[Senate Hearing 109-149]
[From the U.S. Government Publishing Office]
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2006
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WEDNESDAY, APRIL 13, 2005
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 12:30 p.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
MARK REY, UNDER SECRETARY FOR NATURAL RESOURCES AND ENVIRONMENT
GILBERT G. GONZALEZ, ACTING UNDER SECRETARY FOR RURAL
DEVELOPMENT
JOSEPH J. JEN, UNDER SECRETARY FOR RESEARCH, EDUCATION, AND
ECONOMICS
J.B. PENN, UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURAL
SERVICES
DENNIS KAPLAN, OFFICE OF BUDGET AND PROGRAM ANALYSIS
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. The subcommittee will come to order.
We want to thank you all for your accommodating us at this
somewhat unusual hour. We were scheduled to go at 2:00 p.m.,
and we have had to move that because of Senate activity. And I
understand that there is now a vote scheduled for 1:45 p.m.. So
we will try to move through this in expeditious fashion.
I am glad to see the curtain is open. That means you are
not important enough to be on television, but you brought your
own crowd with you. So it is well attended here today, and we
appreciate your being here.
This is our second hearing on the budget request. We heard
from the Secretary yesterday. And today's witnesses are Dr.
Keith Collins, the USDA's chief economist; Dr. J.B. Penn, who
is the Under Secretary for Farm and Foreign Agricultural
Services; Mark Rey, Under Secretary for Natural Resources and
Environment; Gilbert Gonzalez, Acting Under Secretary for Rural
Development; and Dr. Joseph Jen, Under Secretary for Research,
Education, and Economics, and accompanied by Mr. Dennis Kaplan
of the Office of Budget and Program Analysis. We appreciate
your service and appreciate your being here today.
The witnesses today represent production agriculture,
trade, conservation, rural development, and the research and
education, all of which support USDA programs, and we
appreciate your being here.
As I said, we are going to have a supplemental on the floor
today. So I would suggest that Dr. Collins perhaps make some
opening comments from his perspective as the chief economist.
And then if the rest of you are willing to hold yourself in
readiness, we go to questions.
And we will do our best to hear from all of you as we go
through the question situation. If that would be acceptable, we
will do that in the interest of time.
Senator Kohl.
Senator Kohl. I thank you very much, Senator Bennett.
And gentlemen, it is great to have you with us today. I
also will withhold an opening statement in the interest of
brevity and getting to your testimony and questions, and we
appreciate your coming here very much.
Thank you, Senator Bennett.
Senator Bennett. All right. Dr. Collins, you have the
floor.
STATEMENT OF KEITH COLLINS
Mr. Collins. Thank you very much, Chairman Bennett and Mr.
Kohl. For all of us here today, let me say thank you for
inviting the Department up here to discuss our 2006 budget
proposals.
I am going to start with a very brief overview of the
general economic situation in agriculture, and I think that
will help provide some context for the discussions that you
will have with our under secretaries this afternoon.
To begin with, I would say that strong domestic and foreign
economic growth are providing a foundation for U.S. farm and
rural economies to continue the improved performances that we
have seen over the past year and the year before. Markets for
livestock and livestock products, which account for about half
of the farm economy, continue to remain very strong despite the
closure of our beef in Asian markets.
During the first quarter of 2005, in fact, fed cattle
prices averaged $89 a hundredweight, which was the second-
highest quarterly price for cattle ever. With meat protein
demand still firm, with cattle slaughter down, and live animal
supplies expected to continue tight, I think average cattle
prices are likely to remain historically strong for some time
to come.
Likewise, hog, broiler, and milk returns all remain
favorable as supply expansion thus far has been restrained,
even in the face of growing demand.
Turning to major crops, stocks are up, and farm prices are
down following last year's record production levels. However,
farm cash receipts are being supported by the fact that farmers
have more volume to market this year based on last year's
record crops.
If you look at 2005, we believe U.S. crop production will
decline. USDA's prospective plantings report, which was
released a couple of weeks ago, suggests lower acreage for
wheat and for soybeans, about the same acreage for rice and
cotton, and a modest increase for corn. If we have trend yields
in 2005, production levels would decline for all major crops,
with declines ranging from 8 to 9 percent for soybeans to 20
percent for cotton.
But even with such reduced production, our crop supplies
would still be ample, and I believe little price appreciation
seems likely, except for cotton.
Globally, export competition will remain intense this year.
Wheat from the European Union and Black Sea region, corn from
Argentina and China, soybeans from Brazil and Argentina, as
well as oil and demand-driven increases in shipping costs will
pressure U.S. prices despite the competitive benefits from the
weaker dollar.
For fiscal year 2005, U.S. agricultural exports are
forecast at $59 billion, down from last year's record, but the
second highest since 1996. And that is despite the continuing
loss of beef export value.
With lower prices for program crops, Government payments
are forecast to be a record $24 billion in 2005, and that will
offset the decline in cash receipts for major crops. Under
Secretaries Penn and Rey can provide more information this
afternoon on how our farm and conservation programs are
assisting the farm economy.
Higher prices for fuel, fertilizer, and chemicals will
likely push up production expenses in 2005. But those will be
offset by lower expenses for farm origin inputs, such as feed.
That should keep overall production expenses about the same as
last year. And with gross income about the same as last year,
that means that net cash farm income should likewise be about
the same as last year's record high level.
The combination of the growing overall economy, strong
rural job growth, and record net cash income is expected to
boost average farm household income. And Under Secretary
Gonzalez today can relate how our rural development programs
are helping the performance of the rural economy.
With another sound income year in prospect, farm credit
conditions are expected to remain favorable. Farm input sales
should be good, and farm land values will likely rise again.
Thus, cash flow and balance sheet prospects indicate a pretty
solid footing for the farm economy in 2005.
While many farms will benefit from these income and balance
sheet trends, high cost/lower margin farms or those adversely
affected by weather may not see these benefits. And I think
that is why it is so important, as Dr. Jen can explain, to have
research programs that can help farms overcome barriers to
profitability.
PREPARED STATEMENTS
Finally, let me say consumers will continue to have
abundant, affordable food. Much smaller retail price increases
are expected in 2005 for meat and for vegetable oils and for
dairy products. That suggests retail food prices may rise
between 2.5 and 3 percent in 2005, compared with about 3.4
percent in 2004.
That completes my statement, Mr. Chairman. We would be
delighted to have your questions.
Senator Bennett. Thank you very much. And for the record,
all the statements submitted by all of the witnesses will be
included in the record.
[The statements follow:]
Prepared Statement of Keith Collins
Mr. Chairman and members of the Committee, I appreciate the
opportunity to appear at this hearing to discuss the current situation
and outlook for U.S. agriculture. The recovery in the agricultural
economy that began in 2003 is expected to continue in 2005. Net cash
farm income set back-to-back record highs in 2003 and 2004. This record
performance has led to general improvement in farm balance sheets. An
important factor supporting the strong financial performance of the
farm economy is the growth in U.S. agricultural exports. From fiscal
year 2000 to fiscal year 2004, the value of U.S. agricultural exports
rose by nearly $12 billion.
Livestock prices continue to remain strong even though Japan and
several other countries have failed to open their markets to U.S. beef
following the discovery of a cow with Bovine Spongiform Encephalopathy
(BSE) in December 2003. For most major crops, farm prices are down
following last year's record production, but record government payments
are forecast to about offset the decline in crop cash receipts. Higher
prices for energy-related inputs will likely push up production
expenses for fuel and fertilizer in 2005. However, lower production
expenses for farm-origin inputs should keep overall farm production
expenses about unchanged from last year. With gross income and total
production expenses close to last year's levels, net cash farm income
in 2005 is expected to be near last year's record. Cash flow and
balance prospects indicate that the farm economy will remain on a solid
footing in 2005.
Outlook for United States and World Economies and the Implications for
Agriculture
After several years of a weak and variable global economy that
constrained the demand for U.S. agricultural products, the United
States and world economies had back-to-back years of strong growth in
2003 and 2004. Both the United States and world economies are poised
for strong growth in the year ahead, which will bolster the demand for
U.S. agricultural products here and abroad.
In 2004, the U.S. economy grew 4.4 percent, up from 3 percent in
2003. Expansionary fiscal policy resulting from the budget deficit and
the Jobs and Growth Act of 2001; the low interest rates; rising
consumer income and spending; and increasing business fixed investment
all boosted growth. In 2005, rising interest rates and energy prices
are expected to slow the rate of economic growth in the United States
to a more sustainable 3.7 percent.
The improving domestic demand base may be seen in the demand for
food, which also drives demand for animal feed. Personal consumption
expenditures on food rose a very strong 4.8 percent in 2004, in real
terms. That compares with average growth of 3.8 percent in 2003 and
less than 2 percent during the economic slowdown in 2001 and 2002.
In addition to rising food demand, domestic industrial demand for
farm products is also increasing. As an example, ethanol production is
setting new record highs almost every month. In 2005, U.S. ethanol
production from corn will approach 4 billion gallons and is expected to
account for over 13 percent of corn use.
Foreign economies had a very nice recovery in 2004, growing 3.7
percent after a sustained period of substantially lower average growth.
The fitful performance of foreign economic growth had been a factor in
the slow growth in U.S. farm exports since the mid-1990s. For 2005,
lagging performance in Europe and Japan and slower growth in former
Soviet countries and a number of developing economies are expected to
reduce foreign economic growth to 3 percent. China, a $6 billion market
for U.S. farm products in fiscal year 2004, is pegged to grow at 8.7
percent.
By December 2004, the agricultural trade-weighted dollar had
depreciated almost 18 percent from its peak in February 2002. Over the
same period, the depreciation compared with competitor agricultural
exports was over 36 percent. While the dollar has already depreciated
considerably, it may depreciate further in 2005 due to the historically
large current account deficit. The depreciation in the dollar and
robust foreign economic growth helped push U.S. agricultural exports to
a record $62.3 billion in fiscal year 2004.
U.S. agricultural exports are forecast to decline to $59 billion in
fiscal year 2005. The primary factors leading to the decline in exports
include record global grain, soybean and cotton supplies, increased
foreign competition and lower prices. This export forecast reflects, in
part, the assumption that the markets that are now closed to U.S. beef
and poultry exports because of BSE and Avian Influenza will remain
closed in 2005. This is not a forecast of what foreign countries will
do. It simply reflects our standard forecasting procedure to assume the
current policies of foreign countries remain in place until they are
changed.
U.S. meat exports experienced explosive growth in the 1990s but
have faced slower growth over the past few years due to animal diseases
and policy-driven import limitations in some countries. The United
States finding of BSE has resulted in the loss of over 80 percent of
U.S. export markets for beef and related products in 2004. U.S. poultry
exports were flat, as outbreaks of Avian Influenza in several States
resulted in a number of countries placing restrictions on poultry
imports from the United States. But, U.S. pork exports rose by 27
percent last year, as trade restrictions on U.S. beef and poultry
created additional export opportunities for pork. In 2005, poultry
exports are forecast to increase by 5 percent and pork exports could be
up 16 percent.. Beef exports are forecast to increase by 37 percent in
2005, reflecting the resumption of trade with Mexico. Despite the
projected increase, U.S. beef exports are projected to be only one-
quarter of pre-BSE levels.
Outlook for Major Crops
For major crops, production is expected to outpace demand for the
first time in several years leading to a modest rebound in global
stocks and some decline in market prices for the 2004/2005 crops.
However, global grain stocks as a percent of total use remain low by
historical standards. In addition, foreign economic growth appears
sound. With relatively low world stocks, the potential for reduced crop
production in 2005 due to a return to trend yields and economic growth
continuing to support the demand for agricultural products, crop prices
could move higher over the coming months.
In 2004/2005, total supplies are generally exceeding total use of
major crops, leading to higher world and United States carryover. World
wheat stocks at the end of the 2004/2005 marketing year are expected to
increase 12 percent from a year earlier. World coarse grain stocks are
forecast to be up 27 percent, world oilseed stocks are forecast to
increase 40 percent, and world cotton stocks are forecast to increase
34 percent. These increases would result in global carryover stocks at
their highest level in 2 years for wheat and in 3 years for coarse
grains and for cotton. Reflecting the strong expansion in soybean
production in South America in recent years, the forecast global
oilseed stocks would be a record high at the end of 2004/2005.
For wheat, plantings in 2004 declined by 2.4 million acres to 59.7
million acres. This decline and lower yields reduced U.S. wheat
production from 2.35 billion bushels in 2003 to 2.16 billion in 2004.
U.S. wheat carryover is forecast to decrease by only 5 million bushels,
as total use is forecast to decline by 119 million. Larger foreign
wheat production in several traditional importing and major competitor
countries is forecast to lower U.S. wheat exports by 109 million
bushels in 2004/2005. For the current marketing year, the farm price of
wheat is forecast to average $3.35-$3.45 per bushel compared with last
season's $3.40.
For 2005/2006, wheat planted area is expected to be down about 2
percent, based on 4 percent lower winter wheat plantings last fall and
farmers' intentions to increase spring wheat planted area. With this
acreage, the lowest since 1972, and trend yields, 2005 wheat production
would be about 2.1 billion bushels, about 50 million bushels below
2004. Large global supplies are expected to keep exports under
pressure, thus 2005/2006 carryover stocks could rise and farm wheat
prices decline slightly from 2004/2005.
U.S. rice acreage was up 11 percent in 2004, as rice producers
responded to a strong recovery in prices and returns in 2003. Stocks at
the end of the current marketing year are forecast at 37 million cwt,
up from 24 million cwt from a year earlier and the highest as a percent
of total use since the 2001/2002 marketing year. Despite the sharp
increase in carryover, the farm price of rice is forecast to average
$7.30-$7.50 per cwt this marketing year, compared with $8.08 per cwt in
2003/2004, as stronger world prices are helping to bolster the United
States price.
In 2005, farmers indicated plans to seed 3.36 million acres, about
the same as in 2004. With trend yields, U.S. rice production would
decline to about 226 million cwt, but still the second largest crop
ever. A modest rise in exports and domestic consumption are expected in
2005/2006, implying that rice carryover stocks and farm prices are
likely to be very similar to the levels for 2004/2005.
In 2004, the corn crop was a record 11.8 billion bushels as
producers harvested a record 160.4 bushels per acre, exceeding the
previous record set last year by over 18 bushels per acre. The sharp
increase in total supply is forecast to lead to lower prices and
increasing carryover. Higher feed and industrial use is forecast to
increase total use by 328 million bushels, not enough to prevent a 1.3-
billion-bushel increase in carryover stocks. In 2004/2005, the use of
corn for ethanol production is forecast to increase 20 percent to a
record 1.4 billion bushels. This marketing year, the farm price of corn
is projected to average $2.00-$2.10 per bushel, compared with $2.42 per
bushel last season.
Farmers indicated plans to plant 81.4 million acres to corn in 2005
during the USDA planting intentions survey, up less than 1 percent from
2004. This level was lower than generally expected, as producers
planned to switch fewer acres away from soybeans than expected and
producers in the Dakotas preferred to increase area with other
oilseeds, such as sunflowers and canola. High fertilizer and fuel
prices may also be a factor in the limited increase in corn area. With
intended acreage and trend yields, 2005 corn production would be 10.8
billion bushels, 1 billion less than the 2004 crop. However, total use
is expected to about match this production, leaving carryover stocks
and farm prices for 2005/06 about the same as for this marketing year.
Soybean production reached a record 3.1 billion bushels in 2004,
contributing to higher domestic use, exports and carryover stocks.
Soybean crush is forecast to increase by 120 million bushels to 1.65
billion and soybean exports are forecast to increase by 195 million
bushels to 1.08 billion. Both crush and exports are forecast to be the
second highest on record. United State carryover stocks are forecast to
increase to 375 million bushels, which would be the highest carryover
as a percent of total use in 6 years. In February 2005, USDA forecast
Brazil's soybean production at 63 million metric tons for 2004/2005, up
from 53 million metric tons a year earlier. However, USDA is currently
projecting Brazil's soybean crop at 54 million metric tons.
The Brazilian crop potential has been reduced by drought, helping
to bolster U.S. soybean prices. The farm price of soybeans is projected
to decrease from last season's average of $7.34 per bushel to $5.25-
$5.55 per bushel this marketing year.
In 2005, farmers indicated in USDA's recent survey that they would
plant 73.9 million acres to soybeans. Although down 2 percent from
2004, this acreage level generally exceeded expectations. The declines
are largest in the south, where Asian rust was a factor and in the
northern plains, where shifting to other oilseeds is expected. USDA's
survey indicated that 11 percent of soybean producers had adjusted
their planting intentions due to the presence of Asian rust in the
United States. This low figure combined with the modest decline in
intended acreage nationally suggests Asian rust is not likely to be a
major factor in determining this year's United States planted acreage.
With this acreage and trend yields, 2005 soybean production would drop
back to 2.9 billion bushels, about equal to projected use, and leave
carryover stocks about unchanged. Prices in 2005/2006 are projected
below 2004/2005 when drought reduced carryin stocks.
In 2004, U.S. cotton production reached a record 23.1 million
bales, up from 18.3 million in 2003. Larger supplies coupled with lower
exports and domestic use have increased expected carryover and pushed
prices lower this season. U.S. exports of cotton are forecast to drop
from last year's record high 13.8 million bales to 13.2 million in
2004/2005, as production in China, our largest export market, is up
from a year ago. Carryover stocks at the end of this season are
projected to increase to 7.1 million bales, the highest in 3 years.
During the first 7 months of the current marketing year, cotton prices
have averaged 43 cents per pound, compared with last season's average
of 61.8 cents per pound.
For 2005, producers indicate plans to plant 13.8 million acres to
cotton, up slightly from 2004. In the Delta States, where Asian rust in
soybeans is of increased concern, intentions are up 12 percent, led by
Louisiana's 24 percent. With trend yields, this acreage would produce a
2005 crop of 18.1 million bales, down 5 million from last year.
Although domestic use is expected to continue its trend decline under
pressure from imported textiles and apparel, good export prospects and
lower production would reduce 2005/2006 carryover stocks substantially.
A persistent concern in U.S. agriculture is whether we are losing
our competitiveness in bulk commodities in world markets. The United
States share of global exports has been declining for decades for
wheat, coarse grains, rice and soybeans, and only turned up recently
for cotton in recent years as increased imports of textiles and apparel
shifted U.S. textile production overseas, creating higher foreign
demand for our cotton. Brazil, Argentina, China, India and the former
Soviet countries have increased agricultural exports by either
expanding arable land, increasing productivity or altering internal
policies. The share of global export markets of these countries rose
from 2 percent of world grain and soybean exports in 1994 to a peak of
30 percent in 2002. But their share of world trade in 2004/2005 is
expected to be 20 percent, the same as last year.
In the future, we continue to believe that China will be a steadily
increasing importer, that India will consume its own grain, and that
gains for the former Soviet countries, while expected to continue, will
not come as easily as recent gains; an inhospitable climate may also
make them an irregular competitor. Thus, while competition will be
strong, there is every reason to think that the United States will be a
strong competitor as well.
China remains an especially important factor in bulk commodity
trade. China's role as a United States competitor in grain markets
continued to decline in 2004/2005. China's net imports of wheat are
expected to reach 6.5 million metric tons, up from less than 1 million
in 2003/2004. Their net exports of coarse grains are also expected to
fall from 6.2 million tons in 2003/2004 to 3.2 million in 2004/2005. In
addition, China's growing oilseed crushing and textile export
industries have resulted in soaring soybean and cotton imports. China
is likely to continue to be a positive factor for U.S. agriculture in
2005/2006. USDA forecasts U.S. agricultural exports to China will fall
from last year's record of $6.1 billion to $4.6 billion in fiscal year
2005. The drop primarily reflects much lower United States prices for
cotton and soybeans. China is expected to remain the fifth largest U.S.
agricultural export market.
Horticultural markets have become an important contributor to farm
income for all size producers. For 2005, cash receipts from fruits,
vegetables and greenhouse and nursery crops are forecast to be $45.3
billion, down 2 percent from last year. With average weather, farm
receipts for fruits and nuts are expected to decline as production
rebounds, leading to generally lower prices. Exports for horticultural
crops for fiscal year 2005 are forecast to reach $14.5 billion, up
substantially from last year's $13.3 billion.
In recent years, strong demand for imported products has increased
the sector's trade deficit which is forecast at $11.1 billion in fiscal
year 2005. During the last 10 years, domestic production growth has
averaged only 0.5 percent, compared with import growth of 4.4 percent.
And with commercial and government interest in increasing the role of
fruits and vegetables in the American diet, the sector's trade deficit
likely will continue to grow to meet expanding demand.
Outlook for Livestock, Poultry and Dairy
Reduced supplies of red meat and nearly stable milk production
combined with increasing demand led to record-high fed cattle, broiler
and milk prices in 2004. Hog prices were also up sharply, pushing
livestock cash receipts to a record $122 billion, a 16-percent increase
from the previous year. While several traditional beef importers have
failed to open their markets to U.S. beef following the single BSE
incident in late December 2003, market fundamentals generally remain
quite strong. In addition, lower feed costs in 2005 are also helping to
bolster the returns of livestock and dairy producers.
Beef production dropped 6.4 percent in 2004. The drop in production
reflected tight domestic cattle inventories, following several years of
herd liquidation, and the continued closure of the border to Canadian
cattle imports. In addition to the drop in production, strong consumer
demand for meat protein, the improving restaurant and hotel business,
and improved diversity and quality of retail beef products have also
helped support beef prices. During 2004, the price of choice steers
averaged a record $84.75 per cwt.
Cattle herd liquidation ended in 2004 as the U.S. cattle inventory
on January 1, 2005, was 1 percent higher than a year earlier. This was
the first increase in herd size since January 1996. Herd rebuilding is
expected to be slow as the calf crop in 2004 was almost 1 percent
smaller than the previous year, leaving a small base from which to
retain heifers in 2005. USDA's April cattle market forecast assumes
that live cattle imports from Canada will resume during the second half
of 2005 and that fed cattle prices will average $83-87 per cwt. Prices
could be substantially stronger if Japan and other Asian countries open
their markets to U.S. beef.
In 2004, pork production increased 2.8 percent to a record 20.5
billion pounds. Despite the increase in pork supplies, the price of
slaughter hogs averaged $52.51 per cwt in 2004, up from $39.45 in 2003,
as tight supplies of beef boosted the demand for pork. In addition,
U.S. pork exports were record high in 2004 as demand has been strong in
markets that banned beef imports because of BSE or banned broiler
imports because of Avian Influenza. Other factors contributing to the
growth in pork exports are the weaker United States dollar and improved
global economic performance, especially in Mexico.
Despite high hog prices last year, hog producers have been cautious
about expanding, as indicated in farrowing intentions surveys. In 2005,
pork production is forecast up 1.2 percent. Hog slaughter will increase
as a result of the recent International Trade Commission finding that
removes duties placed on Canadian hogs and encourages imports of
Canadian feeder pigs and slaughter hogs. Hog prices are forecast to
average $48-$50 per cwt in 2005. While down from a year ago, hog prices
would still be about $10 per cwt higher than during 1998-2003.
Broiler production increased 4.0 percent to a record 34.1 billion
pounds in 2004. Higher prices for competing meat products and an
improving domestic economy pushed whole-bird broiler prices to a record
74.1 cents per pound in 2004, up from 62.0 cents in 2003. Broiler
exports fell 3 percent in 2004 as several countries restricted imports
of U.S. poultry following outbreaks of Avian Influenza in Delaware, New
Jersey, Pennsylvania, Texas and Maryland.
Broiler production is forecast to increase about 3 percent in 2005,
as producers respond to the increase in broiler prices. Continued
strong prices for competing meats and a rebound in U.S. broiler exports
are expected to maintain broiler prices at near last year's level.
Lower broiler part prices compared with mid-2004 should stimulate
sales, and several countries have either fully lifted the trade ban on
U.S. poultry following last year's outbreaks of Avian Influenza or
allowed the importation of U.S. poultry from selected States.
In 2004, milk production increased by just 0.2 percent, as cow
numbers fell by 0.8 percent and milk production per cow increased by
1.1 percent. Over the past 2 years, milk production has increased by
less than 0.5 percent, marking the slowest growth in milk production
over a 2-year period since the mid-1980s. Many factors have contributed
to this sluggish growth, including tight supplies of good quality hay,
the discovery of BSE in Canada and the subsequent suspension of imports
of dairy cows and heifers from that country, limitations on the
availability of bovine somatotropin (rBST), the National Milk Producers
Federation's CWT program which pays producers to reduce milk
production, and weak milk prices during 2002 and the first half of
2003. Tightening milk supplies caused the all-milk price to average a
record $16.03 per cwt in 2004, up from $12.55 per cwt in 2003.
During most of 2004, the Commodity Credit Corporation (CCC)
continued to purchase nonfat dry milk under the price support program
despite a record-high milk price. In 2004, CCC purchased 278 million
pounds of nonfat dry milk, down from the 635 million pounds purchased
in 2003. The CCC did not purchase any butter or cheese under the milk
price support program in 2004. Tightening domestic and international
milk supplies are keeping nonfat dry milk prices above support. Since
mid-November, the CCC has not purchased any nonfat dry milk.
Higher milk prices in 2004 reduced payments under the Milk Income
Loss Contract (MILC) program. In 2003, MILC payments were triggered
during January through August and the MILC payment rate averaged $1.09
per cwt over the entire year. The MILC payment rate averaged $0.22 per
cwt in 2004 with payments being triggered during January through April.
So far this year, no payments have been made under the MILC program.
Milk production is forecast to increase by 1.6 percent in 2005, as
production per cow recovers from 2 years of anemic growth. Monsanto has
announced that it is increasing the supply of rBST, and lower feed
costs should boost milk production per cow. The all-milk price is
projected to average $15.00 per cwt in 2005, which would be the fourth
highest on record.
Outlook for Farm Income
In 2004, farm cash receipts, net farm income and net cash farm
income all registered historic high. Farm cash receipts reached a
record $235 billion in 2004 as both livestock and crop receipts were
record highs. Livestock receipts rose by $16.7 billion in 2004,
reflecting strong prices for cattle, hogs, poultry and milk. Prices for
major crops generally exceeded year-earlier levels through the first 9
months of 2004, allowing producers to sell the remainder of the large
harvests from the fall of 2003 at unusually favorable prices. These
higher prices were largely responsible for a $7-billion increase in
crop receipts in 2004. Net cash farm income reached a record $77.8
billion in 2004, up from the previous record of $68.6 billion in 2003.
In 2005, both crop and livestock receipts are forecast to decline
from last year's record high. Despite the drop, farm cash receipts in
2005 are projected to be the second highest on record, surpassing $222
billion. Higher government payments are forecast to offset the drop in
farm cash receipts in 2005. The record crops harvested in 2004 have
lowered prices for major crops, triggering additional government
payments under the 2002 Farm Bill. In addition, producers affected by
adverse weather in either 2003 or 2004 will be eligible to receive
disaster payments in 2005. In 2005, government payments are forecast to
reach $24 billion, exceeding the record of $22 billion in 2000. With
higher government payments offsetting lower cash receipts, net cash
farm income is forecast to remain very near last year's record. While
most producers will face these generally favorable conditions, some,
such as high cost producers or those affected by adverse weather, will
not see these income benefits.
An indicator of the underlying fundamental strength of commodity
markets is farm income excluding government payments. In 2000, net cash
farm income excluding government payments hit a cyclical low of $34
billion. As markets have strengthened, payments based on prices have
declined, so that more of net cash income is now coming from market
sales. In 2004, net cash income excluding government payments increased
to $63.3 billion. In 2005, net cash farm income excluding government
payments is projected to fall to $54 billion. While below this past
year, net cash farm income excluding government payments remains well
above the cyclical low in 2000.
Farm production expenses are expected to be about unchanged in 2005
following a $13-billion increase last year. Higher prices for feed,
feeder livestock, labor, fuel, fertilizer and other inputs pushed up
production expenses in 2004. In 2005, lower feed and feeder cattle
prices are expected to about offset increases in energy-based input
costs, such as fuel and fertilizer.
The income earned by farm operator households in 2005 is expected
to continue the increases of recent years. Average farm household
income is forecast at $73,059, up nearly 3 percent from 2004. A 3.4
percent increase is expected in off-farm income, a modest rise from
2004, but more than enough to offset the also modest reduction in net
farm income from 2004.
With another sound income year in prospect, farmland values may
rise 4-5 percent in 2005. This increase would maintain the improvement
in the farm sector balance sheet that we saw in 2003 and 2004. After
ranging between 14.8 percent and 15.2 percent during 1992-2002, the
farm debt-to-asset ratio fell to 14.2 percent last year and expected to
remain steady in 2005. Recent increases in debt have been offset by
larger gains in farm asset values. As a result of farm real estate
values rising faster than farm mortgage debt, the degree of farmland
leverage declined slightly. This has provided farmland owners with an
added equity cushion to lessen the impact of any short-term declines in
income or asset values. While uncertainty remains over the
sustainability of the global economic recovery, the value of the
dollar, issues raised by the Federal budget deficit, trade
negotiations, emerging competitors, animal diseases, and oil prices,
U.S. agriculture appears poised for another sound financial year in
2005.
That completes my statement, and I will be happy to respond to any
questions.
______
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 2006 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 body for the ongoing support of private lands
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. This year, NRCS
celebrates its 70th Anniversary. I am proud to say that even though the
issues facing farmers and ranchers have grown more complex, NRCS has
risen to the challenge to help agriculture become even more vibrant and
productive while helping to protect our private land natural resource
base.
Fiscal Year 2006 President's Budget
The President's fiscal year 2006 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 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
reward performance. It also allows the Administration to commit limited
resources to the highest priorities, such as accelerating technical
assistance to help agricultural producers meet regulatory challenges,
particularly in the area of helping to manage livestock and poultry
waste.
With that said, the President's fiscal year 2006 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 budget includes key increases within the Conservation Technical
Assistance (CTA) account--an additional $37.2 million to help producers
comply with Animal Feeding Operations/Confined Animal Feeding
Operations regulations, and $10 million to control invasive species.
This year, total NRCS funding for both discretionary and mandatory
programs is proposed at $2.7 billion.
Building Strong Accountability Measures
In the current budget environment, it is more important than ever
to continue working diligently in accountability and results
measurements for the funds provided by Congress. Mr. Chairman, I am
proud of the great strides NRCS has made in the past year on
performance and results, as well as 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
Program Assessment Rating Tool (PART) score for the base agency program
of CTA.
Meeting the President's Management Agenda is very 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 budget decisions. I am proud to report that this year
was the first year that NRCS could track direct charge through an
entire budget development cycle. Direct charge has improved the ability
of NRCS to directly track how NRCS employees spend every day and how
the technical assistance workload is distributed among programs. This
is a critical management tool, and will allow the Agency to prioritize
work and provide even greater accountability to the taxpayers and
members of Congress.
In addition, as a result of the accountability management
processes, NRCS has established national CTA program priorities for
fiscal year 2005. These priorities include development of Comprehensive
Nutrient Management Plans (CNMPs) to assist landowners needing to
comply with the Environmental Protection Agency's Concentrated Animal
Feeding Operation Rule; reduction of non-point source pollution, such
as nutrients, sediments, pesticides, or excess salinity in watersheds;
reduction of emissions that contribute to air quality impairment;
reduction in soil erosion and sedimentation from unacceptable levels on
agriculture lands; and promotion of habitat conservation for at-risk
species.
I am encouraged to report this direct link between performance and
priority setting and look forward to reporting further on the results
of this effort.
Cooperative Conservation
At the heart of delivery of voluntary conservation programs is
cooperative conservation. Cooperation in the delivery of programs at
the Federal, State and local levels with landowners, tribes, government
agencies and nongovernmental organizations is critical to providing
accountable, quality land care assistance. In August 2004, the
President issued an Executive Order on Facilitation of Cooperative
Conservation. Through this directive, the President has sent a clear
message that we can look forward to greater cooperation among Federal
agencies on natural resource issues. The order instructs Federal
departments and agencies to enter into conservation partnerships, and
to empower local participation in programs and projects that protect
and conserve natural resources and the environment. The Department of
Agriculture has embraced this concept, and is working with other
Federal agencies to highlight the successes of our joint efforts.
Looking Ahead
As the NRCS prepares to celebrate its 70th Anniversary this spring,
we have much to be proud of in private lands conservation. It is
rewarding to see the changes on the landscape that those early pioneers
in soil conservation envisioned--conservation terraces that stop sheet
and rill erosion, streamside vegetative buffers, acres of wetland
habitat, and healthy grazing and forest lands. Even with all those
changes, the next 3 years (fiscal year 2005 through fiscal year 2007)
promise to be record years for conservation implementation and
spending. This effort will continue to change the face of our Nation's
private lands landscape. Now more than ever, the field staff of NRCS
are focused on working with farmers, ranchers and other conservation
partners to get the job done.
Mr. Chairman, in summary, we all know that we are trying to plan
for the future under an atmosphere of increasingly austere budgets and
with a multitude of unknowns on the domestic and international fronts.
I believe that the Administration's fiscal year 2006 Budget request
reflects sound policy, and will provide stability to the vital mission
of 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.
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 2006 Budget request for the Natural Resources
Conservation Service (NRCS).
As we look ahead to fiscal year 2006, and the contents of the
Administration's Budget request, I want to take a moment to reflect
upon all of the changes that have taken place within NRCS over the past
year. Since I last appeared before this Subcommittee, a great deal of
organizational change, streamlining, and improvements have taken shape.
To begin, we have a new Associate Chief of NRCS, Dana D. York. Dana
began her new position in August, and is a wonderful addition to our
management team. She has spent more than 28 years working for NRCS at
every level, including experience as a District Conservationist in the
field. She also has a breadth of experience on managing organizational
change, which is a timely skill, given the major organizational changes
that NRCS has embarked upon over the past 18 months.
AGENCY REORGANIZATION
Mr. Chairman, since our last hearing with this Subcommittee, we
also have three Regional Assistant Chiefs on board at NRCS National
Headquarters. Richard Coombe is heading up operations for the East
Region; Merlin Bartz for the Central Region, and Sara Braasch for the
West Region. The Regional Assistant Chiefs are providing leadership
excellence in management for their respective States. They are also
providing a critical link directly between the functions of National
Headquarters and our Agency field activities.
Overall, the NRCS reorganization is strengthening our support to
States, better aligning expertise with applied conservation, and making
NRCS a more efficient and effective organization. In September, we
launched our three new National Technology Support Centers in
Greensboro, North Carolina; Fort Worth, Texas; and Portland, Oregon.
The Centers are providing integrated technological support and
expertise for field conservationists. We have also reorganized National
Headquarters to ensure that comparable functions are appropriately
assigned to staff with similar expertise. For example, we now have a
single Easement Programs Division, and a single Financial Assistance
Programs Division to ensure that we have the right people working
together to meet common program objectives. In general, these changes
are helping to ensure that hard work from our staff is translating to
work on the ground.
I am proud of how NRCS staff, at all levels, has responded to the
major organizational changes made over the past year. More than 130
employees impacted by the reorganization have moved into their new
assignments. Although this process was not easy, and required many
careful steps and planning, it has gone remarkably well. We are now in
a position to realize the benefits of the new organizational structure.
Like most Federal agencies, NRCS faces a retirement bulge with 35
percent of our natural resource professionals eligible to retire in the
next 5 years. To ensure we have capable professionals in the future, we
piloted the Conservation Boot Camp. New employees spent six weeks
learning conservation planning and application skills. We plan three
additional pilots this year. The goal of the pilots is to enable the
agency to maintain its cadre of professional employees well into the
future.
PERFORMANCE UNDER PRESSURE
Given the shifts that have taken place over the past year, I think
the agency's accomplishments are all the more impressive. Last year,
NRCS and our partners:
--Provided technical assistance on over 27 million acres of working
farm and ranch land to reduce erosion, sedimentation and
nutrient runoff, enhance water quality, restore and create
wetlands, and improve and establish wildlife habitat;
--Developed 6,100 Comprehensive Nutrient Management Plans and applied
3,400;
--Served nearly 3.8 million customers around the country;
--Completed or updated soil survey mapping on 28 million acres;
--Executed over 47,000 Environmental Quality Incentives Program
agreements;
--Enrolled over 3,000 Wildlife Habitat Incentives Program agreements;
--Helped land managers create, restore, or enhance wetlands through
more than 1,000 contracts;
--Implemented the new Conservation Security program under a tight
deadline;
--Facilitated over one million hours of Earth Team volunteer service;
and
--Brought the number of proposed, interim final, and final rules
issued for implementation of the Farm Bill to 21.
As we move forward in fiscal year 2005, there are numerous
challenges and opportunities ahead, with NRCS playing a central role in
meeting the Administration's conservation objectives. We look to you to
build upon the fine accomplishments achieved this year to reach an even
brighter future.
INCREASING THIRD-PARTY TECHNICAL ASSISTANCE
With the historic increase in conservation funding made available
by the 2002 Farm Bill, NRCS will continue to look to non-Federal
partners and private technical service providers (TSPs) to supply the
technical assistance needed to plan and oversee the installation of
conservation practices. I am proud to report that as of the beginning
of March 2005, there are 2,201 TSPs registered with NRCS. Last year, we
set the goal to use $40 million in TSP assistance. NRCS surpassed this
goal for fiscal year 2004 and obligated $49.2 million for TSPs. In
fiscal year 2005, our goal is to reach $45 million for TSPs, or an
equivalent of 428 staff years.
TRANSPARENCY
Transparency of agency operations is an area that I have
highlighted in the past, and I want to be clear that it remains a key
focus of NRCS. NRCS has made tremendous gains in providing complete
access to program information, allocations, backlog, and contracting
data to the public. Our goal has been to ensure operational processes
are completely open to customers and stakeholders. On the NRCS website,
the Agency provides the following information:
--State rankings for funding in conservation programs;
--State Field Office Technical Guides;
--Program performance data; and
--Public input sessions to gather feedback on Farm Bill program
operation and priority setting.
NRCS has also taken strides to improve access to information in
foreign language formats, including many publications offered in
Spanish.
DISCRETIONARY FUNDING
The President's fiscal year 2006 Budget request for NRCS reflects
our ever-changing environment by providing resources for the ongoing
mission of NRCS and ensuring that new opportunities can be realized.
Conservation Operations
The President's fiscal year 2006 Budget request for Conservation
Operations (CO) proposes a funding level of $767.8 million, which
includes $625.6 million for Conservation Technical Assistance (CTA).
The CTA budget will enable NRCS to maintain funding for ongoing high-
priority work. In addition, the President's Budget request includes an
increase of $37.2 million for technical assistance to agriculture
producers facing significant regulatory challenges. This budget
initiative would be targeted toward animal feeding operations in need
of Comprehensive Nutrient Management Planning (CNMP) assistance. The
Budget request does not fund continuation of fiscal year 2005
congressional earmarks.
Mr. Chairman, for years we have stated that CTA is a program that
is at the heart of everything our Agency does. But as an Agency, we
have had a great deal of difficulty, up to this point, describing the
program's scope and effect and providing clear guidelines to our
frontline conservationists on its implementation.
I am pleased to report that NRCS was successful this year in
issuing a formal program policy for CTA. For the first time in 70
years, CTA has the same kind of official program guidance and specific
implementation framework as our other programs. We are also working to
revise the allocations process for CTA in order to ensure that we
reflect the values in the CTA program policy by placing our dollars
where the needs are. It is key that allocations reflect natural
resource conditions and the drive to meet our strategic planning
objectives and accountability. Our aim is to have the new allocation
formula in place upon enactment of the fiscal year 2006 Appropriations
Bill.
We have made great strides in developing an effective
accountability system with the support of Congress. This system has
allowed us to accurately track our accomplishments and costs. As
Undersecretary Rey outlined in his statement, this is the first budget
that truly integrates an entire cycle in terms of utilization of our
direct charge data. Based upon the current mechanisms in place for
funding discretionary and mandatory program technical assistance, it is
necessary to have sound data for workload in field offices. Our direct
charge accounting, along with the workload assessment tools that we
have in place, are providing the solid data to help us make program
management decisions and to assist in the budget development process.
For instance, with this data we can tell you that the cost of technical
assistance per active participant in the Farm Bill Programs has
decreased 13 percent from fiscal year 2002 to fiscal year 2005.
Watershed Surveys and Planning
The Watershed Surveys and Planning (WSP) account helps communities
and local sponsors assess natural resource issues and develop
coordinated watershed plans that will conserve and utilize their
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.
Over 65 percent of these plans are used to guide local planning
efforts. The other 35 percent guide experts and sponsors in the
implementation of watershed projects to solve natural resource
problems.
The President's fiscal year 2006 Budget proposes to focus funding
on ongoing WSP efforts and includes $5.1 million to help approximately
40 communities complete their watershed planning efforts.
Watershed and Flood Prevention Operations
The Administration proposes to terminate funding for Watershed and
Flood Prevention Operations (WFPO) in fiscal year 2006 for several
reasons.
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 the WFPO program provided the least net
flood damage reduction benefits.
This decrease in funding in WFPO account will enable the
Administration to divert limited resources to other priorities such as
accelerating technical assistance to help agricultural producers meet
regulatory challenges, particularly in the area of helping them to
manage livestock and poultry waste.
Mr. Chairman, I would note that the projects that were earmarked
for this program had funding requests that exceeded the amount
appropriated, which has removed the Department's ability to effectively
manage the program. The intense level of Congressional directives does
not permit the Agency to prioritize projects based upon merit and local
need. The fact that the program is entirely earmarked also makes it
impossible for the Department to attempt to coordinate program efforts
and implement work that will meet overall strategic natural resource
goals.
Watershed Rehabilitation
The President's Budget funding request for fiscal year 2006
includes funding for Watershed Rehabilitation activities involving
aging dams. These projects involve dams with a high risk for loss of
life and property. To date, 134 watershed rehabilitation projects have
been funded and 37 have been completed. Sixty-six dams have
rehabilitation plans authorized and implementation of the plans is
underway.
The Administration requests $15.1 million to address critical dams
with the greatest potential for damage.
Resource Conservation and Development
The purpose of the Resource Conservation and Development (RC&D)
program is to encourage and improve the capability of State, local
units of government, and local nonprofit organizations in rural areas
to plan, develop, and carry out programs for resource conservation.
NRCS also helps coordinate available Federal, State, and local programs
that blend natural resource use with local economic and social values.
Over half of the 375 RC&D areas have received Federal support for at
least 20 years. At this point, most of these communities should have
the experience and capacity to identify, plan for, and address their
local priorities. The President's fiscal year 2006 Budget, therefore,
proposes to phase out Federal support for local planning councils after
20 years of funding assistance after which the local councils should
have the capability to carry out much of the program's purpose
themselves. The overall proposed budget for RC&D in fiscal year 2006 is
$25.6 million.
FARM BILL AUTHORIZED PROGRAMS
Environmental Quality Incentives Program
The purpose of Environmental Quality Incentives Program (EQIP) is
to provide flexible technical and financial assistance to landowners
that face serious natural resources challenges that impact soil, water,
and related natural resources, including grazing lands, wetlands, and
wildlife habitat management. The budget proposes a level of $1 billion
for EQIP.
Over the past year, NRCS fully implemented a new agency developed
system, ProTracts, to speed up the processing of conservation contracts
with farmers and ranchers. ProTracts, which came about as part of the
West Texas Telecommunication Pilot, has allowed the Agency to
streamline the contracts process and, for the first time, see the
ongoing status of contracts, not just the payments. ProTracts allows
program managers to manage payments and obligations for a portfolio of
different contracts. We estimate savings of $5 to $10 million annually
in administrative costs that can be used to get financial assistance to
farmers to implement conservation programs. Because the contract
process is now electronic instead of paper, it speeds up the time
between contract application and approval. While reducing errors and
omissions, NRCS worked with the Office of the Chief Financial Officer
to link ProTracts to prior-year EQIP payments. The Agency is currently
migrating and reconciling EQIP contracts.
Wetlands Reserve Program
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. The fiscal year 2006 Budget request
estimates that about 200,000 additional acres will be enrolled in
fiscal year 2006, an appropriate level to keep NRCS on schedule to meet
the total acreage authorization provided in the Farm Bill.
I would note, Mr. Chairman, that on Earth Day last year, President
Bush announced a new policy: ``Instead of just limiting our losses (of
wetlands), we will expand the wetlands of America.'' ``No-net loss of
wetlands'' on the part of agriculture is a landmark achievement, and a
testament to the kinds of investments made in wetlands conservation on
private lands. I am proud that NRCS' wetland conservation efforts are
at the core of this initiative, and I look forward to working with the
Subcommittee toward achieving the goals.
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 program participant would also enroll in a restoration agreement to
restore the functions and values of the grassland. The 2002 Farm Bill
authorized $254 million for implementation of this program during the
period fiscal year 2003-fiscal year 2007. Because we estimate that GRP
will reach the statutory funding cap by the end of fiscal year 2005,
the fiscal year 2006 Budget assumes that the program will have
exhausted its funding and not be able to enroll new contracts next
year.
Conservation Security Program
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.
Last year, we conducted a successful program signup in 18
watersheds across 22 States. Nearly 2,200 farmers and ranchers entered
contracts that covered 1.9 million acres of privately-owned land. We
are now offering the program in 220 new watersheds across the country
in addition to the 18 that were eligible in 2004. Each State has at
least one participating watershed. The President's fiscal year 2006
Budget requests $273.9 million in program funding to continue to expand
the program and enroll excellent conservation stewards.
Wildlife Habitat Incentives Program
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 $60 million.
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 $83.5 million for FRPP in
fiscal year 2006.
Measuring Outcomes not Outputs
One of the most common questions that I have answered during my
tenure as Chief is about measuring the natural resource outcomes of
NRCS efforts. Rightfully so, policy-makers, such as Members of this
Subcommittee, as well as conservation and farm organizations, have
voiced a need for better information about the kinds of changes in
water and soil quality that are as a result of the investments we have
made.
Six months ago, we launched an exciting endeavor to better quantify
the on-the-ground effects of our conservation work. The Conservation
Effects Assessment Project (CEAP) is a 5-year effort to better quantify
the outcomes of our programs. Through CEAP, NRCS is partnering with the
Agricultural Research Service (ARS), the National Agricultural
Statistics Service (NASS), Farm Service Agency (FSA), and other
agencies to study the benefits of most conservation practices
implemented through the Environmental Quality Incentives Program,
Wetlands Reserve Program, Wildlife Habitat Incentives Program,
Conservation Reserve Program, and the Conservation Technical Assistance
program. This project will evaluate conservation practices and
management systems related to nutrient, manure, and pest management,
buffer systems, tillage, irrigation, and drainage practices, as well as
wildlife habitat establishment, and wetland protection and restoration.
CEAP will provide the farming community, general public,
legislators, and others with a scientifically based estimate of
environmental benefits achieved through conservation programs.
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 Technical Service Providers.
I am proud of the dedicated work ethic our people exhibit day in
and day out as they go about the work of getting conservation on the
ground. We have achieved a great deal of success. We need to focus our
efforts and work together, because available resources will ultimately
determine whether our people have the tools to get the job done. 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.
______
Prepared Statement of Gilbert G. Gonzalez
Mr. Chairman, Members of the Committee, it is a pleasure to present
to you the fiscal year 2006 President's Budget request for USDA Rural
Development.
I am honored to serve as Acting Under Secretary of Agriculture for
Rural Development, and to have the opportunity to work with you to
carry out Rural Development's fundamental mission to increase economic
opportunity and improve the quality of life in rural America.
Everyday, we bring people and resources together. I believe that
given the opportunity, Americans will create strength through
investments in their own economic futures. And I believe it is our role
at Rural Development to stimulate these efforts in ways that will
maximize the benefits of local economies.
With the assistance of this subcommittee, the Bush Administration
has established a proud legacy of accomplishments in rural areas, and
will work to continue to enhance that legacy.
Overall, 800,000 jobs have been created or saved through combined
business, housing, utility, and community development investments by
USDA Rural Development over the last 4 years. Leveraging of these
investments with private sector investments are helping to spur
economic growth throughout rural America.
The Bush Administration has committed over $50 billion in rural
development investments in the last 4 years to support rural Americans'
pursuit of economic opportunities and an improved quality of life.
Rural Development delivers over 40 different programs enhancing
business development, housing, community facilities, water supply,
waste disposal, electric power, and telecommunications. Rural
Development also provides technical assistance to rural families, and
business and community leaders to ensure success of those projects. In
addition to loan-making responsibilities, Rural Development is
responsible for the servicing and collection of a loan portfolio that
exceeds $87 billion.
Rural Development is the only Federal organization that can
essentially build a town from the ground up through investments in
infrastructure, homeownership and job creation through business
development programs. We help rural Americans achieve their part of the
American Dream, particularly the 60 million rural residents who are not
involved in production agriculture.
Rural Development is a catalyst. We focus on our grassroots
delivery mechanism, building partnerships that will act to
strategically place Federal resources to serve as catalysts for
spurring private investment. Partners in this effort include: the
Department of Housing and Urban Development, the Department of Energy,
the Environmental Protection Agency, the Minority Business Development
Agency, the Small Business Administration, the Economic Development
Administration, and the National Credit Union Association. In addition,
we are working to increase the ability of faith-based organizations to
partner with Rural Development to also support local community and
economic development.
Successful economic development in rural areas is driven by local
strategies, where communities take ownership and focus on developing
leadership, technology, entrepreneurship, and higher education
opportunities.
RESPONSIBILITIES
Rural Development provides rural individuals, communities,
businesses, associations, and others with financial and technical
assistance needed to increase economic opportunity and improve the
quality of life in rural America. This financial and technical
assistance may be provided solely by Rural Development or in
collaboration with other public and private organizations promoting
development of rural areas.
VISION
To realize our vision of creating greater economic opportunities
and improved quality of life for rural citizens, we need to structure
the delivery of Rural Development programs in a way that can ensure
those who are most qualified become aware of our programs and receive
needed investment assistance. Rural Development has to do a better job
of outreach and education on what programs are available. To accomplish
this goal, we have embarked upon an aggressive outreach and marketing
effort that focuses on the programs appropriated, rather than on the
names of individual agencies. This is a key priority that we believe
will reduce confusion about who to contact for assistance and help
ensure more efficient utilization of program investment dollars by
those who are most qualified. We are also working to better communicate
with minority sectors, analyze program delivery, and improve the
overall knowledge of what USDA Rural Development can provide to rural
citizens and communities.
RURAL DEVELOPMENT BUDGET REQUEST
The President's commitment to rural America is strong, and this
request will support a total program level of loans and grants of $13.5
billion. Mr. Chairman, this Rural Development request is one component
of the President's overarching budget. The budget reflects the
difficult choices that had to be made among funding opportunities for a
variety of meritorious programs.
Over the last 4 years (fiscal year 2001-fiscal year 2004) with your
assistance, Rural Development has delivered over $50 billion in loans
and grants to rural Americans. Through this infusion of infrastructure
investment and local area income stimulus, many rural areas are
attracting an increase in private sector investment. These Federal
investments are being returned many times over in the form of increased
local tax base and new private ventures, with their associated
multiplier effects on household incomes and local quality of life.
I will now discuss the requests for specific Rural Development
programs.
RURAL HOUSING PROGRAMS
The budget request for USDA Rural Development's housing programs
totals just under $6.5 billion. This commitment will improve housing
conditions, continue to promote homeownership opportunities for
minority populations, and initiate our multi-family housing program
revitalization initiative. Initially, this will put in place a program
of tenant protection for our multi-family housing residents.
Rural Development's multi-family housing program includes about
17,000 properties and 470,000 units, with a loan portfolio value
approaching $12 billion. Many of the properties exceed 20 years in age
and face substantial rehabilitation needs. A substantial number of
owners wish to prepay their loans and remove properties from the
program. Rental assistance, a vital component of the program, has
steadily risen. Faced with this reality, this Administration
acknowledged the need to evaluate tenant protections, the portfolio,
and program, and identify alternatives to ensure the program's long-
term viability and continued supply of affordable rental housing in
rural areas.
Last year, Rural Development engaged private industry experts to:
--Review and define potential approaches to protect tenants;
--Review issues and develop solutions directly pertaining to the
market demand for such housing;
--Analyze and develop solutions for the increasing rehabilitation and
recapitalization requirements of the aging existing properties;
and
--Perform a comprehensive property assessment.
A statistically representative sample of the portfolio was selected
and reviewed. Based on that review and analysis by outside experts and
Rural Development staff, a comprehensive tenant protection and
revitalization initiative is being developed. This budget reflects the
first component of that initiative, which provides protection for the
very low-income tenants residing in the projects. We are requesting
$214 million to fund a rural housing voucher program, which will ensure
that very low-income and elderly tenants are protected in the event of
project prepayment.
A comprehensive legislative proposal is under development to
protect tenants and address the issues of rehabilitation needs and
prepayment. This proposal will embody the Administration's multi-year
initiative to ensure adequate rental housing options remain available
for very low-income rural residents and return the multi-family housing
program to sound footing.
Pending the outcome of the comprehensive multi-family property
assessment, Rural Development did not request funding for section 515
new construction. As a result of the study, we again are not requesting
new construction; we are seeking $27 million in the section 515 program
loan level for repair and rehabilitation only. New construction needs
will be met through the section 538 guaranteed program, which we are
requesting to double to a $200 million loan level.
We are also requesting rental assistance of $650 million to support
needed renewals, preservation, and a farm labor housing program level
comprised of $42 million in loans and $14 million in grants. Rental
assistance contracts should be maintained at the current 4 year term to
underscore our commitment to our private partners that future rental
assistance income streams will be supported.
The request for single-family direct and guaranteed homeownership
loans approaches $5 billion, which will assist about 40,400 rural
households who are unable to obtain credit elsewhere. In addition, $36
million is requested for housing repair loans and $30 million for
housing repair grants, which will be used to improve existing single
family houses mostly occupied by low-income elderly residents.
The community facilities request totals $527 million, including
$300 million for direct loans, $210 million for guaranteed loans, and
$17 million for grants. It is expected that a portion of the direct
loan program will continue to support homeland security and health and
safety issues in rural areas. Community facilities programs finance
rural health facilities, childcare facilities, fire and safety
facilities, jails, education facilities, and almost any other type of
essential community facility needed in rural America. Rural Utility
Programs
USDA Rural Development provides financing for electric,
telecommunications, and water and waste disposal services that are
essential for economic development in rural areas. The utilities
program request exceeds $5 billion, which is comprised of $2.5 billion
for electric loan programs, $669 million for rural telecommunication
loans, $25 million for distance learning and telemedicine grants, $359
million in loans for broadband transmission, over $1 billion for direct
and guaranteed water and waste disposal loans, $377 million for water
and waste disposal grants, and $3.5 million for solid waste management
grants.
The Rural Telephone Bank (RTB) was established in 1971 to provide a
supplemental source of credit to help establish rural telephone
companies. Efforts have been underway to privatize the bank. In fiscal
year 1996, the RTB began repurchasing Class ``A'' stock from the
Federal government, thereby beginning the process of transformation
from a federally funded organization to a fully privatized banking
institution. However, recent analysis has shown that there are private
lenders available to fulfill rural telecommunications lending needs. In
addition, funding for this program has exceeded demand.
In fact, there is about $300 million in unadvanced loan balances
for loans available for 5 years or more. This indicates that there is
little demand for a privatized RTB. The fiscal year 2006 budget
reflects the Administration's proposal to establish the process and
terms to implement dissolution of the RTB. Dissolution will result in
the government being repaid for all outstanding government stock and
the borrower receiving a cash payout for their outstanding stock.
Additional funds are requested for the regular telecommunications
program to maintain and enhance the level of Federal support available
to rural telecommunications. The fiscal year 2006 budget proposes $359
million in new discretionary program funding. This, coupled with $1.6
billion in carryover funds, will provide for almost a $2 billion
program level.
RURAL BUSINESS-COOPERATIVE PROGRAMS
Since fiscal year 2001, USDA Rural Development has provided about
$4 billion for rural business development in the form of loans, grants
and technical assistance. Funds assisted with the start up, expansion
or modernization of businesses and cooperatives in rural areas that
have helped create or save over 56,400 jobs.
The Rural Development business and cooperative program budget
request for fiscal year 2006 totals about $1.3 billion, the bulk of
which is comprised of $900 million for the business & industry (B&I)
loan guarantee program.
The rural business enterprise grant, rural business opportunity
grant, economic impact initiative, and the empowerment zone and
enterprise community programs have been included in the President's new
initiative to help strengthen American's transitioning communities,
while making better use of taxpayer dollars.
These grant programs will be consolidated and 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, an incentive
program for communities, modeled after the Millennium Challenge
Account.
We are requesting $34 million for the intermediary relending
program, $25 million for rural economic development loans, $5.5 million
for rural cooperative development grants, and $15.5 million of
discretionary funding for the value-added producer grant program.
The $10 million of discretionary budget authority for renewable
energy will support $286 million in guaranteed loans and $5 million in
grants. This program will assist in fulfilling the President's Energy
Policy that encourages a clean and diverse portfolio of domestic energy
supplies to meet future energy demands. In addition to helping
diversify our energy portfolio, the development of renewable energy
supplies will be environmentally friendly and assist in stimulating the
national rural economy through the jobs created and additional incomes
to farmers, ranchers, and rural small businesses. This is important for
rural communities and our country's ability to rely less on imported
energy. The President is committed to this program and the benefits it
holds for America.
During this Administration Rural Development has invested over $190
million in Bioenergy/Biomass ventures including $80 million in value-
added and business ventures and $114 million in renewable energy
utility upgrades and expansions. Under the Farm Bill section 9006,
$44.9 million in grant funds have been provided for 281 applicants for
wind power, anaerobic digestion, solar, ethanol plants, direct
combustion and fuel pellet suppliers, and other bioenergy related
systems.
ADMINISTRATIVE EXPENSES
Delivering these programs to the remote, isolated, and low-income
areas of rural America requires administrative expenses sufficient to
the task. From fiscal year 1996 through fiscal year 2004, Rural
Development's annual delivered program level increased by 111 percent.
Over that same period, Rural Development's Salaries and Expenses (S&E)
appropriation increased only 17 percent. In fiscal year 2001, Rural
Development was able to deliver $19 program dollars (loans and grants,
plus servicing the ever-growing portfolio) with one dollar of S&E. By
fiscal year 2004, Rural Development delivered $23 program dollars with
every S&E dollar. Over 4 years we were able to increase efficiencies,
to deliver 21 percent more program dollars with each S&E dollar. Rural
Development has the staff and the local distribution mechanism to meet
the ambitious program targets outlined earlier, but adequate
administrative support must be made available. To maintain our high
level of efficiency requires continued improvements which must be based
on continuous effort and investment of administrative resources.
With an outstanding loan portfolio exceeding $87 billion, fiduciary
responsibilities mandate that Rural Development maintain adequately
trained staff, employ state of the art automated financial systems, and
monitor borrowers' activities and loan security to ensure protection of
the public's financial interests. New, more sophisticated and
complicated programs provided through the fiscal year 2002 Farm Bill
(broadband, renewable energy, value-added, etc.), demand increasing
technical expertise of our aging workforce.
Limited S&E funding could jeopardize our ability to provide
adequate underwriting and loan servicing to safeguard the public's
interests.
For fiscal year 2006, the budget proposes a total of $682.8 million
for Rural Development S&E or an increase of $58.4 million over fiscal
year 2004. Of this increase, $13.3 million will fund salary costs and
related expenses; $20 million supports Information Technology (IT)
needs, including the web farm and data warehousing, continued expansion
and upgrading of systems supporting the evolving multi-family housing
program, e-Gov, IT security, and essential licensing and maintenance
agreements; $4 million for human capital investments, principally
training; and $7.6 million to continue relocation of facilities and
operations from downtown St. Louis, Missouri.
Mr. Chairman, Members of the Committee, this concludes my formal
statement. We would be glad to answer any questions you may have. Thank
you for the opportunity to appear before you to discuss the Rural
Development fiscal year 2006 budget request.
______
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 2006 President's budget for the
USDA Rural Development rural housing programs.
As an integral part of Rural Development, the rural housing program
assists rural communities in many fundamental ways. We provide a
variety of both single and multi-family housing options to residents of
rural communities. We also help to fund medical facilities, local
government buildings, childcare centers, and other essential community
facilities. Rural Development programs are delivered through a network
of 47 State offices and approximately 800 local offices.
The proposed budget for the rural housing program in fiscal year
2006 supports a program level of approximately $6.49 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 2006 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 2006 budget
proposal for our rural housing programs.
MULTI-FAMILY HOUSING PROGRAMS
The Multi-Family Housing (MFH) budget preserves Rural Development's
commitment to maintaining the availability of 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 $1.16 billion. This represents
an increase of 30 percent from last year's request. Six hundred and
fifty million dollars will be used for rental assistance (RA) for
contract renewals, farm labor housing, and preservation. These funds
will renew more than 46,000 4-year RA contracts. We estimate using $27
million for MFH direct loans to meet our preservation responsibilities
including prepayment prevention incentives.
Revitalization Initiative
In November 2004, we released a report titled the ``Multi-Family
Housing Comprehensive Property Assessment and Portfolio Analysis.''
This report analyzed the issues associated with the preservation of the
portfolio and provided recommendations for changes to the MFH program.
The fiscal year 2006 budget addresses the immediate need to provide
assistance for tenants of projects that prepay and leave the program.
Included is $214 million for the initial stage of the multi-family
housing Revitalization Initiative that establishes a tenant protection
program. Later this year, the Administration will propose legislation
to ensure that projects remain in the program and that they are
properly maintained. The authority to make rural housing vouchers is
contained in the Housing Act of 1949. Regulations will need to be
developed in order to use this authority.
The report recommended three primary strategies to revitalize our
aging portfolio, which continue to play a critical role in delivering
affordable rental housing to rural communities across the nation:
Allowing Prepayment While Protecting Tenants
While a significant segment of the portfolio has the legal right to
prepay, the report concluded that prepayment is economically viable for
only about 10 percent of owners. Recent court decisions require that
owners of projects that are eligible to prepay under the terms of their
loans, be allowed to do so. This would leave the tenants of these
projects at risk of significant rent increase and potential loss of
their housing. Therefore, we are proposing that all tenants of these
projects be adequately protected through the use of housing vouchers.
Creating an Equitable New Agreement With Project Owners Electing to
Stay With the Program
The report recommended that new agreements be reached with project
owners to keep their projects in the program and, thus, be used for
housing low income families. This new agreement would allow owners and
project managers to exercise their entrepreneurial planning and
management skills. Performance expectations and performance-based
incentives would be provided so that high-performing owners and project
managers are rewarded. Conversely, owners and property managers
performing poorly would be subject to sanctions.
Using Debt Relief as the Primary Tool to Stabilize Projects at Risk of
Physical Deterioration
The report also recommended that a majority of the existing MFH
portfolio is in need of additional financial assistance to achieve
long-term viability. The report recommended our using debt
restructuring as the primary tool. Additional financial assistance
would be provided in exchange for the owner's commitment to providing
long-term affordable housing.
The Administration continues to evaluate the costs and benefits of
various options to address items (2) and (3). We expect to complete
this evaluation and to propose legislation later this year. However,
the fiscal year 2006 budget includes $27 million for direct loans that
are to be used to meet immediate revitalization needs.
We anticipate our revitalization efforts will span the next several
years and have initiated a demonstration program to test the viability
of the revitalization concepts. In addition, we will be initiating a
demonstration program for making loans through the use of revolving
funds for preservation purposes, as provided for in the fiscal year
2005 Appropriations Act.
Section 538 Guaranteed Rural Rental Housing Program
The fiscal year 2006 budget request will fund $200 million in
section 538 guaranteed loans, funds that may be used for new
construction. The section 538 guaranteed program continues to
experience ever-increasing demand, 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 fact, Rural
Development received an overwhelming response to the latest Notice of
Funding Availability with over 150 applications received.
In fiscal year 2004, we distributed more than $99 million in
guarantees to fund housing projects with over $243 million in total
development costs. The risk exposure to the government continues to be
very low, as loan guarantees to total development costs are well under
50 percent. We also have a delinquency rate of zero. A ``notice to
proceed'' was given to 44 applicants with an average loan guarantee
request of $2.2 million and an average total development cost of $5.5
million. Thirty-five out of the 44 applications given the approval to
proceed included the use of Low-Income Housing Tax Credits from the
various State governments where the projects will be located.
Since inception of the program, the section 538 guaranteed program
has closed 71 guarantees totaling over $171 million. The program also
has an additional 89 loans in process and not yet closed, totaling over
$352 million. The seventy one closed guarantees will provide over 4,200
rural rental units at an average rent per unit of approximately $500
per month.
The rural housing program recently published a final rule to
address program concerns from our secondary market partners and make
the program easier to use and understand. We look forward to
administering the fiscal year 2006 proposed budget of $200 million,
which will enable Rural Development to fund a significant number of
additional guaranteed loan requests.
The fiscal year 2006 budget also request funds $42 million in loans
and $14 million in grants for the Section 514/516 farm labor housing
program, $2 million in loans for MFH credit sales, and $10 million for
housing preservation grants.
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 $4.7 billion in program level requested for the
SFH programs in fiscal year 2006, $3.7 billion will be available as
loan guarantees of private sector loans, including $207 million for
refinancing more affordable loans for rural families. Also, with $1
billion available for direct loans, our commitment to serving those
most in need in rural areas remains strong. This level of funding will
provide homeownership opportunities for 40,400 rural families.
Effective outreach and an excellent guarantee, coupled with
historically low interest rates have increased the demand for the
section 502 guaranteed program. 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 that would typically receive a Section 502 direct loan with a
guaranteed loan instead. In fiscal year 2004, approximately 32 percent
of guaranteed loans were made to low-income families.
Section 523 Mutual and Self-Help Housing
The President's fiscal year 2006 budget requests $34 million for
the mutual and self-help housing technical assistance program.
The fiscal year 2004 ended with over $35 million awarded for
contracts and 2-year grants. There were 39 ``pre-development'' grants
awarded in fiscal year 2004, 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 2006 proposed budget also includes $36 million in
program level for home repair loan funds and $30 million for grants to
assist elderly homeowners. It also includes $5 million in loan level
for each of two site loan programs, $10 million in loan level for sales
of acquired properties, and $1 million 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 $527
million includes $300 million for direct loans, $210 million for loan
guarantees, and $17 million for grants.
In partnership with local governments, State governments, and
federally recognized Indian tribes, the fiscal year 2006 budget will
support more than 240 new or improved public safety facilities, 105 new
and improved health care facilities, and approximately 80 new and
improved educational facilities to serve rural Americans.
In fiscal year 2004, we invested over $130 million in 113
educational and cultural facilities serving a population totaling over
3.3 million rural residents, over $97 million in 338 public safety
facilities serving a population totaling over 1.7 million rural
residents, and over $304 million in 141 health care facilities serving
a population totaling over 3.2 million rural residents. Funding for
these types of facilities totaled $531 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.
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.
Rental Assistance
We have continued to improve the internal controls in the Rental
Assistance (RA) program and plan to implement a number of new
initiatives in this regard with the recent publication of a
comprehensive revision of our regulations. The new initiatives include
an increased emphasis on verification methods and procedures for
certifying income reported by tenants and improving management of
tenants with no reported income. We are currently in discussions with
the Department of Health and Human Services concerning USDA receiving
access to the National Directory of New Hires database. This will
enable us to match the data in the national directory against the
information provided by the tenant, and therefore reduce fraud and
abuse within the program. Additional training of borrowers and property
managers will also be the key to reducing errors when certifying
tenants for residency in MFH properties.
The automated RA forecasting tool is now in place and operational.
The forecasting tool was used to develop the fiscal year 2006 RA budget
and is able to forecast when RA contracts will either exhaust funds or
reach their 4-year term limit. The forecasting tool can also develop
the cost of new contracts based on an actual RA usage rate or a
selected inflation rate. The fiscal year 2006 RA budget, an inflation
rate of 2.4 percent was used, as recommended by the General Accounting
Office. We will continue to provide State offices with additional
guidance on the transfer of RA units and will centralize the
redistribution of unused RA.
Automation Initiatives
Last year, we reported that the rural housing program was
developing a data warehouse for MFH and SFH loans to improve our
reporting capabilities. I am pleased to report that we are currently
utilizing our data warehouses, making needed improvements, and training
staff on how to expand their reporting capabilities. Our Multi-Family
Information System (MFIS) database is now in Phase 5 of development,
following a very successful completion of Phase 4, which integrated
electronic debiting and crediting of borrowers accounts and eliminated
funds handling in area offices. We now have a website available to the
public to locate all MFH properties, with property and contact
information. Also implemented is the Management Agent Interactive
Network Connection (MAINC), which allows property managers to transmit
tenant and property data electronically to MFH via the Internet. This
data goes directly into the MFIS database and the data warehouse.
Last year, we also reported that an Automated Underwriting System
(AUS) was being developed that would allow lenders to input SFH
customer application data, pull credit, and determine immediately
whether the rural housing program would issue a commitment. The AUS
should be fully operational by next winter.
In December 2004 our Centralized Servicing Center (CSC) in St.
Louis, Missouri began the centralization of loss claims submitted by
lenders under our SFH guaranteed program. As of September 30, 2004, CSC
provided loss mitigation for approximately 110,000 guaranteed loans.
CSC is also supporting the rollout of the Lender Interactive Network
Connection (LINC), which is an Internet-based alternative for lenders
to submit loss claims electronically. Centralization will improve
efficiency, consistency, customer service to lenders, and provide
better management data to program officials.
USDA'S FIVE STAR COMMITMENT TO INCREASE MINORITY HOMEOWNERSHIP
The rural homeownership rate continues to outpace the national
rate. In 2004, it stood at 76.1 percent compared to the national rate
of 69.2 percent. But, while rural America has the highest percentage of
homeownership, we are committed to do more, particularly to assist more
minority families in living the American Dream. For USDA's part, we
developed a Five-Star Commitment to increase minority homeownership
opportunities.
Reducing Barriers to Minority Homeownership
Origination fees can now be incorporated into the loan amount.
Through reduction of such barriers the program guaranteed a total of
$3.18 billion in loans in fiscal year 2004, a record for the program.
Doubling the Number of Self-Help Participants by 2010
Over 54 percent of the families who participate in this program are
minorities. In fiscal year 2004, we helped over 1,100 families build
their own home.
Increasing Participation by Minority Lenders Through Outreach
Rural Development offices across the country have developed a
marketing outreach plan to increase participation in the guaranteed
loan program by lenders serving rural minorities.
Promoting Credit Counseling and Homeownership Education--Critical to
Successful Homeownership
Since the signing of an agreement with the Federal Deposit
Insurance Corporation to promote and utilize their ``Money Smart''
training program, nearly 700 Rural Development field staff received
training and will deliver the training to others. Over a third of our
State offices have already made the Money Smart Program available to
non-English speaking groups.
Monitoring Lending Activities to Ensure a 10 Percent Increase in
Minority Homeownership
USDA has jointly developed with the Departments of Housing and
Urban Development (HUD) and Veteran Affairs (VA) an internal tracking
system to measure the success of each of the 53 States and territories
we serve. Overall, the number of loans to minorities has increased by
more than 1,000 per year--an increase of more than 12 percent.
Improving Successful Homeownership
We are also pleased to report our achievement in helping our
customers remain successful homeowners. Rural Development has lowered
its direct loan housing program gross delinquency rate by 35.6 percent
and new loan delinquency rate by 61.8 percent over the past 5 years. As
of today, our gross delinquency rate is 12.85 percent and the new loan
delinquency rate is 1.92 percent. Our portfolio recently outperformed
the delinquency rate for sub-prime mortgage loans as tabulated by the
Mortgage Bankers Association's National Delinquency Survey.
To ensure that we were also providing a high level of customer
service, a satisfaction survey was recently completed. This was our
first independent homeowner survey and established a benchmark for
customer satisfaction. The survey was conducted by an outside
contractor and showed an average homeowner satisfaction rate of 8.6 on
a scale of 1 to 10. The study used the J.D. Power 2004 home mortgage
study to compare these results to the results of other organizations
providing financial services. The J.D. Power survey includes such well
known and respected major lending institutions as Bank of America,
Wells Fargo, and Chase. The average satisfaction level for the
organizations included in the survey is 7.2 with the highest rating
going to USAA (a private mortgage corporation) at 8.6. USDA Rural
Development is at the top of the list for customer satisfaction at 8.6
percent.
Rural Partners
In fiscal year 2006, we will continue to stretch the rural housing
program's resources and its ability to serve the housing needs of rural
America through increased cooperation with HUD and other partners. We
are committed to working with these partners to leverage resources for
rural communities. For example, we are working with HUD and expect to
adopt their ``TOTAL'' scorecard, modified for SFH guaranteed loans.
This cooperation between USDA and HUD will save time and money in
system development. Additionally, Rural Development information
technology staff and the CSC worked with HUD and VA to develop a one-
stop web portal, www.homesales.gov, to market government homes for
sale.
In our MFH program, HUD has been extremely helpful in sharing data
for development of our Comprehensive Property Assessment and in
providing knowledgeable, professional staff from their Office of
Affordable Housing Preservation to consult with before making
determinations on our rural portfolio. This eliminates duplicative work
and ensures better consistency.
CONCLUSION
Through our budget, and the continued commitment of President Bush,
rural Americans will have the tools and opportunities they can put to
work improving both their lives and their communities. We recognize
that we cannot do this alone and will continue to identify and work
with partners who have joined with the President to improve the lives
of rural residents.
I would like to thank each of you for your support of the rural
housing program's efforts. I look forward to working with you in moving
the fiscal year 2006 rural housing program budget forward, and welcome
your guidance as we continue our work together.
______
Prepared Statement of Peter Thomas, Administrator, Rural Business--
Coopertive Service
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to present the fiscal year 2006 President's Budget for USDA
Rural Development's business and cooperative programs.
This is my first opportunity to appear before you as administrator
of the rural business and cooperative programs USDA Rural Development.
I am honored to serve in this position, and to have the opportunity to
work with you to carry out Rural Development's fundamental mission to
increase economic opportunity and improve the quality of life in rural
America. Everyday, we bring people and resources together.
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 programs help close the gap in opportunity for under-served
rural areas and populations, moving them toward improved economic
growth by providing capital, technology, technical assistance, and an
improved quality of life. The $1.279 billion program level requested in
this budget for the rural business and cooperative programs will assist
in creating or saving 56,400 jobs.
BUSINESS PROGRAMS
Business and Industry Guaranteed Loan Program
For the business and industry (B&I) program, the fiscal year 2006
budget includes $44 million in budget authority to support $900 million
in guaranteed loans. We estimate that the funding requested for fiscal
year 2006 will create or save about 24,560 jobs and provide financial
assistance to 489 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 share a story to illustrate how our programs work
together to assist rural businesses. Unicep Packaging, Inc. is located
in City of Sandpoint, Idaho. The area has been affected by the decline
in the logging industry and has an increasing reliance on the tourism
industry for its economic base in addition to light manufacturing.
Dr. John Snedden started his business in 1990 in a Sandpoint
business incubator. In 1995, with the help of a USDA Rural Economic
Development Loan made through Northern Lights, Inc., the electric
cooperative in the Sandpoint area, the company constructed its initial
9,500 sq. ft. manufacturing plant, becoming the first company to
``graduate'' from the incubator. The business' original focus was
manufacturing professional tooth whitening products. Since then it has
shifted to unit-dose packaging and expanded its product lines and
manufacturing capacity to include custom packaging and contract
manufacturing for medical, dental, pharmaceutical, cosmetic,
nutraceutical, and industrial customers.
The B&I guaranteed loans of $2,150,000 to Unicep Packaging, Inc.
and $2,410,000 to Dr. John and Mary Jo Snedden financed a major
expansion completed in 2003, with the manufacturing facility now
encompassing 64,000 square feet. Dr. Snedden and his wife own the land
and building and lease the property to their business, Unicep
Packaging, Inc. Originally projected to create 62 additional jobs, the
expansion has resulted in the creation of 68 jobs. In addition, the
project has saved 58 jobs. On November 10, 2004, Unicep Packaging,
Inc., received the Business of the Year award from the Bonner County
Economic Development Corporation (BCEDC).
Intermediary Relending Program
The fiscal year 2006 budget includes $14.7 million in budget
authority to support $34 million in loans under the intermediary
relending program (IRP). The proposed level of funding will create or
save an estimated 26,172 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 Maine.
Wrabacon, Inc. was established in 1986 to design and build food and
drug packaging systems for customers throughout the United States. It
is located in a rural community with a population of less than 6,000
and a 5.8 percent state unemployment rate and a 7.1 percent town
unemployment rate. Wrabacon, Inc. employs about 13 highly skilled
engineers and technicians with an annual payroll in excess of $600,000.
The economic slow-down of 2001 had a deep effect on the company's sales
and cash flow. Recently, with the economic recovery, the company is
experiencing increased orders and sales.
Using IRP funds received from Rural Development, the Kennebec
Valley Council of Governments provided a $150,000 gap loan to bring
Wrabacon's accounts payable under control and to fund a part of the
company's operations. As a result of the loan, Wrabacon was able to
approach a commercial lender and received a $245,000 line of credit.
The combination of financing tools enabled Wrabacon to obtain needed
working capital, continue its growth, and maintain its level of
success. While retaining their existing employees, Wrabacon is now
anticipating the construction of a 30,000 square foot addition to their
existing facility for storage and expanded manufacturing. This is
expected to produce an additional 10 to 15 new jobs.
Rural Business Enterprise Grant Program and Rural Business Opportunity
Grant Program
No funding is requested for the rural business enterprise grant and
rural business opportunity grant programs. For grants like these that
are for community organizations to stimulate economic development, the
President's fiscal year 2006 Budget proposes to consolidate them into a
new economic and community development program to be administered by
the Department of Commerce. The new program would be designed to
achieve greater results and focus on communities most in need of
assistance.
Rural Economic Development Loan and Grant Programs
The fiscal year 2006 budget includes $25 million in rural economic
development Loans (REDL) and $10 million in rural economic development
grants (REDG). These programs represent a unique partnership, since
they directly involve an Rural Development electric and
telecommunications borrower in community and economic development
projects. We provide 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 REDLoan was utilized to
expand capacity and create jobs with higher than average wages in
Kentucky. P.J. Murphy Forest Products Corporation received a $250,000
loan through the South Kentucky Rural Electric Cooperative Corporation.
The family owned business, located in Bowling Green, produces bedding
for laboratory animals and wood flour which is used as filler in the
plastics industry. Demand for the company's products exceeded its
production capacity. The company built a new facility in Wayne County,
a designated Empowerment Zone, with an unemployment rate of 6.6 percent
at the time of the loan, as compared to the national unemployment rate
of 6 percent at the time of the loan. The $250,000 loan will be used to
purchase new equipment for the new facility. By locating the new
facility in the Empowerment Zone, the company will reduce its
transportation and shipping costs and create up to 15 new jobs in Wayne
County. These new jobs are expected to pay up to 1.8 percent above the
current average per capita income for the county, demonstrating the
Administration's commitment to increasing economic opportunities in
isolated rural areas.
Renewable Energy Grants Program
The fiscal year 2006 budget for the renewable energy systems and
energy efficiency improvements program proposes $10 million of budget
authority to support a $5 million grant program and a $286 million
guaranteed loan program. Fiscal year 2006 will be the first full year
of implementation of this combined loan and grant program. We
anticipate publishing a final rule to implement the program on a
permanent basis by August 2005. To date, we have relied on annual
notices of available funding, a procedure that is generally limited to
grant making.
These programs support the President's Energy Policy by helping to
develop renewable energy supplies that are environmentally friendly. In
addition, they contribute to local rural economies through the creation
of jobs and the provision of new income sources to rural small
businesses, farmers, and ranchers. We anticipate 292,000 households
will be served, and 3 million-kilowatt hours of energy generated while
reducing greenhouse gasses by 6.3 metric tons.
In fiscal year 2004, for example, a $10,000 grant was provided to a
farmer in Cassia County, Idaho. The farmer purchased and installed a
20kW wind turbine which began producing power in June of 2004. The
turbine produces power that is sold to Idaho Power. It also is expected
to supply the majority of the power consumed by the farmer's farm
machinery repair shop as well as his residence. The program directly
supports the President's goals of decreasing reliance on foreign oil,
increasing the use of renewable energy, and reducing toxic emissions
into the atmosphere.
COOPERATIVE PROGRAMS
The cooperative form of organizational governance continues to be a
cornerstone of business development in our rural communities. From the
large agricultural marketing cooperatives that bring additional value
to its members' products, to the small rural telephone cooperative that
brings broadband technology to its community's businesses and
residents, cooperative organizations provide our rural residents with
new and exciting job opportunities, enhanced educational and health
care opportunities, and the products and services that enable viable
rural communities to compete with their urban and suburban
counterparts.
The participatory, self-help foundation upon which cooperative
organizations are based is evidence of the very grass roots effort that
made our Nation great and continues to serve our rural communities
well. The mission of Rural Development's cooperative programs is ``to
promote the understanding and use of the cooperative form of business
as a viable organizational option for marketing and distributing
agricultural products.'' Cooperative program staffs successfully carry
out their mission by providing an array of educational and technical
assistance, research, and funding services to cooperatives, their
members, directors, and managers. Cooperative program staffs identify
and respond to the opportunities and challenges facing rural
cooperatives and agricultural producers, with a special emphasis on
helping its cooperative clientele adjust to the continually changing
economic forces in which they operate and compete in today's global
marketplace. The cooperative programs are relatively modest in size,
yet provide opportunities to encourage farmers and rural residents to
organize cooperatives as a way to expand their income base.
Value-Added Producer Grant Program
For fiscal year 2006, the budget requests $15.5 million for the
value-added producer grant program. The value-added producer grant
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 2005 that target grant funds to smaller, more
economically challenged independent producers. In so doing, not only is
Rural Development poised to infuse capital to meet rural America's most
critical needs, but it is able to assist more producers by funding
additional projects. With this budget request, Rural Development will
be able to fund approximately 60 projects.
The successful blending of modern technology with age-old tradition
is evident in Northern Iowa and Southern Minnesota where Amish dairy
farmers are producing and marketing blue cheese. With a $500,000 value-
added producers grant for marketing expenses, the Golden Ridge Cheese
Cooperative was able to turn a first place tie at the American Cheese
Society's 2004 contest into a profitable business opportunity. After
winning for its Schwarz und Weiss natural rind blue cheese at one of
world's most prestigious contests for specialty cheeses, ``Cheese is
now flying out of here.'' Forming a cooperative to produce cheese in a
modern plant was a difficult decision for the group because Old Order
Amish do not use modern machinery. However, the group went forward with
the modern cheese plant in order to preserve their way of life for
their families to enjoy. The plant now uses about 5,000 pounds of milk
a day that is purchased from the cooperative members and processed into
the Schwarz und Weiss cheese, as well as two other brands of blue
cheese. The plant employs about 20 full-time staff.
Since the passage of the Farm Bill in 2002, 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, $775,000 of the $15.5 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 and 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 2006, the budget requests $5.0 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. With this budget request, Rural
Development will be able to fund additional 3 or 4 centers.
A rural cooperative development grant made in 2003 enabled a rural
Missouri cotton growers' cooperative to participate in today's emerging
global markets. With assistance from the Missouri Enterprise Business
Assistance Center in Rolla, Missouri, Delta Fibers, located in
Caruthersville, Missouri, was introduced to Porter Tech, a Mexican
import company. After visiting the Delta Fibers site, officials from
Porter Tech entered into an agreement with Delta Fibers and in the
summer of 2004, Missouri cotton began shipment into Mexico.
Cooperative Research Agreements
For fiscal year 2006, the budget requests $500,000 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.
CONCLUSION
Mr. Chairman, and Members of the Subcommittee, this concludes my
testimony for the Rural Development fiscal year 2006 budget for rural
business and 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 Curtis M. Anderson, Acting Administrator, Rural
Utilities Service
Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to present the fiscal year 2006 President's Budget for
Rural Development utilities programs.
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 aging utility
infrastructure is occurring in the electric, telecommunications and
water sectors. Without the help of USDA Rural Development's rural
utility programs, rural citizens face monumental challenges in
participating in today's economy as well as maintaining and improving
their quality of life.
The $40 billion RUS loan portfolio includes investments in 7,500
small community rural water and waste disposal systems and
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 $6 million in budget authority
to support a program level of $2.52 billion. The President's budget
requests $920,000 in budget authority for a hardship program level of
$100 million and over $5 million in budget authority for a $100 million
program level for municipal rate loans. The direct Treasury rate loan
program level is proposed to be $700 million provided for with a budget
authority of $70 thousand. The guarantee of Federal Financing Bank
(FFB) direct loans is proposed at a program level of $1.62 billion with
no budget authority required. The FFB loans are made at the cost of
money to the Federal Government plus one-eighth of a percent. As a
result, no budget authority is required for this part of the FFB
electric loan program. Over the past 4 years, we have eliminated most
of the backlog of loan applications and we strongly believe that the
President's budget request will meet the demand during the fiscal year
2006.
The electric program provides financing for rural electric
cooperative to expand and upgrade the transmission and distribution
systems needed to meet the demands of economic growth across our
Nation.
ADVANCED TELECOMMUNICATIONS IN RURAL AMERICA
The area of rural telecommunications is the most rapidly changing
aspect of rural utilities infrastructure. Job growth, economic
development, and continued quality of life in rural America require
access to today's high speed telecommunications.
At the forefront of our telecommunications program is the broadband
program created by the 2002 Farm Bill. The broadband loan program is
distinctive from all other lending programs within the agency's
portfolio. Nearly half of the applicants are ``start-up'' companies
with little, if any, history of doing business in this industry. In
addition, two distinctly different characteristics are at play--
competition (rather than a monopolistic environment) and multi-state
businesses (rather than a single cooperative or independent company
serving a single rural community). Very few of the applications are
designed to serve a single rural community or even a small grouping of
geographically close rural communities. Most are applications
requesting to serve 50, 75, or in excess of 100 rural communities in
multiple States. In these multiple community applications, the vast
majority of the communities already have broadband service available in
some of the proposed service area; in some instances, from more than
one provider. As you can imagine, these factors contribute to increased
review and processing efforts.
In fiscal year 2004, the agency made 33 loans totaling $602.9
million which will serve 535 communities. This means those communities
are connected to global business opportunities, improved quality
education and modern health care that was not available without those
high speed telecommunications connections. Since 2001,
telecommunications loan programs have provided funding to make
available internet access to 1.3 million rural residents.
In order to balance fiduciary responsibility with mission delivery,
USDA is focusing on ``quality loans.'' A failed business plan
translates not only into loss of taxpayer investment, but deprives
millions of citizens living in rural communities of the technology
needed to attract new businesses, create jobs, and deliver quality
education and health care services.
Building on USDA's experience and local presence in serving rural
communities, we bring a unique lending expertise that includes the
tools necessary to examine, and provide solutions for, the financial
and the technical challenges facing entities dedicated to serving rural
America. This model has resulted in a lending agency with unprecedented
success in our other programs and we are dedicated to bringing that
same level of success to this program.
From the beginning, the President has recognized the importance of
broadband technology to our rural communities. The President stated,
``. . . we must bring the promise of broadband technology to millions
of Americans . . . and broadband technology is going to be incredibly
important for us to stay on the cutting edge of innovation here in
America.'' The Bush Administration has been unwavering in its support
for this and other programs that will revitalize and strengthen our
rural communities.
Let me assure you that we are on track, we remain focused, and we
will complete our mission. We must continue to balance fiduciary
responsibility with mission delivery everyday. Our unique lending
expertise--the marriage of financial and technical analysis--helps to
maximize the success rate of borrowers' business models. We will strive
to do our part for rural America in fulfilling the President's promise
of bringing broadband service to millions of citizens.
TELECOMMUNICATIONS BUDGET
The fiscal year 2006 budget proposes a broadband loan program level
of $359 million driven by $10 million in budget authority. This
replaces the mandatory funding provided in the Farm Bill. In addition,
$1.6 billion in unused loan authority that the Farm Bill provided
remains available.
Included in the discretionary broadband loans is $30 million in
direct 4 percent loans requiring $2.4 million in budget authority; $299
million in direct Treasury rate loans requiring $6.4 million in budget
authority and $30 million in guaranteed loans requiring $1.1 million in
budget authority.
In the regular telecommunications program, the fiscal year 2006
Budget calls for a program level of $669 million. Included is $145
million in direct 5 percent loans, $424 million in direct Treasury rate
loans, and $100 million in Federal Financing Bank (FFB) direct loans
guaranteed by RUS. All of this is driven by $212,000 thousand in budget
authority.
The budget also reflects the Administration's commitment to resolve
the complicated issues involving the administration of the Rural
Telephone Bank by proposing dissolution. When the Rural Telephone Bank
was created in 1971, there was no lender other than what was available
through the USDA. However, there are now major lenders that provide a
commercial source of rural telecommunications financing. In addition,
funding for this program has exceeded demand. There are about $300
million in unadvanced loan balances for loans available for 5 years or
more. Dissolution will result in the government being repaid for all
outstanding stock and the borrowers receiving a cash payout for their
outstanding stock. Since the Administration is recommending
dissolution, the budget does not request any budget authority to
support RTB lending for fiscal year 2006. To ensure that rural
telecommunications providers have access to adequate levels of
financing, the budget requests that the standard RUS telecommunications
loan programs be increased by $175 million.
DISTANCE LEARNING AND TELEMEDICINE
Distance learning and telemedicine technologies are having a
profound impact on the lives of rural residents. Helping rural schools
and learning centers to take advantage of the information age and
enabling 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 $25 million, the same as Congress
appropriated for fiscal year 2005. The Budget proposes to zero out the
loan program, simply because the nature of the prospective applicants,
schools and hospitals, have placed the ability to repay loans out of
reach.
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 waste 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 $449.6 million in budget authority for a
program level of $1.455 billion in loans and grants. The proposed loan
levels are $1 billion in direct loans and $75 million in loan
guarantees for water and waste disposal programs. The direct loan
program requires $69 million in budget authority. To augment the loan
programs, the budget request includes $377 million in grants. In
addition, the budget requests an additional $3.5 million in solid waste
management grants.
SUMMARY
Rural utility infrastructure programs are interwoven in the fabric
of USDA Rural Development programs. To provide safe, clean, water;
modern communications; and reliable electric power means businesses can
develop, homes can have light and heat, and markets can be opened to
the rest of the world.
______
Prepared Statement of Joseph J. Jen
Mr. Chairman, members of the Subcommittee, it is my pleasure to
appear before you to discuss the fiscal year 2006 budgets for the
Research, Education, and Economics (REE) mission area agencies of the
USDA. I have with me today Deputy Under Secretary Rodney Brown,
Administrator of the Agricultural Research Service (ARS) Edward
Knipling, Administrator of the Cooperative State Research, Education,
and Extension Service (CSREES) Colien Hefferan, Administrator of the
Economic Research Service (ERS) Susan Offutt, Administrator of the
National Agricultural Statistics Service (NASS) Ronald Bosecker, and
Office of Budget and Program Analysis' (OBPA) Deputy Director for
Budget, Legislative, and Regulatory Systems Dennis Kaplan. Each
Administrator has submitted written testimony for the record.
Before addressing the fiscal year 2006 budget, I want to express my
appreciation for the support received from Congress in our
appropriations for fiscal year 2005. We fully understand the pressure
the Congress, in addition to the Executive branch, is under to keep a
tight reign on the budget and control the Federal deficit. As much as
that was needed in developing the budget for fiscal year 2005, it is
even more true for the fiscal year 2006.
As you know, the President is committed to cutting the Federal
deficit in half over the next 5 years. Reducing the Federal deficit is
critical for continuing the current strength of the economy. As
Secretary Johanns said in his testimony before this subcommittee, ``no
department can opt out of helping in Federal deficit reduction. USDA
must play its role as much as any department.'' In the same way, REE is
not exempt from helping USDA achieve this government-wide goal.
The President's fiscal year 2006 budget proposes $2.320 billion for
the four REE agencies, $347.2 million less than the fiscal year 2005
appropriations, and close to the fiscal year 2005 President's proposed
budget of $2.403 billion. The importance of research in promoting a
competitive and secure food and agriculture sector, safe food, and a
healthy population, remains critical, even under constrained budgets.
Recently at the Agricultural Outlook Forum, Secretary Johanns said,
``Advances in science and technology have always been a part of our
success and they will continue to be.'' The phenomenal increases in
agricultural productivity over many decades in this country are the
product of science and technology. The same can be said for the
increasingly environmentally-friendly production practices used across
the Nation. Much of the improvement in our food safety system can be
attributed to research, and the recently released Dietary Guidelines
for Americans 2005 are firmly based on up-to-date research findings.
The bottom line is that science and technology are the foundation of
the American food and agricultural system.
REE agencies are at the center of the research system, supporting
the food and agricultural sector. They have a proud history over many
decades of finding solutions to the challenges confronting farmers,
ranchers, and others involved in agriculture, resulting in a high
return on the Federal investment to our Nation, which enjoys a
plentiful, affordable, and safe food supply. This remarkable history of
success continues today, yielding new knowledge, technologies,
statistics, and analysis for effectively addressing today's problems
and building the scientific and technological foundation for addressing
tomorrow's problems and opportunities.
However, high quality and relevant research cannot guarantee a
successful, competitive food and agricultural sector. Natural events,
market conditions, and resistance to the adoption of new technologies
can be barriers to the translation of new knowledge and technology into
business gains. At the same time, in the absence of such research, the
food and agricultural sector runs the risk of losing its competitive
edge in global markets.
A most notable example of addressing today's problems relates to
the recent arrival of soybean rust on our shores. For some time
scientists have been saying that this plant disease would inevitably
arrive in the United States, carried by winds from South America where
the disease has been residing for several years. REE agencies, their
partners in other USDA agencies, the research and scientific community,
State departments of agriculture, and soybean industry organizations,
have been preparing for this anticipated event that became a reality
last November in Louisiana. There are now 29 confirmed cases in nine
States.
Effective management and control of soybean rust relies on early
detection, correct identification, and proper and timely application of
fungicides. Starting in 1998, REE agencies have played a critical
leadership role with the ultimate goal of providing producers with
effective disease management options. For example, ARS scientists have
developed a real-time rapid detection test that has been adopted by the
Animal and Plant Health Inspection Service (APHIS). It will provide a
quick, easy and accurate means to detect soybean rust as part of a
national surveillance system. CSREES has been at the forefront of
training first detectors. In June of 2004, a regional soybean rust
teleconference attracted nearly 1,000 participants who grow or service
nine million acres of soybeans. CSREES, in collaboration with APHIS,
has also been instrumental in establishing a National Plant Diagnostic
Network of strategically located university-based laboratories that
support APHIS laboratories, facilitating rapid and accurate detection.
In September 2004, ERS published an article on the economic risks
of soybean rust in the United States in its publication, Amber Waves.
The article indicated that the economic effects of the pathogen's entry
into the United States could vary considerably, depending on growing
conditions, the severity and spread of the disease, and producers'
responses. This analysis presented policymakers and the soybean
industry with information to make more informed decisions in responding
to the detection of the soybean rust in 2004.
Similar to our work on soybean rust, the REE agencies and their
partners in the research community are also collaborating effectively
in genomics research. The future of agriculture is in genomics and
related fields such as proteomics and functional genomics. Sequencing
the genome of important agricultural plants and animals and learning
about the functions of different genes and genetic markers hold the
promise of a whole new generation of agricultural products that are
nutritionally enhanced, disease resistant, and less dependent on
fertilizers and herbicides. Genetic research is also central to the
development of rapid diagnostic tests, such as the ones used by APHIS
to identify avian influenza and exotic Newcastle disease.
Genomics is a prime example of research that takes years to
complete and years to realize many of the benefits, but that fact makes
it no less valuable. The ARS budget proposes an increase of $12.8
million for animal and plant genomics and related research and
preservation of animal and plant genetic resources. Under CSREES'
National Research Initiative (NRI), $11 million is proposed for
agricultural genomics research focused on the maize and swine genomes.
Another pioneering research direction, such as nanotechnology,
provides a new approach for addressing perennial challenges in
agriculture and capitalizing on new possibilities. Nanotechnology
refers to research and development at the atomic, molecular or
macromolecular levels, in the length scale of approximately 1 to 100
nanometer range. The technology takes advantage of novel properties and
functions of systems and structures because of their size. Already used
in both the medical and environmental arena, we are only beginning to
explore the promise this technology holds for agriculture. For example,
it could be used to develop healthy and tasty foods and products that
can be identified and tracked based on nanoscale bar codes. Eight
million dollars of the proposed increase in NRI funding will be
allocated to nanotechnology.
I would like to highlight three high priority programs in which the
REE agencies have a major role that would be enhanced with additional
funding in the President's proposed budget.
Food and Agriculture Defense Initiative.--The interagency Food and
Agriculture Defense Initiative, now in its second year, focuses on
strengthening the Federal Government's capacity to identify and
characterize bioterriorist attacks. The USDA component specifically
relates to protecting the food supply and agricultural production,
protecting USDA facilities, and ensuring USDA staff preparedness for a
potential event. The fiscal year 2006 budget provides increased program
funding of $35 million and $26 million for ARS and CSREES,
respectively, to expand their participation in this initiative. This
investment is just another step in President Bush's commitment to
protect homeland security.
The ARS increases will allow the agency to expand the National
Plant Disease Recovery System 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. The increased funds will also support the
strengthening of ongoing ARS research on rapid response systems to
selected agents, improved vaccines, and identification of genes
affecting disease resistance.
A $59 million request in the ARS buildings and facilities account
will complete the modernization of the National Centers for Animal
Health in Ames, Iowa. This consolidated ARS and APHIS facility will
house and support an integrated, multidisciplinary scientific
capability, combining animal disease research with the development of
diagnostic tools and vaccines. Including its biosecurity level two
(BSL-2), BSL-3, and BSL-3 Ag spaces, the Centers will be a state-of-
the-art facility, unique in the world.
The budget provides CSREES with $30 million, an increase of $21
million, to maintain and enhance the National Diagnostic Laboratory
Network of public agricultural institutions that serves as a backup to
APHIS' diagnostic laboratories for both animals and plants. The network
is playing an important role in the detection and control of soybean
rust and sudden oak death. The network laboratories are now in a
position to do confirmatory tests of soybean rust at the county and
farm level and are ready to detect and track the rust in the coming
growing season. The diagnostic laboratory network has also been
important in identifying sudden oak death on nursery stock before being
sold to the public. The initiative also includes $5 million for a
CSREES competitive program that would promote the training of food
system defense professionals who are critically needed in securing our
Nation's agricultural and food supply.
BSE Related Activities.--Bovine Spongiform Encephalopathy (BSE)
continues to be a challenge for the livestock sector. While no new BSE
has been detected in the United States since the first case in December
2003, two cases have been identified in Canada. Building on its current
BSE and related prion research program, the budget provides ARS with an
additional $7.5 million to further our scientific understanding of the
disease and develop technology needed by regulatory agencies to
establish science-based policies and control programs.
Nutrition Research and Education.--Concern continues regarding the
epidemic of obesity in our Nation. Particularly disquieting is the
incidence of obesity in children, estimated to be approximately 15
percent and essentially doubling between 1980 and 2000. At any age and
for any group, the causes of obesity are many and complex. They include
reduction in physical activity, greater reliance on convenience foods
and restaurants, and more basically, the consumption of more calories.
The reasons behind these behavior choices are complicated and not well
understood. Moreover, without a better understanding of the drivers of
these behaviors, it will be difficult to design effective types of
interventions, such as education programs, public information
announcements, or community campaigns, to help individuals and families
achieve and maintain healthy weights.
USDA, with its food assistance, nutrition education, and nutrition
research programs, plays an important role in promoting healthy
nutrition and weight, in general, and in addressing the obesity, in
particular. Contributing to the President's Healthier United States
initiative, the fiscal year 2006 budget proposes increases for ARS,
CSREES, and ERS that will strengthen the Department's capacity to
address this major national health problem and associated issues. The
increases will focus principally on gaining a better understanding of
the factors influencing food consumption patterns and the development
of effective interventions to promote healthy dietary choices and
prevent obesity.
An ARS increase of $6 million will improve the accuracy and ethnic
representation of ``What We Eat in America,'' a component of the
National Health and Nutrition Examination Survey (NHANES). This joint
USDA/Centers for Disease Control and Prevention survey is the principal
source of Nation-wide information on individuals' food consumption and
associate health status. An additional $2.3 million will be used for
nutrition research on obesity and nutrition survey research on the
energy and nutrient content of food consumed by minority populations.
The CSREES increase of $7.5 million in the NRI will focus on
understanding the environmental and social factors influencing
behaviors leading to childhood obesity.
A $0.6 million increase in the ERS budget will support a behavioral
economic research program to identify strategies for developing
effective nutrition messages that motivate consumers to adopt more
healthful diets.
The Expanded Food and Nutrition Education Program (EFNEP) in the
CSREES budget works directly with low-income individuals to help them
better manage food budgets, gain skills in safe food preparation, and
improve their diets. The program has a very impressive track record of
achieving positive, sustained behavioral changes related to food and
diet. The fiscal year 2006 proposed budget provides EFNEP an increase
of $4.5 million to $63 million, reaching a legislatively required
funding level needed for the 1890 Land-Grant Institutions to
participate in the program. The increase allows the program to reach
more people in more counties.
Before turning specifically to the REE agency budgets, I would like
to discuss a specific proposal found in the CSREES budget. The
Administration strongly believes that competitive research programs
provide the best mechanism for ensuring the allocation of funds to the
highest quality projects. Consistent with this policy position, this
year's CSREES budget proposes the redirection of funds from the Hatch
and McIntire-Stennis formula research programs to competitively awarded
grant programs over the next 2 years, and the reallocation of Animal
Health research formula funds in fiscal year 2006. A new State
Agricultural Experiment Station (SAES) Competitive Grants Program of
$75 million will support the same types of research at Agricultural
Experiment Stations that are currently supported by formula funds. The
budget also proposes eliminating the cap on indirect costs for CSREES
grants. Instead, the indirect cap for grants will be at a negotiated
level for each institution, a practice consistent with most other
Federal research grant programs.
Finally, all four REE agencies are currently initiating or
strengthening a formal process framed by the criteria of relevance,
quality and performance called for in the President's Management Agenda
initiative on research and development programs. These agency processes
are centered on reviews by external scientists that provide valuable
objective insights and recommendations for the programs, as well as
ratings that are used in the Program Assessment Rating Tool (PART)
employed by the Office of Management and Budget under the President's
Management Agenda. I am pleased to report that the three REE agency
programs that were reviewed under the PART in fiscal year 2004 received
scores of moderately effective, and we continue to improve agency
performance measures as part of a larger effort to enhance the
effectiveness of the REE programs.
REE AGENCY FISCAL YEAR 2006 BUDGETS
I would now like to turn briefly to the budgets of the four REE
agencies.
Agricultural Research Service.--As the principal intramural
biological and physical science research agency in USDA, ARS plays a
critical role for the Department and the larger agricultural community
in conducting research to develop new scientific knowledge and
technologies to solve high priority agricultural problems of broad
scope. It also is home to the National Agricultural Library (NAL), the
Nation's major information resource in the food, agricultural and
natural resource sciences. The fiscal year 2006 budget requests $1.1
billion for ARS. Within that total, $996 million is proposed for
research and information programs, approximately $100 million less than
was appropriated in fiscal year 2005. The $65 million proposed for
buildings and facilities is principally directed to complete the
modernization of the National Centers for Animal Health in Ames, Iowa.
The ARS budget proposes increases totaling $97 million for high
priority program areas of national and regional importance, such as
food safety, emerging and exotic diseases, BSE, human nutrition/
obesity, genomics and genetic resources, and climate change. To offset
these increases the budget proposes the elimination of approximately
$175 million in Congressional earmarks and $28 million in other project
terminations.
In addition to those previously described, the ARS budget proposes
increases for controlling emerging diseases and invasive species
affecting animals ($8.6 million) and plants ($17.7 million), a
significant portion of which is included in the Food and Agriculture
Defense Initiative. Targets for the fiscal year 2006 animal protection
research program include developing systems for rapid response to
selected agents and implementing a vaccine research program for control
and eradication of biological threat agents. Plant protection research
targets for fiscal year 2006 include developing and releasing to
producers new varieties of plant stock with insect and disease
resistance. An increase of $15.3 million in food safety research is
proposed to develop surveillance, sampling, and detection methods to
rapidly detect and identify foodborne pathogens as part of the Food and
Agriculture Defense Initiative.
High energy prices, instability in petroleum exporting countries,
environmental concerns, and the potential for new markets for
agricultural products have generated great interest in the development
of bioenergy. ARS continues to conduct research to generate scientific
knowledge and technologies to support production of affordable
bioenergy products. An increase of $2.5 million will be used to
accelerate this bioenergy research and technology program, as well as
other biobased products research. Fostering increased use of renewable
fuels and decreasing our dependence on foreign oil is a key component
of the President's energy plan.
Agricultural production is vulnerable to changes in climate, such
as rising temperatures, changing amounts of precipitation, increased
variability in weather, and increases in the frequency and intensity of
extreme weather events. These environmental changes also offer
opportunities for agriculture to help address the undesirable
accumulation of greenhouse gasses. An increase of $3.2 million in the
President's budget for the Climate Change Research Initiative will
support research providing information on balancing carbon storage,
emissions, and agricultural productivity in different agricultural
systems across the Nation. In particular, the research will generate
new knowledge on how to manage livestock, manures, fertilizers,
biological nitrogen fixation, and soils to minimize emissions and
increase sinks for greenhouse gasses. Other increases will support
research on agricultural air quality ($0.9 million) and water
protection and management ($0.9 million).
In the age of digital information, NAL is providing national
leadership through the development of the National Digital Library of
Agriculture. The requested increase of $1.9 million will allow NAL to
enhance development and delivery of content for the digital library, as
well as continue to integrate the AGRICOLA database into the digital
library.
Advances in information technology (IT), including the ability to
store and share information, are enabling agencies, such as ARS, to
gain great efficiencies and collaborative power in conducting research.
These advances, however, also make ARS' IT infrastructure more
vulnerable to cybersecurity attacks. The safety of sensitive research
information from unauthorized intruders is critical to the agency's
research program. As part of the USDA Homeland Security request, the
fiscal year 2006 budget proposes $3.6 million to strengthen ARS'
cybersecurity program by increasing the number of cybersecurity
officers and securing and implementing new cybersecurity tools.
Cooperative State Research, Education, and Extension Service.--The
President's fiscal year 2006 budget provides just over $1 billion for
CSREES. Compared to fiscal year 2005, the budget includes an increase
of $38 million in on-going programs and the elimination of $181 million
in unrequested increases. The Administration's request places a strong
emphasis on increases in the REE mission area for Food and Agriculture
Defense and peer-reviewed competitive grants. 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 producers and consumers.
As described above, the budget proposes shifting the research
formula funds under the Hatch Act, Cooperative Forestry Research
Program (McIntire-Stennis), and Animal Health and Disease Research
programs to competitive programs over the next 2 years. The proposal
for fiscal year 2006 redirects half of the Hatch and McIntire-Stennis
funds and all of the Animal Health and Disease funds. State
Agricultural Experiment Stations will be eligible to apply for grants
under the new State Agricultural Experiment Station (SAES) Competitive
Grants Program funded at $75 million. Other formula funds will be
shifted to the NRI which would be funded at $250 million, an increase
of $70 million over the fiscal year 2005 appropriation level. The
details of the new SAES program will be developed by CSREES in
consultation with the land grant institutions and other stakeholders.
Administration of research previously funded under the competitive
406 integrated program has been moved to the NRI and SAES Competitive
Grants Program, where the same range of research will be supported.
Finally, the budget proposes eliminating the current indirect cost cap
for CSREES grants, currently set at 20 percent. Instead, the cap will
be negotiated for each institution, following the standard practice of
most other Federal competitive research programs. Lifting the cap
responds to frequently voiced concerns that researchers in some
institutions are discouraged from applying for NRI grants because the
20 percent cap does not cover true indirect costs to the grantee
institution.
The NRI, the agency's flagship competitive program, continues to be
a very valuable avenue for supporting cutting-edge research conducted
by the finest scientists across the country. The $70 million increase
in the NRI for fiscal year 2006 will support new research in genomics,
nanotechnology for functional foods and food safety, and emerging
issues in food and agricultural defense. The investment in food and
agricultural defense will help fill critical knowledge gaps in real
time or near real time rapid detection tests and monitoring
surveillance systems of animal and plant disease. Extensive efforts are
underway in several agencies to produce rapid, sensitive detection
tools. However, their value relies on their being used correctly to
help minimize the probability that animal disease outbreaks in the
United States may spread widely before containment procedures begin.
CSREES will support research that fills this critical knowledge gap on
the use of these tests in real time or near real time detection and
monitoring.
The budget calls for an increase of $1.5 million in the CSREES
Graduate Fellowship Grant Program. Despite recent gains in support for
minority-serving institutions and programs encouraging diversity in
higher education and the workforce, the Nation faces chronic challenges
in promoting human capital development that enables all citizens to
realize their educational potential. The food and agricultural system
would benefit from an expanded base of skilled scientists, technicians,
and other professionals as the baby-boomers begin to retire. The
proposed increase will allow CSREES to further expand the number of
fellowships offered at the Master of Science level, essential for
recruiting minority graduate students.
Economic Research Service.--ERS is provided $80.7 million in the
President's fiscal year 2006 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. Its programs and products are
shaped principally to serve key decision-makers who routinely make or
influence public policy and program decisions.
The budget provides an increase of $5.8 million to continue the
development of ERS's Consumer Data and Information System, a data and
analysis framework of the post-farm gate food system. It is designed to
identify, understand and track changes in food support and consumption
patterns for use in policy decisions in the food, health, and consumer
arenas. Fiscal year 2005 appropriations provided funds for implementing
one component of the system, the Flexible Consumer Behavior Survey
Module (FCBSM). The survey will be coordinated with the NHANES survey
managed by the National Center for Health Statistics of the Centers for
Disease Control and Prevention. in order to link data on individual's
knowledge and attitudes about dietary guidance and food safety with
data on food intake, dietary status, and health outcomes.
The increased funds will support a second component, a Rapid
Consumer Response Module that will provide real-time information on
consumer reactions to unforeseen events and disruptions, current market
events, and government policies. The funds will also be used to create
a Food Market Surveillance System of surveys and analyses to identify
food consumption patterns and how consumers respond to changes in the
food market place and in customers' lifestyles over time.
The data and analytical capacity made possible through the proposed
Consumer Data and Information System is crucial to understanding the
quickly evolving consumer-driven food and agricultural system. The
information from this system will help producers and processors to
continue competing effectively in domestic and global markets and will
help policymakers to identify and develop strategies addressing
nutrition and obesity issues at different levels of the food system.
National Agricultural Statistics Service.--NASS' budget requests
$145.2 million, an increase of $16.7 million over fiscal year 2005.
NASS' comprehensive, reliable, and timely data are critical to policy
decisions, maintaining stable agricultural markets, and ensuring a
level playing field for all users of agricultural statistics.
The budget provides $7 million for continuing a multiyear
initiative begun in fiscal year 2004 to restore and modernize NASS'
core estimates program to meet data users' needs with an improved level
of precision. A second increase of $1.8 million will incrementally
improve statistically defensible survey precision for small area
statistics that are used by the Risk Management Agency and the Farm
Service Agency in USDA, among others.
The Census of Agriculture, conducted by NASS, provides
comprehensive data on the agricultural economy on a 5-year cycle. In
the fiscal year 2006 budget, NASS is requesting an increase of $6.5
million to prepare for the 2007 Census, including finalizing, field
testing and evaluating the questionnaire.
SUMMARY
In summary, I want to reinforce the message that, while developed
within the context of the need to reduce the Federal deficit, the REE
budget reflects a continuing commitment to investment in high priority
agricultural research, statistics, education, and extension programs.
As such, it supports the Federal commitment to solving today's problems
and challenges faced by agricultural producers and to developing the
knowledge and tools of cutting-edge science to address future problems
and explore new scientific advances. This concludes my statement. Thank
you for your attention.
______
Prepared Statement of Dr. Edward B. Knipling, 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 2006. The President's fiscal year 2006
budget request for ARS' research programs is $996.1 million, a net
decrease of $105.9 million from the fiscal year 2005 funding level. The
budget recommends $87.9 million in new and expanded research programs
which address the Nation's highest food and agriculture priorities.
Nearly half of the increase requested, $42.6 million, is in support of
the Federal Government's initiative to strengthen the Nation's homeland
security. ARS homeland security research focuses on the areas of food
safety, emerging and exotic diseases of animals and crops, and the
National Plant Disease Recovery System. There are also new and expanded
initiatives in critical research areas, such as Bovine Spongiform
Encephalopathy (BSE), invasive species of animals and plants, and
obesity. Other ARS program initiatives include research on genetics and
genomics, biobased products and bioenergy, air and water quality, and
climate change. The Agency is also requesting an increase of $9.3
million to finance pay costs required in fiscal year 2006.
The budget again proposes the termination of unrequested research
projects and resources appropriated in recent years. The appropriations
associated with the proposed project terminations total $203.1 million.
The savings to be achieved through the proposed terminations will be
redirected to finance the higher priority research initiatives proposed
in ARS' budget, as well as to help reduce overall Federal spending.
The ARS budget also includes $64.8 million under the Buildings and
Facilities account for the design, modernization, and construction of
ARS facilities. In particular, the budget requests $58.8 million for
the completion of the modernization of the National Centers for Animal
Health at Ames, Iowa.
PROPOSED PROGRAM INCREASES
Food Safety ($15.3 million).--Ensuring the safety of the Nation's
food supply is essential and vitally important to U.S. Homeland
Security. Bioterrorism against our food supply would affect the health
and safety of consumers and their confidence in the safety of the food
they consume. It would also have far-reaching impacts on the country's
economy, given that U.S. agriculture contributes over $1 trillion 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 that 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.
Emerging and Exotic Diseases of Animals and Plants ($19.5
million).--The United States is increasingly vulnerable to emerging
animal and plant diseases which could threaten the country'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 into the United States in recent
years from foreign countries include Avian Influenza and Exotic
Newcastle Disease. 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. With the proposed increase,
ARS will develop vaccines, intervention strategies, and diagnostics for
the prevention, detection, identification, control, and eradication of
biological threat agents. ARS will also strengthen its collaborative
partnerships at the national and international levels to obtain access
to essential agents and data.
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 and
deploy resistant plant resources using cultural, biological, and
chemical control strategies. 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), the Animal and Plant Health Inspection Service
(APHIS), and others. ARS will use the proposed increase to minimize the
impacts of devastating crop diseases by documenting and monitoring
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.
Bovine Spongiform Encephalopathy ($7.5 million).--BSE is a
progressive, degenerative, fatal disease affecting the central nervous
system of adult cattle. It is believed that eating contaminated beef
products particularly 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. We must discover
the cause of BSE and develop diagnostic tools to protect the U.S. food
animal industry and human health. The proposed increase will allow ARS
scientists to enhance the implementation of a national, coordinated
research program (with European scientists and others) in BSE
pathogenesis, diagnostics, and intervention.
Invasive Species ($6.8 million).--The security of the U.S.
livestock and poultry industries is threatened by the emergence of
animal parasites. Of particular concern is the worldwide emergence of
drug resistant nematodes and protozoa. Plants are also at risk. 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. ARS will
use the proposed increase to target its research on controlling Sudden
Oak Death, Salt Cedar, Yellow Starthistle, Lobate Lac Scale, Asian
Longhorned Beetle, and Emerald Ash Borer. It will also develop control
technologies for invasive drug resistant nematodes and protozoa of
livestock and poultry. These new technologies will help facilitate
trade of U.S. commodities and reduce the risk of new harmful species
being inadvertently introduced into the United States.
Geonomics ($9.2 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. 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 NIH's National Human
Genome Research Institute, CSREES, and the National Science Foundation.
Genetic Resources ($3.6 million).--The rate of extinction of lines
and strains of food animals and plants is rapidly 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., Foot and Mouth Disease, 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. The additional funding
will also enable further development of cryopreservation technologies
for the long-term storage of important animal germplasm (i.e., of
poultry, aquaculture, cattle and swine).
Human Nutrition/Obesity Research ($8.3 million).--Obesity is 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 obesity in children, middle-
aged adults and others.
Biobased Products/Bioenergy Research ($2.5 million).--Soaring
energy prices, environmental concerns, and depressed agricultural
commodity prices highlight the need to develop alternative domestic
sources of energy. In addition, chemical and energy companies are
seeking renewable feedstocks for the production of chemicals and
materials that are currently made from petroleum feedstocks. The
Biomass Research and Development Act of 2000 promotes the use of
biobased industrial products, and the Food Security and Rural
Investment Act of 2002 encourages the development and use of bioenergy.
ARS will focus its research on: (1) improving the quality and quantity
of agricultural biomass feedstocks for the production of energy, (2)
developing technologies to produce biofuels from agricultural
commodities, 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 and reduce the Nation's dependence on petroleum
imports from unstable regions.
Air and Water Quality ($1.8 million).--Millions of Americans are
exposed to air pollution levels that exceed the Environmental
Protection Agency's air quality standards. Agricultural activities,
such as animal production operations, which produce ammonia,
particulate matter, and volatile organic compounds, can adversely
affect air quality. Another concern is the Nation's 11,000 small
watershed dams that no longer meet current safety standards and need to
be updated. ARS will use the proposed increase to develop new
technologies that reduce gaseous and particulate matter emissions from
animal feeding operations. It will also improve water quality and
environmental benefits through agricultural systems research, as well
as develop technologies which can be used to rehabilitate the Nation's
aging watershed dams.
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 or adapt to 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 ($1.9 million).--In 2001, both a ``Blue Ribbon
Panel'' and an advisory board concluded that NAL needed increased
resources to meet its potential, taking advantage of technological
innovations for timely information access and retrieval. The proposed
funding will support the development of additional information content
for emerging diseases effecting crops and continue 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 ($4.2 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
2006 budget provides funding to cover costs associated with pay raises.
An increase of, $9.3 million, is critically needed to avoid erosion of
the agency's base resources. Absorption of these costs reduces the
number of scientists and support personnel essential for conducting
viable research programs.
PROPOSED PROGRAM DECREASES
ARS' budget proposes a decrease of $203.1 million that currently
finances unrequested or lower priority research projects added in
recent years. The fiscal year 2006 budget requires that we exercise
fiscal discipline to live within available resources. Within those
resource levels, the Administration has had to exercise its judgment
about what is needed to fund the highest priority programs. The
initiatives described earlier meet that test. Therefore, other
programs, such as those not previously requested by the Administration,
could not be funded within the Budget.
PROPOSED FUNDING FOR BUILDINGS AND FACILITIES
The fiscal year 2006 budget recommends $64.8 million for ARS'
Buildings and Facilities account. Most of the proposed funding, $58.8
million is for the National Centers for Animal Health in Ames, Iowa.
The National Centers for Animal Health are critical to supporting
American agriculture from both domestic and foreign diseases
intentionally or unintentionally introduced. The new facility combines
ARS' National Animal Disease Center with the Animal and Plant Health
Inspection Service's National Veterinary Services Laboratory and the
Center for Veterinary Biologics. The Centers will provide an
integrated, multidisciplinary scientific capability, combining animal
disease research with the development of diagnostic tools and vaccines.
This request will provide the remaining funds necessary to complete
this state-of-the-art complex.
ARS is also recommending $3 million for the planning and design of
new, up-to-date containment facilities at the Foreign Disease Weed
Science Research Laboratory at Ft. Detrick, Maryland. ARS scientists at
this facility conduct research on foreign plant pathogens that must be
kept under containment and pose a potential threat to American
agriculture.
In addition, ARS is recommending $3 million for continuation of
repairs to the National Agricultural Library. Constructed in 1968, many
of the building's systems and structures require replacement. In fiscal
year 2006 ARS plans to finance the replacement of windows and to
complete the repairs to the brick veneer.
Mr. Chairman, this concludes my presentation of ARS' budget
recommendations for fiscal year 2006. I will be happy to respond to any
questions the Committee my 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 submit the proposed fiscal year 2006 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 2006 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 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 2006 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 five of
the Department's strategic goals. Distinct performance criteria,
including strategic objectives and key outcomes with identified annual
targets, are defined for each program or activity. 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.
The CSREES fiscal year 2006 budget proposal supports the
Administration's commitment to competitive programs, in which awards
are made based on an objective peer-review process, and to streamlining
program delivery. Over the past several years, CSREES has demonstrated
the capacity to reshape competitive programs to address not only
fundamental science through individual investigator research, but also
programmatic, multi-institutional efforts aimed at short to
intermediate term problem solving, while maintaining the highest
standard of peer-review. We believe this is the most effective way of
achieving quality results that respond to critical program needs.
Therefore, the fiscal year 2006 budget proposes to: (a) phase out
funding for the Hatch Act and McIntire-Stennis Cooperative Forestry
programs within 2 years; (b) eliminate the Animal Health and Disease,
Section 1433 Research Program; and (c) redirect funding for Section 406
activities, formerly supported under the Integrated Activities account,
to the Research and Education account. Activities for these programs
will be supported through the National Research Initiative (NRI) and
the new State Agricultural Experiment Station (SAES) Competitive Grants
Program. This shift of funding will allow greater flexibility and
responsiveness to critical agricultural issues.
CSREES continues to provide new opportunities for discoveries and
advances in knowledge through the NRI program. The fiscal year 2006
budget request of $250 million for the NRI is a significant step
towards reaching the authorized level of $500 million, and it 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. Through the NRI Coordinated Agricultural
Project (CAP), multi-million dollar awards support multi-year large-
scale projects to promote collaboration, open communication, and
coordinate activities among individuals, institutions, States, and
regions to address priority issues of national importance. A $5 million
CAP award supports research to improve rice crops by using new genomic-
based tools. The support included a multidisciplinary team of 14
institutions that will engage rice extension and industry personnel in
agricultural genomics research to explore the potential of the
technology. Extension personnel also will educate the public on the
merits of applying genome information to improve agricultural crops.
Another $5 million CAP award is being led by the University of Maryland
and includes researchers and extension specialists representing 17
States. It is expected that the research and education from this
project will help prevent and control avian influenza, a disease that
continues to threaten the commercial poultry industry with millions of
dollars in losses.
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 the maize genome will be supported
through partnership with the National Science Foundation and the U.S.
Department of Energy. A comprehensive sequence resource will be
developed for the maize genome, providing the scientific community with
accurate and detailed information in a timely and cost-effective
manner. This information will include a complete sequence of all maize
genes and the full integration of the sequence with genetic and
physical maps leading to improved maize varieties. The NRI also will
support research on swine genomics. The Interagency Working Group on
Domestic Animal Genomics has identified the swine genome as a high
priority. The complete genomic sequence of swine is needed to provide
the basic information to pursue studies of gene function and marker-
assisted selection of animals for genetic improvement of swine in
production systems. We are requesting an increase of $11 million in the
NRI to support genomics research.
An increase of $4.6 million is proposed to address emerging issues
in food and agricultural defense under the NRI. The requested funding
will support research, education, and extension activities to increase
the safety and security of U.S. agriculture and food systems to
minimize threats to domestic plants and animals posed by infectious
diseases and invasive species.
In fiscal year 2006 an increase of $8 million is proposed under the
NRI for nanotechnology for functional foods and food safety. The
requested funds will support innovative research in nanoscale science
and engineering that will have specific applications to agriculture and
food systems. Nanotechnology studies will lead to nutrient dense,
healthful and flavorful foods with consumer appeal. Food function will
be enhanced by using nanotechnologies to facilitate the delivery of
health-providing bioactive nutrients to consumers.
Under the NRI, an increase of $7.5 million is proposed in fiscal
year 2006 for nutrition and obesity studies with emphasis on research
and evaluation methods to prevent childhood obesity. Research efforts
will be specifically aimed at understanding the environmental and
social factors influencing behaviors leading to childhood obesity and
how to change them to reduce and prevent obesity. In addition,
requested under the NRI is an increase of $39.3 million for ongoing
research and integrated research and education projects that focus on
water quality, food safety, and pest-related programs formerly funded
under the Integrated Activities account.
The fiscal year 2006 budget also proposes a change to the general
provisions of the fiscal year 2005 Consolidated Appropriations Act to
increase from a maximum of 20 percent to a maximum 30 percent the
amount provided for the NRI that may be used for competitive integrated
activities.
As part of a coordinated plan to shift formula funding to
competitively awarded grants and replace some of the multistate efforts
currently supported by formula funds, CSREES requests $75 million for
the new SAES Competitive Grants Program. As with the current multi-
State program, funding would be available to all State Agricultural
Experiment Stations. This program will support systemwide research
planning and coordination, as well as regional, State, and local
research in such areas as new products/new uses, social sciences, and
the environment, including ecosystem management. In fiscal year 2006,
it is proposed that research programs focused on methyl bromide and
organic transition could be supported through this program. However, we
will work closely with the SAES to ensure that this program also is
responsive to their needs.
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, within a few
weeks after soybean rust was first detected in Louisiana, private
interest disease surveillance activities were conducted by first
detectors. Samples submitted to diagnostic laboratories, as a result of
these first detectors, identified soybean rust in Mississippi, Florida,
Georgia, Alabama, Arkansas, Missouri, South Carolina, and Tennessee.
The budget proposal requests an increase of $21.1 million for a total
of $30 million to maintain the national diagnostic laboratory network.
The proposed increase also will allow the optimization of the security
value of the diagnostic network which includes: a coordinated ground
surveillance and response component with appropriate educational and
training programs, a more extensive plant and animal disease and pest
diagnostic capability, upgraded and enhanced equipment, increased
information technology, expanded connectivity of State laboratories,
and targeted research to develop improved diagnostic and treatment
capabilities. The network will continue its link with the Extension
Disaster Education Network (EDEN) to disseminate information to
producers and professionals at the State and county level, and to
expand these activities to provide more current and timely educational
resources.
CSREES proposes $5 million for the Agrosecurity Education Program
that will support educational and professional development for
personnel in securing 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 within the fiscal year 2006 budget request is a proposed
increase of $4.5 million for the Expanded Food and Nutrition Education
Program (EFNEP). The EFNEP program reaches predominantly minority, low-
income youth and families with nutrition education that leads to
sustained behavior changes. EFNEP works with various partners in
providing its services, including collaborating with the National
Institute of Health on the 5-A-Day program promoting increased
consumption of fruits and vegetables, and with the Centers for Disease
Control and Prevention on their VERBtm program sharing curriculum
material directed at teaching young people about the importance of
nutrition and physical activity. Increased funding also will allow
EFNEP to move forward with efforts to add a physical activity focus to
help combat the rising problem of obesity in children and adults.
Funding at this level will allow participation by 1890 institutions who
are uniquely positioned to reach those in need of nutrition education.
CSREES continues to expand diversity and opportunity with
activities under 1890 base and educational programs, and 1994 and
Hispanic-Serving Institutions educational programs. In fiscal year
2006, the budget requests an increase of approximately $1.5 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. Sustained 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 sustained support for the Outreach and Assistance
for Socially Disadvantaged Farmers and Ranchers Program (OASDFR).
CSREES will fund competitive multi-year projects to support outreach to
disadvantaged farmers and ranchers. 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.
The 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 2006 budget provides a $1.5
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, new
issues in 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 committed to improving the management of resources
through the development and implementation of an electronic grants
application and reporting system and the Research, Education, and
Economics Information System (REEIS). The fiscal year 2006 budget
proposes increases of $0.2 million and $0.3 million, respectively for
these efforts. Currently, CSREES receives approximately 6,000 proposals
annually, resulting in about 2,000 grants and cooperative agreements.
These numbers are expected to grow with the proposed program increases
in the fiscal year 2006 budget. We are committed to streamlining the
process through participation in a common Federal electronic
application and report system. We are rapidly developing and enhancing
the capability to electronically receive, process, and award proposals,
including electronic distribution to reviewers nationwide, and support
for electronic financial and technical reporting on awards. We are
implementing and expanding the capability of REEIS as a platform to
link some 40 different databases and to serve as a single source of
information on issues related to accountability, strategic planning,
and performance assessment.
CSREES also is requesting funds to accelerate and innovate the e-
Extension network that will offer Americans unparalleled access to
scientifically-derived and unbiased information, education, and
guidance about the things that matter the most in their lives. The
fiscal year 2006 budget proposal includes $3 million for the New
Technologies for Ag Extension Program to support systems that will make
available research-based education offered by the e-Extension network.
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 4 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 are within the program areas of the NRI. In order to ensure the
highest quality research which addresses national needs within
available funding, the fiscal year 2006 budget has therefore proposed
to eliminate earmarked projects.
The fiscal year 2006 budget proposes changes in the general
provisions including, as previously mentioned, increasing the amount
provided for the NRI that may be used for competitive integrated
activities from up to 20 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.
CSREES, in collaboration with university and other partners
nationwide, continually meets the many challenges facing the food and
fiber system. The programs administered by the agency reflect the
commitment of the Administration to further strengthen the problem-
solving capacity of Federally-supported agricultural research,
extension, higher education, and outreach and assistance programs. In
addition, we continue to enhance our responsiveness and flexibility in
addressing critical agricultural issues.
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 2006 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 2006 is $80.7 million. The agency is
requesting a $5.8 million increase 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.
CONSUMER DATA AND INFORMATION SYSTEM
In fiscal year 2006, ERS is requesting an increase of $5.8 million
to fully fund the Consumer Data and Information System which was
partially funded in fiscal year 2005. The new data would be used to
identify, understand and track changes in food supply and consumption
patterns, and to explore the relationship between consumers' knowledge
and attitudes and their consumption patterns.
Understanding consumer behavior is critical for addressing many of
the Nation's problems related to eating behavior. Obesity, in
particular, has become a major problem by increasing the risk for
chronic diseases, increasing medical costs, and reducing productivity.
Studies estimate that obesity is responsible for 365,000 deaths
annually, costs society $92.6 billion in increased medical
expenditures, and taxpayers finance half of these costs through
Medicare and Medicaid. Additionally, research is pointing to a decline
in life expectancy in the United States caused by the dramatic rise in
obesity, especially among young people and minorities. Many people
believe that formulating more effective programs and policies to end
obesity hinges on a clearer understanding of eating behaviors. This
initiative will support research that will provide the information and
knowledge to develop, implement, and target improved nutrition programs
and policies to reduce obesity.
Understanding consumer behavior is also critical for policy-making,
and program development and implementation in many other USDA program
areas. USDA officials require up-to-the-minute 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 our food. This initiative will
provide USDA with current food prices, sales volumes, food purchases, a
data base on consumer characteristics and purchasing behavior, and the
ability to quickly survey consumer reactions, knowledge, attitudes, and
awareness on a host of issues.
The Consumer Data and Information System has three major components
providing intelligence across and within the food and agricultural
complex. ERS has initiated work on the first component, a very limited
version of the Food Market Surveillance Report, which will be issued
quarterly to USDA officials. These quarterly reports will provide the
Department with the most up-to-date information on food prices,
purchases, and sales data publicly or privately available. This
information is critical to improve USDA decision-making and to provide
data for understanding consumer purchasing behaviors. Additional
funding is necessary for full implementation that will integrate food-
away-from-home consumption patterns and associated markets into the
system.
The second component, a new Rapid Consumer Response Module, will
provide real-time information on consumer reactions to unforeseen
events and disruptions, current market events, and government policies.
The questions in the module will be asked to members of several
proprietary consumer data panels currently maintained by private
vendors. The first proposed module is a special survey that will
provide a baseline for measuring consumer nutrition knowledge and
implementation of the new Dietary Guidelines. A follow-up survey of the
same respondents will provide information on consumer reaction to the
guidelines. An examination of the respondents purchase records would
reveal if dietary changes have actually occurred. Information will be
used to better implement dietary guidance strategies and will provide
policymakers with up-to-the-minute information and analyses. Another
planned survey will measure consumer knowledge of BSE and quantify the
relationships between knowledge levels and meat purchases.
Using fiscal year 2005 funding, ERS has initiated development of
the third component, a Flexible Consumer Behavior Survey (FCBS) that
will complement data from the National Health and Nutrition Examination
Survey (NHANES). The FCBS will provide information needed to assess
linkages among individuals' knowledge and attitudes about dietary
guidance, and food safety, 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. A team of representatives from government and non-
governmental entities is developing and implementing the survey.
Additional funding will provide data and research to link food prices
with the NHANES and FCBS data.
Two additional components of the budget request are (1) additional
staff to ensure the successful design and implementation of the
Consumer Data and Information System and (2) a research grants program
to complement and augment the ERS research program. A targeted research
program will provide outside expertise to assist with the complex task
of integrating survey information as well as provide seed funds for
innovative nutrition and obesity studies using the data system. The
design and implementation of this information system is currently being
accomplished using existing staff through the reallocation of
resources.
ERS CONTRIBUTIONS TO MISSION AREA GOALS
ERS supports the five USDA strategic goals to: (1) enhance economic
opportunities for agricultural producers; (2) support increased
economic opportunities and improved quality of life in rural America;
(3) enhance protection and safety of the Nation's agriculture and food
supply; (4) improve the Nation's nutrition and health; and (5) protect
and enhance the Nation's natural resource base and environment.
Goal 1: Enhanced Economic Opportunities for Agricultural Producers
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 assessments
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 2005, 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, 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. We will have databases available for
all major crop and livestock commodities within the next 2 years.
ERS provides assessment of the effects of farm policy on the food
and agricultural sector. The agency led the development of analytical
studies that responded to requests to USDA for studies in the 2002 Farm
Act. For example, the 2004 USDA report, Economic Effects of U.S. Dairy
Policy and Alternative Approaches to Milk Pricing, provides a
comprehensive assessment of the effects of current U.S. dairy programs
that takes into account the ongoing structural change in consumer
demand, farm structure, and the processing industry.
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 factors influencing these changes,
including the declining role of subsistence farming, effects of
urbanization, and the rising demand for convenience. ERS' China
briefing room (www.ers.usda.gov/briefing/china) provides access to
reports that cover both specific market conditions and policy
developments.
ERS continues to expand research on how the dynamics of consumer
demand, notably the growing consumption of and trade in high value
products, are shaping global markets. The United States has one of the
most complex trade patterns for high value food products, including
strong growth in imports. This is attributable to its large productive
capacity, high-income consumers, and its heavy involvement in overseas
investment in food processing and brand licensing. Research to
understand the relative importance of these and other factors builds on
recently completed studies and takes advantage of newly available
global data sets on the food retail industry.
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 allow ERS to continue to
explore in greater depth the market for organic products and other
commodities, and foods that are differentiated in the marketplace by
virtue of how or where they are produced. In 2004, ERS co-sponsored a
workshop with the Farm Foundation and Giannini Foundation that brought
together industry leaders, academics and government agency staffers to
identify research needed to understand the potential oversight role of
government relative to various types of differentiated products, and
the implications of alternative public or private regulatory
approaches. In 2005, ERS is adding a targeted sample of organic dairy
producers to USDA's annual Agricultural Resources Management Survey
(ARMS). Survey data for both organic and conventional operations will
enable, for the first time, a side-by-side comparison of the economic,
structural, and production characteristics of these farms.
Food price determination is increasingly important for
understanding domestic and international markets and for seizing
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.
In 2005, ERS will publish a series of reports on the impacts of
concentration and consolidation along the food marketing chain. One
report focuses on the dramatic change in the competitive dynamics of
retail markets, measuring the price impact of Wal-Mart's success in
marketing food. Another report examines supermarkets' resulting
consolidations and measures the extent by which associated increases in
the efficiency of supermarket operations would reduce food prices.
Another report summarizes research on consolidation and structural
change in the following food industries: meat packing, meat processing,
poultry slaughter and processing, cheese, fluid milk, flour milling,
feeds, and oilseed (corn, cottonseed, and soybean) processing. Findings
to be published in 2005 suggest that even industries with growing
demand experienced consolidation, and that technological change was the
primary driver of consolidation from 1970-90. In addition, during the
period under investigation, firms tended to acquire highly productive
plants and then improve their performance. The evidence refutes the
claim that mergers and acquisitions lead to worker dislocations and
lost wages.
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. ERS continues to conduct research to improve understanding
by decision-makers of changes in the agricultural sector's structure
(for example, the implications for producers of the increasing
replacement of open markets by contractual arrangements and vertical
integration). ERS is currently examining the potential efficiency-
enhancing motives for the increasing use of contracts by food
manufacturers and processors. At the farm level, the new Family Farm
Report--Structural and Financial Characteristics of U.S. Farms, which
was published in March 2005--documents the ongoing changes in farms'
structure, financial performance, and business relationships in
response to consumer demands, competitive pressures, and changing
opportunities for farm families. This report is based on analysis of
2001 ARMS data. A shorter Family Farm report based on 2003 ARMS data
will be released later in 2005.
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. While ERS analysis of the global benefits of trade
liberalization shows potential gains for all types of countries,
developing countries remain skeptical. Two common critiques are that
the analysis does not include potential market effects of decoupled
payments and does not include preferential market access by developing
countries to developed country markets. Current ERS research addresses
these questions with reports forthcoming in 2005 on the effects of farm
programs and an analysis of preferential trade programs.
Since 1980, legislation has encouraged patenting and license
agreements by Federal laboratories as a means of technology transfer.
The ERS report, Government Patenting and Technology Transfer, which
will be released in 2005, examines issues raised by government
patenting behavior through a case study of the Agricultural Research
Service. The report describes trends in patent use and considers its
effectiveness toward this policy goal. The report compares patenting
with alternative methods of technology transfer--such as scientific
publication--and analyzes factors that determine the most effective
means of promulgating the results of public research. Among the
findings are that increased patenting and licensing by USDA has
supplemented, not supplanted, the traditional instruments of technology
transfer such as scientific publications.
Data from ARMS underlie important estimates of farm income and
well-being, and constitute an essential component in much of ERS'
research. In 2004, the ARMS survey sample was expanded sufficiently to
allow ERS, with the National Agricultural Statistics Service (NASS), to
produce State level estimates for the largest fifteen States (as
measured by value of farm output). Also in 2004, ERS collaborated with
NASS to develop new survey instruments and data collection approaches
that merge mail surveys with in-person surveys, thereby reducing
respondent burden and improving the efficiency of data collection. In
addition, ERS has developed a path-breaking, web-based, secure ARMS
data retrieval and summarization prototype tool that is easy to use.
Implemented in 2004 in both public and restricted-access web versions,
this system retrieves ARMS data in formats customized to the customers'
needs, while assuring that sensitive data are not disclosed.
Goal 2: Support Increased Economic Opportunities and Improved Quality
of Life in Rural America
ERS research explores how investments in rural people, businesses,
and communities affect the capacity of rural economies to prosper in
the new and changing global marketplace. The agency analyzes how
demographic trends, employment opportunities, educational improvements,
Federal policies, and public investment in infrastructure and
technology affect economic opportunity and quality of life for rural
Americans. The rural development process is complex and sensitive to a
wide range of factors that, to a large extent, are unique to each rural
community. Nonetheless, ERS assesses general approaches to development
to determine when, where, and under what circumstances rural
development strategies will be most successful.
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 2005, 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: 2005, Rural Transportation at a Glance, Rural Children at a
Glance, and Rural Minorities at a Glance, all designed for a policy
audience, will summarize the most current information relevant
information on these topics.
In fiscal year 2005, ERS will disseminate research findings from an
ERS--Cornell University conference on ``Population Change and Rural
Society,'' held in January 2004. This conference showcased an
integrated set of demographic studies by leading social scientists that
analyzed critical demographic trends from the 2000 Census and drew
conclusions about their implications for economic and social life in
rural America. The conference focused on the policy implications of
changing demographic composition, economic restructuring, changing land
use patterns, and geographic patterns of chronic disadvantage and
emerging growth. The compendium of papers marks the first comprehensive
look at rural America based on data from the 2000 Census.
For over 30 years, ERS has captured aspects of the broad economic
and social diversity among rural areas in various county
classifications. These typologies have been widely used by policy
analysts and public officials to determine eligibility for and the
effectiveness of Federal programs to assist rural America. In August of
2004, ERS released a new county typology that maps out a geographic
portrait of the rich diversity of rural America in ways that are
meaningful for developing public policies and programs. In fiscal year
2005, ERS will publish a series of policy briefs that will address how
the economic, demographic, and policy themes identified in this
typology translate into effective rural development strategies for
enhancing rural economic opportunities and well being.
ERS is at the forefront of analysis assessing the critical role of
education in local, regional, and national economic development. The No
Child Left Behind Act of 2002 created a new era of increased school
accountability to ensure that our public schools adequately prepare
students for the increasingly high-skill ``new economy'' in which we
now live. However, rural schools and communities present a distinct set
of challenges to education reform. In 2005, findings from a conference
sponsored by ERS and the Southern Rural Development Center will be
published as special issues of two academic journals, the Review of
Regional Studies and the Journal of Research in Rural Education.
Research findings will focus on student achievement in rural schools,
and the linkages among schools, rural communities, and the labor
market.
Rural communities view increased educational investments as an
important part of economic development but are sensitive to the partial
loss of their investment in the form of youth outmigration to areas
with better opportunities. ERS is partnering with land-grant
universities in a research program designed to measure the relationship
between education and economic outcomes, both for the individual worker
and rural community, to help local communities better target their
economic development and school improvement efforts.
ERS also continues its long tradition of economic research on the
welfare of disadvantaged population groups in rural areas, including
low-income families, children, the elderly, and racial/ethnic groups,
as well as the Federal assistance programs that serve them. Through its
research on the measurement and dimensions of rural poverty, ERS helps
to better target and improve the effectiveness of Federal assistance
programs. In 2005, ERS will publish a study of the changing nature of
the rural low-skill labor force and its implication for the economic
well being of rural areas.
ERS conducts ongoing research on the impact and effectiveness of
Federal programs in rural areas. For example, ERS assists USDA's Rural
Development mission area in efforts to improve the delivery and
effectiveness of rural development programs through targeted economic
analysis. In 2005, ERS will continue to work with Rural Development
staff and cooperators at the University of Missouri to develop
measurable performance indicators for USDA rural business programs. In
addition, ERS is now focusing greater attention on the effects of
Federal farm policy on rural areas and farm households in preparation
for the upcoming debate over the 2007 Farm Bill. A 2005 conference,
jointly sponsored by ERS and the National Center for Food and
Agricultural Policy, will help provide policymakers with a better
understanding of the linkages between farm policy, farm households, and
rural communities. A new ERS briefing room on our website will be
continually updated during 2005 to provide an economic assessment of
the implications of farm policy reform and adjustment for agriculture
and rural America.
Goal 3: Enhance Protection and Safety of the Nation's Agriculture and
Food Supply
ERS research is designed to support food safety decision-making in
the public sector and to enhance the efficiency and effectiveness of
public food safety policies and programs. The program focuses on
valuing the societal benefits of reducing and preventing illnesses
caused by microbial pathogens; assessing the costs of alternative food
safety policies; assessing industry incentives to enhance food safety
through new technologies and supply chain linkages; evaluating
regulatory options and change; and exploring linkages between food
safety and international trade. ERS has worked closely with various
USDA agencies and the Centers for Disease Control and Prevention (CDC)
on various pathogen risk assessments and on analyzing the benefits and
costs of implementing the Hazard Analysis and Critical Control Points
(HACCP) rule. ERS and the Food Safety and Inspection Service (FSIS)
work together to identify research projects and activities that address
the needs of the Department.
As part of several national homeland security activities, ERS
continues to develop the capacity to assess the impact of accidental
and intentional disruptions to our food and agricultural system. 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 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. Results from both
studies are expected in 2005.
ERS is heading a project supporting the Department's reevaluation
of the appropriate roles for performance versus process standards in
enhancing food safety. Recent massive recalls of beef and poultry
products, the creation of international food safety standards, and a
recent court ruling rejecting failure to meet Salmonella standards as a
legal basis for closing a meat-processing plant have created concern
about the basic principles behind U.S. food safety regulation. This
project analyzes the costs and benefits of food safety performance
standards and develops guidelines for the application of such
standards. Preliminary results indicate that recent advances in testing
technology provide more accurate results, shorter time to result,
greater ease of use, and lower costs than in the past.
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 2005, ERS is working 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.
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 and the Security Analysis System for U.S.
Agriculture (SAS-USA), which is a framework to tie systematically all
food supply processes from farm production, food manufacturing,
distribution of food products, to food consumption in every region of
the country. 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. In
2005, the GSEA team expects to launch joint projects with the Army
Corps of Engineers and several national labs to improve our ability to
measure the economic consequences in the food and agricultural
industries caused by disruptions in other critical infrastructures. 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.
Goal 4: Improve the Nation's Nutrition and Health
ERS studies the relationships among the many factors that influence
food choices and eating habits and their health outcomes. The roles of
income, age, race and ethnicity, household structure, knowledge of diet
and health relationships, nutrition information and labeling, and
economic incentives and policies that affect food prices and
expenditures are of particular interest. Reducing obesity through
understanding its costs to individuals and society, how income, diet
and health knowledge affect obesity status, and considering private
versus public roles in reducing obesity is a priority for this
Administration.
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. In 2005, 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.
Through the Food Assistance and Nutrition Research Program (FANRP),
ERS conducts studies and evaluations of the Nation's food and nutrition
assistance programs. FANRP research is designed to meet the critical
information needs of USDA, Congress, program managers, policy
officials, clients, the research community, and the public at large.
FANRP research is conducted through internal research at ERS and
through a portfolio of external research. Through partnerships with
other agencies and organizations, FANRP also enhances national surveys
by adding a food and nutrition assistance dimension. FANRP's long-term
research themes are dietary and nutritional outcomes, food program
targeting and delivery, and program dynamics and administration.
ERS continues to fund a national survey of food security and
hunger, conducted by the Census Bureau, as a supplement to the Current
Population Survey (CPS). The survey measures the number of U.S.
households that face difficulties in putting enough food on the table.
A new ERS effort, in cooperation with USDA's Food and Nutrition
Service, is designed to assess and strengthen food security measurement
by providing support for a National Academy of Sciences panel. The
panel is reviewing methods and procedures that underlie the current
measure and will consider various approaches to enhance these methods
for monitoring, evaluation, and related research purposes.
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. A panel of experts was compiled, and the first
stage of the data review was a workshop held in the spring of 2004. A
final report will be issued by the Committee in 2005.
Goal 5: Protect and Enhance the Nation's Natural Resource Base and
Environment
In this area, ERS research and analytical efforts, in cooperation
with the Natural Resources Conservation Service (NRCS), support the
development of Federal farm, conservation, and environmental policies
and programs. These efforts require analyses of the profitability and
environmental impacts of alternative production management systems in
addition to the cost-effectiveness and farm income impacts of public
sector conservation policies and programs.
With passage of the Farm Security and Rural Investment (FSRI) Act
of 2002, USDA looked to ERS to provide comprehensive, detailed, and
understandable information to public and private users, including
information on programs in the Conservation Title. In addition, ERS
provided extensive support to other USDA agencies in developing rules
for implementation of Farm Bill conservation programs. ERS participated
in Farm Service Agency (FSA) and NRCS working groups on the
Conservation Reserve Program (CRP), the Environmental Quality
Incentives Program (EQIP), the Conservation Security Program (CSP), and
implementation of conservation technical assistance by third-party
technical service providers. In 2004, ERS contributed substantially to
the NRCS benefit-cost assessment for CSP. For instance, ERS helped to
prepare the NRCS report, Conservation Security Program: Benefit Cost
Analysis released in June 2004. ERS analysts played a central role in
both conceptualizing and developing a model of CSP participation that
is recognized by NRCS and others within USDA as an important
contribution to USDA's analytic capability with respect to conservation
programs. ERS assisted FSA with the implementation of the CRP program
by providing input data and suggesting ways to improve the Willingness-
to-Bid model used by FSA to set an environmental benefits index (EBI)
cutoff for enrollment in the twenty-ninth signup. ERS also participated
in forward-looking planning exercises concerning major CRP enrollment/
reenrollment decisions expected in 2007.
The FSRI sharply increased conservation funding and earmarked most
of it for working lands conservation rather than for farmland
retirement. The ERS report, ``Flexible Conservation Measures on Working
Land: What Challenges Lie Ahead?'' to be released in 2005, tackles the
issues and complexities that pertain to the design of working-land
payment programs (WLPPs). Program design and implementation will
largely determine the extent to which environmental goals are achieved,
and whether they are achieved cost-effectively, i.e., at a minimum cost
to society. A cost-effective program: (1) anticipates economic and
environmental outcomes associated with enrolling specific producers;
and (2) attracts and enrolls producers that are most likely to deliver
the desired outcomes. The report analyzes the critical role of program
design in gathering information (from producers in a bidding process)
and using that information to identify and enroll producers who,
collectively, are most likely to achieve program objectives cost-
effectively. Empirical analysis also shows how the environment,
commodity prices, and farm incomes could be affected by alternative
designs.
In 2004, ERS transmitted to Congress the report, The Conservation
Reserve Program's Economic and Social Impacts on Rural Counties, as
mandated by the FSRI, as well as the public version released in October
2004, The Conservation Reserve Program: Economic Implications for Rural
America. These reports address a number of concerns about the
unintended consequences of high levels of enrollment in the CRP. Our
research finds no statistically significant evidence that high
enrollments in the CRP have had a systematic, adverse effect on
population or community services in rural counties across the country.
In the course of the production of food and fiber, agriculture also
produces many by-products (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 2005, 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.
The report also provides an in-depth look at the costs, benefits, and
tradeoffs associated with the use of indices (such as the EBI used to
implement the CRP) 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, to
be 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.
Many economists, ecologists, and wildlife biologists have argued
that less productive agricultural lands are environmentally sensitive.
If true, then this would have important implications for agricultural
policy. For instance, programs that stimulate production may cause
farmers to bring the relatively less productive lands that are
environmentally more sensitive into production. Using data from the
USDA's National Resources Inventory, the ERS report to be released in
late 2005, Land-Use Change and the Environment at the Extensive Margin
of Cropland, finds that there is a general relationship between lower
productivity and environmental sensitivity in terms of several agri-
environmental indicators examined, but this relationship does not hold
within all locations.
In fiscal year 2004, 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, APHIS
used an ERS-supplied pest ranking decision tool to determine which
pests would be on its 2004 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 economic 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. This study quantifies the
potential economic impacts in the United States in both the first year
of SBR's entry and subsequent years when producers have adapted to this
new pest. On November 10, 2004, APHIS confirmed the presence of SBR on
soybean leaf samples taken from two plots associated with a Louisiana
State University research farm. The already published ERS analysis was
used by the USDA in refining rapid response strategies in anticipation
of SBR entry to North America.
In addition to ERS-led analysis of invasive species issues, PREISM
has allocated over $2.4 million in extramural research cooperative
agreements through a peer- reviewed competitive process. To share
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 a workshop in August 2004
with 90 attendees from academia and Federal agencies. Among the
projects funded in fiscal year 2004 were a GIS-based decision support
tool to help forest land managers prioritize their efforts to eradicate
or control invasive species, and a decision tool for establishing
efficient border protection controls against potentially damaging
species under conditions of extreme uncertainty and limited budgets.
Customers, Partners, and Stakeholders
The ultimate beneficiaries of ERS' programs are the American
people, whose well-being is improved by informed public and private
decision-making that leads to more effective resource allocation. 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.
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.
______
Prepared Statement of R. Ronald Bosecker, Administrator, National
Agricultural Statistic 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 2006 budget request for the National
Agricultural Statistics Service (NASS). This agency administers the
U.S. agricultural statistics program, created in USDA in 1863, and,
beginning in 1997, conducts the U.S. Census of Agriculture, first
collected in 1840. Both programs support the basic mission of NASS to
provide timely, accurate, and useful statistics in service to U.S.
agriculture.
major activities of the national agricultural statistics service (nass)
The continual progression of American farms and ranches to make
greater use of agricultural science and technology, coupled with the
growing complexity of global marketing, increases 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. Voids in
relevant, timely, and accurate data contribute to wasteful
inefficiencies throughout the entire production and marketing system.
The Farm Security and Rural Investment Act of 2002 created the need
for several new data series. For example, the 2002 Census of
Agriculture data were used to help prepare the first annual report to
Congress on USDA program participation of socially disadvantaged
farmers and ranchers. Census data on race, ethnicity, and gender were
used at the county level in preparing the report. These Census of
Agriculture data are the only source of comprehensive information
available on the agricultural sector. The 2002 Farm Bill also
reinforced the importance of existing data series to ensure the
continuation of farm security and rural investments. For example,
counter-cyclical payments are determined in part by market year average
prices determined by NASS. Each $0.01 change in the average corn price
may have resulted in a change of more than $110 million in counter-
cyclical payments during 2004. Similarly, large payment changes also
apply for the other program crops. These are only a few specific data
needs required by the Statute, but they clearly highlight the
importance of a strong, reliable agriculture statistics program.
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 often
cited by others as an excellent model of successful State-Federal
cooperation. This joint State-Federal program helps meet State and
national data needs while minimizing overall costs by consolidating
both staff and resources, eliminating duplication of effort, and
reducing the reporting burden on the Nation's farm and ranch operators.
NASS' 46 field offices, which cover all 50 States and Puerto Rico,
provide statistical information that serves national, State, and local
data needs.
NASS statistics contribute to providing fair 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. Empirical evidence
indicates that an increase in information improves the efficiency of
commodity markets, minimizing price fluctuations for U.S. producers.
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.
NASS statistical reports are critically important to assess the
current supply of and demand for 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. For example, the U.S.
cattle and hog industries requested joint reports of United States and
Canadian livestock. The resulting publications provide composite
information on potential supplies and inventories of cattle and hogs.
This information can be used to make informed decisions, such as
marketing, expansion, or contraction, in today's global economy.
Without these data, the United States would be at a disadvantage in
global trade discussions and would find it very difficult to secure
global contracts and develop strong, reliable relations with our
trading partners.
NASS has been a leader among Federal agencies in providing
electronic access to information. All reports issued by NASS'
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 of NASS' national statistical
reports and data products, including graphics, are available on the
Internet, as well as in printed form. 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 of NASS's 46 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 released the results of the 2002 Census of Agriculture in the
Spring of 2004. 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. Important
demographic information supplied by the Census of Agriculture also
provides a very valuable database for developing public policy for
rural areas. The 2002 Census of Agriculture included for the first time
data on demographic information for up to three operators, enhanced
data on agricultural activity on American Indian Reservations, acreage
of organically produced crops, and information on production contracts
used in agriculture. Additionally, agriculture census results reflected
the status of all U.S. farms instead of only those represented on the
census mail list as was done previously. New statistical methodology
was employed to provide the most complete picture of U.S. agriculture
in many years. Census data were also released for agriculture census
programs in Puerto Rico, Guam, and the Commonwealth of the Northern
Mariana Islands. All of these results are available on the NASS
Website.
Statistical research is conducted to improve methods and techniques
used for collecting and processing agricultural data. This research is
directed toward achieving higher quality census and survey data with
less burden to respondents, producing more accurate and timely
statistics for data users, and increasing the efficiency of the entire
process. For example, NASS officially deployed its Electronic Data
Reporting (EDR) system in 2004, which provides respondents with the
ability to electronically complete the data collection process and thus
reduces reporting burden. Plans are to complete the system with the
electronic availability of the 2007 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 fiscal year 2005 budget included $2.7 million for agricultural
estimates restoration and modernization. These funds provided the
continued development of a foundation for quality improvements in
forecasts and estimates. The 2005 funds are being used to improve the
precision level from commodity surveys conducted by NASS. The majority
of the funding is being allocated to increasing sample sizes and the
data collection activities of local interviewers throughout the Nation.
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 over 400 separate
reports.
Approximately 65 percent of NASS's staff are located in the 46
field offices; 21 of these offices are collocated with State
Departments of Agriculture or land-grant universities. NASS' State
Statistical 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 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, which are important additions to the
database. Surveys conducted in cooperation with the Economic Research
Service (ERS) also 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 138 special surveys
in fiscal year 2004 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 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. NASS's
international programs focus on developing and emerging market
countries in Asia, Africa, Central and South America, and Eastern
Europe. Accurate information is essential for the orderly marketing of
farm products. 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 Brazil, China,
El Salvador, Guatemala, Kazakhstan, Mexico, Nepal, Russia, and the
Ukraine. In addition, NASS conducted training programs in the United
States for 219 visitors representing 24 countries. These assistance and
training activities promote better quality data and improved United
States access to 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, displays 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.
FISCAL YEAR 2006 PLANS
The fiscal year 2006 budget request is for $145.2 million. This is
a net increase of $16.7 million from fiscal year 2005.
The fiscal year 2006 request includes increases to continue
restoration and modernization of NASS' core survey and estimation
program ($7.0 million); improvement in the statistical integrity and
standardization of the data collection and processing activities of the
Local County Agricultural Estimates program ($1.9 million); cyclical
activities associated with preparing and conducting the Census of
Agriculture ($6.5 million); and funding for increased pay costs ($1.3
million).
An increase of $7.0 million and 10 staff years are requested to
fund the continuation of the restoration and modernization of NASS'
core survey and estimation program. This increase will be directed at
continuing to restore and modernize the core survey and estimation
program for NASS to meet the needs of data users at necessary 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 supplying important economic, environmental, and demographic
data that are used to impact lives of rural residents. Escalating
survey expenses, staff costs, and operating expenses, including higher
contract costs, forced detrimental adjustments to many of the Agency's
survey and estimates programs. These actions over time led to
reductions in the quality of the survey data on which NASS estimates
are based. Funding received in fiscal year 2004 and fiscal year 2005
was part of this multi-year initiative to restore survey accuracy to
previous levels. These changes were designed to increase precision at
the State and regional levels to promote the NASS goal for fiscal year
2005 of reaching precision target levels at least 75 percent of the
time for major survey indications. The additional funding requested in
fiscal year 2006 will allow continued improvements and provide the
necessary resources to reach precision target levels an estimated 83
percent of the time.
An increase of $1.9 million and 4 staff years are requested to
provide for data acquisition for the annual integrated Local County
Agricultural Estimates program. Local area statistics are one of the
most requested NASS data sets, and are widely used by private industry,
Federal, State and local governments and universities. This funding
supports the NASS goal to incrementally improve survey precision for
small area statistics. Current estimates are derived through a survey
process that does not support scientific probability design to produce
statistically defensible survey precision. Proper follow-up data
collection activities and redesign of survey systems will improve the
critical annual county-level data. The Risk Management Agency (RMA)
uses these statistics in indemnity calculations for Group Risk Plans
and the Group Risk Revenue Plans as part of the risk rating process.
This affects premium levels paid by producers. The FSA uses county
estimates to weight posted county prices to national loan deficiency
payments, and as an input to assist producers to update their base
acreage and yields as directed by the 2002 Farm Bill. In addition,
financial institutions, agriculture input suppliers, agricultural
marketing firms, and commodity transport firms utilize county level
data to make informed business decisions.
An increase of $6.9 million and 15 staff-years is requested for the
Census of Agriculture. The Census of Agriculture budget request is for
$29.1 million. This includes a cyclical program cost increase of $6.5
million and $389,000 for employee compensation. The available funding
includes monies to prepare for the 2007 Census of Agriculture and to
conclude analysis and publication of the Census of Aquaculture in
December 2006. The increase will be used to finalize questionnaire
content for the 2007 Census of Agriculture. Mail list development
activities will continue during fiscal year 2006 with the assistance of
locally employed enumerators. Contract employees will aid in updating
and streamlining census processing systems needed for conducting the
Census of Agriculture and its follow-on surveys. Finally, hardware and
software will be upgraded to allow for testing and implementation of
the processing systems.
This concludes my statement, Mr. Chairman. Thank you for the
opportunity to submit this for the record.
______
Prepared Statement of J.B. Penn
Mr. Chairman and Members of the Committee, I am pleased to appear
before you this afternoon to present the 2006 budget and program
proposals for the Farm and Foreign Agricultural 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 2006, 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 programs and services of the FFAS mission area
provide the foundation for the Department's efforts to ``enhance
economic opportunities for American agricultural producers'', one of
the five primary goals in the Department's strategic plan. The wide
range of services provided by our agencies--price and income support,
farm credit assistance, risk management tools, and trade expansion and
export promotion programs--are the bedrock for ensuring the economic
health and vitality of American agriculture.
FFAS also plays an important role in protecting and enhancing the
Nation's natural resource base and environment, another of the
Department's strategic goals, by providing critical support for
improved management of private lands.
The 2006 President's budget supports continuation of these diverse
activities and ensures our continued efforts on behalf of America's
agricultural producers. Although the budget does contain proposals for
savings in both discretionary and mandatory programs as part of
government-wide efforts to reduce the deficit, it fulfills our
priorities of promoting and enhancing the economic opportunities of our
farmers and ranchers and for protecting the environment.
FARM SERVICE AGENCY
The Farm Service Agency (FSA) is our 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
The 2002 Farm Bill required FSA to undertake the massive task of
implementing a complex set of new farm programs within a short time
period, and the agency met that challenge successfully and with
distinction. With the major workload associated with Farm Bill
implementation having been completed, FSA recently has faced other
program implementation challenges that have required the full
commitment of agency resources. Last October, the President signed a
disaster assistance bill that 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. Sign-up for crop
disaster assistance began March 14th, and payments began by March 30th.
FSA also has 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 last year.
Also enacted last October was legislation containing the so-called
tobacco buy-out provisions that has major consequences for the Federal
tobacco program. Under those provisions, transition payments will be
made to tobacco quota holders and producers, ending all elements of the
Federal tobacco price support program effective with the 2005 crop. FSA
is now actively engaged in the steps needed to implement the
legislation as quickly and efficiently as possible. Sign-up for the
transition payment program began on March 14th and will continue
through June 17th.
The 2006 budget is designed to ensure the agency's efforts can move
forward. It provides a total program level for FSA salaries and
expenses of nearly $1.4 billion, a net increase of $70 million above
2005. The requested level will support a ceiling of about 5,500 Federal
staff years and 10,300 non-Federal staff years. Staff levels have been
reallocated among FSA's program activities to reflect the decreased
workload associated with farm income program support and other areas,
while accommodating rising workload needs for conservation and other
programs. Permanent full time non-Federal county staff years are
estimated to remain unchanged from this year's level, while temporary
staff years are reduced with the completion of disaster assistance
activities.
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. By
2006, FSA expects all of its major programs will be web-based and
available on-line.
FSA also continues to implement Geospatial Information Systems
(GIS) and Global Positioning System technology that will provide
increasingly better services in the future and should result in
significant long-term savings. Funding for FSA IT modernization and
related GIS initiatives has been provided in the Common Computer
Environment account managed by the Department's Chief Information
Officer.
Finally, FSA is making considerable progress in reaching out to its
small farm and minority constituency base. In January, final guidelines
were implemented that provide reforms to ensure fair representation for
socially disadvantaged farmers and ranchers in county committee
elections. This has been complemented by expanded communication and
outreach activities to increase the number of minority and women
nominees in the election process.
Commodity Credit Corporation
Domestic farm commodity price and income support programs are
financed through 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 2004, as a result of strong prices and a healthy farm economy,
CCC net expenditures declined 39 percent below the previous year to
$10.6 billion. For 2005 and 2006, CCC outlays are expected to increase
significantly due to recent large crops that have contributed to
growing supplies and weakened prices. CCC outlays are now projected to
reach $24.1 billion in 2005 and then decline to $19.8 billion in 2006.
The President's budget 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 production sector, include reducing commodity
payments across the board by 5 percent; basing marketing loan benefits
on historical production; tightening payment limits; lowering dairy
program costs while extending the Milk Income Loss Contract program for
2 years; and reinstituting a 1.2 percent marketing assessment on sugar
processors.
These proposals are expected to save $587 million in 2006 and $5.7
billion over 10 years. The majority of the savings is achieved through
the across-the-board reduction in program payments.
The budget also proposes to limit the CCC bioenergy incentive
program to $60 million, similar to the limitation of $100 million that
applies to the 2005 program. An assessment of this program has found
that additional incentives for ethanol are less critical than other
Federal assistance, including tax credits and production mandates and
that greater emphasis should be placed on incentives for biodiesel
production rather than ethanol.
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 the end of December, CRP enrollment totalled 34.7 million
acres. Another 1.2 million acres were accepted in the 29th general
signup in 2004 and will be enrolled once contracts are finalized. Once
that step is completed, the CRP will have reached more than 90 percent
of the total acreage authorized in the Farm Bill.
Our current baseline assumptions are that CRP acreage will increase
gradually to 39.2 million acres by 2008 and remain at that level
through 2015.
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 2006, 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 2006 budget includes funding for about $937 million in direct
loans and $2.9 billion in guarantees. We believe these proposed loan
levels will be sufficient to meet demand in 2006.
The 2006 budget also maintains funding of $2 million for the Indian
Land Acquisition program. For the Boll Weevil Eradication loan program,
the budget requests $60 million, a reduction of $40 million from 2005.
This reduction is due to the successful completion of eradication
efforts in several areas. The amount requested is expected to fund
fully those eradication programs operating in 2006. For emergency
disaster loans, the budget requests $25 million. About $175 million is
currently available for use in 2005, and a portion of that is likely to
carry over into 2006. The combined request and anticipated carryover
are expected to provide sufficient credit in 2006 to 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 2004, the crop insurance program provided about $46 billion in
protection on over 221 million acres, which is about 3 million acres
more than were insured in 2003. Our current projection is that
indemnity payments to producers on their 2004 crops will be about $2.9
billion which is about $1 billion less than in 2003. Our current
projection for 2006 shows a modest decrease in the value of protection.
This projection is based on the Department's latest estimates of
planted acreage and expected declines in market prices for the major
agricultural crops, and assumes that producer participation remains
essentially the same as it was in 2004.
The 2006 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.
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 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 2007.
In addition, the budget includes a general provision that would
provide $3.6 million in mandatory funds to continue data warehousing
and data mining activities authorized in the Agricultural Risk
Protection Act of 2000 (ARPA). ARPA provided $23 million in mandatory
funds for a variety of purposes, including data mining; however, that
funding expires in 2005. Data mining is an instrumental part of the
Department's efforts to combat fraud, waste, and abuse in the crop
insurance program. In its first year of operation, data mining is
estimated to have prevented the payment of about $94 million in
potentially fraudulent claims and assisted in the identification and
recovery of about $35 million in claims that should not have been paid.
Salaries and Expenses
For salaries and expenses of the Risk Management Agency (RMA), $88
million in discretionary spending is proposed, an increase of $17
million from the 2005 level of about $71 million. This net increase
includes additional funding for IT, increased staff years to improve
monitoring of the insurance companies, and pay costs.
RMA has an aging IT system; the last major overhaul occurred about
10 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 2004, protection was offered through 20 plans
of insurance covering 362 crops, plus livestock and aquaculture, and
providing over $46 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 which 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, ARPA 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.
The development of the new IT system will result in some additional
up-front costs to the Government because we will be required to finance
both the developmental costs as well as the increasingly expensive
maintenance costs of the legacy system. However, once the new system is
operational, the legacy system will be eliminated, and a substantial
reduction in maintenance costs is projected.
Finally, I would note that the budget for RMA includes a request
for 17 additional staff years. This increase will provide RMA with the
additional resources necessary to monitor the financial and operational
condition of the companies participating in the crop insurance program.
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. As Secretary Johanns highlighted
in his recent testimony before the Committee, expanding trade is
critically important for the economic health and prosperity of American
agriculture. Expanding international market opportunities and promoting
trade are among the most important means the Department has to enhance
economic opportunities for our farmers and ranchers.
We have made solid progress during the past year in our market
expansion activities. Central to these efforts is the Framework
Agreement on agriculture that was reached last July by Members of the
World Trade Organization (WTO) as part of the current round of
multilateral trade negotiations. The agreement incorporates key U.S.
objectives for the negotiations and provides strong principles for
further liberalization of agricultural trade. Much work remains to be
done to translate those principles into actual reform commitments,
however, and we are working very diligently to achieve consensus among
WTO Members on as many areas as possible by this summer. This should
pave the way for a successful WTO Ministerial meeting next December in
Hong Kong.
Regional and bilateral trade agreements provide another important
avenue for opening new markets, and we continue to participate in the
ambitious agenda that has been established for the negotiation of such
agreements. During the past year, agreements were concluded with
Australia, Morocco, Bahrain, five Central American countries, and the
Dominican Republic. Negotiations are continuing with Panama, Thailand,
three Andean countries, the five members of the Southern African
Customs Union, the United Arab Emirates, Oman, and 34 countries that
will comprise the Free Trade Area of the Americas.
Our efforts to maintain and expand market access are not limited to
the negotiation of new agreements, however. Trade agreement monitoring
and compliance activities are vital if we are to protect U.S. trade
rights.
During the past year, among our highest priorities has been our
work to recover access to markets for U.S. beef that were closed due to
the December 2003 discovery of one case of bovine spongiform
encephalopathy (BSE) in the United States. To date, we have recovered
markets worth $1.2 billion, based on 2003 values. Most recently, Egypt
opened its market to U.S. beef and beef products from animals less than
30 months of age.
The current focus of our efforts is restoring access to the
Japanese market, and we are committed to reaching a resolution of this
matter as soon as possible. In October, the United States and Japan
reached agreements on the terms by which trade in U.S. beef would
resume. Since that time, U.S. experts have traveled to Japan to provide
additional technical explanations. We have worked across the
Administration to apply pressure to convince the Japanese that they
must open their market expeditiously. Last month, their Food Safety
Commission adopted a new domestic standard excluding cattle 20 months
of age and younger from mandatory testing. This is progress. We now
need an expedited import review process to get the market reopened.
Salaries and Expenses
The Foreign Agricultural Service (FAS) is the lead agency for the
Department's international activities and is at the forefront of our
efforts to expand and preserve overseas markets. Through its network of
78 overseas offices and its headquarters staff here in Washington, FAS
carries out a wide variety of activities that contribute to the goal of
expanding overseas market opportunities.
As the Committee may be aware, FAS is currently undergoing an
extensive review of its activities, organization, and operations. Many
factors have prompted this assessment, including the changing nature of
the global agricultural trade and trade-related issues; the need for
greater efficiency in the delivery of services to the public; and
budgetary constraints stemming in large part from significantly
increased overseas operating costs. Recent declines in the value of the
dollar relative to other currencies, coupled with local wage and price
increases at overseas posts, have created major challenges in managing
the agency's overseas presence.
FAS has already taken steps to respond to these challenges. Earlier
this year, the agency exercised buy-out and early-out authorities,
approved by the Office of Personnel Management, to reduce staff levels
at headquarters. In addition, its travel budget has been reduced by 50
percent, and promotional activities carried out by FAS overseas staff
and other international programs have been sharply curtailed.
Even with the actions that have been taken thus far and further
steps that are likely to result from the current organizational review,
FAS will continue to face fiscal hurdles as it strives to maintain the
services it provides to American agriculture. These factors were taken
into account during development of the 2006 budget, with particular
attention given to maintaining FAS' overseas presence so the agency can
continue to represent and advocate for U.S. agricultural interests on a
global basis.
The budget provides a program level of $152 million for FAS
activities in 2006, an increase of just over $11 million above 2005.
This includes funding to meet higher operating costs at the agency's
overseas posts, including increased payments to the Department of State
for administrative services that State provides at overseas posts.
Funding also is provided for FAS' contribution to the Capital
Security Cost Sharing program. Under that program, which is being
implemented this year, agencies with an overseas presence in U.S.
diplomatic facilities will contribute a proportionate share of the
costs of the construction of new, safe U.S. diplomatic facilities over
a 14-year period.
The budget also requests funding to support an FAS presence in the
new embassy in Baghdad, Iraq, as well as funding for increased agency
personnel costs.
Export Promotion and Market Development Programs
FAS administers the Department's export promotion and market
development programs which play an important role in our efforts to
assist American producers and exporters take advantage of new market
opportunities overseas.
The CCC export credit guarantee programs provide payment guarantees
for the commercial financing of U.S. agricultural exports. Those
guarantees facilitate exports to buyers in countries where credit is
necessary to maintain or increase U.S. sales, but where financing may
not be available with CCC guarantees. For 2006, the budget projects a
program level of $4.4 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 provides funding of $173 million. This is somewhat below the
2005 current estimate reflecting a proposal to limit the Market Access
Program to $125 million. That proposal is intended to achieve savings
in mandatory spending and contribute to government-wide deficit
reduction efforts.
The budget also includes $52 million for the Dairy Export Incentive
Program and $28 million for the Export Enhancement Program.
International Food Assistance
The United States continues to be the world's leader in global food
aid efforts, providing over one-half of world food assistance. In
support of our commitment to help alleviate hunger and malnutrition in
developing countries, the supplemental appropriations package submitted
by the President on February 14th includes a request for $150 million
to support additional Public Law 480 Title II food donations to meet
critical needs in Sudan and other emergency situations. It also
requests funding for recovery and reconstruction activities in tsunami-
affected countries and allows a portion of those funds to cover the
cost of Public Law 480 Title II commodities used to respond after the
tsunami.
For 2006, the budget continues our support for these efforts by
providing a program level of approximately $1.8 billion for U.S.
foreign food assistance activities, including $300 million that is
being requested in the Foreign Operations Appropriations Bill.
The Public Law 480 programs remain the primary vehicle for
providing U.S. foreign food assistance. The 2006 budget provides
funding that would support a Title I credit and grant program level of
$145 million. For Title II donations, funding is provided to support a
program level of $964 million. These estimated program levels include
unobligated funds carried over from previous years and projected
reimbursements from the Maritime Administration for costs associated
with meeting U.S. cargo preference requirements in prior years.
In the case of Title II, the level of appropriated funding
requested has been reduced by $300 million below the level requested in
recent annual budgets, and an equivalent level of funding is being
requested in the Agency for International Development's (AID)
International Disaster and Famine Assistance account to support
emergency food assistance activities that will be administered
separately by AID. This change 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.
For the McGovern-Dole International Food for Education and Child
Nutrition Program, the budget provides appropriated funding of $100
million, an increase of 15 percent above the 2005 enacted level. That
funding will be supplemented by anticipated reimbursements from the
Maritime Administration, and the total combined program level of $106
million is expected to support assistance for as many as 2.6 million
women and children.
The budget also includes an estimated program level of $137 million
for the CCC-funded Food for Progress program, which supports the
adoption of free enterprise reforms in the agricultural economies of
developing countries. The budget also assumes that donations of nonfat
dry milk will continue under the authority of section 416(b) of the
Agricultural Act of 1949. The total value of the commodity assistance
and associated costs is projected to be $151 million.
Trade Adjustment Assistance
The budget includes $90 million for the Trade Adjustment Assistance
(TAA) for Farmers Program, as authorized by the Trade Act of 2002. This
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 producers. 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 2004, the first full year of implementation, 12 petitions
for TAA assistance were approved. Commodities that were certified for
assistance included blueberries, Pacific salmon, shrimp, catfish, and
lychees. The total program costs for 2004 are estimated at $16 million.
The deadline for submission of petitions for 2005 TAA assistance
closed on January 31st. Thus far, TAA assistance has been certified for
Pacific salmon fishermen in 2 States, shrimpers in 7 States, Concord
juice grape producers in 3 states, black olive producers in California,
and potato producers in Idaho. Additional petitions are currently 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. Thank you.
______
Prepared Statement of James R. Little, Administrator, Farm Service
Agency
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to present the fiscal year 2006 budget for the Farm Service
Agency (FSA). Since we met last year, I am pleased to report that FSA
has made substantial progress in a number of areas to enhance customer
service. We are putting in place an infrastructure that will help us
quickly respond to new legislation and provide better access to our
programs and data for our customers and business partners. We have made
great strides in reaching out to our small and disadvantaged
constituency base and engaging our stakeholders to help us develop a
new Strategic Plan that is aligned with the Secretary's plan, all
designed to support productive farms and ranches that are competitive
in global markets; promote a secure and affordable food and fiber
supply; and conserve natural resources and enhance the environment.
This budget is fiscally responsible and proposes several measures
to achieve savings in farm programs. It also includes a number of
projects and initiatives designed to achieve substantial and systemic
improvements that will position us for prompt implementation of the
next farm bill or any other enacted legislation. Your support for the
budget request will enable FSA to meet the challenges of a shifting
economic environment and the influence of natural and man-made
disasters. Before I begin addressing the details of the budget, I would
like to comment on some of our recent successes, some of the
initiatives we currently have underway, and some of the challenges we
face.
Disaster Assistance
The past year provided us 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. In all
cases FSA showed its colors and responded proactively to provide
support in record time. The disaster assistance bill signed by the
President on October 13, 2004, included more than a dozen programs and
$2.9 billion for farmers and ranchers who have been affected by drought
and other weather-related problems in 2003 and 2004, including damage
caused by the devastating 2004 hurricanes and tropical storms that
ravaged Florida, the Southeast and Eastern shore. Delivery of these
programs has been a massive undertaking, which included implementing
the Emergency Conservation Program in 12 days following passage of the
bill that provided new funding. In total, this important legislation
provided relief for losses of crops, livestock, dairy, cottonseed, and
trees, including orchards, timber and pecans. In addition, FSA
implemented an emergency relief program utilizing over $600 million
from Section 32 funds for Florida's citrus, nursery, and vegetable
growers who were especially impacted by back-to-back hurricanes
Charley, Frances and Jeanne.
FSA is working diligently to implement all of these disaster
programs as soon as possible. Signup for the Section 32 initiative
began last October, with more than $315 million already paid out.
Various other programs are being phased in; for example, the Tree
Assistance Program began February 7 and the major Crop Disaster Program
began March 14. I am pleased to note that these delivery times are
consistent with previous ad hoc disaster programs, which have generally
been implemented within 5\1/2\ months of enactment.
In addition, we continued the very successful Nonfat Dry Milk (NDM)
Livestock Feed Assistance Initiative, which provided drought relief to
foundation livestock producers in States hardest hit by drought.
Surplus Commodity Credit Corporation (CCC) stocks of NDM, which have
been denatured to prevent human consumption, are provided to
participating States at a greatly reduced cost. Under the 2004
initiative, 135.8 million pounds of NDM, including some of the unused
NDM from the 2003 initiative, was made available to eligible producers
in 96 counties in Arizona, Idaho, Montana, Nebraska, Nevada, New
Mexico, Oregon, Utah, and Wyoming.
Tobacco Transition Program
On October 22, 2004, President Bush signed into law the American
Jobs Creation Act of 2004, which includes the Fair and Equitable
Tobacco Reform provisions commonly referred to as the Tobacco Buyout.
Under this statute, payments will be made to tobacco quota holders and
producers, ending all aspects of the Federal tobacco support program,
including marketing quotas and non-recourse marketing loans, effective
with the 2005 crop. This is an historic event, Mr. Chairman, since the
tobacco price support program has been in place since the 1930's and
has defined a way of life for many of our Nation's small family
farmers.
Current tobacco program requirements for the 2004 marketing year
will remain in effect through the end of the 2004 marketing season,
which ends June 30, 2005, for flue-cured tobacco and September 30,
2005, for all other types of tobacco. The funds required to pay for the
transition, estimated to total $10.14 billion over a 10-year period,
will be obtained through assessments on manufacturers and importers of
all tobacco products sold in the United States. The payments to
producers will be made in 10 equal annual installments beginning in
2005 and ending September 30, 2014.
A sign-up period began on March 14. Tobacco quota holders will
receive payments of $7 per pound based on their basic quota at the 2002
marketing year level. Producers of quota tobacco will receive payments
of $3 per pound based on their shares of risk in the 2002, 2003, and
2004 crops of quota tobacco. FSA is working aggressively to implement
this historic piece of legislation as quickly and effectively as
possible. We are also working diligently to put in place a
comprehensive communication and educational strategy to ensure all
farmers, especially minority and disadvantaged farmers, are aware of
the program and informed about how to sign up and obtain their
benefits.
Technology Modernization
Over the past year, FSA has moved aggressively and collectively to
a more streamlined environment using state-of-the-art information
technology. FSA made significant progress in moving our systems to a
web-based environment, improving the way we do business, providing
better access to our data for our customers and business partners, and
improving customer service. In keeping with the President's Management
Initiatives on making programs more accessible using today's
technology, last April Secretary Veneman unveiled the USDA Customer
Statement, which enables producers to view all their program
information through one Web portal. According to the 2002 Census of
Agriculture, approximately 48 percent of all farmers have access to the
Internet, enabling them to check on their CCC payments, collections,
debt, and IRS reporting, via the Web. FSA Web-based applications also
allow farmers to sign up for the Direct and Counter-cyclical Payment
Program on line and receive their loan deficiency payments on line,
significantly reducing the paperwork burden and providing benefits more
timely. In addition, other partners are being provided electronic
access. For example, participating U.S. banks and exporters can now
electronically submit registrations, evidence of exports, and notices
of default under the General Sales Manager's Export Credit Guarantee
Program.
To take advantage of USDA's and FSA's electronic commerce (e-
commerce) programs, the FSA is encouraging all producers to sign up for
the capability. Over the next several months, we will be conducting an
extensive public relations campaign to promote e-commerce and its
benefits. Through a substantial modernization effort, FSA expects that
by 2006 all of its major programs will be Web-based and available on
line to our customers and partners.
In addition to e-commerce, FSA, along with other USDA agencies,
continues to implement Geospatial Information System (GIS) and Global
Positioning System (GPS) technology. GIS and GPS are helping FSA staff
more efficiently measure land features by allowing computer-generated
maps to interact with databases that store information about the land
and its characteristics and background. In collaboration with the Risk
Management Agency (RMA), FSA has digitized 80-90 percent of our most
critical component of GIS--the Common Land Unit, which is the smallest
land unit or field. This is the first major step toward creating a
common management information system that can be shared by FSA and RMA
and tremendously reduce redundancies.
Conservation
This past year, FSA set new standards for the Conservation Reserve
Program (CRP), which is the Federal Government's largest private lands
conservation program, assisting farm owners and operators in conserving
highly erodible and other environmentally sensitive land to improve
soil, water quality, air quality, and wildlife resources. I will talk
more about the Conservation Reserve Program in the ``Budget Requests''
section of this statement.
Program Outreach
Over the last year, FSA made great strides in reaching out to its
small farm and minority constituency base with support from Secretary
Veneman. Most importantly, on August 17, 2004, Secretary Veneman
published in the Federal Register Proposed Uniform Guidelines for
conducting FSA County Committee (COC) elections. The guidelines
mandated reforms intended to ensure fair representation of socially
disadvantaged farmers and ranchers on COCs. Detailed actions contained
in the guidelines include improved outreach and communications;
improved election procedures; nominations by the Secretary; and
additional reporting and accountability requirements, which were
implemented for the 2004 COC elections held December 6, 2004. FSA also
launched a massive communications campaign in partnership with many
minority and small farm organizations, with the specific goal to
increase the numbers of minority and women nominees on COC election
ballots. Analysis of the election data is under way, and FSA
anticipates some positive results. In keeping with congressional
intent, USDA will continue to review the results of the elections and
determine what next steps are needed to ensure adequate minority
representation on COCs.
Last year, FSA and the USDA Office of Civil Rights crossed a major
milestone when it implemented the Minority Farm Register and sponsored
several listening sessions to allow minority farmers to interact with
top Agency officials to discuss their problems and ways to improve
customer service. FSA has teamed with the Cooperative State Research,
Education, and Extension Service (CSREES) to train minority-serving
institutions to teach minority producers how to apply for farm loans
and operate their farms more efficiently. The partnership between FSA
and CSREES has been extremely proactive and should prove very
beneficial in helping improve FSA's program delivery.
Budget and Performance Management System
As part of FSA's vigilance towards our mission and meeting the
President's Management Agenda focusing on improved customer service,
FSA has developed the framework for a new performance-based, results-
focused Strategic Plan. Known as the Budget and Performance Management
System (BPMS), this framework aims to improve Agency and individual
performance, accountability, and decision-making; fully comply with
President's Management Agenda objectives; and ensure a customer focus
to all activities. To accomplish all this, FSA formed a BPMS Core Team
representing all major Agency functions. The Core Team looked at
everything FSA does to help farmers, ranchers, and agricultural
partners as well as how FSA manages its employees. Over 450 external
and internal stakeholders participated in the plan's development. The
Strategic Plan focuses on what FSA will do; BPMS focuses on how the
Agency will get it done. The BPMS involves a range of activities to
ensure taxpayer dollars are directed to efficient and effective
programs that get results. The cornerstone of BPMS is the new Strategic
Plan.
BPMS is the vehicle that will help FSA meet its performance goals.
Technology changes associated with BPMS will integrate all aspects of
budget and performance and associated costs for improved decision-
making and accountability to stakeholders and taxpayers. FSA has begun
to examine requirements for fully costing the performance measures it
uses to deliver results.
Organizational Efficiency
FSA is actively engaged in a comprehensive review of its operations
and organization at all levels, including headquarters, State offices,
and our 2,400 service centers. This review is necessary to better
understand how to meet the demands of a dynamic and ever changing
United States and world agricultural marketing system. FSA needs to
better utilize current technology, encourage e-government and web-based
programs, and expand GIS capabilities to improve customer service
across all business lines. Our review is examining ways to make access
to and delivery of our programs more efficient and at less cost, with
the help of technology and a streamlined infrastructure.
Fiduciary Accomplishments
Fiscal year 2004 marks the third consecutive year in which FSA and
CCC earned unqualified (clean) audit opinions for their activities,
which have program levels exceeding $25 billion.
BUDGET REQUESTS
Turning now to the specifics of the 2006 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 2005, $2.11 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 2006 budget estimates largely reflect supply and
demand assumptions for the 2005 crop, based on November 2004 data. CCC
net expenditures for fiscal year 2006 are estimated at $19.8 billion,
down about $4.3 billion from $24.1 billion in fiscal year 2005. If the
President's proposals for farm program savings are enacted, CCC outlays
would decline by an additional $587 million in fiscal year 2006.
This net decrease in projected expenditures is attributable to
decreases for crop, tree and livestock disaster 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 2004 losses, CCC was reimbursed $12.5
billion in fiscal year 2005.
Conservation Reserve Program
The Conservation Reserve Program (CRP), administered by FSA, is
currently USDA's largest conservation/environmental program. It is
designed to cost-effectively assist 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
general signup that ended September 24, 2004, FSA accepted offers to
bring nearly 1.2 million acres into the CRP. Also under the 2004
continuous and Farmable Wetlands Program (FWP) signup, a combined total
of 275,000 acres was enrolled. We issued incentive payments totaling
approximately $85 million under continuous signup, Conservation Reserve
Enhancement Program (CREP), and FWP under the incentives program that
began in May 2000 to boost participation. As of April 5, 2005, total
CRP enrollment is 34.8 million acres, nearly 90 percent of the 39.2
million acres authorized under the Farm Bill.
However, a challenge lies ahead. In 2007, 16 million acres
currently under CRP contracts are scheduled to expire, followed by
another 6 million acres in 2008, 4 million acres in 2009, and 2 million
acres in 2010. To ensure that the benefits of CRP continue, in August
2004 the President declared the Administration's commitment to full CRP
enrollment and announced that FSA will offer early reenrollments and
extensions of existing contracts. In addition, FSA encouraged public
comment on CRP through a Federal Register notice. Over 5,100 comments
were received, and FSA expects to complete its analysis and announce
reenrollment and contract extension provisions later this year.
President Bush also announced the Northern Bobwhite Quail
Initiative, aimed at creating 250,000 acres of habitat for the northern
bobwhite quail and other upland bird species, and a wetland restoration
initiative to restore up to 250,000 acres of wetlands and playa lakes
located outside the 100-year floodplain.
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 30 CREP agreements with 25 States with over 1.7 million
acres reserved for enrollment. The program is very popular with
environmental and wildlife groups, in addition to States and private
landowners. More than 600,000 acres are currently enrolled in CREP
nationwide. Most recently, in March 2005, FSA launched a second new
CREP project in Nebraska.
The fiscal year 2006 budget assumes general signups in fiscal years
2005 and 2006 to enroll approximately 1.0 million acres and 1.3 million
acres, respectively. In each of fiscal years 2005 and 2006, we
anticipate enrolling 450,000 acres under continuous signup and the
CREP. About 50,000 acres are estimated to be enrolled in the FWP in
fiscal year 2005 and 60,000 acres in fiscal year 2006.
Overall, CRP enrollment is assumed to gradually increase from 34.7
million acres at the end of fiscal year 2004 to 39.2 million acres by
fiscal year 2008, and to remain at 39.2 million acres through fiscal
year 2015, 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 2006 Budget proposes a total program level of about
$3.8 billion. Of this total, approximately $0.9 billion is requested
for direct loans and nearly $2.9 billion for guaranteed loans offered
in cooperation with private lenders. These levels should be sufficient
to provide adequate funding for the neediest farmers and ranchers
throughout the year.
For direct farm ownership loans we are requesting a loan level of
$200 million. The proposed program level would enable FSA to extend
credit to about 1,700 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 a
reduced interest rate 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 $650 million to provide approximately
14,775 loans to family farmers.
For guaranteed farm ownership loans in fiscal year 2006, we are
requesting a loan level of $1.4 billion. This program level will
provide about 4,800 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 an fiscal year 2006 program
level of approximately $1.5 billion to assist over 8,500 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.
We are particularly proud of all of our loan programs. As a matter
of fact, since fiscal year 2000, our direct and guaranteed loans to
minorities and women have increased every year. In fiscal year 2004,
there was an increase in the percentage of direct loans to each
minority group, and we set a record for guaranteed farm ownership
loans.
In addition, our budget proposes program levels of $2 million for
Indian tribe land acquisition loans and $60 million for boll weevil
eradication loans. For emergency disaster loans, our budget proposes a
program level of $25 million to provide sufficient credit to producers
whose farming operations have been damaged by natural disasters.
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,
pesticides, 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. Legislative authority expires at the
end of fiscal year 2005; the Department plans to propose extending the
program through fiscal year 2010.
For fiscal year 2005, grants have been issued to 34 States. With
the requested $4.5 million for fiscal year 2006, we anticipate that
between 30 and 34 States will receive mediation grants.
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. No funding was provided for the program in 2002
or 2003; however, it continued to operate throughout the 2 fiscal years
using unobligated funds carried forward, together with recoveries of
unused funds previously allocated to the States.
For fiscal year 2004, the Consolidated Appropriations Act provided
$11.9 million for use in southern California only. The Military
Construction and Emergency Hurricane Supplemental Appropriations Act of
2005, Public Law 108-324, provided $150 million for ECP--$100 million
in direct appropriation and $50 million transferred from CCC. These
funds are available until expended and will be used to provide
emergency cost-share assistance to producers who suffered losses due to
natural disasters such as droughts; Hurricanes Charley, Frances, Ivan,
and Jeanne; and tornadoes. As of April 5, $153.8 million has been
allocated to 45 States. The fiscal year 2006 budget proposes no 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 April 5, we have paid
fiscal year 2005 DIP claims totaling $35,089 in four States.
The fiscal year 2006 appropriation request of $100,000, together
with unobligated carryover funds expected to be available at the end of
fiscal year 2005, 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.
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 2006 Budget requests $1.37 billion from
appropriated sources including credit reform transfers, for a net
increase of about $70 million over the fiscal year 2005 level. The
request reflects increases in pay-related costs to sustain essential
program delivery and increases in information technology investments to
continue and enhance the modernization of FSA program and
administrative systems. These increases are offset by decreases in both
Federal and non-Federal county office staff years and operating
expenses.
The fiscal year 2006 request reflects a ceiling of 5,474 Federal
staff years and 10,284 non-Federal staff years. Temporary non-Federal
county staff years will be reduced to 1,000 from the fiscal year 2005
level of 1,250 due to completion of disaster activities. Permanent non-
Federal county staff years are estimated to remain at the 2005 level.
Federal staff years have a net decrease of 24 staff years. FSA has
taken aggressive actions since fiscal year 2004 to reduce discretionary
spending in order to live within available funding. In fiscal year 2005
these measures were supplemented by a reduction in the hiring ceiling
which will culminate in a reduction of 39 staff years in fiscal year
2006. This reduction is offset by an increase of 15 staff years which
will be devoted to outreach activities aimed at increasing program
participation of underserved customers, with special emphasis on
socially disadvantaged and/or limited resource farmers, women, and
members of minority groups such as African Americans, Asian-Pacific
Americans, Hispanics, and Native Americans.
Before closing I would like to note that support of FSA's
modernization effort is also provided through the Department's Common
Computing Environment 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.
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 2006.
To help position our agency to meet the challenges of the future,
we are going through an intensive self-assessment. Many factors have
driven our review. For example, the outbreaks of bovine spongiform
encephalopathy (BSE) and, to a lesser extent, avian influenza (AI) have
made us keenly aware of the changing nature of the trade issues that we
confront on a daily basis. Since the Uruguay Round Agreement on
Agriculture, trade disruptions have shifted from tariffs and quotas to
a host of more complex issues requiring scientific expertise along with
diplomacy. Issues surrounding biotechnology have underscored the need
for different skills in order to be effective in negotiating and
maintaining market access for our products.
The Administration's strategy of competition for trade
liberalization has also greatly affected our work. Last summer, the
Doha Development Agenda talks got back on track. We now have a
blueprint for completing a final agreement on agriculture that lays out
strong principles for liberalizing trade. Putting details to this
blueprint is not easy. There will be several critical negotiating
sessions in 2005, with a goal to achieve consensus on as many areas as
possible by July. We recognize that we have a lot of ground to cover in
the negotiations, but we are determined to take advantage of this once-
in-a-generation opportunity for fundamental trade reform.
In addition to multilateral negotiations in the World Trade
Organization, we are also negotiating several important regional and
bilateral agreements. Last year alone, agreements were concluded with
Australia, Morocco, Bahrain, five Central American countries and the
Dominican Republic. We continue negotiations with Panama, Thailand,
three Andean countries, the five members of the Southern African
Customs Union, the United Arab Emirates, Oman, and the 33 countries
that will be part of the Free Trade Area of the Americas.
We are also working to incorporate the principles of the
President's Management Agenda into our strategic and operational plans
with the goal of making FAS more results oriented. We are reviewing how
we manage our workforce, what we can do to make our programs more
accessible electronically, and how we can improve our financial
management and performance at all levels of the agency.
Finally, fiscal realities have dictated that we conduct a top-to-
bottom organizational review. The combination of rising expenses for
our overseas offices as a result of the declining value of the dollar,
increased Capital Security Cost Sharing assessments imposed by the
Department of State (DOS), and the need to absorb rising salary costs
has left us with a significant budget shortfall in fiscal year 2005.
To address this shortfall, we requested and received authority from
the Office of Personnel Management for early-outs and buy-outs to
reduce staff levels in headquarters. With this action, we have been
able to reduce headquarters civil service staff levels by 6 percent. We
have also imposed a 50-percent reduction in travel and sharply reduced
our promotional activities conducted by FAS overseas staff and other
international programs.
Thus, a combination of factors has created an opportunity to take a
serious and extensive look at the work of our agency and how we can
best meet the needs of our customers. We have consulted with Congress,
our stakeholders, other government agencies, and our employees to set a
new vision for the agency. We know that FAS needs to change to remain
relevant in a dynamic global environment.
As part of our ongoing assessment, we are charting a course for FAS
for the next 5 years. If we are successful, we envision that in 2010
FAS will be a leader in developing market priorities and strategies for
our most important markets, both from a competitive perspective and
from a market potential perspective.
Given our resource constraints we need to define what the agency
will look like. We know that the agency's most distinct asset continues
to be our overseas presence. Our overseas staff provides invaluable
service through their in-depth knowledge of the country, its
government, the market for our products, and the competition. As
government officials, we have the unique capability to gain access to
foreign officials on behalf of American agriculture.
But by 2010, FAS will be a smaller agency, sharply focused on
market access and market intelligence. Our offices overseas will be
smaller and may be in different locations. Even more than is the case
now, offices will cover more than one country, and we will make better
use of technology to improve our responsiveness and communications.
Market access will be even more technical and scientific in nature than
it is today, and market intelligence will be more targeted and forward
looking.
FAS will continue to be USDA's lead agency for agricultural trade
negotiations. We will focus on non-tariff trade barriers and continue
to monitor other countries' compliance with international agreements.
To build on our market intelligence and development strengths, we will
position our resources strategically to support U.S. trade interests.
Our trade capacity building activities will be targeted not only to
facilitating trade and economic development, but also to promoting
agricultural and food security worldwide.
In keeping with the President's Management Agenda, we are assessing
our activities, both overseas and at headquarters, to determine which
are inherently governmental and provide the maximum value to our
customers. Our country-by-country review has a goal of prioritizing
markets and activities and identifying where we can absorb reductions
with the least impact. We are looking at market potential, market
competition, the ease of doing business, the cost of each office, and
appropriate staff levels. It is essential that we continue to work in
areas where it is most difficult for our private sector to do business.
We expect to announce the results of this review shortly. We are
confident that the end result of our organizational review will be
better, more effective service to U.S. constituents, our agricultural
industry and producers.
Budget Request
Mr. Chairman, as I indicated earlier, FAS continues to experience
significant fiscal pressures resulting from the declining value of the
dollar abroad and rising staff costs.
However, the levels proposed in the President's budget will allow
FAS to maintain current service levels and move toward our 2010 vision
without degradation of service provided to our customers.
Our fiscal year 2006 budget proposes a funding level of $152.4
million for FAS and 982 staff years. This is an increase of $11.2
million above the fiscal year 2005 level and represents the funds
needed to ensure the agency's continued ability to conduct its
activities and provide services to U.S. agriculture.
The budget proposes an increase of $8.8 million for support of FAS
overseas offices. The FAS network of 78 overseas offices covering over
130 countries is vulnerable to the vagaries of macro-economic events
that are beyond the agency's control. The significantly weakened U.S.
dollar and higher International Cooperative Administrative Support
Services (ICASS) payments to DOS have caused base costs to increase
sharply. Since 2002, the dollar has fallen 9 percent against currencies
of our major markets.
Specifically, this increase includes:
--$5.4 million to maintain current services at the 78 FAS offices
around the world, including $2.4 million for wage increases for
locally employed staff; $900,000 for higher rents; and $900,000
for increases in all other in-country expenses including
security, repairs, travel, and supplies. Additionally, an
increase of $1.2 million will be required to meet higher ICASS
payments to DOS.
--$2.7 million for the fiscal year 2006 Capital Security Cost Sharing
Program assessment. In fiscal year 2005, DOS implemented a
program through which all agencies with an overseas presence in
U.S. diplomatic facilities will pay a proportionate share for
accelerated construction of new secure, safe, and functional
diplomatic facilities. These costs will be 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 is
estimated to increase annually in roughly $3 million increments
until fiscal year 2009, at which time the annual assessed level
will total an estimated $12 million. This level is assumed to
remain constant at that point for the following 9 years.
--$650,000 to support the FAS presence in the soon-to-be constructed
embassy in Baghdad, Iraq, after an absence of nearly 20 years.
FAS will have the lead on all USDA activities and projects in
support of Iraq and its agricultural development. This will
entail the entire range of market development, market access,
and market intelligence tools available to FAS and its industry
partners.
The budget also includes an increase of $2.4 million to cover
higher personnel compensation costs associated with the anticipated
fiscal year 2006 pay raise. Pay cost increases are non-discretionary
and must be funded. Absorption of these costs in fiscal year 2006 would
primarily come from reductions in agency personnel levels that would
significantly affect FAS's ability to contribute to USDA's strategic
goal of enhancing economic opportunities for agricultural producers.
Export Programs
Mr. Chairman, the fiscal year 2006 budget proposes $6.1 billion for
programs 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 $4.4
billion for export credit guarantees in fiscal year 2006.
Under these programs, which are administered by FAS in conjunction
with FSA, the Commodity Credit Corporation (CCC) provides payment
guarantees for the commercial financing of U.S. agricultural exports.
As in previous years, the budget estimates reflect actual levels of
sales expected to be registered under the programs and include:
--$3.4 billion for the GSM-102 program;
--$5.0 million for the GSM-103 program;
--$1.0 billion for Supplier Credit guarantees; and
--$20.0 million for Facility Financing guarantees.
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 2006,
the CCC estimates include a total of $173.0 million for the market
development programs, $15 million below fiscal year 2005 levels and
includes:
--$125.0 million for the Market Access Program;
--$34.5 million for the Foreign Market Development (Cooperator)
Program;
--$10.0 million for the Emerging Markets Program;
--$2.5 million for the Quality Samples Program; and
--$2.0 million for the Technical Assistance for Specialty Crops
Program.
International Food Assistance
The fiscal year 2006 budget continues the worldwide leadership of
the United States in providing international food aid. In this regard,
the fiscal year 2006 President's budget includes $1.8 billion for U.S.
foreign food aid programs, including $300 million requested in the
Foreign Operations Appropriations Bill. Programs funded through the
Department of Agriculture include:
--$1.1 billion for Public Law 480 which is expected to support
approximately 2.2 million metric tons of commodity assistance.
For Title I, the budget supports a program level of $145.0
million, which includes $80 million in new appropriations. The
balance will be provided through unobligated carryover balances
and projected Maritime Administration reimbursements. The total
program level will support approximately 540,000 metric tons of
commodity assistance based on current price projections. For
Title II donations, the budget provides for a program level of
$964 million, which is expected to support 1.7 million metric
tons of commodity donations. This includes an appropriation
request of $885 million and $79 million in projected Maritime
Administration reimbursements. While the fiscal year 2006
appropriation request has been reduced by $300 million from
last year's request, an equivalent funding level has been
included in the U.S. Agency for International Development's
(USAID) disaster assistance account to support emergency food
assistance activities. This change will allow food aid
commodities to be purchased locally which will allow for a more
flexible and timelier response to emergencies. Further, the
resultant savings in ocean freight and distribution costs is
expected to increase the total amount of commodities that can
be procured.
--$137.0 million for CCC-funded Food for Progress. Funding at the
proposed level is expected to support 300,000 metric tons of
commodity assistance.
--$151.0 million for donations of CCC-owned nonfat dry milk under
Section 416(b) authority. Under this authority, surplus
commodities that are acquired by CCC in the normal course of
its domestic support operations are available for donation
through agreements with foreign governments, private voluntary
organizations and cooperatives, and the World Food program. For
fiscal year 2006, current CCC baseline estimates project a
limited supply of surplus nonfat dry milk that could be made
available for programming, and the budget assumes that 75,000
metric tons will be programmed.
--$106.0 million for the McGovern-Dole International Food for
Education and Child Nutrition Program. This represents an
increase of $15 million over the fiscal year 2005 current
estimate and includes $100 million in new appropriations and an
estimated $6 million in projected reimbursements from the
Maritime Administration. Funding at this program level will
assist an estimated 2.6 million women and children.
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. The budget includes:
--$28.0 million for the Export Enhancement Program (EEP). World
supply and demand conditions have limited EEP programming in
recent years, and as such, the fiscal year 2006 budget assumes
a continuation of EEP at the fiscal year 2005 level. The 2002
Farm Bill does include the maximum annual EEP program level of
$478.0 million allowable under Uruguay Round commitments, which
could be utilized should market conditions warrant.
--$52.0 million for the Dairy Export Incentive Program (DEIP), $46.0
million above the fiscal year 2005 estimate of $6.0 million.
This estimate reflects the level of subsidy currently required
to facilitate export sales consistent with projected United
States and world market conditions and can 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 for Farmers program authorizes USDA to make payments up to
$90.0 million annually to 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 glad to answer
any questions.
______
Prepared Statement of Ross J. Davidson, Jr., Administrator, Risk
Management Agency
Mr. Chairman and members of the Subcommittee, I am pleased to
present the fiscal year 2006 budget for the Risk Management Agency
(RMA). The Federal Crop Insurance Program plays an important role in
assisting farmers to manage financial risks associated with yield and
revenue shortfalls due to bad weather or other natural disasters. RMA
continues to evaluate and provide new products and to promote the
adoption of crop insurance as a risk management tool so that the
Government can further reduce the need for ad-hoc disaster payments to
the agriculture community. In 2006, current projections are that the
program is expected to provide producers with more than $41 billion in
protection on approximately 220 million acres through about 1.2 million
policies.
The growth and effectiveness of the Crop Insurance Program is
dependent on a reliable delivery system, insurance products that meet
the needs of producers, investment in information technology to ensure
the delivery system is timely, accurate and dependable, and adequate
funding to support compliance and program integrity, product
evaluation, maintenance and administration, and new product
development.
To meet Crop Insurance Program requirements in fiscal year 2006,
RMA has requested a budget that will provide the necessary funding to
continue the growth of the program and ensure its effectiveness to meet
the agricultural community crop insurance requirements and assure
fiscal responsibility in the application of taxpayer's dollars. RMA's
total fiscal year 2006 budget request is $3.3 billion. The funding
level proposed for the Federal Crop Insurance Corporation (FCIC) Fund
is $3,162,979,000 and for the Administrative and Operating Expenses,
the request is $87,806,000.
FCIC Fund
The fiscal year 2006 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 the private sector for expenses incurred in delivering
insurance to farmers and ranchers, to provide premium subsidies to make
crop insurance affordable, and to encourage the purchase of higher
levels of protection. Of the total amount requested for fiscal year
2006, 67 percent is slated for premium subsidies. The current estimate
of funding requirements is based on USDA's latest projections of
planted acreage and expected market prices. The budget request includes
$2.2 billion for Premium Subsidy, $781.4 million for Delivery Expenses,
$137.5 million for estimated excess losses based on an overall
projected loss ratio of 1.075, and $78.1 million for Agricultural Risk
Protection Act of 2000 (ARPA) activities which includes $3.6 million to
continue funding of Program Integrity initiatives under a General
Provision in the 2006 Budget. ARPA provided RMA with mandatory funding
to implement data mining and data warehousing to improve compliance and
integrity in the crop insurance program. We estimate, in the first year
of operation, data mining helped prevent nearly $94 million in improper
payments and helped recover approximately $35 million in improper
indemnities. The authority to use mandatory funds for data mining
expires in fiscal year 2005. Therefore, the 2006 Budget includes
language to provide $3.6 million to continue data mining and data
warehousing activities.
To strengthen crop insurance, promote program expansion, and limit
ad-hoc disaster payments, the 2006 Budget includes a proposal for
legislation to take effect in 2007 that requires those that receive
direct farm payments to purchase crop insurance. The proposal requires
farmers growing program crops who receive farm program benefits to
purchase insurance protection at a 50 percent, or higher additional
coverage level, of their expected market value, or lose their farm
program benefits. This change ensures a farmer's loss in a disaster
will not be greater than 50 percent. This proposal will further reduce
premium subsidies to crop insurance policyholders, as well as subsidies
in total to the participating insurance companies. These changes will
encourage greater personal responsibility of those who buy crop
insurance to pay for their risk management tools and will encourage the
companies to deliver crop insurance more efficiently. This Budget
proposal is estimated to realize $140 million in savings to the crop
insurance program beginning in 2007. The increased self-reliance
encouraged by this proposal and the linkage of the availability of crop
insurance to farm program payments are intended to enhance the
operating efficiency of the program and reduce the need for ad-hoc
disaster payments.
This proposal is expected to be submitted along with the other
mandatory proposals for farm programs that support the President's
Budget.
Administrative and Operating Expenses (A&O)
RMA's fiscal year 2006 request of $87.8 million for Administrative
and Operating Expenses represents an increase of about $16.3 million
from fiscal year 2005. This budget supports an increase for information
technology (IT) initiatives of $12.2 million.
RMA's corporate IT systems need updating and other enhancements to
take advantage of the latest technology and to ensure the IT component
of the delivery system is reliable, accurate, and accessible. Billions
of dollars in indemnity payments, premium subsidy, producer-paid
premiums, and administrative reimbursement payments pass through this
antiquated IT system each year. Therefore, I am duty-bound to continue
to request increases in IT funding because the current IT
infrastructure is long past its life cycle and is increasingly costly
to run, cumbersome to maintain; and makes it difficult to ensure the
security mandated by Federal law. The Agency's IT infrastructure
supports the crop insurance program's business operations at the
national and local levels, provides risk management products to
producers nationwide and is the basis for validating, receiving and
remitting reinsurance subsidy and other payments to private companies
reinsured by the FCIC. RMA is using system and database designs
originally developed in 1994. There have been few hardware and software
upgrades since then, but the program has grown and evolved dramatically
in the timeframe, and business process analysis and re-engineering of
the entire business delivery system are needed to support current and
future program growth. As stated in previous testimonies, without
adequate funding of the IT requirements, the Agency cannot safely
sustain additional IT changes required by new product development or
changes in existing products. Future program expansion will increase
the risk of system failure and possible inability to handle day-to-day
processing of applications and indemnity payments.
Also included in the 2006 Budget is $1.0 million to expand the
monitoring and evaluation of reinsured companies. RMA is, again,
requesting funds to establish a systematic 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.
The 2006 Budget requests $1.8 million to support an increase of 17
staff years. This will raise RMA's employment ceiling from 568 to 585.
A requested increase of 15 staff years is included to support the
increased workload for the Compliance function. The additional staff
years will provide the Compliance function the necessary support 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 establish a systematic process of
auditing insurance providers to detect and correct vulnerabilities to
proactively prevent improper payment of indemnities. RMA's studies
suggest that additional resources in this area would provide a minimum
of $4 dollars in reduced fraud cost for every dollar spent. The
additional staffing will provide the necessary oversight to ensure
taxpayers' funds are expended as intended.
In addition, 2 staff years are requested for the Office of
Insurance Services to support good farming practice determinations and
to support the process of evaluating claims resulting from questionable
farming practices. ARPA requires RMA to establish a process to
reconsider determinations of good farming practices. The Regional
Offices of RMA's Insurance Services Division are in a unique position
by virtue of their background in production agriculture, agronomy and
related fields, and knowledge of local crops and growing conditions to
effectively carry out the important function of managing the process by
which good farming practices determinations are made. RMA data indicate
assessments are infrequently made for uninsured causes of loss against
a producer for failure to follow good farming practices. With approved
insurance providers operating in an environment of risk sharing, there
is a tremendous need for support and incentives for increased quality
of loss adjustment, particularly in the good farming practices area to
ensure that payments for losses are consistent with the requirements of
Federal Crop Insurance Act. Again, it is expected the additional
staffing in this area will be more than paid for by ensuring that loss
payments are made in accordance with the requirement that good farming
practices be used.
Lastly, an increase of $1.3 million is requested for pay costs.
These funds are necessary to maintain required staffing to carry out
RMA's mission and mandated requirements.
PROGRAM MANAGEMENT
Now, I would like to provide an update on some of our key
initiatives and products:
--FCIC Board Activities
--Standard Reinsurance Agreement
--Pilot Programs
--Product Development and Non-Insurance Risk Management Tools
--Education and Outreach Program
--Agricultural Management Assistance
--Comprehensive Information Management System
--Program Integrity
--Other Initiatives
Under the direction of the FCIC Board of Directors (Board), RMA
continues to promote an agenda to bring new and innovative insurance
products to the agricultural community, to validate the utility of
current insurance products, to ensure outreach to small and limited
resource farmers, to promote equity in risk sharing, and to guard
against waste, fraud and abuse within the program.
Through the private sector delivery system in crop year 2004, RMA
provided approximately $46.7 billion of protection to farmers, and
expects indemnity payments for crop year losses of approximately $3.1
billion. The participation rate for major program crops was
approximately 83 percent. RMA continues to improve and update the terms
and conditions of all crop insurance policies to better clarify and
define insurance protection and the duties and responsibilities of the
policyholder and insurance providers. The Board actions to accomplish
program expansion have been somewhat restricted by budget constraints
affecting available IT resources and additional staffing required to
meet new administrative and program requirements brought on by ARPA.
Given this constraint, within the funding appropriated for fiscal year
2004, the Board considered 44 action items during nine (9) meetings.
There were six (6) new program submissions and 19 program modifications
to existing insurance products. For example, the Board authorized the
expansion of the Adjusted Gross Revenue--Lite (AGR-Lite) plan of
insurance to all counties in Alaska, Idaho, Oregon, Washington State
and North Carolina beginning with the 2005 crop year. Also, the Board
approved the implementation of the Silage Sorghum Pilot and the Sugar
Beet Stage Removal Option Pilot.
Standard Reinsurance Agreement (SRA)
The new SRA has been put in place, effective for the 2005 crop
year. Key changes included a lowering of the A&O expense reimbursement,
which will be implemented over the 2005 and 2006 reinsurance years. In
addition, RMA has tightened the monitoring of SRA holders with respect
to financial solvency and is strengthening ties with state regulators
and the National Association of Insurance Commissioners (NAIC).
It should also be noted that, for reinsurance year 2005, RMA
approved three new SRA holders, bringing the current number of
reinsured companies to 16. Thus, 2005 has seen an increase in the
insurance writing capacity of the Federal crop insurance program.
Pilot Programs
For crop year 2005, RMA has 36 pilot programs being offered. A list
of those pilots programs is attached to my testimony (Exhibit 1). As
these programs gain experience, RMA conducts evaluations to determine
whether they may be converted to permanent programs and offered in
counties where the crop is routinely grown. During 2004, RMA completed
evaluations on seven (7) pilot programs including: cabbage, crambe,
cultivated wild rice, mint, mustard, Group Risk Plan (GRP), rangeland
and sweet potatoes. After consideration by the FCIC Board, cabbage,
cultivated wild rice, mint and mustard pilots were approved for
conversion to permanent programs. The Board directed RMA to revise the
GRP, rangeland and sweet potato programs, which has been done, and both
were approved as new pilot programs for the 2005 crop year. In
addition, RMA currently is contracting for an evaluation of the
Adjusted Gross Revenue pilot program.
Product Development and Non-Insurance Risk Management Tools
During fiscal year 2004, RMA awarded over $12 million in contracts
to further program goals of expanding the number of crop insurance
tools available to growers in the United States. Many of these
contracts are directed at specialty crops which supports one of RMA's
top priorities to develop effective risk management products for
pasture, rangeland, and forage. In January 2004, RMA released a
contract for research and development for pasture, rangeland, and
forge, with the aim of serving the vital needs of livestock producers.
RMA awarded four contracts to develop new approaches in various areas
of the country to address this potential market.
The contracts encourage use of new and innovative technology,
including a satellite based vegetative index; a satellite-based remote
sensing imagery that will describe the seasonal growth dynamics of
vegetation; and the use of a seasonal growth constrained rainfall index
based on a combination of a weighted warm-season/cool-season indexing
periods and the National Oceanic and Atmospheric Administration
rainfall data system. These programs are targeted for Board
consideration in 2005 and 2006, and potential availability for the 2006
and 2007 crop years.
Also, RMA has several active contracts underway which are focused
on providing new crop insurance programs for some of the most
significant non-insured specialty crops. Some of these include a new
program for Florida Fruit Trees; a Christmas tree program feasibility
study; development for fresh vegetables including asparagus, broccoli,
carrots, cauliflower, celery, garlic, artichoke, lettuce-head, lettuce-
leaf, lettuce-romaine, and spinach; Hawaii Tropical Fruits and Trees
development is currently under consideration by the FCIC Board;
feasibility of a revenue maple syrup program; a study by USDA's
Economic Research Service evaluating the unique risks of the organic
industry; research to determine the potential for development of a risk
management tool for producers of crops subject to quarantine
restrictions by a state or Federal agency; and research into the
feasibility of developing a crop insurance program for Small Value
Crops with an annual value of less than $50 million.
These are just a few of the product development initiatives
underway to expand and improve the risk management tools for American
agricultural producers.
Education and Outreach Program
For our educational efforts in 2004, a total of $4.5 million in
cooperative agreements were established with state departments of
agriculture, universities and non-profit organizations to benefit
states that have been historically underserved in the Crop Insurance
Program. Crop insurance education will be delivered 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 cooperative agreements will
expand available risk management information; promote risk management
education opportunities, inform agribusiness leaders; increase emphasis
on risk management; and deliver training on risk management to
producers with emphasis on reaching small farms.
Additional education efforts were dedicated to reaching producers
of specialty crops. A total of 41 partnership agreements were
established at a cost of $5.3 million in 2004. These agreements will
provide outreach to specialty crop producers to broaden their risk
management education.
Also, outreach efforts were directed to providing risk management
technical assistance to women, small and limited resource farmers, and
ranchers. A total of 60 projects were funded in 2004 at a cost of $5.2
million.
Agricultural Management Assistance
In 2004, RMA provided $4.2 million in financial assistance to
producers purchasing spring buy-up crop insurance policies in 15
targeted States. The primary goal of the program was to encourage
producers to purchase higher levels of coverage, and to provide an
incentive for new producers to insure. In 2004, RMA paid up to 15
percent of producers' out-of-pocket premium costs to encourage
increased participation.
Overall, in the targeted States RMA has seen an increase in
policies earning premium of about 7 percent. In addition, RMA estimates
that the average coverage level elected by most targeted States is 70
percent, in contrast to 65 percent, for those states without a
financial assistance program.
Comprehensive Information Management System
RMA is actively working on a project to implement Section 10706 of
the 2002 Farm Bill to assist with the development of a Comprehensive
Information Management System (CIMS) which will simplify and improve
the storage and access to data on programs administrated by RMA and the
Farm Service Agency (FSA). This project will provide a management
information system that allows RMA, FSA and other USDA entities and
insurance providers to process, share and report on approved common
information.
The CIMS will be designed to: improve access by agricultural
producers to RMA and FSA programs; improve and protect the integrity of
the information collected; meet the needs of the agencies that require
the data in the administration of their programs; improve the
timeliness of the collection of the information; contribute to the
elimination of duplication of information collection; lower the overall
cost to the Department of Agriculture for information collection; and
achieve such other goals as the Secretary considers appropriate for the
Agriculture community.
A contract has been issued for the system development;
identification of business processes and data elements of RMA and FSA
is in the final stage. The next phase involve the design and
implementation the information system for storing, maintaining,
accessing, and retrieving approved information by RMA, FSA, and USDA.
The design will leverage and comply with USDA's enterprise architecture
and common infrastructure.
Program Integrity
Risk Compliance managers have been concentrating on the mission-
critical tasks of evaluating and improving new processes to prevent and
deter waste, fraud, and abuse in the crop insurance program.
Significant effort is dedicated to building and adapting, reporting and
tracking feedback systems to complement and integrate the oversight
mandates established by ARPA. During 2004, Risk Compliance initiated
operation reviews of insurance providers to capture a program error
rate and to assess reinsured company activities under the Standard
Reinsurance Agreement. The Office of Management and Budget and the
USDA, Office of Chief Financial Officer are in agreement that a
quantifiable program error rate is a key measure in assessing program
compliance/integrity.
Additional efforts have been dedicated to integrating data mining
projects; exploring avenues to expedite the increase in sanction
requests; and continuing to improve the Compliance case management and
tracking system. These areas of responsibility have created 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 2006 Budget includes 15
additional staff years for Risk Compliance to strengthen the front-end
oversight of approved insurance providers and to address outstanding
Office of Inspector General recommendations to improve oversight and
internal controls over insurance providers. Also, included in this
budget is a request for $1 million to establish a systematic process of
auditing insurance providers to detect and correct program
vulnerabilities to preclude the payment of improper indemnities.
In addition, given the success of the data mining and data
warehousing activities to date, a provision is included in the 2006
Budget for $3.6 million to continue funding of data mining and
warehousing activities. Under current ARPA legislation, funding
provided to develop the data mining and warehousing systems expires in
2005. The 2006 Budget includes a General Provision to authorize funding
under the FCIC Fund to support annual maintenance costs and upgrades in
fiscal year 2006. As previously stated, approximately $94 million in
improper payments were determined and $35 million in improper
indemnities were received with the assistance of data mining and data
warehousing capabilities.
Other Initiatives
Some of the other initiatives RMA began or accomplished in 2004
are: completion of the Basic Provisions; development of the Written
Agreement Handbook; implementation of changes to Livestock Risk
Protection for feeder cattle, fed cattle, and swine; and development of
a handbook for Good Farming Practices.
CONCLUSION
RMA continues to make crop insurance protection useful to
producers, research way to address multi-year losses, expand risk
management education opportunities, provide outreach to limited
resource farmers, stimulate development of insurance products and
improve program integrity. Crop Insurance is a primary system of
support to producers when natural disasters strike. This was made very
evident when Florida experienced four hurricanes. In response to this
situation, FCIC-approved insurance providers mobilized immediately to
ensure timely payments of claims.
I urge you to approve this budget as submitted to allow RMA to
continue to improve a Crop Insurance Program that is actuarially sound,
meets producers' risk management needs at a cost which is fair to
taxpayers, affordable to farmers and sufficient for delivery of the
program through the private sector as established by Congress.
Mr. Chairman, this concludes my statement. I would be happy to
respond to any questions.
EXHIBIT 1.--FCIC: CROP YEAR 2005 PILOT CROPS
----------------------------------------------------------------------------------------------------------------
CROPS PLAN
--------------------------------------------------------------------------------------- Comment
Name Code Name Code
----------------------------------------------------------------------------------------------------------------
Alfalfa Seed 0107 APH 90 Also identified as:
Forage seed
All Other Citrus Trees 0211 TDO 40 Florida
Avocado 0019 ARC 46 California
Avocado 0019 APH 90 Florida
Avocado Trees 0212 TDO 40 Florida
Barley 0091 IP 42
Cabbage 0072 APH 90
Carambola Trees 0213 TDO 40 Florida
Cherry 0057 FD 51
Chili Pepper 0045 FD 51
Clams 0116 AQDOL 43
Corn 0041 IP 42
Corn 0041 IIP 45
Cotton 0021 IP 42
Cultivated Wild Rice 0055 APH 90
Fresh Market Beans 0105 DO 50
Grain Sorghum 0051 IP 42
Grapefruit Trees 0208 TDO 40 Florida
GRP Rangeland 0148 GRP 12 New crop code in 2005
Lemon Trees 0209 TDO 40 Florida
Lime Trees 0210 TDO 40 Florida
Mango Trees 0214 TDO 40 Florida
Mint 0074 APH 90
Multiple Crops .............. AGR 63 But not AGR-Lite
Mustard 0069 APH 90
Navel Oranges 0215 FD 51 California
Orange Trees 0207 TDO 40 Florida
Processing Cucumber 0106 FD 51
Raspberry and Blackberry 0108 FD 51 Several other berries
are `types' in this
policy
Silage Sorghum 0059 IAPH 96
Soybean 0081 IP 42
Soybean 0081 IIP 45
Strawberries 0110 FD 51
Sweet Potatoes 0185 APH 90 New crop code in 2005
Wheat 0011 IP 42
Winter Squash 0065 DO 50
----------------------------------------------------------------------------------------------------------------
Notes:
1. RMA will revise this list to reflect new or discontinued pilot programs.
2. Crop policies originally approved via the 508(h) mechanism are not considered pilots. Thus, CRC, RA, and
GRIP are not considered pilots.
AGRICULTURAL ECONOMY
Senator Bennett. Sounds pretty good, Dr. Collins. Does that
mean that the Federal Government can spend less money?
Dr. Collins. Unfortunately, it does not, Mr. Chairman. Part
of the reason it sounds pretty good is a very large increase in
Government payments is built into this assessment of the farm
economy.
Last calendar year, we spent about $14 billion in direct
payments to farmers. This calendar year, we expect about $24
billion. So Government spending is up. That is helping the
prosperity.
Senator Bennett. Ten billion dollars?
Dr. Collins. About $10 billion, yes, sir. Likewise, we see
that in our estimates of the Commodity Credit Corporation
budget, which you have. Last year, the CCC budget was about
$10.5 billion. This fiscal year, the CCC budget will be about
$24 billion. So that is up roughly $14 billion.
And that simply reflects the fact that our farm programs
generally are price sensitive. Counter cyclical payments,
marketing assistance loans depend on price levels. Price levels
are down from last year's fairly high levels, and much of the
increase is in marketing assistance loan spending.
I might add one final point to that----
Senator Bennett. I won't take the time to get into that.
Dr. Collins. The numbers I have just given you for the CCC
are in the President's budget. I might say that since the
President's budget was developed, price prospects do look
better for American agriculture. And I think we are running on
a track to spend less on marketing assistance loans and counter
cyclical payments than we had projected several months ago.
CAFTA
Senator Bennett. Okay. Dr. Penn, CAFTA has stirred up a lot
of passion. Do you want to make any comments about CAFTA and
its benefits to U.S. agriculture? How would you address
specifically the concerns raised by the sugar producers?
Dr. Penn. Thank you, Mr. Chairman, Senator Kohl. It is a
pleasure to be with you again this year.
I appreciate the opportunity to say a couple of words about
CAFTA because it is a trade agreement is very important in and
of itself, and it is also very important for the long-term
prosperity of U.S. agriculture. Should we fail to approve this
agreement, it will cast a long shadow over our opportunities to
expand market access through other trade agreements in the
future.
This is one of those rare trade agreements where virtually
every sector of agriculture stands to benefit. In essence, this
agreement is leveling the playing field. As has been pointed
out over and over, our markets are already open to the Central
American countries and the Dominican Republic. Ninety-nine
percent of all of their food and agricultural products already
enter our market duty free.
So this agreement says that we are going to greatly reduce
and eventually eliminate the tariffs on our products as they
move into those markets. And, the benefits are widespread--
across the grains, the oil seeds, the livestock sectors,
virtually every segment of agriculture stands to benefit.
Now, concern has been expressed by our friends in the sugar
industry, and they have made allegations that including sugar
in this agreement would threaten the operation of the domestic
sugar program. And, we just simply disagree with that. We think
that is not the case.
We are, in this agreement, allowing a very small amount of
additional sugar to enter the United States, 110,000 tons in
the first year. That is about 1 percent of the total United
States consumption of sugar. We consume something on the order
of 10 million tons. That would let in 110,000 tons. And, that
in no way jeopardizes the operation of the premium market that
we have for our own growers in the United States.
The world price of sugar today is well under 10 cents a
pound. The market in the United States is anywhere from 18 to
22 cents a pound. And admitting this additional sugar would not
cause any decrease in the price, nor would it otherwise
jeopardize the operation of the program.
So we think the concerns by the sugar industry are
overblown, that this is a good agreement for agriculture. It is
a good agreement for our country because it does provide
opportunities for economic growth and development in some
fledgling democracies right here in our hemisphere. We think
that that is very important for our national security.
So we believe it is a good agreement overall, and it is one
that I think you will see that most of the agriculture sectors
support very broadly. Some 60 groups are actively supporting
the passage of this agreement.
USDA PRESENCE IN IRAQ
Senator Bennett. Okay. It is a very small item in the
overall budget, but you have got $650,000 to establish a
presence in Iraq. It has been 20 years since the USDA was in
Iraq. What will the role be, just out of curiosity? I think
that is an item that will attract some attention.
Dr. Penn. As you know, the U.S. Government is establishing
a new embassy in Baghdad. And given the current situation
there, this will be the largest embassy that the United States
has in the world, given the nature of the security situation
and the economic situation.
Senator Bennett. We keep getting reminded of that when we
look at the number.
Dr. Penn. Iraq was once a very attractive market for U.S.
agriculture. In the late 1980s, before the earlier war in the
Gulf region, we were exporting something approaching a billion
dollars worth of food and agricultural products to Iraq. This
included grains, oil seeds, poultry products, vegetable oils,
dry beans.
We are slowly regaining some of that market. We have
exported something on the order of 350,000 tons of wheat since
hostilities ended the second time. And just this week, we
announced that we have had reported to us the sale of 65,000
tons of rice. So we are very slowly making inroads into that
market again, and we hope that those sales will continue.
The money that you note specifically is to establish a
presence for the Foreign Agricultural Service in this new
embassy in Baghdad. Under the new rules by the State
Department, all agencies that have a presence in the embassy
have to pay part of the capital cost----
Senator Bennett. I see.
Dr. Penn [continuing]. Part of the operating cost, and this
would support two or three Americans and the foreign nationals
that round out the complement.
CONSERVATION ASSISTANCE
Senator Bennett. I see.
Secretary Rey, first, I want to thank you on behalf of the
people of Utah for the work that you have done with respect to
the flood recovery in Washington County. We are facing another
round of that. The normal flow-off is about 66,000 acre feet,
and there are 240,000 acre feet in storage that could come down
in the next 2 weeks. So----
Mr. Rey. Almost makes you wish for fire season.
Senator Bennett. Yes. Well, unfortunately, we had a fire,
which denuded the watershed just before we had all of the rain.
So we are grateful. And we thank you also for your efforts on
the threatened and endangered species issues that we have to
deal with out in the West. And you have been responsive, and I
want the record to show that.
Now the President's budget requests a $37 million increase
to help farmers and ranchers address regulatory burdens,
primarily coming from EPA. And you and the NRCS has been in the
position of being the main agency that confronts this. Should
EPA bear some of these costs? Should we try to find a way to
shift budget a little on this one?
Mr. Rey. I think our joint recommendation--that is, both
NRCS's and EPA's--would be that the NRCS staff has the
technical capability and the better grassroots delivery system
to assist farmers and ranchers to do this work. And whoever
ends up bearing the cost of the work, the most effective way to
deliver the services or the most cost-effective way to deliver
the services is, I think, through NRCS's delivery system.
INVASIVE SPECIES
Senator Bennett. Okay. Tell me about invasive species.
Mr. Rey. The Administration's budget request includes a $10
million increase to use specifically for invasive species work.
The Western States are a focus of that work, although it is not
going to be exclusively in the West. And there are a couple of
key species, like star thistle and salt cedar, where the focus
that has been developed in coordination with all of the other
agencies in the Interagency Invasive Species Working Group have
agreed to.
Senator Bennett. Are we winning that fight?
Mr. Rey. I think on some species we are, and others we are
not. I think the investment that we are proposing to you for
2006 will help materially on the species that we have selected
for priority. But there are other concerns out there as well.
RESEARCH COORDINATION
Senator Bennett. Okay. Dr. Jen--ARS, one of the most
popular and attractive programs that USDA oversees. So you get
to be the one everybody likes. They have got 22 national
programs, some 1,200 research projects in this country and
overseas. The research is related not only to USDA programs,
although there are some that is exclusively there. But some to
activities in the other parts of the Federal Government, such
as food safety and nutrition and climate change and
environmental programs.
Tell us about what you are doing to make sure there is not
duplication between what you do and other university research
activities and research in the other Federal agencies.
Dr. Jen. Mr. Chairman and Senator Kohl, thank you for the
opportunity to be here.
In terms of trying not to have duplication of research
effort, we operate under the National Science and Technology
Council, which has a committee of science, committee of
technology, and interagency work groups that coordinate the
various type of Federal research among the department. So we
participate in most of those activities and discussions that
promote interagency cooperation.
More specifically, we cooperate with the National Science
Foundation, NIH, and NASA, for example, to address various
issues of common interest.
Within USDA, we have program areas in CSREES and ARS that
are planning together, so that the ARS research activity and
the university grants from CSREES are complimentary.
RURAL HOUSING PREPAYMENTS
Senator Bennett. Thank you.
Secretary Gonzalez, I think you will probably hear from
Senator Kohl about some of the rental assistance and activities
in the rural areas. He has a great interest in that. So I will
pass over it fairly quickly.
But I want to focus on one aspect. The recent report to the
administration on the condition of Section 515 housing
indicates that most of the units are not in danger of
prepayment, but they do need repair and renovation. And the
total, according to the report, is $2.6 billion.
Do you anticipate that any of the funds sought for vouchers
will be used for future renovations of these projects? If not,
why not?
Mr. Gonzalez. Thank you, Chairman Bennett, and thank you,
Senator Kohl.
There are two new developments in our multi-family program
from the time we met last year. First the courts have made a
determination that the owners have a right to prepay.
Fortunately, Rural Development took the initiative by
initiating the comprehensive property assessment, which we have
shared with the committee on both the House and the Senate
side.
Essentially what the study did was look inside the multi-
family portfolio and specifically look at a sample of the
17,000 properties that are out there, and determined that about
10 percent of those properties could potentially prepay.
In addition to that, we looked at market conditions and
property conditions. We did look at capitalization requirements
in the future. We looked at the propensity to prepay. But
specifically what we are focused in on right now in the 2006
budget is the $214 million, which is to establish a new tenant
protection voucher for the tenants.
If you take that 1,700 properties that could prepay, you
are talking about 50,000 families that essentially could be
displaced from the properties as a result of market increases
in rent. And so, the voucher program is designed specifically
to protect the tenant either in the existing property if the
owner prepays or at another property that is in our portfolio.
So the $214 million is designed specifically to meet what
we estimate are one third of the 50,000 units, in 2006, that we
expect to prepay. Those families potentially could be subject
to market rent increases and, as a result, could be out on the
street without housing.
Senator Bennett. So you are not anticipating the money
going for renovations?
Mr. Gonzalez. No, sir.
Senator Bennett. I see. Senator Kohl.
RENTAL ASSISTANCE PROGRAM
Senator Kohl. Thank you, Senator Bennett.
Mr. Gonzalez, I would like to talk a little bit more about
the subject raised by Senator Bennett. I believe the landscape
seems to be shifting here, and I am very troubled by what I
believe I see happening.
First, as you know, developers have gone to court and won
the right to prepay loans and convert low-income rental housing
to market prices, which will effectively force rural poor, the
people who are barely getting by as it is, out into a market
where their housing costs will go up. And now USDA comes
forward with a voucher program.
If we approve your voucher plan--and I don't think we
will--USDA will, in effect, be giving a green light to those
developers who want to hand tenants a voucher, tell them to
find another place to live, and kick them out of their present
housing. I understand that well enough. I don't intend to let
that happen.
In 2003, I requested a GAO report about your rental
assistance program, which found lots of problems, and we have
been working together to fix that. And now you are going to
turn into an uncharted area, where the rural housing service
has no experience. I have to tell you I don't think this
committee has enough confidence at this time to start off in a
new direction, especially one about which I am concerned as
much as I am about this program.
Furthermore, from what I have learned from you so far--and
I have tried to get information about this without a great deal
of success--it doesn't seem that you have much idea how this
voucher program is going to work. It is not authorized. There
is no detailed plan, and it looks like a $215 million carrot to
shove low-income people into the street and let their homes go
to more affluent families that can afford to pay market prices.
What is more, it appears that this proposal would let these
vouchers be used anywhere. A person in rural Wisconsin, for
example, could be given one of these vouchers, move to New York
City, which isn't exactly a rural area, and use this voucher,
funded through USDA's rural development programs. At least I
see nothing that proves otherwise.
I always thought that USDA was there to help poor families
in rural areas instead of working against them. So could you
explain a little bit more what this program is, why it is being
implemented, and what you are trying to do?
Mr. Gonzalez. Yes, Senator. I will share with you the two
new developments that I shared with Chairman Bennett. The
courts have determined the owners have a right to prepay. The
comprehensive property assessment did look inside the portfolio
of the 17,000 properties to examine market conditions, property
conditions, capitalization requirements for the future, and
also the propensity to prepay.
Earlier, GAO had come out with a report indicating that
closer to 25 percent of those properties could prepay. Our
number, based on a sample of 333 properties, is lower at 10
percent. So you are looking at 1,700 properties versus the
4,000 properties GAO estimated potentially could prepay. Our
number is rather conservative in terms of that. GAO has agreed
on our number.
Our primary concern is protecting those tenants from being
displaced by an increase in market rents. There is no program
that has been established like this within Rural Development to
protect tenants from and absorb that type of market rent
increase.
Regarding rental assistance we have brought a forecasting
tool online at the agency to greatly improve the accuracy of
our forecasting. Those numbers are a lot more reliable, a lot
more accurate. I would be glad to demonstrate the tool to staff
and to you, Senator, and to the committee.
We do have a tool that is online now that improves the
accuracy of the rental assistance forecasting.
Senator Kohl. But I don't see you disagreeing with the
assertion that these properties are going to be converted into
market price rental properties and that, as a result, those
tenants are going to be forced out. I mean, that is a statement
of fact, isn't it?
Mr. Gonzalez. Well, based on the study, 10 percent of those
properties are commercially viable and at least 50,000 families
could be subject to being displaced.
Senator Kohl. Well, how is that a good thing?
Mr. Gonzalez. It is not a good thing, but the voucher is
designed specifically, to protect those tenants from being
subject to that risk.
Senator Kohl. So they get a voucher, and they have to go
and find housing elsewhere?
Mr. Gonzalez. The voucher can be used in that property that
was prepaid, or it can be used in another property within our
portfolio.
Senator Kohl. What is the size of the voucher?
Mr. Gonzalez. I believe I would have to get you the details
on the size of the voucher. But I believe it is about $12,000
to $13,000.
Senator Kohl. Well, if you are not able to testify on the
size of the voucher and its adequacy, then how could we discuss
this program in light of these families that are going to be
displaced and their ability or inability to find satisfactory
housing?
Mr. Gonzalez. Our primary focus is the accuracy of the
study. We brought in an outside consulting group to look inside
this portfolio. They determined that at least 10 percent is
commercially viable and that could prepay, subjecting to 50,000
families to being put out in the street. That is a concern for
this agency, and it is a concern for this Administration to
protect those tenants.
HOUSING REVITALIZATION BUDGET REQUEST
Senator Kohl. Now I understand there is some kind of a
consulting fee, $10 million in consulting fees that you are
going to be spending. Please can explain to us what those fees
are for, to sell what I regard as a bad idea. How do you intend
to spend every penny of the $214 million that we are talking
about?
Mr. Gonzalez. Up to $10 million can be used to establish
the Office for Revitalization and provide administrative
support. That is up to $10 million. The balance of the $214
million will be spent on vouchers to protect the tenants.
Senator Kohl. And what is the $10 million going to be spent
on?
Mr. Gonzalez. To establish the Office of Revitalization for
this multi-family portfolio and for administrative support.
Senator Kohl. Well, as you can tell from my comments, we
are going to need to talk about this program in much greater
detail before the 2006 mark-up, and I will look forward to
working with you on ways in which we can at least satisfy my
office and Senator Bennett's that we are heading off into a
direction which is satisfactory. And I look forward to working
with you on it.
Mr. Gonzalez. Thank you, Senator.
MILK PRICES
Senator Kohl. Dr. Collins, when the Congressional Budget
Office prepared its January baseline, it assumed $13.90, as you
know, as the average all-milk price for 2005. On that basis,
CBO estimated that the MILC program would cost $606 million in
fiscal year 2005. The administration came up with an estimate
of about $500 million. More recent data leads me to believe
that those numbers are overstated. In your testimony, you
predict an all-milk price of $15 rather than the $13.90.
We only have 5 months left in our fiscal year, and it seems
very likely that the cost of milk will be much lower than
either the CBO or OMB predictions. So what was the all-milk
price assumption that resulted in the administration's January
price estimate of $500 million for milk, and what market
fundamentals have changed since that time?
Dr. Collins. That is a very good question, Mr. Kohl. Those
estimates were based on November supply and demand conditions.
I cannot remember the exact milk price that was back in the
November forecasts of the department. But I think you are
accurate in suggesting that the market has gotten a little
tighter since then, and milk price prospects look better.
You indicated a CBO price forecast in a $13 per
hundredweight range, and our forecast for 2005 is now up to $15
per hundredweight, which would make it the third- or fourth-
highest price in history. Unfortunately, when we score budget
proposals, we score them off the President's budget, just as
CBO scores budget proposals off its March baseline. We always
pick a point in time and stick with that throughout the entire
reconciliation process.
So even though I think that markets look a little better
than they did back in November of 2004, we will continue to
score the MILC program extension off the President's February
budget baseline.
VALUE-ADDED PROGRAMS
Senator Kohl. All right. For anybody and all on the panel,
in spite of the trend toward market dominance by a handful of
companies, a growing number of small, independent farmers are
turning to the historic role of farmers as business men and
women who are finding value-added niche markets, producing
specifically to those markets, and finding it is not so much
the size of the operation as it is the quality of the
operation.
Does your department recognize that these opportunities for
farmers exist? And if so, what are the farm credit, rural
development, and research and extension agencies doing to
support these niche developments and operations?
Dr. Penn. I can offer the perspective of our program area,
Senator Kohl, in the Farm Service Agency. As you know, we have
a very extensive farm loan operation, and there is a portion of
the loan funds that is set aside by statute for small and
disadvantaged farmers, for beginning farmers, and for minority
farmers.
This is a program that is especially well suited to
operations of the kind that you describe, those that have found
a niche in the marketplace and realize that they can fill that
niche without having to grow as large or operate like the
commercial mainstream field crop or livestock operations. So
those programs are almost ideally suited to the kinds of
operations that you are describing.
Mr. Gonzalez. Rural Development has for the last 3 years,
as a result of the Farm Bill, a value-added producer grant
program that essentially is creating new market opportunities
for farmers and ranchers in terms of taking those raw
commodities and adding value and, at the same time, increasing
the bottom line, creating jobs, and helping diversify rural
economies.
DIRECT MARKETING OF FARM PRODUCTS
Senator Kohl. All right. Gentlemen, I know that marketing
falls under jurisdiction of Agricultural Marketing Service that
will be represented here tomorrow. But for small farmers,
especially those seeking these niche markets, marketing can
make all the difference in the world in terms of success and
failure.
Do you think direct marketing of farm products is a viable
way to diversify rural investment? What are the keys to success
in this style of marketing?
Dr. Collins. All right, Senator Kohl, I would be happy to
take a shot at that.
VALUE-ADDED PROGRAMS
First of all, let me say on this whole question of value
added in niche markets, the Department did send up a report on
its value-added programs to the Congress. It was required in
last year's appropriations bill, and we sent it up, I believe,
in January of 2005. And it profiles across the Department all
the different value-added programs we have.
If my recollection is correct, we have roughly $350 million
a year in value-added programs, and we view value-added
marketing just as you described it, from the research programs
right through to the marketing programs of the Agricultural
Marketing Service or the programs in Mr. Gonzalez's area.
Also as part of value added, we include our bio-energy and
our bio-product work, which is substantial. It is not fully
included in that $350 million, but our bio-energy work and bio-
product work is running about $250 million, with Dr. Penn's
area accounting for a big portion of that with the CCC bio-
energy program.
DIRECT MARKETING OF FARM PRODUCTS
Specifically related to direct marketing--by ``direct
marketing,'' I think you mean farmers markets and things like
that--certainly we have seen an explosion in growth of farmers
markets over the past decade. And it has represented an
excellent opportunity for producers to go directly to the
consumer and get that additional value that might otherwise go
to a middleman or to a processor.
And what we are seeing with the producers is quite a range
of products that are being offered directly to the consumer. At
USDA, we have a farmers market once a week in one of our
parking lots, and we can see firsthand. We get farmers from
Virginia and Maryland and surrounding areas that come in and
directly market to USDA and other Federal employees where we
are.
I think the number of farmers markets is now in the range
of 3,000 across the United States, and we have seen a
tremendous growth in that. So it is an opportunity,
particularly for producers who can provide unique services to
consumers.
I know I have met with farmers who have come in to USDA
who, for example, have programs where they bring classrooms to
their farms. And that acquaints students and students' parents
with what they have on their farms, and then they market
directly to the community, and that becomes a marketing vehicle
for them.
So we are seeing a lot of ingenuity on the part of small
and medium-size farmers to extract a higher value. If you have
a small acreage, the only way you can get more income is to
increase the margin. One way to increase the margin is to
increase the price relative to the cost of production. The way
you increase the price is by you, as the farmer, adding value.
And that is what direct marketing can do.
SPECIALTY PRODUCTS
Senator Kohl. That is great. In Wisconsin, dairy farmers
are forming, as you know, cooperatives to develop specialty
cheese products. And this committee has provided funding to
help these cooperatives establish marketing policies.
Aside from programs like the value-added agricultural
product market development grants program of which I believe
the President proposes to cancel $120 million in this next
fiscal year, how can the department work with farm groups to
promote specialty products and create new markets for these
products? Tell me some of your own thoughts and experiences
here.
Dr. Collins. Well, one thing I would offer is the efforts
that the Department has made to promote the consumption of
fresh fruits and vegetables. We have done that in a variety of
ways. For example, through the school lunch program, we have
had pilot fresh fruit and vegetable programs to increase the
consumption of that.
You are going to hear from Under Secretary Bost tomorrow,
and I think he could give you a range of activities that he has
been involved in to try and promote the consumption of fresh
fruits and vegetables. Again, going back to USDA as a firsthand
experience, in our own cafeteria, we have replaced most of the
vending machines that used to sell highly processed products,
and we now have fruit and vegetable available in vending
machines and fruit juice vending machines and so on.
So I think that there is--through our food assistance
programs, we are making a substantial effort to try and promote
increased consumption of such specialty products.
FARM PRODUCT EXPORTS TO CHINA
Senator Kohl. Good. I thank you. Senator Bennett?
Senator Bennett. Dr. Collins, talk to us about China. That
is a topic on everybody's mind. Sometimes they get demonized.
You mentioned that in fiscal 2004, it was a $6 billion market
for U.S. farm products. Where do you see that going? And
specifically, what farm products do we export to China?
Dr. Collins. Well, specifically, we export a wide range of
products. The biggest ones probably are soybeans and cotton.
China has built a huge vegetable oil processing capacity over
the last decade. They are now the world's largest soybean
importer. This year, we estimate that they will import about
22.5 million tons of soybeans. We will----
Senator Bennett. Are they attempting to grow any
themselves?
Mr. Collins. They do grow soybeans. Their production has
been increasing, but at a slow rate and cannot nearly keep up
with their consumption, which is going to vegetable oil
consumption and going to improving the feed rations of their
livestock.
We expect that this year, we will set a record in soybean
exports to China, probably in the neighborhood of 12 million
tons, which is half of their total imports. And they account
for one third of the world's imports of soybeans.
In addition to that, another issue that you mentioned,
China being demonized, part of that has been related to the
huge overall trade deficit we have with China. It is our
largest single-country trade deficit. A part of that also
relates to the huge increase we are seeing in imported textiles
and apparel from China since January 1, when the Uruguay Round
Agreement on textiles was fully implemented.
But that gives us another opportunity. China is an enormous
consumer of cotton. This year, we think that they will import
about 8 million bales of cotton. Over the next several years,
we expect that that might grow to 10 to 12 million bales of
cotton. They are our largest market for cotton, which is a
high-value commodity, and so that represents a tremendous
opportunity for our producers as well.
Yes, we are losing our domestic cotton consumption. Our
textile mill capacity is slowly going overseas. But we are
replacing that with increased exports of cotton.
I remember years ago, I didn't think we would ever see 10
million bales of cotton exported, and this year, I think we are
going to do about 14 million bales. So it has been tremendous
for the cotton industry to be able to capture that growing
market in China.
China also this year is the world's largest importer of
wheat. This is a commodity that they didn't generally import.
In China, wheat has become a staple in the northern part of
China. Rice is really the staple food in the southern part of
China. And yet we have seen them become the world's largest
importer of wheat, and we are supplying some of that.
Rice, as I said, is considered a staple in the southern
half of China. That is a commodity they are probably most
sensitive about preserving self-sufficiency in, and they have
been right on the threshold of becoming a sizable importer of
rice. They have had difficulty expanding their rice acreage. I
don't foresee them becoming a big rice importer. It is possible
on the margin they could increase their imports some, but I
think you are going to see domestic efforts in China to
increase their rice production.
So we have a broad range of commodities. We are providing
some horticultural commodities to China as well. So there is
quite a range of things that we are providing.
Dr. Penn reminds me that number-one item, hides and skins
to China. So they are a market on the livestock side as well.
TEXTILE EXPORTS AND JOBS
Senator Bennett. Okay. My own observation in another life
here with the Joint Economic Committee, I think the textile
manufacturers that we are going to lose have already been lost.
And interestingly, what I think is happening is that China is
taking jobs away from the Dominican Republic and Mexico and
other places where they had taken these factories from us. And
now the Chinese are undercutting them.
Dr. Collins. This is exactly what we are hearing from
Caribbean area countries, for example. They fear the impact of
China on their exports to the United States. They have had
trade preferences with us in textiles. And now with the
elimination of all quotas, those preferences disappear. Country
of origin rules disappear, and they are very worried that China
is going to displace their textiles in the United States
market.
From a cotton point of view, China accounts for about 15
percent of our cotton textile and apparel imports. So it is not
a huge player right now, but it is going to grow fairly
sizably, I believe, over the next couple of years. I agree with
your point that much of what potentially could be lost has
already been lost. We lost the apparel industry a long time
ago, the high labor cost industry.
Senator Bennett. Yes.
Mr. Collins. And we do have a solid core of textile
companies that produce very high-quality, high-value,
technically advanced product. I can remember early in my career
visiting a textile plant, and you could see the parking lot was
full of cars. You go to a textile plant today, and there are
three cars in the parking lot. You know, it is highly
automated, and it has been able to improve its efficiency.
So we are going to have some market for U.S. textiles, but
there is no question that the Chinese market share in our
market will grow. And it will largely come at the expense of
other countries around the world. And this is an issue for
putting safeguards on Chinese textiles as well. Because when
you do that, we might reduce the imports of China, but they
might find their way into the United States through other
countries.
Senator Bennett. Yes. Well, you raise an interesting
question. If China is a major importer of cotton, as they begin
to take some of this work away from the Caribbean, are we going
to see drop-off in our cotton sales in the Caribbean?
Mr. Collins. That is the worry, that we will see some
decline in our exports of cotton.
Senator Bennett. What is the net number? Is China going to
import more than the Caribbean loses, or are we just going to
shift?
Dr. Collins. I think right now we are expecting our exports
will continue to grow, and that is because world consumption of
cotton textiles will continue to grow. The size of the pie is
going to get bigger.
CONSERVATION RESERVE PROGRAM
Senator Bennett. I see. Well, that is good.
Dr. Penn, let us talk about CRP, and there are tens of
millions of acres under the Conservation Reserve Program that
have contracts that are set to expire in the next few years.
What is FSA doing to make re-enrollment a smooth kind of
process? Do you see any kind of bureaucratic bottlenecks or
problems as those expirations come along?
Dr. Penn. Well, the situation is exactly as you note. I
can't remember the exact numbers, but there is a relatively
small amount of CRP acreage that expires in fiscal year 2006.
But then I believe in 2007 and 2008, over 22 million acres
begin to expire, and that is out of something on the order of
34 to 35 million that are enrolled now.
We have been thinking about this very seriously, noting
that this is both a challenge and an opportunity. We have such
a large amount of acreage coming out of the CRP and then
needing to re-enroll or extend acreage to continue the 39.4
million acre mandate that was included in the 2002 farm bill.
The question becomes do we want to change the profile, the
character, or the nature of the land that is to be re-enrolled
into this program?
We had a major conference last year in which a lot of these
questions were raised. What is the objective of the CRP now in
terms of its role in rural America, its role in protecting
wildlife, its role in environmental enhancement? So there are a
lot of objectives, and these continue to shift over time since
the beginning of this program in 1985.
There is to be another major conference later this year to
further explore these questions, to give all of the
stakeholders--the people who are concerned about soil erosion,
water quality, wildlife habitat, and agricultural production--
an opportunity to state what their views are with respect to
how to effectively manage this program. We have also put a
notice in the Federal Register in asking for comments on
options that we could consider as we begin to re-enroll this
large acreage.
The President has made a commitment to keep the CRP fully
enrolled as the statute allows, and the question then becomes:
exactly how you want to manage the program, what are the
objectives of the program, and where the land will come from.
So we are exploring all of these questions that you raise as we
get closer to the date when this large amount of acreage will
expire.
PLANNING RESEARCH PROGRAMS
Senator Bennett. All right. I applaud you for that.
Whatever we can do to make the re-enrollment as smooth and
seamless as possible. And that sounds like you are of the same
mind.
Now, Dr. Jen, you may be the one to ask this question to,
or others. The budget calls for a number of increases in areas
of research and then eliminates $175 million in projects
requested by Congress, many of which are research projects. In
some places, the budget proposes increases in cuts to the same
subject.
I will give you some examples. A $2 million increase in bio
energy research is offset in part by cuts in bio mass and
ethanol research. You have a $4.7 million increase in genomics
while cutting livestock and fish genome mapping and soybean and
cotton genetics. $15.3 million in food safety while cutting
projects that deal with salmonella, Listeria, and E. coli. $1.5
million increase for obesity and healthier lifestyle, but $6.9
million in cuts for research in those same areas regarding
child and elderly nutrition.
Share with us how you establish or how you set your
priorities and why you had the particular set of winners and
losers that you had. Was it just that if it came from the
department, you like it, and if it came from Congress, you
don't?
Dr. Jen. Absolutely not, Mr. Chairman.
Senator Bennett. Oh, okay. I wanted to get that on the
record.
Dr. Jen. Yes. We probably should get on the record that the
department supports a portfolio of all types of research
programs. Sometimes when you see the shifting from one area to
another, it is somewhat misleading. We set our research agenda
mainly on what is most important for the Nation.
Often, the title of the project, including other research
that you say is cut is moved into a different program or within
that program. So it is really not as clear cut as it appear.
For example, for genomics or obesity, the total budget request
for both these areas has increased in the President's 2006
budget.
Genomics research and obesity research are increased in the
national research initiative. So the budget did not show very
clear-cut increases in those areas. In terms of priority
setting, we have a tremendous number of stakeholder listening
sessions and interactions with industry, with university
community and with Congress, congressional staff, and all the
other stakeholders to set our priorities.
Senator Bennett. You will not be particularly surprised if
the committee adds some congressional earmarks, will you?
Dr. Jen. No, sir.
Senator Bennett. Okay. All right. I will leave that.
Senator Kohl, do you have any additional questions?
Senator Kohl. Thank you very much.
BUDGET DECREASES
Mr. Gonzalez, this year, as before, the President proposes
to cut direct loans and grants, which, as you know, target low-
income communities, and increase guaranteed loan programs,
which serve more moderate income communities. This proposal
effectively cuts vital services to our country's poor citizens
by reducing direct loans and grants for multi-family housing,
water and waste, broadband grants, and other rural development
programs.
USDA justifies this shift through its budget by emphasizing
lower interest rates and a resulting lower subsidy. On its
face, this sounds like a good idea to keep costs down. But
America's most needy rural communities are too poor and
neglected to participate in guaranteed programs. Furthermore,
the public policy underlying direct loans and grants is
precisely to support the Nation's most vulnerable rural
communities.
Now with interest rates rising, will it not be more
difficult for small rural communities to take on additional
debt in lieu of grant funding? Did your proposal anticipate the
possibility of higher interest rates? What effect does higher
interest rates have on the ability to serve low-income families
in the 502 guaranteed program?
Mr. Gonzalez. Yes, Senator. I believe our direct program is
down about $100 million. But our guaranteed program is up about
$400 million. This demonstrates our commitment, the
Administration's commitment to a home ownership society.
We are qualifying more people from our direct program and
also graduating people from our direct program into our
guaranteed program in the case of single-family housing.
In terms of our multi-family housing program, that number,
in terms of direct loans, is down. We obviously are focusing
right now on tenant protection. The other component on our
guaranteed side is our 538 multi-family housing program has
been doubled from $99 million to about $200 million. Combining
that with tax credits, we feel we can still serve the low-
income market.
Those are just examples of areas that even though there
have been some reductions on the direct side, we still are
adequately servicing residents in rural areas with our
guaranteed programs.
NUTRIENT MANAGEMENT LAB IN MARSHFIELD, WI
Senator Kohl. All right. A question for Secretaries Jen and
Rey. Along with volatile dairy prices, another major concern of
dairy farmers is the cost of compliance with State and Federal
environmental regulations. Two years ago, I helped bring
together the ARS, NRCS, and the University of Wisconsin College
of Agriculture and Life Sciences in a collaborative effort to
meet this very challenge.
As a result, this committee has provided funding to
establish a nutrient management laboratory at Marshfield,
Wisconsin. Part of the construction of this facility is
complete, and I hope we can provide funding for the last
construction phase this year.
We have also encouraged the ARS Dairy Forage Laboratory and
NRCS to work together as partners at the Marshfield facility to
develop management practices and implement them at the farm
level.
Mr. Jen or Mr. Rey, can you provide an update on this
partnership between these research and conservation agencies?
Mr. Rey. We have just developed a cooperative agreement for
fiscal year 2005, to develop the laboratory, and we can submit
a copy of that for the subcommittee's hearing record. On the
NRCS side, we will continue to provide resources to the effort
out of our base 2005 budget, and we will spend at least a half
a million dollars to support the continuation of the project
this year.
We will also provide staff support, with the aim of
integrating animal diet and feed management technologies into
overall conservation practices.
Dr. Jen. In terms of the Dairy Forage Research Laboratory,
we have completed feasibility studies for the renovation/
reconstruction of a new facility through the 2004 budget. We
forwarded the report to the Congress.
Senator Kohl. Gentlemen, I understand that a draft
memorandum of understanding between ARS, NRCS, and the
Wisconsin College of Agriculture and Life Sciences has been
forwarded to Washington. Has either agency taken further action
on approval of this memorandum of understanding? And will you
please notify me when such action is taken?
Mr. Rey. After we complete the work, we will notify you and
bring a copy up.
Senator Kohl. I would appreciate that very much. I thank
you very much.
Senator Bennett, I have no further questions.
WATERSHED AND FLOOD PREVENTION OPERATIONS
Senator Bennett. Okay. Secretary Rey, watershed and flood
prevention operations zeroed out in the President's budget. You
say in fiscal 2004, it provided nearly $1.5 billion in monetary
benefits, created, enhanced, or restored 7 million acres of
upland wildlife habitat, benefitted nearly 48 million people.
Okay. I realize this is a program that gets heavily
earmarked up here, and that does have an impact on NRCS's
ability to make decisions. But why do you want to zero it out?
Mr. Rey. I think calling this program heavily earmarked is
a bit of an understatement. It ranged in the last couple of
years between being 100 percent and more than 100 percent
earmarked. In the latter case, through an arithmetical error
that required us to distribute the earmarks on a discounted
fashion.
It is also a program that harkens back to the 1950s. A lot
of watershed structures have been constructed during that
period of time, and very little programmatic oversight has been
provided to the program in perhaps the last 15 years. Running
this program has become a considerable challenge to us. We
don't always have the right staff with the right backgrounds
and expertise in our State offices where the earmarked projects
are provided.
So we think this program has reached a point where stepping
back and taking a broader programmatic look at it is long
overdue. That is something we would like to work with the
Congress about. But, you know, to continue to administer it in
this fashion is perhaps not the best use of what is admittedly
tight budgets in a very difficult budget environment.
Senator Bennett. Will you be surprised if there are some
earmarks in this year's----
Mr. Rey. I would be surprised if there weren't.
Senator Bennett. Okay.
Mr. Rey. That having been said----
Senator Bennett. Yes.
Mr. Rey [continuing]. The point----
Senator Bennett. Can we work together a little more I think
is what you are saying.
Mr. Rey. Right.
Senator Bennett. So that the earmarks are tied more to a
budget plan or management plan that you might have in mind. Is
that what you----
Mr. Rey. Yes, and a programmatic look at where these two
programs should go in the future. I don't think that their past
performance, in terms of the construction of structural
watershed improvements, is necessarily where their future
should go.
Senator Bennett. All right. I think that kind of dialogue
is useful, and we will keep that in mind as we go forward.
Senator Kohl, you had one more question?
Senator Kohl. I thank you very much, Senator Bennett.
TRANSFER TO THE DEPARTMENT OF COMMERCE
Secretary Gonzalez, I see another part of the President's
budget where you want to get rid of four Rural Development
programs and send them over to the Department of Commerce. At
Commerce, they will be lumped with 14 other programs from all
over the Government, with one third less money than they now
have. The Administration justifies this by saying the programs
are duplicative, ineffective, and unaccountable.
Secretary Gonzalez, I understand you have been working with
these programs for a number of years. Do you think, for
example, that the Rural Business Enterprise Grant Program under
your management has been ineffective? Because, frankly, your
own press releases on the successes of these programs, this
particular program, leave quite a different impression.
Mr. Gonzalez. Thank you, Senator Kohl.
These programs obviously were ``PARTED'', were scored over
the last year by OMB, and most of these four programs under
Rural Development did not demonstrate results and, in some
cases, were duplicative. I support the President's
Strengthening America Communities Initiative in terms of
consolidating the 18 programs administered by the five
agencies. It makes a lot of sense, and it stands to benefit
rural areas when you look at the larger pot of money that is
being consolidated. Rural areas will have access to a
substantial portion of a program level of $3.75 billion.
We have been working with the Administration, the White
House and Department of Commerce to ensure that rural areas do
have greater access to a larger pool of money. And, we have
established--at least Commerce has established an advisory
committee, people working to flesh out the details to make sure
rural areas are well served. We had been working closely on
this initiative. I am confident and have been assured by the
Administration that rural areas will have a greater access to a
larger pool of funding--not just $75 million, but $3.75
billion.
Senator Kohl. Well, I will respond to that. I believe this
is, to some considerable extent, a shell game. As I see it, you
all think that while you are moving all these pieces around,
hopefully, no one is going to see that they are being gutted,
and their traditional constituencies are going to have to start
fighting each other. It will be Rural Development against CDBG
and on and on.
Even if we let you merge these programs, a cut is a cut, no
matter how deep, and someone is going to be a big loser. And as
you know, these programs are quite important to poor rural
communities. There seems to be a theme throughout the rural
development budget that these type of communities are going to
be singled out for continuing cuts. What is your response?
Mr. Gonzalez. Sir, I can just assure you that we are,
working with Commerce on this specific initiative, to ensure
that rural areas are well served and they stand to benefit from
this initiative. This is an opportunity for rural areas, as I
see it. Rural Development being the advocate that it is, there
is an opportunity here to provide the resources to rural areas.
I have offered up and proposed to the Department of
Commerce our delivery system. It is unmatched. When the
question becomes what can Rural Development do in terms of its
infrastructure and delivery system, we can help promote and
deliver this initiative. We can help educate communities on
this initiative and help communities, provide technical
assistance to make sure they do have access to this larger pool
of money.
Senator Kohl. Well, if these programs are to be moved to
Commerce, do you know for a fact that every single authorized
activity at USDA will still be an authorized activity at
Commerce? As you know, these are well-established programs at
USDA, and how will you be able to know that they will continue
to serve their traditional constituencies as they have in the
past if, in fact, they are gone from your jurisdiction?
Mr. Gonzalez. We are in the process of crafting legislation
with Commerce and the Administration on this initiative. And we
will be at the table with them to ensure that rural areas are
addressed.
ADDITIONAL COMMITTEE QUESTIONS
A template for urban isn't a template for rural
communities, and that is why we are at the table in terms of
making sure we address issues like business formation. If there
is an educational aspect to it, like No Child Left Behind
Initiative or broadband access, we are going to be there to
make sure that the right criteria are being used for rural
communities.
Senator Kohl. I hope so.
Thanks, Mr. Chairman.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Mark Rey
Questions Submitted by Senator Robert F. Bennett
watershed surveys and planning program
Question. The President's Budget has proposed $5,141,000 for the
Watershed Surveys and Planning program. What will that level of funding
allow NRCS to do?
Answer. This level of funding will allow NRCS to continue to fund
the highest-priority ongoing studies and plans in each of the States.
It will allow for completion of approximately 20 watershed studies and
plans.
Question. Will new projects be initiated?
Answer. Initiation of new plans and studies will, at most, occur on
a limited basis. If new plans or studies are initiated, they will be
selected based on a ranking and funding process that evaluates the
plans and studies according to their support of the NRCS Strategic
Plan.
Question. Will existing projects be completed at this level of
funding?
Answer. Again, this level of funding will allow NRCS to continue to
fund the highest-priority ongoing studies and plans in each of the
States. It will allow for completion of approximately 20 watershed
studies and plans. There are over 130 studies and plans that have
already been initiated.
Question. What level of funding would be required to complete all
initiated work?
Answer. Planning costs can vary widely, depending on the complexity
of the plan or study. It would require over $45 million to complete all
studies and plans which have already been initiated.
Question. How many fiscal year 2005 watershed funding requests did
NRCS receive for projects that were ready to be installed (local
sponsors had obtained land rights, permits, etc. and NRCS was prepared
with designs and ready for construction)?
Answer. In fiscal year 2005, NRCS received 278 funding requests
from project sponsors totaling $201 million on projects ready for
construction.
Question. Please provide the Committee with a list of all the
watershed projects that have been planned and authorized for
implementation, along with the dollar amount needed to provide the
Federal technical and financial share of the costs.
Answer. The attached provides the requested funding total of $1.9
billion to complete the currently authorized watershed projects.
[The information follows:]
----------------------------------------------------------------------------------------------------------------
Requested
State Program Watershed project name funding
----------------------------------------------------------------------------------------------------------------
Alabama................................ Public Law 566............ Pine Barren Creek......... $2,000,000
Alabama................................ Public Law 566............ Powell Creek.............. 500,000
Alabama................................ Public Law 566............ Big Nance Creek........... 2,000,000
Alabama................................ Public Law 566............ Choccolocco Creek......... 3,765,000
Alabama................................ Public Law 566............ Wilkerson Creek........... 312,000
Alabama................................ Public Law 566............ Kelly-Preston Mill Creek.. 20,000
Alabama................................ Public Law 566............ Harrison Mill-Panther 200,000
Creeks.
Alabama................................ Public Law 566............ Camp Branch............... 300,000
Alabama................................ Public Law 566............ Dry Creek................. 400,000
Alabama................................ Public Law 566............ Pates Creek............... 180,000
Alabama................................ Public Law 566............ Whitewater Creek.......... 100,000
Alabama................................ Public Law 566............ Short-Scarham Creeks...... 212,000
Alabama................................ Public Law 566............ Town Creek-Dekalb......... 185,000
Alabama................................ Public Law 566............ South Sauty Creek......... 100,000
Alabama................................ Public Law 566............ Northeast Yellow River.... 1,000,000
----------------
Total............................ .......................... .......................... 11,274,000
================
Alaska................................. Public Law 566............ Delta Clearwater.......... 5,951,600
================
Arizona................................ Public Law 566............ Buckhorn-Mesa............. 2,560,100
Arizona................................ Public Law 566............ Apache Junction-Gilbert... 1,792,000
Arizona................................ Public Law 566............ Williams-Chandler......... 1,280,000
Arizona................................ Public Law 566............ White Tank Mountains...... 1,681,700
Arizona................................ Public Law 566............ Eloy...................... 2,630,409
Arizona................................ Public Law 566............ New Magma................. 2,078,981
Arizona................................ Public Law 566............ Hohokam................... 4,341,423
Arizona................................ Public Law 566............ West Maricopa............. 755,044
Arizona................................ Public Law 566............ Maricopa-Stanfield........ 5,148,479
Arizona................................ Public Law 566............ San Carlos Watershed...... 5,819,964
----------------
Total............................ .......................... .......................... 28,088,100
================
Arkansas............................... Public Law 566............ Big Slough................ 17,036,000
Arkansas............................... Public Law 566............ North Fork Of Ozan Creek.. 1,211,000
Arkansas............................... Public Law 566............ Fourche Creek............. 841,000
Arkansas............................... Public Law 566............ South Fourche............. 3,627,000
Arkansas............................... Public Law 566............ Poinsett.................. 2,919,000
Arkansas............................... Public Law 566............ Upper Petit Jean.......... 12,017,000
Arkansas............................... Public Law 566............ Flat Rock Creek........... 1,779,000
Arkansas............................... Public Law 566............ Ozan Creeks............... 6,563,000
Arkansas............................... Public Law 566............ Little Red River.......... 279,000
Arkansas............................... Public Law 566............ Gould Portion Of Grady- 1,400,000
Gould.
Arkansas............................... Public Law 566............ Buffalo River Tributaries. 2,634,000
Arkansas............................... Public Law 566............ Departee Creek............ 2,060,000
----------------
Total............................ .......................... .......................... 52,366,000
================
California............................. Public Law 566............ Central Sonoma............ 3,700,000
California............................. Public Law 566............ Marsh-Kellogg Creek....... 3,750,000
California............................. Public Law 566............ Beardsley................. 50,000
California............................. Public Law 566............ Lower Llagas Creek........ 2,550,000
California............................. Public Law 566............ Upper Llagas Creek........ 150,000
California............................. Public Law 566............ Carpinteria Valley........ 1,000,000
California............................. Public Law 566............ Lower Silver Creek........ 16,300,000
California............................. Public Law 566............ Upper Stony Creek......... 125,000
California............................. Public Law 566............ Indian Creek.............. 50,000
California............................. Public Law 566............ Elkhorn Slough............ 960,000
California............................. Public Law 566............ Mccoy Wash................ 6,800,000
----------------
Total............................ .......................... .......................... 35,435,000
================
Colorado............................... Public Law 566............ Wolf Creek-Highlands...... 20,000
Colorado............................... Public Law 566............ Trinidad Lake North....... 240,000
Colorado............................... Public Law 566............ Limestone-Graveyard Creeks 340,000
Colorado............................... Public Law 566............ Highline Breaks........... 1,560,000
Colorado............................... Public Law 566............ Holbrook Lake Ditch....... 1,440,000
Colorado............................... Public Law 566............ Six Mile-St. Charles 2,640,000
Watershed.
----------------
Total............................ .......................... .......................... 6,240,000
================
Connecticut............................ Public Law 566............ South Branch Park River... 75,000
Connecticut............................ Public Law 566............ Norwalk River............. 11,567,800
Connecticut............................ Public Law 566............ Mill-Horse Brook.......... 6,760,000
Connecticut............................ Public Law 566............ Yantic River.............. 4,526,200
----------------
Total............................ .......................... .......................... 22,929,000
================
Delaware............................... Public Law 566............ Upper Nanticoke River..... 25,000
================
Florida................................ Public Law 566............ N. East Middle Suwannee 309,680
River.
Florida................................ Public Law 566............ S. West Middle Suwannee 309,680
River.
Florida................................ Public Law 566............ N. West Middle Suwannee 309,680
River.
Florida................................ Public Law 566............ S. East Middle Suwannee 309,680
River.
----------------
Total............................ .......................... .......................... 1,238,720
================
Georgia................................ Public Law 566............ Tobesofkee Creek.......... 1,985,424
Georgia................................ Public Law 566............ Lower Little Tallapoosa 350,562
River.
Georgia................................ Public Law 566............ Piscola Creek............. 822,794
Georgia................................ Public Law 566............ Five Points Area.......... 982,517
Georgia................................ Public Law 566............ South Chickamauga Creek... 1,068,475
----------------
Total............................ .......................... .......................... 5,209,772
================
Hawaii................................. Public Law 566............ Wailuku-Alenaio........... 2,000,000
Hawaii................................. Public Law 566............ Waimanalo................. 1,750,000
Hawaii................................. Public Law 566............ Waimea-Paauilo............ 9,232,000
Hawaii................................. Public Law 566............ Lahaina................... 7,500,000
Hawaii................................. Public Law 566............ Upcountry Maui............ 5,500,000
Hawaii................................. Public Law 566............ Lower Hamakua Ditch....... 4,500,000
----------------
Total............................ .......................... .......................... 30,482,000
================
Idaho.................................. Public Law 566............ Tammany Creek............. 3,673,495
Idaho.................................. Public Law 566............ Mission-Lapwai Creek...... 3,676,044
Idaho.................................. Public Law 566............ Bedrock Creek............. 432,550
Idaho.................................. Public Law 566............ Scott's Pond.............. 4,804,166
----------------
Total............................ .......................... .......................... 12,586,255
================
Illinois............................... Public Law 566............ Little Calumet River...... 52,400,000
Illinois............................... Public Law 566............ Lower Des Plaines 30,300,000
Tributaries.
Illinois............................... Public Law 566............ Lake Bloomington.......... 3,880,000
Illinois............................... Public Law 566............ Lake Carlinville.......... 825,000
----------------
Total............................ .......................... .......................... 87,405,000
================
Indiana................................ Public Law 566............ Muddy Fork Of Silver Creek 2,279,000
Indiana................................ Public Law 566............ Mariah Creek.............. 168,650
Indiana................................ Public Law 566............ Pigeon Creek.............. 160,590
Indiana................................ Public Law 566............ Honey Creek............... 5,400,000
----------------
Total............................ .......................... .......................... 8,008,240
================
Iowa................................... Public Law 566............ Little Paint Creek........ 700,000
Iowa................................... Public Law 566............ Bear Creek................ 3,300,500
Iowa................................... Public Law 566............ East Fork Of Big Creek.... 200,000
Iowa................................... Public Law 566............ West Fork Of Big Creek.... 2,300,000
Iowa................................... Public Law 566............ Upper Locust Creek........ 2,900,000
Iowa................................... Public Law 566............ East Fork Of The Grand 14,800,000
River.
Iowa................................... Public Law 566............ Mill-Picayune Creek....... 3,300,000
Iowa................................... Public Law 566............ Turkey Creek.............. 3,700,000
Iowa................................... Public Law 566............ Mosquito Of Harrison...... 2,800,000
Iowa................................... Public Law 566............ Waubonsie Creek........... 250,000
Iowa................................... Public Law 566............ Simon Run................. 640,000
Iowa................................... Public Law 566............ Troublesome Creek......... 4,000,000
Iowa................................... Public Law 566............ Twelve Mile Creek......... 1,050,000
Iowa................................... Public Law 566............ Little River.............. 500,000
Iowa................................... Public Law 566............ A&T Long Branch........... 500,000
Iowa................................... Public Law 566............ Long Branch............... 500,000
Iowa................................... Public Law 566............ Soap Creek................ 5,500,000
----------------
Public Law 566 Total............. .......................... .......................... 47,440,500
================
Iowa................................... Public Law 534............ Ltl. Sioux--Barber Hollow. 150,000
Iowa................................... Public Law 534............ Ltl. Sioux--Big Coon Creek 300,000
Iowa................................... Public Law 534............ Ltl. Sioux--West Wolf 150,000
Creek.
Iowa................................... Public Law 534............ Ltl. Sioux--Westside...... 450,000
Iowa................................... Public Law 534............ Ltl. Sioux--Bitter Creek.. 1,050,000
Iowa................................... Public Law 534............ Ltl. Sioux--Crawford Ck... 150,000
Iowa................................... Public Law 534............ Ltl. Sioux--Leech Hollow.. 300,000
Iowa................................... Public Law 534............ Ltl. Sioux--Little Whiskey 450,000
----------------
Public Law 534 Total............. .......................... .......................... 3,000,000
================
Iowa Total....................... .......................... .......................... 50,440,500
================
Kansas................................. Public Law 566............ North Black Vermillion.... 6,901,200
Kansas................................. Public Law 566............ Upper Black Vermillion.... 1,925,000
Kansas................................. Public Law 566............ Lower Elk River........... 843,000
Kansas................................. Public Law 566............ Lyons Creek............... 1,274,800
Kansas................................. Public Law 566............ West Sector Whitewater 540,000
River.
Kansas................................. Public Law 566............ East Sector Whitewater 990,000
River.
Kansas................................. Public Law 566............ North Sector Upper Walnut. 1,156,250
Kansas................................. Public Law 566............ Wet Walnut No. 2.......... 1,035,375
Kansas................................. Public Law 566............ Wet Walnut No. 3.......... 2,910,000
Kansas................................. Public Law 566............ Grasshopper-Coal Creek.... 3,097,900
Kansas................................. Public Law 566............ Diamond Creek............. 5,400,000
Kansas................................. Public Law 566............ Middle Creek (Morris)..... 881,250
Kansas................................. Public Law 566............ Elk Creek................. 9,652,500
Kansas................................. Public Law 566............ South Fork................ 978,000
Kansas................................. Public Law 566............ North-Middle Forks Wolf... 4,758,750
Kansas................................. Public Law 566............ South Fork Wolf........... 2,567,000
Kansas................................. Public Law 566............ Squaw Creek Lower Wolf.... 9,230,400
Kansas................................. Public Law 566............ Doyle Creek............... 2,430,000
Kansas................................. Public Law 566............ Upper Delaware And 12,460,000
Tributaries.
----------------
Total............................ .......................... .......................... 69,031,425
================
Kentucky............................... Public Law 566............ Obion Creek............... 4,000,000
Kentucky............................... Public Law 566............ Big Muddy Creek........... 750,000
Kentucky............................... Public Law 566............ Upper Tradewater River.... 10,000
Kentucky............................... Public Law 566............ West Fork Of Mayfield 1,200,000
Creek.
Kentucky............................... Public Law 566............ Red Lick Creek............ 900,000
Kentucky............................... Public Law 566............ Banklick Creek............ 4,000,000
Kentucky............................... Public Law 566............ North Fork Nolin River.... 900,000
Kentucky............................... Public Law 566............ Pigeon Roost Creek........ 1,120,000
Kentucky............................... Public Law 566............ Highland Creek............ 1,324,000
Kentucky............................... Public Law 566............ Brashear's Creek.......... 620,000
Kentucky............................... Public Law 566............ Boone Fork................ 5,720,000
----------------
Total............................ .......................... .......................... 20,544,000
================
Louisiana.............................. Public Law 566............ Cypress-Black Bayou....... 2,000,000
Louisiana.............................. Public Law 566............ Middle Tangipahoa......... 10,000
Louisiana.............................. Public Law 566............ Central Richland.......... 1,500,000
Louisiana.............................. Public Law 566............ Bayou Bourbeux............ 200,000
Louisiana.............................. Public Law 566............ Bayou Duralde-Lower 5,000,000
Nezpique.
----------------
Total............................ .......................... .......................... 8,710,000
================
Maine.................................. Public Law 566............ Kenduskeag Stream......... 1,000,000
Maine.................................. Public Law 566............ Meduxnekeag River......... 50,000
----------------
Total............................ .......................... .......................... 1,050,000
================
Maryland............................... Public Law 566............ Linganore Creek........... 100,000
Maryland............................... Public Law 566............ Dry Run................... 350,000
----------------
Total............................ .......................... .......................... 450,000
================
Massachusetts.......................... Public Law 566............ Baiting Brook............. 475,300
Massachusetts.......................... Public Law 566............ Clam River................ ...............
----------------
Total............................ .......................... .......................... 475,300
================
Michigan............................... Public Law 566............ Elk River................. 50,000
Michigan............................... Public Law 566............ South Branch Kawkawlin 60,000
River.
Michigan............................... Public Law 566............ Mud Creek................. 150,000
Michigan............................... Public Law 566............ Swan Creek................ 450,000
Michigan............................... Public Law 566............ Stony Creek............... 1,165,375
----------------
Total............................ .......................... .......................... 1,875,375
================
Minnesota.............................. Public Law 566............ Kanaranzi-Little Rock..... 780,000
Minnesota.............................. Public Law 566............ Whitewater River.......... 1,197,400
Minnesota.............................. Public Law 566............ Snake River............... 600,000
Minnesota.............................. Public Law 566............ Bear Creed................ 240,000
----------------
Total............................ .......................... .......................... 2,817,400
================
Mississippi............................ Public Law 566............ Chiwapa Creek............. 561,900
Mississippi............................ Public Law 566............ Town Creek................ 7,000,000
Mississippi............................ Public Law 566............ Tuscumbia River........... 1,622,500
Mississippi............................ Public Law 566............ Tallahaga Creek........... 2,100,000
Mississippi............................ Public Law 566............ South Delta............... 1,588,000
Mississippi............................ Public Law 566............ Long Beach................ 4,375,000
----------------
Public Law 566 Total............. .......................... .......................... 17,247,400
================
Mississippi............................ Public Law 534............ Ltl. Talla--Cane Creek.... 1,062,500
Mississippi............................ Public Law 534............ Ltl. Talla--Cypress & Puss 5,160,000
Cuss.
Mississippi............................ Public Law 534............ Ltl. Talla--Upper 1,250,000
Tallahatchie.
Mississippi............................ Public Law 534............ Ltl. Talla--Ayers Cree.... 2,600,000
Mississippi............................ Public Law 534............ Ltl. Talla--Duncan-Cane 2,125,000
Creeks.
Mississippi............................ Public Law 534............ Ltl. Talla--Greasy Creek.. 750,000
Mississippi............................ Public Law 534............ Ltl. Talla--Hell Creek.... 875,000
Mississippi............................ Public Law 534............ Ltl. Talla--Locks Creek... 250,000
Mississippi............................ Public Law 534............ Ltl. Talla--Lower Tippah 15,210,000
River.
Mississippi............................ Public Law 534............ Ltl. Talla--Ltl. Spring- 625,000
Ochewalla Creeks.
Mississippi............................ Public Law 534............ Ltl. Talla--Mill Creek.... 3,746,000
Mississippi............................ Public Law 534............ Ltl. Talla--Mud Creek..... 375,000
Mississippi............................ Public Law 534............ Ltl. Talla--North Tippah 2,431,000
Creek.
Mississippi............................ Public Law 534............ Ltl. Talla--Oaklimeter 11,263,000
Creek.
Mississippi............................ Public Law 534............ Ltl. Talla--Okonatie Creek 250,000
Mississippi............................ Public Law 534............ Ltl. Talla--Upper Tippah 6,625,000
River.
Mississippi............................ Public Law 534............ Yazoo--Abiaca Creek....... 10,553,750
Mississippi............................ Public Law 534............ Yazoo--Askalmore Creek.... 2,594,000
Mississippi............................ Public Law 534............ Yazoo--Batupan Bogue...... 1,250,000
Mississippi............................ Public Law 534............ Yazoo--Big Sand Creek..... 7,678,700
Mississippi............................ Public Law 534............ Yazoo--Black Creek........ 5,000,000
Mississippi............................ Public Law 534............ Yazoo--Black Creek (Delta) 7,500,000
Mississippi............................ Public Law 534............ Yazoo--Buntyn Creek....... 910,000
Mississippi............................ Public Law 534............ Yazoo--Burney Branch...... 5,260,000
Mississippi............................ Public Law 534............ Yazoo--Bynum Creek........ 1,208,000
Mississippi............................ Public Law 534............ Yazoo--Cane-Mussacuna Cks. 1,591,000
Mississippi............................ Public Law 534............ Yazoo--Coldwater River.... 10,740,000
Mississippi............................ Public Law 534............ Yazoo--Cypress Creek...... 3,012,500
Mississippi............................ Public Law 534............ Yazoo--Davis Splinter 1,935,000
Creek.
Mississippi............................ Public Law 534............ Yazoo--Eden Creek......... 63,000
Mississippi............................ Public Law 534............ Yazoo--Fighting Bayou..... 531,300
Mississippi............................ Public Law 534............ Yazoo--Hickahala Creek.... 1,188,000
Mississippi............................ Public Law 534............ Yazoo--Hoffa Creek........ 3,412,500
Mississippi............................ Public Law 534............ Yazoo--Hotophia Creek..... 500,000
Mississippi............................ Public Law 534............ Yazoo--Hurricane-Wolf 5,324,000
Creek.
Mississippi............................ Public Law 534............ Yazoo--Indian Creek-Bobo 1,250,000
Bayou.
Mississippi............................ Public Law 534............ Yazoo--Johnson And Fair 1,720,000
Cks.
Mississippi............................ Public Law 534............ Yazoo--Riverdale Creek.... 695,000
Mississippi............................ Public Law 534............ Yazoo--Senatobia Creek.... 510,000
Mississippi............................ Public Law 534............ Yazoo--Short Fork Creek... 3,940,000
Mississippi............................ Public Law 534............ Yazoo--Skuna River........ 5,818,800
Mississippi............................ Public Law 534............ Yazoo--Strayhorn Creek.... 6,375,000
Mississippi............................ Public Law 534............ Yazoo--Sledge Bayou....... 25,000
Mississippi............................ Public Law 534............ Yazoo--Tillatoba Creek.... 19,885,000
Mississippi............................ Public Law 534............ Yazoo--Toposhaw........... 3,125,000
Mississippi............................ Public Law 534............ Yazoo--Upper Skuna River.. 6,820,000
Mississippi............................ Public Law 534............ Yazoo--Yalobusha River.... 625,000
Mississippi............................ Public Law 534............ Yazoo--Northern Drainage 1,000,000
District.
Mississippi............................ Public Law 534............ Yazoo--North Tillatoha- 1,875,000
Hunter.
Mississippi............................ Public Law 534............ Yazoo--Long Creek......... 1,250,000
Mississippi............................ Public Law 534............ Yazoo--Otoucalofa Creek... 2,806,000
Mississippi............................ Public Law 534............ Yazoo--Pelucia Creek...... 4,535,000
Mississippi............................ Public Law 534............ Yazoo--Perry Creek........ 2,231,000
Mississippi............................ Public Law 534............ Yazoo--Persimmon Creek I.. 5,000,000
Mississippi............................ Public Law 534............ Yazoo--Pigeon Roost Creek. 12,578,700
Mississippi............................ Public Law 534............ Yazoo--Piney Creek........ 16,250,000
Mississippi............................ Public Law 534............ Yazoo--Potacocawa Creek... 1,837,500
Mississippi............................ Public Law 534............ Yazoo--Arkabutla Creek.... 3,512,300
----------------
Public Law 534 Total............. .......................... .......................... 228,513,550
================
Mississippi Total................ .......................... .......................... 245,760,950
================
Missouri............................... Public Law 566............ East Fork Of Big Creek.... 2,400,000
Missouri............................... Public Law 566............ Upper Little Black........ 750,000
Missouri............................... Public Law 566............ Lower Little Black........ 4,500,000
Missouri............................... Public Law 566............ Mozingo Creek............. 70,000
Missouri............................... Public Law 566............ Troublesome Creek......... 5,200,000
Missouri............................... Public Law 566............ Grassy Creek.............. 2,900,000
Missouri............................... Public Law 566............ Big Creek-Hurricane Creek. 16,100,000
Missouri............................... Public Law 566............ West Fork Of Big Creek.... 17,400,000
Missouri............................... Public Law 566............ East Locust Creek......... 5,000,000
Missouri............................... Public Law 566............ Upper Locust Creek........ 26,400,000
Missouri............................... Public Law 566............ Town Branch............... 2,090,000
Missouri............................... Public Law 566............ East Yellow Creek......... 10,000,000
Missouri............................... Public Law 566............ Moniteau Creek............ 3,120,000
Missouri............................... Public Law 566............ Marthasville Town Branch.. 750,000
Missouri............................... Public Law 566............ Hickory Creek............. 3,000,000
Missouri............................... Public Law 566............ East Fork Of The Grand 2,600,000
River.
----------------
Missouri Total................... .......................... .......................... 102,280,000
================
Montana................................ Public Law 566............ Lower Birch Creek......... 3,279,000
Montana................................ Public Law 566............ Mill Creek................ 175,000
Montana................................ Public Law 566............ Buffalo Rapids............ 8,806,000
----------------
Total............................ .......................... .......................... 12,260,000
================
Nebraska............................... Public Law 566............ Gering Valley............. 767,000
Nebraska............................... Public Law 566............ Papillion Creek........... 2,665,300
Nebraska............................... Public Law 566............ Aowa Creek................ 6,700
Nebraska............................... Public Law 566............ Tekamah-Mud Creek......... 6,700
Nebraska............................... Public Law 566............ Middle Fork Maple Creek... 6,700
Nebraska............................... Public Law 566............ Bone Creek................ 6,700
Nebraska............................... Public Law 566............ Stevens-Callahan (Camp 6,700
Creek).
Nebraska............................... Public Law 566............ Balls Branch.............. 6,700
Nebraska............................... Public Law 566............ Swan Creek................ 6,700
Nebraska............................... Public Law 566............ Wolf-Wildcat Creek........ 6,700
Nebraska............................... Public Law 566............ East-West-Dry Maple Creeks 10,000
Nebraska............................... Public Law 566............ Middle Big Nemaha......... 40,000
----------------
Total............................ .......................... .......................... 3,535,900
================
New Mexico............................. Public Law 566............ Prop Canyon & Tributaries. 740,000
New Mexico............................. Public Law 566............ T Or C Williamsburg 7,189,500
Arroyos.
New Mexico............................. Public Law 566............ Cottonwood-Walnut Creek... 19,125,000
New Mexico............................. Public Law 566............ Zuni Pueblo............... 16,487,500
New Mexico............................. Public Law 566............ Espanola-Rio Chama........ 33,920,000
----------------
Total............................ .......................... .......................... 77,462,000
================
New York............................... Public Law 566............ Mill Brook................ 2,050,000
New York............................... Public Law 566............ Nyc Ws (Ashokan).......... 96,100
New York............................... Public Law 566............ Nyc Ws (Upper 1,189,522
Cannonsville).
New York............................... Public Law 566............ Nyc Ws (Lower 1,204,339
Cannonsville).
New York............................... Public Law 566............ Nyc Ws (Pepacton)......... 642,748
New York............................... Public Law 566............ Nyc Ws (Neversink)........ 44,339
New York............................... Public Law 566............ Nyc Ws (Rondout).......... 66,452
New York............................... Public Law 566............ Nyc Ws (Schoharie)........ 362,009
----------------
Total............................ .......................... .......................... 5,655,509
================
North Carolina......................... Public Law 566............ Deep Creek (Yadkin)....... 6,000,000
North Carolina......................... Public Law 566............ Crabtree Creek............ 2,000,000
North Carolina......................... Public Law 566............ Swan Quarter.............. 5,280,000
North Carolina......................... Public Law 566............ Meadow Branch............. 787,830
North Carolina......................... Public Law 566............ Upper French Broad River.. 617,840
North Carolina......................... Public Law 566............ Newfound & Sandymush Creek 1,989,168
----------------
Total............................ .......................... .......................... 16,674,838
================
North Dakota........................... Public Law 566............ Square Butte Creek........ 7,400,000
North Dakota........................... Public Law 566............ Upper Turtle River........ 470,000
North Dakota........................... Public Law 566............ Taylor.................... 40,000
North Dakota........................... Public Law 566............ Belfield.................. 4,650,000
North Dakota........................... Public Law 566............ Colfax.................... 1,573,000
----------------
Total............................ .......................... .......................... 14,133,000
================
Ohio................................... Public Law 566............ Rush Creek................ 1,185,000
Ohio................................... Public Law 566............ Short Creek............... 6,275,000
Ohio................................... Public Law 566............ North Hocking River....... 1,872,000
Ohio................................... Public Law 566............ South Fork Licking River.. 6,820,000
Ohio................................... Public Law 566............ Wills Creek............... 657,000
Ohio................................... Public Law 566............ Four Mile Creek........... 3,915,000
Ohio................................... Public Law 566............ Upper Blanchard River..... 1,050,000
Ohio................................... Public Law 566............ Lower Stillwater River.... 120,000
Ohio................................... Public Law 566............ Upper Stillwater River.... 120,000
----------------
Total............................ .......................... .......................... 22,014,000
================
Oklahoma............................... Public Law 566............ Sandy Creek............... 1,330,000
Oklahoma............................... Public Law 566............ Leader-Middle Clear Boggy 6,650,000
Creek.
Oklahoma............................... Public Law 566............ Upper Black Bear Creek.... 2,660,000
Oklahoma............................... Public Law 566............ Upper Red Rock Creek...... 8,645,000
Oklahoma............................... Public Law 566............ Upper Blue River.......... 35,910,000
Oklahoma............................... Public Law 566............ Tri-County Turkey Creek... 1,330,000
Oklahoma............................... Public Law 566............ Stillwater Creek.......... 11,970,000
Oklahoma............................... Public Law 566............ Lower Clear Boggy Creek... 7,315,000
Oklahoma............................... Public Law 566............ Salt-Camp Creek........... 9,310,000
Oklahoma............................... Public Law 566............ Upper Bayou............... 8,645,000
Oklahoma............................... Public Law 566............ Lower Bayou............... 2,660,000
Oklahoma............................... Public Law 566............ Upper Elk Creek........... 8,645,000
Oklahoma............................... Public Law 566............ Cotton-Coon-Mission Creek. 4,655,000
Oklahoma............................... Public Law 566............ Jack Creek................ 1,330,000
Oklahoma............................... Public Law 566............ Lower Black Bear Creek.... 4,655,000
Oklahoma............................... Public Law 566............ Lower Red Rock Creek...... 12,635,000
Oklahoma............................... Public Law 566............ Okfuskee Tributaries...... 3,325,000
Oklahoma............................... Public Law 566............ Brushy-Peaceable Creek.... 18,620,000
Oklahoma............................... Public Law 566............ Lost-Duck Creeks.......... 2,660,000
Oklahoma............................... Public Law 566............ Cow Creek................. 7,980,000
Oklahoma............................... Public Law 566............ Upper Muddy Boggy Creek... 7,980,000
Oklahoma............................... Public Law 566............ Kickapoo Nations.......... 9,975,000
Oklahoma............................... Public Law 566............ Robinson Creek............ 3,990,000
Oklahoma............................... Public Law 566............ Hoyle Creek............... 665,000
Oklahoma............................... Public Law 566............ Turkey Creek.............. 6,650,000
Oklahoma............................... Public Law 566............ Cambell Creek............. 1,995,000
Oklahoma............................... Public Law 566............ Deer Creek................ 1,540,000
Oklahoma............................... Public Law 566............ Dry Creek................. 8,645,000
Oklahoma............................... Public Law 566............ Lugert-Altus.............. 2,520,000
Oklahoma............................... Public Law 566............ Little Beaver Creek....... 7,980,000
Oklahoma............................... Public Law 566............ Wild Horse Creek.......... 1,610,000
Oklahoma............................... Public Law 566............ Middle Deep Red Run Creek. 5,985,000
----------------
Public Law 566 Total............. .......................... .......................... 220,465,000
================
Oklahoma............................... Public Law 534............ Washita--Bitter Creek..... 1,330,000
Oklahoma............................... Public Law 534............ Washita--Bear Creek....... 665,000
Oklahoma............................... Public Law 534............ Washita--Tonkawa Ck- 4,788,000
Delaware Cks.
Oklahoma............................... Public Law 534............ Washita--Rush Creek....... 665,000
Oklahoma............................... Public Law 534............ Washita--Sugar Creek...... 665,000
Oklahoma............................... Public Law 534............ Washita--Spring Creek..... 2,394,000
Oklahoma............................... Public Law 534............ Washita--Wildhorse Ck (Up 665,000
& Lwr).
Oklahoma............................... Public Law 534............ Washita--Ionine Creek..... 3,325,000
Oklahoma............................... Public Law 534............ Washita--Little Washita... 665,000
Oklahoma............................... Public Law 534............ Washita--Maysville 1,995,000
Laterals.
----------------
Public Law 534 Total............. .......................... .......................... 17,157,000
================
Oklahoma Total................... .......................... .......................... 237,622,000
================
Oregon................................. Public Law 566............ Lower Tillamook Bay....... 6,388,796
Oregon................................. Public Law 566............ McKenzie Canyon Irrigation 2,325,000
Project.
----------------
Total............................ .......................... .......................... 8,713,796
================
Pennsylvania........................... Public Law 566............ Brandywine Creek.......... 1,541,000
Pennsylvania........................... Public Law 566............ Little Shenango River..... 1,172,500
Pennsylvania........................... Public Law 566............ Neshaminy Creek........... 9,160,000
Pennsylvania........................... Public Law 566............ Cross Creek............... 2,496,000
Pennsylvania........................... Public Law 566............ Yellow Creek.............. 60,000
Pennsylvania........................... Public Law 566............ Oven Run.................. 230,000
Pennsylvania........................... Public Law 566............ Monastery Run............. 475,000
Pennsylvania........................... Public Law 566............ Red-White Clay Creeks..... 2,122,000
Pennsylvania........................... Public Law 566............ Glenwhite Run............. 290,000
Pennsylvania........................... Public Law 566............ Tulpehocken Creek......... 2,840,000
Pennsylvania........................... Public Law 566............ Little Toby Creek......... 587,000
Pennsylvania........................... Public Law 566............ Mill Creek (Clarion/ 3,465,000
Jefferson).
Pennsylvania........................... Public Law 566............ Indian Creek.............. 2,960,000
Pennsylvania........................... Public Law 566............ Wheeling Creek............ 150,000
----------------
Total............................ .......................... .......................... 27,548,500
================
South Carolina......................... Public Law 566............ Thompson-Westfield Creek.. 2,000
South Carolina......................... Public Law 566............ North Fork Edisto......... 5,000
South Carolina......................... Public Law 566............ Pickens-Anderson.......... 4,000
South Carolina......................... Public Law 566............ South Edisto.............. 11,000
South Carolina......................... Public Law 566............ Holly Hill................ 1,000,000
----------------
Total............................ .......................... .......................... 1,022,000
================
South Dakota........................... Public Law 566............ Lower Little Mn River-Big 50,000
Stone Lake.
Tennessee.............................. Public Law 566............ Reelfoot-Indian Creek..... 4,021,317
Tennessee.............................. Public Law 566............ Cane Creek................ 8,371,486
Tennessee.............................. Public Law 566............ Hurricane Creek........... 2,008,193
Tennessee.............................. Public Law 566............ Mcnairy-Cypress Creek..... 4,282,632
Tennessee.............................. Public Law 566............ North Fork-Forked Deer 6,615,153
River.
Tennessee.............................. Public Law 566............ Sulphur Fork Creek........ 307,236
Tennessee.............................. Public Law 566............ Big Limestone Creek....... 543,478
Tennessee.............................. Public Law 566............ Lick Creek (1995)......... 684,501
Tennessee.............................. Public Law 566............ Bear Creek (Scott)........ 1,635,494
Tennessee.............................. Public Law 566............ Hickory Creek............. 2,669,595
Tennessee.............................. Public Law 566............ East Prong Little Pigeon 2,120,945
River.
----------------
Total............................ .......................... .......................... 33,260,030
================
Texas.................................. Public Law 566............ Caney Creek............... 5,400,000
Texas.................................. Public Law 566............ Salado Creek.............. 45,000
Texas.................................. Public Law 566............ Pine Creek................ 2,400,000
Texas.................................. Public Law 566............ Attoyac Bayou............. 1,681,000
Texas.................................. Public Law 566............ Donahoe Creek............. 3,600,000
Texas.................................. Public Law 566............ Choctaw Creek............. 24,000,000
Texas.................................. Public Law 566............ Aquilla-Hackberry Creek... 3,600,000
Texas.................................. Public Law 566............ Ecleto Creek.............. 9,600,000
Texas.................................. Public Law 566............ Leona River............... 3,600,000
Texas.................................. Public Law 566............ Paluxy River.............. 14,400,000
Texas.................................. Public Law 566............ Red Deer Creek............ 19,200,000
Texas.................................. Public Law 566............ Elm Creek (Cen-Tex)....... 33,600,000
Texas.................................. Public Law 566............ Elm Creek (1250).......... 9,600,000
Texas.................................. Public Law 566............ Los Olmos Creek........... 12,000,000
Texas.................................. Public Law 566............ Big Creek(Tri-County)..... 27,600,000
Texas.................................. Public Law 566............ Upper North Bosque River.. 90,000
Texas.................................. Public Law 566............ Bexar-Medina-Atascosa 475,000
Counties Water
Conservation.
----------------
Public Law 566 Total............. .......................... .......................... 170,891,000
================
Texas.................................. Public Law 534............ Trinity--Pilot Grove...... 32,400,000
Texas.................................. Public Law 534............ Trinity--Richland Creek... 36,000,000
Texas.................................. Public Law 534............ Trinity--Salt Creek & 6,000,000
Laterals.
Texas.................................. Public Law 534............ Trinity--Village & Walker 13,200,000
Creeks.
Texas.................................. Public Law 534............ Trinity--Cedar Creek...... 54,000,000
Texas.................................. Public Law 534............ Trinity--Chambers Creek... 42,355,000
Texas.................................. Public Law 534............ Trinity--Denton Creek..... 1,800,000
Texas.................................. Public Law 534............ Trinity--East Fork Above 9,600,000
Lavon.
Texas.................................. Public Law 534............ Trinity--Hickory Creek.... 7,200,000
Texas.................................. Public Law 534............ Trinity--Little Elm & 8,400,000
Laterals.
Texas.................................. Public Law 534............ Trinity--Lower E. Fork 1,200,000
Laterals.
Texas.................................. Public Law 534............ Trinity--Elm Fork......... 1,715,000
Texas.................................. Public Law 534............ Trinity--Big Sandy Creek.. 48,000,000
Texas.................................. Public Law 534............ Mdl Colorado--Upper Pecan 3,600,000
Bayou.
Texas.................................. Public Law 534............ Mdl Colorado--Southwest 1,800,000
Laterals.
Texas.................................. Public Law 534............ Mdl Colorado--Northwest 1,800,000
Laterals.
----------------
Public Law 534 Total............. .......................... .......................... 269,070,000
================
Texas Total...................... .......................... .......................... 439,961,000
================
Utah................................... Public Law 566............ Ferron.................... 384,500
Utah................................... Public Law 566............ Muddy Creek-Orderville.... 3,000
Utah................................... Public Law 566............ Tri-Valley................ 3,360
----------------
Total............................ .......................... .......................... 390,860
================
Vermont................................ Public Law 566............ Black River............... 563,000
Vermont................................ Public Law 566............ Lemon Fair River.......... 534,000
Vermont................................ Public Law 566............ Lower Winooski River...... 500,000
Vermont................................ Public Law 566............ Barton And Clyde Rivers... 1,820,000
Vermont................................ Public Law 566............ Lower Lake Champlain...... 1,100,000
Vermont................................ Public Law 566............ Lower Lamoille River...... 1,500,000
----------------
Total............................ .......................... .......................... 6,017,000
================
Virginia............................... Public Law 566............ Bush River................ 10,000
Virginia............................... Public Law 566............ Cedar Run................. 22,313,939
Virginia............................... Public Law 566............ Copper Creek.............. 75,000
Virginia............................... Public Law 566............ Cripple Creek............. 150,000
Virginia............................... Public Law 566............ Hays Creek................ 150,000
Virginia............................... Public Law 566............ Watkins Branch............ 4,083,622
Virginia............................... Public Law 566............ Three Creek............... 250,000
Virginia............................... Public Law 566............ Sandy Creek............... 100,000
Virginia............................... Public Law 566............ Lick Creek................ 7,479,384
Virginia............................... Public Law 566............ Ararat River.............. 17,757,182
Virginia............................... Public Law 566............ Chestnut Creek............ 800,000
Virginia............................... Public Law 566............ Little Reed Island Creek.. 800,000
Virginia............................... Public Law 566............ Buena Vista............... 7,975,146
----------------
Public Law 566 Total............. .......................... .......................... 61,944,273
================
Virginia............................... Public Law 534............ Potomac--South River...... 2,140,196
Virginia............................... Public Law 534............ Potomac--Linville Creek... 200,000
Virginia............................... Public Law 534............ Potomac--Lower North River 14,296,437
----------------
Public Law 534 Total............. .......................... .......................... 16,636,633
================
Virginia Total................... .......................... .......................... 78,580,906
================
Washington............................. Public Law 566............ East Side Green River..... 1,900,000
Washington............................. Public Law 566............ Omak Creek................ 1,000,000
----------------
Total............................ .......................... .......................... 2,900,000
================
West Virginia.......................... Public Law 566............ Elk Two Mile Creek........ 8,956,000
West Virginia.......................... Public Law 566............ Mill Creek................ 5,432,000
West Virginia.......................... Public Law 566............ Upper Deckers Creek....... 3,000,000
West Virginia.......................... Public Law 566............ Little Whitestick- 1,000,000
Cranberry Creeks.
West Virginia.......................... Public Law 566............ Upper Tygarts............. 3,000,000
----------------
Public Law 566 Total............. .......................... .......................... 21,388,000
================
West Virginia.......................... Public Law 534............ Potomac--Lost River....... 29,866,000
West Virginia.......................... Public Law 534............ Potomac--Lunice Creek..... 9,069,000
West Virginia.......................... Public Law 534............ Potomac--Patterson Creek.. 2,898,000
West Virginia.......................... Public Law 534............ Potomac--New Creek-Whites 2,821,000
Run.
West Virginia.......................... Public Law 534............ Potomac--No. & So. Mill 8,170,000
Creek.
West Virginia.......................... Public Law 534............ Potomac--South Fork River. 1,752,000
----------------
Public Law 534 Total............. .......................... .......................... 54,576,000
================
West Virginia Total.............. .......................... .......................... 75,964,000
================
Wyoming................................ Public Law 566............ Allison Draw.............. 2,084,000
Wyoming................................ Public Law 566............ Lingle Fort Laramie....... 5,436,955
----------------
Total............................ .......................... .......................... 7,520,955
================
Pacific Basin.......................... Public Law 566............ Kagman.................... 6,000,000
Pacific Basin.......................... Public Law 566............ Aui....................... 13,000
----------------
Pacific Basin Total.............. .......................... .......................... 6,013,000
================
National Total................... .......................... .......................... 1,887,972,931
----------------------------------------------------------------------------------------------------------------
Question. What is the number of watershed projects that are planned
and authorized for implementation but cannot proceed because the
Federal funding share is not available? How are you working at reducing
the list of projects awaiting the Federal share of funding? What is the
total dollar amount of unfunded Federal commitment in authorized,
unfinished watershed projects?
Answer. There are 442 authorized watershed projects that have
requested $1.9 billion. NRCS assists sponsors on an annual basis to
evaluate the status of project implementation and determine the amount
of funds needed to construct the conservation measures described in all
authorized watershed projects. In fiscal year 2005, 92 watershed
projects received fiscal year 2005 funds.
Question. How much did NRCS request during the fiscal year 2006
budget preparation?
Answer. NRCS' materials used in developing the fiscal year 2006
President's Budget are considered ``pre-decisional'' materials and,
therefore, remain a matter of internal record.
Question. How much did USDA request during the fiscal year 2006
budget preparation?
Answer. USDA's budget materials used in developing the fiscal year
2006 President's Budget are considered ``pre-decisional'' materials
and, therefore, remain a matter of internal record.
TECHNICAL AND FINANCIAL ASSISTANCE FUNDS
Question. If the Administration's budget is enacted, NRCS will have
not technical or financial assistance funds on October 1, 2005. What is
your plan to terminate/shut-down on all of the contractual obligations?
Answer. NRCS has about 2,000 contracts and agreements with sponsors
and landowners to install project measures.
NRCS would not have funds available in fiscal year 2006 to provide
technical services for construction inspection or contract management.
These contracts can be terminated for the convenience of the Government
under the contract terms. Terminating those contracts could result in
the need to restore the site to pre-construction conditions. The
termination costs plus the restoration effort may actually cost more
than the completion of the project. In addition, it might take several
months for the restoration effort to be completed for very large
projects in which case the restoration work may actually impact on the
next fiscal year with attendant needs for technical assistance funds
and perhaps additional financial assistance funds to properly close out
the projects. The true impact for many of the larger contracts will
need to be determined on a case by case basis.
Long Term Contracts.--The Government does not have the unilateral
right to terminate these land treatment agreements with individual
landowners in accordance with the terms of the agreement. If NRCS does
not have technical assistance funds to properly administer the
agreements, we may have to make payments under the agreements for
practices completed by the participants. If watershed funds are not
available for NRCS technical assistance, other funds would need to be
reprogrammed to administer the agreements and continue to make payments
for completed practices until the existing agreements are completed.
According to statute, the Secretary may terminate any agreements
with a landowner by mutual agreement if the Secretary determines that
such termination would be in the public interest. However, many
landowners may not mutually agree to terminate the agreements.
Question. What are the human safety risks, risks to the environment
and infrastructure if you halt construction on a half-constructed or
half rehabilitated dam or flood mitigation measure?
Answer. Human safety risks due to partial flood retention and more
probable dam failure, and environmental damage risks due to erosion and
sedimentation, will vary with the particular site situation and the
degree on completion. A partially completed dam is clearly a higher
risk to the public and the environment than a completed one.
Question. What is the Administration's plan to deal with projects
that are partially complete or dams that are half constructed on
September 30, 2005?
Answer. Dams that are partially completed when construction
activities are terminated can either be completed by others, modified
to protect the general public and the partially completed work, or
decommissioned and the area stabilized. Many embankment dams are
constructed over a period of several years; other dams have
construction interrupted by contractor default. NRCS has also
constructed many dams in planned phases with separate contracts for
each phase. Engineering solutions unique to each particular site will
be needed to mitigate long term risks to the Federal investment and the
general public. Unaddressed long term risks will likely be mitigated by
most State Dam Safety Agencies at the dam owner's expense.
Question. How many current contractual obligations do you have?
What is the monetary value associated with these obligations?
Answer. NRCS has about 2,000 contracts and agreements to install
conservation measures, including floodwater retarding structures and
Long Term Agreements with sponsors and landowners. These contracts and
agreements total about $167 million of obligated, yet undisbursed,
funds.
Question. What is the Administration's dollar estimate of claims,
attorney's fees, and litigation costs for addressing all of the
contractual obligations you propose to terminate?
Answer. The termination costs, including claims, attorney's fees,
and litigation costs, plus the cost to restore sites to original
condition have not been determined. These costs will need to be
determined on a case by case basis.
Question. What guidance are you providing to your sponsors (local
communities) who are anticipating Federal cost-share dollars and are
proceeding with land rights acquisition, engineering, design, and
Federal/State permits?
Answer. We have not provided any guidance to project sponsors.
Question. How much funding is needed to complete the on-going
watershed rehabilitation projects that have been initiated with prior
year appropriations?
Answer. The unfunded Federal commitment for projects authorized and
currently underway is $30 million.
Question. How many USDA assisted watershed dams have already
reached the end of their design life?
Answer. By the end of fiscal year 2005, 457 dams will have reached
the end of their design life.
Question. With the Administration's fiscal year 2006 budget
including a significant reduction in funding for watershed
rehabilitation, it seems like very few of the risks to loss of life and
property associated with these dams will be able to be addressed; is
that correct?
Answer. We project that of the currently authorized project work
that includes 68 dams, rehabilitation work could likely proceed on 7
dams.
Question. What are the anticipated rehabilitation needs for aging
watershed dams in the next 5 years?
Answer. In the next 5 years, 1,808 dams will reach the end of their
design life. By fiscal year 2009, $565 million (current dollars) is
required to rehabilitate these dams. The owners of these facilities
should also seek State and local government, as well as private,
sources of funding for their rehabilitation needs.
Question. At the rate of the administrations request for funding
for watershed rehabilitation, how long will it take to address: (1) the
on-going rehabilitation projects? (2) The existing known rehabilitation
needs?
Answer. With funding at $15 million per year, it would take
approximately 5 years to address ongoing projects. It would take
approximately 37 years to address the existing known rehabilitation
needs at this level of funding.
Question. How can the agency meet these critical public safety
needs with the Administration's budget proposal?
Answer. At the proposed funding level, watershed rehabilitation
needs and requests will be prioritized to address needs with the
greatest potential for loss of life.
Question. If funding was available, what is a realistic estimate of
the actual rehabilitation work that NRCS and local project sponsors can
accomplish in fiscal year 2006? How about the next 5 years?
Answer. The funding levels stipulated in statute are consistent
with the watershed rehabilitation needs to protect life and property.
Question. Is there an opportunity for communities to provide new
benefits, such as adding municipal water supply, recreation, and
wetland and wildlife enhancements when these dams are rehabilitated? Is
decommissioning (removal of dams) a viable alternative to consider for
rehabilitation of watershed dams?
Answer. Yes, local communities and project sponsors can add
additional purposes or beneficiaries to existing dams.
Question. How will appropriated funds be allocated to specific
watershed rehabilitation projects?
Answer. The statute directed USDA to assist sponsors with
rehabilitation of their aging dams and required establishment of a
priority ranking system. The priority ranking process has been
invaluable to provide a consistent method for evaluation of dams and
allocation of funds.
All viable applications received from project sponsors are ranked.
The priority ranking system includes the following major components:
Potential for failure of the dam; Consequences of failure of the dam--
based on existing conditions and design features of the dam; Input from
State Dam Safety Agency; Rapid implementation--to assure unsafe dams
are rehabilitated as quickly as possible. Highest priorities are
assigned to those dams with the greatest rehabilitation needs with the
potential for loss of life or significant environmental damage, should
the dam fail.
Question. Does NRCS have the technical capacity needed to assist
project sponsors with all of their requests for Federal assistance in
watershed rehabilitation?
Answer. While NRCS technical capacity in the area of planning,
design, and construction of water resource projects has decreased
significantly over the past several years the statute does not require
all technical assistance to come from NRCS. NRCS may elect to use
private technical sources to provide assistance in planning, design,
and construction oversight. Also, project sponsors may elect to
complete project planning and design using their own staff or the
hiring consultants to complete this work that would then be reviewed
and concurred on by NRCS.
Question. In fiscal year 2005, how many requests and how much money
was requested for rehabilitation assistance?
Answer. In fiscal year 2005, local communities requested 123
projects in 21 States totaling $43 million.
Question. How many projects were funded in fiscal year 2005? How
many projects were not funded?
Answer. The fiscal year 2005 appropriations provided for 87
projects in 21 States. 36 requests for watershed rehabilitation
projects were not funded.
Question. How much did each State receive for watershed
rehabilitation in fiscal year 2005?
[The information follows:]
FISCAL YEAR 2005 WATERSHED REHABILITATION
------------------------------------------------------------------------
State Total
------------------------------------------------------------------------
Alabama................................................. $170,000
Alaska.................................................. ..............
Arizona................................................. 3,797,000
Arkansas................................................ 431,000
California.............................................. 25,000
Colorado................................................ 195,000
Connecticut............................................. ..............
Delaware................................................ ..............
Florida................................................. ..............
Georgia................................................. 2,800,000
Hawaii.................................................. ..............
Idaho................................................... ..............
Illinois................................................ 40,000
Indiana................................................. 100,000
Iowa.................................................... 122,000
Kansas.................................................. 140,000
Kentucky................................................ 430,000
Louisiana............................................... 25,000
Maine................................................... 30,000
Maryland................................................ ..............
Massachusetts........................................... 115,000
Michigan................................................ 10,000
Minnesota............................................... 40,000
Mississippi............................................. 1,360,000
Missouri................................................ 300,000
Montana................................................. 225,000
Nebraska................................................ 1,122,000
Nevada.................................................. ..............
New Hampshire........................................... 110,000
New Jersey.............................................. 45,000
New Mexico.............................................. 662,000
New York................................................ 295,000
North Carolina.......................................... ..............
North Dakota............................................ 611,000
Ohio.................................................... 170,000
Oklahoma................................................ 5,470,000
Oregon.................................................. ..............
Pennsylvania............................................ 90,000
Rhode Island............................................ ..............
South Carolina.......................................... 102,000
South Dakota............................................ 20,000
Tennessee............................................... 14,000
Texas................................................... 5,035,000
Utah.................................................... 159,000
Vermont................................................. ..............
Virginia................................................ 610,000
Washington.............................................. ..............
West Virginia........................................... 190,000
Wisconsin............................................... 181,000
Wyoming................................................. 105,000
Pacific Basin........................................... ..............
Puerto Rico............................................. 30,000
---------------
State Totals...................................... 25,376,000
------------------------------------------------------------------------
______
Questions Submitted by Senator Herb Kohl
DUTIES OF AGENCY STAFF
Question. We are receiving reports that the Department is altering
the traditional agency assignments of certain field office staff. As we
understand it, where the CRP and EQIP programs are concerned, the Farm
Service Agency historically has assisted landowners with sign-up and
financial matters, while the NRCS has assisted with technical
assistance for these programs. Apparently, this is in line with long
standing expertise of these respective agencies. Information is now
coming forward that managers at the Department level are directing
agency staff to handle matters contrary to this historical pattern with
possible negative consequences. Please explain to the committee what is
taking place in this regard.
Answer. In a jointly signed memorandum dated July 19, 2004, Farm
Service Agency (FSA) Administrator James Little and Natural Resources
Conservation Service (NRCS) Chief Bruce Knight announced the migration
of Environmental Quality Incentives Program (EQIP) administrative
responsibilities from FSA to NRCS. There are many reasons for this
change, but the overall result will be a streamlining of services to
participants and more efficient use of Government resources.
Duplication of efforts, which were necessary when both agencies were
involved in EQIP, has been eliminated. Effective October 1, 2004, NRCS
is the point-of-contact for all administrative and technical services
provided through EQIP.
Although NRCS is recommending streamlining CRP to reduce the
administrative activities that are now required of NRCS, NRCS and FSA
have issued a ``workload agreement letter'' which basically states that
NRCS will provide CRP technical assistance for both the General CRP
Sign Up and the Continuous CRP.
In addition, TSPs have traditionally been hired either by the
landowner or by NRCS. TSPs have been available to conduct technical
assistance for CRP since fiscal year 2003.
NRCS at the State level can determine that they will contract out
the CRP technical assistance for conservation planning or conservation
application. NRCS may also decide that they will contract out different
phases of planning or application (conducting status reviews, practice
design or certification, etc.)
Question. What exact directives are being issued, and with what
degree of formality or permanence?
Answer. Jointly signed national directives from the Administrator
and Chief were issued to all FSA and NRCS employees on July 19, and
December 21, 2004. These directives supported an orderly transition to
new EQIP administrative procedures. A jointly signed letter was also
mailed to all active EQIP participants during August of 2004. The
permanent transfer of all contract files and related administrative
records occurred during October and financial reconciliation tasks were
finished during December. Since assuming administrative
responsibilities, NRCS has made over 32,000 EQIP payments totaling
about $175 million.
For fiscal year 2005, NRCS and FSA are operating under a ``Workload
Agreement'' which delineates the responsibility of CCC, FSA, and NRCS
with respect to CRP technical assistance, based on the 1986 Memorandum
of Understanding (MOU) establishing a cooperative working relationship
among the agencies involved in carrying out the CRP.
Question. What cost reimbursement arrangements are involved?
Answer. Since passage of the 2002 Farm Bill, NRCS has reimbursed
FSA annually for administrative services related to handling EQIP
applications and contracts. During fiscal year 2004, over $13 million
was transferred to FSA for this purpose. In 2005, NRCS has retained
these funds to enhance its administrative capability to support EQIP.
Much of this investment has been in software development, training, and
some additional administrative specialists to process payment
applications. No EQIP reimbursable agreements are planned with FSA this
year.
Utilizing the CRP agreement, NRCS will provide technical assistance
both directly or through NRCS approved Technical Service Providers and
assure all technical work done will meet NRCS technical requirements.
NRCS will also submit to FSA billings for direct charge from NRCS time
and accounting system information for full reimbursement of actual cost
of technical assistance provided by NRCS. These costs are based on NRCS
Cost of Programs Model.
Question. What complaints or inefficiencies are you aware of, and
what remedial steps will you take?
Answer. The transfer of more than 160,000 EQIP contracts has
neither been easy nor without some controversy. The migration and
reconciliation process took 5 months to complete. About 20 percent of
the participant payments were delayed beyond 30 days as NRCS
implemented new business processes for EQIP. We have given priority to
software support and training activities that enabled NRCS to eliminate
this problem. By the end of fiscal year 2005, NRCS expects to implement
additional streamlining activities to achieve more administrative and
technical efficiency.
In fiscal year 2007, 16.1 million acres of CRP land will expire and
will be available for planting to an agricultural commodity. This would
increase the soil erosion rate on cropland, and it would also place a
strain on the delivery of CRP technical assistance by NRCS at a time
when USDA's workforce is declining. FSA has requested comments on how
USDA should handle the expiration of the 16.1 million acres of CRP in
fiscal year 2007 and beyond.
NRCS is recommending streamlining CRP to reduce the administrative
activities that are now required of NRCS, e.g., land ownership changes,
obtaining landowner signatures on conservation plans, plan revision for
non-technical reasons, re-planning and certifying food plots every year
for the life of the contract, when the food plot seeding and/or
planting are the same year after year.
RESOURCE CONSERVATION AND DEVELOPMENT
Question. The President's budget includes substantial cuts in the
RC&D program and these cuts are arbitrarily based on the period of time
the associated districts have been authorized. Have you found that the
period of time a district has been authorized has any relation to the
effectiveness and success of the district?
Answer. We have found a variety of capacity situations in regards
to the length of time a RC&D Area has been designated. The President's
budget is not proposing to eliminate any RC&D councils. After more than
20 years of receiving technical assistance in the form of a full-time
coordinator and administrative support, the proposal reflects the
belief that these councils should have the capacity to supplant Federal
funds. The National Association of RC&D Councils recently provided
information showing that 24 percent of the councils have 2-5 employees
and 4 percent have 6 or more employees. Asking high-performing councils
to address these needs themselves should be feasible, and expecting
low-performing councils to improve their performance or risk being
terminated from assistance should also be reasonable.
Question. Should funding decisions be based on the most effective
use of Federal funds or arbitrary decisions?
Answer. We concur that funding decisions should be based on the
most effective use of Federal funds and believe that the President's
budget proposal reflects that decision.
Question. If effective districts will lose Federal funds under your
proposal, what assurances do you have that State, local or other funds
will replace them?
Answer. We are confident that high-performing councils will
demonstrate local leadership abilities to leverage funds from other
sources to supplant the incubator funds they have received from NRCS in
the past. This confidence is based on information they have provided in
the past regarding the high level of leveraged funds they are able to
achieve, an average of 5 to 1 dollar of RC&D appropriated funds for the
past 3 years, and the variety of funding sources they utilize in
carrying out their area plans each year.
______
Questions Submitted by Senator Tom Harkin
CONSERVATION SECURITY PROGRAM
Question. Participation in the first CSP sign-up was much lower
than NRCS expected, but the agency spent $40 million in 18 watersheds.
This year expenditures are capped at $202 million, some of which will
cover last year's contracts. With the sign-up in 220 watersheds this
year, there will be much less money per watershed for new contracts
this year.
The President's budget proposes capping CSP at $274 million next
year. If CSP is capped at $274 million, how much money will be
available for new contracts in fiscal year 2006?
Answer. With CSP capped at $274 million for 2006, NRCS expects to
have $110 million available for new contracts. The President's budget
provides for $273.9 million in available funding for CSP in 2006. Of
that amount, $123.2 is needed to fund prior year financial assistance
obligations. In addition, $41.4 million is used for technical
assistance by NRCS.
Question. I am concerned that the Conservation Security Program is
being eroded by restrictive rules and limited funds. If we follow the
President's budget recommendation, next year there will be less money
available for new contracts. If we continue decreasing the money
available for new contracts, then producers will not have the
opportunity to enroll in CSP once every 8 years, it will be more like
once in a lifetime.
We designed a program that was intended to be attractive to
producers and that would generate significant and lasting conservation
benefits from widespread participation.
I would like your commitment that USDA will help achieve the
original program objectives. Will you give me that assurance?
Answer. USDA is firmly committed to a CSP program that rewards
producers for their stewardship, promotes improved environmental
performance, and responsibly stays within the available funding
limitations.
NRCS is working hard to ensure development of the program in a
manner that is both farmer-friendly and responsive to the conservation
needs of the Nation. The watershed-based implementation is being used
to operate CSP and stay within the available budget. In 2004, CSP was
offered to producers in 18 selected watersheds and resulted in about
2,200 contracts with the $41 million of available funding. Currently,
sign-up for fiscal year 2005 CSP enrollment is well underway in 220
selected watersheds that reach all 50 States and the Caribbean. There
are 2,119 watersheds nationwide at the eight-digit hydrologic unit code
(HUC) level.
USDA is committed to the vision of CSP as a nationwide conservation
program. Other watersheds will be selected each year until landowners
in every watershed have had a chance to participate.
______
Questions Submitted to Gilbert G. Gonzalez
Questions Submitted by Senator Robert F. Bennett
RURAL RENTAL ASSISTANCE
Question. The budget requests $650 million for rural rental
assistance.
How will those funds be allocated?
Answer. [The information follows:]
FISCAL YEAR 2006 RENTAL ASSISTANCE
------------------------------------------------------------------------
------------------------------------------------------------------------
Renewals................................................ $639,126,000
Debt Forgiveness........................................ 5,900,000
Farm Labor Housing New Construction..................... 5,000,000
------------------------------------------------------------------------
Question. Will rental assistance be available for new construction
and substantial rehabilitation for farm labor housing projects?
Answer. Five million dollars will be available for Farm Labor
Housing new construction.
Question. Will that amount be adequate for all farm labor units
expecting to receive financing?
Answer. The amount is consistent with what has been provided in
recent years to support equivalent Farm Labor Housing New Construction
funding levels. Farm Labor Housing rental assistance costs
approximately $10,500 per unit; so this level will fund just under 500
units which should be sufficient to support the requested funding
levels for the program.
GUARANTEED MULTIFAMILY HOUSING
Question. The budget includes an increase for Section 538
guaranteed loans for rural rental housing.
What is the average income for families living in Section 538
developments and how does that compare to Section 515 developments?
Answer. The average income for families living in section 538
developments varies from project to project; however, section 538
projects have approximately 55 percent of the units rented to families
with very low income and approximately 40 percent are rented to low-
income families. The average income for families living in section 515
developments vary by project as well; however, approximately 95 percent
of section 515 units are rented to very low-income families and
approximately 4 percent are rented to low-income families.
Question. What is the average size of the communities in which
Section 538 developments are located?
Answer. The average size of the communities in which section 538
developments are located is approximately 8,790 people. The program can
assist communities up to 20,000 in population.
Question. What is the record of Section 538 developments in serving
low income households and more remote rural communities?
Answer. More than 90 percent of the units are rented to either very
low- or low-income families. One of the driving forces before renting
to very low- or low-income families is the tax credit requirements on
these projects. Eighty percent of section 538 properties are financed
with tax credit equities, which means that between 40 to 60 percent of
the units must serve families making less than 60 percent of median
income.
Section 538 is solely a guarantee program.
Question. What subsidy sources are available to make Section 538
units affordable for low income families?
Answer. The law governing the program requires that at least 20
percent of the loans made each year receive an interest credit subsidy,
which is a buy down from the lender's note rate to the Applicable
Federal Rate. So that this subsidy may reach the neediest of projects,
scoring and selection criteria are published each year in a Notice of
Funds Availability (NOFA), and the project must score a minimum number
of points, set in the NOFA, to receive interest credit. Because the law
sets a threshold for how many loans must receive interest credit, but
does set a limit on how many loans may receive it, the program's
subsidy rate has been calculated on the program's historic average of
interest credit subsidy granted. Each year, since program inception,
approximately 50 percent of the loans have received interest credit.
Rental Assistance is not available for section 538 projects;
however, other subsidies are permitted in these projects. HUD vouchers
are permitted, and State funded rental assistance is also permitted.
More than 80 percent of the section 538 projects have tax credit
equities, which adds an additional source of funding for the
construction. The tax credit agencies require large percentages of
units to be rented to families making less than 60 percent of area
median income.
Question. Does RHS have any information on the availability of such
sources and the likelihood that Section 538 projects will secure such
subsidies?
Answer. Currently, about 50 percent of section 538 properties
received an interest rate buy down, called interest credit. In order to
``stretch'' its interest credit and provide assistance to more
projects, while keeping the subsidy rate under control, the agency
currently limits the amount that any one property can receive to $1.5
million.
Additionally, 5-10 percent of the section 538 tenants have HUD
section 8 vouchers. As mentioned above, more than 80 percent of the
section 538 projects have applied for tax credits and received them.
These tax credits generate funds used in the construction of these
projects. As a condition of using tax credits, many of the units in
these projects are rented to very low-income families at affordable
rents without rent subsidies.
______
Questions Submitted by Senator Herb Kohl
RURAL DEVELOPMENT PROGRAMS
Question. The President's budget request eliminates four rural
economic development programs at USDA which are targeted to low-income
small rural communities and replaces these and 14 others into a smaller
substitute grant program the legislation for which has not even been
drafted. The Administration justifies this change by describing many of
these programs as duplicative, ineffective, and unaccountable with
results not demonstrated. Nevertheless, recent press releases cite the
successes and benefits the Bush administration has brought to rural
America through these very same programs the Administration seeks to
eliminate.
The entire proposal appears to have been developed and driven by
OMB with little or no input from the various affected Federal agencies.
What studies were conducted by either USDA or the Department of
Commerce to determine the impact this transfer will have on America's
rural communities? Isn't this just a shell game to reduce and/or
eliminate many of these programs and have their traditional
constituencies fighting over less funding? If this new smaller
substitute grant program was to be created in the Department of
Commerce, does the Department know for a fact what eligible activities
that are currently authorized under the four rural development programs
would be eligible under this new program? What transfer of staff from
USDA to the Department of Commerce is contemplated?
Answer. The President's proposed Strengthening America's
Communities Initiative is designed to streamline a number of Federal
programs that provide 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 regarding this initiative, we
feel confident that rural communities will fare well when these
criteria are used, as the proposal includes broad purposes that will
allow rural communities to obtain funds for purposes currently being
met through the Rural Development programs included in the President's
proposal. USDA Rural Development has offered our expertise, assistance,
and experience in program delivery in rural areas through our 800 local
offices. We will continue to work with the Department of Commerce on
the technical details of the delivery of this program, particularly as
it affects rural areas. The Administration will craft the legislation
as a part of a collaborative effort with Congress and stakeholder
groups. A Secretarial Advisory Committee has been created at the
Department of Commerce to help address some of the most complex issues,
including eligibility of rural communities. The legislation that is
ultimately submitted will be the result of an open dialogue with
stakeholders and members of Congress. The impact of this initiative on
Rural Development staff will be minimal, and no staff will be
transferred to the Department of Commerce.
RD GENERAL REDUCTIONS IN DIRECT LOANS AND GRANTS
Question. It seems that Rural America, as presented in this case
and generally across the entire budget request for the Department of
Agriculture, is the loser once again. These are well established
programs at USDA, serving the poorest rural communities and I have no
intention of allowing this proposal to move forward until the
Department can provide detailed answers prior to the Committee's Mark-
up in the very near future. In fact, I request receipt of these answers
this month to adequately prepare to draft a workable bill and not leave
out our poor communities.
This year, as before, the President proposes to cut direct loans
and grants (which target low-income communities), and increase
guaranteed loan programs (that serve more moderate-income communities).
This proposal effectively cuts vital services to America's poorest
citizens by reducing direct loans and grants for multifamily housing,
water and waste, broadband grants, and other rural development
programs. USDA justifies this shift throughout its budget by
emphasizing a lower interest rate environment, and the lower subsidy
and program costs that would result. On its face, this sounds good to
keep costs down. But, America's most needy rural communities are too
poor and neglected to participate in guaranteed programs. Furthermore,
the public policy underlying direct loans and grants is precisely to
support the Nation's most vulnerable rural communities.
What impact studies did the Department undertake prior to proposing
this shift? If none, why not? If studied, what results? When can the
Committee receive the results? What steps is the Department prepared to
take to protect the needy communities and individuals who will not be
able to participate in or benefit from guaranteed programs, and will no
longer have direct loans and grants available?
Answer. The Administration remains steadfast in its commitment to
rural America, including the neediest communities, and Rural
Development's $12.8 billion program budget request reflects that
commitment. This program level will be achieved with $1.775 billion in
budget authority. Budget authority supporting grants plus direct loans
accounts for 94.5 percent of the program total. Budget authority for
guaranteed loans accounts for only 5.5 percent of the program request.
It is also noted that guaranteed loans do, in fact, benefit the very-
low income rural population directly by providing housing and jobs, and
indirectly by providing infrastructure and essential community
facilities. Furthermore, in this continuing low interest rate
environment, individuals and communities are better able to bear some
debt, which allows scarce resources to be stretched further and allows
more communities and very-low income residents to benefit.
RD TAX EXEMPT FINANCING FOR LOAN GUARANTEE PROGRAMS
Question. USDA provides loan guarantees for essential community
projects under the Rural Development Loan Guarantee program. Struggling
rural communities are critically dependent on these loan guarantees to
meet environmental standards for water and waste water in a cost
effective manner. When it comes to financing public investments for
these issues, rural communities are forced by existing regulation to
choose between USDA loan guarantees or tax exempt financing. Financing
costs would likely decrease if communities could combine tax exempt
financing with Federal guarantees.
Does USDA utilize the full program level available for loan
guarantees of this nature?
Answer. No, we are not able to utilize the full guaranteed water
and environment program funds available. In the last 3 fiscal years,
$75 million has been authorized in each year. However, only 6 loans for
$2.3 million were made in fiscal year 2002; 4 loans for $3.6 million in
fiscal year 2003; and 2 loans for $41.2 million in fiscal year 2004.
That is an average of four loans per year for $16 million. In the past
3 fiscal years, only 21 percent of the guaranteed authority was used.
The vast majority of applicants for loans for water and waste disposal
projects are from municipal or tax exempt entities. Even though this
money is available for loan guarantees, RD is not able to use it to
address the current backlog program in the water and waste disposal
program.
Question. Explain how a provision in the tax code allowing rural
communities to combine tax exempt financing with loan guarantees would
increase rural community utilization of these guarantees?
Answer. Changing the tax code to allow tax exempt financing with an
agency guarantee would allow public bodies to borrow funds from
commercial lenders at an interest rate comparable with the agency's
direct market rate loans. In fiscal year 2004, $291 million in loans
were made to 278 public body borrowers at the agency's market rate
interest rate. That represents over 30 percent of the agency's fiscal
year 2004 lending total. Over one third, 100 public body borrowers in
2004, did not receive grant funds and borrowed $134 million in market
rate loans. Most of these borrowers could obtain financing from private
lenders at a cost comparable to direct loans if they could receive both
a tax exemption and a guarantee on the financing.
RD BUSINESS PROGRAMS
Question. The Business and Industry Guaranteed program has received
a substantial increase in the Department's budget request for 2006.
Are you still pursuing other fees through Congress to reduce the
subsidy costs for this program, and if so, what is the Administration's
formal position?
Answer. The Administration is currently assessing its options
including consideration for assessing an annual fee for reducing the
subsidy costs of the program. It is the Administration's goal to find
ways of reducing the cost of the program in order to assure that
adequate funding is provided to accommodate the demand of this program
in fiscal year 2006 and beyond.
RHS NEW CONSTRUCTION
Question. The President's 2006 budget estimates indicate no rental
assistance for new construction for multi-family rental and farm labor
housing programs. In 2004, GAO reviewed this program, which is the
largest line item account in the Rural Development Mission area. Upon
GAO's finding of gross mismanagement of this program, the committee
changed the term of the contracts to capture over inflated contracts.
Is it true that you have now changed this position to allow rental
assistance for new construction in the farm labor housing program?
Answer. The fiscal year 2006 budget has $5 million in rental
assistance for Farm Labor Housing new construction.
[The information follows:]
FISCAL YEAR 2006 RENTAL ASSISTANCE
------------------------------------------------------------------------
------------------------------------------------------------------------
Renewals................................................ $639,126,000
Debt Forgiveness........................................ 5,900,000
Farm Labor Housing New Construction..................... 5,000,000
------------------------------------------------------------------------
Question. What led to this change?
Answer. Fiscal year 2006 budget had all 521 assistance listed on a
single line item as if for renewal only. The intention to provide $5
million in assistance for 514/516 was erroneously omitted in the
accompanying notes. It was the Administration's intent that support for
farm labor housing new construction be included and was part of the
$650 million requested.
Question. Does this indicate that you over-compensated for
renewals?
Answer. No, the chart did not reflect the intention of the
Administration, and the note in the budget should have said ``including
$5 million of funding for RA for Farm Labor Housing'' instead of ``does
not include''. The RA on the chart erroneously appeared as if it was
only for renewal use. It was overlooked in the review process, and
corrected later. We apologize for this error and appreciate the
opportunity to clarify.
Question. Why is the Administration allowing new construction for
the 514/516 program and not the 515 program when they are very similar
in program activities and structure?
Answer. The Department has studied the 515 program and now has
definitive knowledge of the need to focus on revitalization of existing
portfolio. The 514/516 program, though similar, has not benefited from
the same level of study yet. It would be premature to assume the same
approach is needed in both programs. Further review may indicate what
specific directional changes should be made in this program.
Question. Considering that the very low-income elderly compose
almost half of the population making use of the 515 program, is it not
of vital interest to meet those needs?
Answer. Currently approximately 57 percent of the units in the 515
programs are rented to elderly tenants. The Administration believes
that protection of these tenants through availability of new tools such
as vouchers, and emphasis on revitalizing the portfolio is the best way
to serve the rural elderly population with the limited resources
available.
RHS EQUAL ACCESS TO HOUSING
Question. ``Equal access to housing is especially important in
rural America. RHS is continuing to show the way in making decent
affordable housing available to low- and moderate-income rural people
regardless of color, disability, gender or belief.''
The above comments by former Rural Housing Service (RHS)
Administrator Art Garcia were made on April 26, 2002. I am not sure,
however, how faithful RHS remains to these ideas today.
In 2001, Rural Development issued a Request for Proposal (RFP)
(solicitation #RP-31ME-1-1001) to conduct fair housing paired testing.
The RFP stated that the testing was to be: ``. . . on a nationwide
basis in Rural Development's Rural Rental Housing Section 515 and
Section 538 complexes that were financed by USDA.''
Apparently, the testing was to determine whether discrimination
occurs in rental housing supported by RHS. Although the RFP was issued
nearly 4 years ago, we have heard no mention of the results.
Where are the testing results?
Answer. The study has been reviewed with RHS officials, and
training for Headquarters staff is scheduled by the Fair Housing
Alliance for May 24th and 25th regarding the findings. The recent
policy meeting held in Portland, Oregon, introduced the existence of
the study to the field and a session on accessibility and fair housing
was offered as a mandatory part of the training track for Multi-Family
Housing staff and architects. Additionally, discussions have been held
with Council for Affordable and Rural Housing and National Affordable
Housing Management Association groups about training of resident
managers to be more aware of their responsibilities, which was the
primary focus of the study. Both groups are currently offering such
training to industry managers.
Question. Why has there been no discussion of the findings?
Answer. The findings are being reviewed and policy formulated to
address the findings. The official training by the Fair Housing
Alliance is scheduled for May 24th and 25th.
Question. Did the tests find any violations? How many? In what
areas of the country were the tests conducted?
Answer. The tests found violations, but frequency of violations
were found at a rate of one third that normally found in similar HUD
reviews. The study conducted tests in a geographically dispersed
manner, not focusing on any one part of the United States.
Question. What corrective actions has the Department taken to
remedy any discriminatory practices?
Answer. While individual property by property results are not
provided in the study, the contractor has agreed to deliver to RHS a
list of any specific properties where violations were serious enough to
need immediate attention. These cases will be individually evaluated
and corrective action initiated by Rural Development State Offices.
RHS RENTAL ASSISTANCE
Question. In the President's budget request for Section 521 Rental
Assistance:
Does the total rental assistance number include transferred rental
assistance for projects that prepay?
Answer. The budget request does not include transferred rental
assistance for projects that prepay because we do not know at this time
which projects will prepay or what the balance of those rental
assistance contracts will be when the borrower actually prepays his
mortgage. The President's budget request of $650 million is for renewal
of contracts expected to exhaust funds in fiscal year 2006 renewals
($639 million), rental assistance for Farm Labor Housing new
construction ($5 million) and preservation (debt forgiveness) ($5.9
million).
Question. If so, what is the number?
Answer. The budget request does not include transferred rental
assistance.
Question. How many projects (and the associated rental assistance
for projects that prepay) do you anticipate will prepay in fiscal year
2006?
Answer. Unless litigation or legislation lifts restrictions
currently in place, we anticipate that approximately 100 properties
will prepay, based upon past trends. We cannot estimate the balance of
these rental assistance contracts.
RHS SINGLE FAMILY RURAL HOUSING
Question. What is the status of the Rural Home Loan Partnership in
the Section 502 direct loan program?
Answer. The agency continues to participate in the Rural Home Loan
Partnership (RHLP) for fiscal year 2005. The partnership provides
significant benefits for the agency and its partners as well as our
customers by bringing our mutual resources together to assist low- and
very low-income rural residents in becoming successful homeowners.
Question. Do you plan to continue this partnership effort?
Answer. Yes. Our customers benefit from the homeowner education and
affordable housing products that many of our RHLP partners provide. We
look forward to working with our partners to make this initiative even
more mutually beneficial.
Question. What is the cost to the government of this partnership
effort compared with what the cost would be if the Department provided
the entire loan through the 502 direct loan program?
Answer. Rural Development has not performed a specific cost-benefit
analysis. The RHLP is a unique partnership involving a local nonprofit,
local lender and Rural Development all working together to build a
better rural community. The nonprofit organization provides credit
counseling, homeownership education, and other affordable housing
products. The local lender is able to participate in helping lower
income families within their community to achieve homeownership. Rural
Development benefits by helping more families to become successful
homeowners.
RHS MULTI-FAMILY HOUSING
Question. In the Administration's new voucher program, what are the
annual cost, number and term for these vouchers?
Answer. While the legislative language currently being developed
through the Department will determine the final form of these vouchers,
we currently anticipate through the budgeting process that the rental
assistance assisted tenants will be provided a 5-year term and cost
approximately $13,000-$14,000 per voucher. Our calculations assumed
that Non RA assisted tenants would be covered for a shorter term, so
those vouchers would be less expensive. The 2006 Budget estimate is
based upon issuing 15,000-17,000 vouchers, which would cover about one-
third of the total expected in the prepayment estimation of the
Comprehensive Property Assessment (CPA). The CPA estimated the primary
need for vouchers would be in years 2006-2009.
Question. Who will administer this program, for example HUD Public
Housing Authorities?
Answer. We could use a delivery strategy similar to that used by
HUD, which includes public housing authorities as part of the process.
Question. If an entity outside of USDA administers this program,
what type of administrative agreement are you exploring and what is the
cost?
Answer. A delivery network similar to HUD could be operated under
an interagency agreement.
Question. Provide a detailed breakdown of the $214 million voucher
funding request. For example, will consulting costs be included and for
what amount?
Answer. Of the $214 million requested during fiscal year 2006 for a
Rural Development voucher program, $204 million would go for the cost
of vouchers and $10 million would go for administrative expenses,
including contracts for industry experts.
Question. Will these vouchers be project-based or tied to an
individual?
Answer. The vouchers are to be tenant based.
Question. Will they be portable and allowed to transfer outside of
the community? Can they be transferred to any community in the United
States? If so, how will you control the costs?
Answer. Details of the voucher program are still being developed.
They will include portability since it is understood that tenants
prefer to have choices.
Question. Can they be transferred to major urban communities? If
so, how will you avoid confusion or conflicts with the HUD voucher
program?
Answer. While they could be transferred to another geographical
area, the cost is determined by the market conditions in the area where
prepayment occurred. Therefore, moving to a very high cost of living
area from somewhere less expensive might not provide enough financial
assistance to fill the gap for the tenant between their income and the
urban rent.
Question. For several years the Administration has indicated that
they would move back to a low-income production program after a
comprehensive review was completed. When will this take place?
Answer. For fiscal year 2006, the production program will continue,
but will largely take the form of the section 538 program. The use of
tax credit equity, other subsidy, and interest credit have allowed this
program to serve low- and very low-income tenants. While not the same
as the section 515 program, it serves similar sized communities, and a
large number of low- and very low-income residents.
Question. How will the 538 program be an effective tool to
rehabilitate the 515 portfolio? Please explain the process for how this
will work? Would these transactions require the 9 percent tax credits
in order to succeed?
Answer. We are exploring how the section 538 program may be used to
rehabilitate existing section 515 projects. For example; the section
538 guarantee can be used for acquisition of the section 515 project if
coupled with extensive rehabilitation of $6,500 or more per unit. The
legislation and regulations permit the use of section 538 guarantees on
projects when they are acquired and repaired. The current regulations
require that the repairs be substantial, at least $6,500 per unit to
qualify for use with section 515 project acquisition. The economics of
each project would be different; however, the 9 percent tax credits
would not always be necessary for these projects to succeed. The longer
40-year amortization of the section 538 loan, plus the program's
interest credit buy down to the Applicable Federal Rate (AFR), should
help the project to succeed. Some regulation and handbook changes will
be needed to make the program more effective in partnership with
section 515 financing already in place on properties in need of
rehabilitation, and for stay-in owners. We intend to work on these
changes in 2006.
Question. How will you overcome potential barriers to the success
of your proposal, such as state ceilings on the 9 percent tax credits
and program competition?
Answer. In 2004 approximately 80 percent (35 out of 44) of the
projects awarded funds in section 538 had tax credits in the deals.
Similar leveraging occurred with section 515, but with mostly lower
valued 4 percent credits. While tax credits are added financial
benefits to project owners, these tax credits are not indicative of the
success or failure of a project. The projects have competed very well
for 9 percent credits.
The 538 program is currently prohibited from providing assistance
for projects with section 521 rental assistance and/or HUD section 8.
Question. Does this mean your proposal to use the 538 program to
rehabilitate the 515 program will be limited only to projects that have
no rental subsidy, and therefore, not reaching the very-low income
projects?
Answer. While the section 538 projects are not eligible for new
rental assistance, many projects do have HUD section 8 vouchers. As we
explore how a section 538 loan can be used with a section 515 project
rehabilitation, the section 515 project may have existing rental
assistance. Therefore it is possible that some rehabilitated section
515 projects with section 538 loans may have rental assistance. We will
need to explore possible regulation or handbook changes to be able to
successfully couple the two programs in a revitalization scenario, but
believe this is clearly the right direction.
Question. Will you use the 538 program to essentially refinance the
515 projects?
Answer. The section 538 program is a new construction program and a
mechanism to rehabilitate section 515 projects. In addition, to section
515 repair and rehabilitation authority in 2005 of $53 million, and
$8.8 million in section 533 (Housing Preservation Grants), applicants
who desire to purchase section 515 projects and repair them may apply
for section 538 funds. Because of rental assistance and other
considerations, refinancing is not always in the best interest of the
borrower or tenants. We do not expect to see wholesale use of section
538 for refinancing under current circumstances.
Question. If so, how will this affect the low and very low-income
residents and the project rent structure?
Answer. Full refinancing is not anticipated as a likely scenario.
Question. What can you realistically accomplish with the 538
program with the 9 percent tax credit for the rehabilitation of the 515
program in fiscal year 2006?
Answer. The Multifamily Revitalization Initiative anticipates that
revitalization will occur over an 8-10 year schedule, with the majority
of major renovations occurring after 2008. Rehabilitation funding with
the section 538 program will be developed as an option in the meantime.
Question. What percentage of 538 loans approved to date have
received a 9 percent tax credit?
Answer. Approximately 80 percent of the section 538 projects have
received 9 percent tax credits.
Question. Do you believe the 515 and 538 programs serve the same
income groups?
Answer. While the section 515 projects have a higher percentage of
very low-income tenants, they also use rental assistance. The section
538 projects have very low-income tenants also, just not to the same
percentage of tenants as the section 515 projects. A primary reason for
this is that the section 538 projects are prohibited from having rental
assistance; therefore, the section 538 projects in order to survive
must attract low-income tenants as well. Additionally, because many
section 538 projects have tax credits, those tax credits require that a
high percent of the units be rented to very low-income tenants, thus
requiring the owners to address the housing needs of the very low
income families.
Question. Please provide a side-by-side comparison of some
hypothetical 538 and 515 projects residing in the same communities
serving the same very-low-income residents. In doing so, provide the
rent structure, required reserve accounts, management and operational
expenses, and all Federal, State and other subsidies and/or grant money
including tax credits.
Answer. These are two properties that were developed at the same
time on a 4 acre tract in Arkansas. Driveways and property entrances
are shared. Both were constructed in 2003. The rent is higher in the
section 515 project prior to application of rental assistance, and this
is primarily a factor of 9 percent tax credits providing equity in the
section 538 product.
[The information follows:]
Section 538 property (Lowell); 40-unit complex garden; style units
24-1BR, 16-2BR.
Bank Loan 7.69 percent, 40 year; section 538 quarantee with Int.;
Credit Rate 5.19 percent; 9 percent LIHTC funds 40 year; and rate 5.19
percent.
Section 515 property (Robinson); 24-unit 2 story with elevator; 24-
1BR with community room & 2 project rooms.
RD loan 1 percent 50 year amort/30yr bal.; HOME Loan, 1 percent, 50
year amort/20 year bal.; Loan from applicant 1 percent 50 year amort
LIHTc (4 Percent).
Rent Structure $331-1BR, $437-2BR--$440/unit 1-BR (All with R/A)
$218/unit Average R/A.
------------------------------------------------------------------------
------------------------------------------------------------------------
Debt Service.................... $54,460 annually.. $35,857 annually
Reserve Require................. 8,000............. 16,346 annually
Operating Exp................... 9/unit/month...... 16/unit/month
Utilities....................... 19/unit/month..... 36/unit/month
Admin........................... 44/unit/month..... 59/unit/month
Taxes & Ins..................... 31/unit/month \1\. 11/unit/month \1\
---------------------------------------
Total Exp................. 103/unit/month.... 121/unit/month
---------------------------------------
Construction Costs.............. 2,752,028......... 1,908,000
Cost per unit................... 68,800............ 79,500
------------------------------------------------------------------------
\1\ Taxes based on land only.
RCBS RURAL COOPERATIVE DEVELOPMENT GRANTS
Question. The Rural Cooperative Development Grants program has
proven to be very effective in funding co-op development centers that
provide critical technical assistance to co-ops that are revitalizing
rural communities across the Nation.
Given the fact that this program has leveraged millions of dollars
for rural cooperative development, created hundreds of new jobs and new
businesses from health care to meat processing plans, has been an
effective use of Federal money, and is providing grants to far fewer
centers than are seeking funding, why does the Administration propose a
17 percent program cut from $6 million to $5 million? Is it not correct
that the Department is providing grants to far fewer centers than the
number of centers that seek funding? What steps can 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? The Administration has reviewed the programs and services
provided by Cooperative Services at the Rural Business Cooperative
Services agency. What are the results of the review? Please provide any
documentation for these results.
Answer. The $5 million proposal is consistent with the
Administration's 2005 budget request. While we agree that the program
has been successful in developing new business enterprises and creating
jobs in rural America, the success of the program is intricately tied
to the success of the individual centers themselves. Since this is a
competitive grant program, a truly successful center leverages Rural
Development funding with funding from a variety of other sources and
must be able to sustain itself during years when it does not
successfully compete in this program. Several of the centers funded in
the past were not able to remain viable when funding for even a single
year was lost. Therefore, we believe that the $5 million appropriation
requested provides sufficient leveraging and encourages centers to seek
alternative funding sources that will only serve to enhance their
continued sustainability.
In 2003, the Rural Community Development Grants program received 44
applications requesting $12.7 million. Twenty-one applications were
funded for a total of $6.3 million. In 2004, 54 applications requested
$13.7 million. Twenty-four applications were funded for a total of $6.5
million.
Rural Development offers many loan and grant programs for which
cooperatives are eligible. Examples include the Business and Industry
Guaranteed Loan program, the rural Electric and Telecommunications
programs, the Broadband Loan program, the Community Connect Broadband
program, the Distance Learning and Telemedicine program, and the Value-
Added Producer Grant program. Cooperatives are also eligible to receive
technical assistance from recipients of Rural Development programs such
as the Rural Cooperative Development Program and the Rural Business
Enterprise Grant Program. Rural Development staff is also available in
the national office and in state offices to provide technical
assistance such as conducting feasibility studies, developing business
plans, and providing education to groups wishing to form cooperatives
as well as existing cooperatives. Finally, the Cooperative Services
program area of Rural Development conducts research into cooperative
issues and publishes its findings, which are available to the public
free of charge.
The Administration contracted for an outside program review of
Cooperative Services. The review was to identify improvements or
changes in the Cooperative Services programs to better assist today's
rural cooperatives, opportunities for leveraging the present CS
programs and capacity to support a broader range of cooperative
strategies and approaches to building economic vitality in rural areas,
and new ways of generating capital for cooperative organizations. Rural
Development just received the independent contractor's report and the
recommendations and conclusions are under initial review and analysis.
RUS GUARANTEED UNDEWRITING
Question. The Farm Security and Rural Investment Act of 2002
included a new program--Guarantees for Bonds and Notes Issued for Rural
Electrification or Telephone Purposes--to provide private sector
funding for the Department's Rural Economic Development Loan and Grant
(REDLG) program.
The REDLG program provides zero-interest loans and grants for
projects such as business expansion and start-up, community facilities,
schools and hospitals, emergency vehicles and essential community
infrastructure projects in some of the most rural communities in
America. According to USDA statistics, in Wisconsin alone, REDLG has
invested over $13 million in 60 projects while leveraging an additional
$63 million in private capital and creating nearly 2,000 jobs.
At the direction of this Committee, the Department issued a final
regulation for this REDLG enhancement in October of 2004--nearly 2 and
a half years after the program was signed into law by the President.
While this is a step in the right direction, it did not happen in time
for USDA to utilize the $1 billion program level that this Committee
provided in the fiscal year 2004 bill. This was the second year in a
row that USDA failed to utilize the program authority provided by
Congress.
Apparently, USDA still has not provided a single guarantee to date
under this new program. Due to this lack of implementation, no private
funding has flowed into REDLG activities. This represents a substantial
loss of investment in rural communities over the past 2 years.
Funds for rural development activities are becoming increasingly
scarce.
In view of current budget constraints, why has USDA not moved in a
more expeditious manner to implement a program that actually provides
private funding for Federal rural development efforts--at no cost to
the taxpayers?
Answer. There is approximately $100 million in the Rural Economic
Development Loan and Grant (REDLG) program account presently to fund
these economic and community projects. This section of the Farm Bill of
2002 is a very complex financial transaction and it has taken longer
than anticipated to implement. The main reason has been due to our
desire to protect the interest of the taxpayers while simultaneously
ensuring that the maximum amount of funds will be available for the
REDLG program. The Rural Utilities Service, the Federal Financing Bank
and a potential borrower have been negotiating the details of a
guarantee under this program. Last year only $4 million was used from
the REDLG account.
Question. It is very important to this Committee that this program
not only be implemented, but that implementation occurs in an
expeditious manner to ensure that the fiscal year 2005 program levels
are not lost in the same manner as occurred with the fiscal year 2004
and fiscal year 2003 appropriations.
Is it the intention of this Administration to follow the law as set
forth in the 2002 Farm Bill?
Answer. Yes, it is the intention of this Administration to follow
the law as set forth in the 2002 Farm Bill.
Question. Does USDA expect to utilize the funds that were
appropriated by the Committee in the fiscal year 2005 bill?
Answer. USDA expects to utilize the funds that were appropriated in
fiscal year 2005.
Question. When exactly can we expect this program to be fully
implemented?
Answer. The details have been agreed to and implementation is
expected to begin in June 2005.
RURAL UTILITIES SERVICE BROADBAND LOANS
Question. Rural Development and the Rural Utility Service suggest
that the broadband loan program is best utilized for ``residential
service.'' Congress, nevertheless, views this program not only as a
means to provide residential service, but as a tool for economic
development, stating in Senate Report 107-117, ``The availability of
this [broadband] service is crucial for both economic development and
to provide a service that a growing number of Americans are starting to
view as essential.''
Are you approving broadband loans outside residential services to
include economic development activity?
Answer. When a broadband loan is approved it covers the entire
proposed service territory including all residents and businesses in
that service territory. We strongly encourage that the broadband
service be made available to everyone in the area recognizing that any
economic development in the proposed service territory can actually
increase the feasibility of the project and create new customers for
the business plan. We see broadband as a tremendous economic growth
tool for rural America that can create new jobs in today's economy.
Broadband loans are limited by the following requirement: ``RUS
will not make a broadband loan under this part to provide broadband
service in an area receiving local exchange telephone service from an
RUS telecommunications borrower to any other entity other than the
incumbent telecommunications borrower. . . .''
Question. While I realize your concern about creating competition
between potential RUS loan recipients serving one area, can you see a
situation where you have a current broadband borrower that does not
want to expand and provide service for business purposes in their
current service area while another entity wants to provide this service
using a separate customer base, a separate business objective, and a
separate economic objective?
Answer. If a company is currently borrowing funds from RUS and has
no plans to provide broadband service in a specific area, then RUS will
consider making a loan to another entity to provide the broadband
service. Although RUS has not approved a loan of this nature to date,
we are constantly fielding questions about going into an existing
borrower's service territory. We request that a short explanation of
the proposal be prepared for our consideration before an application is
prepared. With the goal to get broadband everywhere, it is highly
likely that RUS will eventually approve loans for the same area to
different entities. Entity ``A'' may only be providing voice service
and the loan to Entity ``B'' could be to provide the broadband service.
______
Questions Submitted by Senator Tom Harkin
RENEWABLE ENERGY OF THE 2002 FARM BILL
Question. My first question about Section 9006, Renewable Energy
Projects and Energy Efficiency Improvements, concerns the timing of the
fiscal year 2005 program implementation. On March 28, 2005, the
Department announced the availability of $11.4 million in grants under
the Section 9006 program, with an application deadline of June 28. The
Department reserved the balance of the Section 9006 funding for a not-
yet-announced loan guarantee program. The Department committed to
releasing the loan guarantee rules later this spring. According to the
Department, any funds for loan guarantees not used by August 31, 2005,
will be made available for grants.
I am concerned that the Department, having reserved 50 percent of
the nearly $23 million in funding for an as-yet-announced loan
guarantee program, will not have sufficient time to make the unused
loan guarantee money available for grants this year. Last year's
grants-only program was well-oversubscribed, and I expect the program
to be even more popular this year.
Will you commit to me that the Department will make all of the
unused loan guarantee money available for additional grants this year,
and obligate those additional grants by September 30, 2005? Otherwise,
the Department risks leaving millions of dollars of unused money on the
table that could have gone for worthwhile projects in Iowa and around
the country.
Answer. The agency anticipates publishing a final rule for the
section 9006 program in late June or early July of 2005. The rule will
implement the guaranteed loan program authorized by the 2002 Farm Bill.
The agency plans to provide both grants and loan guarantees during
fiscal year 2005. In order for the public to be able to take advantage
of guaranteed loans in 2005, it was necessary to announce the
availability of the set aside funds in the March 28, 2005, grant
program Notice of Funds Availability (NOFA).
USDA will evaluate all grant applications received by the deadline
published in the NOFA. Grants will be awarded to all qualified
applicants, or until the initial phase of funding is exhausted,
whichever occurs first. Guaranteed loan applications received by the
deadline for that part of the section 9006 program will be evaluated
and guarantees will be provided for all qualified applicants, or until
funds are exhausted, whichever occurs first. As the NOFA indicates, any
guaranteed loan funds not obligated by August 31, 2005, will be pooled
and made available to fund any remaining qualified grant applications.
We fully expect to complete loan and grant awards to qualified
applicants by September 30, 2005.
My second question involves the scope of the final rules for the
Section 9006 program. Section 9006 requires the Department to offer
grants, loan guarantees, and direct loans to eligible applicants.
Unlike loan guarantees, direct loans are a dedicated source of capital
for clean energy projects, and they are less cumbersome for applicants
to obtain. Direct loans also are often more attractive for smaller but
equally deserving clean energy projects, since banks are unlikely to
issue loan guarantees for these small projects.
Question. Considering the clear statutory requirement for direct
loans, and their multiple benefits, will the Department include a
direct loan component in the final section 9006 program rules that you
have said will be issued later this summer? If not, why not?
Answer. The final rule must be within the scope of the proposed
rule that USDA published last year, which did not contain detailed
provisions for a direct loan program. Moreover, the Notice of Funding
Availability (NOFA) that USDA published earlier this year does not
provide for direct loans in fiscal year 2005. However, if USDA
determines that funds are available for direct loans in future years,
it can implement a direct loan program by including such provisions in
a future NOFA or by issuing regulations.
RURAL BUSINESS COOPERATIVE SERVICE
Question. It is my understanding that an advisory committee was
formed with outside experts to make recommendations on the mission of
the Rural Business Cooperative Service and specifically regarding
cooperative models and activities. I am concerned whether this advisory
committee operated in an open fashion in order to allow interested
groups and individuals to participate or even to have knowledge of any
proposed changes to existing cooperative models and activities.
Under what authority was the advisory committee constituted? Were
these meetings advertised in a public manner in accordance with the
Federal Advisory Committee Act? What were the findings, conclusions and
recommendations of the advisory committee? Are the advisory committee's
findings, conclusions and recommendations contained in a document? Is
that document public? Please promptly provide the document to the
committee. Who at the Department initiated and administered this
advisory committee process, and who were the actual members of this
advisory committee? What is the current status of the advisory
committee?
Answer. Rural Development contracted for an outside program review
of Cooperative Services. An advisory committee was not formed. The
review was to identify improvements or changes in the Cooperative
Services programs to better assist today's rural cooperatives,
opportunities for leveraging the present Cooperative Services programs
and capacity to support a broader range of cooperative strategies and
approaches to building economic vitality in rural areas, and new ways
of generating capital for cooperative organizations. Rural Development
just received the independent contractor's report and the
recommendations and conclusions are under initial review and analysis.
______
Questions Submitted to Joseph J. Jen
Questions Submitted by Senator Robert F. Bennett
BASIC SCIENTIFIC RESEARCH
Question. What do you believe the appropriate role of USDA is in
supporting basic scientific research at the land grant colleges and
universities?
Answer. USDA, through CSREES, is now and should support land-grant
university efforts in all aspects of research relevant to the
advancement of the food and agricultural sciences. New knowledge and
the technological advancements to which it contributes will always be
necessary to maintain an economically viable and environmentally sound
food and fiber industry for the United States.
Question. Do you believe that basic scientific research will be
able to receive funding through competitive awards?
Answer. The highly productive basic scientific enterprise that has
developed in the United States in the years following World War II has
been built on sound systems of competitive awards by agencies of the
United States government. The USDA/CSREES, through its competitively
awarded grants programs such as the National Research Initiative, has
been the major supporter of basic scientific research in fields
relevant to food and agriculture. The success of this program and its
promise for the future are the reasons for its strong support by
Congress, the Administration, and the scientific community.
FORMULA FUNDS
Question. The land grant colleges and universities are not
supportive of the proposed cuts to the formula funds.
--Other than preferring more competitively awarded research, what
does USDA believe is wrong with the current funding mechanisms?
Answer. The commitment to improving the overall quality of Federal
research led to the fiscal year 2006 budget redirection of funds from
formula research programs to competitive programs. Moving from formula-
based to competitive funding changes only the mechanism by which
science is supported, not the goals or objectives of the work. The
emphasis on competitive programs in the President's budget is
consistent with views held beyond the Administration. Within the last
few years Congress has directed USDA to support studies looking at its
research programs. The reports from these studies recommend increasing
the relative, as well as absolute, level of funding to support
competitive research. In addition, the State Agricultural Experiment
Station Competitive Grants Program proposed in the President's budget
will provide a source of funding for functions currently supported by
formula funds.
MISCONDUCT POLICY
Question. In a recent report, the USDA Inspector General says that
the Cooperative State Research, Education, and Extension Service does
not have a Federal Research Misconduct Policy, which is required of
Federal agencies, and that the Agricultural Research Service has such a
policy but it is not in compliance with Federal standards.
What are your plans to bring the agency in compliance?
Answer. The Office of the Undersecretary for Research, Education,
and Economics will serve as the centralized body for research
misconduct on behalf of the Department. By June 30, 2005 a Federal
Register notice will be published announcing the mission area's
research misconduct role and accepting the Office of Science and
Technology Policy (OSTP) definition of research misconduct as the USDA
definition. The Cooperative State Research, Education, and Extension
Service (CSREES) will take the lead on preparation and publication of
the Federal Register notice. Each USDA agency will be required to
develop policies and procedures compliant with the OSTP Federal
Research Misconduct Guidelines, or if more appropriate, to execute a
Memorandum of Understanding with another Departmental agency to act on
their behalf with respect to research misconduct. Agency policies are
to be completed no later than 9 months following publication of the
Federal Register notice noted above. CSREES will refine and document
its research misconduct policy. This will be reviewed by the Office of
General Counsel for OSTP compliance and subsequently published in the
Federal Register and on the agency's website.
The Agricultural Research Service is working with Department
officials to bring its Federal Research Misconduct Policy into
compliance.
STATE AGRICULTURAL EXPERIMENT STATION
Question. How will the proposed State Agricultural Experiment
Station competitive grants program work?
Answer. A CSREES working group of national program leaders has been
charged with the task of developing a preliminary design for the new
competitive grants program for the State Agricultural Experiment
Stations (SAES). Our initial planning for the SAES program emphasizes
broad national issues which are manifested in a wide range of regional
and local research problems, including regional pest management,
marketing and other farm management and local economic issues;
ecosystem management; and new uses and products. Grants may also
emphasize multi-institutional planning and coordination to take
advantage of system-wide capacity in areas such as plant and animal
disease and international markets, and sustaining capacity to assure
rapid response to problems in agrosecurity and food safety.
Question. How will the funding be allocated?
Answer. Funding for the SAES program will be competitively awarded.
Question. Who will review the grant submissions?
Answer. Proposals will be reviewed by ad-hoc reviewers (reviewers
who do not meet in a formal panel setting) and/or peer panel reviewers.
Question. Who will make the award decisions?
Answer. The ad-hoc reviewers and/or peer panel reviewers will
consist of experts in the food and agricultural sciences who will
recommend to CSREES projects for award based upon established
evaluation criteria.
______
Question Submitted by Senator Conrad Burns
HATCH ACT/MCINTIRE-STENNIS
Question. In Montana, our colleges and universities are engaged in
important and high-quality research that yields significant benefits
for Montana agriculture. Yet the President's budget proposes to slash
Hatch Act and McIntire-Stennis funding. I appreciate the desire to
shift funds into competitive grants, but our universities rely on this
funding to sustain long-term research programs.
--Competitive grants are important, but shouldn't they be part of a
balanced portfolio of Federal investment in agriculture and
forestry research?
Answer. Moving from formula-based to competitive funding changes
only the mechanism by which science is supported, not the goals or
objectives of the work. Competitive programs can be designed to build
and sustain research capacity; assure that research contributes to
teaching and extension programs; link strengths and unique expertise
across institutions; and address local and regional issues which
collectively secure the national agricultural system. In addition, with
full indirect cost recovery as part of competitive funding,
institutions can maintain and continuously improve the infrastructure
needed to support modern science, as well as support specialized
undergraduate, graduate, and postgraduate training in the agricultural
sciences. Also, the State Agricultural Experiment Station Competitive
Grants Program proposed in the President's budget will provide a source
of funding for functions currently supported by formula funds.
______
Questions Submitted by Senator Larry Craig
Question. The U.S. dry edible bean industry has been working with
NASS to establish parameters so that a national dry bean stocks report
can be implemented.
Please describe how such a survey and reporting would be
accomplished, including the details of the parameters of such
reporting.
Answer. The survey would be a census of all off-farm dry bean
storage facilities in eighteen States. Approximately 3,200 storage
facilities would be contacted during each survey period. The survey
would be conducted in June and December. Reporting would be by mail,
phone, and electronic data reporting. The initial survey would also
include personal interviews to help answer any questions the respondent
might have about the program.
Question. What do you estimate the initial cost to establish, and
the ongoing annual costs for, a national dry bean stocks report to be,
assuming the parameters you outline in the response to the above
question?
Answer. NASS' cost estimate for the first year is $650,000. The
projected cost for subsequent years is $550,000 per year.
Question. Will USDA make establishing a national dry bean stocks
report a priority and include its cost in the fiscal year 2007 budget
request to the Congress?
Answer. A proposal for instituting a national dry bean stocks
report will be seriously evaluated by USDA during the budget process
when establishing priorities among the many emerging needs requested of
the Department.
Question. If Congress provides sufficient funding to establish a
national dry beans stocks report in the fiscal year 2006 USDA
appropriation, when would NASS be able to start such reporting?
Answer. NASS would be able to start reporting in June 2006. The
following report would come out in January 2007.
______
Questions Submitted by Senator Herb Kohl
ECONOMIC RESEARCH SERVICE REPORTS
Question. Dr. Jen, I would like to compliment you and the employees
of the Economic Research Service for the good work they do. From their
Amber Waves magazine to other shorter reports that ERS publishes, this
Agency provides very helpful and timely information in its
publications.
How are ERS publications made available, and how does USDA work to
make sure the general public is aware of their existence?
Answer. ERS develops and disseminates a broad range of economic,
social scientific, and statistical information to the public. The
agency publishes economic information and research results on the web
and in a variety of agency-published research reports, market analyses
and outlook reports, articles published in ERS periodicals and articles
published in professional journals. Our research is available to the
public in print (which may require a small fee) and online (without
charge).
ERS distributes this information through an array of academic,
policy-, and public-oriented outlets. All ERS publications (including
Amber Waves) are distributed to (and by) the Government Printing Office
(GPO), the National Technical Information Center (NTIS), GPO Depository
Libraries, and the 1890 Land Grant Universities. Commodity Outlook
reports are also distributed to Cornell University's Mann Library
(USDA's economics and statistics system). Many publications are
provided to university Agricultural Economics departments, the Social
Science Research Network (SSRN), and other targeted distributions.
The ERS website (www.ers.usda.gov) provides instant access to ERS
publications, economic and statistical indicators, and datasets. In
fact, ERS' website includes an increasingly comprehensive body of
materials, covering the equivalent of 6,000 200-page books covering:
--Five research emphasis areas that reflect the agency's strategic
goals and research program
--Over 90 briefing rooms offering in-depth syntheses of ERS research
on important economic issues
--Twenty-two key topic areas populated with data, publications, and
other products
--Access to around 9,000 datasets and a range of data products
available in different formats, including online databases,
spreadsheets, and interactive web files and mapping
applications
--Over 1,400 publications, including commodity outlook newsletters
--An ``About ERS'' section pointing to subject specialists, job
listings, and other services
--A newsroom containing concise overviews of key issues, research
findings, and analysis
--Amber Waves magazine, including web-exclusive feature articles,
covering the economics of food, farming, natural resources, and
rural America
--A calendar of upcoming releases
--A subscription-based electronic notification service that supplies
e-mail alerts on newly released or updated products, covering
50 different topic areas and going to 22,000 subscribers.
In February of 2005, the website attracted over 320,000 visitors,
and over the past 4 years site usage has increased 324 percent.
When new research publications and products become available, we
send e-mail notices, postcard notices, report summaries, and sometimes
printed copies of new reports to customers who have expressed interest
in specific ERS topics by registering via the Internet from a
designated page on our website. About 22,000 ERS customers have signed
up for e-mail notifications and about 2,500 have signed up for printed
material. The overlap between the two lists is about 300.
Oral briefings, written staff analyses, and congressionally
mandated studies are delivered directly to executive branch
policymakers and program administrators. We keep the media and
Congressional staff informed of new ERS material via our monthly media
newsletter, DatelinERS, which is a monthly two-page newsletter
(available in both printed and electronic format) announcing recently
released ERS publications, data products, and other web resources. We
also keep our website homepage and newsroom up-to-date, featuring the
latest research and analysis available. We help educate the media about
what's available on our website each time they call us for information.
They, in turn, write stories that the general public reads.
We also exhibit at various conferences throughout the year,
educating the researchers, industry professionals, and the general
public about what we do. We bring publications and demonstrate the
website at these events.
ARS TERMINATIONS
Question. The President's budget proposes to eliminate more than
$200 million in ARS research activities that Congress has determined to
be of high priority. These proposed terminations include work that has
been ongoing for 4 or 5 years.
How does USDA expect Federal employee morale to remain high given
these proposals?
Answer. Research managers have to confront morale issue on a daily
basis and from a variety of sources. While proposals to not continue
funding for these projects have a negative impact on the employees
affected, ARS must retain the flexibility to proposed reallocations of
its resources to meet new challenges that affect the Nation.
Question. What effect is it having on recruitment?
Answer. We have advised all potential research candidates of the
proposed terminations.
csrees cuts in formula funded research programs
Question. The President's budget proposes to cut in half or
eliminate formula-based funding to land grant universities across the
country for research related to general agriculture, forestry, and
animal health. These funds have helped to develop, and continue to
maintain, a strong cooperative relationship between USDA and the states
to share in research challenges and outcomes. Such drastic cuts are
very troubling and shake the foundation of that once-strong
partnership.
I strongly support competitive research, such as the National
Research Initiative, but it is important to note that the formula-based
funds help state universities, such as the University of Wisconsin,
respond rapidly to sudden problems.
A few years ago, the soybean aphid was discovered in Wisconsin, and
was beginning to spread to neighboring states. Within 6 weeks, the
University of Wisconsin, using formula-based Hatch Act funds, was able
to set up a multi-state working group that was able to research the
problem, determine methods of control, and get information to local
farmers on what they could do to protect against losses. If those
researchers had only competitive or special research grants for
problems like this, the ability to respond rapidly would be lost. And
that is just one example. Over the past few weeks, there have been
reports of an invasive pest that has appeared in the Mid South that
affects rice production. States in that region were able to respond
with formula funds in much the same way we were able to deal with the
soybean aphid. Soybean rust will be another example. To drastically cut
or eliminate these funds is an indication the President does not
realize the importance of these funds.
--How do you propose to work with state research institutions on
problems that arise suddenly if you have greatly reduced or
eliminated the source of Federal funds they could use for that
purpose?
Answer. The fiscal year 2006 budget proposes the new $75 million
State Agricultural Experiment Stations Competitive Grants Program
focused on regional, state and local research needs. Our initial
planning for this program emphasizes broad national issues which are
manifest in a wide range of regional and local research problems.
Grants also may emphasize multi-institutional planning and coordination
to take advantage of system-wide capacity in areas such as plant and
animal diseases and international markets, and sustaining capacity to
assure rapid response to problems in agrosecurity such as soybean rust.
This program will provide a source of funding for functions currently
supported by formula funds.
Question. If you shift Federal resources from formula-based funds
to competitive-based programs, how do you intend to help research
institutions that still need to build their capabilities in order to
fairly compete for Federal funding?
Answer. Moving from formula-based to competitive funding changes
only the mechanism by which science is supported, not the goals or
objectives of the work. Competitive programs can be designed to build
and sustain research capacity; assure that research contributes to
teaching and extension programs; link strengths and unique or limited
expertise across institutions; and address local and regional issues
which collectively secure the national agricultural system. In
addition, with full indirect cost recovery as part of competitive
funding, institutions can maintain and continuously improve the
infrastructure needed to support modern science, as well as support
specialized undergraduate, graduate, and postgraduate training in the
agricultural sciences.
Question. Won't there be definite winners and losers in your plan?
Answer. As in all plans that change the way in which funds are
distributed, there will be winners and losers. Smaller institutions
including those located in the territories will be impacted by the cut
in formulas. Institutions who are currently eligible to receive
McIntire-Stennis and Animal Health and Disease Research formula funds
but who are not land grant institutions, will not be eligible to
compete for funds under the new State Agricultural Experiment Stations
Competitive Grants program. It is assumed that institutions who in the
past have been successful in competing for competitive funds will
continue to do so in the future. While the amount of formula funds
available to institutions in fiscal year 2006 will be reduced or
eliminated, it will ultimately be up to each institution to determine
how to allocate funds available from Federal and non-Federal sources to
continue research projects or support personnel.
CLASSICAL PLANT AND ANIMAL BREEDING
Question. Dr. Jen, the Senate fiscal year 2005 report included
language under CSREES encouraging the Department, especially in the
establishment of priorities within the National Research Initiative, to
give consideration to research needs related to classical plant and
animal breeding.
What, if any, steps have the Department taken in response to this
language? Have any changes been made in the NRI priority process to
reflect these concerns?
Answer. For classical plant breeding, the NRI will be offering
funding opportunities for research, education, and training in a number
of plant programs for fiscal year 2006. In the current NRI plant
programs, support is provided for the development of techniques and
tools, such as marker-assisted selection and quantitative trait locus
analysis, which can be used in plant breeding. In the current NRI
animal programs, support is provided for research in areas such as
genetic or breed comparisons, identification of genetic markers,
including quantitative trait loci and economic trait loci, marker-
assisted selection, and chromosome identification, which can be used in
classical animal breeding.
The NRI sets program priorities based on input from stakeholder
groups which include commodity groups, producers, the scientific
community (including scientific societies) and other interested
parties. The National Program Leaders have continuing, ongoing
interactions and discussions with stakeholders through workshops and
conferences, written input and reports from stakeholders, as well as
input via telephone and e-mail. Stakeholder input is vital to setting
the priorities and directions of the NRI programs.
______
Questions Submitted by Senator Tom Harkin
PRESIDENT'S FISCAL YEAR 2006 BUDGET PROPOSAL
Question. The President's fiscal year 2006 budget proposes to move
the competitive, integrated grants programs (Water Quality, Food
Safety, several IPM-related programs, Methyl Bromide, and Organic
Transitions) currently managed under Section 406 of the 1998
Agriculture Research, Extension and Education Reform Act (AREERA) to
the National Research Initiative.
Does this proposal indicate a shift in research, education and
extension priorities? If so, why are the priorities changing and which
current Section 406 programs will see increases or decreases under the
new proposal. If not, what are the specific, detailed plans for
integrating the existing 406 programs within the NRI?
Answer. With the consolidation of programs, CSREES does not plan to
redirect priorities--all emphasis areas will remain in the portfolio of
programs. The primary purpose for moving integrated program activities
to the National Research Initiative Competitive Grants Program (NRI)
and to the new state Agricultural Experiment Stations Competitive
Grants Program (SAES) is to streamline the presentation of the budget,
thus reducing the appearance of redundant programs.
Question. Will each current 406 program be a separate NRI national
program? Will their funding allocation be increased, decreased or
remain the same compared to fiscal year 2005 Section 406 levels? Does
the agency expect that participation of Extension in the integrated
programs will increase, decrease, or remain unchanged if this proposal
were to be approved?
Answer. The fiscal year 2006 Budget proposes that Section 406
activities will be funded at $41.9 million, but the grants will be
administered through the NRI or the new SAES competitive grants
program. This will allow greater flexibility and responsiveness to
changing needs in these targeted areas. In addition, the fiscal year
2006 Budget also proposes an increase from 20 percent to 30 percent of
funds that may be used to support competitive integrated research,
education, and extension programs.
Question. With respect to the Organic Transitions program, would
the proposal retain a specific organic national program within the NRI;
and would the farm bill's Organic Farming REE program, currently
jointly administered with Organic Transitions, be administered
separately?
Answer. In fiscal year 2006, it is proposed that research programs
focused on activities such as organic transition could be supported not
only with NRI funds but also in the new SAES program. As we move
forward in planning for both the NRI and the new SAES competitive
grants program, we will insure coordination with the Organic
Agriculture Research and Education Initiative to maximize the
effectiveness of the funds available for award.
Question. Finally, please provide a detailed accounting of the
number and type of stakeholder groups who were involved in the
development of the proposal to transfer these programs from Section 406
to the NRI, including specific meeting dates and participants.
Answer. While we are prohibited from sharing budget details with
outside groups during the budget development process prior to release
of the President's budget proposal, we have and will continue to
consult widely with universities, stakeholders, and customers to insure
that CSREES research dollars are utilized in the most effective and
efficient way to address critical research issues. In the last 6 weeks,
the CSREES Administrator has met with over 1,000 direct clients and
customers across the country to discuss the fiscal year 2006 budget and
gain input from customers and stakeholders as we continue program
planning. In addition, an agency team is developing a proposal for the
proposed SAES program which will be available for public comment.
______
Questions Submitted to J.B. Penn
Questions Submitted by Senator Robert F. Bennett
FOREIGN AGRICULTURAL SERVICE (FAS) REVIEW
Question. I understand FAS is currently undertaking an
organizational review. What is the status of that review?
Answer. FAS has made progress in its organizational review and is
continuing to re-examine the agency's core mission, goals, and
resources. Input from the private sector has re-affirmed support for
FAS' network of overseas offices, specifically to resolve market access
issues and provide market intelligence for U.S. agricultural producers
and industry. Internal groups are currently reviewing crosscutting
strategies and tactics, particularly in the context of FAS' market
access mission. Ongoing discussions regarding both FAS' mission and
budget concerns have resulted in some shifts in overseas resources such
as downsizing in Europe along with limited expansion plans to cover
developing markets.
Question. When will final recommendations be released?
Answer. Internal working groups have developed some initial
recommendations and more comprehensive recommendations are being
researched and evaluated. We anticipate this review process will
culminate in final recommendations being presented to the FAS
Administrator in the fall of 2005.
LIVESTOCK RISK PROGRAM FOR LAMB
Question. What is the status of the sheep industry's proposed
Livestock Risk Program for lamb?
Answer. Unfortunately, details of the proposed Livestock Risk
Protection (LPR) program for Lamb submission and discussions of the
proposal with the submitters cannot be disclosed. Submissions under
section 508(h) (4)(A) of the Federal Crop Insurance Act (Act) must be
considered to be confidential commercial or financial information
during the period preceding any decision by the Board.
Applied Analytics Group (AAG) and the American Sheep Industry
Association (ASIA) submitted a proposal to include lamb in the LPR
program in accordance with Section 508(h) of the Act. On October 28,
2004, the Federal Crop Insurance Corporation (FCIC) Board of Directors
(Board) voted to send the proposed LRP Lamb Program for external review
by a panel of five persons experienced as actuaries and in underwriting
as required by the Act.
On January 13, 2005, the Board considered the input it received
from the external reviewers and the Risk Management Agency and
discussed the responses to such by AAG and ASIA. Based on these
discussions, the Board agreed to table the proposal for 45 days to
provide AAG and ASIA time to provide modifications to their LRP lamb
submission.
AAG and ASIA met again with the Board on April 28, 2005, to discuss
issues raised by the external reviewers and RMA and concerns of the
Board.
On April 28, 2005, the Board voted unanimously to give notice of
intent to disapprove the LRP lamb submission.
The Board is sympathetic to the needs of the sheep industry for a
viable risk management tool; but, must also assure any proposed program
complies with all applicable provisions of the Act, the interests of
producers are adequately protected, premiums rates are actuarially
appropriate, and that program integrity will be protected.
PUBLIC LAW 480
Question. The fiscal year 2006 budget proposes transferring $300
million from the Public Law 480 Title II account to USAID. What effect
will this have on USDA's role in administering food aid?
Answer. At this time it is not expected that USDA will have an in-
depth administrative role with regard to the $300 million; however,
interagency coordination across all food aid programs will continue.
USDA will continue to procure the food under Public Law 480 title II.
USDA's role in procuring commodities funded through the $300 million
allocated to USAID will depend on whether the commodities are purchased
in the United States or outside of the United States. If the
commodities are procured outside of the United States, USDA would not
be expected to have a role in the procurement of these commodities.
USAID will be responsible for the budget and the financial management
of those resources.
WEB-BASED APPLICATIONS
Question. FSA has put emphasis on web-based applications. What
percentage of producers are utilizing this technology?
Answer. According to the August 2003 Computer Usage and Ownership
Report of the National Agricultural Statistics Service, a total of 48
percent of U.S. farms have internet access. Of the 58 percent of farms
that have access to a computer, 54 percent own or lease one. Thirty
percent of farms use a computer for their farm business.
Question. Do you have benchmarks to track your success?
Answer. We are tracking internet usage daily for the web-based
applications we have deployed. FSA is currently receiving approximately
200,000 external web-site hits monthly. Over 45,000 customers have
obtained eAuthentication credentials--i.e., electronic signature--to
conduct business electronically with FSA.
The major web-based applications that have been deployed include:
--Web-based Forms.--Since the first forms became available in June
2002, FSA has been expanding this capability, specifically
targeting forms that our customers can electronically access,
sign, and submit on line. FSA has posted over 700 forms to our
eForms website, with over 100 in Spanish.
--Electronic Loan Deficiency Payments (eLDP's).--Pre-approved
producers can access a web-based application and interactively
file applications for LDP's. The web-based applications will
accept the LDP transactions, calculate and issue electronic
payments, and issue electronic notification of the payments to
the participating producers. The eLDP project was deployed
nationwide in September 2004. Over $30 million has been
distributed, and 12,000 applications have processed. Over 7,000
customers have established eLDP profiles.
--Electronic Direct and Counter Cyclical Payment Program (eDCP).--The
eDCP was deployed in October 2004 and enables producers to
enroll using web-based public access facilities in the new
system.
--Electronic Representative (eRep).--Deployed in September 2004, this
application allows various entities such as partnerships,
corporations, trusts, and estates, to conduct business with FSA
electronically.
--Customer Financial Inquiry Data Mart.--This application provides
FSA customers access to FSA/CCC payment, receipt, debt, and IRS
reporting information. Deployed March 2004 in conjunction with
the USDA Customer Statement.
--USDA Common Customer Statement.--Deployed March 2004. With linkages
to FSA's Customer Financial Inquiry Data Mart and Farm Loan
Customer Status Web Service, allows producers to obtain
information such as payments and receipts.
--Farm Business Plan Manager--Equity Manager.--This farm business
planning and financial/credit analysis tool is being used to
determine credit worthiness during the life of an FSA farm
loan. Initial deployment to FSA farm loan employees occurred in
2004. Access will be expanded to FSA guaranteed lenders in
2005.
Question. How are you encouraging producers to take advantage of
this technology?
Answer. We are encouraging producers in a number of ways. At
various farm trade shows we are displaying and demonstrating our new
applications as well as providing printed brochures and posters. In our
county offices the print material is also available, and FSA employees
are promoting these new tools and providing our customers instruction
on using them. FSA employees are also promoting these tools when
speaking in different forums across the country. In addition, almost
every press release, brochure, and poster that FSA produces contains a
promotional web-site link.
______
Questions Submitted by Senator Conrad Burns
BEEF TRADE
Question. Resuming beef trade with major foreign markets is a
priority for me, as it is for many Senators. I know USDA shares that
priority. However, news reports from some of these countries,
particularly Japan, indicate that consumer fears about U.S. beef safety
still exist.
In addition to your efforts to open the borders, what types of
things is USDA doing to promote U.S. beef internationally, and reassure
consumers in major markets that our beef is the safest in the world?
Answer. The Japanese and Korean governments have specifically asked
that USDA implement a risk communications plan to help sell any
agreement between the United States and their respective countries on
Bovine Spongiform Encephalopathy (BSE). In response, FAS and the U.S.
Meat Export Federation (USMEF) have produced a joint pre- and post-
opening risk communications plan that focuses on consumer, media, and
political beef trade concerns and misperceptions about BSE. Both USDA
and USMEF have begun to implement and plan activities to communicate
the proper messages such as editorials, journalist trips to the United
States, BSE seminars, advertisements, and dissemination of technical
materials.
In addition, Dr. Charles Lambert, Deputy Under Secretary for
Marketing and Regulatory programs, has led a U.S. delegation of experts
to Tokyo for outreach activities and technical discussions with
Japanese government officials. Outreach activities include press
briefings and roundtables with the press, industry, and consumers to
help convince Japanese that U.S. beef is safe.
SUGAR
Question. The 1.2 percent marketing assessment for sugar producers
appears, at first glance, to be not much more than a tax on sugar. If I
understand correctly, the revenues go directly into the General Fund,
rather than to an agriculture-related purpose. Can you provide a little
more background on the rationale for this assessment?
Answer. The sugar marketing assessment is proposed as part of a
package that spreads the deficit reduction burden across all farmers
that benefit from Federal agricultural programs. The deficit reduction
activities that will affect most agricultural program beneficiaries,
i.e. reduction in marketing loan gains, tightening payment limitations,
and the general 5 percent reduction in payments, will not affect sugar
program beneficiaries because the sugar program does not improve sugar
beet and sugarcane growers' income by direct payments from the Federal
Government. The sugar program increases farm income by increasing the
domestic sugar price by limiting supply through an import tariff-rate
quota and a domestic marketing quota. There is a nonrecourse sugar loan
available, but the sugar program is specifically required to manage
supply to avoid the cost of sugar loan collateral forfeitures. A sugar
marketing assessment, similar to the current proposal, was included in
the Omnibus Budget Reconciliation Acts of 1990 and 1993 to spread the
cost of deficit reduction among all Federal program beneficiaries.
CROP INSURANCE
Question. Last year, RMA successfully negotiated a new Standard
Reinsurance Agreement for crop insurance providers, which included some
reductions in administrative & overhead costs, as well as underwriting
gains. This year's budget includes further reductions in underwriting
gains, as well as some modifications to premium subsidies. Crop
insurance is a critical risk management tool for my producers in
Montana, and I want to ensure that the program remains strong. Can you
discuss the Administration's commitment to effective risk management
tools, and how this year's proposals strengthen crop insurance
delivery?
Answer. One of the highlighted goals of the Administration's budget
is strengthening crop insurance delivery to ensure that farmers have
adequate yield and price protection. The value of crop insurance
protection in 2006 will be about $41 billion, representing more than 80
percent of the Nation's acres planted to principal crops. Despite the
high level of participation, demand still exists for ad hoc disaster
assistance due in part to reliance on catastrophic coverage which
affords the producer only 27.5 percent protection in the event of a
total loss.
In continuing the Administration's efforts to more effectively
budget for and administer disaster assistance programs, the 2006 budget
includes a proposal to compel producers to purchase more adequate
coverage by tying the receipt of direct payments or any other Federal
payment for crops to the purchase of crop insurance.
Other changes include modifications to the fee for catastrophic
coverage that is intended to make the program more equitable in its
treatment of both large and small farms, restructuring premium rates to
better reflect historical losses, and reduction in delivery costs. The
combination of changes is expected to save the government approximately
$140 million per year, beginning in 2007.
______
Questions Submitted by Senator Herb Kohl
FSA AGENCY LOAN OFFICERS
Question. I understand a disproportionately large number of Farm
Service Agency loan officers will be eligible to retire in the next 2-5
years. Moreover, we are told it takes at least 2 years of on-the job-
training before a new loan officer can function at full competence.
Considering the critical impact these employees have on America's
farmers and ranchers, this raises some important questions. How many of
your senior loan officers, in the national office and in the field, are
eligible to retire?
Answer. FSA's records indicate that 287, or 17 percent, of the
agency's loan officers will be eligible to retire in fiscal year 2005.
Question. How many will be eligible to retire in each of the next 1
to 5 years?
Answer. So far, the agency has analyzed the data for the next 3
fiscal years. The information for those years is as follows:
------------------------------------------------------------------------
Number of Loan
Officers Percent of
Fiscal year Eligible to Total Loan
Retire Officers
------------------------------------------------------------------------
2006.................................... 345 21
2007.................................... 408 25
2008.................................... 492 30
------------------------------------------------------------------------
Each year's retirement eligibility includes those eligible from the
previous year, plus those becoming eligible to retire during that year.
Question. How many do you think will actually leave in fiscal year
2006?
Answer. Because each individual's situation is different, it is
difficult to predict the actual number of retirements in any given
year. However, given the high workload, the high rate of change in
program policies and information technology, and similar stress factors
associated with the farm loan manager position, we expect that a
substantial percentage of those employees eligible for retirement will
actually retire.
Question. What plans are you making in your 2006 budget request to
prepare your staff to replace those positions?
Answer. The President's fiscal year 2005 Budget included a request
for 100 trainee positions to establish a ``pipeline'' of new loan
officers in anticipation of coming retirements. However, because
appropriated funds were below the President's request, the agency made
the difficult decision to forgo filling those positions. Given the
continued need for fiscal restraint, the fiscal year 2006 President's
Budget did not include the 100 positions. As part of a comprehensive
review of agency operations, FSA is studying the best approach to
ensuring a sufficient, well-trained cadre of farm loan officers.
Question. If you agree that having adequate and fully competent
loan officers is necessary for the agency to fulfill its mission, why
are you not requesting funds to maintain an adequate force of loan
officers instead of asking for $3,300,000 for new outreach efforts?
Answer. Adequate and fully competent loan officers are indeed
necessary for the agency to fulfill its mission. Under an initiative
known as ``FSA Tomorrow,'' the agency is performing a top-to-bottom
review of its operations to determine whether its current structure
best serves present and future requirements. The need to ensure
adequate staffing of trained loan officers as well as employees in all
mission-critical occupations will be addressed as part of that review.
The stakeholder discussions that FSA held in developing its
strategic plan revealed that outreach to ensure equitable access to
programs by underserved populations is a critical issue. The agency
believes that its goal of outstanding customer service cannot be
realized if it fails to reach many of its potential customers.
Therefore, even in view of the many difficult choices required in
carrying out operations while constraining costs, FSA believes that an
enhanced outreach program is a high priority.
Question. Where and what population will you target in your
requested outreach efforts?
Answer. FSA's outreach efforts will address various populations
throughout the country that are underserved, particularly in access to
farm loan programs. As an example, one of FSA's outreach projects is a
cooperative agreement with the National Tribal Development Association
located in Montana. The National FSA American Indian Credit Outreach
Initiative, which has been ongoing for 3 years, is designed to reach
out to Native Americans on reservations to inform them about FSA farm
loan programs and to assist them in applying for loans. FSA has other
cooperative agreements to inform minority producers about FSA programs
and to encourage their participation. FSA is also reaching out, in
partnership with other Department of Agriculture agencies, to
community-based organizations to encourage minority participation in
FSA loan programs.
The additional $3,300,000 requested in the President's fiscal year
2006 Budget will be used to expand FSA's work with its partners and
customers to increase program participation of underserved customers,
with special emphasis on socially disadvantaged and/or limited resource
farmers, women, and members of minority groups such as Native
Americans, Hispanics, Asian-Pacific Americans, and African Americans.
Without this requested funding increase, the resources required to
perform this much-needed work must be taken from FSA's salaries and
expenses budget, thus placing downward pressure on FSA's hiring
ceilings.
Question. Have you ever tested your employees, for example, by
using third party entities, to see if your loan programs are being
administered in compliance with Federal statutes including the Equal
Credit Opportunity Act?
Answer. To date, third party testers have not been used. The agency
uses several different compliance review processes to ensure that all
regulatory requirements are met. FSA program and civil rights staffs
conduct routine reviews of office operations and loan processing and
servicing activities. If at any time problems become evident, special
targeted reviews are conducted as well. The agency maintains a special
focus on monitoring the processing of loans from minority and female
applicants; periodic reviews of denied applications must be performed
by managers, and corrective action taken immediately upon detection of
problems.
Question. Would not such tests be an appropriate way to identify
and address existing problems within your agency while conducting
additional outreach efforts? Wouldn't this be a cost-effective way to
deal with overall problems within the agency?
Answer. Additional compliance testing will not completely solve
several of FSA's problems with regard to underserved populations. In
order to apply for farm loans, producers, especially women and
minorities, must be made aware of the available loan programs. They
must also, in some cases, be encouraged and assisted by community-based
organizations and minority-serving educational institutions. Special
efforts must also be made to communicate with minority producers who
have special cultural and linguistic needs. While FSA agrees that
customer service during the loan application and approval process is
crucial, removing barriers to applying is also essential. FSA is
currently focusing its outreach effort on overcoming these known
barriers.
FAS FOREIGN OFFICE SECURITY
Question. The President's budget includes within the FAS salaries
and expenses account, nearly $3 million for capital security costs in
overseas locations and an additional $650,000 contribution for the
Baghdad Embassy. What assurances do you have that FAS location needs
will be met as are now indicated by the contribution rates you have
been assigned?
Answer. The State Department has developed a capital construction
program to provide adequate and secure space for all agencies overseas.
The costs of the program are based on a worldwide headcount and not
tied to specific facilities in specific locations. We will continue to
work with the State Department to ensure that FAS will be provided with
adequate space for the numbers of personnel for which it is being
charged.
Question. What input have you had with the State Department in
development of the rates of contributions USDA has been assigned for
this purpose?
Answer. After announcing the program, the State Department accepted
some feedback from other agencies regarding the provision of credit for
rent currently being paid and charging different rates for different
types of personnel. Other than making those two changes to the
calculation of agency contributions, the State Department has not
adopted any other suggestions. The overall level of the program was
determined by State, as was the rate of contribution for each employee.
______
Questions Submitted by Senator Tom Harkin
WTO DECISION ON USDA COMMODITY AND TRADE PROGRAMS
Question. In the course of crafting the 2002 farm bill, the House
and Senate Agriculture Committees, with extensive advice from USDA,
sought to keep the farm bill provisions consistent with our
international trade obligations. Despite those efforts, last month a
WTO appeals panel upheld the claims of the government of Brazil, which
asserted that the U.S. cotton support program and certain other
programs violate WTO rules. As a result, Congress faces a July 1, 2005
deadline for modifying the export credit guarantee and Cotton Step 2
programs in order to come into compliance with that WTO ruling. We will
also have to address changes in the price-related farm programs by some
later date. Congress needs the best advice of USDA regarding options
for changes to the export credit guarantee and cotton step 2 programs
that would be adequate to satisfy the requirements of the WTO appellate
panel's decision. When will we receive this advice and guidance?
Answer. USDA is consulting carefully and extensively with the U.S.
Trade Representative, industry, and others to craft a response to the
WTO Appellate Body's decision. We will fully comply with the WTO
decision. USDA will provide advice and guidance to Congress when we
have determined how best to comply, taking into account the security of
our cotton producers, the stability of our farm program, and the
commercial opportunities and obligations of all who rely on our export
credit programs, as well as our ambitions in the ongoing Doha WTO
negotiations.
FARM SERVICE AGENCY-STATE ALLOCATIONS
Question. Earlier this year I received a letter from a constituent
who was laid off from her temporary position with her county Farm
Service Agency office. She was informed that because the State agency
had not received its budget allocation for fiscal year 2005, there was
not enough money to keep her on staff. Was there a particular problem
with the State FSA budget allocations this year?
Answer. FSA's fiscal year 2005 President's budget assumed an
overall reduction in temporary staff years of 1,067 due to the
completion of final Farm Bill implementation activities. Although FSA
was operating under multiple continuing resolutions from October 1,
2004 through December 8, 2004, temporary ceiling levels and allotments
were made to all States. The total temporary employee ceiling level for
Iowa is 70 staff years. The total temporary employee usage through the
first half of the fiscal year was 36.72 staff years or 52 percent of
the total ceiling level. FSA provided Iowa with full funding through
the various continuing resolution periods, and subsequently for the
full year, in order to ensure the ability of the State to manage its
workforce in correlation with annual workload needs.
Question. What actions will FSA take to avoid future problems?
Answer. FSA complied fully with the requirements of the continuing
resolutions and issued timely allotments to all States. FSA will
continue to make every effort in the future to provide timely and
accurate funding to all States.
Question. Does the FSA have enough funds to adequately staff local
offices?
Answer. FSA completed a thorough review in order to ensure that
critical mission goals are accomplished within the available resources,
given that FSA's appropriation was $27.1 million below the requested
amount.
FARM SERVICE AGENCY--BENEFICIAL INTEREST
Question. For most producers, claiming loan deficiency was a
relatively routine procedure, but far too many producers encountered
beneficial interest problems that blocked them from receiving payment.
I encourage you to provide equitable relief where the loss of
beneficial interest was inadvertent or unintentional. I also understand
that FSA is working to combine forms to avoid some of the confusion
next year and should simplify the process for both producers and FSA
county office employees. What is the status of equitable relief for
these producers?
Answer. The beneficial interest requirement for loan deficiency
payments is the same as that which exists for commodity loans.
Beneficial interest is a statutory requirement. Misaction or
misinformation is determined on a case-by-case basis.
Question. What is the status of the form revision?
Answer. FSA is in the process of drafting a new form and
instructions. We hope to have it available in time for corn harvest.
CONSERVATION RESERVE PROGRAM--SWITCHGRASS
Question. As you mentioned in your comments--we have a challenge
ahead of us as existing CRP contracts expire. Working with the Chariton
Valley RC&D, we were able to combine CRP and energy production in an
innovative project in southern Iowa. I am concerned that the CRP acres
planted to switchgrass may not receive priority when the owners bid
those acres for re-enrollment in the CRP. Will the administration
support the concept of a CRP ``energy reserve'' so we can continue this
innovative project?
Answer. In August 2004, USDA asked for public comment on how to
address the 28 million acres under CRP contracts that will expire
between 2007 and 2010. USDA received about 5,200 comments, which we are
reviewing and evaluating.
As we develop our options on how to address extensions and
reenrollments, we will take into consideration the role that CRP can
play as a renewable fuel source. The pilot program in Iowa is a prime
example of the benefit that CRP can provide to meet some of our energy
needs in an environmentally sound manner.
SUBCOMMITTEE RECESS
Senator Bennett. Thank you. We have managed to beat the
clock by 5 minutes for which we are very grateful.
As I said, all of the prepared material that you brought
with you will be included in the record, and we will examine
it. We thank you for your service and your attention to all
these matters.
The next hearing will be tomorrow afternoon. We will
examine food, nutrition, and consumer services, marketing and
regulatory programs, and food safety.
Thank you again. The subcommittee is recessed.
[Whereupon, at 1:43 p.m., Wednesday, April 13, the
subcommittee was recessed, to reconvene at 2 p.m., Thursday,
April 14.]