[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


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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 0C.
    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

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