduct these eligibility
    exercises, or is the intent that they perform this function under the
    proposed new administrative limitations as well?
        Answer. The President's fiscal year 2007 budget prohibits the use
    of funds to provide WIC benefits to individuals who receive Medicaid or
    who are members of a family in which a pregnant woman or infant
    receives such assistance unless the family income is below 250 percent
    of the poverty guidelines. Six States (Maryland, Minnesota, Missouri,
    New Hampshire, Rhode Island and Vermont) have income eligibility cut-
    offs for Medicaid that are 250 percent or above for some or all
    categories of potential WIC participants.
        Based on the estimated per-person cost in fiscal year 2007
    ($52.67), it is estimated that this proposal will result in a savings
    of $2.9 million. The States affected by this proposal and the estimated
    savings per State are shown in the table below.

    ------------------------------------------------------------------------
                                                 Number of       Estimated
                      State                       Persons       Savings (in
                                                 Affected       thousands)
    ------------------------------------------------------------------------
    Maryland................................             859            $543
    Minnesota...............................           2,434           1,538
    Missouri................................             573             362
    New Hampshire...........................             143              90
    Rhode Island............................             286             181
    Vermont.................................             286             181
                                             -------------------------------
          Total.............................           4,581           2,895
    ------------------------------------------------------------------------

        The President's budget proposal would continue to provide automatic
    (adjunctive) income eligibility based on participation in Medicaid to
    the vast majority of WIC participants certified in this manner. Any
    mother, infant, or child who can currently be certified as income
    eligible for WIC through Medicaid, will still be income eligible for
    WIC if their household income is below 250 percent of poverty. For
    those State agencies affected by the proposal, they will have to modify
    their procedures to determine the income eligibility of individuals who
    would have otherwise been automatically income eligible to participate
    in the WIC Program based on their participation in Medicaid. Based on
    data from the 2004 Report on WIC Participant and Program
    Characteristics, we estimate that approximately 4,600 individuals will
    be affected by the proposal to limit automatic eligibility based on
    participation in Medicaid to those individuals with an income level
    that is below 250 percent of Federal poverty guidelines.
        Affected States may incur a modest increase in the needed
    administrative resources associated with eligibility determinations and
    will have to re-allocate their nutrition services and administration
    (NSA) funds accordingly. The proposal will not increase Federal
    expenditures on NSA.

                       WIC MANAGEMENT INFORMATION SYSTEM

        Question. Last year, we provided $20 million for a new WIC
    Management Information System, which we have heard for several years is
    desperately needed. We made the money contingent on WIC caseload being
    met, and it seems as though that requirement will be met this year. Has
    USDA yet, or do you plan to, release this money this year?
        Answer. The fiscal year 2006 appropriation provided $19.8 million
    (after the 1 percent rescission) for management information systems
    (MIS) if it was determined that adequate funds were available to meet
    caseload requirements without the use of contingency funds. Based on
    current projections of both food package costs and participation for
    the remainder of fiscal year 2006, we do not anticipate the need to use
    contingency funds to support WIC caseload. Therefore, we fully intend
    to allocate the $19.8 million in MIS funding during fiscal years 2006
    and 2007 to WIC State agencies for critical MIS projects.

                                      CSFP

        Question. Mr. Bost, as you know, the CSFP program is slated for
    elimination under the President's budget. Reasons USDA believes this is
    appropriate, as explained by Secretary Johanns, include the fact that
    seniors can move to Food Stamps, there simply isn't enough money, and
    the program operates only in a limited number of States. Is CSFP the
    only nutrition program that operates in a limited number of States? How
    many States currently have CSFP programs? How many, and which States
    have approved plans and would join if there was funding available? Is
    it fair to say that this program has limited participation by States
    because of funding, and not because States don't want it?
        Answer. The CSFP is not the only nutrition assistance program that
    operates in a limited number of States. The Fresh Fruit and Vegetable
    Program (FFVP) and the WIC Farmers' Market Nutrition Program (FMNP)
    also operate in a limited number of States. The FFVP is currently
    authorized to operate in a limited number of schools in limited number
    of States and Indian Tribal Organizations (ITOs); currently 14 States
    and 3 ITOs. Funding is commensurate with the number of participating
    States and ITOs. The FMNP operates in 45 locations (37 States, D.C.,
    Puerto Rico, Guam and 5 ITOs). While new State agencies may apply to
    participate, appropriations have been commensurate with the number of
    currently participating States which precludes the expansion of the
    program to new States.
        CSFP currently operates in limited areas of 32 States, two Indian
    reservations, and the District of Columbia. Five States have approved
    plans for CSFP but are not yet participating: Delaware, Arkansas,
    Oklahoma, New Jersey, and Utah. CSFP's participation by States is
    currently limited because of funding.
        Question. Mr. Bost, I understand that under the Commodity
    Supplemental Food Program, States are required to order their food
    several months in advance. Do you plan to allow States to go ahead and
    place orders for food for next year? What does USDA plan to do if there
    is a continuing resolution? If the entitlement purchases from farmers
    that currently go to the CSFP program end, is it safe to assume that
    farmers will lose money?
        Answer. While the President's fiscal year 2007 budget request does
    not include funding for the CSFP, the program will continue to be
    administered in a manner that ensures program continuity until such
    time that Congress decides not to fund the program. Should Congress
    choose to adopt the President's fiscal year 2007 budget request,
    commodities remaining in CSFP inventories next fiscal year will be
    redonated for use in other programs, including the Emergency Food
    Assistance Program.
        We anticipate no impact on the agriculture sector from the
    elimination of CSFP. Food purchases that result from agricultural
    support activities will be maintained, but distributed through other
    channels.

                                 WIC MORATORIUM

        Question. Mr. Bost, last year's reauthorization legislation
    included measures to contain costs in these and other high-priced
    stores. We knew, however, it would take time for those provisions to be
    implemented. To contain costs in the meantime we included in last
    year's appropriation law a moratorium on the approval of any new WIC-
    only stores. We considered such a measure critical; in its absence,
    this committee would have faced even greater pressure on our limited
    resources. Can you please tell us whether this moratorium has helped
    contain WIC food costs and whether extending the moratorium will help
    to contain food costs next year? Why do you believe it is necessary to
    maintain the moratorium again this year, since the cost containment
    regulations have been in place for several months?
        Answer. We proposed a moratorium to provide States with adequate
    time to implement the newly enacted cost containment provisions of the
    Child Nutrition Act. It is difficult to know for certain how the
    moratorium has affected food costs due to limitations on the data we
    have available and the multiple factors that influence State agency
    food expenditures in any given year. Although the reasons for changes
    in average food package costs are complex, it is likely that the
    moratorium contributed to holding food costs down in fiscal year 2005.
    We know that the 6 State agencies with the largest number of WIC-only
    stores experienced food package cost increases ranging from 3.5 percent
    to 14.2 percent between fiscal year 2003 and fiscal year 2004. Between
    fiscal year 2004 and fiscal year 2005, 3 of these State agencies
    experienced a decrease in the average food package cost, and three had
    a lower rate of increase than in the previous year.
        At present we are optimistic that all State agencies that require
    certification will submit requests before September 30, 2006, and that
    all or most will receive certification by this date. Progress toward
    this goal was delayed for several months following the publication of
    the WIC Vendor Cost Containment Interim Rule on November 29, 2005. This
    rule implements the vendor cost containment certification requirement
    found in section 17(h)(11) of the Child Nutrition Act. From December
    28, 2005 through February 23, 2006, FNS was under a temporary
    restraining order (TRO) due to a lawsuit filed by the National Women,
    Infants and Children Grocers' Association and other plaintiffs to
    prevent implementation of the Interim Rule. The TRO interrupted State
    agency submission of requests for certification and FNS decisions on
    certification. Since the dismissal of the lawsuit on February 23, 2006,
    FNS has moved expeditiously to certify the State agencies that meet the
    certification requirements, and to provide technical assistance to
    others that are still in the planning process. In addition to the
    requests for certification that are currently being reviewed, FNS
    expects to receive nearly a dozen more between mid-April and the end of
    September 2006 (including California's, the State with the largest
    number of WIC-only stores). We are making every effort to certify State
    agencies before the end of the fiscal year. Extension of the current
    moratorium prohibiting the approval of new ``WIC-only'' stores until a
    State agency receives certification would ensure that the number of
    such vendors does not increase before State agencies implement improved
    cost containment methods.

                    WIC REAUTHORIZATION LEGISLATIVE PROPOSAL

        Question. The 2004 reauthorization legislation added section
    9(b)(8) to the Richard B. Russell National School Lunch Act, which
    specifies that all communications with households regarding
    certification or verification for free or reduced price meals must be
    in an understandable and uniform format and, to the maximum extent
    practicable, in a language that parents can understand. FNS has already
    provided model application and verification materials that reflect the
    changes to the certification and verification processes made by
    reauthorization in English and Spanish. In which additional languages
    will translations be provided and when will they be available?
        Answer. The household application is already published in English
    and has been translated into Spanish. Both are available on our Web
    site found at http://www.fns.usda.gov/cnd/FRP/frp.process.htm. The next
    round of translations will include: Russian, Vietnamese, Chinese
    (Mandarin), Japanese, Serbo-Croatian, Arabic, Korean, Somali,
    Cambodian/Khmer, French, Hmong, Haitian Creole, Laotian, Polish,
    Portuguese, Sudanese, Thai, Urdu, Hindi, Kurdish, Farsi, Greek, Samoan,
    and Tagalog. All 25 translations of the English version of the
    application are expected to be finished in time for use in the 2006-
    2007 school year.
        Question. We are aware that FNS has issued general guidance
    alerting States and school districts to this new provision. We are also
    aware that many households never respond to the request for eligibility
    verification and we want to be sure that families get the information
    they need to comply with the verification process. Please describe any
    manuals or other technical assistance materials that FNS has provided
    to local school districts clarifying the kinds of steps they are
    expected to take during the certification and verification processes to
    comply with section 9(b)(8). Has FNS reviewed materials in use by
    States and school districts to assess whether they comply with this
    provision and provide them with the assistance they need to come into
    compliance?
        Answer. FNS has issued 14 guidance memos to the State agencies
    concerning the National School Lunch Program (NSLP) free and reduced
    price applications, certification and verification, eight of which
    specifically deal with verification. The goal of each of these memos is
    to ensure that school food authorities are fully aware of the new
    provision, understand completely the requirement to follow-up when a
    request for verification goes unanswered, and that schools and families
    have the necessary information in order to comply with verification
    requests.
        FNS has updated its Guidance for Coordinated Management Evaluations
    of State Agency Operations to include the new provisions in the
    Reauthorization Act, including the new verification procedures as
    required by the Child Nutrition and WIC Reauthorization Act of 2004. As
    part of the management evaluation process, FNS reviews State agencies
    and the materials they use in their review of school food authorities
    to ensure that they comply with the new verification requirements.

                       FARMERS' MARKET NUTRITION PROGRAM

        Question. It is my understanding that States grants for the Farmers
    Market Nutrition Program have decreased this year. Is this accurate,
    and if so, why, considering the appropriated amount did not decrease?
    How much will the carryover be for the Farmer's Market Nutrition
    Program this year? How does this compare to the past 3 years?
        Answer. It is important to include the effect of prior year unspent
    funds when analyzing funding for the WIC FMNP. We anticipate
    approximately $3-4 million in unspent fiscal year 2005 funds will
    become available after closeout is completed which can supplement the
    appropriated funds, thus bringing State agencies close to their actual
    expenditure levels in fiscal year 2005.
        In fiscal year 2005, in addition to appropriated funds, we had
    available unspent prior year funds that were allocated to State
    agencies at the beginning of the fiscal year. Subsequently in fiscal
    year 2005, additional unspent prior year funds became available that
    were allocated to State agencies. For FMNP base grants for fiscal year
    2006, only available appropriated funds have been made available.
    Additional funds recovered from 2005 should be made available by early
    summer, 2006.
        In fiscal year 2005, $8.4 million in unspent funds were available
    to supplement the appropriation of $19.8 million. In fiscal year 2004,
    $5 million in unspent funds were available to supplement the $22.8
    million appropriation.

                       FRUIT AND VEGETABLE PILOT PROGRAM

        Question. As you know, last year we provided funding for an
    additional 6 States to join the Fruit and Vegetable Pilot Program. How
    much money would be required to extend the participation by these
    States through the next school year?
        Answer. No funding will be needed to extend the program to these
    States through school year 2006-2007 because the extension will be
    covered by existing funds appropriated on November 10, 2005, for the
    period January 30, 2006 through June 30, 2007. After June 30, 2007,
    however, funds will be needed should Congress wish to continue the
    program in these 6 States.

                               WILDLIFE SERVICES

        Question. What is APHIS Wildlife Services currently doing to reduce
    the effects the double-crested cormorant has on the Great Lakes fishery
    and how can we get them to expand their work to other highly impacted
    areas in the State?
        Answer. APHIS is currently conducting double-crested cormorant
    damage management activities in the Great Lake States of Michigan,
    Minnesota, New York, and Ohio. We are also conducting an environmental
    analysis in Wisconsin to determine the potential impacts of expanding
    our activities to that State. In addition, we are cooperating with
    several State, Federal, tribal, and Canadian agencies to survey Great
    Lakes breeding populations. The breeding population of Double-crested
    Cormorants on the Great Lakes has increased dramatically--from 89 in
    1970 to approximately 115,000 pairs in 2005. Also, APHIS continues to
    cooperate in satellite telemetry to monitor and assess regional
    movements in conjunction with diet and foraging studies.
        Question. Would increasing control in the Great Lakes, a prime
    breeding ground for the double-crested cormorant, help reduce the
    number of cormorants currently decimating aquaculture facilities in the
    southern United States?
        Answer. Yes, increasing control in the Great Lakes would help
    reduce the number of cormorants currently decimating aquaculture
    facilities in the southern United States. We have assessed the
    migratory path of double-crested cormorants. Using satellite telemetry
    and band recovery data, we observed the winter movement of these birds
    from the Great Lake Region to aquaculture facilities in Alabama,
    Arkansas, Louisiana, and Mississippi. We do expect that increased
    control activities in the Great Lakes would reduce the wintering
    population in the South and lessen the impact to the aquaculture
    industry and the environment.
        Question. Does APHIS Wildlife Services have enough resources to
    successfully control the Great Lakes breeding population of double-
    crested cormorants?
        Answer. Our current resources allow us to respond to the immediate
    short-term needs of States and industry--such as removing birds from a
    site.

                                STANDARDIZATION

        Question. On January 26, I wrote to Secretary Johanns encouraging
    the UDSA to act expeditiously to establish a grass-fed label standard
    for red meat. This proposal has been in the works for some time.
        When can we expect the Department to act on this proposal?
        What steps can the Department take to make sure that the program is
    affordable for producers?
        Answer. Developing a label standard for the grass-fed marketing
    claim is a priority of the Agricultural Marketing Service (AMS) and we
    have been working closely with the industry to develop a workable and
    usable standard that would serve the grass-fed market. AMS has obtained
    input from a number of individual experts within government, industry,
    and academia while drafting the revised proposed standard and its
    corresponding threshold. We have finalized the development of the
    revised standard, and it is expected to be published in the Federal
    Register this spring.
        Every effort will be made to administer this voluntary program
    cost-effectively. To validate the marketing claim associated with this
    production activity, AMS will conduct verification activities in
    accordance with procedures that are contained in Part 36 of Title 7 of
    the Code of Federal Regulations for Processed Verified Programs. This
    approach to verification of marketing claims makes for the best
    utilization of government resources on a cost recovery basis while
    providing for integrity of the program.

                    NATIONAL VETERINARY MEDICAL SERVICES ACT

        Question. The National Veterinary Medical Services Act (Public Law
    108-161) was funded in the fiscal year 2006 Agriculture Appropriations
    bill. What steps have been taken to implement this program? When can we
    expect those steps to be completed?
        Answer. USDA is exploring potential financial management strategies
    both within the Department and in collaboration with other Federal
    agencies in order to effectively run a loan repayment program. To
    evaluate these and other programmatic issues presented by the National
    Veterinary Medical Services Act--NVMSA, CSREES has constituted the
    NVMSA working group to develop potential program management strategies.
    The working group has met on four occasions and is exploring
    alternative strategies for managing the NVMSA. A draft program
    management proposal is presently being reviewed. We are working to
    ensure a well thought-out program plan which includes collaborations
    with veterinary schools and other stakeholders to develop research-
    based consensus regarding the candidate eligibility requirements, and
    metrics to support prioritized and weighted needs within the veterinary
    need areas identified within the Act.

                                AVIAN INFLUENZA

        Question. Late last year, you were provided more than $90 million
    in supplemental funds to prepare against avian flu, a small part of the
    total avian flu supplemental.
        It is apparent this is both a public health and an agricultural
    issue. Do you think USDA should have more of a leading role in
    protecting against this disease?
        Answer. USDA has taken an important role in preparing for and
    protecting against an incursion of high pathogenicity avian influenza
    (HPAI). We initiated the National Domestic H5/H7 Low Pathogenicity
    Avian Influenza (LPAI) Prevention and Control program in 2004 to
    conduct surveillance on the subtypes of LPAI that can mutate to
    dangerous forms. We have effective trade restrictions to prevent the
    introduction of HPAI through imported poultry and poultry products. Our
    preparation for a possible outbreak includes development of USDA
    responses as well as coordination with other Government agencies to
    protect both human and animal health. Internationally, we support
    capacity building, which allows APHIS to go into countries where the
    disease exists and assist in control efforts by providing technical
    training and advice.
        Question. In what ways are you working with U.S. producers, large
    and small, to make sure they have all the tools possible to protect
    against this disease? What are producers asking you to do?
        Answer. USDA has several cooperative programs to work with
    producers. The National Poultry Improvement Plan is a cooperative
    Industry-State-Federal program through which new technology can be
    effectively applied to the improvement of poultry and poultry products
    throughout the country. The program's provisions were developed jointly
    by industry members and State and Federal officials to establish
    standards for poultry breeding stock and hatchery products with respect
    to freedom from certain diseases and thereby provide certification of
    poultry and poultry products for interstate and international shipment.
        As the avian influenza surveillance program widens, producers are
    often concerned about indemnification for flocks that test positive.
    Both the NPIP General Conference Committee, which represents poultry
    industry stakeholders, and the States have recommended 100 percent
    indemnity for participants of the NPIP H5/H7 avian influenza monitoring
    program.
        In addition to publishing rules and uniform standards, USDA has
    focused on outreach and education through its Biosecurity for the Birds
    advertising campaign, professional development training, and other
    media. The advertising campaign, which provides basic information to
    promote avian health through biosecurity, began in July 2004 and has
    reached a circulation of over 125 million. Various training courses
    have been provided to State and Federal animal health technicians,
    veterinary medical officers, and other stakeholders working with the
    H5/H7 LPAI live bird marketing system program. These training sessions
    have included comprehensive information about poultry diseases,
    laboratory testing, biosecurity, personal protective equipment, State
    regulations, and risk assessments, among other things. USDA is also
    expanding outreach to the commercial poultry industry, especially those
    involved in the NPIP program, by updating an interactive CD to provide
    new information about poultry biosecurity for feed mills, hatcheries,
    slaughter plants, vaccine crews, live haulers, and service personnel.
        Question. I understand that you plan to use $3 million from last
    year's supplemental for avian flu vaccines and immunizations. However,
    there are some concerns that vaccinations will make it difficult to
    determine if flocks are actually infected with the virus after they are
    vaccinated. Do you favor a vaccination program for U.S. poultry?
        Answer. Vaccination does have the potential to negatively impact
    our trade of poultry and poultry products, but the vaccination of
    domestic poultry for H5 Avian Influenza (AI) strains can be valuable as
    part of an official control and eradication program. If appropriate,
    USDA is prepared to vaccinate domestic poultry, and maintains a vaccine
    bank. Approximately 40 million doses of vaccine were manufactured in
    2004 (H5N2, H5N9, H7N2, and H7N3) and are stored as frozen bulk viral
    fluid antigens. In 2005, the bank was expanded by approximately 30
    million doses. The stockpiled H5 vaccines are effective against the
    current Asian strain of AI.
        APHIS's Center for Veterinary Biologics (CVB) regulates the sale
    and distribution of veterinary vaccines. CVB controls the distribution
    of AI vaccines through a license restriction that places constraints on
    when, and under what conditions, manufacturers can sell AI vaccines
    domestically.
        Question. Although the President's 2007 request includes a
    significant increase for avian flu, this bill won't be passed until
    October at the very earliest, and this disease is spreading more
    quickly than many have anticipated. Do you think the funding request in
    the 2007 budget is adequate to deal with avian flu or do you think you
    will need additional funds this year?
        Answer. Currently, APHIS has sufficient funding to carry out its
    national domestic surveillance H5/H7 Low Pathogenicity Avian Influenza
    program and initiate additional surveillance and preparedness
    activities against an incursion of High Pathogenicity Avian Influenza.
    If we were to receive the entire amount requested in the fiscal year
    2007 President's Budget and the disease situation did not change from
    its current status, we would not need additional funds to carry out our
    stated objectives. However, if there were a widespread outbreak or
    another domestic emergency related to avian influenza, we would need to
    reassess our available resources and consider adjustments to our
    spending plans at that time.
        Question. While there has been much attention to transmission by
    migratory birds, there is also evidence that a bigger threat may be
    through the shipment of poultry-related products and that the disease
    might even be carried by containers in which infected birds had been
    kept.
        Just how much do we really know about the transmission of this
    disease? For example, do we know that if all U.S. poultry flocks were
    kept inside buildings that they will be safe? Do you think we have
    enough information to control this threat?
        Answer. Poultry scientists have studied how avian influenza (AI)
    and other virulent poultry diseases are transmitted. From this
    research, they have developed effective procedures to help prevent
    transmission from occurring. USDA has been publicizing these
    biosecurity measures, and we believe that by implementing them,
    producers themselves are helping us reduce the threat of widespread
    disease transmission.
        AI is primarily spread by direct contact between healthy birds and
    infected birds, and through indirect contact with contaminated
    equipment and materials. The virus is excreted through the feces of
    infected birds and through secretions from the nose, mouth and eyes.
    Contact with infected fecal material is the most common method of bird-
    to-bird transmission.
        Wild ducks often introduce low pathogenicity virus into domestic
    flocks raised on range or in open flight pens through fecal
    contamination. Because game birds and migratory waterfowl can introduce
    disease into domestic flocks, USDA and the poultry industries recommend
    preventing these avian populations from coming into contact with each
    other.
        Within a poultry house, transfer of the highly pathogenic avian
    influenza (HPAI) virus between birds can occur via airborne secretions.
    The spread of avian influenza between poultry premises almost always
    follows the movement of contaminated people and equipment. AI also can
    be found on the outer surfaces of egg shells. Transfer of eggs,
    therefore, is a potential means of AI transmission. Airborne
    transmission of virus from farm to farm is highly unlikely under usual
    circumstances.
        It is important to remember that a detection of H5N1 HPAI in wild
    birds would not mean that commercial poultry would be affected. The
    U.S. poultry industry is well equipped to prevent AI. First, chickens,
    turkeys, and eggs produced for human consumption are generally raised
    in very controlled environments. Secondly, biosecurity practices have
    been a part of the business of raising poultry in the United States for
    decades. The vast majority of our commercial poultry producers raise
    their chickens and turkeys in covered structures with controlled
    access.
        In addition to carrying out surveillance and preparedness
    activities, USDA maintains trade restrictions on the importation of
    poultry and poultry products from countries currently affected by H5N1
    HPAI. We would emphasize that there is no evidence that HPAI currently
    exists in the United States.
        Question. If we ever have an outbreak of avian flu in this country,
    what kind of contingency plan do you have in place? Do you have cost
    estimates, including who will pay for it and where will the money come
    from?
        Answer. If there were an outbreak of avian influenza (AI) in this
    country, our response would depend on the nature and extent of the
    outbreak and may require coordinated action with other Federal, State,
    and local agencies, as well as other segments of society. ``The
    National Strategy for Pandemic Influenza'' guides the national
    preparedness and response to an influenza pandemic, with the intent of
    (1) stopping, slowing or otherwise limiting the spread of a pandemic to
    the United States; (2) limiting the domestic spread of a pandemic, and
    mitigating disease, suffering and death; and (3) sustaining
    infrastructure and mitigating impact to the economy and the functioning
    of society. The Strategy provides a framework for future U.S.
    Government planning efforts that is consistent with the National
    Security Strategy and the National Strategy for Homeland Security. It
    recognizes that preparing for and responding to a pandemic cannot be
    viewed as a purely Federal responsibility, and that the Nation must
    have a system of plans at all levels of government and in all sectors
    outside of government that can be integrated to address the pandemic
    threat. APHIS has developed a response plan for AI. This plan provides
    greater detail on how APHIS will respond to an outbreak of AI and
    define activities that will be required to address the control,
    containment, and eradication of the disease. Additionally, APHIS has
    developed a playbook that acts as a direct link to the National
    Strategy for Pandemic Influenza, such that if the scope of an outbreak
    in animals surpasses APHIS and its partner's capacity, other resources
    can be activated in a standardized manner.
        In the event of an HPAI outbreak that is within the scope of APHIS'
    response capabilities, APHIS has the Foreign Animal Disease management
    infrastructure to conduct an emergency response that would occur at the
    local level, in accordance with the National Animal Health Emergency
    Management System's guidelines for HPAI. Should the disease be detected
    in commercial flocks or in back yard flocks, affected flocks would be
    quickly quarantined to prevent spread. Sick and exposed birds would be
    euthanized and the premises cleaned and disinfected to stamp out the
    disease. USDA would conduct epidemiology investigations to determine
    the source of the virus, and to track the movement of birds to contain
    spread.
        To ensure immediate deployment of supplies necessary to contain,
    control, and eradicate an HPAI outbreak, APHIS is building a stockpile
    of needed vaccines; diagnostic products including reagents;
    disinfectants; and equipment that would be required to support
    operations until normal supply lines can be established for protracted
    operations. APHIS is developing models of the potential impacts of AI
    outbreak in the United States and alternative control strategies. These
    models will enable APHIS to test preparedness and response capabilities
    through conducting simulated exercises specific to AI. The information
    gathered through the simulations and the exercises will enable APHIS to
    assess resource requirements in many different outbreak scenarios.
        If the scope of the HPAI outbreak is beyond APHIS' and the affected
    State's immediate resource capabilities, additional resources can be
    obtained through the following mechanisms: the National Response Plan's
    Emergency Support Function #11 ensuring that animal-health emergencies
    are supported in coordination with the emergency support function that
    covers public health and medical services; and the National Animal
    Health Emergency Response Corps and various State response corps can be
    activated. These private veterinarians and animal health technicians
    are ready to assist on short notice.
        Currently, APHIS has sufficient funding to carry out its national
    domestic surveillance H5/H7 LPAI program and initiate additional
    surveillance and preparedness activities against an incursion of HPAI.
    If we were to receive the entire amount requested in the fiscal year
    2007 President's Budget and the disease situation did not change from
    its current status, we would not need additional funds to carry out our
    stated objectives. However, if there were a widespread outbreak or
    other emergency related to AI, we would need to reassess our available
    resources and consider adjustments to our spending plans based on the
    nature and extent of the outbreak.
        USDA's current LPAI funding supports cooperative agreements with
    States; diagnostic work at the National Veterinary Services
    Laboratories; program personnel and their associated support costs;
    vaccine stockpiling; outreach and education; training; information
    technology/database architecture; and investigative and enforcement
    services efforts, among other things. A certain level of indemnity
    funding is available from fiscal year 2005 carry-over funding to allow
    rapid response to occasional LPAI introductions into domestic poultry
    flocks.
        USDA's current HPAI funding supports the expansion of AI
    surveillance in the commercial industry and live bird market system to
    all appropriate States. In addition, the HPAI program will allow for
    surveillance in upland game premises, commercial/backyard flocks, and
    other high-risk populations that have not been covered under the
    national domestic program. The HPAI program will support preparedness
    activities such as data modeling, simulated exercises specific to AI,
    and planning for the immediate deployment of the supplies necessary to
    contain, control, and eradicate an AI outbreak. The program will also
    expand the ``Biosecurity for the Birds'' outreach campaign, as well as
    anti-smuggling and risk management activities. Internationally, the
    HPAI program will support capacity building, which allows APHIS to go
    into countries where the disease exists and assist in control efforts
    by providing technical training and advice. This will create a more
    comprehensive approach to AI by looking at it internationally,
    monitoring the multiple ways that AI might get into the country, and
    preparing for the possibility of a H5N1 outbreak.

                             FOOD SAFETY INSPECTORS

        Question. Dr. Raymond, how many food safety inspectors will FSIS
    employ this year? Do you have a breakdown of ``off-line'' and
    ``online'' inspectors? How does this compare to last year? Are
    inspectors who quit or retire being replaced?
        Answer. There are approximately 7,600 in-plant food safety
    inspection program personnel, including field import inspectors and
    compliance officers. The in-plant personnel includes 7,190 food safety
    inspectors. Of the total food safety inspectors 3,171 are ``on-line''
    and 4,019 are ``off-line.'' This represents a slight decline in the
    number of in-plant food safety inspection program personnel due to
    difficulty finding qualified personnel to fill the positions. In-plant
    employees make up the overwhelming majority of the field inspection
    force and are the only ones designated as ``on-line'' and ``off-line.''
    Other ``front-line'' inspection employees are not identified by these
    terms. Open positions are filled as quickly as possible with qualified
    people. Each year, FSIS hires on average approximately 300 entry-level
    Food Inspectors and approximately 75 Public Health Veterinarians.
        Question. I understand that the number of plants has decreased, but
    what about the number of animals processed? How do you do a good job
    with fewer inspectors doing more work?
        Answer. As required by the Poultry Products Inspection Act and the
    Federal Meat Inspection Act, respectively, each poultry carcass and 100
    percent of livestock carcasses presented for slaughter are inspected by
    FSIS. Over the last decade, the number of poultry carcasses inspected
    per fiscal year has significantly decreased; however, the number of
    livestock inspected per fiscal year has increased.
        The current number of FSIS inspection program personnel allows the
    agency to perform its public health functions. FSIS inspection program
    personnel provide inspection services for all establishments under its
    jurisdiction by employing alternative staffing strategies and fully
    utilizing available field inspection employees to address the demands
    of each particular area.

                    HUMANE ACTIVITIES TRACKING (HAT) SYSTEM

        Question. How much funding will be required to complete connection
    of the HAT system to the FAIM architecture within FSIS? Please provide
    detailed information.
        Answer. The total amount of $7 million available from fiscal year
    2005 and fiscal year 2006 will be sufficient to complete connection of
    the Humane Activities Tracking (HAT) system to the Field Automation and
    Information Management (FAIM) architecture within FSIS. In order to
    ensure that the field work force is able to instantly transmit public
    health and humane handling data to headquarters, $5.5 million of the $7
    million is being used to install new high-speed connections in
    approximately 1,500 of 2,300 ``base plants,'' which are establishments
    from which inspection program personnel, including patrol inspectors,
    operate on a daily basis. Reflected in these costs are equipment,
    initiating services, and monthly charges for 1 year after the service
    is initiated. The agency hopes to have high-speed connections completed
    on these 1,500 base plants by February 2007, and is evaluating
    alternatives for the remaining 800 sites for which DSL/Cable Broadband
    is currently unavailable or have other connectivity issues. By
    replacing dial-up connections with high-speed access at all base
    plants, FSIS will be equipped with a fully-integrated, real-time
    communications infrastructure that gives the agency the ability to
    instantly detect and respond to abnormalities or weaknesses in the
    system to best monitor humane handling and slaughter enforcement,
    safeguard public health, and ensure food safety and food defense.
        The agency will also continue its development of a reporting tool
    which will link the HAT system to other agency databases through a web-
    based system, for which the remaining $1.5 million is earmarked. As
    part of the agency's communications infrastructure, this reporting tool
    will allow inspection program personnel in the District Offices and
    headquarters to access HAT data along with other food safety
    verification data, thereby providing the agency with a powerful
    management control tool for improved and consistent enforcement of the
    Humane Methods of Slaughter Act (HMSA).
        Question. How much funding is required to maintain this technology?
        Answer. Ongoing charges for the 1,500 broadband locations are
    expected to be $3 million of base funding annually. USDA is currently
    evaluating connectivity alternatives for the remaining 800 base plant
    sites, so funding estimates are unavailable at this time.

                              COOPERATIVE SERVICES

        Question. You commissioned an outside review of the programs and
    services provided by Cooperative Services at the Rural Business-
    Cooperative Services agency.
        Can you discuss the results of the review?
        In addition, what steps will USDA take to ensure the unique
    structural and economic advantages of member-owned and controlled
    cooperatives will continue to be supported by USDA and its programs?
        To support cooperatives, what steps have you taken to fill
    positions in the field at Co-op Services that are for cooperative
    development?
        Answer. The Administration contracted for an outside program review
    of Cooperative Programs. The review was conducted by a committee
    comprised of industry leaders and members of academia and was charged
    with identifying improvements or changes that would assist today's
    rural cooperatives and promote opportunities for leveraging the current
    Cooperative Programs' programs and capacity to support a broader range
    of cooperative strategies and approaches to building economic vitality
    in rural areas.
        The committee's recommendations focused on three primary areas--the
    expansion of the Cooperative Program's mission, the need for an
    infusion of new intellectual capital, and the adoption of a regional
    approach for providing cooperative services in rural communities. The
    committee recommended that Cooperative Program's mission be expanded to
    include alternative cooperative models and organizations, as well as
    non-agricultural cooperatives. The traditional cooperative model was
    seen as too restrictive, and the recommendation was made to include new
    generation cooperatives, LLCs, and other innovative ``self-help''
    business models. The committee also found that cooperatives and other
    ``self-help'' organizations that focus on housing, consumer services,
    health care, consumer goods, employer-ownership, small business
    purchasing, and other areas could be useful and important tools for
    rural economic development and improving the quality of life in rural
    areas. Finally, the committee recommended a partnership between
    regional Rural Development offices and rural cooperative development
    centers to provide information, education, and legal and development
    assistance. Rural Development is taking these recommendations under
    review.
        Rural Development's cooperative programs (CP) include the Value-
    Added Producer Grant (VAPG), the Rural Cooperative Development Grant
    (RCDG), and the Agricultural Marketing Resource Center (AgMRC) programs
    that devote major parts of their programs supporting and developing
    member-owned cooperatives. The RCDG program is budgeted at $4.95
    million for fiscal year 2007. Rural Cooperative Development Centers are
    awarded funds for the purpose of providing assistance to groups wishing
    to form cooperatives, as well as for providing assistance to existing
    cooperatives in rural areas. Member-owned cooperatives are encouraged
    and made specifically eligible for the VAPG program. However, the VAPG
    program is a competitive program that does not set aside specific
    support for cooperatives or any other type of applicant. In addition,
    CP provides support to member-owned and controlled cooperatives through
    the Rural Development Salaries and Expenses account by researching
    cooperative issues, by providing cooperative development technical
    assistance, by providing cooperative education and other technical
    advisory services, and by reporting on the financial health of the
    agricultural cooperative sector. Rural Development is taking these
    recommendations under review.
        Question. Mr. Dorr, you have recently stated that Persian Gulf
    countries are showing an interest in investing in U.S. ethanol plants
    and you have said, ``If you don't own [these plants] as agricultural
    producers, someone else will and you're going to be working for them''.
        Do you think that agricultural producers and rural cooperatives
    have a roll in producing renewable fuels or have they already lost out
    to the large corporate interests? Have your dire warnings come too
    late?
        Answer. Renewable energy is, and will continue to be a big part of
    America's energy solution. From 2001 through 2005 ethanol production
    more than doubled from under 2 billion gallons per year to about 4
    billion gallons per year. Government investment, especially in recent
    years, has helped agricultural producers and rural cooperatives play a
    major roll in production of renewable fuels and will continue to assist
    in the growth of the renewable fuels sector. For example, from fiscal
    years 2001 through 2005, USDA Rural Development invested nearly $84
    million in 89 guaranteed loans and grants to assist with development of
    ethanol facilities throughout rural America. Many of these facilities
    are owned and operated by agricultural producers and by cooperatively
    organized entities.
        We sincerely hope that agricultural producers, rural cooperatives,
    and rural residents will continue to be major sources of investment in
    renewable fuels. We want the people and businesses in rural communities
    to share in the returns to investment and the local development that is
    stimulated by local business ownership. As we look at the projects
    being started across the country we see that local money is still
    flowing in. What we are seeing as well, however, is that the big
    institutional investor, domestic and foreign, is seeing those high
    returns too. We would like to see that institutional interest in
    renewables serve as a tremendous way to leverage local investment.
        Question. Mr. Dorr, your mission is to support Rural America and
    rural interests and, I think you agree, not large multi-national or
    foreign corporations.
        Do you think that the budget proposal will provide adequate capital
    to small producers or cooperatives to move into the renewable fuels
    industry?
        Answer. USDA Rural Development has several funding tools and
    opportunities, including direct and guaranteed loans and grants, to
    support investment by small agricultural producers and rural
    cooperatives and help move these entities into the renewable fuels
    industry. Most of these programs are relatively small in terms of
    budget authority. Collectively, however, they provide a highly flexible
    portfolio of management strategies and funding options with which to
    address the unique circumstances of agricultural producers and
    cooperatives we serve. The Renewable Energy/Energy Efficiency Loan and
    Grant Program (Section 9006) provides financial assistance specifically
    targeted to the industry. In order to ensure adequate capital for small
    producers under this program, the Section 9006 final rule, published in
    July of 2005, calls for the provision of priority selection points for
    small agricultural producers.
        Question. Do you think the mix of grants-to-loans that you propose
    will be enough to make sure these groups can get a fair shake in this
    growing industry?
        Answer. Rural Development will continue to extend support to
    agricultural producers and cooperatives for the development of
    renewable fuels from the full range of our business lending and
    investment programs. These funding programs, coupled with private
    sector leverage, will continue to assist rural small businesses and
    small agricultural producers in increasing their access to the growing
    renewable energy industry. In addition, continued simplification of
    application processes for small entities will encourage increased
    participation from that sector. Finally, as mentioned above, we have
    placed increased emphasis on supporting small agricultural producers
    through the priority selection process.
        Question. How do you justify the reductions you propose when the
    opportunities, and the stakes, are so great?
        Answer. One of USDA Rural Development's primary roles in nurturing
    the renewable fuels industry will be to encourage private sector
    investment to maximize the benefit of Federal funding. By leveraging
    Federal dollars with private investments, we can spread resources. By
    fostering partnerships with State, local, and tribal governments,
    community development organizations, and for-profit and not-for-profit
    companies, Rural Development can help to grow State and local renewable
    energy policies that will support further investment. To ensure that
    small projects are not overlooked, we will continue to emphasize the
    use of grants when they are needed and to increase utilization of loan
    guarantees when possible. This will continue to allow us to serve the
    neediest entities while increasing loan-based financial assistance to
    the target market. In fiscal year 2007, we will be looking for ways to
    better target all available program resources to meet the growing
    demand in the renewable fuels industry.
        Question. Please provide us a breakdown, by program, for all the
    funds under your mission area for fiscal year 2007 that can be used to
    support renewable fuels development by farm organizations and rural
    cooperatives.
        Answer.
        [The information follows:]

    FISCAL YEAR 2007 PROPOSED FUNDING TO SUPPORT RENEWABLE FUELS DEVELOPMENT
    ------------------------------------------------------------------------
                                                                Fiscal year
                                                              2007 Projected
                                                Fiscal year       Funding
             Loan/grant description           2007 projected  Activities for
                                              funding levels     Renewable
                                                                  Energy
    ------------------------------------------------------------------------
    Business and Industry Guaranteed Loan       $990,000,000     $16,000,000
     (B&I)..................................
    Rural Economic Development Loan.........      34,600,000         400,000
    Rural Economic Development Grant........      10,000,000         400,000
    Value Added Producer Grants.............      19,280,000       2,500,000
    Section 9006 Renewable Energy Grants and       7,920,000       7,920,000
     Guaranteed Loans.......................
    Section 9006 Renewable Energy Guaranteed      34,600,000      34,600,000
     Loan...................................
    Section 9008 Biomass R&D Grants.........      12,000,000      12,000,000
    Electric Program Loans..................     700,000,000     200,000,000
                                             -------------------------------
          TOTAL.............................   1,732,420,000     273,820,000
    ------------------------------------------------------------------------

        Question. Mr. Dorr, USDA has a long history of running a well-
    managed guaranteed rural homeownership program through a private-public
    partnership with over 2,000 lenders. In fact, in fiscal year 2005, over
    $100 million in housing loans were provided in the rural areas of my
    home State. Of that amount, 32 percent benefited low and very-low
    income families.
        I now see you are raising the origination fee for these loans from
    2 percent to 3 percent, while interest rates are rising, and I must
    admit I am puzzled. An origination fee of 3 percent is extraordinarily
    high for this targeted market and almost unheard of in the housing
    industry. For fiscal year 2003, you stated you were lowering this fee
    from 2 percent to 1.5 percent to lower the so called ``barriers'' to
    achieve the President's Initiative of increasing minority
    homeownership.
        Why was it considered a ``barrier'' then and not now, and how do
    you justify increasing what you personally identified as a ``barrier''
    to an unprecedented level?
        How will your increased fee with rising interest rates help you
    meet or exceed the President's goal of providing increased
    homeownership rates to low and very low-income families, especially
    minorities?
        Answer. Homeownership, particularly minority homeownership, is
    still a key Administration objective. In fiscal year 2003, fees
    presented a barrier to homeownership for some prospective minority
    borrowers because they had to pay the fees at closing. We helped
    eliminate that barrier by allowing the entire fee to be financed into
    the loan by increasing the amount we can lend up to 103 percent of the
    appraised value of the home.
        Additionally, we have no requirements for down payment or mortgage
    insurance, so even with the fees, monthly payments remain reasonable.
    The higher fee would only result in a $6 increase in the average
    monthly payment for most customers. We closely monitor the other fees
    charged by participating lenders in our SFH guarantee program to ensure
    that fees charged are reasonable.
        Raising the guarantee fee saves approximately $35 million in Budget
    Authority for fiscal year 2007. This is a significant savings.
    Realizing savings like this while at the same time maintaining
    effective programs like 502 guaranteed loans is the balance USDA Rural
    Development is trying to achieve.

                             THE USDA LOAN PROGRAM

        Question. Also as part of your request, you are asking lenders to
    certify they would not make a loan to a borrower using any other
    Federal housing program, including FHA, before making a USDA loan. The
    USDA program serves a rural based, lower-income population and is
    limited to a primary home, unlike FHA.
        What data do you have that shows these programs overlap?
        Wouldn't this requirement add another layer or layers of
    bureaucracy and most likely confuse participating lenders and drive up
    the originator's costs that will be passed on the borrower?
        What have you heard from the lending community on both of these
    proposals, because, to be honest, we have heard a great deal from
    lenders, underwriters and national lending associations from around the
    country all of which were very critical of these efforts?
        Answer. The Office of Management and Budget's (OMB's) Program
    Assessment Rating Tool (PART) indicates that the 502 guaranteed program
    may overlap other Federal housing programs, and may at times serve
    customers that could have received loans through the Federal Housing
    Authority or Veterans Administration. This general provision has been
    proposed to preclude the potential overlap of Federal programs.
        Currently, a lender must certify that they would not provide the
    proposed loan without a Rural Development guarantee. The proposed
    provision would require a lender certify that a borrower was not
    eligible for another Federal insured or guaranteed housing program. If
    the lending institution normally does not offer another Federal
    program, they would not be bound by this proposal.
        The reaction from the lending community on the fee increase and the
    new certification proposal has not been positive. Higher fees and
    additional paperwork are not popular concepts. However, given the cost
    savings that would be realized from the fee increase and the
    elimination of potential Federal program overlaps, it is felt that
    benefits from these proposals are significant, can be successfully
    implemented, and make good program management sense.

                 STRENGTHENING AMERICA'S COMMUNITIES INITIATIVE

        Question. In its fiscal year 2007 Budget, the Administration again
    proposes to eliminate four programs within the Department of
    Agriculture and consolidate those activities in the Department of
    Commerce with thirteen other programs from four other departments under
    the ``Strengthening America's Communities Initiative.'' The four USDA
    programs are Rural Business Enterprise Grants, Rural Business
    Opportunity Grants, Economic Impact Grants, and Rural Empowerment
    Zones/Enterprise Communities, which annually have provided over $72
    million to Rural America's most underserved communities for several
    years.
        What assurances can you provide that rural communities will
    continue to receive the same level of support for these specific
    programs under this consolidation?
        Answer. The President's Strengthening America's Communities
    Initiative will include eligibility criteria that will ensure funds are
    directed to those communities most in need of development assistance.
    We feel confident that rural communities will fare well when these
    criteria are used. USDA Rural Development has offered our expertise,
    assistance, and experience in program delivery in rural areas through
    our 800 local offices and 6,800 employees. We will continue to work
    with the Department of Commerce and the Department of Housing and Urban
    Development on the technical details of program delivery, particularly
    as it affects rural areas.
        Question. What studies indicate that this initiative will more
    effectively deliver these specific programs?
        Answer. The initiative is designed to streamline a number of
    programs that provide regional economic assistance to communities, and
    will include eligibility criteria that will ensure funds are directed
    to those communities most in need of development assistance. While
    Rural Development has not conducted any studies of the initiative, we
    are confident that rural communities will fare well when these criteria
    are used. USDA Rural Development has offered our expertise, assistance,
    and experience in program delivery in rural areas.
        Question. If any of these four programs will experience any funding
    reduction under this consolidation, please indicate the amount of the
    reduction and provide detailed justification for each reduction.
        Answer. A total of $327 million is proposed for the economic
    development component of the restructured Initiative. Further
    distributions of funding by program area have yet to be determined.
    Again, we believe rural America will be well served as the eligibility
    criteria will direct resources to those rural communities most in need
    of assistance, and USDA Rural Development expects to be heavily engaged
    in program development, implementation, and delivery.

                                  SECTION 515

        Question. The budget eliminates the section 515 rural rental
    housing program. Since 1963, the Agriculture Department has made loans
    for affordable rental housing in rural areas. The section 515 program
    is the only Federal program providing direct, subsidized loans (1
    percent) to finance rural rental housing. According to a recent USDA
    report, there is a substantial need to repair and renovate section 515
    housing. The portfolio contains 450,000 rented apartments in section
    515 developments. The average 515 tenant income is little more than
    $9,000, which is equal to only 30 percent of the Nation's rural median
    household income. Sixty percent of the tenants are elderly or disabled
    and one-quarter are minority. The existing Section 515 portfolio is
    aging. Of the 17,000 developments across the country, close to 10,000
    are more than 20 years old. To maintain this stock, it will take a
    commitment of Federal funds for restoration. It's hard to argue that
    rural America does have a housing crisis. According to the 2000 Census,
    there are 106 million housing units in the United States. Of that, 23
    million, or 23 percent, are located in non-metro areas. Many non-metro
    households lack the income for affordable housing. The 2000 Census
    reveals that 7.8 million of the non-metro population is poor, 5.5
    million, or one-quarter of the non-metro population, face cost
    overburden, and 1.6 million of non-metro housing units are either
    moderately or severely substandard.
        Why has the Administration proposed to end a program that for over
    40 years has financed over 500,000 units of affordable housing with
    very few delinquencies or defaults and why is RHS giving up on
    providing affordable rental housing for over seniors and families?
        Answer. Rural Development has not given up on providing affordable
    rental housing. The President's fiscal year 2007 budget proposes $74
    million to continue the new vision for Multi-Family Housing programs.
        The Administration proposes to create a new source of funding to
    rehabilitate 515 properties. The Comprehensive Property Assessment
    (CPA) found that 90 percent of the properties lacked sufficient cash
    and reserves to prevent economic obsolescence.
        Already, over 100 properties are lost from the program each year.
    This number will rise quickly in coming years as deferred maintenance
    overtakes the 17,000 remaining properties in the portfolio. This is a
    much bigger threat to the portfolio than prepayment. Furthermore, in a
    few years loans will begin maturing; unless 515 property owners have
    equity in their property, many may be lost to the private market.
        The Administration's multi-family housing proposal allows property
    owners to restructure their loans. With this restructuring USDA will
    exchange debt service payments on the loan to provide cash for
    rehabilitation, and the property owner will sign up for another 20
    years providing affordable housing.
        The new restructuring tools that are key components in our proposed
    revitalization legislation will allow us to assure that resources are
    available to revitalize the vast majority of properties in our
    portfolio where the owner elects to stay in the program. These
    restructuring tools, primarily the use of debt deferral, will create
    the opportunity to add additional debt to take care of immediate
    rehabilitation needs.
        One way to look at this restructuring process is to view it as a
    ``fix-up vs. build'' decision: it costs $85,000 on average to build a
    new affordable housing unit, but only $20,000 per unit to rehabilitate
    what we currently have. The vision, then, is to secure the valuable
    national asset of a large affordable rural rental housing portfolio,
    for the longest period, at the lowest cost to the government, at the
    greatest benefit to tenants, owners, and communities.
        The Administration's fiscal year 2007 Budget proposes more new
    construction for multi-family housing. It does this by doubling funds
    for Section 538 guaranteed loans, thereby increasing dramatically the
    loan amounts available. The section 538 program works in partnership
    with other financing entities to create affordable housing. More than
    80 percent of the closed loans in the portfolio have 9 percent tax
    credit dollars. Many tenants in section 538 properties have section 8
    vouchers which assist the tenants in keeping section 538 housing
    affordable. The program also offers interest credit subsidies that
    assist in lowering the interest rate throughout the term of the loan.
    The subsidized interest rate keeps rents low for tenants.
        Question. According to the Department's Comprehensive Property
    Assessment, repair and renovation of the section 515 portfolio is a far
    greater problem--in terms of number of units--than prepayment. The
    Comprehensive Property Assessment indicated the need for some 50,000
    vouchers for families unlikely to be displaced by sale of certain
    section 515 development and estimated over $2 billion was needed to
    repair and restore the existing portfolio. Rural Housing Service (RHS)
    has used section 515 to finance this sort of repair and renovation
    activity. In fiscal year 2006, RHS will commit at least $50 million to
    repair and restore the existing portfolio.
        How many 515 projects have been repaired using the 538 program and
    how many projects would you predict would be rehabilitated with the 538
    program at the President's budget request?
        What statutory barriers exist for the 538 program to refinance and/
    or repair a 515 project with HUD or USDA rental assistance attached to
    it?
        Answer. This is the first year of using 538 financing to renovate
    existing 515 properties. Currently, we estimate that in fiscal year
    2006, 10 properties in the 515 portfolio will receive lender provided
    funds with a 538 guarantee. At the fiscal year 2007 President's budget
    request amount of $198 million, we expect to finance approximately 20
    to 30 existing 515 properties.
        There are no statutory barriers which would preclude section 538
    financing on an existing 515 project. However, section 515 owners do
    not have to refinance their loans in order to finance repairs or to
    restore their developments. If a section 515 owner wants to finance
    repairs with a 538 loan guarantee, the section 538 program provides an
    interest credit down to the applicable Federal rate at the time the
    loan closes (currently approximately 4.6 percent). The interest rate
    difference is only part of the story. The cost of making section 538
    funds available is significantly less to the Federal Government than
    through the Section 515 program. We would also consider the section 538
    guaranteed funds to be only one of many sources of funding for
    rehabilitation purposes that can be made available to existing 515
    projects.

                                    VOUCHERS

        Question. The fiscal year 2007 budget proposes $74 million for
    vouchers and indicated that some of this money will be used for
    portfolio restructuring.
        What is the planned breakout between expenditures for restructuring
    and vouchers--in both dollars and units?
        Answer. The 2007 Budget addresses the displaced tenant issue with
    the funding of vouchers and hopes to be able to address the
    dilapidation issue if the restructuring authorization is passed. The
    2007 Budget includes $74 million to continue the multi-family housing
    revitalization proposal that was initially proposed in the 2006 Budget.
    This funding will be used primarily for housing vouchers, good for 12
    months, for residents of projects whose sponsors prepay their
    outstanding indebtedness on USDA loans and leave the program. The
    specific dollar amount and number of tenants is dependent on the number
    of properties that pre-pay, their location, and the market conditions
    at the time. In addition, the Administration is proposing that 2007
    appropriation language provide the flexibility to use the $74 million
    for debt restructuring and other revitalization incentives that we
    expect to be authorized before or during 2007.
        Question. The fiscal year 2006 budget requested $214 billion for
    vouchers alone. The fiscal year 2007 budget requests much less for
    vouchers--$74 million--and proposes to use some of that for
    restructuring.
        What has changed in the last year so that the administration can
    request only about one-third of the fiscal year 2006 budget for
    vouchers?
        Answer. The Comprehensive Property Assessment (CPA) found that 10
    percent of the properties (approximately 1,700) could be economically
    viable to prepay if permitted. This is estimated to be about 46,000
    units, with approximately one-third of the prepayments occurring in
    each of the first three years. The fiscal year 2006 budget reflected
    vouchers needed in the first year funded under the assumption they
    would last 3 to 4 years and provided administrative funds to establish
    the Office of Portfolio Revitalization. The fiscal year 2007 budget
    reflects vouchers needed in the first year funded at a 1-year level.

                               RENTAL ASSISTANCE

        Question. The budget proposes to reduce the term on rural rental
    assistance contracts from 4 years to 2 years.
        If this is not approved, what is the total needed to continue all
    expiring contracts? If this is approved, what is the projected total
    needed for contract renewals for fiscal year 2008?
        Answer.
        [The information follows:]

                          RENTAL ASSISTANCE PROJECTIONS
    ------------------------------------------------------------------------
                                                       4 YR RENEWALS
                                             -------------------------------
                      YEAR                                      Dollars in
                                                  Number         Thousands
    ------------------------------------------------------------------------
    2006....................................          66,799        $639,126
    2007....................................          85,756         987,000
    2008....................................          78,567       1,284,564
    2009....................................          60,524       1,204,900
    2010....................................          73,531         950,000
    ------------------------------------------------------------------------

                          RENTAL ASSISTANCE PROJECTIONS
    ------------------------------------------------------------------------
                                                       2 YR RENEWALS
                                             -------------------------------
                      YEAR                                      Dollars in
                                                  Number         Thousands
    ------------------------------------------------------------------------
    2007....................................          66,799        $477,000
    2008....................................          85,756         628,000
    2009....................................         145,366       1,089,000
    2010....................................         146,280       1,121,000
    2011....................................         152,098       1,194,000
    ------------------------------------------------------------------------

        Question. The Administration proposes to continue new construction
    for farm labor housing. These units need rental assistance in order to
    be affordable to eligible farmworkers housing households.
        Is there rental assistance for farmworker housing included in the
    budget request?
        Answer. Yes, Rural Development's rental assistance request includes
    units for farm labor housing.

                             WATER AND SEWER GRANTS

        Question. The budget includes a reduction in the interest rate
    charged to poverty level communities, which is offset by a reduction in
    water/sewer grants. For most rural communities, grant funds are the key
    to financing new systems and system improvements. These communities
    have the most significant problems with their water-sewer systems and
    lack the capacity in terms of income and population to spread the costs
    for improvements. It is likely that a reduction in the amount of
    available grant assistance will limit the ability of the communities
    with the greatest need to afford RUS assistance. The RUS system allows
    for up to 75 percent grant financing for water or sewer systems, yet
    typically communities only get 35-40 percent grant.
        What assurance can you give the Committee that this proposal will
    not result in small poor communities being left out of the program or
    increasing the debt servicing that will have a negative impact on
    increased average user water and sewer bills?
        Did you conduct analysis on small low-income rural communities and
    can you share this information with the Committee?
        Answer. An applicant's debt repayment capacity is evaluated
    independently of the loan interest rate and based on maintaining
    reasonable user fees. The applicant's loan capacity is then determined
    based on its repayment capacity and the interest rates and terms
    available at the time the project is approved. With the proposed
    reduction in interest rates, it expects to increase most applicants'
    loan capacity. Grant funds will continue to be used to assist borrowers
    in maintaining reasonable user rates where their borrowing capacity is
    less than the project cost. Priority for funding will continue to be
    based on small communities with low income levels that must make system
    improvement to meet health standards.
        The chart below describes our analysis of the revised interest rate
    structure in funding a loan and grant project with the same level of
    budget authority. Using data available at the time the President's
    budget was being developed, the chart shows the market rate range where
    the revised interest rate structure will result in lower annual loan
    payments. Since the historic market rate falls within that range, we
    concluded our revised interest rate structure would better serve our
    borrowers in maintaining reasonable user fees. Rural Development has
    determined that because this assists all communities, it will help the
    small low-income rural communities as much or more than those between
    5,000 to 10,000 populations.
        [The information follows:]

                                ORGANIC RESEARCH

        Question. The 2002 Farm Bill established the Organic Research and
    Extension Initiative to fund organic agricultural research at the level
    of $3 million for each of the subsequent 5 years. When combined with
    the Organic Transitions Program, this joint Integrated Organic Program
    has been disbursing about $4.5 million to fund organic research
    annually.
        How does the competitiveness of this program compare to other of
    the integrated grant programs (e.g. section 406 grants)?
        Answer. In 2005, the Integrated Organic Program received 82
    proposals requesting $39 million and the competitive review panel
    deemed 42 of the proposals requesting $23 million as high quality and
    fundable. To stay within the approximately $4.7 million available to
    the program, 8 proposals were recommended for funding, which represents
    10 percent of all submitted and 19 percent of those that were
    determined to be fundable.
        In 2005, the Crops at Risk Program received 22 proposals requesting
    $7.4 million and the competitive review panel deemed 9 of the proposals
    requesting $3.4 million as high quality and fundable. To stay within
    the $1.3 million available to the program, 5 proposals were recommended
    for funding, which represents 23 percent of those that were determined
    to be fundable.
        In 2005, the FQPA Risk Avoidance & Mitigation Program received 18
    proposals requesting $25.6 million and the competitive review panel
    deemed 12 of the proposals requesting $17.6 million as high quality and
    fundable. To stay within the $4.2 million available to the program, 4
    proposals were recommended for funding, which represents 22 percent of
    those that were determined to be fundable.
        In 2005, the Methyl Bromide Transitions Program received 19
    proposals requesting $6 million and the competitive review panel deemed
    11 of the proposals requesting $3.9 million as high quality and
    fundable. To stay within the $2.9 million available to the program, 9
    proposals were recommended for funding, which represents 47 percent of
    those that were determined to be fundable.
        Question. Please describe any plans CSREES has to increase its
    level of support for organic agricultural research.
        Answer. The quality of proposals being funded through the
    Integrated Organic Program and low percentage of high quality proposals
    funded suggest that increased funding for the Integrated Organic
    Program would be effectively used. In the 2007 President's budget, the
    program is funded under the NRI. The agency is assessing how organic
    research is currently supported through allied programs and how this
    support could be increased, if appropriate. For example, a number of
    National Research Initiative programs support basic and applied
    research directly and indirectly related to organic production,
    marketing and environmental interdependencies. It may be possible to
    increase support for organic agricultural research by increasing staff
    awareness of organic research needs and by adapting Requests for
    Applications to reflect the increasing interest of the USDA in organic
    production and marketing systems, as well as potential implications to
    the environment, rural communities and long term competitiveness in the
    United States products.

                              ORGANIC AGRICULTURE

        Question. The 2002 agricultural census contained only 2 questions
    on organic operations, providing little information about the scope of
    the industry. What is NASS's plan to gather more information to
    document demographic and economic trends in the organic sector?
        Answer. NASS has expanded the Organic Section for the 2007 Census
    of Agriculture. NASS staff consulted with other USDA agencies and
    organic grower organizations to develop a more comprehensive Organic
    Section that will better address the needs of the data user community.
    This data will allow NASS to publish the organic data in conjunction
    with the economic and demographic data already collected on the census.
    The result will be a more complete picture of the organic sector of
    American agriculture.
        Question. We understand that NASS has suggested they could better
    address data on the organic industry by doing a follow up survey to the
    2007 census sent only to certified organic operations. Is it possible
    to include this organic survey as an addendum (included with) the main
    agricultural census?
        Answer. The 2007 Census of Agriculture will collect information on
    certified, transitional, and non-certified organic agriculture. In
    combination with other data collected in the census of agriculture,
    NASS will be able to produce cross tabulations providing the most
    comprehensive data set available on the organic sector.
        The main barrier to inserting an addendum into the 2007 Census of
    Agriculture is the inability to easily pre-identify the producers in
    all sectors of organic agriculture. Industry experts have indicated
    information is needed on certified, transitional, and non-certified
    organic producers. While it may be possible to pre-identify certified
    producers, it would be virtually impossible to pre-identify the others.
        Question. Of 15 project areas in the NRI competitive grants
    program, I have been informed that only 2 of them have funded projects
    that contain an organic agriculture element within them. These are
    Managed Ecosystems and Agricultural Prosperity for Small and Medium-
    Sized Farms. However, I have also been informed that since 2003, there
    have been no grants made that specifically fund organic production
    research, though five projects that had some aspect pertaining to
    organic marketing were funded through the Agricultural Prosperity
    program in 2005. How could organic be better represented through more
    program areas of the NRI?
        Answer. Organic research, extension, and educational issues are
    applicable to the majority of the NRI competitive grants programs. In
    the past, the majority of projects funded have been through the Managed
    Ecosystem program and its predecessor, the Agricultural Systems
    program. Between the fiscal years 2003 and 2006, six projects have been
    funded through the Managed Ecosystem program for an award amount of
    $1,976,127. Three of these projects are related to increasing
    production in cropping systems through more efficient cycling of
    nutrients and better understanding of soil biological processes. Two
    projects compared apple production systems between organic,
    conventional, and integrated systems. Results from the apple projects
    were published in an article in Science.
        As you mentioned, the new Agricultural Prosperity for Small &
    Medium-Sized Farms program funded two projects on organic agriculture
    during its first year. One project was from a social perspective
    looking at the role of women farmers in sustaining small farms and
    rural communities. The second project was on production systems
    transitioning to conservation tillage practices. The 2006 fiscal year
    projects have not been announced, but we anticipate additional projects
    related to organic agriculture will be funded.
        In addition to the Managed Ecosystem and the Small Farms program,
    six other programs have been involved in funding organic agriculture
    projects between fiscal years 2001 and 2006. These programs illustrate
    the diversity of topics that can support organic research interests
    through NRI programs. Programs that have funded projects directly
    related to organic agriculture are the Biology of Plant-Microbe
    Associations, Soil Processes, Biologically Based Pest Management,
    Biology of Plant-Microbe Associations, Agricultural Markets and Trade,
    and Rural Development. Research questions being addressed under these
    programs range from ``Population Migrations of Phytophthora Infestans
    in Organic and Conventional Agricultural Production Systems'' related
    to potato blight in the Biology of Plant-Microbe Associations program,
    ``Microbial Community Structure in Relation to Organic and
    Conventionally Farmed Desert Soils'' related to soil health in the Soil
    Processes program, ``Dispersal of Phytophthora capsici in Soils from
    Conventional and Organic Agroecosytems'' looking at how organic
    practices can control disease in the Biologically Based Pest Management
    program, ``Population Migrations of Phytophthora Infestans in Organic
    and Conventional Agricultural Production Systems'' in the Biology of
    Plant-Microbe Associations program. Social and economic issues can be
    addressed through the Agricultural Markets and Trade and Rural
    Development programs. Examples of funded topic are ``Experimental
    Investigation of Interactions in Willingness to Pay for Certified
    Organic and Non-Genetically Modified Foods'', ``The Demand for
    Alternative Foods: Perceptions and Characteristics of U.S. Shoppers'',
    and ``Generational Transfer of Alternative Farms as Rural Development
    in the Northern Great Plains Region''.
        Projects can impact or inform organic producers, but may not be
    directly identified as an organic research project. These projects
    provide examples of the breath of issues that are facing the organic
    producer, which can be addressed through NRI programs. There were 16
    NRI programs that funded projects that are potentially relevant to
    organic research in fiscal years 2004 and 2005. The areas of research
    vary from use and management of manures, growth and health of animals,
    weed dynamics, soil biological processes and nutrient cycles, air
    quality from animal systems, bio-control of insects, biodiversity of
    systems, to health aspects encouraging vegetable consumption. NRI
    funding for these projects was at a level of $16,691,097.
        An emerging area of interest for the organic producer is in being
    able to use generally accepted practices of conservation, enhancing
    biodiversity, soil enrichment, and recycling on inputs to increase the
    economic value of organic production practices. Several programs in the
    NRI are expanding our focus on ecosystem services and market valuation
    of these practices. For example the Markets and Trade and Managed
    Ecosystem programs have funded 10 projects that will lead to adoptions
    of conservation practices or evaluate market potentials for ecosystem
    services. This is a new opportunity for research, extension, and
    educational activities in support of organic agriculture.
                                     ______

                   Questions Submitted by Senator Tom Harkin

                             RISK MANAGEMENT AGENCY

        Question. In your written testimony, you referred to the
    President's request to fund 15 additional staff years for the Risk
    Management Agency to provide better oversight of the crop insurance
    program so as to avoid problems such as those that resulted in the
    failure of the American-Agrisurance insurance company in 2002. Please
    describe in greater detail what functions those additional staff would
    perform that would have such an impact?
        Answer. RMA has requested the additional staff for the Compliance
    offices to provide more effective program oversight, strengthen the
    front-end reviews of approved insurance providers, and to address
    outstanding OIG recommendations to improve company oversight and
    internal controls.
        Increased staffing will assist Compliance with ongoing efforts
    pertaining to quality control and assurance requirements and the
    increased workload associated with increases in program size and
    complexity. These efforts will clearly improve RMA's ability to deter
    waste, fraud, and abuse through better internal controls and
    monitoring. The ability of the Compliance staff to maximize automation
    and other efficiencies to offset limited personnel resources has
    reached a peak, and it is necessary to increase actual numbers of
    people at this time or alternately reduce some activities. Reducing any
    of our ongoing activity would be a hard choice since every activity
    Compliance engages in is based on statutory or approved program
    requirements. Compliance uses various methodologies to limit the number
    of policies selected for review (dollar thresholds, etc.) and refers
    complaints and other related issues back to the Approved Insurance
    Providers for their review and response. However, accomplishing more of
    this work with RMA Compliance staff would provide greater assurance and
    control over the results.
        The addition of two staff to each of the six Regional Compliance
    Offices is intended to assist with the additional workloads associated
    with performing random policy reviews associated with determining a
    program error rate under the Improper Payments and Information Act of
    2002 (IPIA). During the last decade, Compliance greatly reduced the
    numbers of random policy reviews it performed. Requirements in the
    previous Standard Reinsurance Agreement for the companies to randomly
    review policies annually, provided mixed and/or wholly unusable results
    that RMA deemed unsatisfactory, especially for establishing the
    required Program Error Rate. Presently, Compliance has taken resources
    away from other review activities to supplement the required IPIA
    random reviews. The additional staff will permit each office to recover
    some of the effort in these other areas.
        Question. For fiscal 2007, the President is seeking $109 million to
    fund computer upgrades at various agencies in the Department of
    Agriculture, a recurring request for the last several years. Why is
    Risk Management Agency the only entity within USDA for which the
    President is proposing to assess private sector partners the cost of
    upgrading the Agency's computers, by imposing a half cent fee on every
    policy sold by crop insurance companies?
        Answer. The Federal-Private sector partnership that makes up the
    Federal crop insurance program is unique among USDA programs. The
    delivery of the Federal crop insurance program is provided through a
    network of private sector insurance companies who are reimbursed by the
    Federal Government for their delivery costs. The companies are also
    able to earn underwriting gains in years of favorable loss experience.
    For the 2005 crop year, the total compensation paid to participating
    insurance companies is expected to approach $1.8 billion and more than
    $10 billion over the last decade.
        While private sector companies deliver the crop insurance program,
    the USDA Risk Management Agency (RMA) information technology (IT)
    system is critical to its ongoing operation. The RMA IT system is used
    to maintain a wide array of vital program information including acreage
    and production information on about 1.2 million policies, and provides
    critical internal controls for mitigating program vulnerabilities. The
    RMA IT system also maintains actuarial data for over 368 crops in over
    3,000 counties Nation-wide. The private sector insurance companies need
    to access the RMA IT system and data on a daily basis in order to
    conduct business. The existing RMA IT system has been in place for over
    a decade and is reaching the end of its life expectancy. The system is
    becoming increasingly difficult and expensive to maintain and recent
    years have seen increases in computer downtime which threaten the
    operation and security of the Federal crop insurance program.
        The Administration's proposal recognizes the urgency of RMA IT
    funding needs in light of previous budget requests that have gone
    unfunded. The Administration believes the private insurance companies
    are a primary beneficiary of efficient, effective and more advanced
    computer systems, and thus it is not unreasonable to have the companies
    contribute to the modernization and maintenance of the IT systems which
    they rely upon to accrue considerable financial benefits. In addition,
    the new IT systems will likely contribute to improved and more
    efficient compliance with Congressional mandates pertaining to data
    mining and data reconciliation/data sharing, which has a direct impact
    and associated cost to the insurance companies.

                             MARKET ACCESS PROGRAM

        Question. Why does the President's budget propose to reduce funding
    for the Market Access Program (MAP) by 50 percent?
        Answer. The proposal to limit funding for MAP in 2007 reflects the
    Administration's efforts to reduce the Federal deficit. It should be
    noted that even if the program is limited to $100 million in 2007, that
    level is still higher than the $90 million program level that was
    authorized for MAP prior to the 2002 Farm Bill. Reducing the deficit is
    a key component of the President's economic plan and will help to
    strengthen the economy and create more jobs. Farmers, ranchers, and
    other residents of rural America understand the importance of a healthy
    economy, which raises incomes and increases demand for their products.
    This and other deficit reduction measures will contribute to a more
    prosperous future for our citizens.
        Question. Has some problem been detected with the program, or has
    it been determined that it is no longer necessary to assist U.S.
    agricultural exporters?
        Answer. Expanding overseas markets for agricultural products is
    critical to the long-term health and prosperity of the U.S. farm
    community. This Administration is convinced that, given our advantages
    in agricultural productivity and low cost of production vis-a-vis the
    rest of the world, the future of our farmers and ranchers lies in the
    export market. FAS' international activities, including MAP, play a
    critical role in helping open new markets, pursuing the emerging growth
    markets of tomorrow, and maximizing the opportunities offered by trade
    liberalization and growth in global food demand. FAS' market
    development programs were reviewed in accordance with the Office of
    Management and Budget's Program Assessment Rating Tool in 2005 and
    received a score of 75 with a ``Moderately Effective'' rating.
        The current budget situation requires hard choices and the setting
    of priorities. We believe that $100 million is an appropriate level for
    the program in light of the fiscal discipline that is absolutely
    necessary in times of deficit spending. It is also important to
    understand that, while funding for MAP is reduced, funding for all
    other USDA market development activities, including the Foreign Market
    Development Program, remains unchanged from this year's level.

                            WORLD TRADE ORGANIZATION

        Question. In the Doha Round negotiations, the European Union has
    pushed hard to require that all international food aid be provided only
    on a cash basis, rather than through commodity donations as is done in
    U.S. programs. I find the EU proposal on food aid to be unacceptable,
    as do most other members of the Senate. Where do the negotiations stand
    on this issue?
        Answer. Recently, the Agriculture Negotiations Chair, Crawford
    Falconer, issued a Food Aid Reference Paper, which essentially
    summarized the state of play on various food aid issues. The purpose of
    the paper is to help focus discussions on key issues in upcoming
    meetings. We are encouraged by the Chair's paper as it allows for in-
    kind, or commodity, food aid. Earlier this year, the African and Least
    Developed Countries (LDC) groups, which are the recipients of food aid,
    issued a joint submission on food aid. This paper, too, suggested that
    food aid disciplines should leave the door open for in-kind donations.
    These are encouraging developments in the food aid negotiations.

                               AGRICULTURAL TRADE

        Question. Many of the bilateral disputes that have emerged in
    recent years in agricultural trade are highly technical in nature,
    typically having to do with unscientific sanitary or phytosanitary
    (SPS) rules or cumbersome customs or distribution requirements. What
    steps is USDA taking to make sure that potentially problematic rules of
    this kind are identified early and addressed before they hinder access
    for U.S. agricultural exports?
        Answer. On a weekly basis FAS and U.S. food safety agencies meet to
    review new or revised foreign SPS regulations and assess their
    potential impact on U.S. exports. In 2005, USDA's World Trade
    Organization (WTO) Enquiry Point led a U.S. interagency process that
    reviewed over 600 foreign SPS regulations notified to the WTO. Based on
    an interagency analysis, the Enquiry Point drafted and submitted
    official comments on 62 foreign measures to reduce their impact on U.S.
    exports. In addition to the numbers above, FAS and U.S. food safety
    agencies also collaborated to prepare an additional dozen formal
    comments addressing barriers to market access for measures that were
    not notified to the WTO, including a number of measures implemented by
    China and India. FAS' overseas staff also actively monitor local
    government's SPS-related regulations and notify the U.S. industry and
    the Enquiry Point of potentially problematic regulations for further
    action.
        FAS uses the rules of the WTO SPS Agreement to exert pressure on
    countries such as India and China to increase the transparency of their
    import regulations, thereby, allowing the United States and other
    countries to expose and then resolve unfair SPS import barriers. In
    2005, these actions caused China to change import regulations on meat,
    wines, spirits, and fresh fruits. U.S. exports to China of these
    products grew from $142 million in fiscal year 2004 to $252 million in
    fiscal year 2005. Similarly, India relaxed import requirements that
    could have blocked U.S. exports of almonds, pulses (chick peas,
    lentils, and peas), and other horticultural exports. Almond shipments,
    the top U.S. agricultural export to India, increased from $95 million
    in fiscal year 2004 to $118 million in fiscal year 2005. U.S. exports
    of pulses to India increased from $500,000 in fiscal year 2004 to over
    $3 million in fiscal year 2005.

                               FARM LOAN PROGRAMS

        Question. I have heard from constituents that the emergency loan
    program is unnecessarily complex and, for many farmers, too restrictive
    to meet their legitimate needs. I note that FSA is continuing its
    project to streamline all farm loan program regulations, handbooks, and
    information collections. I believe that it is essential to complete
    this project and reduce the paperwork burden for all loan applicants
    and FSA employees as quickly as possible. How soon can borrowers expect
    improved loan processing procedures?
        Answer. FSA has re-engineered and streamlined the guaranteed and
    emergency (EM) loan processes, and is in the process of streamlining
    the remaining direct loan making regulations and processes. These
    streamlined regulations will reduce the paperwork required for a loan
    and shorten the time it takes to process a loan. The final rule
    implementing these regulations is currently in the clearance process,
    and we expect the regulations to be implemented in the field in early
    2007. In the case of EM loans, the submission requirements have been
    reduced and flexibility added to the process. However, the Agency still
    must determine an applicant's eligibility for an EM loan, make
    decisions regarding loan feasibility and adequacy of collateral for the
    proposed loan, and comply with Federal environmental and credit policy
    requirements. We have endeavored to make this as easy as possible for
    the applicant, but these determinations require information that some
    applicants may find burdensome to provide.
        FSA also utilizes technology to ease the application process.
    Applicants can access all forms necessary to apply for a loan via the
    internet. They may also complete and submit loan applications on-line.
    The Agency recently implemented a state-of-the-art business planning
    system that has improved loan processing response times.
        Question. What more can FSA do to make emergency loans available to
    those who have suffered crop, livestock or property damage as a result
    of natural disasters?
        Answer. FSA re-engineered the EM loan regulations and procedures in
    2002. The changes made it easier for producers, particularly livestock
    producers, to apply for and receive EM loans. Any livestock loss,
    whether it is reduced production or loss of animals, is now considered
    a qualifying loss for EM loans. If a producer meets the statutory
    eligibility requirements and has suffered any property damage, they now
    may qualify. Additional changes were made to the method used for
    calculating a qualifying loss for crop producers. These changes have
    streamlined the application process and made EM loans more accessible
    to crop producers. FSA also uses available crop insurance data to
    expedite and reduce the burden on applicants. The new regulations allow
    FSA to provide EM assistance to more producers in an efficient and
    expeditious manner and comply with statutory requirements.
        Question. I am going to read from the USDA Budget Summary: ``The
    farm credit programs provide an important safety net for America's
    farmers by providing a source of credit when they are temporarily
    unable to obtain credit from commercial sources.''
        I fully agree with this statement, but would expand it to include
    the guaranteed loan programs which facilitate loans from private
    lenders, so I am particularly concerned that the Administration intends
    to shift $30 million of the cost of the guaranteed credit to the very
    farmers who are least able to afford the additional cost.
        The Administration proposal refers to a modest increase in the fee
    required to obtain guaranteed loans. In fact, upfront fees for all
    guaranteed loans will be increased 50 percent. In addition, a proposed
    annual fee for multi-year farm operating loans will significantly
    increase the cost of credit for those farmers who obtain guaranteed
    unsubsidized credit lines. For some farmers the annual fee may make the
    difference between the ability to cash flow and the decision to quit
    farming. What makes this proposal even more distressing is that
    interest rates are rising, so farmers will face higher credit costs
    even before the fees are imposed.
        What legal authority are you relying on to impose these fees?
        Answer. The Consolidated Farm and Rural Development Act,  307(b)
    [7 U.S.C. 1927], authorizes fees on farm ownership loans. The fees are
    not statutorily limited but are ``as the Secretary may require.'' In
    the case of operating loans, Title V of the Independent Offices
    Appropriations Act of 1952 [31 U.S.C. 9701] authorizes fees for
    services or things of value provided by the Government. The statute
    requires that the fees or charges be based upon what is fair and on the
    costs to the Government.
        Question. The budget assumes a decrease of $186,000,000 for
    guaranteed farm ownership loans and a decrease of $112,890,000 for
    guaranteed farm operating unsubsidized loans. The justification for
    these significant decreases is a decline in demand for the program.
        To what extent do the proposed user fees contribute to the decline
    in program demand?
        Answer. We do not anticipate that imposition of fees will have a
    material impact on the program demand. Historically, program demand has
    reacted to trends in the agricultural and general economies. Guaranteed
    operating loan demand has actually increased to date in fiscal year
    2006 as higher energy prices, which were unforeseen during the
    development of the budget, have increased production costs. The demand
    for guaranteed farm ownership loans has declined slightly, as
    refinancing activity has slowed with rising interest rates.
        Question. How many borrowers are expected to forgo guaranteed loans
    because of the additional and new fees?
        Answer. We anticipate that very few borrowers will be forced to
    forgo guaranteed loans because of the additional and new fees. The
    amount of the fees is relatively minor as compared to the total
    expenses and overall borrowing of a typical borrower; therefore, very
    few borrowers are likely to be unable to cash flow because of the
    increased fees.
        Question. Has FSA conducted an economic assessment of the proposed
    fees on borrowers and rural lenders? If so, what are the key findings
    of the assessment?
        Answer. FSA did not conduct a formal economic assessment of the
    proposed fees. However, FSA reviewed the impacts of fee increases in
    the Small Business Administration and USDA Rural Development programs.
    Fee increases on guaranteed loans from those agencies have not
    materially impacted the use of the programs.
        Question. Are there adequate funds available to offer subsidized
    guaranteed loans or direct loans to borrowers who will be unable to
    cash flow guaranteed loans because of the additional fees?
        Answer. We anticipate that there will be adequate funds to meet the
    needs of the few borrowers likely to be in that situation. Because the
    amount of the fees is small compared to the total expenses and overall
    borrowing of most guaranteed loan applicants, we anticipate that few
    will need to move to subsidized or direct loans as a result of the
    fees.

                       SECTION 9006 OF THE 2002 FARM BILL

        Question. As you know, section 9006 of the farm bill's energy
    title, which I authored, provides grants and loans to farmers and rural
    small businesses for renewable energy projects and to make energy
    efficiency improvements. The program is very popular, and already well
    oversubscribed. Of course, I strongly disagree with the
    Administration's budget proposal to cut this program's funding by more
    than half. In 2004 less than 3 percent of applications for small wind
    and solar projects were approved and funded. What I have heard is that
    the scoring system USDA and DOE have established puts smaller scale
    distributed generation projected at a significant disadvantage to
    larger projects.
        Why are so few small-scale renewable energy projects and such a
    negligible percentage of such applications for grants receiving funds?
        Are you looking into ways to alter the program to give small-scale
    renewable energy projects a greater opportunity to participate?
        Would you supply data as to how much projects have been funded the
    past several years, by energy category, and by the size or scale of
    those projects?
        Answer. The Section 9006 regulation published on July 18, 2006,
    included a simplified and streamlined application process for small
    projects of $200,000 or less. To increase accessibility for smaller
    projects and applicants, we expanded priority points for small
    agricultural producers and small rural businesses. We are in the
    process of developing application worksheets to help guide smaller
    applicants through the process and provide them with tools to help
    improve the quality of applications. In fiscal year 2007, we are
    looking for ways to better target the resources to give small scale
    projects a greater opportunity to participate.

                                       SECTION 9006 AWARDS, FISCAL YEAR 2003-2005
    ----------------------------------------------------------------------------------------------------------------
                                                            Small Projects \1\              Large Projects \2\
                                                     ---------------------------------------------------------------
                                                         Award ($)        Number         Award ($)        Number
    ----------------------------------------------------------------------------------------------------------------
    Grants:
        Anaerobic Digester..........................  ..............  ..............      21,973,493              82
        Bioenergy...................................         233,521              10       7,547,719              27
        Energy Efficiency...........................       2,068,455             132       2,861,488              33
        Geothermal..................................         130,848               3         249,435               1
        Hybrid......................................          26,457               2       2,413,375               7
        Hydrogen....................................  ..............  ..............  ..............  ..............
        Solar.......................................         229,883              12       1,212,360               5
        Wind........................................         434,712              24      27,374,804              97
                                                     ---------------------------------------------------------------
          Grant Totals..............................       3,123,876             183      63,632,674             252
                                                     ===============================================================
    Guaranteed Loans:
        Bioenergy...................................         100,000               1      10,000,000               1
                                                     ---------------------------------------------------------------
          Loan Totals...............................         100,000               1      10,000,000               1
                                                     ===============================================================
    Total Number....................................             437
    Total Awards ($)................................      76,856,550
    ----------------------------------------------------------------------------------------------------------------
    \1\ Small Projects=projects with total eligible project cost of $200K or less.
    \2\ Large Projects=projects with total eligible project cost greater than $200K.

        Value-added Producer Grant (VAPG) applications, especially those
    seeking funds for planning purposes, do not necessarily indicate size
    or scale of the proposed project. Therefore, an accurate measure of the
    number applicants proposing small-scale energy projects is not
    available.
        Beginning in 2006, VAPG evaluation criteria provide for priority
    points to be awarded to farm-based renewable energy project
    applications.
        Following is a breakdown of VAPG-funded energy projects by number
    of projects, amount funded, and category for 2001-2005.

                                                                   VAPG-FUNDED ENERGY PROJECTS
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Fiscal year 2001    Fiscal year 2002    Fiscal year 2003    Fiscal year 2004       Fiscal year 2005
                        Project                    ---------------------------------------------------------------------------------------------------------
                                                     No.      Amount     No.      Amount     No.      Amount     No.      Amount        No.         Amount
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ethanol.......................................      9   $3,461,704     22   $4,824,323     11   $1,849,620      6     $988,986           14   $1,519,500
    Biodiesel.....................................      2    1,000,000      4    1,246,000      9    1,783,225      4      621,099            9      789,377
    Solid fuel....................................      1      470,000      4      272,567      1       50,000  .....  ...........            1      110,000
    Anaerobic.....................................  .....  ...........      1       65,429  .....  ...........      2      135,000            3      188,975
    Wind..........................................  .....  ...........      2      298,000      2       14,812      1      128,000  ...........  ...........
    Solar.........................................  .....  ...........  .....  ...........  .....  ...........      1       73,332
    Other.........................................  .....  ...........      1      250,000      1      101,920  .....            3      358,435  ...........
                                                   ---------------------------------------------------------------------------------------------------------
          Total...................................     12    4,931,704     34    6,956,319     24    3,799,577     14    1,946,417           30    2,966,287
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                         SECTION 9002 BIOBASED PRODUCTS

        Question. As you know I talked with the Secretary about the
    biobased products rule coming out a few weeks ago. We had a good
    conversation. I want to thank you as I did the Secretary for getting to
    this point. Specifically how many items do you expect to designate for
    preferred procurement by the end of this calendar year?
        Answer. We currently have six items designated by final rule for
    preferred procurement. These six items account for at least 120
    specific products from 58 different manufacturers. We expect to have
    four additional proposed rules, with ten items each, in the clearance
    process or published in the Federal Register by the end of calendar
    2006. When finalized, the first five rules will account for over 1,000
    specific products from more than 300 manufacturers within the 46 items.
    USDA will continue to designate additional items as further market
    research and test data is obtained.

                            RURAL DEVELOPMENT GRANTS

        Question. Please provide a list of Rural Development grants
    (including the amount granted) made in fiscal year 2004 and fiscal year
    2005 to communities on the list published in the Federal Register on
    January 4, 2001 (66 Fed. Reg. 751) for the purpose of building rural
    businesses infrastructures to utilize and market products from forest
    hazardous fuel reduction projects.
        Answer. Our research indicates that no Rural Development grants
    were made to organizations in the communities listed for the purpose of
    building rural business infrastructure to utilize and market products
    from forest hazardous fuel reduction projects.

            IMPLEMENTATION OF TEXAS INTEGRATED ELIGIBILITY CONTRACT

        Question. Under Secretary Bost, as you know, I have had some
    concerns about turning over core Food Stamp Program functions to
    private contractors, specifically the recent decision by the State of
    Texas to turn over large areas of program administration to private
    entities.
        As you know, at the end of January, Texas began to roll out the
    first stage of its integrated eligibility contract in two counties
    surrounding the Austin area on a pilot basis. I have had a chance to
    review several of the site and implementation reports from this
    contract phase and based upon my review, I have several reasons for
    considerable concern.
        The Weekly Post transition Status Report from the Texas Access
    alliance for the reporting period of 3/6/06 through 3/12/06 shows that
    individuals seeking assistance over the telephone are encountering
    major problems. This report indicates call abandonment rates of almost
    55 percent and average waiting time of over 21 minutes. Given that
    these are average waiting times, it is obvious that many individuals
    are waiting longer to speak with customer service representatives.
        Under Secretary Bost, what is being done to ameliorate these
    problems and, more importantly, please indicate what levels of
    telephone service you believe are acceptable. You have assured me
    several times, and I take you at your word, that FNS will not approve
    the rollout of additional project phases unless you are satisfied with
    the contractor performance in the previous contract phase. Under what
    conditions would you not approve the next contract phase? Is a 20
    minute waiting time with more than half of callers giving up
    acceptable? What are the criteria and standards that you will use to
    make a decision regarding approval of the next phase of the contract?
        Answer. Implementation of Texas' new system is intended to allow
    the State to realize the customer service improvements and potential
    savings that its new business model offers. USDA/FNS stewardship
    responsibilities require assurance that basic program standards are
    maintained. Our overriding issues for continuing project expansion are
    sustaining program access and integrity to ensure that applicants and
    recipients get fair, timely, and accurate service.
        We recognize that any new system is likely to encounter problems
    during implementation, many of which can be addressed as rollout
    continues. Our concern is that the project not expand in the face of
    major problems which jeopardize access or integrity, or which warrant
    immediate correction. We intend to continue funding and working with
    the State to resolve problems and will only halt funding in the face of
    serious deficiencies.
        Texas' recent call center performance has not been acceptable, but
    it has been improving. The data from the weekly status report for the
    week ending April 9, 2006, indicates that the call abandonment rate is
    3.86 percent and the call wait time is 66 seconds. The data from the
    week ending March 12, 2006--approximately 1 month earlier--had a call
    abandonment rate of 54.5 percent and the call wait time was 1,276
    seconds. Therefore, based on our monitoring of this project, we know
    that steps are being taken which have already resulted in improved call
    center operations.
        USDA/FNS has developed a list of performance elements which we
    consider critical and appropriate for use in considering the success of
    initial rollouts of the Texas project. While we will be monitoring many
    aspects of project implementation, we will focus on these components
    which include: System Functionality, Customer Service, and Application
    Timeliness. Findings from our recent reviews found: long call wait
    times, high call abandonment rates, and call operators providing
    misinformation; as well as backlogs in data entry, and a high
    percentage of cases returned to the vendor due to missing or inaccurate
    information. We also learned that there is insufficient system testing
    and risk assessment. While these items may not in and of themselves be
    critical, taken together their cumulative effect caused us to question
    the readiness of the system to expand.
        The decisions on the pace of rollout are complex and dynamic and
    must include assessment of the risks of identified problems and the
    availability of remedies to these problems. These must be weighed
    against the cost and risks of delayed implementation. Accordingly, we
    are not setting specific numerical standards but are reviewing and
    monitoring the overall functionality and capacity of the system. Based
    on its own assessment of readiness, the State announced a delay in its
    rollout to resolve fundamental operating concerns. We agree with the
    State's decision and continue to work closely with the State to monitor
    project implementation.
        Note: Under Secretary Bost and Deputy Under Secretary Kate Coler
    traveled to Texas on May 16, 2006 to state clearly the FNS expectation
    that further rollout should be delayed until identified issues have
    been addressed. Texas stated they will not rollout the system to
    additional areas in the State until issues of access and integrity have
    been resolved. No date for future rollout has been established at this
    time.

            IMPACT OF TEXAS ELIGIBILITY SYSTEM ON VULNERABLE GROUPS

        Question. As you know from our prior correspondence on this matter,
    I have been particularly concerned about the disparate impact of the
    new eligibility systems for persons with low levels of literacy,
    persons with limited English proficiency, the elderly, and persons with
    disabilities.
        In my previous correspondence with you, I have raised these issues
    several times. In a recent letter to me you responded that, ``we are
    working to monitor the project's impact on such persons and ensure the
    State's continued compliance with applicable civil rights laws.'' Are
    you tracking the extent to which the new eligibility process and
    systems impact these vulnerable groups compared to other individuals?
    Please tell me specifically how you are monitoring these things. Can
    you provide me with any data about differential impacts of the new
    system on these vulnerable groups? Are you collecting any data on this
    at all?
        Answer. Access to program benefits for all eligible persons is a
    priority of USDA/FNS, however vulnerable populations such as the
    elderly, disabled, and others with barriers to participation are of
    specific concern. For this reason, USDA/FNS is carefully watching for
    negative impacts on especially vulnerable populations. In addition, the
    USDA/FNS Program Access Review process includes contacting advocacy
    organizations, which represent the interests of a variety of vulnerable
    populations, to obtain their feedback on the service they have received
    during the food stamp application process.
        USDA/FNS is conducting on-site monitoring of local offices and call
    centers, participating in project meetings and conference calls, and
    performing an ongoing review of performance reports and contractor
    deliverables.
        USDA/FNS is monitoring Texas' project implementation in affected
    counties on a monthly basis. However, given the normal State reporting
    mechanisms, which include time needed for review of the data, the
    number of cases processed at the State level during the first month of
    project implementation in January 2006 will not be available until June
    2006. County level data is normally reported only for the months of
    January and July; thus county data for January will be available in
    June/July.
        FNS does not impose higher standards on Texas than exist for other
    States administering the Food Stamp Program, such as reporting or
    collecting data not normally collected as a part of routine program
    operations. However, we are monitoring these issues closely, in lieu of
    actual additional data collection. Thus far, it could be concluded that
    Texas' new business model actually has the potential to improve access
    for special populations. We will continue to watch this aspect
    carefully, as Texas proceeds with its project.

                     NATIONAL ANIMAL IDENTIFICATION SYSTEM

        Question. USDA expedited its plans to implement a national animal
    identification system after BSE was discovered in a cow in Washington
    State. A system such as this is extremely important to trace back the
    origin of animals in the event of a disease outbreak, but also to
    determine its exact age. In a recent BSE case in Alabama, the age of
    the cow has been a key issue in order to determine the effectiveness of
    FDA's ruminant-to-ruminant feed ban and for restoring beef trade. South
    Korea made it clear that it wanted certainty that the cow that tested
    positive for BSE in Alabama was in fact born before FDA's ruminant-to-
    ruminant feed ban.
        Recent press accounts indicate that the national animal
    identification system will only track animal movements and not the age
    of animals. Is this correct?
        Answer. Implementation of NAIS will support State and Federal
    animal disease monitoring and surveillance through the rapid tracing of
    infected and exposed animals during animal disease outbreaks. The
    ultimate long-term goal of NAIS is to provide animal health officials
    with the capability to identify all animals and premises that have had
    direct contact with a disease of concern within 48 hours after
    discovery. While age is not required to track an animal to its origin,
    its value in an epidemiologic investigation can be significant and
    producers are encouraged to report such information to the private and
    State databases. However, it is important that the ``required'' data
    elements be restricted to the most basic information needed to trace an
    animal back to its premises of origin.
        What is USDA's justification for only tracking animal movements and
    not incorporating animal age into the system?
        Answer. Producers are very much aware of the value of having
    records to document the age of their animals and may elect to input
    such data in private tracking data systems. While age is not required
    to track an animal to its origin, its value in an epidemiologic
    investigation can be significant and producers are encouraged to report
    such information to the private and State databases. However, it is
    important that the ``required'' data elements be restricted to the most
    basic information needed to trace an animal back to its premises of
    origin. USDA wants this system to be as easy as possible to allow for
    producer participation. Increasing the amount of information producers
    must submit could discourage the number of participants.
        Why does USDA not want to know the age of animals for tracking
    purposes when it would provide critical information for restoring or
    maintaining beef trade?
        Answer. The ultimate long-term goal of NAIS is to provide animal
    health officials with the capability to identify all animals and
    premises that have had direct contact with a disease of concern within
    48 hours after discovery. While age is not required to track an animal
    to its origin, its value in an epidemiologic investigation can be
    significant and producers are encouraged to report such information to
    the private and State databases. However, it is important that the
    ``required'' data elements be restricted to the most basic information
    needed to trace an animal back to its premises of origin. USDA wants
    this system to be as easy as possible to allow for producer
    participation. Increasing the amount of information producers must
    submit could discourage the number of participants. Again, market
    demands will drive the reporting of additional information and will be
    better accepted by the affected producers.
        Question. On January 10, of this year, a non-profit U.S. Animal
    Identification Organization (USAIO) was formed, at the behest of USDA,
    to implement and operate the animal movement database. USAIO submitted
    a Memorandum of Understand (MOU) to USDA to develop a strategic
    partnership.
        Has USDA approved the MOU?
        Answer. USDA has received a proposed memorandum of understanding
    from USAIO. USDA since published the document detailing our plan for
    the integration of private animal tracking databases with the National
    Animal Identification System (NAIS). This plan includes a draft
    cooperative agreement that, when finalized, will be used to establish
    the arrangement of all participating organizations. USDA plans to have
    all agreements signed in June 2006.
        Will USDA exercise authority to approve or disapprove decisions
    made by the USAIO regarding the management and operation of the
    national animal tracking database.
        Answer. Animal tracking databases will be managed and owned by the
    industry and States. As envisioned and outlined in our strategic
    documents, the NAIS will integrate with more than one of these private
    animal tracking databases. On April 6, 2006, USDA released the general
    technical standards that animal tracking databases will need to comply
    with to enable their integration with the NAIS. Private database owners
    or those involved with the development of private databases, such as
    USAIO, have been invited to submit applications for system evaluation
    to USDA and offer feedback as the final technical requirements are
    established.
        Should USDA find that the defined data elements are compliant with
    the NAIS standards, the technology architecture meets the technical
    requirements, and the proposed databases submitted for review meet all
    the other criteria, we would initiate a formal agreement with each
    entity responsible for compliant databases. The agreement would also
    detail access rights, as well as safeguards for preserving historic
    data if the organization discontinues operation of the database or
    ceases business. If and when the agreement is finalized, those
    databases would be noted as an authorized or compliant animal tracking
    system in the NAIS. The application for system evaluation and a draft
    cooperative agreement are available on the NAIS Web site at
    www.usda.gov/nais.
        By early 2007, USDA expects to have the technology in place, called
    the ``Animal Trace Processing System'' or commonly known as the
    ``metadata system,'' that will allow State and Federal animal health
    officials to query the NAIS and private databases during a disease
    investigation. The animal tracking databases will record and store
    animal movement tracking information for livestock that State and
    Federal animal health officials will query for animals of interest in a
    disease investigation.
        If there is a disease outbreak, and there is an inability of USAIO
    to provide the necessary tracking information to USDA due to poor
    management decisions or technology flaws, who will be held accountable?
        Answer. USDA has released the general technical standards that
    animal tracking databases will need to comply with to enable their
    integration with the NAIS. Private database owners or those involved
    with the development of private databases, such as USAIO, have been
    invited to submit applications for system evaluation to USDA and offer
    feedback as the final technical requirements are established.
        Should USDA find that the defined data elements are compliant with
    the NAIS standards, the technology architecture meets the technical
    requirements, and the proposed databases submitted for review meet all
    the other criteria, we would initiate a formal agreement with each
    entity responsible for compliant databases. The agreement would also
    detail access rights, performance measures such as availability of the
    system, and requirements for redundancy and back-ups to ensure data is
    available on an as-needed basis. Also, safeguards for preserving
    historic data if the organization discontinues operation of the
    database or ceases business will be part of the agreement. If and when
    the agreement is finalized, those databases would be noted as an
    authorized or compliant animal tracking system in the NAIS. If USDA is
    unable to access necessary data from a compliant entity during a
    disease investigation, USDA may either revoke their status as a
    compliant entity (therefore affecting the system's marketability to
    producers) or take some other corrective action.
        Question. In June 2004, I wrote Secretary Veneman expressing
    concern that the implementation and infrastructure of the planned
    national animal identification system appeared to be geared towards
    cattle to the exclusion of other animal species. Currently, the USDAIO
    is made up of only cattle or bison representatives and the database
    appears to not be suited for poultry or hogs.
        What is USDA doing to remedy this problem to ensure that the
    database is least burdensome to producers and tailored to the daily
    functioning for operations of all animal species?
        Answer. Throughout the establishment and implementation of the
    NAIS, USDA has engaged in extensive dialogue with producers and
    industry organizations across the country to gauge their views on
    animal identification. In April 2005, USDA published a draft strategic
    plan and draft program standards for the NAIS and invited public
    comments on those documents. Industry-specific working groups have also
    been studying the issue of animal identification and will be making
    recommendations to USDA through an established advisory committee on
    how best to tailor the program to meet their industry-specific needs.
    NAIS working groups have been established for both the poultry and
    swine industries, and they have been providing input throughout the
    developmental process.
        On April 6, 2006, USDA released the general technical standards for
    animal tracking databases that will enable integration of private
    systems with the NAIS. Those involved in the development of private
    databases, such as the U.S. Animal Identification Organization (USAIO),
    were invited to submit applications for system evaluation to USDA and
    offer feedback as the final technical requirements are established.
    USDA plans to enter into cooperative agreements with organizations
    responsible for the databases that meet the standards. The application
    for system evaluation and a draft cooperative agreement are available
    on the NAIS website. More than one private animal tracking database can
    be integrated into the overall NAIS, including those that might be
    species-specific.
        By early 2007, USDA expects to have the technology in place, called
    the ``Animal Trace Processing System'' or commonly known as the
    ``metadata system,'' that will allow State and Federal animal health
    officials to query the NAIS and private databases during a disease
    investigation. The animal tracking databases will record and store
    animal movement tracking information for livestock that State and
    Federal animal health officials will query for animals of interest in a
    disease investigation.
        Once the entire system is designed and implemented, the market will
    determine which technologies are the most appropriate to meet the needs
    of the system. Sale barns, feedlots, and others will help determine
    which methods are most cost-efficient and effective. In developing the
    system, USDA has been accepting input from both species-specific
    working groups and a markets and processors working group.
        Will USDA, in partnership with USAIO, be incorporating the
    principles and practices of existing USDA disease eradication programs
    into the structure and operation of the national animal identification
    system?
        Answer. The primary objective of the NAIS is to develop and
    implement a comprehensive information system that will support ongoing
    animal disease programs and enable State and Federal animal health
    officials to respond rapidly and effectively to animal health
    emergencies such as foreign animal disease outbreaks or emerging
    domestic diseases. The faster animal health officials can respond to,
    contain, and eradicate disease concerns, the sooner affected producers
    can resume business as usual. USDA has been developing data standards
    to align with this overall concept.
        grain inspection, packers and stockyards administration (gipsa)
        Question. On March 9, during a hearing of the Committee on
    Agriculture, Nutrition, and Forestry to review GIPSA's enforcement of
    the Packers and Stockyards Act, I asked GIPSA Administrator James Link
    why there had been no governmental oversight or corrective action given
    the high rate of staff turnover, management preventing employees from
    doing their jobs and management demanding that staff inflate the number
    of investigations listed in annual reports at GIPSA. These problems
    continued over the course of 5 years. James Link stated he did not know
    why USDA failed to take corrective action because he was not employed
    by USDA during that time. You have served as USDA's Deputy Under
    Secretary for Marketing and Regulatory programs since December 2002.
    You have also served as acting Under Secretary since last year. How is
    it possible that GIPSA was in complete disarray for so many years, yet
    you did not take corrective action?
        Answer. Prior to my appointment with USDA, I served as the Chief
    Economist for the National Cattlemen's Beef Association. Due to my past
    connection with the cattle industry, I was recused from issues that had
    a direct connection to my previous employer for a period of 1 year.
    After this recusal period ended, I continued to distance myself from
    Packers and Stockyard Program issues due to a perceived conflict of
    interest. However, upon Under Secretary Hawks retirement and assuming
    the role of Acting Under Secretary, followed shortly by Jim Link's
    appointment as GIPSA Administrator, I worked with USDA ethics experts
    to assure that by inserting myself into GIPSA management that I was not
    crossing ethical boundaries. At such time corrective actions were taken
    to begin addressing the matters that have been outlined in the OIG's
    report.
        Question. During your time as Deputy Under Secretary, what was your
    role in and responsibility for communicating with the Under Secretary
    and Secretary concerning GIPSA's mission and daily operations relating
    to enforcement of the PSA against anti-competition practices?
        Answer. Prior to my appointment with USDA, I served as the Chief
    Economist for the National Cattlemen's Beef Association. Due to my past
    connection with the cattle industry, I was recused from issues that had
    a direct connection to my previous employer for a period of 1 year.
    After this recusal period ended, I continued to distance myself from
    Packers and Stockyard Program issues due to a perceived conflict of
    interest. However, upon Under Secretary Hawks retirement and assuming
    the role of Acting Under Secretary, followed shortly by Jim Link's
    appointment as GIPSA Administrator, I
        worked with USDA ethics experts to assure that by inserting myself
    into GIPSA management that I was not crossing ethical boundaries. At
    such time corrective actions were taken to begin addressing the matters
    that have been outlined in the OIG's report.
        Question. What will you do to make sure that the Secretary or the
    new Under Secretary knows what GIPSA is doing in regard to anti-
    competitive practices?
        Answer. Both the Secretary and I have an open door policy with
    GIPSA. I meet weekly with the Administrator to discuss issues ongoing
    within the agency. These discussions involve all types of Packer and
    Stockyards cases, including financial, trade practice, and competition
    issues. Also, weekly activity reports are submitted by GIPSA and
    reviewed by the Secretary's and Under Secretary's office. This report
    includes all important issues ongoing within GIPSA. As needed, GIPSA's
    Administrator briefs my office, as well as the Secretary on
    investigations that may have a large economic impact. I am committed to
    maintaining open lines of communications between GIPSA and the Under
    Secretary's office for Marketing and Regulatory Programs.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                         SIMPLIFIED SUMMER FOOD PROGRAM

        Question. The Simplified Summer Food Program, started as the Lugar
    pilot program, was expanded to now include 25 states. In Illinois, we
    know there are many children who are eligible for free or reduced price
    lunch during the school year who are not participating in a summer food
    program. I'm told sponsors are hard to come by because the paperwork
    and accounting requirements are onerous. The nutrition and anti-hunger
    community in Illinois expects to see a dramatic increase in summer food
    programs when Illinois is able to participate in the Simplified Summer
    Food Program. Have States participating in the Simplified Summer Food
    Program seen increases of this type? Have States that participated in
    this program attracted more program sponsors, operated more program
    sites and served more low-income children than those States not
    participating in the program?
        Answer. States participating in the Simplified Summer Food Program
    have shown an increase in participation as measured by sponsors, sites,
    and meals served to eligible children during the summer months. During
    the same time, those States not participating in the program have
    experienced a decrease in each of the corresponding categories.
    However, since the inception of the Simplified Summer Food Program,
    many States have also had the opportunity to operate a seamless summer
    feeding program through the National School Lunch Program (NSLP).
    Because these two initiatives have operated concurrently in these
    States, we are not able to identify the extent to which changes in
    sponsors, sites, and children result from the Simplified Summer Food
    Program, from the NSLP seamless summer feeding program, or from a
    combination of both.

                                WIC FOOD PACKAGE

        Question. Last year, the Institutes of Medicine released
    recommendations for improving the nutritional profile of the WIC food
    package, including adding whole grain foods, fresh produce and
    incentives for breast feeding. Given the growing rates of overweight
    and obese children, these recommendations for an updated food package
    also could help start children on the right path to nutritious and
    lower fat dietary habits makes. What are the USDA's plans for
    incorporating IOM recommended changes to the WIC food package?
        Answer. USDA is proceeding with a rule making process that will
    afford opportunity for public comment on all of the proposed changes to
    the WIC food packages before the rule is finalized. The proposed
    revisions to the WIC food packages largely reflect the recommendations
    of the Institute of Medicine (IOM) in its 2005 Report WIC Food
    Packages: Time for a Change. The proposed rule was sent to the Office
    of Management and Budget this spring. We are hopeful that a proposed
    rule can be published by summer 2006. However, affording opportunity
    for a full 90-day public comment period for this important rule may
    preclude issuing an interim final rule within the 18-month statutory
    deadline.

                                 CSFP CASELOAD

        Question. Low-income Illinois seniors rely heavily on the Commodity
    Supplemental Food Program to supplement what they are able to purchase
    at the grocery store or obtain through a food bank. I recognize the
    program is under stress as commodity prices have grown faster than
    program funding. What plans does the agency have to ensure that current
    caseload demand can be met?
        Answer. All available resources are being utilized to support the
    program, but total estimated resources are insufficient to support 2006
    nationwide caseload at the 2005 level.
        In addition to cash resources, CSFP commodity inventory maintained
    at Federal, State, and local levels and those commodities obtained
    under agriculture support programs (surplus commodities) that are
    appropriate for inclusion in the CSFP food package are being used to
    support the program. The types and amounts of surplus commodities
    depend on agricultural market conditions.
        On December 29, 2005, we assigned tentative caseload and
    administrative grants for 2006 based on the level of resources expected
    to be available to support the program. While all available resources
    were included in our calculations, total estimated resources available
    were sufficient to support about 477,000 tentative caseload slots,
    representing a reduction of approximately 11 percent from the 2005
    caseload level. Final caseload and administrative grants were allocated
    on March 27, 2006. The final caseload level increased to over 492,000
    slots due to an expected increase in the level of surplus commodities
    available for use in the CSFP food package and lower caseload use by
    Louisiana early in the year due to the disruption caused by the recent
    hurricanes. Both of these factors served to free available cash
    resources to support more caseload slots nationwide without negatively
    impacting Louisiana. However, CSFP States were subject to at least a 6
    percent reduction in final caseload from 2005 levels, and consistent
    with the regulations, States that did not fully utilize caseload in the
    previous year were subject to further reductions.

               FINANCIAL ASSISTANCE PROGRAMS ALLOCATION FORMULAS

        Question. NRCS administers a host of conservation programs--the
    Environmental Quality Incentives Program (EQIP), Conservation Security
    Program (CSP), and others. In my view, the State of Illinois is well-
    equipped to take advantage of these environmental programs--producers
    in the State have a long-standing tradition of being at the forefront
    of conservation, the State is one of the leading producers of
    agricultural products, and there is a lot of land used for farming--28
    million acres or 80 percent of the State's total land. Unfortunately,
    when compared to States with similar populations or farm sectors or
    agricultural production statistics, Illinois receives lower
    conservation technical assistance allotments. These are the multiplier
    funds that help farmers build expertise and leverage other funding
    sources. One of my concerns is that there are more than two dozen
    measures that can be weighted differently to determine State technical
    assistance allocations. My other concern is that the formulae and
    criteria that are used to make State allocations are not available on
    the NRCS website. I would like to know why the State of Illinois
    received this allocation and I would like to know what NRCS is doing to
    make these allocation decisions more transparent. Will NRCS publish
    theses criteria on its website?
        Answer. EQIP allocations to States include financial assistance
    (FA) and technical assistance (TA) dollars. FA is allocated to the
    States and territories based on 31 base and natural resource factors
    which are relevant to addressing the EQIP national priorities. The
    source of the data is generally the Natural Resources Inventory (NRI)
    data, although some data is based on Environmental Protection Agency
    (EPA), Ag Census, Bureau of Indian Affairs (BIA), National
    Oceanographic and Atmospheric Agency (NOAA) and the American Plant Food
    Control Officials reports. Program Management Performance Incentives,
    initiated in EQIP in fiscal year 2003, include FA and TA and are part
    of a State's allocation only if a high level of performance was
    achieved in administering the prior years funding.
        TA funding is used to deliver program-specific services. Technical
    assistance allocations are based on the NRCS cost-of-programs data and
    linked directly to a State's FA allocation. There are no weights in TA
    allocations. For fiscal year 2006, NRCS took into consideration the
    amount of TA that would be required to service EQIP contracts written
    in prior years. Nationally, with the prior year workload pulled into
    the equation, the total workload--represented by FA dollars equaled
    $1,947,931,838 (prior year $1,094,395,709 plus fiscal year 2006
    $662,601,964). EQIP TA was set at $190,934,165 and equals about 9.8
    percent of the FA workload. Therefore, each State, including Illinois,
    received a TA allocation equal to 9.8 percent of the total FA
    workload--as represented by the prior year and current year FA dollars.
        In fiscal year 2005, Illinois received an additional $313,958 EQIP
    TA allocation to accelerate the writing of Comprehensive Nutrient
    Management Plans through the use of Technical Service Providers. That
    same year, the State returned $1.4 million in EQIP FA without the
    commensurate amount of TA. Fortunately, other States were able to use
    the FA.
        The FA and Performance Incentive formulas are as follows:

                                   FA FORMULA
    ------------------------------------------------------------------------
                                                                  Weight
                                                                 (percent)
    ------------------------------------------------------------------------
    The base factors (49.3 percent):
        Acres of non-irrigated cropland (1997 NRI)..........             3.2
        Acres of irrigated cropland (1997 NRI)..............             4.3
        Acres of Federal grazing lands (1992 NRI)...........             0.5
        Acres of non-Federal grazing lands (1997 NRI).......             4.2
        Acres of forestlands (1997 NRI).....................             1.1
        Acres of specialty crops (1997 NRI).................             3.2
        Acres of wetlands and at-risk species habitat (1997              4.5
         NRI)...............................................
        Acres of water bodies (1997 NRI)....................             3.2
        Livestock animal units (1992 NRI)...................             5.7
        Animal waster generation (1992 NRI).................             5.7
        Waste management capital cost (1992 NRI)............             3.4
        Acres American Indian Tribal Lands (most current BIA             3.3
         acres).............................................
        Number of Limited Resource Producers (1997 Ag                    4.9
         Census)............................................
        Grazing land lost to conversion (1997 NRI)..........             0.8
        Revised Air Quality non-attainment areas (EPA)......             1.3
    The resource factors (49.3 percent):
        Acres of pastureland needing treatment (1992 NRI)...             5.4
        Acres of cropland eroding above T (1992 NRI)........             6.1
        Acres of Fair and Poor Rangeland (1992 NRI).........             6.1
        Acres of Forestlands, eroding above T (1992 NRI)....             1.4
        Acres of cropland and pastureland soils affected by              2.6
         saline and/or sodic conditions (1997 NRI)..........
        Miles of impaired rivers and streams (EPA)..........             3.5
        Potential for pesticide and nitrogen leaching (1997              1.3
         NRCS Report).......................................
        Potential for pesticide and nitrogen runoff (1997                1.7
         NRCS Report).......................................
        Ratio of livestock animal units to cropland (1997                1.7
         NRCS Report & NRI).................................
        Number of CAFO/AFO (1997 Ag Census).................             2.7
        Ratio of commercial fertilizers to cropland (1995                0.8
         American Plant Food Control Officials Report)......
        Wind erosion above T (1997 NRI).....................             4.2
        Phosphorous runoff potential (1997 NRCS Report).....             3.9
        Riparian areas (1997 NRCS Report)...................             0.8
        Carbon sequestration (1992 & 1997 NRCS Reports).....             3.5
        Coastal zone (1992 NOAA Report).....................            3.6
    ------------------------------------------------------------------------
    Note: Financial Assistance allocations to entities (Alaska, Hawaii,
      Pacific Basin, and Puerto Rico) without reliable base and resource
      factors account for 1.4 percent of total FA.
    Total of FA factors (100 percent).

        Program Management Performance Incentives:
        For fiscal year 2006, $38.4 million Program Management Performance
    Incentives are part of the allocation if a State performed above the
    cut-off. The following factors were used to compare State performance:

    ------------------------------------------------------------------------
                                                                  Weight
                       Performance Factors                       (percent)
    ------------------------------------------------------------------------
    Cost share obligations versus payments for fiscal year                15
     2004 and fiscal year 2005..............................
    FA to TA ratio..........................................              25
    TSP obligations and disbursements.......................              15
    Weighted cost-share percentage..........................              10
    Limited Resource Farmers................................              10
    Livestock-related contracts (CNMP)......................              15
    Program National Priorities.............................              10
                                                             ---------------
          Total of Performance factors......................             100
    ------------------------------------------------------------------------

        In fiscal year 2006, NRCS will release a request for proposals to
    evaluate all of the allocation formulas in their entirety. This project
    will be a comprehensive evaluation of each program allocation formula,
    to include analysis and findings on each formula's consistency with the
    new NRCS Strategic Plan; consistency with program statutory authorities
    and regulatory requirements, and program goals and objectives;
    technical and analytical defensibility of the formula (parameter and
    variable selection, formula functional form) and data sources; the
    efficiency and effectiveness of allocation outcomes as a result of
    formula. The deliverable will be used to provide guidance for
    improvement in allocation formulas, as evidence to support NRCS's
    allocation formulas to interested external parties, to provide a
    template for which to evaluate future allocation formulas, and finally
    as a means to assess how allocation formulas relate to programmatic
    efficiency and annual/long-term performance measures.
        When the evaluation is complete, NRCS will post this information on
    the website. NRCS is committed to making our processes transparent
    through our public website.

                             MARKET ACCESS PROGRAM

        Question. The Administration's fiscal year 2007 budget cuts the
    Market Access Program (MAP) program in half from $200 million to $100
    million. Overseas markets are critical for our agricultural producers,
    and this program was an important part of making our products
    competitive overseas. The State of Illinois alone exports $4 billion
    annually in agricultural products.
        I would like a report on the markets that MAP has helped open up,
    the commodities the program has assisted since the MAP received
    funding, and the rate of return on the Map's activities. I would also
    like to know what alternative programs the Administration hopes will
    fill the place of MAP as our producers compete against foreign
    producers supported by export subsidies.
        Answer. We are providing a table which identifies more than 40
    markets where MAP funds were used to help open the market for some 35
    U.S. agricultural, fish, and forestry products. We are also providing a
    listing of all the current participants in the MAP.
        With regard to the rate of return on MAP activities, the Foreign
    Agricultural Service (FAS) has hired an independent evaluator to assess
    the effectiveness of two primary market development programs
    administered by FAS--the MAP and the Foreign Market Development
    (Cooperator) Program. This work is ongoing, and FAS hopes to receive
    the results in late summer of 2006. This evaluation will also be used
    to satisfy the Office of Management and Budget's requirement outlined
    in the Program Assessment Rating Tool to conduct independent
    evaluations of government programs.
        As for supporting U.S. producers in the export market, the U.S.
    Government is actively pursuing reform of international trade rules in
    the World Trade Organization (WTO) so that U.S. exporters will not have
    to compete with foreign producers who receive export subsidies. In
    fact, agreement was reached at the Hong Kong Ministerial meeting in
    December 2005 that all forms of export subsidies should be eliminated
    by 2013. FAS currently administers four other foreign market
    development programs that augment the MAP: the Foreign Market
    Development (Cooperator) Program funded at $34.5 million in fiscal year
    2006, the Emerging Markets Program at $10 million, the Technical
    Assistance for Specialty Crops Program at $2 million, and the Quality
    Samples Program at $2.5 million.
        Question. In its January 2006 report, the Office of the Inspector
    General stated that because of the voluntary nature of the enhanced
    surveillance program and based on USDA published data that estimated
    the ``distribution of the cattle population, as well as those that died
    or became nonabulatory,'' it could not determine whether USDA achieved
    the desired representation. How does USDA know that it is testing a
    representative sample and that it is testing animals that are at
    highest risk such as older, clinically normal cattle? Why hasn't USDA
    released detailed results of the surveillance program, such as age
    distribution, geographic locations of the sample, and whether the cows
    were down, neurologic or clinically normal?
        Answer. Experience in Europe (where there has been significant
    Bovine Spongiform Encephalopathy (BSE) exposure and circulating
    infectivity in contrast to the United States, where we can assume very
    limited, if any exposure) has shown that testing a targeted population
    of cattle--those animals exhibiting some type of clinical abnormality--
    is the method most likely to identify BSE in the national herd. As an
    example, from 2001 to 2004, a total of 4,798,764 targeted animals were
    sampled, with a total of 5,486--or approximately 0.11 percent--of the
    targeted animals testing positive for BSE. In contrast, during that
    same time frame, a total of 34,207,597 clinically normal animals were
    sampled, with a total of 982--or approximately 0.003 percent of the
    clinically normal animals testing positive. These differences clearly
    demonstrate the efficiencies of sampling subpopulations where the
    disease is most likely to be detected if it is present. Therefore,
    since our surveillance efforts began, USDA has consistently focused on
    sampling these targeted cattle subpopulations. The targeted population
    includes cattle that have classic clinical signs of BSE, are
    nonambulatory, exhibit signs of a central nervous system disorder, or
    cattle that die for unexplained reasons.
        With regard to the geographic distribution of the sample obtained
    in our enhanced surveillance effort, we are still analyzing this
    information and will present this to the public when our analysis is
    complete. USDA's surveillance plan looks at this issue on a national
    level. It is most important that our sample is obtained from among the
    animals in our target populations. European reports have shown clearly
    that this disease is most likely to be found in downed, dying, dead,
    and diseased animals, so we go to the facilities where these animals
    are found, regardless of where the animals originate. We have largely
    worked with animal disposal facilities. In regions where those don't
    exist, we have made efforts to conduct other types of collection and
    are confident that we have obtained a sufficient sample that represents
    the target populations--those animals where we are most likely to
    detect the disease--within the United States.

                             CONCLUSION OF HEARINGS

        Senator Bennett. The subcommittee is recessed.
        [Whereupon, at 11:20 a.m., Thursday, March 30, the hearings
    were concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 2007

                                  ----------

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

                           NONDEPARTMENTAL WITNESSES

        [The following testimonies were received by the
    Subcommittee on Agriculture, Rural Development, and Related
    Agencies for inclusion in the record. The submitted materials
    relate to the fiscal year 2007 budget request for programs
    within the subcommittee's jurisdiction.]

           Prepared Statement of the American Farm Bureau Federation

        The Farm Security and Rural Investment Act of 2002 (FSRIA) was
    enacted 4 years ago following 2 years of exhaustive debate in the House
    and Senate. The new farm law represents a delicate balance by
    effectively addressing the stability of our agricultural production
    base, protecting our important natural resources and enhancing
    nutrition and food assistance programs in our Nation.
        The mandatory programs administered by the Department of
    Agriculture such as commodity, conservation, crop insurance, export
    promotion programs, nutrition and forestry are of enormous importance
    to farmers, ranchers, rural businesses, low-income Americans and our
    Nation's children. Therefore, we respectfully ask the Appropriations
    Committee to avoid making any changes to mandatory programs within the
    USDA budget.
        Contract-based working lands conservation programs such as the
    Environmental Quality Incentives Program (EQIP), Conservation Security
    Program (CSP), Wildlife Habitat Incentives Program (WHIP) and Forest
    Land Enhancement Program (FLEP) are a priority within the agricultural
    and landowner community, as shown by current levels of
    oversubscription. Farm Bureau is concerned that many of these programs
    have not been funded at optimum levels, especially the Conservation
    Security Program. This has led to a level of confusion among farmers
    and ranchers of when and how the program will be implemented within
    their particular watershed, and whether or not the financial incentives
    will be adequate to encourage participation. As we move forward in this
    budget process, Farm Bureau encourages Congress to find an appropriate
    balance of funding for targeted land idling programs, such as the
    General and Continuous Conservation Reserve Programs, with our current
    working lands conservation programs.
        Farm Bureau supports the farm bill's energy title that includes
    provisions for Federal procurement of bio-based products, bio-refinery
    development grants, a biodiesel fuel education program, renewable
    energy development program, renewable energy systems, a bioenergy
    program, biomass research and development and value-added agricultural
    product development and marketing. These programs play a critical role
    in assisting in rural economic development as well as in increasing our
    Nation's energy independence and should be fully funded at authorized
    levels.
        Farm Bureau has identified three areas as priorities for
    discretionary funding in fiscal year 2006. They are funding for animal
    identification implementation, programs that maintain the use of
    agriculture inputs and programs that increase agriculture exports.

         PROGRAMS NECESSARY FOR IMPLEMENTATION OF ANIMAL IDENTIFICATION

        The threat of bioterrorism and the discovery of bovine spongiform
    encephalopathy (BSE) in the United States has prompted increased action
    by USDA and others to step up animal disease surveillance and funding
    for critical programs such as animal identification. Farm Bureau places
    great priority on efforts to safeguard our livestock and food supply
    and requests increased resources be appropriated to the National Animal
    Identification System (NAIS) for these activities.
        We have serious concerns about the adequacy of the administration's
    proposal for $33 million for the Animal and Plant Health Inspection
    Service (APHIS) to continue implementation of the NAIS. Industry
    estimates of the U.S. Animal Identification Plan (USAIP), upon which
    the NAIS is based, forecast an ongoing cost of about $100 million per
    year to effectively implement such a system. USDA has expended just $84
    million total in the first 2 years of development of the NAIS. When
    added to this year's budget request, the total Federal fund commitment
    amounts to approximately $117 million. This is significantly short of
    the department's own cost estimate of $550 million for the first 5
    years of NAIS operation.
        If the government were to fund $33 million each year (the same as
    their budget requests during the first 3 years of operation), two-
    thirds of the cost of the NAIS would have to be funded by producers and
    affected industries in order for the NAIS to proceed on the timeline
    originally proposed by both USDA and the livestock industry. Farmers
    and ranchers cannot afford to bear the brunt of the cost of this
    program, which is essentially a public good. Although participating in
    the NAIS does provide some insurance to producers in the event of an
    animal health incident, this program also assists Federal animal health
    officials and is an important tool against the effects of accidental or
    intentional introduction of zoonotic disease. Given the benefits of the
    NAIS to the general public and our overall national biosecurity, a
    larger portion of the cost must be borne by the government.
        If the industry bears the cost of identification devices and
    application of those devices, and the Federal Government were to fund
    the majority of the cost of database maintenance, program
    administration, and retro-fitting for data collection at large co-
    mingling sites (i.e., markets and processing facilities), the end
    result would be an almost equal funding distribution between industry
    and government. However, the current budget request will not support
    this funding split under the timeline proposed in USDA's NAIS Draft
    Strategic Plan. Under the fiscal year 2007 budget proposal, States and
    industry would have to bear a greater share of the cost burden in order
    to maintain the timeline through full implementation in 2009, although
    States and industry cannot afford to pay for the majority of the
    system, the United States cannot afford to delay implementation of the
    system. A delay could be economically devastating in the case of an
    animal disease outbreak such as foot-and-mouth disease (FMD), both in
    terms of the impact on the domestic herd and the implications from the
    loss of trading partners.
        We appreciate the inclusion of NAIS funding in the fiscal year 2005
    and fiscal year 2006 agriculture funding bills, and strongly encourage
    the committee to significantly increase that amount in this year's
    version of the agriculture appropriations bill. Progress has been seen
    in making premises registration available in all 50 States and multiple
    tribes. Nationally, just over 10 percent of all livestock premises are
    now identified, but much work remains to bring the remaining 90 percent
    into the system. Outreach and education are key to inform producers
    about the purpose of the NAIS; it is critical to immediately correct
    the many misconceptions that have circulated and may discourage
    producers from participating. In addition to continuing funding for
    APHIS's premises registration activities in cooperation with State
    animal health officials, we believe it is important to proceed with the
    next phases of the NAIS--the individual identification of animals or
    groups of animals, and the tracking of animal movements. The department
    has turned to the private sector to provide the data repository
    necessary for animal tracking; therefore, we encourage the committee to
    consider a cost-share funding allocation for privately managed, non-
    profit animal ID databases maintained by agricultural organizations.
    Such databases should be capable of providing multi-species data
    repository services and access to that data by State and Federal
    veterinary officials in the event of an animal health issue in order to
    meet public needs and justify a Federal funding appropriation.
        While there are still some major issues to be resolved, primarily
    data confidentiality, AFBF strongly supports the NAIS. Timely
    implementation of this critical program will not only add to our
    ability to trace a diseased animal back to the source but will also
    reassure the public and our trading partners of a safe food supply
    system.

                   PROGRAMS TO INCREASE AGRICULTURAL EXPORTS

        Creating new and expanding existing overseas markets for U.S.
    agricultural and food products is essential for a healthy agricultural
    economy anytime, but especially in 2006/07 when the USDA is forecasting
    a reduction in net U.S. farm income of $15 billion. We recommend full
    funding of all export development and expansion programs consistent
    with our WTO commitments.
        Export Development and Expansion Programs.--The Market Access
    Program, the Foreign Market Development Program, the Emerging Markets
    Program and the Technical Assistance for Specialty Crops program are
    all very effective export development and expansion programs that have
    demonstrated substantial increases in demand for U.S. agriculture and
    food products abroad. These programs are also important because they
    attract larger amounts of private sector funding into development and
    expansion activities for U.S. agriculture and food exports. We
    recommend full funding of these programs
        Farm Bureau also supports General Sales Manager credit guarantee
    programs. These programs are important because they make available
    commercial financing to buyers of U.S. food and agricultural exports
    that might otherwise not be available. They should be funded at fully
    authorized levels.
        Direct assistance for U.S. agricultural exports is also authorized
    by the Export Enhancement Program, a program to counter unfair trading
    practices of foreign countries. Farm Bureau supports the funding and
    use of this program in all countries and for all commodities where the
    United States faces unfair competition. The Dairy Export Incentive
    Program is another similar program that allows U.S. dairy producers to
    compete with foreign nations that subsidize their diary exports. We
    recommend full funding of this program as well.
        Food Aid Programs.--We urge full funding of Public Law 480 that
    serves as the primary means by which the United States provides needed
    foreign food assistance through the purchase of U.S. commodities. In
    addition to providing short-term humanitarian assistance, the program
    helps to develop long-term commercial export markets. We oppose any
    efforts to reduce funding of Public Law 480, especially efforts to
    transfer funding to other food aid and development programs outside the
    jurisdiction of USDA. Further, the International Food for Education
    Program will be an effective platform for delivering severely needed
    food aid and educational assistance and we urge its full support.
        Plant and Animal Health Monitoring, Pest Detection and Control.--
    USDA services and programs that facilitate U.S. exports by certifying
    plant and animal health to foreign customers, that protect U.S.
    agricultural production from foreign pests and diseases, and fight
    against unsound non-tariff trade barriers by foreign governments should
    be funding priorities. Plant and animal health monitoring, surveillance
    and inspection are crucial. We support funding increases for improved
    plant pest detection and eradication, management of animal health
    emergencies and to increase the availability of animal vaccines.
    Expansion of Plant Protection and Quarantine personnel and facilities
    is necessary to protect U.S. agriculture from new, oftentimes virulent
    and costly pest problems that enter the United States from foreign
    lands.
        APHIS Trade Issues Resolution and Management.--Full funding is
    needed for APHIS trade issues resolution and management. As Federal
    negotiators and U.S. industry try to open foreign markets to U.S.
    exports, they consistently find that other countries are raising pest
    and disease concerns (i.e., sanitary and phytosanitary measures), real
    or contrived, to resist or prohibit the entry of American products into
    their markets. Only APHIS has the technical capability to respond
    effectively to this resistance. It requires however, placing more APHIS
    officers at U.S. ports and in overseas locations where they can monitor
    pest and disease conditions, negotiate trading protocols with other
    countries and intervene when foreign officials wrongfully prevent the
    entry of American imports. It is essential that APHIS be positioned to
    swiftly and forcefully respond to such issues when and where they
    arise.
        APHIS Biotech Regulatory Service (BRS).--Agricultural biotechnology
    is an extremely promising technology and all reasonable efforts must be
    made to allow continued availability and marketability of biotech tools
    for farmers. BRS plays an important role in overseeing the permit
    process for products of biotechnology. Funding for BRS personnel and
    activities are essential for ensuring public confidence and
    international acceptance of biotechnology products. AFBF supports an
    increase in spending to $11.417 million ($8.584 in 2006) for BRS
    because it will enable the USDA to increase inspections of genetically-
    modified crop field test sites and enhance its capacity to regulate
    transgenic animals, arthropods, and disease agents.
        Foreign Agricultural Service (FAS).--The USDA's Foreign
    Agricultural Service will require sufficient funding to expand services
    to cover all existing and potential market posts. We support
    continuance of funding at the 2006 appropriations level for the office
    of the secretary for cross-cutting trade negotiations and biotechnology
    resources.

              PROGRAMS THAT MAINTAIN THE USE OF AGRICULTURE INPUTS

        USDA must continue to work with EPA, agricultural producers, food
    processors and registrants to provide farm data required to ensure that
    agricultural interests are properly considered and fully represented in
    all pesticide registration, tolerance reassessment re-registration, and
    registration review processes. In order to participate effectively in
    the process of ensuring that crop protection tools are safe and remain
    available to agriculture, USDA must have all the resources necessary to
    provide economic benefit, scientific analysis and usage information to
    EPA. To this end, funding should be maintained or increased, and in
    some cases restored, to the following offices and programs:
        Office of Pest Management Policy (OPMP).--OPMP has the primary
    responsibility for coordination of USDA's Food Quality Protection Act
    (FQPA) and crop protection obligations and interaction with EPA. Proper
    funding is vital for the review of tolerance reassessments,
    particularly dietary and worker exposure information; to identify
    critical uses, benefits and alternatives information; and to work with
    grower organizations to develop strategic pest management plans. The
    funding to OPMP should be designated under the secretary of
    agriculture's office, rather than as an add-on to the Agricultural
    Research Service budget.
        Agriculture Research Service (ARS).--Integrated Pest Management
    (IPM) research, minor use tolerance research (IR-4) must have funding
    maintained, and research on alternatives to methyl bromide must have
    funding restored and receive future funding to satisfactorily address
    the unique concerns of these programs. Research is also needed to
    identify new biological pest control measures and to control pesticide
    migration.
        Cooperative State Research, Education and Extension Service
    (CSREES).--Funding must be maintained, in some cases restored, and full
    future funding provided for Integrated Pest Management research grants,
    IPM application work, pest management alternatives program, expert IPM
    decision support system, minor crop pest management project (IR-4),
    crops at risk from FQPA implementation, FQPA risk avoidance and
    mitigation program for major food crop systems, methyl bromide
    transition program, regional crop information and policy centers and
    the pesticide applicator training program.
        Economic Research Service (ERS).--USDA and EPA rely on ERS programs
    to provide unique data information and they should be properly funded
    including IPM research, pesticide use analysis program and the National
    Agriculture Pesticide Impact Assessment Program.
        Food Quality and Crop Protection Regulation.--Additional funding
    for proper regulation of pesticides is needed in the following
    programs: National Agriculture Statistics Service pesticide use
    surveys; Food Safety Inspection Service increased residue sampling and
    analysis; Agricultural Marketing Service; and the Pesticide Data
    Program.
                                     ______

     Prepared Statement of the American Indian Higher Education Consortium

        Mr. Chairman and Members of the Subcommittee, on behalf of the
    American Indian Higher Education Consortium (AIHEC) and the 33 Tribal
    Colleges and Universities that comprise the list of 1994 Land Grant
    Institutions, thank you for this opportunity to share our funding
    requests for fiscal year 2007 (fiscal year 2007).
        This statement is presented in three parts: (a) a summary of our
    fiscal year 2007 funding recommendation, (b) a brief background on
    Tribal Colleges and Universities, and (c) an outline of the 1994 Tribal
    College Land Grant Institutions' plan for using our land grant programs
    to fulfill the agricultural potential of American Indian communities,
    and to ensure that American Indians have the skills and support needed
    to maximize the economic development potential of their resources.
    Summary of Requests
        We respectfully request the following funding levels for fiscal
    year 2007 for our land grant programs established within the USDA
    Cooperative State Research, Education, and Extension Service (CSREES)
    and Rural Development mission areas. In CSREES, we specifically
    request: $12 million payment into the Native American endowment fund;
    $3.3 million for the higher education equity grants; $5 million for the
    1994 institutions' competitive extension grants program; $3 million for
    the 1994 Institutions' competitive research grants program; and in
    Rural Development--Rural Community Advancement Program (RCAP), that $5
    million be provided for each of the next 5 fiscal years for the tribal
    college community facilities grants program. RCAP grants help to
    address the critical facilities and infrastructure needs at the
    colleges that impede our ability to participate fully as land grant
    partners.
     Background on Tribal Colleges and Universities
        The first Morrill Act was enacted in 1862 specifically to bring
    education to the people and to serve their fundamental needs. Today,
    over 140 years after enactment of the first land grant legislation, the
    1994 Land Grant Institutions, as much as any other higher education
    institutions, exemplify the original intent of the land grant
    legislation, as they are truly community-based institutions.
        The Tribal College Movement was launched in 1968 with the
    establishment of Navajo Community College, now Dine College, serving
    the Navajo Nation. Rapid growth of tribal colleges soon followed,
    primarily in the Northern Plains region. In 1972, the first six
    tribally controlled colleges established the American Indian Higher
    Education Consortium to provide a support network for member
    institutions. Today, AIHEC represents 34 Tribal Colleges and
    Universities 3 of which comprise the list of 1994 Land Grant
    Institutions located in 12 States--created specifically to serve the
    higher education needs of American Indian students. Annually, they
    serve approximately 30,000 full- and part-time students from over 250
    Federally recognized tribes.
        All of the 1994 Land Grant Institutions are accredited by
    independent, regional accreditation agencies and like all institutions
    of higher education, must undergo stringent performance reviews to
    retain their accreditation status. Tribal colleges serve as community
    centers by providing libraries, tribal archives, career centers,
    economic development and business centers, public meeting places, and
    child care centers. Despite their many obligations, functions, and
    notable achievements, tribal colleges remain the most poorly funded
    institutions of higher education in this country. Most of the 1994 Land
    Grant Institutions are located on Federal trust territory. Therefore,
    States have no obligation and in most cases, provide no funding to
    tribal colleges. In fact, most States do not even fund our institutions
    for the non-Indian State residents attending our colleges, leaving the
    tribal colleges to absorb the per student operational costs for non-
    Indian students enrolled in our institutions, accounting for
    approximately 20 percent of our student population. Under these
    inequitable financing conditions and unlike our State land grant
    partners, our institutions do not benefit from economies of scale--
    where the cost per student to operate an institution is diminished by
    the increased size of the student body.
        As a result of 200 years of Federal Indian policy--including
    policies of termination, assimilation and relocation--many reservation
    residents live in abject poverty comparable to that found in Third
    World nations. Through the efforts of Tribal Colleges and Universities,
    American Indian communities are receiving services they need to
    reestablish themselves as responsible, productive, and self-reliant
    citizens. It would be regrettable not to expand the very modest
    investment in, and capitalize on, the human resources that will help
    open new avenues to economic development, specifically through
    enhancing the 1994 Institutions' land grant programs, and securing
    adequate access to information technology.
    1994 Land Grant Programs--Ambitious Efforts to Reach Economic
            Development Potential
        Tragically, due to lack of expertise and training, millions of
    acres on our reservations lie fallow, under used, or have been
    developed through methods that render the resources nonrenewable. The
    Equity in Educational Land Grant Status Act of 1994 is starting to
    rectify this situation and is our hope for future advancement.
        Our current land grant programs are small, yet very important to
    us. It is essential that American Indians explore and adopt new and
    evolving technologies for managing our lands. We have the potential of
    becoming significant contributors to the agricultural base of the
    Nation and the world.
        Native American Endowment Fund.--Endowment installments that are
    paid into the 1994 Institutions' account remain with the U.S. Treasury.
    Only the annual interest, less the USDA's administrative fee, is
    distributed to the colleges. The latest gross annual interest yield
    (fiscal year 2005) is $2,577,357 after the USDA's administrative fee of
    $103,094 is deducted; $2,474,263 is the amount available to be
    distributed among all of the eligible 1994 Land Grant Institutions by
    statutory formula. While we have not yet been provided the latest
    breakdown of funds distributed to each of the 1994 institutions, last
    year USDA's administrative fee amounted to more than the payment
    amounts to 75 percent of the 1994 Land Grant Institutions. After the
    distribution amounts are determined for this year's disbursement, we
    fully expect similar results. We respectfully ask that the Subcommittee
    review the Department's administrative fee and consider reducing it for
    this program, so that more of these already limited funds can be
    utilized to conduct vital 1994 Land Grant community based programs.
        Just as other land grant institutions historically received large
    grants of land or endowments in lieu of land, this endowment assists
    1994 Land Grant Institutions in establishing and strengthening our
    academic programs in such areas as curricula development, faculty
    preparation, instruction delivery, and to help address critical
    facilities and infrastructure issues. Many of the colleges have used
    the endowment funds in conjunction with the Education Equity Grant
    funds to develop and implement their academic programs. As earlier
    stated, tribal colleges often serve as primary community centers and
    although conditions at some have improved substantially, many of the
    colleges still operate under less than satisfactory conditions. In fact
    most of the tribal colleges cite improved facilities as one of their
    highest priorities. Several of the colleges have indicated the need for
    immediate and substantial renovations to replace buildings that have
    long exceeded their effective life spans and to upgrade existing
    facilities to address accessibility and safety concerns.
        Endowment payments increase the size of the corpus held by the U.S.
    Treasury and thereby increase the annual interest yield disbursed to
    the 1994 land grant institutions. This additional funding would be very
    helpful in our efforts to continue to support faculty and staff
    positions and program needs within Agriculture and Natural Resources
    departments, as well as to continue to help address the critical and
    very expensive facilities needs at our institutions. Currently, the
    amount that each college receives from this endowment is not adequate
    to address curricula development and instruction delivery, as well as
    make even a dent in the necessary facilities projects at the colleges.
    In order for the 1994 Institutions to become full partners in this
    Nation's great land grant system, we need and frankly, under treaty
    obligations, warrant the facilities and infrastructure necessary to
    fully engage in education and research programs vital to the future
    health and well being of our reservation communities. We respectfully
    request the subcommittee fund the fiscal year 2007 endowment payment at
    $12 million, $120,000 above fiscal year 2006 and the in the President's
    Budget recommendation--restoring the across-the-board cut imposed on
    fiscal year 2006 appropriated levels. 1994 Institutions' Educational
    Equity Grant Program: Closely linked with the endowment fund, this
    program is designed to assist 1994 land grant institutions with
    academic programs. Through the modest appropriations made available
    since fiscal year 2001, the tribal colleges have been able to begin to
    support courses and plan activities specifically targeting the unique
    needs of their respective communities.
        The 1994 Institutions have developed and implemented courses and
    programs in natural resource management; environmental sciences;
    horticulture; forestry; bison production and management; and especially
    food science and nutrition to address epidemic rates of diabetes and
    cardiovascular disease on reservations. If more funds were available
    through the Educational Equity Grant Program, tribal colleges could
    channel more of their endowment yield to supplement other facilities
    funds to address their critical infrastructure issues. Authorized at
    $100,000 per eligible 1994 Institutions, in fiscal year 2006,
    approximately $68,000 or two-thirds of the authorized level was
    available to the 1994 institutions, after across-the-board cuts and
    Department fees were applied to the initial appropriated level of
    $2,250,000. We respectfully request full funding of $3.3 million to
    allow the tribal colleges to build upon the courses and successful
    activities that have been launched.
        Extension Programs.--The 1994 Institutions' extension programs
    strengthen communities through outreach programs designed to bolster
    economic development; community resources; family and youth
    development; natural resources development; agriculture; as well as
    health and nutrition awareness.
        In fiscal year 2006, $3,273,000 was appropriated for the 1994
    Institutions' competitive extension grants, a slight increase over
    fiscal year 2005. Without adequate funding, 1994 Institutions' ability
    to maintain existing programs and to respond to emerging issues such as
    food safety and homeland security, especially on border reservations,
    is severely limited. Increases in funding are needed to support these
    vital programs designed to address the inadequate extension services
    provided to Indian reservations by their respective State programs. It
    is important to note that the 1994 extension program is designed to
    complement the Indian Reservation Extension Agent program and does not
    duplicate extension activities. 1994 Land Grant programs are funded at
    very modest levels. The tribal college land grants have applied their
    ingenuity for making the most of every dollar they have at their
    disposal by leveraging funds to maximize their programs whenever
    possible. For example, College of Menominee Nation (CMN) in Keshena,
    Wisconsin, has a multiyear program that leverages funding from several
    activities to expand its extension program, which focuses on
    strengthening the economic capacity of the local community. Partnering
    with U.S. Department of Health and Human Services, CMN is designing
    curriculum that involves tribal elders, relevant service providers,
    local schools, the Commission on Aging, and health clinics designed to
    encourage minority youth to enter Allied Health fields. With a grant
    from the Wisconsin Department of Transportation, the college's
    extension and outreach offers the Transportation Alliance for New
    Solutions (TrANS) program. This is a 120 hour program designed to train
    women and minorities in roads construction. In addition, the Federal
    Highway Administration and the Wisconsin Department of Transportation
    have provided grant funds to CMN extension and outreach to conduct a
    Summer Transportation Institute focusing on middle school students.
    Students spend 4 weeks exploring various careers within the
    transportation industry. CMN is just one example of the innovative
    programs being conducted at 1994 Institutions. To continue and expand
    these successful programs, we request the Subcommittee support this
    competitive program by appropriating $5 million to sustain the growth
    and further success of these essential community based programs.
        1994 Research Program.--As the 1994 Land Grant Institutions have
    begun to enter into partnerships with 1862/1890 land grant institutions
    through collaborative research projects, impressive efforts to address
    economic development through land use have come to light. Our research
    program illustrates an ideal combination of Federal resources and
    tribal college-state institutional expertise, with the overall impact
    being far greater than the sum of its parts. We recognize the budget
    constraints under which Congress is functioning. However, $1,039,000,
    the fiscal year 2006 appropriated level, is a 4.4 percent decrease in
    funding that was already grossly inadequate. This research program is
    vital to ensuring that tribal colleges may finally become full partners
    in the Nation's land grant system. Many of our institutions are
    currently conducting agriculture based applied research, yet finding
    the resources to conduct this research to meet their communities' needs
    is a constant challenge. This research authority opens the door to new
    funding opportunities to maintain and expand the research projects
    begun at the 1994 Institutions, but only if adequate funds are
    appropriated. $1,039,000 for 33 institutions to compete for is clearly
    inadequate. Project areas being studied include soil and water quality,
    amphibian propagation, pesticide and wildlife research, range cattle
    species enhancement, and native plant preservation for medicinal and
    economic purposes. We strongly urge the Subcommittee to fund this
    program at a minimum of $3 million to enable our institutions to
    develop and strengthen their research potential.
        Rural Community Advancement Program (RCAP).--In fiscal year 2006,
    $4,464,000 of the RCAP funds appropriated for loans and grants to
    benefit Federally recognized American Indian tribes were targeted for
    community facility grants for improvements at Tribal Colleges and
    Universities. This amounts to an increase of $464,000 over the level
    that had been allocated to the program each year since it began in
    fiscal year 2001. This program requires a minimum 25 percent non-
    Federal match. Tribal colleges are chartered by their respective
    tribes, which enjoy a government-to-government relationship with the
    Federal Government. Due to this relationship, tribal colleges have very
    limited access to non-Federal dollars making non-Federal matching
    requirements a significant barrier to our colleges' ability to compete
    for much needed funds. The 2002 Farm Security and Rural Investment Act,
    (Public Law 107-171) included language limiting the non-Federal match
    requirement for the Rural Cooperative Development Grants to no more
    than 5 percent in the case of a 1994 institution. We would like to have
    this same language applied to the RCAP community facilities grants for
    tribal colleges to open the door to more 1994 Institutions to compete
    for these dollars.
        We urge the Subcommittee to designate $5 million for each of the
    next 5 fiscal years to afford the 1994 institutions the means to
    aggressively address critical facilities needs, thereby allowing them
    to better serve their students and respective communities.
    Additionally, we request that Congress include language directing the
    agency to limit the non-Federal matching requirement to not more than 5
    percent, the same level as applied to the Rural Cooperative Development
    Grants program, to help the 1994 land grant institutions to effectively
    address critical facilities and construction issues at their
    institutions.
    Conclusion
        The 1994 Land Grant Institutions have proven to be efficient and
    effective vehicles for bringing educational opportunities to American
    Indians and hope for self-sufficiency to some of this Nation's poorest
    regions. The modest Federal investment in the 1994 Land Grant
    Institutions has already paid great dividends in terms of increased
    employment, education, and economic development. Continuation of this
    investment makes sound moral and fiscal sense. American Indian
    reservation communities are second to none in their potential for
    benefiting from effective land grant programs and as earlier stated no
    institutions better exemplify the original intent of the land grant
    concept than the 1994 Land Grant Institutions.
        We appreciate your support of the Tribal Colleges and Universities
    and we ask you to renew your commitment to help move our communities
    toward self-sufficiency. We look forward to continuing our partnership
    with you, the U.S. Department of Agriculture, and the other members of
    the Nation's land grant system--a partnership that will bring equitable
    educational, agricultural, and economic opportunities to Indian
    Country.
        Thank you for this opportunity to present our funding proposals to
    this Subcommittee. We respectfully request your continued support an
                                     ______

          Prepared Statement of the American Public Power Association

        The American Public Power Association (APPA) is the national
    service organization representing the interests of over 2,000 municipal
    and other state and locally owned utilities throughout the United
    States (all but Hawaii). Collectively, public power utilities deliver
    electricity to one of every seven electricity consumers (approximately
    43 million people), serving some of the nation's largest cities.
    However, the vast majority of APPA's members serve communities with
    populations of 10,000 people or less.
        We appreciate the opportunity to submit this statement outlining
    our fiscal year 2007 funding priorities within the jurisdiction of the
    Agriculture, Rural Development, and Related Agencies Subcommittee.
    Department of Agriculture: Rural Utility Service Rural Broadband Loan
            Program
        APPA urges the Subcommittee to fully fund the Rural Utility
    Service's (RUS) Rural Broadband Loan Program at $10 million, as
    authorized in the 2002 Farm Bill. A funding level of $10 million would
    produce approximately $356 million in RUS loans for fiscal year 2007.
        APPA believes it is important to provide incentives for the
    deployment of broadband to rural communities, many of which lack
    broadband service. Increasingly, access to advanced communications
    services is considered vital to a community's economic and educational
    development. In addition, the availability of broadband service enables
    rural communities to provide advanced health care through telemedicine
    and to promote regional competitiveness and other benefits that
    contribute to a high quality of life. Approximately one-fourth of
    APPA's members are currently providing broadband service in their
    communities. Several APPA members are planning to apply for RUS
    broadband loans to help them finance their broadband projects.
                                     ______

     Prepared Statement of the American Society of Agronomy, Crop Science
            Society of America, and Soil Science Society of America

        Dear Chairman Bennett, Ranking Member Kohl and Members of the
    Subcommittee: On behalf of the American Society of Agronomy, Crop
    Science Society of America, Soil Science Society of America (ASA/CSSA/
    SSSA), we are pleased to submit comments in strong support of enhanced
    public investment in food and agricultural research, extension and
    education as a critical component of federal appropriations for fiscal
    year 2007 and beyond. With nearly 18,000 members, ASA/CSSA/SSSA are the
    largest life science professional societies in the United States
    dedicated to the agronomic, crop and soil sciences. ASA/CSSA/SSSA play
    a major role in promoting progress in these sciences through the
    publication of quality journals and books, convening meetings and
    workshops, developing educational, training, and public information
    programs, providing scientific advice to inform public policy, and
    promoting ethical conduct among practitioners of agronomy and crop and
    soil sciences. The programs and activities of ASA/CSSA/SSSA are
    tailored not only to our members' interests and scientific advancement,
    but also serve the public interest. ASA/CSSA/SSSA publish six peer-
    reviewed journals in which over 1100 scientific articles are published
    yearly. The peer-review procedures for manuscripts published in ASA/
    CSSA/SSSA journals as well as our activities and procedures for
    publishing ensure the highest quality and integrity in our scientific
    literature.
        ASA/CSSA/SSSA understand the challenges the Senate Agriculture
    Appropriations Subcommittee faces with the tight agriculture budget for
    fiscal year 2007. We also recognize that the Agriculture Appropriations
    bill has many valuable and necessary components, and we applaud the
    efforts of the Subcommittee to fund mission-critical research through
    the USDA-Cooperative State, Research, Education and Extension Service
    as well as its intramural research portfolio funded through the
    Agricultural Research Service. We are particularly grateful to the
    Subcommittee for funding the NRI at $181 million in fiscal year 2006.
    Below we have highlighted recommendations for the fiscal year 2007
    appropriations cycle.
    Agricultural Research Service
        ASA/CSSA/SSSA understand the agency's need to reprogram
    approximately $49.1 million in funding to higher priority areas such as
    homeland security, emerging diseases, food safety, obesity, climate
    change, invasive species, and genomics and genetics. ASA/CSSA/SSSA
    applaud ARS's ability to respond quickly and flexibly to rapidly
    changing national needs. The proposed increase of $57.7 in new monies
    for these high priority areas is also commended. However, ASA/CSSA/SSSA
    are concerned that the proposed overall cut in total funding for ARS of
    $123, or 11 percent, from fiscal year 2006 enacted, could result in
    decreased research capacity and/or the elimination of important
    research programs currently underway. ASA/CSSA/SSSA urge the
    Subcommittee to act judiciously and not implement such drastic funding
    cuts for this critical research agency.
    Cooperative State Research, Education, and Extension Service
        National Research Initiative.--ASA/CSSA/SSSA strongly endorse the
    President's proposed fiscal year 2007 budget increase of $66.3 million
    for the National Research Initiative Competitive Grants Program (NRI)
    which would bring total funding for this important research program to
    $247.5 million. However, we do not support the President's proposal to
    transfer the $42.3 million Sec 406 (Integrated Research, Education, and
    Extension program) program into the NRI. This transfer may result in
    the loss of critical programs such as the Organic Transitions Program.
        NRI Integrated Research.--ASA/CSSA/SSSA request that any new monies
    appropriated for the NRI, as requested by the administration, allow the
    Secretary the discretion to apply up to 30 percent towards carrying out
    the NRI integrated research, extension and education competitive grants
    program.
        Sustainable Agriculture Research and Education Programs.--ASA/CSSA/
    SSSA oppose the administration's request to cut funding for SARE by
    more than $3 million. At a minimum, the Subcommittee should fund SARE
    at the fiscal year 2006 enacted (pre-rescission) level of $12.4
    million.
        Indirect Costs.--ASA/CSSA/SSSA applaud the administration's
    proposal to eliminate the indirect cost cap on the NRI, set at 20
    percent for fiscal year 2006, which will broaden its appeal by putting
    the NRI on equal footing with other federal competitive grants programs
    such as those of NSF and NIH. However, we are concerned that new
    funding was not provided to cover this change.
        Research Formula Funding.--ASA/CSSA/SSSA oppose the
    administration's proposal to change the methodology for distributing
    Hatch Funds and McIntire-Stennis Funds through a multistate,
    competitively awarded proposal program. Such drastic changes would be
    detrimental to the entire USDA research portfolio. Because of their
    timing and potential regional and intra-state impacts, much of the
    infrastructure needed to conduct competitively funded research could be
    compromised if formula funds were to be redirected as proposed, and
    could irreparably damage programs housed at each land-grant university.
    This would mean a huge and potentially damaging loss of national
    infrastructure to conduct agricultural research. The private sector
    depends heavily on the agricultural technology and training provided by
    the U.S. land grant system, and the impact of such a drastic transfer
    of formula funds to a competitive grants program would affect not only
    the viability of U.S. industry but also the health and survival of
    millions of people across the globe. Moreover, as noted below,
    investments in formula funded research show an excellent annual rate of
    return.
        Agrosecurity.--ASA/CSSA/SSSA support the request of the
    administration that $12 million be provided for the Animal and Plant
    Diagnostic Labs and EDEN to facilitate protecting America's
    agricultural production systems. ASA/CSSA/SSSA also endorse the
    administration's request ($5.0 million) for the Agrosecurity Curricula
    Development, which we consider to be a critical new initiative. Recent
    security threats facing America require new and expanded agricultural
    research to protect our nation's natural resources, food processing and
    distribution network, and rural communities that will secure America's
    food and fiber system.
        Higher Education.--ASA/CSSA/SSSA urge the Subcommittee to fund the
    Institution Challenge Grants at $6 million which will restore some of
    the funding lost due to the 2006 rescission. We applaud the
    Administration's budget request of $4.445 million for the Graduate
    Fellowships Grants.
        Extension Formula Funding.--Extension forms a critical part of the
    research, education and extension program integration, the hallmark of
    CSREES which in not seen in other agencies. Unfortunately, the Smith
    Lever 3(b) and 3(c) account has been flat-funded (in constant dollars,
    this account has seen a gradual erosion in funding), in recent years.
    Moreover, the current trend of annual rescissions has resulted in an
    even lower funding level for this and other vital extension programs.
    ASA/CSSA/SSSA proposes, at a minimum, that the Subcommittee restore
    funding for Smith Lever 3(b) and 3(c) to the fiscal year 2006 pre-
    rescission enacted level of $275.73 million.
        A balance of funding mechanisms, including intramural, competitive
    and formula funding, is essential to maintain the capacity of the
    United States to conduct both basic and applied agricultural research,
    improve crop and livestock quality, and deliver safe and nutritious
    food products, while protecting and enhancing the Nation's environment
    and natural resources. In order to address these challenges and
    maintain our position in an increasingly competitive world, we must
    continue to support research programs funded through ARS and CSREES.
    Congress must enhance funding for agricultural research to assure
    Americans of a safe and nutritious food supply and to provide for the
    next generation of research scientists. According to the USDA's
    Economic Research Service (Agricultural Economic Report Number 735),
    publicly funded agricultural research has earned an annual rate of
    return of 35 percent. This rate of return suggests that additional
    allocation of funds to support research in the food and agricultural
    sciences would be beneficial to the U.S. economy. We must also continue
    support for CSREES-funded education programs which will help ensure
    that a new generation of educators and researchers is produced.
    Finally, we need to ensure support for extension at CSREES to guarantee
    that these important new tools and technologies reach and are utilized
    by producers and other stakeholders.
        As you lead the Congress in deliberation on funding levels for
    agricultural research, please consider American Society of Agronomy,
    Crop Science Society of America, Soil Science Society of America as
    supportive resources. We hope you will call on our membership and
    scientific expertise whenever the need arises.
                                     ______

         Prepared Statement of the American Society of Civil Engineers

        The American Society of Civil Engineers (ASCE) is pleased to offer
    this testimony on the President's proposed budget for the Natural
    Resources Conservation Service (NRCS) for fiscal year 2007.
        ASCE was founded in 1852 and is the country's oldest national civil
    engineering organization. It represents more than 139,000 civil
    engineers in private practice, government, industry and academia who
    are dedicated to the advancement of the science and profession of civil
    engineering. ASCE is a 501(c)(3) non-profit educational and
    professional society.
        The Administration's proposed fiscal year 2007 budget includes only
    $15.3 million in discretionary appropriations to fund rehabilitation of
    unsafe and seriously deficient dams that were originally constructed
    under USDA Watershed Programs. This is more than a 50 percent reduction
    from the fiscal year 2006 when $31.5 million was appropriated by
    Congress.
        ASCE respectfully requests that this Subcommittee increase the
    Administration's proposed appropriation to $75 million. This amount is
    $60 million less than the total $135 million authorized in the 2002
    Farm Bill which includes discretionary funds and Commodity Credit
    Corporation (CCC) mandatory funding.
        Of the 78,000 dams in the United States, 95 percent are regulated
    by the states. Approximately 10,400 of these dams are small watershed
    structures built under the United States Department of Agriculture
    programs authorized by Congress beginning in the 1940s (primarily the
    Flood Control Act of 1944, Public Law 78-534 and the Watershed
    Protection and Flood Control Act of 1953, Public Law 83-566). By the
    year 2020, more than 85 percent of all dams in the United States will
    be more than 50 years old, the typical useful life span.

                       THE URGENT NEED FOR FEDERAL ACTION

        The benefits from the 11,000 improved watershed dams are enormous.
    The dams provide downstream flood protection, water quality,
    irrigation, local water supplies and needed recreation. Yet these
    benefits to lives and property are threatened. The small watershed dams
    are approaching the end of their useful lives as critical components
    deteriorate. The reservoirs become completely filled with sediment,
    downstream development increases the potential hazards and
    significantly changes the design standards, and many dams do not meet
    State dam safety standards.
        Although these dams were constructed with technical and financial
    assistance from the Department of Agriculture, local sponsors were then
    responsible for operation and maintenance of the structures. Now these
    dams are approaching the end of their useful lives, yet the resource
    need is still great. The flood control benefits, the irrigation needs,
    the water supply, the recreation and the conservation demands do not
    end. In fact, they are more necessary than ever as downstream
    development has dramatically increased the number of people, properties
    and infrastructure that are protected by the flood control functions of
    these dams. The Federal Government has a critical leadership role in
    assuring that these dams continue to provide critical safety and
    resource needs.
        The NRCS in the Department of Agriculture has estimated the cost of
    rehabilitating the small watershed dams at $542 million. While the
    average rehabilitation cost per dam is approximately $242,000, the
    local sponsors typically do not have sufficient financial resources to
    complete these necessary repairs to assure the safety and critical
    functions of these dams. The Federal Government must recognize the
    urgent need to provide assistance to maintain these dams. Congress
    should reinforce its earlier commitment to the goals of the Flood
    Control Acts of 1944 and 1953.
        Since the program began, there have been 136 watershed
    rehabilitation projects initiated in 21 States, which include 47
    completed rehabilitation projects and 89 projects either in the
    planning, design or construction phase. It is clear from these 136
    projects as well as the 76 projects, which requested assistance but
    were unable to be funded in fiscal year 2006, just how much demand
    exists; and how successful this USDA program is.

                             EXTENT OF THE PROBLEM

        ASCE views the funding of dam safety repairs as a critical need for
    the nation. In ASCE's 2005 Report Card for America's Infrastructure
    dams received a grade of D. Nearly 3,500 unsafe dams have been
    identified in this country and many of the owners do not have
    sufficient funding sources.
        More that 900 watershed dams across the nation will need
    rehabilitation in just the next five years at a cost of over $570
    million. These numbers will increase as dams get older and thousands of
    people and millions of dollars of property could be at risk if these
    dams should fail. That is why Congress authorized $600 million for
    rehabilitation for 2003-2007 in the last Farm Bill. Local watershed
    project sponsors provide 35 percent of the cost of the rehabilitation
    projects and many have local cost-share funds ready for projects that
    could be lost if the Federal money isn't made available.
        Many of these urgent repairs and modifications are needed because
    of the following: downstream development within the dam failure flood
    zone, replacement of critical dam components, inadequate spillway
    capacity due to significant watershed development and increased design
    criteria due to downstream development.
        Many of the small watershed dams do not meet minimum State dam
    safety standards and many that are being counted on for flood
    protection can no longer provide flood protection due to excessive
    sedimentation and significant increases in runoff from development
    within the watershed. The dams suffer from cracked concrete spillways,
    failing spillways, inoperable lake drains and other problems that
    require major repairs that are beyond the capability of the local
    sponsors.

                             THE COST OF NO ACTION

        These small watershed dams have been a silent and beneficial part
    of the landscape. Failure to make the necessary upgrades, repairs and
    modifications will increase the likelihood of dam failures. Continued
    neglect of these structures may easily result in reduced flood control
    capacity causing increased downstream flooding. Failure of a dam
    providing water supply would result in a lack of drinking water or
    important irrigation water.
        The recent dam failures in Hawaii and Missouri, and the near
    failure in Massachusetts last year have brought into tragic focus for
    the public the impact aging and under-funded dams can have on a
    community. The floods in Georgia in 1993 and in the Midwest in 1994 are
    recent reminders of natural events that can cause enormous disasters,
    including dam failures. The failure to act quickly will clearly result
    in continued deterioration and a greater number of unsafe dams until a
    dam failure disaster occurs. The failure of a 38-foot tall dam in New
    Hampshire in 1996, which caused $5.5 million in damage and one death,
    should be a constant reminder that dam failures happen and can have
    tragic consequences.
        Completion of the needed repairs will result in safer dams, as well
    as continued benefits. Failure to establish a mechanism to reinvest in
    these structures will greatly increase the chances of dam failures and
    loss of benefits, both having significant economic and human
    consequences. Costs resulting from flood damage and dam failure damage
    are high and unnecessarily tap the Federal Government through disaster
    relief funds or the National Flood Insurance Program.

                                 RECOMMENDATION

        ASCE asks that the Subcommittee view funding the Rehabilitation of
    Watershed Dams as a significant re-investment in the benefits of the
    program and an investment in the safety of these dams. Therefore, ASCE
    respectfully requests that this Subcommittee provide additional
    appropriations beyond the Administration's request to $75 million for
    fiscal year 2006.
        The condition of our Nation's dams, and the need for watershed
    structure rehabilitation, should be a national priority before we have
    to clean up after dam failures that we know are likely to happen if
    nothing is done.
                                     ______

          Prepared Statement of the American Society for Microbiology

        The American Society for Microbiology (ASM) appreciates the
    opportunity to submit testimony on the fiscal year 2007 appropriation
    for the United States Department of Agriculture (USDA). The ASM is the
    largest single life science organization in the world, with more than
    42,000 members who work in academic, industrial, medical, and
    governmental institutions. The ASM's mission is to enhance the science
    of microbiology, to gain a better understanding of life processes, and
    to promote the application of this knowledge for improved plant, animal
    and human health, and for economic and environmental well-being.
        The USDA sponsors research and education programs, which meet the
    USDA's strategic goals of enhancing competitiveness and sustainability
    of U.S. agriculture; increasing economic opportunities and improving
    quality of life in rural America; enhancing protection and safety of
    the Nation's agriculture and food supply; improving the Nation's
    nutrition and health; and protecting and enhancing the Nation's natural
    resource base and environment. U.S. agriculture faces new challenges,
    including threats from emerging infectious diseases in plants and
    animals such as avian influenza, as well as threats from climate
    change, and public concern about food safety and security. It is
    critical to increase the visibility and investment in agriculture
    research to respond to these challenges. The ASM urges Congress to
    provide increased funding for research programs within the USDA in
    fiscal year 2007.
        Microbiological research in agriculture is vital to understanding
    and finding solutions to foodborne diseases, endemic diseases of long
    standing, new and emerging plant and animal diseases, development of
    new agriculture products and processes and addressing existing and
    emerging environmental challenges. Unfortunately, Federal investment in
    agricultural research has not kept pace with the need for additional
    agricultural research to solve emerging problems. The USDA funds more
    than 90 percent of all Federal support for the agricultural sciences.
    According to the USDA Economic Research Service (ERS) report,
    Agricultural Research and Development: Public and Private Investments
    Under Alternative Markets and Institutions, the rate of return on
    public investment in basic agricultural research is estimated to be
    between 60 and 90 percent.
    USDA National Research Initiative Competitive Grants Program
        The National Research Initiative Competitive Grants Program (NRI)
    was established in 1991 in response to recommendations outlined in
    Investing in Research: A Proposal to Strengthen the Agricultural, Food
    and Environmental System, a 1989 report by the National Research
    Council's (NRC) Board on Agriculture. This publication called for
    increased funding of high priority research that is supported by the
    USDA through a competitive peer-review process directed at:
      --Increasing the competitiveness of U.S. agriculture.
      --Improving human health and well-being through an abundant, safe,
            and high-quality food supply.
      --Sustaining the quality and productivity of the natural resources
            and the environment upon which agriculture depends.
        Continued interest in and support of the NRI is reflected in two
    subsequent NRC reports, Investing in the National Research Initiative:
    An Update of the Competitive Grants Program of the U.S. Department of
    Agriculture, published in 1994, and National Research Initiative: A
    Vital Competitive Grants Program in Food, Fiber, and Natural Resources
    Research, published in 2000.
        Today, the NRI, housed within the USDA Cooperative State Research,
    Education, and Extension Service (CSREES), supports research on key
    problems of national and regional importance in biological,
    environmental, physical, and social sciences relevant to agriculture,
    food, and the environment on a peer-reviewed, competitive basis.
    Additionally, the NRI enables the USDA to develop new partnerships with
    other Federal agencies that advance agricultural science. Examples of
    such collaborations include the USDA's involvement in the Microbial
    Genome Sequencing Program, the Maize Genome Program, the Microbial
    Observatories program, the Plant Feedstock Genomics for Bioenergy
    program, the Metabolic Engineering program, and the Climate Change
    Science Plan.
        The ASM urges Congress to support the Administration's requested
    increase for the NRI in fiscal year 2007. NRI's proposed increase comes
    from shifting the CSREES Integrated Activities, such as food safety,
    pest management, and water quality, making up $42.7 million of the
    proposed increase, providing a net increase of $24 million for the NRI
    including the additional responsibility of the Integrated Programs. The
    ASM supports the Administration's effort to increase competitively
    awarded funding mechanisms and believes that competitive grants ensure
    the best science.
        Additional funding for the NRI is needed to expand research in
    microbial genomics and to provide more funding for merit reviewed basic
    research with long-term potential for new discoveries and products. It
    is critical to increase the visibility and investment in agriculture
    research to respond to these challenges and we appreciate Congress's
    efforts to fund the NRI at $181 million in fiscal year 2006 and urge
    Congress to support the Administration's fiscal year 2007 request of
    $247.5 million for this program.
    Agricultural Research Service
        The Agricultural Research Service (ARS) is the USDA's chief
    scientific research agency, which conducts research to develop new
    scientific knowledge, transfers technology to the private sector to
    solve critical agricultural problems of broad scope and high national
    priority, and provides access to scientific data. The ARS supports
    approximately 1,200 individual research projects conducted by
    scientists from the USDA at over 100 Federal facilities. The
    Administration requests approximately $1.03 billion for the ARS in
    fiscal year 2007, a 20 percent decrease from fiscal year 2006. The ASM
    urges Congress to strongly support the ARS in fiscal year 2007.
    USDA Food and Agriculture Defense Initiative
        The Food and Agriculture Defense Initiative is an interagency
    initiative to improve the Federal Government's capability to rapidly
    identify and characterize a bioterrorist attack, by improving the
    national surveillance capabilities in human health, food, agriculture,
    and environmental monitoring. The ASM supports the Administration's
    request for this initiative of $322 million for fiscal year 2007, an
    increase of $127 million over fiscal year 2006. This does not include
    funding for construction of the Ames, Iowa facility for animal research
    and diagnostics, which was fully funded in fiscal year 2006. Of the
    total amount, an increase of approximately $30 million for Food Defense
    would enhance the Food Safety and Inspection Service's (FSIS) ability
    to detect and respond to food emergencies and for the USDA's research
    agencies to conduct related research. For Agriculture Defense, the
    budget includes a $97 million increase to improve the Animal and Plant
    Health Inspection Service's (APHIS) monitoring and surveillance of
    plant and animal health, including wildlife; response capabilities,
    including provisions for the National Veterinary Stockpile; and further
    research on emerging and exotic diseases.
        The ASM supports this greater emphasis on research in the Food and
    Agriculture Defense Initiative and recommends an increase in funding,
    both extramural and intramural, for research on pathogenic
    microorganisms as part of the Food and Agriculture Defense Initiative.
    Food Safety
        The Centers for Disease Control (CDC) estimates that each year 76
    million people get sick, more than 300,000 are hospitalized, and 5,000
    die because of foodborne illnesses. Primarily the very young, the
    elderly, and the immunocompromised are affected. Recent changes in
    human demographics and food preferences, changes in food production and
    distribution systems, microbial adaptation, and lack of support for
    public health resources and infrastructure have led to the emergence of
    novel as well as traditional foodborne diseases. With increasing travel
    and trade opportunities, it is not surprising that now there is a
    greater risk of contracting and spreading a foodborne illness locally,
    regionally, and even globally. (MMWR 2004;53[No. RR-04]). The USDA's
    Economic Research Service (ERS) estimates that the medical costs,
    productivity losses, and costs of premature deaths for diseases caused
    by just five types of foodborne pathogens exceeds $6.9 billion per year
    in the United States. The USDA plays a vital role in the government's
    effort to reduce the incidence of foodborne illness. Continued and
    sustained research is important to safeguarding the Nation's food
    supply and focusing on methods and technologies to prevent microbial
    foodborne disease and emerging pathogens. The ASM supports the
    requested increases for the Food and Agriculture Defense Initiative and
    the Food Safety and Inspection Service. Without sustained significant
    increases in the level of food safety research funding, meeting the
    National Health Objectives for 2010 in all likelihood will not become
    reality. The ASM recommends a substantial increase in food safety
    research, which is essential to ensure the protection of the Nation's
    health.
    Genomics Initiative
        The NRI and the ARS fund the USDA collaborative efforts in the
    field of genomics. There are opportunities to leverage the USDA's
    investments with those of the National Institutes of Health (NIH), the
    Department of Energy (DOE), and the National Science Foundation (NSF)
    in projects to map and sequence the genomes of agriculturally important
    species of plants, animals, and microbes. Determining the function of
    the sequenced genomes (functional genomics) and analyses of the data
    (bioinformatics) now need investment for new management techniques and
    tools. The USDA plays an important role in coordinating and
    participating in interagency workgroups on domestic animal, microbial,
    and plant genomics. Access to genomic information and the new tools to
    utilize it have implications for virtually all aspects of agriculture.
    The ASM urges Congress to provide strong support for the USDA genomics
    initiative.
    Emerging Infectious Diseases in Plants and Animals
        The food production and distribution system in the United States is
    vulnerable to the introduction of pathogens and toxins through natural
    processes, global commerce, and intentional means. The ASM supports
    increases in the USDA research budget for emerging diseases and
    invasive species. Nearly 200 zoonotic diseases can be naturally
    transmitted from animals to man and opportunistic plant pathogens and
    soil-inhabiting microorganisms can be causal agents of infection and
    disease in humans. For emerging diseases to be effectively detected and
    controlled the biology, ecology, and mechanisms for pathogenicity of
    the causal pathogens must be understood and weaknesses exploited to
    limit their impact. This research will help address the risk to humans
    from emerging diseases and opportunistic pathogens, and will ensure the
    safety of plant and animal products. Additionally, expanded research is
    needed to accelerate the development of information and technologies
    for the protection of United States agricultural commodities, wildlife
    and human health against emerging diseases.
    Antimicrobial Resistance Research
        The USDA plays a key role in addressing the national and global
    increase in antimicrobial resistance and the complex issues surrounding
    this public health threat. The ARS Strategic Plan for 2003-2007 states
    the need to ``determine how antimicrobial resistance is acquired,
    transmitted, maintained, in food-producing animals, and develop
    technologies or altered management strategies to control its
    occurrence.'' In 1996, the Department of Health and Human Services
    (HHS) and the USDA established the National Antimicrobial Resistance
    Monitoring System (NARMS) to monitor trends in antimicrobial resistance
    in foodborne pathogens; the USDA has expanded monitoring to include the
    Collaboration on Animal Health Food Safety Epidemiology (CAHFSE)
    program. The USDA support for these projects should continue and the
    ASM urges Congress to increase support for antimicrobial resistance
    surveillance, research, prevention, and control programs.
    Conclusion
        The USDA's mission and goals of leadership on food, agriculture,
    and natural resources, based on sound public policy, the best available
    science, and efficient management should be strongly supported. With a
    significant investment in research, the USDA will be better able to
    meet its goals. The ASM urges Congress to increase funding for
    agricultural research programs to enable the USDA to help ensure a
    safe, nutritious and plentiful food supply for America. This includes
    providing $247.5 million for the NRI in fiscal year 2007.
        The ASM appreciates the opportunity to provide written testimony
    and would be pleased to assist the Subcommittee as the Department of
    Agriculture bill is considered throughout the appropriations process.
                                     ______

          Prepared Statement of the American Society for Microbiology

        The American Society for Microbiology (ASM) is submitting the
    following statement in support of increased funding for the fiscal year
    2007 budget of the Food and Drug Administration (FDA). The ASM is the
    largest single life science society in the world with over 42,000
    members who are involved in basic and applied research and testing in
    university, industry, government and clinical laboratories.
        The Administration's fiscal year 2007 budget request of $1.95
    billion for the FDA includes $1.55 billion in budget authority and $402
    million in industry user fees, a total increase of $70.8 million or 3.8
    percent over the fiscal year 2006 budget. Despite the proposed
    increase, the FDA's budget continues to be constrained, especially in
    view of the increasing demands on the FDA related to food safety,
    pandemic influenza, new and emerging infectious diseases, such as West
    Nile and Mad Cow Disease, drug safety, and initiatives to advance
    innovation in medical product development. The ASM recommends that
    Congress provide additional funding for the FDA to increase its fiscal
    year 2007 proposed budget. Increased support for the FDA will enable
    the Agency to enhance programs that protect against unsafe healthcare
    products, unhealthy foods, and health challenges from bioterrorism or
    natural disasters. The FDA regulates products that account for almost
    25 percent of U.S. consumer spending, including 80 percent of our
    national food supply and all human drugs, vaccines, medical devices,
    tissues for transplantation, equipment that emits radiation, cosmetics,
    and animal drugs and feed. Together these products are worth nearly
    $1.5 trillion annually and affect the daily lives of people.
    Protecting America's Health--Pandemic Preparedness
        The specter of a potential influenza pandemic requires increased
    resources for preparedness. Recent research has found that viruses
    responsible for the three influenza pandemics in the past century
    carried genes from avian influenza viruses. In the current H5N1
    outbreak, the World Health Organization has confirmed about 186 human
    cases although thus far the virus does not spread readily from human to
    human. If viral mutations make human-to-human transmission a tragic
    reality, however, a deadly pandemic could cause millions of human
    deaths and billions in economic costs. The FDA request for fiscal year
    2007 asks for $55.3 million for pandemic preparedness, an amount $30.5
    million more than the fiscal year 2006 level.
        The FDA provides unique support to the recently launched National
    Strategy for Pandemic Influenza, a broad, multi-agency effort to better
    prepare the United States for any pandemic influenza. This Federal
    response targets three primary goals: detect and contain outbreaks
    wherever they occur; ensure that Federal, State, and local communities
    are prepared; and stockpile vaccines and antiviral drugs through
    accelerated development of new vaccine technologies and greatly
    increased U.S. production capacity. Last December, when the Department
    of Health and Human Services (DHHS) announced its Pandemic Influenza
    Plan as part of the Federal strategy, the ASM endorsed its priority of
    increased vaccine manufacturing capacity (enough vaccine for all
    Americans within 6 months of a domestic outbreak). At present, there
    are not nearly enough vaccines and antiviral drugs to meet Federal
    goals. The ASM is concerned that adequate funding be given to the FDA,
    which will be a central figure in vaccine and antiviral development and
    manufacturing. Heightened output using new technologies will further
    burden the FDA's product evaluation process, already stretched by
    research responses to emerging infectious pathogens like SARS and West
    Nile virus.
        Scientists at the FDA's Center for Biologics Evaluation and
    Research (CBER) and Center for Drug Evaluation and Research (CDER) will
    shoulder much of the Agency's growing vaccine and antiviral
    contribution towards pandemic preparedness. Researchers from the FDA
    and their private-industry partners will tackle the critical issues of
    expanding U.S. capacity for traditional egg-based vaccine production,
    the technological transition to cell-culture-based vaccine production,
    and development of innovative vaccines and therapeutic drugs. Through
    the FDA's Critical Path Initiative to get products to market more
    quickly, accelerated approval can help expedite the Federal stockpile
    of vaccines and antivirals needed to counter pandemic influenza.
        The FDA not only assures the safety and efficacy of new products,
    but agency personnel also provide technical support to manufacturers
    from laboratory to market. In early March, the FDA issued two sets of
    draft recommendations to aid manufacturers in developing vaccines, one
    for seasonal, one for pandemic influenza. Seasonal influenza is an ever
    present threat to American health and with pneumonia, it remains the
    leading infectious cause of U.S. deaths. The two guidances also address
    some promising higher-output technologies for vaccine production, such
    as cell culture and recombinant manufacturing. The scientific advances
    from the FDA's influenza activities will undoubtedly heighten
    protection against infectious diseases in general, as well as
    production of antiviral vaccines and drugs in particular. Efforts by
    the influenza preparedness programs also will improve the safety of our
    national food supply. Scientists from the FDA are developing new
    methods to detect antiviral drug residues in food, while FDA
    communications personnel are creating public guidelines on food
    preparation in the event that avian influenza reaches poultry flocks in
    the United States.
    Protecting America's Health--Food Security and Safety
        The FDA oversees about 80 percent of the nation's entire food
    supply, with only the exception of meat, poultry, and some egg products
    regulated by the Department of Agriculture (USDA). Within the FDA, the
    Center for Food Safety and Applied Nutrition (CFSAN) and the Office of
    Regulatory Affairs are responsible each year for goods worth $417
    billion in domestically produced foods and $49 billion in imported
    foods. In fiscal year 2007, the agency's Prior Notice Center is
    expecting to process daily up to 20,000 notifications of food import
    shipments. The FDA's food safety efforts involve reams of regulations,
    constant laboratory testing with the latest methods, and field
    inspections of producers and handlers from among the 420,000 FDA-
    registered food establishments here and abroad. The Administration's
    proposed fiscal year 2007 budget requests about $450 million for the
    FDA foods program, an increase of $11 million over last fiscal year.
    Within this total, $178 million is earmarked for protecting our food
    against deliberate attacks, a $20 million increase over fiscal year
    2006.
        The CFSAN conducts research typically not conducted by industry or
    other research agencies, which provides the basis for regulating the
    food-producing and processing industries to ensure a safe and
    nutritious food supply from farm to table. It provides the scientific
    basis for nutrition labeling regulations and guidance, identification
    of foodborne pathogens, the development of mitigation and prevention
    strategies, as well as identifying and recommending the adoption of
    innovative technologies that reduce public health concerns related to
    foodborne pathogens. The ASM is concerned with the proposed $5.2
    million reduction for the CFSAN in fiscal year 2007, and the
    redirection of resources from base programs that includes cuts to the
    CFSAN's research program and the loss of 64 full-time employees (FTE).
    With the current increasing trends in importation of produce, the FDA
    needs to strengthen its role in this area, including better sampling
    and real-time microbiological testing procedures, and more inspectors
    to provide a greater assurance of public health protection.
        Protecting the nation's food supply from bioterrorism is one of the
    FDA's priority initiatives for fiscal year 2007, specifically through
    improved prevention strategies and plans, advanced screening methods to
    detect microbial food contamination, and outreach to industry, State,
    and local stakeholders. The FDA's Food Defense Initiative is part of an
    interagency strategy involving the Department of Homeland Security, the
    USDA, and other government entities. Because of countless possibilities
    for intentional and accidental food contamination, the ASM supports the
    aggressive measures taken by the FDA to inspect, detect, and prevent
    unsafe foods. For example, in fiscal year 2005, the FDA conducted more
    than 86,000 import security reviews to identify any imported food and
    feed products that might be intentionally contaminated. Much of the
    fiscal year 2007 budget increase would expand the FDA's Food Emergency
    Response Network (FERN) and the Internet-based data exchange system
    used by health labs at all levels, the Electronic Laboratory Exchange
    Network (eLEXNET). FERN is a network of Federal and State laboratories
    designed to guarantee the analytic surge capacity to respond to any
    attack on the U.S. food system. By the end of fiscal year 2006, the
    network will incorporate 10 Federal and 10 State labs; the additional
    fiscal year 2007 funds will expand the network into 6 more State labs.
    Funds also support related basic food defense research and other
    surveillance linkages among Federal, State, and local responders.
        Although impressive in its quantity, quality and diversity, the
    food supply system in the United States nonetheless remains vulnerable
    to accidental cases of foodborne infectious diseases. Health officials
    report that each year these diseases are responsible for an estimated
    76 million illnesses, more than 300,000 hospitalizations, and 5,000
    deaths. The USDA has estimated that each year the most common foodborne
    pathogens cost the U.S. economy as much as $6 billion through direct
    medical costs (acute and chronic cases) and lost productivity. The ASM
    commends the FDA regulatory and research programs that address health
    risks related to foods, cosmetics, and animal feed and drugs, many of
    which involve microbial pathogens. Globalization of our food sources
    has diversified American diets, but it also greatly increases the
    possibilities for contamination as we eat more fresh produce, once-
    unfamiliar foods, and products from less-regulated import sources.
    Oversight of the new genetically engineered foods and recent dramatic
    growth in the diet supplement industry also stretches limited FDA food
    safety resources.
        An estimated 118,000 illnesses occur each year in the United States
    due to eggs contaminated with Salmonella bacteria (Salmonella caused
    infections alone account for $1 billion yearly in direct and indirect
    costs). In 2006, the FDA expects to publish its final rule to the
    States and the egg industry to prevent Salmonella contamination during
    production, with the intent of reducing the annual human cases by at
    least 33,500. The agency uses on-going surveillance of U.S. foodborne
    disease outbreaks to detect any incidents with products regulated by
    the FDA. It also has several emergency response plans to address sudden
    threats to food safety, for example, post-Katrina deployment to assess
    stored-food sources in the Gulf Coast, and the BSE Emergency Response
    Plan to quickly evaluate with the USDA any report of bovine spongiform
    encephalopathy in US cattle. For fiscal year 2007, BSE research/
    detection will be one of the two highest-priority programs at the FDA's
    Center for Veterinary Medicine, along with reduction of antimicrobial
    resistance in humans now linked to antibiotics fed to food animals.
    Protecting America's Health--Biomedical Frontiers
        The new Critical Path to Personalized Medicine will be the FDA's
    top scientific policy initiative for at least the next 5 years, created
    ``to accelerate the field of personalized, predictive, and preemptive
    medicine.'' Economic experts predict that by 2015 the United States
    will pay out about 20 percent of its gross domestic product on health
    spending. The FDA is seeking to more efficiently evaluate pre-market
    biomedical products. The critical path initiative is the Agency's
    response to recent stagnation in new product development due to
    problematic clinical trials or manufacturing procedures that disallow
    approval FDA from the FDA. By using cutting-edge molecular biology
    technologies, the FDA expects to modernize the medical product
    development process with cooperation from private industry. These
    technologies also will enable scientists from the FDA to evaluate and
    encourage superior therapies personalized or tailored to individual
    groups of patients, reducing the time-consuming need to approve
    products for broad use and paving the way to less-expensive clinical
    trials and more effective drugs. The new molecular-based technologies
    also are expected to help predict which patients would benefit from a
    particular therapy and which might suffer ill effects. The ASM agrees
    with the FDA intent to stimulate private industry use of new
    generations of scientific tools, in order to expedite technology
    transfer and to help maintain U.S. science-based competitiveness in an
    expanding global healthcare market.
    Conclusion
        The ASM strongly recommends an increased budget for the FDA, which
    would benefit its important programs and provided need resources for
    priority initiatives.
                                     ______

     Prepared Statement of the American Society of Plant Biologists (ASPB)

        The American Society of Plant Biologists (ASPB), a non-profit
    society representing nearly 6,000 plant scientists, urges the
    Subcommittee to support the President's fiscal year 2007 budget request
    of $247.5 million for the Department of Agriculture National Research
    Initiative Competitive Grants Program (NRI). We urge a significant
    increase for the Cooperative State Research Education, and Extension
    Service (CSREES) and Agricultural Research Service (ARS) over the
    fiscal year 2006 appropriation.
        Basic plant research supported by USDA-ARS and CSREES, including
    the NRI, provides new knowledge that leads to improved and value-added
    crops. This enhances economic opportunities for America's farmers. This
    in turn benefits rural economies and the quality of life in rural
    communities.
        As ASPB Committee on Public Affairs Chair Roger Innes, Professor,
    Indiana University, noted, NRI-funded research performed by ASPB
    members has led to major advances in enhancing and protecting the
    safety of the Nation's agriculture and food supply. ASPB members are
    also studying how plants accumulate nutrients in order to develop crop
    plants with higher nutrient content and are learning how plants utilize
    water and soil nutrients (e.g. nitrogen and phosphorous) in an effort
    to develop crops that require less fertilizer, which would have major
    environmental, economic and health benefits.
        Advances in science made possible through the NRI will enable
    farmers to reduce their dependency on pesticides and antibiotics and to
    protect the water supply, soils and fragile ecosystems, noted ASPB
    Committee on Public Affairs Chair Pamela Ronald, Professor, University
    of California, Davis.
        Research sponsored by the NRI contributes to higher yields and
    safer foods. The NRI contributes to the talent pool of agricultural
    scientists in the states and Nation to better serve the needs of
    producers and consumers. Without grant support from the NRI, the
    agricultural research community in our Nation would be severely
    weakened, commented ASPB President Michael Thomashow, Professor,
    Michigan State University.
        Research leading to improved energy crops could boost economies in
    rural and urban areas of America while reducing dependence on foreign
    oil. USDA and DOE reported in April how more than 33 percent of our
    Nation's transportation fuels could be supplied by homegrown biofuels
    compared to the current two percent. This would help cut the Nation's
    trade deficit, while also reducing carbon emissions. We applaud the
    Department of Agriculture for its own and collaborative efforts with
    the Department of Energy and National Science Foundation to increase
    basic understanding of plants for enhanced production of biofuels.
    Advances in plant research that have helped farmers give Americans the
    world's lowest cost for food (as the share of personal income) could
    also lower fuel costs and stabilize energy supplies.
        The majority of ASPB members perform research that addresses
    fundamental questions in plant biology. It is this basic research that
    leads to unexpected breakthroughs and new approaches to improving crop
    production. For example, the discovery of RNA interference arose from
    basic research on the control of gene expression and on virus
    resistance in plants, but is now revolutionizing research and
    applications in both plant and human biology. ASPB urges the
    Subcommittee to continue supporting USDA-sponsored world leading basic
    plant biology research. New enhanced crops result from research
    directly on crops and on simpler model plants with shared traits, such
    as Arabidopsis.
        Tremendous advancements in our understanding of plant genomes have
    been made in the last 5 years. These advancements have greatly
    accelerated our ability to identify genes controlling important
    agricultural traits such as disease resistance, flowering time, and
    drought tolerance. These genomic resources have also greatly enhanced
    our abilities to use molecular breeding tools to develop superior crop
    varieties, Innes commented.
        We have recommended in the past that the NRI increase funding
    awarded for individual research grants for both direct and indirect
    costs, but not decrease the total number of grants awarded. This
    requires substantial additional funding for the NRI program. Due to
    overall budget constraints, the NRI budget for existing programs has
    not increased at a rate to keep pace with the higher grant award
    levels, that are more comparable now to award levels from other
    research agencies. As a result, to accomplish an increase in award
    sizes, the NRI has had to fund fewer grants. This has caused funding
    rates to plummet.
        If such low funding rates are maintained, it will cause many
    research labs to close and make it difficult for universities to
    justify maintaining faculty in these areas. It will also make it very
    difficult to attract new students and faculty into plant biology, just
    at a time when the opportunities for rapid advancement are
    unprecedented. A substantial increase as requested by the President for
    the NRI would lead to a higher number of awards in plant biology and
    other areas. This will result in more benefits in crop yields, human
    health and nutrition, environmental quality, clean energy production
    and farming practices.
        Continued support for a balanced research portfolio in the
    Department including extramural and intramural research is needed to
    address the many and sometimes devastating problems farmers face in
    growing crops. CSREES and ARS continue to address very effectively many
    important research questions for American agriculture.
        We deeply appreciate the Subcommittee's support for research
    sponsored by the Department of Agriculture. The Subcommittee's support
    has been essential to producing and securing the Nation's food supply.
    Disclosure statement on Federal grant support
        The American Society of Plant Biologists (ASPB) received Federal
    grants from USDA-CSREES in the amount of $7,000 in each of fiscal years
    2005 and 2006 to help coordinate the USDA-CSREES Plant and Pest Biology
    Stakeholders' Workshop and print the subsequent workshop report. Many
    associations representing growers of commodity crops; science societies
    representing the research community; and officials administering
    Federal research programs participated.
                                     ______

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

        Mr. Chairman and Members of the Subcommittee: On behalf of the
    California Industry and Government Central California Ozone Study
    (CCOS) Coalition, we are pleased to submit this statement for the
    record in support of our fiscal year 2007 funding request of $400,000
    from the Department of Agriculture for CCOS. These funds are necessary
    for the State of California to address the very significant challenges
    it faces to comply with new national ambient air quality standards for
    ozone and fine particulate matter. The study design incorporates recent
    technical recommendations from the National Academy of Sciences (NAS)
    on how to most effectively comply with Federal Clean Air Act
    requirements.
        First, we want to thank you for your past assistance in obtaining
    Federal funding for the Central California Ozone Study (CCOS) and
    California Regional PM10/PM2.5 Air Quality Study
    (CRPAQS). Your support of these studies has been instrumental in
    improving the scientific understanding of the nature and cause of ozone
    and particulate matter air pollution in Central California and the
    Nation. Information gained from these two studies is forming the basis
    for the 8-hour ozone, PM2.5, and regional haze State
    Implementation Plans (SIPs) that are due in 2007 (ozone) and 2008
    (particulate matter/haze). As with California's previous SIPs, the
    2007-2008 SIPs will need to be updated and refined due to the
    scientific complexity of our air pollution problem. Our request this
    year would fund the completion of CCOS to address important questions
    that won't be answered with results from previously funded research
    projects.
        To date, our understanding of air pollution and the technical basis
    for SIPs has largely been founded on pollutant-specific studies, like
    CCOS. These studies are conducted over a single season or single year
    and have relied on modeling and analysis of selected days with high
    concentrations. Future SIPs will be more complex than they were in the
    past. The National Academy of Sciences (NAS) is now recommending a
    weight-of-evidence approach that will involve utilizing more broad-
    based, integrated methods, such as data analysis in combination with
    seasonal and annual photochemical modeling, to assess compliance with
    Federal Clean Air Act requirements. This will involve the analysis of a
    larger number of days and possibly an entire season. In addition,
    because ozone and particulate matter are formed from some of the same
    emissions precursors, there is a need to address both pollutants in
    combination, which CCOS will do.
        Consistent with the new NAS recommendations, the CCOS study
    includes corroborative analyses with the extensive data provided by
    past studies, advances the state-of-science in air quality modeling,
    and addresses the integration of ozone and particulate pollution
    studies. In addition, the study will incorporate further refinements to
    emission inventories, address the development of observation-based
    analyses with sound theoretical bases, and includes the following four
    general components:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Performing SIP modeling analyses........................       2005-2011
    Conducting weight-of-evidence data analyses.............       2006-2008
    Making emission inventory improvements..................       2006-2010
    Performing seasonal and annual modeling.................       2008-2011
    ------------------------------------------------------------------------

        CCOS is directed by Policy and Technical Committees consisting of
    representatives from Federal, State, and local governments, as well as
    private industry. These committees, which managed the San Joaquin
    Valley Ozone Study and are currently managing the California Regional
    Particulate Air Quality Study, are landmark examples of collaborative
    environmental management. The proven methods and established teamwork
    provide a solid foundation for CCOS.
        For fiscal year 2007, our Coalition is seeking funding of $400,000
    from the Department of Agriculture/CSREES in support of CCOS. Domestic
    agriculture is facing increasing international competition. Costs of
    production and processing are becoming increasingly more critical. With
    the current SJV PM10 SIP and the upcoming ozone and
    PM2.5 SIPs, the agricultural industry within the study area
    is facing many new requirements to manage and reduce their air quality
    impacts. The identification of scientifically validated, cost-effective
    options for reducing the environmental impacts of on-field and
    livestock related air emissions will contribute significantly to the
    long-term health and economic stability of local agriculture. Funding
    will support livestock and crop-related research that will help
    maintain a vital agricultural industry within the state. Research will
    be focused to measure baseline emissions, and to study the most
    economical and effective approaches for reducing the impacts of
    agriculture on air quality. These studies also have nationwide
    benefits.
        The funding request is for: (1) Study of agricultural VOC emissions
    from pesticide application that will help answer questions relevant to
    farmers and regulators throughout the Nation, (2) Evaluation of
    baseline livestock emissions (VOCs, PM10, ammonia) and
    effective methods to reduce these emissions, (3) Development of
    livestock facility emissions models as recommended by the National
    Academy of Sciences and (4) Improvement of emissions estimates for
    agricultural related diesel engines, both on-road and off-road. This
    includes emission factors, activity data, fleet characteristics,
    seasonality of emissions, and benefits of incentive programs to
    accelerate the introduction of cleaner engines.
        Thank you very much for your consideration of our request.
                                     ______

     Prepared Statement of the Coalition on Funding Agricultural Research
                               Missions (CoFARM)

        The Coalition on Funding Agricultural Research Missions (CoFARM)
    appreciates the opportunity to submit testimony on the fiscal year 2007
    appropriation for the United States Department of Agriculture (USDA).
    CoFARM is a coalition of 23 professional scientific organizations with
    130,000 members dedicated to advancing and sustaining a balanced
    investment in our Nation's research portfolio.
        The USDA sponsors research and education programs which contribute
    to solving agricultural problems of high national priority and ensuring
    food availability, nutrition, quality and safety, as well as a
    competitive agricultural economy. U.S. agriculture faces new
    challenges, including threats from emerging infectious diseases in
    plants and animals, climate change, and public concern about food
    safety and security. It is critical to increase the visibility and
    investment in agriculture research to respond to these challenges and
    we appreciate the Subcommittee's efforts to fund the National Research
    Initiative at $181 million in fiscal year 2006 and urge the
    Subcommittee to support the Administration's fiscal year 2007 request
    of $247.5 million for this program.
    USDA National Research Initiative Competitive Grants Program
        The National Research Initiative Competitive Grants Program (NRI)
    was established in 1991 in response to recommendations outlined in
    Investing in Research: A Proposal to Strengthen the Agricultural, Food
    and Environmental System, a 1989 report by the National Research
    Council's (NRC) Board on Agriculture. This publication called for
    increased funding of high priority research that is supported by USDA
    through a competitive peer-review process directed at:
      --Increasing the competitiveness of U.S. agriculture.
      --Improving human health and well-being through an abundant, safe,
            and high-quality food supply.
      --Sustaining the quality and productivity of the natural resources
            and the environment upon which agriculture depends.
        Continued interest in and support of the NRI is reflected in two
    subsequent NRC reports, Investing in the National Research Initiative:
    An Update of the Competitive Grants Program of the U.S. Department of
    Agriculture, published in 1994, and National Research Initiative: A
    Vital Competitive Grants Program in Food, Fiber, and Natural Resources
    Research, published in 2000.
        Today, the NRI, housed within USDA's Cooperative State Research,
    Education, and Extension Service (CSREES), supports research on key
    problems of national and regional importance in biological,
    environmental, physical, and social sciences relevant to agriculture,
    food, and the environment on a peer-reviewed, competitive basis.
    Additionally, NRI enables USDA to develop new partnerships with other
    Federal agencies that advance agricultural science. Examples of such
    collaborations include USDA's involvement in the Microbial Genome
    Sequencing Program, the Maize Genome Program, the Microbial
    Observatories program, the Plant Feedstock Genomics for Bioenergy
    program, the Metabolic Engineering program, and the Climate Change
    Science Plan.
        CoFARM Urges Congress To Support the Administration's Requested
    Increase or NRI in Fiscal Year 2007.--NRI's proposed increase comes
    from the shifting of CSREES Integrated Activities, such as food safety,
    pest management, and water quality, making up $42.7 million of the
    proposed increase, providing a net increase of $24 million for NRI
    including the additional responsibility of the Integrated Programs.
    CoFARM supports the Administration's effort to increase competitively
    awarded funding mechanisms and believes that competitive grants ensure
    the best science.
        Past investments in agricultural research have yielded many
    breakthroughs in American agricultural productivity, including these
    few Hatch and NRI funded research success stories:
      --Pennsylvania researchers are developing rapid diagnostic tests to
            curb avian influenza, a disease that could cripple the state's
            $700 million poultry industry.
      --University of Maryland researchers have created an advanced machine
            vision technology to detect bone fragments and foreign objects
            in meat.
      --Researchers in Florida have tested a common fern's ability to soak
            up arsenic, a cancer-causing heavy metal, from contaminated
            soils. The market for plant-based remediation of wastes is
            estimated to be $370 million in 2005.
      --Entomologists and Nematologists developed a vaccine for the
            protection of cattle from the horn fly, a major insect pest in
            many parts of the world costing the North American cattle
            industry alone more than $1 billion annually.
      --As a result of NRI funding, a group of economists found that the
            competitive environment of supermarket retailers encourages
            patterns of adoption of food products using technologies that
            are new to the market.
      --Through NRI funded research, scientists developed a new assay that
            allows for rapid identification of Clostridium perfringens,
            which is associated with common food-borne illness, in hospital
            outbreaks and has resulted in improved diagnostic procedures.
      --Florida family and youth researchers have shed light on crime and
            violence trends in schools and evaluated prevention programs.
            The result has been a decline in disruptive behavior in
            classrooms by 40 percent over 2 years. The work is a national
            model for improving school safety.
        Congress must enhance funding for agricultural research to assure
    Americans of a safe and nutritious food supply and to provide for the
    next generation of research scientists.
        CoFARM appreciates the opportunity to provide written testimony and
    would be pleased to assist the Subcommittee as the Department of
    Agriculture bill is considered throughout the appropriations process.
                                     ______

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

        As members of the Coalition to Promote U.S. Agricultural Exports,
    we commend the Chairman and members of the Subcommittee for their
    interest and support of U.S. agriculture and express our appreciation
    for this opportunity to share our views.
        The Coalition to Promote U.S. Agricultural Exports is an ad hoc
    coalition of over 100 organizations, representing farmers and ranchers,
    fishermen and forest product producers, cooperatives, small businesses,
    regional trade organizations, and the State Departments of Agriculture
    (see attached). We believe the United States must continue to have in
    place policies and programs that help maintain the ability of American
    agriculture to compete effectively in a global marketplace still
    characterized by highly subsidized foreign competition.
        With the 2002 Farm Bill, Congress sought to bolster U.S. trade
    expansion efforts by approving an increase in funding for the Market
    Access Program (MAP) and the Foreign Market Development (FMD) Program.
    This commitment began to reverse the decline in funding for these
    important export programs that occurred over the previous decade. For
    fiscal year 2007, the Farm Bill authorizes funding for MAP at $200
    million, and FMD is authorized at $34.5 million. The Coalition strongly
    urges that both programs be funded at the full authorized levels in
    order to carry out important market development activities. These are
    the same levels of funding included in the fiscal year 2006 Agriculture
    Appropriations bill that was signed into law last November.
        Farm income and agriculture's economic well-being depend heavily on
    exports, which account for over 25 percent of U.S. producers' cash
    receipts, provide jobs for nearly one million Americans, and make a
    positive contribution to our nation's overall trade balance. In fiscal
    year 2006, U.S. agriculture exports are projected to reach $64.5
    billion which, if realized, would make it the highest export sales year
    ever. However, exports could be significantly higher if it were not for
    a combination of factors, including continued high levels of subsidized
    foreign competition and related steep artificial trade barriers.
    Agricultural imports are also forecast to be a record $63.5 billion,
    continuing a 35-year upward trend that has increased at a faster pace
    recently. If these projections hold, then agriculture's trade surplus
    is only expected to be about $1 billion, a huge decline from the
    roughly $27 billion surplus of fiscal year 1996. In fiscal year 1999,
    the U.S. recorded its first agricultural trade deficit with the EU of
    $1 billion. In fiscal year 2006, USDA forecasts that the trade deficit
    with the EU will grow to $6.8 billion, the largest agriculture deficit
    the United States runs with any market.
        America's agricultural industry is willing to continue doing its
    best to offset the alarming trade deficit confronting our country.
    However, the support provided by MAP and FMD (both green box programs)
    is essential to this effort.
        According to USDA, the European Union (EU) spent more than $3.25
    billion on agricultural export subsidies in 2003, compared to
    approximately $30 million by the United States. In other words, the
    United States is being outspent by more than 100 to 1 by the EU alone
    with regard to the use of export subsidies.
        In recent years, the EU, the Cairns group, and other foreign
    competitors also devoted approximately $1.2 billion on various market
    development activities to promote their exports of agricultural,
    forestry, and fishery products. A significant portion of this is
    carried out in the United States. Market promotion is permitted under
    World Trade Organization (WTO) rules, with no limit on public or
    producer funding, and is not expected to be subject to any disciplines
    in the Doha Round negotiations. As a result, it is increasingly seen as
    a centerpiece of a winning strategy in the future trade battleground.
    Many competitor countries have announced ambitious trade goals and are
    shaping export strategies to target promising growth markets and bring
    new companies into the export arena. European countries are expanding
    their promotional activities in Asia, Latin America, and Eastern
    Europe. Canada, Australia, New Zealand, and Brazil have also budgeted
    significant investments in export promotion expenditures worldwide in
    recent years. As the EU and our other foreign competitors have made
    clear, they intend to continue to be aggressive in their export
    efforts.
        Both MAP and FMD are administered on a cost-share basis with
    farmers and other participants required to contribute up to 50 percent
    of their own resources. These programs are among the few tools
    specifically allowed in unlimited amounts under WTO rules to help
    American agriculture and American workers remain competitive in a
    global marketplace still characterized by highly subsidized foreign
    competition. The over 70 U.S. agricultural groups that share in the
    costs of the MAP and FMD programs fully recognize the export benefits
    of market development activities. Since 1992, MAP participants have
    increased their contributions from 30 percent (30 cents for every
    dollar contributed by USDA) to 166 percent ($1.66 in industry funds for
    every USDA dollar). For FMD, the contribution rate has risen from 76
    percent to the current level of 139 percent. By any measure, such
    programs have been tremendously successful and extremely cost-effective
    in helping maintain and expand U.S. agricultural exports, protect
    American jobs, and strengthen farm income.
        Competing in the agricultural export market carries new challenges
    and opportunities for U.S. agriculture. Not only is the competition
    becoming more intense with increased funding being brought to bear, but
    we also face a world where new trade agreements are being developed
    almost daily. The United States is also negotiating trade agreements
    with the goal of opening new market opportunities for U.S. agriculture.
    In addition, the opening of the Iraq market and the markets of other
    previously sanctioned countries will offer further opportunities and
    challenges.
        For all these reasons, we want to emphasize again the need to
    strengthen the ability of U.S. agriculture to compete effectively in
    the global marketplace. American agriculture is among the most
    competitive industries in the world, but it cannot and should not be
    expected to compete alone in export markets against the treasuries of
    foreign governments. As a Nation, we can work to export our products,
    or we can export our jobs. Eliminating or reducing funding for MAP and
    FMD in the face of continued subsidized foreign competition, and during
    ongoing Doha Round trade negotiations, would put American farmers and
    workers at a substantial competitive disadvantage and would be nothing
    short of unilateral disarmament. USDA's export programs, such as MAP
    and FMD, are a key part of an overall trade strategy that is pro-
    growth, pro-trade and pro-job.
        Again, as members of the Coalition to Promote U.S. Agricultural
    Exports, we appreciate very much this opportunity to share our views
    and we ask that this statement be included in the official hearing
    record.
                                     ______

     Prepared Statement of the Colorado River Basin Salinity Control Forum

        The Congress concluded that the Colorado River Basin Salinity
    Control Program (Program) should be implemented in the most cost-
    effective way. Realizing that agricultural on-farm strategies were some
    of the most cost-effective strategies, the Congress authorized a
    program for the United States Department of Agriculture (USDA) through
    amendment of the Colorado River Basin Salinity Control Act in 1984.
    With the enactment of the Federal Agriculture Improvement and Reform
    Act of 1996 (FAIRA), the Congress directed that the Program should
    continue to be implemented as one of the components of the
    Environmental Quality Incentives Program (EQIP). Since the enactment of
    the Farm Security and Rural Investment Act (FSRIA) in 2002, there have
    been, for the first time in a number of years, opportunities to
    adequately fund the Program within the EQIP.
        The Program, as set forth in the Colorado River Basin Salinity
    Control Act, is to benefit Lower Basin water users hundreds of miles
    downstream from salt sources in the Upper Basin as the salinity of
    Colorado River water increases as the water flows downstream. There are
    very significant economic damages caused by high salt levels in this
    water source. Agriculturalists in the Upper Basin where the salt must
    be controlled, however, don't first look to downstream water quality
    standards but look for local benefits. These local benefits are in the
    form of enhanced beneficial use and improved crop yields. They submit
    cost-effective proposals to the State Conservationists in Utah, Wyoming
    and Colorado and offer to cost share in the acquisition of new
    irrigation equipment. The Colorado River Basin Salinity Control Act
    provides that the seven Colorado River Basin States will also cost
    share with the Federal funds for this effort. This has brought together
    a remarkable partnership.
        After longstanding urgings from the States and directives from the
    Congress, the USDA has concluded that this program is different than
    small watershed enhancement efforts common to the EQIP. In this case,
    the watershed to be considered stretches more than 1,200 miles from the
    river's headwater in the Rocky Mountains to the river's terminus in the
    Gulf of California in Mexico and receives water from numerous
    tributaries. The USDA has determined that this effort should receive a
    special funding designation and has appointed a coordinator for this
    multi-state effort.
        In recent fiscal years, the Natural Resources Conservation Service
    (NRCS) has directed that over $19 million be used for the Program. The
    Forum appreciates the efforts of the NRCS leadership and the support of
    this subcommittee. The plan for water quality control of the Colorado
    River was prepared by the Colorado River Basin Salinity Control Forum
    (Forum), adopted by the States, and approved by the United States
    Environmental Protection Agency (EPA). The Colorado River Basin
    Salinity Control Advisory Council has taken the position that the
    funding for the salinity control program should not be below $20
    million per year. Over the last 3 fiscal years, for the first time,
    funding almost reached the needed level. State and local cost-sharing
    is triggered by the Federal appropriation. In fiscal year 2006, it is
    anticipated that the States will cost share with about $8.3 million and
    local agriculture producers will add another $7.5 million. Hence, it is
    anticipated that in fiscal year 2005 the State and local contributions
    will be 45 percent of the total program cost.
        Over the past few years, the NRCS has designated that about 2.5
    percent of the EQIP funds be allocated to the Colorado River salinity
    control program. The Forum believes this is the appropriate future
    level of funding as long as the total EQIP funding nationwide is around
    $1 billion. Funding above this level assists in offsetting pre-fiscal
    year 2003 funding below this level. The Basin States have cost sharing
    dollars available to participate in funding on-farm salinity control
    efforts. The agricultural producers in the Upper Basin are waiting for
    their applications to be considered so that they might improve their
    irrigation equipment and also cost share in the Program.

                                    OVERVIEW

        The Program was authorized by the Congress in 1974. The Title I
    portion of the Colorado River Basin Salinity Control Act responded to
    commitments that the United States made, through a Minute of the
    International Boundary and Water Commission, to Mexico specific to the
    quality of water being delivered to Mexico below Imperial Dam. Title II
    of the Act established a program to respond to salinity control needs
    of Colorado River water users in the United States and to comply with
    the mandates of the then newly-enacted Clean Water Act. This testimony
    is in support of funding for the Title II program.
        After a decade of investigative and implementation efforts, the
    Basin States concluded that the Salinity Control Act needed to be
    amended. The Congress agreed and revised the Act in 1984. That
    revision, while keeping the Department of the Interior as lead
    coordinator for Colorado River Basin salinity control efforts, also
    gave new salinity control responsibilities to the USDA. The Congress
    has charged the Administration with implementing the most cost-
    effective program practicable (measured in dollars per ton of salt
    controlled). It has been determined that the agricultural efforts are
    some of the most cost-effective opportunities.
        Since Congressional mandates of nearly 3 decades ago, much has been
    learned about the impact of salts in the Colorado River system. The
    Bureau of Reclamation (Reclamation) has conducted studies on the
    economic impact of these salts. Reclamation recognizes that the damages
    to United States' water users alone are hundreds of millions of dollars
    per year.
        The Forum is composed of gubernatorial appointees from Arizona,
    California, Colorado, Nevada, New Mexico, Utah and Wyoming. The Forum
    has become the seven-state coordinating body for interfacing with
    Federal agencies and the Congress in support of the implementation of
    the Salinity Control Program. In close cooperation with the EPA and
    pursuant to requirements of the Clean Water Act, every 3 years the
    Forum prepares a formal report evaluating the salinity of the Colorado
    River, its anticipated future salinity, and the program elements
    necessary to keep the salinity concentrations (measured in Total
    Dissolved Solids--TDS) at or below the levels measured in the river
    system in 1972 at Imperial Dam, and below Parker and Hoover Dams.
        In setting water quality standards for the Colorado River system,
    the salinity concentrations at these three locations in 1972 have been
    identified as the numeric criteria. The plan necessary for controlling
    salinity and reducing downstream damages has been captioned the ``Plan
    of Implementation.'' The 2005 Review of water quality standards
    includes an updated Plan of Implementation. In order to eliminate the
    shortfall in salinity control resulting from inadequate Federal funding
    for a number of years from the USDA, the Forum has determined that
    implementation of the Program needs to be accelerated. The level of
    appropriation requested in this testimony is in keeping with the agreed
    upon plan. If adequate funds are not appropriated, significant damages
    from the higher salt concentrations in the water will be more
    widespread in the United States and Mexico.
        Concentrations of salts in the river cause $330 million in
    quantified damages and significantly more in unquantified damages in
    the United States and result in poorer quality water being delivered by
    the United States to Mexico. Damages occur from:
      --a reduction in the yield of salt sensitive crops and increased
            water use for leaching in the agricultural sector,
      --a reduction in the useful life of galvanized water pipe systems,
            water heaters, faucets, garbage disposals, clothes washers, and
            dishwashers, and increased use of bottled water and water
            softeners in the household sector,
      --an increase in the use of water for cooling, and the cost of water
            softening, and a decrease in equipment service life in the
            commercial sector,
      --an increase in the use of water and the cost of water treatment,
            and an increase in sewer fees in the industrial sector,
      --a decrease in the life of treatment facilities and pipelines in the
            utility sector,
      --difficulty in meeting wastewater discharge requirements to comply
            with National Pollutant Discharge Elimination System permit
            terms and conditions, and an increase in desalination and brine
            disposal costs due to accumulation of salts in groundwater
            basins, and
      --increased use of imported water for leaching and cost of
            desalination and brine disposal for recycled water.
        For every 30 mg/L increase in salinity concentrations, there is $75
    million in additional damages in the United States. The Forum,
    therefore, believes implementation of the USDA program needs to be
    funded at 2.5 percent of the total EQIP funding.
        Although the Program thus far has been able to implement salinity
    control measures that comply with the approved plan, recent drought
    years have caused salinity levels to rise in the river. Predictions are
    that this will be the trend for the next several years. This places an
    added urgency for acceleration of the implementation of the Program.

                  STATE COST-SHARING AND TECHNICAL ASSISTANCE

        The authorized cost sharing by the Basin States, as provided by
    FAIRA, was at first difficult to implement as attorneys for the USDA
    concluded that the Basin States were authorized to cost share in the
    effort, but the Congress had not given the USDA authority to receive
    the Basin States' funds. After almost a year of exploring every
    possible solution as to how the cost sharing was to occur, the States,
    in agreement with Reclamation, State officials in Utah, Colorado and
    Wyoming and with NRCS State Conservationists in Utah, Colorado and
    Wyoming, agreed upon a program parallel to the salinity control
    activities provided by the EQIP wherein the States' cost sharing funds
    are being contributed and used. We are now several years into that
    program and, at this moment in time, this solution to how cost sharing
    can be implemented appears to be satisfactory.
        With respect to the States' cost sharing funds, the Basin States
    felt that it was most essential that a portion of the Program be
    associated with technical assistance and education activities in the
    field. Without this necessary support, there is no advanced planning,
    proposals are not well prepared, assertions in the proposals cannot be
    verified, implementation of contracts cannot be observed, and valuable
    partnering and education efforts cannot occur. Recognizing these
    values, the ``parallel'' State cost sharing program expends 40 percent
    of the funds available on these needed support activities made possible
    by contracts with the NRCS. Initially, it was acknowledged that the
    Federal portion of the Program funded through EQIP was starved with
    respect to needed technical assistance and education support. The Forum
    is encouraged with a recent Administration acknowledgment that
    technical assistance must be better funded.
                                     ______

      Prepared Statement of the Council on Food, Agricultural, & Resource
     Economics (C-FARE) and the Consortium of Social Science Associations
                                    (COSSA)

        Dear Chairman Bennett, Ranking Member Kohl and Members of the
    Subcommittee: The Council on Food, Agricultural, and Resource Economics
    (C-FARE) and the Consortium of Social Science Associations (COSSA)
    appreciate the opportunity to submit testimony on the fiscal year 2007
    appropriation for the United States Department of Agriculture. C-FARE
    is a non-profit, non-partisan organization dedicated to strengthening
    the presence of the agricultural, natural resources, and applied
    economics profession to matters of science policy and Federal budget
    determination, and we represent approximately 3,500 economists
    nationwide. COSSA is an advocacy organization for the social and
    behavioral sciences supported by more than 100 professional
    associations, scientific societies, universities, and research
    institutes.
        Our organizations understand the challenges the Senate Agriculture
    Appropriations Subcommittee faces given the tight fiscal year 2007
    agriculture budget. We also recognize that the Agriculture
    Appropriations bill has many valuable and necessary components, and we
    applaud the efforts of the Subcommittee to fund mission-critical
    research. Below are listed recommendations for the fiscal year 2007
    appropriations cycle.

       USDA COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE
                                    (CSREES)

    National Research Initiative
        C-FARE and COSSA endorse funding for the National Research
    Initiative Competitive Grants Program (NRI) at the President's proposed
    level of $247.5 million. The NRI encourages high quality research that
    is conducted through a peer reviewed format. In particular, the
    research issues addressed by Markets and Trade and Rural Development
    are diverse and multi-faceted. Social Science research also enhances
    ideas and technologies from other fields of science and research which
    adds value to their role in the NRI.
        C-FARE and COSSA requests that any new monies appropriated for the
    NRI, as requested by the administration, allow the Secretary the
    discretion to apply up to 30 percent towards carrying out the NRI
    integrated research, extension and education competitive grants
    program.
        Our organizations applaud the administration's proposal to
    eliminate the indirect cost cap on the NRI, set at 20 percent for
    fiscal year 2005, which will broaden its appeal by putting the NRI on
    equal footing with other Federal competitive grants programs.
        Social Science research is highly valued by USDA and much of what
    our scientists offer can help meet the strategic goals of CSREES. For
    example, social science research meets CSREES strategic goal number 1,
    ``Enhance Economic Opportunities for Agricultural Producers'' by
    providing science-based information, knowledge, and education to help
    farmers and ranchers understand risk management, and the long-term
    impacts of trade barriers. Research by our members also meets CSREES
    goal number 2, ``Support Increased Economic Opportunities and Improved
    Quality of Life in Rural America,'' by providing information to help
    inform decisions affecting the quality of life in rural America.
    Therefore, we request that the Committee encourage CSREES to fund the
    social science research components of the NRI at a level sufficient to
    allowing scientists to address these unmet research needs. Within the
    last year, USDA changed funding for these core congressionally-mandated
    programs to every other year, rather than on a yearly basis.
        Formula Funding.--Cuts to and proposed elimination of CSREES'
    formula-funded research programs can be detrimental to the entire USDA
    research portfolio. Formula Funds support the continuing costs of
    research activities while providing for long-term commitments to
    research that is often essential. Because of their timing and potential
    regional and intra-state impacts, much of the infrastructure needed to
    conduct competitively award research would be compromised if formula
    funds were cut. This would mean a huge and potentially damaging loss of
    research data nationwide. A balance of funding mechanisms, including
    competitive awards and formula funding, is essential if the capacity of
    the United States to conduct agricultural research, both basic and
    applied, is to be maintained and the country is to continue to excel in
    areas such as agricultural production and expanding the quality of
    rural life.
    USDA Economic Research Service (ERS)
        C-FARE and COSSA support the President's proposed fiscal year 2007
    funding level for the Economic Research Service (ERS) initiatives. The
    President's budget includes $5.0 million towards the Agricultural and
    Rural Development Information System (ARDIS) to help ERS establish and
    maintain data collection on the demographic, economic, government
    program participation, and other household well-being information from
    samples of non-farm rural households and rural-based farm households,
    over time. The scientists our organizations represent need exactly such
    new and valuable data for a variety of purposes, including estimating
    impacts of farm policy changes. Simultaneously collecting the same data
    and information from panels of farm and non-farm households in the same
    rural area makes it possible to determine just how farm and non-farm
    rural households are different from or similar to one another, and
    provides a far more definitive than currently available basis for
    judging whether and to what extent farm policy changes spill over into
    the rural economy. We urge full funding of this initiative to assure
    that agricultural and rural economic analysts can reap the minimum
    necessary value added that will, in turn, enhance their contributions
    to a sound farm policy and robust rural economies throughout the
    Nation. We also support the President's proposal of $1.6 million for
    the ERS Consumer Data and Information System at ERS. The funding will
    include a comprehensive food data system that will be used to obtain
    food away from home information. C-FARE and COSSA believe funding this
    program is an important contribution to the government wide effort to
    fight obesity.
    USDA National Agricultural Statistics Service (NASS)
        C-FARE and COSSA recommend supporting the President's priority
    activities for NASS. These include a net increase of $14 million for
    funding for agricultural estimates, Census of Agriculture, and pay
    costs. Of the proposed increase, it is necessary to support $3.9
    million for Agricultural Estimates Restoration and Modernization. This
    initiative will continue NASS' efforts to restore quality and
    modernization of the basic USDA agricultural estimates program that
    supports the U.S. agricultural market system. The increase will also
    include $7.3 million for the 2007 Census of Agriculture. The census
    data are relied upon to measure trends and new developments in the
    agricultural sector.
    USDA Agriculture Marketing Service (AMS)
        C-FARE and COSSA encourage Congress to continue supporting USDA's
    AMS at a level that will allow them to continue offering the high value
    programs they provide. As economists and social scientists we
    appreciate that the AMS programs promote a competitive and efficient
    marketplace. AMS services such as standardization, grading, market
    news, commodity procurement, and other market-facilitating activities
    benefit both consumers and producers. For the research community
    specifically, AMS market news services provide in-depth data regarding
    a wide range of commodities and modes of transportation; such basic
    information is invaluable for analysis. AMS also supports research on
    marketing and transportation issues through cooperative agreements and
    through the Federal-State Marketing Improvement Program.
    USDA Grain Inspection, Packers, and Stockyards Administration (GIPSA)
        C-FARE and COSSA also value the vital work of GIPSA to help USDA
    enhance economic opportunities for agricultural producers by promoting
    fair and competitive trade practices and financial integrity in the
    grain, livestock, meat and poultry industries. GIPSA reports provide
    information that aid in the development of industry standards and
    policy decision-making. Several of these reports are used in the
    research conducted by social scientists. In particular, the Packers and
    Stockyards Statistical Report provides researchers with data on
    industry concentration, plant size, and other industry economic
    information. The data helps social science researchers study important
    social and economic issues, including concentration in the meat packing
    industry. We encourage Congress to continue providing appropriate
    support for GIPSA and their important programs.
    USDA Natural Resources Conservation Service (NRCS)
        Our organizations also support sustained investment in our Nation's
    natural resources and environment. We applaud USDA NRCS for promoting
    conservation and sustainable use of natural resources on the Nation's
    private lands. NRCS helps provide science-based knowledge to improve
    the management of forests, rangelands, soil, air and water resources.
    Social science researchers use this vital information to develop policy
    recommendations that impact the future of our agricultural sector, as
    well as life in rural America.
    Conclusion
        Recent security threats facing America require new and expanded
    agricultural research to protect our Nation's forests, water supplies,
    food processing and distribution network, and rural communities and
    insure the future security, safety and sustainability of America's food
    and fiber system. In order to address these challenges and maintain our
    position in an increasingly competitive world, we must continue to
    support research programs such as the NRI and formula funding, and
    information systems such as those provided by ERS.
        Thank you for the opportunity to present our recommendations. As
    you know, past investments in agricultural research have yielded many
    breakthroughs in American agricultural productivity. If you have any
    questions or concerns regarding our priorities please do not hesitate
    to contact us.

                             C-FARE DISCLOSURE OF GOVERNMENT CONTRACTS AND GRANTS 2004-2006
    ----------------------------------------------------------------------------------------------------------------
                   Agency                    Year                               Background
    ----------------------------------------------------------------------------------------------------------------
    USDA CSREES.........................       2005  $10,000 to help support C-FARE's Educational Outreach
                                                      Activities by funding a 2004 conference on ``Partnering for
                                                      Agricultural Research.'' The conference invited in scientists
                                                      from universities, government and private sector to discuss
                                                      ways to partner for enhanced research.
    USDA ERS............................       2004  $25,000 to help support C-FARE's Educational Outreach
                                                      Activities by funding a 2004 conference on ``Partnering for
                                                      Agricultural Research.'' The conference invited in scientists
                                                      from universities, government and private sector to discuss
                                                      ways to partner for enhanced research. Other portions of the
                                                      funding were dedicated to other education activities with
                                                      academic scientists.
    USDA ERS............................       2005  $25,000 to help support C-FARE's Educational Outreach
                                                      Activities by helping provide funding for C-FARE's intern
                                                      briefings, and other educational seminars.
    USDA NASS...........................       2004  $7,500 to help support C-FARE's Educational Outreach Activities
                                                      by funding a 2004 conference on ``Partnering for Agricultural
                                                      Research.'' The conference invited in scientists from
                                                      universities, government and private sector to discuss ways to
                                                      partner for enhanced research.
    USDA NASS...........................       2005  $7,500 in funding helped provide educational seminars to
                                                      college students about careers in Washington, DC and other
                                                      educational seminars
    EPA.................................       2004  $5,000 to help support a 2003 conference on how to use various
                                                      database systems.
    ----------------------------------------------------------------------------------------------------------------

                                     ______

                  Prepared Statement of Defenders of Wildlife

        On behalf of our members and supporters, Defenders of Wildlife
    appreciates the opportunity to comment upon the fiscal year 2007 budget
    for the U.S. Department of Agriculture. Defenders of Wildlife is a
    national nonprofit conservation organization committed to preserving
    the integrity and diversity of natural ecosystems, preventing the
    decline of native species, and restoration of threatened habitats and
    wildlife populations.
        Defenders of Wildlife has concerns about the administration's
    fiscal year 2007 budget and we strongly oppose a number of changes the
    Bush Administration's proposed fiscal year 2007 budget would make to
    Farm Bill conservation programs. While we applaud the administration's
    recommendations to fully fund the Wetlands Reserve Program, the Bush
    Administration's proposal continues to attempt to rewrite the Farm Bill
    to the great detriment of the suite of USDA voluntary conservation
    programs. We make recommendations in the following priority areas. 2002
    Farm Bill Conservation Title Programs
        Resource conservation programs within the Farm Security and Rural
    Investment Act of 2002 (Public Law 107-171) (Farm Bill) provide an
    integrated approach, through incentives and technical assistance, to
    both production and stewardship of farm and ranch lands and the
    environment. Further, these programs have been particularly valuable in
    providing resources for addressing threatened and endangered species
    conservation issues. The 2002 Farm Bill tried to achieve a balance
    between farm commodity provisions and critical conservation, nutrition,
    research and rural development programs that reach far more Americans
    than the traditional commodity programs. But, in every year since the
    passage of the Farm Bill, conservation programs continue to be funded
    well under authorized levels. This comes at the expense of meaningful
    benefits to both sustainable farmers and ranchers and the environment.
    The conservation title specifically has bourn the brunt of the cuts.
        Since the passage of the 2002 farm bill, congressional and
    administrative actions have shortchanged promised conservation title
    funding for programs administered by the National Resource Conservation
    Service (NRCS) by $1.444 billion over fiscal year 2003 through fiscal
    year 2006. The President's proposed budget for 2007 unfortunately
    continues this trend. We are pleased that the President's budget this
    year again contains a promising proposal to limit environmentally
    harmful agricultural commodity subsidies by capping payments at
    $250,000 per farmer, and for the first time since he came to office, a
    request to fully fund the Wetlands Reserve Program. Unfortunately, his
    request still cuts critical conservation programs not just from the
    mandated Farm Bill funding, but actually below even the fiscal year
    2006 level.
        Thus, Defenders of Wildlife urges Congress to restore balance to
    the Farm Bill and to not shortchange progressive voluntary conservation
    programs. National Farm Bill legislation has a profound impact on
    native species and wildlife habitat conservation choices of individual
    private landowners who practice crop, livestock, and forestry
    activities. Almost 60 percent of at risk species (as defined by The
    Nature Conservancy) are on private or state lands. Nearly 40 percent of
    plant and animal species listed as threatened or endangered are found
    only on private or state lands. Seventy percent of the land in the
    United States is held in private ownership in the form of range,
    forestry, or agricultural use. As of 1995, nearly 84 percent of the
    plants and animals listed as endangered or threatened were listed in
    part due to agricultural activities. Specifically, we urge Congress to
    restore balance by protecting funding allocations for the following
    programs
    The Conservation Security Program
        The Bush Administration's proposed fiscal year 2007 budget
    continues to cripple the landmark Conservation Security Program (CSP).
    CSP is an innovative and important initiative that is meant to support
    farmers and ranchers who implement and maintain effective stewardship
    practices on their working farm and ranch lands. However, every year
    since passage it has been a target for cuts thus limiting its ability
    to be implemented as intended. Furthermore, the baseline for CSP was
    dramatically slashed by $1 billion in the fiscal year 2006 budget
    reconciliation. Yet, the administration's fiscal year 2007 budget cuts
    CSP by a further 8 percent. As originally enacted, CSP should have
    received $846 million in 2007, compared to the $342 million requested
    in the President's 2007 budget.
        The President's fiscal year 2007 budget reduces the CSP
    substantially below the original and intended level authorized in the
    Farm Bill, but with the reduced baseline it amounts to an 8 percent
    decrease. Moreover, because a significant portion of fiscal year 2006
    funding will go to fund the continuation of contracts signed in 2004
    and 2005, the proposed funding level will severely curtail the number
    of watersheds where the program can be offered to well below the intent
    of the 2002 Farm Bill. Current funding levels have permitted enrollment
    of only about 10 percent of the Nation's watersheds in the first 2
    years of program implementation. In the spring of 2006 the CSP sign-up
    was cut in half because there was not enough money. Many farmers who
    had been told that their watershed would be funded under CSP were
    suddenly told there was no money. This inconsistency turns away many
    good stewards of the land.
        The Conservation Security Program offers long term benefits for
    continued management of lands to promote environmental health. CSP is
    structured to reward farmers who have already invested in environmental
    stewardship, and to encourage them to go even farther to implement
    stewardship practices on their working lands through the enhancement
    payment structure. CSP is an essential part of the USDA portfolio of
    conservation programs to protect our water, soil, and wildlife
    resources. In order to achieve its promise of continuous income support
    to all of the country's best stewards, the program must be available to
    all producers nationwide, and must be implemented on a schedule that
    permits farmers to re-enroll when their contracts are up. Thus
    Defenders urges Congress to consider the benefits that these programs
    can provide to sustainable farmers in all types of agriculture and in
    all regions of the country, and appropriate at authorized levels. At
    this point, perpetual cuts have the effect of rewriting the Farm Bill
    and changing CSP from the first-ever working lands conservation
    entitlement program envisioned by Congress, to a program with limited
    enrollment, preferential bidding, and waiting lists.
    The Wildlife Habitat Incentives Program
        In the President's fiscal year 2007 budget the Wildlife Habitat
    Incentives Program (WHIP) gets slashed by 35 percent--$30 million less
    then fiscal year 2007 authorized level mandated in the 2002 Farm Bill
    and $5 million less then the administration requested last year. WHIP
    provides cost sharing and technical assistance for the development of
    wildlife habitat on private lands. Though small in size, the program
    provides significant benefits for wildlife and wildlife habitat and
    provides proactive solutions to dealing with endangered habitat and
    species issues before they become critical. More than 8,400 projects
    affecting some 1.4 million acres have been approved under WHIP through
    fiscal year 2004 (source: http://www.nrcs.usda.gov/programs/farmbill/
    2002/pdf/WHIPFct.pdf, fiscal year 2005 data still unavailable) There is
    demand for more as backlog statistics from NRCS show us: nationwide,
    according to figures through fiscal year 2004 (fiscal year 2005 data
    unavailable), over 3,000 qualified applicants were turned away. The
    value of the backlogged applications that could be going to these
    stewards totals $10 million.
        Defenders urges Congress to restore full funding to this program
    and protect the allocation of this program to continue to provide
    meaningful benefits to sustainable farmers and ranchers and to
    wildlife.
    Other Important Conservation Programs in the Farm Bill
        Several other critical programs, that are part of the forward
    thinking conservation initiatives in the Farm Bill, will also be
    significantly cut, which in turn will undermine progressive efforts by
    farmers and ranchers to steward land, conserve soil and water, and
    provide habitat for wildlife. The Environmental Quality Incentives
    Program (EQIP), which provides technical assistance, cost-share/
    incentive funding to assist crop and livestock producers with
    environmental and conservation improvements on their farms and ranches,
    is cut by 21 percent--and is $17 million below 2006 funding levels. And
    the Farm and Ranch Land Protection Program (FRPP), which keeps working
    farms and ranches in production and puts cash in the pockets of farmers
    and ranchers, is slashed by a whopping 48 percent--$23.5 million below
    the fiscal year 2006 level. Defenders again urges Congress to protect
    the restore funding and protect the allocation for these programs, as
    well as the Conservation Reserve program. Farm Bill conservation
    programs should be appropriated at authorized levels as intended by the
    2002 Farm Bill. Overall, the President's request cuts 21 percent of the
    Farm Bill's mandatory fiscal year 2007 funding for NRCS programs.
        This pattern has real consequences both for environmental quality
    and for the farmers and ranchers who need assistance. In 2004 alone,
    nearly 152,000 qualified applications for farm conservation programs
    had to be turned away--an astonishing unmet conservation need of almost
    $4.5 billion! Defenders again urges Congress to protect the restore
    funding and protect the allocation for these programs.
    Farm Bill Energy Title Programs
        Inclusion of an Energy Title in the 2002 Farm Bill was a huge
    bipartisan victory for renewable energy and for rural America. However,
    the program was allocated $23 million per year in mandatory funding for
    fiscal years 2003-2007. The President's fiscal year 20067 budget
    request provides only $10 million in discretionary funding. This title
    provides programs to spur the growth of renewable energy within the
    agriculture sector, an immense potential energy source. Sec. 9006 is
    the only provision specific to renewable energy project development
    within the Farm Bill. It provides grants, and eventually loans and loan
    guarantees, to farmers, ranchers, and rural small businesses for the
    development of renewable energy projects and energy efficiency
    improvements. The program is designed to help farmers develop much
    needed new income streams from renewable energy generation, including
    wind, biomass, geothermal, hydrogen and solar energy, as well as
    helping to meet the Nation's critical energy needs in an
    environmentally sustainable way, and generate economic development in
    every region of the country. Defenders urges Congress to restore full
    funding to the Renewable energy program as mandated by the Farm Bill.
    USDA Invasive Species Prevention and Rapid Response
        Defenders of Wildlife is pleased that the President's budget for
    fiscal year 2007 includes a $28 million increase over 2006 for the
    Animal and Plant Health and Inspection Service's Pest and Disease
    exclusion program (page 83). Many of the pests, weeds, and diseases
    that threaten livestock, crops and rangelands area are also problematic
    for wildlife and wildlife habitats, and exclusion of these pests is the
    safest and most cost-effective way to prevent these impacts.
    Unfortunately, this foresightedness does not appear to extend to other
    areas of the Agriculture budget. For instance: while the Agriculture
    Research Service budget text promises ``increased emphasis'' on
    diseases, crop pests and invasive species, many of the line items
    related to these functions have been substantially decreased from 2006
    levels: Food safety by $9 million, Livestock Protection by $7 million,
    Crop Protection by $32 million, and Environmental Stewardship by $51
    million (page 74-75). We note that the Homeland Security line item
    receives a $45 million increase; however, the vast majority of damaging
    organisms that have entered the United States have arrived
    accidentally, or were deliberately imported for perceived benefit, not
    through malicious intent. The Forest Service's Research and Development
    program also promises ``increased funding'' for ``invasive species
    research vital to a rapid management response'' but overall funding for
    Forest and Rangeland Research is decreased by $56 million (pages 181-
    182). Furthermore, State and Private Forestry programs, which provide
    technical and financial assistance to states for invasive species
    issues that impact forest health, is also cut by $39 million from 2006
    levels (page 182).
        Given the serious economic and ecological problems associated with
    invasive species, which are particularly prevalent in agriculture,
    rangelands and forests, we urge Congress to fund all of these programs
    at their 2006 levels or higher.
    Animal and Plant Health and Inspection Service and Wildlife Services
                Livestock Protection
        The Wildlife Services (WS) program, housed under the Animal and
    Plant Health and Inspection Service (APHIS), continues to spend a
    disproportionate amount of its annual allocation for livestock
    protection activities, which translates generally into the killing of
    predators primarily on behalf of sheep and cattle producers. But
    according to a recent study by the Wildlife Conservation Society (WCS),
    decades of U.S. government-subsidized predator control has failed to
    prevent a long-term decline in the sheep industry. The study says that
    more than 80 years of federally subsidized predator control with a
    total investment of more than $1.6 billion have not been able to stave
    off an 85 percent decline in the sheep industry since its peak of 56.2
    million animals in 1942.
        According to the study, predation by coyotes is often cited as the
    primary cause of the decline. However, 80 years of historical data
    reveal that a variety of market trends ranging from fluctuating hay
    prices and rising wages for livestock workers, to the drop in wholesale
    prices of lamb and wool, are the real culprits behind the industry's
    drop-off. According to the study's author, ``If predation losses are
    responsible for the decline in the U.S. sheep industry and Federal
    predator control has been effective at reducing these losses, then we'd
    expect to see a strong, positive relationship between efforts to
    control predators and trends in sheep numbers and that is just not the
    case.'' While predation is not the industry's primary threat, it is one
    of the few factors over which ranchers feel they have some degree of
    control. In fiscal year 2004 alone, Federal agents killed more than
    80,000 mammalian carnivores, including 75,674 coyotes, 359 mountain
    lions and 397 black bears. The study suggests that Federal funding for
    predator control in the sheep industry should be re-evaluated given the
    program's failure to prevent the industry's decline. We support such a
    reevaluation and urge the Committee to direct Wildlife Services to
    modernize its livestock protection program to focus on assisting
    ranchers by providing them with a range of more effective means of
    reducing predation, many of which have been developed by the program's
    research facility, the National Wildlife Research Center, rather than
    concentrating on killing predators. Specifically, Defenders is
    concerned with the consistent lack of attention paid to repeated
    Congressional directives to the Wildlife Services program that deal
    with modernizing the field activities of its staff. Defenders
    recommends that Congress ask for a report on Wildlife Services'
    documenting its compliance with the directives dealing with the
    increased use of non-lethal methods. Defenders of Wildlife requests
    also that the Committee's report include the following language: ``The
    Committee expects that Wildlife Services will make use of the non-
    lethal methods developed by the National Wildlife Research Center and
    will make non-lethal controls as the method of choice and resort to
    lethal means only as a last resort.''
        Defenders of Wildlife appreciates this opportunity to provide
    testimony on the fiscal year 2007 USDA budget. Thank you for your
    consideration of these comments.
                                     ______

      Prepared Statement of the Duchesne County Water Conservancy District

        The Duchesne County Water Conservancy District is requesting your
    support for continued funding for the Colorado River Salinity Control
    Title II Program. This program has greatly assisted in removal of many
    tons of salt from the Colorado River, but there is still a great deal
    of work to be completed that will require an adequate level of funding.
    The seven Colorado River Basin States, as well as Mexico, have greatly
    benefitted from this important program. For many years high
    concentrations of salt in the Colorado River had severely damaged
    agricultural production in the West as well as resulting in poor
    quality water being delivered to Mexico.
        Great strides have been made in improving water quality in the
    Colorado River since the inception of this program but we strongly feel
    that there is still a great deal to be done. We understand that the
    Colorado River Basin Salinity Control Forum is requesting $17,500,000
    in funds be appropriated for this program for fiscal year 2007 and we
    would like to add our full support to that funding level request. We
    would also like to express support for the continued funding of the
    Natural Resource Conservation Service program, the Environmental
    Quality Incentive Program (EQIP) which works closely with the Salinity
    Program. It is very important that adequate funding levels be
    maintained for it also.
        We request the Subcommittee's assistance to ensure that the
    Colorado River Salinity Control Title II program and EQIP program are
    provided with continued adequate funding.
                                     ______

                 Prepared Statement of Florida State University

        Mr. Chairman, I would like to thank you and the Members of the
    Subcommittee for this opportunity to present testimony before this
    Committee. I would like to take a moment to briefly acquaint you with
    Florida State University.
        Located in Tallahassee, Florida's capitol, FSU is a comprehensive
    Research I university with a rapidly growing research base. The
    University serves as a center for advanced graduate and professional
    studies, exemplary research, and top-quality undergraduate programs.
    Faculty members at FSU maintain a strong commitment to quality in
    teaching, to performance of research and creative activities, and have
    a strong commitment to public service. Among the current or former
    faculty are numerous recipients of national and international honors
    including Nobel laureates, Pulitzer Prize winners, and several members
    of the National Academy of Sciences. Our scientists and engineers do
    excellent research, have strong interdisciplinary interests, and often
    work closely with industrial partners in the commercialization of the
    results of their research. Florida State University had over $182
    million this past year in research awards.
        Florida State University attracts students from every state in the
    nation and more than 100 foreign countries. The University is committed
    to high admission standards that ensure quality in its student body,
    which currently includes National Merit and National Achievement
    Scholars, as well as students with superior creative talent. We
    consistently rank in the top 25 among U.S. colleges and universities in
    attracting National Merit Scholars to our campus.
        At Florida State University, we are very proud of our successes as
    well as our emerging reputation as one of the nation's top public
    research universities.
        Mr. Chairman, let me summarize our primary interests today. The
    Southeast Climate Consortium (SECC), which consists of Florida State
    University, the University of Florida, the University of Miami, the
    University of Georgia, Auburn University, and University of Alabama at
    Huntsville, has been at the forefront of research and extension for the
    applications of climate predictions to risk reduction for agriculture.
    With support from NOAA and USDA, the SECC has developed new methods to
    predict the consequences of climate variability for agricultural crops,
    forests, and water resources in the southeast United States. In recent
    real-life tests, these methods have been applied to the problems that
    farmers raising specialty crops face arising from variable rainfall,
    temperature, and wild fires. By the use of these methods, these initial
    challenges have been successfully met.
        In the SECC, Florida State University will provide the climate
    forecasts and risk reduction methodology. The University of Florida and
    University of Georgia will translate this climate information into
    risks associated environmental impacts on agriculture and, with Auburn
    University, will work with Extension Services to provide information to
    the agricultural community. The University of Miami will provide
    economic modeling of agricultural systems. Together UM, UF, and the
    University of Alabama-Huntsville are developing new tools to help
    minimize climate risks to water quality and quantity, especially for
    agriculture. FSU, on behalf of the SECC, seeks $4,500,000 in fiscal
    year 2007 for this activity. Utilization of these tools and their
    application to agricultural problems in this project has the strong
    support of extension managers.
        The new tasks for fiscal year 2007 are to develop flood forecasting
    methods to help farmers and producers plan for reducing risks of
    economic losses and environmental damage; to develop partnerships and
    methods for incorporating climate forecasts and other climate
    information into agricultural and water policy decisions, and to begin
    development of a prototype decision support system for the application
    of climate forecasts to water resource management, especially for
    agricultural water use.
        Mr. Chairman, we believe this research is vitally important to our
    country and would appreciate your support.
                                     ______

                    Prepared Statement of Food & Water Watch

        My name is Wenonah Hauter. I am the Executive Director of Food &
    Water Watch, a non-profit consumer organization. We welcome this
    opportunity to present our views on the fiscal year 2007 Agriculture,
    Rural Development, Food and Drug Administration and Related Agencies
    Appropriations Bill.
                usda--food safety and inspection service (fsis)
        The Food Safety and Inspection Service (FSIS) is proposing a shift
    to a risk-based inspection system. We have the following concerns about
    this proposal:
        The Agency lacks the statutory authority to execute a risk-based
    inspection scheme that would require less than daily inspection.
    According to both the Federal Meat Inspection Act (21 U.S.C. 603) and
    the Poultry Inspection Act (21 U.S.C. 455), the United States
    Department of Agriculture is required to provide continuous inspection
    in all establishments that produce meat and poultry products that enter
    the food supply.
        Furthermore, the FSIS' own glossary defines continuous inspection
    as:
        Continuous Inspection.--USDA's meat and poultry inspection system
    is often called ``continuous'' because no animal destined for human
    food may be slaughtered or dressed unless an inspector is present to
    examine it before slaughter (antemortem inspection), and its carcass
    and parts after slaughter (postmortem inspection). In processing
    plants, as opposed to slaughter plants, inspectors need not be present
    at all times, but they do visit at least once daily. Processing
    inspection is also considered continuous.\1\
    ---------------------------------------------------------------------------
        \1\ See http://www.fsis.usda.gov/Help/glossary-C/index.asp.
    ---------------------------------------------------------------------------
        Risk-based inspection needs to have a reliable database upon which
    to make judgments about which meat and poultry plants meet or exceed
    performance standards. At the present time, there are problems with the
    data collection within the Food Safety and Inspection Service. The USDA
    Inspector General, in a November 2004 audit report, stated the
    following about the Performance Based Inspection System (PBIS)
    database:
        Due to the lack of controls noted during our audit, FSIS cannot be
    assured that PBIS data is complete, accurate, and reliable. As a
    result, FSIS management may not have the information it needs to
    effectively manage its inspection activities. Without effective
    controls over data integrity, the PBIS system may be an unreliable
    repository that gives FSIS management a false sense that inspection
    activities are adequately carried out and sanitation of plant
    operations is accurately reported.\2\
    ---------------------------------------------------------------------------
        \2\ See http://www.usda.gov/oig/webdocs/2451-01-FM.pdf.
    ---------------------------------------------------------------------------
        The Hazard Analysis Critical Control Points (HACCP) inspection
    system still has problems. The authority of inspectors to prevent
    adulterated products from entering the food supply has been severely
    hampered. Company HACCP plans do not require pre-approval from FSIS
    before they are implemented. Under HACCP, inspectors have been
    relegated to verifying whether company-written HACCP plans are being
    followed. Even when FSIS issues directives to companies to reassess
    their HACCP plans to take into account new food safety policies (e.g.,
    the 2002 directive requiring companies to deal with E. coli 0157:H7 as
    an adulterant likely to occur in beef processing), companies often take
    long periods of time to implement the new policy.
        The HACCP-Based Inspection Models Project (HIMP) in poultry
    slaughter still has fewer than two dozen plants participating in the
    program. The Government Accountability Office issued the last
    comprehensive analysis of this project in December 2001 and pointed out
    a number of serious problems.\3\ Inspectors assigned to these plants
    report that they are not able to perform food safety functions because
    they are assigned to stationary positions on the slaughter lines (e.g.,
    they are not able to look inside the cavity of poultry carcasses where
    there may be contamination). Furthermore, defects that are considered
    to be ``other consumer protection,'' such as blemishes, scabs, tumors,
    feathers, and bruises, and would not pass muster in processing plants
    using conventional inspection techniques are being permitted to enter
    commerce under the HIMP system. We do not believe that they Agency is
    prepared to extend this inspection model to the entire poultry industry
    at this time. There should be a thorough examination of the HIMP
    project before it is expanded.
    ---------------------------------------------------------------------------
        \3\ See http://gao.gov/new.items/d0259.pddf.
    ---------------------------------------------------------------------------
        Because there has not been a full evaluation of HIMP recently, we
    filed a Freedom of Information Act request on December 14, 2005
    requesting certain documents so that we could conduct our own study.
    FSIS responded that they wanted us to pay more than $10,000 for the
    information. We have since scaled back the request, and yet they are
    still requesting the exorbitant sum of $2,858 for the records. We are a
    non-profit consumer group and we do have access to such large sums of
    money. Furthermore, we believe that this information should be
    available at no cost to requesters since the agency is proposing to
    expand this pilot project that will radically change our inspection
    system in slaughter establishments. We believe that Congress should
    request full disclosure of this information.
        In January 2006, the USDA Inspector General released an audit
    report entitled, ``Food Safety and Inspection Service Assessment of the
    Equivalence of the Canadian Inspection System'' (Report No. 24601-05-
    Hy). The report indicates that Canada was continually exporting meat
    and poultry products to the United States that had been subject to less
    than daily inspection--in violation of U.S. standards. While those
    responsible for enforcing our equivalency agreements at FSIS
    recommended taking disciplinary action against Canada for their
    repeated violations, they were overruled by the Secretary in 2004. We
    find this most troubling. FSIS has repeatedly testified before Congress
    that countries that wish to export their meat and poultry products to
    the United States must maintain inspection standards that are identical
    to those for domestic producers. Yet, in this instance, USDA has chosen
    to look the other way.
        While Canada has agreed to institute daily inspection in those
    establishments that export to the United States, we have learned that
    FSIS has been in discussions with the Canadian Food Inspection Agency
    (CFIA) to establish a pilot project with a subset of Canadian plants
    that would be able to export products that have been subject to less
    than daily inspection. This pilot program is being created without the
    benefit of congressional input or discussion through rulemaking. We
    believe that instituting such a pilot project would be a violation of
    the Federal Meat Inspection Act (FMIA) and the Federal Poultry Products
    Inspection Act (FPPIA) and it should be stopped before it is
    implemented.
        We have also learned that Australia is in the process of
    considering a ``trial'' of its controversial Meat Safety Enhancement
    Program (MSEP) for a beef processor that would like to export its
    products to the United States. MSEP is a privatized inspection system
    for beef for which there is no comparable system here in the United
    States. MSEP trials were last conducted in 1999, but were stopped since
    the inspection system raised consumer concerns both here in the United
    States and in Europe. We can only surmise that someone at USDA has
    signaled to Australia that we would accept beef products produced under
    a privatized inspection system.
        We view both the Canadian pilot project and the Australian MSEP
    trial as vehicles by the current USDA policymakers to institute
    backdoor changes to our inspection system through our international
    trading partners. Congress has already had to step in to warn USDA on
    changing the programs authorized under the 2002 Farm Security and Rural
    Development Act through the Doha round of WTO negotiations; it may be
    time for Congress to send another shot across the bow to prevent the
    undermining of the FMIA and FPPIA through international discussions
    that have not had the benefit of congressional or public scrutiny.
        For all of these reasons, we do not believe that the Agency is
    prepared to make radical changes to the current inspection system, no
    matter what terms they use to describe it. The concept of
    ``continuous'' government inspection has been the core of our meat
    inspection system for 100 years, and the Agency should not be permitted
    to abandon this principle.
                                     ______

                    Prepared Statement of The Humane Society

        As the largest animal protection organization in the country, we
    appreciate the opportunity to provide testimony to the Agriculture,
    Rural Development, Food and Drug Administration, and Related Agencies
    Subcommittee on fiscal year 2007 funding items of great importance to
    The Humane Society of the United States (HSUS) and its more than 9.5
    million supporters nationwide.

                       ENFORCEMENT OF ANIMAL WELFARE LAWS

        We thank you for your outstanding support during recent years for
    improved enforcement by the U.S. Department of Agriculture (USDA) of
    key animal welfare laws and we urge you to sustain this effort in
    fiscal year 2007. Your leadership is making a great difference in
    helping to protect the welfare of millions of animals across the
    country. As you know, better enforcement will also benefit people by
    helping to prevent: (1) orchestrated dogfights and cockfights that
    often involve illegal gambling, drug trafficking, and human violence,
    and can contribute to the spread of costly illnesses such as Exotic
    Newcastle Disease and bird flu; (2) injuries to slaughterhouse workers
    from animals that are still conscious; (3) the sale of unhealthy pets
    by commercial breeders, commonly referred to as ``puppy mills''; (4)
    laboratory conditions that may impair the scientific integrity of
    animal based research; (5) risks of disease transmission from, and
    dangerous encounters with, wild animals in or during public exhibition;
    and (6) injuries and deaths of pets on commercial airline flights due
    to mishandling and exposure to adverse environmental conditions. In
    order to continue the important work made possible by the fiscal year
    2006 budget, we request the following for fiscal year 2007:

                   APHIS/ANIMAL WELFARE ACT (AWA) ENFORCEMENT

        We request that you support the President's request of $19,142,640
    for AWA enforcement under APHIS. We commend the Committee for
    responding in recent years to the urgent need for increased funding for
    the Animal Care division to improve its inspections of more than 13,000
    sites, including commercial breeding facilities, laboratories, zoos,
    circuses, and airlines, to ensure compliance with AWA standards. Animal
    Care now has 100 inspectors (with four vacancies that the agency is in
    the process of filling), compared to 64 inspectors at the end of the
    1990s. We are pleased that the President's budget recommends an
    increase of $1,481,420 (plus allowance for pay costs) to cover hiring
    15 new staff to further improve AWA enforcement in fiscal year 2007.
    This increase will enable the agency to handle additional
    responsibilities as the number of licensed/registered facilities has
    grown by 12 percent from fiscal year 2004 to fiscal year 2005.

                  APHIS/INVESTIGATIVE AND ENFORCEMENT SERVICES

        We request that you support the President's request of $11,738,430
    for APHIS Investigative and Enforcement Services. We appreciate the
    Committee's consistent support for this division, which handles many
    important responsibilities including animal welfare. The President's
    budget recommends an increase of $1,235,000 (plus allowance for pay
    costs) and 12 staff years for IES in fiscal year 2007. A portion of
    this increase will be used to improve enforcement of federal animal
    welfare laws. The volume of animal welfare cases is rising
    significantly as new facilities become licensed and registered. In
    fiscal year 2005, IES conducted 575 animal care investigations, with
    169 cases resolved through either civil penalty stipulations or
    Administrative Law Judge decisions and a total of $1.1 million assessed
    in fines (compared to 288 investigations and 97 cases resolved through
    stipulations or ALJ decisions and $548,614 in fines during fiscal year
    2004).

            OFFICE OF INSPECTOR GENERAL/ANIMAL FIGHTING ENFORCEMENT

        We request sustained funding of $800,000 for the Office of
    Inspector General to focus on enforcement of animal fighting laws (this
    amount is incorporated in the President's request for OIG base
    funding). We appreciate the inclusion of $800,000 in each of the past
    three fiscal years for USDA's Office of Inspector General to focus on
    animal fighting cases. Congress first prohibited most interstate and
    foreign commerce of animals for fighting in 1976 and tightened
    loopholes in the law in 2002. Since then, USDA has begun to take
    seriously its responsibility to enforce this law, working with state
    and local agencies to complement their efforts. Dogfighting and
    cockfighting are barbaric (but still surprisingly widespread) practices
    in which animals are drugged to heighten their aggression and forced to
    keep fighting even after they've suffered grievous injuries. Animal
    fighting is almost always associated with illegal gambling, and also
    often involves illegal drug trafficking and violence toward people.
    Dogs bred and trained to fight endanger public safety, and some
    dogfighters steal pets to use as bait for training their dogs.
    Cockfighting was linked to an outbreak of Exotic Newcastle Disease in
    2002-2003 that cost taxpayers more than $200 million to contain. It's
    also been linked to the death of at least eight people in Asia
    reportedly exposed through cockfighting activity to bird flu. Given the
    potential for further costly disease transmission, as well as the
    animal cruelty involved, we believe it would be a sound investment for
    the federal government to increase its efforts to combat illegal animal
    fighting activity.

      FOOD SAFETY AND INSPECTION SERVICE/HUMANE METHODS OF SLAUGHTER ACT
                               (HMSA) ENFORCEMENT

        We request sustained funding of no less than $5,000,000 and no
    fewer than 63 staff years for HMSA enforcement (this amount is
    incorporated in the President's request for FSIS base funding) and
    continued funding of $4,000,000 as provided in fiscal year 2006 for
    further implementation of the new tracking system. We are grateful that
    Congress provided $5 million in fiscal year 2006 to sustain at least 63
    full time equivalent positions dedicated solely to inspections and
    enforcement related to the Humane Methods of Slaughter Act, plus $4
    million to incorporate a new tracking system to ensure compliance with
    this law. The HMSA is designed to ensure that livestock are treated
    humanely and rendered unconscious before they are killed. The effort to
    target funds for this purpose was undertaken following reports of lax
    enforcement of the HMSA and animals being skinned, dismembered, and
    scalded while still alive and conscious. Implementation of the Humane
    Animal Tracking System is ongoing; continued funding of $4 million will
    be used to equip remaining facilities.

    COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE/VETERINARY
                            STUDENT LOAN FORGIVENESS

        We request $1,000,000 to continue a pilot program for the National
    Veterinary Medical Service Act, authorized in 2003, that received
    initial funding of $500,000 in fiscal year 2006. We appreciate that
    Congress has begun to address the critical shortage of veterinarians
    practicing in rural and inner-city areas, as well as in government
    positions such as at FSIS and APHIS. Having adequate veterinary care is
    a core animal welfare concern. There are only 70 veterinarians engaged
    in poultry practice to address the needs of approximately nine billion
    chickens raised each year in the United States, and only 75
    veterinarians addressing the needs of 30 million beef cattle and 102
    million pigs, respectively. Veterinarians support our Nation's defense
    against bioterrorism (the Centers for Disease Control estimate that 80
    percent of potential bioterrorism agents are zoonotic--transmitted from
    animals to human). They are also on the front lines addressing public
    health problems associated with pet overpopulation, parasites, rabies,
    chronic wasting disease, bovine spongiform encephalopathy (``mad cow''
    disease), and a host of other concerns. Veterinary school graduates
    face a crushing debt burden of $80,000 on average, and the lowest pay
    of any of the medical professions, with an average starting salary of
    $43,000. For those who choose employment in underserved rural or inner-
    city areas or public health practice, the National Veterinary Medical
    Service Act authorizes the Secretary of Agriculture to forgive student
    debt. It also authorizes financial assistance for those who provide
    services during Federal emergency situations such as disease outbreaks
    or disasters. We hope you will build on the initial funding provided
    last year to expand this needed program under CSREES or such other
    account as the Committee deems appropriate.

                     APHIS/HORSE PROTECTION ACT ENFORCEMENT

        We hope you will provide the $492,030 requested by the President
    for fiscal year 2007, and we urge the Committee to oppose any effort to
    restrict USDA from enforcing this law to the maximum extent possible.
    Congress enacted the Horse Protection Act in 1970 to end the obvious
    cruelty of physically soring the feet and legs of show horses. In an
    effort to exaggerate the high-stepping gate of Tennessee Walking
    Horses, unscrupulous trainers use a variety of methods to inflict pain
    on sensitive areas of the feet and legs for the effect of the leg-jerk
    reaction that is popular among many in the show-horse industry. This
    cruel practice continues unabated by the well-intentioned but seriously
    understaffed APHIS inspection program. We appreciate the Committee's
    help providing modest increases to bring this program close to its
    authorized annual funding ceiling of $500,000.

                             DOWNED ANIMALS AND BSE

        We are pleased that the Bush Administration proposed an interim
    final rule in January 2004 to ban the use of downed cattle for human
    food, in the wake of the discovery of a cow in Washington State that
    was infected with Bovine Spongiform Encephalopathy (BSE). We hope the
    Committee will codify this ban--and extend it to other livestock
    besides cattle--with language barring the Food Safety and Inspection
    Service from spending funds to certify meat from downed livestock for
    human consumption. While the science to date on BSE has only indicated
    transmission from infected cows to people, downer pigs and other downer
    livestock are at a significantly higher risk of transmitting other
    serious and sometimes fatal illnesses through their meat, such as E.
    coli and Salmonella, and these animals, too, suffer when they are moved
    en route to slaughter.
        As the Committee is aware, some segments of industry and members of
    Congress have recommended weakening the USDA downed cattle ban. They
    claim that animals unable to walk because of injury pose no health
    risk. But injury and illness are often interrelated--an animal may
    stumble and break a leg because of disease that causes weakness and
    disorientation. And USDA inspectors would have a difficult--if not
    impossible--task trying to sort out the reason an animal became non-
    ambulatory. Major consumer groups including Consumers Union and
    Consumer Federation of America, support groups for victims of food-
    borne illness such as Safe Tables Our Priority (S.T.O.P.), Creutzfeldt-
    Jakob Disease Foundation, and CJD Voice, food safety organizations,
    companies such as McDonald's and Wendy's, and many others have all
    pointed out how reckless such a system would be. Of the BSE cases
    identified in Canada and the United States to date, 7 out of 8 have
    involved downers, and at least 3 of these were identified as downed due
    to injuries, including the Washington State case (``calving injuries'')
    and a January 2005 case in Canada (``slipped on ice/broken leg'').
        From an animal welfare perspective, a comprehensive ban is needed
    because a downer cow with a broken leg would suffer just as much as a
    sick one if it's dragged through a slaughterplant--maybe even more. A
    ban on use of all downers for human food also provides an incentive for
    producers to treat animals humanely and prevent livestock from going
    down. Even before the administrative ban, USDA estimated that only 0.4
    percent to 0.8 percent of all cows processed annually were non-
    ambulatory. The downer ban encourages producers and transporters to
    engage in responsible husbandry and handling practices, so that this
    percentage may be reduced to levels approaching zero. Temple Grandin--
    advisor to the American Meat Institute and others in the meat
    industry--has noted that as many as ninety percent of all downers are
    preventable. Cases that involve broken bones and other injuries are
    perhaps the most preventable with improved husbandry.
        Most Americans had no idea that animals too sick or injured to walk
    were being dragged with chains or hauled by bulldozer en route to the
    food supply. When that fact came to light in December 2003, USDA's
    prompt decision to ban all downer cattle from human food calmed
    consumers. Unraveling the ban would undermine consumer confidence. More
    than 99 percent of the 22,000+ public comments USDA received on its
    downer ban called on the agency to maintain and strengthen its downer
    ban, with most asking that other species be included. For a report on
    the comments received by the agency, please go to: http://
    files.hsus.org/web-files/PDF/2004_06_16_rept_USDA_comments.pdf.
        USDA testimony before various congressional committees has made
    clear that the agency need not rely on slaughterplant testing of
    downers for BSE surveillance purposes. Surveillance of downers can and
    should be conducted at rendering plants and on farms.
        In addition to the downer issue, we urge the Committee to provide
    adequate funding to ensure meaningful enforcement by the Food and Drug
    Administration of its ``feed ban,'' designed to prevent BSE-
    contaminated animal products from being fed to other animals. We are
    concerned that inspectors visit facilities infrequently and rely on
    self-reporting by those facilities and paperwork checking rather than
    first-hand evaluation of feed content and dedicated production lines.
    We are also concerned that FDA relies a great deal on state agencies to
    conduct this oversight, when most states face severe budget constraints
    that may compromise their ability to handle this job. Preventing the
    spread of BSE is vital to the Nation as a whole, for public health, the
    agricultural industry, and animal welfare. Vigorous enforcement of the
    feed ban is an essential component of this effort. We hope adequate
    Federal funds will be provided in fiscal year 2007 to meet this
    challenge.
        Again, we appreciate the opportunity to share our views and
    priorities for the Agriculture, Rural Development, and Related Agencies
    Appropriation Act of fiscal year 2007. We appreciate the Committee's
    past support, and hope you will be able to accommodate these modest
    requests to address some very pressing problems affecting millions of
    animals in the United States. Thank you for your consideration.
                                     ______

           Prepared Statement of Interregional Research Project No. 4

        The Interregional Research Project No. 4 (IR-4 Project) was
    organized 43 years ago by the Directors of the State Agricultural
    Experiment Stations (SAES) to obtain regulatory clearances for crop
    protection chemicals on specialty or minor food crops when the economic
    incentives for the registrants precluded private sector investment. IR-
    4 has been administered by the United States Department of
    Agriculture's (USDA's) Cooperative State Research, Education, and
    Extension Service (CSREES) since its inception in 1963. The
    Agricultural Research Service (ARS) component of the USDA established a
    companion minor use program in 1976 to provide further program support.
    The objectives of the IR-4 Project were expanded in 1977 to include
    registration of pest control products for the protection of nursery,
    floral, Christmas tree, and turf crops and again in 1982 when the
    objective of clearance of biological control agents or biopesticides
    was added.
        The IR-4 Project works as a model government program that fosters
    cooperative partnerships between the USDA (CSREES and ARS), the IR-4
    Headquarters and Regional staff, the land grant university system, the
    crop protection industry, commodity and grower groups, the
    Environmental Protection Agency (EPA), and the California Department of
    Pesticide Regulation (CDPR) to bring crop protection solutions to
    specialty crop growers.
        The Food Use Program is the primary focus of the IR-4 Project. To
    streamline the project request process, growers, commodity groups,
    university researchers and extension personnel, USDA researchers and
    other interested parties can submit on-line requests directly from our
    website at: http://www.ir4.rutgers.edu/FOODRequestForm.htm. The
    requests are recorded and reviewed by IR-4 Headquarters staff. At the
    annual Food Use Workshop, growers, commodity groups, university and
    USDA researchers, extension personnel, and EPA staff discuss and
    prioritize the projects by consensus. The high priority projects are
    finalized the following month at the annual National Research Planning
    Meeting where field residue and analytical laboratory assignments are
    made based on the best use of available USDA-ARS and land grant
    university personnel within the funding provided by Congress. For more
    information concerning the food use program and the status of on-going
    projects or studies, access the IR-4 website at: http://
    www.ir4.rutgers.edu/foodcrops.html. All IR-4 food use residue research
    is carried out by EPA approved Good Laboratory Practices (GLP's) with
    coordination and implementation by the Quality Assurance Unit (QAU).
    Annual training of the Field Research Directors, laboratory personnel
    and support staff involved in the conduct of work is essential to the
    success of the IR-4 Project. GLP compliance audits of facilities and of
    ongoing field and laboratory procedures, provides assurance that IR-4
    food safety data will be accepted by the crop protection industry,
    growers and the EPA.
        The 991 food use clearances obtained in 2005 boosted the 43 year
    total to over 9,300 clearances. It is interesting to note that 53
    percent (4,949) of all clearances in the program's history have been
    obtained in the last 8 years. In pursuit of this remarkable
    accomplishment, IR-4 continues its commitment to producing high
    quality, compliant scientific data in order to meet EPA's GLP
    requirements and strive to further enhance our effectiveness and
    efficiency by providing continuing GLP education and/or QA training
    sessions for IR-4 personnel and cooperators, audit data and reports, as
    well as, review and revise Standard Operating Procedures (SOP's).
        The research program for year 2006 consists of approximately 110
    studies supported by 701 field trials. One hundred and six (106) of
    these studies will require the collection of residue samples and 4
    studies will be for collecting efficacy and/or crop safety data to
    support specific data needs. The smaller efficacy program this year is
    a result of the reduced budget in 2006 thereby eliminating the pilot
    efficacy program. Five hundred and twenty-eight (528) of the field
    trials will be conducted by regional State agricultural research
    stations, while USDA-ARS will be conducting 115 field trials and Canada
    has agreed to cooperate on 58 trials.
        The Section 18 Economic Benefits/Loss Avoidance Project to document
    potential economic impact (loss) data from state submitted Section 18's
    approved by the EPA and supported by IR-4 residue data was initiated in
    1998. Since this initiative began, a total of 205 Section 18's have
    been converted to full Section 3 labels as a result of IR-4 petitions.
    This is the result of IR-4's commitment to minimize the number of years
    that Section 18's are needed on new crop protection products before
    Section 3 labels are approved by the EPA. The total over the eight year
    period from 1998 to 2005 (where the data are available) bring the total
    economic impact/loss avoidance to $12.589 billion from 1,229 Section
    18's covering 47 States.
        The ornamental industry is an extremely important component of
    specialty crop agriculture with over $15 billion in annual sales which
    comprise over 35 percent of all specialty crop sales. The research to
    develop efficacy and crop safety data to support registration of both
    traditional chemicals and biopesticides as pest control tools on
    ornamentals continues to be an important component of our overall
    program. The industry presents a formidable challenge since it involves
    a diverse array of crops in various markets such as floral, bulbs,
    forestry seedlings, Christmas trees, nursery, turf, commercial and
    interior landscapes, greenhouses, etc.
        Like the Food Use Program, requests are received, recorded and
    reviewed by IR-4 Headquarters. At the annual Ornamental Horticulture
    Workshop, growers, commodity groups, university and USDA researchers,
    extension personnel and EPA staff discuss and prioritize the projects
    by consensus. The efficacy and crop safety trials are planned in
    discussions between the IR-4 Headquarters Ornamental Horticulture
    Manager, regional field coordinators and ARS leadership. In 2006, the
    Ornamental Horticulture research program will focus on the high
    priority projects established at the annual workshop: Phytophthora
    Efficacy, Pythium Efficacy, Thrips Efficacy, Coleopteran Efficacy, and
    Broadleaf Weed and Sedge Management Tools Crop Safety. The research
    program also enables each regional field coordinator to focus some
    discretionary funds on trials of specific regional interest. The
    Northeast and Southern regions are coordinating their funding on
    herbicide fern safety, while the Western region enhanced the testing
    program for the high priority herbicide project.
        The Biopesticide Research Program continued its 8 year of
    competitive grant funding of projects for $400,000 and amounting to
    over $3,325,000 since its inception. In addition to funding projects
    that have focused in recent years on the biopesticides considered
    Advanced Stage (near commercialization or commercialized but expanding
    uses to specialty crops), IR-4 has continued to help biopesticide
    registrants with regulatory support needs.
        For the 2006 Biopesticide Research Program, IR-4 received a total
    of 113 proposals requesting approximately $1.2 million. Of the 113
    proposals, 21 were Early Stage, 64 were Advanced Stage and 28 were
    Demonstration Stage of which 70 involved disease management, 24 were
    for insect/mite management, 5 were for weed control, 11 were for
    nematode control, 2 were plant growth regulators and 1 involved bird
    management. The 2006 program will fund 42 of the project proposals.
        Without the existence of the IR-4 Project, fewer safe and effective
    crop protection chemicals and biological alternatives would be
    available for use on specialty crops today. The crop protection
    industry has continued to be an excellent partner in working with IR-4
    to provide their latest technologies, both chemical and biological, for
    specialty crop uses. However, the Project must continue to evolve in
    order to stay relevant. To this end, the importance of the continued
    special research grant funding and strategic plan implementation will
    be critical to the future of IR-4.
        Three hot topics' for the fiscal year 2007 Congressional
    Appropriations hearings were recently posed to the Cooperative State
    Research, Education and Extension Service concerning the IR-4 Project.
    The questions asked and answers provided are as follows:
        Question. What has the Inter-regional Project #4 (IR-4) done to
    provide safe and effective pest management solutions for growers of
    specialty crops in the United States?
        Answer. By cooperating with researchers, producers, the
    agrichemical industry and Federal agencies, IR-4 has achieved over
    9,300 food crop and 10,000 ornamental crop registrations for pest
    management products since the project began in 1963. In 2004 and 2005
    alone, there were over 2,000 clearances for these specialty crops which
    are collectively valued at $43 Billion. Priorities for future research
    and future registrations are established at IR-4's annual Food Use and
    Ornamental Horticulture Workshops and a record attendance of over 325
    stakeholders participated in defining IR-4's workplan for 2006.
        Question. Since horticultural/specialty crops are an important part
    of U.S. agriculture, what is being done to improve export opportunities
    for the producers of these crops?
        Answer. Over the past decade, the agrichemical industry has
    developed a range of new, safer products and IR-4 has been very
    successful in expanding the registrations of these products
    facilitating their use on specialty crops. This has significantly
    benefited growers producing food for domestic markets. However, some of
    their new lower risk products are not approved by some of the U.S.
    trading partners resulting in U.S. growers not being able to use some
    of these products if their produce is going to be shipped to countries
    that do not have Maximum Residue Limits (MRLs) established for these
    new products. Therefore, it has become critically important for a
    product to be available globally in order to level the playing field
    for United States specialty crop growers who wish to export their
    crops. IR-4 is in a unique position to facilitate the Global Specialty
    Crop Initiative where existing data in the IR-4 Library can be used to
    solve some of the trade issues. This initiative would enhance global
    registrations and reduce trade barriers, while at the same time further
    promote the use of new, safer pest management products both
    domestically and world wide.
        Question. What is the economic impact of the IR-4 Project on United
    States specialty crop growers?
        Answer. Using economic loss avoidance data submitted to the EPA by
    47 states covering over 1225 Section 18 requests supported by IR-4
    specialty crop residue data, the economic loss avoidance between 1998
    and 2005 has been $12.6 billion.
                                     ______

       Prepared Statement of the Metropolitan Water District of Southern
                                   California

        The Metropolitan Water District of Southern California is writing
    in support of the following Federal program under the Department of
    Agriculture's (USDA) budget that we believe is deserving of your
    Subcommittee's support during the fiscal year 2007 budget process:
        Natural Resources and Environment Mission Area--Agency: Natural
    Resources Conservation Service (NRCS)--Farm Bill Programs (Funded by
    the Commodity Credit Corporation)--Environmental Quality Incentives
    Program:
      --$1 billion requested by the President nationwide with $25 million
            designated by the NRCS for the Colorado River Basin Salinity
            Control Program.
        The Metropolitan Water District of Southern California is a public
    agency that was created in 1928 to meet the supplemental water demands
    of people living in what is now portions of a six-county region of
    southern California. Today, the region served by Metropolitan includes
    approximately 18 million people living on the coastal plain between
    Ventura and the international boundary with Mexico.
        Included in our region are more than 300 cities and unincorporated
    areas in the counties of Los Angeles, Orange, San Diego, Riverside, San
    Bernardino, and Ventura. We provide over half of the water used in our
    5,200-square-mile service area and help our members to develop local
    supplies through increased water conservation, recycling, storage and
    other resource-management programs. Metropolitan's imported water
    supplies come from the Colorado River via our Colorado River Aqueduct
    and from northern California via the State Water Project's California
    Aqueduct.
        MWD continues to support USDA implementation of conservation
    programs. MWD firmly believes that interagency coordination, along with
    incentive-based cooperative conservation programs that facilitate the
    development of partnerships, are critical to addressing natural
    resources concerns, such as water quality degradation, wetlands loss
    and wildlife habitat destruction. It is vital that the Congress
    provides USDA with the funding necessary to successfully carry out its
    commitment to natural resources conservation.
    Environmental Quality Incentives Program (EQIP)
        An important program for MWD has been the Colorado River Basin
    Salinity Control Program, which is funded by USDA at the Federal level
    through the Environmental Quality Incentives Program. MWD recommends
    that EQIP be funded at $1 billion in fiscal year 2007, as proposed in
    the President' Budget, with the Colorado River Basin Salinity Control
    Program funded at $25 million, 2.5 percent of the EQIP budget, as
    requested by the seven Colorado River Basin states through the Colorado
    River Basin Salinity Control Forum.
        EQIP provides assistance to farmers and ranchers who face threats
    to soil, water, air and related natural resources on their land. EQIP
    provides assistance in a manner that will promote agricultural
    production and environmental quality as compatible goals. NRCS offers
    the program throughout the Nation.
        In Public Law 104-127, Congress amended the Colorado River Basin
    Salinity Control Act to direct the Secretary of Agriculture to carry
    out salinity control measures in the Colorado River Basin as part of
    EQIP. Beginning with the first full year of EQIP funding in 1997
    through 2001, USDA's participation in the Colorado River Basin Salinity
    Control Program (Salinity Control Program) had significantly diminished
    as compared to the 1996 level of funding for salinity control. After
    requests had been made by the Colorado River Basin Salinity Control
    Forum (Forum), the interstate organization responsible for coordinating
    the seven Basin states' salinity control efforts, and others, as well
    as directives from the Congress, USDA concluded that the Salinity
    Control Program warranted a multi-state river basin approach. The Forum
    is composed of Gubernatorial appointees from Arizona, California,
    Colorado, Nevada, New Mexico, Utah, and Wyoming. Clearly, Colorado
    River Basin salinity control has benefits that are not merely local or
    intrastate in nature, but continue downstream. EQIP is also important
    because it provides funding for agricultural source water protection
    measures that protect and improve the quality of Metropolitan's
    imported supplies from Northern California.
        The Colorado River is a large component of Southern California's
    regional water supply and its relatively high salinity causes
    significant economic impacts on water customers in MWD's service area,
    as well as throughout the Lower Colorado River Basin (Lower Basin). MWD
    and the Bureau of Reclamation (Reclamation) completed a Salinity
    Management Study for Southern California in June 1999. The study
    concluded that the high salinity from the Colorado River continues to
    cause significant impacts to residential, industrial and agricultural
    water users. Furthermore, high salinity adversely affects the region's
    progressive water recycling programs, diminishes the effectiveness of
    water conservation efforts, and is contributing to an adverse salt
    buildup through infiltration into Southern California's irreplaceable
    groundwater basins.
        In April 1999, MWD's Board of Directors authorized implementation
    of a comprehensive Action Plan to carry out MWD's policy for management
    of salinity. The Action Plan focuses on reducing salinity
    concentrations in Southern California's water supplies through
    collaborative actions with pertinent agencies, recognizing that an
    effective solution requires a regional commitment. MWD, the Association
    of Groundwater Agencies, the Southern California Association of
    Publicly Owned Treatment Works, and the WateReuse Association of
    California have formed a Salinity Management Coalition.
        During 2002, the Coalition was expanded to include major water and
    wastewater agencies throughout Southern California. Presently, the ten
    members of the coalition are working to implement a Strategic Action
    Plan that focuses primarily on local contributions to southern
    California's high-salinity problem.
        In addition, Southern California leaders are working with urban
    areas in Arizona, Nevada, New Mexico, and Texas to find solutions to
    mutual problems with salinity in imported supplies, such as from the
    Colorado River, and other sources. These agencies participate in the
    annual National Salinity Summit to examine and coordinate salinity
    management activities.
        Concentrations of salts in the Colorado River cause hundreds of
    millions of dollars in damage in the United States according to the
    U.S. Department of the Interior. Implementation of salinity control
    measures:
      --increases the yield of salt sensitive crops and decreases water use
            for leaching in the agricultural sector,
      --increases the useful life of galvanized water pipe systems, water
            heaters, faucets, garbage disposals, clothes washers, and
            dishwashers, and decreases the use of bottled water and water
            softeners in the household sector,
      --decreases the use of water for cooling, and the cost of water
            softening, and increases equipment service life in the
            commercial sector,
      --decreases the use of water and the cost of water treatment, and
            decreases sewer fees in the industrial sector,
      --increases the life of treatment facilities and pipelines in the
            utility sector,
      --eases the meeting of wastewater discharge requirements to comply
            with National Pollutant Discharge Elimination System permit
            terms and conditions, and decreases desalination and brine
            disposal costs due to less accumulation of salts in groundwater
            basins, and
      --decreases use of imported water for leaching and the cost of
            desalination and brine disposal for recycled water.
        Absent the Salinity Control Program, impacts would progressively
    increase with continued agricultural and urban development upstream of
    California's points of Colorado River diversion. Droughts will cause
    spikes in salinity levels in the future that will be highly disruptive
    to Southern California water management and commerce. The Salinity
    Control Program has proven to be a very cost-effective approach to help
    mitigate the impacts of higher salinity. Adequate Federal funding of
    the Salinity Control Program is essential.
        The Forum issued its 2005 Review, Water Quality Standards for
    Salinity, Colorado River System (2005 Review) in October 2005. The 2005
    Review found over 900,000 tons of salinity needs to be controlled
    annually to maintain 2004 salinity levels through 2025. From 1994
    through 2003, funding for USDA's salinity control program did not equal
    the Forum-identified funding need for the portion of the program the
    Federal Government is responsible to implement. While NRCS has
    designated Colorado River Basin salinity control as an area of special
    interest, appointed a multi-state coordinator, and allocated about
    $19.5 million in fiscal years 2005 and 2006, it is essential that
    implementation of salinity control efforts through EQIP continue to be
    accelerated to reduce economic impacts. The Basin states and farmers
    continue to stand ready to pay their share of the implementation costs
    of EQIP.
        The Forum has determined that allocation of 2.5 percent of the EQIP
    funds, that is $25 million, is needed in fiscal year 2007 for on-farm
    measures to control Colorado River Basin salinity. Funding at this
    level will permit the state adopted and U.S. Environmental Protection
    Agency approved water quality standards to be met. With 2.5 percent of
    the EQIP cost share financial assistance, monitoring, and technical
    assistance funding requested by the President allocated to the Salinity
    Control Program, an additional $21 million in states and local cost
    sharing could be committed.
        MWD urges the Subcommittee to support funding of $1 billion for
    EQIP, the amount requested in the President's Budget, and advise USDA
    that $25 million, or 2.5 percent of the EQIP funds, be designated for
    the Salinity Control Program. Thank you for your consideration of our
    testimony. USDA's conservation programs are critical for achieving
    Colorado River Basin salinity control objectives, as well as broader
    source water quality protection objectives in the Colorado River Basin
    and California.
        We look forward to working with you and your Subcommittee. Please
    contact me at (213) 217-6211, if I can answer any questions or provide
    additional information.
                                     ______

    Prepared Statement of the Midwest Advanced Food Manufacturing Alliance
                                    (MAFMA)

        The Midwest Advanced Food Manufacturing Alliance (MAFMA) is a
    research consortium involving 13 leading Midwestern universities
    (University of Illinois, Indiana University, Iowa State University,
    Kansas State University, Michigan State University, University of
    Minnesota, University of Missouri, University of Nebraska, North Dakota
    State University, Ohio State University, Purdue University, South
    Dakota State University, University of Wisconsin). MAFMA expedites the
    development of new manufacturing and processing technologies for food
    and related products derived from U.S. produced crops and livestock and
    thus contributes to the economic development of the U.S. food industry,
    one of this country's premier industry sectors. The research of MAFMA
    is conducted by scientists in food science and technology, food
    engineering, nutrition, microbiology, and other relevant disciplines
    from universities participating in the MAFMA consortium. MAFMA sponsors
    an annual peer-reviewed research competition where superior research
    proposals are selected from among the submissions of scientists from
    these 13 universities. Specific research proposals are funded on a
    competitive basis to university scientists who must also demonstrate
    matching funds from non-Federal sources (primarily the food industry)
    for research involving processing, packaging, storage, and
    transportation of food products. The close cooperation between
    university and corporate researchers assures that the latest scientific
    advances are applied to the most relevant problems and that any
    solutions will be efficiently transferred and used by the private
    sector. MAFMA research proposals are peer-reviewed by scientists from
    academia and industry who are not affiliated with the 13 institutions
    or any of the companies providing matching funds which assures that the
    proposed research is sound and likely to contribute valuable scientific
    information. The MAFMA project has been funded for 12 years and this
    proposal will fund the 13th year of competition. During the past 12
    years, the MAFMA consortium has funded 136 projects for a total of
    $4,327,570 of USDA funds and an impressive total of $6,369,623 in
    matching funds from non-Federal (primarily food industry) sources
    involving 193 companies and other entities.
                                     ______

       Prepared Statement of the National Association of State Foresters

                                  INTRODUCTION

        The National Association of State Foresters (NASF) is pleased to
    provide testimony on the U.S. Department of Agriculture (USDA) budget
    request for fiscal year 2007. Representing the directors of State
    forestry agencies from all 50 States, eight U.S. territories, and the
    District of Columbia, our testimony centers around those program areas
    most relevant to the long-term forestry operations of our constituents:
    Research, Education, and Economics, as well as Natural Resources and
    Environment. We believe the USDA budget for fiscal year 2007, which
    offers opportunities for advancing the sustainable management of
    private forestland nationwide, can be strengthened through our
    recommendations.

       USDA COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE
                               (CSREES) PROGRAMS

        Cooperative Forestry Research (Mcintire-Stennis) Program.--The
    Cooperative Forestry Research (McIntire-Stennis) Program (CFRP) is a
    crucial part of the foundation that underlies academic and scientific
    understanding of the Nation's forest resources. McIntire-Stennis CFRP
    was originally enacted in order to provide universities with formula
    funds for the explicit purpose of research in the field of forestry,
    which was not provided for in similar research funding programs. For
    more than 40 years, CFRP has equipped both private and land-grant
    universities with the ability to produce invaluable research concerning
    forest productivity, environmental quality, and technologies for
    monitoring and extending the natural resource base. The program also
    provides rigorous scientific education and training for university
    students--the future managers of the Nation's forest resources.
        Universities, supported by base funds from the Federal Government,
    have consistently supplied science-based forestry research not
    affiliated with any particular resource use or interest group. Without
    sufficient base funds from the Federal Government, society will lose
    the benefits wrought by this productive partnership.
        NASF recommends $24.5 million for the Cooperative Forestry Research
    (McIntire-Stennis) Program. The proposed increase in CFRP will help the
    program continue to serve as the cornerstone of forest research in
    universities, providing knowledge central to sound management from
    environmental, economic, and social perspectives. In addition, we
    strongly urge the Subcommittee to reject the President's proposal to
    shift 59 percent of the program to competitive funding.
        The Renewable Resources Extension Act (Rrea).--The Renewable
    Resources Extension Act (RREA) facilitates the transfer of needed
    forestry information and technology to non-industrial private forest
    landowners, as well as loggers and small businesses involved with
    forest resource management.
        Extension's education programs aid private landowners in
    understanding their management options and responsibilities, and
    encourage them to take advantage of other technical and financial
    assistance programs.
        NASF recommends funding RREA at $4.1 million for fiscal year 2007,
    in order to sustain the program's ability to address critical extension
    and stewardship needs.

                        FARM BILL CONSERVATION PROGRAMS

        NASF believes that the conservation programs enacted in the 2002
    Farm Bill are integral for protecting water quality, erodible soils,
    wildlife habitat, and wetlands associated with agricultural and
    forestry operations. Trees and forestry practices are often the best
    solution to many of the conservation challenges arising from these
    operations.
        NASF recommends funding for the Environmental Quality Incentives
    Program (EQIP) at the fiscal year 2006 level of $1.2 billion, full
    funding for the Conservation Reserve Program (CRP), and $85 million for
    the Wildlife Habitat Improvement Program (WHIP). NASF supports the
    President's fiscal year 2007 funding proposal of $342 million for the
    Conservation Security Program (CSP). NASF recommends that the
    Subcommittee encourage the Secretary of Agriculture and the NRCS to
    expand the emphasis on forestry practices in EQIP and the other Farm
    Bill Conservation Programs.
        These programs are important for landowners with both forest and
    agricultural land, as well as farmers who wish to plant trees for
    conservation purposes on their agricultural lands. Nearly two thirds of
    the land in the United States is forested, the majority of which is
    privately owned. Investing Federal funds in conservation practices on
    private forest lands produces benefits for all, not simply landowners.
    These benefits include abundant clean water for drinking and
    recreation, improved wildlife habitat, open space, viable rural
    economies, and many other tangible and intangible public benefits.
                                   conclusion
        The National Association of State Foresters seeks the
    Subcommittee's support for a USDA fiscal year 2007 budget that will
    make sure the public's conservation needs--provided by private
    landowners--are met. Thank you for the opportunity to provide our
    testimony.
                                     ______

    Prepared Statement of the National Coalition for Food and Agricultural
                                    Research

        Dear Mr. Chairman, Ranking Member Kohl and Members of the
    Subcommittee: On behalf of the National Coalition for Food and
    Agricultural Research \1\ (National C-FAR), we are pleased to submit
    comments in strong support of enhanced public investment in food and
    agricultural research, extension and education as a critical component
    of Federal appropriations for fiscal year 2007 and beyond. National C-
    FAR serves as a forum and a unified voice in support of sustaining and
    increasing public investment at the national level in food and
    agricultural research, extension and education. National C-FAR is a
    nonprofit, nonpartisan, consensus-based and customer-led coalition
    established in 2001 that brings food, agriculture, nutrition,
    conservation and natural resource organizations together with the food
    and agriculture research and extension community.
    ---------------------------------------------------------------------------
        \1\ As part of its mission, National C-FAR seeks to increase
    awareness about the value of food and agricultural research, extension
    and education. For example, National C-FAR is hosting an educational
    series of ``Lunch-N-Learn'' seminars on the hill, featuring leading-
    edge researchers on timely topics to help demonstrate the value of
    public investment in food and agricultural research, extension and
    education. More information about National C-FAR and its programs is
    available at http://www.ncfar.org.
    ---------------------------------------------------------------------------
    Support for Fiscal Year 2007 Funding for Food & Agricultural Research,
            Extension & Education
        CSREES--National C-FAR urges the Subcommittee and Committee to
    support the Administration's fiscal year 2007 request for USDA's
    Cooperative State Research, Education, and Extension Service (CSREES)
    of $1.038 billion, and to augment funding to the extent practicable
    since it represents a represents a significant decrease from fiscal
    year 2006 funding levels. In particular, National C-FAR supports the
    Administration's $247.5 million request for the National Research
    Initiative (NRI). This represents a significant increase over fiscal
    year 2006 levels. While a portion of the proposed increase occurs
    through the shifting of Section 406 Integrated Activities funding and
    responsibilities (such as food safety, pest management, and water
    quality) to NRI, funding for NRI would still realize a net increase of
    $24 million. Significantly, the Administration's proposal increases the
    cap for Integrated Activities funding, providing more funding for
    projects that include both research and extension components.
        The NRI supports research on key problems of national and regional
    importance in biological, environmental, physical, and social sciences
    relevant to agriculture, food, and the environment on a peer-reviewed,
    competitive basis. Additionally, the NRI enables USDA to leverage a
    portion of its funds for food and agricultural research, extension and
    education by fostering the development of new partnerships with other
    Federal agencies that advance agricultural science. Examples of
    successful collaborations include USDA's involvement in the Microbial
    Genome Sequencing Program, the Maize Genome Program, the Microbial
    Observatories program, the Plant Feedstock Genomics for Bioenergy
    program, the Metabolic Engineering program, and the Climate Change
    Science Plan.
        ARS.--National C-FAR is concerned about the Administration's
    proposed $123 million cut in funding for the USDA Agricultural Research
    Service (ARS), as compared with fiscal year 2006 funding levels. Indeed
    ARS funding has been cut each of the past several years. Research
    conducted by ARS helps to ensure high-quality, safe food, and other
    agricultural products, assess the nutritional needs of Americans,
    sustain a competitive agricultural economy and enhance the natural
    resource base and the environment. The steady erosion in ARS funding
    could jeopardize the ability of the agency to carry out its important
    mission.
        ERS.--National C-FAR urges the Subcommittee and Committee to
    support the Administration's fiscal year 2007 request of $83 million
    for the USDA, Economic Research Service (ERS), which represents a
    modest increase over the fiscal year 2006 level. Many of the research
    outcomes generated through ERS efforts provide value in both policy and
    business application terms far in excess of what the modest size of the
    ERS budget might suggest. An important part of the Administration's
    budget includes $5 million for the ERS to establish and maintain data
    collection on the demographic, economic, government program
    participation, and other information from samples of non-farm rural
    households and rural-based farm households, over time. National C-FAR
    believes such new and valuable data is necessary for a variety of
    purposes, including estimating impacts of farm policy changes. National
    C-FAR urges full funding of this initiative to assure that agricultural
    and rural economic analysts can reap the minimum necessary value added
    that will, in turn, enhance contributions to a sound farm policy and
    more robust rural economies throughout the Nation.
        National C-FAR urges that funding for food and agricultural
    research, extension and education be augmented to the maximum extent
    practicable, as an important next step toward building the funding
    levels needed to meet identified food and agricultural research,
    extension and education needs.
        As a coalition representing stakeholders in both the research,
    extension and education community and the customers' who need and
    depend upon their outcomes, National C-FAR urges expanded public
    participation in the Administration's research priority setting and
    funding decision process and stands ready to work with the
    Administration and other interested stakeholders toward that end.

       DEMONSTRATED VALUE OF PUBLIC INVESTMENTS IN FOOD AND AGRICULTURAL
                       RESEARCH, EXTENSION AND EDUCATION

        Public and private investments in U.S. agricultural research and
    practical application of results have paid huge dividends to the United
    States and the world, especially in the latter part of the 20th
    century. However, these dividends are the result of past investments in
    agricultural research.
        If similar research dividends are to be realized in the future,
    then the Nation must commit to a continuing investment that reflects
    the long-term benefits of food and agricultural research.
        Food and agricultural research, extension and education to date
    have helped provide the United States with an agricultural system that
    consistently produces high quality, affordable food and natural fiber,
    while at the same time:
      --Creating Jobs And Income.--The food and agricultural sector and
            related industries provide over 20 million jobs, about 17
            percent of U.S. jobs, and account for nearly $1 trillion or 13
            percent of GDP.
      --Helping Reduce The Trade Deficit.--Agricultural exports average
            more than $50 billion annually compared to $38 billion of
            imports, contributing some $12 billion to reducing the $350
            billion trade deficit in the nonagricultural sector.
      --Providing Many Valuable Aesthetic And Environmental Amenities To
            The Public.--The proximity to open space enhances the value of
            nearby residential property. Farmland is a natural wastewater
            treatment system. Unpaved land allows the recharge of the
            ground water that urban residents need. Farms are stopovers for
            migratory birds. Farmers are stewards for 65 percent of non-
            Federal lands and provide habitat for 75 percent of wildlife.
      --Sustaining Important Strategic Resources.--This Nation's abundant
            food supply bolsters national security and eases world tension
            and turmoil. Science-based improvements in agriculture have
            saved over a billion people from starvation and countless
            millions more from the ravages of disease and malnutrition.
        Publicly financed research, extension and education are necessary
    complements to private sector research, focusing in areas where the
    private sector does not have an incentive to invest, when (1) the pay-
    off is over a long term, (2) the potential market is more speculative,
    (3) the effort is during the pre-technology stage; and (4) where the
    benefits are widely diffused. Public research, extension and education
    help provide oversight and measure long-term progress. Public research,
    extension and education also act as a means to detect and resolve
    problems in an early stage, thus saving American taxpayer dollars in
    remedial and corrective actions.
        By any standard, the contributions of publicly supported
    agricultural research, extension and education to advances in food
    production and productivity and the resulting public benefits are well
    documented. For example, an analysis by the International Food Policy
    Research Institute of 292 studies of the impacts of agricultural
    research and extension published since 1953 (Julian M. Austin, et al, A
    Meta-Analysis of Rates of Return to Agricultural Research, 2000) showed
    an average annual rate of return on public investments in agricultural
    research and extension of 81 percent!

    NATIONAL C-FAR URGES ENHANCED FEDERAL FUNDING FOR FOOD AND AGRICULTURAL
                       RESEARCH, EXTENSION AND EDUCATION

        National C-FAR appreciates the longstanding support this
    Subcommittee and the full Committee have demonstrated through funding
    food and agricultural research, extension and education programs over
    the years that have helped the U.S. food and agricultural sector be a
    world leader and provide unprecedented value to U.S. citizens, and
    indeed the world community.
        National C-FAR is deeply concerned that shortfalls in funding in
    recent years for food and agricultural research, extension and
    education jeopardize the food and agricultural community's continued
    ability to maintain its leadership role and more importantly respond to
    the multiple, demanding challenges that lie ahead. Federal funding for
    food and agricultural research, extension and education has been flat
    for over 20 years, while support for other Federal research has
    increased substantially. Public funding of agricultural research in the
    rest of the world during the same time period has reportedly increased
    at a nearly 30 percent faster pace.
        Reduced public investment in food and agricultural research,
    extension and education may well be a result of a view that the U.S.
    food and agricultural system is an unprecedented success story.
    However, societal demands and expectations placed upon the food and
    agricultural system are ever-changing and growing. Simply stated,
    Federal funding has not kept pace with identified priority needs.
        National C-FAR believes it is imperative to lay the groundwork now
    to respond to the many challenges and promising opportunities ahead
    through Federal policies and programs needed to promote the long-term
    health and vitality of food and agriculture for the benefit of both
    consumers and producers. Stronger public investment in food and
    agricultural research, extension and education is essential in
    producing research outcomes needed to help bring about beneficial and
    timely solutions to multiple challenges. Multiple examples, such as
    those listed below, serve to illustrate current and future needs that
    arguably merit enhanced public investment in research, extension and
    education so that the food and agricultural system can respond to these
    challenges on a sustainable basis:
      --Strengthened bio-security is a pressing national priority. There is
            a compelling need for improved bio-security and bio-safety
            tools and policies to protect against bio-terrorism and dreaded
            problems such as foot-and-mouth and ``mad cow'' diseases and
            other exotic plant and animal pests, and protection of range
            lands from invasive species.
      --Energy costs are escalating, dependence on petroleum imports is
            growing and concerns about greenhouse gases are rising.
            Research, extension and education can enhance agriculture's
            ability to provide renewable sources of energy and cleaner
            burning fuels, sequester carbon, and provide other
            environmental benefits to help address these challenges, and
            indeed generate value-added income for producers and stimulate
            rural economic development.
      --Food-linked health costs are high. Some $100 billion of annual U.S.
            health costs are linked to poor diets, obesity, food borne
            pathogens and allergens. Opportunities exist to create
            healthier diets through fortification and enrichment.
      --Research, extension and education are key to providing to solutions
            to environmental issues related to global warming, limited
            water resources, enhanced wildlife habitat, and competing
            demands for land and other agricultural resources.
      --There was considerable debate during the last farm bill
            reauthorization about how expanded food and agricultural
            research, extension and education could enhance farm income and
            rural revitalization by improving competitiveness and value-
            added opportunities.
      --Population and income growth are expanding the world demand for
            food and natural fiber and improved diets. World food demand is
            projected to double in 25 years. Most of this growth will occur
            in the developing nations where yields are low, land is scarce,
            and diets are inadequate. Without a vigorous response, demand
            will only be met at a great global ecological cost.
      --Regardless of one's views about biotechnology and genetic
            resources, an effective publicly funded research role is needed
            for oversight and to ensure public benefits.
        Translational education (extension) is a vital link connecting the
    research community to those who need and use research outcomes. The
    extension and education system helps translate basic and applied
    research outcomes into practical applications and more timely
    implementation by the end user community, thus helping to realize
    positive economic, environmental, health, food security and a host of
    other benefits in the food and agricultural system, and for the
    consuming public. The extension community is evolving its mission in a
    positive direction, seeking to engage constituents in a way that not
    only fulfills the traditional extension role but also actively solicits
    feedback concerning research and extension needs as identified by the
    customers' who need research outcomes. This is consistent with National
    C-FAR's mission of increasing stakeholder involvement in decision
    making about research priorities and funding. The USDA NRI has made
    significant progress in recognizing the extension role, through funding
    of projects that undertake an integrated research and extension
    approach. National C-FAR strongly supports funding for extension and
    education.
        Finally, there is a continuing need to build the human capacity of
    expertise to do quality food and agricultural research, extension and
    education, and to implement research outcomes in the field and
    laboratory. The food and agricultural sciences face a daunting task of
    supplying the Nation with the next generation of scientists and
    educators. If these basic human resource needs are not met, then the
    Nation will face a shortage of trained and qualified individuals.
        Public investment in food and agricultural research, extension and
    education today and in the future must simultaneously satisfy needs for
    food quality and quantity, resource preservation, producer
    profitability and social acceptability. National C-FAR supports the
    public funding needed to help assure that these interdependent needs
    are met.
        A Sense of the Congress resolution endorsed by National C-FAR to
    double funding in food and agricultural research, extension and
    education within five years was incorporated into the 2002 Farm Bill
    that was enacted into law. However, the major commitment to expanded
    research has not yet materialized. At the four-year mark, the larger
    reality is the threat of funding cuts.

                                   CONCLUSION

        In conclusion, National C-FAR respectfully submits that--
      --The food and agricultural sector merits Federal attention and
            support;
      --Food and agricultural research, extension and education have paid
            huge dividends in the past, not only to farmers, but to the
            entire Nation and the world;
      --There is an appropriate and recognized role for Federal support of
            research, extension and education;
      --Recent funding levels for food and agricultural research, extension
            and education have been inadequate to meet pressing needs;
      --Federal investments in food and agricultural research, extension
            and education should be enhanced in fiscal year 2007 and
            beyond; and
      --The Administration should provide for expanded public
            participation, including during review of programs being
            considered for possible reforms or cuts.
        National C-FAR appreciates the opportunity to share its views and
    stands ready to work with the Chair and members of this Subcommittee
    and Committee in support of these important funding objectives.
                                     ______

      Prepared Statement of the National Cooperative Business Association

        The National Cooperative Business Association appreciates the
    opportunity to submit testimony on the importance of the Rural
    Cooperative Development Grant program and the need for increased
    funding. NCBA is the Nation's only national organization representing
    cooperatives across all economic sectors--including agriculture,
    childcare, electricity, finance, food retailing and distribution,
    healthcare, housing, insurance, purchasing and shared services,
    telecommunications and many others.
        The Rural Cooperative Development Grant program, which NCBA helped
    to establish, is the only dedicated source of Federal funding
    supporting the network of more than 20 cooperative development centers
    serving more than 40 States. This funding leverages much more from
    State and local as well as private sources. The program also includes
    money for economic research on the impact of cooperatives, research
    needed to inform policymakers and cooperatives about how best co-ops
    can address issues facing this Nation such as senior services and rural
    housing.
        Congress recognized the importance of the work of cooperative
    development centers when it enacted the program in 1996 and authorized
    $50 million annually to help create businesses and jobs in rural
    America. In 2002, Congress reauthorized the program at the same level.
    Unfortunately, chronic underfunding has limited the ability of centers
    to capitalize on opportunities to revitalize rural areas. A first step
    to address this problem is for this Subcommittee to appropriate $8.5
    million in this year's appropriations bill and maintain the President's
    funding for research on the economic impact of cooperatives.
    Rural Cooperative Development Grants--Revitalizing Rural Economies
        Cooperatives are businesses owned and controlled by the people who
    buy their products or use their services. Tens of thousands of
    cooperatives in this country range in size from small storefronts to
    Fortune 500 companies. Credit unions, electric cooperatives, telephone
    co-ops, agricultural cooperatives, purchasing cooperatives, and worker
    cooperatives all serve the needs of millions of members.
        Cooperatives represent a flexible business model that can be
    developed by the community to address its economic needs. Co-ops
    provide an opportunity for entrepreneurial ideas to become reality.
    Since members own the cooperative, they participate in the earnings of
    the cooperative. Rather than leaving the community, patronage refunds--
    money paid to members based on their use in the cooperative--remains,
    refueling the economy as members use their refunds to purchase goods
    locally.
        The Rural Cooperative Development Grants program funds the
    establishment and operation of centers for rural cooperative
    development to improve economic conditions in rural areas. Grants are
    competitive, require a 25 percent non-Federal match in most cases, and
    can be provided to nonprofits or institutions of higher education. For
    the past few years, USDA has funded only half of all applications
    received due to budget constraints. The program is authorized at $50
    million.
        Cooperative development centers are on the front lines of efforts
    to revitalize struggling rural economies. They use Rural Cooperative
    Development Grants to conduct feasibility studies, develop business
    plans, launch new businesses, and provide education and training to
    help ensure the success of these businesses. Through CooperationWorks!,
    a national organization of more than 20 centers, centers share their
    knowledge and experience. This network allows centers to maximize
    resources, avoid duplication and bring the greatest benefit to their
    communities.
        The work of the centers translates into jobs and money in these
    rural communities. Since the 1990s, the centers have helped start or
    expand almost 400 cooperative businesses with more than 47,000 members,
    creating more than 5,800 new rural jobs in virtually every sector of
    the economy, including energy, housing, agriculture, forestry, food,
    senior and childcare services, and health care. Investment in these
    cooperatives exceeds $900 million.
    The Need for Cooperative Development
        Cooperative development centers address a growing need. Rural areas
    in this country, especially in the Midwest, have not benefited from the
    recent economic expansion. This has worsened an outmigration problem
    that has ravaged the center of our country over the last few years.
        For example, despite 3 years of economic expansion, 1.5 million
    people were added to the poverty rolls in the Midwest between 2001 and
    2004. In all non-metropolitan areas, the poverty rate has remained
    stuck at 14.2 percent despite the economic recovery.
        With the help of RCDG grants, cooperative development centers are
    working with communities to create economic sustainability. For
    example, the Georgia Cooperative Development Center helped 27 local
    farmers create a co-op to get access to wholesale buyers who had
    previously denied them business. The Farmers Fresh Food Network now
    markets to agriculture members, local restaurants and farmers markets
    and soon plans to provide local schools with fresh produce.
        The Missouri Farmers Union Family Farm Opportunity Center helped
    families turn seemingly profitless land into a sustainable business by
    forming a co-op to mill their trees into high quality boards. Not only
    are they practicing sustainable development with the project but the
    estimated return to the community could jump from $35 million to $3.4
    billion.
        The centers also respond to communities in crises, such as those
    devastated by Katrina. The Federation of Southern Cooperatives and the
    Mississippi Association of Cooperatives have been working with farmers
    to stabilize farms and homes destroyed by the storm, to provide
    shelter, basic supplies and financial assistance. They are also working
    long term to train people at their facilities and create cooperatives
    that address basic economic needs of these hard-hit communities, such
    as housing.
        The common thread through these stories is economic sustainability
    and revitalization. Substantial amounts of money generated by these
    cooperatives are being put back into the local economy by members.
    Cooperative Research--Filling a Gap
        The number of jobs and other data collected by the cooperative
    development centers and the success stories indicate that cooperatives
    have great potential to address many of the problems facing rural
    America. There is a serious gap, however, in the information about
    cooperatives. Though economic data was collected on cooperatives many
    years ago, there has been no comprehensive data collection effort to
    find out the impact of all types of cooperatives on the United States
    and regional economies.
        The President's budget this year includes $495,000 for research on
    the economic impact of cooperatives. The funding is for a cooperative
    research agreement between USDA and a qualified academic institution to
    direct research on the national economic impact of cooperatives. The
    research can assess how cooperatives can address emerging economic
    development needs in all sectors of the economy. The research funded
    for fiscal year 2007 will build on the research currently underway on
    the economic impact of all types of cooperatives. In addition, this
    research is essential to assess the impact and cost effectiveness of
    the Federal program on efforts to revitalize rural economies.
        The limited studies available indicate the potential is significant
    for cooperatives to address economic needs. According to the National
    Co-op Month Planning Committee's ``2005 Snapshot,'' a quick survey of
    co-ops, annual revenues for cooperatives are in excess of $211.9
    billion. In Wisconsin, a study funded by USDA found cooperatives
    supported close to 30,000 full time jobs. The South Dakota Rural
    Electric Association found that the electric co-ops there generated 800
    new jobs and $11 million in economic development over a 5 year period.
    The Alabama Credit Union League found that their State's credit unions
    generated 8,777 jobs, $288 million in household income and $24.1
    million in tax receipts.
        These types of studies need to be replicated on a nationwide basis
    for all types of cooperatives. This country needs data such as:
      --The number of jobs created by cooperatives both directly and
            indirectly.
      --The level of economic activity created by cooperatives.
      --The tax revenue generated by the level of economic activity.
      --A definitive census on the number of cooperatives and the types of
            good and services that are being offered.
      --The amount of patronage dividends that are returned to the members
            from their cooperatives.
      --The extent of the economic and social benefit where cooperatives
            can meet the needs of communities that are not adequately met
            by other types of businesses.
        As Liz Bailey, Executive Director of the Cooperative Development
    Fund noted:

        We all know that there is a basic lack of understanding about
    cooperatives in all levels of government, in the business community, in
    the academic world, in the philanthropic world and among the general
    public. Too few understand how cooperatives function and the role they
    play in the Nation's economy. We all use anecdotal stories to tell of
    successful cooperative enterprises, but we don't have access to the
    kind of aggregated economic data that is routinely used by economic and
    business analysts to map U.S. economic activity and interpret the data
    for those who make or influence public policy. Government, through its
    support of university research, has traditionally been the source of
    this kind of basic research . . . It's also important to have data that
    is continually updated. It can't be a one time snapshot . . . it's data
    that needs to be tracked and reported on a regular basis. (emphasis
    added) Testimony of Liz Bailey, USDA Public Meeting on Cooperative
    Research Agenda, September 27, 2005
    Chronic Underfunding Limits Opportunities
        The need for rural economic development and cooperative development
    is clear. Congress recognized the need when it developed the program:

        The Managers intend to target the limited funds available for the
    Rural Cooperative Development Grant program on cooperative development
    centers that operate on a regional or statewide basis. By focusing this
    grant program on regional centers rather than on small local projects,
    the Committee hopes to link cooperatives from different communities and
    different sectors of the economy to strengthen the cooperative movement
    as a whole. (emphasis added) Federal Agriculture Improvement and Reform
    Act of 1996, Conf.Rep., p. 432

        One of the ways Congress tried ``to strengthen the cooperative
    movement as a whole'' with the program was to ``emphasiz[e] job
    creation in rural areas through the development of rural cooperatives,
    value added processing, and rural businesses.'' (Conf.Rep., p. 431) The
    centers provide a cost effective and efficient way to deliver technical
    assistance that creates businesses, jobs and opportunities. But the
    program's funding has not kept up with the demand, which limits both
    the ability of current centers to provide assistance to create jobs and
    the development of new centers to ensure national coverage.
        Last year, for example, many projects that could have created jobs
    and economic opportunities were denied funding. Centers with proven
    track records, with business development expertise, were turned down.
    Though the program serves more than 40 States, the program was intended
    to cover the entire country. More funding is needed to ensure that all
    States are served by a center that can address the economic and
    entrepreneurial needs of the area.
        Private dollars also go into cooperative development. But these
    funds struggle to meet the need as well. The Cooperative Development
    Fund's Mutual Service Cooperative Fund, which makes grants for
    feasibility studies, educational programming and technical assistance
    projects, knows how great the demand for dollars is. In 2004, with
    $90,000 in available funds for grants, CDF received 44 applications
    requesting a total of $980,000. In 2005 the trustees narrowed the focus
    of the Fund and still received over $300,000 in proposals, 3 times the
    funds available.
        Cooperative development centers also would benefit from multi-year
    funding. Many times efforts to develop a business are halted due to a
    lack of commitment for funds in the future. Since businesses typically
    take at least 3 years from concept to operation, there is great need to
    have funds available during that period.
        The program's recent funding history shows little to no increase in
    the program over the past 5 years despite the continued growing demand.
      --Fiscal year 2006--$6.5 million (includes $500,000 for research
            agreement)
      --Fiscal year 2005--$6 million
      --Fiscal year 2004--$6.5 million
      --Fiscal year 2003--$6.5 million
      --Fiscal year 2002--$5.25 million
        This funding also is only a small portion of the program's
    authorized level of $50 million. The program's sponsors intended there
    to be enough funds to address the rural economic needs of the whole
    country.
    Request for Increased Appropriation for RCDG
        The President's fiscal year 2007 budget includes $7 million for the
    RCDG program, including $495,000 for research on the economic impact of
    cooperatives. We seek an increase in funding to at least $8.5 million,
    which would help provide funding for four to six additional centers and
    help fulfill the goal of serving all States. The $8.5 million would
    also ensure that sufficient funds are available to help build the
    research capacity to provide policymakers with information to assess
    the value of RCDG and how cooperatives can address economic issues
    facing the country. This would be a first step toward achieving the
    goals Congress intended for the program. Thank you for the opportunity
    to submit testimony on this important topic.
                                     ______

    Prepared Statement of the National Commodity Supplemental Food Program
                                  Association

        Mr. Chairman and Subcommittee members, I am Tim Robertson,
    President of the National Commodity Supplemental Food Program
    Association (NCSFPA). Thank you for this opportunity to present
    information regarding the Commodity Supplemental Food Program (CSFP).
        CSFP was our Nation's first food assistance effort with monthly
    food packages designed to provide protein, calcium, iron, and vitamins
    A and C. CSFP began in 1969 for low-income mothers and children,
    preceding the Special Supplemental Nutrition Program for Women,
    Infants, and Children known as WIC. CSFP pilot programs in 1983 added
    low-income seniors to the list of eligible participants and they now
    comprise nearly 90 percent of all participants.
        CSFP is a unique Federal/State and public/private effort. The USDA
    purchases specific nutrient-rich foods at wholesale prices for
    distribution. State agencies such as the department of health,
    agriculture or education provide administration and oversight. These
    agency's contract with community and faith based organizations to
    warehouse and distribute food, certify eligibility and educate
    participants. The local organizations build broad collaboration among
    non-profits, health units, and area agencies on aging so that seniors
    and others can quickly qualify for and receive their monthly
    supplemental food package along with nutrition education to improve
    their health and quality of life. This unique public/private
    partnership reaches even homebound seniors with vital nutrition.
        The foods provided through CSFP includes canned fruits and
    vegetables, juices, meats, fish, peanut butter, cereals and grain
    products, cheese, and other dairy products. The availability of these
    goods increases healthy food consumption among these low-income
    populations.
        The CSFP is also an important ``market'' for commodities supported
    under various farm programs, as well as an increasingly important
    instrument in meeting the nutritional and dietary needs of special low-
    income populations.
        In fiscal year 2006, the CSFP provided services through 150 non-
    profit community and faith-based organizations at over 1,800 sites
    located in 32 States, the District of Columbia, and two Indian
    reservations (Red Lake, Minnesota and Oglala Sioux, South Dakota). On
    behalf of those organizations the NCSFPA would like to express our
    concern and disappointment regarding the reduction of available CSFP
    resources for fiscal year 2006.
      --Congress in the fiscal year 2006 Agricultural Appropriations bill
            strongly encouraged USDA to make every effort to maintain the
            fiscal year 2005 caseload by making full use of CSFP inventory
            and carryover from preceding years and to access all available
            resources from bonus commodity holdings and CCC stocks.
      --It is not clear from the ``CSFP 2006 Final Caseload Assignments''
            memorandum whether USDA has made full use of all available
            resources, especially since States were instructed to cut
            program participation by 6.26 percent (32,902 seniors
            nationally).
      --The prospect of seniors not receiving needed CSFP food in a year
            when USDA has forecast in excess of $35.4 million in carryover
            inventory at the end of the fiscal year 2006 is disturbing.
            Clearly these inventories could and should be used to serve the
            full fiscal year 2006 caseload.
      --Other resources such as $4 million included for CSFP Gulf Coast
            operators in the defense bill, and full use of Commodity Credit
            Corporation (CCC) inventory appears not to have been factored
            into the CSFP 2006 final caseload assignments.
      --At a time when many Americans must choose between food or their
            medicine, utilities, and other basic expenses, the Federal
            Government should not be reducing benefits for our most
            vulnerable citizens. We respectfully request your review of
            USDA's adherence to your directive in the Agriculture
            Appropriation Bill.
        CSFP's 36 years of service stands as testimony to the power of
    partnerships among community and faith-based organizations, farmers,
    private industry and government agencies. The CSFP offers a unique
    combination of unparalleled advantages.
      --The CSFP specifically targets our Nation's most nutritionally
            vulnerable populations: seniors and young children.
      --The CSFP provides a monthly selection of food packages tailored to
            the nutritional needs of the population served. Eligible
            participants are guaranteed [by law] a certain level of
            nutritional assistance every month in addition to nutrition
            education regarding how to prepare and incorporate these foods
            into their diets.
      --The CSFP purchases foods at wholesale prices, which directly
            supports the farming community. The cost of the average food
            package for fiscal year 2006 is $15.04, but the retail value is
            approximately $50.00.
      --The CSFP involves the entire community in confronting the problem
            of hunger. There are thousands of volunteers as well as many
            private companies who donate money, equipment, and most
            importantly time and effort to deliver food to needy and
            homebound seniors. These volunteers not only bring food but
            companionship and other assistance to seniors who might have no
            other source of support. (See Attachment 1)
        The White House proposed budget for fiscal year 2007, released on
    Monday, February 6, 2006, would eliminate the CSFP completely, and
    would eliminate all of this effort and support of those 36 years. This
    proposal has shocked the entire CSFP community as well as legislators,
    anti-hunger and senior service organizations and concerned citizens.
    America's Second Harvest, AARP, FRAC, and others have all voiced their
    opposition to the elimination of CSFP. It is unconscionable to
    eliminate benefits for some of our most vulnerable citizens and to
    eliminate hope of those waiting for participation in the program. It is
    the cruelest cut for the greatest generation.
        In a recent CSFP survey, more than half of seniors living alone
    reported an income of less than $750 per month. Of those respondents
    from two-person households, more than half reported an income of less
    than $1,000 per month. Fewer than 25 percent reported being enrolled in
    the Food Stamp Program. Over 50 percent said they ran out of food
    during the month. Also, close to 70 percent senior respondents say they
    use money for medical bills not food.
        The Senate Agriculture Appropriations Subcommittee has consistently
    supported CSFP, acknowledging it as a cost-effective way of providing
    nutritious supplemental foods. This year, your support is needed
    urgently to provide adequate resources for the 536,196 mothers,
    children and seniors currently receiving benefits, 20,500 low-income
    participants currently waiting in five new States and 154,259 seniors
    waiting in current States for this vital nutrition program.
        There is no discernible plan to address the long-term needs of
    those affected by the elimination of CSFP. The proposed transition plan
    provides that seniors being removed from CSFP will be provided a Food
    Stamp Program (FSP) benefit of $20 per month for up to 6 months, or
    until the participant actually enrolls in the FSP, whichever comes
    first. As referenced earlier, CSFP provides a food package that costs
    USDA about $15 per month. It has a retail value of approximately $50.
    How does someone use $20 to purchase approximately $50 worth of
    nutritious foods? What happens at the end of 6 months? Simply
    transferring seniors to the FSP is an inadequate solution. It is
    essential for seniors to have access to services which they
        feel is offered with dignity and respect. Many will outright reject
    the idea of applying for FSP benefits. According to the ERS Evaluation
    of the USDA Elderly Nutrition Demonstrations: Volume I:

        ``The Commodity alternative benefit demonstration in North Carolina
    was popular both among new applicants and among existing FSP
    participants. Clients eligible for low FSP benefits were more likely to
    get the commodity packages, which had a retail value substantially
    greater than their FSP benefits''. In particular, seniors described the
    anxiety of using FSP benefits in stores, where they felt shoppers and
    store clerks looked down on them. The demonstrations attracted a
    particularly large share of clients eligible for the $10 benefit
    because the retail value of the commodity packages was worth $60-$70''.

        Depending on their non-cash assets, seniors may not qualify for a
    FSP benefit level equivalent to the CSFP food package. Seniors
    receiving the minimum benefit would not be eligible for the $20/month
    transitional benefit. The 25 percent of current CSFP participants who
    already enrolled in the FSP will lose the benefits of CSFP and those
    benefits will not be replaced at a time when they are struggling to
    make ends meet. CSFP and FSP are supplemental programs. They work
    together to make up the shortfall that many of our seniors are facing
    each month. Both programs need to be available as part of the ``safety
    net'' for our low-income participants.
        USDA reports that the average FSP benefit paid to senior citizens
    is about $65 per month, but in reality, many senior citizens receive
    only the minimum monthly benefit of $10, which has not been updated
    since 1975. USDA figures also report households rather than individual
    participants and include households with disabled family members.
        The proposed transition plan for women, infants and children
    enrolled in the CSFP is to transfer them to WIC. However, due to
    increasing coordination between WIC and CSFP at the State and community
    levels, the number of WIC-eligible mothers and children enrolled in the
    CSFP is steadily declining. In some States, this figure is less than 2
    percent of all enrolled women and children, eradicating supplemental
    food and nutrition benefits for that population as well. Further, the
    majority of women and children receiving CSFP food are 6 month
    postpartum women and 5 year old children who are not eligible for the
    WIC Program.
        The National Commodity Supplemental Food Program Association
    requests the Senate Agriculture Appropriations Subcommittee take the
    appropriate actions to fund CSFP for fiscal year 2007 at $160 million
    as illustrated below:

                              [Dollars in millions]
    ------------------------------------------------------------------------
                Description               People (caseload)       Funding
    ------------------------------------------------------------------------
    Maintain fiscal year 2005 Caseload  536,196.............          $128.0
     Requirements in Existing States.
    Five New States (AK, DE, OK, NJ,    20,500..............             3.7
     UT).
    Current States Senior Needs.......  154,259.............            27.6
    USDA Costs for Procuring            ....................              .7
     Commodities.
                                       -------------------------------------
          Total CSFP Request for        710,955.............           160.0
           fiscal year 2007.
    ------------------------------------------------------------------------

        With the aging of America, CSFP must be an integral part of USDA
    Senior Nutrition Policy as well as comprehensive plans to support the
    productivity, health, independence, and quality of life for America's
    seniors.
        Measures to show the positive outcomes of nutrition assistance to
    seniors must be strengthened. A 1997 report by the National Policy and
    Resource Center on Nutrition and Aging at Florida International
    University, Miami--Elder Insecurities: Poverty, Hunger, and
    Malnutrition indicated that malnourished elderly patients experience 2
    to 20 times more medical complications, have up to 100 percent longer
    hospital stays, and incurs hospital costs $2,000 to $10,000 higher per
    stay. Proper nutrition promotes health, treats chronic disease,
    decreases hospital length of stay and saves health care dollars.
        Rather than eliminating the program, the NCSFPA recommends the
    following initiatives to strengthen CSFP:
      --Develop a formal evaluation process to demonstrate individual and
            program outcomes of CSFP with Federal, State, and local CSFP
            managers included in the study design.
      --Restore financial guidelines for seniors to the original level of
            185 percent of poverty.
      --Set ``greatest need within a project area'' as the priority for
            service or let each State set its priority for service under a
            plan approved by the Secretary of Agriculture.
      --Support and expand the program in those States that have
            demonstrated an interest in the CSFP, including the 5 States
            that already have USDA-approved plans to operate CSFP
            (Arkansas, Delaware, New Jersey, Oklahoma, and Utah) or that
            have demonstrated a willingness to continue and expand current
            CSFP services.
        This program continues with committed grassroots operators and
    dedicated volunteers. CSFP's mission is to provide quality nutrition
    assistance economically, efficiently, and responsibly always keeping
    the needs and dignity of our participants first. We commend the Food
    and Nutrition Service of the Department of Agriculture and particularly
    the Food Distribution Division for their continued innovations to
    strengthen the quality of the food package and streamline
    administration. We also remain committed to providing quality services
    in collaboration with the community organizations and volunteers that
    contribute more than 50 percent of the resources used in providing
    these services.

                                                    ATTACHMENT 1.--NATIONAL CSFP ASSOCIATION ADMINISTRATIVE EXPENSE/VALUE SURVEY FOR FISCAL YEAR 2005
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Goods &                                                       Extra Goods
                                                                           USDA       Not Reimbursed       CSFP          Services        Volunteer     Annual Total    Percent Paid     donated to
                                Programs                                Reimbursed     by USDA Cash    Expenditures     donated to      Labor Hours    Program Value      by USDA          CSFP
                                                                           Cash                            Cash        agency Value        Value                                       participants
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    New Hampshire...................................................        $425,689         $16,902        $442,591  ..............        $117,370        $559,961              76          $1,668
    New York........................................................       1,896,086          85,500       1,981,586         $20,000           9,126       2,010,712              94          10,425
    Vermont.........................................................         257,950         318,327         576,277           1,200          96,578         674,055              38  ..............
    Washington DC...................................................         449,139       1,500,000       1,949,139       1,600,000          12,513       3,561,652              13  ..............
    Pennsylvania....................................................         834,444         147,234         981,678         332,604         234,310       1,548,592              54         278,303
    Kentucky........................................................         912,417          35,538         947,955           5,000         376,799       1,329,754              69  ..............
    Mississippi.....................................................         402,779  ..............         402,779  ..............         189,540         592,319              68  ..............
    North Carolina..................................................          79,849          40,000         119,849  ..............           3,438         123,287              65          20,000
    South Carolina..................................................         215,880         113,827         329,707          66,000          98,456         494,163              44          14,500
    Tennessee.......................................................         827,805  ..............         827,805  ..............  ..............         827,805             100  ..............
    Illinois........................................................         903,174           3,000         906,174  ..............         341,172       1,247,346              72  ..............
    Indiana.........................................................         264,831          32,020         296,851          19,440         369,603         685,894              39             100
    Michigan........................................................       4,535,044       2,237,705       6,772,749         296,000       3,696,683      10,765,433              42         577,199
    Minnesota.......................................................         806,379         277,890       1,084,269          28,000         798,525       1,910,794              42         497,700
    Red Lake, MN....................................................           5,937           5,937          11,874  ..............  ..............          11,874              50  ..............
    Ohio............................................................         713,807         250,997         964,804          54,800         442,629       1,462,233              49         166,590
    Wisconsin.......................................................         287,026          15,000         302,026  ..............         305,370         607,396              47          79,797
    Louisiana.......................................................       4,672,088  ..............       4,672,088         377,479       1,483,387       6,532,955              72           2,500
    New Mexico......................................................       1,120,106         195,000       1,315,106          78,719         231,800       1,625,625              69       1,208,353
    Texas...........................................................         706,534          85,000         791,534           1,500         115,830         908,864              78          12,000
    Colorado........................................................       1,196,217         425,963       1,622,180          13,375         174,254       1,809,809              66         650,425
    Iowa............................................................         228,563         286,543         515,106  ..............          67,247         582,353              39         108,510
    Kansas..........................................................         342,332          69,019         411,351         329,960         255,881         997,192              34          81,424
    Missouri........................................................         539,700         109,072         648,772           2,000         398,455       1,049,227              51  ..............
    Montana.........................................................          81,528          29,649         411,177         115,929         515,022       1,042,128              37          37,800
    Nebraska........................................................         761,247         116,207         877,454          46,449         276,044       1,199,947              63          74,960
    North Dakota....................................................         161,155          43,208         204,363  ..............         192,594         396,957              41           1,695
    South Dakota....................................................         161,911           5,005         166,916          36,875          87,785         291,576              56          12,480
    Oglala Sioux, SD................................................          37,779  ..............          37,779  ..............  ..............          37,779             100  ..............
    Alaska..........................................................         138,798  ..............         138,798  ..............          35,100         173,898              80
    Arizona.........................................................         968,788         640,636       1,609,424         442,950       1,030,066       3,082,440              31         655,000
    California......................................................       3,095,354       1,036,699       4,132,053         242,424       3,532,078       7,906,555              39         588,868
    Nevada..........................................................         401,133          16,000         417,133           2,000           1,123         420,256              95           4,000
    Oregon..........................................................          72,603  ..............          72,603  ..............  ..............          72,603             100  ..............
    Washington......................................................         134,426          31,000         165,426          12,600           6,318         184,344              73  ..............
                                                                     -------------------------------------------------------------------------------------------------------------------------------
          Grand Total...............................................      28,938,498       8,168,878      37,107,376       4,125,304      15,495,096      56,727,776              51       5,084,297
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

        Prepared Statement of the National Turfgrass Evaluation Program

        Mr. Chairman and Members of the Subcommittee: On behalf of the
    National Turfgrass Evaluation Program (NTEP), I appreciate the
    opportunity to present to you the turfgrass industry's need and
    justification for continuation of the $490,000 appropriated in the
    fiscal year 2006 budget for turfgrass research within the Agricultural
    Research Service (ARS) at Beltsville, MD. Secondly, we ask that the
    committee support and accept the $1,880,000 for Drought Mitigation in
    the President's budget request. This funding will be used by ARS to
    conduct turfgrass water conservation and salinity research at Phoenix,
    AZ and Riverside, CA. Thirdly, to implement the most critical needs
    within the National Turfgrass Research Initiative, we are asking for
    five individual research positions of $450,000 each. This amount is
    being requested by senators in the states where the positions are
    located. We appreciate the support of research funding at Beaver, WV
    ($330,000) provided by the committee in fiscal year 2006 and request
    that funding be restored in fiscal year 2007. All funding provided by
    the Committee is requested to go directly to ARS/Beltsville, not the
    industry per se.
    Restoration of funding for the existing ARS Scientist Position and
            related support activities at Beltsville, MD ($490,000)
        NTEP and the turfgrass industry are requesting the Subcommittee's
    support for $490,000 to continue funding for the full-time scientist
    staff position within the USDA, ARS at Beltsville, MD, focusing on
    turfgrass research, that was provided by the Committee in the fiscal
    year 2006 budget, and in the four previous budget cycles. We consider
    this funding our Congressional ``baseline'', i.e. that funding which is
    central to and critical for the mission of the National Turfgrass
    Research Initiative. We are very grateful for this support and hope the
    Committee will continue this funding.
        Turfgrass provides multiple benefits to society including child
    safety on athletic fields, environmental protection of groundwater,
    reduction of silt and other contaminants in runoff, and green space in
    home lawns, parks and golf courses. Therefore, by cooperating with
    NTEP, USDA has a unique opportunity to take positive action in support
    of the turfgrass industry. While the vast majority of the USDA's funds
    have been and will continue to be directed toward traditional ``food
    and fiber'' segments of U.S. agriculture, it is important to note that
    turfgrasses (e.g., sod production) are defined as agriculture in the
    Farm Bill and by many other departments and agencies. It should also be
    noted that the turfgrass industry is the fastest growing segment of
    U.S. agriculture, while it receives essentially no federal support.
    There are no subsidy programs for turfgrass, nor are any desired.
        For the past 70 years, the USDA's support for the turfgrass
    industry has been modest at best. The turfgrass industry's rapid
    growth, importance to our urban environments, and impact on our daily
    lives warrant more commitment and support from USDA.
        A new turfgrass research scientist position within USDA/ARS was
    created by Congress in the fiscal year 2001 budget. Additional funding
    was added in fiscal year 2002 with the total at $490,000. A research
    scientist was hired, and is now working at the ARS, Beltsville, MD
    center. A research plan was developed and approved by ARS. This
    scientist has used the funding for a full-time technician, equipment
    and supplies to initiate the research plan and for collaborative
    research with universities. We have an excellent scientist in place,
    and he is making good progress in establishing a solid program. At this
    point, losing the funding for the position would be devastating to the
    turf industry, as significant research has begun.
    Support the President's budget request for Drought Mitigation research
            as proposed by ARS (See ARS Explanatory Notes, pages 10-82, 10-
            83) ($1,880,000)
        The turfgrass industry is excited that for the first time, the
    President's budget contains funding for turfgrass research within ARS.
    This funding will be used to hire scientists in two very important
    locations, Riverside, CA and Phoenix, AZ, focusing on water
    conservation, wastewater reuse and salinity research. These issues are
    the most critical research needs for the survival of the turf industry.
    Following is a brief description of the research that ARS will conduct
    with this funding:
        ARS will:
        Develop Technology and Management Systems to Use Non-Potable Water
    to Reduce Agriculture's Vulnerability to Drought ($1,880,000 Total).--
    In the process, ARS will develop systems to safely reuse wastewater and
    low-quality water as a means of irrigating agricultural, horticultural
    and turf-based enterprises in an environmentally and economically
    sustainable manner
        As noted in USDA's Explanatory Notes accompanying this budget
    request, this funding will be directed to the following two critical
    locations:
    Phoenix, AZ, ($940,000)
        The U.S. Water Conservation Lab in Phoenix will determine the on-
    site impacts and movement in the air, soil, plant, and ground water of
    biological and chemical substances contained in treated and untreated
    waste water used for irrigation of turfgrass. They will also develop
    irrigation technologies and management systems to mitigate the impact
    of elevated levels of these compounds and nutrients when wastewater is
    used in the production of turf and specialty crops.
    Riverside, CA, ($940,000)
        This research will be conducted at the world-renowned U.S. Salinity
    Lab. The Riverside lab will focus on the development of new irrigation
    technologies and systems to either mitigate or manage the effect of
    saline irrigation on the production of turf and specialty crops.
    Request funding of Congressional earmarks for five ARS scientist
            positions at four ARS installations @ $450,000 each (Total:
            $2,250,000)
        The turfgrass industry also requests that the Subcommittee
    appropriate an additional $2,250,000 for the National Turfgrass
    Research Initiative. This Initiative has been developed by USDA/ARS in
    partnership with the turfgrass industry. We are asking for five
    priority research positions at four locations across the United States.
    These five positions address the most pressing research needs, namely
    water use/efficiency and environmental issues. $450,000 is being
    requested for each location.
        The USDA needs to initiate and maintain ongoing research on
    turfgrass development and improvement for the following reasons:
        The value of the turfgrass industry in the United States is $40
    billion annually. There are an estimated 50,000,000 acres of turfgrass
    in the United States. Turfgrass is the number one or two agricultural
    crop in value and acreage in many States (e.g., MD, PA, FL, NJ, NC).
        As our society becomes more urbanized, the acreage of turfgrass
    will increase significantly. In addition, State and local
    municipalities are requiring the reduction of water, pesticides and
    fertilizers on turfgrass. However, demand on recreational facilities
    will increase while these facilities will still be required to provide
    safe turfgrass surfaces.
        Currently, the industry itself spends about $10 million annually on
    applied and proprietary turfgrass research. However, private and
    university research programs do not have the time nor the resources to
    conduct basic research and to identify completely new sources of
    beneficial genes for stress tolerance. ARS turfgrass scientists will
    enhance the ongoing research currently underway in the public and
    private sectors. Because of its mission to conduct the Nation's
    research for agricultural commodities, ARS is the proper delivery
    system for this research.
        Water management is a key component of healthy turf and has direct
    impact on nutrient and pesticide losses into the environment.
    Increasing demands and competition for potable water make it necessary
    to use water more efficiently. Also, drought situations in many regions
    have limited the water available and, therefore, have severely impacted
    the turf industry as well as homeowners and young athletes. Therefore,
    new and improved technologies are needed to monitor turf stresses and
    to schedule irrigation to achieve the desired quality. Technologies are
    also needed to more efficiently and uniformly irrigate turfgrasses.
    Drought tolerant grasses need to be developed. In addition, to increase
    water available for irrigation, waste water (treated and untreated)
    must be utilized. Some of these waste waters contain contaminants such
    as pathogens, heavy metals, and organic compounds. The movement and
    accumulation of these contaminants in the environment must be
    determined.
        USDA conducted significant turfgrass research from 1920-1988.
    However, since 1988, no full-time scientist has been employed by USDA,
    Agricultural Research Service (ARS) to conduct turfgrass research
    specifically, until the recently appropriated funds became available.
        ARS and the turfgrass industry enjoy a special, collaborative
    relationship, and have even entered into a cooperative Memorandum of
    Understanding (MOU). The turfgrass industry has met on numerous
    occasions with USDA/ARS officials to discuss the new turfgrass
    scientist positions, necessary facilities, and future research
    opportunities. In January 2002, ARS held a customer workshop to gain
    valuable input from turfgrass researchers, golf course superintendents,
    sod producers, lawn care operators, athletic field managers and others
    on the research needs of the turfgrass industry. As a result of the
    workshop, ARS and the turfgrass industry have developed the National
    Turfgrass Research Initiative. The highlights of this strategy are as
    follows:
        ARS, as the lead agency at USDA for this initiative, has graciously
    devoted a significant amount of time to the effort. Like the industry,
    ARS is in this research endeavor for the long-term. To ARS' credit, the
    agency has committed staff, planning and technical resources to this
    effort. This year is the first time ARS has been able to include some
    funding in the President's budget for the Turfgrass Research
    Initiative. However, there are so many issues and needs, that the
    industry is desperate for answers. Thus, to address the critical
    research needs, the industry is left with no alternative but to come
    directly to Congress for assistance through the appropriations process.
        The role and leadership of the Federal Government and USDA in this
    research are justifiable and grounded in solid public policy rationale.
    ARS is poised and prepared to work with the turfgrass industry in this
    major research initiative. However, ARS needs additional resources to
    undertake this mission.
        The turfgrass industry is very excited about this new proposal and
    wholeheartedly supports the efforts of ARS. Since the customers at the
    workshop identified turfgrass genetics/germplasm and water quality/use
    as their top priority areas for ARS research, for fiscal year 2007, the
    turfgrass industry requests that the following positions be established
    within USDA/ARS:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Position 1: Component II: Germplasm: Molecular                  $450,000
     Biologist: Southwest--Lubbock, TX
    Position 2: Component I: Water: Agricultural Engineer--          450,000
     Irrigation: Transition Zone--Florence, SC
    Position 3: Component IV: Environment: Agricultural              450,000
     Engineer--Fate & Transport: Northeast--University Park,
     PA
    Position 4: Component III: Pest Management: Weed                 450,000
     Scientist: Northeast--University Park, PA
    Position 5: Component II: Germplasm: Geneticist--                 50,000
     Biodiversity: Upper West--Logan, UT
                                                             ---------------
          Total.............................................       2,250,000
    ------------------------------------------------------------------------

        For this research we propose an ARS-University partnership, with
    funding allocated to ARS for in-house research as well as in
    cooperation with university partners. For each of the individual
    scientist positions, we are requesting $300,000 for each ARS scientist
    position with an additional $150,000 attached to each position to be
    distributed to university partners, for a total of $450,000 per
    position. We are also asking that the funding be directed to ARS and
    then distributed by ARS to those university partners selected by ARS
    and industry representatives.
    Request restoration of funding for the ARS lab in Beaver, WV that was
            appropriated in fiscal year 2006 ($330,000)
        In the last 2 fiscal years, the Subcommittee has generously
    provided funding for turfgrass research at the Appalachian Farming
    Systems Research Center in Beaver, WV. The Subcommittee allocated
    $150,000 in fiscal year 2005 and an additional $180,000 in fiscal year
    2006, bringing the total to $330,000. As the Beaver lab has expertise
    in soils research, the turf industry has embraced this funding and the
    research possibilities. The turf industry is now working with the lab
    to construct a research program on soil issues that affect turfgrass
    production. This research fits very nicely within the framework of the
    National Turfgrass Research Initiative. Therefore, we appreciate the
    support of the Subcommittee for this new funding in the last 2 fiscal
    years and ask for your continued support of that funding in fiscal year
    2007.
        In addition, the Committee should be receiving Member requests for
    funding of each of the five positions described above. We appreciate
    your strong consideration of each individual member request for the
    turfgrass research position in his or her respective state.
        In conclusion, on behalf of the National Turfgrass Evaluation
    Program and the turfgrass industry across America, I respectfully
    request that the Subcommittee continue the funding appropriated in
    fiscal year 2006 for Beltsville, MD, ($490,000) and Beaver, WV
    ($330,000) within the Agricultural Research Service. I also request
    that the committee support the President's budget request of $1,880,000
    for Drought Mitigation. Finally, I request that the Subcommittee
    appropriate an additional $2,250,000 for five new turfgrass scientist
    positions around the country, with $450,000 provided for each location.
        Thank you very much for your assistance and support.
                                     ______

        Prepared Statement of the National Fish and Wildlife Foundation

        Mr. Chairman and Members of the Subcommittee: I appreciate the
    opportunity to submit testimony regarding the fiscal year 2007 funding
    request for the National Fish and Wildlife Foundation (Foundation).
    Included in this testimony is a summary of our history and fiscal year
    2005 accomplishments, as well as the new and innovative programs we
    hope to accomplish with the funding provided by this Committee.
        Congress established the Foundation 22 years ago, and since that
    time the Foundation's vision for more healthy and abundant populations
    of fish, wildlife and plants has flourished through the creation of
    numerous valuable partnerships. The breadth of our partnerships is
    highlighted through our active agreements with 14 Federal agencies, as
    well as various corporations, foundations and individual grantees.
    Through these unique arrangements, we are able to leverage Federal
    funds, bring agencies and industry together and produce tangible,
    measurable results. Our history of collaboration has given way to
    programs and initiatives such as the North American Waterfowl
    Management Plan, the Neotropical Migratory Bird Conservation Program,
    the Chesapeake Bay Small Watershed Grants Program and the Pulling
    Together Initiative. With the support of the Committee in fiscal year
    2007, we can continue to uphold our mission of enriching fish, wildlife
    and the habitat on which they depend.
        Federal dollars appropriated by this Committee allow the Foundation
    to be highly successful in assisting the Natural Resources Conservation
    Service (NRCS) in accomplishing its mission to help people conserve,
    maintain and improve our natural resources and environment. Whether it
    involves farm, range or grassland conservation, species management or
    conservation education, the Foundation strategically invests the
    Federal funds entrusted to us in sound projects. The Foundation
    respectfully requests that this Subcommittee fund the Foundation at $4
    million through the U.S. Natural Resources Conservation Service
    Appropriation.
        This request would allow the Foundation to expand its highly
    successful grant program to better assist NRCS in maximizing private
    land conservation.
        Since the grants partnership began in 2000, the Foundation has
    received $18 million in NRCS Federal funds ($3 million per fiscal
    year), which it has dedicated to a matching grant program focused on
    private land conservation. The Foundation has supported over 400
    projects in 49 states by leveraging the $18 million in NRCS funds into
    more than $75 million in on-the-ground conservation. These projects
    have led to the direct restoration of more than 200,000 acres of
    farmland and rangeland and 775 miles of streams and rivers. In fiscal
    year 2005, the Foundation received $3 million in NRCS Federal funds,
    which it leveraged into more than $12 million in on-the-ground
    conservation. With the funds provided by the Committee in fiscal year
    2006, we are on track to successfully continue leveraging NRCS funds to
    increase on-the-ground conservation benefits.
        The Foundation's achievements are based on a competitive grant
    process where Federal funds are matched by the grantee with non-Federal
    funds and in-kind services. Grantees include Resource Conservation and
    Development Areas, conservation districts, universities and non-profit
    organizations who partner with farmers and ranchers to support
    conservation efforts on private land. The Foundation also works to
    further maximize Federal funds by providing private funds through the
    generosity of our growing number of corporate and foundation partners.
    These funds are in addition to the non-Federal funds that are provided
    by the Foundation's grantees. In the Foundation's partnership with
    NRCS, Federal funds have been supplemented with funding from Shell Oil
    Company, FMC Corporation, Anheuser-Busch Companies, Inc., Southern
    Company, Summer T. McKnight Foundation, Charles Stewart Mott
    Foundation, William Penn Foundation and the David and Lucile Packard
    Foundation. The Foundation is also pleased to report that the Kellogg
    Foundation has agreed to a multi-year partnership beginning in fiscal
    year 2006 to further the Foundation's agriculture conservation work.
        Working Landscapes.--Through our partnership, the Foundation works
    with NRCS to identify and fund projects that have strong support in
    affected agricultural and rural communities. We place our highest
    priority on projects integrating conservation practices on ongoing
    agricultural, ranching and forestry operations with the goal of
    improving the ecological health of working lands. We fund partners and
    provide expertise by engaging watershed experts, ranchers, foresters,
    farmers, local governments and non-profits to undertake on-the-ground
    private land activities with willing landowners. Through these efforts,
    the Foundation has helped to reduce agricultural runoff, remove
    invasive species and restore native ecosystems.
        Conserving Fish, Wildlife and Plants.--With our NRCS dollars, the
    Foundation funds projects that directly benefit diverse fish and
    wildlife species, including salmon in the West, migratory birds in the
    Midwest and grassland birds in the South. Habitat for native fish has
    been restored on private lands throughout the United States through
    vegetative planting, streambank stabilization, livestock fencing and
    nutrient reduction efforts. In addition to improving water quality,
    efforts have been undertaken by our grantees to reduce water loss
    caused by invasive species or from outdated irrigation systems. By
    reducing the water taken from rivers, there is less chance that drought
    will negatively impact aquatic life.
        We also measure our success, in part, by preventing the listing of
    species under the Endangered Species Act and by stabilizing and
    hopefully moving others off the list. Some species that have received
    support through our NRCS grant program include salmonids, golden-
    cheeked warblers, black-capped vireos, Southwestern willow flycatchers,
    whooping cranes, sage grouse, lesser prairie chickens, aplomado
    falcons, black-tailed prairie dogs, Louisiana black bears, bog turtles,
    tiger salamanders and Karner blue butterflies. We invest in common
    sense and innovative cooperative approaches to endangered species,
    building bridges between the government and the private sector.
        Expanding Conservation Education Opportunities.--Our grantees also
    use our NRCS dollars to expand conservation education opportunities. Of
    our fiscal year 2005 NRCS partnership grants, over one-fourth contained
    an environmental education or outreach component. Some of the
    conservation education projects supported through our NRCS grant
    program seek to educate farmers and ranchers on conservation practices,
    while demonstrating how best management practices and wildlife
    incentives provide both environmental and economic benefits. Other
    projects have provided training to secondary school teachers on the
    ecological, economic and cultural benefits of rangeland and farmland
    conservation.
        Special Grant Programs.--In fiscal year 2005, NRCS joined the
    Foundation's Pulling Together Initiative, a grant program that supports
    the creation of local cooperative Weed Management Area partnerships.
    These partnerships bring together local landowners, citizens groups and
    weed experts to develop and implement strategies for managing weed
    infestations on public lands, natural areas and private working lands.
    Through this collaborative program, NRCS staff is able to join invasive
    species experts from the U.S. Fish and Wildlife Service, USDA-Forest
    Service, Bureau of Land Management, Animal and Plant Health Inspection
    Service and the Department of Defense to review and jointly select the
    most innovative weed management projects. This collaborative model has
    proven so successful that in late fiscal year 2005, the Foundation
    launched a new strategically focused grant program targeting the Great
    Lakes Watershed. The partners in this program include the Environmental
    Protection Agency, U.S. Fish and Wildlife Service, National Oceanic and
    Atmospheric Administration and the USDA-Forest Service. The Foundation
    is currently in discussions with NRCS regarding their formal
    participation in the program for the next grant cycle.
        The Foundation is currently developing two additional Special Grant
    Programs that will be launched later this year. The purpose of the
    first grant program is to implement the National Fish Habitat
    Initiative Action Plan. The National Fish Habitat Initiative is a
    multi-agency, multi-partner initiative to improve our Nation's aquatic
    resources. The Foundation's grant program will bring together Federal
    and non-Federal funds to strategically invest in priority fish habitat
    grants. The Foundation's second grant program will focus on the Upper
    Mississippi River Watershed. The program is being launched at the
    direction of the USDA-Forest Service with the goal of restoring private
    land streambanks with native trees and grasses. The Foundation is
    hoping to expand this program into a multi-partnered effort in fiscal
    year 2007.
        Evaluation.--The Foundation has become a leader in evaluation and
    adaptive management among its peers. The Foundation's goal is to build
    the capacity of both itself and its partners to undertake more
    effective evaluation, to assist in both measuring performance and
    adapting methods and funding strategies for more effective
    conservation. To address these goals, the Foundation is implementing
    several evaluation strategies simultaneously. First, the Foundation has
    instituted new protocols within its application process to provide the
    measurable indicators needed to evaluate the impacts of our programs.
    Second, the Foundation has convened discussions among our agencies
    partners to identify and coordinate potential opportunities for
    collaboration within evaluation. One of the initial results of these
    meetings has been an interest in piloting new evaluation indicators, to
    better articulate the Federal investment for GPRA and PART
    requirements.
        Third, the Foundation has commissioned several third-party
    evaluations targeting standard methods like culvert removal to full
    program evaluations to learn where we have been successful and where
    past methods have not provided the desired impact. As an example, in
    fiscal year 2006, the Foundation's Chesapeake Bay Small Watershed
    Grants Program will be evaluated for the first 5 years of grant-making.
    The evaluation will include 355 projects associated with about $10.6
    million in Federal funds. The Federal legislation accompanying this
    program included 10-year goals, and this evaluation presents an
    opportunity to assess the mid-way mark in helping the Foundation and
    its partners better focus their resources over the next 5 years. To
    capture the evaluations and lessons learned, the Foundation is taking a
    fourth key step by developing a new searchable project website where
    users will be able to query information and learn more about funded
    projects, including how to adapt projects for higher rates of success.
        Continued Need.--The Foundation is uniquely positioned to continue
    assisting NRCS in implementing beneficial conservation practices on our
    Nation's farms and ranches by leveraging NRCS's scarce Federal
    resources to maximize on-the-ground conservation benefits. The
    Foundation's matching grant program has the flexibility to address many
    agricultural conservation needs. These include, but are not limited to,
    increasing instream flow for rivers while continuing to support
    agricultural irrigation, promoting the recovery of specific threatened
    or endangered animals on private lands, implementing critical
    conservation practices on private lands that do not qualify for funding
    under a Farm Bill program, working with non-traditional partners such
    as the Amish and Mennonites and by forging broad community-based
    partnerships. Additional resources are needed in fiscal year 2007 to
    continue meeting the growing demand for private land conservation,
    while expanding the participation of NRCS into new multi-partner
    programs.
        Accountability and Grantsmanship.--The Foundation constantly
    strives to improve the grant making process while maintaining a healthy
    level of oversight. To improve ease of use for potential applicants,
    Foundation applications are now completed and reviewed electronically.
    In early 2006, to further improve efficiency, the Foundation released a
    revised application, grant contract template and reporting form. Even
    with these efficiencies, the Foundation still requires strict financial
    reporting by grantees and has once again received an unqualified audit
    in fiscal year 2005.
        In addition to the evaluation requirements described earlier, all
    potential grants are subject to a peer review process. This involves
    five external reviews representing state agencies, Federal agencies,
    affected industry, environmental non-profits and academics. Before
    being recommended to the Foundation's Board of Directors, grants are
    also reviewed internally by staff, including our conservation
    scientists. The internal review process examines the project's
    conservation need, technical merit, the support of the local community,
    the variety of partners and the amount of proposed non-Federal cost
    share. The Foundation also provides a 30-day notification to the
    Members of Congress for the congressional district and state in which a
    grant will be funded, prior to making a funding decision.
        Basic Facts About the Foundation.--The Foundation is governed by a
    25-member Board of Directors, appointed by the Secretary of the
    Interior and in consultation with the Secretary of Commerce. At the
    direction of Congress, the Board operates on a nonpartisan basis.
    Directors do not receive any financial compensation for service on the
    Board; in fact, all of our directors make financial contributions to
    the Foundation. It is a diverse Board, representing the corporate,
    philanthropic and conservation communities; all with a tenacious
    commitment to fish and wildlife conservation. I took over the
    chairmanship in January, after serving on the Board for 10 years. It is
    an honor to lead such a prestigious board.
        The National Fish and Wildlife Foundation continues to be one of,
    if not the most, cost-effective conservation programs funded in part by
    the Federal government. Since our inception in 1984 through fiscal year
    2005, the Foundation has supported over 8,190 grants and leveraged $339
    million in Federal funds into more than $1 billion in on-the-ground
    conservation. None of our Federally appropriated funds are used for
    lobbying, litigation or the Foundation's administrative expenses. By
    implementing real-world solutions with the private sector while
    avoiding regulatory or advocacy activity, our approach is more
    consistent with this Congress' philosophy than ever before. We are
    confident that the money you appropriate to the Foundation will
    continue to make a difference.
                                     ______

              Prepared Statement of the National Organic Coalition

        Chairman Bennett, Ranking Member Kohl, and Members of the
    Subcommittee: My name is Steven Etka. I am submitting this testimony on
    behalf of the National Organic Coalition (NOC) to detail our requests
    for fiscal year 2007 funding for several USDA marketing, research, and
    conservation programs of importance to organic agriculture.
        The National Organic Coalition (NOC) is a national alliance of
    organizations working to provide a voice for farmers, ranchers,
    environmentalists, consumers and others involved in organic
    agriculture. The current members of NOC are the Center for Food Safety,
    Rural Advancement Foundation International-USA, National Cooperative
    Grocers Association, and the Northeast Organic Farming Association-
    Interstate Council.
        We urge the Subcommittee's strong consideration of the following
    funding requests for various USDA programs of importance to organic
    farmers, marketers and consumers:
    USDA/Agricultural Marketing Service (AMS)
                National Organic Certification Cost-Share Program Request:
                        $1.5 million
        In recognition of the costs to farmers and handlers associated with
    the process of organic certification, the National Organic
    Certification Cost Share program was authorized by Section 10606 of the
    Food Security and Rural Investment Act of 2002. In fiscal year 2002
    initial funding of $5 million was provided for this program through the
    Commodity Credit Corporation (CCC) to AMS. The assistance provided by
    this program has been particularly critical to small-to-medium scale
    farmers and handlers struggling with the costs of mandatory organic
    certification and required annual updates. Unfortunately, the initial
    CCC funding for this program has been fully expended. Therefore, we are
    seeking stop-gap funding of $1.5 million from the CCC to keep the
    program running until the program can be reauthorized.
                Organic Standards Request: 3.13 million
        In fiscal year 2006, Congress specified funding of $2.026 million
    for the AMS category of ``Organic Standards.'' In the President's
    fiscal year 2007 budget submittal, a request was made for $3.13 million
    for AMS ``Organic Standards.'' We support the President's budget, in
    order to provide the National Organic Program with greater resources
    for certifier training, National Organic Standards Board support,
    enforcement, and public outreach and education on upcoming rulemaking
    processes.
        For several years, report language has been included in the Senate
    report strongly urging the National Organic Program to take action on
    several unfulfilled statutory requirements. Specifically, the Senate
    report language in fiscal years 2004, 2005, and 2006 called on the NOP
    to hire an Executive Director for the National Organic Standards Board
    and to establish an on-going Peer Review Panel, as called for in OFPA,
    to provide oversight and advice to the NOP regarding the accreditation
    process for organic certifiers.
        While progress has been slow in complying with these statutory
    requirements, the members of the National Organic Coalition are very
    pleased that an Executive Director for the National Organic Standards
    Board has been hired by USDA. This position is critical in helping the
    NOSB fulfill its statutory role, especially at time of such heavy
    workload for the Board. We congratulate the NOP for taking this action.
        In contrast, the requirements of Section 2117 of OFPA to establish
    a Peer Review Panel and the further requirement of Section 205.509 of
    the Organic rule to establish an annual Peer Review Panel have not been
    met by the NOP. However, we are pleased that the NOP contracted with
    the American National Standards Institute (ANSI) to perform an outside
    audit of the NOP, the results of which were presented in late 2004. The
    ANSI audit noted numerous technical and procedural deficiencies in the
    NOP's operations and suggested corrective actions in several areas. In
    addition, USDA's own Inspector General's office released an audit
    report regarding the National Organic Program in July of 2005, which
    was very critical of the National Organic Program's operations, and
    also suggested several corrective actions that could be taken by the
    Agency to resolve the problems. The Members of the National Organic
    Coalition concur with the recommendations of the ANSI and Office of
    Inspector General (OIG) audits, and believe that if the NOP were to
    implement these recommendations, it would be a significant step to
    resolving many of the concerns that have been raised by the organic
    community regard the NOP's operations.
        Recently, a new National Organic Program Director was hired with
    significant expertise in the area of quality systems management and ISO
    compliance. We are very encouraged that the new Director's expertise
    will be helpful in guiding the NOP in implementing the ANSI and OIG
    audit recommendations. However, we also believe that the House and
    Senate Agriculture Appropriations Subcommittees should be kept informed
    by NOP with regular reports on their progress in complying with these
    recommendations. Therefore, in addition to supporting the
    Administration's budget request of $3.13 million for AMS/organic
    standards, we are requesting that the following report language be
    included:
        The Committee is encouraged that the Agency has hired an Executive
    Director for the National Organic Standards Board (NOSB), as well as a
    new Director for the National Organic Program. The Committee also notes
    that the audits performed by the American National Standards Institute
    (ANSI) in 2004 and by the USDA Office of Inspector General (OIG) in
    2005 made strong recommendations about changes needed in the
    administration of the National Organic Program. The Committee expects
    the Agency to take the necessary actions to comply with these
    recommendations, and to provide a written report to the Committee by
    December of 2006 regarding the progress in implementing these
    recommendations. In addition, the Committee expects a report regarding
    the complaints that the NOP has received about violations of the
    organic standards, and the progress of the Agency in investigating and
    responding to those complaints. Finally, the Committee expects the NOP
    to work closely with the NOSB to implement the Peer Review Panel
    requirements of OPFA and USDA's organic regulations.
    USDA
                Organic Data Initiatives
        Authorized by Section 7407 of the 2002 Farm Bill, the Organic
    Production and Marketing Data Initiative States that the ``Secretary
    shall ensure that segregated data on the production and marketing of
    organic agricultural products is included in the ongoing baseline of
    data collection regarding agricultural production and marketing.'' As
    the organic industry matures and grows at a rapid rate, the lack of
    national data for the production, pricing, and marketing of organic
    products has been an impediment to further development of the industry
    and to the effective functioning of many organic programs within USDA.
    Because of the multi-agency nature of data collection within USDA, the
    effort to improve organic data collection and analysis must also be
    undertaken by several different agencies within the Department:
    Economic Research Service (ERS)
                Collection and Analysis of Organic Economic Data Request:
                        $750,000
        In fiscal year 2006, Congress appropriated $500,000 to USDA's
    Economic Research Service to continue the collection of valuable
    acreage and production data, as required by Section 7407 of the 2002
    farm bill. Because increased ability to conduct economic analysis for
    the organic farming sector is greatly needed, we request $750,000 to be
    appropriated to the USDA ERS to implement the ``Organic Production and
    Market Data Initiative'' included in Section 7407 of the 2002 farm
    bill.
    Agricultural Marketing Service (AMS)
                Organic Price Collection Request: $1 million
        Accurate, public reporting of agricultural price ranges and trends
    helps to level the playing field for producers. Wholesale and retail
    price information on a regional basis is critical to farmers and
    ranchers, but organic producers have fewer sources of price information
    available to them than conventional producers. Additionally, the lack
    of appropriate actuarial data has made it difficult for organic farmers
    to apply for and receive equitable Federal crop insurance. AMS Market
    News is involved in tracking product prices for conventional
    agricultural products, and with funding, could broaden their efforts to
    include organic price data as well. We request $1 million to be
    appropriated to the USDA Agricultural Marketing Service for collection
    of organic price information.
    National Agriculture Statistics Service (NASS)
                Census Follow-up/Organic Grower Survey Request: $1 million
        The mission of USDA's National Agricultural Statistics Service
    (NASS) is to provide timely, accurate, and useful statistics in service
    to U.S. agriculture. NASS is making an effort to expand the quantity of
    organic questions in the 2007 census. However, they will need to
    conduct a follow-up survey to collect more in-depth information on
    acreage, yield/production, inventory, production practices, sales and
    expenses, marketing channels, and demographics. Therefore, we are
    requesting $1 million for USDA NASS.
    USDA/CSREES
                Organic Transitions Program Request: $5 million
        The Organic Transition Program, funded through the CSREES budget,
    is a research grant program that helps farmers surmount some of the
    challenges of organic production and marketing. As the organic industry
    grows, the demand for research on topics related to organic agriculture
    is experiencing significant growth as well. The benefits of this
    research are far-reaching, with broad applications to all sectors of
    U.S. agriculture, even beyond the organic sector. Yet funding for
    organic research is minuscule in relation to the relative economic
    importance of organic agriculture and marketing in this nation.
        The CSREES Organic Transition Program was funded at $2.1 million in
    fiscal year 2003, $1.9 million in fiscal year 2004, and $1.88 million
    for both fiscal years 2005 and 2006. Given the rapid increase in demand
    for organic foods and other products, and the growing importance of
    organic agriculture, the research needs of the organic community are
    expanding commensurately. Therefore, we are requesting that the program
    be funded at $5 million in fiscal year 2007. In addition, we are
    requesting that the Organic Transition Program remain a separate
    program, and not be subsumed within the National Research Initiative,
    as proposed in the President's budget.
    USDA/CSREES
                National Research Initiative (NRI) Request: Language
                        directing CSREES to add a new NRI program area to
                        foster classical plant and animal breeding
        In recent decades, public resources for classical plant and animal
    breeding have dwindled, while resources have shifted toward genomics
    and biotechnology, with a focus on a limited set of major crops and
    breeds. Unfortunately, this shift has significantly curtailed the
    public access to plant and animal germplasm, and limited the diversity
    of seed variety and animal breed development. This problem has been
    particularly acute for organic and sustainable farmers, who seek access
    to germplasm well suited to their unique cropping systems and their
    local environment. Without renewed funding in this arena, the public
    capacity for plant and animal breeding will disappear.
        In both of fiscal years 2005 and 2006, the Senate Agriculture
    Appropriations Subcommittee included report language raising concerns
    about this problem, and urging CSREES to give greater consideration to
    research needs related to classical plant and animal breeding, when
    setting priorities within the National Research Initiative. Despite
    this report language, research proposals for classical plant and animal
    breeding that have sought NRI funding in the past couple of years have
    been consistently declined. Further, the shift in NRI toward work on
    genomics and biotechnology continues, to the exclusion of classical
    plant and animal breeding.
        As the nation's preeminent agricultural competitive grants program,
    the National Research Initiative should be funding classical plant and
    animal breeding activities. The NRI currently has over 30 program areas
    of focus. We are requesting that an additional program area be created
    within the NRI to foster this important research, and that this new
    program area be entitled, ``Classical Plant and Animal Breeding to
    Foster More Diverse, Energy Efficient and Environmentally Sustainable
    Agricultural Systems.''
    USDA/CSREES
                Sustainable Agriculture Research Request: $15 million
                        (Chapter 1) and Education (SARE) and $5 million
                        (Chapter 3)
        The SARE program has been very successful in funding on-farm
    research on environmentally sound and profitable practices and systems,
    including organic production. The reliable information developed and
    distributed through SARE grants have been invaluable to organic
    farmers. We are requesting $15 million for Chapter 1 and $5 million for
    Chapter 3 for fiscal year 2007.
    USDA/Rural Business Cooperative Service Appropriate Technology Transfer
            for Rural Areas (ATTRA) Request: $3.1 million
        ATTRA is a national sustainable agriculture information service,
    which provides practical information and technical assistance to
    farmers, ranchers, Extension agents, educators and others interested in
    sustainable agriculture. ATTRA interacts with the public, not only
    through its call-in service and website, but also provides numerous
    publications written to help address some of the most frequently asked
    questions of farmers and educators. Much of the real-world assistance
    provided by ATTRA is extremely helpful to the organic community. As a
    result, the growth in demand for ATTRA services has increased
    significantly, both through the website-based information services and
    through the growing requests for workshops. We are requesting $3.1
    million for ATTRA for fiscal year 2007, representing a $600,000
    increase over fiscal year 2005 and fiscal year 2006 levels. These funds
    would be used to initiate a Farm Energy Initiative, to respond to the
    high demand for information and technical assistance from farmers about
    ways to increase their energy efficiency in response to high energy
    costs.
    USDA/ARS
                Strategic Regional Programming for Organic Agricultural
                        Research Request: $10 million, divided between
                        regions
        In 2005, USDA-ARS spent about $3.5 million on organic-specific
    projects, or about 0.35 percent of the overall ARS budget for fiscal
    year 2005. Given its growing importance in the overall agricultural
    economy, the commitment by ARS to organic research must be greatly
    enhanced.
        Distributed among the 7 Regional Areas and the ARS National Program
    Office, this funding would provide needed flexibility to better address
    the broad needs and opportunities of the organic production and
    processing sector. Funding will be allocated by the Area Directors to:
    (1) maintain and enhance existing CRIS projects, scientists and
    technicians whose objectives are specific to organic production and
    processing; and (2) provide support to integrate organic agriculture
    objectives into other projects, when such capacity exists.
    USDA/NRCS
                Conservation Security Program Request: No Funding
                        Limitation
    USDA/Rural Business Cooperative Service
                Value-Added Producer Grants Request: No Funding Limitation
        The Conservation Security Program (authorized by Section 2001 of
    the 2002 farm bill) and the Value-Added Producer Grant (authorized by
    Section 6401 of the 2002 farm bill) have great potential to benefit
    organic producers in their efforts to conserve natural resources and to
    explore new, value-added enterprises as part of their operations.
    Unfortunately, while these programs were authorized to operate with
    mandatory funding, their usefulness has been limited by funding
    restrictions imposed through the annual appropriations process. We are
    urging that the Conservation Security Program and the Value-Added
    Producer Grant Program be permitted to operate with unrestricted
    mandatory funding, as authorized.
        Thank you for this opportunity to testify and for your
    consideration on these critical funding requests.
                                     ______

                 Prepared Statement of National Potato Council

        My name is Ed Schneider. I am a potato farmer from Pasco,
    Washington and current Vice President, Legislative/Government Affairs
    for the National Potato Council (NPC). On behalf of the NPC, we thank
    you for your attention to the needs of our potato growers.
        The NPC is the only trade association representing commercial
    growers in 50 States. Our growers produce both seed potatoes and
    potatoes for consumption in a variety of forms. Annual production is
    estimated at 437,888,000 cwt. with a farm value of $3.2 billion. Total
    value is substantially increased through processing. The potato crop
    clearly has a positive impact on the U.S. economy.
        The potato is the most popular of all vegetables grown and consumed
    in the United States and one of the most popular in the world. Annual
    per capita consumption was 136.5 pounds in 2003, up from 104 pounds in
    1962 and is increasing due to the advent of new products and heightened
    public awareness of the potato's excellent nutritional value. Potatoes
    are considered a nutritious consumer commodity and an integral,
    delicious component of the American diet.
        The NPC's fiscal year 2007 appropriations priorities are as
    follows:
    Potato Research
                Cooperative State Research Education and Extension Service
                        (CSREES)
        The NPC urges the Congress not to support the President's fiscal
    year 2007 budget request to eliminate the CSREES Special Grant Programs
    and the formula funds under the Hatch Act. Both of these programs
    support important university research work that helps our growers
    remain competitive in today's domestic and world marketplace.
        The NPC supports an appropriation of $1.8 million for the Special
    Potato Grant program for fiscal year 2007. The Congress appropriated
    $1.417 million in fiscal year 2004, a decrease from the fiscal year
    2003 level of $1.584 million and $1.509 million in fiscal year 2005.
    This has been a highly successful program and the number of funding
    requests from various potato-producing regions is increasing.

        The NPC also urges that the Congress include Committee report
    language as follows:
        ``Potato research.--The Committee expects the Department to ensure
    that funds provided to CSREES for potato research are utilized for
    varietal development testing. Further, these funds are to be awarded
    after review by the Potato Industry Working Group.''
    Agricultural Research Service (ARS)
        The NPC urges that the Congress not support the Administration's
    fiscal year 2007 budget request to rescind all fiscal year 2005
    Congressional increases for research projects.
        The Congress provided funds for a number of important ARS projects
    and, due to previous direction by the Congress, the ARS continues to
    work with the NPC on how overall research funds can best be utilized
    for grower priorities.
    Foreign Market Development: Market Access Program (MAP)
        The NPC also urges that the Congress maintain the spending level
    for the Market Access Program (MAP) at its authorized level of $200
    million for fiscal year 2007 and not support the Administration's
    budget request to cap this valuable export program at the $125 million
    level.
                Foreign Agriculture Service (FAS)
        The NPC supports the President's fiscal year 2007 budget request of
    $152.4 million for the USDA Foreign Agriculture Service (FAS). This
    level is the minimum necessary for the agency given the multitude of
    trade negotiations and discussions currently underway.
    Food Aid Programs
                Mcgovern-Dole
        The NPC supports the Administration's fiscal year 2007 budget
    request of $100 million for the McGovern-Dole International Food Aid
    Program. PVO's have been including potato products in their
    applications for this program.
                Public Law 480
        The President's fiscal year 2007 budget requests $1.2 billion for
    USAID programs, including $964 million for USAID Public Law 480 Title
    II programs. The President's budget also transfers $300 million from
    USAID Title II activities funded under the Agriculture Budget to the
    Foreign Operations Budget. The NPC urges that the $300 million be
    reinstated in the regular USAID Public Law 480 Title II budget to avoid
    a significant loss of applications for dehydrated potatoes in Title II
    programs and procurement of U.S. food commodities for food aid.
    Pest and Disease Management
                Animal and Plant Health Inspection Service (APHIS)
        Golden Nematode Quarantine.--The NPC supports an appropriation of
    $1,266,000 for this quarantine which is what is believed to be
    necessary for USDA and the State of New York to assure official control
    of this pest. Failure to do so could adversely impact potato exports.
        Given the transfer of Agriculture Quarantine Inspection (AQI)
    personnel at U.S. ports to the Department of Homeland Security, it is
    important that certain USDAAPHIS programs be adequately funded to
    ensure progress on export petitions and protection of the U.S. potato
    growers from invasive and harmful pests and diseases.
        Pest Detection.--The NPC supports $45 million in fiscal year 2007,
    which is the Administration's budget request. Now that the Agriculture
    Quarantine Inspection (AQI) program is within the new Homeland Security
    Agency, this increase is essential for the Plant Protection and
    Quarantine Service's (PPQ) efforts against potato pests and diseases
    such as Ralstonia.
        Emerging Plant Pests.--$101 million was appropriated in fiscal year
    2005. The President requests $127 million in fiscal year 2007 which the
    NPC supports.
        The NPC supports having the Congress once again include language to
    prohibit the issuance of a final rule that shifts the costs of pest and
    disease eradication and control to the States and cooperators.
        Trade Issues Resolution Management.--$12,578,000 was appropriated
    in fiscal year 2005 and the President requests $18 million in fiscal
    year 2007. The NPC supports this increase only if it is specifically
    earmarked for plant protection and quarantine activities. These
    activities are of increased importance yet none of these funds are used
    directly for plant protection activities. As new trade agreements are
    negotiated, the agency must have the necessary staff and technology to
    work on plant related import/export issues. The NPC also relies heavily
    on APHIS-PPQ resources to resolve phytosanitary trade barriers in a
    timely manner.
    Agricultural Statistics
                National Agricultural Statistics Service (NASS)
        The NPC supports sufficient funds and guiding language to assure
    that the potato objective yield and grade and size surveys are
    continued.
    Rural Development Grants
        Since potato growers do not receive direct payments, the 2002 Farm
    Bill provided for, among other things, grants to allow our growers to
    expand their business opportunities. One program that has been used by
    our growers is the value-added grant program. The NPC would urge that
    the Farm Bill funding level for this program be maintained. In
    addition, maintaining adequate farm labor is also important to our
    growers. The NPC urges that farm labor housing grants be maintained and
    not reduced as proposed by the Administration's budget request.
                                     ______

          Prepared Statement of the National Rural Telecom Association

        Project Involved.--Telecommunications lending programs administered
    by the Rural Utilities Service of the U.S. Department of Agriculture
        Actions Proposed.--Supporting loan levels for fiscal year 2007 in
    the amounts requested in the President's budget for 5 percent direct
    ($144 million) and cost of-money ($247 million) and the associated
    subsidy, as required, to fund those programs at the requested levels.
      --Supporting Sec. 306 guaranteed loans in the amount ($299 million)
            requested in the budget.
      --Opposing the budget request that would cut direct loans for
            broadband facilities and internet service access by almost 30
            percent from the fiscal year 2006 enacted level of $500 million
            to $356 million. Supporting the request to fund the program
            through discretionary funding and the budget proposal to
            provide $30 million of the authorized level in broadband loans
            at an interest rate of 4 percent.
      --Supporting the completion of the dissolution of the Rural Telephone
            Bank in fiscal year 2006 in accordance with the
            administration's budget assumption.
      --Supporting continued funding, as requested in the President's
            budget, in the amount of $25 million in grant authority
            designated for distance learning and medical link purposes.
        Mr. Chairman, Members of the Committee: My name is John F. O'Neal.
    I am General Counsel of the National Rural Telecom Association. NRTA is
    comprised of commercial telephone companies that borrow their capital
    needs from the Rural Utilities Service of the U.S. Department of
    Agriculture (RUS) to furnish and improve telephone service in rural
    areas. Approximately 1000, or 71 percent of the Nation's local
    telephone systems borrow from RUS. About three-fourths of these are
    commercial telephone companies. RUS borrowers serve almost 6 million
    subscribers in 46 states and employ over 22,000 people. In accepting
    loan funds, borrowers assume an obligation under the act to serve the
    widest practical number of rural users within their service area.
    Program Background
        Rural telephone systems have an ongoing need for long-term, fixed
    rate capital at affordable interest rates. Since 1949, that capital has
    been provided through telecommunications lending programs administered
    by the Rural Utilities Service and its predecessor, the Rural
    Electrification Agency (REA).
        RUS loans are made exclusively for capital improvements and loan
    funds are segregated from borrower operating revenues. Loans are not
    made to fund operating revenues or profits of the borrower system.
    There is a proscription in the Act against loans duplicating existing
    facilities that provide adequate service and state authority to
    regulate telephone service is expressly preserved under the Rural
    Electrification Act.
        Rural telephone systems operate at a severe geographical handicap
    when compared with other telephone companies. While almost 6 million
    rural telephone subscribers receive telephone service from RUS borrower
    systems, they account for only 4 percent of total U.S. subscribers. On
    the other hand, borrower service territories total 37 percent of the
    land area--nearly 12 million squares miles. RUS borrowers average about
    six subscribers per mile of telephone line and have an average of more
    than 1,000 route miles of lines in their systems.
        Because of low-density and the inherent high cost of serving these
    areas, Congress made long-term, fixed rate loans available at
    reasonable rates of interest to assure that rural telephone
    subscribers, the ultimate beneficiaries of these programs, have
    comparable telephone service with their urban counterparts at
    affordable subscriber rates. This principle is especially valid today
    as this administration endeavors to deploy broadband technology and as
    customers and regulators constantly demand improved and enhanced
    services. At the same time, the underlying statutory authority
    governing the current program has undergone significant change. In
    1993, telecommunications lending was refocused toward facilities
    modernization. Much of the subsidy cost has been eliminated from the
    program. In fact, most telecommunications lending programs now generate
    revenue for the government. The subsidy that remains has been targeted
    to the highest cost, lowest density systems in accordance with this
    administration's stated objectives.
        We are proud to state once again for the record that there has
    never been a loan default by a rural telephone system! All of their
    loans have been repaid in accordance with their terms: $13 billion in
    principal and interest at the end of the last fiscal year.
    Need for RUS Telecommunications Lending Continues
        The need for rural telecommunications lending is great today,
    possibly even greater than in the past. Technological advances make it
    imperative that rural telephone companies upgrade their systems to keep
    pace with improvements and provide the latest available technology to
    their subscribers. And 5 years ago, Congress established a national
    policy initiative mandating access to broadband for rural areas. But
    rapid technological changes and the inherently higher costs to serve
    rural areas have not abated, and targeted support remains essential.
        Competition among telephone systems and other technological
    platforms have increased pressures to shift more costs onto rural
    ratepayers. These led to increases in both interstate subscriber line
    charges and universal service surcharges on end users to recover the
    costs of interstate providers' assessments to fund the Federal
    mechanisms. Pressures to recover more of the higher costs of rural
    service from rural customers to compete in urban markets continue to
    burden rural consumers. There is a growing funding crisis for the
    statutory safeguards adopted in 1996 to ensure that rates, services and
    network development in rural America will be reasonably comparable to
    urban telecommunications opportunities.
    Ongoing Congressional Mandates for Rural Telecommunications
        Considerable loan demand is being generated because of the mandates
    for enhanced rural telecommunications standards contained in the
    authorizing legislation. We are, therefore, recommending the following
    loan levels for fiscal year 2007 and the appropriation of the
    associated subsidy costs, as required, to support these levels:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    5 percent Direct Loans..................................    $144,000,000
    Cost-of-Money Loans.....................................     247,000,000
    Guaranteed Loans........................................     299,000,000
    Broadband Loans.........................................     500,000,000
                                                             ---------------
          Total.............................................   1,190,000,000
    ------------------------------------------------------------------------

        These are the same levels for 5 percent direct, cost-of-money loans
    and guaranteed loans, as requested in the President's budget for fiscal
    year 2007 and the enacted amount for broadband loans in the fiscal year
    2006 appropriations act. The authorized levels of loans in each of
    these programs were substantially obligated in fiscal year 2005 and
    current estimates are that authorized program levels will be met in
    fiscal year 2006. We believe that the needs of this program balanced
    with the minimal cost to the taxpayer make the case for its
    continuation at the stated levels.
    Rural Telephone Bank Dissolution Initiative
        Congress established the Rural Telephone Bank in 1971 to provide
    supplemental financing for rural telephone systems with the objective
    that the bank ultimately would be owned and operated by its private
    shareholders. However, changed circumstances in the rural telephone
    industry and difficulties associated with accelerating privatization of
    the Rural Telephone Bank have made this transition to private ownership
    and control problematic raising difficult questions about the viability
    of a privatized bank and its future support among rural telephone
    systems.
        In recognition of these factors, the administration, subject to
    congressional approval, determined to dissolve the bank in fiscal year
    2006 pursuant to Sec. 411 of the RTB enabling act. We continue to
    support this action as well as the budget recommendation to transfer
    the historic lending authority of the RTB ($175 million) to the
    guaranteed loan program so that rural telephone systems will continue
    to have adequate loan resources available for rural telecommunications
    infrastructure development at the levels intended by the Congress. We
    share the assumption in the fiscal year 2007 budget that the bank's
    dissolution will be completed during the current fiscal year.
    The Broadband Loan Program
        The broadband loan program was funded last year for the current
    fiscal year at $500 million. Very little subsidy cost is associated
    with this program since most of the loans are made at the government's
    cost-of-money. Despite that, the President's budget recommends reducing
    the loan levels for fiscal year 2007 by almost 30 percent to $356
    million. We are opposed to that and recommend to the committee that the
    fiscal year 2007 appropriations bill continue to fund the program at
    enacted levels. The demand for this program is still quite strong and
    if the President's stated objective of deploying this technology to all
    rural areas of this country is to be met, the $500 million funding
    level must be maintained.
        At the same time, this year's budget recognizes that given the high
    costs involved in the more sparsely populated areas requires subsidy
    assistance and recommends that $30 million of the authorized level of
    these loans be made at a 4 percent interest rate. We support that
    initiative as well as the budget request to fund the program through
    discretionary rather than mandatory funding.
    Grants for Medical Link and Distance Learning Purposes
        We support the continuation in fiscal year 2007 of the $25 million
    in grant authority provided in the President's budget for medical link
    and distance learning purposes and the decision to not request
    additional loan funds for these programs. The purpose of these grants
    is to accelerate deployment of medical link and distance learning
    technologies in rural areas through the use of telecommunications,
    computer networks, and related advanced technologies by students,
    teachers, medical professionals, and rural residents. We agree with the
    conclusion in the budget that these projects are more feasible when
    provided through grants to eligible recipients rather than loans.
    Conclusion
        Thank you for the opportunity to present the association's views
    concerning this vital program. The telecommunications lending programs
    of RUS continue to work effectively and accomplish the objectives
    established by Congress at a minimal cost to the taxpayer. They serve
    to assure that America's rural inhabitants will never become second-
    class citizens in this modern information age of telecommunications
    technology.
                                     ______

               Prepared Statement of the National WIC Association

        Dear Chairman Bennett and Ranking Member Kohl: We write on behalf
    of the National WIC Association, NWA, to present comments on the
    President's proposal to fund the Special Supplemental Nutrition Program
    for Women, Infants and Children, known as WIC, for the fiscal year
    2007.
        We write on behalf of the thousands of nationally recognized WIC
    health professionals, nutritionists and dietitians who are committed to
    addressing the nutrition and healthcare needs of WIC families. Our
    members serve over 8.0 million low and moderate-income women and
    children with, or at risk of developing, nutrition-related health
    problems through 2,100 WIC agencies in 10,000 WIC clinics each month.
    WIC serves almost one-half of all infants born in this country and
    roughly 1 in 4 of all children between 1 and 5 years of age. Our
    members are the front lines battling to improve the quality of life for
    our most vulnerable populations.
        At the outset, we would like to compliment both of you and members
    of the Subcommittee for your long-term commitment to WIC. The future of
    our Nation's low-income women, infants and children depend upon your
    support. NWA is proud of the strong bi-partisan commitment WIC has
    engendered since its inception.
        As well, we compliment the President, Secretary Mike Johanns, Under
    Secretary for Food, Nutrition, and Consumer Services Eric Bost and
    their teams for their past support of WIC.
        We applaud the President for proposing to provide $15 million for
    breastfeeding initiatives, $14 million for infrastructure funds, $125
    million to restore the contingency fund, and to maintain the moratorium
    on new WIC-Only vendors.
        In contrast to the President's budget proposal of $5.2 billion, NWA
    strongly recommends that WIC be funded at $5.388 billion. NWA's
    recommended funding level is $188 million above the President's request
    and redresses the damages from the proposed cap on NSA funding ($152
    million), the proposal to cap Medicaid adjunctive eligibility ($3
    million), a failure to provide funding for essential MIS needs ($30
    million) and important health outcomes research ($3 million).
        We are dismayed that the President has again offered his proposal
    to cap nutrition services funding (NSA) at 25 percent of the total
    amount provided--that Congress wisely defeated in the 1st Session of
    the 109th Congress. This proposal will reduce services for all mothers
    and children and because States are highly unlikely to be able to
    further reduce per participant costs, 850,000 mothers and children
    could potentially lose essential nutrition services benefits.
        Nutrition services include nutrition assessment, counseling and
    education, obesity prevention efforts, breastfeeding support and
    promotion efforts, on-going interventions of nutrition related
    complications of pregnancy, complex feeding and growth issues of
    infants and children, follow-up of special metabolic formulas, pre-
    natal and pediatric healthcare referrals and follow-up, spousal and
    child abuse referral, drug and alcohol counseling referral,
    immunization screening assessment and referral and a host of other
    client benefits. Simply put, the President's proposal to cap nutrition
    services funding, NSA, represents a significant benefit cut to WIC
    mothers and children.
        The Government Accountability Office, GAO, in its mandated report
    to Congress entitled ``Food Assistance: WIC Faces Challenges in
    Providing Nutrition Services,'' published in December 2001, writes
    that: ``WIC has been faced with the challenge of meeting additional
    program requirements with available resources. Since the late 1980's, a
    number of requirements have been placed on the program aimed at, among
    other things, containing the cost of food benefits, promoting
    breastfeeding, encouraging immunizations, and controlling program
    abuse. While these requirements have placed additional service delivery
    and administrative demands on WIC staff, they have not been accompanied
    by more funding per participant; the NSA grant per participant was
    established in 1989 and since then has only been adjusted for
    inflation. There is also evidence that nonfederal support for NSA may
    have decreased since fiscal year 1992. Nor have the additional demands
    been offset by reductions in other responsibilities. As a result, WIC
    agencies have had to cut costs and make changes in service delivery
    that potentially will have a negative impact on the quality of WIC
    services (GAO-02-142, p. 31).''
        Balancing increased program demands and available resources has
    forced WIC Programs across the nation to cut costs despite increasing
    needs.
        Indeed, local agencies have been forced to consolidate or close
    clinics and in some cases dramatically increase participant to staff
    ratios to unacceptable levels of 1,000:1 or 1,200:1 from 300:1. The GAO
    quotes 1998 and 2001 USDA studies that found that ``22 percent of local
    agencies serving almost 25 percent of all WIC participants reported
    having inadequate office space. Additionally, 30 percent of local
    agencies serving about 41 percent of all WIC participants reported
    having insufficient numbers of professional staff. Finally, 56 percent
    of State WIC agency automated management information systems were not
    capable of performing, or efficiently performing, 1 or more of 19
    essential program tasks (GAO-02-142, p. 37).'' Evidence suggests that
    this situation has only gotten worse.
        It is important to note that State cost containment efforts have
    significantly contributed to reducing WIC food package costs. Indeed,
    savings from infant formula cost containment efforts allow WIC to cover
    the food benefits provided to roughly 20 percent of WIC mothers and
    children and saved the Subcommittee and Federal tax payers over $23
    billion since 1989. ``If rebate savings are considered, NSA has
    remained roughly 20 percent of total program costs from 1988 through
    1999 (GAO-02-142, p. 34).'' In essence, cost containment has
    effectively capped NSA at unreasonably low levels. A legislated cap has
    the potential to further diminish the success and savings the Program
    has achieved.
        It takes NSA resources to prescribe and distribute WIC food
    packages and maintain program integrity. The President's proposed cap
    on WIC NSA funding will result in unspent WIC food resources and unmet
    participant needs, increasing the vulnerability of all ready food
    insecure mothers and children. We cannot imagine that the President
    intends this result when in previous years he was so committed to
    ensuring that WIC received additional overall Program funding.
        WIC's population, like the general population, has experienced
    dramatic increases in the prevalence of overweight and obesity and
    related health issues. A study released by the Department of Health and
    Human Services' Centers for Disease Control and Prevention shows that
    deaths due to poor diet and physical inactivity rose by 33 percent over
    the past decade and may soon overtake tobacco use as the leading
    preventable cause of death. WIC Programs across the Nation have been
    actively engaged in obesity prevention efforts since the turn of the
    millennium and WIC is recognized for its role in addressing the
    Nation's obesity health crisis.
        WIC uses multiple key nutrition services strategies in the
    Program's nearly 10,000 clinics to combat the growing national obesity
    epidemic. These include:
      --Individualized nutrition assessments provided to mothers and
            children to identify overweight or obesity among other
            nutrition risks;
      --Individualized nutrition counseling provided for at-risk mothers
            and children;
      --Prescribed, tailored, reduced fat and low-sugar WIC food packages
            provided to all WIC mothers and children that include reduced
            or non-fat milk, reduced-fat cheese, and cereals with 6 grams
            of sugar or less;
      --Counseling to promote increased physical activity;
      --Counseling for eating and life-style behaviors that may contribute
            to overweight and obesity;
      --Instruction on how to select and prepare healthy foods;
      --Active promotion and support of breastfeeding as the best form of
            infant feeding--acknowledged to aid in preventing childhood
            overweight and obesity.
        Inadequate nutrition services and administration funding will
    stifle WIC's efforts to achieve positive nutrition outcomes.
        The net result of the President's proposal to cap nutrition
    services funding, NSA, would be to harm the Program and to erode
    benefits and services for mothers and children.
        We urge the Subcommittee to once again exempt WIC from the proposed
    cap on Nutrition Services funding to protect critical WIC participant
    benefits.
        NWA urges the Subcommittee not to override WIC's authorizing
    statute and to provide $30 million annually outside of the regular NSA
    grant to implement MIS core functions, upgrade and maintain WIC
    technology systems, achieve program efficiencies and economies, and
    render systems EBT ready. This will fulfill the President's own WIC
    technology initiative, embodied in the Child Nutrition and WIC
    Reauthorization Act of 2004.
        The President, in his WIC reauthorization agenda, recognized that
    technology provides a critical foundation for quality WIC services and
    Program Integrity. He recognized that funding WIC technology from
    existing resources compromises WIC's ability to deliver services and
    develop responsive MIS systems. Current limits on funding prevent more
    than half--56 percent--of WIC State agencies from meeting USDA core
    functions. Among these core functions are those that are critical for
    States to effectively manage grant funds and food cost containment
    efforts.
        To develop and maintain MIS and electronic service delivery
    systems, and to link with other health data systems the President urged
    Congress during reauthorization to earmark and provide a funding level
    of $30 million annually outside the regular NSA grant to implement MIS
    core functions, upgrade WIC technology systems, maintain MIS and
    electronic services and expedite the joint NWA/USDA 5 year plan for
    State MIS systems. This funding level is a mere down payment for the
    actual costs of improving outdated and outmoded MIS systems--USDA
    reported in 2001 that ``the cost of bringing WIC's essential program
    tasks up to standard in all States over the next 6 years is between
    $147 million and $267 million (GAO-02-142, p. 22).''
        The President's fiscal year 2007 proposal provides no monies for
    MIS, seriously jeopardizing mandated vendor cost containment
    requirements and impending changes to the WIC food packages essential
    to combating obesity. We urge the Subcommittee to act to fund MIS and
    electronic service delivery systems at $30 million in its
    appropriations bill.
        NWA urges that Congress continue to save Medicaid funds by ensuring
    that all Medicaid recipients remain automatically income eligible for
    WIC. The President has again proposed a cap on Medicaid adjunctive
    eligibility, freezing that eligibility level at 250 percent. This
    proposal, wisely rejected by Congress last year, most directly affects
    MD, MO, MN, NH, RI and VT.
        This proposal flies in the face of the Administration's purported
    efforts to reduce NSA costs by driving up the expense of doing WIC
    business for the six States directly affected. Though it eliminates
    eligibility for only a small number of individuals, it would require
    the affected States to accomplish duplicative income documentation for
    all Medicaid recipients applying for WIC. It would have the unintended
    consequence of potentially discouraging otherwise WIC eligible mothers
    and children from applying if they feel that they may not be eligible,
    undermining the preventative impact of WIC and adding unnecessary
    administrative burden.
        Although this proposal is not included in the fiscal year 2007
    budget request for WIC, the President has signaled his intention in the
    Administration's fiscal year 2007 budget request to recommend in fiscal
    year 2008 a required State match of 20 percent for nutrition services
    (NSA) funds. NWA urges Subcommittee members to oppose this
    recommendation. Based on USDA data, adjusted for inflation, in fiscal
    year 2008, should States fail to provide a match, more than 1.5 million
    mothers and children would be at risk of losing critical nutrition
    services benefits!
        It is inconceivable that State legislatures and governors would be
    willing to provide matching funds. This proposal would be disastrous
    for the future of WIC, leading to a significant deterioration in
    services and State and local agencies closing down clinics, even entire
    programs. WIC food benefits cannot be prescribed or provided, nor can
    program integrity be maintained without adequate NSA resources.
        A matching grant would undermine or even eliminate current
    effective collaborative relationships due to reduced resources.
    Collaboration is already jeopardized with some programs that have
    limited resources as a result of Federal and State funding cuts.
        A national priority for 32 years, WIC ensures healthy pregnancies,
    babies and children. To make WIC anything less than a national priority
    runs the risk of increased infant mortality and increased numbers of
    low birth weight infants. WIC must remain a national priority.
        Finally, NWA has sought changes in the WIC Food Packages since
    2000, attempting to bring them in line with current dietary science.
    The Association has encouraged USDA/FNS to publish a proposed rule
    transforming the WIC food packages by adding fresh, frozen and canned
    fruits and vegetables, among other changes proposed by the National
    Academy of Sciences Institutes of Medicine. NWA urges the Subcommittee
    to continue to press USDA/FNS for immediate publication of a proposed
    rule, reflecting the IOM's recommendations, with a minimum 90-day
    public comment period. The time for change in the WIC food packages is
    now if we are to continue to meet the challenges of ensuring healthy
    children and preventing obesity in low-income populations.
        NWA urges the Subcommittee to fully fund WIC for the fiscal year
    2007 at $5.388 billion, oppose the NSA and Medicaid caps, fund MIS at
    $30 million, fund breastfeeding initiatives at $15 million, fund
    infrastructure needs at $14 million, fully restore the WIC contingency
    fund to $125 million, continue the moratorium on new WIC-Only stores
    until State agencies are in full compliance with the Interim Final Rule
    on Vendor Cost Containment, and fund WIC health outcomes research at $3
    million.
        WIC is a short-term intervention program designed to influence
    lifetime nutrition behaviors and lifelong health outcomes in a
    targeted, high-risk population. It has an extraordinary, nearly 31-year
    record of preventing children's health problems and improving their
    health, growth and development. WIC children enter school ready to
    learn. They show better cognitive performance. It would be tragic to
    undo 32 years of success and reverse the President's own multi-year
    commitment to the families WIC serves.
                                     ______

                  Prepared Statement of The Nature Conservancy

        Mr. Chairman and members of the Subcommittee, I appreciate this
    opportunity to present The Nature Conservancy's recommendations for
    fiscal year 2007 appropriations for Agriculture, Rural Development,
    Food and Drug Administration and Related Agencies. My name is Jimmie
    Powell and I am the Director of Government Relations at the
    Conservancy.
        The Nature Conservancy is an international, nonprofit organization
    dedicated to the conservation of biological diversity. Our mission is
    to preserve the plants, animals and natural communities that represent
    the diversity of life on Earth by protecting the lands and waters they
    need to survive. Our on-the-ground conservation work is carried out in
    all 50 states and in 27 foreign countries and is supported by
    approximately one million individual members. We have helped conserve
    nearly 15 million acres of land in the United States and Canada and
    more than 102 million acres with local partner organizations globally.
        Much of my testimony today will concern the pests, pathogens and
    other invasive species that threaten natural landscapes and working
    lands all across our Nation. These threats are urgent and it is most
    important that the federal government provide leadership now in
    addressing this growing threat to our economy and to the wildlife and
    plants of our continent.
        Asian Longhorned Beetle.--The Asian Longhorned Beetle kills a wide
    variety of hardwood trees, particularly sugar maple. ALB threatens to
    devastate forests reaching from New England to the Great Lakes.
    Currently the beetle is found primarily in New York City and New
    Jersey. APHIS, working with state, and local officials, is succeeding
    in a 10-year program to eradicate ALB. The President has proposed
    funding of $19.927 million in fiscal year 2007 as compared to the
    $19.859 million appropriated (after recision) in fiscal year 2006. We
    urge the Subcommittee to fund ALB at $30 million in fiscal year 2007,
    so that the ongoing efforts to eradicate this pest will succeed.
    Failure to eradicate the ALB exposes both urban and rural areas of
    northern states to substantial risk. If not stopped, ALB could kill 30
    percent of the Nation's urban trees at a compensatory value of $669
    billion. If it is unchecked, the New England maple syrup industry is
    threatened as well as autumn foliage tourism which generates $1 billion
    in revenue in New England every year.
        Cactus Moth.--The cactus moth kills prickly pear cacti. First found
    in Florida, the moth is rapidly moving along the Gulf Coast (currently
    it has traveled as far as Alabama). APHIS has bred a sterile cactus
    moth that may help control the spread of this pest. Control of the
    cactus moth before it disperses around the Gulf Coast would protect the
    vast diversity of prickly pear cacti in the southwestern United States
    and Mexico. There are 31 likely host prickly pear species (opuntia) for
    the moth across the United States (9 found nowhere else in the world),
    including the federally endangered Opuntia treleasei, and 56 in Mexico
    (38 found nowhere else in the world). Control would also protect
    agricultural interests. Horticultural production of prickly pears
    occurs in Arizona, California, Nevada, New Mexico, and Texas. Annual
    revenues for Arizona alone are estimated at $14 million. In drought
    years, ranchers in Texas have burned the spines off opuntias and fed
    them to cattle. Thus, the cactus moth presents both a critical
    ecological and agricultural threat. We urge you to fund eradication
    efforts at $1.5 million in fiscal year 2007 for a full sterile release
    program.
        Emerald Ash Borer.--The Emerald Ash Borer (EAB), an Asian native,
    was detected in 2002. Control programs began in 2003. The quarantine
    area now covers nearly 20,000 square miles in Michigan's Lower
    Peninsula and nearby areas in Indiana, Ohio, with additional areas in
    Ontario. At present, spread of the emerald ash borer to the Upper
    Peninsula, Illinois, and Wisconsin is partially prevented by the Great
    Lakes. However, if eradication efforts are not sufficiently aggressive,
    EAB will spread further south into Ohio and Indiana, and be carried to
    other vulnerable areas in the East and Midwest. Seven billion ash trees
    are at risk across the Nation, at an estimated cost of $282 billion. We
    urge the Subcommittee to provide APHIS with $55 million to contain the
    Emerald Ash Borer in fiscal year 2007. In fiscal year 2006, APHIS is
    spending only $9.93 million in appropriated funds. We support the
    efforts of Governors and other partners to obtain urgently needed
    emergency funds drawn from the Commodity Credit Corporation (CCC) to
    contain this beetle. Since funding must continue at this higher level
    for the program to succeed, it is important that the Congress
    appropriate $55 million in fiscal year 2007 and beyond.
        Sudden Oak Death.--Since 2000, APHIS has worked with California,
    Oregon, and other states to prevent the spread of Sudden Oak Death
    (SOD). This disease infects at least 40 native tree, shrub and herb
    species. The disease kills a variety of western and eastern oak trees.
    SOD has already killed one hundred thousand tanoaks, live oaks and
    black oaks in California. If SOD spreads into Oregon and Washington, it
    could severely disrupt production and movement of Douglas-fir seedlings
    used in replanting. If SOD spreads to the East, it is likely to kill
    large numbers of red oaks. Collectively the red and white oaks comprise
    38 percent of the Nation's total hardwood saw-timber volume.
        Containing Sudden Oak Death has become more challenging as the
    number of host plants has grown. The situation became a crisis in 2004
    when officials discovered that infected nursery plants had been shipped
    to more than 200 nurseries across the country. APHIS adopted highly
    restrictive regulations to prevent a recurrence of the 2004 crisis that
    are proving effective: in 2005, inspectors detected infected plants in
    56 nurseries, only 8 of which were not on the West Coast. In fiscal
    year 2007, at least $9 million is needed to ensure the continued
    efficacy of these regulations and curb the spread of this disease.
        Sirex Woodwasp.--This wood-boring insect native to Europe, Asia,
    and North Africa has been introduced into pine plantations in several
    countries in the Southern Hemisphere where it caused serious damage
    before the release of a biological control agent reduced the problem.
    The wasp has now become established in New York and Ontario. According
    to the USDA Forest Service, if the Sirex woodwasp is allowed to spread,
    within 55 years it could cause damage ranging from $3 billion to $17
    billion to U.S. pine timber and pulp production, primarily in the
    South. To forestall these damages, APHIS must implement regulations to
    prevent movement of infested material while expediting the safety
    review required before any release in North America of the biological
    control agent. We anticipate that APHIS will need several million
    dollars for this new activity.
        USDA Agriculture Research Service.--The Conservancy urges the
    Subcommittee to provide funding for the Agricultural Research Service
    (ARS) to study possible biological control agents targeting two insects
    that threaten the unique cycad forests of Guam. The Asian cycad scale
    and cycad blue butterfly--both individually and together--are on track
    to destroy these forests. ARS staff at the Ft. Pierce, Florida
    laboratory should receive funds to identify and test possible
    biological control agents targeting these two harmful insects.
    Additional funds are needed for staff on Guam.
        Noxious Weed Control and Eradication Act.--We respectfully request
    $15 million to fully implement the Noxious Weed Control and Eradication
    Act of 2004, enacted by the 108th Congress. As control and management
    of invasive species are important for agriculture, natural areas,
    forestry, and rangeland, this effort has strong bipartisan support.
    This issue is vital to the health of the Nation's economy and
    ecosystems. Funding for this program now will save money in the long-
    term.
        Pest and Disease Management Programs.--APHIS provides technical and
    financial support to help control or eradicate a variety of threats to
    our agricultural and natural systems. In an attempt to further combat
    pest and disease outbreaks and problems the Administration has proposed
    a $10 million pilot competitive-bid program to award grants to private
    groups who can respond to invasive species with innovative
    methodologies. It has been noted that a major obstacle to APHIS'
    ability to rapidly respond to infestations is that there is no national
    system that addresses all types of invasive species infestations--those
    affecting aquatic areas, rangelands, and forests as well as crops and
    livestock. With this pilot program the agency may be able to increase
    its effectiveness with invasive species by including the early
    involvement of on the ground groups who recognize the urgent need for
    rapid response, active involvement, and can bring with them pioneering
    and resourceful tactics.
        Wetlands Reserve Program.--America's wetlands are the habitat for
    thousands of species of wildlife, and up to half of all North American
    bird species nest or feed in wetlands and about half of all threatened
    and endangered species use wetlands. In addition, our wetlands help to
    trap pollution, reduce the impact of floods, stabilize shore areas, and
    provide recreational opportunities. President Bush has committed to
    increasing the number of wetland acres in the United States and has
    requested full funding for the Wetlands Reserve Program (WRP) in his
    fiscal year 2007 budget request. Full funding of WRP would allow for
    enrollment of 250,000 acres in 2007, the full yearly authorized amount
    in the 2002 Farm Bill. WRP is the key component in meeting the
    president's promise to create, improve and protect at least 3 million
    wetland acres over a 5-year period that ends in 2009.
        Another very effective program administered under WRP, is the
    Wetlands Reserve Enhancement Program (WREP), which uses existing
    authority to enhance the delivery of WRP. Specifically, WREP provides
    an avenue for NRCS to form special partnerships with States, local
    governments, and non-profit organizations to improve and expand the
    delivery of WRP through easement acquisition and activities associated
    with wetland restoration, creation, or enhancement. We are pleased to
    see NRCS using this tool to direct funding to locally initiated and led
    projects that achieve maximum environmental benefits while remaining
    cost-effective and leveraging non-Federal funds. We fully support the
    expanded use of this program and propose that with an increased funding
    level for WRP, NRCS be encouraged to expand its financial assistance
    available for WREP.
        Wildlife Habitat Incentive Program.--The Wildlife Habitat Incentive
    Program (WHIP) is a highly-effective and widely-accepted program across
    the country. WHIP is able to target wildlife habitat projects on all
    lands and aquatic areas, and provides assistance to conservation-minded
    landowners to develop and improve wildlife habitat on their lands. We
    recommend that the committee support the President's program request
    for an increase of $12 million over the 2006 level. The Conservancy
    supports the NRCS proposal to target $10 million to improve migratory
    fish habitats by removing obstructions from rivers, such as small
    private dams and water diversions. This focus will help to create
    incentives to protect streamside areas, repair instream habitat,
    improve water flows and water quality, or initiate watershed management
    and planning in areas where streams are in a degraded condition due to
    past practices.
        Conservation Reserve Program.--The Conservancy has been a strong
    supporter of USDA's Conservation Reserve Program (CRP) and supports the
    full authorized enrollment of 39 million acres. Roughly 35 million
    acres across the country are under short term CRP rental agreements,
    and beginning in 2007, contracts representing over 22 million acres
    will expire, over 62 percent of those acres. USDA's Farm Service Agency
    (FSA) is currently deciding how to handle this large number of expiring
    contracts and additional acres, as well.
        Few environmental programs have matched the scope and achievement
    of CRP. Since its inception in 1986, the program has been responsible
    for reducing soil erosion by nearly 40 percent and restoring the
    grassland and wetland communities of the Great Plains. However, there
    is still so much more that the program could accomplish. We urge the
    committee to direct USDA to increase CRP's environmental benefits by:
    (1) better targeting CRP enrollments; (2) enhancing the management of
    CRP lands; and (3) assuring that inappropriate cover plantings are not
    encouraged by the program. In order to achieve these higher
    environmental benefits, FSA will need to update and improve the
    Environmental Benefits Index (EBI). Proper management of CRP lands and
    improved targeting of CRP contracts to attain the highest conservation
    goals will require increased funding for the agency as it prepares for
    huge reenrollment that it now faces.
                                     ______

       Prepared Statement of the New Mexico Interstate Stream Commission

                                    SUMMARY

        This Statement is submitted in support of appropriations for the
    U.S. Department of Agriculture's Environmental Quality Incentives
    Program (EQIP) and the Colorado River Basin Salinity Control Program.
    Prior to the enactment of the Farm Security and Rural Investment Act
    (FSRIA) in 2002, the salinity control program had not been funded at
    the level necessary to control salinity with respect to water quality
    standards since the enactment of the Federal Agriculture Improvement
    and Reform Act (FAIRA) of 1996. Inadequate funding of the salinity
    control program also negatively impacts the quality of water delivered
    to Mexico pursuant to Minute 242 of the International Boundary and
    Water Commission. Adequate funding for EQIP, from which the U.S.
    Department of Agriculture (USDA) funds the salinity program, is needed
    to implement salinity control measures. The President's budget for
    fiscal year 2007 requests an appropriation of $1 billion for EQIP. I
    urge the Subcommittee to support an appropriation of at least $1
    billion to be appropriated for EQIP. I request that the Subcommittee
    designate 2.5 percent, but no less than $20 million, of the EQIP
    appropriation for the Colorado River Basin salinity control program. I
    request that adequate funds be appropriated for technical assistance
    and education activities directed to salinity control program
    participants.

                                   STATEMENT

        The seven Colorado River Basin States, in response to the salinity
    issues addressed by Clean Water Act of 1972, formed the Colorado River
    Basin Salinity Control Forum (Forum). Comprised of gubernatorial
    appointees from the seven Basin States, the Forum was created to
    provide for interstate cooperation in response to the Clean Water Act,
    and to provide the States with information to comply with Sections
    303(a) and (b) of the Act. The Forum has become the primary means for
    the seven Basin States to coordinate with Federal agencies and Congress
    to support the implementation of the Salinity control program.
        Congress authorized the Colorado River Basin salinity control
    program in the Colorado River Basin Salinity Control Act of 1974.
    Congress amended the Act in 1984 to give new responsibilities to the
    USDA. While retaining the Department of the Interior as the lead
    coordinator for the salinity control program, the amended Act
    recognized the importance of the USDA operating under its authorities
    to meet the objectives of the salinity control program. Many of the
    most cost-effective projects undertaken by the salinity control program
    to date have occurred since implementation of the USDA's authorization
    for the program.
        Bureau of Reclamation studies show that damages from the Colorado
    River to United States water users are about $330,000,000 per year.
    Damages are estimated at $75,000,000 per year for every additional
    increase of 30 milligrams per liter in salinity of the Colorado River.
    It is essential to the cost-effectiveness of the salinity control
    program that USDA salinity control projects be funded for timely
    implementation to protect the quality of Colorado River Basin water
    delivered to the Lower Basin States and Mexico.
        Congress concluded, with the enactment FAIRA in 1996, that the
    salinity control program could be most effectively implemented as a
    component of EQIP. However, until 2004, the salinity control program
    since the enactment of FAIRA was not funded at an adequate level to
    protect the Basin State-adopted and Environmental Protection Agency
    approved water quality standards for salinity in the Colorado River.
    Appropriations for EQIP prior to 2004 were insufficient to adequately
    control salinity impacts from water delivered to the downstream States,
    and hampered the required quality of water delivered to Mexico pursuant
    to Minute No. 242 of the International Boundary and Water Commission,
    United States and Mexico.
        EQIP subsumed the salinity control program without giving adequate
    recognition to the responsibilities of the USDA to implement salinity
    control measures per Section 202(c) of the Colorado River Basin
    Salinity Control Act. The EQIP evaluation and project ranking criteria
    target small watershed improvements which do not recognize that water
    users hundreds of miles downstream are significant beneficiaries of the
    salinity control program. Proposals for EQIP funding are ranked in the
    States of Utah, Wyoming and Colorado under the direction of the
    respective State Conservationists without consideration of those
    downstream, particularly out-of-state, benefits.
        Following recommendations of the Basin States to address the
    funding problem, the USDA's Natural Resources Conservation Service
    (NRCS) designated the Colorado River Basin an ``area of special
    interest'' including earmarked funds for the salinity control program.
    The NRCS concluded that the salinity control program is different from
    the small watershed approach of EQIP. The watershed for the salinity
    control program stretches almost 1,200 miles from the headwaters of the
    river through the salt-laden soils of the Upper Basin to the river's
    termination at the Gulf of California in Mexico. NRCS is to be
    commended for its efforts to comply with the USDA's responsibilities
    under the Colorado River Basin Salinity Control Act, as amended.
    Irrigated agriculture in the Upper Basin realizes significant local
    benefits of improved irrigation practices, and agricultural producers
    have succeeded in submitting cost-effective proposals to NRCS.
        Years of inadequate Federal funding for EQIP since the 1996
    enactment of FAIRA and prior to 2004 resulted in the Forum finding that
    the salinity control program needs acceleration to maintain the water
    quality criteria of the Colorado River Water Quality Standards for
    Salinity. Since the enactment of FSRIA in 2002, an opportunity to
    adequately fund the salinity control program now exists. The
    President's budget request of $1 billion accomplishes the needed
    acceleration of the NRCS salinity control program if the USDA continues
    its practice of designating 2.5 percent of the EQIP funds appropriated.
    The requested funding of 2.5 percent, but no less than $20 million, of
    the EQIP funding will continue to be needed each year for at least the
    next few fiscal years.
        State and local cost-sharing is triggered by and indexed to the
    Federal appropriation. Federal funding for the NRCS salinity control
    program of about $19.5 million for fiscal year 2006 has generated about
    $15.8 million in cost-sharing from the Colorado River Basin States and
    agricultural producers, or more than an 80 percent match of the Federal
    funds appropriated for the fiscal year.
        USDA salinity control projects have proven to be a most cost-
    effective component of the salinity control program. USDA has indicated
    that a more adequately funded EQIP program would result in more funds
    being allocated to the salinity program. The Basin States have cost-
    sharing dollars available to participate in on-farm salinity control
    efforts. The agricultural producers in the Upper Basin are willing to
    cost-share their portion and are awaiting funding for their
    applications to be considered.
        The Basin States expend 40 percent of the state funds allocated for
    the program for essential NRCS technical assistance and education
    activities. Previously, the Federal part of the salinity control
    program funded through EQIP failed to adequately fund NRCS for these
    activities, which has been shown to be a severe impediment to
    accomplishing successful implementation of the salinity control
    program. Recent acknowledgement by the Administration that technical
    assistance and education activities must be better funded has
    encouraged the Basin States and local producers that cost-share with
    the EQIP funding for implementation of the essential salinity control
    work. I request that adequate funds be appropriated to NRCS technical
    assistance and education activities directed to the salinity control
    program participants (producers).
        I urge the Congress to appropriate at least $1 billion in fiscal
    year 2007 for EQIP. Also, I request that Congress designate 2.5
    percent, but no less than $20 million, of the EQIP appropriation for
    the Colorado River Basin salinity control program.
                                     ______

         Prepared Statement of the US Marine Shrimp Farming Consortium

        Mr. Chairman, we greatly appreciate the opportunity to provide
    testimony to you and the Subcommittee, to thank you for your past
    support, and to discuss the achievements and opportunities of the US
    Marine Shrimp Farming Consortium(USMSFC), funded under the Federal
    initiative, Shrimp Aquaculture.
        We bring to your attention the success of the US Marine Shrimp
    Farming Consortium and its value to the Nation. The Consortium consists
    of institutions from 7 States: the University of Southern Mississippi/
    Gulf Coast Marine Laboratory, Mississippi; the Oceanic Institute,
    Hawaii; Tufts University, Massachusetts; Texas Agricultural Experiment
    Station, Texas A&M University, Texas; Waddell Mariculture Center, South
    Carolina; the University of Arizona, Arizona; and Nicholls State
    University, Louisiana. These institutions, which oversee the USMSFC,
    have made major advances in technology development and services to
    support the U.S. shrimp farming industry. The USDA in its 2004 program
    review recognized the program's excellent scientific performance,
    output, and multi-state collaborative efforts. The Consortium is at the
    crossroads of contributing to major growth of the U.S. shrimp farming
    industry, consolidating its competitive advantages, and satisfying
    consumer's demands for safe and wholesome seafood products. Shrimp is
    the number one consumed seafood product in the United States, yet
    contributes to a $3.6 billion trade deficit, second only to the import
    of oil for the deficit contributed by natural resource products.
    Accomplishments
        The Consortium, in cooperation with private industry, industry
    associations, and government agencies has generated new technologies
    for producing safe and premium quality marine shrimp at competitive
    prices. To date, the program has: (1) established the world's first and
    currently most advanced breeding and genetic selection program for
    marine shrimp; (2) completed pioneering research and development of
    advanced diagnostic tools for disease screening and control; (3)
    described the etiology of shrimp diseases associated with viral
    pathogens; (4) fostered shrimp production at near-shore, inland/rural
    farm and even desert sites; (5) served a lead role in the Joint
    Subcommittee on Aquaculture's efforts to assess the threat of globally
    transported shrimp pathogens; (6) served on the Office of International
    Epizootics, recommending country-of-origin labeling of imported shrimp
    products to combat the spread of exotic disease pathogens, subsequently
    adopted by the USDA in its 2002 Farm Bill; (7) supplied the United
    States industry with selectively bred and disease-resistant shrimp
    stocks; (8) developed advanced technology for biosecure shrimp
    production systems to protect both cultured and native wild stocks from
    disease; and (9) developed new feed formulations to minimize waste
    generation and enhance the use of domestic grains and oilseed products.
    These substantial accomplishments advance the continued growth of the
    domestic industry place an important emphasis on environmental
    sustainability, address concerns for the safety and quality of our
    seafood supply, and increase market competitiveness.
        Judging from the State of the industry today, USMSFC efforts
    continue to have measurable positive effect. Coastal farming continues
    to lead in the production of cultured shrimp in the United States,
    inland farming has added new dimensions and growth to the industry, and
    super-intensive production approaches are gaining momentum.
    Improvements in farm management practices coupled with the widespread
    use of disease-resistant stocks have resulted in bumper crops for the
    industry over the last several years.
        With reliable production in place, we have also seen a commensurate
    geographic expansion of the industry within the United States from
    three to seven States in the last 10 years. A broader industry base,
    while increasing production through the addition of new farms, also
    provides additional protection to the industry by geographically
    isolating different regional sectors in the event of disease outbreaks
    or natural disaster. Significant amounts of shrimp are now being
    produced in Texas, South Carolina, Florida, Hawaii, Arizona, Alabama,
    and Arkansas. Several other States are now beginning to explore
    production with the newer, super-intensive technologies being
    developed.
        In addition, the recent and growing worldwide switch to use of
    specific pathogen free (SPF) L. vannamei has created tremendous
    opportunity for U.S. shrimp broodstock suppliers. This switch has been
    caused by diseases overseas which have affected wild broodstock
    animals, lowering overall yield and profitability. The SPF concept for
    shrimp, pioneered by the USMSFC, has now been accepted worldwide and
    U.S. broodstock suppliers are being overwhelmed by orders for their
    stocks. For instance, in 2004, the State of Hawaii gave its exporter of
    the year award to a local company specializing in shrimp broodstock.
    Estimates are the world market for SPF stocks can reach near $90
    million yearly.
    Industry Vulnerability
        While exceptional progress has been made, this emerging industry is
    continually confronted with new challenges. The industry depends on the
    USMSFC for leadership and innovative technology development. As a
    result of development of high-health and improved stocks, disease
    diagnosis, new feeds, and new production technologies and farming
    approaches, the domestic industry has maintained relative stability,
    while other countries have had major losses in their production due to
    diseases and environmental problems. Disease losses due to exotic
    viruses in Asia and Latin America during the past 6 years have
    approached $6 billion USD.
        Diseases present in imported commodity shrimp products threaten not
    only the emerging domestic shrimp farming industry, but also the
    Nation's native shrimp stocks. During 2004, limited disease outbreaks
    did occur in Texas and Hawaii that were caused by a breakdown in
    biosecurity protocols against imported shrimp products. A quick
    response of the USMSFP, working in concert with the USDA's Animal and
    Plant Health Inspection Services and other agencies in the State of
    Texas, helped identify and isolate these outbreaks, limit the spread,
    and minimize the loss in production nationwide. There were no
    reoccurrences or outbreaks of other disease in 2005.
        While significant progress has been made in risk assessment and
    risk management with visible success, the industry and the USMSFC must
    remain constantly vigilant and proactive to further improve global
    competitiveness. In addition to providing significant input on the
    development of national and international regulatory standards for
    shrimp farmers, important service work for governmental agencies and
    NGOs keeps us continuously apprised of new developments pertaining to
    emerging regulations so that USMSFC research plans can be kept
    proactively responsive to dynamic shifts in industry needs.
        The overwhelming threat facing the U.S. marine shrimp farming
    industry today is the significant decline in market prices for domestic
    shrimp due to a surge of foreign imports over the last 3 years. The
    decline has also seriously threatened the domestic shrimp harvest
    industry. Average U.S. farm gate prices have fallen 40 percent since
    then, constraining profitability and plans for industry expansion.
    Anti-dumping tariffs imposed in February 2005 have not nor are
    forecasted to stem the tide of rising imports, or improve domestic
    shrimp prices as intended. Affected buyers and distributors have
    largely absorbed those costs or producers have switched to product
    forms not covered by the tariffs. Moreover, other countries not named
    on the order have filled any voids with increased imports into the
    United States.
        Concerns also have been heightened over food safety issues
    associated with unregulated use of antibiotics and fecal-borne
    contaminants due to questionable production practices in certain
    countries. Further, due to disease outbreaks worldwide, several foreign
    countries have switched production to the dominant species in the
    United States, eroding a previous competitive advantage. While it is
    important that a level playing field be created through reexamination
    of trade and food safety issues, more technologically advanced and
    innovative approaches are now critically needed to leverage U.S.
    industry gains, create competitive advantage, and improve
    profitability. Innovative ways need to be sought to offset low prices
    and to distinguish and add value to the domestic product to provide a
    competitive edge in the marketplace and to ensure the safety of the
    domestic seafood supply.
    Industry Independence
        In fact, despite recent price and profitability trends, investor
    confidence is rising as a result of the work of the Consortium. New
    farms are emerging utilizing new and improved technologies, while
    others are working in cooperation with the Consortium on more advanced
    approaches that are nearing fruition. In addition to supporting today's
    industry, our advanced, high-density biosecure shrimp production
    systems are now developed to the point for further expansion of shrimp
    farming into near-shore, inland/rural and desert sites away from the
    environmentally sensitive coastal zone. We now have in place the
    economic models that will appropriately direct research to ensure
    economic viability, taking in consideration all associated biological,
    regional, and economic risk factors. Importantly, these new production
    technologies produce the highest quality and safest shrimp, utilize
    U.S. grain and oilseed products for feed production, and do not pose
    any threat to the environment. These important traits of an evolving
    domestic industry can be exploited to gain competitive edge, offset
    declining prices, and ensure the quality and safety of shrimp for the
    consumer. Clearly, the U.S. shrimp farming industry has emerged solid
    from near collapse in the early 1990s, and appears well poised for a
    new phase of growth, provided the technologies and innovations are in
    place to support a larger, more diverse, and more competitive domestic
    industry for the new millennium.
        To support existing efforts and technology transfer and plans for
    new dimensions to the research to address recent profitability issues,
    an increase in the current funding level from $4.158 million to $6
    million is requested. The increase will be used to: strengthen the
    Consortium's biotechnology and molecular capabilities and activities to
    support rapid and more advanced disease monitoring and genetic
    selection efforts; accelerate the development of new genetic lines for
    market advantage; advance high-density production prototypes to
    commercial-scale testing; determine the mechanisms of disease immunity
    in shrimp for protection of both farmed and wild shrimp stocks; and
    address niche market technologies for competitive advantage. In
    addition to these needed technological innovations, increased funding
    will support new efforts to promote institutional innovations that will
    enable expansion and vertical integration of the domestic industry,
    including examination of regulatory impediments to shrimp aquaculture;
    the effect of farm insurance; development of cooperatives; and the
    socioeconomics of existing and advanced, high-density production
    systems.
        Mr. Chairman, the U.S. shrimp farming industry and our Consortium
    deeply appreciate the support of the Committee and respectfully ask for
    a favorable consideration of this request.
                                     ______

      Prepared Statement of the Organic Farming Research Foundation (OFRF)

        The Organic Farming Research Foundation (OFRF) has received support
    from the following federal grants and contracts during the period
    October 1, 2002 to present.
    environmental protection agency (epa) strategic agriculture initiative
           (sai) grants under the food quality protection act (fqpa)
    REGION 9
        Grant Agreement: X-97901601-0
        Project Title: Organic Farming Research for Alternative Weed and
    Pest Management
        Project Period: 10/01/2001--12/31/2003 amended to 6/30/2005
        This assistance agreement provided full Environmental Protection
    Agency (EPA) funding in the amount of $84,000. The project supported
    limited research in EPA Regions 8, 9 and 10 that investigated pest and
    weed management in organic farming systems to develop alternative
    approaches for managing pests and weeds without relying on agricultural
    chemicals.

        Grant Agreement: X-97935601-0
        Project Title: Pest and Weed Management
        Project Period: 11/01/2001--12/31/2004
        This assistance agreement provided full Environmental Protection
    Agency (EPA) funding in the amount of $10,430. The project supported
    investigation and development of pest and weed management methods in
    organic farming systems for a variety of crops in EPA Region 9 to
    develop alternatives to synthetic agricultural chemicals.

    REGION 5
        Grant Agreement: X8-96562001-0
        Project Title: Organic Farming Research Foundation
        Project Period: 10/01/2004--9/30/2006
        Environmental Protection Agency (EPA) funds in the amount of
    $30,000 would be distributed through a competitive grants program for
    projects that investigate organic pest control alternatives to
    chemicals being reviewed under the Food Quality Protection Act. The
    Organic Farming Research Foundation proposed to use EPA funding to
    support research on organic farming practices for weed and insect pest
    management in IL, IN, MI, MN, OH, and WI and tribal Nations.

        Grant Agreement: X8-96562001-1
        Project Title: Organic Farming Research Foundation
        Project Period: 10/01/2004--9/30/2006
        Environmental Protection Agency (EPA) funds in the amount of
    $30,000 would be distributed through a competitive grants program for
    projects that investigate organic pest control alternatives to
    chemicals being reviewed under the Food Quality Protection Act. The
    Organic Farming Research Foundation proposed to use EPA funding to
    support research on organic farming practices for weed and insect pest
    management in IL, IN, MI, MN, OH, and WI and tribal Nations.
    REGION 8
        Grant Agreement: X8-97815401-0
        Project Title: Surveys, Studies, Investigations
        Project Period: 10/01/2004--9/30/2006
        Environmental Protection Agency (EPA) funds in the amount of
    $40,000 support research on organic farming practices for weed and
    insect pest management in CO, MT, ND, SD, UT, WY, and 27 Tribal
    Nations. Funds are channeled through OFRF's competitive grants program
    for projects that investigate organic pest control alternatives to
    chemicals being reviewed under the Food Quality Protection Act.

     UNITED STATES DEPARTMENT OF AGRICULTURE (USDA)/INITIATIVE FOR FUTURE
                      AGRICULTURE AND FOOD SYSTEMS (IFAFS)

        Subcontract RF740050 under the USDA/IFAFS Award Number: 00-52101-
    9691
        Project Title: Revitalizing Small and Mid-Sized Farms: Organic
    Research, Education, and Extension
        Project Period: 9/15/2000--9/30/2004 amended to 9/30/2005
        USDA/IFAFS funding in the amount of $221,038 to establish a
    consortium of universities, non-profit and grassroots farmers
    organizations that will revitalize small and mid-sized family farms by
    integrating multidisciplinary research, education, and extension of
    organic agriculture. The goal is to catalyze new opportunities for
    farmers including niche marketing of high-value horticultural and
    agronomic crops by expanding existing organic agriculture programs at
    three land grant institutions.
        I, Brise Tencer, am submitting this testimony on behalf of the
    Board of Directors of the Organic Farming Research Foundation (OFRF) to
    detail our recommendations and requests for funding of several USDA
    marketing, research, and conservation programs of importance to organic
    agriculture.
        The Organic Farming Research Foundation is a non-profit whose
    mission is to sponsor research related to organic farming practices, to
    disseminate research results to organic farmers and to growers
    interested in adopting organic production systems, and to educate the
    public and decision-makers about organic farming issues.
        As you prepare your appropriations priorities for the fiscal year
    2007 Agriculture, Rural Development and Related Agencies Appropriations
    bill, we request your support for the following organic programs.
    Development of organic production effectively serves USDA strategic
    objectives for environmental quality, human health and nutrition, and
    agricultural trade. Organic agriculture has experienced extraordinary
    growth over the last decade; the International Trade Center (UNCTAD/
    WTO) estimates that organic products represent 2-2.5 percent of total
    U.S. retail food sales. Because organic production improves
    profitability and market access, it is a desirable alternative for many
    producers and represents an important opportunity for growth in U.S.
    agriculture. The organic sector is extremely diverse in scale,
    technology, and market chains. Both ends of the scale spectrum are
    experiencing vibrant growth. The modest funding levels requested below
    will help these trends continue while providing a cost effective way to
    create positive returns for the environment and our economy.

                       USDA AGRICULTURAL RESEARCH SERVICE

    $10 Million for Strategic Regional Programming for Organic Agricultural
            Research
        In 2005, USDA-ARS spent about $3.5 million on organic-specific
    projects, or about .35 percent of $1 billion fiscal year 2005 ARS
    expenditures. Under a 2 percent ``fair share'' framework, the ARS would
    have generated about $20 million for organic research in its budget.
    The 2004 and 2005 appropriations omnibus bills contained language
    urging ARS to direct an increased amount of resources to organic. This
    report language was not a mandate and no significant increases in
    organic expenditures have been seen over the last several years.
        For fiscal year 2007, OFRF recommends $10 million for Strategic
    Regional Programming for Organic Agricultural Research. This funding
    would be part of an overall package of $10 million total that would be
    distributed among the 8 Regional Areas (and the National Agricultural
    Library). Regional distribution of funds would provide flexibility to
    address the needs and opportunities of the organic production and
    processing sector. This approach would make progress towards the ``fair
    share'' goal and provide a bridge to the evolution of a national
    program for organic research. Funding will be allocated by the Area
    Directors (with stakeholder input) to (1) Maintain and enhance existing
    CRIS projects, scientists and technicians whose objectives are specific
    to organic production and processing; and (2) Provide support to
    integrate organic agriculture objectives into other projects and
    partnerships, where such capacity exists and when the objectives meet
    priority needs (e.g., as identified by the ARS National Organic
    Workshop held January, 2005 in Austin, Texas). The attached addendum to
    this request provides additional information about regional needs.
        usda cooperative state research education and extension service
    Organic Transitions Program: $5 million
        Over the last few years the Organic Transition research program has
    become one of the most competitive of the USDA CSREES integrated grant
    programs. Because of the high level of interest in this program, only
    about 10 percent of qualified applicants have been able to receive
    funding (compared to 19-29 percent of qualified applicants that receive
    funding in comparable grants programs at the USDA CSREES). We expect
    interest in this program to continue to grow. Expansion of this program
    should focus on a higher number of smaller grants. Also, it is
    important that this program keeps its own identity and not be
    incorporated into the National Research Initiative (NRI). We ask the
    committee to increase funding for Organic Transition program to $5
    million in 2007 and for it to remain as part of the Integrated Organic
    Program, distinct from the National Research Initiative.
    National Research Institute (NRI): 30 percent directed to goals of the
            Initiative for Future Food and Agricultural Systems (IFAFS)
        The IFAFS program has provided an important source of research
    funds for projects relevant to organic growers. The appropriation bills
    between fiscal year 2003 to fiscal year 2006 each prohibit USDA from
    spending money for IFAFS, but directed the Department to spend a 20
    percent subset of the National Research Initiative competitive grants
    program ``under the same terms and conditions'' as IFAFS. For fiscal
    year 2007 we support the President's request that 30 percent of NRI be
    directed to IFAFS goals. Additionally, we request the Committee include
    report language directing the USDA CSREES to direct a significant
    portion of these funds to organic research (including trade and
    economic policy topics) within the following program areas: Managed
    Ecosystems and Small and Mid sized Farm Viability and Rural
    Entrepreneurship through inclusion of language soliciting applications
    on organic research topics in the NRI requests for applications.
    Sustainable Agriculture Research and Education (SARE): Chapter 1: $15
            million, Chapter 3: $5 million
        SARE funds farmer-driven research and outreach on profitable,
    environmentally sound farming practices, including organic production.
    SARE's solid track record, regional structure, and close links between
    research and outreach mean that farmers nationwide get reliable
    information they need on how to stay in business while being
    environmentally responsible. In 2005 the SARE program was funded at
    Chap 1: $9.2 million, Chap 3: $3.8 million. For 2007 we seek $15
    million, $5 million for Chapters 1 and 3, respectively.

                         USDA ECONOMIC RESEARCH SERVICE

    Organic Production and Marketing Data Collection: $750,000
        Because increased ability to conduct economic analysis for the
    organic farming sector is greatly needed, we request $750,000 be
    appropriated to the USDA Economic Research Service to implement the
    ``Organic Production and Market Data Initiative'' included in Section
    7407 of the 2002 farm bill.

              USDA NATIONAL AGRICULTURE STATISTICS SERVICE (NASS)

    Census follow up--Organic Grower Survey: $1 million
        Unlike other sectors of agriculture, the organic industry has
    suffered from a lack of data collection and analysis, which has limited
    producers' ability to respond to market trends. The USDA NASS is
    currently in the process of developing the 2007 agricultural census.
    Although they are making an effort to expand the quantity of organic
    questions in the census, they will need to conduct a follow up survey
    in order to collect more in-depth information on acreage, yield/
    production, inventory, production practices, sales and expenses,
    marketing channels, and demographics. We request $1 million be
    appropriated to the USDA National Agriculture Statistics Service for
    collection of organic price information, authorized by the ``Organic
    Production and Market Data Initiative'' included in Section 7407 of the
    2002 farm bill.

                      USDA AGRICULTURAL MARKETING SERVICE

    Organic Price Collection: $1 million
        Wholesale and retail price information is critical to farmers and
    ranchers, but organic producers have fewer resources for price
    information than conventional producers. Organic price information is
    particularly important for insuring that organic producers receive
    appropriate payment from Federal crop insurance when they incur a loss.
    We request $1 million be appropriated to the USDA Agricultural
    Marketing Service for collection of organic price information,
    authorized by the ``Organic Production and Market Data Initiative''
    included in Section 7407 of the 2002 farm bill.
    Organic Certification Cost Sharer: $1.5 million
        For small to medium scale producers and handlers, the cost of
    organic certification can be a significant impediment to entry into the
    USDA Organic Program. The cost of the program are not confined to
    initial certification, in fact many small and medium sized producers
    often cite the ongoing annual cost burden of maintaining organic
    certification as an obstacle to staying in the USDA National Organic
    Program. The Organic Certification Cost Share Program was created to
    ease the cost burden of certification by providing up to 75 percent (to
    a maximum of $500) of certification costs, but the $5 million provided
    in the 2002 Farm Bill has now been expended at the Federal level
    (although a few states have some residual funding which they are still
    in the process of dispersing to producers or handlers). We urge the
    committee to direct $1.5 million in funds of the Commodity Credit
    Corporation as a stopgap measure to continue the National Organic
    Certification Cost Share Program authorized in Section 10606 of the
    2002 Farm Bill.
    Organic Standards: $3.13 million
        The national organic standards, which have been in effect since
    October 31, 2002, provide a uniform national standard for the term
    ``organic'' that ensures consumer confidence in American organic
    products. The rules, however, will have little effect unless it is
    properly enforced thereby protecting both consumers and producers of
    organic products. Additional funding is needed to investigate
    complaints, on-site auditing of certifiers (for accreditation
    purposes), and certifier training programs. In fiscal year 2005,
    Congress appropriated $2 million to AMS for Organic Standards. For
    2007, we support the President's request of $3.13 million to expand
    enforcement and compliance of the National organic standards.
    Additionally, we request the following report language be included:
    ``The Committee is encouraged that the Agency has hired an Executive
    Director for the National Organic Standards Board (NOSB), as well as a
    new Director for the National Organic Program. The Committee also notes
    that the audits performed by the American National Standards Institute
    (ANSI) in 2004 and by the USDA Office of Inspector General (OIG) in
    2005 made strong recommendations about changes needed in the
    administration of the National Organic Program. The Committee expects
    the Agency to take the necessary actions to comply with these
    recommendations, and to provide a written report to the Committee by
    December of 2006 regarding the progress in implementing these
    recommendations. In addition, the Committee expects to be kept abreast
    of the complaints that the NOP has received about violations of the
    organic standards, and the progress of the Agency in investigating and
    responding to those complaints. Finally, the Committee expects the NOP
    to work closely with the NOSB to implement the Peer Review Panel
    requirements of OPFA and USDA's organic regulations.''

                  USDA NATURAL RESOURCES CONSERVATION SERVICE

    Conservation Security Program (Csp): Full Funding
        The Conservation Security Program is a comprehensive stewardship
    incentives program that provides financial and technical assistance to
    farmers and ranchers nationwide to reward them for creating public
    benefits such as clean water, clean air, wildlife habitat, and long-
    term carbon storage. Such assistance is of particular importance to the
    organic producers, many of whom already implement practices outlined in
    this program. We seek full funding for the CSP as a nationwide
    conservation entitlement program.
    Environmental Quality Incentives Program (Equip): Language supporting
            incentive payments for transitioning to organic production
        The Environmental Quality Incentives Program (EQIP) is a voluntary
    conservation program for farmers and ranchers that promotes
    agricultural production and environmental quality as compatible
    national goals. EQIP offers financial and technical help to assist
    eligible participants install or implement structural and management
    practices on eligible agricultural land.
        Incentive payments may be provided for up to three years to
    encourage producers to carry out management practices they may not
    otherwise use without the incentive. Some states, including
    Massachusetts, Montana, and Minnesota have used incentive payments to
    support producers transitioning to organic production. These transition
    incentives payment programs assist farmers who choose to convert new
    acreage to organic production. To qualify, farmers must apply at their
    local NRCS offices, file organic system plans, and be inspected by a
    USDA-accredited certifying agent. We urge the Committee to encourage
    more states to make such programs available by adding language that
    says: ``funds may be used for incentive payments for transition to
    organic production''.

                    USDA RURAL BUSINESS-COOPERATIVE SERVICE

    Appropriate Technology Transfer for Rural Areas (ATTRA): $3.9 million
        ATTRA, is a national sustainable agriculture information service
    managed by the National Center for Appropriate Technology. It provides
    information and other technical assistance to farmers, ranchers,
    Extension agents, educators, and others involved in sustainable
    agriculture in the United States. The ATTRA website receives hundreds
    of thousands of visitors annually. Often written in response to
    questions from organic farmers, the ATTRA publications cover specific
    issues about the most widely produced organic crops. With the continued
    rapid growth of the organic industry, we anticipate an increase in
    demand for ATTRA services in the coming year. Because ATTRA
    specifically provides accurate and up-to-date technical information
    relating to organic agricultural practices we request that it be funded
    at $3.9 million.
        Thank you for your consideration of these requests. Supporting
    organic agriculture, by appropriating adequate funding for these
    programs provides critical, cost-effective benefits for U.S. producers
    and consumers.
                                     ______

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

                               SUMMARY OF REQUEST

        The Organization for the Promotion and Advancement of Small
    Telecommunications Companies (OPASTCO) seeks the Subcommittee's support
    for fiscal year 2007 loan levels for the telecommunications loans
    program administered by the Rural Utilities Service (RUS) in the
    following amounts:

                              [Millions of dollars]
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    5 percent hardship loans................................             145
    Treasury rate loans.....................................             250
    Guaranteed loans........................................         \1\ 300
    ------------------------------------------------------------------------
    \1\ Note: The $300 million requested for guaranteed loans includes $175
      million in funding that was previously available through the Rural
      Telephone Bank (RTB). The dissolution of the RTB necessitates
      additional funds for RUS telecommunications loans in order to maintain
      the level of funds available to rural telecommunications borrowers.

        In addition, OPASTCO requests that the distance learning,
    telemedicine, and broadband program be funded at sufficient levels.
        OPASTCO is a national trade association of approximately 550 small
    telecommunications carriers serving primarily rural areas of the United
    States. Its members, which include both commercial companies and
    cooperatives, together serve over 3.5 million customers in 47 States.
        Perhaps at no time since the inception of the RUS (formerly the
    REA) has the telecommunications loans program been so vital to the
    future of rural America. The telecommunications industry is at a
    crossroads, both in terms of technology and public policy. Rapid
    advances in telecommunications technology in recent years have begun to
    deliver on the promise of a new ``information age.'' Both federal and
    state policymakers have made deployment of advanced communications
    services a top priority. However, without continued support of RUS's
    telecommunications loans program, rural telephone companies will be
    hard pressed to continue building the infrastructure necessary to bring
    their communities into this new age and achieve policymakers'
    objectives.
        Contrary to the belief of some critics, RUS's job is not finished.
    Actually, in a sense, it has just begun. We have entered a time when
    advanced services and technology--such as fiber-to-the-home, high-speed
    packet and digital switching equipment, and digital subscriber line
    technology--are expected by customers in all areas of the country, both
    urban and rural. Moreover, the ability of consumers to use increasingly
    popular Voice over Internet Protocol (VoIP) services requires that they
    first have a broadband connection from a facilities-based carrier.
    Unfortunately, the inherently higher costs of upgrading the rural
    wireline network, both for voice and data communications, has not
    abated.
        Rural telecommunications continues to be more capital intensive and
    involves fewer paying customers than its urban counterpart. In the
    FCC's September 2004 report on the deployment of advanced
    telecommunications capability, the Commission correctly noted that
    ``[r]ural areas are typically characterized by sparse and disperse
    populations, great distances between the customer and the service
    provider, and difficult terrain. These factors present a unique set of
    difficulties for providers attempting to deploy broadband services.''
    Thus, in order for rural telephone companies to continue modernizing
    their networks and providing consumers with advanced services at
    reasonable rates, they must have access to reliable low-cost financing.
        The relative isolation of rural areas increases the value of
    telecommunications for these citizens. Telecommunications enables
    applications such as high-speed Internet connectivity, distance
    learning, and telemedicine that can alleviate or eliminate some rural
    disadvantages. A modern telecommunications infrastructure can also make
    rural areas attractive for some businesses and result in revitalization
    of the rural economy. For example, businesses such as telemarketing and
    tourism can thrive in rural areas, and telecommuting can become a
    realistic employment option. Certainly, telecommunications plays a
    major role in any rural community's economic development strategy, with
    the existence of modern and advanced telecommunications infrastructure
    being a major enabling factor in the development of small business and
    manufacturing enterprises in rural areas.
        While it has been said many times before, it bears repeating that
    RUS's telecommunications loans program is not a grant program. The
    funds loaned by RUS are used to leverage substantial private capital,
    creating public/private partnerships. For a very small cost, the
    government is encouraging tremendous amounts of private investment in
    rural telecommunications infrastructure. Most importantly, the program
    is tremendously successful. Borrowers actually build the infrastructure
    and the government is reimbursed with interest.
        In addition to RUS's telecommunications loans program, OPASTCO
    supports adequate funding of the distance learning, telemedicine, and
    broadband program. Through distance learning, rural students gain
    access to advanced classes which will help them prepare for college and
    jobs of the future. Telemedicine provides rural residents with access
    to quality health care services without traveling great distances to
    urban hospitals. Furthermore, funding that is targeted to finance the
    installation of broadband transmission capacity will allow more rural
    communities to gain high-speed access to the Internet and receive other
    advanced services. In light of the Telecommunications Act's purpose of
    encouraging deployment of advanced technologies and services to all
    Americans--including schools and health care providers--sufficient
    targeted funding for these purposes is essential in fiscal year 2007.

                                   CONCLUSION

        The development of the nationwide telecommunications network into
    an information superhighway, as envisioned by policymakers, will help
    rural America survive and prosper in any market--whether local,
    regional, national, or global. However, without the availability of
    low-cost RUS funds, building the information superhighway in
    communities that are isolated and thinly populated will be untenable.
    By supporting the RUS telecommunications programs at the requested
    levels, the Subcommittee will be making a significant contribution to
    the future of rural America.
                                     ______

          Prepared Statement of the Pickle Packers International, Inc.

        The pickled vegetable industry strongly supports and encourages
    your committee in its work of maintaining and guiding the Agricultural
    Research Service. To accomplish the goal of improved health and quality
    of life for the American people, the health action agencies of this
    country continue to encourage increased consumption of fruits and
    vegetables in our diets. Accumulating evidence from the epidemiology
    and biochemistry of heart disease, cancer and diabetes supports this
    policy. Vitamins (particularly A, C, and folic acid) and a variety of
    antioxidant phytochemicals in plant foods are thought to be the basis
    for correlation's between high fruit and vegetable consumption and
    reduced incidence of these debilitating and deadly diseases. The
    problem is that many Americans choose not to consume the variety and
    quantities of fruits and vegetables that are needed for better health.
        As an association representing processors that produce over 85
    percent of the tonnage of pickled vegetables in North America, it is
    our goal to produce new products that increase the competitiveness of
    U.S. agriculture as well as meet the demands of an increasingly diverse
    U.S. population. The profit margins of growers continue to be narrowed
    by foreign competition. Likewise, the people of this country represent
    an ever-broadening array of expectations, tastes and preferences
    derived from many cultural backgrounds. Everyone, however, faces the
    common dilemma that food costs should remain stable and preparation
    time continues to be squeezed by the other demands of life. This
    industry can grow by meeting these expectations and demands with
    reasonably priced products of good texture and flavor that are high in
    nutritional value, low in negative environmental impacts, and produced
    with assured safety from pathogenic microorganisms and from those who
    would use food as a vehicle for terror. With strong research to back us
    up, we believe our industry can make a greater contribution toward
    reducing product costs and improving human diets and health.
        Many small to medium sized growers and processing operations are
    involved in the pickled vegetable industry. We grow and process a group
    of vegetable crops, including cucumbers, peppers, carrots, onions,
    garlic, cauliflower, cabbage (Sauerkraut) and Brussels sprouts, which
    are referred to as minor' crops. None of these crops is in any
    ``commodity program'' and as such, do not rely upon taxpayer subsidies.
    However, current farm value for just cucumbers, onions and garlic is
    $2.3 billion with an estimated processed value of $5.8 billion. These
    crops represent important sources of income to farmers, and the
    processing operations are important employers in rural communities
    around the United States. Growers, processing plant employees and
    employees of suppliers to this industry reside in all 50 States. To
    realize its potential in the rapidly changing American economy, this
    industry will rely upon a growing stream of appropriately directed
    basic and applied research from four important research programs within
    the Agricultural Research Service.

            VEGETABLE CROPS RESEARCH LABORATORY, MADISON, WISCONSIN

        The USDA/ARS Vegetable Crops Research Lab at the University of
    Wisconsin is the only USDA research unit dedicated to the genetic
    improvement of cucumbers, carrots, onions and garlic. Three scientists
    in this unit account for approximately half of the total U.S. public
    breeding and genetics research on these crops. Their past efforts have
    yielded cucumber, carrot and onion cultivars and breeding stocks that
    are widely used by the U.S. vegetable industry (i.e., growers,
    processors, and seed companies). These varieties account for over half
    of the farm yield produced by these crops today. All U.S. seed
    companies rely upon this program for developing new varieties, because
    ARS programs seek to introduce economically important traits (e.g.,
    virus and nematode resistance) not available in commercial varieties
    using long-term high risk research efforts. The U.S. vegetable seed
    industry develops new varieties of cucumbers, carrots, onions, and
    garlic and over twenty other vegetables used by thousands of vegetable
    growers. The U.S. vegetable seed, grower, and processing industry,
    relies upon the USDA/ARS Vegetable Crops Research Lab for unique
    genetic stocks to improve varieties in the same way the U.S. health
    care and pharmaceutical industries depend on fundamental research from
    the National Institutes of Health. Their innovations meet long-term
    needs and bring innovations in these crops for the United States and
    export markets, for which the United States has successfully competed.
    Past accomplishments by this USDA group have been cornerstones for the
    U.S. vegetable industry that have resulted in increased profitability,
    and improved product nutrition and quality.
        Both consumers and the vegetable production and processing industry
    would like to see fewer pesticides applied to food and into the
    environment in a cost-effective manner. Scientists in this unit have
    developed a genetic resistance for many major vegetable diseases that
    are perhaps the most important threat to sustained production of a
    marketable crop for all vegetables. Genetic resistance assures
    sustainable crop production for growers and reduces pesticide residues
    in our food and environment. Value of this genetic resistance developed
    by the vegetable crops unit is estimated at $670 million per year in
    increased crop production, not to mention environmental benefits due to
    reduction in pesticide use. New research progress initiated in the
    1990s and continuing today in Madison has resulted in cucumbers with
    improved disease resistance, pickling quality and suitability for
    machine harvesting. New sources of genetic resistance to viral and
    fungal diseases, environmental stress resistance like heat and cold,
    and higher yield have recently been mapped on cucumber chromosomes to
    provide a ready tool for our seed industry to significantly accelerate
    the development of resistant cultivars for U.S. growers. Nematodes in
    the soil deform carrot roots to reduce yield from 10 percent to over 70
    percent in major production areas. A new genetic resistance to nematode
    attack was recently discovered and found to almost completely protect
    the carrot crop from one major nematode. This group improved both
    consumer quality and processing quality of vegetables with a resulting
    increase in production efficiency and consumer appeal. This product was
    founded on carrot germplasm developed in Madison, Wisconsin. Carrots
    provide approximately 30 percent of the U.S. dietary vitamin A. With
    new carrots that have been developed, nutritional value of this crop
    has tripled, including the development of nutrient-rich cucumbers with
    increased levels of provitamin A. Using new biotechnological methods, a
    system for rapidly and simply identifying seed production ability in
    onions has been developed that reduces the breeding process up to 6
    years! A genetic map of onion flavor and nutrition will be used to
    develop onions that are more appealing and healthy for consumers.
    Garlic is a crop familiar to all consumers, but it has not been
    possible to breed new garlic varieties until a new technique for garlic
    seed production was recently developed and is now being bred like other
    crops.
        There are still serious vegetable production problems which need
    attention. For example, losses of cucumbers, onions, and carrots in the
    field due to attack by pathogens and pests remains high, nutritional
    quality needs to be significantly improved and U.S. production value
    and export markets could certainly be enhanced. Genetic improvement of
    all the attributes of these valuable crops are at hand through the
    unique USDA lines and populations (i.e., germplasm) that are available
    and the new biotechnological methodologies that are being developed by
    the group. The achievement of these goals will involve the utilization
    of a wide range of biological diversity available in the germplasm
    collections for these crops. Classical plant breeding methods combined
    with bio-technological tools such as DNA marker-assisted selection and
    genome maps of cucumber, carrot and onion will be the methods to
    implement these genetic improvements. With this, new high-value
    vegetable products based upon genetic improvements developed by our
    USDA laboratories can offer vegetable processors and growers expanded
    economic opportunities for United States and export markets.

           U.S. FOOD FERMENTATION LABORATORY, RALEIGH, NORTH CAROLINA

        The USDA/ARS Food Fermentation Laboratory in Raleigh, NC is the
    major public laboratory that this industry looks to as a source for new
    scientific information on the safety of our products and development of
    new processing technologies related to fermented and acidified
    vegetables. Over the years this laboratory has been a source for
    innovations, which have helped industry remain competitive in the
    current global trade environment. We expect the research done in this
    laboratory to lead to new processing and product ideas that will
    increase the economic value of this industry and provide consumers with
    safe, high quality, healthful vegetable products.
        To maintain the current level of research we request that Congress
    restore the funding increases provided in the fiscal year 2004
    ($270,000) and fiscal year 2005 ($100,000) budgets. It is very
    important that Congress restore the full $370,000 in the fiscal year
    2007 budget, since the funds were not included in the budget sent to
    the Congress.
        We seek additional funding to support two new research directions
    for this laboratory that have substantial economic potential for our
    industry and health benefits for the American public. These are: (1)
    Preservation of a variety of high nutrient/high antioxidant vegetables
    using fermentation or acidification techniques so as to maintain the
    natural levels of beneficial phyotochemicals in convenient to use
    value-added products; (2) development of techniques to deliver living
    pro-biotic microorganisms to consumers in fermented or acidified
    vegetable products.
        Certain vitamins and beneficial phytochemicals in vegetables are
    stabilized by the low pH in acidified and fermented foods. In addition,
    low pH makes it possible to preserve vegetables with low heat or,
    ideally, no heat. While many high nutrient/high antioxidant vegetables
    are pickled to a very limited extent, traditional processes typically
    include steps that lose many of the health-promoting components that
    diet authorities emphasize when they urge people to increase their
    consumption of fruits and vegetables. The objective will be develop new
    acid preservation techniques for broccoli, Brussel sprouts, sweet
    potato, cauliflower, and peppers that will provide high levels of
    vitamin C, folic acid, carotenoids, glucosinolates, and phenolic
    compounds to maximize the health benefits of these vegetables in
    products that are convenient and attractive to consumers.
        Most of what we hear about bacteria in foods concerns the pathogens
    that cause disease. However, lactic acid bacteria are intentionally
    grown in fermented foods because they are needed to give foods like
    sauerkraut, yoghurt, cheeses, and fermented salami the characteristic
    flavors and textures that we desire. There is a growing body of
    research to indicate that certain living lactic acid bacteria are pro-
    biotic' and can improve human health by remaining in the intestinal
    tract after they are consumed. Fermented or acidified vegetables may be
    a good way to deliver such pro-biotic bacteria to consumers. The
    objective will be to identify pro-biotic lactic acid bacteria that can
    survive in high numbers in selected vegetable products and investigate
    the potential for using vegetables as healthful delivery vehicles for
    pro-biotic organisms.

           SUGAR BEET AND BEAN RESEARCH UNIT, EAST LANSING, MICHIGAN

        The USDA/ARS cucumber post harvest engineering research at East
    Lansing, Michigan, is the only federally funded program that is devoted
    to developing new and/or improved engineering methods and technology
    for assessing, retaining, and assuring post harvest quality,
    marketability, and wholesomeness of pickling cucumbers and other
    vegetable products. The cucumber post harvest engineering research is
    one component of the post harvest engineering research program within
    the Sugar Beet and Bean Research Unit in East Lansing, Michigan. The
    post harvest engineering research program currently has a full-time
    research agricultural engineer whose primary research is to develop
    methods and technology for assessing and assuring post harvest quality
    of tree fruits. Because of severe under-funding, the location's
    cucumber post harvest engineering research has not been carried out at
    the full scope it would have been expected. A postdoctoral research
    associate has been hired to conduct research on developing
    nondestructive technology for assessing and grading pickling cucumbers
    and other vegetables. The ARS East Lansing location has been
    internationally recognized for developing innovative, practical
    engineering methods and techniques to improve harvest and post harvest
    handling systems for vegetables and tree fruits. The location recently
    developed a new laser-based multi-spectral imaging technology for
    grading and sorting fruit for texture and soluble solids content. The
    technology has the potential for inspecting a variety of vegetable
    crops including cucumbers. The location also developed an advanced
    hyper-spectral imaging system for automated detection of defects and
    quality attributes of fruit, which could be used for pickling cucumber
    inspection.
        Today, consumers have increasing choices of foods and they are
    demanding for better, consistent safe products. Defective and inferior
    cucumbers/vegetables will lead to poor quality, inconsistent pickled
    products and can cause significant economic losses to growers and
    processors. An effective quality control and assurance system
    throughout the handling steps between harvest and retail is required
    for the pickling industry to provide consistent, superior products to
    the marketplace. Methods currently available for measuring and grading
    quality of cucumbers and other vegetables are either ineffective or
    time consuming. New and/or improved technologies are needed to assess,
    inspect and grade fresh cucumbers rapidly and accurately for various
    internal and external quality characteristics so that raw products can
    be directed to, or removed from, appropriate processing or marketing
    avenues. This will minimize post harvest losses of food that has
    already been produced and ensure high quality, consistent final product
    and end-user satisfaction. Current research at East Lansing is focused
    on developing rapid inspection techniques for detecting and segregating
    defective cucumbers to assure the keeping and processing quality of
    pickling cucumbers. The research will lead to new inspection and
    grading technology that will help the pickling industry in delivering
    high-quality safe products to the marketplace. To enhance research on
    the development of engineering methods and technology for assuring post
    harvest quality and marketability of pickled and vegetable products, a
    full-time research scientist (engineering) will be needed for the ARS
    East Lansing research program.

             U.S. VEGETABLE LABORATORY, CHARLESTON, SOUTH CAROLINA

        The research program at the USDA/ARS Vegetable Laboratory in
    Charleston, South Carolina, addresses national problems in vegetable
    crop production and protection with emphasis on the southeastern United
    States. This research program is internationally recognized for its
    accomplishments, which have resulted in development of over 150 new
    vegetable varieties and lines along with the development of many new
    and improved disease and pest management practices. This laboratory's
    program currently addresses 14 vegetable crops including those in the
    cabbage, cucumber, and pepper families, which are of major importance
    to the pickling industry. The mission of the laboratory is to (a)
    develop disease and pest resistant vegetable crops and (b) develop new,
    reliable, environmentally sound disease and pest management programs
    that do not rely on conventional pesticides.
        Continued expansion of the Charleston program is crucial. Vegetable
    growers depend heavily on synthetic pesticides to control diseases and
    pests. Cancellation and/or restrictions on the use of many effective
    pesticide compounds are having a considerable influence on the future
    of vegetable crop production. Without the use of certain pesticides,
    growers will experience crop failures unless other effective, non-
    pesticide control methods are found quickly. The research on improved,
    more efficient and environmentally compatible vegetable production
    practices and genetically resistant varieties at the U.S. Vegetable
    Laboratory continues to be absolutely essential. This gives U.S.
    growers the competitive edge they must have to sustain and keep this
    important industry and allow it to expand in the face of increasing
    foreign competition.

                          FUNDING NEEDS FOR THE FUTURE

        It remains critical that funding continues the forward momentum in
    pickled vegetable research that the United States now enjoys and to
    increase funding levels as warranted by planned expansion of research
    projects to maintain U.S. competitiveness. We also understand that
    discretionary funds are now used to meet the rising fixed costs
    associated with each location. Additional funding is needed at the
    Wisconsin and South Carolina programs for genetic improvement of crops
    essential to the pickled vegetable industry, and at North Carolina and
    Michigan for development of environmentally-sensitive technologies for
    improved safety and value to the consumer of our products. The
    fermented and acidified vegetable industry is receptive to capital
    investment in order to remain competitive, but only if that investment
    is economically justified. The research needed to justify such capital
    investment involves both short term (6-24 months) and long term (2-10
    years or longer) commitments. The diverse array of companies making up
    our industry assumes responsibility for short-term research, but the
    expense and risk are too great for individual companies to commit to
    the long-term research needed to insure future competitiveness. The
    pickled vegetable industry currently supports research efforts at
    Wisconsin and North Carolina and anticipates funding work at South
    Carolina and Michigan as scientists are put in place. Donations of
    supplies and processing equipment from processors and affiliated
    industries have continued for many years.
    U.S. Vegetable Laboratory, Charleston, South Carolina
        The newly constructed laboratory-office building at the U.S.
    Vegetable Laboratory was occupied in April 2003. Design of the
    accompanying greenhouse and head house using the funds appropriated for
    this purpose in fiscal year 2003 was completed in July 2004. In fiscal
    year 2004, construction of the head house component of this project was
    funded. The head house component of the project is now under
    construction with an expected completion in late spring 2006. In fiscal
    year 2005, $2.976 million was appropriated for construction of
    greenhouses. In fiscal year 2006, an additional $1.980 million was
    appropriated for construction of greenhouses, but $7.169 million is
    still needed for the planned $12.125 million greenhouse complex. This
    new facility replaces and consolidates outmoded laboratory areas that
    were housed in 1930s-era buildings and trailers. Completion of the
    total research complex will provide for the effective continuation and
    expansion of the excellent vegetable crops research program that has
    been conducted by the Agricultural Research Service at Charleston for
    over 60 years. It is most critical to the mission of the U.S. Vegetable
    Laboratory that the fiscal year 2002, fiscal year 2003, and fiscal year
    2004 appropriated funds for expansion of the Charleston research staff
    is maintained in fiscal year 2007. In addition, new funds are still
    needed to hire additional scientists to expand the research program. An
    Entomologist is needed to facilitate development of host resistance and
    new management approaches to a wider range of established insect pests
    of vegetable crops; a Molecular Biologist is needed to develop and
    utilize molecular techniques for pathogen and pest population studies
    necessary to development of new management approaches and resistant
    genetic stocks. Both of these new scientific positions will greatly
    contribute to the accomplishment of research that will provide for the
    effective protection of vegetable crops from disease and pests without
    the use of conventional pesticides. Each of these positions requires a
    funding level of $400,000 for their establishment.

    ------------------------------------------------------------------------
                                                                Gross funds
            Appropriations to restore           Fiscal year      impacted
    ------------------------------------------------------------------------
    Minor Use Pesticides (IR-4).............  ..............          $5,335
    U.S. Vegetable Laboratory...............            2003         484,969
    U.S. Vegetable Laboratory...............            2004         263,597
                                                             ---------------
          Total funds to restore............  ..............         753,901
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                                                                 New Funds
        New Scientific Staff Needed        Current Status         Needed
    ------------------------------------------------------------------------
    Entomologist......................  Needed..............        $400,000
    Molecular Biologist...............  Needed..............         400,000
                                                             ---------------
          New funds needed............  ....................         800,000
    ------------------------------------------------------------------------

    Food Fermentation Laboratory, Raleigh, North Carolina
        The current funding for the laboratory is $1,274,000. This includes
    the new funds provided in fiscal year 2004 ($270,000) and in fiscal
    year 2005 ($100,000) that are not in the fiscal year 2007 budget
    proposal that was sent to the Congress. We request that the additional
    funding provided by the Congress in fiscal year 2004 and fiscal year
    2005 be restored in the fiscal year 2007 budget.
        To initiate and then increase the research initiatives to preserve
    high nutrient/high antioxidant vegetables to maximize healthful
    components and to determine how to deliver living pro-biotic lactic
    acid bacteria in acidified and fermented vegetable products, we request
    additional support for the Food Fermentation Laboratory of $100,000 in
    fiscal year 2007 with the expectation that an additional $100,000 be
    added each year from fiscal year 2008 through fiscal year 2011. This
    will provide an ability to have an orderly growth of research effort in
    these areas by supporting Post-Doctoral or Pre-Doctoral research
    associates initially and then hiring a permanent scientist in the third
    or fourth year to provide a long term research capability in the most
    productive research areas.

    ------------------------------------------------------------------------
             Scientific staff              Current status      Funds needed
    ------------------------------------------------------------------------
    Microbiologist....................  Active..............        $318,500
    Chemist...........................  Active..............         318,500
    Food technologist/biochemist......  Active..............         318,500
    Microbial Physiologist............  Active..............         318,500
    Fiscal year 2007 post-doctoral or   Needed..............         100,000
     predoctoral research associates.
                                                             ---------------
          Total funding required......  ....................       1,374,000
                                                             ===============
    Presidential Budget (fiscal year    ....................         912,195
     2007).
    Appropriations to restore.........  ....................         361,805
    New funds needed..................  ....................         100,000
    ------------------------------------------------------------------------

    Vegetable Crops Research Laboratory Unit, Madison, Wisconsin
        Current base funding for three scientists is $835,900, of which
    $200,000 was added in fiscal year 2002. An additional $64,100 is needed
    to fully fund the scientists and support staff, including graduate
    students and post-doctorates.

    ------------------------------------------------------------------------
         Scientific staff in place         Current status      Funds needed
    ------------------------------------------------------------------------
    Geneticist........................  Active..............        $300,000
    Horticulturist....................  Active..............         300,000
    Geneticist........................  Active..............         300,000
                                                             ---------------
          Total funding required......  ....................         900,000
                                                             ===============
    Presidential Budget (fiscal year    ....................         641,911
     2007).
    Appropriations to restore.........  ....................         193,989
    New funds needed..................  ....................          64,100
    ------------------------------------------------------------------------

        A temporary addition of $200,000 was provided to enhance the
    research effort of this program in fiscal year 2002, and we greatly
    appreciate that additional support, but that addition is being proposed
    for reduction in fiscal year 2007. Thus, the restoration of the funds
    proposed for reduction, is urgently requested. We request a $258,089
    permanent addition this year to sustain the long-term research of this
    group.
    Sugar Beet and Bean Research Unit, East Lansing, Michigan
        The location urgently needs to hire a full-time research engineer
    to develop a comprehensive research program on nondestructive
    inspection, sorting and grading of pickling cucumbers and other
    vegetable crops to assure the processing and keeping quality of pickled
    products. The current base funding for the cucumber engineering
    research is $200,000. An increase of $100,000 in the current base
    funding level would be needed to fund the research engineer position.

    ------------------------------------------------------------------------
         Scientific staff in place         Current status      Funds needed
    ------------------------------------------------------------------------
    Postdoctoral Research Associate...  Active..............        $200,000
    Research Engineer.................  Needed..............         100,000
                                                             ---------------
          Total funding required......  ....................         300,000
                                                             ===============
    Current Funding...................  ....................         200,000
    New funds needed..................  ....................         100,000
    ------------------------------------------------------------------------

        Thank you for your consideration and expression of support for the
    USDA/ARS.
                                     ______

             Prepared Statement of the Red River Valley Association

        Mr. Chairman and members of the Committee, I am Wayne Dowd, and I
    am pleased to represent the Red River Valley Association as its
    President. Our organization was founded in 1925 with the express
    purpose of uniting the citizens of Arkansas, Louisiana, Oklahoma and
    Texas to develop the land and water resources of the Red River Basin.
    (Enclosure 1)
        The Resolutions contained herein were adopted by the Association
    during its 81st Annual Meeting in Bossier City, Louisiana on February
    24, 2006, and represent the combined concerns of the citizens of the
    Red River Basin Area as they pertain to the goals of the Association.
    (Enclosure 2)
        As an organization that knows the value of our precious water
    resources we support the most beneficial water and land conservation
    programs administered through the Natural Resources Conservation
    Service (NRCS). We understand that attention and resources must be
    given to our national security and the war in Iraq; however, we cannot
    sacrifice what has been accomplished on our Nation's lands. NRCS
    programs are a model of how conservation programs should be
    administered and our testimony will address the needs of the Nation as
    well as our region.
        The President's fiscal year 2007 budget for NRCS indicates a
    decrease of $216.4 million (21.5 percent decrease) from what Congress
    appropriated in fiscal year 2006. In addition, the Administration
    eliminated two crucial watershed programs: Watershed & Flood Prevention
    Operations and Watershed Survey & Planning. Along with drastic
    reductions in the other programs, NRCS manpower for fiscal year 2007
    would have to decrease by over 1,500 staff years, if the President's
    budget is implemented. This is unacceptable.
        This means that NRCS assistance to landowners will not be
    adequately funded, to the detriment of the Nation and our natural
    resources. We would like to address several of the programs
    administered by NRCS. Failure to adequately fund these initiatives
    would reduce assistance to those who want it and the resources that
    need protection.
        Conservation Operations.--This account has been in steady decline,
    in real dollars, over the past several years. The President's budget
    included $745 million, which is a decrease of $94.5 million from what
    you appropriated in fiscal year 2006. Mandated increases in pay and
    benefits, continuing increases in the cost of doing business' and
    budget reductions greatly reduces the effective work that can be
    accomplished in this account. Allocations should be increased not
    decreased.
        We request a total of $930 million be appropriated for Conservation
    Operations for NRCS to meet the demands it faces today.
        Conservation Technical Assistance is the foundation of technical
    support and a sound, scientific delivery system for voluntary
    conservation to the private users and owners of lands in the United
    States. It is imperative that we provide assistance to all working
    lands' not just those fortunate few who are able to enroll in a Federal
    program. Working lands are not just crops and pasture (commodity
    staples) but includes forests, wildlife habitat and coastal marshes.
    The problem is that NRCS personnel funded from mandatory programs' can
    only provide technical assistance to those enrolled in these programs,
    leaving the majority of the agricultural community without technical
    assistance. We recommend that adequate funding be placed in
    'Conservation Technical Assistance', and allow NRCS to provide
    assistance to all who are in need of assistance.
        It is our understanding that the Technical Service Providers (TSP)
    program has not lived up to its expectations. Experience indicates
    landowners are hesitant to use the program. This program funds projects
    at a level estimated if NRCS conducted the work. Usually the TSP cost
    exceeds this estimate and the landowner is responsible for the
    difference, effectively making the landowner cost share. We believe
    that TSPs should be used only after NRCS staffing is brought up to
    levels commensurate with the increase in workload caused by the Farm
    Bill, not to replace NRCS staffing.
        Watershed and Flood Prevention Operations (Public Law 566 & 534).--
    We are greatly disappointed that the President's Budget provided no
    funding for watershed operations. There is no doubt that this is a
    Federal responsibility, in conjunction with a local sponsor. This
    program addresses all watershed needs to include: flood protection,
    water quality, water supply and the ecosystem. There is no Corps of
    Engineer, Bureau of Reclamation or FEMA program to address small
    watershed needs, before disaster strikes. We recommend that Congress
    continue to hold oversight hearings to understand the importance and
    hear how popular this program is to our communities.
        These projects have developed a $15 billion infrastructure that is
    providing $1.5 billion in annual benefits to over 48 million people. It
    is not a Federal program, but a Federally assisted program. This
    partnership between local communities, State agencies and NRCS has been
    successful for over 50 years. It would take $1.6 billion to fund the
    existing Federal commitment to local project sponsors. This cost only
    increases every year if adequate funding is not provided.
        If you allow this program to end, all ongoing contracts will be
    terminated. This will ultimately lead to lawsuits and tort claims filed
    by both sponsors and contractors, due to the Federal government not
    fulfilling its contractual obligation.
        We are very appreciative for the funding level of $75 million
    enacted in fiscal year 2006. It is reassuring to know that both the
    House and Senate realize the importance of this program to the
    agricultural community. For every $1 spent, the Nation realizes $2 in
    benefits.
        There are many new projects, which are awaiting funds for
    construction under this program. We strongly recommend that a funding
    level of $190 million be appropriated for Watershed Operations
    Programs, Public Law 534 ($20 million) and Public Law 566 ($170
    million).
        The Red River has proven, through studies and existing irrigation,
    to be a great water source for supplemental' irrigation. The two
    projects mentioned below, will use existing, natural bayous to deliver
    water for landowners to draw from. The majority of expense will be for
    the pump system to take water from the Red River to the bayous. These
    projects will provide the ability to move from ground water dependency
    to surface water, an effort encouraged throughout the Nation. Both will
    enhance the environmental quality and economic vitality of the small
    communities adjacent to the projects.
      --Walnut Bayou Irrigation Project, AR.--Plans and specifications have
            been completed and it is ready to proceed into the construction
            phase. An irrigation district has been formed and they are
            prepared to take on the responsibility to generate the income
            for the O&M required to support this project. We request that
            $4,000,000 be appropriated for these projects in fiscal year
            2007.
      --Red Bayou Irrigation Project, LA.--The plans and specifications
            have been completed, making this project ready for construction
            in fiscal year 2007. An irrigation district has been formed and
            is prepared to collect funds to support the O&M for this
            proposed system. We request that $2,500,000 be specifically
            appropriated to begin construction in fiscal year 2007.
        Watershed Rehabilitation.--More than 10,400 individual watershed
    structures have been installed nationally, with approximately one-third
    in the Red River Valley. They have contributed greatly to conservation,
    environmental protection and enhancement, economic development and the
    social well being of our communities. More than half of these
    structures are over 30 years old and several hundred are approaching
    their 50-year life expectancy. Today you hear a lot about the watershed
    approach to resource management. They protect more people and
    communities from flooding now than when they were first constructed.
    The benefit to cost ratio for this program has been evaluated to be
    2.2:1. What other Federal program can claim such success?
        In the next 5 years over 900 watershed structures will require over
    $570 million for rehabilitation. Each year this number increases as
    more dams reach their 50-year life. There is no questioning the value
    of this program. The cost of losing this infrastructure exceeds the
    cost to reinvest in our existing watersheds. Without repairing and
    upgrading the safety of existing structures, we miss the opportunity to
    keep our communities alive and prosperous. It would be irresponsible to
    dismantle a program that has demonstrated such great return and is
    supported by our citizens. We cannot wait for a catastrophe to occur,
    where life is lost, to decide to take on this important work.
        The President's budget neglects the safety and well being of our
    community needs by allocating only $15 million for this program. This
    is drastically lower than the levels authorized in the 2002 Farm Bill,
    which authorized $600 million for rehabilitation for 2003-2007.
        We request that $65 million be appropriated to provide financial
    and technical assistance to those watershed projects where sponsors are
    prepared (35 percent cost share) to commence rehabilitation.
        Watershed Survey and Planning.--In fiscal year 2006, $6.1 million
    was appropriated to support this extremely important community program.
    NRCS has become a facilitator for the different community interest
    groups, State and Federal agencies. In our States such studies are
    helping identify resource needs and solutions where populations are
    encroaching into rural areas. The Administration decided to eliminate
    this program. We disagree with this and ask Congress to fund this
    program at the appropriate level.
        Proper planning and cooperative efforts can prevent problems and
    insure that water resource issues are addressed. Zeroing out the
    planning process assumes the economy will not grow and there is no need
    for future projects. We do not believe anyone supports or believes
    this. Another serious outcome is that NRCS will lose its planning
    expertise, which is invaluable.
        We request this program be funded at a level of $35 million.
        We request that the following two studies be specifically
    identified and funded in the fiscal year 2007 appropriation bill.
      --Maniece Bayou Irrigation Project, AR.--This is a project in its
            initial stage of planning. An irrigation district is being
            formed to be the local sponsor. This project transfers water
            from the Red River into Maniece Bayou where landowners would
            draw water for supplemental irrigation. We request that
            $200,000 be appropriated to initiate the plans and
            specifications.
      --Lower Cane River Irrigation Project, LA.--The transfer of water
            from the Red River to the Lower Cane River will provide
            opportunities for irrigation and economic development. Funds
            are needed to initiate a Cooperative River Basin Study. We
            request that $250,000 be appropriated for this study.
        Resource Conservation and Development (RC&D).--This has
    traditionally been a well-received program by the Administration, not
    this year. Their budget proposal only had $27 million, far short of
    national needs. This program leverages its resources at 4 to 1, with
    communities, local sponsors and non-government organizations. The
    benefits are realized at over 14 to 1, average per project. What other
    Federal program can claim such a return on investment?
        We request that $51 million be appropriated for this program, at
    the same level as in fiscal year 2006.
        Mandatory Accounts (CCC) Technical Assistance (TA).--Request for
    assistance through the CCC programs has been overwhelming. Requests far
    exceed the available funds and place an additional workload on NRCS's
    delivery system. Adequate funding for TA must be provided at the full
    cost for program delivery. This includes program administration,
    conservation planning and contracting with each applicant. Congress, in
    the 2002 Farm Bill, wisely increased conservation programs each year.
    This increased investment, with the multi-year CCC programs, will
    increase the NRCS workload. It is imperative that NRCS receive the TA
    funding levels required to administer these programs. If they do not
    receive full funding these programs will not realize their full
    capability.
        It has been mandated that a set percent of TA, from the CCC
    Program, must be used for TSPs, approximately $40 million. This is
    equivalent to losing 600 staff years from NRCS manpower. This is
    another unacceptable policy, which will reduce the effectiveness of
    NRCS. This mandate must be eliminated.
        Over 70 percent of our land is privately owned. This is important
    in order to understand the need for NRCS programs and technical
    assistance. Their presence is vital to ensuring sound technical
    standards are met in conservation. These programs not only address
    agricultural production, but sound natural resource management. Without
    these programs and NRCS properly staffed to implement them, many
    private landowners will not be served adequately to apply conservation
    measures needed to sustain our natural resources for future
    generations. Technical Assistance cannot be contracted out to private
    companies.
        We are all aware of the issue with TMDL levels in our waterways. If
    our Nation is to seriously address this we must look at the impacts
    from our farmlands. Assistance for land treatment plans and plan
    implementation is exactly what the NRCS Watershed programs are intended
    to address. Watershed programs should be receiving an increase in
    funds, not zeroed out!
        With these new clean water initiatives why do we ignore the agency
    that has a proven record for implementing watershed conservation
    programs? Congress must decide; will NRCS continue to provide the
    leadership within our communities to build upon the partnerships
    already established? It is up to Congress to insure NRCS is properly
    funded and staffed to provide the needed assistance to our taxpayers
    for conservation programs.
        These NRCS studies and watershed projects are an example of true
    ``cooperative conservation'' initiatives. There is an interface with
    communities and local sponsors at each step of the process and local
    sponsors do cost share at the levels expected of them.
        All these programs apply to the citizens in the Red River Valley
    and their future is our concern. The RRVA is dedicated to work toward
    the programs that will benefit our citizens and provide for high
    quality of life standards. We therefore request that you appropriate
    the requested funding within these individual programs, to insure our
    Nation's conservation needs are met.
        I thank you for the opportunity to present this testimony on behalf
    of the members of the Red River Valley Association and we pledge our
    support to assist you in the appropriation process.

                   ENCLOSURE 1.--RED RIVER VALLEY ASSOCIATION

        The Red River Valley Association is a voluntary group of citizens
    bonded together to advance the economic development and future well
    being of the citizens of the four State Red River Basin area in
    Arkansas, Louisiana, Oklahoma and Texas.
        For the past 80 years, the Association has done notable work in the
    support and advancement of programs to develop the land and water
    resources of the Valley to the beneficial use of all the people. To
    this end, the Red River Valley Association offers its full support and
    assistance to the various Port Authorities, Chambers of Commerce,
    Economic Development Districts, Municipalities and other local
    governmental entities in developing the area along the Red River.
        The Resolutions contained herein were adopted by the Association
    during its 80th Annual Meeting in Bossier City, Louisiana on February
    24, 2005, and represent the combined concerns of the citizens of the
    Red River Basin area as they pertain to the goals of the Association,
    specifically:
      --Economic and Community Development
      --Environmental Restoration
      --Flood Control
      --Irrigation
      --Bank Stabilization
      --A Clean Water Supply for Municipal, Industrial and Agricultural
            Uses
      --Hydroelectric Power Generation
      --Recreation
      --Navigation
        The Red River Valley Association is aware of the constraints on the
    Federal budget, and has kept those constraints in mind as these
    Resolutions were adopted. Therefore, and because of the far-reaching
    regional and national benefits addressed by the various projects
    covered in the Resolutions, we urge the members of Congress to review
    the materials contained herein and give serious consideration to
    funding the projects at the levels requested.

       ENCLOSURE 2.--RED RIVER VALLEY ASSOCIATION FISCAL YEAR 2007 APPROPRIATIONS--NATURAL RESOURCES CONSERVATION
                                                     SERVICE (NRCS)
                                                 [Thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal year     Fiscal year     Pres. 2007
                         Discretionary accounts                        2006 approp.    2007 request       budget
    ----------------------------------------------------------------------------------------------------------------
    Conservation Operations.........................................         839,519         930,000         745,000
    Watershed & Flood Prevention Operations.........................          75,000         190,000  ..............
        Walnut Bayou Irrigation Project, AR.........................  ..............           4,000  ..............
        Red Bayou Irrigation Project, LA............................  ..............           1,600  ..............
    Watershed Rehabilitation........................................          31,516          65,000          15,000
    Watershed Survey & Planning.....................................           6,083          35,000  ..............
        Maniece Bayou Irrigation Project, AR........................  ..............             200  ..............
        North Wallace Lake Watershed, LA............................  ..............             250  ..............
    Resource Conservation & Development (RC&D)......................          51,300          51,000          27,000
    Healthy Forest Reserve Program..................................           2,475           5,000           2,475
    ----------------------------------------------------------------------------------------------------------------

                                     ______

      Prepared Statement of the Society for Animal Protection Legislation

    $1.5 Million for the Animal Welfare Information Center (AWIC) at the
            National Agricultural Library
        The Animal Welfare Information Center was established by the
    Improved Standards for Laboratory Animals Act (the 1985 amendment to
    the Animal Welfare Act) to serve as a clearinghouse, training center
    and educational resource for institutions using animals in research,
    testing and teaching. A primary purpose of the Center is to help
    research laboratories comply with the requirements of the Federal law.
    The Center provides data on alleviating or reducing pain and distress
    in experimental animals (including anesthetic and analgesic
    procedures), reducing the number of animals who must be used for
    research where possible, and identifying alternatives to the use of
    animals for specific research projects. The AWIC was also charged with
    providing information to prevent the unintended duplication of animal
    experiments.
        We greatly appreciate the past support Congress has provided to the
    AWIC to carry out its programs: $750,000 and an add-on of $400,000. It
    is essential to maintain the existing level of support therefore a
    minimum base of $1.15 million is needed on an annual basis. We are
    respectfully requesting an additional $350,000 for desperately needed
    expansion in fiscal year 2007 including increased educational workshops
    and exhibits presented throughout the United States, increased
    production and printing of educational material and increased staffing
    to meet the demand for services.
        There is general consensus between the biomedical research industry
    and the animal welfare community about the need for increased funding.
    In fact, myriad individuals representing these disparate interests have
    agreed on the need for $1.5 million in funding for the Animal Welfare
    Information Center (see attached letter). The AWIC is able to help
    improve the conduct of research, including the care provided to the
    animals who are used, thereby ensuring a reduction in variables which
    might skew the research. Better science is the end result.
        The $1,500,000 would be used as follows: staff salary and benefits
    ($1,073,000), exhibitions conducted at major scientific conferences
    ($53,600), preparation and conduct of educational workshops across the
    country ($16,800), educational workshops conducted at the Center
    ($4,100), printing and reproduction of paper and electronic material
    ($29,200), training for the NAL staff ($13,900), acquisition of,
    including electronic access to, data ($38,000), internet services
    ($20,400), office supplies including hardware and software ($26,000)
    and the overhead that must be provided to the Agricultural Research
    Service and the National Agricultural Library (at least $225,000).
        The Center's mandate necessitates the collection and dissemination
    of material on humane housing and husbandry, the functions and
    responsibilities of Institutional Animal Care and Use Committees
    (IACUCs), animal behavior, improved methodologies, psychological well-
    being of primates and exercise for dogs. The AWIC has expanded to
    include the broader industry regulated under the Animal Welfare Act:
    animal dealers, carriers and handlers, zoos and other exhibitors. Other
    topics covered by the Center include animal diseases, animal models,
    animal training and environmental enrichment for all species. USDA
    Animal Care's veterinary medical officers and animal care inspectors
    are able to utilize the full range of services provided by the AWIC to
    better fulfill their responsibilities.
        The AWIC is the single most important resource for helping research
    facility personnel meet their responsibilities under the Animal Welfare
    Act. There are more than 1,200 research facilities nationwide, and the
    services of the AWIC are available to all individuals at these
    institutions including the cage washers, animal technicians, research
    investigators, attending veterinarians, IACUC representatives including
    the nonaffiliated member, and the Institutional Official. The Office of
    Inspector General (OIG) audit titled ``APHIS Animal Care Program
    Inspection and Enforcement Activities'' cited an increase in apparent
    violations of the AWA by research facilities over the past few years.
    There appears to be a significant problem with the oversight provided
    IACUCs and training for IACUC members is encouraged. In response to
    this need, we are requesting funds to allow--for the first time--AWIC
    to conduct workshops at locations around the country rather than being
    limited to conducting them only from the Center's base in Maryland.
        The AWIC website (http:www.nal.usda.gov/awic) received more than 27
    million hits in fiscal year 2005 (one of the most accessed sites at the
    NAL). 300,000 documents were distributed via the web and more than
    12,000 hard copies were distributed as well. Exhibitions and/or
    presentations were provided at the following venues: American
    Association for Laboratory Animal Science (AALAS) annual meeting,
    National Capital Area Branch AALAS, Tribranch AALAS, Society of
    Neuroscience, New Jersey Association for Biomedical Research, American
    Veterinary Medical Association, Combined Animal Science meeting,
    International Conference on Environmental Enrichment, American
    Association for the Advancement of Science and the 5th World Congress
    on the Use of Animals in the Life Sciences, Scientists Center for
    Animal Welfare meetings and the Public Responsibility in Medicine and
    Research annual meeting.
        The AWIC works closely with both APHIS Animal Care and with
    Emergency Veterinary Services on emerging crises such as the highly
    pathogenic Avian Influenza. The Center is focused on transmissible
    spongiform encephalopathy, exotic Avian Newcastle disease,
    tuberculosis, West Nile Virus and micro-bacterial diseases too.
        A proposal was made to create a ``Center for Excellence'' within
    Animal Care, but we oppose this effort as an enormous misuse of funds.
    There is no need to pay for a site and hire new staff because much of
    the work proposed for such a Center for Excellence is already covered
    effectively and efficiently by the AWIC. We would, however, support
    further expansion of the AWIC at its current location within the
    National Agricultural Library. The AWIC has a record spanning nearly
    two decades that demonstrates its abilities to serve.
    $19.143 Million for APHIS/Animal Care's Enforcement of the Animal
            Welfare Act
        The Animal Welfare Act (AWA) is the chief Federal law for the
    protection of animals. The USDA seeks compliance with its minimum
    standards for the care and treatment of animals during transportation
    and at the nearly 13,000 sites of dealers, research, testing and
    teaching facilities, zoos, aquariums, circuses, carriers (airlines,
    motor freight lines and other shipping businesses) and handlers (ground
    freight handlers). There are a mere 101 Veterinary Medical Officers
    (VMOs) and Animal Care Inspectors (ACIs) conducting searches, pre-
    licensing inspections and enforcement inspections across the country.
        In fiscal year 2005, 575 cases were brought regarding violations of
    the AWA and more than $1.1 million dollars was received in fines and
    stipulations. These enforcement actions help ensure the protection of
    both animals and people as evidenced by the OIG Audit released this
    fall.
        We support the President's request for $19.143 million for
    enforcement of the AWA. We hope the additional funds will permit USDA
    to hire 15 additional inspectors and to conduct a national meeting
    (with all inspectors in attendance). There were insufficient funds for
    USDA to conduct a workshop this fiscal year, and a national meeting
    must be held next year; it is vital as it provides proper training of
    inspectors and ensures a high and equal standard of enforcement is
    being implemented by the field inspectors nationwide. The cost for a
    national meeting is expected to be $150,000.
        In 1966 the Laboratory Animal Welfare Act (later renamed the Animal
    Welfare Act) was adopted in an effort to prevent the sale of lost or
    stolen pets into research. Nevertheless, this has continued to be a
    serious problem. Sound enforcement by USDA has reduced the number of
    random source dealers in live dogs and cats to 10. More than half of
    these are currently under investigation by USDA for their failure to
    comply with the law. A recent Home Box Office documentary film, Dealing
    Dogs, highlighted the problems that plague this cottage industry. The
    committee could save Animal Care significant resources and aggravation
    if it brought an end to this illicit trade by including report language
    prohibiting the sale of dogs and cats to research by random source
    dealers. Animals needed for research purposes can be obtained from
    other sources including licensed breeders. This would ensure integrity
    in the supply of dogs and cats for research purposes.
    $750,000 for APHIS/Animal Care's Enforcement of the Horse Protection
            Act
        More than thirty years have passed since the Horse Protection Act
    was adopted by Congress, yet soring of Tennessee Walking Horses
    continues to be a widespread problem. Soring is defined by APHIS as
    ``the application of any chemical or mechanical agent used on any limb
    of a horse or any practice inflicted upon the horse that can be
    expected to cause it physical pain or distress when moving.'' Horses
    are sored to produce an exaggerated gait.
        The most effective method of reducing the showing of horses who
    have been sored is to have Animal Care (AC) inspectors present at the
    shows. Oftentimes, as soon as an AC inspector arrives at a show, there
    is a rush to put horses back into trailers and haul them away. If the
    likelihood that an AC inspector will show up increases significantly,
    this will have a huge deterrent effect on those who routinely sore
    their horses.
        AC was only able to attend 32 events in fiscal year 2004 out of a
    total of approximately 865 shows. $750,000 ($500,000 plus a $250,000
    add-on) must be provided to enable AC to attend even a modest number of
    events.
        Unfortunately, the amount of penalties assessed for violations of
    the law have dropped to a negligible amount. In addition to increasing
    the presence of inspectors, USDA must increase the penalties which are
    assessed or the industry will continue to defy the law with impunity.
        Lack of financial support has made it necessary for Animal Care to
    rely heavily on the industry to assume responsibility for enforcement
    of the law. This is the same industry that has turned a blind eye to
    compliance with the law since 1970! ``Designated Qualified Persons''
    (DQPs) are the ``inspectors'' from industry who are supposed to assist
    AC in identifying sore horses and pursuing action against the
    individuals who are responsible. The history of the DQPs reveals their
    failure to achieve the level of enforcement of the unbiased, well-
    trained, professional inspectors who work for AC. Following is data for
    horses shown with pads on their front feet to accentuate their gait: in
    calendar year 2001 (the most recent year for which such information is
    available from USDA); the average rate at which DQPs identified
    violations for soring was 3.4 per 1,000 horses inspected. The rate of
    violations reported when government inspectors were present to oversee
    the activities of the DQPs was more than 5 times higher--19 per 1,000
    horses inspected.
        We have few current figures on enforcement, however, we recently
    learned from USDA that in 2005 of the samples taken by a gas
    chromatography machine (used to test for use of illegal substances to
    sore horses) at the Kentucky Celebration horse show, 100 percent
    indicated the presence of diesel fuel or another similar fuel plus
    numbing agents. Clearly the law is not being taken seriously by the
    industry.
        An appropriation of at least $750,000 is essential to permit AC to
    maintain a modest level of compliance with the Horse Protection Act by
    trained AC professionals.
    Strengthened Enforcement of Humane Slaughter Act by FSIS
        When President Eisenhower signed the Humane Slaughter Act (HSA)
    into law he noted that if he went by his mail he would think Americans
    were interested in no other issue. The concern about HSA enforcement
    continues today and is as broad now as it was then. Over the past few
    years the Congress has generously provided additional appropriations to
    the Food Safety and Inspection Service (FSIS) to improve enforcement of
    the Humane Slaughter Act, however, problems persist. A big part of the
    problem is that the vast majority of animals currently slaughtered at
    the approximately 900 federally inspected plants are not observed by
    FSIS until after they are already dead.
        In addition, FSIS inspectors are discouraged from enforcing the
    law. Inspectors are supposed to be able to stop the slaughter line if
    violations are seen. However, stopping the line will markedly reduce
    the plant's financial profits, thus there is intense pressure for the
    inspector not to take action. The situation at plants appears to be
    cozy for people, meanwhile the animals are suffering. For example, the
    Office of the Inspector General conducted an investigation of a large
    plant in Iowa, issuing a report on April 25, 2005, which concluded
    that: ``employees of AGRI had engaged in acts of inhumane slaughter. It
    was also determined that FSIS employees observed the acts of inhumane
    slaughter and did nothing to stop the practice. Additionally, the
    investigation revealed that FSIS inspectors accepted meat products from
    AGRI employees and that FSIS employees engaged in other acts of
    misconduct.''
        FSIS has attempted a variety of machinations in an effort to dupe
    Congress into believing that enforcement efforts have increased
    dramatically. This is mere window dressing, and inspectors who are in
    the plants have confirmed that little has changed--and abuses are rife.
    The situation at Agriprocessors, described above is but one example
    (http://awionline.org/pubs/Quarterly/05_54_1/541p7a.htm). Because of
    this, we vehemently oppose increased resources for FSIS. The agency
    hasn't demonstrated its resolve to strongly enforce the law.
         Bill language should direct FSIS to hire no fewer than 50
    individual inspectors (as opposed to FTE's) to serve as permanent
    fixtures in each of the largest slaughter plants to observe the
    handling, stunning and slaughter of animals for compliance with the
    law. When inspectors are not present, line speeds are increased and the
    operations are conducted in a completely different (and horrific)
    manner. A full-time presence is the only way to ensure compliance. FSIS
    should report the results of this effort to the Committee and evaluate
    the effectiveness of having full-time (not full time equivalent)
    enforcement of the humane slaughter requirements following a year of
    diligence. All inspectors who engage in HSA enforcement must receive
    adequate training about the law and, more importantly, must receive a
    strict mandate from the Secretary of Agriculture to take strong,
    immediate action against any violators of the HSA. This would be a
    modest step toward protecting the millions of animals who are killed
    for food from unnecessary suffering.
    Congress Needs to Provide Increased Oversight of Wildlife Services
            Operations and Research
        Wildlife Services (WS) needs to utilize a variety of tools for
    management of wildlife under its purview. However, it is essential that
    these tools are effective and publicly acceptable. As improved tools
    are developed through research, operations must make use of this data
    and shift methods accordingly.
        WS needs to phase out of use of steel jaw leghold traps. WS' own
    research demonstrates the archaic nature of certain leghold traps;
    these should be prohibited immediately. Leghold traps slam shut with
    bone-crushing force on the limbs of their victims, tearing ligaments
    and tendons, severing toes and causing excruciating pain. These traps,
    opposed by the vast majority of Americans, have been condemned as
    ``inhumane'' by the American Veterinary Medical Association, the
    American Animal Hospital Association, the World Veterinary Association
    and the National Animal Control Association.
        The European Union (E.U.) banned use of the barbaric steel jaw
    leghold trap so that 88 countries now prohibit their use. Nobly, the EU
    went a step further; the EU law also prohibits import of furs from
    countries that use steel jaw traps. On December 11, 1997, in response
    to this European law, the U.S. Trade Representative reached an
    ``Understanding'' with the E.U. in which the United States agreed to
    end use of ``all jaw-type leghold restraining traps'' by 2002 on
    muskrat and nutria and to phase out use of ``conventional steel-jawed
    leghold restraining traps'' by 2004. WS has the responsibility of
    complying with this United States obligation by ending its use of these
    barbaric devices.
        WS should pursue no further testing of leghold traps as this would
    be an extremely wasteful and cruel use of taxpayer money. Previously,
    funds designated for trap research were merely passed on to a
    nongovernmental organization to utilize as it saw fit, without
    involvement from WS. If funds are allocated for trap testing, WS should
    conduct the research since the agency has the appropriate technical
    expertise.
        Further, WS should adopt a policy of checking all restraining traps
    within a 24-hour period. A wealth of scientific studies documents the
    fact that the longer an animal is in a restraining trap, the greater
    the injury. For this reason, the majority of States have a daily trap
    check requirement. Animals should not be subjected to long-drawn out
    pain because of a failure to assume the responsibility of carefully
    checking traps every day. This policy will help reduce the trauma
    experienced by non-target animals, too, ensuring that more of these
    animals will be able to be released alive.
        Thank you very much for the opportunity to submit testimony. We
    would be happy to provide any additional information that might be of
    interest.
                                     ______

       Prepared Statement of the Society for Women's Health Research and
                       Women's Health Research Coalition

        On the behalf of the Society for Women's Health Research and the
    Women's Health Research Coalition, we are pleased to submit testimony
    in support of increased funding for biomedical research, and more
    specifically women's health research.
        The Society is the only national non-profit women's health
    organization whose mission is to improve the health of women through
    research, education, and advocacy. Founded in 1990, the Society brought
    to national attention the need for the appropriate inclusion of women
    in major medical research studies and the need for more information
    about conditions affecting women disproportionately, predominately, or
    differently than men.
        The Coalition was created by the Society in 1999 to give a voice to
    scientists and researchers from across the country who are concerned
    and committed to improving women's health research. The Coalition now
    has more than 620 members, including leaders within the scientific
    community and medical researchers from many of the country's leading
    universities and medical centers, directors from various Centers of
    Excellence on Women's Health.
        The Society and the Coalition are committed to advancing the health
    status of women through the discovery of new and useful scientific
    knowledge. We believe that sustained funding for the women's health
    research programs that are conducted and supported across the Federal
    research agencies is necessary if we are to accommodate the health
    needs of the population and advance the Nation's research capability.
    Therefore, we urge your support for the Food and Drug Administration's
    (FDA) Office of Women's Health and request funding of $5 million in
    order that it may meet its program goals.
             food and drug administration office of women's health
        The Office of Women's Health (OWH) role at FDA is critical to
    women's health, both within and outside the agency and to research into
    sex and gender-differences, areas in which the Society long has been a
    proponent. The office aims to provide scientific and policy expertise
    on gender sensitive regulatory and oversight issues; to correct gender
    disparities in the areas for which the FDA is responsible--drugs,
    devices, and biologics and to monitor women's health priorities,
    providing leadership and an integrated approach across the agency. The
    OHW accomplishes its admirable work, despite inadequate budgets that
    prevent it from fully accomplishing its mission.
        Since its inception, OWH has funded high quality scientific
    research to serve as the foundation for agency activities that improve
    women's health. To date, OWH has distributed $12 million in funding for
    over 100 research projects. OWH has recently funded research to fully
    understand heart disease in women. Despite being the number one killer,
    women with heart disease face misdiagnosis, delayed diagnosis, under-
    treatment, and mistreatment due to the under-representation in heart-
    related research studies. Extramural research funded by OWH is looking
    into the use of coronary stents in women and problems with breast
    interference in interpreting heart catherization studies.
        We would encourage OWH to expand its research focus to further
    address the discrepancies in heart disease treatment for women. The
    Society in conjunction with WomenHeart: the National Coalition for
    Women with Heart Disease compiled a list of ten questions that must be
    answered if women are to receive optimal cardiovascular care and
    treatment. The ten unanswered research questions are:
      --Why do women receive significantly fewer referrals for advanced
            diagnostic testing and treatments for heart disease than men,
            and how can the referral rate for women be increased?
      --What are the best tools and methods for assessing women's risk of
            heart disease?
      --What are the best strategies for preventing heart disease in women?
      --What treatments for heart disease work best for women?
      --What are the most effective methods and treatments for diastolic
            heart failure, which is the most common form of congestive
            heart failure in women?
      --How can the heart disease diagnosis and care disparities between
            white women and women of color be eliminated?
      --What are the biological differences between men and women in the
            location, type, and heart disease risk level associated with
            fat deposits, and what determines these differences?
      --How do sex differences in the regulation of heart rhythm affect
            risk of heart disease and response to treatment?
      --What is the role of inflammation in heart disease in women?
      --Why are women ages 50 and younger more likely to die following a
            heart attack than men of the same age?
        As part of its educational outreach efforts to consumers, OWH
    worked closely with women's advocacy and health professional
    organizations to address some of the confusing issues related to the
    findings of the Women's Health Initiative Study. As a result of this
    OWH initiative, an informational fact sheet about menopause and
    hormones and a purse-size questionnaire for women to review with their
    doctor were distributed to national and local print, radio, and
    Internet advertisements. The FDA website received over 3 million hits
    to download campaign materials.
        In 2001, the Society submitted testimony on behalf of the OWH and
    in support of a centralized database at the FDA to coordinate clinical
    trial oversight, monitor the inclusion of women in clinical trials,
    oversee the parameters of informed consent, and identify training needs
    for all scientific agency staff who analyze human clinical trials. Due
    to Society efforts and this Committee's commitment, in 2002 Congress
    provided the OWH at the FDA with funds to develop an agency-wide
    database focused on women's health activities to include demographic
    data on clinical trials. The FDA has been developing this database now
    known as the ``Demographic Information and Data Repository'' to review
    clinical studies, enhance product labeling, identify knowledge gaps,
    and coordinate data collection.
        While progress has been made, the database is far from up and
    running. Currently, the FDA receives large volumes of information in
    applications from drug manufacturers for review and evaluation. The FDA
    reviewers must comb through the submitted drug trial reports and
    digital data in as many as twelve formats in order to evaluate a new
    drug's safety and effectiveness. With no uniform system or database,
    reviewers must handpick gender, age, and ethnicity information from
    stacks of reports and craft their own data comparisons. This is time
    consuming, makes the review process less efficient, and delays access
    to important information. Scientific and medical advances are occurring
    rapidly and the public needs and deserves access to the most recent and
    accurate information regarding their health. Therefore, in order to
    fully capitalize on the potential of the data warehouse and the
    resulting wealth of information, we urge Congress to commit $1 million
    for the Demographic Information and Data Repository.
        Scientists have long known of the anatomical differences between
    men and women, but only within the past decade have they begun to
    uncover significant biological and physiological differences. Sex
    differences have been found everywhere from the composition of bone
    matter and the experience of pain to the metabolism of certain drugs
    and the rate of neurotransmitter synthesis in the brain. Sex-based
    biology, the study of biological and physiological differences between
    men and women, has revolutionized the way that the scientific community
    views the sexes, with even more information forthcoming as a result of
    the recent sequencing of the human X chromosome. The evidence is
    overwhelming, and as researchers continue to find more and complex
    biological differences, they are gaining a greater understanding of the
    biological and physiological composition of both sexes.
        The Society has long recognized that the inclusion of women in
    study populations by itself was insufficient to address the inequities
    in our knowledge of human biology and medicine, and that only by the
    careful study of sex differences at all levels, from genes to behavior,
    would science achieve the goal of optimal health care for both men and
    women.
        The differences between men and women are important in disease
    susceptibility, prevalence, time of onset and severity and are evident
    in cancer, obesity, coronary heart disease, autoimmune, mental health
    disorders, and other illnesses. Physiological and hormonal fluctuations
    may also play a role in the rate of drug metabolism and effectiveness
    of response in females and males. This research must be both encouraged
    and supported.
        In addition, the Society encourages the establishment of drug-
    labeling requirements that ensure labels include language about
    differences experienced by women and men. Furthermore, we advocate for
    research on the comparative effectiveness of drugs with specific
    emphasis on data analysis by sex. When available, this information
    should also be specified on drug labels.
        Our country's drug development process has succeeded in providing
    new and improved medications to ensure the health of both women and
    men. However, there is no mandated requirement that the data acquired
    during research of a new drug's safety and efficacy be analyzed as a
    function of sex, to evaluate potentially important differences in
    females versus males. Similarly, there are no requirements that
    information regarding the action of drugs in various populations (e.g.,
    women requiring a lower dosage because of different rates of absorption
    or chemical breakdown) be included in prescription drug labeling or
    other patient educational and instructional materials. In order for
    patients to be an informed participant in their own care, they should
    have access to all available pertinent information.
        Proper drug labeling may not always provide the complete solution.
    If the drug is not one newly approved or if sex-specific information is
    detected only in post-marketing studies, the drug label will not convey
    the sex-specific information discovered to the prescribing physician,
    and it may be difficult to get such new information incorporated into
    physicians' prescribing habits.
        The Society believes the opportunity is now before us to
    communicate the sex differences data discovered from clinical trials to
    the medical community and to consumers through drug labeling and
    packaging inserts, and other forms of alerts. As part of advancing the
    analysis and reporting of sex-based effects, the Society encourages the
    FDA to continue addressing the need for accurate drug labeling to
    identify important sex and gender differences, as well as to ensure
    that appropriate data analysis of post-market surveillance reporting
    for these differences is placed in the hands of physicians and
    ultimately the patient.
        To ensure adequate analysis and recording of sex and gender
    disparities in drugs, devices and biologics, and to provide for
    appropriate regulatory policy and accurate drug labeling, we believe
    that the OWH at the FDA should be funded at a total of $5 million so
    that this Office can create, implement, and coordinate gender sensitive
    programs vital to women and men throughout the Nation.
        In conclusion, Mr. Chairman, we thank you and this Committee for
    its strong record of support for women's health. We look forward to
    continuing to work with you to build a healthier future for all
    Americans.
                                     ______

       Prepared Statement of the Society of American Foresters, National
     Association of State Foresters, The Nature Conservancy, and National
                Association of State Departments of Agriculture

        Dear Mr. Chairman/Ranking Member: The Society of American
    Foresters, National Association of State Foresters, The Nature
    Conservancy, and the National Association of State Departments of
    Agriculture urge the Subcommittee on Agriculture, Rural Development,
    and Related Agencies to increase funding substantially for the USDA
    Animal and Plant Health Inspection Service (APHIS) Emerging Plant Pests
    program. A sharp increase in funding is necessary in order to ensure
    adequate funding for eradication and control efforts targeting the
    emerald ash borer, Asian longhorned beetle, and sudden oak death. All
    three introduced organisms threaten forest and amenity trees and
    related economic activities worth hundreds of billions of dollars.
        This statement of common goals supplements individual letters to
    the Subcommittee submitted by several of these organizations. These
    individual letters address additional issues which we do not include
    here.
        We seek an appropriation of $55 million for fiscal year 2007 to
    contain the emerald ash borer. The emerald ash borer threatens twelve
    species of ash across the continent, especially in the upper Midwest
    and Southeast. At risk are the $25 billion ash timber industry in the
    Northeast and street trees across the Nation valued at $20 to $60
    billion. The emerald ash borer outbreak is large, but the core of the
    infestation remains in the lower peninsula of Michigan--where it is
    largely contained by the Great Lakes. It is absolutely essential that
    APHIS receive adequate funding in fiscal year 2007 to enable affected
    states to eradicate the limited and isolated outbreaks found in Ohio,
    Indiana, and Michigan's Upper Peninsula. It is also crucial that APHIS
    and its partners carry forward detection surveys and regulatory and
    educational programs aimed at preventing movement of infested firewood,
    nursery stock, and other materials that spread the insect. Once the
    outlying outbreaks are eradicated, officials can begin efforts to quash
    the core outbreak in Michigan.
        We seek an appropriation of $30 million for fiscal year 2007 to
    carry forward eradication of the sole remaining populations of the
    Asian longhorned beetle. The Asian longhorned beetle poses an alarming
    threat to hardwood forests reaching from New England into Minnesota and
    in the West, and to the hardwood timber, maple syrup, and autumn
    foliage tourism industries dependent on these forests. Also at risk are
    street trees across the Nation valued at $600 billion. Eradication has
    been successful in Chicago, proving the efficacy of this approach.
    Beetle populations in New Jersey are well on track for eradication.
    Only the populations in New York persist--and that is because funding
    for the New York effort has been reduced in past years to focus the
    inadequate overall resources on Illinois and New Jersey. It is
    essential to provide sufficient funding now and in coming years to
    complete eradication in New York.
        We seek $9 million in appropriations for fiscal year 2007 to
    contain a third damaging forest pest, sudden oak death (also called the
    phytophthora leaf and stem blight). If sudden oak death does escape
    confinement, it threatens oaks in forests in Oregon and Washington as
    well as throughout the Appalachians, Ozarks, and even into southern New
    England. This disease is also a major threat to the Nation's nursery
    industry as it readily attacks species such as rhododendron and other
    species used in the garden nursery business. Spread of sudden oak death
    is thus of enormous consequence to both native forests and the garden
    nursery business. In its impact on the oak species, it has the
    potential to devastate critical forage for many wildlife species as
    well.
        Additional forest pests introduced into the United States and
    recently identified are currently being reviewed by scientific experts
    convened by APHIS and the USDA Forest Service. The most prominent
    example is the Sirex wood wasp, now present in New York, which
    threatens valuable pine timber resources, including those of the
    Southeast and eastern United States. The scientists' conclusions
    regarding the wood wasp and other species might result in additional
    funding needs.
        The Society of American Foresters, National Association of State
    Foresters, The Nature Conservancy, and the National Association of
    State Departments of Agriculture strongly support the Congress'
    numerous statements urging the Administration to release emergency
    funds from the Commodity Credit Corporation sufficient to enable full
    implementation of management plans for the exotic threats to our forest
    resources.
        Action now at the funding level requested would help ensure that
    these forest pests do not reach populations so large as to threaten
    forest, amenity trees, garden nursery stock, and related economic
    activities worth hundreds of billions of dollars.
                                     ______

             Prepared Statement the Wyoming State Engineer's Office

        Dear Chairman Bennett and Ranking Member Kohl: This letter is sent
    in support of the designation of 2.5 percent of the fiscal year 2007
    Environmental Quality Incentive Program (EQIP) funding for the
    Department of Agriculture's Colorado River Salinity Control (CRSC)
    Program. Pursuant to Public Law 104-127, the USDA's CRSC Program is a
    component program within EQIP. Wyoming views the inclusion of the CRSC
    Program in EQIP as a direct recognition on the part of Congress of the
    Federal commitment to maintenance of the water quality standards for
    salinity in the Colorado River--and that the Secretary of Agriculture
    has a vital role in meeting that commitment.
        The State of Wyoming is a member State of the seven-State Colorado
    River Basin Salinity Control Forum. Established in 1973 to coordinate
    with the Federal Government on the maintenance of the basin-wide Water
    Quality Standards for Salinity in the Colorado River System, the Forum
    is composed of gubernatorial representatives and serves as a liaison
    between the seven States and the Secretaries of the Interior and
    Agriculture and the Administrator of the Environmental Protection
    Agency. The Forum advises the Federal agencies on the progress of
    efforts to control the salinity of the Colorado River and annually
    makes funding recommendations, including the amount believed necessary
    to be expended by the USDA for its on-farm CRSC Program. Overall, the
    combined efforts of the Basin States, the Bureau of Reclamation and the
    Department of Agriculture have resulted in one of the nation's most
    successful non-point source control programs.
        The Colorado River provides municipal and industrial water for 27
    million people and irrigation water to nearly 4 million acres of land
    in the United States. The River is also the water source for some 2.3
    million people and 500,000 acres in Mexico. Limitations on users'
    abilities to make the greatest use of that water supply due to the
    River's high concentration of total dissolved solids (hereafter
    referred to as the salinity of the water) are a major concern in both
    the United States and Mexico. Salinity in the water source especially
    affects agricultural, municipal, and industrial water users. While
    economic detriments and damages in Mexico are unquantified, the Bureau
    of Reclamation presently estimates salinity-related damages in the
    United States to amount to $330 million per year. The River's high salt
    content is in almost equal part due to naturally occurring geologic
    features that include subsurface salt formations and discharging saline
    springs; and the resultant concentrating effects of our users man's
    storage, use and reuse of the waters of the River system. Over-
    application of irrigation water by agriculture is a large contributor
    of salt to the Colorado River as irrigation water moves below the crop
    root zone, seeps through saline soils and then returns to the river
    system.
        In close cooperation with the EPA and pursuant to requirements of
    the Clean Water Act, every three years the Forum prepares a formal
    report analyzing the salinity of the Colorado River, anticipated future
    salinity, and the program elements necessary to keep the salinity
    concentrations (measured at Total Dissolved Solids--TDS) at or below
    the levels measured in the river system in 1972 at Imperial Dam, and
    below Parker and Hoover Dams. In setting water quality standards for
    the Colorado River system, the salinity concentrations at these three
    locations have been identified as the numeric criteria. The plan
    necessary for controlling salinity and reducing downstream damages has
    been captioned the ``Plan of Implementation.'' The 2005 Review of water
    quality standards includes an updated Plan of Implementation. In order
    to eliminate the shortfall in salinity control resulting from
    inadequate Federal funding for the last several years from the USDA,
    the Forum has determined that implementation of the Program needs to be
    accelerated. The level of appropriation requested in this testimony is
    in keeping with the agreed upon plan.
        The Department of Agriculture's CRSC Program is an important proven
    and cost-effective tool in improving irrigation water application and
    thus reducing salt loading into the Colorado River system. For the past
    22 years, the seven-State Colorado River Basin Salinity Control Forum
    has actively assisted the U.S. Department of Agriculture in
    implementing its unique, collaborative and important program. With the
    enactment of the Federal Agriculture Improvement and Reform Act of 1996
    (FAIRA), the Congress directed that the Program should be implemented
    as one of the components of the Environmental Quality Incentives
    Program (EQIP). Since the enactment of the Farm Security and Rural
    Investment Act (FSRIA) in 2002, there is, for the first time, an
    opportunity to adequately fund the Program within the EQIP. At its
    recent October 2006 meeting, the Forum recommended that the USDA CRSC
    Program should expend 2.5 percent of the Environmental Quality
    Incentive Program funding. In the Forum's judgment, this amount of
    funding is necessary to implement the needed program. ``Catch-up''
    funding in the future will require expending greater sums of money,
    increase the likelihood that the numeric salinity criteria are
    exceeded, and create undue burdens and difficulties for one of the most
    successful Federal/State cooperative non-point source pollution control
    programs in the United States. The Colorado River Basin Salinity
    Control Advisory Council has taken the position that the funding for
    the salinity control program should not be below $20 million per year.
    Over the last 3 fiscal years, for the first time, funding almost
    reached the needed level. The amount of State and local cost-sharing
    that can be applied in each given fiscal year is driven by the amount
    of Federal appropriations and the EQIP allocation. In fiscal year 2006,
    the participating basin States will cost share with about $8.3 million
    and local agriculture producers will add another $7.5 million. Hence,
    it is anticipated that in fiscal year 2006 the State and local
    contributions will be 45 percent of the total program.
        The State of Wyoming greatly appreciates the Subcommittee's support
    of the Colorado River Salinity Control Program in past years. We
    continue to believe this important basin-wide water quality improvement
    program merits support by your Subcommittee. We request that your
    Subcommittee direct the allocation of 2.5 percent of the Environmental
    Quality Incentives Program funding for the USDA's CRSC Program during
    fiscal year 2007. Thank you in advance for your consideration of this
    statement and its inclusion in the formal record for fiscal year 2007
    appropriations.
                                     ______

                Prepared Statement of the U.S. Apple Association

        The U.S. Apple Association (USApple) appreciates the opportunity to
    provide this testimony on behalf of our nation's apple industry.
        Our testimony will focus on the following areas: the Market Access
    Program (MAP); funding for the Specialty Crop Competitiveness Act,
    Cooperative State Research, Extension and Education Service (CSREES)
    and Agricultural Research Service (ARS) funding, nutrition education
    and expansion of the fruit and vegetable snack program.
        USApple is the national trade association representing all segments
    of the apple industry. Members include 36 State and regional apple
    associations representing the 7,500 apple growers throughout the
    country as well as more than 300 individual firms involved in the apple
    business. Our mission is to provide the means for all segments of the
    U.S. apple industry to join in appropriate collective efforts to
    profitably produce and market apples and apple products.
    Market Access Program (MAP)
        USApple encourages Congress to appropriate $200 million in MAP
    funds, the level authorized in the farm bill for fiscal 2007.
        The apple industry receives over $3 million annually in export
    development funds from the U.S. Department of Agriculture's (USDA)
    Market Access Program (MAP). These funds are matched by grower dollars
    to promote apples in more than 20 countries throughout the world. One-
    quarter of U.S. fresh apple production is exported, with an annual
    value of approximately $370 million.
        Strong MAP funding is critical to the U.S. apple industry's efforts
    to maintain and expand exports, and to increase grower profitability.
    Congress recognized the importance of MAP by authorizing increased
    funding in the 2002 farm bill. Over the past three years, congressional
    appropriations have kept pace with the farm bill's authorized level.
    Food Quality Protection Act (FQPA) Implementation
        USApple urges full funding for the following U.S. Department of
    Agriculture (USDA) administered programs to mitigate the negative
    impact of FQPA implementation on apple growers.
      --$16 million for the Pesticide Data Program, administered by the
            Agricultural Marketing Service (AMS);
      --$8.0 million for the National Agricultural Statistics Service
            (NASS) pesticide-usage surveys;
      --$2.0 million for the Office of Pest Management Policy administered
            by the Agricultural Research Service (ARS);
      --$3.7 million for minor-use registration of crop protection tools
            (IR-4) administered by ARS;
      --$7.2 million for area-wide IPM research administered by ARS;
      --$13.5 million for the Integrated Pest Management Research Grant
            Program administered by the Cooperative State Research,
            Extension and Education Service (CSREES);
      --$10.8 million for minor-use registration of crop protection tools
            (IR-4) administered by CSREES; and
      --$12.5 million for the Pest Management Alternatives Program,
            Regional Pest Management Centers, Crops at Risk and Risk
            Avoidance and Mitigation Program also administered by CSREES.
    National Tree Fruit Technology Roadmap
        USApple urges the Committee to support the apple industry's efforts
    to improve its competitiveness by providing increased Federal funding
    for the development and application of new technologies as outlined
    below.
        Codling Moth and Other Lepidoptera Insect Research:
      --$800,000 Agricultural Research Service--Yakima, Washington
      --$800,000 Agricultural Research Service--Kearneysville, West
            Virginia
        Colonial immigrants introduced the codling moth into the United
    States from Europe, and its presence in apple orchards has plagued
    apple growers for the past 200 years. If uncontrolled, codling moth
    larvae damage apples by burrowing into fruits. This pest causes
    significant production losses and ruins demand. Codling moth is
    presently controlled by pesticide applications or techniques that
    interfere with reproduction. However, these options are insufficient to
    fully meet industry standards for codling moth control. Shortcomings in
    current controls have even led to the closure of the apple industry's
    third largest export market. Other lepidoptera insects such as oriental
    fruit moth and leaf rollers are also significant pests of concern that
    decrease grower profitability.
        The apple industry needs better decision-making techniques,
    improved understanding of secondary pests and the biology of pest
    predators, improved mating disruption techniques, rapid and efficient
    pest detection and instrumentation methods. Geographic differences in
    codling moth control capabilities requires a regional approach to
    research funding.
        Rootstock Breeding and Soil Replant Disease Research:
      --$400,000 Agricultural Research Service--Geneva, New York
      --$400,000 Agricultural Research Service--Wenatchee, Washington
        Rootstocks are important to apple growers because of their
    prominence in determining tree size, tree architecture and disease
    vulnerability. There is a growing interest and demand for hearty
    rootstocks that lend disease resistance and improved tree structures
    that are more efficient and profitable to manage.
        Soil replant disease is a poorly understood phenomenon that reduces
    tree vigor and stunts tree growth in new orchards, which are planted on
    the site of a previously existing orchard. A combination of organisms
    such as bacteria, fungi, nematodes and viruses are suspected to play a
    role in attacking the roots of new apple trees, limiting their growth
    potential. This problem has surfaced as a high priority problem because
    of the scarcity of new orchard sites, the need to replant existing
    orchards, the high per acre cost of planting new orchards and shortage
    of good options to control replant disease. Soil replant disease is a
    problem for all tree fruits including apples, pears, peaches and
    cherries. Genetics and genomics approaches are expected to yield
    significant progress in addressing rootstock related research.
        Research is needed to better understand site-specific drivers
    causing the disease and how the disease causes damage. Research is
    necessary to develop sustainable controls.
        Fruit Quality Research:
      --$750,000 Agricultural Research Service--Albany, California
      --$750,000 Agricultural Research Service--Wenatchee, Washington
        The future of the U.S. apple industry will depend on the ability of
    apple growers to consistently grow and market apples with superior
    quality. Improved fruit quality will not only ensure greater
    international competitiveness, but it will increase consumer demand for
    apples.
        Research is needed on the physical, chemical and genetic
    composition of apples so apple growers can produce apples with superior
    consumer traits, such as texture, aroma, and nutrition and apples with
    superior production traits such as uniform ripening and better storage
    characteristics and systems to deliver better fruit quality to
    consumers through improved defect and quality sorting.
        Automation, Sensors, and Precision Agriculture Research:
      --$4,000,000 Agricultural Research Service--Kearneysville, West
            Virginia
      --$2,000,000 Agricultural Research Service--East Lansing, Michigan
      --$2,000,000 Agricultural Research Service--Prosser, Washington
        Improving labor productivity is a critically important goal for the
    apple industry as it strives to remain competitive with low-wage
    international competitors. Tree fruit industries must identify and
    incorporate new technologies that will minimize low skill tasks,
    enhance worker productivity and safety, reduce production and handling
    costs, decrease seasonality of labor, and maximize fruit quality
    delivered to consumers.
        Additional research is needed for fruit postharvest technology
    research in a packing line environment to better evaluate internal
    fruit quality characteristics, such as internal defects, sugar content
    and fruit firmness. Improved sensor technology used on packing lines
    will be beneficial in detecting internal defects, lessen that amount of
    labor needed to detect and sort fruit and ensure that all packed fruit
    meets consumer demand for high quality fruit.
        Successful technological innovations must be coupled with novel
    plant genetics, integrated orchard designs, biorational pest and
    predator management systems, and prescriptive plant bioregulators. A
    systems approach will also require the simultaneous development and
    deployment of remote and ground sensing capabilities for real-time
    assessment of micro-environmental variables; tree vigor and orchard
    canopies; pest, pathogen, and predator pressure; water stress, and
    fruit quality. This research would also be applicable to a host of tree
    fruits including cherries, peaches, almonds and apples and pears.
        The need for investment in these new technologies has never been
    greater, but current Federal research to address this need is
    insufficient. Therefore, the tree fruit industry is requesting an
    increase in research funding to meet this great need.
    Specialty Crops Competitiveness Act
        USApple urges Congress to fund the block grants authorized under
    the Specialty Crop Competitiveness Act at the full $44.5 million
    authorized under the Act.
        The Specialty Crop Competitiveness Act (SCCA) was introduced in the
    108th Congress by Reps. Cal Dooley (D-CA) and Doug Ose (R-CA) and in
    the Senate by Senators Craig (R-ID) and Stabenow (D-MI). The bill was
    designed to strengthen demand, reduce production costs, and enhance
    production and marketing efficiencies.
        The majority of the funds authorized funds would go toward block
    grants, with each State department of agriculture being guaranteed a
    minimum of $100,000. In fiscal year 2006 Congress appropriated $7
    million for the block grants. USDA's Agriculture Marketing Service is
    now in the process of drafting regulations to implement the program.
    There is a strong need to build on the $7 million authorized for fiscal
    year 2006 and continue this important program.
        USApple urges Congress to increase funding for the Technical
    Assistance for Specialty Crops (TASC) program to $4 million as
    authorized under the Specialty Crop Competitiveness Act.
        This program has been critical over the last 4 years in helping the
    apple industry address specific sanitary and phytosanitary (SPS) non-
    tariff trade barriers.
    Fresh Fruit and Vegetable Snack Program
        USApple urges Congress to include $36 million in the USDA budget to
    expand the fruit and vegetable snack program to 25 schools in each of
    the 36 remaining States.
        The 2002 farm bill established the Fruit and Vegetable Pilot
    Program to promote consumption of fruits and vegetables among school
    children by providing free produce to schools in 25 schools in each of
    four States (Iowa, Indiana, Michigan, Ohio and one Indian Tribal
    Organization in New Mexico). The Child Nutrition and WIC
    Reauthorization Act of 2004 made the pilot permanent and expanded it to
    25 schools in Mississippi, three additional States (North Carolina,
    Pennsylvania and Washington were chosen by USDA) and two additional
    Indian Reservations. In fiscal year 2006, Congress expanded the program
    to an additional 6 States (Utah, Wisconsin, Texas, Idaho, New Mexico,
    and Connecticut). If Congress is unable to expand the program to the
    entire country, USApple urges that the program be expanded to include
    New York.
        Reports from the original pilot showed that students were
    increasing their consumption of fruits and vegetables, choosing more
    fruits and vegetables for lunch, and asking their parents for fruits
    and vegetables at home. The fruit and vegetable snack program works to
    educate children about the healthy eating habits that will last a
    lifetime. The fruit and vegetable snack program should be expanded to
    25 schools in every State.

                          REINSTATEMENT OF RECESSIONS

    Temperate Fruit Fly Research Position--Yakima, Wash.
        USApple requests continued funding of $300,000 to conduct critical
    research at the USDA ARS laboratory in Yakima, Wash. on temperate fruit
    flies, a major pest of apples.
        The Yakima, Wash., USDA ARS facility is conducting research
    critical to the crop protection needs of the apple industry. FQPA
    implementation has reduced the number of pesticides currently available
    to growers for the control of pests, such as cherry fruit fly and apple
    maggot. Left unchecked, these temperate fruit flies can be devastating.
    Thus, research is needed to develop alternative crop protection methods
    as growers struggle to cope with the loss of existing tools. While
    Congress appropriated $300,000 last fiscal year for this critical
    research, the administration's proposed budget for fiscal 2007 rescinds
    this funding.
    Post Harvest Quality Research Position--East Lansing, Mich.
        USApple urges Congress to maintain funding of $309,600 in the USDA
    ARS fiscal year 2007 budget for the postharvest quality research
    position in East Lansing, Mich.
        The East Lansing, Mich., USDA ARS facility is conducting research
    critical to the future survival of the apple industry. Using a series
    of new sensing technologies, researchers at this facility are
    developing techniques that would allow apple packers to measure the
    sugar content and firmness of each apple before it is offered to
    consumers. Research indicates consumer purchases will increase when
    products consistently meet their expectations, suggesting consumers
    will eat more apples once this technology is fully developed and
    employed by our industry. While Congress appropriated $309,600 last
    fiscal year for this critical research, the administration's proposed
    budget for fiscal 2007 rescinds this funding.
    Genomics, Disease Resistance and Insect Behavior--Kearneysville, W.V.
        USApple urges Congress to maintain funding of $588,900 in the USDA
    ARS 2007 budget for genomics, disease resistance and insect behavior
    research in Kearneysville, W.V.
        This research provides critical information that assists with the
    development of new apple varieties, identification of disease pathways
    and strategies to control devastating insect pests. This research is
    important in developing solutions to problems that reduce fruit quality
    and increase production costs. Apple growers depend on this research
    for economic sustainability and increased international
    competitiveness.
    Genetics of Fruit Quality Research--Wenatchee, Wash.
        The Wenatchee, Wash., USDA Agricultural Research (ARS) lab is
    building a genetics and genomics research program that will develop a
    greater understanding of fruit quality attributes that are important to
    consumers, such as flavor, texture, storability and nutrition. This
    research will also provide a clearer understanding of where important
    genes are located within the apple genome and the role those genes play
    in the expression of desirable fruit quality attributes. This
    understanding will provide new tools that can be understood as a
    multiplier effect to propel existing research programs that will be
    able to utilize the genetics and genomics tools related to fruit
    quality and physiological issues.
        USApple urges Congress to maintain baseline funding of $450,000 in
    the USDA Agricultural Research Service's fiscal year 2007 budget for
    the genetics of fruit quality research position in Wenatchee, Wash.
    Laboratory.
                                     ______

                 Prepared Statement of the USA Rice Federation

        Dear Mr. Chairmen: This is to convey the rice industry's request
    for fiscal year 2007 funding for selected programs under the
    jurisdiction of your respective subcommittees. The USA Rice Federation
    appreciates your assistance in making this letter a part of the hearing
    record.
        The USA Rice Federation is the national advocate for all segments
    of the rice industry, conducting activities to influence government
    programs, developing and initiating programs to increase worldwide
    demand for U.S. rice, and providing other services to increase
    profitability for all industry segments. USA Rice members are active in
    all major rice-producing States: Arkansas, California, Florida,
    Louisiana, Mississippi, Missouri, and Texas. The USA Rice Producers'
    Group, the USA Rice Council, the USA Rice Millers' Association, and the
    USA Rice Merchants' Association are members of the USA Rice Federation.
        USA Rice understands the budget constraints the committee faces
    when developing the fiscal year 2007 appropriations bill. We appreciate
    your past support for initiatives that are critical to the rice
    industry and look forward to working with you to meet the continued
    needs of research, food aid and market development in the future.
        A healthy U.S. rice industry is also dependent on the program
    benefits offered by the Farm Security and Rural Investment Act of 2002.
    Therefore, we oppose any attempts to modify the support levels provided
    by this vital legislation through more restrictive payment limitations
    or other means and encourage the committee to resist such efforts
    during the appropriations process.
        A list of the programs the USA Rice Federation supports for
    appropriations in fiscal year 2007 are as follows:
    Funding Priorities
                Research and APHIS
        The Dale Bumpers National Rice Research Center should receive
    continued funding at the fiscal year 2006 approved level. This center
    conducts research to help keep the U.S. rice industry competitive in
    the global marketplace by assuring high yields, superior grain quality,
    pest resistance, and stress tolerance. The fiscal year 2007 budget
    proposal from the U.S. Department of Agriculture proposes to rescind
    $270,000 in funding for this key research center, which would severely
    hamper the vital research activities being conducted at this national
    center. We urge you to provide full funding to the Dale Bumpers
    National Rice Research Center.
        In addition, we have attached information outlining the top
    priority research request from the USA Rice Federation; funding for
    aromatic rice variety research at the Dale Bumpers Center. The request
    is for $250,000 for fiscal year 2007 for research to develop domestic,
    high-yielding, high-quality aromatic rice varieties for the U.S. rice
    industry. Further details and specifics of this request are attached.
        Furthermore, we urge the subcommittee to continue to provide full
    funding for the USDA-ARS Rice Research Unit in Beaumont, Texas. The
    fiscal year 2007 budget proposal calls for cuts of $1.4 million, which
    would likely result in the closure of this important rice research
    facility. We ask for your consideration in maintaining funds to keep
    this center in operation for the benefit of the U.S. rice industry.
        The Western Regional Research Center, located in California, should
    receive continued full funding for operating funds. This center
    provides important research activities in support of the California
    rice industry, particularly post-harvest research. This facility has
    undergone recent modernization and upgrades and it is important to
    continue to provide the funds necessary to allow the center to continue
    full operations.
        For APHIS-Wildlife Services, we encourage the committee to fund the
    Louisiana blackbird control project at $333,000. This program annually
    saves rice farmers in Southwest Louisiana over $4,000 per farm, or $2.9
    million total. No increases have been provided to the program since
    1994 and inflation is reducing the overall impact. An increase from the
    $150,000 baseline is justified.
    Market Access
        Exports are critical to the U.S. rice industry. Historically, 40-50
    percent of annual U.S. rice production has been shipped overseas. Thus,
    building healthy export demand for U.S. rice is a high priority.
        The Foreign Market Development Program (FMD) allows USA Rice to
    focus on importer, foodservice, and other non-retail promotion
    activities around the world. For fiscal year 2007, FMD should be fully
    funded at $34.5 million, consistent with the President's Budget
    request.
        The Market Access Program (MAP) allows USA Rice to concentrate on
    consumer promotion and other activities for market expansion around the
    world. For fiscal year 2007, MAP should be funded at $200 million as
    authorized by the Farm Security and Rural Investment Act of 2002, which
    restores MAP funding to its authorized level. This is $100 million
    above the President's budget request.
        In addition, the Foreign Agricultural Service should be funded to
    the fullest degree possible to ensure adequate support for trade policy
    initiatives and oversight of export programs. These programs are
    critical for the economic health of the U.S. rice industry.
    Food Aid
        We encourage the committee to fund Public Law 480 Title I at a
    minimum level of $100 million, an increase from fiscal year 2006
    levels. This program is our top food-aid priority and we support
    continued funding in order to meet international demand. Food-aid sales
    historically account for a significant portion of U.S. rice exports.
        For Public Law 480 Title II we support funding for fiscal year 2007
    at $1.335 billion, equal to the fiscal year 2006 level. We encourage
    the committee to fund Title II at a level to ensure consistent tonnage
    amounts for the rice industry. We oppose any shifting of funds, as all
    Title II funds have traditionally been contained within USDA's budget.
    We believe all food-aid funds should continue to be used for food-aid
    purchases of rice and other commodities from only U.S. origin.
        USA Rice supports continued funding at fiscal year 2006 levels for
    Food for Progress. Funding for this program is important to improve
    food security for food deficit nations.
        The Global Food for Education Initiative is a proven success and it
    is important to provide steady, reliable funding for multi-year
    programming. USA Rice supports the $103 million request in the
    President's fiscal year 2007 budget for this education initiative
    because it efficiently delivers food to its targeted group, children,
    while also encouraging education, a primary stepping-stone for
    populations to improve economic conditions.
    Other
        Farm Service Agency.--We encourage the Committee to provide
    adequate funding so the agency can deliver essential programs and
    services. The Agency has been hard hit by staff reductions and our
    members fear a reduction in service if sufficient funds are not
    allocated.
        Please feel free to contact us if you would like further
    information about the programs we have listed. Additional background
    information is available for all of the programs we have referenced,
    however, we understand the volume of requests the committee receives
    and have restricted our comments accordingly.
        Thank you for your consideration of our recommendations.
        Attachment:

                     FISCAL YEAR 2007 FUNDING REQUEST FORM

        Agency.--U.S. Department of Agriculture
        Account.--USDA/ARS: The Dale Bumpers National Rice Research Center,
    Stuttgart, AR
        Project Name.--Research to develop domestic, high yield, high
    quality aromatic rice varieties at the USDA/ARS Dale Bumpers National
    Rice Research Center
        Priority.--High.
        New Project.--Yes.
        Project Description.--Aromatic rice imports have grown dramatically
    in the United States in the past 15 years and now total about 450,000
    MT per year or 15 percent of total consumption. The United States does
    not have an aromatic rice variety that has the yield, milling quality,
    and flavor to compete with the imported products. The research will
    enable the U.S. rice industry to compete effectively in a timely manner
    in the U.S. market with imported aromatic rice.
        The Dale Bumpers National Rice Research Center conducts research in
    rice genetics, quality, and pests' resistance to help keep the U.S.
    rice industry competitive in the global marketplace. The Center
    directly serves the needs of the U.S. industry in Arkansas, California,
    Mississippi, Louisiana, Missouri, and Texas. One of its major emphases
    is the genetic improvement of rice through the use of cutting-edge
    genomic tools and a multidisciplinary research approach.
        Aromatic rice has a flavor and aroma similar to roasted nuts or
    popcorn. This is a natural compound that is found in several plants
    like corn and rice but is present in much higher concentrations as a
    result of breeding and development of aromatic rice varieties.
    What is the anticipated benefit and/or impact of the project?
        Developing high-yielding domestic aromatic rice varieties with the
    grain quality traits needed is essential for the U.S. rice industry to
    compete in this market and meet domestic consumer demand. In addition,
    developing a new understanding of the various chemical compounds that
    result in aromatic flavors and smells, along with developing genetic
    markers that can be used by breeders to improve grain chemistry and
    grain appearance traits, will help the U.S. rice industry to have a
    competitive edge in this value-added market.
        Previous Funding: Fiscal Year 2002-06 And Amount.--Zero.
        Fiscal Year 2007 Request.--$250,000; one full-time staff position
    for 1 year.
        Fiscal Year 2007 Share.--Fiscal year 2007 funding is for 1 year of
    research, with development of a multi-year project pending the findings
    of the 2007 research.
        Local Share.--Availability of matching funds is being explored at
    this time.
    Request Description
        ARS Account: Dale Bumpers National Rice Research Center, Stuttgart,
    AR
        Dale Bumpers National Rice Research Center, Stuttgart, AR
        Domestic Aromatic Rice Varieties Research
        The Committee provides $250,000 toward development of domestic
    aromatic rice varieties to enable the U.S. rice industry to compete
    effectively in a timely manner in the U.S. market.
                                     ______

     Prepared Statement of the University of Southern Mississippi and the
                         Mississippi Polymer Institute

        Mr. Chairman, distinguished Members of the Subcommittee, I thank
    you for this opportunity to provide testimony describing ongoing
    research and commercializing efforts of The University of Southern
    Mississippi (USM) and the Mississippi Polymer Institute. I am very
    grateful to the Subcommittee for its leadership and the continued
    support of the Institute and its work. This testimony will include a
    summary of the Institute's research progress since my testimony of
    approximately 1 year ago.
        Research efforts over the last year have focused on developing
    agricultural-based, environmentally responsible derivatives for use in
    coatings and composites to replace petroleum derivatives. Novel
    monomers for emulsion polymerization have eliminated the previously
    required complicated synthesis procedures while allowing higher levels
    of vegetable oil macromonomer (VOMM) incorporation. The resulting latex
    polymers facilitate the formulation of architectural coatings with
    gloss levels rivaling solvent-based coatings and zero volatile organic
    compound (VOC) content. Performance and storage stability optimization
    continues across a wide range of novel VOMMs. We are excited about the
    continued progress as we believe the agriculturally-derived monomers
    have the potential to improve performance while reducing environmental
    hazards.
        Last year, we reported the successful production of lab-scale soy-
    based adhesive, formaldehyde-free particleboards that exceeded all
    commercial specifications. We have confirmed that the adhesive can be
    scaled up to 30 L batches that produce superior boards compared to the
    conventional formaldehyde-based boards. Moreover, the soy-based
    particleboards degrade faster than commercial particleboards as
    evidenced in soil burial tests. To the best of our knowledge, this is
    the only soy protein-based adhesive that can be formulated into
    particleboards without the use of formaldehyde-releasing resins that
    meets and exceeds commercial particleboard performance. Pilot plant
    testing confirmed laboratory performance. It defined the limits of
    conventional production and suggested areas requiring further research
    to prepare it for commercial manufacturing.
        Through our continued research, the U.S. farmer is better
    positioned to grow and supply the sustainable raw materials required to
    produce environmentally responsible products and reduce our dependency
    on imported petroleum products. Coupled with the reduction in air
    pollution, a carbon neutral technology, and the absence of
    formaldehyde, our research is a valuable strategic component to
    America's long-term success and aid in maintaining a higher standard of
    living. To date, our technology has resulted in a total of 25 patents
    and patent applications, both United States and foreign. Additional
    patent applications will be submitted during the upcoming months. With
    adequate funding, facilities, and commitment, ag-based research will
    continue to the betterment of our society. We are most appreciative of
    your support and will continue to push for full commercialization of
    technological advances utilizing agricultural intermediates while
    training scientists for careers in the next generation of
    agriculturally-oriented polymer science.
        The design and synthesis of novel vegetable oil macromonomers
    (VOMMs) using soy oil, linseed oil, and tung oil are being
    investigated. Continued research has increased the utility for new
    monomers at higher levels of incorporation. Tailored synthesis methods
    with the new monomers have increased the VOMM content in latexes to 80
    percent of the monomers by weight, a 30 percent increase over last year
    (based on solids). The monomers that permit the polymer chain to form a
    smooth film also provide a mechanism for crosslinking through auto-
    oxidation. Successful incorporation of a variety of VOMM levels allows
    our research to advance to the optimization of unsaturation, comonomer
    ratios, and coating performance. Long-term storage stability and
    coatings performance continue to be investigated.
        Surfmers or VOMMs that act as the stabilizing surfactant and a
    participating monomer in emulsions continue to be investigated.
    Neutralized soybean acrylated monomer (nSAM) functions well as a
    surfmer and performs similar to commercial surfactants with good
    polymerizability. Last year, we synthesized stable styrene emulsion
    copolymers containing 44 weight percent VOMM-based surfmers. This year,
    we have successfully synthesized 100 percent VOMM-based latexes that
    yielded high gloss films without added plasticizers or solvents,
    forming films at 0C.
        Solvent-free nail polishes and waterborne industrial coatings based
    on VOMMs were studied in comparison with commercial products. VOMM-
    based nail polishes provided high gloss levels and improved adhesion on
    plastic (ABS) and human nails. Research will continue to improve the
    water resistance. Industrial coatings formulated with VOMM-based
    latexes performed similar or superior to the control coatings when
    crosslinked with melamine or aziridine crosslinkers, respectively.
    VOMM-based latexes formulated into paper coatings have exhibited
    performance properties similar to those of styrene-acrylic commercial
    controls. VOMM coating properties continue to be evaluated and
    optimized using various comonomer compositions.
        Particleboard composites based solely upon soy protein adhesives
    were scaled from the 1-4 L range to 30 L and proved that board
    performance and storage stability are achievable. Additionally, the 30
    L batch of adhesive produced quality composites after long-term
    storage. Our research produced particleboards that have met or exceeded
    each of the industry performance requirements as defined by ANSI
    standards for M1, M2, M3, and M-S grade boards. The two primary
    barriers to market entry/commercialization are solids content/viscosity
    and cost. This year, the practical adhesive solids content was
    increased from 20 weight percent to 29 weight percent. Commercial
    formaldehyde-based resins are supplied at 65 percent or greater in
    solids content. The low solids content of our adhesive necessitates
    removal of large quantities of water during the commercial
    manufacturing process which is influenced by various factors such as
    temperature, time, and platen type and size. Current research efforts
    are focused on improving the solids content/viscosity balance through
    understanding the protein interactions in water that generate a viscous
    solution. Soy protein isolate (SPI) is a high purity protein (90
    percent) and therefore is more expensive than other forms of soy
    protein such as defatted soy flour (DSF) at 53 percent protein content.
    Particleboards manufactured with DSF as the sole replacement for SPI
    exceeded MS and M1 specifications, but did not meet M2 and M3
    performance requirements. Since SPI-based particleboards exceed the
    commercial performance requirements of formaldehyde-based
    particleboards in that it delivers superior moisture resistance and
    improved structural integrity even after 24 hours of water immersion,
    we believe the environmentally responsible and sustainable goals
    warrant further research. In addition to the performance attributes,
    SPI-based particleboards degrade more rapidly than commercial
    particleboards during soil burial tests.
        The Mississippi Polymer Institute is charged with promoting and
    supporting Mississippi's polymer industry by providing workforce
    development, technical service, product development, and assistance
    with economic development activities. In the area of workforce
    development, the Institute provides industry training in injection
    molding, extrusion, blow molding, and lean manufacturing. In 2004-2005,
    MPI trained 192 employees and in 2005-2006 MPI provided training for an
    additional 152 employees. The Institute has implemented polymer
    technology programs in high schools throughout the State of
    Mississippi. Currently, MPI supports four high school polymer
    technology programs in Petal, Moss Point, Columbia, and Corinth. There
    are 74 students enrolled in these programs. Implementing similar
    programs throughout the State will build a skilled workforce in polymer
    science for Mississippi.
        The faculty, the University, and the State of Mississippi are
    strongly supportive of the Mississippi Polymer Institute and its close
    ties with industry. Most faculty maintain at least one industrial
    contract as an important part of extramural research efforts. Polymers
    which include fibers, plastics, composites, coatings, adhesives, inks,
    and elastomers play a key role in the materials industry. They are
    ubiquitous in industrialized societies and across all industries
    including textiles, aerospace, transportation, energy, packaging,
    architecture and construction, medicine, sports and sporting goods,
    composites, and defense related materials. Critical for many of the
    technologies is a combination of controlled performance, weight
    reduction, and high strength performance. Unfortunately, our strategic
    position resembles the natural rubber supply situation during WWII
    which was controlled by potentially unreliable sources affecting our
    Nation's security.
        Our agriculturally focused research continues to create innovative
    natural product derivatives across several technology platforms
    targeting commercialization in coatings, adhesives, composites, and
    polymers in general. America is presently at a critical point in
    history as our standard of living is tied directly to technological
    advancements and innovation demanding high energy usage and the need
    for scientists and engineers. Since petroleum reserves are being
    depleted at an accelerating rate and other countries are competing on
    price and innovation, timing is critical. Our youth are no longer
    choosing careers in science and engineering which will cause us to lose
    our competitive edge, and in turn, affect the standard of living within
    the next decade. Our greatest achievements can be accomplished through
    the development of high performance materials based upon carbon neutral
    sustainable raw material resources. Almost every technological
    development over the past decade was dependent upon polymeric
    materials. Since the polymer industry is the largest single consumer of
    petroleum chemical intermediates in the world, our reality is clear in
    that we must develop agriculture as the industry of the future.
    Fortunately, many scientists are beginning to harness agricultural
    feedstocks and natural products. For example, a scientific literature
    search using the term biomimetic (defined as copying nature's methods
    or designs) revealed only 125 peer reviewed publications and patents in
    1990, whereas over 1,100 publications and patents in 2005, followed
    nature's lead for energy-related products, coatings protection,
    composites, adhesives, environmentally friendly antibacterial/
    antimicrobial agents, and improved medicines. A similar search using
    the word polymer provides over 70,000 publications and patents for
    2005. Our research and commercialization efforts encompass many
    important facets including training scientists that will continue to
    innovate and develop technology that is critical for the maintenance of
    our quality of life and national stability. We, as a Nation, can
    improve our environment, reduce our dependence on imported petroleum,
    keep America's farmlands in production, and continue to be the World's
    technology leader. Your support is necessary to continue our research
    efforts to accomplish the goals set forth.
        As a polymer scientist, I am intrigued by the vast opportunities
    offered by American agriculture. As a professor, however, I continue to
    be disappointed that few of our science and business students receive
    training in the polymer-agricultural discipline despite its enormous
    potential. The School of Polymers and High Performance Materials and
    the Mississippi Polymer Institute at USM are attempting to make a
    difference by showing others what can be accomplished if appropriate
    time, energy, and resources are devoted to the understanding of ag-
    based products. I became involved in the polymer field more than 40
    years ago, and have watched its evolution where almost each new product
    offered the opportunity for many more. Although polymer science as a
    discipline has experienced expansion and a degree of public acceptance,
    alternative agricultural materials in the polymer industry continue to
    be an underutilized national treasure. Today, society displays less
    acceptance of petroleum-derived materials than ever before, and
    consequently, the timing is ideal for agricultural materials to make
    significant inroads as environmentally responsible, biodegradable, and
    renewable feedstocks. Agricultural materials have always been available
    for our use, and the scientific community often grasps the real
    potential for renewable materials, unfortunately, society continues to
    ignore their potential.
        U.S. agriculture has made the transition from the fields to the
    kitchen tables, but America's industrial community continues to be
    frightfully slow in adopting ag-based industrial materials. The prior
    sentence was included in several of my previous testimonies and rings
    true again. We are making progress and must continue to aggressively
    pursue these opportunities and in doing so:
      --Intensify U.S. efforts to commercialize alternative crops and
            dramatically reduce atmospheric VOC emissions and odor. The
            result will be much cleaner and less noxious air for all
            Americans.
      -- Reduce U.S. reliance on imported petroleum.
      -- Maintain a healthy and prosperous farm economy with unlimited
            sustainability.
      -- Foster new cooperative opportunities between American farmers and
            American industry.
      --Create advanced polymer technology-based manufacturing jobs that
            can not be easily exported to other countries.
        Mr. Chairman, your leadership and support are deeply appreciated by
    the entire USM community. While I can greatly appreciate the financial
    restraints facing your Subcommittee, I feel confident that further
    support of the Mississippi Polymer Institute will continue to pay
    dividends of increasing commercialization opportunities of agricultural
    materials in the American industry and training scientists required for
    America's continued prosperity. Advances in polymer research are
    crucial to food, energy, transportation, housing, medical, and defense
    industries. Our work has clearly established the value of ag-products
    as industrial raw materials, and we must move it from the laboratories
    to the industrial manufacturing sector. Only then can the United States
    enjoy the cleaner and safer environment that these technologies offer,
    as well as new jobs, and expanded opportunities for the U.S. farmer and
    scientists. We are most grateful for the support you have provided in
    the past. The funding you have provided has supported fundamental
    research as well as pilot commercial manufacturing and testing.
    However, additional funds are needed to further advance these
    technologies.
        Since our testimony last year, we have continued to research,
    understand, and develop, agricultural-based materials for
    commercialization. We are in need of additional and consistent
    resources to advance these infant technologies to the market place, and
    to continue our research and development of other exciting
    technologies. We therefore respectfully request $2 million in federal
    funding to more fully exploit the potential of commercializing the
    technologies described herein. We have shown that we can be successful,
    yet we need additional resources in order to ultimately utilize the
    potential of this technology. Next year's research and
    commercialization plan is aggressive, knowing that our Nation requires
    technology to survive and that our efforts will be recognized as
    instrumental in developing a ``process'' for the commercialization of
    new ag-based products. The development of this process, and to show it
    is successful, is extremely important to all entrepreneurs who believe
    in and support ag-based products. Thank you, Mr. Chairman and Members
    of the Subcommittee, for your support and consideration.
                                     ______

      Prepared Statement of the Upper Mississippi River Basin Association

        The Upper Mississippi River Basin Association (UMRBA) is the
    organization created in 1981 by the Governors of Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating
    the five States' river-related programs and policies and for
    collaborating with Federal agencies on regional water resource issues.
    As such, the UMRBA has an interest in the budget for the U.S.
    Department of Agriculture's conservation programs and technical
    assistance.
        Of particular importance to the UMRBA is funding for the
    Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP),
    Environmental Quality Incentives Program (EQIP), and Conservation
    Security Program (CSP). Taken together, these four Commodity Credit
    Corporation-funded programs provide an invaluable means for the USDA to
    work with landowners, local conservation districts, and the states to
    maintain agricultural productivity while protecting the Nation's soil
    and water resources. Moreover, they do this in a voluntary, non-
    regulatory fashion. CRP, WRP, EQIP, and CSP will be key non-regulatory
    elements in the States' efforts to address agricultural sources of
    water quality impairment through the Total Maximum Daily Load program.
    Successful application of conservation programs to this region's water
    quality problems will also help address the growing national concern
    with hypoxia in the Gulf of Mexico, which has been linked to nutrient
    loads from agriculture and other sources. As stewards of some of the
    Nation's most productive agricultural lands and important water
    resources, the five States of the Upper Mississippi River Basin believe
    these programs are vital.
    Conservation Reserve Program
        The UMRBA supports President Bush's fiscal year 2007 budget request
    of $2.09 billion for the Conservation Reserve Program, a 5 percent
    increase over fiscal year 2006. This increase is testament to the
    strong landowner interest and high environmental benefits resulting
    from enrollment of fragile cropland acres in CRP. Through CRP, farmers
    and ranchers can voluntarily establish long term conservation
    practices, such as filter strips and riparian buffers, on highly
    erodible and environmentally sensitive cropland.
        In the UMRBA States (Illinois, Iowa, Minnesota, Missouri, and
    Wisconsin), total CRP enrollment is currently 7.0 million acres, or
    approximately 19 percent of the national CRP acreage. Yet the five
    States' CRP enrollment represents 41 percent of the total number of CRP
    contracts, 40 percent of the total number of farms enrolled nationwide
    in the CRP, and 32 percent of the total annual CRP rental payments.
        In 2007, nearly 39,000 CRP contracts in the five UMRBA States will
    expire, representing 29 percent of the CRP acres currently enrolled in
    these States. To determine which expiring contracts will be eligible
    for re-enrollment, USDA used an Environmental Benefits Index. As a
    result, 99.7 percent of the contracts expiring in 2007 in the five
    States will be offered re-enrollment.
        All five UMRBA States also have active Conservation Reserve
    Enhancement Programs tailored to meet their priority conservation
    needs. Current CREP enrollment in the five States is nearly 243,000
    acres, or 31 percent of the national total. These rates of
    participation clearly demonstrate the importance of the CRP and CREP in
    the Nation's agricultural heartland and reflect the compatibility of
    these programs with agricultural productivity.
    Wetlands Reserve Program
        The President's fiscal year 2007 budget proposes $403 million for
    the Wetlands Reserve Program, an increase of 60 percent over fiscal
    year 2006 funding. UMRBA applauds this substantial increase and urges
    Congress to provide sufficient funding to meet WRP's 2007 enrollment
    goal of 250,000 acres, which is 100,000 acres more than the 2006
    estimate.
        Since the WRP was established in 1996, its easements have proven to
    be important tools for restoring and protecting wetlands in
    agricultural areas. This is clearly evident from the overwhelming
    landowner response and the resulting improvements to water quality and
    habitat. Through fiscal year 2004, WRP enrollment in Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin totaled more than 309,000 acres, or
    19 percent of the national total. In fiscal year 2005, landowners in
    the five States enrolled an additional 28,000 acres in the WRP.
    However, there were 1,217 eligible, but unfunded, applications to
    enroll another 134,000 acres from the five States in fiscal year 2005.
    This represents 38 percent of the total national backlog of
    applications for that year.
    Environmental Quality Incentives Program
        In contrast to conservation programs that protect land and water
    resources by curtailing production on sensitive lands, the
    Environmental Quality Incentives Program supports conservation on
    working lands. Promoting agricultural production and environmental
    quality as compatible goals is particularly important in the Midwest
    agricultural heartland.
        The 2002 Farm Bill provides $1.3 billion of budget authority for
    the EQIP in fiscal year 2007. However, the President is proposing to
    fund EQIP at only $1.0 billion. The UMRBA urges Congress to fund EQIP
    at its full authorized level. Like many other conservation programs,
    EQIP funding has not kept pace with demand. Even at full funding, there
    will likely be significant numbers of unfunded EQIP applications. In
    fiscal year 2006, the EQIP allocation to the States of Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin totals $118 million, only slightly
    more than the $114 million provided in fiscal year 2004, a year when
    there was an additional $180 million in unmet requests for EQIP
    assistance.
    Conservation Security Program
        The President's fiscal year 2007 budget request of $342 million for
    the Conservation Security Program reflects a 32 percent increase over
    fiscal year 2006 for this popular voluntary program, which provides
    financial and technical assistance to agricultural producers who
    implement conservation measures on working lands.
        In fiscal year 2005, CSP contracts were offered to farmers and
    ranchers in 220 watersheds across the country. Twenty-two of those
    watersheds were in the five States of the Upper Mississippi River
    Basin. In those 22 watersheds, NRCS approved payments totaling $37.6
    million, which was 26 percent of the total CSP contract payments that
    year.
        In fiscal year 2006, CSP will be offered in 60 different watersheds
    nationwide, including one or two in each UMRBA State. It is too early
    to judge the demand for CSP in fiscal year 2006. The fiscal year 2006
    sign-up opened February 13, 2006 and is scheduled to close March 31,
    2006. It remains to be seen what the ultimate level of landowner
    interest will be in the CSP, as eligible watersheds change each year.
    But the UMRBA is encouraged that CSP is continuing to expand and
    funding levels are increasing.
    Conservation Technical Assistance
        Through the Conservation Technical Assistance program, NRCS
    provides the technical capability that helps people plan and apply
    conservation on the land. NRCS works through and in partnership with
    conservation districts to assist individuals and groups in assessing
    conservation needs and planning, designing, and installing conservation
    practices. In addition, the CTA program assists in preparing landowners
    to participate in USDA conservation financial assistance and easement
    programs, provides emergency disaster technical assistance, and enables
    NRCS to coordinate with other programs such as U.S. EPA's nonpoint
    source management program and U.S. Fish and Wildlife Service's Partners
    for Wildlife. Approximately $92.8 million in CTA funding will be
    allocated to the five UMRBA States (Illinois, Iowa, Minnesota,
    Missouri, and Wisconsin) in fiscal year 2006. Yet that is an 8.6
    percent decrease from funding levels just 2 years ago.
        Given that CTA is the foundation for much of the Nation's private
    lands conservation assistance, it is disappointing that the President's
    fiscal year 2007 budget proposes a $62 million, or 9 percent, decrease
    in the CTA account. The UMRBA urges that, at a minimum, funding for CTA
    be maintained at the fiscal year 2006 level.
    Watershed Programs
        The UMRBA is concerned that the President is proposing deep cuts to
    NRCS's watershed programs, including total elimination of the Watershed
    and Flood Prevention Operations program, which funds Public Law 566 and
    Public Law 534 projects. Funding for Watershed Operations has declined
    substantially over the past 20 years, from an historical high of $199
    million in fiscal year 1994 to only $74 million in fiscal year 2006.
    And yet this program provides significant local, regional, and national
    benefits, by addressing watershed protection, flood prevention, erosion
    and sediment control, water supply, water quality, water conservation,
    agricultural drought problems, rural development, municipal and
    industrial water needs, upstream flood damages, fish and wildlife
    habitat enhancement, and wetland creation and restoration. In May 2005
    there were $1.89 billion of unfunded Federal commitments to Public Law
    566 and Public Law 534 projects nationwide, with nearly $243 million of
    that in the States of Illinois, Iowa, Minnesota, and Missouri. Despite
    the fact that Public Law 566 and Public Law 534 projects in the five
    States were allocated nearly 27 percent of the total national funding
    in fiscal year 2005, that amount ($19.1 million) was far less than the
    $243 million backlog. In fiscal year 2006, although there is only $74
    million available for watershed protection and flood prevention
    operations nationwide, there are funding requests totaling over $174
    million, $44 million of which are in the five UMRBA States. Rather than
    eliminating this important program, UMRBA urges that it be funded at
    least equal to the fiscal year 2006 level of $74 million.
        In addition to continuing to invest in watershed and flood
    prevention projects, the rehabilitation of aging flood control dams
    must also be addressed. Of the 11,000 Public Law 534 and Public Law 566
    dams nationwide, more than 3,000 will reach the end of their design
    life by 2013. Recognizing this fact, Congress authorized the Watershed
    Rehabilitation Program in 2000 and authorized significant new funding
    for the program in the 2002 Farm Bill. In particular, $60 million is
    authorized for the Watershed Rehabilitation Program in fiscal year
    2007. Yet the President's fiscal year 2007 budget request is only $15
    million, a 52 percent decrease over the fiscal year 2006 funding level.
    In fiscal year 2005, when $27.3 million was appropriated for the
    Watershed Rehabilitation Program, only 60 percent of the $46 million in
    project requests was met for the year. Rehabilitation of aging dams,
    which could become a threat to public health and safety, is extremely
    important and UMRBA thus urges Congress to fund the Watershed
    Rehabilitation Program at least equal to its fiscal year 2006 level.
                                     ______

                 Prepared Statement of West Virginia University

        Chairman Bennett and Members of the Subcommittee: Thank you for the
    opportunity to offer testimony to the Subcommittee on Agriculture,
    Rural Development, and Related Agencies. We request funding in the
    amount of $1,000,000 in the USDA budget for fiscal year 2007 to
    initiate a program called SCIPS, the Small Community Infrastructure
    Protection and Sustainability program. Discussion regarding our request
    is offered below.
    Introduction
        My name is Richard Bajura, and I serve as Director of the National
    Research Center for Coal and Energy at West Virginia University in
    Morgantown, West Virginia. We have a long history of working with small
    and rural communities on projects in drinking water, wastewater, solid
    waste management, security for small community water systems, and
    emergency preparedness. We offer a resource of information and
    specialized technical assistance and training services to small
    communities and to those professionals that serve small communities and
    rural areas.
        Currently in the United States, there are no comprehensive regional
    or national centers dedicated to helping a small community to prepare
    for, respond to, and recover from natural or man-made emergencies or
    terrorist acts which affect a community's water infrastructure. This
    testimony outlines a model concept called Small Community
    Infrastructure Protection and Sustainability (SCIPS) which addresses
    this national need. Benefits to be gained by small communities include
    improved emergency preparedness and reduced costs for restoring
    infrastructure and services.
    Need
        In the last 5 years, the Federal Emergency Management
    Administration (FEMA) has responded to more than 300 declared disasters
    including natural events such as earthquakes, hurricanes, tornadoes,
    and floods and man-made perils such as major fires, dispersal of
    hazardous materials, and acts of terrorism. Floods are the most common
    and widespread of all natural disasters except fires. The devastation
    caused by hurricanes such as Katrina or Rita is widely publicized and
    impinges on our consciousness. During major disasters, much of the
    Nation's attention is focused on large population centers, but nearly
    one-third of all Americans live in small, rural communities. Early
    reports on Hurricane Katrina's aftermath indicated that nearly 1,000
    drinking water and sewer systems were damaged and non-functional. Most
    of the impacted systems were in sparsely populated rural communities,
    lacking in emergency communications, and typically last in line for
    assistance as responders bypassed them on the way to the bigger cities.
        Advance preparation before an emergency is essential since federal
    protocols require that communities should be able to manage with their
    own resources for at least 24 to 72 hours before national programs
    provide assistance. But many small communities lack the expertise,
    information, and resources to install and operate appropriate water and
    wastewater systems, prepare the mandated emergency response plans,
    respond to emergencies when they occur, and recover afterwards. Small,
    and even medium-sized communities, are the least able to afford
    security and emergency preparedness enhancements to their water
    infrastructure or to obtain such expertise. These communities require
    assistance in all phases of preparing for and responding to
    emergencies.
    SCIPS Model
        States and their respective small communities would benefit from
    access to a national resource dedicated to providing comprehensive
    water and wastewater assistance in all phases of emergency management.
    The SCIPS model program can assist small communities nationwide to
    maintain, protect, and replace water infrastructure resources damaged
    during emergency events. A service organization, or center, based on
    the SCIPS model draws upon experts in technology, public health, public
    administration, law, and policy to make the best environmentally and
    economically sound options available to small communities. SCIPS can
    serve as a comprehensive, one-stop resource for regulatory and public
    officials, assistance providers, utility operators/managers, and
    homeowners who want unbiased and timely information on water and
    wastewater infrastructure selection, maintenance, and replacement.
        Community Preparation.--During non-emergency periods, the SCIPS
    center focuses on community preparedness. Preparedness includes
    development and dissemination of short- and long-term strategies
    addressing threats to, and fostering the sustainability of, small
    community water and wastewater infrastructure. SCIPS personnel will
    provide customized training and education, technical assistance, and
    R&D throughout the Nation. These services will promote and facilitate
    asset management practices and emergency protocols as an integral part
    of infrastructure protection and sustainability. The SCIPS center
    increases the knowledge base of community officials, policy makers,
    scientists, engineers, and others through a research, education, and
    awareness campaign.
        Disaster Response.--During a disaster, the SCIPS center is a
    specialized resource that can be drawn upon at the request of national
    and local officials for timely assistance. The SCIPS center has core
    capabilities as an information center and technical assistance provider
    through its extensive knowledge of the network of public and private
    service providers across the Nation. SCIPS personnel are available to
    answer questions via hotline phone and internet facilities, serve as a
    communications resource among responders, and provide specialized
    assistance by arranging for technology experts to visit the affected
    communities. The SCIPS center assists communities in quickly restoring
    services as effectively as possible based on the extent of the
    disaster.
        Recovery.--During the post-emergency recovery phase, the SCIPS
    center assists communities in assessing damage, evaluating options for
    infrastructure replacement, and providing technical services for the
    replacement, installation and/or repair of infrastructure damaged
    during the emergency. The SCIPS center provides communities access to
    local, regional, and national experts. The Center offers a
    comprehensive spectrum of assistance to small communities for recovery
    of services, which enables a return of economic productivity to the
    community in addition to restoring essential services and ensuring
    public health.
    Benefits
        The benefits to small and rural communities and to the Nation from
    establishing the SCIPS program include:
      --Implementation of viable security improvements for water and
            wastewater infrastructure, systems ``hardened'' to withstand
            disaster and prevent damage from terrorism acts, and quicker
            recovery of essential systems and services after catastrophic
            events;
      --Small communities that are better informed about preparing and
            implementing water and wastewater emergency procedures;
      --Communications plans for small community water and wastewater
            treatment systems in coordination with other community
            organizations;
      --Improved rural community public health and a protected environment;
            and,
      --Cost savings at the Federal, State and local levels realized by
            implementing infrastructure sustainability measures which
            reduce economic losses during catastrophic events.
    West Virginia University
        West Virginia University is uniquely qualified to undertake
    implementation of the SCIPS model. As a comprehensive land grant,
    research extensive university, West Virginia University has the
    necessary faculty expertise to address the spectrum of legal, health,
    policy, research, and service requirements of the SCIPS model. Its
    National Environmental Services Center has more than 26 years of
    service to the Nation's small communities in the areas of drinking
    water, waste water, homeland security, and educational and training
    programs. The Center also has working relationships with relevant
    Federal agencies, State offices, and technology experts through out the
    country who would participate in response teams addressing emergencies
    in their respective regions.
    Recommendation
        The lessons learned from the effects of Hurricane Katrina
    demonstrate the need for assistance to small communities in the
    protecting drinking water and wastewater infrastructure. We recommend
    establishing a national center to provide the services outlined under
    the SCIPS model.
        The following language is suggested for the Subcommittee Report:
    ``The Managers provide $1 million for the Small Community
    Infrastructure Protection and Sustainability program.'' We have not
    received funding for this program previously.
                                     ______

        Prepared Statement of the National Drinking Water Clearinghouse

        Chairman Bennett and Members of the Subcommittee: Thank you for the
    opportunity to offer testimony to the Subcommittee on Agriculture,
    Rural Development and Related Agencies. We request an appropriation of
    $2 million for fiscal year 2007 to continue the programs of the
    National Drinking Water Clearinghouse [NDWC] under the Rural Community
    Advancement Program [RCAP] in the USDA budget.
    Introduction
        My name is Richard Bajura, and I represent the National Drinking
    Water Clearinghouse, which is located at West Virginia University in
    Morgantown, West Virginia. My unit is home to a specialized suite of
    programs that address the environmental needs of small and rural
    communities. Our staff members have expertise in drinking water,
    wastewater, solid waste management, security systems for small
    community infrastructure, and emergency preparedness. We offer a
    resource of information and specialized technical assistance and
    training services to small communities and to those professionals that
    serve small communities and rural areas. This testimony focuses on our
    programs in drinking water infrastructure that are funded under RCAP.
    Need for Federal Programs
        Clean, safe drinking water and the effective treatment of
    wastewater are critical to public and environmental health. For most of
    us, it's easy to take water for granted. However, not that long ago,
    most people didn't have indoor plumbing. According to U.S. Census
    Bureau data, half of American homes in 1940 lacked complete plumbing
    facilities (defined as hot and cold piped water, a bathtub or shower,
    and a flush toilet). By 2002, EPA found that the number of homes having
    complete plumbing facilities increased to 91 percent. Much of this
    improvement can be attributed to Federal infrastructure investment. The
    U.S. Department of Agriculture's Rural Utilities Service [RUS] has
    provided more than $20 billion for water and wastewater projects since
    1947. In spite of these improvements, however, 670,000 households (with
    nearly 2 million people) lack access to water, sanitation, or both.
    Safe, affordable water infrastructure is an investment in the economic
    viability and public health of rural America.
    Water Infrastructure Challenges
        Over 50,000 water treatment systems serve the U.S. population, with
    86 percent of these systems being classified as ``small'' systems
    (serving fewer than 3,300 customers) and ``very small'' systems
    (serving fewer than 500 customers). Because smaller systems have lower
    revenues and fewer resources, they are more likely to have difficulty
    meeting an increasing number of environmental regulations. Very small
    systems are 50 percent more likely to incur violations than all other
    system sizes. When the Safe Drinking Water Act was passed in 1974, 18
    contaminants were regulated. By 2004, that number had grown to 86.
    Another eight will be added by 2008.
        While significant progress has been made, a number of challenges
    confront communities as they try to safeguard public health. The very
    nature of rural/small town America works against easy solutions to
    providing essential water service. The cost of providing basic water
    service (and other infrastructure) is often prohibitive because of
    geographic isolation, low population density, social and cultural
    diversity, and a lack of proper information. Twenty-five percent of our
    Nation's drinking water utilities have insufficient revenues to fund
    the full cost of providing service to customers. An equal percentage of
    utilities have deferred maintenance due to insufficient funding.
    Estimates show that during 2000-2019, the operation and maintenance
    funding gap for our Nation's drinking water utilities could be as high
    as $495 billion, and the capital funding gap could be as high as $267
    billion.
        In many communities, water distribution systems and wastewater
    collection systems are 40 to 50 years old, with many dating back more
    than a century. According to the American Society of Civil Engineers
    (ASCE), U.S. drinking water systems are responsible for maintaining an
    estimated 800,000 miles of water delivery pipelines. In the 2002 report
    titled Clean Water and Drinking Water Infrastructure Gap Analysis, EPA
    estimated that we need to invest $265 billion for drinking water
    systems infrastructure through 2022. In the 2003 update to ASCE's
    Report Card for America's Infrastructure, both drinking water and
    wastewater were given a grade of ``D.'' The report suggests that,
    without new investment, the progress made over the last 30 years is
    threatened.
        As a partial solution to addressing these challenges, the Technical
    Assistance and Training [TAT] grants program under the USDA Rural
    Community Advancement Program make it possible for small communities to
    maximize their investments in water infrastructure through the use of
    appropriate technology and sound management practices. The next
    sections of this testimony focus on programs of the National Drinking
    Water Clearinghouse which provide needed assistance to these
    communities.
    Information and Technical Assistance Services of the NDWC
        For 15 years, the National Drinking Water Clearinghouse has helped
    small and rural communities with their water infrastructure management
    and utility security issues. The NDWC's services enable small
    communities to provide clean water to their citizens and prevent
    pollution. In this way the NDWC helps small and rural communities to
    protect their public health, increase economic opportunity, and improve
    their quality of life through providing adequate, safe, and economical
    drinking water to their citizens.
        The NDWC accomplishes its mission through a three-pronged approach.
    First, the NDWC provides targeted assistance and quality information
    for meeting regulatory compliance requirements and for optimizing
    community water services. Second, the NDWC provides assistance and
    strategic information to small communities to enable them to develop
    sustainable water services that facilitate economic development. Third,
    the National Drinking Water Clearinghouse provides information for
    public awareness and increased stewardship of water resources to
    educate community officials (who usually are part-time administrators)
    and the general public.
        The NDWC performs a range of assistance activities for small
    communities. Telephone callers can obtain toll-free technical
    assistance from our staff of certified operators, engineers, and
    scientists. Our quarterly publication ``On Tap,'' a magazine about
    drinking water treatment, financing, and management options helps
    communities and small water systems to operate, manage and maintain
    their facilities while keeping them financially viable. A comprehensive
    Web site and databases with thousands of entries provide around the
    clock access to contemporary information on small water systems.
    Training sessions customized for small and rural areas,
    teleconferences, and more than 400 free and low-cost educational
    products provide people the instruction and tools they need to address
    their most pressing drinking water issues.
        These services are well received by small community officials and
    service providers and should be continued. Unless the services of the
    National Drinking Water Clearinghouse are available to provide
    assistance to these communities regarding alternative technologies,
    preparing grant proposals, and training the community officials and
    service providers, the health of these communities will be jeopardized
    and opportunities for economic development will be severely hampered.
        We plan to use $1.5 million of our request to continue NDWC's
    Information and Technical Assistance Services in fiscal year 2007. This
    program receives funding from proposals submitted to the Technical
    Assistance and Training [TAT] Grants Program in the RCAP budget line.
    Special Services to Small Communities
        In addition to the National Drinking Water Clearinghouse's
    knowledge base and technical support, the NDWC is expanding its
    assistance to small ``underserved'' communities through technical field
    support. ``Underserved'' is a term that is used to characterize those
    small and rural communities that, due to size and economic constraints,
    have great difficulty assessing their environmental problems and
    competing for funding. Examples would be communities such as we have in
    West Virginia, Alaska, the sprawling Colonias bordering Mexico, Indian
    reservations, and small communities in California, New York, and the
    New England States.
        The NDWC's funding under the Technical Assistance and Training
    Grants program currently does not provide for direct ``on the ground''
    services to underserved communities. A portion of our funding will be
    used to develop a pilot program to honor requests for site-specific
    technical support from underserved communities. This support gives
    small and very small communities assistance through site assessments
    and feasibility studies that they might not otherwise be able to access
    for planning needed infrastructure improvements, their financing, and
    management.
        Communities often ask for help in assessing their water and
    wastewater needs and options prior to contacting and retaining the
    services of a private consulting firm. Through the pilot program, the
    NDWC will be able to conduct site assessments and offer information and
    education on technology options. In addition, NDWC staff will attend
    and make presentations at community meetings concerning best technology
    and management practices. Pre-engineering assessments conducted by NDWC
    will enable communities to have a thorough knowledge of their water and
    wastewater treatment needs and options, prior to retaining engineering
    services. In this way they will be positioned to select technologies
    that they can afford, and will be able to manage and maintain.
        Funding for the special services to small communities programs will
    enable assistance to be provided on location in communities throughout
    the United States. We will use $500,000 of our appropriation for
    special services to small communities.
        For the past several years, the Managers of this Subcommittee have
    inserted language in the committee report for Agriculture
    Appropriations budget bill that recommended increases in our annual
    funding to provide special services to underserved communities.
    However, no specific amount of funding was earmarked through this
    language, and, consequently, the National Drinking Water Clearinghouse
    has not received funding from USDA to initiate the special services
    program.
    Request
        In the Conference Report for the USDA appropriations for fiscal
    year 2006 [H.R. 109-255], the Conference Managers directed spending in
    the amount of $18,250,000 for the Technical Assistance and Training
    [TAT] Grants Program in the RCAP budget line. For fiscal year 2007, we
    request that the TAT program receive sufficient funding to maintain the
    NDWC program and that of the total amount provided for fiscal year
    2007, $2 million should be specifically earmarked for the programs of
    the NDWC.
        The following language is suggested for the USDA Subcommittee
    Report: ``The Mangers provide $2 million to the National Drinking Water
    Clearinghouse for information, technical assistance and special
    services to small communities.''
        A summary of our recent awards history is provided for reference.

        FUNDING AWARDED TO THE NATIONAL DRINKING WATER CLEARINGHOUSE FOR
        TECHNICAL ASSISTANCE AND TRAINING (TAT) PROJECTS UNDER THE RURAL
             COMMUNITY ADVANCEMENT PROGRAM (RCAP) OF THE USDA BUDGET
    ------------------------------------------------------------------------
                                              Federal fiscal
               USDA funded grants                   year       Award amount
                                               appropriated
    ------------------------------------------------------------------------
    National Drinking Water Clearinghouse...            2006         ( \1\ )
    National Drinking Water Clearinghouse...            2005      $1,200,000
    National Drinking Water Clearinghouse...            2004       1,157,000
    National Drinking Water Clearinghouse...            2003       1,336,000
    Technical Assistance for Rural                      2003         510,000
     Wastewater Management Entities (Project
     II)....................................
    National Drinking Water Clearinghouse...            2002       1,336,000
    Technical Assistance for Rural                      2002         500,000
     Wastewater Management Entities (Project
     II)....................................
                                              ..............      6,039,000
    ------------------------------------------------------------------------
    \1\ Amount pending.
    Fiscal year 2007 Request: $2 million ($1.5 million for Information and
      Technical Assistance Services and $0.5 million for Special Services to
      Small Communities).

                                     ______

                   Prepared Statement of The Wildlife Society

        The Wildlife Society appreciates the opportunity to submit
    testimony concerning the fiscal year 2007 budgets for the Natural
    Resources Conservation Service (NRCS), Animal Plant Health Inspection
    Service (APHIS), and Cooperative State Research, Education and
    Extension Services (CSREES). The Wildlife Society is the association of
    almost 8,000 professional wildlife biologists and managers dedicated to
    sound wildlife stewardship through science and education. The Wildlife
    Society is committed to strengthening all Federal programs that benefit
    wildlife and their habitats on agricultural and other private land.
    Natural Resources Conservation Service
        Wildlife Habitat Incentives Program (WHIP).--WHIP is a voluntary
    program that provides technical and financial support to farmers and
    ranchers to create high quality wildlife habitat. The Wildlife Society
    recommends funding WHIP at $85 million in fiscal year 2007, the full
    amount authorized by the 2002 Farm Bill.
        Wetland Reserve Program (WRP).--WRP is a valuable program designed
    to assist farmers and ranchers in protecting and restoring wetland
    habitat. The Wildlife Society appreciates the continued targeting of
    200,000 acres annually for enrollment in WRP. However, we recognize
    that if the authorized level of 250,000 acres is not enrolled every
    year, then enrollment must increase in future years to reach the
    authorized level of 2,275,000 acres. Full WRP enrollment is needed if
    the Administration intends to achieve the President's goal of no-net-
    loss of wetlands. The Wildlife Society supports an enrollment target of
    250,000 acres in fiscal year 2007.
    Animal and Plant Heath Inspection Service
        Wildlife Services.--Wildlife Services (WS), a unit of APHIS, is
    responsible for controlling wildlife damage to agriculture,
    aquaculture, forest, range, and other natural resources, for
    controlling wildlife-borne diseases, and for controlling wildlife at
    airports. Its activities are based on the principles of wildlife
    management and integrated damage management, and are carried out
    cooperatively with State fish and wildlife agencies.
        The Wildlife Society is concerned by the Administration's proposal
    to decrease funding in key activity areas for WS. The President's
    fiscal year 2007 proposed budget directs an increase of $9,750,000 to
    the WS Operations line item, while requesting $12,539,000 in deceases
    to offset the proposed increases, for a net decrease of $2,789,000. In
    essence, $9,750,000 is being redirected from existing activities to
    support airport safety and assistance ($3,000,000), the oral rabies
    vaccination program ($1,750,000), and wildlife disease monitoring and
    surveillance ($5,000,000). While we are pleased that these activities
    have gained presidential support, these new mandates, along with the
    net decrease to the WS operational budget, will effect a $12,539,000
    overall reduction to key activity areas. The Wildlife Society strongly
    recommends that Congress restore, as an add-on, the proposed decrease
    of $2,789,000 and provide increased funding of $9,750,000 for WS to
    continue local program operations, as well as to support the airport
    safety, rabies, and wildlife disease activities without redirecting
    funds from other needed activities.
        We understand the importance of safeguarding our Nation against
    highly pathogenic avian influenza and applaud the added fiscal
    resources to address this critical issue. The President's fiscal year
    2007 budget proposal redirects $3.2 million for avian influenza
    research as it relates to migratory birds. The Wildlife Society
    recommends that Congress provide additional money to adequately fund
    this and other important and associated research. Redirection of funds
    for this program would have serious and, in many cases, terminal
    effects on existing projects.
        This program is also short $2.2 million because of previously
    directed unfunded earmarks. These directed programs leave important
    programs under-funded, like the Jack Berryman Institute for Wildlife
    Damage Management at Utah and Mississippi State Universities; the
    Logan, Utah Predator Research Station; the newly-established Texas A&M
    University-Kingsville Research Field Station; important reproduction
    inhibition research; and the National Trap Standards Development and
    Testing Project.
        Veterinary Services.--The Wildlife Society is deeply troubled by
    the proposed cuts in several line-item budgets of USDA-APHIS-Veterinary
    Services (VS). The protection of wildlife, livestock, and humans from
    the threat of intentional and/or accidental introduction of disease
    pathogens is very real and increases daily. The occurrence of Highly
    Pathogenic Avian Influenza H5N1 in Asia, Europe, Africa, and the Middle
    East, the introduction of Monkey Pox in 2003, the Exotic Newcastle
    Disease event in California and other States in 2003-2004, and the
    national spread of West Nile Virus starting in 1999 all indicate that
    the introduction of diseases is rapidly increasing with no signs of
    abating. In time of concern about national security and the need to
    protect the citizens of the United States. from the introduction of
    exotic diseases, it is imperative that funding for the agencies
    responsible for detecting and prohibiting disease introductions be
    adequately funded. The reemergence of several diseases, such as bovine
    TB, Brucellosis, and others indicate that the efforts to control and
    eradicate these diseases are not complete and APHIS must continue to
    address the threats they pose to livestock, wildlife, and humans.
    Additionally, VS continues to identify some diseases, such as
    pseudorabies in feral pigs, as important economic drains on the economy
    while sister agencies in USDA-APHIS propose to cut research into feral
    hog control programs. The Wildlife Society strongly recommends that all
    branches of USDA-APHIS coordinate budgets and activities for livestock
    and wildlife disease surveillance, research, and control.
        The Wildlife Society is very concerned about the proposed $1.405
    million reduction in the Brucellosis Program budget. This appears ill-
    advised given the fact that three States--Texas, Wyoming, and Idaho--
    currently are without their brucellosis class-free status because of
    recent outbreaks in domestic cattle herds. Because of its presence in
    wild elk and bison, brucellosis in the Greater Yellowstone Area will be
    especially difficult to eliminate and will require more, not less,
    fiscal resources to accomplish. We recommend Congress restore
    brucellosis funding to $11 million in fiscal year 2007, and that USDA-
    APHIS-Veterinary Services continue to utilize the authorities and
    expertise of the Greater Yellowstone Interagency Brucellosis Committee
    to address domestic livestock interactions with wild elk and bison in
    the region.
        The Wildlife Society commends APHIS-Veterinary Services for
    providing funding to state wildlife management agencies for Chronic
    Wasting Disease (CWD) surveillance and management in free-ranging deer
    and elk. Additionally, The Wildlife Society strongly supports APHIS'
    efforts to eliminate CWD from captive cervids in order to eliminate the
    risk of spread of the disease from these animals to free-ranging deer
    and elk. The surveillance and monitoring efforts conducted by all 50
    States during 2004 and 2005 would not have been possible without this
    cooperative funding. Additionally, knowledge of the presence and
    prevalence of CWD has been enhanced by this program. Without continued
    funding, States will be unable to maintain the level of CWD
    surveillance necessary to track the disease. The National CWD Plan
    calls for additional management efforts to prevent the spread of CWD in
    the United States. The finding of CWD in three additional States in
    2005 (New York, West Virginia, and Kansas) emphasizes the need for
    continued surveillance and monitoring. Without the State cooperative
    agreement funding from Veterinary Services, this surveillance and
    monitoring would not be possible. With additional States finding CWD or
    bordering States with CWD, the amount of funding available will be
    spread thinner, while the need for this activity increases. The
    Wildlife Society strongly recommends Congress increase CWD funding to a
    total of $30 million in fiscal year 2007, with $20 million designated
    for cooperative agreements with the States for surveillance and
    management of CWD in free-ranging cervids.
        The Wildlife Society is encouraged by the additional funding
    proposed in fiscal year 2007 for both low pathogenic and high
    pathogenic avian influenza work. The potential for this disease to
    spread to the North American continent and severely impact wildlife,
    domestic poultry, and humans highlights the importance of continued
    surveillance and monitoring of all zoonotic diseases. The fiscal year
    2006 supplemental appropriation provided funding needed to begin to
    address the avian influenza issue, both in the United States and
    elsewhere. This effort must continue to ensure that America's citizens
    and resources are protected. The Wildlife Society strongly supports the
    proposed funding for low pathogenic avian influenza at $3.05 million
    and for high pathogenic avian influenza at $51.7 million.
    Cooperative State Research, Education, and Extension Service
        Renewable Resources Extension Act.--RREA provides an expanded,
    comprehensive extension program for forest and rangeland renewable
    resources. The RREA funds, which are apportioned to State Extension
    Services, effectively leverage cooperative partnerships at an average
    of four to one, with a focus on private landowners. The need for RREA
    educational programs is greater today than ever because of continuing
    fragmentation of ownership, urbanization, the diversity of landowners
    needing assistance and increasing societal concerns about land use and
    the impact on natural resources including soil, water, air, wildlife
    and other environmental factors. The Wildlife Society recommends that
    the Renewable Resources Extension Act be funded at $30 million as
    authorized in the 2002 Farm Bill.
        McIntire-Stennis.--The proposed budget for fiscal year 2007
    reflects a stable funding level for the McIntire-Stennis Cooperative
    Forestry program. An alternative approach to the research formula base
    programs would redirect 45 percent of both the Hatch Act and the
    McIntire-Stennis Cooperative Forestry program funds to nationally
    competitively awarded multi-state/multi-institutional projects. This
    represents a significant departure from prior years. These funds are
    essential to the future of resource management on non-industrial
    private forestlands, as forest products are produced while conserving
    natural resources, including fish and wildlife. As demand for forest
    products grow, private-land forests will increasingly be needed to
    supplement supplies, but trees suitable for harvest take decades to
    produce (versus the single year in which crops such as corn and
    soybeans can be harvested). In the absence of long-term and on-going
    research, such as provided through McIntire-Stennis, the Nation could
    easily become ill-suited to meet future forest-product needs.
    Replacement of McIntire-Stennis funding with competitive grants will
    leave long-term and stable forest research to chance. The Wildlife
    Society strongly believes that the reasons for continuing the McIntire-
    Stennis Cooperative Forestry program into the future are compelling and
    urges Congress to increase the fiscal year 2007 budget to $25 million,
    an amount more consistent with historic levels.
        National Research Initiative.--National Research Initiative
    Competitive Grants (NRI) are open to academic institutions, Federal
    agencies, and private organizations to fund research on improving
    agricultural practices, particularly production systems that are
    sustainable both environmentally and economically, and to develop
    methods for protecting natural resources and wildlife. Innovative grant
    programs such as NRI help broaden approaches to land management, such
    as integrating timber and wildlife management on private lands. The
    Wildlife Society supports the administration request of $247 million
    for National Research Initiative Competitive Grants.
        Thank you for considering the views of wildlife professionals. We
    look forward to working with you and your staff to ensure adequate
    funding for wildlife conservation.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Advanced Medical Technology Association, Prepared Statement of...   293
    American:
        Farm Bureau Federation, Prepared Statement of................   527
        Indian Higher Education Consortium, Prepared Statement of....   530
        Public Power Association, Prepared Statement of..............   534
        Society:
            For Microbiology, Prepared Statements of...............538, 540
            Of:
                Agronomy, Crop Science Society of America, and Soil
                  Science Society of America, Prepared Statement of..   534
                Civil Engineers, Prepared Statement of...............   536
                Plant Biologists (ASPB), Prepared Statement of.......   543
    Andrew, James M., Administrator, Rural Utilities Service,
      Department of Agriculture, Prepared Statement of...............   432

    Bennett, Senator Robert F., U.S. Senator From Utah:
        Opening Statements of...................................1, 133, 297
        Questions Submitted by.................................79, 173, 455
    Bond, Senator Christopher S., U.S. Senator From Missouri,
      Questions Submitted by.........................................    91
    Bosecker, R. Ronald, Administrator, National Agricultural
      Statistics Service, Department of Agriculture, Prepared
      Statement of...................................................    33
    Bost, Eric M., Under Secretary, Food, Nutrition, and Consumer
      Services, Department of Agriculture............................   297
        Prepared Statement of........................................   346
        Statement of.................................................   345
    Brownback, Senator Sam, U.S. Senator From Kansas, Questions
      Submitted by..................................................94, 259
    Burns, Senator Conrad, U.S. Senator From Montana, Questions
      Submitted by...................................................    92

    California Industry and Government Central California Ozone Study
      Coalition, Prepared Statement of...............................   544
    Christopherson, Charles, Chief Financial Officer, Office of the
      Financial Officer, Department of Agriculture, Prepared
      Statement of...................................................    36
    Coalition:
        On Funding Agricultural Research Missions (CoFARM), Prepared
          Statement of...............................................   546
        To Promote U.S. Agricultural Exports, Prepared Statement of..   547
    Cochran, Senator Thad, U.S. Senator From Mississippi, Prepared
      Statement of...................................................     4
    Collins, Keith, Chief Economist, Office of the Secretary,
      Department of Agriculture......................................1, 297
        Prepared Statement of........................................   301
        Statement of.................................................   299
    Colorado River Basin Salinity Control Forum, Prepared Statement
      of.............................................................   548
    Combs, David M., Chief Information Officer, Office of the Chief
      Information Center, Department of Agriculture, Prepared
      Statement of...................................................    42
    Conner, Charles, Deputy Secretary, Office of the Secretary,
      Department of Agriculture......................................     1
    Consortium of Social Science Associations (COSSA), Prepared
      Statement of...................................................   551
    Council on Food, Agricultural, & Resource Economics (C-FARE),
      Prepared Statement of..........................................   551

    Davis, Russell T., Administrator, Rural Housing Service,
      Department of Agriculture, Prepared Statement of...............   430
    Day, Lloyd C., Administrator, Agricultural Marketing Service,
      Department of Agriculture, Prepared Statement of...............   391
    Defenders of Wildlife, Prepared Statement of.....................   553
    DeHaven, Dr. W. Ron, Administrator, Animal and Plant Health
      Inspection Service, Department of Agriculture, Prepared
      Statement of...................................................   397
    Dorgan, Senator Byron L., U.S. Senator From North Dakota,
      Questions Submitted by.......................................116, 283
    Dorr, Thomas C., Under Secretary, Rural Development, Department
      of Agriculture, Prepared Statement of..........................   423
    Duchesne County Water Conservancy District, Prepared Statement of   556
    Durbin, Senator Richard J., U.S. Senator From Illinois:
        Prepared Statement of........................................     5
        Questions Submitted by................................120, 287, 521

    Florida State University, Prepared Statement of..................   557
    Food & Water Watch, Prepared Statement of........................   558

    Gleason, Jackie J., Acting Administrator, Rural Business-
      Cooperative Service, Department of Agriculture, Prepared
      Statement of...................................................   426
    Gould, Eldon, Administrator, Risk Management Agency, Department
      of Agriculture, Prepared Statement of..........................   332

    Harkin, Senator Tom, U.S. Senator From Iowa, Questions Submitted
      by......................................................109, 277, 509
    Hefferan, Dr. Colien, Administrator, Cooperative State Research,
      Education, and Extension Service, Department of Agriculture,
      Prepared Statement of..........................................   442
    Hentges, Eric J., Executive Director, Center for Nutrition Policy
      and Promotion, Department of Agriculture, Prepared Statement of   352
    Heuer, Kathleen, Chief Financial Officer and Associate
      Commissioner for Management, Food and Drug Administration,
      Department of Health and Human Services........................   133

    Interregional Research Project No. 4, Prepared Statement of......   562

    Jen, Dr. Joseph J., Under Secretary, Research, Education, and
      Economics, Department of Agriculture, Prepared Statement of....   434
    Johanns, Hon. Mike, Secretary, Office of the Secretary,
      Department of Agriculture......................................     1
        Prepared Statement of........................................    11
        Statement of.................................................     6
    Johnson, Senator Tim, U.S. Senator From South Dakota, Questions
      Submitted by...................................................   123

    Kelly, James Michael, Deputy General Counsel, Office of the
      General Counsel, Department of Agriculture, Prepared Statement
      of.............................................................    47
    Klurfeld, Roger J., National Appeals Division, Department of
      Agriculture, Prepared Statement of.............................    33
    Knight, Bruce I., Chief, Natural Resources Conservation Service,
      Department of Agriculture, Prepared Statement of...............   339
    Kniplings, Dr. Edward B., Administrator, Agricultural Research
      Service, Department of Agriculture, Prepared Statement of......   438
    Kohl, Senator Herb, U.S. Senator From Wisconsin, Questions
      Submitted by.................................................103, 262

    Lambert, Charles, Acting Under Secretary, Marketing and
      Regulatory Programs, Department of Agriculture.................   297
        Prepared Statement of........................................   384
        Statement of.................................................   383
    Lasseter, Teresa C., Administrator, Farm Service Agency,
      Department of Agriculture, Prepared Statement of...............   321
    Link, James E., Administrator, Grain Inspection, Packers and
      Stockyards Administration, Department of Agriculture, Prepared
      Statement of...................................................   405

    Masters, Dr. Barbara J., Administrator, Food Safety and
      Inspection Service, Department of Agriculture, Prepared
      Statement of...................................................   373
    McConnell, Senator Mitch, U.S. Senator From Kentucky, Questions
      Submitted by...................................................   259
    Metropolitan Water District of Southern California, Prepared
      Statement of...................................................   565
    Midwest Advanced Food Manufacturing Alliance (MAFMA), Prepared
      Statement of...................................................   567
    Moore, Terri Teuber, Director of Communications, Office of
      Communications, Department of Agriculture, Prepared Statement
      of.............................................................    40

    National:
        Association of State Foresters, Prepared Statements of.....567, 625
        Coalition for Food and Agricultural Research, Prepared
          Statement of...............................................   546
        Commodity Supplemental Food Program Association, Prepared
          Statement of...............................................   575
        Cooperative Business Association, Prepared Statement of......   572
        Fish and Wildlife Foundation, Prepared Statement of..........   583
        Organic Coalition, Prepared Statement of.....................   586
        Potato Council, Prepared Statement of........................   590
        Rural Telecom Association, Prepared Statement of.............   592
        Turfgrass Evaluation Program, Prepared Statement of..........   581
        WIC Association, Prepared Statement of.......................   594
    New Mexico Interstate Stream Commission, Prepared Statement of...   600

    Offutt, Susan E., Administrator, Economic Research Service,
      Department of Agriculture, Prepared Statement of...............   446
    Organic Farming Research Foundation (OFRF), Prepared Statement of   604
    Organization for the Promotion and Advancement of Small
      Telecommunications Companies, Prepared Statement of............   608

    Pellett, Nancy C., Chairman and Chief Executive Officer, Farm
      Credit Administration, Department of Agriculture, Prepared
      Statement of...................................................    26
    Penn, J.B., Under Secretary, Farm and Foreign Agricultural
      Services, Department of Agriculture............................   297
        Prepared Statement of........................................   315
        Statement of.................................................   313
    Pickle Packers International, Inc., Prepared Statement of........   609

    Raymond, Richard, M.D., Under Secretary, Food Safety, Department
      of Agriculture.................................................   297
        Prepared Statement of........................................   362
        Statement of.................................................   359
    Red River Valley Association, Prepared Statement of..............   615
    Rey, Mark, Under Secretary, Natural Resources and Environment,
      Department of Agriculture......................................   297
        Prepared Statement of........................................   337
        Statement of.................................................   336
    Romero, Annabelle, Deputy Assistant Secretary for Civil Rights,
      Office of Assistant Secretary for Civil Rights, Department of
      Agriculture, Prepared Statement of.............................    19

    Salazar, Roberto, Administrator, Food and Nutrition Service,
      Department of Agriculture, Prepared Statement of...............   354
    Society:
        For:
            Animal Protection Legislation, Prepared Statement of.....   619
            Women's Health Research and Women's Health Research
              Coalition, Prepared Statement of.......................   622
        Of American Foresters, Prepared Statement of.................   625
    Specter, Senator Arlen, U.S. Senator From Pennsylvania, Questions
      Submitted by..................................................89, 489
    Steele, W. Scott, Budget Officer, Office of the Secretary,
      Department of Agriculture......................................     1
    Sundlof, Steve, Director, Center for Veterinary Medicine, Food
      and Drug Administration, Department of Health and Human
      Services.......................................................   133

    Terpstra, A. Ellen, Administrator, Foreign Agricultural Service,
      Department of Agriculture, Prepared Statement of...............   327
    The Humane Society, Prepared Statement of........................   559
    The National Drinking Water Clearinghouse, Prepared Statement of.   640
    The Nature Conservancy, Prepared Statements of.................597, 625
    The Wildlife Society, Prepared Statement of......................   642
    Thomas, Peter J., Deputy Assistant Secretary, Department of
      Administration, Department of Agriculture, Prepared Statement
      of.............................................................    20
    Turman, Richard, Deputy Assistant Secretary for Budget,
      Technology, and Finance, Food and Drug Administration,
      Department of Health and Human Services........................   133

    U.S. Apple Association, Prepared Statement of....................   627
    University of Southern Mississippi and the Mississippi Polymer
      Institute, Prepared Statement of...............................   633
    Upper Mississippi River Basin Association, Prepared Statement of.   636
    US Marine Shrimp Farming Consortium, Prepared Statement of.......   601
    USA Rice Federation, Prepared Statement of.......................   630

    von Eschenbach, Hon. Andrew C., Acting Commissioner, Food and
      Drug Administration, Department of Health and Human Services...   133
        Prepared Statement of........................................   136
        Statement of.................................................   134

    West Virginia University, Prepared Statement of..................   638
    Wyoming State Engineer's Office, Prepared Statement of...........   626

                                 SUBJECT INDEX

                                  ----------

                           DEPARTMENT OF AGRICULTURE

                                                                       Page
    Accelerating Conservation Implementation.........................   339
    Additional Committee Questions...................................    78
    Administrative Support...........................................   326
    Agricultural
        And Rural Development Information System.....................   447
        Estimates....................................................    33
        Marketing Service............................................   387
        Trade........................................................   511
    Agriculture Buildings and Facilities.............................    21
    Air and Water Quality Issues.....................................   419
    Alternative Fuels..............................................108, 415
    AMS:
        Programs.....................................................   391
        2007 Budget Request..........................................   388
    Animal and Plant Health Inspection Service.......................   385
        Blackbird Control............................................   118
        2007 Budget Request..........................................   386
    Animal:
        Health and Disease Research..................................    99
        Identification..............................................79, 467
    Avian:
        Flu..........................................................   475
        Influenza....................................70, 114, 411, 469, 496
    Beef:
        Exports to Japan.............................................64, 75
        Imports and BSE..............................................   119
    Beginning Farmers and Ranchers...................................    94
    Biomass Research and Development Grants..........................   430
    Bovine Spongiform Encephalopathy.................................   412
    BSE--Japanese Exports..........................................106, 107
    Budget...........................................................   446
        Construction Authority.......................................   464
        Request....................................................323, 330
            Summary..................................................   397
    Building Strong Accountability Measures..........................   338
    Business and Industry Guaranteed Loan Program....................   427
    Capital Security Cost Sharing Program............................   455
    Census of Agriculture............................................    34
    Central Administration Funding...................................    71
    Child Nutrition Programs.......................................350, 356
    Civil Rights.....................................................    60
    Classical Chinese Garden.........................................    80
    Codex............................................................   464
        And Trade Capacity Building..................................   456
    Commodity:
        Credit Corporation...........................................   323
        Program Elimination..........................................   459
        Supplemental Food Program...........66, 90, 104, 131, 351, 358, 416
    Common Computing Environment.....................................   110
    Community Programs...............................................   432
    Condition of the Farm Credit System..............................    31
    Conservation.....................................................    16
        Operations...................................................   341
        Security Program.............................................   343
            Customer Service Results Survey..........................   338
    Consumer Data and Information System.............................   447
    Continuity of Operations Planning................................    22
    Cooperative:
        Research Agreements..........................................   428
        Services.....................................................   500
    Corporate Activities.............................................    30
    Country of Origin Labeling.....................................125, 392
    County Office Restructuring......................................   489
    Crop Insurance..................................................14, 111
    Cross Cutting Trade Negotiations and Biotechnology Resources.....    86
    CSFP.............................................................   492
        Caseload.....................................................   521
    CSREES Renewable Energy Research.................................   479
    Current Activities and Issues....................................    47
    Customers, Partners, and Stakeholders............................   454
    Dairy:
        Assistance...................................................    89
        Policy.......................................................    65
    Department Management............................................    18
    Departmental Administration Direct Appropriation.................    21
    Dietary Guidelines for Americans Establish Federal Nutrition
      Policy.........................................................   352
    Disaster Assistance............................................116, 120
    Discretionary Funding............................................   341
    eGovernment Solutions............................................   409
    Electric Program.................................................   433
    Electronic Government............................................    44
    Emergency Response to Hurricane Katrina..........................   344
    Emphasis on Energy...............................................   340
    Energy...........................................................    13
        Costs........................................................    65
    Ensuring Low Income Persons Have Access to Food..................   347
    Enterprise:
        Architecture.................................................    46
        Human Resources System.......................................    23
    Environmental Quality Incentives Program.........................   343
    EPA Regulations..................................................    92
    ERS Contributions to Mission Area Goals..........................   448
    Examination Programs for FCS Banks and Associations..............    27
    Excess Personal Property Program.................................    25
    Export Programs..................................................   330
    Faith-based and Community Organizations Outreach.................   355
    Farm and Ranch Lands Protection Program..........................   344
    Farm:
        Bill Authorized Programs.....................................   343
        Commodity Program Spending...................................    13
        Loan Programs.........................................316, 325, 511
        Program:
            Delivery.................................................    14
            Funding..................................................   102
        Service Agency...............................................   315
            Office Realignment.......................................    80
        Subsidies....................................................   419
    Farmers' Market Nutrition Program................................   494
    Federal:
        Agricultural Mortgage Corporation............................    32
        Biobased Products Procurement Preference Program.............    24
        Grain Inspection Service.....................................   407
        Seed Act Program.............................................   395
        State Marketing Improvement Program..........................   395
    Financial:
        Assistance Programs Allocation Formulas......................   522
        Management System............................................    84
    Fiscal Year:.....................................................
        2005 Accomplishments.........................................    27
        2005 Highlights..............................................   397
        2007:
            Budget...................................................    33
            Key Outcomes.............................................    19
            Objectives...............................................    19
    515 Housing Program.............................................82, 472
        Request..........................20, 32, 41, 62, 371, 394, 402, 424
    Food:
        Aid..........................................................   114
        And:
            Agriculture Defense Initiative...........................    12
            Nutrition Division.......................................    48
        Defense--Food Emergency Response Network.....................   462
        Protection Program...........................................   395
        Safety......................................................15, 115
            Budget Trends............................................   104
            Inspectors...............................................   499
        Stamp Program..............................................349, 356
        Participation................................................   459
    Foreign:
        Agricultural Service.........................................   318
            Office Closures..........................................   123
            Staffing Levels..........................................    74
        Service Performance Pay......................................    86
    Forest Service Funding...........................................    83
    Fruit and Vegetable Pilot Program................................   495
    Funding Sources..................................................   385
    General Law Division.............................................    58
    Government Ethics Program........................................    23
    Grain:
        Exports Forecasting..........................................    77
        Inspection, Packers and Stockyards Administration.....120, 389, 520
        OIG Audit....................................................   105
        2007 Budget Request..........................................   390
    Grants to Assist Minority Producers..............................   428
    Grassland Reserve Program........................................   343
    Grazing Land Conservation Initiative.............................   418
    Hatch Act........................................................    97
    Hazardous Materials Management...................................    26
    Helping People Help the Land.....................................   340
    Horse Slaughter..................................................    94
        User Fees....................................................   103
    Human Capital Management........................................23, 355
        Strategic Plan...............................................   340
    Humane:
        Activities Tracking System...................................   499
        Slaughter....................................................   465
    Hurricane Assistance.............................................   471
    Impact of Texas Eligibility System on Vulnerable Groups..........   517
    Implementation of Texas Integrated Eligibility Contract..........   516
    Imports:
        From Canada..................................................   124
        Of Japanese Beef.............................................   123
    Information Security.............................................    44
    Intermediary Relending Program...................................   428
    International Affairs and Commodity Programs Division............    47
    IT Management....................................................    46
    Land Grant University Funding....................................    95
    Legislation Division.............................................    60
    Legislative Proposals in the Budget..............................    79
    Litigation Division..............................................    59
    Livestock Protection Program.....................................    90
    Major Activities:
        And Goals....................................................   328
        Of the National Agricultural Statistics Service (NASS).......    34
    Managing Prudently and Efficiently...............................   348
    Mandatory Commodity Programs.....................................    83
    Market:
        Access Program.............................................510, 524
        Development..................................................   393
        News.........................................................   392
    Marketing:
        Agreements and Orders User Fees..............................   397
        Regulatory and Food Safety Programs..........................    49
        Services.....................................................   392
    McIntire-Stennis Forestry Grants.................................    98
    Meat and Poultry Import Requirements.............................   417
    Microbiological Data Program Termination.........................   396
    Milk Income Loss Contract........................................    67
    Minority Outreach................................................   460
        Mission................................................33, 391, 446
        Of the Farm Credit Administration............................    27
    Mississippi River Transportation Infrastructure..................    76
    MRP Initiatives..................................................   385
    Multi-Family Housing Programs....................................   430
    Mushroom Spawn...................................................   490
    MyPyramid Serves as Premier Teaching Tool........................   353
    National:
        Agro-Forestry Center.........................................    91
        Animal Identification System...........................94, 102, 518
        Finance Center:
            Data Center Operations...................................    82
            Status...................................................    81
        Institute for Food and Agriculture...........................    91
        Organic Program..............................................   394
        Veterinary Medical Services Act........................83, 117, 495
    Natural Resources................................................    55
    New:
        Strategic Plan...............................................   340
        User Fees....................................................   396
        Uses Expo for Biobased Products..............................    94
    Non-Ambulatory Disabled Cattle...................................   107
    NSA Grants.......................................................   491
    Nutrition:
        Assistance...................................................    18
        Programs Administration....................................351, 359
    Office of:
        Civil Rights.................................................    88
        Program Funding..............................................    89
        The Under Secretary for Marketing and Regulatory Programs...80, 469
    Organic:
        Agriculture..................................................   508
        Research...................................................473, 507
    Organization.....................................................   405
    Other Appropriated Programs......................................   325
    Packers and Stockyards Program...................................   405
    Partnerships.....................................................   393
    Pathogenic Avian Influenza (AI)..................................    12
    Personnel and Information Security...............................    22
    Pest Management Alternatives.....................................   489
    Pesticides.......................................................    93
    Physical Security................................................    21
    Planned use of Pandemic Influenza Funds..........................    71
    Premise Identification...........................................   468
    President's Fiscal Year 2007 Budget..............................   337
    Procurement Policy...............................................    24
    Program Highlights...............................................   430
    Promoting Healthful Diets and Active Lifestyles..................   348
    Proposed:
        Increase for Buildings and Facilities........................   442
        Operating Increases..........................................   442
        Program:
            Decreases................................................   442
            Increases and Redirections...............................   439
        Reprogrammings...............................................   442
    Protecting the Homeland..........................................   410
    Provincial Reconstruction Team...................................    85
    Public:
        Law 480 Titles I and II......................................   413
        Opinion on Agricultural Policy...............................   421
    Rapid Watershed Assessments......................................   458
    Real Property Asset Management...................................    25
        Reducing the Federal Deficit.................................    66
    REE Fiscal Year 2007 Initiatives.................................   437
    Regulatory Activity..............................................    29
    Renewable Energy.................................................64, 68
        Fuels........................................................    93
        Loan Guarantee Program.......................................   429
        Research.....................................................   477
    Rental Assistance................................................   505
    Research.........................................................    17
        Budget.......................................................   116
    Resource Conservation and Development Program........115, 125, 342, 457
    Results Achieved Recently........................................    37
    Resuming Beef Exports to Japan...................................    92
    Review of Stakeholder Response to the Fiscal Year 2006 Budget as
      Background for Cooperative State Research, Education, and
      Extension Service (CSREES) Fiscal Year 2007 Budget Proposal....    96
    Risk Management Agency.........................................317, 509
        Crop Insurance...............................................   455
    Rural:
        Business:
            And Cooperative Programs.................................   426
            Enterprise Grant Program/Rural Business Opportunity Grant
              Program................................................   429
        Cooperative Development Grant Program........................   428
        Development..................................................16, 53
            Grants...................................................   516
        Economic Development Loan and Grant Programs.................   429
        Housing and Community Facilities Programs....................   425
        Utilities Programs...........................................   424
        Voucher Program..............................................   472
    Section:
        32...........................................................   393
        515..........................................................   503
        9002 Biobased Products.......................................   516
        9006 of the 2002 Farm Bill...................................   513
    Seniors' Farmers Market Nutrition Program (SFMNP)................   358
    Sericea Lespedeza................................................   103
    Service Center Modernization Initiative--(SCMI)..................    43
    Simplified Summer Food Program.................................491, 521
    Single Family Housing Programs...................................   431
    Small:
        And Disadvantaged Business Utilization.......................    25
        Farm/Direct Marketing........................................   106
    Special Supplemental:
        Nutrition Program for Women, Infants and Children (WIC)......   357
        Program for Women, Infants, and Children (WIC)--Food Package.   460
            Legislative Proposal...................................459, 491
    Specialty Markets................................................   414
    Standardization..................................................   495
    Standards User Fees..............................................   396
    State Meat Inspection Program....................................   119
    Strategic Planning:
        And Performance Plans........................................    30
        For the Future...............................................   339
    Streamlining for Conservation Gains..............................   338
    Strengthening America's Communities Initiative...................   503
    Summary of Personnel Supported With:
        Animal Health and Disease Research Program Funds in Fiscal
          Year 2004..................................................   101
        Hatch Act Funds in Fiscal Year 2004..........................    98
        McIntire-Stennis Funds.......................................    99
    Telecommunications Program.......................................   433
    The Challenge of Improper Payments...............................   355
    The Emergency Food Assistance Program (TEFAP)..................351, 358
    The USDA Loan Program............................................   502
    Trade...........................................................14, 113
    Transportation...................................................   393
    Trends Continue to Show Need for Revised Nutrition Guidance and
      Educational Tools..............................................   352
    2007:
        Budget.......................................................    12
        Farm Bill....................................................   118
        Request......................................................   410
    USDA:
        Fiscal year 2007 Information Technology Budget Summary.......    42
        Service Centers..............................................   109
        Share of Budget Cuts.........................................    79
    Use of Biofuels..................................................    24
    User Fees........................................................   411
    Value-Added Producer Grants......................................   117
        Program......................................................   427
    Vision...........................................................   424
    Vouchers.........................................................   505
    Water and:
        Environmental Programs.......................................   434
        Sewer Grants.................................................   506
        Wastewater...................................................   473
    Watershed:
        And Flood Prevention Operations..............................   342
        Project Backlog..............................................   458
        Rehabilitation...............................................   342
        Surveys and Planning.........................................   342
    Weather-related Disaster Assistance..............................    73
    Web Based:
        Soil Survey..................................................   341
        Supply Chain Management System (WBSCM).......................   396
    Wetlands Reserve Program.........................................   343
    WIC..............................................................   350
        Food Package.................................................   521
        Legislative Proposal.........................................    79
        Management Information System................................   492
        Moratorium...................................................   493
        Reauthorization Legislative Proposal.........................   494
    Wildlife:
        Habitat Incentives Program...................................   344
        Services.....................................................   495
    World Trade Organization.......................................420, 511

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

    Additional Committee Questions...................................   173
    Advisory Committees..............................................   289
    Avian:
        Flu..........................................................   265
        Influenza....................................................   159
    Bioterrorism.....................................................   278
    Bovine Spongiform Encephalopathy...............................161, 168
        Feed Ban.....................................................   247
        Rule and Harmonization With Canada...........................   164
    Clinical Trials..................................................   259
    Color Certification..............................................   256
    Critical Path:
        Initiative...................................................   221
        To Personalized Medicine.....................................   158
    Dietary:
        Health Supplements Education Act.............................   169
        Supplements..................................................   287
    Drug:
        Advertising..................................................   273
        Efficacy Study Implementation (DESI) Monograph System........   255
        Labeling.....................................................   292
        Safety.......................................................   251
            Oversight Board..........................................   166
    Early Food Safety Evaluation.....................................   280
    Existing Programs................................................   260
    FDA Detailees....................................................   244
    Field:
        Inspectors...................................................   166
        Staff........................................................   262
    Food:
        And Nutrition FTE..........................................169, 169
        Contact Substances...........................................   257
        Defense....................................................254, 274
        Imports......................................................   280
        Recall.......................................................   281
    FoodNet..........................................................   283
    Gelatin Capsules for Dietary Supplements.........................   172
    Generic Drug:
        Approval.....................................................   270
        Backlog......................................................   156
        Drugs.................................................155, 159, 279
        User Fees/Citizen Petitions..................................   269
    Health Certificates for Gelatin Capsules.........................   173
    Human Tissue Safety..............................................   253
    Import Inspection................................................   251
    Imported Prescription Drugs......................................   283
    Medical Device User:
        Fee and Modernization Act (MDUFMA)...........................   173
        Fees.......................................................164, 220
    Medical Imaging Drugs............................................   256
    Methylmercury..................................................282, 290
    Microbiological Data Program.....................................   277
    National Institute for Pharmaceutical Technology and Education...   259
    New Drug Applications............................................   258
    Openness of Drug Safety Oversight Board..........................   167
    Pandemic Influenza.............................................154, 247
    Personnel Manual.................................................   245
    Post-Marketing Studies...........................................   276
    Postmarket Safety Issues.........................................   220
    Poultry Litter and BSE Transmission..............................   162
    Proposed User Fees...............................................   253
    Reuse of Single-Use Devices......................................   243
    Strategic Redeployment.........................................144, 172
    Sunscreen........................................................   278
        Monographs...................................................   258
    Unified Financial Management System..............................   170
    Uniform Food Safety..............................................   276
    Women's Health...................................................   288